After an intense night of haggling the EU’s 27 leaders finally agreed to a cut in the payment ceiling for next 7-year EU budget as the previous budget (see below) comes to an end this year. The cut to the ceiling reduces the limit from €942.8bn to €908.4bn – a reduction of 3.65%. This represents the first cut in the EU budget since the formation of the Common Market in 1957.
Despite tough negotiations over the extent of the cuts, the overall consensus was that budget cuts were necessary. Of course, the new budget must be agreed by the European parliament, and, once the headline figures are agreed the lobbying will begin between competing governments and interest groups in terms of how to carve-up the budget, and where to make the necessary savings. High on the list of ‘ring fenced’ projects are those targeting youth unemployment, infrastructure investment and the spread of broadband. This is, of course, further evidence of the consensus that the EU budget should be seen as a tool for long term supply-side improvements to the European economy in the face of intense competition from global producers in China and India. Although the cuts to the budget ceiling also represent a victory for those who have long argued against subsidies and the general featherbedding of inefficient producers, including the excessive protection of low value-added farming and fisheries, the budget for the ‘preservation and management of natural resources’ (mainly the support of farms and fisheries) will still represent over 40% of the whole budget (around €400bn).
The news of the budget agreement, and the inevitable behind the scenes horse-trading has been overshadowed, in the UK at least by horse-trading of an entirely different kind, with the discovery that some European farmers appear to have been passing off horsemeat as beef. Perhaps some of the new budget for ‘preservation and management of natural resources’ can be put towards establishing proper controls on food standards and labelling. As for Mr Cameron, well he surely deserves his Sunday roast.
So where exactly does the money go?
Over the period of the previous 7-year budget the total EU budget was €975.8bn, which was allocated as follows:
Sustainable growth – €438.6bn
Includes spending on research and innovation, education and training, trans-European networks, social policy, and economic integration. Also included in ‘sustainable growth’ is spending on convergence of the least developed EU countries and regions, EU strategy for sustainable development outside the least prosperous regions, inter-regional cooperation.
Preservation and management of natural resources – €412.6bn
This includes the much maligned common agricultural policy (CAP), common fisheries policy, rural development and environmental measures.
Citizenship, freedom, security and justice – €12.2bn
This budget covers justice and home affairs, border protection, immigration and asylum policy. Citizenship includes spending on public health, consumer protection, culture, youth, information and dialogue with citizens.
EU as global player – €55.9bn
This covers foreign policy by the EU, but excludes the European Development Fund.
Administration – €55.5bn
Administration includes administrative expenditure of all the European institutions, pensions and EU-run schools for staff members’ children.