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• Agreement by unanimity – ‘the current system of unanimously-agreed long-term budget periods can mean that sensible decisions, like investment in research and innovation and HE [higher education], are easily blocked by Member States with specific interests’.24 ‘Negotiations over the long-term EU Budget are also inherently biased towards the status quo, since they are subject to unanimity, with every single Member State able to veto an agreement,’25 Furthermore, agreement by unanimity can also be difficult to deliver in good time with one respondent suggesting that ‘In order to prevent the blocking of progress in implementing decisions, majority voting should be applied to all budgetary decisions’;26
• Inflexibility to respond to new pressures – [The MFF] further blunts the effectiveness of the EU Budget as a stabilisation mechanism, with the ceilings for the period 2007-13, for instance, determined before the global financial crisis struck’;27
3.35 Dr Dermot Hodson of Birkbeck, University of London goes on, however, to note that the MFF for 2014-20 ‘introduces a greater degree of flexibility over such decisions, inter alia, by allowing expenditure on youth unemployment and research to be brought forward’.28 Meanwhile, others suggested that ‘a robust mid-term review process [...] should help to ensure that spending can be reviewed earlier and adjusted to reflect the priorities of the day’.29 Hodson finally summarises the broader balance of debate on the question, noting that ‘as things stand the economic limitations of long budget periods are outweighed by the political benefits of long-term consensus over budget decisions’.30
3.36 It is the Government’s view that the balance between greater certainty from a long-term planning period (which UK-based budget recipients largely supported) and the opportunity to bring greater leverage to bear in negotiations (through use of the ‘veto’) are strong points in favour of the MFF as a negotiating structure which is in the interest of Member States like the UK.
3.37 On the question of how long an MFF period should be, respondents noted the limit set by the Lisbon Treaty, which requires an MFF period of at least five years.31 Within this limit,
respondents’ views varied on two points:
• Greater flexibility, longer planning: As in the discussion around the need for the MFF, above, there was some discussion about the trade-off between having increased long-term certainty of funding, for example, ‘this brings greater stability to spending, and enables better planning’, ‘this certainty and transparency [of the 7 year structural fund period] has had a strong and positive impact on strategic planning’, and the Northern Ireland Executive (Simon Hamilton MLA), submission of evidence.
Universities UK and UK Higher Education International Unit, submission of evidence.
Open Europe, Seizing the Moment: Aligning the EU Budget with Europe’s Economic Needs (2012).
Professor Robert Leonardi, submission of evidence.
Dr Dermot Hodson, submission of evidence.
Institute for European Environmental Policy, submission of evidence.
Dr Dermot Hodson, submission of evidence.
Article 312 TFEU.
40 Review of the Balance of Competences between the United Kingdom and the European Union: EU Budget increased flexibility of a shorter MFF, for example, ‘a degree of flexibility is needed to take account of emergencies, changing circumstances, and to allow priorities to be reconsidered in mid-term.32 33 So a multiannual framework needs to be longer than two years but probably shorter than seven’.34
• Alignment with European Parliament calendar: Several respondents noted the possible link between the MFF period and the European Parliament electoral calendar, with five year periods. The National Farmers’ Union (NFU) noted that ‘There is an argument that a new European Parliament can find its activities and ambitions significantly constrained by a budget deal that has previously been agreed’.35
3.38 On the latter question, views were mixed, with some arguing in favour of a direct alignment
with European Parliament periods:
Budget and Parliamentary cycles should be aligned at 5 years to give better accountability.
MEP candidates would then be able to stand on platform spelling out what size of budget they wanted and what their priorities would be.36 Professor Iain Begg of the London School of Economics and Political Science noted however that this ‘depends on the view taken on the EU as a level of government’ and indeed on the view on how long the MFF should be on planning grounds, with those arguing in favour of a period greater than five years naturally therefore seeing alignment with the European Parliament as a lesser priority.37
3.39 It is worth also noting that, while evidence suggests that a longer framework provides greater certainty for the planning of major projects through the EU Budget, it may not be an absolute necessity. National budgets, particularly in the UK, have generally been set for periods far shorter than seven years while including funding for major projects, a point also noted in the consideration of the commitments and payments system in the EU Budget in the Running the Budget section of this chapter.
Roles of Institutions in Agreeing the Budget
3.40 The role of institutions in agreeing budget periods was also seen as a key question for many respondents, with a particular interest in the role of the European Parliament on the revenue side of the budget. Evidence has been considered, above, on the impact of requiring unanimity in Council to agree an MFF period, but by contrast (as Chapter Two of this report sets out), the annual budget and the regulations underpinning the MFF require agreement by QMV in Council. At the same time, the European Parliament’s consent is required to agree an MFF period, but only an opinion is required for the Own Resources Decision. Views were seen from respondents on all of these questions.
3.41 Respondents broadly noted that the process for agreeing budgets, the MFF in particular,
was not the same as in other areas of policy, with some benefits for the UK:
Centre for European Reform, submission of evidence.
Welsh Government (Jane Hutt AC/AM), submission of evidence.
Brussels and Europe Liberal Democrats, submission of evidence, although it is worth noting that this submission also suggested that exceptional periods of longer than seven years could be justifiable for particular projects with long-term plans, including, for example, the Connecting Europe Facility and the International Thermonuclear Experimental Reactor (ITER).
National Farmers’ Union, submission of evidence.
George Lyon MEP, submission of evidence. Please also see: Leonardi, Dimitrakopoulos, Boyd, submissions of
Procedures concerning the EU Budget are in general more restrictive than those concerning Union legislation. Special legislative procedures apply for decisions on own resources – EU Budget revenue – and for decisions on the multiannual financial framework fixing annual ceilings to expenditure.38
3.42 On the roles of institutions in agreeing an MFF, Open Europe noted in 2012 a changing role
for the European Parliament:
The Lisbon Treaty enhanced the role of the European Parliament in negotiations over the EU long-term budget, giving MEPs an effective veto (or at least codified the practice in law) [...]Therefore, through the Commission’s agenda-setting powers and the Parliament’s veto powers, the EU institutions are also an obstacle to reforming the budget.39
3.43 This increased involvement was seen to have had a significant impact on the timing of negotiations by some respondents. Fiona Wishlade of the University of Strathclyde’s
European Policies Research Centre noted:
The input of the European Parliament added several months to the process of agreeing the MFF. While some aspects of the agreement were important (in relation to the annual budget, for example), it contributed to the overall atmosphere of brinkmanship, which was arguably counterproductive.40
3.44 Despite this, the NFU suggested that the UK could wield its influence more effectively in negotiations, bearing in mind that ‘the UK has 73 MEPs (the third biggest number) and is one of the top 4 most powerful in the council’.41
3.45 Professor Robert Ackrill of Nottingham Trent University argued that a distinction between the roles of the European Parliament and national Parliaments was important to maintain,
focussing particularly on the timing of budget periods and European Parliament elections:
It is wrong to compare the EP with national parliaments in terms of the powers of budgetary determination. As the process of elections, manifestos and policy commitments is so different with the EP, linking MFF and EP cycles would, arguably, require a much greater role for the EP in MFF determination.42
3.46 Others suggested an increased level of cooperation and coordination between national Parliaments and the European Parliament on all issues. WWF-UK made this point in
National and European Parliaments: this relationship on the EU Budget is currently extremely weak. It would make a lot of sense to strengthen it, notably to develop a better shared view of key spending priorities at the EU level. For example the environment is considered a priority for Cohesion policy at the European level but neglected by some MSs [sic]: better discussions between national and European Parliaments would help smooth these discrepancies.43
3.47 On the role of the European Parliament on the revenue side of the budget system, Hodson and others raised the question of whether the European Parliament’s limited role on Own
Resources actually resulted in upward political pressure on the size of the budget:
Brussels and Europe Liberal Democrats, submission of evidence.
Open Europe, Seizing the Moment, p 9.
Fiona Wishlade, submission of evidence.
National Farmers’ Union, submission of evidence.
Professor Robert Ackrill, submission of evidence.
WWF-UK, submission of evidence.
42 Review of the Balance of Competences between the United Kingdom and the European Union: EU Budget In the EU case [...] the European Parliament can (and generally does) seek higher EU expenditure without bearing responsibility for revenues, which come, in part from Member States.44
3.48 Others, however, challenged this point:
I accept there is a question about how representative the current parliament is of the ‘normal’ electorate given the poor turn-out at EU elections and the performance of smaller protest parties in what is often a mid-term referendum on incumbent governments.45
3.49 Alternatively, Dr Dionyssis Dimitrakopoulos of Birkbeck, University of London argued that the synchronisation of the electoral and budget cycles could increase democratic accountability and therefore public interest in European Parliament elections, by bringing closer the link between elections and decision making financial outcomes which directly impact on citizens.46
3.50 Alex Boyd, of the European Parliament, was sceptical about the impact a greater role for the Parliament would have on the discussion of budget size. The view shared in a discussion during the call for evidence period was that ‘it was indeed more likely that MEPs’ ‘asks’ on the budget would only increase. MEPs were seen to be more distanced from voters – and not always seen as local representatives [...] and would not feel the same pressure as national MPs’.47 Summary
3.51 Respondents considered:
• The overall size of the EU Budget, which was seen by some to be small as a percentage of GNI, when compared to federal budgets. However, the unique structure and focus of the EU Budget was recognised, with expenditure not directly comparable with that of Member States;
• The need for a long-term budget period, with respondents largely supporting the need for long-term planning to support recipients, though difficulties were seen in agreeing budget periods by unanimity;
• The length of the MFF period, with discussion of the relationship between the MFF period and European Parliament electoral cycles and the need for flexibility as well as long-term certainty;
• The roles of institutions in agreeing the budgets, with discussion in particular of the role of the European Parliament on the revenue side of the EU Budget system;
Spending the Budget Does the EU Budget of 2014 represent a ‘modern’ and high-quality budget, focussed on areas of added value, in the interests of the UK?
3.52 In this section, we consider the ‘added value’ of the EU Budget, including: the distribution of expenditure between major areas of the budget; the distribution of spend between Member States; the most effective methods of delivering expenditure and the relationship between the UK’s abatement; and the added value of the EU Budget.
Dr Dermot Hodson, submission of evidence.
Professor Cillian Ryan, submission of evidence.
Professor Dionyssis Dimitrakopoulos, submission of evidence.
EU ‘Added Value’
3.53 The Commission’s EU Budget Review of 2010 identified five core principles against which spending options should be assessed; of which ‘EU added value’ was one.48 49 Through these principles citizens should be able to have a better view of what the budget is for and how choices have been made.50 EU added value is a significant principle because it provides a framework for assessing whether citizens get a better deal through spending at an EU rather than national level.