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Wednesday, June 11, 2014

EU spending to go up by only 1.3% next year (well, only if you buy the Commission's spin)

The European Commission has this afternoon put out its draft EU budget for 2015 which proposes total new spending commitments amounting to €145.6bn and €142.1bn in actual expenditure. The accompanying press release proudly proclaims that:
"The proposed increase of 2.1% in commitments and 1.3% in payments is virtually absorbed by the estimated inflation rate for 2015."
A below inflation increase would amount to a real terms cut which would be welcome but is that really the case?

The 2014 budget as signed off by member states and the European Parliament sets the level of payments at €135.5bn, so in actual fact the Commission's proposal constitutes a 4.9% increase, not 1.3%. So what accounts for the difference?

Well, a couple of weeks ago, on the 28th of May to be exact, the Commission proposed to retroactively top up the budget by €4.7bn in order to
"cover legal obligations in research and innovation, education and support for small and medium-sized enterprises. Higher reimbursement claims from Member States in cohesion policy have to be addressed as well as the difficult situation in the Ukraine."
This €4.7bn would come from a mixture of spare cash from the 2013 budget and income from fines levied by the Commission on companies breaking EU law as well as fresh funds from member states. However, this top-up still needs to be signed off by member states (the decision will be taken under QMV) so it is disingenuous to tack it onto what has already been agreed and present it as a lower overall increase.

Ultimately, the top-up itself is not completely the Commission's fault - member states often submit higher claims than the agreed budget allows, forcing the Commission to retroactively top the budget up (this annual ritual is as depressing as it is predictable). However that does not justify the Commission putting such dubious spin on the issue. This kind of stuff doesn't help in boosting citizens trust in EU just after the European elections produced a record strong showing for anti-EU parties.


Jesper said...

How much of the spending is poorly accounted for?
Just to get a perspective compared to the increase :-)
I seem to remember that auditors don't sign off on the accounts...

& an ethical question:
Is it better or worse if money is spent badly in a net-contributor country rather than not spent in the net-contributor country at all?

I've had a look on some of the Swedish taxpayer funded but EU directed spending on projects. They are sold as EU-projects and therefore 'free' (not tax-payer funded) and the 'bang for buck' does seem very bad. Might be easier to swallow the poor return on investment if it is seen as a better alternative than no investment at all...

Anonymous said...

I am confident that with appropriate reforms and controls things will get better any decade now!

Jesper: it is known that it's better to not tax people in the first place.

The EU is hopeless. The easiest and best way to fix it is to destroy it.