EN Official Journal of the European Union C 356/15

Opinion of the Committee of the Regions on ‘The Draft EU Budget for 2014’

2013/C 356/04

THE COMMITTEE OF THE REGIONS

— stresses that the process of drawing up the annual EU budget is of a political and strategic nature for regional and local authorities and proposes a formal consultation on future years' budgets;

— welcomes the efforts made by the European Commission to provide information on who receives EU funding, but finds that the publicly available information is inadequate and too sketchy to get an accurate overall picture of the European funds spent and managed by regional and local authorities;

— stresses that it will carefully monitor whether a slow programming start and a slow absorption will have a negative impact on the mid-term review of the MFF planned for 2016;

— notes that about one third of the total RAL (EUR 70.7 billion) will be paid in 2014, but concurs with the concerns expressed by the European Commission with regard to the financial years 2015 and 2016;

— finds it unacceptable that payments are delayed and urges that the payment deadline of 60 days for programmes under shared management should be binding and that there should be a legal or financial penalty if this is not done within the deadline;

— regrets the absence of references to the European Semester in the political presentation of EU budget's priorities for 2014;

— suggests that the full frontloading of the YEI in 2014-2015 should be accompanied by appropriate measures (e.g. capacity building) for quick implementation;

— requests further frontloading in commitment appropriations of up to EUR 200 million for Horizon 2020, EUR 150 million for Erasmus and EUR 50 million for COSME in 2014-2015;

— welcomes the fact that a transfer of EUR 351.9 million is foreseen from the first to the second pillar of the common agriculture policy (CAP) and reiterates its firm opposition to transfers in the other direction;

— suggests that the extra flexibility of the ‘global margin for growth and employment’ be used for heaving 1b.

Rapporteur Luc VAN DEN BRANDE (BE/EPP), Chairman of the Flemish European Liaison Agency Reference documents European Commission, Statement of estimates of the European Commission for the financial year 2014 (Preparation of the 2014 Draft Budget) SEC(2013) 370, June 2013 Council of the European Union, Draft Council regulation laying down the multiannual financial framework for the years 2014-2020 11655/13, 27 June 2013

I. POLICY RECOMMENDATIONS

THE COMMITTEE OF THE REGIONS

1. points out that it is for the first time drawing up an opinion on the annual EU budget procedure in order to represent the views of regional and local authorities (RLAs) on the budget headings of which they are the main beneficiaries and in which they are directly involved;

2. stresses that the process of drawing up the annual EU budget is of a political and strategic nature for regional and local authorities and proposes a formal consultation on future years' budgets by the Commission, the Council or the Parliament, allowing for a CoR position once the Commission has published the draft budget and, preferably, before the Council forwards it to the Parliament;

3. emphasises that the opinion does not address administrative expenditure related to heading V;

4. focusses in this opinion on budget headings of main interest to the Committee of the Regions and RLAs, including the Structural Funds, Horizon 2020, COSME, the Cohesion Fund and other shared management programmes such as EMFF and EAFRD, and LIFE+;

The European budget and the regional and local authorities (RLAs)

5. notes that the European budget is of particular importance to regional and local authorities since they directly manage some EU programmes under shared management and are therefore directly affected by the level of both commitment and payments appropriations in these fields, especially in view of delays in payments resulting from an accumulation of outstanding payment claims in past years, which directly affects the public finances of many regional and local authorities across the EU;

6. further notes that many RLAs that benefit from European funds such as the European Regional Development Fund (ERDF), the Cohesion Fund, the European Social Fund (ESF), the European Agricultural Fund for Rural Development (EAFRD), the European Maritime and Fisheries Fund (EMFF) are very much dependent on these funds for achieving their policy objectives;

7. wishes also to recall that the EU budget represents only a small share (around 2 %) of the overall public spending within the European Union and in itself is insufficient to deliver the EUR 1.8 trillion of future-oriented direct investments required by Europe 2020. The Committee of the Regions considers therefore that further involvement of RLAs in the new European economic governance framework is crucial and emphasises the importance of RLAs' participation in the context of partnership agreements;

8. stresses that investment from the European budget has multiplier and leverage effects through the public and private co-financing at regional, local and national level. Public investment in many Member States is heavily dependent on the structural funds, which represent over 30 % of public investment in 13 countries and, in six Member States, even more than 60 %;

9. notes that there is no clear picture with regard to the share of the regions and local governments, although is assumed that a large part of the EU budget is spent by national, regional and local authorities, by public authorities, non-governmental organisations, non-profit organisations, private organisations, businesses, universities and educational institutions, individuals, etc., and that overall one third of public expenditure and two thirds of public investment are at regional and local level;

10. is convinced that RLAs play a vital and irreplaceable role regarding the implementation of European policy objectives. RLAs participate directly or indirectly e.g. in: — employment programmes for the unemployed, immigrants, women, etc.; — programmes to promote youth employment; — the social integration of vulnerable groups in society; — the fight against discrimination in the workplace; — intercultural dialogue and the dissemination of culture; — the social inclusion and the participation of young people; — promoting the social inclusion of people with disabilities; — supporting the audio-visual sector; — environmental protection and biodiversity; — the implementation of the Seventh Framework Programme for research and technological development; — the programmes for the modernisation and diversification of the economic structure and for job creation in sectors such as ICT, tourism, energy, health, environment, research, etc.; — promoting innovation and knowledge; — the access to transport and telecommunications; — promoting energy efficiency and public transport; — renewable energy; — cross-border, transnational and interregional cooperation; — solving the specific problems of cities, remote areas, etc.; — building European transport networks; — programmes to combat climate change; — improving the competitiveness of the agricultural sector; — improving the quality of life in rural areas; — diversifying the rural economy; — sustainable development of fisheries areas, etc.;

11. concludes that the regions and local authorities are involved, directly and/or indirectly, in managing or spending more than 75 % of the EU budget (1);

12. welcomes the efforts made by the European Commission to provide information on who receives EU funding, either directly from the European Commission or through the national and regional authorities with a view to increasing responsibility by more transparency, but finds that the publicly available information is inadequate and too sketchy to get an accurate overall picture of the European funds spent and managed by RLAs;

13. regrets the lack of statistical data allowing the Committee of the Regions to perform its consultative role and requests the European Commission to provide, as from 2014, — consolidated data on the amounts of funds received and RAL (2) per budget line and type of beneficiary, notably subnational public authorities; — the breakdown of outstanding payment claims not only by country but also by category of beneficiary (national authorities vs. subnational public authorities); — the amount of funds raised by national/subnational authorities for cofinancing EU projects under shared management;

14. calls on the European Commission, the European Parliament and the European Council to streamline and harmonise the way changes to the draft budgets are presented in order to facilitate the democratic scrutiny process;

15. stresses in this respect that the effectiveness of European policy depends on proper application of the principle of multilevel governance, which is considered as a general principle governing the structural funds (3), meaning that all levels of government, each according to their competences, work together in an efficient manner to achieve the policy objectives. The regional and local authorities cannot be considered as beneficiaries in the same way as non-governmental organisations, private organisations, businesses, educational institutions, etc.;

16. supports the initiative of the European Commission on the European Code of Conduct on Partnership (ECCP) as a supplement to the Common Provisions Regulation; the ECCP fleshes out and expands partnership in the preparation, implementation and evaluation of the CSF programmes and funds; is of the opinion that such a partnership is the best guarantee for an effective use of resources and for an alignment with the needs of the region or local community and regrets that the Council has not included the ECCP in the negotiating box, although this code is an important management tool for the programming period 2014-2020;

17. calls upon the Commission to report in a clear manner on the way RLAs were involved in a timely and structured way in the drafting of the Partnership Agreements and the Operational Programmes for 2014-2020;

18. reiterates the necessity to reduce the administrative burden for regional and local authorities and urges the Commission, Council and Parliament to take this into consideration by developing new rules affecting RLAs;

19. recalls its request for proposals by the European Commission to take into account the quality of public spending in the macroeconomic accountancy of the European Union and the Member States. These proposals should in particular address the issue of separating current spending and investment in the budget deficit calculations so as to avoid investments with long-term net benefits being calculated as a negative;

20. welcomes the efforts undertaken by the European Commission to track public expenditure related to climate action;

The multiannual financial framework (MFF) and the regional and local authorities (RLAs)

21. welcomes the fact that a political agreement was reached on 27 June 2013 between the Parliament, the Council Presidency and the Commission on the 2014-2020 Multiannual Financial Framework;

22. is worried that the Commission does not have a proper risk management strategy as to the extent to which cohesion policy could work on the basis of annual budgets in the absence of a multiannual financial framework;

23. is particularly concerned that the overall level of the next MFF, as decided by the European Council, might not be sufficient to meet the EU ambitions expressed in ‘Europe 2020’ and the ‘Compact for Growth and Jobs’;

24. regrets that the ceiling of the MFF for commitment appropriations (EUR 960 billion) is EUR 34 billion lower than for the period 2007-2013, and this at a time when Europe needs the necessary means to recover from the current crisis in a coordinated way, and that this MFF ceiling (EUR 960 billion) is over EUR 80 billion lower than originally proposed by the Commission;

25. supports the EP's position that the MFF regulation cannot be legally adopted unless there is a political agreement on the relevant legal bases;

26. regrets that no substantial progress has been made on the reform of the own resources system as a means of reducing Member States' direct contributions to the EU budget; urges therefore the Council, the Commission and the European Parliament to decide without delay on the mandate and the composition of the working group on own resources as provided in the 27th June agreement in view of meeting the deadline of a first assessment in 2014. The working group should be convened at the time of the formal adoption of the MFF Regulation;

27. welcomes the agreement that has been reached on the enhanced flexibility with a view to making full use of the respective MFF ceilings, allowing the automatic carry-over of unused appropriations from one financial year to the next and on the compulsory review and consequent revision of the MFF by the end of 2016;

28. reiterates its clear, firm opposition to any form of macro-economic conditionality, and considers that the option of extending it to all budget headings as requested by some Member States is unhelpful, as it risks heavily penalising regional and local authorities that are not responsible for their Member States' failure to comply with these requirements. Regrets that the macro-economic conditionality is still mentioned in Article 6 of the Draft Council Regulation laying down the multiannual financial framework for the years 2014-2020;

29. reiterates its rejection of the performance reserve since it could encourage the development of unambitious projects and discourage innovation. Regrets the references to it in the political presentation of the 2014 draft budget;

30. supports the EP's position that the consent vote on the MFF Regulation cannot be granted unless there is an ‘absolute guarantee’ that the outstanding payment claims for 2013 will be covered in full and that therefore the Council should take not only a formal decision on the Draft Amending Budget (DAB) 2/2013 (EUR 7.3 billion) but also stick to its political commitment to adopt without delay a further amending budget (EUR 3.9 billion, to reach the EUR 11.2 billion (4) required) and welcomes in this respect the fact that the Commission has chosen to base its Draft Budget 2014 on the assumption that these two DABs 2013 will be adopted;

31. stresses that it will carefully monitor whether a slow programming start and a slow absorption will have a negative impact on the mid-term review of the MFF planned for 2016;

The structural deficit of the EU budget

32. is concerned about the fact that the MFF 2014-2020 introduces an additional structural deficit in the European budget of EUR 52 billion. RLAs, being heavily dependent on European funds for their investments, see it as a very dangerous trend, as the Commission will not be able to honour on time the commitments made for lack of payment appropriations and notes that the creation of such a structural deficit in the European budget is contrary to the provisions of the Treaty (Articles 310 and 323 TFEU);

33. expresses its great surprise that even with the assumption that the two DABs 2013, adding a total of EUR 11.2 billion of extra payments for 2013, are adopted, it is still expected that there will be at the end of 2013 a RAL of approximately EUR 225 billion (5) from 2007-2013 programmes in the new financing period, which represents about 25 % of the total MFF ceiling for payments over 2014-2020 (EUR 908.4 billion) and 1.6 times the annual EU budget;

34. notes that this amount of RAL contrasts with the political objective expressed by the EP in the negotiations to start the new programming period from a clean slate and warns that there will be at the end of 2020 a RAL of approximately EUR 277 billion (6) and that this gap, i.e. structural deficit, will increase MFF after MFF;

35. points out that the two areas which contribute most to the overall level of RAL are cohesion policy (two thirds of the total) and rural development, and recommends that solutions be found to avoid an accumulation of RAL over years;

36. supports the call by the European Parliament on the European Commission to ‘provide monthly reports (…) on the evolution of Member States' payment claims for the structural funds, cohesion fund, rural development and fisheries funds (breakdown per Member State and per fund)’;

37. notes that about one third of the total RAL (EUR 70.7 billion) will be paid in 2014, but concurs with the concerns expressed by the European Commission with regard to the financial years 2015 and 2016 and that, whilst the year 2014, being the first of the new MFF, has room of manoeuvre with payment appropriations since the new programmes will take time to start up (especially those under shared management), this flexibility will become smaller and smaller with years passing;

38. underlines in this respect the positive aspect of the MFF agreement (7) on flexibility possibilities within the MFF and the so-called ‘global margin for payments’ (8);

39. expresses its concern that the Commission is not foreseeing any margin for the year 2014, since the level of payments is set at EUR 136.1 billion which means that the Commission will have no extra margin for 2015 and that the structural deficit risks accumulating again with the run-up of the new programmes in 2014-2020 and the remaining backlog from 2007-2013 (+/-EUR 155 billion);

40. draws attention to the consequences of the new ‘n+3’ rule for decommitments in the field of cohesion policy in terms of RAL accumulation in the coming years. In this respect the Committee of the Regions recommends that the payment of outstanding claims from 2007-2013 be given priority in 2014-2016 (EUR 70 billion every year over three years), since the payment claims for the new programming period will most probably start building up in 2017-2018 (2014 + 3 years, counting with the delay in the start-up of programmes in 2014 due to the late MFF agreement);

41. finds it unacceptable that payments are delayed and urges that the payment deadline of 60 days for programmes under shared management should be binding and that there should be a legal or financial penalty if this is not done within the deadline and that the already existing financial penalty (interest) for programmes centrally managed (e.g. Framework Programme 7 /future ‘Horizon 2020’ related projects) could be envisaged for other funds when payments do not meet the deadline. This is a particularly important issue for regional and local authorities waiting for reimbursements. The Committee of the Regions therefore expects a solution to this to be found in the next revision of the EU Financial Regulation;

42. regrets the proliferation of amending budgets during the implementation year resulting from unrealistically low estimations in payment needs imposed by the Council, the Commission and the Parliament. For 2013 there have been already 5 draft amending budgets, whilst in 2010 there had been 10 of them;

43. urges the Commission, the Parliament and the Council to come forward with structural solutions to settle the EU's structural budget deficit so that the committed revenues of RLAs should no longer be threatened by a shortfall of European payment appropriations;

The EU draft budget 2014: strategic priorities for RLAs

Europe 2020

44. reaffirms that subnational public investment tends to be concentrated in a number of key priority sectors that are critical for the success of the Europe 2020 strategy; reiterates its call for a stronger political priority to be given to creating synergies between the EU, Member States, regions, and local authorities' budgets focused on delivering agreed EU priorities;

45. welcomes the Commission's initiative to track all public expenditure dedicated to the financing of the Europe 2020 strategy, but is surprised that the seven flagships are taken as a basis, rather than the five headline targets (on employment, innovation, education, social inclusion and climate/energy);

46. regrets the absence of any reference to the 11 thematic objectives of the Common Provisions Regulation on which the European Structural and Investment Funds need to be concentrated (9), which should be in line with the Common Strategic Framework (CSF) proposed by the European Commission on 14 March 2012;

47. reiterates its call for flexibility in order to respect territorial specificities of regions and cities;

48. regrets the absence of references to the European Semester in the political presentation of EU budget's priorities for 2014. Regrets furthermore that the Commission has ignored the call of the EP to provide factual and concrete data on how its proposed draft EU budget can actually play a triggering, catalytic, synergetic and complementary role to investments at local, regional and national levels to implement the priorities agreed in the framework of the European semester (10); and therefore urges, on the basis of the principle of multi-level governance, the involvement of regions, and in particular regions with legislative powers, in the European semester;

The Youth Employment Initiative (YEI)

49. supports the Youth Employment Initiative and requests that the YEI be part of future partnership agreements, while highlighting that regions and local authorities must be fully engaged in delivering any employment initiative given that they are best placed to assess local employment markets and tailor made programmes for young people and also given that many regions have full competence in this policy field;

50. regrets that the YEI is being created alongside the other funds instead of using the ESF framework to tackle the issue, thereby increasing the administrative burden for beneficiaries;

51. notes that the Commission proposed the full frontloading (EUR 6 billion) (11) of the YEI in 2014-2015 and suggests that a full frontloading should be accompanied by appropriate measures (e.g. capacity building) for quick implementation given the impossibility of adopting the draft Common Provisions Regulation and ESF regulation before the MFF regulation, i.e. towards the end of 2013, leading to a delay in implementation, and given the broader uncertainties with regard to how this YEI will be implemented by Member States/Regions in practice and to its absorption speed; calls in addition for Article 9f of the MFF regulation to be amended in order to remove the explicit limitation of the new YEI budget line to EUR 3 bn. This move would be all the more necessary in order to avoid any backloading after 2016 of programmes which are critical for cohesion such as cross border cooperation programmes or parts of the Connecting Europe Facility;

Budget cuts in crucial programmes

52. is particularly worried about the cuts made in several budget headings that are essential for achieving the long-term investment needed for a swift economic recovery, notably in cohesion policy, rural development, COSME, or Horizon 2020;

53. requests, in line with Article 9f of the draft MFF Council Regulation of 27 June 2013, further frontloading in commitment appropriations of up to EUR 200 million for Horizon 2020, EUR 150 million for Erasmus and EUR 50 million for COSME in 2014-2015;

54. is not surprised that commitment appropriations for 2014 in the field of cohesion are minimal given the delays (12) expected with the implementation of partnership agreements and operational programmes, but invites the Member States to focus on the operational programmes in order to activate the funds already in 2014;

55. regrets the deletion of the budget item related to the Erasmus for elected local and regional representatives under heading 1b (budget item 13 03 77 11) and request its continuation based on the CoR experience with this initiative;

56. welcomes the increase of 10.3 % in commitment appropriations for the LIFE+ programme compared to 2013 but finds the reduction in payment appropriations (– 1.1 %) incomprehensible;

57. welcomes the major shift from direct management to shared management for the EMFF, though this means lower payments at the beginning of the financing period;

58. welcomes the provision inserted in Article 8 of the draft MFF Council regulation, which allows the MFF to be revised in order to transfer to subsequent years, in excess of the corresponding expenditure ceilings, allocations not used in 2014 in the case of the adoption after 1st January 2014 of new rules or programmes under shared management;

Budgetary flexibility

59. welcomes the fact that a transfer of EUR 351.9 million is foreseen from the first to the second pillar of the common agriculture policy (CAP) and reiterates its firm opposition to transfers in the other direction;

60. stresses that neither the European Council conclusions of 7-8 February 2013 nor the draft MFF Council Regulation of 27 June 2013 foresee a sub-ceiling for cohesion policy, which has been transformed instead into a sub-heading. On this basis the Committee disputes the numerous references to this sub-ceiling in the presentation of the Draft Budget 2014 (13) and therefore argues in favour of commitment/payment appropriation transfers within heading 1, where relevant;

61. welcomes the ‘global margin for growth and employment’, which will be constituted with margins left available below the MFF ceilings for commitment appropriations for the years 2014-2017, appreciates that the related commitment appropriations can be used ‘over and above’ the ceilings for the years 2016 to 2020 (14), and suggests that this extra flexibility be used for heading 1b.

Brussels, 8 October 2013. The President of the Committee of the Regions Ramón Luis VALCÁRCEL SISO

(1) This calculation is based on the commitments in the initial budget 2013 and the following major budget items are concerned: the European Social Fund, Agricultural support, European Agricultural Fund for Rural Development, Trans-European Transport Network, Life +, research programmes, Fisheries Fund, European Regional Development Fund, Cohesion Fund, Instrument for pre-Accession Assistance, Programme Lifelong Learning, Culture, Youth in Action, Media 2007, European Neighbourhood and Partnership Instrument.

(2) RAL: ‘reste à liquider’ (French expression commonly used in English) which means outstanding payment claims. The difference between the level of commitments and the level of related payments each year represents the additional RAL for that year.

(3) Proposal for a Regulation of the European Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund covered by the Common Strategic Framework and laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Council Regulation (EC) No 1083/2006

{SEC(2011) 1141 final} {SEC(2011) 1142 final}.

(4) A contradicting figure of EUR 16.2 billion had been mentioned by the European Commission with regard to outstanding payments at year end 2012 but the European Commission is now sticking to this new figure for 2013. EUR 11.2 billion concerns all EU budget headings, out of which heading 1b (cohesion policy) represents EUR 9 billion.

(5) European Commission, Statement of estimates of the European Commission for the financial year 2014 (Preparation of the 2014 Draft Budget), SEC(2013) 370, June 2013, Annex III-Payment request overview, p. 86.

(6) EUR 277 billion ( from 2007-2013 and earlier periods expected to be paid in 2014-2020).

(7) Draft Council regulation laying down the multiannual financial framework for the years 2014-2020, 27 June 2013, Article 3A.

(8) The ‘global margin for payments’ specifies that every year, starting in 2015, the Commission will adjust the payment ceiling upwards by an amount equivalent to the difference between payment outturns and the MFF payment ceiling for year n-1 (e.g. 2014).

(9) Lambert van Nistelrooij/Constanze Angela Krehl — Draft report on the Proposal for a regulation of the European Parliament and of the Council laying down common provisions (…), adopted in the EP Committee on 10 July, Article 9: Thematic objectives: (1) Strengthening research, technological development, innovation, (2) enhancing access to, and use and quality of, information and communication technologies, (3) enhancing the competiveness of SMEs, the agricultural sector and the fisheries and aquaculture sector, (4) supporting the shift towards a low-carbon economy in all sectors, (5) promoting climate change adaptation, risk prevention and management, (6) preserving and protecting the environment, and promoting resource efficiency, (7) removing bottlenecks in key network infrastructures and filling in missing links, (8) promoting sustainable and quality employment and supporting labour mobility, (9) promoting social inclusion, combating poverty and any discrimination, (10) investing in education, training and vocational training for skills and lifelong learning, (11) enhancing institutional capacity of public authorities and stakeholders and efficient public administration.

(10) European Parliament Resolution of 13 March 2013 on the general guidelines for the preparation of-n the 2014 budget, Section III — Commission point 22.

(11) i.e. the frontloading of both the EUR 2.143 billion specific top-up allocation agreed in the EP-Council MFF agreement of 27 June 2013 (Article 9f) and the EUR 3 billion carved out from the ESF budget.

(12) In 2006, the general regulation was published in the official journal at the end of July, whereas this time no publication is expected before November-December, i.e. an additional 5 or 6 months delay compared to the previous financing period (which had already faced a substantial delay).

(13) The only agreed sub-ceilings are for market related expenditure and direct payments under heading 2 and administrative expenditure under heading 5.

(14) See Article 9g of the draft MFF Council Regulation.