Commission braced for spending review row

The European commissioner for budgets will present options for EU budget reform in September.

The European Commission is expected to present a review of budget spending in September that is likely to spark a row over its future budgetary priorities, officials say.

The review of the EU’s 2007-13 spending was supposed to come out last year, but was delayed because of problems ratifying the Lisbon treaty and appointing the new Commission.

“The problem is we have to shape a review at a time when people are focused on the future [budget] perspectives,” said Janusz Lewandowski, the European commissioner for the budget.

Introducing tax

The mid-term review is supposed to analyse spending priorities and who pays how much into the EU’s coffers. This is always contentious but promises to be exceptionally tricky in the wake of an economic crisis that has left governments with huge deficits. Officials working on the budget are increasingly pessimistic about the chances of getting an increase in the EU’s budget in the future.

Part of the review will address the issue of whether the EU should introduce its own tax, in the form of a new value added tax or fuel levy, to pay for its own budget. EU officials are doubtful about proposing a new tax because of the resistance from member states.

The European Council had set the end of 2009 as a deadline for the review when EU leaders agreed the budget for 2007-13 back in 2005.

The review is supposed to address issues such as whether deeper reform of the Common Agricultural Policy is needed as well as what to do about the UK’s budget rebate.

Diplomats and officials say the review is likely to spark a new clash over the UK’s rebate, subsidies for farmers and aid given to the EU’s poorer regions. Some officials fear that a row over the review could make member states toughen their positions and inhibit the Commission from presenting ambitious proposals on the EU’s spending plans for the new budgetary period, which starts in 2014.

Those proposals are expected in the spring of next year, with the aim of getting an agreement in 2012. However, many people following the issue fear a drawn-out and painful negotiation not only between member states but also with the European Parliament, which now has greater budgetary powers thanks to the Lisbon treaty.

Lewandowski warned the Parliament last week that there will be very tight limits on spending in the coming years in wake of the economic crisis (see below).