Preliminary draft amending budget No 6 to the general budget 2006 - General statement of revenue - Statement of revenue and expenditure by section - Section III - Commission
Date: 2006-10-31
Institutions: Directorate-General for Budget, European Commission
Subjects: Cyprus, EAGGF Guarantee Section, European Commission, Structural Funds, accession to the European Union, amending budget, budgetary resources, payment appropriation, preliminary draft EC budget













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52006SC1410

Preliminary draft amending budget No 6 to the general budget 2006 - General statement of revenue - Statement of revenue and expenditure by section - Section III - Commission  /* SEC/2006/1410 final */  








[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |Brussels, 31.10.2006SEC(2006) 1410 finalPRELIMINARY DRAFT AMENDING BUDGET No 6 TO THE GENERAL BUDGET 2006 GENERAL STATEMENT OF REVENUESTATEMENT OF REVENUE AND EXPENDITURE BY SECTION Section III - Commission(presented by the Commission)PRELIMINARY DRAFT AMENDING BUDGET No 6TO THE GENERAL BUDGET 2006 GENERAL STATEMENT OF REVENUESTATEMENT OF REVENUE AND EXPENDITURE BY SECTION Section III - CommissionHaving regard to:-  the Treaty establishing the European Community, and in particular Article 272 thereof,-  the Treaty establishing the European Atomic Energy Community, and in particular Article 177 thereof,-  the Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities[1], and in particular Article 37 thereof,The European Commission hereby presents to the budgetary authority the Preliminary Draft Amending Budget No 6 to the 2006 budget for the reasons set out in the explanatory memorandum.TABLE OF CONTENTS1. Introduction 42. Increase in the forecast of revenue 42.1. Revision of the forecasts of VAT and GNI balances 42.2. Revision of the forecasts for traditional own resources 42.3. Other revenue 52.4. Technical amendment 53. Sub-Heading 1a: Decrease of appropriations for the EAGGF-Guarantee 54. Heading 2 74.1. Decrease of payment appropriations for the Structural Funds and Cohesion Fund 74.2. Modification of the remarks of budget line 13 03 08 85. Heading 7 95.1. Decrease of payment appropriations for SAPARD 95.2. ISPA 105.3. Cyprus 10SUMMARY TABLE BY HEADING OF THE FINANCIAL PERSPECTIVE 11GENERAL STATEMENT OF REVENUESTATEMENT OF REVENUE AND EXPENDITURE BY SECTIONThe general statement of revenue and the statement of revenue and expenditure by section are forwarded separately via the SEI-BUD system. An English version of the general statement of revenue and statement of revenue and expenditure by section is attached for information as a budgetary annex.1. INTRODUCTIONThe Commission presents this Preliminary Draft Amending Budget (PDAB) No 6 for the year 2006 to take into account the following exceptional circumstances:-  the need to budget a substantial increase in the forecast of revenue, in particular for the revision of the forecasts of VAT and GNI balances and traditional own resources (EUR 2 470 million)[2];-  the need for a decrease of payment appropriations in budget lines for Heading 1, 2 and 7 (EUR 3 906 million), after taking into account redeployments from other headings proposed in the global transfer;-  additionally, the Commission proposes the modification of the remarks of budget article 1 1 1 concerning the sugar storage, as well as of article 13 03 08 – European Development Fund (ERDF), Technical assistance and innovative measures.2. INCREASE IN THE FORECAST OF REVENUE2.1. Revision of the forecasts of VAT and GNI balancesIn accordance with Article 16 of Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000, the Commission proposes to revise the forecasts of VAT and GNI balances on the basis of the available information by an increase of EUR 1 639,5 million. These modifications concern chapters 3 1 and 3 2 of the revenue side of the budget.The GNI revision carried out by the National Statistical Service of Greece and transmitted to the Commission was based on many new elements and sources and resulted in an exceptional increase of the GNI figures. Before Greece’s revised GNI figures can be properly assessed, a thorough examination has to be carried out by Eurostat. Given the current high uncertainty surrounding these figures, in this amending budget a "p.m." has to be maintained in respect of Greece’s VAT and GNI balances.It has to be noted that at this stage the calculations are provisional as the data for Member States GNI have not yet been confirmed. This may lead the Commission to revise the figures in the course of the procedure concerning this PDAB.2.2. Revision of the forecasts for traditional own resourcesThe Amending Budget No 3/2006 estimated the total of traditional own resources to a net amount of EUR 14 788,9 million. Taking into account the progression of the cashed amounts in the last months, the new total can be estimated to EUR 14 888,9 million. Therefore it is proposed to budget the additional EUR 100 million on Article 1 0 0 (agricultural duties).  2.3. Other revenue-  Repayment of unused Community aid and Financial corrections in connection with the Structural fundsTaking into account the cashed amounts for items 6 1 5 0 and 6 5 0 0 and supposing that these amounts will not be re-used this year an amount of EUR 220 million is proposed to be budgeted.-  Interest on late payments and finesChapters 7 0 and 7 1 of the general statement of revenue register interest on late payments and fines. Already in the Budget 2006 an amount of EUR 120 million was budgeted. Considering the amounts that at this stage of the year are cashed or will probably be cashed, an additional amount of EUR 470,5 million is proposed to be entered.-  Borrowing and lending operationsConsidering the actual outturn for article 8 1 0 (Capital repayments and interest in respect of special loans and risk capital granted in the framework of financial cooperation with Mediterranean non-member countries) a supplementary EUR 30 million can be entered.-  Miscellaneous revenueIt is also proposed to enter and additional amount of EUR 10 million for Article 9 0 0 in order to approximate forecast and outturn.2.4. Technical amendmentIn order to account the amounts related to the abnormal stocks in the sugar sector by reason of the accession in 2004, an update of the budgetary comments of article 1 1 1 concerning the sugar storage levies has become necessary. Therefore, the following paragraph is added in the comments of this article:" This article is intended for recording the income charged by new Member States in the event of non elimination of sugar stocks considered surplus within the meaning of Commission Regulation (EC) No 60/2004 of 14 January 2004."3. SUB-HEADING 1A: DECREASE OF APPROPRIATIONS FOR THE EAGGF-GUARANTEEOn 30 November 2005, the European Parliament, the Council and the Commission agreed on accepting the Amending Letter No 2/2006 concerning agricultural expenditure. The 2006 budget was adopted on 15 December 2005. The 2006 EAGGF-Guarantee budget’s commitment appropriations amounted to EUR 51 050 million and its payment appropriations amounted to EUR 50 991 million for Heading 1. Specifically, appropriations amounted for sub-heading 1a to EUR 43 279 million, both for commitments and payments. For sub-heading 1b, commitment appropriations amounted to EUR 7 771 million while payment appropriations amounted to EUR 7 711 million.Based on execution figures available so far, the Commission has identified for sub-heading 1a a significant surplus of appropriations, for which this PDAB proposes to annul the commitments where there is an important excess of the budget. The under-utilisation is due to more favourable developments of agricultural markets in 2005/2006 also relates to some agricultural direct aids so that savings are generated. On the other hand, lower amount of corrections resulting from the clearance of accounts decisions will lead to an increase of agricultural spending compared to the amounts initially foreseen in the budget, so that the net savings are somewhat lower.Hereafter, a brief commentary on the most significant divergences between the actual and the expected level of implementation for the various sectors of the 2006 budget follows.-  Textile plants: The increase in the world price of cotton has led to a reduction of the aid rate and a consequent reduction in the payments to be made.-  Refunds on Non-Annex I products: The general fall in the level of export refund rates as well as the smaller exported volume of processed agricultural products have led to lower refund payments by the Member States, thus, leading to an under-implementation of this measure's appropriations.-  Fruit and vegetables: Member States' payments for the operational funds for producer organisations by the end of the budget year will be lower than initially foreseen.-  Beef and veal: The favourable development of internal demand for beef and veal is reflected not only in prices but also by steady increasing imports and lower exports. The savings result from fewer quantities exported with refunds and lower refund levels. Furthermore, an additional saving has been identified for the budget item financing exceptional support measures (Over Thirty Months Scheme and Older Cattle Disposal Scheme measures related to BSE) on the basis of the most recent uptake figures.-  Direct aids: On the basis of the latest information provided for by the Member States, an overall under-implementation of the appropriations for direct aids is expected by the end of the budget year. This applies not only for decoupled aids, where administrative and structural difficulties for their payments persist (Single Payment Scheme and Additional amounts of aid), but also for some coupled direct aids (Olive oil production aid, tobacco premiums, area payments for nuts, compensatory aid for bananas).-  Audit of agricultural expenditure: Taking into account all clearance decisions which will be taken up to the end of the budget year, the amounts expected to be clawed back through corrections imposed by these decisions are lower than the amount retained in the 2006 budget. As mentioned above, this under-implementation means in fact an increase in EAGGF-Guarantee expenditure compared to the budget 2006. On the contrary, the recoveries for Direct aids were more than foreseen in the Budget.At this stage, the overall net under-utilisation is estimated at around EUR 860 million. The Commission will attentively follow the evolution in coming weeks and revise, if necessary, the figure in the course of the procedure concerning this PDAB.4. HEADING 24.1. Decrease of payment appropriations for the Structural Funds and Cohesion FundThis PDAB proposes a reduction of EUR 2 500 million in payment appropriations for Heading 2. The justification for this is given below.The Budget for 2006 was adopted with a declaration on payment appropriations for Heading 2.The declaration states that "If the execution of payment appropriations for the Structural Funds exceeds 40% by the end of July 2006, or if the Commission becomes otherwise convinced of a shortage in payment appropriations in the budget, it will, after having examined the possibilities of redeployment of payment appropriations within the totality of the budget, including Heading 2, and evaluated possible sources of additional revenue, present a PDAB to the budgetary authority at the latest by October. The European Parliament and the Council will decide in one single reading on the PDAB in order to have additional appropriations needed available at the latest in early November 2006.”The Commission followed execution throughout the year carefully. While execution of payments progressed satisfactorily in general, payments from the European Regional Development Fund and the European Social Fund for the Spanish Structural Funds programmes were systematically below expectations. It has now become quite likely that the shortfall will not be recouped before year-end. The assessment of execution by the end of September and the resulting end-of-year projections show the need to decrease the payment appropriations in Heading 2 by EUR 2 150 million, in net terms. Of the four Structural Funds, the European Agriculture Guidance and Guarantee Fund, Guidance Section (EAGGF) is the only Fund that needs additional appropriations for an amount of EUR 350 million. It was possible to redeploy the appropriations needed to reinforce the EAGGF in the context of the Global Transfer. Therefore, only the negative corrections to Heading 2 are included in this PDAB. They amount to a decrease of payment appropriations of EUR 2 500 million, the breakdown of which is as follows:13 03 01 - ERDF Objective 1 (EUR -1 500 million);04 02 01 - ESF Objective 1 (EUR -500 million);13 04 01 - Cohesion Fund (EUR -500 million).The bulk of the downward revision sought by this PDAB concerns the 2000-2006 Structural Funds programmes and is linked to the Spanish payment claims. By the end of September, payments to the Spanish programmes amounted to EUR 1 717 million (EUR 3 745 million at the same time last year). Structural Funds' annual payments to Spain are typically quite large (EUR 6 345 million in 2005). The Spanish authorities have been withholding payment claims until the completion of extensive, i.e., 100%, audit work and the timing of the submission of further payment claims this year is yet uncertain. This uncertainty justifies a cautious stance aiming at controlling the risk of significant surpluses by year-end. The downward revision this PDAB proposes for the 2000-2006 Structural Funds programmes is essentially equivalent to the shortfall in payments to Spain by the European Regional Development Fund and the European Social Fund by the end of September. Payments for the other Member States, including for EU-10, have generally been above last year payments.With regard to the Cohesion Fund, payments by the end of September were significantly above last year's payments by the same date and there is no particular Member State which gives cause for concern. However, the budget for 2006 is significantly above last year's execution (EUR 3 500 million versus EUR 2 200 million) due to the increase in the "Copenhagen" allocation for EU-10, and the Commission's current assessment is that the rate of payments execution will not increase sufficiently in the last quarter to ensure full use of the original budget allocation. Therefore, this PDAB proposes a decrease of EUR 500 million in payment appropriations.This Commission's proposal reflects the most recent information available and the best estimates at the time of its adoption. Nevertheless, the Commission intends to continue its close monitoring of execution and make a final assessment of the payment claims received from all Member States by the end of October (1 November for the Cohesion Fund), which is the regulatory deadline for the introduction of payment claims for this year. This may lead the Commission to revise the figure in the course of the procedure concerning this PDAB. This is the only approach capable of addressing simultaneously two key, albeit conflicting, concerns: firstly, to ensure the budget is sufficient to satisfy all eligible payment claims received; secondly, to avoid to the extent possible surpluses by year-end. Therefore, the Commission asks the budgetary authority to plan its procedure concerning this PDAB with a view to allowing for a possible revision in early November of the amendments proposed here.4.2. Modification of the remarks of budget line 13 03 08The Commission is also proposing a modification to the budgetary remark of article 13 03 08, European Regional Development Fund (ERDF), Technical assistance and innovative measures. The rationale for this proposal is explained below.Council Regulation (EC) 1083/2006, of 11 July 2006, laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and repealing Regulation 1260/1999, covers the programming of the new Cohesion policy programmes for the 2007-2013 period. Its article 36 specifies that the EIB and the EIF may participate in the preparation of national strategic reference frameworks and operational programmes, the preparation of projects, in particular major projects, and the arrangement of finance and public-private partnerships. Under the terms of the article, the EIB and the EIF may assist the Commission which, in implementing the provisions of the article, may award a grant to the EIB or the EIF.Therefore, the Commission considers necessary, in the interests of full transparency vis-à-vis the budgetary authority, to amend the budget remarks of budget line 13 03 08 to add the new legal basis and mention explicitly the funding of measures in application of article 36 of Council Regulation (EC) 1083/2006. The amended budget remark being proposed is as follows:" RemarksThis appropriation is intended to cover the ERDF-funded innovative measures and technical assistance as provided for in Articles 22 and 23 of Regulation (EC) No 1260/1999. The innovative measures include studies, pilot projects and exchanges of experience. They are intended in particular to bring about a qualitative improvement in Structural Fund measures. Technical assistance covers preparatory, monitoring, evaluation, supervision and management measures required for implementation the ERDF. The appropriation may, in particular, be used to meet:-  support expenditure (representation expenses, training, meetings, missions),-  information and publishing expenditure,-  expenditure on information technology and telecommunications,-  contracts for the provision of services and studies,-  grants.This appropriation is also intended to fund measures taken by partners in preparation for the next programming period, including in application of article 36 of Council Regulation (EC) N° 1083/2006 of 11 July 2006.Legal basisRegulation (EC) No 1261/1999 of the European Parliament and of the Council of 21 June 1999 on the European Regional Development Fund (OJ L 161, 26.6.1999, p. 43).Regulation (EC) No 1080/2006 of the European Parliament and of the Council of 5 July 2006 for the European Regional Development Fund, repealing Regulation (EC) No 1783/1999 (OJ L 210, 31.7.2006, p. 1).Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions for the European Regional Development Fund, the European Social Fund and the Cohesion Fund, repealing Regulation (EC) No 1260/1999 (OJ L 210, 31.7.2006, p. 25)."5. HEADING 75.1. Decrease of payment appropriations for SAPARDThe PDAB proposes decreases in the appropriations for SAPARD where there is an important excess budget for the old eight applicant countries and under-utilisation for Romania and Bulgaria:EUR 109 million can be decreased from line 05 05 01 01 – The SAPARD pre-accession instrument, because of delays in executing the programmes especially in Romania. The delay is due, in particular, because of the floods which took place in 2005 and 2006 and because of the importance, among the contracts agreed, of infrastructure works which need a longer time to be executed.EUR 287 million can be decreased from line 05 05 01 02 – The SAPARD pre-accession instrument – Completion of the pre-accession assistance relating to eight applicant countries.In its PDB 2006 prepared early 2005 the Commission included the necessary appropriations to allow the payment of the final claims of the SAPARD programmes for the new Member States for the closure of the programmes (EUR 300 million).In autumn 2005 the execution of the programmes strongly accelerated. To meet the increased demand EUR 271 million were transferred to budget line 05 05 01 02 and the bulk of the RAL could be liquidated in 2005 rather than 2006. Budget 2006 however could not be adjusted downwards. This led to the situation that at the end of 2005, six out of eight new Member States had reached the ceiling of 95% at which the Commission stops paying until the conditions for the payment of the final balance are met. The extremely high level of payments in 2005 reduced the outstanding RAL for the eight new Member States to EUR 75 million at the end of 2005 much lower than the 2006 appropriations.Due to this accelerated execution at the end of 2005 only two payments to Hungary and Latvia had to be made in 2006. Both countries have also reached the ceiling of 95%. Still in 2005 the Czech Republic submitted its claim for the final balance of the programme. Subject to the adoption of a positive decision on the clearance of the 2005 accounts this programme could be closed by paying the outstanding amounts to the Czech Republic. In this case an amount of EUR 287 million would remain unused on this budget line.5.2. ISPAThe Commission proposes a reduction of EUR 100 million in payment appropriations for budget line 13 05 01 02 - Instrument for structural policies for pre-accession – Closure of pre-accession assistance, relating to eight applicant countries.This amendment reflects lower-than-expected payment claims for the new Member States' projects launched under the Instrument for Structural Policies for Pre-accession (ISPA) that have become Cohesion Fund projects after accession. The regulatory deadline for the submission of payment claims in 2006 for these projects is the 1st of November. Therefore, for reasons similar to the ones mentioned for the amendments proposed in this PDAB for the Structural and the Cohesion funds, the Commission may revise the figure in the course of the procedure concerning this PDAB.5.3. CyprusThe aid regulation for northern Cyprus was only approved at the end of February 2006. The Regulation[3] is designed to meet the particularities of the situation in northern Cyprus - a part of the EU where the acquis is suspended. One particular aspect of this is that, for projects above EUR 5 million, the Regulation requires an extended consultation period with Member States during the programming process (two months rather than three weeks). This, together with obstacles met during the process of programming and relating to the procedures for ensuring the respect of property rights, has delayed the Commission decision process for larger projects. Until October, only two projects, each below EUR 5 million, were approved. Nevertheless, the full amount (EUR 259 million assuming that the Draft Amending Budget No 5/2006 is approved) will be committed before the end of the year and initial contracts will be signed. However, it is not expected that initial payments will be made on these larger projects before 2007 and therefore, this PDAB proposes a decrease of EUR 50 million in payment appropriations.SUMMARY TABLE BY HEADING OF THE FINANCIAL PERSPECTIVEFinancial perspective Heading/subheading | 2006 Financial perspective | Budget 2006 including AB 14-2, 35, PDAB 3 and 5/2006 | PDAB 6/2006 | Budget 2006 including AB 14, 2, 35, PDAB 3, 5 and 6/2006 ||CA |PA |CA |PA |CA |PA |CA |PA | |1. AGRICULTURE | | | | | | | | | |- Agricultural expenditure |44 847 000 000 | |43 279 720 000 |43 279 720 000 |-860 000 000 |-860 000 000 |42 419 720 000 |42 419 720 000 | |- Rural development and accompanying measures |7 771 000 000 | |7 771 000 000 |7 711 300 000 | | |7 771 000 000 |7 711 300 000 | |Total |52 618 000 000 | |51 050 720 000 |50 991 020 000 |-860 000 000 |-860 000 000 |50 190 720 000 |50 131 020 000 | | Margin | | |1 567 280 000 | | | |2 427 280 000 | | |2. STRUCTURAL OPERATIONS | | | | | | | | | |- Structural Funds |38 523 000 000 | |38 522 922 880 |32 134 099 237 | |-2 000 000 000 |38 522 922 880 |30 134 099 237 | |- Cohesion Fund |6 094 000 000 | |6 032 082 110 |3 505 500 000 | |-500 000 000 |6 032 082 110 |3 005 500 000 | |Total |44 617 000 000 | |44 555 004 990 |35 639 599 237 | |-2 500 000 000 |44 555 004 990 |33 139 599 237 | | Margin | | |61 995 010 | | | |61 995 010 | | |3. INTERNAL POLICIES |9 385 000 000 | |9 394 562 774 |8 907 066 732 | | |9 394 562 774 |8 907 066 732 | | Margin | | |5 235 815 | | | |5 235 815 | | |4. EXTERNAL ACTION |5 269 000 000 | |5 544 000 000 |5 369 049 920 | | |5 544 000 000 |5 369 049 920 | | Margin | | |-275 000 000 | | | |-275 000 000 | | |5. ADMINISTRATION |6 708 000 000 | |6 656 924 362 |6 656 924 362 | | |6 656 924 362 |6 656 924 362 | | Margin | | |51 075 638 | | | | 51 075 638 | | |6. RESERVES |458 000 000 | |458 000 000 |458 000 000 | | |458 000 000 |458 000 000 | |- Guarantee reserve |p.m. | |229 000 000 |229 000 000 | | |229 000 000 |229 000 000 | |- Emergency aid reserve |p.m. | |229 000 000 |229 000 000 | | |229 000 000 |229 000 000 | | Margin | | |p.m. | | | |p.m. | | |7. PRE-ACCESSION AID |3 566 000 000 | |2 692 159 038|2 984 409 038| |-546 000 000 |2 692 159 038|2 438 409 038| | Margin | | | 965 400 000 | | | | 965 400 000 | | |8. COMPENSATION |1 074 000 000 | |1 073 500 332 |1 073 500 332 | | |1 073 500 332 |1 073 500 332 | | Margin | | | 499 668 | | | | 499 668 | | | TOTAL |123 695 000 000 |119 292 000 000 |121 424 871 496 |112 079 569 621 |-860 000 000 |-3 906 000 000 |120 564 871 496 |108 173 569 621 | | Margin | | |2 376 486 131 |7 318 788 006 | | |3 236 486 131 |11 224 788 006 | |4For AB 1, the EUSF amount is entered over and above headings 3 and 7 as provided for by the Interinstitutional Agreement of 7 November 2002 (OJ C 283, 20.11.2002).5PDAB 4/2006 was adopted as AB 3/2006.[1] OJ L 248, 16.09.2002, p.1.[2] The use of updated forecasts in the revenue side improves the accuracy of the payments Member States are asked to make during the budgetary year. Accordingly to this proposed revision Member States will reduce their contributions based on the GNI.[3] Council Regulation (EC) No 389/2006 of 27 February 2006 (OJ L 65, 7.3.2006, p.5)