Last April, the European Commission presented the 2013 EU’s draft budget – €150.9 billion in commitments appropriations that represents an increase of 2% comparing to the 2012 budget, and €137.9 billion in payments appropriations, which represents an increase of €9 billion or 6.8% on the 2012 budget. The European Commission has, therefore, ignored calls from several Member States, including the UK, for an EU budget freeze. Such considerable increase has been justified to meet prior commitments, particularly projects in the area of EU regional policy. However, as Mark Hoban, Financial Secretary to the Treasury, said “At a time when Governments across Europe are making difficult decisions on public spending, a 6.8% increase in EU spending in 2013 is completely unacceptable”. The Government noted, “that the proposed increase would impose unaffordable costs on taxpayers in the UK and other Member States”. In fact, the Commission’s proposal would, obviously, entail an increase in the UK’s contributions to the EU budget, which has been estimated to be around €1 billion more than in 2012.

The UK cannot veto the Commission’s proposal, hence, as Mark Hoban noted, “the Government's success in the 2013 negotiation will depend on corralling a group of like-minded Member States around a strong position on the 2013 EU Budget.” Several Member States, including Germany and France, have been showing their opposition to the proposed increase in the EU’s 2013 budget. Nevertheless, just the Netherlands and Sweden have backed the deep cuts proposed by the UK.
Although the Council has reduced the amount of the Commission proposed draft budget there is still an increase of 2.79% compared to 2012. The Council should have proposed lower figures as the UK has suggested. In fact, the UK, the Netherlands and Sweden voted against such proposal, but they did not have enough votes to block such compromise, which has been described by the Government as “unhappy.”

The Council has agreed to a budget of EUR 132.70 billion in payments and EUR 149.78 billion in commitments. Compared to 2012, whereas the European Commission has proposed for an increase of €3,031.5 in commitments appropriations and €9 billion in payments appropriations, the Council's position provides for an increase of EUR 1.88 billion and EUR 3.61 billion respectively. The Council has therefore called for reducing the payments by a total of EUR 5.23 billion and the commitments by EUR 1.15 billion.

Hence, because of QMV, the Government is no succeeding in ensuring deep cuts to the EU’s 2013 budget. According to Bill Cash, “firmer steps” should be taken “in the light of the changed relationship that has resulted from these times of austerity.” While noting that “other member states have been breaking the law all over the place” and “The whole of the fiscal compact was unlawful”, Bill Cash believes “we should say no to the final results.” In fact, he pointed out “If we were to adopt a Swiss-style relationship and negotiate a proportionate drop in our net contributions, we would be able to save at least £7 billion for the British taxpayer.” Thus, he stressed “That is the direction we should go in. It is time that we said no, not maybe.”

The Government has acknowledged that the Council would “come under pressure from both the Commission and Parliament to increase spending and move away from the 2.79% increase”. Consequently, according to Mark Hoban, the Government has “worked with France, Germany, the Netherlands, Sweden, Austria, Finland and Denmark, not only outlining our disappointment with the 2.79%, but making it clear in a statement (…) that further increases to EU spending should not be agreed later this year.”

However, it is important to mention that Mr Barroso sent a letter to member states' leaders expressing his concern about the Council's position and the negotiations on the 2013 budget, which, according to him, “are already compromising the spirit of our recent agreement by not making sufficient funds available to enable the European Union to pay agreed levels of support for many growth-enhancing projects.” The president of the European Commission pointed out, “The proposed increase in payment levels of 6.8% for 2013 largely stems from legal obligations.” He, therefore, stressed, “I hope you will be willing to work constructively with the European Parliament and the Commission to agree on the budget that Europe needs.

It is important to note that the European Parliament has always sought a bigger budget for the EU than that proposed by the Commission and Member States. Therefore, the vote at the European Parliament’s Budget Committee to increase the EU’s 2013 budget did not come as a surprise. The Budget Committee proposed a total of €137.9 billion in payments and €151.15 billion in commitments. The MEPs rejected the cuts made by the Council, and restored funding lines as proposed by the European Commission. They proposed, therefore, an increase in payments of 6.82% as compared to 2012's budget and an increase of commitments of 2.2%, requiring even more money from taxpayers.

The European Parliament’s vote is scheduled for 23 October. The European Parliament is very likely to follow the recommendations of the Budget Committee, consequently a conciliation committee would be convened. A three-week conciliation period would therefore start on 26 October. Such Committee will be composed of Council representatives and representatives of the European Parliament aiming at reaching an agreement on a joint text. Fierce negotiations between the Council and the European Parliament are, therefore, expected. If the Conciliation Committee does not agree on a joint text within 21 days, the Commission shall submit a new draft budget. If the EU 2013 budget is not approved before the end of the year, spending would have to be frozen at 2012 levels. And, Brussels would have to work under the system of the "provisional twelfth." It is, therefore, essential for the UK to achieve a blocking minority in the vote on the conciliation agreement.

It is important to recall that last year, in exchange for the so called limited increase, the member states also committed to accept requests for additional payment appropriations through amending budgets, in order to avoid any shortfalls. In fact, there is a Joint Statement on payment appropriations by the Council and the European Parliament where they asked “the Commission to request additional payment appropriations in an amending budget if the appropriations entered in the 2012 budget are insufficient to cover expenditure …” Unsurprisingly, the Commission has recently announced that it will table on 23 October an amending budget to fill a gap of €10 billion between the payments foreseen in the current budget and the commitments in areas such as research, the Erasmus student exchange programme and EU social and development funds. The EU Member States would therefore be asked to pay further contributions to make up for shortfalls in this year’s EU budget. As Richard Ashworth MEP, European Conservatives and Reformists group’s Budgets spokesman, said “Rather than saying how much money is available in the EU budget, the commission waits for governments to submit receipts and then it realises it has a shortfall. EU budgeting seems to be more of an art than a science and it is a totally unacceptable way to manage taxpayer money.”