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1.5.1. The Community's revenue and expenditure
- Decision of 21 April 1970, as replaced by the Decisions of 7 May 1985, 24 June 1988 and 31 October 1994.
- Interinstitutional agreement of 6 May 1999 on budgetary discipline and improving the budgetary procedure.
- Interinstitutional agreement of 13 October 1998 on the legal bases and implementation of the budget.
To provide the Community with a certain degree of financial autonomy.
1. The ECSC levy
2. 'Traditional' own resources
3. New own resources
a. The VAT levy
b. The levy on the Member States' GNP and the ceiling on own resources
The 1988 Decision also placed an overall ceiling on own resources, expressed as a percentage of the total of the Member States’ GNP. This ceiling was initially set at 1.15%, before being raised to 1.2% in 1992 and 1.27% in 1999. The ‘fourth own resource’ therefore cannot exceed the difference between the maximum authorised percentage of GNP (1.27%) and the other own resources.
1. Basic principles
Nonetheless, application of the annuality rule is circumscribed by the concept of dissociated appropriations which distinguish commitment appropriations, covering the total cost during the current financial year of legal obligations contracted for activities lasting a number of years, from payment appropriations, covering expenditure in connection with implementing commitments contracted during the current financial year or previous ones. The unity rule is not fully adhered to either, owing to the fact that European Development Fund appropriations and borrowing operations are not included in the budget.
The budget nomenclature is intended to identify appropriations by their characteristics.
a. Operating expenditure/administrative expenditure
b. Compulsory expenditure/non-compulsory expenditure
c. Breakdown by sector (financial perspectives for 2000)
3. Drawing up the financial perspective
An ‘interinstitutional agreement on budgetary discipline and improvement of the budgetary procedure’ was concluded between the Council, the Commission and Parliament (at Parliament’s instigation) in 1988. It established a five-year financial perspective (1988-1992) for each main category of expenditure. A further agreement concluded in 1993 contains forecasts for a seven-year period. These forecasts are in fact binding ceilings, and the Institutions undertake to treat them as annual ceilings which they must respect and not to reduce projected non-compulsory expenditure by making changes to compulsory expenditure. A flexibility margin (0.04% of overall Community GNP) is provided to deal with substantial changes in the economic situation.
A new financial perspective has been adopted for the period 2000-2006 as part of the Interinstitutional Agreement of 6 May 1999. The two sections of the Budgetary Authority may agree to revise the ceiling of the financial perspective within very precise limits, only in the event of unforeseen events or new needs.
4. Establishing a budget for individual activities
As part of its administrative reform, the Commission has proposed introducing a new budget nomenclature by establishing individual activity budgets. The aim is essentially to improve management transparency by grouping together expenditure on a particular measure, making it easier to assess the cost and effectiveness of each Community policy. These changes would lead to the removal of the distinction between part A (administrative appropriations) and part B (operating appropriations) in section III – Commission.
ROLE OF THE EUROPEAN PARLIAMENT
Parliament has in several resolutions drawn attention to the inadequacy of revenue and called for Community activities to be funded from own resources. Taking the view that the third and fourth resources cannot, in their present form, be regarded as genuine own resources, it has proposed a number of ways of ensuring that the Community is financially independent, in particular in a resolution of 11 March 1999.
With a view to adjusting the current rules on own resources, the Berlin European Council on 24 and 25 March 1999 instructed the Commission to consider this issue in general, taking particular account of the effects of enlargement up to 1 January 2006. It was also decided not to change the rate of 1.27% of GNP before 2006. During this period, Parliament’s desire for changes with regard to the possible creation of a fifth resources have therefore not yet been taken into account.
With regard to Parliament’s role in budgetary decision-making, * 1.4.3 Parliament has from the start opposed the distinction between compulsory and non-compulsory expenditure, regarding it as artificial and restricting the powers of Parliament.
Initiatives taken by Parliament to put an end to this distinction have included several appeals to the Court of Justice. However, the Institutional Agreement on budgetary discipline of 6 May 1999 and the agreement on legal bases of 13 October 1998 confirm the extension of Parliament’s budgetary powers by means of the flexibility instrument, preparatory activities and pilot projects.
Financial perspective, 2000 - 2006
Commitment appropriations (EUR millions, 2000 prices)