Budget chickens come home to roost

The European Commission is struggling to justify an increase of nearly 7 per cent in the EU payments budget for 2013.  The timing could hardly be worse, with national budgets feeling the full force of austerity, governments facing fierce opposition to spending cuts at home, and the Dutch being forced into new elections as coalition consensus crumbles. No surprise, then, that presentation was a major preoccupation at this week’s Commission meeting.

As you might expect, member states which are net contributors were quick to express their indignation at the Commission’s draft budget, which would rise to €151 billion for commitments (up 2 per cent) and to €138 billion for payments (up 6.8 per cent).

But of course everyone is to blame: governments, Parliament and the Commission. Yesterday’s chickens are coming home to roost. Long-term spending programmes from past budgets must be paid for, and a backlog of liabilities has accumulated which must either be cleared, or pushed further into the future.

The roll-over of unpaid bills from 2011 to 2012 amounted to €11 billion out of a total payments allocation of €129 billion for the year. It would hardly be good housekeeping to allow these liabilities to increase further, quite apart from the pressure on member states which have made investments under EU programmes and are then denied reimbursement to which they are entitled.

In presenting the Commission proposals President Barroso stressed that the funds to be committed for 2013 programmes would only increase by the rate of inflation, and I could only find one budget line, “Intermodality between Transport Means” where the proposed commitment has actually been cut. Another cut would be a 5 per cent reduction in Commission staff numbers over five years, but total administrative costs would still rise by 2.8 per cent.

Agricultural spending, including direct payments to producers, continues to take a third of the total budget, but the proposed increase would be less than the rate of inflation.

The budget proposals are of course founded, first on the belief that spending on European programmes will deliver more sustainable growth than spending at the national level, and secondly that they play a vital role in redistribution from wealthier to poorer regions.

On this basis, research, innovation and the structural funds would receive the lion’s share of new commitments. The allocation for the EU’s external relations would go up by 5 per cent. This includes additional resources for Europe’s diplomatic service, a proposal which has not been well received by Baroness Ashton’s home country.
The 2013 draft budget is an attempt to put greater emphasis on growth and to encourage European integration. But with a European population which is much more sceptical about the virtues of greater integration the argument does not have the traction which it once did.

This year’s budget discussions promise to be more bruising than ever, because long-term budget ceilings must be agreed for the years 2014 to 2018 (or 2020), together with the means of funding them. A financial transaction tax will no doubt be pushed as a supplement to the EU budget, combining with the UK rebate issue to ensure a fractious negotiation.

Just as a footnote it is worth recalling that the EU budget constitutes just over 1 per cent of gross national income of the 27. Figures for per capita payments or receipts in 2010, helpfully compiled by Laissez Faire, give some insight  into how EU citizens are impacted by the EU budget and how this may reflect national negotiating positions.  No wonder the Dutch are sensitive!