European Policy Centre Reform of the EU Budget an Opportunity for a Radically Different EU 12 Octobe

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European Policy CentreReform of the EU Budget
an Opportunity for a Radically Different EU?
12 October 2007

• Fabian Zuleeg
• Senior Policy Analyst

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Radical budget reform?

• The Comissions approach is one of openness and
  no taboos
• Real opportunity to reflect on one of the EUs
  most important tools
• Reforming the budget changing Europe
• But are Member States up to it?

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Key issues

• Expenditure
• Total expenditure level - more or less than 1
• EU focus on non-spending areas e.g. four
  freedoms
• Distribution of expenditure between policy areas
• What needs to be at the EU level?
• Effectiveness of current spending and future
  implications
• Addressing new policy challenges, e.g. energy,
  climate change
• Revenue
• Raising revenue efficiently and effectively
• EU resources as a political milestone

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Key issues

• Economic governance
• Stability vs. flexibility
• Expenditure and taxes as policy instruments
• Juste Retour
• EU fiscal policy in relation to EMU
• Budget management and implementation
• Who and how to decide future multi-annual
  financial frameworks

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Expenditure radical proposals?

• Increase EU budget
• Cut agricultural spending significantly
• Focus cohesion policy at areas of greatest need
  (not in rich MS)
• Increase resources for competitiveness, research,
  entrepreneurs etc.
• Competitiveness funding for opportunity rather
  than need
• Increase European capacity to deal with security
  threats
• More money for future issues e.g. food security,
  climate change, migration, adapting to
  globalisation, skills and energy
• Introduce mechanisms to evaluate spending and
  refocus when not working

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Revenue radical proposals?

• Genuine own resources at EU level
• Shift from GNI to VAT base, environmental taxes,
  corporate tax
• Visibility of EU revenue to citizens
• Low cost of raising revenue
• More independence for EU level

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Economic governance radical proposals?

• Focus on efficient and effective spending, not
  Juste Retour
• Policy instruments used according to what is
  needed, including tax
• Sufficient funding to act as fiscal lever
• Synchronising budget, EP and Commission cycles
• Bigger role for Commission and EP

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BUT..

• Its very unlikely that we get radical change!
• Juste Retour is not going to go away
• EU budget is not going to grow (but might shrink)
• Overall bias to status quo in spending gradual
  change at best
• Shift away from agriculture will continue but
  slowly
• Some reform of cohesion policy
• More money for new policy areas but in a tight
  framework
• EU taxes not acceptable to many governments and
  citizens
• Closed system overall ceiling, juste retour
  little room to move
• MS will not give up control over budget

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Less ambitious - but more realistic

• More focus on non-spending areas completing the
  Single Market
• Build in staggered automatic reduction system for
  agriculture spending
• Focus current EU spending on leverage effects
  change behaviour in MS
• Provide the Commission with a flexible proportion
  of the budget
• Take Juste Retour out of the equation make it
  automatic and focus on expenditure
• Fix percentage affected by Juste Retour and
  negotiate on net expenditure
• Simplify revenue on GNI basis not move to EU
  tax
• Develop alternative policy instruments to
  implement policy (e.g. reduced expenditure
  mechanism rather than environmental taxes)
• Clear division of roles between Council,
  Commission and EP
• Politicising the budget synchronised political
  cycles

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Conclusions

• Main focus of EU policy should be on issues such
  as the 41 Freedoms, external economic relations
  and co-ordinating MS action issues which do not
  require big budgets
• Where the budget is important, focus on
  achievable progress not ideals
• Progress is possible but will be limited
• But budget negotiations will continue
• Start of a long reform process?
• Key issue is for the EU to make itself relevant
  to what is happening now and in future
• For many at the EU level it will not go far
  enough
• But for many in the member states it will already
  be a step too far