Authors Iain Begg | Gabriel Glöckler | Anke Hassel ... - The Europaeum

Reform of EU expenditure
Spending 40% of the Union budget on supporting agriculture, at a time
when agricultural prices have risen sharply and profitability in agriculture
has also increased, appears bizarre. It should however be remembered
that the EU budget is part of total public spending in the Union and that,
in some areas, member states have decided to finance their policies
through the EU budget rather than national budgets. This is the case in
agriculture which throughout the EU attracts only 1% or less of total public
funding while absorbing between 40% of the EU budget.
This is of course not a defence of the CAP. It is however an important
argument. Many of the contributors to the discussion of the budget appear
to want it to be a financial showpiece of a modern, future oriented and
deeply integrated European Union. Yet where some policies are delegated
to the Union, and others are the competence of the member states, it is
obvious that the Union budget is going to be “unbalanced”, unless seen as
a part of total public spending in the Union.
One of the key problems with agricultural spending is that it is not
progressive in the same way that cohesion spending is. It therefore
exacerbates the problem of net balances, without meeting the priorities
and values of the Union treaties. In spite of the serious question of food
security, the subsidisation of low productivity activity in the Union does
seem perverse.
This situation could be changed in several ways. Subsidies, notably direct
income subsidies, could simply be reduced over a number of years. On the
other hand the individual member states could take over some of the
financing of agricultural subsidies, although this would hold dangers for
the common market in agricultural products.
A considerable reduction in CAP spending is expected to allow the British
government to agree to a gradual elimination of the British budget rebate,
and therefore of the other distorting rebates in the budget.
While almost everybody agrees that cohesion policy is a fundamental
pillar of solidarity within the Union, there is much criticism of the way in
which it has come to be considered rather as a permanent subsidy for
regions in relatively rich member states. It will therefore be important in
any major overhaul of the Union budget that the temporary nature of
cohesion spending should be underlined and that complex and well
endowed transitional arrangements should be kept to a minimum.
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After the crisis: A new socio-economic settlement for the EU