Posted on Sep 11, 2017
The Brexit talks between the United Kingdom and the EU are focussing European politicians’ attention on the reality that the UK’s contributions will come to an end, and that there will be a reduction in the EU’s total budget available post March 2019, writes Karine Iffour.
The UK currently contributes between €10-12 billion a year to the EU’s budget, and there will need accordingly to be small cuts to the EU’s budget from 2019. The European Commission’s Budget Commissioner Günther Oettinger has said that he will not rule out cuts in any EU programme, but he is committed to minimise the impact as far as possible on research and innovation and on cohesion.
Although the impact of Brexit will not be felt on the EU’s budget until 2019, the question of how to fill the future shortfall left by the U.K.’s departure is already having an impact on this year’s review of the EU’s budget.
The EU’s divorce settlement demands for Britain leaving the EU amount to £90 billion; the figure has been rejected by the UK and is under negotiation. As the haggling over the exact settlement figure progresses, both sides will explore whether there may be an interim deal on the UK’s budget responsibilities for specific EU wide programmes during a transitional period. One possible scenario would be for the UK to stay within the EU’s Multi-Annual Financial Framework (MAFF) for a transitional period of 2-3 years, with payments of budgetary contributions spread over that period.
This is a controversial idea in the UK where there is a strong caucus that is hostile to anything but a clean break.
As might be expected, the British tabloid press is ridiculing certain specific EU expenditure items, particularly programmes for environmental and aid expenditure, and focussing on sensational stories designed to fan the flames of anti-EU sentiment in the country.
There are however very serious and controversial consequences at stake for programmes dedicated to the EU’s future economic growth as the priorities for the allocation of future budgets to programmes such as the €10 billion Horizon 2020 programme and the Connecting Europe Facility come under scrutiny.
Improving the competitiveness of enterprises is essential if the EU is to deliver on its Europe 2020 strategic priorities of smart, sustainable and inclusive growth. SMEs are the backbone of the EU’s economy and a key driver for growth, innovation and employment. A priority of the 2014-2020 Multi-annual Financial Framework must remain to keep open EU programmes to SMEs. In this respect the budget for research is crucial if cohesion policies are to have the maximum impact.
Against this background, the annual EU Budget process now under way will decide in two months’ time on a total budget for 2018. The Council adopted a position on the Commission’s proposals for the 2018 EU budget on 4th September. The Council counter-proposal foresees €158.9 billion in commitments and €144.4 billion in payments.
But the Council’s counter-proposal to the Commission’s budget represents an alarming cut in the Commission’s EU 2018 budget of € 1.7 billion; the cuts are proposed especially in the areas of Research and Infrastructure programmes. The Council also proposes to reduce the budget for the Connecting Europe Facility (CEF), and to transfer a significant share of the Horizon 2020 budget to the European Fund for Strategic Investments (EFSI). The Council’s position is to seek cuts from these expenditure headings without providing proper justification. Both programmes are absolutely vital to assisting SMEs in Europe and to maintain entrepreneurial growth in the EU. The role of EFSI is also controversial, as historically 91% of their beneficiaries have come from only 15 of the EU’s Member States, leading to an unequal distribution of infrastructure across the EU, and impacting negatively on cohesion.
Both the Commission’s original budget proposal, and the Council’s position are now with the European Parliament, and the next step in the annual budget process will be for the European Parliament to adopt amendments to the Council's position by 26 October. A three-week conciliation period between the institutions will then begin on 31 October, with a view to reaching a joint position between the Council and the Parliament on the 2018 budget by 20 November. The Parliament’s Rapporteur has said that he does not intend to compromise with the Council on cuts in EU funded programmes, nor on the Horizon 2020 budget to be allocated to the European Fund for Strategic Investments (EFSI).
The battle lines between the institutions are drawn. The proposal from the European Commission had originally increased the amount allocated to the Horizon 2020 research and innovation programme and to the CEF programme (Connecting Europe Facility), designed to improve transport, energy & digital networks in Europe. I strongly support Commissioner Moedas’s statement that research and innovation are key factors to increase wealth, and urge the Council to keep these as key priorities to ensure an effective jobs and growth driven budget.
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