| 24 October 2010
Two questions: Does 140 billion euros seem like a lot of money to you? What
does the European Union do?
For the average girl in the street, the answers are presumably: Yes; and Don't
really know.
Certainly most people would be hard put to it to say how the EU spends that
much money every year, amounting it's true to only 1.2% of total member state
national income. Perhaps the average European citizen would hazard a guess that
quite a lot of money goes on agricultural support, although if you look at even
a detailed setting out of the EU's budget you won't find those words anywhere;
instead catchy phrases like 'environmental sustainability' and 'rural cohension'
are used to mask the gritty reality of paying French and Romanian farmers to
produce fruit that could be imported at half the price from poor African countries
where people are starving to death.
In fact, whereas the CAP once consumed 70% of the EU budget, that figure has
fallen now to between 30% and 40%, depending on how you classify expenditure
programs, although the total in money terms hasn't gone down all that much,
because overall EU spending has risen at a sharp pace. It's also true to say
that the balance of CAP spending has shifted towards the new, Eastern European
entrants and away from richer countries.
Perhaps many people would also hazard a guess that quite a bit of money goes
on 'bloated Eurocrats' and MEPs, and they would be right, in that administration
costs are EUR9bn this year, although again one wonders just how much is hidden
under other budgetary headings. Various administrative excrescences continue
unabated, such as the twice-monthly pilgrimage of the Parliament from Brussels
to Strasbourg, involving a baggage train of attendants, bureacrats, lackeys,
camp followers and files on a scale worthy of Napoleon's Grande Armée.
All of these reflections because the EU has this week floated a consultation
on how it is to finance itself after 2013 when the current budgetary deal runs
out. At present, more than 70% of the money comes from direct government contributions,
more or less in proportion to national income, and the remainder from a slice
of VAT receipts. It used to be the other way around, but has changed because
national contributions are seen to be 'fairer', although Mrs Thatcher didn't
think so, and argued forcibly (and successfully) for a rebate for the UK, the
first of a number of 'adjustments' that have been made to the formula over the
years.
The EU itself (meaning the Commission) would like to switch to an 'own resources'
basis, meaning that it would raise its money by imposing taxes directly. Laughably,
it gives as examples a tax on all EU flights, an EU corporate profits tax (presumably
based on the CCCTB), an EU VAT and, of course, that old war-horse, a Tobin (transactions)
tax on bank accounts.
But any major, structural change in the financing system would require a new
Treaty, and after the agony that was Lisbon no-one has got the stomach for that,
so in reality what will probably happen is some patching and mending of the
existing system. That way it can all be tied up during one of those famous all-night
bargaining sessions between finance ministers in which preparation and endurance
count for more than equity, and having the great advantage that the Parliament
can be kept out of the proceedings to a large extent.
Yes, the Parliament. Any consideration of the future of the EU has got to get
to grips with the democratic deficit that lies at the heart of the Union, and
in particular with that feeble talking shop on the rue de la Loi in Brussels,
whose barmy behaviour reflects its lack of democratic legitimacy, despite some
recent improvements. That of course is where the purposes and financing of the
Union ought to be thrashed out. And that is where, sadly, it won't happen, one
more time. Perhaps by 2020, when the next financing package runs out, something
will have been done about the Parliament. But I'm not holding my breath.
You have been reading an entry on the following blog:
Jeremy Hetherington-Gore Unleashed
Jeremy tackles the difficult issues head on!
Contact: jeremy@lowtax.net
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