A reality check on the EU 'budget' talks

Schadenfreude cuts through the confusion over the EU's budget and points out that, whether or not a deal is reached, the multiannual financial framework hardly matters because the process of agreeing annual budgets will go on

Let us try to dispel some confusion. The European Union 'budget' that is being talked about at the moment is not, in fact, a budget but an outline of seven of them from 2014 to 2020.

The annual budget, also talked about, is the draft brought forward by the European Commission for 2013 only. The British finance minister will vote against it, as always happens. Others will also vote against, but they want more money, not less. There will be a compromise, probably upwards, fixed by qualified majority, the United Kingdom outvoted. Note that the 2013 budget should be governed by the current seven year outline, but that plays in effect no part. See further below.

Meanwhile, as mentioned, what is being colloquially called the 'budget' is the draft multiannual financial framework. The British Prime Minster David Cameron, who will be the negotiator, began by demanding a freeze – which is a cut through inflation – then changed to an inflationary increase, but last night was instructed by a bipartisan parliamentary vote to obtain a cut in real terms.

The EU decision on this framework needs unanimity. This rule could be changed, but improbably – see Schadenfreude, October 26. Unanimity on the present draft is not available, the UK not being the only dissident. The question is whether the outcome will be (a) failure to agree, (b) a freeze at the 2013 level, (c) an inflationary increase or (d) a cut in real terms. It hardly matters. Whatever happens in negotiation, the commission will annually bring out a draft budget for the coming year.

If there has been on agreement on the framework its proposal for spending will still probably be close to what it had originally suggested. If there is a freeze, the commission will argue that the budget cannot be balanced. Those who want more but lost on the unanimity vote will take the opportunity to organise a qualified majority for an increase. If there is an inflationary increase there will be debate about how much it should be – with cries of pain from the member states with above average inflation rates. If there is a real terms cut here again those seeking funding for agriculture and infrastructure development will combine to insist that circumstances have changed and that they cannot be penalised because the better -off want to save money. What price solidarity?

In short, the seven year plan needs unanimity and may not get it. The annual budget negotiations will plough on without out it, reaching agreement by qualified majority on a compromise. 'Twas ever so.