EC BUDGET 2007
Letter from Ed Balls MP, Economic Secretary,
HM Treasury to the Chairman
As you are probably aware the Council of the
European Union formally agreed the 2007 Draft Budget (DB) of the
European Communities at the ECOFIN (Budget) Council on 14 July,
following conciliation with the European Parliament. The DB was
based on a package put together by the Finnish Presidency following
discussions of the Commission's 2007 Preliminary Draft Budget
(PDB) in the Council's budget committee.
My Explanatory Memorandum of 23 May 2006 set
out the PDB proposals in detail. The DB documents will be published
in the autumn and discussed further at the Council's second reading
in November, following amendments and modifications proposed by
the European Parliament in its first reading in October. The main
features of the DB are set out below.
— The DB proposes a total of €125,
756.0 million in commitment appropriations, and €114,613.0
million in payment appropriations[9].
This represents a reduction of €1,068.0 million (or 0.8 per
cent) for commitments and €1,805.0 million (or 1.6 per cent)
for payments compared to the Commission's PDB. These figures are
well within the ceilings set by the mulit-annual Financial Perspective
(FP), leaving an increased margin of €2,651.0 million under
the FP ceiling for Commitments. The reductions are made up of
targeted reductions to the proposed increases for specific programmes
reflecting the Council's estimate of actual financing needs for
2007, reductions to increases to reflect the quality of certain
Activity Statements for upcoming spending and reductions to increases
in budgets of decentralised agencies to ensure these are subject
to the same budget discipline as other institutions.
— In Heading 1 a (Competitiveness for
Growth and Employment), commitment appropriations were reduced
by €13.9 million and payment appropriations by €176.0
million compared to the PDB, leaving a margin of €135.8 million
below the FP ceiling for commitments. This reduction is mainly
made up of targeted reductions in increases for specific programmes
to reflect the Council's estimate of actual financing needs during
2007. Most noteworthy are the reductions in payment appropriations
proposed for:
— the Security and Space Research programme
(-€50.0 million); and
— the Completion of the sixth EC framework
programme (-€48.0 million).
A reduction of €29.1 million and of €22.2
million was made to commitment and payment appropriations respectively
on the basis of the quality of Activity Statements. A 2 per cent
reduction to the level of commitments and payments proposed for
the Lifelong Learning programme make up the bulk of this reduction.
The increases proposed for decentralised agencies were reduced
by €8.78 million for both commitments and payments.
— In Heading l b (Cohesion for Growth
and Management), commitment appropriations were not reduced, but
the massive increase in payment appropriations was trimmed by
€425.0 million. This reduction is split between the completion
of Structural Fund and European Regional Development Fund programmes
for 2000-2006 (-€345.0 million), the completion of EQUAL
programme for 2000-2006 (-€10.0 million), and the completion
of specific budget lines of Structural Funds prior to 2000 (-€70
million). These cuts are designed to bring payment appropriations
more closely in line with implementation capability, and thereby
minimise the budget surplus.
— In Heading 2 (Preservation and Management
of Natural Resources), commitment and payment appropriations for
agricultural expenditure were reduced by €746.4 million and
€787.6 million respectively compared to the PDB. This leaves
a margin of €1879.9 million below the FP ceiling for commitments.
Rural Development spending has not been affected by these reductions,
the bulk of which come from:
— across the board-reduction in all
budget lines dedicated to Interventions in agricultural markets,
excluding lines subject to specific reductions (-€365.0 in
both commitments and payments),
— accounting clearance of previous
years' accounts with regard to shared management expenditure under
the EAGGF Guarantee Section and under the EAGF (-€205.0 million
in both commitments and payments); and
— refunds for milk and milk products
(-€150.0 million in both commitments and payments).
— In Heading 3a (Freedom, Security
and Justice), commitment appropriations were reduced by €9.6
million and payment appropriations by €26.8 million compared
to the PDB, leaving a total margin of €75.3 million under
the FP ceiling for commitments. The overall reduction was mainly
achieved through: targeted reductions to specific budget lines
where the justification for increases in funding in the PDB was
poor (Visa information system, European Refugee Fund and European
Fund for Third Country Nationals), and a reduction to Decentralised
Agencies, the European Union Agency for Fundamental Rights, Eurojust
and Frontex in particular, to take account of implementation capacity.
— In Heading 3b (Citizenship), commitment
appropriations were reduced by €16.4 million and payment
appropriations were reduced by €31.6 million compared to
the PDB, leaving a total margin of €49.4 million under the
FP ceiling for commitments. This represents reductions to specific
budget lines where the justification for funding was poor (Local
Actions, Specific actions on priority themes, Completion of Public
Health Programme and Transition Facility for new Member States),
reductions to subsidies for certain agencies (in particular European
Food Safety Authority), and modest reductions on the basis of
poor Activity Statements (eg: Developing Cultural Co-operation
in Europe).
— In Heading 4 (European Union as a
Global Partner), commitment appropriations were reduced by €109.6
million and payment appropriations by €185.8 million compared
to the PDB, leaving a total margin of €219.6 million below
the FP ceiling for commitments. This allows for an increase of
€17.5 million for assistance for the reconstruction in Iraq
in 2007 compared to the PDB. The reductions were mainly achieved
through horizontal top-slicing of big geographical budget lines
(totalling €144.3 million for commitments and €179.0
million for payments). Reductions to increases of €5.0 million
to commitments and €6.6 million to payments were also made
on the basis of poor Activity Statements (International and Financial
affairs and European initiative for democracy and human rights),
and a modest reduction to the increase in subsidies was applied
to the European Training Foundation (decentralised agency). There
was a general lack of Council consensus on priorities under this
Heading. To achieve the increase in funding for the reconstruction
of Iraq, the Government agreed to include the following in the
horizontal reduction:
— Adjustment Support for Sugar Protocol
Countries; and
— Co-operation with Developing Countries
in Asia.
— In Heading 5 (Administration), the
big increase in commitment and payment appropriations was reduced
by €172.0 million compared to the PDB, leaving a total margin
of €290.3 million below the FP ceiling for commitments. This
has mainly been achieved by a proposal to delete every second
post becoming vacant following the retirement of their incumbents
in the period 2007-13. The reduction to the increase proposed
for the administration budget is designed to ensure that appropriations
for administration are based on a realistic assessment of operation
needs, taking into account the increased demands resulting from
enlargement while exploiting the possibilities for economies of
scale and redeployment of existing staff resources.
— There were no changes to the PDB
proposal for Heading 6 (Compensations).
Tables summarising the changes between the PDB
and DB are set out in Annex 1 to this letter.
— The Government believes the Council's
2007 DB goes a considerable way to meeting its key objectives.
In particular the DB maintains budget discipline: it significantly
reduces the level of payment appropriations in Headings 1 and
2, to reflect a more realistic forecast of implementation, it
has protected increased allocations for Iraq and other UK priority
areas (Adjustment Support for Sugar Protocol Countries, Co-operation
with Developing Countries in Asia, Humanitarian Aid and CFSP)
and it takes a rigorous approach to expenditure in Headings 3
and 5, delivering savings and increased flexibility. In addition,
the 2007 DB remains fully consistent with the financial settlement
agreed in December 2006 and continues to cater for the needs of
enlargement in a budget-disciplined fashion. The Government will
continue to pursue its key objectives in the subsequent stages
of the 2007 budget process.
AMENDING LETTER
NUMBER 1 TO
THE PRELIMINARY
DRAFT BUDGET
2007
Amending Letter No. 1 takes account of more
up-to-date Member State forecasts of their VAT and GNI bases,
Agricultural and Customs Duties, and Sugar Levies (Traditional
Own Resources) for 2007. The Advisory Committee on Own Resources
agreed these forecasts in Brussels on 19 May 2006. This meeting
(held annually) usually takes place before the Commission publishes
the PDB but this year this was unable to happen as certain key
figures were unavailable. As a result of the rescheduling of this
meeting the European Commission was obliged to produce the PDB
using old data, with the proviso that this would be amended once
the Advisory Committee on Own Resources had met. Amending Letter
Number 1 honours this commitment.
7 September 2006
9 For Pound Sterling figures, please refer to the
summary table in Annex 1 of this letter. Back
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