Jean Lambert’s statement on the European Parliament vote to increase the EU budget by 6 per cent. Jean voted in favour of the increase, which was passed on 20 October 2010.

There has been a lot of criticism of the European Parliament decision to ask for a 6% increase in the EU budget at a time when most national Governments are urging budget restraint but let’s look at the background. The Lisbon Treaty gave the Union new responsibilities, such as the European Action Service, a stronger role on climate change, and the EU2020 Strategy and also more co-decision (joint decision making between the Parliament and the national governments in Council). Parliament thinks there should be the necessary finance for these new responsibilities.

Some of us were also concerned at what Council had proposed to cut in the Commission’s proposed budget and how cuts had been applied – across the board rather than with any clear strategy. Parliament had proposed some cuts of our own from that proposal, including €35 million from the EP’s own budget. At a time of economic difficulty it seems to make little sense to cut back on commitments to lifelong learning, necessary for retraining; support for SMEs (small and medium enterprises), a driver for new employment; or spending on the programme on combating domestic violence when we know that rises when money is tight. Also, given that climate change and rising energy prices will potentially have a lasting negative effect on the planet, it makes sense to restore the proposed additions to energy research.

It is true that there are cuts that could be made – agricultural export subsidies that damage markets in poor countries; support for tobacco growing and the monthly trips to Strasbourg are obvious candidates, although the latter requires a Treaty change to cut that from the budget. We could also make shifts within the budget – ongoing fossil-fuel and nuclear support should be switched to renewable energy – and we still have to complete reform of the CAP (Common Agricultural Policy), which now takes about 42% of the budget rather than the 70% of some years ago.

So what sort of money are we talking about?

The EU budget is 1.02% of the combined Gross National Income (GNI) of the 27 Member States (MS), lower than 20 years ago. The agreed ceiling is, in principle, 1.24% of GNI. The EP proposed budget sum for 2011 is about €130.14 in payments [1] compared to the actual €122.9 billion for 2010 [2].

The UK national budget for 2009-2010 was about £671 billion of which our contribution to the EU budget was 0 .6%: our net contribution for the same year was approximately £4.7 billion, compared to the £17.5 billion paid by Germany.  Our net contribution for 2011 is estimated to be £7.7 billion, but that budget is still under discussion. That net contribution is lower than a number of MS as we still receive a rebate (£3bn in 2009), as we benefit less from CAP than some other MS. According to a recent House of Commons briefing paper, the rebate can only be removed by Council voting in unanimity. There are many who feel it very unfair that newer MS effectively contribute more than might be “fair”, given their overall situation, to let the UK benefit from a deal made 26 years ago in a Union of 12MS.

So what happens next? The EU must agree a balanced budget as the EU has no capacity to borrow money as national governments do. Council meets on October 30th . Then, representatives from Council and Parliament will meet over the following days and an agreed proposal should be tabled for the November plenary session in Strasbourg. It is likely to be lower than the EP proposal (it is a negotiation after all) but not as low as Council’s initial proposal.

And next year? We are currently starting discussions about the so-called financial perspectives, the overall budget framework, for the next seven years. One issue that the EP wants national governments to look at seriously is that of how the money is raised. There is a strong feeling that the EU should have its own resources (funding source) rather relying on an assortment of sources all stemming from MS via governments. This would give greater flexibility and certainty but some fear that a tax-base (however small) is another step towards a super-state.

So last week’s vote was about more than the budget amount: it’s about the EP being an independent negotiator and partner, not just a voice for government, and about the future sources of EU budget funding. Let’s see what is on the table for the November plenary session.

Notes:

[1] Payments are the monies to be paid out in 2011, commitments are the monies that may be contracted in that year. For 2011, EP proposes €142.65 billion in commitments. These amounts are lower than foreseen in financial perspectives agreed for 2007-2013.

[2] The 2010 commitments budget was €141.4 billion.