The EU institutions are in the middle of their annual budget ping-pong. The European Commission proposes the annual budget, and then the European Parliament and Council of the European Union (where Member States are represented) decide on the budget.

The Commission’s opening shot for the 2012 budget, published in April this year, proposed a 4.9% increase over 2011. The Council rejected this in July, arguing for a 2% rise in line with inflation. The European Parliament has today hit back, trumping the Commission even, by proposing a whopping 5.2% increase.

Rather predictably Labour MEPs in the EP voted against the increase, with Derek Vaughan MEP saying “Given the tough economic times, our constituents expect us to deliver a responsible EU budget, and Labour MEPs believe that means it should be frozen next year” and in the EPLP press release he goes on to state some vague words about budget re-prioritisation.

The thing is the EP’s budget proposal does re-prioritise, keeping administrative spending down and proposing increases in Research and Development (+10.35%) and Cohesion and Structural funds (+8.8%). The EPLP press release even says that the UK Labour MEPs backed those increases, but rejected the whole position due to inadequate cuts elsewhere.

What exactly are Vaughan and his fellow Labour MEPs playing at? They know full well that CAP spending cannot easily be reduced in the annual budget, so they symbolically reject the budget proposal, but back important increases elsewhere.

As for the budget vote in the EP overall I can’t make up my mind about it. The EP’s rapporteur – Francesca Balzani – is from the S&D group, but at the time of writing there is no news on the S&D website about their position. Further, there’s not a hope in hell that the Council will agree to 5%, nor that cuts to CAP will be agreed there so as to allow the R&D and Cohesion funds to increase. So, despite all these words, and plenty of bluster, I am still far from sure this is going to make much of a decisive difference in the face of austerity in budgets at national level. Perhaps not pissing in the wind, but this all looks like a case of excessive moral righteousness from the European Parliament…

While I don’t do point by point rebuttals (for these sorts of reasons) very often, I’m going to have a go this time, as there is so much in what Montgomerie has written that’s wide of the mark.

The opening lines – that a 4.9% increase in the budget is unacceptable – is probably about the only thing that’s correct in the piece. There’s no way that is going to actually see the light of day anyway. The figure relates to a proposal for the increase in the 2012 annual budget of the European Union.

It’s worth pointing out that a real-terms (i.e. inflation not included) 1.3% increase between 2011 and 2012 has been known about anyway right since the 2007-2013 financial perspectives were agreed – see table towards the bottom here.

Montgomerie goes on, quoting George Osborne in Metro:

Unfortunately because the last Labour government signed away our veto on budgetary matters, it’s possible we won’t be able to stop all of the increase.

This is not true.

Three treaties – Amsterdam, Nice and Lisbon – were agreed during Labour’s time in office, yet the procedure to adopt the annual budget in the Council has remained the same since 1992 and the Treaty of Maastricht – the last Treaty the previous Tory administration signed. This Treaty is only available online in a scanned PDF (huge download here) but the important line is in Article 203 3. and states: “The Council, acting by a qualified majority, shall establish the draft budget and forward it to the European Parliament”. Note the words qualified majority – i.e. not unanimity. So there has been no signing away the veto by Labour – that has been no veto at least since 1992. Unanimity still applies if the UK’s budget rebate were to be amended in future.

Montgomerie again:

a transfer to French hobby farmers, ineffective regional aid programmes and other unaudited EU projects

OK, it’s possible to not like the French agricultural industry, but it’s not as if it is not a professional operation! More on this here – it’s not as if CAP cash ends up in the hands of small ‘hobby’ farmers. Plus the agriculture budget is set already for the period to 2013 anyway. The ineffective and unaudited stuff I’ve dealt with before – EU spending is not perfect, but it’s much less bad than it was, and the UK is no better than anyone else.

Britain is an abusive relationship with Europe. Brussels keeps hitting us with more and more demands.

So Tim, how does all of that sit with Number 10′s very public calls to complete the Single Market? Or is it because you’re annoyed with things like the EU is ticking off the UK about air pollution? There’s a fundamental contradiction here. To make the Single Market work you need rules, and rules that everyone respects. You can’t expect others to open up their markets, liberalise etc., without the UK living with the things that are important to others.

…to get a sense of the real frustration at Europe. Whether it’s the budget, votes-for-prisoners, controlling immigration, protecting the City from dangerous regulation or reviving the UK fishing industry, the EU is a massive problem.

Budget I’ve dealt with above.

Votes for prisoners is the Council of Europe, not the EU, but of course it’s all ‘over the channel’ to a Tory.

Controlling immigration – what’s the problem? Migration from EU countries now shows a downward trend (some stats here), and if the UK were to negotiate limits on EU migration, how would all the Tory voters feel who own homes in France and Spain and would see their movement restricted? Freedom of movement within the EU is here to stay, and even Tory ministers would admit that.

City and regulation – here there might be a point, but as the financial crisis has shown, there’s a determination across Europe to make sure the same thing does not happen again, and no country is immune to the dangers within the European Union where capital can move freely. The problem with the City is that it overplays its hand in Brussels and lobbies in an insensitive manner – the legislation could be shaped in the UK’s interests, and that needs positive engagement, not a bull-in-a-china-shop approach.

Fisheries – Maria Damanaki is doing a better job to reform the Common Fisheries Policy than any of her predecessors, and is making bold efforts to cut down discards. These efforts should be commended, shaped and supported, not berated.

Only when the Tory leadership is seeking a fundamental resetting of Britain’s relationship with the EU will it deserve to be seen as Eurosceptic.

So it’s not even about policy outcomes then – the notion that the UK government’s interests and the EU interest could somehow be aligned. It’s about going to Brussels, fighting, and winning. Very responsible approach to politics, that is. Well done.

But for those of us that have been following the EU for years there’s little that’s groundbreaking here. The only new, substantive things I’ve found out are about the slow levels of spending so far for 2007-13 (although slow spending has beset all kinds of EU programmes for years), and the fact that local governments in Poland are running up debts in order to be able to release match funds from EU level.

Beyond that any of the problems and allegations – a focus on paperwork rather than project impact, cumbersome bureaucracy, fraud, lack of staffing resources, OLAF being dysfunctional, the mess being more at regional or national level than EU level – are things that have been known for years and years, and are generally well documented already.

So why then are the folks that inhabit the Brussels bubble getting so flustered? So much in fact that Commission spokesperson Pia Ahrenkilde-Hanssen spent time rebutting the allegations, Commissioners Hahn and Andor felt obliged to publish a statement (see all of this on the FT blog), and #eufunds on Twitter is a stream of RTs from every institution-related Twitter account defending structural funds.

All of this seems to demonstrate two things – the importance of the FT in Brussels circles, and the fact that the allegations hurt. The FT is widely read in Brussels, but unlike European Voice it doesn’t just slavishly service the the institutions; it brings some semblance of connection to the real world. While it remains to be seen how many politicians outside the Brussels bubble pay attention to this week’s reports, it seems that the FT has a unique ability to at least deflate, if not pop, the Brussels bubble.

First, vocabulary and presentation of numbers. Perhaps naively I expect the tone of pieces in the FT to be dispassionate, to let the facts of the matter do the talking. The article in the printed FT talks of programmes “riddled with waste and fraud” and the video intro to the story on the FT’s site talks of the “murky world of EU structural funds“. The way the numbers are presented is also rather inconsistent – the total budget for structural funds for 7 years (2007-2013) is €347 billion yet the headline number on the main graphic fails to mention this, and this total is then compared to two years of UK government spending on health and education. I suppose this is consistent form for the FT though, as I’ve previously commented.

Secondly, openness. I was travelling by Eurostar this morning so was able to pick up a copy of the FT but if you want access to the story off their website it’s behind the paywall. There’s a summary post at the FT’s Brussels Blog, but this too ultimately leads to articles that are not public. And this for a story about openness of information where in the printed paper they encourage readers to dig into the data and see what they can find. Then there’s the data – it’s not downloadable and there’s a single search field. If research like this is to truly reach a new level then bloggers and the open data community need to play a role too, and the opportunities for that strike me as rather restricted here.

Thirdly, the substance and the structures – why is EU structural funding in this mess? What should be done about it? I hope that’s going to be the subject of subsequent stories in the coming days in the FT. From my own perspective I think the situation is explainable although highly undesirable – administrative stasis and risk aversion in the Commission, coupled to slow bureaucratic procedures for any financial transaction that date back to attempts to stamp out corruption in the late 1990s.

It’s also possible to predict now what will happen when the budget post-2013 is negotiated in detail – countries that benefit from structural funds will lose a bit, net contributors will pay a bit less, everyone will agree to some messy compromise in a late night negotiation, the UK will realise it can’t annoy the countries of central and eastern Europe who are the main recipients, and so we will all muddle ahead, until 7 years from now the FT produces an equivalent investigation about how the problems have persisted.

Plus ça change, plus c’est la même chose. Or am I too cynical?

Merkel, Cameron, Van Rompuy - CC / Flickr

There’s an interesting piece at Centre Right on Conservative Home that looks at Cameron’s posturing on the EU budget last week (making a similar point to mine about his ‘win’) but also looking more broadly at whether the EU is an important political issue for voters, and what that might mean for the future.

The main argument is that the EU is seen as such a monolithic, unchangeable beast that voters cease to care about it – it’s impossible to alter, impossible to fix, so henceforth impossible to care about. There’s an element of truth in this, but it’s exacerbated by the very sort of approach the Tories (including the author of the Conservative Home piece) advocate – that the way forward is for the UK to renegotiate, for the UK to leave the EU, or for the UK to in some way not cooperate.

The first line of the final paragraph is the important one: “Voters need politicians that lead them, that tell them what matters, what can be changed and what to simply sit back and accept” – yes, precisely, particularly at EU level. So isn’t it about time Cameron got together with Merkel, Sarko, Berlusconi and even Barroso to try to work that out? I suspect that would require a cooperative pragmatism that Cameron’s rather incapable of just now.

EU Flag - CC / Flickr

The British press has been making a big thing of negotiations on the 2011 EU budget for the past couple of days. David Cameron was apparently telephoning EU leaders yesterday, and on the eve of today’s summit claimed victory that the budget would rise 2.9% rather than the 5.9% proposed. About the lower increase Cameron said “the key point is, it wouldn’t have happened without our action”. Not so.

Anyone who has ever looked at how the EU’s annual budget has been negotiated would have seen this pattern replicated loads of times. It’s a merry dance conducted between the institutions, and everyone knows the steps and the rhythm.

The European Commission proposes the budget for the coming year, and deliberately sets it high. The European Parliament likes to see the EU doing things, to generally agrees with the Commission. Then the Member States – the ones who pay 75% of the budget directly as contributions from national finance ministries – step in, and knock down the percentage rise. So everyone gets what they want, give or take a bit. Commission and Parliament get a bit more cash. Member States look like they are reigning in the Commission and Parliament.

And Cameron claims he managed that all on his own? Rubbish.

Merkel and Sarkozy have precisely the same incentives Cameron does and, you could indeed argue, incentives three times as high as Cameron’s. For 2/3 of any extra money the UK puts into the budget is going to come back to the UK in the form of the UK budget rebate anyway, and it’s not clear whether all the numbers Cameron and co are banding around take account of the rebate or not.

As for the crux of the issue – the EU budget itself – then there is a good case for proper reform, but that will all happen when the financial perspectives are negotiated for the years beyond 2013. There some sparks are going to fly for sure.

The European Commission has put together the smart video above about the EU budget. Clearly professionally filmed and produced, I wonder whether it will it will convince anyone about the merits of the budget? Yes, OK, it’s 1% of EU GNI, that’s all very well. It’s decided in a transparent way. Good. But the problem is what the money is spent on (and the fact this this is so incredibly slow to change) – that’s down to administrative complexity.

Also isn’t a young woman doing some cooking a rather gender specific way to approach this?

Anyway, I am glad at least that the Commission is trying in part to set out how the budget works and using a reasonable video to do this. The video has only 1500 views at the time of writing – it should get more than that at least.

[UPDATE]
@erikwesselius on Twitter has pointed out this video – more balanced, but probably with a lower budget to film it.