EU's 2013 budget to rise 2.9% amid UK spending cuts

The European Parliament's budget committee this evening approved a deal that will see the EU budget in 2013 rise by 2.9% to €132.8 billion (£107.2bn).

MEPs, meeting this week in Strasbourg, will vote in plenary on Wednesday 12 December on whether to approve the above-inflation increase in the EU's 2013 spending.

The deal was agreed by negotiators for the European Commission, Parliament and Council on Friday 30 November, but the details were withheld until last Tuesday, while UK attention was focussed on the Chancellor's upcoming Autumn Statement.

EU Ministers must also approve the deal but difficulties are not likely, since the EU's annual budget is agreed by majority vote. Member governments demanding a budget freeze or cuts are likely to be over-ruled by the majority (17) of net recipient countries.

The deal is likely to increase Britain's 2013 contribution to the EU budget by several hundred million pounds. This means that some of the money saved through cuts to public spending outlined in George Osborne's own budget statement last week is likely to be spent in 2013 not on reducing our deficit or supporting growth, but on increased UK payments to the EU.

Commission demands

Prior to recent negotiations, the European Commission had been demanding a 2013 budget of just under €138 billion (£111.5bn).

Administration costs amounted to 5.6% of the EU budget in 2012 - €8.3bn (£6.7bn) - and the proportion proposed for 2013 has not yet been revealed. Much of this is very visibly wasted on excessive EU pay, perks, grandiose facilities together with EU self-aggrandisment.

Examples include the EU's £45m tribute to itself, the House of European History, and a £250m refurbished 'Résidence Palace' building for the EU Council and its president Herman van Rompuy, due to open next year.

Future framework

Annual budgets are a translation of the current Multiannual Financial Framework (MFF) covering 2007-2013. The EU's next MFF, setting funding rules from 2014-2020, is currently being negotiated and requires unanimous approval of EU member governments.

Talks on the new MFF broke down in November, according to the Prime Minister as a result of disatisfaction by several member states over the European Commission's intransigence on cuts to administration costs. EU taxes have also been proposed in the context of the bloc's future funding and it has been suggested that member governments could not agree on whether the EU should be given powers to tax citizens directly. A further summit is expected in January.

On the new MFF, David Cameron has pledged "at best a cut, at worst a freeze" in the seven-year spending limits, although Britain's contribution may rise in any case. On 31 October, rebel Conservatives and Labour MPs teamed up to defeat the government, with a majority voting for a real terms cut in the EU's spending.

If no agreement is reached between governments and EU institutions in time to allow for legal ratification of the new deal by the end of 2013 - under a political, rather than legal, Inter-Institutional Agreement - the 2013 budget will be rolled over year-by-year with a built-in 2% rise to cover inflation.