EC Budget Council (Hansard, 17 October 1994)

§ Mr. Heathcoat-Amory

I represented the United Kingdom at the Budget Council on 25 July. The Council considered the Commission's preliminary draft budget for 1995. The draft budget established by the Council totalled 75.7 billion ecu or £59.8 billion in commitment appropriations. The draft budget would require own resources totalling 1.999 per cent. of Community gross national product, compared with the existing own resources ceiling of 1.20 per cent. of Community GNP.

The Council took no formal votes, with the Presidency concluding that the necessary majority existed to establish the draft budget for 1995.

The summary table compares the outcome of the Budget Council to the proposals in the Commission's amended preliminary draft budget by reference to the financial perspective ceilings.

Further information is contained in explanatory memorandum 8782/94 on the draft budget, which was deposited in Parliament on 27 September.

The European Parliament will consider the draft budget for 1995 at its plenary in October. The Parliament's amendments and modifications will be considered at the

	Financial perspective expenditure ceilings	Preliminary draft budget²	Budget Council draft budget
	mecu	£ million¹	mecu	£ million	mecu	£ million
Commitment appropriations
1. Common Agricultural Policy	36,994	29,219	36,994	29,219	36,994	29,219
2. Structural operations	25,264	19,954	25,264	19,954	25,264	19,954
3. Internal policies	4,652	3,674	4,605	3,637	4,286	3,385
4. External action	4,605	3,637	4,555	3,597	4,363	3,446

second Budget Council in November. The European Parliament's Second Reading is likely to be in mid-December.

The Budget Council also briefly discussed own resources shortfalls and agreed that the issue would be considered again in September after the Commission had provided more up-to-date figures.

My right hon. and learned Friend the Chancellor of the Exchequer represented the United Kingdom at the Economic and Finance Council on 27 July. A copy of the press release, 8718/94, from the general secretariat of the Council has been placed in the Members' Library.

The Council discussed the taxation of savings —withholding tax. My right hon. and learned Friend resisted any agreement in principle to action at the Community level, on the grounds that it was unnecessary, likely to be ineffective, and would divert business away from financial centres in the European Union.

The Council reviewed progress on the new own resources decision. The Council discussed the definitive VAT regime. The Council agreed the following criteria which any definitive system should meet: fundamental simplification and fewer administrative obligations; no reduction in income for member states from VAT; no increased risk of tax fraud; and preservation of the neutral effect on competition of VAT. My right hon. and learned Friend the Chancellor fully agreed with this list, and endorsed the Presidency's emphasis on simplification.

The Council took note of a progress report from a working group on the VAT simplification directive. The Council was then informed of progress on a long-standing Commission proposal for a Community system of taxation of interest and royalty payments made between parent companies and subsidiaries in different member states.

The Council discussed the question of a carbon/energy tax. The Chancellor agreed that member states should implement measures to ensure that commitments agreed under the Rio convention were met, but doubted that Community-wide tax was necessary. My right hon. and learned Friend noted that the United Kingdom was already on target to meet its own commitments using national measures. A range of opinions was expressed; but there was general agreement that the alternative of building on existing minimum excise duty rates for oils should be explored, and that ECOFIN should continue to take the lead role in discussing this issue.

The other principal issue discussed was the possible case for the introduction of a reduced rate of excise duty on biofuels. There was a broad range of views. The Chancellor stated that he was sceptical about whether there were any benefits to be gained from such subsidies; and that it was wrong in principle to subsidise a product which was unlikely to become commercially viable in the near future.

No formal votes were taken.

	Financial perspective expenditure ceilings	Preliminary draft budget²	Budget Council draft budget
	mecu	£ million¹	mecu	£ million	mecu	£ million
5. Administrative expenditure	3,852	3,042	3,827	3,023	3,691	2,915
6. Reserves	1,146	905	1,146	905	1,146	905
Total Commitments	76,513	60,432	76,390	60,335	75,745	59,825
Total payment appropriations	72,924	57,597	72,412	57,193	71,955	56,832
¹Throughout this reply the rate of £1=1.2661 ecu has been used. The rate notified in the Official Journal as prevailing on the last working day of last month—31 August.
² As amended from the figure which appeared in the Commission's overview of the PDB for 1995, to take account of the higher bids of the small institutions on administration under category 5.