Eurpoean Union must show financial restraint to reflect age of austerity

03 May 2012

The House of Lords EU Committee reported today following an in-depth examination of the European Commission’s proposals for the EU’s seven-year budget – the Multiannual Financial Framework (MFF). The Committee concludes that the EU must show overall budgetary restraint, with reductions proposed in areas such as the Common Agricultural Policy (CAP), but suggests that in some areas of European expenditure there may be scope for higher budgets, for example to encourage growth and innovation.

The Committee slammed plans by the European Commission to use a Europe wide Financial Transaction Tax (FTT) to fund the 2014-2020 EU budget. The Committee says the Commission has ‘failed to make a case for the tax’ and suggests if it were introduced the UK could account for 71% of the revenue it would raise. The Committee recently published a broader analysis of EU-wide FTT proposals, Towards a Financial Transaction Tax?

The Committee’s recommendations include:

  • The EU budget cannot be exempt from efforts to restrain public spending in Member States. MFF spending should not grow in real terms between 2014-2020.
  • The MFF should not be funded by a new Financial Transaction Tax as this would target only one sector of the economy, would fall disproportionately on the UK and is not genuinely linked to EU policy objectives.
  • There should be no removal of the UK rebate without fundamental reform of the CAP.
  • The failure of the MFF proposals on CAP spending to include more significant reform is disappointing, and there must be greater efforts to reduce CAP spending. 
  • EU spending should be reprioritised to support projects that encourage growth, such as Creative Europe, which supports the creative and cultural sectors.
  • On infrastructure spending, the past focus on transport spending should now be broadened to include greater investment in energy and telecoms infrastructure.
  • Funding should be found for a European cyber-crime centre.   

Commenting, Lord Roper, Chairman of the House of Lords EU Select Committee, said:

“The next Multiannual Financial Framework will be in place until 2020 and will dictate much of what the EU does for the next decade. Given the euro area crisis, it is vital that the European Union gets this right.

“We strongly oppose the Commission’s proposals to raise money in new ways and to change the rebate system, which only distract from the need to really address the size and priorities of EU spending.

“The EU’s focus now should be on encouraging growth. This is especially important when many Member States are struggling with austerity measures and stagnant economies. While the EU budget should not grow overall, there are opportunities to rebalance spending away from inefficient areas such as the CAP and towards areas such as infrastructure spending that could help get European economies moving again.”

The report, The Multinational Financial Framework 2014-20, is available on the Commitee's webpage.

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