The European Parliament’s Committee on Budgets has launched a debate about the next Multiannual Financial Framework (MFF) the day before and the morning of the hearing (see EUROPE 13520/4) of the Commissioner-designate for the Budget, Piotr Serafin, on Thursday 7 November.
MEPs will be outlining a proposal over the next few months, leading up to the publication of their own-initiative report, which is scheduled for February 2025. They hope that the European Commission will draw inspiration from this before publishing its proposal for the MFF.
Set to increase tenfold, the EU’s long-term budget will have to cover, among other things, the repayment of EU debts linked to the European Recovery Plan, the construction of European defences, and adaptation to climate change.
At this current time, marked by “challenges and uncertainties”, the European Parliament’s Committee on Budgets invited specialists from the European Court of Auditors, the European Investment Bank, the College of Europe, the Bruegel Institute and theJacques Delors Institute, among others, to share their analyses. Agence Europe has reviewed the main issues, collating them in a series of key words.
“Performance”. This will be at the heart of a long-term budget that is reorganised around the principle of ‘money for reforms’. Furthermore, the budget will also focus on achieving political objectives rather than managing expenditure.
Inspired by the Recovery and Resilience Facility (RRF), this model must “pursue policies that bring added value to Europe”, with the advantage that “Member States guarantee the results”, explained Johannes Hahn, in one of his last speeches as European Commissioner for Budget and Administration, on 6 November.
“Simplification”. The EU wants to reduce the number of budget programmes and last month, the idea was unveiled to reduce them to 27 national plans for each Member State (see EUROPE 13498/11).
The fewer there are, “the better”, said Johannes Hahn. In line with this objective, the European Investment Bank told MEPs that “any new action we take under the next Multiannual Financial Framework should really focus on simplification, optimisation and the consolidation of mandates. With three overarching mandates, we could unlock €50 billion in additional investment”. The reasons put forward for such changes are the savings that could be made, as well as reducing the administrative burden for beneficiaries and making the EU budget more efficient.
“Flexibility”. The future Commissioner for Budget and Administration, Piotr Serafin, confirmed in his written answers (see EUROPE 13511/18) that the annual budget procedure must be “more responsive to changing needs”, since the lack of flexibility in the MFF has been the “main lesson from the last four years”.
Since exceptional and unforeseen circumstances may become the norm, the proposed solution is to facilitate the transfer of resources within the MFF. By way of response, Benedicta Marzinotto, from the College of Europe, mentioned two solutions: intrinsic flexibility and the use of borrowing capacity “in the budget”, for greater control.
“Mainstreaming”. The EU incorporates cross-cutting policy objectives throughout the EU budget to guarantee results. This practice “will undoubtedly be repeated”, said Iain Begg of the London School of Economics. With varying degrees of effectiveness, this is already the case in the current MFF, with climate mainstreaming, gender equality and sustainable development goals, said the academic.
He nevertheless warns that the addition of new political priorities could complicate the achievement of results, especially if they defend interests that are sometimes in conflict with each other, as is the case with competitiveness and the social dimension, both of which are defended in the political guidelines of the European Commission’s new mandate.
“Traceability”. Because mainstreaming is about societal transformation, “it is generally harder to link to specific budgetary outlays, especially with multiple sources of funding”, says Iain Begg. Establishing monitoring methods based on the experience of the MFF, in particular, will prove necessary, even if “assessing mainstreaming means looking at longer-term results and societal impacts”, warns the academic.
According to Francesco Corti of the Centre for European Policy Studies, performance monitoring will require the “definition of indicators clearly linked to the funding objectives” and the provision of interoperable IT solutions. These recommendations are inspired by the limitations of the MFF, which assigns budgetary control of EU spending to the Member States. In particular, the European Court of Auditors reminded MEPs that the milestones set out in the MFF were difficult to assess.
“Transparency”. “If all our programmes were rolled into one, would there be sufficient democratic oversight?” was the question asked by Damian Boeselager (Greens/EFA, German) to Tony Murphy of the ECA. What role will the European Parliament play if the long-term budget is more flexible?
Iain Begg and Francesco Corti both advocate the creation of a Parliamentary Budget Office, which would, for example, give the European Parliament access to the list of beneficiaries of the EU budget. In their view, the European Parliament’s involvement in the governance of external assigned revenue should be strengthened. The European Parliament would also be consulted in the event of a transfer of resources within the MFF, but this would require a revision of the Financial Regulation.
“Own resources”. Discussions on new own resources are “typical”, on the eve of a new MFF, according to Michael Thöne, from the University of Cologne. But in order to become the “Investment Commission” announced by Ursula von der Leyen, the European Commission will, more than ever, be seeking to have new regulations adopted.
Three new own resources are awaiting approval by the EU Council (see EUROPE 13289/10). They are based on revenues derived from the Emissions Trading System (ETS), the EU Carbon Border Adjustment Mechanism (CBAM) and statistics on company profits.
“The longest compilation of ideas for new own resources comes from the European Parliament’s resolution of 10 May 2023 on own resources (see EUROPE 13179/15) that depicts six decades of work on this issue”, said Michael Thöne. This basket of own resources included the taxation of financial transactions and cryptocurrencies, a levy on major digital content providers and own resources based on statistics (gender pay gap, bio-waste recycling rate).
However, according to Michael Thöne, “these little niches” do not generate “enough revenue”. The researcher is of the opinion that a European income tax surcharge and a European VAT percentage point would be more effective, as these could generate up to €60 billion a year, according to him.
Finally, debt could be a fully-fledged pillar of the future MFF’s revenue. Michael Thöne points out that increased debt financing of public goods “can only be justified if it generates macroeconomic returns – i.e. if it obeys the famous ‘golden rule’”, which goes beyond the individual profitability of each project to include investment in public infrastructure, climate protection and the green transition, as well as investments in digital and technological sovereignty.
Read the presentations by specialists invited by the European Parliament Committee on Budgets: https://aeur.eu/f/e8z (Original version in French by Florent Servia)