lars jorgen magnusson senior administrator external actions dg budget eu budget and financial...
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Lars Jorgen MAGNUSSONSenior AdministratorExternal ActionsDG Budget
EU budgetandFinancial Programming
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EU: 28 Member States with nearly 500 million inhabitants
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EU Institutions
European Commission
Council of theEuropean Union
European Parliament
Court of Justice of the European Communities
European Court of Auditors
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EU Budget
• Section I – Parliament • Section II – Council • Section III – Commission • Section IV – Court of Justice • Section V – Court of Auditors • Section VI – Economic and Social Committee • Section VII – Committee of the Regions • Section VIII – European Ombudsman • Section IX – European Data Protection Supervisor • Section X – European External Action Service (EEAS) • – 95% of the EU budget – goes to fund concrete activities ("operating
appropriations") is paid out by the Commission (Section III).
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EU – relative size of the EU Budget2011 Public expenditure : Member States vs. EU Budget
(as % of GNI / excluding interest charges)
53,0 52,7 52,1
50,049,0 48,6 48,3 47,5
46,8 46,445,2 45,1 44,9
43,942,9 42,5
41,440,3
39,537,737,9 37,3 37,1
54,9
60,7
49,5
45,7
1,0
0
10
20
30
40
50
60
LU DK FR FI IE SI SE AT NL BE HU PT UK CY CZ IT EL PL MT DE ES EE LV SK RO BG LT EUBudget
% of GNI
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Legal framework and regulations
• EU Treaties set out basic principles, budget procedure, general goals of policies
• Multiannual financial framework regulation with a duration of at least five years establishes annual upper limits (known as ‘ceilings’) per heading
• Own resource decision determines what and how much to collect - financing mechanisms and revenue limit (‘own resource ceilings’)
• Financial Regulation specifies the rules of spending and financial management
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Multiannual Financial Programming
• Multiannual Financial Frameworks (MFF)• 2000-2006, 2007-2013, 2014–2020
• The MFF translates into financial terms the Union’s political priorities for a given period
• Divides the expenditure to categories (headings) and provides the general framework (ceilings) to be respected in annual budgets
• Defines the maximum amounts of money to be spent during the period and in each budgetary year in:
• commitment appropriations: legal pledges to provide finance, provided that certain conditions are fulfilled
• payments: cash or bank transfers to the beneficiaries
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Annual budgetary procedure
• In the Treaty of Lisbon, the budgetary procedure has been improved
• The "Multiannual Financial Framework" becomes legally binding
• The European Parliament decides on an equal footing with the Council
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EU Budget Expenditure Lifecycle
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Who manages the EU budget?
Executive
agencies
CentralisedJoint
International Organisations
SharedMemberStates
Direct Indirect
DecentralisedThird
Countries
Community
agencies
Specialised Community
bodies
EIB & EIF
National
agencies
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Who manages the EU budget?
• The bulk of EU expenditure is managed jointly between
• the Commission and the Member States
• under the so called • shared management
Commission SharedManagement
Third Countriesand International
Partners
22% 76% 2%
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Accountability and external control
• Transparency in the use of funds: recipients of all EU funds disclosed, e.g. Through Financial Transparency System
• Reporting: Commission publishes annual accounts of the
EU
• External control: European Court of Auditors annual report
• Political accountability: EP gives discharge
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The "4 eyes" principle
Authorising Officer
Operationalverification
Operational initiation
Financial initiation
Financial verification
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EU Budget 2013
For 500million Europeans
For growthand employment
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EU budget 2013 in figures
Budget headings Budget2013*
Change from 2011
Sustainable growth 67.5 4.7 %
a) Competitiveness for growth and employment 14.8 9.1%
b) Cohesion for growth and employment 52.8 3.5 %
Preservation and management of natural resources
60.0 2.2 %
Citizenship, freedom, security and justice** 2.1 10.9%
The EU as a global player*** 9.4 7.4 %
Administration 8.3 1.3 %
Total 147.2 3.5 %
(*)Expenditure estimates for EU policies in commitment appropriations (billion EUR)(**) Excluding the European Union Solidarity Fund.(***) Including the Emergency Aid Reserve.
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Reflecting Europe 2020 prioritiesBalancing austerity and growth-boosting measures
The 2013 EU budget looks to the future
Innovation Union EUR 23.0 billion
Youth on the move EUR 1.4 billion
A digital agenda for Europe EUR 2.4 billion
A resource-eficient Europe EUR 22.1 billion
An industrial policy for the globalisation era EUR 1.8 billion
An agenda for new skills and jobs EUR 9.5 billion
European platform against poverty EUR 2.0 billion
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Sustainable growth
2nd column: Budget 2013, expenditure estimates for EU policies in commitment appropriations (billion EUR)3rd column: Change from 2011
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Natural resources
2nd column: Budget 2013, expenditure estimates for EU policies in commitment appropriations (billion EUR)3rd column: Change from 2011
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Citizenship, freedom, security and justice
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The EU as a global player
(2) Including the Emergency Aid Reserve
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Administration
• 5.6 % of the EU budget is planned to cover the functioning of all the EU institutions, compared to 5.7 % in 2011
• Major reform of administration which saved the EU taxpayers EUR 3 billion.
• The Commission has maintained the policy of 0 % staff growth.
• The rest of the 2013 budget (94.4 %), is directed to Union programmes and operations in favour of Europe’s regions and towns, business, scientists, citizens and the EU’s actions in the world
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Where does the money come from?
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Sustainable growth: Competitiveness in 2010
0,0 billion EUR
1,0 billion EUR
2,0 billion EUR
3,0 billion EUR
4,0 billion EUR
5,0 billion EUR
6,0 billion EUR
7,0 billion EUR
8,0 billion EUR
PL ES DE PT IT EL CZ HU UK FR SK LT EE RO LV SI BG NL BE SE AT FI IE CY DK MT LU
0,00%
0,50%
1,00%
1,50%
2,00%
2,50%
3,00%
3,50%
4,00%
4,50%
in billion EUR
% GNI
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Natural resources in 2010
0,0 billion EUR
2,0 billion EUR
4,0 billion EUR
6,0 billion EUR
8,0 billion EUR
10,0 billion EUR
FR ES DE IT UK PL EL IE RO HU AT PT DK NL CZ SE FI BE SK BG LT LV SI EE CY LU MT
0,00%
0,50%
1,00%
1,50%
2,00%
2,50%
in billion EUR
% GNI
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MFF 2014-2020 Challenges
• Exceptional Lisbon Treaty: more responsibilities • Austerity climate• Financial crisis interventions• Ensure synergies to prove EU Value-added• Social, economic and territorial disparities• Connect Europe better to strengthen the internal market• Unstable neighborhood
MORE EUROPE FOR THE SAME MONEY!
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Responses• European logic fully geared to Europe 2020 strategy• Modernised budget, output oriented, simplification, conditionality,
leveraging investment:• Connecting Europe Facility and innovative financial instruments• Key changes in research, cohesion, agriculture, external action
• Limited in size, but redesigned • Budgetary rigour, administrative limits • Savings in some areas and more for areas that matter • Multi-purpose expenditure• New legitimacy of traditional policies
• Reformed financing system:• New Own Resources linked to EU policies• Relief on Member States budget (via reduced contributions)• Simplification of existing correction mechanisms
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Commission’s proposal*
(EUR million - 2011 prices)
COMMITMENT APPROPRIATIONS 2014 2015 2016 2017 2018 2019 2020Total
2014-20201. Smart and Inclusive Growth 64 706 66 588 68 138 69 957 71 594 73 763 76 163 490 909
of which: Economic, social and territorial cohesion 50 468 51 543 52 542 53 609 54 798 55 955 57 105 376 0202. Sustainable Growth: Natural Resources 57 833 56 759 55 707 54 670 53 660 52 665 51 633 382 927
of which: Market related expenditure and direct payments 42 691 41 854 41 034 40 229 39 440 38 667 37 909 281 8253. Security and citizenship 2 532 2 571 2 609 2 648 2 687 2 726 2 763 18 5354. Global Europe 9 400 9 645 9 845 9 960 10 150 10 380 10 620 70 0005. Administration 8 542 8 679 8 796 8 943 9 073 9 225 9 371 62 629
of which: Administrative expenditure of the institutions 6 967 7 039 7 108 7 191 7 288 7 385 7 485 50 464TOTAL COMMITMENT APPROPRIATIONS 143 013 144 241 145 094 146 179 147 164 148 758 150 551 1 025 000
as a percentage of GNI 1.08% 1.07% 1.06% 1.06% 1.05% 1.04% 1.03% 1.05%
TOTAL PAYMENT APPROPRIATIONS 133 851 141 272 135 506 138 384 142 228 142 894 137 966 972 102as a percentage of GNI 1.01% 1.05% 0.99% 1.00% 1.01% 1.00% 0.94% 1.00%
Margin available 0.22% 0.18% 0.24% 0.23% 0.22% 0.23% 0.29% 0.23%Own Resources Ceiling as a percentage of GNI 1.23% 1.23% 1.23% 1.23% 1.23% 1.23% 1.23% 1.23%
*29/06/2011 - COM(2011)500 final, page 5
Multiannual Financial Framework (EU 27)
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What does constant in real terms mean?
14-20 vs. 07-13Statistical overhang
14-20 vs 13
in EUR billion 993,6 146,4 1.024,8 1.025,0 3,2% 3,1% 0,0%
in % of GNI 1,12% 1,12% 1,05%
in EUR billion 942,8 137,8 964,4 972,2 3,1% 2,3% 0,8%
in % of GNI 1,06% 1,05% 1,00%
2007-2013 2013
Payments
2013 * 7 2014-2020
MFF COMPARISON BETWEEN 2007-2013 AND 2014-2020 (in 2011 prices)
Commitments
Change (in %)
2011 prices
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What does constant in real terms mean?
125.0
130.0
135.0
140.0
145.0
150.0
155.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
EUR billion
2013: EUR 146.4 bn
'07-'13 average EUR 141.9 bn
2014:EUR 142.6 bn(EUR 3.8 bn
less than 2013)
'14-'20 averageEUR146.4 bn
COM proposal '14-'20: EUR 1025 bn
Statistical overhang
+ 3.1%
Committment ceiling ofCOM proposal for MFF 2014-2020
Committment ceiling ofMFF 2007-2013
MFF '07-'13: EUR 993.6 bn
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Decreasing payment share
0,85%
0,90%
0,95%
1,00%
1,05%
1,10%
1,15%
1,20%
1,25%
% of EU GNI
'93-'99 average 1.18%
'00-'06 average 1.06% '07-'13 average 1.06%'93-'99 average1.06%
'00-'06 average0.94%
1.27% of GNP ≡ 1.24% of GNI excl. FISIM 1.23% of GNI incl. FISIM
Own Resources ceiling
Payment ceiling of Financial Framework('14-'20 COM proposal)
Payments actuallyexecuted/appropriations
'14-'20 average 1.00%
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Commission’s proposal*
Outside the Multiannual Financial Framework (EU 28)
OUTSIDE THE MFF 2014 2015 2016 2017 2018 2019 2020Total
2014-2020
Emergency Aid Reserve 350 350 350 350 350 350 350 2 450
European Globalisation Fund 429 429 429 429 429 429 429 3 000
Solidarity Fund 1 000 1 000 1 000 1 000 1 000 1 000 1 000 7 000
Flexibility instrument 500 500 500 500 500 500 500 3 500
Reserve for crises in the agricultural sector 500 500 500 500 500 500 500 3 500
ITER 886 624 299 291 261 232 114 2 707
GMES 834 834 834 834 834 834 834 5 841
EDF ACP 3 271 4 300 4 348 4 407 4 475 4 554 4 644 29 998
EDF OCT 46 46 46 46 46 46 46 321
Global Climate and Biodiversity Fund p.m. p.m. p.m. p.m. p.m. p.m. p.m. p.m.
TOTAL OUTSIDE THE MFF 7 815 8 583 8 306 8 357 8 395 8 445 8 416 58 316
as a percentage of GNI 0.06% 0.06% 0.06% 0.06% 0.06% 0.06% 0.06% 0.06%
EUR million – 2011 prices
*29/06/2011 - COM(2011)500 final, page 5
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Despite restraint – significantre-distribution in key policy areas
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
2007-2013 77.8 12.9 12.4 56.8
2014-2020 114.9 40.0 18.5 70.0
Competitiveness InfrastructureSecurity and Citizenship
Global Europe
EUR billion commitment appropriations
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Ambitious, but realistic…
EUR billion commitment appropriations
2007-2013 2014-20201. Smart and Inclusive Growth 445,5 490,9 10,2%Of which Competitiveness 77,8 114,9 47,7%Of which infrastructure 12,9 40,0 209,7%Of which cohesion policy 354,8 336,0 -5,3%2. Sustainable Growth: natural resources 421,1 382,9 -9,1%Of which Market related expenditure and direct payments 322,0 281,8 -12,5%3. Security and Citizenship 12,4 18,5 49,9%of which Freedom, Security and Justice 7,6 11,6 53,0%of Citizenship 4,8 6,9 44,9%4. Global Europe 56,8 70,0 23,2%5. Administration (including pensions and European schools) 56,9 62,6 10,1%Of which administrative expenditure of EU institutions 48,4 50,5 4,2%6. Compensations 0,9Total appropriations 993,6 1.025,0 3,2%In % of EU-27 GNI 1,12% 1,05%
COMPARISON MFF 2007-13/2014-20EUR billion in 2011 prices
Difference (in %)
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Development of the Common Agricultural Policy and Cohesion policy share in the EU budget
20%
25%
30%
35%
40%
45%
2013 2014 2015 2016 2017 2018 2019 2020
Common agricultural policy Cohesion policy
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Cohesion policy
• Common strategic framework for all structural funds
• Investment partnership contracts with Member States
• Stronger conditionality
• Concentration on poorer and weakest regions
• Thematic concentration0%
10%
20%
30%
40%
50%
60%
2007-2013 2014-2020
EU-15
EU-12
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Connecting Europe
Connecting Europe Facility 40 EUR billion
• Energy, transport and digital networks
• Cross-border multi-country investments to the benefit of internal market
• Strong co-ordination with cohesion policy
• Proposed use of EU project bonds
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Cohesion policy proposalMultiannual Financial Framework 2014-2020
EUR billion - 2011 prices
Cohesion Fund* 68.7
Less developed regions 162.6
Transition regions 39.0
More developed regions 53.1
Cooperation 11.7
Extra allocation for outermost and northern regions 0.9
Total ** 336.0
*Cohesion Fund will earmark 10 billion EUR for the new Connecting Europe Facility** ESF minimum share: 25%
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New architecture of cohesion policy• Three categories of regions
• Less developed regions (GDP per capita < 75% of EU average)
• Transition regions (GDP per capita between 75% and 90%)
• More developed regions (GDP per capita > 90%) • Cohesion Fund for Member States with GNI per
capita <90%• Territorial cooperation (3 strands: Cross-border
Cooperation, transnational, interregional)
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Agriculture
• Declining share in the EU budget until 2020
• Greening of CAP - direct aid 30 % linked to environment measures
• Progressive convergence of direct support towards EU average:
• Close 33% of the gap with 90% of EU average• Financed by all Member States above the average
• Market measures: Emergency Mechanism
• European Globalisation Fund to help farmers adapt to globalisation
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Administrative expenditure
• Budget under restraint
• Staff reduction up to 5%
• Efficiency gains (increase working hours to 40 a week)
• Reviewing certain benefits in line with similar trends in Member States
• Administrative expenditure discipline for all EU institutions
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Own resources past changesEU budget revenue
1958-2011(in % of EU GNI)
Financial contributionsTraditional own resources (custom
duties & sugar levies)
VAT-based own resource
GNI-based own resource
Other revenue & surplus
0,00%
0,20%
0,40%
0,60%
0,80%
1,00%
1,20%
1958 1963 1968 1973 1978 1983 1988 1993 2003 2008 2011
Other revenue & surplus
GNI-based own resource
VAT-based own resource
Traditional own resources (custom duties &sugar levies)Financial contributions
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… in other words
• considerable evolutions in EU financing • OR now mainly based on 'statistical aggregates' (GNI and
VAT-based OR = 85%)• contributions seen as “expenditures” to be minimized
by Member States• permanent tension on EU financing• development of corrections and focus on "allocated"
expenditures• own resources disconnected from EU policies
• in times of budgetary consolidation, necessity to find new ways to finance the budget
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A new own resources system
• Commission proposal
• End current statistical VAT own resource as of 2014
• Introduce 2 new own resources– Financial Transaction Tax– New VAT resource
• Radically simplify the system of corrections
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EU taxation of financial sector
• Commission proposal
• Introduce Financial transaction tax (FTT) from 1/1/2018 at the latest.
• Applicable tax rates to be set at the moment of legislative proposal (Autumn 2011)
• Advantages
• Contributes to budgetary consolidation of Member States by reducing their contributions to the EU budget
• Support in European Parliament, national parliaments, NGOs and public at large (Eurobarometer: 61% in favour and 50% or more in 20 Member States)
• FTT more efficient at EU than at national level
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New VAT resource
• Commission proposal• New VAT resource from 1/1/2018 at the latest.• Proposed rate: 1 %
• Advantages• Link EU VAT policy and EU budget• Part of wider revision of VAT systems: fight against VAT
fraud and reinforce harmonisation of VAT systems
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Envisaged evolution of own resources structure
Share of Own Resources Types in Total Own Resources Payments
29%
78%
40%
0%
61%
0%
56%
12%
60%
10%
44%
10%
0%
20%
40%
60%
80%
100%
1978 1988 2013 2020
Traditional own resources + new OR
GNI resource (1978 MS Financial Contributions)
VAT resource
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Correction mechanisms• Commission proposal
• Replace all corrections mechanisms by a system of fixed annual lump sums for 2014-2020
• Based on Fontainebleau principle:"any member State sustaining a budgetary burden which is
excessive in relation to its relative prosperity may benefit from a correction at the appropriate time."
• Advantages
• Fairness – lump sums based on relative prosperity• Simplicity and transparency• Lump-sum corrections aligned with expenditures (same duration as
MFF)
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Corrections
Annual lumpsum
2014-2020
GROSS AMOUNT
DE 2500NL 1050SE 350UK 3600
TOTAL 7500
(in million of euro / in current
prices)
LUMPSUMS ADJUSTED FOR RELATIVE PROSPERITY
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The EU Budget is unique, not comparable to any other government or federal budget.
Financed by the Traditional Own Resources (customs duties; Value added tax (VAT) and a MS contribution based on the size of their Gross National Income (GNI).
Revenues are used to finance activities of common interest to all MS, as specified in the Treaties.
The overall amount of the EU Budget is limited by a ceiling, currently 1.23% of the Union's GNI.
The Budget can not run a deficit, i.e. payments must match revenues in any budget year.
Commitments are programmed in advance in the Multi-annual Financial Framework (MFF).
Result - Little room to manoeuvre and a budget relatively well "protected" against fiscal disruptions.
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Further information on:
• Financial Programming and Budget website:• http://ec.europa.eu/budget/ • MFF 2014-2020 website:• http://ec.europa.eu/budget/reform/
Thank you !