ALDE POSITION PAPER ON EU BUDGET POST 2013 1. Background Since 1988, annual EU budgets are based on a Multiannual financial framework (henceforth MFF) agreed between the European Parliament, Council and Commission. Until the Lisbon treaty, the MFF was set by an Interinstitutional Agreement on sound financial management (henceforth IIA) which did not have a legal status. Since the Treaty on the Functioning of the European Union came into force on 1 December 2009, Article 312 confers a legally binding status to the MFF, which determines "the amounts of the annual ceilings on commitment appropriations by category of expenditure and of the annual ceiling on payment appropriations". The current Multiannual Financial Framework 2007-2013 was adopted on 17 May 2006 and it is annexed to the IIA. It was agreed on the basis of the agreement reached at the Brussels European Council on 15-16 December 2006 and subsequent changes later agreed with the European Parliament. In July 2010 the European Parliament set up a special committee on the policy challenges and budgetary resources for a sustainable European Union after 2013 (SURE). The responsibility of this committee is: - to define Parliament's political priorities for the post-2013 MFF, both in legislative terms and budgetary terms; - to estimate the financial resources necessary for the Union to attain its objectives and carry out its policies for the period starting 1 January 2014; - to define the duration of the next MFF; - to propose, in accordance with those priorities and objectives, a structure for the future MFF, indicating the main areas of Union activity; - to submit guidelines for an indicative allocation of resources between and within the different headings of expenditure of the MFF in line with the priorities and proposed structure; - to specify the link between a reform of the financing system of the EU budget and a review of expenditure to provide the Committee on Budgets with a sound basis for negotiations on the new MFF. 1
2. Preparation of the ALDE position on the MFF post 2013 On 7 September, an ALDE joint bureau/coordinators meeting took place to discuss the budget 2011, the budget review and the next MFF. The Joint bureau/coordinators meeting agreed on a list of 7 priority themes as regards the preparation of the MFF post 2013 and decided that those reflection themes would be sent to all ALDE members as a reflection paper. The priority themes were as follows: - The duration of the next MFF - ALDE priorities in the next MFF - The debate between net payers and net receivers and the need to ensure a stable and sufficient source of revenue for the EU budget - Debt financing at the EU level (Eurobonds, EU investment plan) - The overall size of the budget - The rebates - Synergies between the EU budget and national budgets The interest for the reflection paper has been great the written contributions from the individual members and delegation cover more than 75 percent of the members of the group. On the 26 th of October ALDE arranged a workshop where the EU budget as a whole was examined and discussed. Approximately 50 people attended the workshop. This ALDE position paper is based on the debate in the workshop, discussions in the group bureau meeting on the 24th of November and group meeting on the 8th and on the 14th of December, as well as on the previous written contributions on the reflection paper submitted by national delegations and individual members. The final version was endorsed by the group on its meeting on the 14th December. This paper will serve as the negotiation position for ALDE as the parliament forms its position on the next MFF. 3. The duration of the next MFF The duration of the current Multiannual Financial Framework is seven years. This time span has been perceived as too long due to the rigidity of long-term planning in a volatile political and economic environment. At the same time the seven-year time span has introduced a necessary element of stability in the funding of Community programmes. During the past years voices have been raised to shorten the time span of the MFF and synchronise it with the "institutional rhythm", i.e. the mandate of the European Parliament and European Commission in order to increase democratic responsibility, accountability and popular legitimacy. This idea contains a hope that proposals on the European budget should be part of the election programmes of national parties and candidates in the European elections, tying them closer to the budgetary process and bringing the budgetary element more into the public debate. It has also been proposed that the MFF should be based on the work programme of the Commission. 2
As a consequence, the European Commission has suggested a system of two interlinked five-year MFFs with a mandatory mid-term revision and obligatory reserves to fund unforeseen initiatives. This so called "5+5" system has been received positively by Parliament, but it leaves many open questions both regarding the practical implementation of such a system and its political consequences. One such question in the Commission proposal is the fact that interlinking two five-year MFFs creates an imbalance between Parliaments / Commissions, as one gets to prepare a "5+5" MFF and the next one only a mid-term revision of the same. Another important question is what effect the shorter time span would have on the individual programmes which currently are set for seven-year periods in order to synchronise them with the MFF. It should be debated if five-year time spans are appropriate for all individual programmes, or if a more flexible approach should be considered for some of them. A third very important question is the relation between the mandate of the Parliament / Commission and the preparations and start of the MFF. The appropriate basic principle should be that every Parliament and Commission, whose mandate periods are identical, has the responsibility both to prepare an MFF and to implement at least a part of it. Hence it would not be recommendable that the MFF and the mandate of the Parliament / Commission are fully parallel. Instead, the MFF should overlap the mandate period of the Parliament / Commission by one year in order to allow the preparations of the next MFF. Practically, this approach would necessitate a prolongation of the current MFF by one year to 2015. ALDE supports the principle of a five-year MFF, but to stress the political and practical challenges linked to this approach. 4. The overall size of the budget The economic crisis and its effect on the economy of the member states have had implications on the development of the EU budget. For instance the budget for 2011 will increase by 2.91 % from 2010. This increase is roughly half of what the Commission - in charge of implementing the policies - proposed in its original Draft Budget, and half of what was foreseen in the MFF programming, as well as of what the parliament would have seen necessary in its reading. At the same time the EU budget is requested to finance new needs such as the European External action service and the European financial supervisory authorities. This increase of 2.91 % was a result of the strong resistance from many member states to increase the budget in times of difficult national austerity measures. At the same time, one should keep in mind that in the current MFF payments are set at 1 % of EU GNI, while the Treaty sets the ceiling for own resources at 1.24 % of EU GNI. Also, the EU Budget has increased by only 8.2 % 3
between 1996 and 2002, while the average increase of Member States national budgets is 22.9 % for the same period. Within the ALDE group there is understanding for the views of the member states in these difficult times. However, in the longer perspective ALDE sees the need for the EU budget to live up to the obligations of the Lisbon treaty and the goals set in the Europe 2020 strategy for growth and jobs. Given its current structure, the EU budget is not fit to fulfil these obligations. ALDE therefore recognises the need for significant re-allocations within the EU budget together with a possible re-organisation of the budget structure to better reflect EU's new and increased responsibilities. 5. EU budget revenues, net contributions and rebates Today, the EU budget is financed through four main sources of revenue: customs duties, agricultural levies, VAT own resources and GNI-based resources from member states. From the outset, the European integration was to be funded independently from Member states. National contributions based on GNI of Member states were introduced only in the late 80's. The VAT own resource was the largest source of revenue for the union still in the mid-nineties. Today the GNI-based resources cover more than 75 percent of the EUbudget. This development has been challenging for the Union, since the member states tend to analyse the expenditure, and hence activities, based on how their flow of money to and from the Union will be affected. As a result, the EU is divided into net receivers and net contributors. This division is not useful from a community point of view, as it creates a situation where many member states are foremost interested in how much they contribute to the EU budget and how much they get back through different policy programmes. The current rebate arrangements are inherently linked to this system. ALDE does not support a future EU budget process including any form of rebate or other arrangement which significantly reduce the contributions to the EU budget for individual member states. A shift towards a budget financed with own resources would enable the abolishment of rebates. ALDE finds it necessary to return to the initial method of funding EU policies through own resources. This would allow the community perspective to be more clearly distinguished in the budgetary procedure. Returning to an own resource-based funding method would also improve the alchemy between the European Parliament and the Council in budgetary matters, as the two arms of the budgetary authority would be on a more equal footing vis-à-vis the revenues. As it stands today, the European Parliament is the only parliament who has no say on the revenue side of the budget. ALDE welcomes the initiatives made by the European commission to investigate possibilities for new own resources. In the long term, the increase of existing own resources and/or the introduction of new own resources should aim at replacing the national contributions to the EU budget altogether. 4
ALDE underlines the need for thorough impact and feasibility assessments before agreeing upon new own resources. It is important to stress that the European Union has to have a stable funding base. Revenues stemming from sources that are subject to unpredictable changes should be avoided. Any new sources of revenue must also be transparent and legitimate in the eye of the general public, and enjoy a similar level of acceptance as existing own resources. 6. The flexibility of the EU budget The flexibility of the EU budget is an essential tool as it allows the EU budget to react to unforeseen situations. It is strictly connected with the magnitude and the revenue side of the EU budget. Under the current MFF the funds are available under five separate headings and the transfer of the funds between them is only possible when the revision of the MFF is in place. Each year the EU budget has a surplus which is then paid back to the Member States (in practice the Member States contributions to the EU budget for the current year are decreased by this amount). At the same time there is a constant lack of funding especially for new initiatives or unpredicted events. When speaking about flexibility in the EU budget, one must differentiate between re-allocating existing funds within the budget and revising the overall size of the MFF. Re-allocation could mean transferring appropriations smoothly between headings as well as moving unspent appropriations from one budget year to another within the same MFF. Increasing the overall size of the MFF is a heavier instrument reserved mainly for a mid-term review of the MFF. Since the entry into force of the current MFF, 5 revisions have been adopted in order to finance Galileo, the European Institute of Technology, the food facility, and the Economic Recovery Plan. This was only possible after difficult negotiations between the two arms of the budgetary authority. At the same time, no proper mid-term review has been proposed by the Commission for the current MFF, despite pressing needs due to new costs and despite the fact that there is an agreement between the institutions to have a review. ALDE is of the opinion that flexibility is an essential tool of the MFF as it gives the EU budget the means to react to situations which were unforeseen when the MFF was agreed. ALDE regrets the rigidity of the current procedure to transfer funds from one heading to another, and expresses its willingness to explore any possibility to simplify such transfers within the MFF, while ensuring the full respect of the principle of sound financial management and budgetary discipline. Furthermore, instead of returning unspent appropriations to Member states, ALDE supports transferring this unspent money to the revenue of the following year. 5
7. Implementation of the Budget Today, the annual activities reports of each Commission General Directorates are signed by their respective Director Generals. This is not acceptable, as it does not ensure the political responsibility of each Commissioner over the implementation and sound management of EU funds by the DGs of which they are in charge. Also, in the last IIA it was agreed that EU Member States should produce an annual summary of national audits and declarations on their handling of EU funds. However, Member States have not respected this agreement - only a few have delivered such declarations so far, and even these are not available to both arms of the budget authority. Member states must pay more attention to the way in which EU funds are being spent. Therefore ALDE calls for compulsory, public national declarations of assurance on the appropriateness of their management of EU funds, issued at the appropriate political level. The high levels of error, together with the slow absorption rates in the Cohesion policy, also point to weaknesses in the planning and supervision practices of community funds. Furthermore, there is an urgent necessity to simplify the implementing rules of EU funds. Today, some rules are so rigid that many potential beneficiaries are discouraged from applying to calls for tenders. This has a negative impact on the overall implementation of EU programs, such as the Research Framework Programmes and Regional Development programmes. As a consequence, ALDE calls for a comprehensive review of the EU Financial Regulation to make financial rules simpler both to implement and to enforce. 8. Synergies between the EU budget and national budgets - European Added Value. According to the Treaty, all EU spending must, in respect of the subsidiarity principle, prove its added value. This added value is difficult to identify without proper coordination between national and EU budgets. Therefore ALDE calls for closer attention to be paid to the relationship between national and EU spending. As a principle, any duplication of spending must be avoided. Furthermore, EU spending must always create a greater value than the aggregated individual spending of member states. There are many cases where joint solutions on an EU level enable savings in national budgets. Several examples and proposals have been brought forward by ALDE members for joint action with potential added value where EU action would be greater than member states' individual actions: - EEAS - humanitarian aid, specifically an EU rapid response capability - pooling of defence resources - research, development and innovation 6
- big infrastructure projects, particularly in the field of energy and transport - inclusion of the European Development Fund in the EU budget - financial market oversight ALDE supports any proposals for new joint EU solutions which create an added value and demonstrate the efficiency of community action. 9. Debt financing at the EU level The idea of launching European bonds is more topical than ever. European bonds are however conceived as many different instruments. European project bonds can serve as a solution to raise financing for large pan-european investments. European project bonds could also encourage Public-Private-Partnerships. The European Investment Bank (EIB) is an international financial institution owned by all 27 Member States whose objectives are to lend money to projects to foster EU economic development and integration. The annual funding programme is 70 billion. EIB lending activities are mainly funded via the issuance of bonds. At the same time the European Financial Stability Mechanism will have to issue bonds guaranteed by the EU budget in order to finance the loans needed to cover challenges that some member states are facing. This development shows that common European borrowing is a reality we are facing. ALDE supports the development of European project bonds. ALDE also welcomes serious proposals on how the current debt crisis can be solved. 10. ALDE priorities Revenues ALDE supports returning to the initial method of funding EU policies through own resources, and therefore underlines the need for a thorough debate and review on the possibility of increasing existing own resources, as well as creating new own resources together with the Council, Commission and Member states. ALDE supports abolishing all existing rebates in the EU budget. Spending The spending should always be analysed from a European added value point of view. 7
Spending in the next MFF should support the implementation of the aims set in the Europe 2020 strategy for growth and jobs - innovation, research and development, education, infrastructure, energy security, EU recovery and EU external relations. The financing of the CAP and of the Cohesion policy is still justified, but there is a need to modernise these. Improving the access to internet in rural areas, increasing investments in innovation and R&D, improving the capacity of the agricultural sector and of weaker regions to improve their competitiveness etc. can be achieved through aligning these policies closely with the goals of the Europe 2020 strategy. In cases where the EU is given new competences, it is self-evident that these must be accompanied by corresponding resources. This is particularly important in cases where they completely replace national actions. Re-allocations As regards the question of finding some possible savings in the current budget, three recurring ideas can be identified: - fundamentally restructuring certain parts of the EU administration, such as the Committee of Regions, in order to ensure that all parts contribute significantly to the democratic decision-making process and the transparent, smooth and efficient running of the Union; - maintain the option of abolishing such administrative structures which do not fulfil the criteria above, such as the Economic and Social Committee and others; - avoid duplication and encourage synergies in spending between the national and the EU level; for instance the European External Action Service should lead to savings at the national level; - limited and precise cuts in the CAP may become possible, depending on the outcome of the current CAP reform. Other suggestions for re-allocations include the following: - concentrating the work of the European Parliament to one single seat; - efforts to find savings in the EU administrational costs, including the European Parliament - avoid duplication by improving coordination between programmes of similar nature, such as the European Globalisation Adjustment Fund and the European Social Fund: - cutting provisions for programmes for which the initial need has expired and for dubious programmes such as support for tobacco production in the EU. Strasbourg, 14 December 2010 8