The EU Budget: The UK Rebate and the CAP – Phasing them both out? CEPS Task Force Reports, 8 November 2007

In a groundbreaking speech in the European Parliament in June 2005, the then British Prime Minister Tony Blair effectively signalled room for negotiation on the UK rebate in exchange for fundamental reform of the EU budget, with particular reference to the common agricultural policy. No concrete proposal was presented, but in the European Council’s Decision on the financial perspective for 2007–13 in December 2005, the Commission was invited to undertake a full review of EU budget expenditures and resources, and to report its findings in 2008–09. This review represents a unique opportunity to reshape the budget more in line with the needs of the EU. The review offers the prospect of breaking the often-vicious circle between expenditures, resources and the net balances of member states, and the budgetary paralysis engendered by old policies preventing the introduction of new initiatives. The CEPS Task Force on the EU budget began its deliberations shortly after the December 2005 Council Decision, embracing all aspects of the budget and culminating, after more than a year of preparation, in this report. This report offers a structure for evaluating the EU’s expenditures and future reform options based on a set of guiding principles drawn from the EU Treaties and precepts of good governance. It goes on to identify the misallocation of resources as a central cause of the net balance disputes that plague the system and undermine its fairness. To ensure that the EU is able to act in areas of real value, the report concludes that improvements in the rationale for the expenditures and an increase in the quality of interventions must occur in tandem with an elimination of distortions in the resources mechanism