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21st Jul 2019

Commission reveals plastic tax to cover Brexit budget hole

  • Budget commissioner Oettinger said almost all EU programmes would have to be cut because of Brexit (Photo: European Commission)

The European Commission wants to use a new "plastic tax", moving income from the emission trading scheme from national to EU level, plus extra money from member states, to help plug the hole in the EU budget left by Brexit and to finance migration and security tasks.

Budget commissioner Guenther Oettinger said on Wednesday (10 January) that with the UK leaving, the EU's joint coffers will be €12-15 billion smaller annually.

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The current seven-year budget runs out in 2020, while the UK is leaving the bloc in March 2019.

Briefing reporters after the EU executive held a "comprehensive policy debate" on the upcoming EU budget, Oettinger said new tasks such as migration, border controls, internal and external security, and defence, increase the common expenditures.

Oettinger said these could cost up to €10 billion per year, and would have to largely be financed by new contributions.

He said the commission plans to plug the Brexit blackhole 50 percent by new contributions from member states, and the other 50 percent by cutting existing projects.

All EU projects would suffer, Oettinger warned, except for the Erasmus+ programme and the research programmes.

To increase the "own resources" of the EU budget, the commission will propose a plastic tax in the coming weeks.

"In the interests of the world's oceans … we have to ensure we reduce the quantity used in Europe," Oettinger told reporters.

However, the commissioner said it has not yet decided on the details, such as whether the tax should be levied on consumers or producers, and what should be the rate.

The EU executive also wants to shift the income from emission trading from national to EU level, arguing the policy is made at European level.

"Climate law is discussed at European level, it is possible for ETS [emissions trading scheme] to be traded on European stock markets, however incomes from these measures flow into national level. However it would be logical for this to be brought into the European budget," Oettinger argued.

The commission plans to draw up a larger post-Brexit EU budget than the current seven-year long 'financial framework'.

Oettinger said the overall budget should be greater than the current threshold of one percent of the GDP.

The commission would also do away with various sorts of rebates after Brexit.

"The mother of all rebates [ie, the UK's] will be eliminated. This should be a good way on ensuring that we will no longer have any other rebates in place," Oettinger said.

Originally designed to reduce the UK's contribution to the EU budget, the rebate resulted in Germany, the Netherlands, Sweden and Austria also getting back money for chipping in extra for the UK.

Political conditions

The idea of linking EU funds for poorer European regions, called cohesion funds, to respect of the rule of law could also play a part in the next budget.

Some of the member states think better control of EU funds could put extra pressure on countries where concerns have been raised over the rule of law, mainly Hungary and Poland.

Oettinger said the commission is looking into the legal feasibility of tying EU funds to the respect for the rule of law.

The commissioner pointed out that for this conditionality to happen all member states need to agree.

The budget commissioner added that cohesion and infrastructure programmes could be tied into the European semester, the economic lifecycle of the EU, to have a clearer idea what the resources are going to be used for.

The commission wants to merge some of the 60 programmes in the budget, wants to use clearer names for the budget headings to make them more understandable, and would simplify procedures dealing with the EU funds.

For now, the commission does not want to reduce the EU budget's lifecycle from seven years to a five years to harmonise with the European elections which take place every five years.

The commission will come out with a detailed budgetary proposal in May, and Oettinger wants member states to agree politically on the new budget before the European elections in spring 2019.

Oettinger, a German commissioner, ruled out running a deficit. "Every single euro spent must be financed by one euro's worth of income," he said.

Juncker pushes for bigger post-Brexit EU budget

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EU mulls post-Brexit budget options

EU seeks novel ways to plug a Brexit-based budget hole of up to €11 billion, but income from fines, such as the one on Google, cannot be relied on.

Tying EU funds to politics could be double-edged

EU taxpayer money to countries challenging EU core values? The answer might seem obvious, but not to those on the receiving end of the EU subsidies, who argue that most of the money trickles back.

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