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)
Date: 2006-07-05
Institutions: European Economic and Social Committee
Subjects: Community budget, Member States' contribution, budgetary equilibrium, own resources

16.12.2006

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

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

civil society

Pursuant to Article 9 of the Council Decision on the
1.1
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.

The

European institutions

assessed the proposal,
1.2
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 Com-
munity 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.

the UK presidency,

In December 2005 under

the
1.5
in the course of evaluating the financial
Council of the EU,
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.

As an active and dynamic player, our Committee has a
2.1
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 Commis-
sion's documents concerning the period of reflection, and
promotes active participation by citizens with a view to imple-
menting 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 interinsti-
tutional 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 implementa-
tion 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 com-
munity of 15 countries. Adoption of Community policies for
an EU of 25 and soon of 27 Member States, as well as deci-
sions 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

(1) OJ C 253, 7.10.2000

(2) OJ C 74, 23.3.2005.

C 309/104

EN

Official Journal of the European Union

16.12.2006

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 objec-
tives of a shared future.

3.2
Adoption of the Commission's Communication repre-
sented 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.

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 agree-
ment 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.

these account

The EU budget is limited compared to national budgets;
3.3
on average,
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.

for 45 % of national

Expecting more Europe for less money is simply unrea-
3.4
listic; new Community policies require additional
financial
backing. The proposed expenditure on policies offering Euro-
pean added value in the new financial perspective was decided
on the basis of the triple requirements of effectiveness, effi-
ciency 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 Euro-
pean added value.

The need for reform of the system of own resources has
3.6
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 gener-
alised correction or a change in the system.

4. The EU's financial perspective for 2007-2013 subse-
quent to the December 2005 European Council deci-
sion

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

The March 2005 European Council

4.2
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 Euro-
pean social model; the new financial perspective for 2007-
2013 was to reflect new priorities, such as research and devel-
opment,
innovation, energy, politics, education (including
investment in higher education), promoting economic migra-
tion between regions, and dealing with demographic change.

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 multi-
annual 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 integra-
tion process have evolved; between 1957 and 2006,
four
stages can be identified:

1957-1969, a period of separate budgets for each of
Communities;

the

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 deter-
mined 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.

financial

In general, it can be observed that during the period of the first
appropriations
two
increased in step with the development of Community policies,
and this development was the deciding factor in the Com-
munity financial framework.

commitment

perspectives

16.12.2006

EN

Official Journal of the European Union

C 309/105

5.2
During the debate on Agenda 2000, net contributors to
the EU budget, rallying to the call for ‘stabilisation of expendi-
ture’, 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.

After the failure of the June 2005 summit, a review of
5.3
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 perspec-
tive, 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.

The EESC, as it pointed out

5.5
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 Com-
munity 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 equi-
table 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 contribu-
tors. 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.

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
of
in
EUR 150 million.

contribution

reduction

its GNI

annual

Starting no later than 2013, the United Kingdom will
6.2
pay its full share of the enlargement costs relating to countries
which acceded to the EU after 30 April 2004, with the excep-
tion 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 EU's own
resources is to include the CAP and the British rebate, and a
report is expected in 2008-2009.

the financial perspective;

the review of

6.3
According to the Commission's proposal, the reduced
VAT rates of call should be taken into account before calcu-
lating 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 agree-
ment, 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 enlarge-
ment expenditure.

7. General comments

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 excep-
tions: for the period 2007–2013, the rate of call of the VAT

The EESC concurs with the EP on the VAT and GNI-
7.1
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 trans-
parent for citizens and less equitable, resulting in a system of
funding which has created unacceptable disparities between the
Member States.

C 309/106

EN

Official Journal of the European Union

16.12.2006

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.

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.

The EESC would point out

7.3
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.

that

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 Com-
munity 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.

The EESC feels that an own resources system based
8.3
either on common policies, or on a genuine Community own

Brussels, 5 July 2006.

Despite strong opposition to a Community tax based on
8.4
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.

In adapting the own resources system,

it is vital to
8.5
ensure its consistency with the principles of transparency, effi-
ciency, 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 citi-
zens

— 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.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND