The outcome of the EU budget summit last week was not as bad as it could have been. Cameron did not wield his veto, as he was threatening to just a few days before. And while EU Leaders did not reach a final agreement, progress was made towards reaching a compromise at the next Council meeting in early 2013. Crucially, the UK was able to drum up support for a real-terms freeze amongst like-minded member states such as Germany, the Netherlands and Sweden. This is in stark contrast to our self-imposed isolation following Cameron’s blocking of EU-wide treaty change last December.
However, Cameron’s focus on preventing a rise in spending is side-lining the wider issue of EU budget reform. This has been compounded by Labour’s unholy alliance with Tory Eurosceptics in the Commons in calling for a real-terms cut in the budget, a position they knew was hopelessly unrealistic. As a result, the debate has tended to centre on the size of the EU budget, rather than what it is actually spent on.
Currently, over 40% of the EU budget is still being spent on the Common Agricultural Policy. The Commission’s budget proposal would trim this down to 30% by 2020, while investing more in research and innovation, modern infrastructure, the EU’s external relations and the fight against crime, terrorism and irregular migration. These are areas where significant savings can be made through avoiding duplication of national spending. In addition, the proposed increase in EU structural funds will enable long-term infrastructure projects, often in poorer regions, which would otherwise be neglected by national governments.
Reforming the EU budget could reap huge benefits for the UK, especially by increasing the overall money spent in areas such as research and renewable energy where we already receive a disproportionately large amount of funding. In fact, a major overhaul of the budget could reduce the UK’s net contribution by far more than a real-terms cut.
Cameron is right to call for a cut in the EU’s administrative costs, especially by reducing the salary of highly paid Brussels bureaucrats. Yet this would be more a symbolic gesture than a major reform, and would generate a fraction of the required savings. The EU’s administrative expenses are just 6% of the total budget, and only around half of this 6% is spent on salaries.
More puzzling is Cameron’s proposal for a major cut in the new Connecting Europe Facility. This instrument is set to invest up to 50 billion euros in modern infrastructure such as high-speed broadband, cloud computing, and cross-border energy and transport networks. This will help ensure the EU remains competitive in the 21st century, and will also help deepen the single market in energy and services, a longstanding objective of the UK. Similarly, Cameron is calling for cuts in security, justice and external spending, areas where taxpayers’ money is saved by pooling at the EU level.
Cameron’s insistence on achieving a real-terms freeze risks jeopardising the EU’s moves towards a more modern, efficient and growth-oriented budget. Wary of alienating key member states such as Poland or France, he has made only limited demands to cut the bulk of agricultural subsidies or EU structural funds, and has instead proposed cutting some of the more useful aspects of EU spending. As a result, we risk cutting the EU budget in the very areas where it is most likely to contribute to Europe’s future prosperity and security.
* Paul Haydon has recently completed an MSc in European Public Policy at University College London.
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10 Comments
Paul,
If only the debate in Parliament was as sensible and pragmatic as your article, we might just reap the huge benefits for the UK that you allude to and demonstrate to the public how Britain, with partners on board, can steer the EU in a direction that benefits us all.
“This has been compounded by Labour’s unholy alliance with Tory Eurosceptics in the Commons in calling for a real-terms cut in the budget, a position they knew was hopelessly unrealistic.”
Surely no more unrealistic than the Commission demanding a 6.8% increase?
I’m fairly certain, that rather than being hopelessly unholy, this is understood in most parts of the world as the art of negotiation.
Personally, I support the German position that the EU budget should be limited to 1% of GDP, and that it should be paid by subscription rather than independent EU tax raising powers.
Anything in excess of this should be confined to additional measures for the eurozone, where a future democratic mandate will (hopefully) permit a mandate for european taxation.
Thank you Joe.
@Jedibeeftrix If find it interesting that your comment centres on the size of the budget, confirming the main thrust of my article!
While I can see your point, this isn’t just a simple negotiation between the UK and the Commission, but between 27 member states each with their own competing interests. Calling for a cut would isolate the UK and give us little bargaining power, while a real-terms freeze actually has considerable support amongst several member states.
Size does matter though. The budget of EUR 151 billion equates to an average of about EUR 300 for every one of the 500 million or so inhabitants of the EU. How much is paid by an average UK taxpayer?
http://ec.europa.eu/budget/news/article_en.cfm?id=201211261445
Yes size does matter too, but put in perspective it’s not as significant as it seems, especially when you consider the potential benefits of budget reform. Cameron’s focus on achieving a real-terms freeze has far more to do with domestic politics than defending the UK’s national interests.
Under the Commission’s proposals, the UK would end up paying at most around £400 and £550 million more per year, about £10 per taxpayer . That’s 0.03 per cent of GDP, or the same size as Oxfordshire County Council’s budget.
@ Paul – “If find it interesting that your comment centres on the size of the budget, confirming the main thrust of my article!”
Don’t get me wrong Paul, I entirely agree that reform of [how] the EU budget is spent is essential, and has the potential to turn the budget into a powerful force for good. I would like to see more spent on developing the infrastructure in accession nations allowing them to better integrate into the common market. I would like to see less spent on CAP and administration.
However, in desiring these things I still hold as of foremost importance that an institution of negligible perceived legitimacy to govern is not given the tools to de-facto govern. Gladstones “power of the purse”:
http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&ved=0CEYQFjAC&url=http%3A%2F%2Fwww.parliamentarystrengthening.org%2Fbudgetmodule%2Fpdf%2Fbudgetunit1.pdf&ei=fSO3ULvPK6ia0QW70IHgDg&usg=AFQjCNGl7VBU3WqgJBVABBojXAyA45cqfQ&sig2=E2XlhYtI8Oq6qq9ZbaKLkA
In short:
1. Cap the amount of money it can spend (because institutions always want more)
2. Do not give it control of its own resources (because from here power derives)
Having said this, the imperative within the eurozone is to converge economically, and thus politically, in which case there may well be a need for greater revenues and a justification for the eurozone to source those revenues itself. There are those that deny that this process is happening, and must happen, and the view is absurd. But the eurozone is an entirely separate matter to the EU as a whole.
Let’s mention the duplicate Parliament in Strasbourg. If ever there was a boondoggle, this was it – what is the annual cost of this and the annual removals between there and Brussels?
I’m almost tempted to call for a boycott of Strasbourg by British LibDem MEPs.
300 Euro per annum doesn’t sound like much of my income tax bill – like most of us, I have little idea what I pay annually in VAT!
I am sure that are parts of the budget that can be trimmed, but I would be concerned if the cuts impacted on the Research & Development parts; that sounds too much like eating the seedcorn.
It’s always a source of amusement that when some, ‘…ocracy’, or other wants further tax or revenue, they impress on the little guy, that the extra cost, is ONLY the cost of a tea bag per day, or ONLY £10 extra per year.
However, if the little guy asks for the equivalent increase, of ONLY the price of a tea bag to his minimum wage, to bring it closer to something that can actually, be lived on, he will get a swift, and reaffirming, political slap in the face.
More to the point if politicians just got on with “..the wider issue of EU budget reform”, instead of endlessly and unproductively, babbling about it, perhaps the little guy could keep his tea bag a day.
But they won’t of course, because an already morbidly obese EU, needs more fat..!
Thanks for a much more sensible approach than allowing the usual and utterly sterile ‘in/out’ to be the agenda.