Brexit and Staff Cuts

The prospects for the EU and the UK reaching an agreement on the financial settlement of Brexit do not look good at the moment. Among many other issues, the issue of the UK contribution to the payment of our pensions is a topic of debate (See copy of Times article– obviously, the article makes no distinction between the extremely generous pensions of staff recruited before the 2004 reform of the Staff Regulations and the rest of the staff).

The longer the negotiators wait before reaching a compromise, the closer we are to no compromise at all. Thus, it is worth looking into the financial consequences of a ‘hard’ Brexit on the divorce bill and the resulting impact on EU staff. At this stage, there is no indication that EU staff of British origin will be treated differently from other staff. We have reasons to hope that at least UK citizen on a permanent position will not be dismissed. So the comments below makes no distinction between British and non-British officials.

The first question is: how much does the UK currently contribute to the EU budget? The answer is: around €7billion/year. For instance, the 2015 detailed budget shows that the UK paid €18 billion and received back €7.5 billion, so its net contribution was just above €10 billion for that year. For other years, the net contribution was lower, whence the averaged net contribution of roughly €7billion. (Interestingly, the UK will contribute less in 2018 because the pound has gone down compared to the euro.) €7 billion is about 5% of the annual EU budget. Thus, if no agreement is found between the EU and the UK, one can assume that the EU budget will be reduced by 5% in the future.

Before applying this 5% figure straight away to the €9 billion (2017 figure) of heading V that pays for our pensions and for the salaries of most of us, one needs to remember that the pensions cannot be reduced without a major reform of the Staff Regulations. Nor can the annual adjustment to our salaries be stopped in the immediate future because the “method” has been pretty much cast in stone until 2022. Other administrative expenses like building costs or MEP allowances will be hard to reduce too.

That leaves essentially one way to achieve a 5% budget cut in administrative expenses on the short term: drastically reduce staff numbers. The 5% budget reduction applied to heading 5 represents about €500million/year, which amounts to the annual expenses generated by about 5000 posts in the establishment plans of the institutions. In comparison, the 5% staff cut that just ended in 2017 has led to a reduction of 1254 in the number of establishment plan posts in the Commission. (see pg5 of pdf) and a reduction of about 2000 posts in the past 5 years across all the institutions (see pg64 of pdf). Overall, we could thus face a staff cut that would be more than double the one that just ended.

Of course, the EU and the UK might reach an agreement on the financial settlement of Brexit, or Germany and other wealthy donors might pick up the tab to avoid staff cuts (unlikely), or the Commission might rush another reform of the Staff Regulations through the co-decision process (far more likely), so nothing is cast in stone yet. However, the lesson from the simple back of the envelope calculation above is that those who think that Brexit will be painless for EU staff are mistaken. Brexit will affect us all. Against this backdrop, it would be useful if the Commission could consult its staff in order to devise solutions in common (e.g. Art 41 for those who are interested in leaving, see pg3 of newsletter) instead of waiting until the last minute and then rushing through a proposal to cut staff blindly as quickly as possible.

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