EC Budget Council (Hansard, 24 February 1988)

§ Mr. Brooke

The Budget Council met in Brussels on 23–24 February. I represented the United Kingdom.

The Council reached agreement in principle, subject to a reserve by Italy and clarification of some technical details, on a draft Community budget for 1988. The Italian delegation agreed to signify its assent or otherwise by Monday 29 February. The proposed draft budget reflects the conclusions of the Brussels European Council on 11–12 February.

The proposed draft provides for total expenditure of 44.7 billion ecu (becu) (£31.0 billion) in commitment 193W appropriations and 43.4 becu (£30.1 billion) in payment appropriations, the latter being equivalent to about 1.11 per cent. of Community GDP. (All sterling equivalent figures are calculated at the rate of 1.44 ecu to the pound, used by the Commission in its latest budgetary proposals).

In keeping with the Brussels European Council conclusions, the proposed draft makes basic provision for agricultural guarantee expenditure of 27.5 becu (£19.1 billion), with a further 1.24 becu (£0.9 billion) for disposals of existing stocks and a monetary reserve of 1 becu (£0.7 billion) to be called up, as agreed at the European Council, only if changes in the ecu/dollar rate increase spending requirements by more than 400 million ecu (mecu) (£277 million). The Council agreed that budgetary provision would be adjusted if necessary later in the year to enable implementation of the new arrangements which are to be agreed for systematic depreciation of new stocks. On other compulsory expenditure, the draft provides for 3.9 becu of commitment and payment appropriations, equivalent to £2.7 billion.

On non-compulsory expenditure, the Council agreed on figures of 11.0 becu (£7.6 billion) for commitment appropriations and 9.8 becu (£6.8 billion) for payment appropriations. The increases over 1987 are 7 and 5.8 per cent. respectively, compared with the "maximum rate" of increase, calculated in accordance with the treaty, of 7.4 per cent. The European Parliament will have the right under the treaty to add a further half maximum rate "margin" to these amounts (some 380 mecu for commitment and 341 mecu for payment appropriations). The draft includes provision for the structural funds of 7.8 becu (£5.4 billion) in commitment appropriations, as agreed at the European Council, and 6.8 becu (£4.7 billion) in payment appropriations.

The Brussels European Council conclusions provided that, in order to cover the Community's 1988 budget requirements pending entry into force of the new own resources decision, member states would make available any necessary sums in excess of the existing own resources ceiling, after completion of the appropriate national procedures, in the form of non-repayable advances on payments due after entry into force of the new own resources decision.

In accordance with this, 11 members of the Council agreed to a provisional and indicative draft of an Inter-Governmental Agreement (IGA). This follows the precedent set after the 1984 Fountainebleau European Council. On the basis of the Commission's expenditure proposals, before amendment by the Council and the European Parliament, the indicative draft envisages that member states would pay a sum of some 7.7 becu (£5.3 billion) corresponding to the new fourth own resource, with a United Kingdom share of some 1,274 mecu (£884 million). This extra financing would be partially offset by smaller VAT payments, leaving total extra financing, compared with the maximum amount available under the existing own resources ceiling, of around 6.0 becu (some £4.2 billion). The intention is that member states should contribute to whatever extra financing is finally agreed in accordance with the amounts which they would have paid if the new own resources decision had taken effect immediately. I made it clear at the Council that the United Kingdom will not be able to pay over any of the additional sums unless and until the United Kingdom Parliament's approval has been obtained.

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The Italian delegation argued that the GNP-based financing of the United Kingdom's abatement should be brought to account against the new fourth own resource (thus in effect increasing the proportion of the budget which would be financed in accordance with VAT shares) rather than (as proposed by the Commission) within the VAT ceiling. The delegation reserved its position accordingly on the draft budget and agreed to signify its agreement or otherwise by midnight on 29 February.

The final figures for the Inter-Governmental Agreement will be determined in the light of the total budget as adopted later in the year and of the own resources decision as finally agreed. Meanwhile, technical details are still under discussion in Brussels.

If the Italian delegation lifts its reserve, the draft budget will be sent forward to the European Parliament and the next step will be for the European Parliament to give the budget its first reading. If the Italian delegation does not lift its reserve, the German presidency hopes to arrange a further meeting of the Budget Council next week.