The Commission’s proposals for the EU budget’s next Financial Framework (MFF) for 2014-2020 can be found here. Judged against the parameters I proposed to evaluate the MFF proposal from an Irish perspective, then the proposal is as good as we could have hoped for. RTE reported that “The Government has given a cautious response to the European Commission’s proposed 2014 to 2020 budget” which, given that this is the start of a difficult set of negotiations, is about as close to saying “we are delighted” as you are likely to get.
We can return to the financing side of the budget another day, including the proposals for new sources of financing the budget and the complex issue of rebates used to adjust the net contributions of some member states, These will be addressed in greater detail in the promised Commission draft for an own resources decision which has not yet been published.
On the spending side, the positive features from an Irish perspective are an overall budget which will see minimal growth over the period to 2020 (despite the protestations of the British press), the maintenance of the CAP budget in nominal terms, a formula for redistributing CAP Pillar 1 spending on the Single Farm Payment which will leave the Irish share untouched, and an increased budget for research and development, including a new ring-fenced element for agricultural and food research. In addition, the Globalisation Fund will be opened to farmers (opening the way for compensation for Irish agriculture in the event of a Mercosur trade deal).
From a communications point of view, the launch of the proposal was a bit of a disaster, with conflicting views over what the figures mean for the growth in EU spending. In part, this reflects a lack of clarity over differences between commitment and payment appropriations, but also confusion over the currency units in which the MFF is presented and the time periods being compared.
A common error is to ignore the fact that the figures for the 2007-2013 MFF are presented in current prices and those for the proposed 2014-2020 MFF in constant 2011 prices. For example, the New York Times writes in its report:
In all, the European Union would spend about €971.5 billion from 2014 to 2020 — though, when all spending pledges made in that time period are included, the figure would reach more than €1 trillion, crossing that psychologically important threshold. The respective figures for the last period, 2007-2013, were €925.5 billion and €975.77 billion, though the proportion of the bloc’s gross national income would remain the same.
The difference between €925.5 bn and €971.5 bn is the 5% increase quoted in media reports. However, the €925.5 billion in payment appropriations in current prices from 2007-13 cannot be directly compared to the proposed €971.5 billion in 2011 prices for 2014-20. The spending in the years 2007-10 in current prices would have to be inflated to 2011 prices and the spending in 2012 and 2013 would have to be deflated to make the appropriate comparison. While I have not done the figures, on balance the adjustments may narrow the differences between the two periods. On the other hand, some spending included in the current MFF is proposed to be funded outside the 2014-2020 MFF and should also be taken into account.
In terms of commitment appropriations, the increase proposed is from €145.7 billion in 2013 to €150.7 billion in 2020, both in 2011 prices, which is an increase of 3.5%.
Thus there will still be a small increase in real terms, contrary to the call from five member states that the budget should be frozen in real terms. Though as a share of the EU’s total GNI, the proposal would continue the downward trend in the share of the EU budget (from 1.06% to 1.00% in payment appropriations terms).
Whether the Commission proposal is the optimal budget from an EU perspective is, of course, a different question. Despite the rhetoric, the proposal does not represent a radical rethinking of EU spending priorities, with only a minor fall projected for the share of the agricultural budget. However, the Commission had consulted extensively with member states prior to its publication. It was determined to avoid the fate of its proposed MFF on the last occasion when it was simply ignored by the Council of Ministers in the course of their negotiations. It is reasonable to assume that the proposal represents the approximate centre of gravity of member state positions and the views of the European Parliament. But the wide variation in views around that centre of gravity means that there is a long way to go before the new MFF is agreed.