Brexit will tear a hole in the European Union's budget, but Brussels seems determined to go ahead as if nothing happened. If the European Union wants to actually improve the life of its citizens, it's not by increasing spending that it will do so.
EU Budget Commission, the German Günther Oettinger has already set an agenda for reaching the new budget goals in the coming years. Oettinger alongside commission president Jean-Claude Juncker told journalists at a news conference that for the period 2021 to 2027 member states, should contribute between 1.1 and 1.2 per cent of gross national income, compared to the current 1 per cent. The Commissioner subsequently explained that 50 per cent of the budget gap created by the UK's departure will already be covered through cuts in the sector of agriculture and regional development. Little is known of specifics regarding these cuts. The other half would be covered by increasing revenue for which EU leaders are now scouting the terrain, looking for takers to pay the bill.
However, Oettinger’s move is likely to face some harsh opposition in the member states. Austria's finance minister Gernot Blümel made the case in Brussels that if revenue goes down, then the union should simply cut spending. He said that it couldn't be the case that if revenue goes down, spending could continuously increase. Blümel certainly has a point: in a time in which the political priorities of the EU are under increased scrutiny, it isn't good politics to avoid any type of fiscal discipline.
Last month as part of the Commission’s new plastics strategy, Oettinger had raised the idea of introducing a tax on plastic packaging, in order to raise revenue. The German politician pointed out that the union “should learn from the positive outcome we have seen in countries like Ireland. After introducing a plastic bag tax, the country generated €200 million over a 12-year period and also reduced the presence of bags in the environment from 5% of litter pollution to 0.13%.”
After the idea had come under fire, it disappeared very quickly in the abyss of creative EU-policy ideas. However, it ties into a general tendency to demand an EU-income as such, coming from, amongst others, the Monti Group, which includes ALDE (Alliance of Liberals and Democrats in Europe) group chairman Guy Verhofstadt, French taxation commissioner Pierre Moscovici, Commission vice-president Frans Timmermans as well as the former Prime Minister of Italy Mario Monti. Even as recent as this week, Guy Verhofstadt tweeted out:
If the EU were to levy its own taxes, the control over the "necessary revenue" that it needs to raised would be in the hands of Brussels itself. As member states would lose their influence through negotiations over the budget, centralisation would have made a noticeable leap forward. Compare this to Switzerland, where the individual cantons levy taxes and transfer it to the capital. This way, they safeguard an important negotiating force against the centralisation of power. Regional tax levy is one of the most important features of giving power to local communities instead of capitals.
The Baltic states also joined the call to increase the member states' budgetary contribution to the European Union. That move however comes less as a staunch pro-EU position than an cheap way to cash in on financial aid, as they demand in increase in farm subsidies through the Common Agricultural Policy (CAP). As over 40 per cent of the union's budget goes to expenditure on these agricultural aids, Estonia, Latvia and Lithuania would likely get an interesting return on their call for feathering the British budget losses. In fact, the CAP makes up 40 per cent of total EU expenditure. The question therefore shouldn't be: "how do we continue to fund this programme?" but "do we actually still need this programme?".
The CAP funding leads to agricultural overproduction in Europe, and makes producers outside of the union less competitive. It is one of the regrettable features of protectionism that the EU happily practices in order to please its local farmers. It is an enormous cost on the European taxpayer and important arguments against it have already been made.
The European Union needs to look at Brexit as an opportunity to reevaluate its priorities. EU-leaders in Brussels need to cut spending on EU programmes and reduce the size and scope of the organisation, in order to regain trust in European cooperation. That, in its essence, is what the Juncker Commission should really aim for.