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Open Europe fact-checks the Commission's 2013 draft budget

27 Apr 2012

Proposed staff cut only amounts to net loss of 6 out of almost 41,000 EU jobs

On Wednesday, the European Commission tabled a proposal to increase spending in next year’s EU budget by 6.8%. Despite the increase, the Commission claims that the budget contains “tough” decisions on savings, including a 1% cut in the Commission’s workforce, while promoting “jobs and growth”.

However, upon closer examination, these claims do not stack up. For example, total EU expenditure on administration is actually going up by 3.2% while the proposed staff cut for next year only amounts to a net loss of 6 out of almost 41,000 EU jobs. To help focus the debate, Open Europe presents a detailed factcheck of the Commission’s claims below.

Open Europe’s research analyst Pawel Swidlicki said:

“No amount of Commission spin can conceal the huge and growing mismatch between the EU budget and economic reality, including the failure of far too much EU spending to deliver jobs and growth.”

“Given the austerity that is sweeping Europe, reformist governments such as the UK now have a rare opportunity to push for radical EU budget reform, starting with cutting the cost of the EU institutions and overhauling the economically irrational structural funds.”

FACT CHECK: THE COMMISSION’S EU DRAFT BUDGET

 1.   IS THE EU REALLY CUTTING STAFF?

The claim: “[The Commission is] cutting its staff by 1%, the first step towards the goal of a 5% reduction of staff in 5 years”.

The reality: The EU will only cut 6 jobs net out of 41,000 jobs in 2013

  • While the EU is cutting 286 posts from a total of 40,775, it is also taking on an additional 280 staff as a result of Croatian accession, expected on 1 July 2013, bringing the total number of staff across all the EU institutions to 40,769. In other words, net, it is only cutting 6 jobs. Once these additional posts are taken into account, the Commission is only cutting its overall staff by 0.5%, not by the 1% presented in the headline figure.

  • In contrast, Greece is cutting a total of 150,000 public sector jobs over the next three years, while according to figures from the ONS, Between March 2010 and March 2011, UK civil service employment fell by 6%, or 29,051 posts.[1]

2.   IS EU ADMIN SPENDING ACTUALLY FROZEN?

The claim: “[The budget] also freezes the Commission's administrative budget at well below inflation level…The vast majority of people across the EU feel the daily pain of the crisis as their national, regional and local governments have to make cuts, therefore a ‘business as usual’ attitude from the EU institutions is simply not acceptable.” 

The reality: Overall EU administration spending to increase by 3.2%

  • While the Commission claim that its 1.5% increase in strictly administrative expenditure (as classified by the Commission itself) is below the level of inflation is true, once the costs of spending on EU schools and pensions are factored in – which also fall under the heading for administration – total EU expenditure in this area across all institutions is actually increasing by 3.2%.
  • At the same time, a number of individual spending items under this heading are going up substantially. Total spending on Commission salaries will increase by 2.8% (to €2.4bn). Total EU employees’ pensions and allowances across all institutions are up a full 6.8%, an increase of €90.5m (taking the total to €1.4bn).

The growing cost of EU pensions and allowances 2005 – 2013 (€m) 

  • In addition, EU spending on ‘European schools’ (schools for children of EU officials), is also up 6.8%, an increase of €11.5m, taking total expenditure on EU schools to €181m. The increase is partly due to the opening of two new schools, one in Brussels and one in Luxembourg. If the Commission’s share of the costs for pensions and EU schools were factored into its individual figure for administration, it would be substantially higher than the 1.5% claimed.

3.   DO THE OTHER EU INSTITUTIONS REALLY SAVE “WHEREVER POSSIBLE”?

The claim: “[The draft budget] includes a strong emphasis on savings and cost efficiency…pressure was exerted on every EU institution and agency to seek savings wherever possible. Most EU agencies will actually see a real cut in their annual budget.”

The reality: Apart from the Commission, many of the EU’s other institutions, committees, quangos and agencies have seen their budgets go up despite adding no discernible value or duplicating tasks, although it is welcome that many of the EU’s decentralised agencies have indeed had their budgets frozen or cut in absolute terms.

  • The budgets of the Economic and Social Committee and the Committee of the Regions - two largely redundant EU institutions which even EU officials admit have no influence on policy - are set to go up by 3% and 2.9% after Croatian accession, bringing their combined budgets to €221.7m. However the budget of the Court of Auditors, which performs a useful role in scrutinising EU expenditure, is only set to increase by 1.6%, below the rate of inflation.
  • The budget for the Agency for Fundamental Rights, one of two EU agencies specifically dedicated to human rights and which duplicates the work of similar bodies in member states, the Council of Europe, the ECHR and a range of NGOs is set for an increase of 5.2%, bringing its total budget to €21.2m.
  • The cost of running the ECJ is to increase by 8.4% after the Croatian accession (total expenditure €377.5m). The operational costs of running the EU’s diplomatic service, the EEAS, will increase by 5.7%, an increase of €28m. Meanwhile, the UK’s FCO is facing cuts of 10% to its core budget.[2]
  • Spending on other non-essential items is also on the rise, with the budget under the ‘Education and Culture’ heading increasing by €681m (2.5%) to a total of €2.8bn. In contrast, the UK’s Department for Media Culture and Sport has been cut by 25%, even though it is in charge of delivering the London Olympics this year.[3] 
4.   WILL THE INCREASED SPENDING REALLY PROMOTE JOBS AND GROWTH?

The claim: “€62.5 billion in payments are devoted to job friendly growth in Europe”.

The reality: The EU’s jobs and growth programmes are inefficient and their overall impact is inconclusive, while too much money is still wasted on farm subsidies to landowners with no link to any meaningful economic activity.

  • The vast majority of these payments are for projects funded under the EU’s structural funds, which redistribute taxpayers’ cash across European regions, and are set to increase by 12.1% to €39.3bn.
  • While these funds can help new member states, over 40% still goes to richer countries and merely involves money flowing back to regions in which it was originally raised, adding no economic value. Furthermore, the Commission’s extravagant claims on jobs and growth are often based on macroeconomic models which rest on unrealistic assumptions. For example, as one Commission study admits, these models “assume no money is wasted on suboptimal projects”, meaning they assume the very thing they are meant to prove.[4]
  • In addition, agricultural spending in the form of market interventions and direct taxpayer subsidies to farmers and landowners, irrespective of what they do with their land area, is set to go up by 0.5% to a total of €44.1bn – despite a number of studies have pointed out that such spending is outright damaging for jobs and growth.[5]
5.   DOES THE COMMISSION REALLY HAVE NO CHOICE BUT TO INCREASE SPENDING?

The claim: “The EU budget must meet its contractual obligations of current and previous years vis-à-vis the Member States and other recipients.”

The reality: Yes the Commission is legally obliged to make certain payments based on previous years’ commitments. However, both national governments and households also have to pay bills too at the end of the month or year. The Commission must likewise learn how to prioritise and find savings if there is not enough money in the pot.

  • The Commission is correct when it argues that is not straightforward to move cash from one area of the EU budget to another, but that does not mean that it is impossible to find savings. There was a €1.5bn surplus in last year’s EU budget, and a €4.5bn surplus before that. While this can’t be used to finance savings in the 2013 budget, it still shows that there is plenty of fat to cut.

NOTES FOR EDITORS

1) For more information, please contact Pawel Swidlicki on 0044 (0)207 197 2333 or 0044 (0)796 607 0172.

2) Open Europe is an independent think-tank calling for reform of the European Union. Its supporters include: Lord Leach of Fairford, Director, Jardine Matheson Holdings Ltd; Lord Wolfson, Chief Executive, Next Plc; Hugh Sloane, Co-Founder and Chief Executive, Sloane Robinson; Sir Stuart Rose, former Chairman, Marks and Spencer Plc; Jeremy Hosking, Director, Marathon Asset Management; Sir Henry Keswick, Chairman, Jardine Matheson Holdings Ltd; Sir Martin Jacomb, former Chairman, Prudential Plc; Lord Sainsbury of Preston Candover KG, Life President, J Sainsbury Plc; Michael Dobson, Chief Executive, Schroders Plc; David Mayhew, former Chairman, JP Morgan Cazenove.

For a full list, please click here:
http://www.openeurope.org.uk/Page/Supporters/en/LIVE

3) The Commission’s press release ‘Draft Budget 2013: Investing in growth and jobs’ which contains the Commission’s claims cited above is available here:
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/12/393&format=HTML&aged=0&language=EN&guiLanguage=en

4) The ‘Statement of Estimates of the Commission for 2013’ which contains the projected changes to staffing levels and expenditure is available here:
http://ec.europa.eu/budget/library/biblio/documents/2013/DB2013/DB2013_docI_en.pdf

ENDNOTES

[1] Open Europe, 'The Second Bailout: Bad for Greece, bad for eurozone taxpayers'
http://www.openeurope.org.uk/Article?id=8555
Office for National Statistics, ‘Civil Service Statistics – 2011’
http://www.ons.gov.uk/ons/dcp171778_237745.pdf

[2] House of Commons’ Foreign Affairs Select Committee, ‘The Implementation of SR2010’
http://www.publications.parliament.uk/pa/cm201012/cmselect/cmfaff/1618/161806.htm

[3] DCMS, ‘Spending Review 2010’
http://www.culture.gov.uk/news/news_stories/7502.aspx

[4] Open Europe, ‘Off Target: The Case for bringing regional spending back home’
http://www.openeurope.org.uk/Content/Documents/PDFs/2012EUstructuralfunds.pdf

[5] Open Europe, ‘More for Less: Making the EU’s farm policy work for growth and the environment’
http://www.openeurope.org.uk/Content/Documents/Pdfs/CAP2012.pdf

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