Margarida Vasconcelos: Coalition’s call for an EU 2012 budget freeze fell on deaf ears

David Cameron has been calling for the EU budget to be cut or, at least, to be frozen. Last December, David Cameron, AngelaMerkel, Nicolas Sarkozy,Mari Kiviniemi and Mark Rutte wrote a letter to the President of the European Commission, Mr Barroso, saying “The action taken in 2011 to curb annual growth in European payment appropriations should…be stepped up progressively over the remaining years of this financial perspective and payment appropriations should increase, at most, by no more than inflation over the next financial perspectives.” However, the calls for an EU 2012 budget freeze fell on deaf ears. The European Commission has ignored the Member States pleas for a freeze or, at least, a limited increase, according to the inflation rate, in the 2012 EU budget.

The European Commission has presented the 2012 EU’s Draft Budget on 20 April. The Commission has not proposed to cut the 2012 EU budget, but to increase it, and above the rate of inflation. In fact, the Commission has proposed a considerable increase in the overall budget. The Commission proposed the 2012 draft budget – €147.4 billion in commitments appropriations which represents an increase of €5,324,3 million or 3.7% comparing to the 2011 budget, and €132.7 billion in payments appropriations. At a time of severe strain on the majority of Member States’ public finances, where governments are reducing public spending, the Commission proposes an increase of €6.2 billion or of 4.9% on the 2011 budget. Martin Callanan, MEP stressed “Every other public sector organisation is tightening its belt and the EU must do the same.” It has been reported that the European Commission’s proposal for the EU’s budget in 2012, calling for a 4.9% increase to the budget, will increase the UK contributions to the EU budget at £600m. Consequently British taxpayers will end up paying over £10 billion to the EU in 2012.

Janusz Lewandowski, the Budget Commissioner, describes the draft EU budget 2012 as “A delicate balancing act combining austerity and growth boosting measures for 500 million Europeans.” According to the European Commission “The key objective of the 2012 Draft Budget is to fully support the European economy and EU citizens” and “reinforce growth and employment opportunities, while sustaining the actions implemented within Member States’ budgets.” However, citizens of several Member States are facing austerity measures, public spending cuts and job insecurity. In fact, as Jan Kees de Jager, the Dutch finance minister, noted, “How can we explain to our citizens who are tightening their belts that the European budget simply keeps on growing?” The UK government has already said that the Commission’s proposals are “unacceptable.”

The Commission has proposed €15,223,6 million in commitment appropriations for Competitiveness for Growth and Employment (heading 1a), which represents an increase of 12.6%, compared to the 2011 budget, and €12,566,1 million in payment appropriations. Commitment appropriations of €52,738,9 million are proposed for Cohesion for Growth and Employment (heading 1b) and €45,134,8 million in payment appropriations. The Commission believes that this “will support the EU economy and contribute to shaping the conditions for sustainable growth, both in the short and longer term.” The Commission has proposed €62,6 billion in commitment appropriations for spending at the centre of the Europe 2020 strategy. There is a considerable increase, (5.1%) in a strategy spending which would be a failure as the Lisbon agenda. For Preservation and Management of Natural Resources (heading 2), the Commission has proposed €60,158,4 million in commitment appropriations, which represents an increase of 2.6% compared to 2011 and €57,948,4 million in payment appropriations, representing an increase of 2.8% compared to 2011. The 2012 Draft Budget also foresees a 6.8% increase in payment appropriations for Freedom, Security and Justice (heading 3a) (EUR 868,3 million) and an increase in commitment appropriations of 17,7%, which has risen to €1,340,4 million. The Commission has proposed €9,009,3 million in commitment appropriations for the EU as a Global Player (heading 4) which represents an increase of 2.9%, and €7,293,7 million in payment appropriations.

2012 will be no exception to the rule as the EU budget wastes millions of taxpayer’s money. There is no clear added value in spending such amounts at the EU level. The EU has been spending UK taxpayer’s money on policies that clearly do not benefit them. The EU budget commissioner has to justify the EU budget increase to pay the bills, particularly the bills for projects in the area of EU regional policy, and he said “The main reason for the increase is that we must pay the bills coming from projects from across Europe. (…) to stop funding them is unthinkable.” It is important to recall that the European Court of Auditors for the 16th year in a row has not signed the EU accounts. According to the Court “payments from the budget continue to be materially affected by error…” According to the Court several spending areas in the budget continue to be materially affected by errors, particularly the cohesion policy, where the error rate estimated by the Court is above 5% (very serious).

The administrative expenditure includes expenditure for human resources (salaries, allowances and pensions) as well as expenditure for buildings, equipment, energy, communications, and information technology. The EU administrative costs represent around six per cent of the EU budget. It might not be much comparing to other expenditures, but Brussels has not kept these costs as low as possible and has been wasting taxpayers’ money. The European Commission has decided to freeze its own administrative expenditure for 2012. Mr Lewandowski asked the other EU Institutions to do the same, as according to him “That would send a positive signal to the European public opinion, demonstrating that the European institutions are acting responsibly in the light of the difficult economic and budgetary conditions.” One cannot forget that the 2011 EU’s budget foresees €126.5 billion in payments, amounting to a 2.9% increase on 2010 and now the Commission is proposing €132.7 billion in payments appropriations, amounting an increase of €6.2 billion or of 4.9% on the 2011 budget. The Commission plans to limit administrative expenditure are too little too late.

The Commission has proposed €8,281,5 million in commitments and €8,281,6 million in payments for Administrative expenditure (heading 5) for all Institutions, which represents an increase by 1.3%. The Commission has frozen its own administrative expenditure (excluding Pensions and European schools), but it has not followed by the other institutions as there is an increase of administrative appropriations for the other Institutions of 1.7%. There would also be an increased funding for the European External Action Service. The Commission has allocated €490,916,129 to the EEAS, which represents an increase of 5.8% compared to the 2011 budget.

It remains to be seen what will come out of the negotiations between the Council and the European Parliament. The negotiations will start in June with a trilogue meeting, between the European Parliament, the Council and the Commission. Whereas the Council is planning to make considerable cuts to the Commission’s draft EU budget, in fact Member States might demand a budget freeze, to reflect economic and budgetary constraints at national level, the MEPs, unsurprisingly, want to increase it. The Council shall adopt by QMV the draft budget and forward it to the European Parliament. David Cameron should not give up on his effort to achieve a 2012 EU budget freeze. The UK cannot veto the Commission’s proposal but it will not have difficulties in finding a blocking minority. The UK is not alone in its fight against the proposed increase in the EU’s 2012 budget. In fact, several Member States are also eager to reduce EU spending. The European Parliament’s first reading is scheduled for October. The budget is deemed to have been adopted if the European Parliament within 42 days from the Council communication approves the Council draft budget or has not taken a decision. If the European Parliament amends the draft budget, the Lisbon Treaty provides for a Conciliation Committee to be convened. Such Committee will be composed of Council representatives and representatives of the European Parliament aimed at reaching an agreement on a joint text.

It is very likely that a conciliation committee would be convened, as happened last year, it would therefore be essential for the UK to achieve a blocking minority in the vote on the conciliation agreement. If the Conciliation Committee does not agree on a joint text within 21 days, the Commission shall submit a new draft budget. Last year, the Member States and the European Parliament could not agree on the 2011 budget. The Conciliation Committee could not reach an agreement before the deadline. Consequently, the Commission had to put forward a new draft budget. If the EU 2011 budget has not been approved before the end of the year, spending would have been frozen at 2010 levels. Obviously, Brussels did not want to work under the system of the “provisional twelfth.” The Commission, the European Parliament and the Council Presidency all worked at speed of light so that a deal could be reached before the end of December.

It is important to mention that, according to the Office for National Statistics, the UK’s contribution to the EU budget has risen from £5.3bn in 2009 to £9.2bn in 2010. It is important to recall that Tony Blair gave up £7bn of the UK rebate in return for reform of the CAP and there is no serious reform on the way. In fact, the Commission wants to scrap the UK rebate in the next Financial Perspective, for the period 2007–2013. The EU budget commissioner, Janusz Lewandowski, has said, “The rebate for Britain has lost its original justification.” Downing Street replied to such comments, saying “Without the rebate, the UK’s net contribution as a percentage of national income would be twice as big as France’s, and one and a half times bigger than Germany’s.” It was noted that the UK is paying €38 billion and without the rebate it would have paid €75 billion over the period 2007 to 2013.

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