Changes from report parliamentary committee draft to plenary report

Added88. Emphasises that the Commission has sought, to some degree, to circumvent its own stable staffing policy by increasing staff attached to programmes and facilities and thus not covered by the administrative spending ceiling; underscores, however, that such an approach merely masks the problem and may ultimately undermine the operational capacity of programmes; insists, therefore, that additional responsibilities require administrative expenditure and must not erode programme envelopes;

Added89. Stresses that up-front investment in secure and interoperable IT infrastructure and data mining capabilities can also generate longer-term cost savings and hugely enhance policy delivery and tracking of spending;

Added90. Acknowledges that, in the absence of any correction mechanism in the current MFF, high inflation has significantly driven up statutory costs, requiring extensive use of special instruments to cover the shortfall; regrets that the Council elected not to take up the Commission’s proposal to raise the ceiling for administrative expenditure in the MFF revision, thus further eroding special instruments;

A long-term budget that is simpler and more transparent

Change 40

Changed60.91. Stresses that the next MFF must be designed so as to simplify the lives of beneficiaries,all harmonisebeneficiaries by cutting unnecessary red tape; underlines that simplification will require harmonising rules and reporting requirements wherever possiblepossible, including, as relevant, ensuring consistency between the applicable rules at European, national and cutregional unnecessarylevels; redunderlines, tapein that respect, the need for a genuine, user-friendly single entry point for EU funding and a simplified application procedure designed in consultation with relevant stakeholders; points out, furthermore, that the next MFF must be implemented as close to people as possible;

Change 41

Changed61.92. Calls for genuine simplification where there are overlapping objectives, diverging eligibility criteria and different rules governing aspectshorizontal provisions that should be uniform across programmes; considers that an assessment of which spending programmes should be included in the next MFF must be based on the above aspects, on the need to focus spending on clearly identified policy objectives with clear European added value and on the policy intervention logic of each programme; stresses that reducing the number of programmes is not an end in itself;

Change 42

Removed62. Insists that a simpler budget must also be a more transparent budget, enabling better control of spending and reducing the risks of double funding; underlines that any reduction in programmes must be offset by a far more detailed breakdown of the budget by budget line, in contrast to some programme mergers in the current MFF, such as the Neighbourhood, Development and International Cooperation Instrument – Global Europe (NDICI – Global Europe), which is an example not to follow; calls, therefore, for a sufficiently detailed breakdown by budget line to enable proper accountability and ensure that decision-making in the annual budgetary procedure is meaningful;

Added93. Underlines that simplification cannot mean more leeway for the Commission without the necessary checks and balances and must therefore be achieved with full respect for the institutional balance provided for in the Treaties;

Removed63. Reiterates its long-standing position that all EU-level spending should be brought within the purview of the budgetary authority; calls, therefore, for the full budgetisation of (partially) off-budget instruments such as the Social Climate Fund, the Innovation Fund and the Modernisation Fund, or their successors;

Added94. Insists that simplification cannot come at the expense of the quality of programme design and implementation and that, therefore, a simpler budget must also be a more transparent budget, enabling better accountability, scrutiny, control of spending and reducing the risks of double funding, misuse and fraud; underlines that any reduction in programmes must be offset by a far more detailed breakdown of the budget by budget line, in contrast to some programme mergers in the current MFF, such as the Neighbourhood, Development and International Cooperation Instrument – Global Europe (NDICI – Global Europe), which is an example not to follow; calls, therefore, for a sufficiently detailed breakdown by budget line to enable the budgetary authority to exercise proper accountability and ensure that decision-making in the annual budgetary procedure and in the course of budget implementation is meaningful;

Added95. Recalls that transparency is essential to retain citizens’ trust, and that fraud and misuse of funds are extremely detrimental to that trust; underlines, therefore, the need for Parliament to be able to control spending and assess whether discharge can be granted; insists that proper accountability requires robust auditing for all budgetary expenditure based on the application of a single audit trail; calls on the Commission to put in place harmonised and effective anti-fraud mechanisms across funding instruments for the post-2027 MFF that ensure the protection of the Union’s budget;

Added96. Reiterates its long-standing position that all EU-level spending should be brought within the purview of the budgetary authority, thereby ensuring transparency, democratic control and protection of the Union’s financial interests; calls, therefore, for the full budgetisation of (partially) off-budget instruments such as the Social Climate Fund, the Innovation Fund and the Modernisation Fund, or their successors;

A long-term budget that is more flexible and more responsive to crises and shocks

Change 43

Changed64.97. Points out that, traditionally, the MFF has not been conceived with a crisis response or flexibility logic, but rather has been designed primarily to ensure medium-term investment predictability; underlines that, in a rapidly changing political, security, economic and social context, such an approach is no longer tenable; insists on sufficient in-built crisis response capacity in the next MFF;

98. Underscores that the current MFF has been beset by a lack of flexibility and an inability to adjust to evolving spending priorities; considers that the next MFF needs to strike a better balance between investment predictability and flexibility to adjust spending focus; highlights that spending in certain areas requires greater stability than in others where flexibility is more valuable; stresses that recurrent redeployments are not a viable way to finance the Union’s priorities as they damage investments and jeopardise the delivery of agreed policy objectives;

Change 44

Changed66.99. Believes that, while allocating a significant portion of funding to objectives up-front, spending programmes should retain a substantial in-built flexibility reserve, with allocation to specific policy objectives to be decided by the budgetary authority; notes that the NDICI – Global Europe’s emerging challenges and priorities cushion provides a model for such a flexibility reserve, but that the decision-making process for its mobilisation must not be replicated in the future MFF; points to the need for stronger, more effective scrutiny powers of the co-legislators over the setting of policy priorities and objectives and a detailed budgetary breakdown to ensure decisions bythat the budgetary authority areis meaningful;equipped to make meaningful and informed decisions;

Change 45

Changed67.100. Underlines that the MFF must have sufficient margins under each heading to ensure that new instruments or spending objectives agreed over the programming period can be accommodated without eroding funding for other policy and long-term strategic objectives or eating into crisis response capacity;

Change 46

Removed68. Calls for a root-and-branch reform of the existing special instruments to bolster crisis response capacity; underlines that the current instruments are both inadequate in size and constrained by excessive rigidity, with several effectively ring-fenced according to crisis type; points out that enhanced crisis response capacity will ensure that cohesion policy funds are not called upon for that purpose and can therefore be used for their intended investment objectives;

Added101. Underlines that the possibility for budgetary transfers under the Financial Regulation already provides for flexibility to adjust to evolving spending needs in the course of budget implementation; stresses that, under the current rules, the Commission has significant freedom to transfer considerable amounts between policy areas without budgetary authority approval, which limits scrutiny and control; calls, therefore, for the rules to be changed so as to introduce a maximum amount, in addition to a maximum percentage per budget line, for transfers without approval; considers that for transfers from Union institutions other than the Commission that are subject to a possible duly justified objection by Parliament or the Council, a threshold below which they would be exempt from that procedure could be a useful measure of simplification;

Removed69. Considers that the post-2027 MFF should include only two special instruments - one dedicated to ensuring solidarity in the event of natural disasters (the successor to the existing European Solidarity Reserve) and one for general-purpose crisis response (the successor to the Flexibility Instrument); insists that both special instruments should be adequately funded from the outset and able to carry over unspent amounts indefinitely over the MFF period; believes that all other special instruments can either be wound up or subsumed into the two special instruments or into existing programmes;

Added102. Recalls that the current MFF has been placed under further strain due to high levels of inflation in a context where an annual 2 % deflator is applied to 2018 prices, reducing the budget’s real-terms value and squeezing its operational and administrative capacity; considers, therefore, that the future budget should be endowed with sufficient response capacity to enable the budget to adapt to inflationary shocks;

Removed70. Calls for the future Flexibility Instrument to be heavily front-loaded and subsequently to be fed through a number of additional sources of financing: unspent margins from previous years (as with the current Single Margin Instrument), the annual surplus from the previous year, a fines-based mechanism modelled on the existing Article 5 of the MFF Regulation, and decommitted appropriations;

Added103. Calls for a root-and-branch reform of the existing special instruments to bolster crisis response capacity and ensure an effective and swift reaction through more rapid mobilisation; underlines that the current instruments are both inadequate in size and constrained by excessive rigidity, with several effectively ring-fenced according to crisis type; points out that enhanced crisis response capacity will ensure that cohesion policy funds are not called upon for that purpose and can therefore be used for their intended investment objectives;

Added104. Considers that the post-2027 MFF should include only two special instruments – one dedicated to ensuring solidarity in the event of natural disasters (the successor to the existing European Solidarity Reserve) and one for general-purpose crisis response and for responding to any unforeseen needs and emerging priorities, including where amounts in the special instrument for natural disasters are insufficient (the successor to the Flexibility Instrument); insists that both special instruments should be adequately funded from the outset and able to carry over unspent amounts indefinitely over the MFF period; believes that all other special instruments can either be wound up or subsumed into the two special instruments or into existing programmes;

Added105. Calls for the future Flexibility Instrument to be heavily front-loaded and subsequently to be fed through a number of additional sources of financing: unspent margins from previous years (as with the current Single Margin Instrument), the annual surplus from the previous year, a fines-based mechanism modelled on the existing Article 5 of the MFF Regulation, reflows from financial instruments and decommitted appropriations; underlines that the next MFF should be designed such that the future special instruments are not required to cover debt repayment;

Added106. Underlines that re-use of the surplus, of reflows from financial instruments and surplus provisioning and of decommitments would require amendments to the Financial Regulation;

107. Points out that, with sufficient up-front resources and such arrangements for re-using unused funds, the budget would have far greater response capacity without impinging on the predictability of national GNI-based contributions; insists that an MFF endowed with greater flexibility and response capacity is less likely to require a substantial mid-term revision;

A long-term budget that is more results-focused

Change 47

Changed72.108. Emphasises that, in order to maximise impact, it is imperative that spending under the next MFF be much more rigorously aligned with the Union’s strategic policy aims and carefullybetter coordinated with spending at national level; underlines that, in turn, consultation with regional and local authorities is vital to facilitate access to funding and ensure that Union support meets the real needs of final recipients and delivers tangible benefits for people; underscores the importance of technical assistance to implementing authorities to help ensure timely implementation, additionality of investments and therefore maximum impact;

Change 48

Added109. Underlines that, in order to support effective coordination between Union and national spending, the Commission envisages a ‘new, lean steering mechanism’ designed ‘to reinforce the link between overall policy coordination and the EU budget’; insists that Parliament play a full decision-making role in any coordination or steering mechanism;

110. Considers that the RRF, with its focus on performance and links between reforms and investments and budgetary support, has helped to drive national investments and reforms that would not otherwise have taken place;

111. Underlines that the RRF can help to inform the delivery of Union spending under shared management; recalls, however, that the RRF was agreed in the very specific context of the COVID-19 pandemic and cannot, therefore, be replicated wholesale for future investment programmes;

Change 49

Changed75.112. Points out that any application of anspending RRF-styleunder deliveryshared modelmanagement in the next MFF would have to correct the RRF’s fundamental flaws, bymust involvinginvolve regional and local authorities and all relevant stakeholders from design to delivery through a place-based and multilevel governance approach,approach ensuringand in line with an improved partnership principle, ensure the cross-border European dimension of investment projects, focusingand focus on results and impact rather than outputs, guaranteeingoutputs fullby transparencysetting inmeasurable relationperformance toindicators, finalensuring recipientsavailability of Unionrelevant spendingdata and safeguarding Parliament’s role as legislator, budgetaryfeeding andinto dischargeprogramme authoritydesign and in holding the executive to account;adjustment;

Change 50

Added113. Underlines that the design of shared management spending under the next MFF must safeguard Parliament’s role as legislator, budgetary and discharge authority and in holding the executive to account, putting in place strict accountability mechanisms and guaranteeing full transparency in relation to final recipients or groups of recipients of Union spending funds through an interoperable system enabling effective tracking of cash flows and project progress;

Added114. Considers that the ‘one national plan per Member State’ approach envisaged by the Commission is not in line with the principles set out above and cannot be the basis for shared management spending post-2027; recalls that, in this regard, the Union is required, under Article 175 TFEU, to provide support through instruments for agricultural, regional and social spending;

A long-term budget that manages liabilities sustainably

Change 51

Changed76.115. Recalls Parliament’s very firm opposition to subjecting the repayment of NGEU borrowing costs to a cap within an MFF heading given that these costs are subject to market conditions, influenced by external factors and thus inherently volatile, and that the repayment of borrowing costs is a non-discretionary legal obligation; stresses that introducing new own resources is also necessary to prevent future generations from bearing the burden forof past debts;

Change 52

Changed77.116. Deplores the fact that, under the existing architecture and despite the joint declaration by the three institutions as part of the 2020 MFF agreement whereby expenditure to cover NGEU financing costs ‘shall aim at not reducing programmes and funds’, financing for key Union programmes and resources available for special instruments, even after the MFF revision, have de facto been competing with the repayment of NGEU borrowing costs in a context of steep inflation and rising interest rates; recalls that pressure on the budget driven by NGEU borrowing costs was a key factor in cuts to flagship programmes in the MFF revision;

Change 53

Changed78.117. Underlines that, to date, the Union budget has been required only to repay interest related to NGEU and that, from 2028 onwards, the budget will also have to repay the capital; underscores thatthat, according to the Commission, the total costs for NGEU capital and interest repayments are projected to be around EUR 20-3025-30 billion a year from 2028;2028, equivalent to 15-20 % of payment appropriations in the 2025 budget;

Change 54

Changed79.118. Acknowledges that, while NGEU borrowing costs will be more stable in the next MFF period as bonds will already have been issued, the precise repayment profile will have an impact on the level of interest and thus on the degree of volatility; insists, therefore, that such repaymentall costs related to borrowing backed by the Union budget or the budgetary headroom be treated distinctly from appropriations for EU programmes within the MFF architecture;

Change 55

Changed80.119. Points, moreover,in that regard, to the increasing demand for the Union budget to serve as a guarantee for the Union’s vital support through macro-financial assistance;assistance and the associated risks; underlines that, in the event of default or the withdrawal of national guarantees, the Union budget ultimately underwrites all macro-financial assistance loans and therefore bears significant and inherently unpredictable contingent liabilities, notably in relation to Ukraine;

120. Calls, therefore, on the Commission to design a sound and durable architecture that enables sustainable management of all non-discretionary costs and liabilities, fully preserving Union programmes and the budget’s flexibility and response capacity;

A long-term budget that is properly resourced and sustainably financed

Change 56

Changed82.121. Underlines that, as described above, the budgetary needs post-2027 will be significantly higher than the amounts allocated to the 2021-2027 MFF;MFF and, in addition, will need to cover borrowing costs and debt repayment; insists, therefore, that the Union willnext onlyMFF be ableendowed with significantly increased resources compared to tacklethe 2021-2027 period, moving away from the significanthistorically challengesrestrictive, itself-imposed faceslevel andof deliver1 on% itsof policyGNI, objectiveswhich ifhas prevented the nextUnion MFFfrom isdelivering endowedon withits ambitions and deprived it of the resourcesability necessaryto respond to meetcrises theand increasingadapt budgetaryto emerging needs;

Change 57

Changed83.122. Considers that all instruments and tools should be explored in order to provide the Union with those resources, in line with its priorities and identified needs; considers, in this respect, that joint borrowing through the issuance of EU bonds presents a viable option to ensure that the Union has sufficient resources to respond to acute Union-wide crises such as the ongoing crisis in the area of security and defence;

Change 58

Changed84.123. Reiterates the need for sustainable and resilient revenue for the Union budget; points to the legally binding roadmap towards the introduction of new own resources in the IIA, in which Parliament, the Council and the Commission undertook to introduce sufficient new own resources to at least cover the repayment of NGEU debt; underlines that, overall, the basket of new own resources should be fair, linked to broader Union policy aims and agreed on time and with sufficient volume to meet the heightened budgetary needs;

Change 59

Changed85.124. Recalls its support for the amended Commission proposal on the system of own resources; is deeply concerned by the complete absence of progress on the system of own resources in the Council; calls on the Council to adopt this proposal as a matter of urgency; points, furthermore,and tourges the needCommission to explore additional innovative and genuine newspare ownno resources,effort in order to coversupporting the higher spendingadoption needs;process;

Change 60

Added125. Calls furthermore, on the Commission to continue efforts to identify additional innovative and genuine new own resources and other revenue sources beyond those specified in the IIA; stresses that new own resources are essential not only to enable repayment of NGEU borrowing, but to ensure that the Union is equipped to cover its the higher spending needs;

126. Calls on the Commission to design a modernised budget with a renewed spending focus, driven by the need for fairness, greater simplification, a reduced administrative burden and more transparency, including on the revenue side; underlines that existing rebates and corrections automatically expire at the end of the current MFF;

Change 61

Added127. Welcomes the decision, in the recast of the Financial Regulation, to treat as negative revenue any interest or other charge due to a third party relating to amounts of fines, other penalties or sanctions that are cancelled or reduced by the Court of Justice; recalls that this solution comes to an end on 31 December 2027; invites the Commission to propose a definitive solution for the next MFF that achieves the same objective of avoiding any impact on the expenditure side of the budget;

A long-term budget grounded in close interinstitutional cooperation

Change 62

Added128. Underlines that Parliament intends to fully exercise its prerogatives as legislator, budgetary authority and discharge authority under the Treaties;

129. Recalls that the requirement for close interinstitutional cooperation between the Commission, the Council and Parliament from the early design stages to the final adoption of the MFF is enshrined in the Treaties and further detailed in the IIA;

130. Emphasises Parliament’s commitment to play its role fully throughout the process; believes that the design of the MFF should be bottom-up and based on the extensive involvement of stakeholders; underlines, furthermore, the need for a strategic dialogue among the three institutions in the run-up to the MFF proposals;

131. Calls on the Commission to put forward practical arrangements for cooperation and genuine negotiations from the outset; points, in particular, to the importance of convening meetings of the three Presidents, as per Article 324 TFEU, wherever they can aid progress, and insists that the Commission follow up when Parliament requests such meetings; reminds the Commission of its obligation to provide information to Parliament on an equal footing with the Council as the two arms of the budgetary authority and as co-legislators on MFF-related basic acts;

Change 63

Changed90.132. StressesRecalls that the IIA specifically provides for Parliament, the Council and the Commission to ‘seek to determine specific arrangements for cooperation and dialogue’; stresses that the cooperation provisions set out in the IIA, including regular meetings between Parliament and the Council, are a bare minimum and that much more is needed to give effect to the principle in Article 312(5) TFEU of taking ‘any measure necessary to facilitate the adoption of a new MFF’; calls, therefore, on the successive Council presidencies to respect not only the letter, but also the spirit of the Treaties;

Change 64

Removed91. Expects the Commission, as part of the package of MFF proposals, to put forward a new IIA in line with the realities of the new budget, including with respect to the management of contingent liabilities;

Added133. Recalls that the late adoption of the MFF regulation and related legislation for the 2014-2020 and 2021-2027 periods led to significant delays, which hindered the proper implementation of EU programmes; insists, therefore, that every effort be made to ensure timely adoption of the upcoming MFF package;

Added134. Expects the Commission, as part of the package of MFF proposals, to put forward a new IIA in line with the realities of the new budget, including with respect to the management of contingent liabilities; stresses that the changes to the Financial Regulation necessary for alignment with the new MFF should enter into force at the same time as the MFF Regulation;

135. Instructs its President to forward this resolution to the Council and the Commission.