3 EU General Budgets 2014 and 2015
| Committee's assessment
| Politically important |
| Committee's decision | (a)-(f) Cleared from scrutiny after debate in European Committee B on 15 October[15]
(g)-(h) and (j)-(k) Cleared from scrutiny
(i) Not cleared from scrutiny; clarification requested
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| Document details | (a) Draft Amending Budget No. 3 for 2014
(b) Draft Decision concerning finance for Draft Amending Budget No. 3 for 2014 (c)-(f) Statement of estimates of the Commission for 2015, Parts I-IV: political presentation, financial programming 2016-2020 (provisional figures), figures by Multiannual Financial Framework heading, section and budget line and changes in the budgetary remarks and establishment plan staff (g) Draft Amending Budget No. 4 for 2014 (h) Draft Decision on use of the EU Solidarity Fund (i) Draft Amending Budget No. 5 for 2014 (j) Amendment Letter No. 1 to the Draft Budget for 2015 (k) Amendment Letter to Draft Amending Budget No. 4 for 2014
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| Legal base | (a)-(b), (g), (i) and (k) Article 314 THEU and Article 106a EURATOM; co-decision; QMV (c)-(f) Article 314 TFEU; co-decision; QMV (h) Articles 175 and 352 TFEU; co-decision; QMV (j) Article 314 TFEU; co-decision; QMV
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| Department
Document numbers
| HM Treasury
(a) (36067), 10340/14, COM(14) 329 (b) (36068), 10341/14, COM(14) 328 (c)-(f) (36139-36142), —, SEC(14) 357 (g) (36215), 11775/14, COM(14) 461
(h) (36317), 12953/14, COM(14) 565 (i) (36318), 12954/14, COM(14) 564 (j) (36418), 14401/14, COM(14) 637 (k) (36419), 14403/14, COM(14) 641
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Summary and Committee's conclusions
3.1 We have being scrutinising nine Commission documents
concerning significant revisions to the current 2014 EU Budget
and proposals for 2015 EU Budget. The Government now updates us
on the position on these documents, six of which have already
been cleared from scrutiny, but three of which are still under
scrutiny, ahead of the Budget ECOFIN Council of 14 November.
3.2 The Government also informs us about two new
documents which make relatively insignificant amendments to two
of the earlier documents.
3.3 The Government asks us to clear from scrutiny
the remaining five documents
3.4 We regret that the Government has only given
us an anodyne general indication of its approach to the final
stages of the Council consideration of these important budgetary
issues. It has not given us any sense of what the major detailed
spending proposals are that need addressing. Nor does it give
us any information about or comment on the position of the European
Parliament. Nevertheless we now clear from scrutiny the remaining
documents, bar one.
3.5 We remain dissatisfied about the Government's
comment on Draft Amending Budget No. 5 for 2014. It repeats "that
the Commission should always look first to reallocate funds from
within existing agreed budgets to meet emerging inyear pressures,
rather than coming to Member States to request additional money".
This does not answer our question as to whether the Government
will actually oppose the proposal. So before considering this
document again we wish to have an answer to that question and
meanwhile it remains under scrutiny.
Full details of the documents:
(a) Draft Amending Budget No. 3 to the General Budget 2014: General
statement of revenue; Statement of expenditure by section: Section
III — Commission, Section VII — Committee of the Regions
and Section IX — European Data Protection Supervisor: (36067),
10340/14, COM(14) 329; (b) Draft Decision on the mobilisation
of the Contingency Margin in 2014: (36068), 10341/14, COM(14)
328; (c) Statement of estimates of the Commission for 2015 (Preparation
of the 2015 Draft Budget), Document I, Political presentation:
(36139), —, SEC(14) 357; (d) Statement of estimates of the
Commission for 2015 (Preparation of the 2015 Draft Budget), Document
II, Financial programming 2016-2020 (provisional figures): (36140),
—, SEC(14) 357; (e) Statement of estimates of the Commission
for 2015 (Preparation of the 2015 Draft Budget), Document III,
Figures by MFF heading, section and budget line: (36141), —,
SEC(14) 357; (f) Statement of estimates of the Commission for
2015 (Preparation of the 2015 Draft Budget, Document IV, Changes
in the budgetary remarks and establishment plan staff: (36142),
—, SEC(14) 357; (g) Draft Amending Budget No. 4 to the General
Budget 2014: General statement of revenue; Statement of revenue
by section: Section III — Commission and Section IX —
European Data Protection Supervisor: (36215), 11775/14, COM(14)
461; (h) Draft Decision on the mobilisation of the EU Solidarity
Fund: (36317), 12953/14, COM (14) 565; (i) Draft Amending Budget
No. 5 to the General Budget 2014: General statement of revenue;
Statement of expenditure by section: Section III — Commission:
(36318), 12954/14, COM(14) 564; (j) Letter of amendment No. 1
to the draft General Budget for 2015: Statement of expenditure
by section: Section III — Commission and Section VIII —
European Ombudsman: (36418), 14401/14, COM(14) 637; (k) Letter
of amendment to Draft Amending Budget No. 4 to the General Budget
2014: General statement of revenue; Statement of revenue by section:
Section III — Commission and Section IX — European
Data Protection Supervisor: (36419), 14403/14, COM(14) 641.
Background
3.6 The Draft Budget (DB), documents (c)-(f), sets
out the Commission's proposals for EU expenditure in 2015. It
is the first stage in the annual process of establishing the EU's
budget for the following year and provides the basis for negotiations
between the two arms of the Budgetary Authority (the Council and
the European Parliament). The context for the DB is determined
by the Multi-annual Financial Framework (MFF) for the period 2014-20,
which sets out annual ceilings for the six headings of budget
expenditure.
3.7 In the DB the Commission proposed commitment
appropriations of €146.0 billion (£118.4
billion), which represents 1.04% of EU Gross National Income (GNI).
For payment appropriations, the Commission proposed €142.1
billion (£115.6 billion), or 1.02% of EU GNI. In July a Council
position on the 2015 DB was agreed. This called for a budget of
€140.0 billion (£112.2 billion) in payment appropriations,
representing a €2.1 billion (£1.7 billion) cut to the
Commission's DB, and provided for a margin of €1.9 billion
(£1.5 billion) under the 2015 ceiling set out in the MFF.
3.8 During the course of a financial year the Commission
presents to the Council and European Parliament Draft Amending
Budgets (DABs) proposing increases or reductions for revenue and
expenditure in the current EU General Budget. The Contingency
Margin is a mechanism set out in the MFF Regulation, which allows
for "mobilisation", that is use, of 0.03% of GNI for
all Member States to react, as a last resort, to unforeseen circumstances.
3.9 With document (a), DAB No. 3/2014, the Commission
asked for an increase in payment appropriations of €4,738
million (£3,853 million) in 2014. These appropriations were
requested through two routes — mobilisation of the Contingency
Margin by the draft Decision, document (b), and use of the unallocated
in-year margin between the agreed budget for 2014 and the annual
payment ceiling set out in the MFF, which the Commission specified
as €711 million (£578 million). Council consideration
of these documents has become linked to its consideration of the
DB.
3.10 We have considered these six documents several
times and they were cleared from scrutiny after debate in European
Committee B on 15 October.[16]
3.11 In July, with DAB No. 4/2014, document (g),
the Commission proposed revisions to the estimates for 2014 of
Member States' contributions to the annual budget. We would normally
clear from scrutiny, without further ado, this sort of DAB. But,
given that we were told that its consideration might be linked
to discussion of the DB and DAB No. 3/2014, we have been keeping
it under consideration pending information from the Government
about further developments.
3.12 In September the Commission proposed a Decision,
document (h), to approve four applications for financial aid from
the EU Solidarity Fund from Italy, Greece, Slovenia and Croatia,
following natural disasters in those countries. The draft Decision
was accompanied by a DAB, document (i), to increase the 2014 Budget
by €47 million (£37.4 million) to finance use of the
Fund in relation to the four applications for assistance. While
the Government reminded us of its overall approach to EU budgetary
restraint, particularly in relation to proposals for in-year increases,
it did not say whether it accepts the Commission's position in
this case or whether it would be opposing the proposals. So before
considering the documents further we asked to be advised on these
points — meanwhile they remained under scrutiny.
The new documents
3.13 Amendment Letter No. 1 for the 2015 DB, document
(j), amends the Commission's original proposal to account for
the most recent developments in agricultural markets, recent forecasts
of Member States on the execution of the 2014 Budget and legislative
changes since the Commission's original proposal.
3.14 The letter provides two main adjustments to
DB:
· redeployment of €448.5 million (£373.9
million) of expenditure from Heading 2 and Heading 5 to Headings
1a, 2, 3 and 4 in 2015 — this is made possible by the €448
million (£373.5) increase in assigned revenues available
for the European Agricultural Guarantee Fund in 2015 and a conversion
of Commission posts which yields a saving of €0.5 million
(£0.42 million); and
· use of the 'crisis reserve' in Heading
2 of the DB to finance "temporary emergency measures"
in response to the Russian ban on certain EU agricultural imports,
the cost of which is currently estimated at €344 million
(£286.79 million) — this will not require additional
appropriations as the DB already included €433 million (£360.99
million) of appropriations for 'crisis reserve', intended to support
the agricultural sector in crisis situations and any mobilisation
of the 'crisis reserve' would require a budget transfer to be
agreed by Council after the adoption of the EU Budget for 2015.
3.15 The net impact of these changes is a reduction
of €448.5 million (£373.9 million) in commitment appropriations
with no overall change to the level of payment appropriations.
3.16 The Amendment Letter for DAB No. 4/2014, document
(k), includes additional fines and interest on late payments as
well as interest on fines which adds to 'miscellaneous revenue'
to the DAB to the tune of €374 million (£312 million).
The Minister's letter of 3 November 2014
3.17 The Financial Secretary to the Treasury (Mr
David Gauke) writes now to inform us about the position on negotiation
of the proposed revisions to the 2014 Budget and of the 2015 Budget.
He says first that:
· as in previous years, the 2015 Budget
will be discussed and agreed at a Budget ECOFIN Council, which
will be held on 14 November;
· the Presidency has presented its compromise
proposal for the 2014 DABs, which includes a €350 million
(£204 million) reduction in DAB No. 3/2014 payment requests
and the Government expects this package to be discussed to the
same time frame;
· while he is unable to offer a definitive
stance on these ongoing EU negotiations at this stage, he can
confirm that at the ECOFIN Council of 14 October, he intervened
strongly to urge the Commission to pursue fiscal prudence in negotiations
at November's meeting, stressing the importance of the EU budget
reflecting the fiscal restraint demonstrated by national Governments
across the EU;
· he also highlighted the disappointment
shared by a number of Member States that the Commission had not
done more to identify necessary savings and raised concerns over
the consideration of MFF ceilings as being the 'minimum level
of expenditure' which has contributed to the challenges the EU
budget now faces; and
· over the coming weeks, the Government
will continue to work with like-minded Member States to pursue
this budget-disciplinarian and sustainable approach to EU budget
negotiations.
3.18 Turning to Amendment Letter No. 1 for the 2015
DB the Minister says that:
· the Government welcomes that the Letter
is budget neutral on payments and reduces commitments;
· it is also pleased to see that the Commission
has identified savings in agricultural and administrative expenditure;
· it does not think, however, that the Commission
should seek to use the savings to increase expenditure in other
headings on top of the DB it had proposed;
· instead, these savings should be used
to help reach an agreement on the 2015 EU Budget which is in line
with the Council position; and
· the Government notes that the Letter will
be part of wider negotiations by the Council, where it be clear
in the UK objective to push for a 2015 EU Budget which sets expenditure
at a level that provides a significant margin below the MFF ceiling.
3.19 In response to our concern, prompted by the
Minister's original Explanatory Memorandum, that discussion of
DAB No. 4/2014 might be linked to that on DAB No. 3/2014, the
Minister now assures us that this is not the case and reminds
us that the combined effect of the proposed changes would reduce
the overall level of contributions required from Member States.
He adds in relation to the Amendment Letter for DAB No. 4/2014
that as these changes serve to further reduce Member State contributions,
the Government's position of support for the DAB remains unchanged.
3.20 As for the proposal to mobilise the EU Solidarity
Fund for Italy, Greece, Slovenia and Croatia and the consequential
DAB No. 5/2014 and our request for clarification as to whether
the Government accepts the Commission's position in this case
or whether it would be opposing the proposals, the Minister now
confirms that the Government supports this mobilisation of the
Fund. But on the DAB he continues that:
"the Government has been consistently clear
that we want to see real budgetary restraint in the EU in order
to avoid unaffordably high costs to the UK. To deliver this goal,
the Government is committed to continuing to work hard to limit
EU spending, reduce waste and inefficiency, and ensure that where
EU funds are spent they deliver the best possible value for money
for taxpayers.
"The Government's position on DAB5 is therefore
that the Commission should always look first to reallocate funds
from within existing agreed budgets to meet emerging inyear
pressures, rather than coming to Member States to request additional
money."
3.21 Finally the Minister says:
"I would like to reassure the Committee
that, taking into account ongoing EU negotiations and the fact
that the UK's final position will be dictated by the shape of
negotiations, I have provided as much information as possible.
I hope that the Committee now has sufficient information to clear
these documents from scrutiny."
European Parliament consideration
3.22 The Minister does not comment on the position
of the European Parliament on the DB, but we understand that its
first reading was adopted at its October plenary session. Media
reports suggest that the European Parliament reversed all Council
cuts in the DB and even increased the amount proposed by the Commission
for priorities such as growth, jobs, research and education and
that by reversing the Council cut of €522 million (£435
million) in commitments and €2.1 billion (£1.75 billion)
in payments, it raised commitment appropriations to €146.3
billion (£121.97 billion) and payment appropriations to €146.4
billion (£122.05 billion) for 2015.
Previous Committee Reports
Fourth Report HC 219-iv (2014-15), chapter 5 (25
June 2014), Fifth Report HC 219-v (2014-15), chapter 3 (2 July
2014) and Ninth Report HC 219-ix (2014-15), chapters 4 and 15
(3 September 2014).
15 See Gen Co Debs, European Committee B, 15 October
2014, cols. 3-26. Back
16
Ibid Back
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