EU General Budget 2015 - European Scrutiny Committee Contents


1 EU General Budget 2015


Committee's assessment Politically important
Committee's decisionNot cleared from scrutiny; further information requested
Document detailsRevised Draft Budget for 2015
Legal baseArticle 314 TFEU; co-decision; QMV
DepartmentHM Treasury

(36567), —, COM(14) 723

Summary and Committee's conclusions

1.1 The Council and the European Parliament have failed to reach agreement on the Commission's original Draft Budget for 2015. Consequently the Commission has presented this revised Draft Budget.

1.2 In the new Draft Budget the Commission proposes commitment appropriations of €145,226.3 million (£115,498.5 million), which represents 1.05% of EU Gross National Income (GNI). For payment appropriations it proposes €141,337.3 million (£112,405.6 million), or 1.02% of EU GNI. It states that this represents an increase in commitments of €2,536.0 million (£2,016.9 million) or 1.8% compared to 2014 levels, and an increase of €968.1 million (£769.9 million) or 0.7% in payments compared to the 2014 EU General Budget.

1.3 We have been told by the Government, on 9 December, that it:

·  welcomes the fact that the revised Draft Budget represents a €800 million (£636.2 million) cut compared to the Commission's original proposal;

·  continues to think, however, that there should be a significant margin between the agreed budget and the annual Multiannual Financial Framework ceiling for the purpose of sound budgetary management; and

·  notes that the EU budget is agreed by QMV, and that it will need to work closely with like-minded budget disciplinarian Member States to deliver the best deal possible for the UK.

1.4 We have learnt separately that, also on 9 December, the Council's Committee of Permanent Representatives agreed a position on the Draft Budget, which appears to be acceptable to the European Parliament and to be a done deal, which the Council will merely formally adopt on 12 December,

1.5 We note the content of the revised Draft Budget, the Government's brief comment on it and that it has apparently been, in effect, adopted by the Council. But we observe also we have little information about how agreement on the 2015 EU General Budget relates to resolution of the disagreement between the Council and the European Parliament on a number of Draft Amending Budgets for the 2014 EU General Budget.

1.6 So before considering this document again we wish to have a full explanation from the Government of developments on all these budgetary matters. We also wish to have an explanation of the scrutiny breaches in relation to these issues, particularly the failure to deposit the revised Draft Budget, published on 27 November, until 10 December.

1.7 When we have this information, on both the substantive and procedural issues, we will consider whether we need to seek further information from a Minister in an evidence session. Meanwhile the document remains under scrutiny.

Full details of the documents: Draft General Budget of the European Union for the financial year 2015: General Introduction: (36567), —, COM(14) 723.

Background

1.8 Each year a Draft Budget (DB) sets out the Commission's proposals for EU expenditure in the following year. 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: Smart and inclusive growth; Sustainable growth; natural resources; Security and Citizenship; Global Europe; Administration; and Compensations.

1.9 The DB is the first stage in the annual process of establishing the EU's budget for that year and provides the basis for negotiations between the two arms of the Budgetary Authority (the Council and the European Parliament). The ECOFIN Council hopes to negotiate and agree its first reading position on the DB by the end of July (the TFEU requires the Council to complete this stage by 1 October), which would then be forwarded to the European Parliament. The European Parliament would in turn discuss and agree its first reading position by late October (the TFEU deadline is 42 days after the Council adopts its position). If it proposed further amendments to those made by the Council, a Conciliation Committee would be convened to meet over 21 days, largely in late October and early November, with the aim of reaching agreement on the next year's General Budget. This would be subject to separate approval by both the Council and the European Parliament, after which the EU's General Budget would be deemed to have been adopted.

1.10 If, however, the Conciliation Committee does not reach agreement within the 21 days, the DB falls and the Commission is required to present a new DB. If that revised proposal is not adopted before 31 December, then monthly budgetary expenditure in the new year is based on no more than one twelfth of the preceding year's budget (provisional twelfths), until agreement is reached on a budget for formal adoption.

1.11 During the course of a financial year the Commission presents to the Budgetary Authority Draft Amending Budgets (DABs) proposing increases or reductions for revenue and expenditure in the current EU General Budget.

1.12 In June the Commission the Commission presented its DB for 2015.[1] The negotiation of that DB became linked directly or indirectly with the negotiation of several DABs for the 2014 EU General Budget.[2]

1.13 The Conciliation Committee failed to reach agreement on the Commission's DB for 2015 by the 17 November deadline. So the Commission was automatically obliged to present a revised DB.

The document

1.14 On 27 November the Commission presented this revised DB, which sets out its new proposal for EU expenditure for 2015.

OVERVIEW

1.15 The Commission's General Introduction to its revised DB is broken down into five sections. Section 1 sets out why the need for the Commission to submit a revised DB has arisen and its priorities for the revision. These priorities are then placed within the context of the MFF in Section 2. Section 3 breaks down the key aspects of the DB on a heading-by-heading basis. Section 4 has the Commission's Concluding Remarks. Section 5 is a three page table setting out the DB under the MFF headings and at the 'main programme' level.

1.16 The Commission first explains the budget making process so far, saying that:

·  on 2 September the Council completed its reading of the Commission's original DB and on 22 October the European Parliament voted its reading;

·  as the European Parliament adopted amendments to the DB, which could not be accepted by the Council, a Conciliation Committee was convened, in accordance with the TFEU;

·  the Conciliation Committee worked over a period of 21 days, between 28 October and 17 November;

·  the positions of the European Parliament and Council could not be reconciled within the 21 day time period allowed;

·  this prevented an agreement being reached on the 2015 budget, as well as on the DABs No. 2/2014, No. 3/2014, No. 4/2014, No. 5/2014 and No. 7/2014;[3]

·  in the absence of agreement in the Conciliation Committee, the Commission now submits a new DB for 2015, in accordance with the TFEU;

·  it is seeking to reconcile the positions of the two arms of the Budgetary Authority in this proposal for a new DB, without recourse to a further period of conciliation; and

·  the consequences of non-agreement on the budget would be recourse to provisional twelfths in 2015.

1.17 The Commission then describes how its revised DB is focused on supporting, in particular, those policies in favour of competitiveness and economic convergence, thus contributing to growth and jobs, as well as those budget lines which allow the EU to address crises especially in its neighbourhood.

1.18 In the DB the Commission proposes commitment appropriations[4] of €145,226.3 million (£115,498.5 million), which represents 1.05% of EU Gross National Income (GNI).[5] For payment appropriations[6] it proposes €141,337.3 million (£112,405.6 million), or 1.02% of EU GNI. When comparing any figures from the revised DB the 2014 EU General Budget, the Commission includes DAB No. 1/2014[7] and DABs No. 3/2014 to DAB No. 8/2014.[8] (DAB No. 3/2014 to DAB No. 8/2014 have not been adopted yet.) This corresponds to a total EU General Budget 2014 size of €140,369.2 million (£111,635.6 million) in payments. The Commission states that this DB represents an increase in commitments of €2,536.0 million (£2,016.9 million) or 1.8% compared to 2014 levels, and an increase of €968.1 million (£769.9 million) or 0.7% in payments compared to the 2014 EU General Budget.

1.19 The Commission state that the margin[9] under the MFF ceiling is €1,855.3 million (£1475.5 million) for commitments and €800.0 million (£636.2 million) for payments.

1.20 The Commission's proposal includes, in its calculation of the total commitments, total payments expenditure and the margin in DB:

·  €83.3 million (£66.2 million) in commitments and €11.3 million (£9.0 million) in payments for the Flexibility Instrument, which provides funding in a given financial year for clearly identified expenses which could not be covered by one or more budget headings without exceeding their expenditure ceilings;

·  €515.4 million (£409.9 million) in commitments for 'other Special Instruments', that is €303 million (£241.0 million) for the Emergency Aid Reserve (EAR), €162.4 million (£129.2 million) for the European Globalisation Adjustment Fund (EGF) and €50 million (£39.8 million) for the European Union Solidarity Fund (EUSF); and

·  €225 million (£178.9 million) in payments for these instruments, that is €150 million (£119.3 million) for the EAR, €25 million (£19.9 million) for the EGF and €50 million (£39.8 million) for the EUSF.

DETAIL OF PROPOSED EXPENDITURE BY HEADING

1.21 Sub-Heading 1a: Competitiveness for growth and jobs:

·  total commitments in 2015 of €17,488.5 million (£13,908.6 million), representing an increase of 6.1% compared to 2014;

·  total payments of €15,833.3 million (£12,592.2 million), representing an increase of 31.6% compared to 2014; and

·  a margin of €177.5 million (£141.2 million) beneath the commitments ceiling for the sub-heading.

1.22 Sub-Heading 1b: Economic, social and territorial cohesion:

·  total commitments in 2015 of €49,230.3 million (£39,152.9 million), representing an increase of 3.6% compared to 2014;

·  total payments of €51,067.4 million (£40,613.9 million), representing a decrease of 6% compared to 2014; and

·  no margin beneath the commitments ceiling for the sub-heading.

1.23 Heading 2: Sustainable growth: natural resources:

·  total commitments in 2014 of €58,808.6 million (£46,770.5 million), representing a 0.6% cut on 2014;

·  total payments of €56,231.1 million (£44,720.6 million), representing a 0.6% cut on 2014; and

·  a margin of €790.4 million (£628.6 million) beneath the commitments ceiling for the heading.

1.24 Heading 3: Security and Citizenship:

·  total commitments in 2015 of €2,146.7 million (£1707.3 million), representing a decrease of 1.2% compared to 2014;

·  total payments of €1,884.3 million (£1,498.6 million), representing an increase of 12.4% compared to 2014; and

·  a margin of €99.3 million (£79.0 million) beneath the commitments ceiling for the heading.

1.25 Heading 4: Global Europe:

·  total commitments in 2015 of €8,356.4 million (£6,645.8 million), representing an increase of 1.2% compared to 2014;

·  total payments of €7,428.0 million (£5,907.5 million), representing an increase of 9.6% compared to 2014; and

·  a margin of €392.2 million (£311.9 million) beneath the commitments ceiling for the heading.

1.26 Heading 5: Administration:

·  total commitments in 2015 of €8,680.5 million (£6,903.6 million), representing an increase of 2.4% compared to 2014;

·  total payments of €8,668.1 million (£6,893.7 million), representing an increase of 2.4% compared to 2014; and

·  a margin of €395.5 million (£314.5 million) beneath the commitments ceiling for the heading.

1.27 Heading 6: Compensations: there are no commitments in 2015, compared to €28.6 million (£23.5 million) in 2014 and no payments compared to €28.6 million (£23.5 million) in 2014.

The Government's view

1.28 In his Explanatory Memorandum of 9 December the Financial Secretary to the Treasury (Mr David Gauke) says, in familiar terms, that:

·  the Government has been clear that it wants to see real budgetary restraint in the EU over the coming years, as well as the longer term, in order to reduce costs to the UK and to UK taxpayers; and

·  to deliver this goal, the Government is committed to continue 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.

1.29 The Minister comments substantively that:

·  the Commission proposal does not make a comparison between the revised proposal and the original DB;

·  the Government's analysis suggests that the revised DB represents a €373 million (£296.6 million) decrease in commitments and a €800 million (£636.2 million) decrease in payments compared to the original DB (for which total commitments were €145,599.3 million and total payments were €142,137.3 million);

·  the Government welcomes that the revised DB represents a €800 million (£636.2 million) cut compared to Commission's original proposal;

·  however, the Government continues to think that there should be a significant margin between the agreed budget and annual ceiling for the purpose of sound budgetary management;

·  the Government also notes that the budget is agreed by QMV, and that it will need to work closely with like-minded budget disciplinarian Member States to deliver the best deal possible for the UK; and

·  the UK's post-abatement financing share of EU expenditure will be approximately 11%, but it is not possible to calculate the exact amounts yet, as the amount will depend on actual budgetary outturns.

1.30 The Minister also says that:

·  the revised DB will be subject to negotiations and separate approval by both Council and the European Parliament, after which the EU General Budget 2015 will be deemed to have been adopted;

·  the indicative timetable for adoption envisions agreement of the Council position on the revised DB on 12 December and adoption of the Council's position at the European Parliament Plenary on 17/18 December, thus reaching an agreement on EU General Budget 2015.

Council consideration of the revised Draft Budget

1.31 A Council Secretariat press notice[10] suggests that a COREPER decision on the DB on 9 December effectively commits the Council to an agreement with the European Parliament, requiring only formal adoption by the council on 12 December.

Previous Committee Reports

None.





1   (36139)-(36142): see Fifth Report HC 219-v (2014-15), chapter 3 (2 July 2014), Eighteenth Report HC 219-xvii (2014-15), chapter 3 (5 November 2014) and Gen Co Debs, European Committee B, 15 October 2014, cols. 3-26. Back

2   (35970), 9017/14 (36067) 10340/14 (36215), 11775/14 (36318), 12954/14 (36427), 14442/14: see First Report HC 219-i (2014-15), chapter 33 (4 June 2014), Fourth Report HC 219-iv (2014-15), chapter 5 (25 June 2014), Ninth Report HC 219-ix (2014-15), chapter 4 (3 September 2014), Twelfth Report HC 219-xii (2014-15), chapter 3 (10 September 2014), Thirteenth Report HC 219-xiii (2014-15), chapter 22 (15 October 2014), Eighteenth Report HC 219-xvii (2014-15), chapter 3 (5 November 2014), Nineteenth Report HC 219-xviii (2014-15), chapter 1 (5 November 2014), Twenty-second Report HC 219-xxi (2014-15), chapter 1 (26 November 2014) and Gen Co Debs, European Committee B, 15 October 2014, cols. 3-26. Back

3   IbidBack

4   Commitment appropriations set the limit of legal obligations that can be made in the budget year for activities that will lead to payments in the current and/or future budget years. Back

5   The DB is based on the forecast of GNI issued after the Advisory Committee on Own Resources meeting held on 19 May. Back

6   Payment appropriations are the amounts of funds available to be spent during the budget year, arising from commitments in the budget for the current or preceding years. Back

7   (35803) 6096/14: see Thirty-eighth Report HC 83-xxxv (2013-14), chapter 19 (5 March 2014). Back

8   DABs No. 3/2014 to No. 6/2014, op cit; DAB No. 7/2014: (36429), 14444/14: see Eighteenth Report HC 219-xvii (2014-15), chapter 4 (5 November 2014); DAB No. 8/2014: (36547), 16210/14, on which we have yet to report. Back

9   The 'margin' refers to the difference between total commitments/payments in the DB and total commitments/payments provided for in the MFF. Back

10   See Council Secretariat press notice. Back


 
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Prepared 11 December 2014