The new European Union of 25 Member States must, as a matter of urgency, reform the way it spends its money, says the House of Lords European Union Committee in a report published today.

Lord Radice, the Chairman of the inquiry into the Future Financing of the European Union, said:

"The European Union is now getting too big to carry on the spending policies of the past. Money spent at EU level must add value and be targeted at areas where it can be most effective. The current proposals by the Commission are a missed opportunity and fail to acknowledge the need for change.

"The continued predominance of the Common Agricultural Policy makes no sense. Now that the system is based on direct income transfers, and no longer linked to production, the argument for shifting the financing of the CAP back towards Member States is strong.

"While the share of agricultural spending remains so high the Government is fully justified in defending the British rebate, the case for which arises because of the impact of the Common Agricultural Policy."

The Committee recommends that:

  • The figures for CAP until 2013 should be treated as ceilings not targets

  • The burden of CAP financing needs to be shifted back towards the Member States

  • Structural Funds after 2006 should focus on Greece, Portugal and the ten poorest Member States, as well as the two candidate countries, Bulgaria and Romania

  • There is a supporting role for EU investment in Research & Development, infrastructure and education programmes in improving competitiveness

  • For the longer term, a high-level review of the budget is needed to ensure that it adds value and targets areas of most need


1. The inquiry was conducted by Sub-Committee A (Economic and Financial Affairs and International Trade) of the European Union Committee. The members of the Sub-Committee are:

Lord Alliance

Lord Blackwell

Lord Cobbold

Lord Hannay of Chiswick

Lord Inglewood

Lord Jones

Lord Jordon

Lord Kerr

Lord Marlesford

Lord Radice (Chairman)

Lord Taverne

Specialist Advisor to this inquiry: John Peet.

2. The report is published by The Stationery Office: The Future Financing of the European Union, House of Lords Select Committee on the European Union, 6th Report, Session 2004−05, HL Paper 62, ISBN 010 400629 3, price £24.50. The full text of the report will be available on the internet via shortly after publication.

3. The Committee heard evidence from a wide variety of witnesses including Ms Michaele Schreyer, former EU Commissioner for Budgets and The Rt Hon Stephen Timms, Financial Secretary to the Treasury. The report is being made available to all twenty-five Commissioners and all members of ECOFIN.

4. Spending proposals for the period 2007 to 2013 are currently under negotiation. It is the first time that 25 Member States of the European Union will be negotiating the seven-year financial package, known as the Financial Perspective. Over the course of the seven year period (from 2007 to 2013) it is expected that the European Union will enlarge further to include Bulgaria and Romania. The accession of Turkey is possible a few years later. The European Union must anticipate these changes.

For embargoed copies of the report or requests for embargoed interviews with Lord Radice (on Tuesday 8 March) please contact:

  • Jillian Bailey, Press and Publicity Officer (Committees) on 020 7219 8659.

For further information please contact:

  • Judith Brooke, Clerk to the Sub-Committee on 020 7219 6772.