Documents considered by the Committee on 18th November 2016 Contents

2EU General Budget

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; for debate in European Committee B, together with documents related to the mid-term review of the Multiannual Financial Framework already recommended for debate

Document details

(a) Amendment Letter No. 1 to the 2017 Draft Budget;
(b) Proposed Decision on the mobilisation of the Contingency Margin in 2017

Legal base

Article 312 TFEU and Article 106a Euratom, special legislative procedure, QMV

Department

HM Treasury

Document Numbers

(a) (38157), 13147/16, COM(16) 679; (b) (38173), 13377/16, COM(16) 678

Summary and Committee’s conclusions

2.1The Commission has presented a Letter of Amendment to update its Draft Budget for 2017, currently under negotiation. This is to take into account both technical adjustments on expenditure that have occurred within the course of the year, and proposals accompanying the Commission’s mid-term review of the Multiannual Financial Framework 2014–2020. The amending letter increases the Draft Budget’s commitment appropriations from €157.7 billion (£136 billion) to €159 billion (£136.8 billion) and payment appropriations from €134.9 billion (£116.2 billion) to €135.4 billion (£116.6 billion). The changes fall into four areas: agriculture and fisheries; technical adjustments; growth and jobs; and migration and security. The first two are annual features of amending letters, the second two are particular to the budget proposals for 2017.

2.2The Multiannual Financial Framework provides for a Contingency Margin, as a mechanism to be mobilised (used), as an addition to the EU General Budget, to react to unforeseen circumstances as a last resort instrument, by redeployment between Budget Headings. When the Commission presented its Draft Budget for 2017 it proposed a mobilisation of the Contingency Margin. It now withdraws that proposal and instead proposes a larger mobilisation of the Contingency Margin in support of the migration and security section of the amending letter.

2.3The Government notes, in the context of Brexit, that it continues to work closely with other national governments to ensure budget discipline, the best possible value for money for British and other EU taxpayers from EU spending, and to reduce waste and inefficiency. It says that the proposed level of expenditure outlined in the proposed budget is fully within the annual ceiling for commitments and payments set out in the Multiannual Financial Framework, and that the Commission’s updated proposal continues to achieve a significant payments margin.

2.4We recognise that these documents are relevant primarily to negotiation of the 2017 EU General Budget. But, given that the Commission has also linked them to the mid-term review of the Multiannual Financial Framework, we recommend that they be included in the debate in European Committee B on the documents concerning that review, which we have already recommended for debate.11

Full details of the documents

(a) Letter of amendment No 1 to the draft general budget for 2017: Updating the estimated needs for agricultural expenditure and fisheries—Enhancing successful programmes and instruments for sustainable growth—Migration agenda, external investment plan and security—Technical adjustments relating to agencies and administrative expenditure—Increase of revenue linked to fines: (38157), 13147/16, COM(16) 679; (b) Proposed Decision on the mobilisation of the Contingency Margin in 2017: (38173), 13377/16, COM(16) 678.

Background

2.5During the course of negotiation of its Draft Budget for the following year the Commission may present Letters of Amendment to the Council and the European Parliament.

2.6The Multiannual Financial Framework (MFF) provides for a Contingency Margin, of up to 0.03% of EU Gross National Income, as a mechanism to be mobilised (used), as an addition to the EU General Budget, to react to unforeseen circumstances as a last resort instrument, by redeployment between Budget Headings. As redeployments must be found from within existing MFF ceilings, use of the Contingency Margin is always consistent with the overall MFF deal.

The documents

2.7Letter of Amendment No. 1 (AL1/2017), document (a), updates the Commission’s Draft Budget (DB) for 2017,12 which sets out the Commission’s proposal for EU expenditure in 2017. The update is to take into account both technical adjustments on expenditure that have occurred within the course of the year, and proposals accompanying the mid-term review (MTR) of the MFF 2014–2020.13 None of the proposals contained in AL1/2017 are contingent on the agreement of the MTR. The key changes proposed are an increase of €1.3 billion (£1.1 billion) in commitment appropriations and €0.5 billion (£0.43 billion) in payment appropriations, in comparison with the DB. This increases commitments from €157.7 billion (£136 billion) to €159 billion (£136.8 billion) and payments from €134.9 billion (£116.2 billion) to €135.4 billion (£116.6 billion). It leaves a margin of €0.5 billion (£0.43 billion) in commitments and €7.5 billion (£6.46 billion) in payments, relative to the MFF ceiling.

2.8The changes fall into four areas of amendment: agriculture and fisheries; growth and jobs; migration and security; and technical adjustments, as follows.

Agriculture and fisheries

2.9The Commission proposes to update the expenditure estimates for agriculture in Heading 2 of the Budget by €527 million (£454 million) to take into account the financial consequences of the €500 million (£431 million) package announced in July 2016,14 in support of the dairy sector, and minor adjustments to other programmes, such as the Sustainable Fisheries Partnership Agreements. Given higher than expected assigned revenue assigned to the European Agriculture and Guarantee Fund this proposal is, however, budget-neutral in commitments and leads to an overall reduction of €1 million (£0.86 million) in payments.

Growth and jobs

2.10The Commission proposes an increase of €200 million (£172 million) in commitments and €7 million (£6 million) in payments. This includes commitment increases of €50 million (£43.1 million) for Horizon 2020,15 €50 million (£43.1 million) for COSME,16 €50 million (£43.1 million) for the Connecting Europe Facility transport strand17 and €50 million (£43.1 million) for Erasmus+.18 These increases reflect the Commission’s proposals, published in September 2016 as part of the wider MTR package,19 which proposed to further target expenditure on activities leading to the creation of jobs and growth. They are to be financed in part by the Global Margin for Commitments, and from the unallocated margin under Heading 1a (competitiveness for growth and jobs).

Contingency Margin: Migration and security

2.11Alongside AL1/2017 the Commission presents an updated proposal to mobilise (use) the Contingency Margin in 2017, document (b), which replaces its previous proposal20 presented alongside the DB. Given the ongoing pressures from the migration, refugee and security crisis affecting member states, the Commission proposes to mobilise the Contingency Margin, in support of the third section of the Letter of Amendment, for €2.15 billion (£1.85 billion) in 2017 to reinforce commitments in Heading 3 (migration and security) and Heading 4 (Global Europe). This mobilisation is to be offset as follows:

2.12The total use of the Contingency Margin now proposed includes the amount of €1.16 billion (£1 billion) in the Commission’s previous proposal for Heading 3 to be spent on management of external borders, reform of the Common European Asylum System, integration and migrant return. The additional amount to be mobilised by the Contingency Margin in AL1/2017 is €986 million (£849 million) for Heading 4. Of this, €750 million (£646 million) of commitments will be spent on launching the Migration Partnership Framework, through reinforcing the Development Co-operation Instrument and the European Neighbourhood Instrument. A further €250 million (£215 million) of commitments will be used to set up the European Fund for Sustainable Development (EFSD).21

2.13These proposals were included alongside the MTR of the MFF 2014-2020. The Commission announced its intention to launch the Migration Partnership Framework, but did not specify the amounts needed. However, it did specify the €250m (£215m) required for the EFSD.22 €13.8 million (£11.9 million) of these additional needs can be financed from the Heading 4 margin, reducing the total required from the Contingency Margin. Mobilisation of the Contingency Margin will lead to €460 million (£396 million) in payments in 2017.

Technical adjustments

2.14The Government’s Explanatory Memorandum of 1 November 2016 says that “AL1/2017 makes a number of technical adjustments to Budget Heading 5, resulting in a net increase of €71 million (£86 million) in commitments. These include

The Government’s view

2.15In his Explanatory Memorandum of 1 November 2016 the Chief Secretary to the Treasury (Mr David Gauke) first reiterates the Government’s standard position that until Brexit the UK remains a full member of the EU, that all the rights and obligations of EU membership remain in force and that during this period it will continue to negotiate, implement and apply EU legislation. Adding that this includes the 2017 EU General Budget he then says that:

Previous Committee Reports

None.


11 See (38057) 12183/16 + ADD 1, (38061) 12184/16, (38062) 12185/16, (38063) 12186/16, (38064) 12187/16: Seventeenth Report HC 71-xv (2016–17), chapter 2 (2 November 2016).

12 (37911),—: see Eighth Report HC 71-vi (2016–17), chapter 2 (13 July 2016).

13 Op cit.

14 See (37984), (37985), (37986), (37987), (37988), (37989): Tenth Report HC 71-viii (2016–17), chapter 13 (7 September 2016).

19 Op cit.

20 See (37907), 10765/16: Eighth Report HC 71-vi (2016–17), chapter 2 (13 July 2016).

21 See (38072) 12192/16, (38074) 12201/16 + ADDs 1–3: Fifteenth Report HC 71-xiii (2016–17), chapter 5 (26 October 2016).

22 Op cit.




21 November 2016