MFF 2021-2027: Heading V of the EU budget

In the framework of the next multiannual financial framework (MFF 2021-2027) Commissioner Oettinger invited the staff representations in January to provide suggestions concerning heading V of the budget which covers the administrative costs of all EU institutions (salaries, pensions, buildings, IT and security). We very much appreciated Commissioner Oettingers willingness to consult the staff at an early stage of the MFF drafting procedure. Generation 2004 has responded to this call and will defend staff recruited after 2004 (including new recruits) and low income staff.

Generation 2004 is aware of the fact that the Brexit will have some negative impact on the EU budget. As mentioned in our last newsletter here according to Commissioner Oettinger there will be a net revenue gap of 12-14 billion Euros per year. This amount represents the loss of income caused by Brexit. If one takes a more optimistic view, Brexit will also lead to a reduction on the expenditure side.

Indeed, UK’s net contribution (contribution to EU budget minus EU money spent on UK entities) can be estimated to be around 8 billion € (the net contribution varies significantly from one year to another). Taking into account that the EU is facing new challenges (such as migration, defending the external borders, fight against terrorism and the European defence policy) and salaries in the public service of the Members States are increasing, any reduction in heading V  – which makes up only 6% of the total EU budget – would be counter-productive.

We need to remember to the numerous restrictions that have been imposed especially on staff recruited after May 2004 and 2014: we recall that entry grades have been lowered and pension accrual rates have been decreased for newcomers, a solidarity levy has been imposed on staff, the working time has been increased (which corresponds to 5 % pay decrease) and the number of staff has been reduced by 5% in the last 5 years. Further measures may actually not lead to significant savings for the EU taxpayers in the short term but they might lead to the demotivation of the EU civil service as a whole and as a result generate inefficiencies.

Therefore, Generation 2004 insists that an impact analysis should be carried out for heading V of the new financial framework and the results of this analysis should be shared and discussed with the staff representation.

One particularly controversial issue, often subject of pressure from the Member States – is our pension fund. Even though the fund is reported to be in actuarial balance, the fact that staff contributions are increasingly coming from permanent officials and contract agents recruited since 2004, with significantly reduced salaries leads to a decreasing staff contribution. However, the Member States should be reminded that most pensioners have retired with pensions that are equal to or higher than the salaries of the majority of active staff, and these current high pensions are not even subject to the solidarity levy. This is a structural problem that cannot be solved by cuts imposed on newly recruited staff. Indeed, the most recent cuts in pension rights for staff recruited since 2004 and since 2014 will show their effects only in the long run, when those affected staff members reach retirement age in big numbers. In other words, reforms of the pension scheme applied only to newcomers and younger staff do not have a significant short-term impact because the big bulk of the current pension expenditure is paid to pre-2004 staff members.

Generation 2004 recalls that salaries only represent about 50% of the spending under heading V. The residual part of heading V includes the allowances paid to MEP’s, building costs, the IT system etc. Those costs could be better controlled provided the political will is there. For instance, the regular trips of the Parliament to Strasbourg are said to cost 200 million euros per year. These trips could be avoided if the Parliament would recognise Brussels as its only seat. Similarly, rents in Luxembourg are much higher than in most places in the EU, which increases the costs of buildings and the cost of living for the staff. In addition, the excessively high prices charged for medical services in Luxembourg create a heavy burden on the Joint Sickness Insurance System. This raises the question of whether the current trend of transferring more services to Luxembourg is justified. This trend is even more questionable when taking into account costs for missions between Brussels and Luxembourg and the significantly lower level of staff satisfaction in Luxembourg which results from limited career possibilities as well as difficult and expensive living conditions due to the limited infrastructure offered by the host country.

Another idea to save money is to reduce the number of DG’s through mergers. By reducing the number of DG’s the number of managers and office space as well as other related costs could be also reduced. Along the same lines, the number of Commissioners and cabinets could also be reduced. But this is a political discussion which mainly takes place in the Member States between politicians who think first about their national interests being represented by a Commissioner in Brussels, at whatever cost.

Generation 2004 will continue to actively contribute to the MFF discussions by defending the interests of staff recruited since 2004 and of course we will keep you informed.

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