It is important to recall that although this year budget is €5bn below the European Commission’s original proposal for payment appropriations it is higher than the budget initially proposed by the Council, and, obviously, higher than the freeze demanded by the UK Government. The Council and the European Parliament reached an agreement on €150.90 billion in commitment appropriations and €132.84 billion in payments appropriations, which represents an increase of 2.9%, compared to the EU budget for 2012. Nevertheless, they issued a joint statement on payment appropriations for 2013, “acknowledging that they were “…aware that a draft amending budget may possibly be required as early as mid-2013.” In fact, they called upon the European Commission to present "at an early stage in the year 2013 a draft amending budget devoted to the sole purpose of covering the 2012 suspended claims (…) To ensure sound and accurate EU budgeting, the Council and the European Parliament will take position on this draft amending budget as quickly as possible in order to cover any outstanding gap". Consequently, we were already expecting the budget to be amended during 2013. Hence, although unacceptable, the draft amending budgets are not a surprise.
In March 2013 the European Commission requested €11.2 billion in extra funding from the member states “to reimburse beneficiaries of EU funded programmes completed across Europe in 2012 as well as to honour the Cohesion Policy claims that will fall due in 2013.” The Financial Secretary to the Treasury described the Commission request as "totally unacceptable”, particularly “at a time when most Member States are taking difficult decisions to reduce public spending;” Nevertheless, last May, the European Commission, the European Parliament and the Council of Ministers, represented by the Irish presidency, reached a compromise deal on the draft amending budget for 2013, whereby the €11.2 billion proposed by the Commission would be paid in two tranches, €7.3 billion to be paid before summer then €3.9 billion in the autumn. Coreper initially rejected such compromise deal, as member states have been against the idea of contributing with more money into the 2013 budget. Several EU’s member States, the UK, Holland, Germany, France, Sweden, Denmark and Finland as described the Commission’s request as excessive and could not endorse an additional contribution of €7.3 billion as a first tranche. The Government could not support and voted against such request for additional payments for the EU Budget. However, it was unable to veto it, as the request for extra funds can be approved if a qualified majority of member states supports it. The UK was therefore outvoted on draft amending budget for 2013. Hence, the Council agreed to provide €7.3 billion as a first installment.
The European Parliament has been particularly determinate to resolve the issue of unpaid bills from last year’s budget. The MEPs reiterated, "the European Parliament will not conclude these negotiations before the final adoption by the Council and the Parliament of this amending budget" and demanded “a formal, binding decision by the Council on the full amount of €11.2 billion before concluding the MFF negotiations.” The European Parliament has made clear that it won't give its formal consent to the MFF regulation covering the next period (2014-2020) unless it has an absolute guarantee that the outstanding payment claims for 2013 will be covered in full.
It is important to note that the European Parliament has not formally adopted yet the EU's 2014-2020 budget regulation. The MEPs seating in the Parliament's Budgets Committee have decided to postpone the consent vote as the European Parliament’s conditions have not been met yet. The MEPs have stressed that the Council has solely agreed to pay €7.3 billion and they want to be ensured that €11.2 billion will be fully paid.
The European Parliament as well as the Council has already adopted the first instalment (EUR 7.3 billion) and asked the Commission to come with a proposal "in early autumn on the basis of the latest updated estimates regarding payment appropriations". Last July, the Council said in a statement that "...it is not in a position to agree to the full level of payment appropriations requested by the Commission in draft amending budget 2/2013 at this stage” but it has confirmed “its willingness to take all necessary additional steps to ensure that the EU's obligations are honoured in a second phase, when the Commission will have more information on implementation, the possibilities for redeployment and on budget revenues.”
Hence, the European Commission has not wasted time and it has recently adopted the second instalment of its Draft Amending Budget 2 presented in March 2013, amounting to EUR 3.9 billion to cover outstanding payment needs until year-end.
The European Commission’s draft amending budget No 8 for the year 2013 updates therefore DAB 2/2013 for an amount of EUR 11,2 billion. According to the European Commission “The updated review of payment needs in the 2013 budget has confirmed a major shortage of payment appropriations, after taking into account the EUR 7,3 billion authorised in AB 2/2013 and all the possible sources for redeployment.” The European Commission stressed “This second instalment is based on updated estimates for payments in cohesion policy provided by Member States themselves;” The majority of the money, around EUR 3.1bn, will be used to pay bills sent in by Member States in the cohesion policy area whilst the remaining money will be spent on instruments to stimulate growth and jobs and to help the victims of major humanitarian crises particularly in Syria, Mali and the Horn of Africa.
Consequently, the Commission is demanding further EUR 3,9 billion in member states' contributions to the EU's present budget so it can reimburse beneficiaries of EU funded programmes, mainly for completed projects under the cohesion policy.
The European Commission has stressed, “This amendment is particularly important, as it is a condition for the adoption of the next MFF” and called upon the budgetary authority, Council and the European Parliament, to swiftly adopt it. It is important to recall that the Council issued a statement in July 2013 saying “On the basis of a proposal to be made by the Commission in early autumn on the basis of the latest updated estimates regarding payment appropriations, the Council commits to decide, without delay, on a further draft amending budget to avoid any shortfall in justified payment appropriations.” The Council is therefore most likely to agreed to provide the remaining €3.9 billion. Consequently, the total 2013 EU Budget will increase from €132.8bn to €144.5bn. This will cost UK’s taxpayers an additional €1.3bn. Nevertheless the government is unable to veto it. Due to QMV the government will be outvoted again as it was when the Council adopted the Draft Amending Budget 2 for 2013 and agreed to provide further €7.3 billion to this year budget.