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European Standing Committee B Debates

2003 Draft Preliminary Budget

European Standing Committee B

Tuesday 16 July 2002

[Mr. Joe Benton in the Chair]

2003 Draft Preliminary Budget

4.30 pm

The Financial Secretary to the Treasury (Ruth Kelly): Mr. Benton, I am delighted to welcome you to the Chair, and I am pleased to have the opportunity to discuss the 2003 preliminary draft budget of the European Community.

As ever, the time between publication of the budget documents and the Budget Council is short and a few volumes are still not available. My explanatory memorandum was submitted under the provision for ''official text not yet received'', but in the expectation that most documents would be available in time for the debate. That is the case, and I hope that hon. Members have benefited from having, in particular, volume 0, the general introduction, and the three parts of volume 4, which contains the Commission's budget. I shall endeavour to answer questions concerning the budget as a whole or particular chapters or lines that hon. Members are interested in.

As a net contributor to the EU, the UK's approach to the budget is characterised by budget discipline. We seek to ensure that the financial perspective ceilings established in Berlin in 1999 for the period 2000–2006 are fully respected. In general, we seek to restrict growth in the budget as much as possible by securing a margin under the financial perspective ceilings, while working to ensure that spending in each category of the budget is efficient and accommodates UK priorities without breaching the ceilings or resorting to the so-called flexibility instrument.

Total commitments appropriations in the 2003 preliminary draft budget amount to just over €100 billion, or £61 billion. Payment appropriations amount to €98 billion, or £60 billion. Those figures represent increases of just 1.4 per cent. and 2.7 per cent. above the adopted budget for 2002 and are almost unchanged from the corresponding figures in the 2002 preliminary draft budget. As a result, the 2003 preliminary draft budget in payment appropriations represents 1.03 per cent. of member states' gross national income, slightly down on the equivalent figure of 1.05 per cent. for the 2002 Budget. That is clearly a move in the right direction, but there is scope to do even better, in terms both of limiting expenditure and of setting realistic budgets that avoid large surpluses of unspent payments.

The Commission's proposals involve the use of the flexibility instrument to allow spending above the financial perspective ceilings in two areas. First, in category 2—the structural funds—for assistance to certain fishing fleets that have suffered from the loss of an EU fishing agreement with Morocco, and secondly, in category 5 for administrative spending, in a year in which pre-enlargement costs will put severe pressure on the administrative budgets of all the institutions.

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The UK will press for savings to be found to avoid the use of that instrument.

Enlargement has to be a key priority for the coming year. However, we do not agree that increasing the administrative category of the budget by more than the 3.5 per cent. allowed by the financial perspective ceiling is necessary to finance the building, interpretation and other costs associated with enlargement. Instead we want existing resources to be redeployed and co-operation between institutions to increase.

As members of the Committee know, much of the annual budget is determined by legislation that sets multi-annual envelopes for spending in such areas as agriculture, structural funds, transport networks and external aid. In the latter field, established aid programmes, such as those for the Mediterranean region and eastern Europe, mean that there is only limited scope for reprioritisation in favour of poorer countries. Nevertheless, the UK is determined that an increasing share of the external actions budget should be spent in low-income countries. We will take every opportunity to ensure that the EU lives up to its development policy declaration of 2000, which puts poverty reduction as its top priority.

It is encouraging that the preliminary draft budget proposes resources for the common foreign and security policy that will enable the EU to provide a police mission to replace the United Nations presence in Bosnia. It also provides for the implementation of the new research and development programme, a new public health programme and measures to promote employment incentives. Spending on renewable energy and transport are also given high priority. The Government fully support those programmes within the context of firm budget discipline. The Government will continue to press for improved efficiency in all areas of EU spending.

At the Council's First Reading on 19 July, we aim to establish a draft budget with figures lower than the Commission's proposals in many areas. That will leave room for the Parliament to bring forward its own proposals before the Council's Second Reading in November. We look forward to constructive negotiations between the Council and Parliament with a view to agreeing a budget within the financial perspective ceilings. I commend the motion to the Committee.

The Chairman: We have until 5.30 for questions to the Minister. I ask Members to keep their questions brief. There will be ample opportunity, if they so wish, to ask two or three.

Mr. Peter Luff (Mid-Worcestershire): On a point of order, Mr. Benton—or at least, I seek your guidance as to whether this is a point of order or a question to the Minister. I am concerned that we are not considering today volume 2, Parliament document, and volume 6, Court of Auditors document. The Committee should have been given an opportunity to scrutinise those two documents at this stage. I appreciate that that is not the Minister's fault, but I wonder what procedures she can recommend to ensure

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that Parliament has a chance to scrutinise those documents in due course.

The Chairman: It may be appropriate for the Minister to give an explanation, and then I will give whatever guidance I can.

Ruth Kelly: As I pointed out, there is a balance to be struck between waiting for all the available information to be put in the public domain and allowing Members a full opportunity to scrutinise budget documents so that they receive the necessary scrutiny before I have to travel to Brussels on Thursday night to start the negotiations on the preliminary draft budget.

Volumes 2 and 6 have not yet been published by the Commission. Of course we continue to press for earlier delivery, and I take the hon. Gentleman's point that it would be valuable if Members were to have a better opportunity to scrutinise those documents. However, as I made plain, the core documents have been made available, and I hope that the Committee considers them sufficient.

The Chairman: Is the hon. Gentleman happy with that explanation?

Mr. Luff: I should also have mentioned volume 9, which is also missing. On a separate point of order, Mr. Benton, I am concerned that documents available to Members of Parliament who are not members of this Committee did not include the preliminary draft budget report from the European Scrutiny Committee. That has now been corrected, but when I went to the Vote Office as late as at lunchtime today, the document was still not available. That is a very helpful document on which I hope to base some of my later questions. I hope that on future occasions steps will be taken to ensure that the Scrutiny Committee report is with the documents in the Vote Office.

The Chairman: I am sure that that has been noted.

Mr. Kelvin Hopkins (Luton, North): Will my hon. Friend the Minister again confirm that the Government intend to defend, for the foreseeable future, the UK rebate on the budget?

Ruth Kelly: Yes, we are totally committed to the UK rebate, which recognises the fact that we receive less than other member states, while contributing a significant amount to the budget. It is important to do everything we can to ensure that that rebate is maintained.

Mr. Luff: The European Scrutiny Committee report contains three issues on which the Government should be pressed, and I would like to ask the Minister about the first of them. The Committee says that we should

    ''press the Government on the Commission's proposal to fund the spending on administration and restructuring fishing fleets which breaches the Financial Perspective Ceilings by use of the flexibility instrument.''

What is the Government's position on that matter?

Ruth Kelly: Yes, the Commission has proposed using the flexibility instrument to increase spending in category 2 on structural operations, and there is clearly a need to help member states affected by the

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recent collapse of the EU fishing agreement with Morocco.

However, we think that category 2 supplies sufficient flexibility for the redeployment of resources within the category, and we will press both for good budget discipline and for re-prioritisation within that category. We would not like the flexibility instrument to be used in that way.

David Cairns (Greenock and Inverclyde): My hon. Friend will be aware that throughout British industry there is a strong suspicion—I put it no higher than that—that, via the EU budget and member states' domestic budgets, some of our competitor states provide soft subsidies to their businesses and industries that we do not provide to ours. Does she share that suspicion? If so, can she tell me what steps she will take to negotiate with our partners to put an end to the practice, or to bring it into the open so that we can all take part in it?

Ruth Kelly: I understand my hon. Friend's point. We certainly need a fair state aid regime that concentrates on tackling real market failure rather than on propping up, with covert or transparent subsidies, industries that are flagging or are seen by their national Governments as in need of state support. A level playing field is important. We are promoting a debate in Brussels about reducing overall state aid, yet targeting it more effectively with measures that do not subsidise some industries as opposed to others, but tackle market failure across the board.

 
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Prepared 16 July 2002