Iain Begg / Jul 2025
Photo: European Union, 2025
It’s that time again. Five years ago, the EU wrangling over its next multi-annual financial framework (MFF), for 2021-27, eventually led to a deal after a four-day European Council meeting in July 2020. Even then, it took until nearly the end of the year for the final settlement to be agreed.
The usual timetable required the Commission to put forward its proposals for the next seven years this summer which it did on 16th July 2025. The Commission had already released a roadmap towards the next MFF which, while not containing firm proposals, started to shape the debate.
A question that almost always arises is ‘will this time be different?’. The roadmap was adamant that it had to be, with an entire section entitled ‘the status quo is not an option’. In presenting the new proposals to the European Parliament. EU Budget Commissioner Piotr Serafin was at pains to emphasise the many innovations envisaged, and Ursula von der Leyen described it as being ‘designed for a new era’.
But is it? Those of us familiar with previous MFFs know full well that anyone looking for radical changes should prepare to be disappointed. Serafin was given a torrid time by the Parliament, with diverse objections to the proposals, as well as to what MEPs saw as insufficient respect being shown to them in how the proposals have emerged.
The Commission calls for a sizeable increase in the headline total, taking the budget to some €2 trillion over seven years (allowing for inflation), amounting to 1.26% of GDP. This would be an increase of 0.13% of GDP, although most of the increase is because of the need to assign 0.11% of GDP to repaying the debts incurred by the EU to fund the Next Generation EU programme.
The Commission also wants spending to be ‘simplified’ - a term much used but rarely achieved – into four broad headings instead of the current seven. One is unavoidable (administration) and the others can be interpreted as distributive policies, boosting competitiveness and external policies. In practice, most current budget lines are still visible in the new proposals.
However, the detailed proposals also contain the seeds of several disputes. The most contentious is for national and regional partnerships which will bring together support for regions, farmers and others in a single national spending ‘envelope’. In principle, this would give the Member States greater discretion on how to use EU funding and might, for this reason, be welcomed. But it also risks diluting the idea that the EU should concentrate its limited resources on EU public goods, as opposed to cash transfers.
At a time when many Member States are already struggling to fund sizeable increases in defence spending, stiff resistance to higher contributions to the EU must be expected, and not only from the major net contributors such as Germany and those who have been referred to previously as the ‘frugal four’. It took only a few minutes for Dutch Finance Minister Eelco Heinen to lambast the Commission’s spending plans as ‘too high’.
The Commission also (again) wants an end to the rebates enjoyed by a handful of Member States; squeezing that genie back into its bottle will be a challenge. Past experience suggests the outcome will be for the Member States to reach a consensus to lower the headline total, while retaining at least some rebates.
Plans for a proliferation of new ‘own resources’ are also put forward by the Commission, including politically clever ideas to tax tobacco-related products and e-waste. None of these on its own would raise substantial amounts of money, but together they could raise up to 20% of the EU’s revenue. While welcomed by the Parliament, new resources will face a frosty reception in many Member States concerned to protect their autonomy on taxation.
Another tricky proposal is for a shift towards performance-based budgeting, building on what was done for the Recovery and Resilience Facility. Beneficiaries had to fulfil ‘milestones’ and ‘targets’ to unlock successive stages of funding. Although this approach can, in theory, enhance the quality of spending, the evidence from the RRF is that it will complicate the task of both the Budgetary Control Committee of the Parliament and the European Court of Auditors.
Questions will also arise about how the negotiations will develop and whether key shifts in spending will survive pressures from all sides. Unsurprisingly, most MEPs would favour higher spending. Existing beneficiaries from EU farming and Cohesion Policy programmes have been remarkably adept over the years at maintaining their substantial shares of total EU spending. Already, the roadmap set out a range of arguments for why continuing support for agriculture (and fisheries) is needed and reasserts the virtues of Cohesion Policy.
It is going to be a bumpy ride.
