House of Commons - European Scrutiny

Select Committee on European Scrutiny Fifteenth Report

Summary

This Report examines two EU documents: the Commission's proposals for a new Financial Perspective for the EU and its proposals for reform of regional and cohesion funding.

The new Financial Perspective will determine the overall revenue and expenditure of the EU and the expenditure on each category of EU activity for the seven years from 2007 to 2013. It will also largely determine the net contribution to the EU of each Member State, and the future of the UK's budget rebate. As well as determining the shape of the EU's finances it will set the Commission's policy agenda. It is therefore one of the most crucial forthcoming EU decisions.

The Report examines in turn the Commission's priorities for the enlarged EU, the proposed overall level of expenditure, how the Commission plans to ensure the objectives are met, the new structure of the Financial Perspective and new ways of providing flexibility within the overall framework, and proposals for revenue raising and for a system of budget rebates.

The central aspect of the Financial Perspective is the overall level of expenditure. Widely differing figures have already been floated, from the 1% of gross national income proposed by the UK and certain other Member States to the 1.24% proposed by the Commission.

The two largest areas of expenditure are the Common Agricultural Policy, on which spending up to 2013 has largely been determined already, and regional and cohesion policy. However, the Commission's proposals include many proposals for increased spending and for significant new policies or changes in policies. The Committee requests the Government's views on some of these, such as the proposed European Border Guard Corps and increased spending on security-related research.

The Commission will present proposals later on revenue, but has set out options for "a relatively major and visible tax resource payable by EU citizens and/or economic operators" to replace the existing system. It also proposes a system of budget rebates which would replace the UK rebate and be available to any Member State making an excessive budgetary contribution, but (unlike the UK rebate) this would be subject to a threshold and all Member States would have to contribute to it. The UK Government firmly opposes this proposal.

The overall level of funding and the funding of regional and cohesion policies will be closely linked. The second document examined here presents the Commission's proposals for regional and cohesion funding for 2007 to 2013, together with an assessment of the impact of such funding hitherto.

For the future the Commission proposes three priorities: assistance for regions with per capita GDP of less than 75% of the EU average, together with transitional funding for regions which qualified in that respect before enlargement but will no longer do so after enlargement (together accounting for 78% of the funding); promotion of regional competitiveness and employment, through help for urban areas in decline and disadvantaged rural areas and through national programmes to assist labour market reform and strengthen social inclusion (together accounting for 18% of the budget); and support for inter-regional, cross-border and transnational co-operation to promote joint solutions to common problems (accounting for 4% of the funding). Total spending would be €336.3 billion in the seven years, compared with €257 in the preceding seven years. In the UK only Cornwall and the Isles of Scilly would be likely to qualify in the first priority area, but some other regions would receive transitional funding.

The UK Government argues that the priority should be the poorer Member States, particularly the new ones, whereas under the Commission's proposals about 50% of the funding would go to the existing Member States. It adds that the proposals do not focus sufficiently on the need to add value at EU level.

The Committee notes that the two key questions are the overall amount of regional and cohesion funding for 2007-2013 and what proportion should be available to the more prosperous Member States (and, following from that, whether it should be left to those Member States to finance and deliver their own regional policies). It has asked the Government for an assessment of the likely impact of the Commission's proposals on the resources available for UK domestic assistance to the regions and of how the impact of the Commission's proposals would compare with that of the Government's preferred approach.

The Committee recommends that the two documents be debated together on the Floor of the House, but plans to gather further evidence before such a debate takes place.



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