Parliament backs EU budget increase

The European Parliament has today backed a report which calls for a minimum increase of 5 per cent in the European Union's post 2013 budget. It also sets out plans for EU taxes and an end to national rebates.

Passed by 468 votes to 134, the report is likely to spark a dispute with member state governments who have called on the EU to show restraint in its budget demands for the next seven-year multi-annual framework. MEPs demanded that countries which opposed the increase should spell out which spending programmes they would drop.

If the budget is increased by 5 per cent, MEPs said, it would stand at about 1.11 per cent of the EU's gross national income, compared with 1.06 per cent planned for 2013, the final year of the current framework. They said regional funding and Common Agricultural Policy spending, which together account for two-thirds of the total budget, should remain at current levels, while savings could be made on administrative costs.

They also called for a system of own resources – in other words Europe-wide taxes – which would be, MEPs claimed, a fairer and more transparent system. The demand for an end to rebates will infuriate particularly the UK, which has in the past been extremely protective of its own rebate, worth about £3bn a year.

Joseph Daul, chairman of the centre-right European People's party, the largest group of MEPs in the parliament, said the budget had to be increased and based on own resources. "Europe has changed, and it would be irresponsible not to reflect these changes in the way the EU is managed and funded," he said.

Referring to the likely dissent from national governments who are undertaking severe budget cuts in a time of austerity, he said: "I would point out that the EU budget has always been balanced, unlike those of our member states who, for the most part, are severely indebted. I also recall that more than 90 per cent of the EU budget is spent on projects that directly benefit the member states themselves."

"We must tell the truth to Europeans," he continued, "namely that a euro spent at EU level offers a much more promising future, is much better invested, than one euro spent at national level, which has already lost 20 or 30 per cent of its value to repay the interest on the national debt." His rhetoric is unlikely to be received well in those countries, including the UK, France and Germany, which have called for the EU's budget to rise only in line with inflation.

The Greens/European Free Alliance also welcomed the adoption of the report. Bas Eickhout MEP said that neither freezing nor decreasing the budget would have been credible if the EU's long-term policy objectives in areas such as climate, innovation and education were to be achieved. He added that only by raising resources itself could the EU end the "perpetual, damaging squabbling over national contributions".

But the European Conservatives and Reformists group slammed the proposals as "total unacceptable". Chairman Jan Zahradil said his was the only group listening to European taxpayers, while Richard Ashworth MEP said the parliament was now "on a collision course with many national governments who have already said that they will not accept EU budget increases".

Ashworth added: "One day national governments are being told by Brussels to cut their deficits and the next they're being asked to pay tens of billions more to the EU. National governments, local authorities and households are having to set priorities on their spending yet MEPs categorically refuse to do the same."

He said the "ostrich mentality – whereby MEPs answer every question with "more Europe" – only increased the public's disaffection with the parliament. "The EU should never gain the power to raise its own taxes," he added. "Apart from the fundamental loss of national sovereignty, we cannot allow MEPs to have any powers to raise taxation given their record of inexorably increasing the EU budget."

The parliament is the first of the EU's institutions to set its position on the budget. The European Commission will table proposals on the budget and on own resources on June 29, and negotiations will continue from there.

Meanwhile the Socialists and Democrats hailed as "major breakthrough" the parliament's backing of a financial transaction tax as one way of raising money. Leader Martin Schulz said: "We know expect the commission to act promptly on the demands of the democratically elected parliament and to bring forward appropriate measures. Europe must give the rest of the world a lead by levying this tax within its boders and campaigning for it to be introduced in the rest of the world."

The group's budget spokesman Göran Färm added: "A financial transaction tax will deal with two problems at once – how to finance ever-growing demands to put new EU policies in place, and how to make the financial sector contribute to the resolution of the economic crisis that it caused."