Select Committee on European Scrutiny Fourteenth Report


BUDGET 2002


(22792)


Final Adoption of the General Budget of the European Union for the Financial Year 2002.

Legal base:Article 272 EC; the special role of the European Parliament regarding adoption of the Budget is set out in the article; qualified majority voting
Department:HM Treasury
Basis of consideration:Minister's letter of 8 January 2002
Previous Committee Report:HC 152-iv (2001-02), paragraph 1 (7 November 2001) and HC 152-ix (2001-02), paragraph 19 (5 December 2001)
To be discussed in Council:Not applicable
Committee's assessment:Politically important
Committee's decision:Cleared


Background

  11.1  We cleared the 2002 Preliminary Draft Budget on 18 July 2001[34]. On 7 November 2001, we recommended the 2002 draft general budget for debate.[35] The debate was held on 19 November 2001 in European Standing Committee B. The EC budgetary cycle is concluded when the Draft Budget is adopted following the European Parliament's second reading. The European Parliament's second reading took place 13 December 2001.

    The documents

  11.2  In her letter, the Economic Secretary to the Treasury (Ruth Kelly) highlights some key figures from the adopted budget. Although the official texts will not be available for some time, we have decided to produce a short report on the 2002 adopted budget on the basis of the Minister's letter. A table summarising the key figures is set out in annex 1.

  11.3  The Minister says:

"The 2002 adopted budget is consistent with the financial perspective agreed by the European Council in 1999. It respects the commitment ceilings for each category of expenditure, and leaves a margin below the overall ceiling for both commitments and payments. In establishing its second reading the Parliament has also respected the package agreed in conciliation between the two branches of the budget authority at the November Budget Council.

"The adopted budget includes _98.64bn in commitment appropriations, leaving a margin of _2.40bn below the financial perspective ceiling. Commitment appropriations have been increased by 1.7 per cent compared with the 2001 budget. Total payment appropriations amount to _95.65 bn or 1.04 per cent of GNP. The increase in payment appropriations was limited to 2 per cent as agreed at the November Budget Council. Compared with the Council second reading figures, the total commitments and total payments have been increased by 0.2 per cent and 0.9 per cent respectively.

"The level of agricultural spending was already agreed at the Council second reading, as the Council has the final say over this part of the Community budget. The 2002 budget includes _400m for Foot and Mouth Disease, in addition to the _400m included in the 2001 budget. The total allocation for agriculture is _44.26bn. This leaves a significant margin of _2.3bn for any further needs in 2002.

"As agreed in conciliation at the November Budget Council, an additional _200m was allocated to Category 2 (structural operations) through the mobilisation of the flexibility instrument. _170m of this will be used to restructure the Community fishing fleet and the remaining _30m to support the regions bordering the candidate countries. The Parliament increased the payment appropriations for this Category by _15m compared to the Council's second reading.

"The European Parliament has reinforced many of the Category 3 (internal policies) budget lines according to its own priorities. The total commitments for internal policies amount to _6.56bn, or 1.4 per cent more than proposed by the Council at its second reading. The main increases were in education (_20m), employment (_15.5m), information and communication (_12m), internal market (_8.8m) and justice and home affairs (_15m). The margin in Category 3 was reduced to _186,400.

"In Category 4 (external policies) the Parliament approved the 171m package of additional funding for Afghanistan and its neighbours to deal with the post 11 September events. This includes the Category 4 margin of _70m which has been earmarked wholly for this purpose. Elsewhere in Category 4 the Parliament made a number of changes compared to the Council's second reading. Additional funds were made available for food aid, democracy and human rights, MEDA and Latin America, while appropriations for the Balkans were cut by _49m and humanitarian aid by _31m.

"Administrative expenditure will amount to _5.2 billion, or approximately 5.4 per cent of total payments and 5.2 per cent of total commitments. The margin in Category 5 was reduced to _2.2m.

"The total commitments for pre-accession aid amount to _3.3 billion, unchanged from the PDB and the Council second reading. The Parliament decided to increase the payment appropriations for Category 7 by _54.4m from the Council second reading.

"There was also a late change to the revenue side of the budget. The Commission advised that not all 15 member states would ratify the 2000 Own Resources Decision (ORD) by 1 January 2002. This meant that the 2002 EC budget had to be adjusted. The Commission prepared a third letter of amendment to its PDB to bring the revenue side of the budget back into line with the 1994 ORD. This is a temporary, but legally necessary, measure. The effect on the UK is budgetarily neutral, but some member states will see modest increases in their call up of own resources. But this effect will be temporary as the Commission will bring forward in 2002 a Supplementary Budget to reflect once again the 2000 ORD when all 15 member states have finally ratified it."

Conclusion

  11.4  We have already expressed views on the 2002 Budget proposals at the Preliminary Draft and Draft Budget stages. As regards the adopted budget, we note that its size and composition is very close to that agreed at the Council's second reading. We welcome this outcome. We have no further questions, and therefore clear the document, but we shall look forward to the deposit of the official texts in due course.

ANNEX 1

2002 EC Budget






_ million


Financial Perspective Ceilings

Preliminary Draft Budget (including Letters of Amendment 1-2)

Council's First Reading Draft Budget (including Letters of Amendment 1-2)

European Parliament First Reading Draft Budget

Council's Second Reading Draft Budget (including Letters of Amendment 1-2)

Adopted budget 2002

Commitment appropriations







Common Agricultural Policy

46,587

44,251

45,022

45,390

44,255

44,255

Structural Operations

33,638

33,835

33,638

33,638

33,838

33,838

Internal Policies

6,558

6,490

6,447

6,554

6,470

6,558

External Action

4,873

4,746

4,773

4,873

4,753

4,803

Administration

5,179

5,186

5,127

5,175

5,127

5,177

Reserves

676

676

676

676

676

676

Pre-accession aid

3,328

3,328

3,328

3,328

3,328

3,328

Total Commitment appropriations

100,839

98,512

99,011

99,634

98,448

98,635

Total Payment appropriations

100,245

95,794

95,600

98,737

94,827

95,655

Payments as a percentage of Community GNP

1.10

1.04

1.04

1.07

1.03

1.04



34  (22497) -; HC 152-i (2001-02), paragraph 50 (18 July 2001). Back

35  (22792) -; see headnote to this paragraph.. Back


 
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