The European Commission has suggested a new form of tax to finance the EU’s budget and reduce member states’ direct contributions.

The Commission today (19 October) said that the current system of financing the EU’s budget of around €132 billion a year is too reliant on member states contributing directly. Direct contributions account for around 70% of the budget with the rest coming from ‘own resources’. The Commission argues that this system has led to “bitter debates about net contribution” and a “complex system of rebates”.

It suggests that member states’ contributions could be reduced by abolishing the own resource funding based on a share of value-added tax and introducing a new system. It suggests a share of a tax on financial transactions or activities, a share of the proceeds of auctioning greenhouse-gas emissions allowances, a tax on air travel, a separate VAT rate, an energy tax or an EU corporation tax.

The suggestion on improving the own resources system is part of the Commission’s plan to move away from the debate on net contributions and towards a stronger focus on European ‘added-value’. “Negotiations on the budget are too often guided by the need to give everyone the feeling they got their fair share rather than on giving European priorities the right funding”, its paper on the subject said.

The Commission is also calling for more flexibility in the budget so that the EU can respond more easily to unforeseen events. “When sudden new circumstances arise [the EU’s budget] is too slow to react. Current rules make shifting funds, even in a very limited way, a long and cumbersome process,” according to the paper.  

The paper shies away from suggesting an overall amount for the budget or how to divide the budget among different policy areas, saying that there should be a debate on the principles of the EU budget before discussing figures. However, it does say that there should be further reform of the Common Agricultural Policy, which accounts for around 40% of the total budget. Possible reforms include reducing discrepancies in the level of direct payments, and shifting funds away from income support to environmental and climate-change objectives.

The Commission says it will present formal proposals for changes to the EU’s budget after 2014 before the middle of next year.

MEPs and national governments are in negotiations on the 2011 budget, with a large number of member states trying to limit the increase for next year to 2.9%. But MEPs want a 5.9% increase to ensure funding for projects linked to tackling employment and boosting growth. 

Liberal members of the European Parliament are to meet Liberal members of the Committee of the Regions (CoR) next week to explain why they drafted a paper calling for the abolition of the body.

A position paper on the European Union’s spending after 2013 was revised after protests from Liberal members of the CoR. The published version called instead for “a fundamental restructuring” of the CoR, but the MEPs pressed ahead with a demand that the European Economic and Social Committee (EESC) should be abolished.

The paper was published last week (11 January), having been endorsed by MEPs in the Alliance of Liberals and Democrats for Europe (ALDE) group last month. Carl Haglund, a Liberal MEP from Finland who drafted the paper, said that an earlier version of the position paper stated that the EU should “consider abolishing both” the CoR and the EESC, but that wording was dropped after opposition from the ALDE group at the CoR.

The hasty revision is still evident in the final text which says that on the question of finding some possible savings in the current budget, “three recurring ideas can be identified” – and then goes on to list four. They are: “fundamentally restructuring certain parts of the EU administration, such as the Committee of the Regions”; “maintain the option of abolishing such administrative structures…as the Economic and Social Committee and others”; “avoid duplication and encourage synergies in spending between the national and the EU level”; and “limited and precise cuts in the CAP” – the Common Agricultural Policy.

Caught off-guard

ALDE officials at the CoR admitted that they had been caught off-guard by the proposal’s initial wording, but had persuaded Liberal MEPs to revise their initial call to shut down the CoR.

Flo Clucas, president of the ALDE group in the CoR and deputy leader of the Liberal Democrats on the city council of Liverpool, said that MEPs lacked information as to the importance of the CoR.

“People did not really understand our role,” she said, adding that the CoR was crucial in ensuring that local and regional governments across the EU had “a voice in Brussels” when it comes to policymaking.

Staffan Nilsson, the president of the EESC, said that it was “sadly surprising” that Liberal MEPs were proposing the abolition of the only non-political EU advisory body. Nilsson pointed out that the Lisbon treaty had not only consolidated the EESC’s role, but had increased its “tasks, budgets and potential”.

Budget

The ALDE paper sets out the group’s position as to what line the Parliament should take in negotiations with the member states and the European Commission about the EU’s next multiannual financial framework (MFF) after 2013.

The current MFF is seven years in duration. The ALDE group supports the idea, put forward by the Commission among others, that the MFF should be five years long and be synchronised with the mandates of the Parliament and the Commission. But ALDE voices doubts about how the Commission’s idea of two interlinked five-year MFFs would work. ALDE warns that one Parliament would get to prepare a “five-plus-five” MFF, but the next Parliament would prepare only a mid-term revision of something already agreed.

On the size of the budget, the ALDE paper does not come out with a clear statement as to what ceiling to put on spending. It says that in the political group “there is understanding for the views of the member states in these difficult times”, but adds that in the longer term ALDE sees the need for the EU’s budget to “live up to the obligations of the Lisbon treaty and the goals set in the EU 2020 strategy for growth and jobs”. The EU’s budget is not fit to fulfil these obligations, given its current structure, ALDE says. It calls for “significant re-allocations within the EU budget together with a possible reorganisation of the budget structure”.

Cost-cutting priorities

In addition to the reallocations involving the CoR, the EESC, the CAP and eliminating duplication between the national and EU levels, the ALDE paper floats other possibilities. They are: concentrating the work of the Parliament in one place; savings on EU administration “including the Parliament”; avoiding duplication between the European Social Fund and the European Globalisation Adjustment Fund; cutting or ending support for programmes whose rationale is now dubious (“support for tobacco production in the EU” is one example it gives).

The ALDE paper says that there should be greater flexibility about moving money from one part of the EU’s budget to another. Under the current MFF, money is allocated under five separate headings and transferring money between headings is only possible with a revision of the MFF, entailing difficult negotiations between the Council of Ministers and the Parliament.

ALDE says that the EU’s budget should be entirely funded by its own revenue stream, whether value-added taxes and customs duties or some new “own resources”, and national contributions should be replaced altogether. It says rebates to member states should be abolished.

ALDE calls for member states to issue “compulsory” public national declarations of assurance on how they spend EU funds.

The group suggests the EU set up a Eurobonds scheme to pay for “large, pan-European investments”, such as bridges, rail links or major roads.

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Your article “Pipeline projects vie for gas and for cash” (28 October-3 November) suggested that by implementing the Trans Adriatic Pipeline (TAP), the Balkans and eastern Europe could be left vulnerable to Russian influence via the South Stream pipeline.

I would like to make it clear that, in fact, TAP has plans that would address security concerns in south-east Europe in several ways. First, TAP’s shareholders are considering supplying up to 1 billion cubic metres (bcm) of gas to the Albanian market. Furthermore, our underground gas-storage option in Albania would ensure that additional gas supplies would be accessible to the Balkan market in an emergency.

Similarly, TAP also has a physical reverse-flow option that could be initiated rapidly in the event of an emergency, such as the Russia-Ukraine gas dispute in 2009. Finally, the existence of TAP across the Balkan and south-eastern Europe region would also spur additional opportunities to connect with other planned and existing networks (such as the Ionian-Adriatic Pipeline, or IAP, and the Greece-Bulgaria Interconnection pipeline, or IGB).

TAP is therefore a pipeline that would contribute to the EU’s energy security. In addition, it requires no public grants or subsidies, and it is the shortest (at 520 kilometres) and most commercially viable of the pipeline options designed to secure the future of Europe’s energy supply.

For the reasons outlined above, I firmly believe that the European Commission must ensure that all pipelines in the ‘southern gas corridor’ are considered on an equal and level playing-field.

Kjetil Tungland

Managing director

Trans Adriatic Pipeline

Baar, Switzerland

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