APPENDIX 2: THE COMMITTEE RESPONSE TO
THE 2008/9 EU BUDGET REVIEW CONSULTATION PAPER
1 Has the EU budget proved sufficiently responsive
to changing needs?
No. The allocation of funding from the EU Budget
remains dominated by historic influences. We welcome the review
as an opportunity to remove many of these and start afresh with
a budget which is suitable for the issues which the community
currently faces.
2 How should the right balance be found between
the need for stability and the need for flexibility within multi-annual
financial frameworks?
We support the principle of multi-annual financial
frameworks. The stability and certainty of funding that they produce
is particularly welcome for regions and projects that are receiving
funds from the Cohesion and Structural Funds, and similar schemes,
as it allows the project managers to plan over several years rather
than rush to distribute funding.
3 Do the new policy challenges set out in
the consultation document effectively summarise the key issues
facing Europe in the coming decades?
Yes. The list of challenges in section 2.1 of the
document is comprehensive and wide-ranging. As the document implies,
financial resources are just one policy lever that is available
to the commission, and we would not expect the European Union
budget to have to fund activities under all of these headings.
National governments must take steps to address many of these
factors themselves. All areas clearly need to be properly justified
against the criterion of EU value added.
4 What criteria should be used to ensure that
the principle of European value added is applied effectively?
The Consultation Paper summarises the case for spending
from the EU budget. European action should provide clear additional
benefits compared to action by individual Member States alone
in pursuing policies that promote the European common interest.
It is important to remember that the Commission can act as a repository
of information and best practice, and co-ordinate Member States'
activities, rather than directly spending money itself.
5 How should policy objectives be properly
reflected in spending priorities? What changes are needed?
Direct income support under the CAP should be progressively
phased out over the course of the next Financial Perspective.
A significant proportion of the funds released should remain earmarked
for the rural development element of the policy. There is a place
for collective EU investment in ensuring that Europe has a dynamic
economy—because that depends on the EU as a whole improving
capacity and therefore investment in innovation and human capital.
As long as the principle of subsidiarity is respected, we believe
there is a place for collective EU investment in Research and
Development (R&D), education and infrastructure programmes,
but this investment can only reach its potential in a fully realised
Internal Market.
We are currently considering the Structural &
Cohesion Funds and a report will be published in May. Our preliminary
conclusions are that funding should be concentrated on the new
Member States, where the lack of administrative capacity is a
significant impediment to growth; spending on these programmes
should not occur in wealthier regions. EU cohesion spending should
remain transitional, time limited and geographically focused to
assist with economic convergence, restructuring or diversification.
The support should be tapered and it should not become a permanent
policy instrument used by the EU to prop up regions on a continuing
basis.
6 Over what time horizon should reorientations
be made?
Reorientations should be completed as soon as possible.
A prompt conclusion to the Budget Review would allow the necessary
groundwork to be laid for new programmes and policies before the
end of this Financial Perspective.
7 How could the effectiveness and efficiency
of budget delivery be improved?
Developments in the value for money and performance
auditing side of the Court of Auditors' work would be particularly
valuable. The Court already produces some special reports which
go beyond simple audit function, and this is a role that could
be expanded further. We also support work undertaken by Eurostat
to ensure that reliable and comparable statistics are available
in all countries: these are often the only means by which the
success or otherwise of an intervention can be measured. It is
important that this work continues and that comprehensive economic
data is available for all regions of the EU.
8 Could the transparency and accountability
of the budget be further enhanced?
The lack of a positive assurance from the European
Court of Auditors in their annual Statement of Assurance is a
serious problem for the European Union and the governments of
its Member States. We recognise, however, that the EU budget is
relatively small compared to the total government spending in
many Member States and that the resolution of the failure to produce
a positive assurance will require Member State commitment to change.
We encourage the Court to put in place measures clearly
to distinguish between irregularity and fraud and to publish separate
figures for the level of fraudulent transactions and administrative
mistakes. Whilst the distinction between fraud and other irregularities
must be made clear, we consider that administrative mistakes could
still indicate deficiencies in the control systems operated by
the Member States or the Commission. Attention should therefore
be drawn to both categories and all sources of error should be
taken into account when calculating material error rates.
The European Court of Auditors should produce a list
of those Member States demonstrating poor management of European
funds. We consider that such a list would encourage all the governments
of the Member States to take this issue seriously. We consider
it particularly unacceptable for the government of a Member State
to treat European money with less care than national funds and
urge the Council to make this clear. We are also concerned about
the variability of control standards between Member States. We
consider that all European expenditure should be subject to equivalent
standard of control to ensure that the risk of fraud and error
is minimised.
We are strongly in favour of a national Statement
of Assurance on the monies disbursed in each Member State. Such
a Statement should be sent to national parliaments as well as
to the Commission as we consider that this will encourage the
Member States to take responsibility for the systems and controls
they operate. Consideration should be given to ensuring the length
of time the discharge procedure takes is not extended. We do not
consider that a national Statement of Assurance requires a political
signature.
We recognise the commitment which the Commission
has shown to improving its accounting system. This must continue
and the Commission must always aim to be a global leader in public
accounting.
9 Could enhanced flexibility help to maximise
the return on EU spending and political responsiveness of the
EU budget?
This is not necessary. The EU budget is best placed
to consider wide-ranging, long-term issues where a multinational
approach is most likely to effect change. It should not aim to
be responsive to political pressures which vary more frequently.
National government budgets can fulfil this role instead.
10 What principles should underpin the revenue
side of the budget and how should these be translated in the own
resources system?
In principle we would welcome greater simplicity,
transparency and a reduced administrative burden. But we would
not wish to propose change for change's sake. We therefore see
no need for change with respect to the Traditional Own Resources.
On balance we believe it would be no great loss if the VAT Resource
were eliminated. We welcome Eurostat's continuing work to enhance
the comparability, exhaustiveness and reliability of Gross National
Income data, but we believe it already is sufficiently reliable
to provide the statistical base for a revenue stream. We reject
suggestions that the GNI-based revenue stream, or any other transfer
from a Member State, is not a valid funding mechanism.
We do not think a tax on citizens is needed to fund
the EU. Any assessment of the suitability of a tax or revenue
generating measure will be subjective and dependent on the weightings
placed on the different attributes considered desirable. Considered
against the criterion of suitability for revenue raising (which
should be the Commission's sole concern), none of the alternatives
as currently set out demonstrate compelling advantages over the
present system.
11 Is there any justification for maintaining
correction or compensatory mechanisms?
If real reform of the expenditure side of the Budget
were secured the scale of, and possibly the need for, the corrections
and compensatory mechanisms would be reduced. The pressing need
for reform is on the expenditure side, and in particular in the
area of direct agricultural income support for farmers: without
it, the case for maintaining rebate mechanisms will remain strong.
12 What should be the relationship between
citizens, policy priorities, and the financing of the EU budget?
We welcome the changes to the budget that have been
made by the Lisbon Treaty, in particular the removal of the principle
of "compulsory" expenditure which will enhance the role
of the European Parliament.
There is also a role to be played by national Parliaments.
We have found it very useful to produce a report on the draft
annual budget each year. Sub-committee A of the House of Lords
European Union Committee meets a United Kingdom Treasury Minister
between the publication of the Preliminary Draft budget and the
July Budget ECOFIN meeting. The Minister is asked to outline the
Government's stance on the budget and is made aware of Parliament's
views.
Wider publicity could be given to the Annual Policy
Strategy (APS) by the Council and national governments. The Commission
must also explain clearly in the APS the financial constraints
around it, and the ways in which the Commission can or cannot
change its spending priorities within the financial framework.
Political priorities must be matched in budgetary terms, and to
do that it needs to declare which areas of action are receiving
less funding in order to allow it to prioritise others. The Commission,
the Council and the Parliament need to forge a closer link between
the budgetary and legislative processes.
Ultimate responsibility lies in the Council, so it
is crucial that it assists any effort to increase the correlation
between political priorities and financial resources. The APS
must provide the clear, overarching strategy for the Commission's
coming year, indicating in each area what are to be the key policy
intentions to be prioritised for implementation of that strategy.
As outlined in our answer to question ten, we oppose
a direct tax on citizens or business.
This response draws on reports recently published
by the Committee, including:
- The Future of the Common Agricultural
Policy (7th Report, 2007-08; HL 54) 6 March 2008
- The 2008 EC Budget (33rd Report, 2006-07; HL
160) 30 July 2007
- Funding the European Union (12th Report, 2006-07;
HL 64) 14 March 2007
- Financial Management and Fraud in the European
Union: Perceptions, Facts and Proposals (50th Report, 2005-06;
HL 270) 13 November 2006
- The 2007 EC Budget (39th Report, 2005-06; HL
218) 10 July 2006
- Future Financing of the European Union (6th Report,
2004-05; HL 62) 9 March 2005
These are all available online at
http://www.publications.parliament.uk/pa/ld/ldeucom.htm
The response also draws on comments made by Lord
Grenfell in the House of Lords on 28 February 2008, during a debate
on the report of the European Union Committee, The Commission's
Annual Policy Strategy for 2008 (23rd Report, Session 2006-07,
HL Paper 123).
http://www.publications.parliament.uk/pa/ld200708/ldhansrd/text/80228-0013.htm#08022878000205
The Committee plan to conduct an inquiry into the
proposals for the Budget Review when they are available.
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