Marching On

by Andrew Stuttaford

The European Union’s executive has proposed a new tax on bank transactions as the centrepiece of the EU’s first €1trn budget, triggering a row with Downing Street, which dismissed the proposal as “completely unrealistic”.

Unveiling his blueprint for the budget for the seven years from 2014, José Manuel Barroso, president of the European Commission, demanded a bigger share of its spending supplied from “own resources” – taxes paid to Brussels supplanting contributions from EU member states. He attacked the “prejudices and Pavlovian reactions” of EU governments, led by Britain, who have been quick to denounce his proposals as a non-starter.

“We are proposing an ambitious and, at the same time, responsible budget,” said Barroso. “It is a realistic proposal.” The proposed budget for 2014-2020 amounts to €971.5bn (£872bn) in payments and €1,025bn in commitments. “It’s a trillion euro budget,” said a Brussels official.

Backed by Germany, France, the Netherlands and Finland, David Cameron has called for a budget freeze at 2013 levels, rising only in line with inflation.

According to British Treasury estimates, the Barroso blueprint would add €100bn to EU spending over the seven-year period. “The budget increase proposed is unrealistic,” said a Downing Street spokesman. “Britain and the EU’s other largest payers made clear that the budget should be frozen, and we will stick to that. The EU has to take the same tough measures as national governments are taking across Europe to tackle public deficits.”

An actual cut would be greatly preferable to an inflation-adjusted freeze, but it’s no surprise that Barroso finds even the latter to be unacceptable. The EU is, after all, still building itself palaces. That said, the most important aspect of Barroso’s proposed budget is the extent to which it provides for an increase in the percentage of tax revenues for the EU that are independent of national control:

.. a tax on European financial transactions could enable the EU to raise up to 40 percent of its own revenue by 2020.A second option would see the creation of a EU-wide sales tax. The new VAT would be levied at a fixed percentage by governments and transferred directly to EU coffers. Current member state contributions based on VAT would be abolished.

Democratic accountability? Less please. Barroso is, quite genuinely, a former Maoist, but some old habits are, it seems, hard to shake off.

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