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Committee says 'EU budget is no longer fit for purpose'

9 July 2014

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The House of Lords Economic and Financial Affairs EU Sub-Committee has written to the Treasury Secretary warning that the EU budget process needs 'radical modernisation'.

The Committee has identified a series of problems with the EU budget-making process. These include:

  • A huge backlog of outstanding payments to Member States, including €23bn in cohesion policy payments (of which €1.3bn relates to the UK);
  • The frontloading, or prioritising, of payments for certain EU programmes leading to undue pressure in later years;
  • The use of an emergency pot of funds, or Contingency Margin, to make ends meet in the meantime.

These problems have already led to the EU having to ask for an extra €4.7bn for the 2014 budget, and they reflect 'a significant cash flow' problem within the budget-setting process, according to the Committee. It is asking the Government to 'identify urgently' a solution to these problems.

Chairman's comment

Lord Harrison, Chair of the Committee, said:

"The EU budgetary process is groaning under the weight of seemingly intractable problems.

"In our letter to the Treasury we ask why the scale of the backlog of payments was not anticipated, and ask whether this failure is an indictment of not only the Commission, but also the Council and the European Parliament.

"The frontloading of programmes, while important for promoting growth and jobs, risks placing an intolerable pressure on the overall seven year budget for 2014-2020. Yet the Council failed to foresee that the Commission would need to resort to the Contingency Margin.

"The UK is right to press the Commission on avenues for reallocation within the existing budget. But the Government's suggestions for where such savings can be made are woefully lacking in detail.

"Taking all these issues together we believe that the budgetary process now needs radical modernisation. We have asked the Government to write to us as a matter of urgency setting out how they believe the system can be reformed."

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