1. ESF Committee , Brussels, 9.2.2017
Future Financing of the EU
High Level Group on Own Resources
Final report and recommendations
Next steps
ESF Committee , Brussels,

2. Overview of the presentation
Prologue: basics on the EU Budget
The High Level Group on Own Resources
What's the problem?
Origine, Mandate and composition
Conceptual and analytical approach
Final report and recommendations
The economic case for reform
Main recommendations, encompassing both expenditure and revenue issues
Clusters of 'Candidates' for new own resources
Next steps
Follow-up of the Report in the EU institutions?
Commission proposals for the post-2020

3. EU Budget: overall volume
Annual Budget 2017
EUR 158 billion for Commitment Appropriations
EUR 135 billion for Payment Appropriations
Multiannual Financial Framework
EUR billion for Commitments
EUR billion for Payments
equivalent roughly to 1% of EU GNI
… and 2% of overall EU public spending

4. Where does the money come from?
Own resources:
Traditional Own Resources
VAT-based Own Resource
GNI-based Own Resource
Other revenue

5. Where does the money come from
Where does the money come from? Composition by type of source: EU Budget 2014

6. Breakdown by Member State: EU Budget 2014

7. The Logic of the Revenue Side
Overall level of revenue has to equal overall expenditure in payments: ex-ante equilibrium, no deficit!
Revenue items budgeted: forecasts for 'other revenue', custom duties, VAT-based OR
GNI-based own resource to cover the difference
Adjustments and fine-tuning in the course of budget execution: Objective is to be up to date and fair for Member States

8. Who decides?
The ground rules are decided by unanimity in Council and ratified by the National Parliaments;
Commission implements with the help and scrutiny of an Advisory Committee;
European Parliament can only deliver opinion on the basic legal act;
In the annual procedure, the revenue side is largely a function of the expenditure (barely debated between the EP and the Council).

9. Evolution of Revenue Composition

10. Creation and composition of the HLGOR
European Council of February 2013 decided to largely prolong the existing OR arrangements, but tasked Council to further examine FTT- and VAT-based own resources;
European Parliament: reform of own resources system a high priority (introduction of ‘genuine’ own resources); potential changes must be thoroughly prepared;
February 2014: Commission, Council an European Parliament jointly create the HLGOR and nominate chairman Mario Monti. Each institution then designate 3 Members.
The Group was given until the end of 2016 to finalise its report. Background: emergence of new priorities and challenges, strong pressure on the EU to intervene in areas which are not its core business

11. a Fresh Approach Initial Mandate: Group's approach as it evolved:
Explore ways to finance EU budget so that it is
simpler
more transparent and equitable
democratically accountable
Group's approach as it evolved:
Consider revenue side as building block in a broader reform effort
Identify and keep what works well in present system
Consider the broader picture: legitimacy, trust, public goods, emerging priorities
Prepare the ground for a well-informed, serious and non-dogmatic interinstitutional debate 'post-2020'

12. Conference of 7-8 September 2016
Objective
Open interinstitutional discussions with national parliaments (panels) and debates (questions and answers sessions after each panel)
Provide input to the HLGOR final report and recommendations
Outcome
Broad support from national parliaments on new own resources to finance the EU
Some traditional fault lines on expenditure reform: friends of cohesion, focus on added value

13. Economic rationale of the reform
Functions of the EU Budget
Non-cyclical, hardly any stabilization function
Redistribution: … limited
Allocation: finance EU policies, objectives, priorities
High Level Group consensus
EU budget can be used to leverage / incentivise
political reforms
additional investement, co-funding
policies with EU focus, cross-border and single market dimensions

14. Economic rationale of the reform
Revenue Reform can play a Role
Which co-benefits? What link to policies?
Reinforcing the single market,
Minimising the negative effects of tax competition,
Promoting sustainable policies, tax shift etc.
Defining a basket of own resources?
No single ideal candidate
A combination of tax bases (consumption, production, environment) is most promising

15. Key recommendations from the HLGOR report
A comprehensive reform is needed: both on expenditure and revenue side
European added value of EU budget: requires more focus on investment in common public goods
Own resources can also bring added value: coherence with policy objectives
Overcome the fixation on ‘juste retour’: changing the current perception of the EU Budget's 'costs and benefits'; win-win instead of zero-sum; introduce 'genuine' own resources to this effect
Allow for some Géométrie Variable under well-defined circumstances and for clear purposes
Not a revolution: many elements of the present system work well

16. What's Genuine?
Mapping existing and possible future income sources

17. Criteria as endorsed in the First Assessment
Criteria which emerged in the course of the deliberations
Link to policy objectives, co-benefits
Sustainability Agenda
Consider 'other revenue'

18. Follow-up on the report
Commissioner Oettinger mentions report in 'Hearings' on 9 January
Mario Monti presents the report to the EP (BUDG Committee on 12 January) (CoP this week)
To the Commission: 17 January
To the ECOFIN: 27 January
Dissemination of the main messages of the HLGOR (academia, think tanks, national parliaments)
 "Scene-setter" for MFF preparations

19. Link to the HLGOR website: http://ec. europa