Did MEPs really vote to reject the EU budget deal?

There is a fair amount of confusion surrounding the vote that took place in the European Parliament earlier today on the long term 2014-2020 EU budget deal (MFF) struck by EU leaders last month. MEPs voted by a large margin (506 vs 161 with 23 abstentions) on a motion to “reject the agreement in its current form”. So what does this mean?

Firstly, it is important to stress that MEPs have not rejected the budget itself. Unlike other areas of EU legislation, the EP cannot amend the MFF, it can only accept or reject the entire thing. So, what we have now is the EP positioning itself to 'negotiate' with government ministers on some of the details before taking a final decision on the package, expected at some point in the summer.

The figures

Although the motion did not state that the Parliament has accepted the headline spending figures negotiated by member states, it appears most MEPs have come to accept, however reluctantly, that these will not be up for re-negotiation, as evidenced by the Freudian slip in this press release. Instead, they will demand concessions on the structure of the deal.

Settling all outstanding claims for the current MFF

EP jargon: “The European Parliament… Strongly opposes the current accumulation and rollover of outstanding payment claims in the EU budget… Is therefore determined to prevent any further shifts of payments from 2013 to the next MFF… emphasises that it will not start negotiations on the MFF until the Commission comes forward with an Amending Budget corresponding to [all unpaid payment claims for 2012].” 

Translation: MEPs may have to accept lower spending ceilings for 2014 – 2020 but they want to make sure that any funding shortfalls in 2012 and 2013 are paid for with new cash and not money from the 2014-2020 budget. It is rumoured that up to €16bn could be requested to cover spending commitments made for 2012. This is set to be a huge flash point with member states.

"Maximum overall flexibility"

EP jargon: “Agreed MFF ceilings for commitment and payment appropriations be used to the fullest extent when establishing the annual EU budgets; [The European Parliament] considers, therefore, that the maximum overall flexibility between and within headings, as well as between financial years, needs to be ensured in the next MFF and decided by qualified majority in the Council… [and supports] recycling of the surplus of the EU budget.”

Translation:  Essentially the EP wants to be able to adjust the areas where money is spent at some point during the seven year MFF. This is a reasonable demand given that a seven year budget clearly struggles to take account of changing economic circumstances - MEPs may get some joy with national ministers on this.

"Recycling the surplus" refers to the EP's desire to roll back any unspent funds back into the budget rather than seeing them returned to member states as they are now. This is likely to face resistance from member states but could be less of an issue than thought since the surplus is expected to be squeezed under the new MFF anyway.

Compulsory mid-term revision under QMV

EP jargon: “The next European Parliament and Commission – that will come into office following the 2014 European elections – should be in a position to reconfirm the Union’s budgetary priorities and carry out a revision of the MFF 2014-2020; [The European Parliament] underlines, therefore, its position in favour of a compulsory and comprehensive revision of the MFF… considers that the revision should be legally binding, enshrined in the MFF Regulation and decided by qualified majority in the Council.”

Translation:  Same as the demands for "flexibility" above. However, the big target is to introduce majority voting to the MFF, which unlike annual budget is always conducted under unanimity. This idea will hit a brick wall when proposed to national governments.

Direct EU taxes

EP jargon: "The European Parliament… Stresses the importance of reaching an agreement on an in-depth reform of the own resources system… [and supports] phasing out all existing rebates and correction mechanisms… insists that revenues from the Financial Transaction Tax should be allocated at least partly to the EU budget as a genuine own resource.” 

Translation:  The EP wants to see the budget part-funded directly by EU taxes (the Commission proposed the FTT and a new system of EU VAT) and also limit the number of rebates that countries get. Demands for EU taxes will be met with the same derision by national ministers as calls for QMV. Even those countries that eventually went down the FTT road aren't planning on handing the revenue to the EU.

Ultimately today’s vote is a case of the EP trying to flex its muscles by standing up to member states. However, today would suggest that Martin Schulz, who marched his fellow MEPs up the top of hill in the immediate aftermath of the summit by threatening to veto the entire budget, will have to march them back down again, albeit with a couple of minor concessions. Most of the EP's demands will be thrown out immediately.