Multiannual financial framework: shaping EU expenditure
What is the multiannual financial framework?
The multiannual financial framework (MFF) sets the limits for the annual general budgets of the European Union. It determines how much in total and how much for different areas of activity the EU could use each year when it enters into legally binding obligations over a period of not less than 5 years. The recent MFFs usually covered 7 years.
The Council, after obtaining consent from the European Parliament, adopts the multiannual financial framework regulation.
Why do we need it?
The purpose of the MFF regulation is to:
- make the adoption of the annual EU budget easier
- translate political priorities into figures for a budget cycle of at least five years
- ensure budgetary discipline for the EU
- add predictability to EU finances
Ceilings for expenditure
The multiannual financial framework regulation sets 'ceilings' (annual maximum amounts) for the following two types of EU expenditure:
The MFF is one of three component parts of the EU budgetary system. The other two are:
1. Commitment appropriations
Commitment appropriations cover the total cost of legal obligations - contracts, grant agreements or decisions - that the EU could sign in each financial year that is covered by the MFF. In other words, they are the amounts that the EU can promise to spend in one give year and which would then be spent in that same year or over several years.
2. Payment appropriations
Payment appropriations cover expenditure that is spent in a given year of the MFF. This expenditure arises from legal commitments that the EU entered into either in that same year and/or in earlier years.
The MFF also includes annual global ceilings for payment appropriations and for commitment appropriations.
All the MFF ceilings have to be complied with in the annual EU budgets.
There are two types of expenditure ceilings:
- a ceiling for each heading (i.e. a policy priority) in commitment appropriations
- an overall ceiling for commitment appropriations and for payment appropriations
The overall ceiling in commitment appropriations is equivalent to the sum of the ceilings for the individual headings.
Special legislative procedures
There are 2 'special legislative procedures': consent and consultation.
Role of the Council
The Council adopts the MFF regulation by a unanimous vote and after having obtained the consent of the European Parliament (the consent procedure). Under the consent procedure the Parliament may approve or reject the Council's position, but it may not make amendments to it.
The proposal for the MFF regulation is drafted by the European Commission.
The European Council traditionally gives guidance to the Council of the EU on the MFF negotiations with the European Parliament.
The MFF regulation is usually negotiated as a package together with other key financial elements contained in the following legal acts:
• acts on own resources
• sector-specific acts
The negotiations on the whole package involve three institutions: the Council, the European Parliament and the European Commission.
The EU rules on own resources define the types of EU revenue and the methods for their calculation.
Own resources: the EU revenue
EU's own resources - the EU revenue - at a glance
The sector-specific acts establish the EU's operational spending programmes: they define the conditions for eligibility and the criteria for allocation of funds for measures that will be implemented in various policy areas, such as agriculture, foreign policy, research and others.
Most of the key financial elements of these sector-specific acts have been negotiated and agreed in the Council and the European Council in parallel with the MFF regulation and the rules on own resources.
As a general rule, sector-specific acts are adopted under the ordinary legislative procedure by the Council and the European Parliament on the basis of proposals by the Commission.