REPORT on the communication from the Commission to the Council and the European Parliament: financial programming 2002-2006: financial perspective headings 3 and 4
(SEC(2001) 1013 – C5‑0410/2001 – 2001/2162(COS))
27 November 2001
Committee on Budgets
Rapporteur: Joan Colom i Naval
PROCEDURAL PAGE
By letter of 27 June 2001 the Commission forwarded to the Council and Parliament its communication on financial programming 2002-2006: financial perspective headings 3 and 4 (SEC(2001) 1013 – 2001/2162(COS)).
At the sitting of 19 September 2001 the President of Parliament announced that she had referred the communication to the Committee on Budgets as the committee responsible and all other committees concerned for their opinions (C5-0410/2001).
The Committee on Budgets had appointed Joan Colom i Naval rapporteur at its meeting of 11 July 2001.
It considered the Commission communication and the draft report at its meetings of 13 September, 9 October, 15 October and 5 November 2001.
At the last meeting it adopted the motion for a resolution unanimously.
The following were present for the vote: Terence Wynn, chairman; Reimer Böge, vice-chairman); Joan Colom i Naval, rapporteur; Herbert Bösch (for Paulo Casaca), Kathalijne Maria Buitenweg, Carlos Costa Neves, Gérard M.J. Deprez (for Ioannis Averoff), Den Dover, Markus Ferber, Salvador Garriga Polledo, Catherine Guy-Quint, Jutta D. Haug, Anne Elisabet Jensen, Juan Andrés Naranjo Escobar, Heide Rühle, Francesco Turchi, Michiel van Hulten (for Bárbara Dührkop Dührkop), Kyösti Tapio Virrankoski, Ralf Walter and Brigitte Wenzel-Perillo.
The report was tabled on 27 November 2001.
The deadline for tabling amendments is 12 noon on 6 December 2001.
MOTION FOR A RESOLUTION
European Parliament resolution on the communication from the Commission to the Council and the European Parliament: financial programming 2002-2006: financial perspective headings 3 and 4 (SEC(2001) 1013 – C5‑0410/2001 – 2001/2162(COS))
The European Parliament,
– having regard to the Commission communication (SEC(2001) 1013 – C5-0410/2001)[1],
– having regard to Articles 272 and 274 of the Treaty,
– having regard to the Treaty of Nice,
– having regard to the Interinstitutional Agreement of 6 May 1999 and the financial perspective annexed thereto[2],
– having regard to Article 3 of the Financial Regulation,
– having regard to its resolution of 26 October 2000 on the Interinstitutional Agreement on financial statements[3],
– having regard to the budget of the European Union for the financial year 2001 adopted on 14 December 2000[4],
– having regard to the report of the Committee on Budgets (A5-0427/2001),
A. whereas since 1995 the Commission has undertaken to send the budgetary authority a half-yearly report on financial programming in headings 3 and 4 of the FP,
B. whereas the communication for the first half of 2001 is the first to have been sent officially, thus giving rise to a consultation procedure,
C. whereas, for its part, its committee responsible has drawn up a financial programming schedule on the basis of the 2001 budget adopted on 14 December 2000,
D. having regard to the growing interest expressed by the institutions in an assessment of programmes in progress and monitoring implementation in year N,
E. having regard to the new tools and new programming methods introduced by the Commission and to the additional human resources which the budgetary authority has been asked for in the context of the reform,
F. whereas Parliament, the Council and the Commission have undertaken to assess the compatibility of new actions, without scaling down existing policies, with the FP ceilings,
1. Hails the programming efforts made by the Commission, which, by virtue of Article 274 of the EC Treaty, is responsible for implementing the budget;
2. Points out that the budget is adopted as part of the annual procedure, in accordance with the principle of unity, and that financial programming must be brought into line with the budgetary authority's decisions;
3. Reaffirms its wish to comply with the FP ceilings as annexed to the IIA of 6 May 1999 and with the IIA provisions on budgetary discipline;
4. Stresses, however, that the latest GNP growth forecast put forward by the Commission for the whole of the EU for 2001 is appreciably lower than the 2.5% implicit in the financial perspective table;
5. Points out that successive treaties (Maastricht, Amsterdam and Nice) have increased the legislative powers of Parliament without prejudice to its budgetary powers;
6. Restates its intention of complying with the budget allocations adopted by the legislative authority for multiannual codecision programmes and of exercising its power of oversight over the Commission's implementation thereof;
7. Points out that the two arms of the budgetary authority have undertaken to improve their follow-up and assessment methods with the aim of exercising precise and effective oversight over budget implementation;
8. Stresses the tentative nature of financial programming and the primacy of the annual budget decision via which it voices its priorities and its wish to maintain traditional activities that have proven their benefit to citizens and European added value;
9. Calls for the Commission, in tandem with legislative consultation to establish or renew budget-funded measures, to consult the budgetary authority on any new non-legislative initiative or any shedding of activities with a budget-related financial programming impact;
10. Invites the Secretary-General to put in place the technical and administrative support machinery needed by the portfolio committees to prepare legislative and budgetary decisions, so as to take account of a qualitative and quantitative assessment of measures in progress;
11. Takes note of the financial programming for headings 3 and 4, sent to the budgetary authority, for the period 2000-2006;
12. Stresses that presenting multiannual-programme amounts including a future inflation rate estimated a priori (in euro at current prices) makes the Union's financial efforts less visible and makes estimating the unused margins below the ceilings for headings 3 and 4 less reliable;
13. Calls therefore on the Commission to specify in its proposals whether multiannual spending amounts are expressed in constant-price euro or in euro at current prices and, if the latter is the case, to specify all figures in the financial statement in both current and constant euro;
14. Instructs its President to forward this resolution to the Council and Commission.
EXPLANATORY STATEMENT
Compliance with the financial framework and its limits
Parliament, as one arm of the budgetary authority, approved the Interinstitutional Agreement of 6 May 1999 and the FP table for the period 2000-2006 (which is an integral component of the IIA).
From the very first financial year in the period, however, the spending ceilings adopted by the Berlin European Council concerning Agenda 2000, and revised by Parliament, proved inadequate to cover expenditure resulting from the Union's political commitments, in particular in the Balkans. Out of a shared willingness to comply with the IIA, the Council and Parliament have decided to make use, during the 2000 and 2001 financial years, of the flexibility instrument provided for by the agreement.
On a host of occasions since the entry into force of the financial perspective system, Parliament has reaffirmed its commitment to complying with ceilings in the interests of fairness, using Community public monies rigorously in emulation of efforts made in national budgets, and, above all, institutional discipline and, lastly, out of a sense of responsibility in the light of the decision-taking and oversight powers conferred on it by the Treaty.
In addition, institutional developments in recent years (the Maastricht, Amsterdam and Nice treaties) have substantially increased Parliament's legislative powers in the shape of the codecision arrangements now applying to the lion's share of Community legislation.
In its capacity as co-legislator and as one arm of the budgetary authority, Parliament has complied with the terms of the IIA concerning multiannual funding, in particular paragraphs 33, 34 and 35, which provide for financial provisions to be incorporated into legislative instruments establishing multiannual programmes.
Such provisions, more commonly known as 'amounts deemed necessary' (ADN) or 'reference amounts’, are adopted by the legislative authority for the duration of a programme and constitute the 'prime reference' for the budgetary authority under the annual procedure.
This arrangement, which is based on arithmetic tallying, at the end of programmes, between annual amounts aggregated over the period in question and budget allocations under an indicative programming schedule drawn up by the Commission, is without prejudice to the budgetary authority's decision under the annual procedure.
The rapporteur would point out that, during the procedure for 2000, the margin available in heading 3 of the financial perspective did not allow Parliament to enter the annual amount representing the overall budget allocation adopted during the legislative procedure for the Socrates, Youth and Culture 2000 programmes, thus highlighting the tentative nature of the Commission's programming.
Flexibility of annual programming
Using its implementing powers, the Commission draws up a financial statement incorporating the multiannual impact of the measures it proposes (Article 3 of the Financial Regulation (FR)). At the request of the budgetary authority, and in particular of Parliament (budgetary procedure for 2001), the Commission has sought to enhance the impact of programming in relation to the managing departments for which it progressively must be an essential point of reference. In the context of the reform new programming, monitoring and assessment tools have been introduced.
The rapporteur is keen to hail the Commission's forecasting efforts not only in house, but also at institutional level: since 1995, the relevant departments have forwarded the financial programming for headings 3 and 4 to the budgetary authority; and because programming has been submitted to the Commission for collective approval, and subsequently to the budgetary authority, it is patently obvious that a further milestone - clearly a political one - has been passed. However, he has his doubts as to the method used by the Commission, as a result of which percentage increases are shown that do not reflect the real changes which have taken place.
However useful and important financial programming may be, it remains tentative in nature and without prejudice to the budgetary authority's decisions under the annual procedure and under no circumstances may be binding.
The rapporteur also invites the Council to gear its programming method towards flexibility and to take more account, as a point of reference, of the assessment and impact of each measure than of the previous year's appropriation figure.
As far as Parliament is concerned, the rapporteur points out that the Bureau decision of 11 December 2000 provides for the internal procedures of Parliament to be adapted, in particular the Rules of Procedure, to enable its competent bodies to carry out the compatibility assessments provided for by the Joint Statement of 20 July 2000. That is the gist of the opinion adopted by the Committee on Budgets for the Committee on Constitutional Affairs[1]. It would also be beneficial to set up an appropriate administrative structure to assist the portfolio committees, when the budget for year N + 1 is being prepared, in assessing and in qualitatively and quantitatively monitoring implementation of the budget for year N, this to be extended to codecision programmes.
This exercise will be made all the more necessary by the introduction of activity-based budgeting (ABB) in 2003.
Honouring political commitments
The rapporteur, who was behind the statement of 20 July 2000 on assessment of compatibility in the light of the financial framework, submitted a working document in February 2001[2] which had a three-pronged objective:
- to guide the budgetary authority's decisions;
- to provide an overview of available margins in the light of budget allocations adopted for codecision programmes;
- to facilitate implementation of the new assessment procedure stemming from the joint statement.
For Parliament, the main objective of the statement is to make it possible, through such assessments, to ensure funding continuity for policies in operation and to prevent them from being shedded, scaled down or 'merged' into new legal bases for which the overall budget allocation would represent a scaling down in real terms.
The fact is that in its annual programming exercise, and on the basis of its power of initiative, the Commission endeavours to 'slot in' its new proposals below existing ceilings, as is shown by the analysis of document SEC(2001) 1013.
In the working document referred to above, the rapporteur drew up a financial projection starting from the 2001 budget on the basis of the statement of 20 July 2000, i.e. without discontinuing policies in operation. The communication covered by this report gave the rapporteur the opportunity of carrying out a comparative analysis in the spirit of the joint statement, again without scaling down policies in operation for which the funding level, to his mind, reflects the Union's political priorities, whereas the Commission's financial programming shows overall reductions, by policy (title), over the period of validity of the financial perspective. By securing budget allocations for multiannual programmes and making room for new initiatives, the Commission is unable to ensure that all other measures in progress can be renewed.
Admittedly, its power of initiative allows it to merge or discontinue some programmes and propose others - albeit at the expense, often, of existing measures (measure by measure). In recent years, furthermore, the rapporteur has noted a trend towards more multiannual legislative initiatives, limiting the scope for the Commission's autonomous actions (within the meaning of paragraph 37 of the IIA) and new budgetary authority initiatives such as pilot projects and preparatory actions.
To enable the budgetary authority to take its annual decisions and be fully responsible for them, the Commission must consult it on the establishment or discontinuation of any measure which may have a financial programming impact (by supplying it with information on, for example, compatibility with the FP within the meaning of the statement of 20 July 2000, components covered or not covered by other legal bases, assessment results, implementation rates, etc.).
The problem of including future inflation in financial programming
The method used by the Commission to calculate its forecasts makes a distinction between multiannual programmes and 'other actions'. Multiannual programmes which have been adopted are allocated the amount already approved for each financial year. Programmes not yet adopted but already the subject of a proposal are allocated the amounts set out in that proposal. Lastly, for programmes expiring before 2006 in respect of which no proposal has been made, the amounts granted are extrapolated and increased by 2%. The extrapolation method is also used for the 'other actions'.
The Commission's action would be unexceptionable were it not for one hugely important issue: the inclusion of future inflation by means of what the Commission terms a budgetary 'deflator', which, in the rapporteur's opinion, it would almost be more appropriate to call an 'inflator'. Constant-price programming is the only way of establishing the value of a particular sum of money in real terms after a period of years and, hence, of establishing the real amount for a programme regardless of inflation in each year or, rather, irrespective of the specific year in which the expenditure is effected. That is the very reason why the financial perspective is expressed in constant-price euro.
Concealing future inflation creates an illusion. In the case, for instance, of the Framework Programme of research and development, according to the figures put forward by the Commission, annual allocations would increase by 14.3% between 2002 and 2006. If, a priori, the inflation rate used by the Commission throughout its programming is taken away, however, the increase is cut to 4.9%. Are we alive to this difference when discussing the aggregate figure for the Framework Programme?
|
Table 1 | |||||||||
|
5th FRAMEWORK PROGRAMME € m |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
New Framework Programme Total 2002-2006 |
Increase 2002-2006 |
|
COM figures in current-price € |
3 630 |
3 920 |
4 055 |
4 055 |
4 310 |
4 500 |
4 635 |
17 500 |
14. 3% |
|
Rapporteur's figures in constant-price € |
4 055 |
3 974 |
4 136 |
4 225 |
4 253 |
16 587 |
4. 9% | ||
According to this method, the margin in headings 3 and 4 for the financial years 2003 to 2006 will be greater however much actual inflation rises. However, this is a virtual margin. The Commission admits as much in its document when it refers to the heading 3 margin as being:
'around €350 million at the end of the programming period in 2006. However, it must be borne in mind that this scenario is based on a hypothesis of an annual budgetary deflator of 2%. Should this forecast turn out to be inaccurate and the deflator is 0.5 percentage points lower, the ceiling will need to be adjusted downwards and the margin in 2006 will be some €150 million lower.'
In short, this is verging on the ridiculous assertion that, should inflation increase considerably, the Union would have considerable margins with which to implement new policies: at 5% inflation, the € 350 m margin calculated by the Commission for 2006 would turn into about € 1300 m, whereas if annual inflation were 0.5%, again according to the Commission's reckoning, there would be a shortfall in excess of € 90 m in 2006.
GNP growth
It should lastly be pointed out that the calculations forming the basis for the financial perspective adopted on 6 May 1999 assumed average annual GNP growth of 2.5%. According to a host of recent Commission statements, current forecasts put growth at 1.5% for 2001.
The Commission ought to examine, on the basis of its own official autumn forecasts, the potential impact of the new economic outlook on the ceilings for projected expenditure under the financial perspective and notify the budgetary authority accordingly.
|
FINANCIAL PROGRAMMING 2002-2006 New Figures | ||||||
|
COMMISSION |
RAPPORTEUR | |||||
|
Heading 4 |
Budget 2001 |
PDB 2002 |
2006 |
COM Growth rate 2006/2002 |
"Real"(1) 2006 |
Growth rate 2006/2002 |
|
constant prices |
4 873.0 |
4 916.0 | ||||
|
Heading 4 ceiling current prices |
4 735.0 |
4 873.0 |
5 320.0 | |||
|
Ex-Yugoslavia and Western Balkans Countries |
839. 8 |
829. 5 |
520. 0 |
- 37.3% |
476. 9 |
- 42.5% |
|
MED Countries (incl. Cyprus, Malta, Turkey, Near and Middle East) |
917. 0 |
886. 8 |
1.010. 0 |
13. 9% |
926. 3 |
4. 4% |
|
New Independent States and Mongolia |
476. 0 |
478. 7 |
590. 0 |
23. 3% |
541. 1 |
13. 0% |
|
South Africa |
122. 0 |
125. 0 |
130. 0 |
4. 0% |
119. 2 |
- 4.6% |
|
Latin America |
336. 3 |
315. 0 |
315. 0 |
0. 0% |
288. 9 |
- 8.3% |
|
Asia |
446. 0 |
436. 0 |
484. 0 |
11. 0% |
443. 9 |
1. 8% |
|
Geographic co-operation Programmes |
3 137.1 |
3 071.0 |
3 049.0 |
- 0.7% |
2 796.2 |
- 8.9% |
|
Food Aid |
455. 0 |
433. 8 |
545. 0 |
25. 6% |
499. 8 |
15. 2% |
|
Humanitarian Aid |
473. 0 |
473. 0 |
502. 0 |
6. 1% |
460. 4 |
- 2.7% |
|
Other Co-operation Actions |
827. 6 |
812. 9 |
774. 0 |
- 4.8% |
709. 8 |
- 12.7% |
|
CFSP |
36. 0 |
35. 0 |
50. 0 |
42. 9% |
45. 9 |
31. 0% |
|
Subtotal Food and Humanitarian aid, other co-operation actions |
1 791.6 |
1 754.8 |
1 871.0 |
6. 6% |
1 715.9 |
- 2.2% |
|
TOTAL |
4 928.7 |
4 825.8 |
4 920.0 |
2. 0% |
4 512.1 |
- 6.5% |
|
(1) Figures deflated by 2% | ||||||