The European Commission's draft budget review, a copy of which was obtained by EurActiv, is raising eyebrows in EU circles.
The proposal seeks a "root and branch reform" of the 130 billion euro annual budget, which currently devotes 45% of spending to agricultural policies.
It proposes redirecting funds to policies which address key challenges such as globalisation and suggests more flexibility in allocating funds, with the current system considered to be too "rigid" and seen as leading to "inertia".
It also suggests more fairness, with member states benefiting from redistributive policies - like Eastern European countries - contributing more to the EU budget (EurActiv 23/10/09).
Regional funding, the budget's second largest area, which has so far focused on helping lower-income countries, should be rebalanced to take into account internal differences within countries, the draft says. "Concretely, member states with per capita income above the convergence threshold could qualify for increased competitiveness spending, if regional income disparities within the country were particularly large," the document reads.
But national governments would have more say in defining priorities, combining the current decentralised bottom-up approach to regional spending with "centralised spending based on strong European guidelines".
Moreover, those regional funds would be made more "performance-oriented", with stronger evaluation mechanisms and payments made on the basis of "measurable objectives".
Three 'priority axes'
The review wants to put European added value "at the heart of the EU budget," saying a "new consensus" on EU spending should be built around "three priority axes":
- Sustainable growth and jobs, "accelerating change towards a knowledge-based low-carbon economy" through research, skills and "enhancing competitiveness through innovation";
- Climate and energy, "leveraging the technological revolution needed in terms of energy efficiency and supply […] transport infrastructure and other sustainable policies, notably with regard to natural resources," and;
- A global Europe, "promoting security, prosperity and solidarity throughout the world with a focus on fighting poverty, migration management and strengthening cooperation with the European neighbourhood".
The budget review particularly focuses on the EU's external relations given the upcoming entry into force of the Lisbon Treaty, which will give the Union a permanent president and foreign affairs chief. As a result, "a larger share of the budget will be devoted" to promoting the EU's interests in the world.
Reforming the Common Agricultural Policy
The most controversial element of the reform is a proposal to redirect spending on the Common Agricultural Policy (CAP), which currently represents some 45% of the EU's long term budget for 2007-2013.
Under the proposal, CAP money would be refocused, giving "larger responsibility" to member states, which would co-finance direct aid to farmers with national contributions.
The European Commission is eyeing such re-nationalisation of the CAP as a means of expanding its spending power to other areas. Worth €55 billion a year, farm policies absorb about 45% of the EU's 130 billion annual budget, making it the single biggest area of EU spending.
The budget proposal also foresees the elimination of VAT-based contributions to the EU budget, replacing this with "a new, policy-driven own resource". Such a resource would replace the current national contributions based on national income and would help resolve the 'juste retour' situation, whereby countries ask for a return proportionate to their initial investment, the Commission says.
One possibility would be to use monies raised by auctioning CO2 emissions permits under the EU's cap-and-trade scheme for greenhouse gases, which has been operating since 2005. Other possible resources include a charge on mobile text messages, a tax on financial transactions or levies related to aviation, such as a departure tax or a kerosene tax.
So-called "correction mechanisms" such as the British rebate on the budget should also be abolished, the document reads.