FINANCES

The case for a larger EU budget is strong, and is well made by the Commission and Parliament in the current negotiations on the next multi-annual financial framework (MFF) for 2021-27. Higher EU spending must be linked to reform of the financial system which, essentially unchanged since 1988, is opaque, unjust and inefficient. Even if the Commission’s target of increasing commitments to 1.11% GNI is achieved, the EU budget will remain well below the size commensurate with a mature federal system [73].

In any case, the European Development Fund should be incorporated into the EU budget at the time of the next MFF in 2028. This transfer would allow for the better coordination of overseas aid with the Union’s other common policies, including immigration, as well as for stronger parliamentary control.   

The Commission’s proposals to introduce new sources of revenue are especially welcome, and conform to the principle that fiscal income directly created by EU policies should accrue to the EU budget [74].  These are not EU taxes, however: the EU does not have the competence to levy taxes, but only to harmonise the way national taxes are applied [75].  The Spinelli Group would go further, therefore, and grant the EU Treasury that power to raise both direct and indirect taxation. As already mentioned, the current budget fixing rules, grounded in unanimity, should be replaced by an organic law. The European Parliament must acquire full powers of co-decision with the Council over all financial decisions, including the raising of revenue. 

The euro area needs its own fiscal capacity, to be included as a separate section in the general EU budget. Such a supplementary budget will grow over time into an instrument capable of contributing to macro-economic stabilisation. Where EU rules for fiscal discipline restrict the ability of states to invest in public goods, it makes every sense for social and capital investment by the EU level to act as a counterweight [76].  Pan-European infrastructure assists growth in productivity, and real added value can be achieved at the EU level in sectors such as R&D, energy, defence, space and cybersecurity. Investment at EU level will be managed by the Treasury, installed within the Commission, equipped to borrow and lend in the interests of financial stability, social cohesion, sustainable economic growth and reduced regional imbalances. New fiscal rules will be needed for the Treasury. 

To lessen the possibility of a breakdown in the annual budget process, the final stage of the procedure should be amended [77].  In the event of no agreement being reached in the conciliation committee, Parliament could confirm its amendments by a high qualified majority. The budget will be adopted unless the Council, within a time limit, votes against – thereby obliging the Commission to submit a new draft budget. This change returns to the pre-Lisbon formula whereby both Parliament and Council had to take equal responsibility for the rejection of the budget [78].  

[73] The MacDougall Report in 1977 recommended that EMU would require the support of an EU budget of at least 5% GNP. 
[74] The Commission proposes three new own resources from a Common Consolidated Corporate Tax Base, the carbon emissions trading scheme and a scheme to reduce plastic packaging. 
[75] Article 113 TFEU.[76] The Commission is proposing a European Investment Stabilisation Function of 0.2% GNI. 
[77] Article 314(8) TFEU.
[78] In the case of a breakdown, the system of advancing one-twelfth of last year’s budget should be rendered adjustable for inflation (Article 315 TFEU). 

 

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