EN Official Journal of the European Union C 309/103

Opinion of the European Economic and Social Committee on the Proposal for a Council Decision on the system of the European Communities' own resources (//EC, Euratom)

COM(2006) 99 final — 2006/0039 (CNS)

(2006/C 309/21)

On 26 April 2006, the Council decided to consult the European Economic and Social Committee, under Article 93 of the Treaty establishing the European Community, on the abovementioned proposal.

The EESC Bureau assigned preparation of the Committee's work on the subject to the Section for Economic and Monetary Union and Economic and Social Cohesion.

In view of the urgency of the work, the European Economic and Social Committee decided at its 428th plenary session of 5 and 6 July 2006 (meeting of 5 July 2006) to appoint Ms Cser as rapporteur-general, and adopted the following opinion by 84 votes to 2, with 2 abstentions:

1. Summary of the opinion

1.1 Pursuant to Article 9 of the Council Decision on the system of the European Communities' own resources (1), the Commission was required to undertake a general review of the own-resources system for the 2007-2013 period by 1 January 2006 and to submit appropriate proposals. The EP submitted a request for a review of the contribution criteria. In agreement with the Council, the Commission drew up its proposal and submitted it for review.

1.2 The European institutions assessed the proposal, including the EESC, which (ECO/148) discussed it in the light of its own previous opinions and repeatedly drew attention to the important link between EU budgetary policy and Community policies in general.

1.3 The Committee discussed the future use of the three own resources and evaluated the proposal for an own, direct resource of the EU set out in the Commission's document.

1.4 The Committee outlined the historical development of the own resources and the changes which they had undergone; it also analysed the ‘fourth resource’ and evaluated the UK rebate and the generalised correction mechanism.

1.5 In December 2005 under the UK presidency, the Council of the EU, in the course of evaluating the financial perspective for the 2007-2013 period, reached a political agreement. The earlier European Council decision was revised and new guidelines were set. The Commission was asked to draw up a new proposal, and to amend the accompanying working document on the UK rebate together with the Commission's proposal for a generalised correction mechanism.

1.6 Notwithstanding the Commission's amended proposal, the EESC stands by the concluding observations of its previous opinion, as the amended proposal merely reflects a political deal and not a fundamental change. At the same time, the change in the method used to calculate the UK rebate for the first time in twenty years is of historic importance, as it could represent the first step towards doing away with the rebate.

2. The EESC's approach, as the representative of organised civil society

2.1 As an active and dynamic player, our Committee has a key role at EU and Member State level in bridging the gap between the European institutions and citizens. The Committee mediates and evaluates the objectives set out in the Commission's documents concerning the period of reflection, and promotes active participation by citizens with a view to implementing Community policies (Action Plan, Plan D and the White Paper on a European Communication Policy).

2.2 According to these documents, EU citizens have a right to know what the EU is doing and why. In its opinion on the period of reflection, the EESC outlined public expectations with regard to imbuing policies on the EU's future with appropriate content. In this context, the Committee welcomes the interinstitutional agreement of 4 April 2006, which provided for an increase in total funding in the financial framework for the 2007-2013 period relative to what was originally agreed on by the European Council. However, referring to its previous opinion (2), it notes that this increase is limited and that the financial perspective does not provide scope for implementation of objectives in such a way as to entirely match their ambitions.

3. Introduction

3.1 The 2004 enlargement was an historic event, given that over 450 million Europeans are now reunited after a period of 50 years. The enlargement involved significant work on the institutional system, which until then had only served a community of 15 countries. Adoption of Community policies for an EU of 25 and soon of 27 Member States, as well as decisions on and the creation of the requisite funding represented a serious challenge for cooperation between ‘old’ and ‘new’ Member States. Against the backdrop of these developments, the Commission's Communication of 2004 on Building our common future: Policy challenges and budgetary means of the enlarged Union 2007-2013 and the Commission's proposal for the 2007-2013 financial perspective drawn up on the basis of that Communication would have helped to achieve the objectives of a shared future.

3.2 Adoption of the Commission's Communication represented the starting point for the decision on the new financial perspective. The EP's position took the EU's priorities into account. The European Council's decision of June 2005 set tighter priorities for expenditure and spending needs.

3.3 The EU budget is limited compared to national budgets; on average, these account for 45 % of national income, whereas the EU budget is barely over 1 %. The Commission proposed that the ceiling for resources included in the 2007-2013 financial perspective should remain unchanged at 1,24 % of GNI.

3.4 Expecting more Europe for less money is simply unrealistic; new Community policies require additional financial backing. The proposed expenditure on policies offering European added value in the new financial perspective was decided on the basis of the triple requirements of effectiveness, efficiency and synergy.

3.5 To achieve the objectives, reference should be made to guidelines on greater financial transparency, more targeted and effective expenditure, and a more accurate assessment of European added value.

3.6 The need for reform of the system of own resources has become more pressing, due to its lack of transparency, limited financial autonomy, complexity and sheer impenetrableness. The adjustment mechanism applied exclusively to the United Kingdom since the mid-1980s has given rise to calls for generalised correction or a change in the system.

4. The EU's financial perspective for 2007-2013 subsequent to the December 2005 European Council decision

4.1 As the European Council acknowledged in its conclusions of December 2004, there is a close link between the financial perspective and the issue of own resources, the correction mechanism, and the need to reform the current system.

4.2 The March 2005 European Council reaffirmed the objectives of the Lisbon strategy, and focused the strategy on boosting growth and employment.

4.3 The informal Hampton Court summit of October 2005 focused on the challenges of globalisation rather than the European social model; the new financial perspective for 2007-2013 was to reflect new priorities, such as research and development, innovation, energy, politics, education (including investment in higher education), promoting economic migration between regions, and dealing with demographic change.

4.4 The December 2005 European Council agreed on the financial framework for the 2007-2013 period. Taking account of this political agreement and based on the Commission's amended proposal, the interinstitutional agreement concluded by the European Parliament, the Council and the Commission laid down the seven-year framework. The signing of the agreement was crucially dependent on the outcome of dialogue with the EP. The structure of the financial framework only partially reflected the dual requirement of, on the one hand, financing the new challenges facing the EU while, on the other hand, meeting budgetary needs arising from enlargement.

4.5 In December 2005, the Council decided that the review of the system of own resources should be completed as part of the overall review of EU expenditure and revenue in the multiannual financial perspective, a review which is due for 2008-2009. In May 2006, provision for this was incorporated into the interinstitutional agreement.

4.6 The Commission has proposed drawing up a White Paper providing a comprehensive summary of the financial perspective, revenue and expenditure. The expectation is that the EU's current system of own resources will be replaced by more transparent and autonomous revenues. The Commission notes the EP's plan to hold a conference with the involvement of national parliaments. The EESC declares its willingness to take part in this work.

5. The system of own resources

During two years of negotiation on the financial perspective, little attention was paid to the system of own resources as a whole.

5.1 To get a full picture of the own resources system, we need to look at how budgets supporting the European integration process have evolved; between 1957 and 2006, four stages can be identified: 1957-1969, a period of separate budgets for each of the Communities; 1970-1987, a period of single annual budgets; 1988-1999, the period of the first two financial perspectives, in which Community policies were the deciding factor; 2000-2006, a period in which Community policies were determined by the budget. From the very start, the way in which budgets evolved in the course of European integration was shaped by the pursuit of common goals and Member States' interests. In general, it can be observed that during the period of the first two financial perspectives commitment appropriations increased in step with the development of Community policies, and this development was the deciding factor in the Community financial framework.

5.2 During the debate on Agenda 2000, net contributors to the EU budget, rallying to the call for ‘stabilisation of expenditure’, succeeded in limiting the room for budgetary manoeuvre. Net contributors backed their case for stabilising expenditure by invoking the budgetary discipline stipulated by the Stability and Growth Pact.

5.3 After the failure of the June 2005 summit, a review of joint expenditure and own resources became a key issue. However, there was, as yet, no real debate on own resources. At the initiative of the UK presidency, a review clause was adopted. This initiative was in turn based on the Commission's June 2005 proposal, which had already been incorporated by the Luxembourg presidency in its final proposals. Member States were divided as to the content of the review clause and the timescale of the reforms arising from it. The debate on the review focused on the future of the EU budget, and once again divided Member States, whose opinions were determined by their positions as net contributors or net beneficiaries. It became clear that there would be no major reforms before 2013.

5.4 If we examine the situation of Member States in relation to the common budget simply from an accounting perspective, taking only the balance of allocated expenditure and payments into account, we will find significant and highly misleading differences. Merely looking at countries' positions as net contributors or beneficiaries does not give any idea of the benefits at European level, of the contribution of Community policies to additional growth in macroeconomic income in the internal market.

5.5 The EESC, as it pointed out in its earlier opinions, cannot accept the view that Member States' positions as net contributors should take precedence over Community policies, which contribute to achieving common goals.

5.6 We feel that the role of Community policies in shaping the budget is compatible with budgetary discipline at EU level. Budgetary discipline initially appeared on the agenda in the first Delors package; however, this does not preclude Community policies from playing a decisive role in terms of the balance between budget and policies.

5.7 The growing GNI-based resource, whose role will continue to develop after 2007, is an example of how an equitable solution can be reached. However, there is an inherent risk that the growth of GNI-based contributions will strengthen the tendency to focus on countries' positions as net contributors. The GNI resource is derived from national budgets by means of direct transfers, and is not intended to ensure genuine own resources for the EU.

6. The working document on the UK rebate

6.1 The changes to the decision on own resources have enabled the drafting of a new document, which could enter into force from 1 January 2007 or no later than early 2009, perhaps even with retroactive effect. The document maintains the ‘standard rate’ of call of VAT at 0,30 %, as in the previous proposal, but in contrast to that proposal allows for two exceptions: for the period 2007–2013, the rate of call of the VAT resource for Austria is fixed at 0,225 %, for Germany at 0,15 % and for the Netherlands and Sweden at 0,10 %; for the same period, the Netherlands benefits from a gross annual reduction in its GNI contribution of EUR 605 million and Sweden from a gross annual reduction in its GNI contribution of EUR 150 million.

6.2 Starting no later than 2013, the United Kingdom will pay its full share of the enlargement costs relating to countries which acceded to the EU after 30 April 2004, with the exception of CAP-market-related expenditure. During the period 2007–2013, the UK's additional contribution relative to the decision currently in force may not exceed EUR 10,5 billion. This additional contribution will be adjusted in the event of enlargement to countries other than Romania and Bulgaria. In its decisions to review the system of own resources, the Council again emphasises the need for a comprehensive review of the financial perspective; the review of the EU's own resources is to include the CAP and the British rebate, and a report is expected in 2008-2009.

6.3 According to the Commission's proposal, the reduced VAT rates of call should be taken into account before calculating the UK rebate, whereas the GNI-based contribution should only be reduced after calculating the rebate. In the view of 17 Member States, both of these steps should be taken after calculation of the UK rebate, while the UK insists that both should precede it. The UK proposal would mean a higher rebate, and thus impose a heavier burden on the other Member States.

6.4 The EESC concurs with the Court of Auditors that the existence of any type of correction mechanism undermines the simplicity and transparency of the own resources system. The Court of Auditors has frequently commented on the current own resources system and its shortcomings. In particular, it has pointed to and highlighted a lack of management, consistency and transparency. It has also noted that budgetary imbalance cannot be rectified through numerical rules.

6.5 Among the modest alterations in the own resources system, the change in the method of calculating the UK rebate is of particular importance. Under the December 2005 agreement, expenditure allocated to the new Member States will be gradually phased out from the rebate from 2009, and fully excluded from 2011, with the exception of CAP-market-related expenditure and direct payments to farmers — thus ensuring that the UK rebate does not grow at the same rate as enlargement expenditure.

7. General comments

7.1 The EESC concurs with the EP on the VAT and GNI-based resources, which, at the time of their creation, were intended to complement the EU's own resources, and which have gradually become the main source of funding for the Community budget: adding derogations to the current own resources system has merely made it more complex, less transparent for citizens and less equitable, resulting in a system of funding which has created unacceptable disparities between the Member States.

7.2 The EESC agrees with the EP that, as the EU enlarges, it must be endowed with adequate financial resources in line with its growing political ambitions. The financial perspective is a financial framework aimed at ensuring that the EU's priorities are developed, while taking budgetary discipline into account; it is not a multi-annual budget for the next seven years.

7.3 The EESC would point out that the own resources ceiling set in 1993 for 15 Member States at 1,31 % of EU GNI for commitment appropriations and 1,24 % of EU GNI for payment appropriations has remained unchanged since then.

8. Summary

8.1 With the above in mind, the Committee would interpret the political agreement reached by the European Council in December 2005 to mean that the fourth stage of the evolution of the common budget, i.e. the period of budget-driven Community policies which started in 2000, will continue up to 2013.

8.2 The key to the future budget is to move away from an approach based on countries' net positions as contributors or beneficiaries; what we need is a common budget which is autonomous or virtually autonomous from national budgets. Only genuine own resources are capable of ensuring such autonomy.

8.3 The EESC feels that an own resources system based either on common policies, or on a genuine Community own resource in the form of a Community tax, or on a combination of both of these, would make it possible to set an autonomous common budget. From the perspective of the Community's future, the solution which ties in best with the Community method is to pursue common policies as a means of generating resources.

8.4 Despite strong opposition to a Community tax based on the principle of financial sovereignty, we feel that it is necessary to create the requisite own resources for the implementation of common objectives, instead of GNI-based contributions.

8.5 In adapting the own resources system, it is vital to ensure its consistency with the principles of transparency, efficiency, flexibility and proportionate financing. — Effectiveness of resources: resources must have a significant impact on the size of the budget — Transparency and simplicity: Member State contributions to the EU budget must be readily comprehensible to EU citizens — Efficient expenditure: the administrative costs of raising revenue should not be too high relative to resources — Equal gross contributions: Member States should share the burden fairly, taking into consideration the actual situation of their citizens.

Brussels, 5 July 2006. The President of the European Economic and Social Committee Anne-Marie SIGMUND

(1) OJ C 253, 7.10.2000

(2) OJ C 74, 23.3.2005.