9. DRAFT BUDGET OF THE EUROPEAN COMMUNITIES
FOR THE YEAR 2000
Letter from Lord Tordoff, Chairman of
the Committee, to Patricia Hewitt MP, Economic Secretary to the
Treasury
We have considered this document [the Preliminary
Draft Budget for the year 2000] on the basis of your two Explanatory
Memoranda, which we found most helpful. We may decide to take
evidence from you at a latter stage in the budgetary process,
but for the moment the Committee has asked me to send you our
views so that you can take them into account in preparing for
the Budget Council on 16 July.
Like you, we welcome in principle the [proposed]
reduction in the financial perspective ceilings to bring them
to a more realistic level. But we note that there is very little
headroom between those ceilings and the total expenditure proposed
in the Preliminary Draft Budget (PDB). This is of particular concern
because the Commission says in its Overview that the provision
of 280 million euro (in heading 4: external aid) for co-operation
with Balkan countries "does not take account of needs arising
from recent events and the figure may need to be adjusted . .
. which might involve reviewing the financial framework".
Is any indication now emerging of what amounts may actually be
needed in the financial year 2000? How do you consider that funds
should be found to meet that need? How do you envisage that the
provision for other items under the heading will be affected?
On agricultural expenditure, we regret the failure
to agree fundamental reform at the Berlin European Council. We
note your comment that the Commission's original estimate for
expenditure on the traditional CAP exceeded the limit agreed at
Berlin, and that the Commission brought the figures into line
simply by altering them rather than by proposing any policy change.
We should be grateful if you would bring us up to date with the
position, and tell us whether the outcome of the Budget Council
is a genuine solution or simply another fudge.
Under the internal policies heading, the programme
for trans-European networks is the second largest programme, and
provision for it is due to increase by 10 per cent. You comment
that you expect the final provision to be lower: can you please
explain the United Kingdom's lack of enthusiasm for this programme,
and tell us whether other Member States share it? We also note
the progress which has been made on eliminating expenditure proposals
without a proper legal base. We commend this in principle, but
should be glad of reassurance that it is not being used as a pretext
to suppress or delay desirable small-scale social projects.
We note that the provision for pre-accession
instruments has been almost doubled. We should be glad to know
whether you think that the amount suggested is appropriate, and
whether it will be sufficient to allow enlargement to proceed
as fast as the United Kingdom would wish.
We look forward to receiving your comments on
these points after the Budget Council, together with your account
of the progress made at that meeting. We shall then decide how
to take forward our scrutiny of the budgetary process, but in
the meanwhile we clear the Preliminary Draft Budget from scrutiny.
7 July 1999
Letter from Lord Tordoff, Chairman of
the Committee, to Patricia Hewitt MP, Economic Secretary to the
Treasury
I wrote to you on 7 July with our views on the
substance of the Preliminary Draft Budget. We look forward to
receiving your reply after the Budget Council.
In the meanwhile, however, Sub-Committee A would
be grateful for some further information. You said in your second
Explanatory Memorandum on the PDB that "the fact that our
underlying contributions are expressed in sterling means that
if the pound appreciates we tend to fund a larger share of the
budget, whereas if it weakens we fund a smaller share". We
should appreciate a full explanation of the effects of the changes
in the exchange rate on the actual United Kingdom contribution
to the financing of the EU budget.
16 July 1999
Letter from Patricia Hewitt MP, Economic
Secretary to the Treasury, to Lord Tordoff, Chairman of the Committee
Thank you for your letter of 7 July regarding
the 2000 Preliminary Draft Budget (PDB) of the European Communities.
I will write again after the recess—alongside the explanatory
memorandum on the Council's Draft Budget—to address all
the points raised in your letter. Meanwhile, I thought that you
might like an early outline of the draft budget established by
the Council.
Clearly one of the important issues in the coming
year will be the reconstruction of Kosovo. I was therefore very
pleased that the Budget Council agreed to set aside 500 million
euros in the 2000 Draft Budget specifically for this purpose,
by re-prioritising funds within the external aid ceiling set out
in the Inter-Institutional Agreement. The international community
rightly expects the EU to play an important role in the rebuilding
of Kosovo—alongside other donors and the international financial
institutions—and the Draft Budget established by the Council
is an important step in making this possible.
The Council also found significant savings relative
to the Commission's PDB in other areas, with payments in the Draft
Budget now set to rise only by some 2.8 per cent on 1999, compared
to the 4.7 per cent rise proposed by the Commission. Commitments
are also set to fall relative to the PDB
The Council's Draft Budget now passes to the
European Parliament for its first reading.
26 July 1999
Letter from Melanie Johnson MP, Economic
Secretary to the Treasury, to Lord Tordoff, Chairman of the Committee
I am referring to your letter of 7 July regarding
the 2000 Preliminary Draft Budget (PDB) of the European Communities.
Patricia Hewitt wrote to you on 26 July concerning provision in
the 2000 EC Draft Budget for reconstruction in Kosovo. As agreed
I would now like to address the other points you raised.
Regarding agricultural expenditure, despite
not going as far as we would have liked, the outcome of the European
Council in Berlin nevertheless makes significant reforms to the
CAP by bringing it under tighter control than before. Fundamental
reform still remains a priority for this Government. It was important,
however, that estimates for spending were altered in order to
maintain the agreed Berlin ceilings, ensuring budgetary rigour.
Some success was achieved at the Budget Council on 16 July where
spending figures for agriculture were reduced further by a sum
of 375 million euros to stand at 40.5 billion euros.
The Budget Council on 16 July also agreed to
resume examination of agricultural expenditure on the basis of
a letter of amendment to be submitted by the Commission this October.
This rectifying letter will set out up-to-date forecasts, and
possibly reduce appropriations further.
As you are aware, the importance of pre-accession
aid was demonstrated by the creation of a new heading 7 at Berlin.
The Draft Budget for 2000 more than doubled pre-accession aid
with a provision of up to 3.1 billion euros per annum for all
applicant countries. The UK perspective is that this is sufficient
to meet our policy of maintaining the momentum for enlargement
while reaffirming the commitment to the "pre-accession strategy"
made at the Cardiff European Council in June 1998. The Government
believes that the Commission has struck about the right balance
in its proposals for aid to help the applicants prepare for membership.
However it is not enough to find the money; we must also ensure
that it is used well. The UK will be active in trying to encourage
best value for money. This will help deliver effective enlargement.
Finally, regarding your concerns over trans-European
networks, the allocation in the 2000 Preliminary Draft Budget
for trans-European networks amounts to 622 million euros for commitments
(an increase of 13 per cent compared with 1999). This lower provision
of 4.6 billion euros over the seven-year period is consistent
with Commission proposals, and was the outcome of negotiations
on the Inter-Institutional Agreement. The adjustment downwards
reflects our approach, working with others, towards the TENS programme
which is to ensure that the ceilings in the financial perspective
hold while maintaining commitments for other priorities in heading
3, including LIFE, Socrates and Youth. Financial rigour is especially
important as the European Parliament will be pressing for big
increases during conciliation.
I am also glad of your support on proposals
to eliminate expenditure that does not have a proper legal basis
and we continue to pursue this issue. I am pleased to say that
Commission proposals are designed to make efficient use of existing
resources, and pursue a policy of financial rigour in community
spending. The Budget Council in July further approved the proposals,
but felt that the implementation of important measures, including
those to combat violence against children, adolescents and women,
could continue without delay. As regards the fight against social
exclusion the Council agreed that the Treaty of Amsterdam now
ratified would provide the means of adopting the required legal
bases. I hope this allays your concerns over suppression of small-scale
projects.
29 September 1999
Letter from Lord Tordoff, Chairman of
the Committee, to Melanie Johnson MP, Economic Secretary to the
Treasury
I wrote to you on 7 July raising various points
on the Preliminary Draft Budget, and we have now been able to
consider Patricia Hewitt's reply of 27 July and yours of 29 September.
We are grateful to you for responding to our points, though in
the context of subsequent stages of the budget procedure we may
wish to return to some of them (particularly the adequacy of funding
for external aid, given the needs of Kosovo).
20 October 1999
Letter from Melanie Johnson MP, Economic
Secretary to the Treasury, to Lord Tordoff, Chairman of the Committee
Council's second reading of the 2000 Budget
takes place on Thursday, and I am therefore writing to summarise
the state of play. In terms of negotiations on the 2000 EC Budget,
as you will know, the European Parliament is determined to ensure
that the Budget for 2000 finances the EU's share of the Kosovan
reconstruction effort.
However, the Parliament has not included provisions
for Kosovo in its first reading of the 2000 Draft Budget. Instead,
the EP has concluded that a limited revision of the financial
perspective by exceeding the ceiling for category four of the
budget is necessary on this occasion. The Parliament has therefore
invited the Council to revise the financial perspective in order
to allow agreement between the institutions on the entire Budget
prior to the Parliament's second reading.
Last week the Commission pledged 500 million
euro towards reconstruction in Kosovo. The Council's current position
(agreed at the Budget Council on 16 July), is that it is possible
to fund the EU's share of reconstruction costs in Kosovo from
within the financial perspective ceilings.
I will of course send you an EM on the amendments
and proposed modifications to the Draft Budget by the Parliament
once we have received and deposited a final copy of the document
in English. I would also like to thank you for clearing the Council's
Draft Budget and will be writing to you shortly to address the
points raised in your committee's report of 20 October.
23 November 1999
Letter from Melanie Johnson MP, Economic
Secretary to the Treasury, to Lord Tordoff, Chairman of the Committee
The House of Commons European Scrutiny Committee
wrote to me on 24 November asking for a report on the Budget Council
held on 25 November, which I attended.
In terms of the needs for Kosovo, the Commission
proposal of 500 million euro for Kosovan reconstruction includes
30 million carried over from the 1999 budget, 50 million under
humanitarian aid and 60 million already existing in the 2000 budget.
This leaves 180 million to be found from redeployment in category
4, 60 million euros from use of the flexibility instrument, 10
million from the margin in category 4 and 110 million transferred
from category 1b (rural development).
On 25 November, the Council gave its second
reading of the 2000 EC Budget, which was consistent with our UK
objectives. The Council agreed with the Commission proposal and
made the following amendments. It agreed that the financing of
reconstruction in Kosovo in 2000 should be 360 million euro, with
a further 140 million to be part of the pledge that the Commission
will be allowed to make for 2001. This 360 includes 30 million
from 1999, 50 million under humanitarian aid, 60 million already
existing in the 2000 budget, 180 from redeployment in category
4 followed by a 40 million flat rate reduction also in the external
aid category. The Council also made it clear that it is prepared
to use the flexibility instrument, if this can be agreed by the
European Parliament.
The Council was firm that it is possible to
meet the EU's share of reconstruction costs in Kosovo without
revising the financial perspective ceilings. At its first reading
the European Parliament did not enter provision for Kosovan reconstruction
or any proposals to use the flexibility instrument, but instead
invited the Council to revise the financial perspective. During
conciliation on 25 November, the Parliament kept to this position.
The European Parliament will meet on 14 December to debate their
second reading of the 2000 budget, and will take a vote on 16
December.
As you mention in your letter there were indeed
constraints given the sensitivities of the negotiations involved.
Nevertheless the UK did not change its approach to Budget Council
from that set down in my letter of 23 November. That is, the UK
Government's view is that it is possible to fund the EU's share
of reconstruction costs in Kosovo from within the financial perspective
ceilings agreed at Berlin. There is no need to revise the IIA
financial perspective ceilings while possibilities for redeployment
and use of the flexibility instrument still exist.
1 December 1999
Letter from Melanie Johnson MP, Economic
Secretary to the Treasury, to Lord Tordoff, Chairman of the Committee
I wrote to you on 1 December 1999 reporting
on the outcome of Budget Council held on 25 November. The issue
of meeting the EU's share of reconstruction costs in Kosovo dominated
that Council. In summary, the Council was firm that it would be
possible to meet the EU's share of reconstruction costs in Kosovo
without revising the new financial perspective ceilings.
At the European Parliament's second reading,
agreement was reached between the Council and the European Parliament
not to revise the funding perspective in order to cover provision
for Kosovan reconstruction, instead funding has been found within
the expenditure ceilings agreed at Berlin, and also includes use
of the 200 million euro flexibility instrument.
As you will be aware, the EC Budget for 2000
was adopted by the European Parliament following its second reading
on 16 December. Total commitments for 2000 therefore now total
93.3 billion euro, (3.4 billion euro below the 1999 Adopted Budget).
Meanwhile, payments now total 89.4 billion euro, (1.5 billion
euro above the 1999 Adopted Budget).
The UK Government position, shared by most other
Member States, was to resist attempts to revise the financial
perspective, and we are therefore extremely satisfied with the
outcome of the established EC Budget for 2000. I will send an
EM on the Adopted Budget for 2000 once we have received a depositable
document.
I also attach an EM on the European Parliament's
first reading of the 2000 Budget held in October 1999, in order
to keep records complete. A depositable document has not been
available until this stage—hence the delay in providing
an EM.
13 January 2000
Letter from Lord Tordoff, Chairman of
the Committee, to Melanie Johnson MP, Economic Secretary to the
Treasury
You wrote to me three times to update the Committee
on the final stages of the procedures on the Budget for 2000.
Your letter of 23 November preceded the 25 November Budget Council,
on which you reported in your letter of 1 December, and your letter
of 13 January told us that the Budget had been adopted. We are
grateful for these letters. But we have been surprised to see
references in the press to relevant matters which the letters
do not mention.
For example, we understand that when the Council
was considering the amendments proposed by the European Parliament
the Commission put forward a letter of amendment which would have
provided a compromise solution. It would have been helpful at
the time to have your reactions to that proposal, which we assume
is the one contained in document 13965/99 (now deposited with
your Explanatory Memorandum of 17 January 2000).
Again from the press, we understand that as
part of the final agreement the Council gave an undertaking to
look again at the ceiling on expenditure in the area of foreign
aid once the Commission had presented its medium-term plan for
assistance to the Balkans, due in April. Reports referred to this
as "a mini-review of the financial perspective". If
these reports are correct, they seem to us to shed a somewhat
different light on the outcome of the budgetary process. We should
welcome your comments.
We do understand the difficulty of keeping Parliament
in touch when business in the EU is moving fast. Similar problems
have of course arisen with the scrutiny of in-year changes to
the 1999 Budget, about which you wrote to me on 17 January. Sub-Committee
A was glad to learn that discussions are in progress between its
Clerk and your officials with a view to improving the process
in future, so that Parliament can fulfil its scrutiny responsibilities.
The Sub-Committee has also asked me to thank
you for your helpful explanation of the circumstances in which
in-year movements of funds have to be made by means of Supplementary
and Amending Budgets rather than by transfers of appropriations.
And members have expressed particular appreciation of the useful
glossary which you provide with all Explanatory Memoranda on budgetary
matters.
26 January 2000
Letter from Melanie Johnson MP, Economic
Secretary to the Treasury, to Lord Tordoff, Chairman of the Committee
Thank you for your letter of 26 January.
I am particularly grateful for the Sub-Committee's
positive comments regarding our advice on Supplementary and Amending
Budgets and transfers, and also on the glossary we provide with
all budget EMs. My attention has been drawn to a minor error in
the glossary concerning agricultural expenditure, and this has
now been addressed.
I am of course keen to ensure that the Government's
scrutiny obligations in respect of the EC budget are carried out
correctly, and always aim to keep you informed of key developments
in the EC Budget process, especially when they have clear implications
for UK policy. I am therefore concerned that you feel my letters
relating to the final stages of the procedures on the Budget for
2000 do not cover certain specific matters.
You refer to the Commission's "compromise
solution" in terms of providing for the EU's share of reconstruction
costs in Kosovo. I can confirm that this proposal is that contained
in document 13965/99, on which I provided an Explanatory Memoranda
on 17 January 2000. I have covered detail of this proposal in
previous letters.
In my letter of 23 November and 1 December,
I mentioned the specific issue of the Commission's proposal for
revising the financial perspective. The first letter referred
to the Commission's pledge of 500 million euro for Kosovan reconstruction,
while the second described in greater detail how the Commission
proposed this money would be found. I did not refer explicitly
to the Commission's proposal as a "compromise", because
in the UK Government's view this approach did not represent compromise.
The Commission's intention was to revise the financial perspective,
in opposition to Council and UK policy. In my letter of 1 December
I clearly set out the UK and Council position in regard to this
proposal—that there must be no revision of the financial
perspectives, and that it was possible to fund the EU's share
of reconstruction costs in Kosovo from within existing expenditure
ceilings. This represented no change from our established UK Government
policy, which is that the expenditure ceilings agreed at Berlin
must not be revised.
You mention that there has been suggestion in
the press that, as part of the final agreement on the 2000 Budget,
the Council gave an undertaking to look again at the ceiling on
expenditure in the area of foreign aid once the Commission had
presented its medium-term plan for assistance to the Balkans,
due in April. I have no record of the Council giving such an undertaking.
The Council was and is firm that the financial perspective ceilings
apply and are not up for revision.
At its second reading of the 2000 EC Budget
the Council did invite the Commission to present a global overview
of the programming of the appropriations under headings 3 and
4 of the financial perspective, within the context of the budgetary
procedure for 2001. The Council asked for this overview (not review)
in order to assist with planning and budgeting in these budget
categories.
In terms of medium-term plans for assistance
to the Balkans, the Commission produced in December a Communication
to the Council and the European Parliament, on which DFID colleagues
provided an EM on 28 January. This Communication included mention
of a "political" financial reference amount of 5.5 billion
euros for EU aid to S E Europe over the 2000-06 period. My understanding
is that we now expect the Commission by the end of April to make
a formal proposal for a new regulation for aid to South East Europe.
I will of course keep you closely in touch with developments on
this proposal.
I attach an Explanatory Memorandum on the Council's
second reading of the EC Budget for 2000. This provides more detail
on the Council's actions, following on from my letter of 1 December.
All financial figures in the EM are provided in euros unless otherwise
specified.
8 February 2000
Letter from Melanie Johnson MP, Economic
Secretary to the Treasury, to Lord Tordoff, Chairman of the Committee
Jimmy Hood wrote to me on 16 February, attaching
reports from Agence Europe detailing the EC 2000 budget
settlement. These reports seem to be written from the viewpoint
of the European Parliament, and paint a rosy yet significantly
flawed picture of the settlement which does not have any foundation.
I assured the Committee again that the Council did not at any
stage agree to revise the financial perspective ceilings for the
2000 budget in order to accommodate aid for Kosovan reconstruction.
I attach an Explanatory Memorandum on the overview
document, (ref: SEC 2000-150), of the adopted budget. This document
is not, however, the final adopted budget document, which we are
yet to receive. My officials have discussed this with the committee
clerk who agreed that provision of an EM on the overview document
will be useful and helpful to the committee at this stage. I hope
it will be of similar use to your committee.
I am also responding to the outstanding points
raised by the Common's committee in its report of 20 October and
16 December 1999. I apologise for the delay in responding to these
questions but am, however, carrying out the committee's recommendations
in responding to these questions now that I am submitting an EM
on the adopted budget, (letter of 19 January). My officials have
also improved the process for receiving committee reports which
will allow me in future to address outstanding issues as promptly
as those made directly by letter.
The Committee asked how provision for Kosovan
reconstruction could be reconciled with the Government's commitment
to increase external aid to the poorest regions in your Committee's
report regarding the Draft Budget. The Adopted EC Budget for 2000
actually increases the proportion of aid going to the poorest
regions—Africa, Asia and Latin America—as a share
of external aid spending, from 18.82 per cent in 1999 to 18.87
per cent in 2000. (This is reflected in the table below.)
| Budget 1999 (million euro)
| Adopted Budget 2000 |
| Co-operation—Asia | 438
| 447 |
| Co-operation—Latin America | 314
| 336 |
| Co-operation—Southern Africa and South Africa
| 127 | 124 |
| Total Category 4 Commitments | 4,672
| 4,806 |
| Percentage of poorest regions as share of Category 4 spending
| 18.82% | 18.87% |
It also asked in its report of 16 December about the prospects
for legal action if the European Parliament created a budget which
exceeded the financial perspectives. My legal adviser's view is
that the Inter-Institutional Agreement (IIA), signed by the European
Parliament, Council and Commission on 6 May 1999, including the
Financial Perspective, is intended to be binding on all three
parties and can be amended only with the consent of all of them
(see in particular paragraphs 2 and 4). Hence the European Parliament
must adhere to the terms of the agreement and if it failed to
do so the Council would have grounds to take action against it
in the European Court of Justice.
If no budget were adopted, in the meantime Article 273 would
apply, which provides for an amount of one twelfth of the appropriations
for the previous year to be made available to the Commission each
month until the matter was resolved.
I am writing to you separately to answer questions raised
by the Commons' committee report concerning exchange rates for
the EC budget, and OLAF.
29 February 2000
Letter from Lord Tordoff, Chairman of the Committee,
to Melanie Johnson MP, Economic Secretary to the Treasury
At its meeting on 14 March, Sub-Committee A considered your
letters of 8 and 29 February about the process of scrutiny of
the EU Budget. I have been asked to thank you for the information
contained in those letters, and to say that the Sub-Committee
will also be interested in your responses on the points where
the House of Commons European Scrutiny Committee has asked for
further clarification.
Attached to your letter of 29 February was an Explanatory
Memorandum on the 2000 Budget, based on the overview document.
The Sub-Committee considered this, but decided to hold the document
under scrutiny until it had been able to consider the full Budget
with the help of your further Explanatory Memorandum.
You will also be interested to know that the Sub-Committee
considered the detailed proposals on the organisation of the Parliamentary
scrutiny of the budgetary process which had been agreed between
your officials and our Clerk. We are very grateful for this co-operation,
and we hope that it will help the scrutiny process run more smoothly
in future, despite the inevitable problem of documents arriving
late.
15 March 2000
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