It is expected that the European Commission will present its long-awaited review of the EU budget on 29 September. The report will propose an “evolution” rather than a “revolution” for policies like agriculture and cohesion and a set of “six or seven options” for new own resources, a knowledgeable source told Europolitics.

The date of publication is still uncertain and will depend on the decision of the College of Commissioners. The document will be presented by Budget Commissioner Janusz Lewandowski (Poland) and Commission President José Manuel Barroso, who is personally involved in this sensitive matter. The text will not be a communication or legislative proposal, but a report in response to the mandate given by the member states five years ago. In the early morning hours of 16 December 2005, after hammering out an agreement on the 2007-2013 financial framework, the states asked the Commission to undertake a “thorough review” of the budget “covering all aspects of EU expenditure, including the Common Agricultural Policy, and resources, including the United Kingdom’s rebate, and to report in 2008-2009”.

Barroso failed to keep to this timeframe so as not to impede ratification of the Lisbon Treaty in 2008 and the appointment of his new team in 2009. The document will consequently see the light of day in September this year. In the midst of an economic crisis, the date hardly seems well chosen but the Commission cannot delay any longer because it is obliged to present, no later than June 2011, a proposal for the forthcoming 2014-2020 financial framework. The report, on 29 September, will open the debate on budget reform.

It is expected to reconsider the expenditure aspect by addressing the question of the future of EU policies like the CAP and cohesion. Unlike an unofficial document revealed by the press in November 2009 and which proposed, like the Sapir report six years earlier, to renationalise these two policies to a large extent, the forthcoming document will not present a “revolution” but simply an “evolution”. EU resources for farmers and for the poorest regions will not be totally abolished but the allocation of funds will be reviewed and corrected. On the CAP, for instance, Commissioner Lewandowski would like to encourage rural development more than direct payments. The text will systematically outline several scenarios “possibly matched with figures”.

The revenues section of the budget will be given the same treatment. The Commission is expected to propose to abolish the British rebate and all other types of exceptions granted to certain states in order to simplify the present system, based essentially on national contributions. “Six or seven options” for new own resources will be presented, with each one’s advantages and disadvantages detailed. Among the likely options are the creation of a carbon tax, a tax on financial transactions and an air transport tax. Lewandowski is opposed to a European income tax that would fall on states and EU citizens. On the other hand, he seems prepared to defend the idea that a substantial part of the income generated by taxes levied nationally and decided at European level should be paid back into the EU budget. The Commission’s document will stress that such taxes are “fiscally neutral,” “politically acceptable” and “logistically feasible” (ie the cost of levying them does not exceed the revenues raised).

The Belgian Council Presidency will probably react to the Commission’s budget review this autumn, as will the European Parliament, which in July set up a special committee on preparation of the next financial framework. The two branches of the budgetary authority will be in the midst of tense negotiations on the 2011 budget at the time (see Europolitics 4029-4030).