REPORT OF THE JOINT COMMITTEE
ON FINANCE, PUBLIC EXPENDITURE AND REFORM
Attendance at the EU Multiannual Financial Framework 2014-2020 Conference, Brussels, 20-21 October 2011
November2011
Table of contents Page
Introduction4
Conference Opening 5
First Plenary Session,
The Big issues in the next MFF 9
Conference Debate-Contributions from Delegates11
Conference Debate-Contributions from Delegates 13
Session 3-Adding Value: The EU Budget in Efficient Public Finances 15
Second Plenary Session-
Reports from the three parallel working sessions 20
Conference Debate- Contributions from Delegates 22
Concluding Remarks26
Appendices
Appendix A: Membership of the Joint Committee on Finance, Public Expenditure and Reform.
Appendix B:Report of Working Group-Session 1
Appendix C: Report of Working Group-Session 2
Introduction:
Representatives of the Commission, European Parliament and National Parliaments met in Brussels on 20/21October 2011.
The meeting was arranged under the auspices of the Polish EU Presidency. The conference focused on the EU Budget-Multiannual Financial Framework 2014-2020 proposal published by the Commission on 29 June, 2011.Following the opening plenary session, the conference was sub-divided into three parallel workshops. Each of the three workshops addressed three individual budgetary themes. These included:(1) EU Revenue: The Future of Own Resources, (2) EU Expenditure: Spending Priorities for the Future and (3) Adding Value: The EU Budget in Efficient Public Finances. The meeting took the form of a number of presentations and panel discussions each addressing the subjects in a particular manner. This report outlines the principal issues raised.
The Joint Committee on Finance, Public Expenditure and Reform was represented by Deputy Alex White, (Chairman) and Deputy Michael McGrath accompanied by Mr. Eoin Hartnett, Junior Clerk.
Opening of conference: Speeches by Mr. Jose Manuel Barosso, President of the European Commission, Mr. Jerzy Busek, President of the European Parliament and Mr.Donald Tusk, Prime Minister of Poland
Mr. Barosso welcomed the visitingdelegates participating in the conference. His opening remarks alluded to the forthcoming EU Council summit centred on resolving the Eurozone sovereign debt crisis. He acknowledged that the heads of states could no longer delay in tackling a deteriorating and destabilising situation. Addressing the Greek situation, Mr. Barosso called for immediate action in confronting the issue of debt sustainability in Greece. Similarily, he advocated that European leaders had to reinforce the Eurozone firewall to prevent contagion spreading throughout the system. Decisive and immediate action was necessary to reassure markets that the Euro was sustainable and that its members could and would repay their debts.
Growth would be a prerequisite in any effort to remedy the difficulties currently facing EU states. In devising the EU budgetary proposal, the Commission explicitly incorprated job creation and investment as central pillars in the overarching objective of achieving a sustainable growth economic model. For the Commission, growth was an “uppermost thought” and central to any comprehensive solution aimed at tackling the economic crisis. The EU budget proposal, as published, is a budget for investment in european citizens.
The EU Commission proposals demonstrated innovation and ambition. Mr Barosso specifically highlighted the “added value” element of the proposals, where the pooling of resources would result in maximum impact. Combining resources, through the EU budget, offered the opportunity for the completion oflarge scale infrastructure projects that would otherwise place additional pressure on Member state’s financial resources. Investing in the transport and energy sectors and providing Europe with a modern and integrated network is a case in point. The Commission had shown its commitment to large scale infrastructural projects through its ‘Connecting Europe’ strategy. Connecting Europe displayed the new approach to EU budgetary decisionmaking that placed responsibility and solidarity at its core. Through co-ordination and coherence in devising a pan-european energy and transport framework, EU Members states reflected “a true economic unit”.
In addition, Mr. Barosso highlighted the need to restore competitiveness throughout the EU. To achieve this, EU funds would have to be spent properly. The Commission’s proposal reinforced economic governance and was forward-looking in promoting the efficent use of limited resources. The financing aspects of the Commission’s proposals also proved attractive in the current economic climate. According to the Commission, the EU could leverage finance through the use of multiple financial instruments. For instance, project bonds offered the possibility of fusing public and private funding in tandem with European Investment Bank (EIB) contributions. Other advantages derived from centralising funding at EU level included simplification and a reduction in administrative burden.
Mr. Barosso also commented on the recently published Financial Transaction Tax (FTT) proposal. Reviewing the many state contributions to ailing finanacial institutions throughout the economic crisis, Mr. Barosso argued it was appropriate for financial entities to make a positive contribution towards the restoration of growth. Such a contribution would reduce the burden on national governments, demonstrate fairness and responsibility and increase the transparency of financial activities. The current budgetary system was not sustainable and the proposed lump sum reduction would simplify the process considerably.
In his closing remarks, Mr. Barosso acknowledged that matters surrounding the future direction of the EU budget were very sensitive-both politically and technically. Many months of preparation involving the Commission and the European Parliament had produced in Mr. Barosso’s words a document that offered a “sound basis for discussion”. He argued that the decisions taken now will shape the future of Europe, and thus, it was imperative to achieve consensus to spur growth and exit the current crisis. Acknowledging the deeper involvement of national parliaments in scrutinising the EU budgetary process, Mr. Barosso requested that parliamentarians “make the case for Europe”. He railed against the politics of narrow nationalism and decried populist and incorrect characterisations of monies disappearing into a black hole in Brussels. Instead, funds would be allocated to research and development and fostering employment and growth in the SME sector. To achieve these objectives, Mr Barosso issued a clarion call for a “partnership for progress” and the 2014-2020 financial framework represented one step in the completion of this task.
Mr. Jerzy Buzek, President of the European Parliament, also supported closer european economic co-ordination in relation to the financing of the Union’s policy objectives. Mr. Buzek stated that the idea of arranging this conference originated from the European Parliament’s consideration of the 2010 EU Budget. The Parliament was keen to explore the long-term perspective on how the EU budget is financed beyond 2013. The Parliament has accquired new powers in the budgetary sphere following the adoption of the Lisbon Treaty.Article 320.4 specifically provides for the inclusion of the European Parliament in the Multiannual Financial Framework discussions from the outset. President Buzek emphasised the importance of this Treaty change as it effectively places the Parliament on an equal footing with the Commission in terms of formulating the future budgetary strategy.
Mr. Buzek proceeded to pose four key questions to the conference delegates. Firstly, he asked: Why a common budget? Mr Buzek outlined five key reasons for the necessity of maintaining and increasing the size of the budget. He argued that the EU is widely perceived as an economic powerhouse but is similtaneously represented as a political dwarf. The Community and its linkages to the periephery through the various neighbourhood policies require further support. Equally, the EU budget provides value for money. 94.5 % of the EU budget is directly spent on investment initiatives. Administrative costs are relatively small, accounting for 4.4% of the overall spend. Also, the EU budget can lessen the financial pressures of individual member states. President Buzek labelled this benefit as “subsidiarity in reverse” cliaming that some problems are best resolved centrally at EU level. This idea of collective contributions generating a maximum return underpinned the “added value” concept outlined in detail in the Financial Framework document.
The continued prosperity of the individual members states depends on policies pursued at European level. Previous expenditure supporting the single market typified the positive results that can accrue from the single largest global economic market. As with the past, the EU will utilise future budgetary funds in job creation, regaining competitiveness and developing an integrated infrastructure network to assist the completion of the single market. As an example, President Buzek cited the €30bn increase in the budget allocation to Research and Development in the 2014-2020 budgetary timeframe.
Mr. Buzek stated that the Parliament’s proposed 5% increase in the EU budget represented a modest investment and will not achieve all of the Union’s plans. He asked delegates “to think forward” in terms of the the long-term financing of the EU and reflected that the EU budget today is relatively lower than it was twenty years ago. In his closing remarks, Mr. Buzek acknowledged the unique climate in which the budgetary discussions were taking place. EU taxpayers were enduring tremendous difficulties as austerity and recession gripped most european economies. However, the time had arrived to overcome the prevailing pessimism and to make decisions. To this extent, he supported a “budget of hope” over a “budget of fear” that harboured dreams for a brave, consistent and unified Europe of the future.
Mr Donald Tusk, Prime Minister of Poland, focused on Europe regaining its competitiveness over the next 15 years. The Multiannual Financial Framework would shape the form of the community over the next 10 years and could help restore confidence and economic growth. He specifically mentioned the three policy fields that lay at the heart of the future EU-
(1)Cohesion Policy
(2)Common Agricultural Policy and
(3)European Neighbourhood policy
It was vital that the people’s representatives, through the national parliaments, participated in these budgetary discussions as the decisions taken will affect all EU citizens in five years time. He noted the “increase in own resources” element of the MFF had generated some controversy but he argued that the support of national parliaments could help copperfasten support and legitimise the proposal. Mr Tusk accepted that various parties supported a reduction in the EU budget but he differed in this respect. In a time of crisis, the EU, he argued, should enhance its instruments of solidarity-not weaken it.He cited Poland as a positive example. Poland had largely avoided the worst aspects of the economic crisis thanks to the transfer of EU funds. The EU budget may only account for 2% of the total allocation but its impact is immeasureable.
Prime Minister Tusk also referred to synergies between the EU budget and member states budgets. Serious challenges confronted Europe and it was important to coordinate resources in tackling present difficulties. Far from retreating, Mr. Tusk deemed that the centrality of national parliaments had increased. National Parliament’s were best placed to determine priority spending in the next financial framework. Completion of the single market will be the litmus test for the success or otherwise of the MFF. Economic growth will only arise if Europe continues to invest in infrastructure and upskill its citizens to particpate in future labour processes. In this regard, common financing will lead to greater efficencies and it will be cheaper to construct projects if we use EU funds. Finally, Mr Tusk stated that there should be “no taboos” in this budget debate. Delegates should speak frankly and honestly. The implications in failing to address the current crisis were too stark to contemplate. The EU has to consider all options but ultimately will have to speak with one voice. Echoing sentiments prevalent in Polish politics, Mr. Tusk praised unity and argued the greatest european attribute is solidarity amongst member states. The future of the EU, no less, is at stake.
First Plenary Session: The big issues in the next MFF
Panel: Mr. Janusz Lewandowski, Member of the European Commission, Ms. Jutta Haug, Vice-Chair, Budgets Committee, European Parliament, Mr. Eniko Gyori, Minister of State for EU Affairs-Hungary and Mr. Paulo Mota Pinto, Chairman of the European Affairs Committee of the Assembleia da República-Portugal
Mr. Janusz Lewandowski made the first contribution on this panel discussion. Mr. Lewandowski emphasised the diverse elements of the MFF. It is too simplistic to merely interptret the MFF as a financial construct. The effects of the MFFwill impact on a much broader canvass and the social and political context of the debate should not be lost. Moreover, the present MFF discussion is important, in that, it is the first time that the full context of enlargement is enumerated. Summarising the Commission’s proposal, Mr Lewandowski characteristed its content as “..more Europe with the same money but more intelligent spending..”. The MFF spending projection had been calculated on the 2013 income level multiplied by the rate of inflation. This was the calculation that underpinned the entire philosophy of the budget.
Mr. Lewandowski proceeded to identify the main highlights and beneficiaries of the proposal. Freezes on the Common Agricultural policy would result in a shift of resources to poorer farmers. Similarly, the “Connecting Europe” infrastructure programme would transfer resources to poorer regions. Attracting private investment featured prominently in the Commission’s thinking. Private sector contributions would increase by 300% in infrastructure, 68% in education and 20% in the external relations portfolio. In sum, Mr Lewandowski viewed the MFF proposal in positive terms as a necessary precondition to foster more dynamic and sustainable growth.
Ms. Jutta Haug informed delegates that the Parliament had adopted the MFF proposal in plenary and by more than two-thirds. The Parliament had achieved this in the face of enormous challenges. The many obstacles in the path of renewed economic growth required a pan-european response. Ms. Haug reflected the wider Parliament belief that “we need more Europe-not less Europe”. She re-iterated that all of the EU policies included in the EU2020 initiative must be implemented. To do this, resources at both national and EU level would have to merge together. In particular, significant additional resources should be distributed to the SME sector and research and development “must be stepped up”.
Ms. Haug stated that the Parliament had set a far more ambitious investment programme for the MFF. The European Parliament does not believe that the EU budget can be frozen at 2013 levels. Instead, the Parliament has argued for a benchmark increase of 5% in the EU budget.She confirmed that the Council opposed this increase but, in return, the Parliament had asked the Council to itemise the projects that should be withdrawn from the MFF due to insufficent funds. The Parliament to date had adopted 177 paragraphs of the MFF, including 6-10 new paragraphs. The Parliament, in its appraisal, had clearly advocated a preference for an “own resources” system. Transfers from Member States were deemed unsatisfactory and the Parliament vehemently opposes the continuation of a system of rebates.
Ms. Eneto Gyori, Minister of State for EU affairs in Hungary, said austerity should not be used as an excuse for curtailing the EU budget. The MFF fulfilled an important role in providing a framework to achieve the common priorities of member states. The “addded value” concept outlined in the MFF proposal was particularly interesting. However, Ms Gyorki relayed some concerns surrounding the cohesion measures. She feared that the “Connecting Europe” policy favoured developed regions over poorer areas. Less developed regions were growing from a lower base and the bulk of funding should be allocated to these regions to accellerate convergence. Regarding agriculture, Ms. Gyorki welcomed the emphasis placed on food supply and food quality through a sustainable environmental model. The Common Agricultural Policy demonstrated the best example of clear added-value where community financing could make significant savings at national level. Finally, Ms. Gyorki addressed the significance of the EU budget. There is more to the MFF than money. Its existence symbolised solidarity among member states where collective decision-making and collective pooling exemplified the ethos of the EU founding fathers.
Mr. Paulo Mota Pinto, Chairman of the Portugueese EU Affairs Committee, argued that the MFF had to be seen as central to the success of the EU 2020 programme. Moreover, in the present time of crisis, the EU 2020 objectives assumed added importance as a source of growth. Cohesion policy in current circumstances was essential and it should retain the present level of funding. Cohesion policy was truly european in its configuration and had successfully delivered opportunities to citizens in all parts of Europe. Mr Pinto also endorsed the “own revenue” aspect of the MFF proposal. Transparency was a major attraction of the concept and he criticised objections as unjust. In sum, Mr. Pinto believed the Commission proposal represented a “good opening position” from which delegates could debate and widen the discussion.
Conference Debate-Contribution from Delegates
Ms. Flo Glucas (UK):stressed the importance of cohesion funds in the context of urban renewal. Citing Liverpool as an example, Ms. Glukes said that cohesion funds had contributed significantly to urban regeneraton. The receipt of cohesion funds meant that Liverpool could also attract high-level private finance. This had resulted in the construction of a retail core providing in excess of 2000 jobs to local inhabitants. In addition, the Bill Gates foundation had agreed to match EU funds allocated to the School of Tropical Medicine in Liverpool which has directly and indirectly supported approximately 54,000 jobs. Ms. Glukes argued that the answers to many of the current economic problems could be found in cohesion funding and requested that the EU maintain these levels of funding.
Mr. Juan Manuel De Welta (Spain): said he had attended the conference to bring a clear message that the EU budget had to be defended. Contrary to some views undermining the EU budget, Mr. De Weltahad seen many positives accruing from EU funding. The EU budget generally acts as a catalyst for growth and an increase in innovation funding would undoubtedly replicate a growth in research intensive industries throughout Europe.