Reforming the EU budget a practical approach

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Reforming the EU budget-a practical approach
Jorge Núñez Ferrer EU Budget Review Benefit for
Europe and Lithuania 12th October
2007 Presidential Palace Hall of Columns Vilnius
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Back to basicsobjectives and principles

• Budget is too politicised
• Quality and rationale damaged -gt rebates
• Principles
• Subsidiarity
• Proportionality
• Additionality
• Added Value
• Cost efficient
• Objective efficient
• European Public Goods
• European Value Added

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The present situation

• The budget does not reflect well the EU
  aspirations and the economic and political
  objectives
• 80 of the budget is supposed to be cohesive
  across regions and sectors (CAP), but relation
  between GDP per capita and distribution nearly 0,
  even in EU 27 after full phasing in.
• CAP is a important and serious issue

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Common Agricultural Policy

• Scores badly on principles
• Support is supposed to be for income support and
  farm practices.
• Calculation has nothing to do with the aims.
• Much more could be done with the resources
  available or the same for much less. Large
  opportunity costs are associated to the policy
• Does not address modern challenges

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Other budget items

• Better score on principles, but
• Structural Funds could be better designed, but
  much depends on member states strategic planning
  and capacities. The Commission does not have the
  capacity and incentive to influence this much.
• Rural development funds still subservient to the
  CAP, even in distribution
• External action and security very underfunded
  while theoretically optimal at supranational
  level
• Environment not well integrated

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Reforming the budget

• Depoliticise the budget
• Expenditures should be more efficient and better
  targeted
• Avoid creating waste and growth damaging
  investments
• What does it mean in practice?

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• CAP
• Replace direct payments in line with the given
  objectives
• income support gt based on farm household
  incomes
• Good farming practices based on costs and
  limited not to farms with high turnover
• Allow the redistribution effects!
• Emancipate Rural Development from the CAP
• Modulation should have no link with origins of
  funds, funds cannot be distributed based on
  1989-91 yields in Europe
• Measures should be widened in scope and
  eligibility criteria tightened

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• Structural Funds
• Improve targeting
• Create stronger conditionalities, not based on
  absorption, but impacts penalise unjustified
  underperformance and irregularities
• Increase the national responsibility for auditing
• Careful with RD expansion
• share of public RD in Europe not low, it is
  the private share! Review EU national tax and
  regulatory situation
• DO not allow RD to become net balance
  redistributor.
• Strengthen justice and security
• Strengthen environment (e.g. climate change
  adaptation and mitigation)

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Resources?

• After TOR
• Easiest if real VAT based
• GNI marginal correction
• VAT marginal national GNI share
• Still Corrections because of expenditures?
• Special transparent correction heading OUT of the
  budget GNI ceiling (redistribution, not cost)