EC BUDGET FOR 2003
Letter from the Minister, Ruth Kelly,
to the Chairman
The Commission has presented the Preliminary
Draft Budget (PDB) for 2003. I enclose an Explanatory Memorandum
outlining the proposals contained in the PDB. The PDB proposes
total commitment appropriations of just over
100 billion and payment appropriations of
A number of documents which make up the PDB
have not yet been received. These will be deposited as soon as
we get them. In some cases we may send you unpublished versions
in advance of the formal document, for example I enclose with
this letter the "Political Presentation" and "Expenditure
Analysis by Activity" which constitute Volume 0 of the PDB.
The Council will establish its Draft Budget
for 2003 on 19 July.
4 July 2002
Letter from the Minister, Ruth Kelly,
to the Chairman
The Council of the European Union formally established
the 2003 Draft Budget (DB) of the European Communities on 22 July
following conciliation with the European Parliament. The background
was set out in my Explanatory Memorandum of 5 July on the Preliminary
Draft Budget (PDB). I represented the UK at the ECOFIN (Budget)
Council on 19 July.
The Draft Budget documents will be published
in the autumn and discussed at the Council's Second Reading in
November. I thought it would be helpful to provide you now with
information on the main elements of the Draft Budget agreed by
The Draft Budget proposes a total of
99.5 billion in commitment appropriations and
97.0 billion in payment appropriations, reducing
the level of commitment appropriations by
487 million and payments by
1,249 million from the Preliminary Draft Budget (PDB).
These figures are well within the limits set in the Financial
Perspective, leaving a margin of
5.9 billion under the ceiling for total payment appropriations.
In conciliation the Council and the European
Parliament agreed to maintain good budget discipline by refusing
to agree the Commission's proposals to exceed the ceilings on
the Structural Funds and Administration by a total of
through the use of the flexibility instrument (established in
the Inter-institutional Agreement of 1999 on budgetary discipline).
In addition, the Council and the Parliament agreed to limit the
overall growth in payment appropriations as close as possible
to 1.4 per cent (1.0 per cent of GNI).
In Category 1 (Agriculture), commitment appropriations
were cut by
288 million compared to the PDB, to
44.8 billion, leaving a margin of
2.5 billion below the financial perspective ceiling.
A declaration was agreed stating that a supplementary and amending
budget (SAB) would be raised rapidly if payments proved insufficient.
In conciliation Parliament and Council agreed another declaration
noting that the Commission will further examine whether the amount
proposed in the PDB for animal disease eradication is sufficient.
In Category 2 (Structural Funds), payment appropriations
were reduced by
525 million compared to the PDB. A declaration was
agreed calling on the Commission to bring forward a SAB rapidly
if payments proved insufficient. In rejecting use of the flexibility
instrument of fishing fleet restructuring, the Council and Parliament
adopted a declaration committing themselves to finding a way of
financing the outstanding
27m before the end of the 2003 budget setting process.
In Category 3 (Internal policies), commitment
appropriations were reduced by
41 million compared to the PDB, bringing the overall
6.7 billion and leaving a margin of
122 million below the financial perspective ceiling.
In Category 4 (External actions), the margin
was increased to
80 million (from
60 million in the PDB), bringing total commitments
In Category 5 (Administration), commitment appropriations
were reduced by
101 million compared to the PDB, creating a margin
16 million below the financial perspective ceiling,
thereby avoiding use of the flexibility instrument. The reductions
were achieved through cuts to the budgets of all the institutions.
In conciliation the Parliament agreed to respect the financial
perspective ceiling and the Council's own budget and rejected
use of the flexibility instrument. In return, the Council accepted
that an early retirement scheme would include temporary staff
employed in the Parliament's political groups but noted that this
would not cause a precedent. In addition, a declaration was agreed
noting that the Inter-Institutional Agreement allows the Emergency
Aid Reserve to be used for humanitarian aid and, where circumstances
require, civilian (ie non-military) crisis operations.
In Category 7 (Pre-accession aid), commitments
were left unchanged but payments for SAPARD were cut by
200 million and ISPA by 100 million compared to the
The European Parliament will establish its First
Reading of the 2003 budget in October. The Council's Second Reading
and a further conciliation with the Parliament will take place
on 25 November. The final budget will be adopted after the Parliament's
Second Reading in December.
I attach a table comparing the Draft Budget
with the PDB and the 2002 adopted budget.
6 August 2002
COMPARING THE 2003 PDB, 2003 DB AND 2002
ADOPTED BUDGET (millions of euros)
|2002 adopted budget|
| 2003 PDB || Council 1st reading
|| Change: Council 1st reading/20002 budget
NB Figures may not add up due to rounding.
Com: Commitments, leading to payments in 2003 and future
Pay: Payments, cash that will be spent in 2003 arising from
commitments in 2003 and earlier years.
Letter from the Minister, Ruth Kelly, to the Chairman
I wrote to you on 6 August describing the outcome of the
ECOFIN Budget Council of 19 July which established the Draft EC
Budget for 2003. We have now deposited the Draft Budget published
by the Council and I enclose an EM formally recording its content
In its report on my letter (reference 23844) the House of
Commons European Scrutiny Committee asked to be kept informed
about the outcome of the European Parliament's first reading and
of the Government's approach to the Council's second reading and
conciliation on 25 November.
The European Parliament (EP) held its first reading on 24
October. The results were posted on its website and I am pleased
to set out the main points below. The EP increased commitment
672 million (1 per cent) and payment appropriations by
2,942 million (1 per cent) compared to the Council's Draft Budget.
It is usual for the EP to increase the budget at this stage before
conciliation with the Council at second reading. The increases
were made across the various categories of the budget.
In Category 1 (Agriculture), the EP reversed most of the
cuts made by the Council to the Commission's Preliminary Draft
Budget. In category 2 (Structural operations), the EP reversed
the reduction of
525 million in payment appropriations made by the Council and
added a further
500 million in payments for the Cohesion Fund. The EP increased
commitment appropriations in Category 2 by
27 million, in line with the Commission's PDB proposal to use
the flexibility instrument for fleet restructuring.
In Category 3 (Internal policies), the EP made increases
to a wide variety of lines and introduced new lines for pilot
projects in many areas. The result was a reduction in the Category
3 margin from
122 million to only
In Category 4 (External actions), the EP's largest increase
was for the poverty-related diseases line, including the Global
Fund to fight Aids, Tuberculosis and Malaria. The EP also increased
a range of other lines, which resulted in commitments exceeding
the Category 4 ceiling by
75 million. The EP proposed use of the flexibility instrument
to meet this expenditure.
The EP has reduced spending on Common Foreign and Security
40.7 million in the Council's Draft Budget to
30 million, the level in the 2002 adopted budget. The EP is also
seeking a greater role in CFSP decision-making.
In Category 5 (Administration), the EP kept to the terms
of the agreement reached in conciliation at the July Council and
ensured that spending on pre-enlargement administrative costs
can be met from within the Financial Perspective ceiling. As a
result of frontloading certain expenditure to 2002, it was able
to reallocate appropriations from the Parliament's budget to the
Commission's budget to enable the latter to recruit 500 temporary
staff for enlargement preparations.
No changes were made to Category 6 (Reserves), which remains
at the level in the PDB. In Category 7 (Pre-Accession aid), the
EP increased payments appropriations over the Council's Draft
The Government's view of the Parliament's increases to the
Draft Budget is that, in general, they will need to be reduced
at the second reading in order to maintain budget discipline and
keep within the Financial Perspective ceilings. This view is broadly
shared by other Member States. The Council will, however, need
to make some concessions to the Parliament's changes as part of
the normal process of conciliation.
Notwithstanding the need to reduce the overall levels of
expenditure proposed by the Parliament, the Government welcomes
the priority which the EP has given to spending on poverty-related
diseases. We are working within the Council to ensure that this
priority is recognised in conciliation with the EP.
The Government's priorities for the Council meeting and conciliation
are therefore to maintain budget discipline by reversing or reducing
most of the EP's first reading amendments, while increasing the
poverty focus of the external aid budget by encouraging the Council
to accept as much as possible of the EP's increase for poverty-related
diseases. The Government also wishes to protect the budget for
Afghanistan and to reject EP demands for greater involvement in
CFSP, which, under the EU Treaty is a matter for Member States.
On payments appropriations the Government would expect the
Council to press for a significant reduction in the increases
made by the EP as the level of payments in the Council's Draft
Budget should be sufficient to cover all outstanding commitments
and it would wish to avoid repeating the large surpluses of recent
In Category 5, the Government is pleased that the Parliament
has been able to assist the Commission with its pre-enlargement
expenditure. There may be some room for a further increase in
the Category 5 margin due to a downward revision of assumptions
for staff pay rises.
In its report on my letter of 6 August, the Committee asked
for confirmation that the Government was generally content with
the way the 2003 budget was developing. We are content that the
Council's Draft Budget maintained budget discipline and achieved
an incremental increase in the poverty focus of external aid.
Ideally, we would have liked it to go further in terms of a greater
poverty focus and for this reason we are keen to reach an agreement
with the EP that will help achieve that aim.
20 November 2002
Letter from the Minister, Ruth Kelly, to the Chairman
I wrote to Lord Brabazon on 20 November enclosing a EM on
the 2003 Draft EC budget and explaining the Government's approach
to the Council's second reading. This took place at the ECOFIN
of 25 November immediately after conciliation with the European
Parliament. I represented the UK.
I am pleased to say that the outcome of the conciliation,
and hence the Council's second reading, is a Draft Budget which
respects firm budget discipline, restricting growth in payments
appropriations at the end of the 2003 budgetary procedure to only
1.9 per cent over the 2002 budget, and limiting the use of the
flexibility instrument to a minimal call of
12 million (out of a maximum of
200 million) for restructuring of the Community fishing fleet.
The outcome also secures other key UK priorities including sufficient
resources for the Global Health Fund and increased funding for
Common Foreign and Security Policy, without concession to the
EP in terms of powers over CFSP decision making.
The key issue in this year's conciliation was spending on
external policies (Category 4), in particular the budget for CFSP
and the allocation for the Global Health Fund. In conciliation
the EP agreed to a CFSP budget for
47.5 million (up from
30 million in 2002) in exchange for a joint declaration on improving
the flow of information between Council and EP which respects
the powers of the institutions as set out in the Treaty and the
1999 Inter-Institutional Agreement. Appropriations for the Global
Health Fund were increased from
35 million to
42 million, with a declaration stating that a similar amount would
be provided from the European Development Fund (which is not part
of the EC budget) and that the Commission will take the necessary
steps to maintain a seat on the board of the GHF should this contribution
The budget authority also agreed to provide
55 million in emergency aid for the Horn of Africa in 2002, with
offsetting decreases to food and humanitarian aid lines in 2003.
In order to ensure sufficient funds for emergency relief in 2003,
it was also agreed that if the appropriations for food and humanitarian
aid prove insufficient, the budget authority will take the necessary
action to reinforce these lines.
The level of Category 1a (traditional CAP) expenditure was
40,082 million, 1.1 per cent more than in 2002. The figure is
lower than at the Council's first reading and reflects the proposals
for cuts included in the Commission's Amending letter No 3 (see
my EM of 20 November on document SEC(2002)1144). In conciliation
the Council accepted, in the interest of transparency, the EP's
request to split the budget line for beef and veal export refunds
between meat and live animals, but it did not reduce the corresponding
appropriations. Funds for rural development (Category 1b) were
The budget authority welcomed the Commission's announcement
that it is now able to find
15 million of the outstanding
27 million for fishing fleet restructuring through redeployment
in 2002. Therefore, the budget authority was able to agree to
a call of only
12 million on the flexibility instrument in Category 2 (Structural
operations) to finance the remaining tranche of the programme.
As a result of the conciliation the budget authority accepted
an EP proposal for a joint declaration welcoming new pilot projects
in Category 3 (Internal policies). In addition, the Council accepted
the EP's proposals for increased spending on transport programmes
and on the European Refugee Fund.
In Category 5 (Administration) the budgets for the EP and
the Council were fixed at
1.1 billion and
0.4 billion respectively. The Council invited the EP to include
a margin of
30 million under the financial perspective ceiling when it finalises
the administrative budgets for the other institutions.
Category 6 (Reserves) remains at the level of the PDB. In
Category 7 (Pre-accession aid) the Council reinstated its first
reading figure for payment appropriations, which the EP had increased
250 million. The budget authority accepted the Commission's proposal
to increase the estimated surplus on the 2002 budget from £500
1 billiion and enter this as revenue in the 2003 budget.
While the key aspects of next year's general budget have
now been agreed, some aspects of the final budget will only be
settled at the EP's second reading which will take place on 19
December . These include setting total commitments for Categories
3, 4 and 5, and hence also the margins under the respective commitments
ceilings. The EP can also change the levels of payments for non-compulsory
expenditure from Council second reading, but is bound by the agreement
reached in conciliation to limit the total growth of payments
to 1.9 per cent.
I attach a table comparing the Council's 2nd reading with
the EP's, 1st reading, the Council 1st reading, the PDB and the
2002 adopted budget.
I am writing in similar terms to the Chairman of the House
of Commons European Scrutiny Committee and am copying this letter
to Sir Andrew Turnbull.
6 December 2002
|2002 adopted budget3
||2003 PDB ||Council 1st reading
||EP 1st reading ||Council 2nd reading
NB Figures may not add up due to rounding.,
Com: Commitments, leading to payments in 2003 (2002 in
the case of the 2002 adopted budget) and future years.
Pay: Payments, cash that will be spent in 2003 (2002)
arising from commitments in 2003 (2002) and earlier years.
Letter from the Minister, Ruth Kelly to the Chairman
I am writing to advise you that the European Parliament adopted
the general budget of the European Communities for 2003 at its
plenary session on 19 December. This marks the close of the 2003
budget exercise. In your letter of 11 December you asked me to
give a final account after the adoption of the 2003 budget. A
summary of the main results of the budget procedure is set out
below. Key figures can be found in the attached table.
The 2003 adopted budget is consistent with the financial
perspective ceilings agreed by the European Council in 1999. It
respects the commitment ceiling for each category of expenditure,
and leaves a margin below the overall ceiling for both commitments
and payments. The use of the
200 million flexibility instrument was limited to only
12 million, which will be used to fund the restructuring of the
Community fishing fleet. In establishing its second reading the
European Parliament has respected the package agreed in the November
conciliation between Council and Parliament, including extra resources
for the Global Health Fund and for the Common Foreign and Security
Policy. The result of the conciliation was covered in my letter
of 6 December.
The adopted budget includes
99.6 billion in commitment appropriations, leaving a margin of
2.63 billion below the total financial perspective ceilings. Commitment
appropriations have been increased by 0.25 per cent compared with
the 2002 budget. Total payment appropriations amount to
97.50 billion or 1.02 per cent of GNP. The increase in payment
appropriations was limited to 1.9 per cent as agreed at the conciliation.
The level of CAP spending (Category 1A) was already agreed
at the Council second reading, as the Council has the final say
over this part of the Community budget. The appropriations for
rural development (Category 1B) are budgeted up to the Financial
Perspective ceiling of
4.7 billion. The European Parliament voted to split the budget
line for export refunds to separate exports of meat and live animals.
The total allocation for agriculture is
44.78 billion, leaving a significant margin of
As agreed in conciliation at the November ECOFIN, an additional
12 million was allocated to Category 2 (structural operations)
through the mobilisation of the flexibility instrument, to finance
the final tranche of the programme for restructuring the Community
fishing fleet after the non-renewal of the fishing treaty with
Morocco. The Parliament increased the payment appropriations for
Category 2 by
150 million compared to the Council's second reading.
As usual, the European Parliament reinforced many of the
Category 3 (internal policies) budget lines according to its own
priorities. The total commitments for internal policies amount
97 million above the Council's second reading. The main increases
were in information and communication (
27 million), labour market and technological innovations (
20 million) and educations (
11 million). As a result of these and other increases the Category
3 margin was reduced to
In Category 4 (External Actions) the European Parliament
respected the agreement reached in conciliations to increase the
CFSP budget to
47.5 million and to secure a seat for the Commission on the board
of the Global Health Fund by including
42 million for the Fund in the budget (to be complemented by a
similar amount from the European Development Fund). For transparency
reasons the EP created a separate new budget line for aid for
Afghanistan with an allocation of
124 million (further funds for Afghanistan can be provided from
other lines, such as the humanitarian aid line). Elsewhere in
Category 4 the Parliament made a number of changes compared to
the Council's second reading. Additional funds were made available
for, among other things, East Timor (
6 million) Latin America (
13 million), TACIS (
17 million) and democracy and human rights (
17.5 million). the total commitments for External action amounts
4,949 million, leaving a margin of
The budget for administrative expenditure totals
5.4 billion. This will allow the Commission to recruit 500 temporary
staff from the accession countries to help prepare the institutions
for enlargement. The use of the flexibility instrument was avoided
through frontloading some administrative spending to 2002, and
the final budget therefore meets enlargement related needs while
leaving a margin of
21 million under the Category 5 ceiling.
The total commitments for pre-accession aid amount to
3.4 billion, unchanged from the PDB and the Council's second reading.
The parliament decided to increase the payment appropriations
for Category 7 by
150m from the Council second reading.
21 January 2003
2003 EC Budget
|Council's First Reading Draft|
of Amendment 1)
|Total Commitment appropriations||102,315
|Total Payments appropriations||102,938
|Payments as a percentage of Community GNP
This figure includes 66m for administration and 27 million for
fishing fleet restructuring as proposed in the Preliminary Draft
Budget and 32 million for Common Fisheries policy reform measures
proposed in an Amending letter to the PDB (COM 2002 399 final). Back
Including 170 million in staff contributions to the pension scheme. Back
Including Supplementary and Amending budgets 1-5. Back
including 170 million in staff contributions to the pension scheme. Back