Detail by expenditure heading
TABLE 2
Sustainable growth—EUR million and
GBP million
| Heading
| 2009 PDB
| Change 2008 to 2009
|
| Commitments
| Payments
| Commitments |
Payments |
| €
| £ |
€ | £
| € | £
| % | €
| £ | %
|
| 1 | Sustainable growth
| 60,104
| 47,494
| 45,199
| 35,716
| 1,766
| 1,395
| 3.0
| -5,121
| -4,047
| -10.2
|
| 1a | Competitiveness for growth and employment
| 11,690
| 9,327
| 10,285
| 8,127
| 608 |
480 | 5.5
| 516 |
408 | 5.3
|
| 1b | Cohesion for growth and employment
| 48,414
| 38,257
| 34,914
| 27,589
| 1,158 |
915 | 2.5
| -5,637
| -4,454
| -13.9 |
15. Overall expenditure in this category for commitments is
€96 million under the Financial Perspective ceiling.
16. In Heading 1a (Competitiveness for Growth and Employment),
the increases in commitment appropriations are largely accounted
for by programmes that the Commission considers key to the implementation
of the Lisbon Strategy for Jobs and Growth. These include the
following:
- 7th Research Framework Programme (increase of €631 million
or 10.4%, following a rise of a similar magnitude last year);
- Competitiveness and Innovation Programme (increase of €71
million or 17.2%);
- Lifelong Learning Programme (increase of €60 million
or 6%).
17. The increase in commitments under Heading 1b (Cohesion
for Growth and Employment) is €1,158 million or 2.5%, while
payments under the Heading decrease by €5,637 million or
13.9%. This is primarily due to a decrease in payments under the
Structural Funds as projects agreed under the 2000-2006 Financial
Perspective reach their conclusion before projects under the current
Perspective are fully operational. The Minister noted that 60%
of structural fund spending goes to wealthier Member States and
that the Government was pushing for fundamental reform in this
area (QQ 3-4). This is an issue we have discussed recently
(European Union Committee, 19th Report (2007-08): The Future
of European Regional Policy (HL 141)).
TABLE 3
Preservation and management of natural resources—EUR
million and GBP million
| Heading | 2009 PDB
| Change 2008 to 2009
|
| Commitments
| Payments
| Commitments |
Payments |
| €
| £ |
€ | £
| € | £
| % | €
| £ | %
|
| 2 | Preservation and management of natural resources (CAP)
| 57,526
| 45,457
| 54,835
| 43,331
| 1,966
| 1,554
| 3.5
| 1,597
| 1,262
| 3.0
|
| Of which market related expenditure and direct payments
| 42,860
| 33,868
| 42,814
| 33,382
| 1,854 | 1,465
| 4.5 |
1,925 | 1,521
| 4.7 |
18. Commitment appropriations under Heading 2 (Preservation
and Management of Natural Resources) rise by €1,966 million
or 3.5%, and are €2,133 million under the ceiling agreed
by the Financial Perspective. 74.5% of commitments under this
Heading are allocated to "Market related expenditure and
direct aids", which receives €1,954 million (4.8%) more
than last year, and 23.3% to "Rural development", which
receives €99 million more (0.7%). The Preliminary Draft Budget
does not take into account the proposals made in the CAP Health
Check, but if its proposals are adopted the Commission plans to
incorporate these before the Draft Budget is finalised.
19. The Government recognised that the increase in direct
payments had already been set by the Financial Perspective, but
signalled their intent to ask the Commission to examine whether
rising food prices would allow further reductions in interventions
in agricultural markets (p 5). However, the Minister did not suggest
that any money released should automatically be diverted to rural
development, but that instead the opportunity should be taken
to reform the Common Agricultural Policy fundamentally with a
decision on where to channel the unused funds to be taken at a
later date (QQ 23-28). This is also an issue which we have
discussed recently (European Union Committee, 7th Report (2007-08):
The Future of the Common Agricultural Policy (HL 54)).
TABLE 4
Freedom, Security, Justice and Citizenship—EUR
million and GBP million
| Heading | 2009 PDB
| Change 2008 to 2009
|
| Commitments
| Payments
| Commitments |
Payments |
| €
| £ |
€ | £
| € | £
| % | €
| £ | %
|
| 3 | Citizenship, Freedom, Security and Justice
| 1,468
| 1,160
| 1,266
| 1,000
| -144
| -114
| -9.0
| -243
| -192
| -16.1
|
| 3a | Freedom, security and justice
| 839
| 663
| 597
| 472
| 110 |
87 | 15.0
| 62 |
49 | 11.7
|
| 3b | Citizenship
| 629
| 497
| 669
| 529
| -254 |
-201 | -28.8
| -306 |
-242 | -31.4
|
20. Proposed commitments under Heading 3 (Freedom, Security,
Justice and Citizenship) leave a margin of €55 million under
the Financial Perspective ceiling. Following a substantial increase
in commitments in last year's Budget, funding for "Solidarity
and management of migration flows" rises by a further 16.6%
(€65 million).
21. The Government expressed concerns about the size of the
margin[4] under this Heading
and stated that they will be looking for reductions in spending
to ensure that there was sufficient reserve to meet any unforeseen
future expenditure (p 5). The Minister explained that these savings
might be achieved by bearing down on unrealistic implementation
forecasts: last year, only 29.6% of the budgeted provision for
"Solidarity and management of migration flows" was spent,
and only 22.7% of funding for "Fundamental rights and justice"
was taken up (QQ 11-14). We support the Government's aim
to ensure that the budget appropriations reflect amounts that
can realistically be spent under each Heading.
22. The decreases in payments and commitments under Heading
3b (Citizenship) are largely due to the presence of €260
million of Solidarity Fund expenditure in the 2008 Budget: due
to its contingent nature, the Solidarity Fund is not allocated
resources in the Budget until an application is approved.[5]
TABLE 5
The EU as a global partner—EUR million and GBP
million
| Heading | 2009 PDB
| Change 2008 to 2009
|
| Commitments
| Payments
| Commitments |
Payments |
| €
| £ |
€ | £
| € | £
| % | €
| £ | %
|
| 4 | EU as a global partner
| 7,440
| 5,879
| 7,579
| 5,989
| 129
| 102
| 1.8
| -533
| -421
| -6.6
|
23. Proposed commitments under Heading 4 are €244 million
under the Financial Perspective ceiling. The Commission highlights
three items that may lead to this margin being used: additional
activity in the Middle East (in line with the priorities of the
2009 Annual Policy Strategy); the settlement of the status of
Kosovo; and the increases in prices on world food markets which
may influence the EU's capacity to meet its food aid commitments.
It is not clear, however, whether the margin is sufficient to
meet these potential additional commitments.
24. The decrease in payment appropriations is largely due
to a €700 million reduction in payments under the Instrument
for Pre-accession Assistance. Notable increases of commitment
appropriations are for the Development and Cooperation Instrument
(by €112 million (5.0%)) and the Instrument for Stability
(by €78 million (42.9%)).
TABLE 6
Administration—EUR million and GBP million
| Heading | 2009 PDB
| Change 2008 to 2009
|
| Commitments
| Payments
| Commitments |
Payments |
| €
| £ |
€ | £
| € | £
| % | €
| £ | %
|
| 5 | Administration
| 7,648
| 6,043
| 7,648
| 6,043
| 366
| 289
| 5.0
| 366
| 289
| 5.0
|
25. The margin under Heading 5 is €129 million. The Commission
explains that the 5% increase in costs is primarily driven by
a 7.6% increase in pension contributions, and a request by the
Commission itself for a 4.5% increase in its own budget. Within
the Commission, IT costs rise by 11.9% and total staff remuneration
by 6.6%. An additional 250 posts—the final tranche of the
850 new posts agreed after the accession of Romania and Bulgaria—are
scheduled to be created. Over one quarter of these posts will
work in the translation and language services. Other than these
250 positions, the Commission is not recruiting any additional
staff. The Government indicate their commitment to ensuring that
efficiency gains are being made (p 5).
26. We asked the Minister about the Government's plans to
"closely scrutinise the efficiency of the EU agencies"
(p 5).[6] The Minister
and her officials highlighted the declaration made last summer
that required the Commission to provide budgetary estimates of
the staffing and surpluses of agencies, and the February Council
conclusions that pushed for a review of the efficiency of the
agencies (QQ 29-34). The Minister highlighted that the year-on-year
increase in commitment appropriation for agencies was 1.8% (p
19). This is below the rate of growth of commitment appropriations
for the budget as a whole (3.1%). We welcome the initiatives
to enhance scrutiny of the EU agencies and look forward to a review
of their efficiency.
27. The Minister explained that no decisions
on Lisbon Treaty implementation would be made until ratification
in all Member States has occurred. As a consequence, this Preliminary
Draft Budget had not included costs for the institutional innovations
introduced by the Treaty such as the new status of the High Representative
for Foreign Affairs and Security Policy or the European Council
President (Q 2).
28. Finally, Heading 6 of the budget provides
for compensation payments to Bulgaria and Romania. These aim to
improve cash-flow in their national budgets and finance control
actions at the new external borders of the Union. This is the
sixth and final year that these payments will be made.
The 2008/09 Budget Review
29. The European Council of December 2005 agreed
that the Commission "should carry out a comprehensive reassessment
of the financial framework, covering both revenue and expenditure,
to sustain modernisation and to enhance it, on an ongoing basis".
The Commission was asked to conduct a "full, wide ranging
review covering all aspects of EU spending, including the CAP,
and of resources, including the UK rebate, to report in 2008/9".[7]
30. This review began in late 2007 with the publication
of a consultation paper by the Commission. Responses to the paper
were initially required by mid-April, and we submitted a response
before that deadline, which is published in Appendix 2. The Commission
then extended its deadline to 15 June, four days after the evidence
session with the Minister. The Minister emphasised that the delay
was to enable more submissions to be made, rather than because
the Commission had lost interest in reform (QQ 37-38).
31. We asked the Minister whether the Government
planned to make a formal response to the Review. We were told
that while the Government had submitted "an enormous amount
of informal views", they had not yet decided whether to make
a formal submission (QQ 39-43). The Government did later
decide to respond to the consultation[8]
and called for the re-orientation of the budget towards three
areas:
- Building a prosperous Europe within
a strong global economy;
- Addressing the challenges of climate change;
and
- Ensuring security, stability and poverty reduction.
The Government calls for the abolition of price support
and direct intervention in agricultural markets, and for other
payments under the CAP to focus on delivering environmental benefits
to society that would not otherwise be delivered by the market.
The Government also argues that funding for the Competitiveness
and Employment Objective of the EU's regional policy, currently
available to all but the poorest regions in the EU, should not
be available to richer Member States.
32. Further progress on the budget review is
expected later this year, and we shall return to this subject
when the Commission publishes its proposals for change.
Public understanding of the EC
Budget
33. The Government's focus on climate change
follows the Commission's emphasis on the environment in its press
release about the 2009 Preliminary Draft Budget.[9]
The press release indicated that 10% of funds would be spent on
environmental targets and we took the opportunity to ask the Government
whether enough money was allocated in the draft budget to climate
change issues. The Minister said that the issue was "a very
real and pressing challenge, but simply translating that into
requiring a large budget line does not automatically logically
follow" (Q 18). The Minister highlighted different projects
under various budget Headings which were all related to climate
change issues, and indicated that the Government believed climate
change to be "a more valid area for EU work than the Common
Agricultural Policy" (Q 20).
34. The Minister agreed that the distribution
of funds for action on climate change under different Headings
did not facilitate public understanding of the budget. She suggested
that the different initiatives should be listed more clearly in
a note to the budget that could be used to highlight the total
expenditure on this subject (Q 18). We would welcome the
provision of consolidated figures for related expenditure on particular
topics that are distributed across several Headings in the budget,
and hope that the Government will take forward this suggestion
with the Commission.
2 The Government uses the exchange rate on 30 April
2008, €1 = £0.7902, in its Explanatory Memorandum. Last
year's equivalent used the rate on 31 May 2007, €1 = £0.6801.
This results in is a rise in sterling of 16.1%. Back
3
VAT, GNI and UK abatement payments are converted from the euro
figures shown in the adopted EC Budget, or any amending Budgets,
using the exchange rate on the last working day of the preceding
year. Back
4
Margin is the difference between planned commitment appropriations
and the expenditure ceilings set out in the Financial Perspective.
Back
5
The Solidarity Fund provides aid to Member States and countries
negotiating accession in the event of a major natural disaster.
Back
6
A number of specialised and decentralised EU agencies have been
established to support the Member States and citizens. Each focuses
on tasks of a legal, technical and/or scientific nature. Back
7
15915/05. Back
8
HM Treasury Global Europe: vision for a 21st century budget,
June 2008. Back
9
European Commission Press Release IP/08/695, 6 May 2008. Back
