EU budget proposals: Caught between ambition and governance failure

• The EU Commission’s proposals for the next multiannual EU budget are ambitious, but fail to fix long-standing governance problems

• The switch towards ‘funding not linked to costs’ are not a simplification but actually very difficult to implement

• Results are hard to measure, indicators are weak, and funds continued to be routinely distributed even if results were debatable

• Risks of integration by stealth are real. The plans extend EU influence into sensitive national areas via loans and conditions, and even imply a choice for economic governance

• The EU should build an independent audit system led by national auditors and overseen by a reformed European Court of Auditors (ECA)

Will the Commission’s proposals for the next multiannual financial framework (MFF) solve the deficiencies that have plagued EU spending for a long time? The proposals are ambitious. Yet, the MFF will continue to underperform without profound reform of the current governance structures. Currently, the MFF suffers from a governance deficit. Yet, the Commission’s MFF proposals hardly address the deficiencies in planning and accounting of costs and results. Hence, with an underperforming multilevel supervisory structure, the ambitious MFF proposals dive in at the deep end by aiming at simplification, performance-pay (conditionality), fewer but better indicators, 25% reduction in administrative costs, and more discretion in spending for the Member States and the Commission. Previous efforts to introduce performance-based pay largely failed, and funds continued to be routinely distributed even if results were debatable. Moreover, there is no guarantee that the now-proposed shift from cost accounting to performance-based payments (Financing Not Linked to Costs, FNLC) will be successful. Making FNLC work will require reforming the Commission, the EU Court of Auditors (ECA), and national audit institutions (Supreme Audit Institutions, SAIs). However, these reforms are not on the agenda. As it stands, it will be difficult to achieve the desired simplification and added value of EU spending.