The EU budget: no solidarity during austerity | FT Alphaville

The EU budget: no solidarity during austerity

Earlier this week the European Commission’s proposed a whooping 6.8 per cent increase for next year’s EU budget. Cue outrage and fury. Finance minsters around Europe stamped their feet while their assistants dialled journalists to explain just how outraged and furious they were.

This is how the FT reported it (emphasis ours):

The UK Treasury accused the commission of “wilfully ignoring” member states’ calls for restraint. “It is unacceptable for the commission to propose an inflation-busting budget increase when governments across Europe are making difficult decisions on public spending,” said Mark Hoban, the Treasury minister.

A French government spokesperson dismissed the proposal as “impossible, unjustifiable and unacceptable” while a diplomat from one of the EU’s northern member states called it “hilarious”.

To be fair to José Manuel Barroso, European Commission president, he probably expected this kind of reaction. So he threw in a few concessions, such as a one per cent staff cut next year, which would apparently mark the first time since the EU’s creation that its headcount does not increase. It’s supposed to be the first step “towards the goal of a 5 per cent reduction of staff in 5 years”.

Spending on admin would also be kept in check. According to the press release (emphasis ours):

[The budget] also freezes the Commission’s administrative budget at well below inflation level…The vast majority of people across the EU feel the daily pain of the crisis as their national, regional and local governments have to make cuts, therefore a ‘business as usual’ attitude from the EU institutions is simply not acceptable.”

And that’s about the extent of cost-cutting ideas that Barroso seems able to come up with.

But, on closer examination, even these modest claims don’t seem to stand up. Pawel Swidlicki, at independent think tank Open Europe, took a closer look and it turns out, “the proposed staff cut for next year only amounts to a net loss of 6 out of almost 41,000 EU jobs”. Yes, you read that right. He notes (emphasis ours):

While the EU is cutting 286 posts from a total of 40,775, it is also taking on an additional 280 staff as a result of Croatian accession, expected on 1 July 2013, bringing the total number of staff across all the EU institutions to 40,769. In other words, net, it is only cutting 6 jobs.

The figures are from this table on page 65 in the budget proposal which looks at human resources at all the various EU institutions.

(Click to expand)

While the Commission, which employs the bulk of the EU’s civil servants, is proposing to cut 251 jobs, it also wants to create 142 new ones. So its overall staff would be down by 0.5 per cent, not by the 1 per cent presented in the headline figure in the press release.

Swidlicki also looked into the claim that the EU is clamping down on its admin spending, and concluded that: “overall EU administration spending [is] to increase by 3.2 per cent.” He notes:

While the Commission claim that its 1.5 per cent increase in strictly administrative expenditure (as classified by the Commission itself) is below the level of inflation is true, once the costs of spending on EU schools and pensions are factored in – which also fall under the heading for administration – total EU expenditure in this area across all institutions is actually increasing by 3.2 per cent.

At the same time, a number of individual spending items under this heading are going up substantially. Total spending on Commission salaries will increase by 2.8 per cent (to €2.4bn). Total EU employees’ pensions and allowances across all institutions are up a full 6.8 per cent, an increase of €90.5m (taking the total to €1.4bn).

In addition, EU spending on ‘European schools’ (schools for children of EU officials), is also up 6.8 per cent, an increase of €11.5m, taking total expenditure on EU schools to €181m. The increase is partly due to the opening of two new schools, one in Brussels and one in Luxembourg. If the Commission’s share of the costs for pensions and EU schools were factored into its individual figure for administration, it would be substantially higher than the 1.5 per cent claimed.

A bunch of other EU institutions we hadn’t heard of are also getting budget increases, Swidlicki notes, including the Agency for Fundamental Rights — “one of two EU agencies specifically dedicated to human rights and which duplicates the work of similar bodies in member states, the Council of Europe, the ECHR and a range of NGOs is set for an increase of 5.2 per cent, bringing its total budget to €21.2m.”

This prompted us to take a closer look at the proposed budget, and we discovered a few clues as to why spending seems so difficult to reign in. On page 98 there is a list of reasons for why certain institutions are getting above-inflation budget increases. Here’s one:

The Ombudsman requests an increase of 2,9 per cent. However, most of these costs are linked to the adjustment of expenditure for rent following a removal.

While we’re not entirely sure what that actually means, it sure sounds like the Ombudsman has moved into some nice new offices and needs more rent money. But the next item is even more worrying. It seems the EC doesn’t even know why The European External Action Service, the EU’s diplomatic corps, is requesting a massive increase but it’s making an educated guess (emphasis ours):

The European External Action Service requests an increase of 5,7 per cent. At this stage, it is considered that the increase is linked to the transition period following the creation of this new service.

And that’s another €28m earmarked, just like that. No wonder Europe’s finance ministers are fuming.

Related links:
Baroness Ashton demands extra £23 million to run the EU foreign service – The Telegraph
– Netherlands vows to meet EU budget target – FT