News from Brussels

The deadline for agreeing a new EU budget for the next seven years is fast approaching; and if anyone harboured any hopes that this budget would be reoriented towards growth, they will be sorely disappointed.  Farm ministers of France and Germany argued that CAP spending between 2014 and 2020 should be frozen, and not cut as some countries had demanded. If this position is maintained there will be no headroom in the budget for the EU's policy priorities to be matched with more EU spending. France and Germany are arguing that the CAP can be a catalyst for growth, employment, innovation - rather than allowing opponents to portray the CAP simply as a social security scheme for farmers. The UK Government will undoubtedly regret this development but may not choose to fight it as it will need to use its political capital to defend its budget rebate.

The Commission consults on VAT

Last week the Commission launched a consultation on reduced VAT rates, as part of a wider exercise to reform the EU VAT system in order to make it simpler, more efficient and more robust. The consultation focuses on 3 specific areas where reduced VAT rates need to be reviewed: the impact of reduced rates on competition within the Single Market; the choice of goods and services which can benefit from a reduced rate; and the impact of technological developments on the VAT treatment of similar goods and services (which was agreed by Member States many years ago, and EU policy has developed and evolved since). Therefore, respondents are asked whether certain reduced VAT rates now contradict EU policy objectives. Here, answers should be concentrated on the reduced rates for water, energy, waste management and housing.

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