Explanatory memorandum by HM Treasury
SEC (2008) 514
PRELIMINARY DRAFT BUDGET (PDB) OF THE EUROPEAN COMMUNITIES
2009
SUBJECT MATTER
Commission Proposals, the Budget Structure and
the Annual Procedure
1. The Preliminary Draft Budget (PDB) sets
out the Commission's proposals for European Community expenditure
in 2009. it represents the first stage in the annual budget
procedure[1]
and provides the basis for subsequent negotiations between the
two arms of the Budgetary Authority (the Council and the European
Parliament), which will result in the adoption of the 2009 General
Budget in December.
2. The context for each year's PDB is determined
by the multi-annual Financial Perspective (FP), which sets
out annual ceilings for six headings representing areas of expenditure:
1. Sustainable Growth; 2. Preservation and Management of Natural
Resources; 3. Citizenship, Freedom, Security and Justice; 4. The
European Union as a Global Partner; 5. Administration; and 6.
Compensation (temporary compensation to ensure that the newest
Member States, Bulgaria and Romania, retain a positive budgetary
balance during the first years of accession).
3. The PDB is presented in Activity-Based
Budgeting (ABB) format with budget appropriations and resources
organised by activity with the amount of appropriations and staff
allocated to each activity indicated. ABB seeks to tie budgetary
resources to clear policy objectives, together With appropriate
performance indicators and evaluation measures and as part of
the 2009 PDB the Commission also publishes Activity Statements
providing performance information for each activity. These Present
specific objectives, planned outputs, and performance measures
at the level of individual budget lines as well as higher-level
activity areas, in line with ABB. Negotiations on the 2009 budget
will be conducted on the basis of ABB documentation.
4. As in previous years, the PDB consists
of a General Statement of Revenue and the draft estimates of required
appropriations for the nine separate EU institutions (European
Parliament, Council, Commission, Court of Justice, Court of Auditors,
Economic and Social Committee, Committee of the Regions, European
Ombudsman, European Data Protection Supervisor). In addition,
the Commission publish a number of Working Documents alongside
the PDB, including a document containing the Activity Statements
and a document containing Financial Statements.
PDB 2009—Overview
5. Presenting the PDB 2009, Dalia Grybauskaité,
European Commissioner for Financial Programming and Budget commented
that "this is a stable, realistic budget where we have managed
to shift the centre of gravity of spending firmly to long-term
economic development and employment without putting other areas
at rise"[2].
6. For commitment appropriations,
the PDB proposes a total of €134,395 million (£106,198
million)[3],
or 1.04% of EU Gross National Income (GNI). This represents an
increase of €4,086 million (£3,228 million), or 3.1%,
above 2008 levels. The margin remaining under the global Financial
Perspective (FP) ceiling for commitments is €2,638 million
(£2,085 million).
7. For payment appropriations, the
PDB proposes a total of €116,736 million (£92,245 million),
0.90% of EU GNI. This represents a decrease of €3,932 million
(£3,107 million), or 3.3%, below the 2008 Budget, in which
payments represented 0.96% of GNI.
8. Compulsory expenditure accounts
for €44,532 million (£35,189 million) of the proposed
commitment appropriations and €44,514 million (£35,175
million) of the proposed payment appropriations, representing
respective increases of 4.7% and 4.8% above the 2008 budget.
9. Non-Compulsory expenditure accounts
for €87,779 million (£69,363 million) of commitment
and €72,222 million (£57,070 million) of payment appropriations,
representing an increase of 2.4% and a decrease of 7.6% respectively,
relative to 2008 levels.
10. Tables summarising the key figures of
the 2008 PDB are provided in Annex 1 (in both Euros and Sterling).
PDB 2009—Detail of Proposed Expenditure
by Heading
11. Overall, proposed expenditure on Heading
1 (Sustainable Growth) is €60,104 million (£47,494 million)
for commitment appropriations and €45,199 million (£35,716
million) for payment appropriations, leaving a margin of €96
million (£76 million) under the FP ceiling for commitments.
Heading 1 is divided into two further headings.
12. For Heading 1a (Competitiveness for
Growth and Employment), the PDB proposes €11,690 million
(£9,237 million) for commitments and €10,285 million
(£8,127 million) for payments. Compared with the 2008 Budget
this represents increases of €608 million (£480 million),
or 5.5%, in commitments and €516 million (£408 million),
or 5.3%, in payments.
13. The change in commitment appropriation
levels is largely accounted for by proposed increases for policies
that the Commission considers key to achieving the Lisbon Strategy.
These include:
— Seventh Research framework programme—a
€631 million (£499 million), or 10.4%, increase;
— Competitiveness and Innovation Programme
(CIP)—a €71 million (£56 million), or 17.2%, increase;
and
— Lifelong Learning Programme—a
€60 million (£47 million), or 6.0%, increase.
14. The change in payment appropriations
is largely accounted for by proposed increases for:
— Seventh Research framework programme—a
€518 million (£409 million), or 8.4%, increase;
— Trans-European Networks—a €133
million (£105 million), or 18.8%, increase; and
— Galileo—a €2m (£49
million), or 20.7% increase.
15. For Heading lb (Cohesion for Growth
and Employment), the PDB proposes commitment appropriations
of €48,414 million (£38,257 million) and payment appropriations
of €34,914 million (£27,589 million). These represent
an increase of €1,158 million (£915 million), or 2.5%,
in commitments and a reduction of €5,637 million (£4,454
million), or 13.9%, relative to the 2008 Budget The proposed increase
in commitments within H1b is largely due to a €1,142 million
(£902 million), or 14.0% increase, in proposed expenditure
devoted to the Cohesion Fund.
16. For Heading 2 (Preservation and Management
of Natural Resources), the PDB proposes commitments of €57,526
million (£45,457 million) and payments of €54,835 million
(£43,331 million), These represent respective increases of
€1,966 million (£1,554 million), or 3.5%, and £1,597
million (£1,262 million), or 3.0%, above 2008 levels. The
PDB reserves a margin of €2,113 million (£1,670 million)
under the FP ceiling for commitments.
17. The increases in commitments within
Heading 2 are largely accounted for by increases for:
— Market related support and direct
payments in relation to Agriculture markets—a €1,954
million (£1,544 million), or 4.8%, increase—accounted
for by the phasing-in of direct aids for the new member states,
which is partly offset by a €570 million (£450 million),
or 11%, reduction in commitments and payments for interventions
in agricultural markets.
— Rural development—a €99
million (£78 million), or 0.7%, increase;
— Life+—a €21 million (£17
million), or 7.8%, increase—related to intensified activities
in the areas of climate change and adaptation, biodiversity, environment,
public health, water and waste management; and
— European Fisheries Fund (EFF)—a
€19 million (£13 million), or 3.1% increase)—in
line with the relevant legal base.
18. The increases in payments within Heading
2 are largely accounted for by increases for:
— Market related support and direct
payments in relation to Agriculture markets—a €1,925
million (£1,521 million), or 4.7%, increase - accounted for
by the phasing-in of direct aids for the new member states;
— EFF—a €110 million (£87
million), or 24.5%, increase—attributed to low payment levels
in the 2008 Budget; and
— Life+—a €61 million (£48
million), or 39.3%, increase—attributed to low payment levels
in the 2008 Budget following delay in concrete measures resulting
from the final adoption of the legal base in May 2007.
19. The proposed expenditure on Heading
3 (Citizenship, Freedom, Security and Justice) is €1,468
million (£1,160 million) for commitments and €1,266
million (£917 million) for payments. This represents a decrease
in commitments of €144 million (£114 million), or -9.0%,
and a decrease in payments of €243 million (£192 million)
or 16.1%, relative to 2008 levels, and leaves a margin of €55
million (£44 million) under the FP ceiling for commitments.
Heading 3 is divided into two further headings.
20. For Heading 3a (Freedom, Security
and Justice), the PDB proposes commitment appropriations of
€839 million (£663 million) and payment appropriations
of €597 million (£472 million). These represent an increase
to commitments of €110 million (£87 million), or 15.0%,
and an increase in payments of €62 million (£49 million),
or 11.7%, relative to 2008 levels. This leaves a margin below
the FP ceiling of €33 million (£26 million).
21. The increases in commitments and payments
within Heading 3a include:
— "Solidarity and management of
migration flows"—a €65 million (£34 million),
or 16.6%, increase in commitments, and a €37 million (£27
million), or 11.7%, increase in payments;
— "Security and safeguarding liberties"—a
€22 million (£17 million), or 31.9%, increase in commitments,
and a €37 million (£14 million), or 32.6%, increase
in payments.
22. For Heading 3b (Citizenship),
the PDB proposes commitments of €629 million (£497 million)
and payments of €669 million (£529 million). These represent
overall decreases of €254 million (£201 million), or
-28.8%, for commitments, and €306 million (£242 million),
or -31.4%, for payments, relative to 2008 levels. This leaves
a margin below the ceiling for commitments of €22 million
(£18 million).
23. The decrease in commitments and payments
within Heading 3b is accounted for largely by the provision of
€260 million (£206 million) in EU Solidarity Fund assistance
(EUSF) in 2008, which due to its contingent nature, is not allocated
resources in the PDB. However there are also reductions in commitments
and payments for policy areas, in particular "Other actions
and programmes"[4],
for which the PDB proposes reductions of: €14 million (£11
million), or -50.1%, in commitments (in particular in relation
to Education and Culture) and a €56 million (£44 million),
or -44.3%, reduction in payments (in particular in relation to
enlargement). These reductions are partially offset by increases
to other areas of Heading 3b, in particular related to decentralised
agencies for which increases in commitments and payments of €16
million (£13 million), or 15.8%, and €19 million (£15
million), or 18.3%, respectively are proposed.
24. For Heading 4 (The EU as a Global
Partner), the PDB proposes commitments of €7,440 million
(£5,879 million) and payments of €7,579 million (£5,989
million). These represent an increase in commitments of €129
million (£102 million), or 1.8%, and a decrease in payments
of €533 million (£421 million), or 6.6%, relative to
2008 levels and leaves a margin of €244 million (£192
million) below the FP ceiling for commitments.
25. Significant increases in commitments
within Heading 4, include:
— the Development and Cooperation Instrument
(DCI)—a €112 million (£88 million), or 5.0%, increase;
— EC guarantees for lending operations—a
€92 million (£73 million) increase for this area of
expenditure—which did not receive any allocations in 2008;
and
— Instrument for Stability—a
€78 million (£61 million), or 42.9%, increase.
26. The decrease in payment appropriations
within heading 4 is largely accounted for through a €700
million (£553 million), or a 23.8%, reduction in payments
for the Instrument for Pre-accession Assistance (IPA). The reduction
in payments is partially offset by increases in payments for EC
guarantees for lending operations, Common and Foreign Security
Policy (CFSP), and Other actions and programmes, particularly
Development and relations with ACP States.
27. For Heading 5 (Administration),
the PDB proposes commitments and payments of €7,648 million
(£6,043 million), representing an increase of €366 million
(£289 million), or 5.0% in both payments and commitments,
above 2008 levels. This leaves a margin for commitments of €129
million (£102 million) below the FP ceiling. Allocations
for the Commission represents the largest increase, with a €152
million (£120 million), or 4.5%, increase in commitments
and payments.
28. The PDB attributes staff numbers as
the primary driver for increases in commitments and payments within
Heading 5. The PDB requests 250 new staff posts for the Commission,
in relation to the EU-2 enlargement.
29. For Heading 6 (Compensation),
which now only applies to Bulgaria and Romania, the PDB proposes
commitments and payments of €209 million (£165 million).
These represent increases of €2 million (£2 million)
or 1.2 %, above 2008 levels, leaving a margin for commitments
of €0.89 million (£0.70 million) below the ceiling.
This is the last year for which such compensations will be provided.
MINISTERIAL RESPONSIBILITY
30. Treasury Ministers are responsible for
the Government's policy on the budget of the European Communities.
Other Ministers have interests in those parts of the budget that
are of relevance to their departments.
INTEREST OF
DEVOLVED ADMINISTRATIONS
31. Policy concerning the EC Budget is a
reserved matter under the UK's devolution settlements but the
devolved administrations may have an interest in some aspects
of EC expenditure in these areas and have been consulted in the
preparation of this EM.
LEGAL AND
PROCEDURAL ISSUES
Legal basis:
32. The PDB is presented under Article 272
of the EC Treaty.
European Parliament procedure:
33. The European Parliament (EP) participates
fully in the budgetary process and formally adopts the budget.
The EP votes by a majority of its members, or a three-fifths majority
of the votes cast, depending on the circumstances, and has the
final say in setting non-compulsory expenditure.
Voting procedure:
34. The Council votes by qualified majority
and has the final say in setting the level of compulsory expenditure.
Impact on United Kingdom Law:
35. None
Application to Gibraltar:
36. Not applicable
Analysis of Fundamental Rights Compliance:
37. No fundamental rights issues arise with
this proposal.
APPLICATION TO
THE EUROPEAN
ECONOMIC AREA
38. Not applicable
SUBSIDIARITY
39. The EC Budget is a matter of exclusive
Community competence and the Commission's presentation of the
PDB is required by the Treaty.
POLICY IMPLICATIONS
40. As a net contributor to the EC Budget
it is in the UK's interests to control growth in the EC budget,
whilst working to enhance efficiency in the use of EC resources.
The Government will work with like-minded Member States to maintain
budget discipline and subject all areas of EC spending to rigorous
scrutiny. However it should be noted that much of EC expenditure
(including in relation to agriculture, structural funds and multi-annual
programmes) is pre-determined by previous Financial Perspective
decisions, and that in the annual budget process, the final decision
on much of EC expenditure is taken by the European Parliament.
41. The Government's primary aim in the
upcoming negotiations will be to respect agreed and established
budgetary principles. In particular, to ensure that: spending
delivers genuine value for money; global appropriations for payments
are based on realistic implementation forecasts (to prevent the
emergence of a large budget surplus); Financial Perspective ceilings
are respected, with full accordance being given to the rules governing
use of the Flexibility Instrument; and that Activity-Based
Budgeting is fully factored into the budgeting process. A
heading-by-heading outline of the Government's initial intended
approach towards the PDB follows.
42. Heading 1 (sustainable growth).
The Government is supportive of appropriate expenditure on growth.
However it intends to scrutinise and suggest appropriate reductions
to commitment and payment levels to ensure that the margin under
the financial perspective commitment ceiling (€96
million, £76 million) is sufficient to meet any unforeseen
future expenditures, and that payment levels more accurately reflect
absorption capacity.
43. Heading 2 (Preservation and Management
of Natural resources). The Government intends to: welcome
the Commission's proposed reductions in interventions in agricultural
markets and to ask the Commission to consider whether or not,
in light of rising food prices, further reductions might be possible.
Although it is recognised that much of the increase in direct
payments has already been agreed—as is the case for direct
payments related to the phasing in of the new member states—the
Government intends to scrutinise the remaining increases closely.
44. Heading 3 (Citizenship, Freedom,
Security and Justice). The Government is supportive of appropriate
EC expenditure in relation to shared challenges relating to migration,
health, and crime, and terrorism. However it will be looking for
appropriate reductions to the commitment and payment levels proposed
to ensure that the margin under the financial perspective
commitment ceiling is sufficient to meet any unforeseen future
expenditures, and that payment levels more accurately reflect
absorption capacity.
45. Heading 4 (The European Union as
a Global Partner). The Government supports appropriate expenditure
on global challenges such as international development and Common
Foreign and Security Policy (CFSP). However it will encourage
the Commission to ensure appropriate absorption capacity exists
for payments and to make sure that the margin under the financial
perspective ceiling is sufficient to meet requirements for
possible future contingencies including any additional requirements
for Kosovo, Palestine and food aid, so that these do not pose
a threat to budget discipline.
46. Heading 5 (Administration).
The Government is in favour of enhanced efficiency and value for
money from EC institutions administration expenditure. Whilst
it is recognised that much of the proposed increase in this area
of expenditure is related to enlargement, which potentially limits
the scope for substantial reductions, the Government intends to
question what efforts have been made to find efficiency gains
and economies of scale. Working with other like-minded Member
States, the Government will, for example, examine the level of
vacancies, the redeployment of existing staff. The Government
also intends to work with like-minded Member States to closely
scrutinise the efficiency of the EU agencies.
47. Subject to ratification by Member State
parliaments, the Lisbon Treaty, with the establishment of the
new office of President of the European Council and the High Representative
and External Action Service, could introduce additional resource
requirements for Heading 5. The Government intends to work with
like-minded Member states to assert that, wherever possible, the
costs of these new institutions are met from reprioritisation.
REGULATORY IMPACT
ASSESSMENT
48. Not applicable.
FINANCIAL IMPLICATIONS
49. The UK contribution to the 2009 PDB
is expected to be 15.4% pre-abatement, or 10.0% post-abatement.
The actual net financial cost to the UK of the 2009 EC Budget
will depend not only on the size of the budget that is finally
adopted, but also on the balance between different spending programmes
within the budget. This determines the level of UK receipts and
subsequently affects the size of the UK's abatement in the following
year.
CONSULTATION
50. Not applicable.
TIMETABLE
51. Discussion of the PDB began in Council's
budget committee on 8 May 2008. On 17 July the Council will establish
the Draft Budget on the basis of these discussions, which will
then be forwarded to the European Parliament (EP). It is expected
that the Draft Budget will be debated by the EP in a plenary session
in October. The EP's amendments and modifications will be considered
at the Council's second reading in November. A revised Draft Budget
will then be submitted to the EP for its second reading, and formal
adoption of the budget is expected by mid-December.
Kitty Ussher
Economic Secretary
HM Treasury
2 June 2008
1 Terms in italics are explained in the glossary (Annex
2). Back
2
Source: European Commission, Press Release, Budget 2009:
highest spending for growth and employment (available from:
http://europa.eu. Back
3
Total expenditure broken down by heading and sub-heading is shown
in tables 6 & 2 in Annex 1. Back
4
Includes: Transition facility for new Member States; Subsidy for
Executive Agency for Education, Audiovisual; and Culture and European
Year for intercultural dialogue. Back
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