The EU could have cut back, with the UK leaving, but chose not to.
Older readers may recall the words of Viv Nicholson, famous football pools winner of 1961 when asked what she and her husband intended to do with the money they had won. “Spend! Spend! Spend!” she cried. Not surprisingly, this strategy did not end well for them.
Add a century and reverse the final two digits of the year, and we have 2016 and the EU Referendum. In June 2016 the EU found out they were losing their second-largest benefactor: the UK. Not only was the UK the second-largest donor, but it was also one of only nine member states which actually contributed to its massive budget in net terms.
With just nine “givers”, the EU was spreading the money to the nineteen “takers”. Losing one of the nine “givers” — and one of the biggest bankrollers of the EU system to boot — should have perhaps made the EU review its spending plans. But oh no.
Could the EU have cut back instead of presenting a £39bn+ divorce bill?
The simple to this question is yes, the EU could have started ‘cutting its cloth to suit its means’.
In 2016, the EU was still involved in planning how to spend the six-year budget it had received in 2014. (The current EU budget period is 2014–2020.) The figures are so vast (€1.1 TRILLION) that I decided to give readers one example.
I chose the EU’s £57 billion “Cohesion Fund” because this is the fund I have reported on in the last two days, This is the fund that the UK pays for, but from which it doesn’t receive back so much as a single penny.
So how much could the EU have saved?
When the EU shows the progress of each fund, it divides up the money into three categories. These are:
- Planned: Total budget of the fund
- Decided: Financial resources allocated to selected projects (project pipeline)
- Spent: Expenditure reported by the selected projects
The first category is, of course, a misnomer. It should simply be called “Total Budget”.
How the EU could have easily saved the ‘Divorce Bill’
6 months after the Referendum, the EU had spent only 5.9% of its ‘Cohesion Fund’
This Fund is only a small fraction of the EU’s total expenditure
The EU had only allocated 26% of the Cohesion Fund to actual projects
£38 billion pounds of the Fund had not even been allocated to any project at all.
Six months after the Referendum, it was possible for the EU to have saved almost the entire ‘Brexit Divorce Bill’ of £39 billion by stopping the approval of proposed new projects — on this one EU fund alone. It would not have had to cancel a single project. All it had to do was stop approving new proposals.
And this one fund, the EU’s “Cohesion Fund”, represents only 5.8% of the EU’s total budget of €1.1 trillion euros.
If one of the major earners in a household is given notice of redundancy, it is common sense to review expenditure in case that earner’s income cannot be replaced by him or her getting another job in short order.
Perhaps the new car that was hoped for might have to be put on hold. Maybe the proposed two week holiday might have to be limited to one week. Possibly the family dog’s weekly visit to the pedicurist could be changed to monthly.
Most people are not like the famous pool's winner of 1961 I mentioned in the opening. Most people think about tomorrow. And they certainly think hard about their expenditure if there is an impending loss of income.
In the EU’s case, this has not happened. Despite the fact that there is no legal basis for any financial claim from the EU against the UK on its departure, the EU has just kept on spending like there is no tomorrow.
It is sound accounting practice that you never anticipate future revenues but you always make provision for possible future liabilities. In the case of the EU, I suggest that they have not exactly been prudent.
[ Sources: Eu Commission ]