WRITTEN QUESTION E-0417/00

by Maurizio Turco (TDI) to the Commission

(23 February 2000)

Subject: Budget nomenclature encouraging the practice of false subsidies

As the answer to Written Question P-2367/99(1) on budget nomenclature encouraging the practice of false subsidies indicates that Mrs Schreyer failed to understand the first question, I shall rephrase it as follows:

1. According to the Committee of Independent Experts, with regard to subsidies, the Part A/Part B nomenclature, far from leading to clarity, adds to the confusion, as a result of which a large proportion of subsidies are in fact disguised contracts. The Committee states even more clearly, in recommendation 4, that the present budget nomenclature, based on the distinction necessitated by The Financial Regulation between Part A (administrative expenditure) and Part B (operating expenditure) is impracticable. It is frequently circumvented when appropriations are earmarked under the budget. Would the Commission therefore simply state whether or not it intends to retain, with regard to subsidies, the Part A / Part B nomenclature?

As the Commissioner did not even try to answer my second question, I shall rephrase it as follows:

2. Which subsidies disguised as contracts were brought to the Committee's attention, who were those responsible, what steps does the Commission intend to take and according to what time-scale? The Committee of Independent Experts' second report states that a large proportion of subsidies are in fact disguised contracts. To the best of the Commission's knowledge, was this statement based on the Independent Experts' impressions, and in that case, what does the Commission intend to do to defend its own reputation? Or was the statement made on the basis of objective findings, and if so, does the Commission intend to ascertain where responsibility lies and take action in respect of those responsible?

(1) OJ C 225 E, 8.8.2000, p. 115.

Answer given by Mrs Schreyer on behalf of the Commission

(3 May 2000)

1. With the current budgetary nomenclature laid down in the financial regulation the Commission budget is separated into two global parts Part A for administrative expenditure and Part B for operational expenditure. As the scope and size of the Community budget has evolved, this global separation has become blurred and it no longer provides adequate clarity and transparency to the actual allocation and reporting of resources.

In the framework of activity based budgeting, the Commission is studying possible changes to the budget nomenclature. These changes will aim to introduce a policy-driven budget and to increase the transparency of the Commission budget. However, for sound management reasons the Commission continues to regard a distinct separation of administrative and operational expenditure in the implementation of the budget of primary importance, but does not have the intention to retain the present Part A and Part B division.

Progress can only be achieved gradually since it involves revising the financial regulation. Furthermore, as the current financial perspectives include a separate heading which regroups all the Administrative expenditure of the different institutions (heading 5), a solution would need to be found at the interinstitutional level.

2. No particular subsidies disguised as contracts were brought to the Commission's attention by the committee of independent experts. The committee were making the general point that they disagreed with the Commission's distinction in its expenditure coding between a grant and a contract for procurement spending on the grounds that, as most grants involved a quid pro quo, they too were in fact a kind of contract. The Commission accepts that most grants do involve a quid pro quo and mutual obligations of a contractual type, but not that they can therefore be assimilated to procurement spending, and so does not accept the term false subsidy.

The Commission has already laid down guidelines, within the framework of the vademecum on grant management(1) that came into force on 1 January 1999, for differentiating between grants and procurement spending, with the same basic principles of transparency and equality of treatment applying to both types of expenditure.

(1) http://europa.eu.int/comm/secretariat_general/sgc/info_subv/intro_funding.htm.