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An EU budget fit for the 21st century?


By dxw


Stephen Tindale, Associate Fellow, Centre for European Reform, writes:

The future of the EU Budget is now under serious discussion in Brussels and member states capitals.  The Budget is not significant in macroeconomic terms only just over 1% of EU gross national income.  But it is highly politically significant; it always has been and is even more so in the current age of austerity.

Around 40% of the EU Budget is spent on the Common Agricultural Policy (CAP).  Following the Fischler reforms of 2003, the CAP is less bad than it was.  But that isnt setting the bar very high, and there is still need for major improvement.  Most of the CAP budget goes in Single Farm Payments, paid to farmers just for having land and the more land they have, the more money they get. CAP spending should be focused on rural development and public goods such as climate protection, with Single Farm Payments phased out.

Around 37% of the EU Budget goes on Cohesion funds.  These are very important for economic development in poorer member states, and also an essential part of the rationale for European co-operation.  Redistribution from rich to poor is fundamental to European civilisation.   This needs to take place within member states as well as between them.  But there is no need for money being transferred from rich parts of a country to poorer parts of the same country to go via Brussels.

The third area of significant EU expenditure is research and innovation.  This is crucial, and should be increased.  It should be made less bureaucratic, however.  At the moment applicants have to say in advance how many hours of work particular projects would take.  Most of us arent clever enough to know how long research will take until weve actually done it.

An area where the EU currently spends little, and needs to spend more, is climate and energy.  The EU has ambitious targets the EU being good at targets and some quite good regulations (though these must be strengthened).  But energy efficiency and the transition to a low carbon economy require investment.  Much will come from the private sector, and most public funding from national governments, but some must come from the EU; for example, cross-border infrastructure.  The European Commission is publishing proposals for EU Project Bonds to raise money for such projects.  These should be supported, and not rejected on grounds of subsidiarity.  They would be bonds for agreed European projects, not bonds simply to fill Commission coffers.

Since we live in an age of austerity, we must also find some bits of spending to cut.  Top of the list should be any further subsidy for nuclear fusion.  I have worked on energy policy for 22 years.  In 1989 we were told that nuclear fusion was 30 years away.  22 years and several billion euros later, we are now told that it is 30 years away.  Nuclear power is, as Angela Merkel has said, a necessary low-carbon bridge technology until we can be 100% reliant on renewables.  Nuclear fusion is not needed for this bridge there is enough uranium to last the forty or fifty years it will take to cross.

Stephen Tindale is a consultant on climate and energy policy.  He also writes for the Climate Answers website.