Are there any planned budget policy changes?

Main policy challenges

The consultation shows a significant degree of convergence regarding the main challenges Europe will have to address in the coming decades. Globalisation is widely seen as predominant force behind many of these challenges, creating huge opportunities but also testing Europe's capacity to shape and manage its consequences.

Maintaining and improving Europe's global competitiveness and the fight against climate change are often quoted among the most demanding challenges. Assuming greater global responsibility to deal with increasing external pressures, ensuring energy supply, promoting Europe's transformation into a knowledge and service economy, adapting to demographic trends, managing migration, reducing inequalities and disparities, as well as addressing security threats are also important issues frequently mentioned. Many contributions emphasize the need for better linking up our policies with these priority challenges. In respect of Europe's competitiveness, most private sector contributions stress the importance of focusing on economic efficiency, while others, especially NGOs, often emphasize objectives linked to sustainable development, such as social inclusion and maintaining the European social model.

There is widespread and strong support in many contributions for Europe to continue its leading role and mobilise all available means in the fight against climate change, with particular emphasis on the need to tackle this problem from a global perspective.

Guiding principles

The principle of "European added value" is embraced by the majority of contributors as being the key criterion for pursuing spending policies at EU level. While few contributions offer a precise description of what is understood by this term and with some arguing that the concept is too vague to be effectively applied, the subsidiarity and proportionality principles are often seen at the core of this concept.

A variety of factors are proposed to determine whether these requirements are met, ranging from economic efficiency criteria, such as economies of scale (including through concentration of resources, avoiding duplication and visibility gains), external effects, networking and dissemination of best practices or other comparative advantages in the effective pursuit of European objectives, over solidarity considerations to the potentially distortive or restrictive nature of action at lower levels of government.

EU spending must offer clear and visible benefits for the Union and its citizens that could not be attained by spending at other levels (including from the private sector). Issues often referred to as European public goods are, among others, transnational infrastructure investments, protection of the environment, maintaining food security and safety, promoting European identity (e.g. by means of mobility programmes in education), balanced economic and social development or external border protection.
European added value can be achieved in different ways. Some point to the fact that the budget is not the only instrument to achieve our objectives. The benefits and the potential of loan and loan-guarantee schemes are also mentioned.

Priorities and changes to be implemented

Contributions generally agree that the EU budget needs to reflect the current policy challenges, with climate change and enhancing European competitiveness receiving an overwhelming attention in the contributions. Similarly, when it comes to making recommendations for the future, further enhancing growth oriented policies in the framework of the Lisbon Strategy for Growth and Jobs and climate related measures dominate the list of proposals.

There is widespread support for considerably reorienting spending priorities, with many contributions advocating, in particular, reductions in spending on agriculture and increased spending on research and energy. Cohesion receives strong support, with, however, opinions considerably diverging on how it should be reformed.

A considerable number of respondents put emphasis on the importance of having all policies aligned with the main priorities and the need for gearing existing policies towards helping to address these main challenges. A typical proposal along these lines is to refrain from awarding subsidies to projects which might have a negative effect on the environment. Some environmental NGOs, in particular, express concern at the negative impact of considerable EU funds being spent in new Member States on road and air transport infrastructures. They argue that greater focus should be put on supporting the development of renewable energy and energy-saving measures as well as prioritising more sustainable means of transport. There is widespread support for increased spending in the area of research, technological development and innovation. It is often argued that European competitiveness requires increased budgetary support for research and development activities as well as mobility schemes in education. With regard to the fight against climate change, many call for more R&D funds to support environmental objectives, making sure that direct spending on environmental policy is increased and aligning other spending policies with environmental needs. They stress the importance of energy efficiency in EU research spending, increased investments in environmentally friendly technologies, the development of renewable energy sources and other initiatives with the potential to reduce greenhouse gas emissions. Energy is mentioned as an area that should be given greater attention, as promoting energy interconnection and closing missing links across Europe are seen as major contributor to address environmental concerns, improve energy security and increase the competitiveness of the European economy.
The reduction of regional disparities remains a key concern in the enlarged Union. A clear majority of contributions argues in favour of concentrating funds more strongly on less developed Member States and regions. Some would like to limit cohesion spending in richer Member States, while others plead for the continued availability of structural funds for all regions. While many contributors argue that cohesion policy should make a major contribution in support of the priority objectives in relation to enhancing competitiveness and the fight against climate change, others warn against the risk of overloading the policy with too many objectives; instead, they argue, cohesion policy should be refocused on its initial purpose, with a limited number of well-defined targets to facilitate the assessment of its impact and increase its effectiveness and accountability.

There are diverging views with regard to the role and definition of territorial cohesion. Some argue that this concept is already implicit in the current objectives, in particular in the European territorial cooperation objective allowing for cross-border, transnational and interregional cooperation. Gross National Income (GNI)/Gross Domestic Product (GDP)-percapita should continue to be the main reference criterion for deciding about eligibility and support levels. Others argue that other criteria should be added to target the specific needs of territories, both in terms of natural handicaps and the potential impact of climate change, demographic trends or other challenges identified.

The most frequently commented policy area in the consultation is the Common Agricultural Policy (CAP), with a relatively broad consensus about the need for further reforms to align the policy with today's priorities. Opinions are however divided on the extent of these reforms. To many, agriculture remains a strategic sector, but most respondents advocate modernising the CAP, making European agriculture competitive at a global scale, more responsive in terms of climate change and food safety and quality requirements and better targeted on the objectives it is set to achieve. The current spending levels and mechanisms are not seen as meeting these requirements and taking account of new realities. Most respondents would like to see a significant reduction in agricultural spending and favour more or less radical changes, especially in the first pillar, whereas some others consider it best to continue reform along the same lines as the "Health Check" and earlier reforms. Many contributors argue in favour of shifting spending from the 1st to the 2nd pillar. Some propose to shift the 2nd pillar closer towards cohesion policy and transform it into a more balanced policy for rural areas. Most farmers' interest groups do not object in principle to more emphasis on rural development, but also emphasise the continued relevance of the first pillar. Contributions from NGOs tend to focus on sustainable rural development, in particular on environmental issues (e.g. preserving biodiversity) and the contribution of rural development in the fight against climate change. There is no general agreement on the future of direct payments. Some want to gradually eliminate direct agricultural support measures, basing their argument on what they perceive to be the trade distorting nature of direct payments and structural price increases for agricultural products. Several contributions highlight the weaknesses of the current allocation method and plead for comparable support levels across the Union. While there seems to be a clear expectation of reducing agricultural spending, renationalising the whole policy is not an option for the vast majority of respondents. Some contributions explicitly mention or argue in favour of co-financing in the 1st pillar. There is globally strong support for stepping up the Union's profile in the areas migration and security, although some contributions point out that not all aspects linked to these priorities necessarily need a lot of financial resources. Key considerations in that context are burden sharing and operational cooperation, with particular emphasis on border protection, infrastructures for the exchange of information and the external dimension of our migration and security policies.
A significant number of contributions highlight the increasing dependence of the well-being of Europeans on developments outside our borders, in particular in our neighbourhood. Special emphasis is therefore placed on the particular importance of our external policies, including the external dimension of energy security, climate change or migration, with enlargement, the European Neighbourhood policy, our development action as well as the common foreign and security policy frequently being mentioned in that context.

Implementation

Respondents generally agree that there is scope for further improvements in the effectiveness and efficiency of budget implementation. The same applies to transparency and accountability, where the need for clear responsibilities and an integrated control framework is highlighted. The consultation also conveys a clear message in favour of simplification and proportionality. Administrative burdens and control requirements are often considered excessive in the light of the modesty of resources involved for certain actions. Most respondents agree that budget delivery should become more result and performance oriented, with increased coordination to achieve synergies and ensure coherence. The role of systematic policy evaluations and stronger links with budgeting is highlighted in several contributions.

The balance between centralised and decentralised management
In particular contributors representing local and regional governments often emphasize the need for decentralisation in budget delivery. They encourage greater involvement of local and regional authorities both in the design and delivery of EU financial action, without increasing administrative burdens.

Simplification and strengthened delivery instruments
Most respondents strongly agree that procedures need to be simplified and streamlined within and across policies. Several contributors request that all EU funds and expenditures should be integrated in the EU budget.

Executive agencies
Some contributors express concern about the increasing number of executive agencies. One proposal refers to the obligation to make a cost-benefit analysis before setting up new agencies or the setting of certain time limits for the functioning of these agencies. A complementary point of view expressed is that agencies should only be set up when there are clear economies of scale or real advantages in specialisation. Others see the use of executive agencies as a specialised one-stop interface for problems and enquiries.

Transparency and accountability
It is argued that the task of continuously increasing transparency and accountability is complicated by great organisational and procedural complexity and historically grown management and control arrangements. Proposed measures to address these difficulties include:

• Simplifying the budget structure,
• Application of the public access principle and further investments in informing the general public,
• Initiatives similar to the establishment of the 'Code of Conduct for Interest Representatives' (framework for lobby groups),
• Greater involvement of the Member States and/or strengthening of the partnership with local authorities,
• Publication of data on all beneficiaries of EU spending.

Some contributors take the view that a better balance should be found between the cost of control and the efficiency and benefit of such controls. Since aiming at zero risk is extremely expensive and not realistic, a clear understanding about the "tolerable risk of error" could help improving the economy of the system.

A considerable number of respondents argue that, with 80% of EU funds managed by implementing authorities in the Member States, national accountability must be strengthened. A clear allocation of responsibilities between Member States and the European Commission is of particular importance in areas under shared management.

Several respondents emphasise the fact that integration of all EU expenditures in the budget, including in particular the European Development Fund, would increase synergies, legitimacy and administrative simplification.

Some contributions emphasise the important role of external audits, focused on identifying the source of systemic weaknesses rather than errors in sample transactions. The need for national audit declarations is often mentioned in that context.

The need for continued efforts to receive a positive declaration of assurance from the Court of Auditors is highlighted in several contributions. Effective cooperation between the Commission, the Member States and the Court is considered essential in that context, in particular for areas under shared management. Some therefore propose to introduce generalised national declarations of assurance. Others point to the risk of additional administrative burdens for the Member States.

Concerning the activities of the Court of Auditors, it is suggested to distinguish between and publish separate figures on irregularities and fraud. Its role could be expanded to producing special reports on the value for money of certain actions and performance auditing.

Flexibility in budget delivery
A considerable number of respondents argue that sufficient margins should be foreseen to increase effectiveness and efficiency. Some agree that shifting support towards the highest performing programmes on the basis of criteria such as absorption capacity could enhance sound financial management. However, it is also pointed out that flexibility should not only benefit these programmes but also include aspects of solidarity and capacity building. Flexibility is also valued with regard to EU procedures often said to be too slow and predetermined to test out new ideas. More flexible instruments enabling quick decisions would be more suitable to support new initiatives.

Some react with scepticism on the possibility of reallocating resources between headings, the main concern being that increased flexibility would jeopardise the stabilising function of the financial framework. It is also argued that too much flexibility could lead to abuse, favouring short-term considerations instead of long-term strategies.

Time horizon for reorientations

Of those respondents referring to a concrete time horizon for budget reform, a majority places itself in a post-2013 perspective, with major adjustments subject to appropriate transitional arrangements. Some contributions could imagine some reforms to take effect already in the current financial period, while others suggest introducing certain changes only after 2020.

References

Reforming the Budget, Changing Europe: Short Summary of Contributions