Select Committee on European Union Thirty-Third Report

PART 4: Proposals for reform of the budget process

39.  The Convention on the Future of Europe considered the EC Budget in some detail. Working Group IX on Simplification was mandated to consider the EU budgetary process and recommended a simplification of the current procedures. Two discussion circles on the Budget and Own Resources looked in more detail at ways of reforming the EC Budget and their conclusions informed the relevant articles in the draft constitutional Treaty. The Government has been active in influencing the Convention outcomes in general and on the Budget in particular, as has Lord Tomlinson, one of the House of Lords representatives on the Convention.

40.  The draft constitutional Treaty introduces a number of changes to the EC Budget that would affect the process by which it is agreed and both the revenues and expenditure side of the Budget. For revenues, the draft Treaty maintains current arrangements whereby the ceiling of own resources and the introduction of new own resources is decided by unanimity in the Council with national ratification and after consultation of the European Parliament.[15] As the Minister said, this means "there can be no increase in the overall ceilings for the EU Budgets without the agreement of this Parliament and there is no question of European tax being imposed on the UK" (Q 41).

41.  However, the draft Treaty proposes a change to the decision-making procedure for determining the level of individual Member State contributions to the Union's resources which would allow decisions to be reached by qualified majority vote without national parliamentary ratification and subject to the consent of the European Parliament.[16] At present, such decisions must be reached by unanimity, with national parliamentary ratification and after consultation with the European Parliament. The Minister said that this proposal "would mean that changes to the Own Resources decisions directly affecting the level of UK contributions [to the EU] could be taken out of the hands of the UK Government and Parliament" (Q 41). We concur with the Government's view that the changes to the system of Own Resources proposed in the draft Constitutional Treaty are "unacceptable" (Q 41). We support the Government in its efforts to retain the status quo for decision-making in this area.

Proposed Changes to Budget Expenditure

42.  The draft constitutional Treaty introduces three main changes to the expenditure side of the Budget. The first is to give legally-binding status to the Financial Perspectives under the new title of Multi-Annual Financial Framework.[17] Like the Financial Perspectives, the Multi-Annual Financial Framework would set binding expenditure ceilings for the categories of spending for a period of at least five years. At present, Financial Perspectives are agreed inter-institutionally between the Council, the European Parliament and the Commission (see above, paragraph 9). As a result, decision-making in this system can be opaque. By giving a Treaty base to the Financial Framework, transparency of the budgetary process should be enhanced.

43.  The draft Constitutional Treaty also proposes simplifying the complicated annual budget procedure. The draft Treaty proposes a streamlined procedure with a single reading in the Council and the European Parliament, and with both institutions having a say on all expenditure. This would replace the present system in which the European Parliament has the last word on non-compulsory expenditure and the Council has the last word on compulsory expenditure (Q 41). We welcome the proposal that the European Parliament should have a greater say over spending on agriculture.

44.  The third key change on Budget expenditure proposed in the draft Treaty concerns a further drive for value for money. If adopted by the IGC, the Commission will be required to produce a performance report to accompany the financial accounts each year.[18] It is hoped that this performance report will provide an opportunity for an output-focused analysis of the use to which EC spending has been put.

45.  The proposals for a Treaty base for the Financial Perspectives, the simplification of the annual budgetary process and the requirement for the Commission to produce an annual performance report, if adopted, would greatly aid our future scrutiny of EC spending. We welcome these reforms as facilitating greater accountability for EC spending and urge the Government to continue to support these reforms in the Inter-Governmental Conference, which will decide on the final version of the Treaty. We support the Government in its efforts to retain unanimity and the need for national parliamentary ratification for decisions about the level of individual Member State contributions to the Union's resources.

15   CONV 820/1/03 Art. I-53.3 Back

16   CONV 820/1/03 Art. I-53.4 Back

17   CONV 820/1/03 Art. I-54. Back

18   CONV 568/03; CONV 634/03 and CONV 635/03. Back

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