The Apollo Project
Liberal Ideas for the 21st Century
Tuesday, September 13, 2005
Mr Duff's complaint
by Jabez Clegg

Simon Titley gave a sympathetic hearing to Chris Davies on the conference motion on EU Finance. Now Liberal Democrat News carries a heartfelt article from Andrew Duff MEP.
Duff writes that "...conference will be asked to support maintaining a cap of 1% of GNI on EU spending, regardless of poltical purpose. Embarassingly, today's ceiling stands at 1.24%, and a cut of such savagery as the party's establishment proposes would mean the certain end of all EU social policy, regional development and R&D financing in the UK".
It is worth subjecting all this to scrutiny.
The cap/ceiling refered to is that provided by the EU's Own Resources Decision, setting the maximum amount that can be asked of the Member States. It is true that this stands presently at 1.24% of GNI.
Duff appears to imply that all the current cap is actually spent. This is not the case. Between the own resources cap and actual spending come a series of mechanisms that tend to reduce actual spending. As a result the 2004 Financial Perspective Headings for payments (limiting the amount the EU will actually spend on individual categories of expenditure) was set at 1.08% of EU GNI and 2005 headings at 1.06% of GNI.
But the annual budget was set at a lower figure (€105 billion), and, inevitably, not all the budget was spent. So final payments amounted to €100 billion in 2004. This (consults back of envelope) amounts to 0.97% of EU GNI.
Anyone involved with Structural Funds financing in the UK will be aware that many of the projects put forward for EU funding are put forward retrospectively: activities that were carried out without the promise of EU support are reclassified as Structural Funds spending. Why? Because the European Commision already finds it hard to spend all the money in the budget (and when they fail to spend it all, MEPs moan),
Reducing the cap on own resources to 1% would certainly make life more difficult for the Commission (which might actually become constrained by the budgetary framework) but would not necessarily lead to big real term cuts. It would require the Commission to develop much more flexible funding mechanisms. This would be welcome. In practice it is costly to receive EU funding, which comes with many strings in terms of procedures and accounting.
Duff claims that this would lead to the end of all R&D and Structural Funds spending in the UK. There does not seem to be any basis for the first argument. The UK is a reasonably large player in R&D and would continue to receive funding on any foreseeable distribution. The second argument, on Structural Funds spending, is more difficult to deal with, as it depends on all the subsidiary agreements made in the context of a budget deal. There is no correct answer at present.
The Commission's current proposals involve a great deal of Structural funds spending over the 2007-2013 period taking place in richer Member States, such as the UK. Liberal Democrats from Cornwall and the Highlands might appreciate this. But it would be in the best traditions of the party to support a reallocation of expenditure to focus it on the newer, poorer Member States. These could have a better deal even with a significantly smaller budget.
A final thought. Many of us are enthusiatic about the EU. That is seldom because of the way it spends money.
posted by Apollo Project @ 8:47 pm  
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"What is Liberalism?: I should say it means the acknowledgment in practical life of the truth that men are best governed who govern themselves; that the general sense of mankind, if left alone, will make for righteousness; that artificial privileges and restraints upon freedom, so far as they are not required in the interests of the community, are hurtful; and that the laws, while, of course, they cannot equalise conditions, can at least avoid aggravating inequalities, and ought to have for their object the securing to every man the best chance he can have of a good and useful life." C-B.

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