Select Committee on European Scrutiny Thirty-Seventh Report




Financing of EU-led crisis management operations having military or defence implications.

Legal base:



Foreign and Commonwealth Office

Basis of consideration:

Minister's letter of 3 July 2002

Previous Committee Report:

HC 152-xxxv (2001-02), paragraph 15 (3 July 2002)

Approved by Council:

17 June General Affairs Council

Committee's assessment:

Politically important

Committee's decision:

Cleared (decision reported on 3 July 2002)



    1. In a letter dated 5 April 2002, the then Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Mr Ben Bradshaw) told us that, although Article 28 of the Treaty on European Union sets out the broad principles, it had become clear to the Member States that a framework agreement was needed on the financing of EU-led crisis management operations under the European Security and Defence Policy (ESDP) which have military or defence implications.
    2. Under the Treaty, the operational expenditure arising from operations having military or defence implications must be charged to the Member States, though if a Member State formally declares its abstention it will not be obliged to contribute towards the costs.
    3. On 12 June, we considered a letter from the Minister for Europe (Mr Peter Hain), in which he said that, according to the latest Presidency compromise text dated 4 June, the financing of operations would be based on the principle of "costs lie where they fall", with each Member State funding its own contribution of personnel and/or equipment, but that certain costs would be defined as "common costs". On 19 June, he wrote again to say that the 17 June General Affairs Council had approved a final text of the framework agreement. We considered that letter on 3 July, noting that the Chairman of the House of Lords Select Committee on the European Union, Lord Brabazon of Tara, had written to the Minister expressing concern that under the agreed system of "costs lie where they fall with a narrow element of common costs" the UK could end up unfairly out of pocket if it took a leading role in a military ESDP operation. We asked the Minister to copy his reply to us.
    4. The Minister's letter

    5. The Minister says that it is not possible to give a cast-iron guarantee that the formula agreed on ESDP financing is best value for the UK, as to do so would require prior knowledge of the mix of EU-led operations over the coming years. It was impossible to predict with total accuracy when, where and on what scale an EU-led military crisis management operation might occur. Nor could the Government predict on what scale the UK and others might participate. He then spells out the main reasons why the UK pushed for the formula agreed at the Council:
          1. the Government believes that the option chosen, Option A, is the best way of ensuring efficient crisis management. The second option, Option B, with all costs being treated as common, on a GNP scale, would mean less national "ownership";
          2. Option B would mean that the UK would automatically have to pay 18% of the cost of any military ESDP operation, even if it did not participate, unless it had formally abstained. Under Option A, apart from its share of the narrow common costs element, the UK would only pay for the equipment and personnel it contributed. This Option is the method used in NATO and the Government regards it as the most cost-effective;
          3. under Option A, the UK could decide when and how to stand down its forces and put an end to its military and financial commitment. Under Option B, the UK would not have that control.

    6. The Minister says that, because of the difficulty of predicting what kind of ESDP operations might take place, the UK was one of the Member States which insisted on a review clause.
    7. Lord Brabazon also asked what progress was being made to persuade those Member States which do not commit 2% or more of their GDP to defence to increase their defence budgets. The Minister says that it is not for the UK to impose budgetary targets on other countries. It was encouraging Member States by example. He notes that reviews similar to the UK's Strategic Defence Review had been carried out in five other Member States. In addition, France and Spain, by completely professionalising their armed forces, would be spending their defence budgets more effectively.
    8. Conclusion

    9. The Minister has given a clear explanation of the Government's reasoning. We find the case he makes persuasive and do not intend to raise further questions on this document, which we cleared on 3 July.


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Prepared 26 July 2002