I thank the Chairman and the committee for the opportunity to discuss these proposals, which relate, respectively, to proposed reinforcements under the EU budget and separately how the budget might be funded in the future. All of these proposals were published by the European Commission in June. While published at the same time, they should be seen as being on two separate tracks. The first track is the more urgent one in the coming months, namely, the mid-term review of the EU’s multi-annual budget for the period 2021 to 2027. The European Commission has pointed to major challenges arising since the multi-annual financial framework was agreed in 2020. Self-evidently of course, these include the illegal invasion of Ukraine by Russia and the rise in inflation. The proposed changes to the 2021 to 2027 budget amount to €100 billion, half of which is focused on assistance to Ukraine.
The EU has already been providing more than €25 billion in macro-financial assistance to Ukraine in 2022 and 2023, in part underpinned by the EU budget.
This mid-term review envisages this support, which helps with Ukraine’s day-to-day costs for its government and economy, being provided for on a multiannual basis over the remaining years to 2027. The Minister for Finance and the Irish Government supports assistance. The mid-term review proposals include other elements including provision for increased interest costs on loans the EU has taken out to fund the Next Generation EU package, which was agreed alongside the EU budget in 2020. It also includes the STEP proposal that is aimed at reinforcing and restructuring of competitiveness supports to help respond to global trends. There are other smaller elements around migration and the administration of EU institutions.
On some of these, non-Ukraine there was less consensus among member states on the need for additional funding. Ireland sees merit in much of the proposals but is among a group of net contributors to the EU budget who believe there must be adequate scrutiny of how and to what extent some of these policy priorities can already be addressed within the existing EU budget.
The second track in this group of proposals is less urgent and should take more time to negotiate. These are known as the own resource proposals. They concern changes as to how the EU budget is funded by member states. Importantly, all of these changes and proposals require unanimity by all member states. Two of these own resources proposals from 2021 relate to the revised emissions trading system, known as ETS, and the carbon border adjustment mechanism known as CBAM. The package also contains an existing proposal from 2021 for the introduction of a new own resource based on pillar 1 of the OECD international tax agreement. This proposal will require further progress at the OECD level. The fourth is a new proposal for a corporate own resource based on company profits known as CPOR. I apologise for all the acronyms. Members of the committee will have seen our preliminary views on this in the scrutiny note provided in July.
In summary, we are among a number of member states who believe this specific does not meet the test set by EU leaders on own resources when they agreed to the long-term EU budget in 2020 . They said that all new own resources should deliver “simplicity, transparency and equity, including fair burden-sharing”. Ireland can support the emissions trading and CBAM proposals but we cannot support the corporate own resource proposal. The situation is that, as of now, none of these proposals has the necessary unanimity among member states to be agreed. We are in a process of negotiation and this process in ongoing.
Crucially, it is worth stressing to the committee that any new money agreed for the first track, which is the EU budget mid-term review, does not require any parallel agreement on new own resources. Any increased contributions would automatically be based on the current main source of EU contributions, namely the gross national income contribution.
Finally, our approach to these proposals is informed by a whole-of-government perspective. In this context I note that the first track on the budget mid-term Review is being negotiated in the EU General Affairs Council, while the second track - the own resources proposals - is handled by Finance Ministers at ECOFIN. I thank the Chairman for the invitation today. We are happy to take any questions.
