The outcome of the EU budget summit last week was not as bad as it could have been. Cameron did not wield his veto, as he was threatening to just a few days before. And while EU Leaders did not reach a final agreement, progress was made towards reaching a compromise at the next Council meeting in early 2013. Crucially, the UK was able to drum up support for a real-terms freeze amongst like-minded member states such as Germany, the Netherlands and Sweden. This is in stark contrast to our self-imposed isolation following Cameron’s blocking of EU-wide treaty change last December.
However, Cameron’s focus on preventing a rise in spending is side-lining the wider issue of EU budget reform. This has been compounded by Labour’s unholy alliance with Tory Eurosceptics in the Commons in calling for a real-terms cut in the budget, a position they knew was hopelessly unrealistic. As a result, the debate has tended to centre on the size of the EU budget, rather than what it is actually spent on.
Currently, over 40% of the EU budget is still being spent on the Common Agricultural Policy. The Commission’s budget proposal would trim this down to 30% by 2020, while investing more in research and innovation, modern infrastructure, the EU’s external relations and the fight against crime, terrorism and irregular migration. These are areas where significant savings can be made through avoiding duplication of national spending. In addition, the proposed increase in EU structural funds will enable long-term infrastructure projects, often in poorer regions, which would otherwise be neglected by national governments.
Reforming the EU budget could reap huge benefits for the UK, especially by increasing the overall money spent in areas such as research and renewable energy where we already receive a disproportionately large amount of funding. In fact, a major overhaul of the budget could reduce the UK’s net contribution by far more than a real-terms cut.
Cameron is right to call for a cut in the EU’s administrative costs, especially by reducing the salary of highly paid Brussels bureaucrats. Yet this would be more a symbolic gesture than a major reform, and would generate a fraction of the required savings. The EU’s administrative expenses are just 6% of the total budget, and only around half of this 6% is spent on salaries.
More puzzling is Cameron’s proposal for a major cut in the new Connecting Europe Facility. This instrument is set to invest up to 50 billion euros in modern infrastructure such as high-speed broadband, cloud computing, and cross-border energy and transport networks. This will help ensure the EU remains competitive in the 21stcentury, and will also help deepen the single market in energy and services, a longstanding objective of the UK. Similarly, Cameron is calling for cuts in security, justice and external spending, areas where taxpayers’ money is saved by pooling at the EU level.
Cameron’s insistence on achieving a real-terms freeze risks jeopardising the EU’s moves towards a more modern, efficient and growth-oriented budget. Wary of alienating key member states such as Poland or France, he has made only limited demands to cut the bulk of agricultural subsidies or EU structural funds, and has instead proposed cutting some of the more useful aspects of EU spending. As a result, we risk cutting the EU budget in the very areas where it is most likely to contribute to Europe’s future prosperity and security.