I thank the Chairman, Senators and Deputies. It is a great honour and privilege for me to be here as they will hear from my accent. Although I have been living in Brussels for 17 years, I am from Dublin. I thank the joint committee for inviting me. "A modern budget for a Union that protects, empowers and defends" is the proposal the European Commission put forward on 2 May in its communication on the Multi-annual Financial Framework, MFF, for the period 2020 to 2027, inclusive. In the coming months there will be many negotiations, analysis, discussion of figures, numbers and percentages, but we are not simply talking about figures, numbers and percentages. This is the political project the Commission wants to put forward for the future of Europe.
This is the first MFF for 27 member states, bound together by solidarity which began at the beginning of the process. It has been prepared by way of a very inclusive process, involving open public consultation during which more than 11,000 responses were receiving, talking to beneficiaries of EU funding, Members of the European Parliament, member states and national parliaments, Commissioner Oettinger, the Commissioner with responsibility for the budget, abd travelling to all member states to engage. This political process which has been brought along by the Commission's White Paper, various reflection papers and papers from the European Parliament has been accompanied by an in-depth spending review by the Commission of existing programmes because we want to learn from what has been done up until now, take the best from it and build on it.
The main messages from the Commission's extensive consultations were clear. We need a stronger focus on European added value. Where can we do best when we pool our resources, whether it be in research, the digital economy, cross-border connections or dealing with the challenges Europe faces from migration?
In addition, what can we do better, given we cannot do it as individual member states, whether it is in regard to fusion, energy or space?
We need a more streamlined and transparent budget. The Commission's proposal reduces the number of programmes by more than a third and brings fragmented funding together into new integrated programmes, for example, for the Single Market by bringing together the support for small and medium size enterprises through COSME, along with statistical and health programmes, and streamlining the use of financial instruments. "Less red tape" is a constant refrain but the idea now is to have a single rule book and to reduce the administrative burden, not only for the beneficiaries but also for the managing authorities, so we can facilitate participation in EU programmes and accelerate their implementation. We need a flexible budget. Unforeseen things happen and we need to be able to redirect expenditure both within programmes and between them in order to face challenges, whether those challenges come from economic shocks, migrations or natural disasters.
Overall, through a combination of additional contributions and savings, the Commission proposes the multi-annual financial framework of €1,279 billion in commitments over the period, which is equivalent to 1.114% of the EU 27 gross national income. This is pretty much comparable with the size of the current financial framework, when taken in real terms, and includes the European Development Fund, which gives support to developing countries that up to now have been outside the budget.
If we go back to the multi-annual frameworks from the late 1980s, one can see that the bulk of spending was on the traditional policy of the Common Agricultural Policy and that, little by little, cohesion funding grew in size and share of the budget. The current proposal streamlines CAP and cohesion funding, and while these remain very important policies which bring great added value and benefits to member states, it also takes account of new priorities which need reinforcement, such as research and innovation, youth and migration, to name just a few.
Of course, we are talking about an EU of 27 and we all realise and accept there is a gap. The United Kingdom's departure will lead to a gap of some €84 billion across the seven years, although this should be partly matched by new resources and partly by savings and redeployments from existing programmes.
There are key increases in priority areas, such as research, migration and youth, and also an increased emphasis on climate change and climate mainstreaming. The current multi-annual financial perspective dedicated 20% of expenditure to this and it will go up to 25%.
There are many innovations and new programmes within the proposals. The Commission made its overall communication on 2 May but all the proposals for all the programmes will be on the table by the end of this week and the final package is to be adopted on 14 June. While there simply is not time for me to run through all of them with the committee, I would like to focus on a couple of particular innovations. Digital Europe, which is not only about investment in the digital sector but also about upskilling European citizens in regard to the digital economy, is proposed to have a budget over the period of €9.2 billion. Invest EU will build on the success of the European Fund for Strategic Investments, or the Juncker plan. With a budget of €15.2 billion, it can mobilise more than €650 billion of additional investment across Europe and will provide advisory services and accompanying measures to support projects. With respect to the euro and EMU, it is important to strengthen the economic and monetary union, and the tools to do this must not be separate but part and parcel of the overall financial architecture of the Union.
Two new instruments are proposed - a reform support programme and a European investment stabilisation function. The reform support programme will have an overall budget of €25 billion and include a reform delivery tool to provide financial support across all member states for key reforms identified in the context of the European semester. A convergence facility will provide dedicated support for member states seeking to adopt the euro. Tailor-made technical support is given to member states on request for the design and implementation of reforms. It will build on the experience of the structural reform support service which has provided support for more than 440 projects in 24 member states in recent years.
There will be a new CAP delivery model, bringing operations together under a single programming instrument, the CAP strategic plan which each member state will deliver. It is proposed to have more flexibility and simplification. Direct payments will remain an essential part of the CAP but will be moderately reduced and better targeted, with a more balanced distribution of payments to be promoted through compulsory capping at farm level, with a view to redistributing towards small and medium-sized farms. The CAP will also have reinforced links with environmental objectives. It is proposed that there be a new crisis reserve to address crises generated by unforeseeable developments in international markets or by specific shocks to the agriculture sector. The innovation side, particularly in terms of agrifood, rural development and the bioeconomy, will benefit from an earmarked €10 billion within the Horizon Europe research programme.
In addition to trying to improve, streamline and innovate in our spending policies, the Commission would like to review the financing of the budget in line with the recommendations of the high level group on the future financing of the European Union, chaired by Mr. Mario Monti. The departure of the United Kingdom means that there will be no more UK rebates. Similarly, the rebates for certain member states will be phased out in order that there will be a level playing field. They will be phased out gradually over five years so as not to create a dramatic shock for those member states that have been benefiting from them.
Other changes include the fact that the collection costs retained by member states from traditional own resources of customs duties and so on will be returned to a figure of 10% from 20%. This will have an impact on some member states more than others, notably Belgium and the Netherlands which collect most of the customs duties. The VAT-based own resource will be simplified.
The Commission is proposing to find 12% on the revenue side of the budget through new own resources, which will allow for a reduction in traditional own resources, particularly the GNI contributions of member states. We will try to focus them on areas that align with policy. For example, a tax on non-recyclable plastics could provide part of the revenue. This is clearly linked with environmental policy. It would have the added benefit of encouraging member states to reduce their plastic waste and would, by bringing revenue to the budget, reduce their GNI contributions. If the necessary legislation was adopted, the relaunched common consolidated corporate tax base, CCCTB, would link the financing of the EU budget directly with the benefits enjoyed by companies operating in the Single Market. The Commission proposes to allocate a 20% share of the emissions trading system, ETS, revenues to the EU budget.
These new elements could, on average, contribute €22 billion per year, which would correspond to approximately 12% of EU budget revenue. The proposed reforms are about changing the way the budget is funded, not its overall size. The Commission would like to proceed with the next steps as quickly as possible, with a view to arriving at an agreement before the European Parliament elections in 2019.
The intention, and it is one of the reasons the legislative proposals have been put on the table so quickly after the overall communication, is to ensure the new programmes can get off the ground as quickly as possible in 2021. We have learned from the experience of the 2014-2020 financial framework, where agreement came late in 2013, that the first year was effectively lost in terms of implementation, which is very negative for the overall policies and for the individual beneficiaries.
I stress the importance of EU added value in the new proposal and the aim of the Commission to modernise and focus policies to build a prosperous secure and cohesive Europe.