EU budget stalemate: The battle is about more than European waste

Matthew Sinclair
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THE EU summit in Brussels last week ended the way most people expected: no agreement. The deal on the table from Hermann van Rompuy – president of the European Council – was for a €973bn (£787.5bn) budget over seven years in 2011 prices. It was significantly less than the over €1 trillion budget originally proposed by the European Commission.

Many in Brussels back the European Commission and regard David Cameron as an utterly unreasonable eurosceptic for insisting on at least a real terms freeze in the Budget. Hannes Swoboda MEP – president of the Progressive Alliance of Socialists and Democrats group, which Labour MEPs call home – said “it is unacceptable that the majority of member countries are letting themselves be blackmailed by Cameron, who is permanently threatening to block progress in the EU”.

On the other hand, in Britain Cameron is under attack for being too soft. Conservative rebels and the Labour party inflicted a defeat on the government in Parliament, with a resolution that he should work for an actual cut in the EU budget, not just a real terms freeze.

This disagreement is not just a clash of financial interests between the countries which enjoy most of the spending and the countries – like Britain – who get most of the bill. There is a deeper divide between those who see European institutions as a replacement for national governments, and those who see them as an expensive duplication of what is, and will continue to be, done by member states.

Nevertheless, there is no doubt that the EU wastes money on an eye-watering scale. The European Court of Auditors has refused to sign off on the EU accounts for the eighteenth successive year. It found that a “farmer was granted a special premium for 150 sheep” but actually “did not have any sheep.” Land was classed as “permanent pasture,” despite being “fully or partially covered with dense forest or other ineligible features.” The overall rate of material error in payments was even higher in 2011 – 3.9 per cent – than it was in 2010 – 3.7 per cent.

But it isn’t just fraud and error that means the EU wastes money. Even compared to the British government’s lamentable record in managing major projects, Brussels has had some incredible overruns.

In 2010, Open Europe found that the cost to European taxpayers of the Galileo satellite project – designed to provide an alternative to the American GPS, used in smartphones and satnavs today – had gone from €2.6bn to €22.2bn. It went from a largely privately funded project, due to be finished by 2008, to a completely taxpayer-funded disaster, not expected this side of 2017.

European bureaucrats also spend a fortune promoting their own political agendas, at your expense. TaxPayers’ Alliance research earlier this year found that nearly €100m has been given to environmentalist groups like Friends of the Earth under a programme called LIFE+. Those groups use the money to agitate for even more aggressive energy policies, meaning even higher costs for consumers and industry.

Despite all that, and countless other examples of EU waste, enthusiasts for ever closer union see the potential for savings. Guy Verhofstadt MEP argues, for example, that the “biggest waste in EU spending is the duplication at national level in defence spending, diplomatic representations around the world or research and development.” In other words, the real problem isn’t waste at the EU institutions, it is the fact that member states are still clinging to the functions he wants to transfer to Brussels and aren’t pooling their resources.

That is why this debate over the budget is about more than the financial interests of different countries fighting their corner. If you think, like I do, that the lack of flexibility and accountability that afflicts supranational organisations, like the EU, means we should continue to govern ourselves, sending a lot more money off to the European institutions is therefore a terrible idea. When taxes are being raised (and at least some spending is being cut) at home, it is unthinkable that the results should be squandered in Brussels.

But, if you are trying to build a superstate to govern a population of over 500m people, €1 trillion over seven years looks like a bargain. This is a disagreement over ends, not just means.

Matthew Sinclair is chief executive of the TaxPayers’ Alliance.