Select Committee on European Union Minutes of Evidence


Explanatory Memorandum by HM Treasury

PRELIMINARY DRAFT GENERAL BUDGET OF THE EUROPEAN COMMUNITIES FOR THE FINANCIAL YEAR 2004

INTRODUCTION

  1.  The Preliminary Draft Budget (PDB) 2004 sets out the Commission's proposals for European Community expenditure in 2004. It provides the basis for the negotiations between the two arms of the Budgetary Authority (the Council and the European Parliament). The PDB is the first stage in the annual budgetary procedure[1], which will result in the adoption of the 2004 General Budget at the end of the year. The context for each year's PDB is set by the multi-annual Financial Perspective (FP), which forms part of the Inter-Institutional Agreement (IIA) signed on 6 May 1999 between the European Parliament, the Commission and the Council. The FP sets out annual expenditure ceilings for eight broad expenditure categories, currently over a period of seven years (2000-06).

  2.  The 2004 PDB is the first EC budget to be presented mainly in the new Activity-Based Budgeting (ABB) format, which seeks to tie resources to clear objectives and specific outcomes and performance indicators. 2004 budget negotiations will be conducted on the basis of ABB documentation. In addition, there will be a shadow presentation of the budget in traditional format.

  3.  The 2004 PDB is also the first EC budget for a Union of 25 members, anticipating the accession of 10 new Member States in May 2004. The budget adopted in December will be for the existing Member States (EU-15), and will be in force for four months. However, agreement on the EU-25 figures will be reached at the same time, and the EU-25 budget will be formally adopted as a Supplementary and Amending Budget (SAB) following the conclusion of the accession process in May 2004. Accordingly, the 2004 PDB lists figures for both EU-15 and EU-25. Unless otherwise stated, the figures in this Explanatory Memorandum refer to the EU-25, and therefore set out the real level of expenditure after accounting for enlargement.

  5.  For commitment appropriations, the 2004 PDB envisages an increase of 12.6 per cent over 2003 to

112.2 billion[2]. This reflects the financial impact of enlargement, and is

3.2 billion below the FP ceiling as revised for enlargement, at Copenhagen in 2002. The like-for-like comparison with EU-15 figures shows a more modest increase of 0.7 per cent over 2003, to

100.4 billion (

3.3 billion below the 1999 Berlin FP ceiling).

  6.  For payment appropriations, the 2004 PDB proposes an increase of 3.3 per cent over 2003, to

100.7 billion. This is

10.9 billion below the Copenhagen FP ceiling. The payment appropriations for the EU-15 show a 2 per cent decrease in comparison to 2003, to

95.6 billion (

6.7 billion below the Berlin FP ceiling). Payments represent 0.97 per cent of Community Gross National Income (GNI), compared to 1.04 per cent in 2003.

  7.  For the EU-25, compulsory expenditure makes up

44.25 billion of total commitment appropriations, and non-compulsory expenditure

68 billion. The figures for payment appropriations are

44.3 billion and

56.4 billion respectively. For the EU-15, compulsory expenditure makes up

42.5 billion of total commitment appropriations, and non-compulsory expenditure

57.9 billion, with figures for payment appropriations at

42.5 billion and

53.0 billion respectively.

  8.  Tables summarising the key figures of the PDB are provided in Annex 1 (in both Euros and Sterling[3]. All figures are in current prices.

INDIVIDUAL CATEGORIES OF EXPENDITURE

  9.  The total commitment and payment appropriations for Agriculture (Category 1) amount to

47.9 billion, an increase of 6.9 per cent over 2003 (of which 4.7 per cent is due to enlargement). Within this global envelope, expenditure on the Common Agricultural Policy (CAP) amounts to

41.3 billion (an increase of 3.1 per cent), and expenditure on Rural Development amounts to

6.5 billion (an increase of 39.1 per cent, up to the FP ceiling). This reflects the fact that Category 1 expenditure for the new Member States has been concentrated on rural development, whereas direct payments to farmers in these countries will only commence in 2005.

  17.  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.

LEGAL AND PROCEDURAL ISSUES

  18.   Treaty basis: the PDB is presented under Article 272 of the EC Treaty.

  19.   European Parliament procedure: 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. The EP has the final say in setting the level of non-compulsory expenditure.

  20.   Voting procedure: The Council votes by qualified majority and has the final say in setting the level of compulsory expenditure.

  21.   Impact on United Kingdom Law: none.

  22.   Subsidiarity: 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

  23.  The Community budget has significant financial and policy implications. Since the UK is a net contributor to the EC budget, it is in the UK's interest to restrict growth in the budget as much as possible, while working to achieve a more efficient use of existing resources and ensuring that the Financial Perspective ceilings agreed in Berlin and Copenhagen are respected. The Government will work with the like-minded Member States to maintain budget discipline and subject all areas of EC spending to rigorous scrutiny. However, it must be borne in mind that most EC spending (including agriculture, structural funds and multi-annual programmes) is largely predetermined by decisions made outside the annual budget process, and that the final decision on much of the remainder is in the hands of the European Parliament.

  24.  Key priorities for the Government in 2004 include external actions (Category 4), where the focus will be on improving the overall effectiveness of EC external spending, including larger margins, containment of spending in middle-income countries, and a greater poverty focus; and administration (Category 5), where the Commission's staff proposals will have to be carefully examined to ensure value for money. Further priorities include supporting the successful implementation of ABB in the annual budget process, and paving the way for a smooth adoption of the EU-25 budget in May 2004.

FINANCIAL IMPLICATIONS

  25.  The UK financing share of the 2004 PDB has not yet been set—detailed calculations will follow once the relevant data is available. In the 2003 adopted budget, the UK's financing share was 19.4 per cent excluding the abatement, or 14.1 per cent after abatement. The actual net financial cost to the UK of the 2004 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.

TIMETABLE

  26.  The PDB is currently being discussed in the Council's budget committee. On 16 July the Council will establish the Draft Budget on the basis of these discussions, which will then be forwarded to the European Parliament. 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 will then be submitted to the EP for its second reading, and formal adoption of the budget is expected by mid-December.

Dawn Primarolo MP

Paymaster General

HM Treasury

5 June 2003

Annex 1

Table 1

BUDGET 2003 AND PDB 2004 (EU-15) APPROPRIATIONS FOR COMMITMENTS (IN EUR MILLION)
Appropriations for commitments Adopted 2003
Budget
PDB 2004 (EU-15)% change
1. AGRICULTURE44 780,4 45 785,92,2
Margin
2 597,6 1 425,1
Agricultural expenditure (excluding rural development) 40 082,440 982,92,2
Rural development and accompanying measures 4 698,04 803,02,2


2.  STRUCTURAL OPERATIONS
33 980,034 326,0 1,0
Margin
-12,0 0,0
Structural Funds31 141,0 31 541,01,3
Cohesion fund2 839,0 2 785,0-1,9


3.  INTERNAL POLICIES
6 795,87 006,0 3,2
Margin
0,2 47,0


4.  EXTERNAL ACTION
4 949,04 996,0 3,9
Margin
23,0 86,0


5.  ADMINISTRATION
5 360,16 112,2 14,0
Margin
21,9 44,8


6.  RESERVES
434,0 442,01,8
Margin
0,0 0,0
Guarantee reserve217,0 221,01,8
Emergency aid reserve217,0 221,01,8


7.  PRE-ACCESSION STRATEGY
3 386,01 732,3 -51,0
Margin
0,0 1 722,7
SAPARD Pre-accession instrument564,0 226,7-59,8
ISPA Pre-accession instrument1 129,0 453,3-59,8
PHARE Pre-accession instrument1 693,0 809,7-52,2
Turkey242,6 62,8
Appropriations for commitments

Total

99 685,7100 400,4 0,7
Margin
2 630,3 3 325,6
Compulsory expenditure
41 502,9 42 491,82,4
Non compulsory expenditure
58 182,8 57 908,6-0,5

Table 2

BUDGET 2003 AND PDB 2004 (EU-25) APPROPRIATIONS FOR COMMITMENTS (IN EUR MILLION)
Appropriations for commitmentsAdopted 2003
Budget
PDB 2004 (EU-25)% change
1. AGRICULTURE44 780,4 47 873,86,9
Margin
2 597,6 1 431,2
Agricultural expenditure (excluding rural development) 40 082,441 337,83,1
Rural development and accompanying measures 4 698,06 536,039,1
2. STRUCTURAL OPERATIONS33 980,0 41 035,020,8
Margin
-12,0 0,0
Structural Funds31 141,0 35 353,013,5
Cohesion fund2 839,0 5 682,0100,1
3. INTERNAL POLICIES6 795,8 8 639,527,3
Margin
0,2 82,5
4. EXTERNAL ACTION4 949,0 4 996,03,9
Margin
23,0 86,0
5. ADMINISTRATION5 360,1 6 112,214,0
Margin
21,9 44,8
6. RESERVES434,0 442,01,8
Margin0,0 0,0
Guarantee reserve217,0 221,01,8
Emergency aid reserve217,0 221,01,8
7. PRE-ACCESSION STRATEGY3 386,0 1 732,3-51,0
Margin0,0 1 722,7
SAPARD Pre-accession instrument564,0 226,7-59,8
ISPA Pre-accession instrument1 129,0 453,3-59,8
PHARE Pre-accession instrument1 693,0 809,7-52,2
Turkey242,6 62,8


8.  COMPENSATION
1 409,5
Margin
0,5
Appropriations for commitmentsTotal 99 685,7112 240,3 12,6
Margin
2 630,3 3 367,7
Compulsory expenditure
41 502,9 44 256,36,6
Non compulsory expenditure
58 182,8 67 984,016,8

Table 3

BUDGET 2003 AND PDB 2004 (EU-15) APPROPRIATIONS FOR COMMITMENTS (IN £ MILLION)

Appropriations for commitmentsAdopted 2003
Budget

PDB 2004 (EU-15)

% change
1.  AGRICULTURE29,107 29,7602,2
Margin
1,688 926
Agricultural expenditure (excluding rural development) 26,05426,6382,2
Rural development and accompanying measures 3,0533,1222,2


2.  STRUCTURAL OPERATIONS
22,08722,311 1,0
Margin
-8.0 0.0
Structural Funds20,242 20,5011,3
Cohesion fund1,8451,810 -1,9


3.  INTERNAL POLICIES
4,4174,553 3,2
Margin
0.13 30


4.  EXTERNAL ACTION
3,2183,247 3,9
Margin
15 56


5.  ADMINISTRATION
3,4843,973 14,0
Margin
14.2 29


6.  RESERVES
282 2871,8
Margin
0.0 0.0
Guarantee reserve141 143.51,8
Emergency aid reserve141 143.51,8


7.  PRE-ACCESSION STRATEGY
2,2001,126 -51,0
Margin
0.0 1,120
Appropriations for commitments Total 64,795 65,2600,7
Margin
1,709 2,166
Compulsory expenditure
26,976 27,6202,4
Non compulsory expenditure
37,819 37,640-0,5

Table 4

BUDGET 2003 AND PDB 2004 (EU-25) APPROPRIATIONS FOR COMMITMENTS (IN £ MILLION)

Appropriations for commitmentsAdopted 2003
Budget

PDB 2004 (EU-15)

% change
1.  AGRICULTURE29,107 31,1176,9
Margin
1,688 930
Agricultural expenditure (excluding rural development) 26,05426,8693,1
Rural development and accompanying measures 3,0534,24839,1


2.  STRUCTURAL OPERATIONS
22,08726,672 20,8
Margin
-8.0 0.0
Structural Funds20,242 22,97913,5
Cohesion fund1,8453,693 100,1


3.  INTERNAL POLICIES
4,4175,615 27,3
Margin
0.13 54


4.  EXTERNAL ACTION
3,2183,247 3,9
Margin
15 56


5.  ADMINISTRATION
3,4843,973 14,0
Margin
14.2 29


6.  RESERVES
282 2871,8
Margin
0.0 0.0
Guarantee reserve141 143.51,8
Emergency aid reserve141 143.51,8


7.  PRE-ACCESSION STRATEGY
2,2001,126 -51,0
Margin
0.0 1,120


8.  COMPENSATION
N/A916
Margin
N/A 0.3
Appropriations for commitments

Total

64,79572,956 12,6
Margin
1,709 21,897
Compulsory expenditure
26,976 28,7666,6
Non compulsory expenditure
37,819 44,19016,8

Table 5

BUDGET 2003 AND PDB 2004 (EU-15) APPROPRIATIONS FOR PAYMENTS (EUR MILLION)
Appropriations for paymentsAdopted 2003
Budget

PDB 2004

% change
1.  AGRICULTURE44,780 45,7862.2
Agricultural expenditure (excluding rural development) 40,08240,9832.2
Rural development and accompanying measures 4,6984,8032.2


2.  STRUCTURAL OPERATIONS
33,17328,922 -12.8
Structural Funds30,523 26,280-13.9
Cohesion fund2,6502,642 -0.3


3.  INTERNAL POLICIES
6,1986,577 6.1


4.  EXTERNAL ACTION
4,695 4,7922.1


5.  ADMINISTRATION
5,3606,112 14.0


6.  RESERVES
434 4421.8
Guarantee reserve217 2211.8
Emergency aid reserve217 2211.8


7.  PRE-ACCESSION STRATEGY
2,8632,956 3.3
SAPARD Pre-accession instrument443 442-0.2
ISPA Pre-accession instrument718 7180.1
PHARE Pre-accession instrument1,547 1,6043.7
Turkey155192 23.7


Appropriations for payments
Total
97,50395,587 -2.0
Margin
5,435 6,687
Compulsory expenditure
41,581 42,5402.3
Non compulsory expenditure
55,922 53,047-5.1
Appropriations for payment as % of GNI 1,040,99

Table 6

BUDGET 2003 AND PDB 2004 (EU-25) APPROPRIATIONS FOR PAYMENTS (EUR MILLION)

Appropriations for paymentsAdopted 2003
Budget

PDB 2004

% change
1.  AGRICULTURE44,780 46,7864.5
Agricultural expenditure (excluding rural development) 40,08241,3383.1
Rural development and accompanying measures 4,6985,44816.0


2.  STRUCTURAL OPERATIONS
33,17330,682 -7.5
Structural Funds30,523 27,982-8.3
Cohesion fund2,6502,700 1.9


3.  INTERNAL POLICIES
6,1987,496 20.9


4.  EXTERNAL ACTION
4,695 4,7922.1


5.  ADMINISTRATION
5,3606,112 14.0


6.  RESERVES
434 4421.8
Guarantee reserve217 2211.8
Emergency aid reserve217 2211.8


7.  PRE-ACCESSION STRATEGY
2,8632,956 3.3
SAPARD Pre-accession instrument443 442-0.2
ISPA Pre-accession instrument718 7180.1
PHARE Pre-accession instrument1,547 1,6043.7
Turkey155192 23.7


8.  COMPENSATION
N/A1,410


Appropriations for payments
Total
97,503100,6763.3
Margin
5,435 10,878
Compulsory expenditure
41,581 44,3046.5
Non compulsory expenditure
55,922 56,3720.8
Appropriations for payment as % of GNI 1,040,99

Table 7

BUDGET 2003 AND PDB 2004 (EU-15) APPROPRIATIONS FOR PAYMENTS (£ MILLION)
Appropriations for paymentsAdopted 2003
Budget

PDB 2004

% change
1.  AGRICULTURE29,107 29,7612.2
Agricultural expenditure (excluding rural development) 26,05326,6392.2
Rural development and accompanying measures 3,0543,1222.2


2.  STRUCTURAL OPERATIONS
21,56218,799 -12.8
Structural Funds19,840 17,082-13.9
Cohesion fund1,7221,717 -0.3


3.  INTERNAL POLICIES
4,0294,275 6.1


4.  EXTERNAL ACTION
3,052 3,1152.1


5.  ADMINISTRATION
3,4843,973 14.0


6.  RESERVES
282 2871.8
Guarantee reserve141 143.51.8
Emergency aid reserve141 143.51.8


7.  PRE-ACCESSION STRATEGY
1,8611,921 3.3
SAPARD Pre-accession instrument288 287-0.2
ISPA Pre-accession instrument467 4670.1
PHARE Pre-accession instrument1,005 1,0443.7
Turkey101125 23.7
Appropriations for payments
Total
63,37762,131 -2.0
Margin
3,533 4,347
Compulsory expenditure
27,027 27,6512.3
Non compulsory expenditure
36,350 34,480-5.1
Appropriations for payment as % of GNI 1,040,99

Table 8

BUDGET 2003 AND PDB 2004 (EU-25) APPROPRIATIONS FOR PAYMENTS (£ MILLION)
Appropriations for paymentsAdopted 2003
Budget

PDB 2004

% change
1.  AGRICULTURE29,107 30,4114.5
Agricultural expenditure (excluding rural development) 26,05326,8703.1
Rural development and accompanying measures 3,0543,54116.0


2.  STRUCTURAL OPERATIONS
21,56219,943 -7.5
Structural Funds19,840 18,188-8.3
Cohesion fund1,7221,755 1.9


3.  INTERNAL POLICIES
4,0294,872 20.9


4.  EXTERNAL ACTION
3,052 3,1152.1


5.  ADMINISTRATION
3,4843,973 14.0


6.  RESERVES
282 2871.8
Guarantee reserve141 143.51.8
Emergency aid reserve141 143.51.8


7.  PRE-ACCESSION STRATEGY
1,8611,921 3.3
SAPARD Pre-accession instrument288 287-0.2
ISPA Pre-accession instrument467 4670.1
PHARE Pre-accession instrument1,005 1,0443.7
Turkey101125 23.7


8.  COMPENSATION
N/A917


Appropriations for payments
Total
63,37765,4393.3
Margin
3,533 7,071
Compulsory expenditure
27,027 28,7976.5
Non compulsory expenditure
36,350 36,6420.8
Appropriations for payment as % of GNI 1,040,99

Annex 2


GLOSSARY

Activity-based budgeting (ABB)

  ABB is a system for making budget decisions which ensures allocations more closely reflect pre-defined political priorities and objectives. The system is designed to ensure that priority setting, planning, monitoring and evaluation better inform the EU's budget setting.

The budget procedure

  The Community's financial year runs from 1 January to 31 December. The rules governing decisions on the Community Budget are set out in Article 272 of the Amsterdam Treaty and in the Inter-Institutional Agreement. The timetable is as follows:

    —  Commission sets its annual policy strategy and the Council and the European Parliament decide their priorities for the next year's budget in early spring;

    —  establishment of the preliminary draft budget by the Commission, normally by end-April;

    —  establishment of the draft budget by the Council in late-July;

    —  first reading by the Parliament in late-October;

    —  second reading by the Council in mid-November; and

    —  second reading by the Parliament and adoption of the budget in mid-December.

Commitment and payment appropriations

  The Budget distinguishes between appropriations for commitments and appropriations for payments. Commitment appropriations are the total cost of legal obligations which can be entered into during the current financial year for activities which will lead to payments in the current and future financial years. Payment appropriations are the amount of money which is available to be spent during the year arising from commitments in the Budgets for the current or preceding years. Unused payment appropriations may, in exceptional circumstances, be carried forward into the following year.

Compulsory and non-compulsory expenditure

  Community expenditure is regarded as either "compulsory" or "non-compulsory". Compulsory expenditure is expenditure necessarily resulting from the Treaty or from acts adopted in accordance with the Treaty. It mainly includes agricultural guarantee expenditure including stock depreciation and the monetary reserve. The Council has the last say in fixing its total.

  The Parliament has the last say in determining the amount and pattern of non-compulsory expenditure. The growth of this expenditure is governed by the "maximum rate". Article 272(9) of the Amsterdam Treaty provides a formula for determining this rate unless an alternative figure is agreed by the budgetary authority. Under the Inter-Institutional Agreement the Council and Parliament agree to accept the maximum rates implied by the financial perspective ceilings.

Fontainebleau abatement system

  The UK's VAT contributions are abated according to a formula set out in the Own Resources Decision. Broadly this is equal to 66 per cent of the difference between what the UK contributes to the Community budget and the UK's receipts, subject to the following points:

    —  the abatement applies only in respect of spending within the Community. Expenditure outside the Community (mainly aid), amounting to around 8 per cent of the total expenditure in the 2002 Budget, is excluded;

    —  the UK's contribution is calculated as if the budget were entirely financed by VAT;

    —  the abatement is deducted from the UK's VAT contribution a year in arrears.

INTER-INSTITUTIONAL AGREEMENT AND FINANCIAL PERSPECTIVE

  The Inter-Institutional Agreement (IIA) is a political and legal binding agreement, which clarifies the Community's budgetary procedure. Under the Treaty, the Council and the European Parliament have joint responsibility for deciding the Community Budget on the basis of proposals from the Commission. The IIA sets out the way the three institutions will exercise their responsibilities in accordance with the Treaty, and respecting the revenue ceilings which are laid down in the Own Resources Decision. It sets the Financial Perspective which forms the framework for Community expenditure over a period of several years.

OWN RESOURCES

  The Own Resources Decision lays down four sources of Community revenue, or "own resources":

    —  Customs duties, including those on agricultural products—These are paid on a range of commodities imported from non-member countries. Following the agreement on agriculture during the Uruguay GATT Round, most agriculture levies are now fixed. However, for some key commodities, they continue to vary in line with changes in world prices;

    —  Sugar levies—These are charged on the production of sugar to recover part of the cost of subsidising the export of surplus Community sugar onto the world market;

    —  Contributions based on VAT—Essentially, this is the amount yielded by applying a notional rate of 1 per cent to an identical range of goods and services in each Member State (Member State's contributions are, however, subject to a cap relating to the size of their Gross National Products); and

    —  GNP-based contributions—Commonly known as the "Fourth Resource". This resource is calculated by taking the same proportion of each Member State's Gross National Product (GNP). It is a budget-balancing resource and covers the difference between total expenditure in the budget and the revenue from the other three resources.

RECTIFYING LETTER/LETTER OF AMENDMENT

  Letters of Amendment to the Preliminary Draft Budget, also called rectifying letters, make changes to the Commission's Preliminary Draft Budget (PDB) to reflect information which was not available at the time the PDB was prepared.

STRUCTURAL FUNDS, THE COHESION FUND AND ISPA

  At present, there are four Structural Funds through which the European Union grants financial assistance to resolve structural economic and social problems: the European Regional Development Funds (ERDF), which promotes economic and social cohesion within the Union through the reduction of imbalances between regions or social groups; the European Social Fund (ESF), which promotes the EU's employment objectives by providing financial assistance for vocational training, retraining and job creation schemes; the European Agricultural Guidance and Guarantee Fund (EAGGF—Guidance Section), which contributes to the structural reform of the agriculture sector and to the development of rural areas; and the Financial Instrument for Fisheries Guidance (FIFG), the specific Fund for the structural reform of the fisheries sector.

  In addition, the EU supports Member States whose GDP is less than 90 per cent of the European average through the Cohesion Fund, which finances projects linked to the environment and trans-European transport systems. The Instrument for Structural Policies for Pre-Accession (ISPA) supports development of infrastructure in the candidate countries.





1   The meaning of terms in italics is explained in the glossary (Annex 2).

4. The PDB consists of the following documents:

    (a) Document I-overview and political presentation of the budget;

(b) Document II-expenditure analysis by policy area;

(c) Document IV-line-by-line presentation of the budget figures, in ABB and traditional format, for EU-15 and EU-25;

(d) Document V-financial programming 2004-06;

(e) Working document 1-activity statements by budget title;

(f) Working document 2-financial statements;

(g) Working document 3-RAL ("Restes a" Liquider", or unspent commitments) and legal basis.

SUMMARY OF FIGURES Back

2   For Sterling equivalents of all figures quoted, please refer to the tables in Annex 1. Back

3   Converted at the 30 December 2002 rate of 1 Euro = 0.65 GBP.

10. For Structural Operations (Category 2), commitment appropriations rise by 20.8 per cent to

41 billion, in order to cover the participation of the new Member States in the EU's structural and cohesion funds. The specific amount related to enlargement is

6.7 billion, reflecting the figures agreed at Copenhagen. For the EU-15, commitments for Structural Actions are at

34.3 billion, representing an increase of 1 per cent over 2003. The payment appropriations for Category 2 amount to

30.6 billion (EU-25), a 7.5 per cent decrease over 2003. This decrease is mainly due to the closure of programmes launched between 1993 and 1999.

11. For Internal Policies (Category 3), total commitment appropriations rise to

8.6 billion, a 27.2 per cent increase over 2003, leaving a margin of

90.5 million. Again, the majority share of this increase (24 per cent) reflects the extension of Category 3 actions to the new Member States. In particular, the Commission proposes to finance a number of enlargement-related priorities from these funds, including the adaptation of existing programmes to enlargement (

938 million); the implementation of the Schengen agreement in the new Member States (

317 million); assistance for institution-building to prepare for the phasing-out of the PHARE programme (

221 million); and nuclear decommissioning in Lithuania and Slovakia (

138 million). For the EU-15, total increases of

217, as well as the redeployment of a further

80 million within the Category, are intended to cover new priorities including research and technological development (

255 million); transport and energy (

19 million); Justice and Home Affairs (

9 million); and health and consumer protection (

7 million). Payment appropriations for Category 3 are

7.5 billion, an increase of 20.8 per cent over 2003.

12. For External Policies (Category 4), commitment appropriations total

4.9 billion, an increase of 0.9 per cent over the amount budgeted in 2003. This figure is the same for EU-15 and EU-25, since external policies are not affected by enlargement. In addition,

174 million is freed up in Category 4 in 2004 as a consequence of the accession of Cyprus and Malta and the move of assistance to Turkey to Category 7 (Pre-Accession aid). The level of resources budgeted for beneficiaries of Category 4 in 2004, compared to what the same beneficiaries would have received in 2003, therefore represents an effective increase of 4.5 per cent. This money has been provisionally set aside for large increases in assistance to the Western Balkans (by

70 million, +12 per cent compared to the level originally programmed for 2004) and the Mediterranean/Middle East (by

83 million, +10.7 per cent compared to the level originally programmed for 2004). There are also headline increases for Humanitarian aid (by

48.3 million, +10.8 per cent); assistance to Eastern Europe and Central Asia (by

30 million, +6 per cent); assistance to Asia (by

47.5 million, +8.4 per cent, mainly to cover commitments to Afghanistan); and the Common Foreign and Security Policy (by

5 million, +8.4 per cent, following the deployment of the EU police mission in Bosnia-Herzegovina)-some of these reflect programmed increases while others represent increases above the original programme. Aid to Latin America falls by 8 per cent to

310 million, as a consequence of the termination of aid following Hurricane Mitch-if this temporary measure is discounted, this region too benefits from an effective increase in funding. These proposals leave a total margin of

86 million under the Category 4 FP ceiling which can be used for unforeseen emergencies, or for foreseeable but as yet unquantifiable spending needs in Iraq and the Middle East. The total payment appropriations for Category 4 are

4.7 billion, an increase of 2.2 per cent over 2003 (if assistance to Turkey, Cyprus and Malta is discounted for purposes of like-for-like comparison).

13. Unlike the other Categories, expenditure on Administration (Category 5) has been programmed for the EU-25 from 1 January 2004, in order to cover the additional administrative burdens of the run-up to formal accession. The total amount budgeted for this Category is

6.1 billion, an increase of 14 per cent over 2003, leaving a margin of

46 million. The additional commitments relating to enlargement amount to

725 million. These figures cover administrative expenditure for the Commission as well as for all of the other EU institutions-for the Commission specifically, the administrative commitments are

2.7 billion, an increase of 10 per cent over 2003. The Commission proposes to use these increased funds to recruit 780 extra staff in 2004, as part of a wider drive to recruit 3,900 additional staff by 2008 in order to adapt to enlargement.

14. The total amount budgeted for Reserves (Category 6) is

442 million, a 1.8 per cent increase over the 2003 budget. These funds cover the loan guarantee reserve and the emergency aid reserve (

221 million each), and are within the FP ceilings set for this Category.

15. For Pre-Accession Aid (Category 7), the 2004 budget proposes total commitments of

1.7 billion, a decrease of over 50 per cent in comparison to 2003. This reflects the absence of new commitments for pre-accession assistance to the 10 new Member States expected to join the EU in May, leaving a high margin of

1.8 billion. Increases are programmed for all of the remaining recipients of pre-accession aid (Romania, Bulgaria and Turkey), including an extra

101 million for Turkey. Payment appropriations in Category 7 amount to

2.9 billion, a 3 per cent increase over 2003. This high level reflects payments resulting from previous commitments for the ISPA, PHARE and SAPARD programmes, as well as the inclusion of Turkey in Category 7 (the latter accounts for the slight rise in payment appropriations for this year).

16. Finally, the 2004 PDB includes a new heading for Compensations (Category 8). This is a temporary measure agreed at Copenhagen and designed to ensure that the new Member States remain net recipients from the EU budget, covering a shortfall of funding as pre-accession programmes are phased out and full participation from regular programmes (such as the CAP) is gradually introduced over a number of years. The commitments budgeted for this Category are

1.4 billion, leaving a margin of

0.45 million.

MINISTERIAL RESPONSIBILITY Back


 
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