Little or large? The EU budget and public perceptions

It’s that time of year again, when the European Commission releases its draft budget for the following year, to howls of anguish and disgust from all sides.  I’ve already talked some weeks ago about how the EU budget isn’t like national budgets and shouldn’t be compared to them on a like-by-like bias, but today I want to address a slightly different issue.

Much of the criticism on the proposals stems from the 6.8% increase in commitments that the Commission has set out, at the same time that the EU (including the Commission itself) is asking national governments to make substantial cuts in their budgets to secure improvements in public finances, seen as a key part of the eurozone’s current crisis. “Do as I say, not do as I do” seems to be the message.

Some caveats are much in order here.  Firstly, the EU does not have any public debt, because it’s required to balance its books each year (i.e. the Commission has also produced calculations on the national contributions required to supplement other income streams to meet expenditure), so EU spending doesn’t add directly to the debt burden.  Secondly, the annual EU budget is agreed by member states (in the Council) and the European Parliament, so goes through extensive public debate and has the explicit requirement to have each institutions’ support.  Thirdly, annual budgets sit within the Multiannual Finance Framework which is adopted by the Council with Parliament’s assent (i.e. no amendments), so member states set out the broad trajectory of spending.  Fourthly, much spending requires match-funding by member states (especially in cohesion funds), so a significant amount of money never gets used.  Finally, as the Commission office in the UK notes, “The EU budget was around € 140 billion in 2011, which is very small compared to the sum of national budgets of all 27 EU Member states, which amount to more than € 6,300 billion. In other words, total government expenditure by the 27 Member States is almost 50 times bigger than the EU budget!”

So member states control spending and the sums are relatively small: problem solved?  Not at all.

As so often, perceptions matter here.  €150b is indeed small in comparison to national budgets, a mere 67cents per day per EU citizen, but it’s still a very big number. To use one topical number, it’s approximately twice the size of Greece’s budget, or about the same as all UK spending on groceries in 2011.  In short, to the woman on the Athens omnibus, it’s the absolutes that matter, not the relatives.  Likewise, the regular rebates that come to national exchequers from unutilised spending are not nearly enough to change that impression.

Margaret Thatcher understood this long before most other people: her battle in the 1980s to secure a British rebate (another topic that will be haunting discussions in the next two years) was in part informed by an understanding that every little percentage she could crawl back would allow her to get millions of pounds.  Regardless of the appropriateness of EU spending structures, until fonctionnaires in Brussels and MEPs in Strasbourg can see this, their troubles will continue.