On 8 February the EU leaders reached an agreement on the EU's 2014-2020 budget, the so-called multi-annual financial framework (MFF). The MFF negotiations were a victory for David Cameron. Due to his determination the EU budget has been cut for the first time in the EU’s history. In fact, as David Cameron said “This Government are taking the toughest line in these budget negotiations of any Government since we joined the European Union.”
The European Commission completely ignored the UK and other member states demands for an increase in spending to be limited to the rate of inflation and proposed over one trillion Euros for the EU spending between 2014 and 2020. This is a substantial amount of money to be earmarked for the purpose of running such a failing project as the EU, particularly having in mind that the European Court of Auditors for the 18th year in a row has not signed the EU accounts. The EU spending continues to be affected by “material error”; there has been an error rate increase from 3.3 % in 2009 to 3.7 % in 2010 and 3.9 % in 2011. In fact, the special reports that the European Court of Auditors regularly publishes analysing EU funding often show that EU funds are not effective in helping to achieve EU policies objectives and have been revealing that EU taxpayers’ money is not being properly spent.
Brussels is clearly wasting taxpayer’s money and the European Commission has the nerve to ask for a ludicrous increase on the new MFF. Moreover, it is absolutely appalling whilst the EU is imposing austerity on Member States, and all Member States are reducing public spending and increasing taxes, Brussels wanted to increase its own budget.
The Commission proposed for the next seven years €1,033bn billion in commitment appropriations, which will increase from €975.8bn (an increase of 5%), and payment appropriations would increase to €987.6bn from €925.6bn in 2007-13. It has also earmarked an extra €58 billion for programmes outside the MFF, proposing, therefore, a 2014-2020 budget on the total amount of €1.091.3bn.
Last November, the President of the European Council proposed a ceiling of €973bn, but David Cameron could not accept such proposal, as it “would have risked UK taxpayers paying for unaffordable increases in the EU’s annual budgets.” The Prime Minister was therefore determined to achieve further cuts in the EU budget covering the years 2014-2020. Hence, the UK as well as Sweden, the Netherlands, and Denmark demanded further cuts, of around €30bn to Herman Van Rompuy’s proposal.
Due to David Cameron determination the EU leaders agreed to a multiannual financial framework that reduces EU expenditure for the first time in the EU’s history.
David Cameron described the deal reached by the EU leaders on the overall limit on EU spending for the period 2014-2020, as “a good deal for Britain. A good deal for Europe and above all a good deal for all our taxpayers.”
The EU leaders agreed for the next seven years €960 billion in commitment appropriations, which will decrease from €975.8bn, representing 1.00% of EU GNI, and payment appropriations would decrease from €925.6bn in 2007-13 to €908.4bn, representing 0.95% of the EU GNI. There has been therefore a substantial reduction from the €1,033bn originally proposed by the European Commission, and there was also a significant cut on budget payments. Whereas the European Commission has originally proposed a 5.0 percent increase, the EU leaders agreed to a cut of 3.5% compared with the 2007-13 budget.
It is important to recall that last November the House of Commons voted to reject any deal on the MFF that does not cut spending in real terms. The House of Commons voted against an inflationary increase for the EU budget, which would have meant a 2% increase on the current MFF. As Mark Reckless, MP noted, “If there is an inflationary increase, as the Government propose, we will be looking at a net contribution going from £9.2 billion last year to £13.6 billion at the end of the process.” David Cameron has been saying “I wanted to set the limit at a level that would deliver at worst a freeze and at best a cut in the actual spending over the next seven years.” In fact, he delivered a real terms cut. As Bernard Jenkin, MP noted “Not only has he brought back a good deal for the British taxpayer, but it was a good day for the British Parliament—this House voted for a cut, and he delivered it.” Bill Cash stressed, “that the UK national interest is best served when the Government and Parliament are at one”.
According to the European Council conclusions, the EU leaders agreed that “Smart and inclusive growth corresponds to an area where EU action has significant value
Added”. Their agreement on the level of commitments for sub-Heading1a “Competitiveness for growth and jobs” is less than the Commission’s original proposal but there has been an increase in this part of the budget comparing to the current framework, as it has gone up from €91bn to €125.6bn. David Cameron pointed out “Research and Development – and other pro-growth investment – will now account for 13 per cent rather than 9 per cent of the total budget.” On the other hand, the European Commission's Connecting Europe Facility for cross-border projects in energy, transport and information technology, to which the European Commission has allocated €40 billion, was slashed by the EU leaders to €29bn.
A lot of emphasis has been put on the implementation of the Europe 2020 strategy and the achievement of its targets. However, one could say that a considerable amount of money has been allocated to the new strategy for sustainable growth and jobs, which will have the same fate as the Lisbon agenda, as it is set to fail. Brussels’ plan to increase growth entails increasing EU spending. However, the solution does not lie in injecting more money into the public sector and to ventures and projects that, in fact, have failed, according to several reports of the European Court of Auditors. The EU policies and strategies aiming at promoting growth competiveness and jobs have achieved nothing else but the opposite. The EU overregulation and employment laws have been preventing growth, prosperity and employment. The EU leaders should tackle first the causes of no growth in Europe, namely repealing the EU employment and social laws, which have been strangled the small and medium-sized business in Europe.
The EU’s promotion of “economic, social and territorial cohesion and solidarity among Member States” is an effective way of increasing Member States dependence on massive structural funds. And, it is now clear that a subsidised Europe is a failed Europe. There are deep structural problems in the EU, which are the reason why the European project does not work. The cohesions funds have been creating economic distortions while taking up a vast amount of the EU budget. The EU's regional policy was the EU's second largest budget for the period 2007-2013, with an allocation of €348 billion. The Commission has earmarked €376 billion for spending in cohesion policy instruments, which represented 36,7% of the new MFF for 2014 – 2020. The EU leaders set the level of commitments for this sub-Heading “Economic, social and territorial cohesion” at €325 billion. Nevertheless, the cohesion funds will continue, therefore, to take up a vast amount of the EU budget.
The Commission has kept the two-pillar structure of the Common Agricultural Policy (CAP) and proposed to allocate €281.8 billion for Pillar I and €89.9 billion for rural development (Pillar II), making a total of €382.9bn to “Sustainable growth: Natural Resources.” The Commission has proposed to allocate 36,2% of the MFF to CAP as compared to 39.4% in the existing MFF. Nevertheless, this was not a substantial decrease in the share of the budget for CAP. France being the biggest beneficiary of CAP does not want to see a reduction of farm subsidies, and obviously, has sought to defend its farmers' interests. According to the EuropeanVoice, François Hollande, said that he had achieved three of its four main goals, namely protecting the Common Agricultural Policy. Although there were not further cuts to the budget proposed by Van Rompuy last November, and as David Cameron pointed out, “while there are areas where we could and should go further, not least on reforming the Common Agricultural Policy,” he noted “The common agricultural policy budget pillar one goes from €320 billion to €277 billion, which is a significant change.”
The EU leaders agreed to cut the current CAP budget of €421bn to €373bn. Of this amount “EUR 277 851 million will be allocated to market related expenditure and direct payments”. According to David Cameron “overall spending on the Common Agricultural Policy will fall by 13 per cent compared with the last seven year budget.”
The EU leaders agree to earmark to €15.7 billion for Security and citizenship, which is less than the Commission’s original proposal of €18.5bn but more than the current €12.4 billion.
The Commission also proposed a significant increase in the budget for external policies. Under the Commission proposal, the budget for Heading 4 “Global Europe” would have increased from €56bn to €70bn, but the EU leaders agreed to set the level of commitments at €58.7bn.
The EU 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 compared to other expenditures, but Brussels has not kept these costs as low as possible and has been wasting taxpayers’ money. The Commission has proposed a 5% cut in the staff of each EU institution and agency. Nevertheless, it has earmarked €62.6bn to Administration, allocating €12.1bn for pension and expenditures and European schools and €49bn for administrative expenditure of the institutions.
The EU civil servants enjoy not only high salaries, but also benefits such as family allowances, expatriation allowance, installation allowance, travel expenses, removal expenses, daily subsistence allowance as well as low taxes. The wages of EU civil servants have been annually increasing whilst there is a wage freeze for civil servants in the UK and other Member States.
However, the EU leaders agreed that “The level of commitments for this Heading will not exceed EUR 61 629 million” and that “expenditure for administrative expenditure of institutions (…) will not exceed EUR 49 798 million.” Hence, the Commission proposal for the EU's administrative spending was solely cut by €1bn, which David Cameron described as disappointing. He stressed, “It is disappointing that administrative costs are still around 6 per cent of the total.”
It is important to note that the EU leaders agreed, that all EU institutions would have to reduce their staff by 5% over the period 2013-2017, which “shall be compensated by an increase in working hours for staff without salary adjustment.” Moreover, the salaries and pensions of all EU civil servants will be frozen for the next two years.
David Cameron has faced a lot of pressure from various Member States and from the European Commission for the rebate to be abolished. As he noted, “Without the rebate, we would have the largest contribution in the European Union, double that of France and almost one and a half times as large as Italy’s or Germany’s” which “would be completely unfair.” The prime Minister Government has put his foot down and the other EU leaders agreed, “The existing correction mechanism for the United Kingdom will continue to apply.” David Cameron stressed, “Under this government, the British rebate is safe.”
The UK is a major net contributor to the EU budget. The UK contributions have been rising in recent years due to Tony Blair's 2005 decision to give away parts of the UK rebate. In 2011 the UK's gross contribution was £15,357 million and net contribution £8,1bn. The Government has estimated that the UK contribution to the next EU financial framework is 11.5%, after the UK rebate has been taken into account. Hence, if the Commission’s proposal had been adopted, the UK would end up paying around £70 billion to the EU budget from 2015 to 2020, which is unacceptable, particularly in a time of austerity. This on top of costs of the EU overregulation.
David Cameron recalled, at the House of Commons, that “the last government gave away almost half of our rebate” which “has had a long term and continuing effect on the UK’s net contributions.” Hence, because Tony Blair has given way an increasing amount of British rebate, as David Cameron pointed out “almost whatever budget deal was done, our net contributions were always going to go up”. But, he stressed, “as a result of this deal they will be going up by less.” Hence, although the UK’s net contribution is likely to rise, they will be less than it would have been under the European Commission’s original proposal and the Van Rompuy’s proposed compromise. Moreover, the UK’s gross contribution is likely to fall. As David Cameron noted, “– as a result of this deal, we now expect the UK’s contribution to the EU to fall as a share of our Gross National Income.”
The EU leaders agreed, for the first time ever in the EU's history, to cut the budget from its previous level, but the European Parliament is threatening to reject such important deal. It is important to recall that the political agreement reached last week by all the EU member states will have to be translated into a Council Regulation and requires the consent of the European Parliament. Under the Lisbon Treaty, the Council, acting unanimously, shall adopt the multiannual financial framework, after obtaining the consent of the European Parliament (special legislative procedure (assent procedure)). The European Parliament may accept or reject the proposal but cannot amend it.
Since the beginning of the negotiations, the MEPs have been threatening that they will reject the multiannual financial framework if their demands for higher spending are not met. The European Parliament takes the view that a freeze of the multiannual financial framework between 2014 and 2020, would not be sufficient to finance the existing policies, which come out of the Lisbon treaty. In a joint statement the leaders of four political groups in the European Parliament, Joseph Daul (EPP Group), Hannes Swoboda ( S&D Group), Guy Verhofstadt (ALDE Group) and Rebecca Harms and Daniel Cohn-Bendit ( Greens/EFA Group) made clear that “The European Parliament cannot accept today's deal in the European Council as it is.” The MFF successfully negotiated by David Cameron may not receive the required parliamentary majority.
It is important to mention that Martin Schulz, the European Parliament's president has recently said that the Parliament is likely to hold a secret ballot on the budget. He said, “You need 151 signatures [from MEPs] to oblige me to vote with a secret ballot and I was informed by different group leaders that the signatures will be presented to me.” In this way, MEPs would be free from voting with their national parties, hence they are more likely to vote against the budget agreed by their countries’ leaders. The European Parliament has been described, as the house of European democracy, yet is likely to take such undemocratic decision, as David Cameron pointed out “MPs and MEPs should vote transparently so that their constituents can hold them to account. They have to account not only to their electorates but to their countries, which will suffer if a deal is not passed through.” Unfortunately, the issue of lack of democratic legitimacy of the EU institutions has been and it would continue to be addressed by increasing the role of the European Parliament, by increasing substantially the policy areas subject to co-decision and by introducing more QMV decision-making.
The leaders of the four political groups above-mentioned, stressed that “The real negotiations will start now with the European Parliament.” Herman Van Rompuy also pointed out “that a final agreement must still be reached with the European Parliament”, while stressing “we all need to be ready to compromise”. He recalled “That’s how Europe works.” In fact, the EU decision-making is a horse-trading bureaucratic procedure, whereby, most of the time, particularly through the ordinary legislative procedure, policies are adopted not because of their merit or benefit to member states but for the sake of reaching an agreement benefiting the EU as a whole.
It is important to mention that the European Parliament has been calling for “unused margins, de-committed and unused appropriations (both commitments and payments) in one year's budget should be carried over to the next year and constitute a global MFF margin to be attributed to the different headings.” In fact, under the draft decision on the system of own resources of the European Union proposed by the Commission "Any surplus of the Union's revenue over total actual expenditure during a financial year shall be carried over to the following financial year.” The MEPs have been therefore insisting for the EU’s unspent money to be kept in the EU budget, instead of being returned to the member states according to their share of the total contribution. According to the European Voice, Angela Merkel confirmed, that “unused but committed money will at the end of the budget year no longer be transferred back to the member states but rolled over into the following year.” This is unacceptable, unspent EU money must be returned to national governments.
According to the leaders of the EPP, S&D, ALDE and Greens/EFA Groups in the European Parliament, the MEPs “will not abandon” the call “for increased flexibility using Qualified Majority Voting: between years and between categories of spending”, “on a compulsory revision clause with a Qualified Majority Vote in the Council, which should allow us to revise the financial framework in two or three years”. This would put the UK in a very weak negotiation position. Due to QMV, the UK has been outvoted and being forced to accept measures against the national interest. Moreover, the MEPs are calling for a “new, genuine own resources for the European budget to progressively replace the current system based heavily on national GNI contributions.”
In order to reach an agreement on the MFF, the EU’s leaders are prepared to make some concessions to the European Parliament namely introducing a clause allowing the budget to be reviewed in two years as well as accepting some flexibility in shifting funds between budget years and headings. According to David Cameron the European Council agreed, “that this must be within the framework that the Member States have now agreed.”
Nevertheless, it seems that MEPs would prefer the EU to work under the emergency arrangements than to vote in favour of the European Council’s deal. Martin Schulz has been saying, "If there is no deal, we can live with an annual budget”. It is important to mention that under Article 321 (4) TFEU if the financial framework has not been adopted “ by the end of the previous financial framework, the ceilings and other provisions corresponding to the last year of that framework shall be extended until such time as that act is adopted.” Hence, there is no agreement by the end of 2013, the 2013 ceilings plus inflation will be extended to 2014 until a new MFF is adopted. Under an Interinstitutional Agreement between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management, “Should the two arms of the budgetary authority fail to agree on a new financial framework, and unless the existing financial framework is expressly terminated by one of the institutions, the ceilings for the last year covered by the existing financial framework will be adjusted in accordance with Point 16 so that the 2013 ceilings are maintained in constant prices.” This means that the European Commission will make technical adjustments to the financial framework “on the basis of a fixed deflator of 2 % a year.” David Cameron noted, “If no deal is reached, the existing ceilings are simply rolled over and annual budgets are negotiated on a year-by year-basis, taking account of those ceilings”. He stressed that the UK “would not get the reduction we need in the seven-year budget ceilings negotiated by the last Government.” In fact, it would be €60bn more than the European Council’s deal.
If the Parliament votes against the MFF as agreed by the European Council, there would be no budget as the Council can only adopt the MFF regulation after obtaining the consent of the European Parliament. In this case, the EU leaders would have to change the deal successfully negotiated by David Cameron. David Cameron has stressed "it is better to have a deal than to have no deal, and this deal is right for Europe’s taxpayers” hence, he is encouraging all UK’s MEPs to vote in favour of the budget and to do it “in an open, transparent manner”. He noted, “The Liberal Democrats will be voting for this budget in the European Parliament and the Conservatives will be voting for it in the European Parliament too” then he stressed “We now need to hear from the Labour party, not only about its own MEPs, but about socialists right across Europe.”
The EU’s multiannual financial framework for 2014 to 2020 was set to reflect the power grab of the EU, as the increase in EU powers has led to an increase in the budget. David Cameron put his foot down and stand up for taxpayers, as he was able to negotiate an EU’s long-term budget which, for the first time, will be cut in real terms despite the Union's increased powers and enlargement. However, the European Parliament is likely to vote against this budget in order to secure a 2 per cent inflationary increase. Moreover, although David Cameron was able to secure a reduction in the overall EU budget, the UK net contribution is likely to increase. Hence, British taxpayers will continue to pay substantial amounts to Brussels. As Bill Cash has been saying the British electorate has been paying, as taxpayers, for our direct contributions to the EU, as consumers because of the high prices and costs endured by UK business in complying with EU regulations, as well as higher food prices, which have resulted from implementation of the CAP and CFP. He stressed,
"The great European con-trick has to end.”
The time has come to say No and stop paying this vast amount of money for running this failing project. There is no clear added value in spending such amounts at the EU level. In fact, the EU has been spending UK taxpayer’s money on policies that clearly do not benefit them. It is outrageous that we have no say on how to spend the money we get back from Brussels. The UK Parliament should decide how the money should be spent; yet we have to follow the EU failing agendas.
David Cameron announced in his big speech “The next Conservative Manifesto in 2015 will ask for a mandate from the British people for a Conservative Government to negotiate a new settlement with our European partners in the next Parliament” and then he promised to give the British people a referendum “with a very simple in or out choice. To stay in the EU on these new terms; or come out altogether.” As soon as David Cameron renegotiates the whole UK relationship with the EU the better, as he would be able to save even more money for the British taxpayer.
