Lars Jorgen MAGNUSSON Senior Administrator External Actions DG Budget EU budget and Financial Programming Lars Jorgen MAGNUSSON Senior Administrator External Actions DG Budget

EU: 28 Member States with nearly 500 million inhabitants

European Court of Auditors EU Institutions European Commission Council of the European Union European Parliament European Court of Auditors Court of Justice of the European Communities 3 3

EU Budget Section I – Parliament Section II – Council Section III – Commission Section IV – Court of Justice Section V – Court of Auditors Section VI – Economic and Social Committee Section VII – Committee of the Regions Section VIII – European Ombudsman Section IX – European Data Protection Supervisor Section X – European External Action Service (EEAS) – 95% of the EU budget – goes to fund concrete activities ("operating appropriations") is paid out by the Commission (Section III).

EU – relative size of the EU Budget

Legal framework and regulations EU Treaties set out basic principles, budget procedure, general goals of policies Multiannual financial framework regulation with a duration of at least five years establishes annual upper limits (known as ‘ceilings’) per heading Own resource decision determines what and how much to collect - financing mechanisms and revenue limit (‘own resource ceilings’) Financial Regulation specifies the rules of spending and financial management

Multiannual Financial Programming Multiannual Financial Frameworks (MFF) 2000-2006, 2007-2013, 2014–2020 The MFF translates into financial terms the Union’s political priorities for a given period Divides the expenditure to categories (headings) and provides the general framework (ceilings) to be respected in annual budgets Defines the maximum amounts of money to be spent during the period and in each budgetary year in: commitment appropriations: legal pledges to provide finance, provided that certain conditions are fulfilled payments: cash or bank transfers to the beneficiaries

Annual budgetary procedure In the Treaty of Lisbon, the budgetary procedure has been improved The "Multiannual Financial Framework" becomes legally binding The European Parliament decides on an equal footing with the Council

EU Budget Expenditure Lifecycle

Who manages the EU budget? Executive agencies Centralised Joint International Organisations Shared Member States Direct Indirect Decentralised Third Countries Community agencies Specialised Community bodies EIB & EIF National agencies

Who manages the EU budget? The bulk of EU expenditure is managed jointly between the Commission and the Member States under the so called shared management 22% 76% 2%

Accountability and external control Transparency in the use of funds: recipients of all EU funds disclosed, e.g. Through Financial Transparency System Reporting: Commission publishes annual accounts of the EU External control: European Court of Auditors annual report Political accountability: EP gives discharge

The "4 eyes" principle Authorising Officer Operational verification Operational initiation Financial initiation Financial verification

EU Budget 2013 For 500 million Europeans For growth and employment

EU budget 2013 in figures Budget headings Sustainable growth 67.5 2013* Change from 2011 Sustainable growth 67.5 4.7 % a) Competitiveness for growth and employment 14.8 9.1% b) Cohesion for growth and employment 52.8 3.5 % Preservation and management of natural resources 60.0 2.2 % Citizenship, freedom, security and justice** 2.1 10.9% The EU as a global player*** 9.4 7.4 % Administration 8.3 1.3 % Total 147.2 (*)Expenditure estimates for EU policies in commitment appropriations (billion EUR) (**) Excluding the European Union Solidarity Fund. (***) Including the Emergency Aid Reserve.

Reflecting Europe 2020 priorities Balancing austerity and growth-boosting measures The 2013 EU budget looks to the future Innovation Union EUR 23.0 billion Youth on the move EUR  1.4 billion A digital agenda for Europe EUR  2.4 billion A resource-eficient Europe EUR 22.1 billion An industrial policy for the globalisation era EUR 1.8 billion An agenda for new skills and jobs EUR  9.5 billion European platform against poverty EUR 2.0 billion

Sustainable growth 2nd column: Budget 2013, expenditure estimates for EU policies in commitment appropriations (billion EUR) 3rd column: Change from 2011

Natural resources 2nd column: Budget 2013, expenditure estimates for EU policies in commitment appropriations (billion EUR) 3rd column: Change from 2011

Citizenship, freedom, security and justice

The EU as a global player (2) Including the Emergency Aid Reserve

Administration 5.6 % of the EU budget is planned to cover the functioning of all the EU institutions, compared to 5.7 % in 2011 Major reform of administration which saved the EU taxpayers EUR 3 billion. The Commission has maintained the policy of 0 % staff growth. The rest of the 2013 budget (94.4 %), is directed to Union programmes and operations in favour of Europe’s regions and towns, business, scientists, citizens and the EU’s actions in the world

Where does the money come from?

Sustainable growth: Competitiveness in 2010

Natural resources in 2010

MFF 2014-2020 Challenges Exceptional Lisbon Treaty: more responsibilities Austerity climate Financial crisis interventions Ensure synergies to prove EU Value-added Social, economic and territorial disparities Connect Europe better to strengthen the internal market Unstable neighborhood MORE EUROPE FOR THE SAME MONEY!

Responses European logic fully geared to Europe 2020 strategy Modernised budget, output oriented, simplification, conditionality, leveraging investment: Connecting Europe Facility and innovative financial instruments Key changes in research, cohesion, agriculture, external action Limited in size, but redesigned Budgetary rigour, administrative limits Savings in some areas and more for areas that matter Multi-purpose expenditure New legitimacy of traditional policies Reformed financing system: New Own Resources linked to EU policies Relief on Member States budget (via reduced contributions) Simplification of existing correction mechanisms

Commission’s proposal* Multiannual Financial Framework (EU 27) *29/06/2011 - COM(2011)500 final, page 5

What does constant in real terms mean?

What does constant in real terms mean?

Decreasing payment share

Commission’s proposal* Outside the Multiannual Financial Framework (EU 28) EUR million – 2011 prices *29/06/2011 - COM(2011)500 final, page 5

Despite restraint – significant re-distribution in key policy areas EUR billion commitment appropriations

Ambitious, but realistic… EUR billion commitment appropriations

Development of the Common Agricultural Policy and Cohesion policy share in the EU budget

Cohesion policy Common strategic framework for all structural funds Investment partnership contracts with Member States Stronger conditionality Concentration on poorer and weakest regions Thematic concentration

Connecting Europe Connecting Europe Facility 40 EUR billion Energy, transport and digital networks Cross-border multi-country investments to the benefit of internal market Strong co-ordination with cohesion policy Proposed use of EU project bonds

Cohesion policy proposal Multiannual Financial Framework 2014-2020   EUR billion - 2011 prices Cohesion Fund* 68.7 Less developed regions 162.6 Transition regions 39.0 More developed regions 53.1 Cooperation 11.7 Extra allocation for outermost and northern regions 0.9 Total ** 336.0 *Cohesion Fund will earmark 10 billion EUR for the new Connecting Europe Facility ** ESF minimum share: 25%

New architecture of cohesion policy Three categories of regions Less developed regions (GDP per capita < 75% of EU average) Transition regions (GDP per capita between 75% and 90%) More developed regions (GDP per capita > 90%) Cohesion Fund for Member States with GNI per capita <90% Territorial cooperation (3 strands: Cross-border Cooperation, transnational, interregional)

Agriculture Declining share in the EU budget until 2020 Greening of CAP - direct aid 30 % linked to environment measures Progressive convergence of direct support towards EU average: Close 33% of the gap with 90% of EU average Financed by all Member States above the average Market measures: Emergency Mechanism European Globalisation Fund to help farmers adapt to globalisation

Administrative expenditure Budget under restraint Staff reduction up to 5% Efficiency gains (increase working hours to 40 a week) Reviewing certain benefits in line with similar trends in Member States Administrative expenditure discipline for all EU institutions

Own resources past changes

… in other words considerable evolutions in EU financing OR now mainly based on 'statistical aggregates' (GNI and VAT-based OR = 85%) contributions seen as “expenditures” to be minimized by Member States permanent tension on EU financing development of corrections and focus on "allocated" expenditures own resources disconnected from EU policies in times of budgetary consolidation, necessity to find new ways to finance the budget

A new own resources system Commission proposal End current statistical VAT own resource as of 2014 Introduce 2 new own resources Financial Transaction Tax New VAT resource Radically simplify the system of corrections

EU taxation of financial sector Commission proposal Introduce Financial transaction tax (FTT) from 1/1/2018 at the latest. Applicable tax rates to be set at the moment of legislative proposal (Autumn 2011) Advantages Contributes to budgetary consolidation of Member States by reducing their contributions to the EU budget Support in European Parliament, national parliaments, NGOs and public at large (Eurobarometer: 61% in favour and 50% or more in 20 Member States) FTT more efficient at EU than at national level

New VAT resource Commission proposal Advantages New VAT resource from 1/1/2018 at the latest. Proposed rate: 1 % Advantages Link EU VAT policy and EU budget Part of wider revision of VAT systems: fight against VAT fraud and reinforce harmonisation of VAT systems

Envisaged evolution of own resources structure

Correction mechanisms Commission proposal Replace all corrections mechanisms by a system of fixed annual lump sums for 2014-2020 Based on Fontainebleau principle: "any member State sustaining a budgetary burden which is excessive in relation to its relative prosperity may benefit from a correction at the appropriate time." Advantages Fairness – lump sums based on relative prosperity Simplicity and transparency Lump-sum corrections aligned with expenditures (same duration as MFF)

Corrections lumpsum GROSS AMOUNT DE 2500 NL 1050 SE 350 UK 3600 TOTAL Annual lumpsum 2014-2020 GROSS AMOUNT DE 2500 NL 1050 SE 350 UK 3600 TOTAL 7500 (in million of euro / in current prices) LUMPSUMS ADJUSTED FOR RELATIVE PROSPERITY

The EU Budget is unique, not comparable to any other government or federal budget. Financed by the Traditional Own Resources (customs duties; Value added tax (VAT) and a MS contribution based on the size of their Gross National Income (GNI). Revenues are used to finance activities of common interest to all MS, as specified in the Treaties. The overall amount of the EU Budget is limited by a ceiling, currently 1.23% of the Union's GNI. The Budget can not run a deficit, i.e. payments must match revenues in any budget year. Commitments are programmed in advance in the Multi-annual Financial Framework (MFF). Result - Little room to manoeuvre and a budget relatively well "protected" against fiscal disruptions.

Further information on: Financial Programming and Budget website: http://ec.europa.eu/budget/ MFF 2014-2020 website: http://ec.europa.eu/budget/reform/ Thank you !