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Summary

EU BudgetFocused onResultsBrussels, 22 September 2015

Cover Illustration: From the top left to the bottom right: © goodluz - Fotolia, © European Union,© ACF Daniel Burundi, © European Union, © Thinkstock, © European Union,© Thinkstock, © Andrew Alek - European UnionAll inside images © European Union - Benedicte Maindiaux

EU BudgetFocused onResults

Summary of the 1st annual conference held on 22 September, 2015De Gasperi Hall, European Commission, Brussels

At the initiative of the European Commission Vice-President Kristalina Georgieva

ec.europa.eu/budget4results4

EU Budget Focused on Results

Member States Authorities31%

NGOs2%

EU Funds Beneficiaries2%

European Council1%

European Commission27%

European Parliament9%

Media8%

Other8%

International Institutions4%

European Court of Auditors4%

Think Tank / Universities2%

Other EU Institutions2%

451attendees

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Foreword

The ‘EU Budget Focused on Results’ conference took place in Brussels on 22 September as the first in a series of annual events. The conference, organised by Vice-President Kristalina Georgieva, launched the “EU Budget Focused on Results” strategy initiative which paves the way for joined-up efforts of the EU institutions and the Member States towards better spending, increased accountability, transparency and maximum added value for EU citizens.

The conference saw a high-level discussion of key questions on the European budget policy agenda. Leading figures in Europe’s political landscape including Commission President Jean-Claude Juncker exchanged views on how to improve the efficiency of the EU Budget and results achieved.

Almost 500 people from the European Institutions, Member States, international financial institutions like the World Bank, various think tanks, EU funds beneficiaries and many others attended the confer-ence live, while many more followed it on-line and contributed to the discussion via social media.

This brochure contains the transcripts of the three main speakers’ speeches, as well as summaries of the remaining keynote speeches and a summary on all the panels.

Table of Contents

Speech by Jean-Claude Juncker 7

Speech by Kristalina Georgieva 13

Speech by Dr. Wolfgang Schäuble 20

Summary of the speech by Dr. Maroš Šefčovič 24

Summary of the speech by Marianne Thyssen 25

Summary of the speech by Dr. Marc Robinson 26

Panel 1: Performance in the Public Sector: Theory and Practice 27

Focus on Policy: EU Budget in Climate Action 30

Panel 2: Key Features of the EU Budget’s Performance 33

Panel 3: Outlook: an EU Budget Focused on Results 36

Annex: Overview of Performance Budgeting at the EC 39

EU Budget for Results Web Application 40



Every action we takemust deliver maximum

performance andvalue added.

Jean-Claude JunckerPresident of the European Commission

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Speech by Jean-Claude JunckerPresident of the European Commission

As you know, the Commission I have the honour of presiding is a political one, with a political mission.

As I said in my recent State of the Union address ‘political’ means tackling the great challenges that stand before us today. Being political is about leadership, about taking decisions. Which is why this Commis-sion has chosen to focus on 10 political priorities. Boosting jobs, growth and investment. Creating a digital single market, an energy union, and a new migration policy - to name but a few.

But don’t worry, I won’t repeat the entire State of the Union speech, here. As it seems, the speech was too long, it took 80 minutes because people normally expect that you can explain the world, the future of the world, the past of the world in 10 minutes. I am not able to do that and 80 minutes were not sufficient. But I will need less time today than the other day at the European Parliament. Because Kristalina offered me 15 minutes. Yes, 15 minutes I was told.

Politics in a democracy is also about being accountable.

As politicians, we are accountable to Parliament, to some extent to the Council and Member States, and to the people of Europe, who want us to create jobs and growth and expect us to solve the refugee crisis.You can hold us to account on our achievements, and as a political leader among others, I am welcoming that.

Today, under the leadership of Kristalina, we discussed the EU budget. We need a budget to achieve our aims. The budget for us is therefore not an accounting tool, but a means to achieve our political goals.



Just look at the central role of the budget is playing in the Commission’s work. It is not an accident that I created the post of a Vice-President responsible specifically for the budget. This cements the key role of the budget in the very heart of the Commission’s tools.

And it is no accident that I asked Kristalina Georgieva, a politician of exceptional skill and talent, to fulfil this role. I am not fishing for compliments. I am describing the Vice-President. She is making sure that all parts of the Commission play by the same financial rulebook.

To me, now more than ever, what is important is what we can do with our budget.

We need now, first and foremost, to use the budget to solve the refugee crisis.

Last week I said: There is not enough Europe in this Union.

Refugees are sleeping out in the street, in the rain - in 2015, in Europe. It is September. It is getting colder.

History will hold us to account if we do not succeed in solving this crisis in a humane and civilised manner. We see countries closing their borders and some of them are closing their hearts.

Closing borders is not the solution. If you have survived bombs and warfare, and crossed the Mediterra-nean in a rubber boat, a fence won’t stop you.

I call on all Member States to recognise this reality and show solidarity.

And I ask the countries of Europe, the citizens of Europe, to show solidarity with those people who have fled their homes, seeking safety.

Solidarity is an easy word to pronounce, but it is an empty word if it is not followed up by action.

Member States have finally agreed to relocate 40 000 people. The Council is meeting - as we are speaking - in an extraordinary meeting to discuss our proposal to relocate another 120 000 people. The Council is also discussing our other proposals. Living up to our legal and moral obligations has of course a financial impact. We will need more resources for Frontex and other EU agencies, and we must invest in the neigh-bouring region where the burden of hosting refugees is even by far higher than it is for us.

Sometimes I am asking myself, if the Lebanese people - 25 % of the Lebanese population are refugees - if the Jordanian people - they have 600 000 people - do understand what we are discussing here: 120 000. We are ridiculous giving the magnitude of the problem. But this is not the time for business as usual. I said it before: if you really want to help these people, you have to put your money where your mouth is. Provide us with the funds needed to combat this crisis.

Last week I announced proposals to establish a Trust Fund to tackle root causes of irregular migration in parts of Africa.

We need a budget to achieve our aims. The budget for us is therefore not an accounting tool, but a means to achieve our political goals.

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In our draft budget for 2016, we have planned a big increase for two Funds dealing with Asylum and Security. These funds underpin the migration package presented by First Vice-President Timmermans and Commissioner Avramopoulos.

For 2016, we have set aside nearly EUR 9 billion to respond to external crises, such as those in Ukraine and in Syria.

As I said last week, we will propose steps towards a European Border and Coast guard. Naturally, we will have to find appropriate funds for this, too.

We are not, as Commission, asking for a blank cheque and I know well that times are still difficult everywhere, but less in this part of the world than in other parts of the world.

Our budget is limited.

Our proposed budget for next year is EUR 143.5 billion. This is an increase of 1.6 % in nominal terms, but not in real terms, adjusted for inflation.

Our proposed budget is less than half the annual budget of Belgium, less than half the annual budget of Austria, or EUR 80 cents per day for every European for 1 year. That’s half a cup of coffee in many places, certainly in Brussels; in Luxembourg it is more costly.

Deciding what to spend this budget on is a political decision.

The refugee crisis is the most acute example. But let me give you some examples of what we do in support of our 10 main political priorities:

• In July, we proposed a EUR 35 billion package to help Greece grow. The money is there. Greece has to take it.

• We plan to use nearly half of next year’s budget to stimulate growth, employment and competitive-ness. That is our main duty for the next coming years.

• For 2016, we have set aside more than EUR 1.5 billion for the Connecting Europe Facility. This directly supports political priorities such as the Digital Single Market and the Energy Union. That sounds like nothing, it is millions of jobs, it is growth, it is organising European attractiveness for others.

• For 2016, we have proposed a rise in payments for Horizon 2020, our research and innovation pro-gramme.

Our means are limited. It is not enough to allocate money wisely. We will have to do more, with less. We need to get the best out of the budget and spend money smartly.

This is why we need a better budget, a budget focused — as Kristalina is saying — on results.

We need to make every euro count. For instance, by using existing EU funds to stimulate private sector investment.



In fact, that’s the idea behind the Commission’s EUR 315 billion investment plan, called Juncker plan. I do not like the name. I do not know who decided to call this the Juncker plan, but they need someone to be guilty if it is not a success. And so they decided to call this the Juncker plan.

But I am pleased that the first projects are now coming off the ground, projects dealing with research into Alzheimer’s disease and energy-efficient buildings.

We should make every euro count twice, by making it achieve multiple objectives. For instance, if we create jobs in the renewable energy sector, we get two objec-tives for the price of one.

People want us to achieve results. They also want to know how we spend the tax payer’s money.

And I completely agree with them.

We are accountable, not just for our actions, but also for the money we spend and the way we are spending this money. We need to be sure that European funds have been spent correctly and effec-tively.

In my mission letter to the Vice-President, to Kristalina, I asked her to make budgetary control more effective.

Our means are limited. It is not enough to allocate money wise-ly. We will have to do more, with less. We need to get the best out of the budget and spend money smartly.

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Audits are necessary. But too much red tape can prevent companies from setting up innovative projects. I am speaking to my good friend, the President of the Court of Auditors, whom I meet tomorrow. I am repeating, audits are necessary, but too much red tape is not good.

But rules must also ensure that we have the right level of control on how money is spent. So, we need to strike a healthy balance: we need rules that ensure accountability, and at the same time guarantee pre-cise results.

To be accountable, we have also to be visible. What is the use of producing results and transparency, if nobody knows about it?

Today we have the opportunity to frankly discuss our budget, its merits and its deficiencies. And today we should examine how we together can improve the way we work.

This conference today is an excellent start, the beginning of the road towards a better budget. There are several things we need to keep in mind along that way.

If we want a better budget, we should not forget to involve, at all stages and at all levels, the Member States, the European Parliament who is a branch of the budgetary authority. Sometimes Member States do forget about that.

We have to involve the Member States, the Parliament because these two are sharing responsibility with us for large parts of the EU budget.

We have to constantly ask ourselves, all of us: are we spending the EU budget for the right things and in the right way?

This is not only relevant when we have the next mid-term review of the budget, or when we draft propos-als for the next multiannual financial framework; an exciting job waiting for Kristalina.

We have to be able to quickly respond to sudden European crises. I think of the refugee crisis of course, but also of our recent EUR 500 million aid package for the farmers.

The budget is not there for the Commission. It is there to improve life for all Europeans.

We need a budget aimed at results, rather than rules.

A road to nowhere built according to the rules, is still a road to nowhere.

We should not spend money just to obey the rules. It is important. But we should invest it with results in mind. To be precise: our 10 political priorities, and, at this very moment, a solution to the refugee crisis.

This approach to the budget, which you have discussed, this will not only help us to achieve our political goals. It will also help us prove that we perform well, and that we can spend wisely.

People want us to achieve results. They also want to know how we spend the tax payer’s money.



Because to me, the budget is not about accounting, it is about being accountable.

The budget is an important matter. I have been familiar with it for a very long time; I chaired the Budget Council for the first time in July 1985, before most of you were born. Its importance as a mechanism for solidarity and action is underestimated.

I regret more than anyone that most Finance Ministers take so little interest in it. The Budget Council is gener-ally composed of Secretaries of State for Foreign Affairs – who are of course very knowledgeable about world affairs but not always so familiar with the budgetary situation – or Deputy Permanent Representatives.

Discussion of the budget and its preparation is such a key issue that I would like it to regain its place at the heart of governments’ concerns. I consider this very important. That is why, I repeat, I have appointed Kristalina as Vice-President for Budget, someone whose experience means that she knows how things work and how Europe should work.

So let’s take the European budget seriously! Let’s spend carefully and concentrate expenditure on the main priorities set by the Commission following a mandate from the European Council.

Thank you for your attention.

The budget is not about accounting, it is about being accountable.



Speech by Kristalina GeorgievaVice-President of the European Commission

Ladies and Gentlemen,

We often hear that budgets are boring. But seeing this room so packed, and knowing that there is also a listening room, I think we beg to differ! And I think we will have today a fabulous opportunity to get into a very serious, very timely substantive discussion.

So why are we here? Why is a Budget Focused on Results so important and what precisely is it?

Let me start with the first question, why is this such an important topic?

First, because for good or for bad, for better or for worse, we live in extraordinary times. On the posi-tive side, innovation and technology are constantly changing the way we live. Modern science tells us we can now live until 120. And that’s wonderful until you think of having to work until 100, but that’s a separate story.

There is a lot that impacts (positively) the way we can implement a budget because of these developments in innovation and technology.

For good or for bad, for better or for worse, we live inextraodinary times.



But there are also very significant negative factors. More frequent, unexpected and severe shocks. Be it shocks in the global financial system, like in 2007-2008 or right now China, shaking up the global markets.

And there are the worst of shocks, those that are caused by the evil of war. And unfortunately this has become such a dramatic phenomenon that we feel it all the way here in Europe with the massive refugee flow in the last months.

We have exceeded, measured by number of people displaced, the footprint of the Second World War, with more 60 million people being displaced by conflicts. And on top of that we now know that climate change is for real, it is hitting us at home and it is hitting far away.

More frequent, more devastating natural disasters disrupt our economies, but they are also impacting most severely the most vulnerable of people, those who live in fragile countries. Two thirds of the natural disasters happen in countries that are also vulnerable to conflict. So we have this factor that is changing dramatically the operating environment for all of us and of course for those who deal with the EU budget.

Second, demands for public funding, especially for EU funding, are going up - be it to deal with the consequences of the financial crisis, to boost investments, to cope with Ebola, to help the refugees or to deal with the impact of the euro crisis on Greece.

Demands are going up, and at the same time, our EU budget is smaller. And when we are facing this reality, it is absolutely clear that we have to strive for higher value for money, we have to stretch every euro of our budget to the maximum, for the benefit of our people.

Third, last but not least, over a long period of time, we have been primarily concentrating on absorp-tion and compliance. And not so much on performance. There are reasons for it. When your budget is more than you can spend - and this has been the history for many years - then spending it is a primary driver.

So we have to rebalance performance - I see here people from the Court of Auditors, we work very closely with them, we work with the Parliament, we work with our Member States - we have to work together to lift up performance.

All these three factors together mean that there is a real urgency for systemic change in how we budget, how we implement the budget, how we use the resources.

It has started already. Those who have worked on the current financial framework, 2014-2020, are fully aware of the many changes that have been introduced. I will flag three because I think they are the foun-dation on which we stand and build today.

• The integration of performance indicators into projects and programmes in a more system-atic way.

• The fact that we have introduced macroeconomic conditionality. Why is this important? Be-cause, if the labour markets are improperly managed, the money we may be putting in job creation

Demands are going up, and at the same time, our EU budget is smaller.



and labour mobility, in a bad policy environment, may not do the job. So obviously we have to look at the overall macroeconomic situation and use the budget to help it improve.

• And we also introduced – a third very important element – a performance reserve. If you do well, you get access to more money.

Our Commission - starting on November 1 - took that issue of focus on results as an overwhelming, across the board, horizontal priority.

In the very first weeks of the new Commission we created the Commissioners’ group ‘Budget Focused on Results’ and linked to this group we brought staff from different DGs to work together horizontally so we can make this systemic shift that we will be discussing today.

We do not come here only with ambition for the fu-ture, we come here with achievements we have already made.

Let me move to the second and most important question. What does it mean for the EU budget to be working harder for our people, to be focused on results?

It is a systemic change in where we spend, how we spend, how we are assessed and how we communicate the results.

There is a real urgency for sys-temic change in how we budget, how we implement the budget, how we use the resources.



Let me go through these four blocks of what we believe this mission we have embraced is about.

And of course you are here to help us to make it more precise, and give it more punch!

First, where we spend. The changes we are introducing are quite significant, they are far-reaching chang-es and they are, in their totality, leading to that notion of having value for money.

The first is aligning budget with priorities. The Commission under Jean-Claude Juncker has 10 prior-ities, the most critical of those are Investments, Jobs, the Energy Union, Digital Market, Capital Union, migration (obviously a priority that is now hugely significant for us) trade, and looking at the democratic accountability of our institutions. We framed the 10 priorities and then the challenge for us is that we put our money where our mouth is, that we are aligning our spending with priorities.

Easily said, more difficult to do, but I can tell you that we have been working exactly in this direction. Look at our 2016 budget proposal, the first budget proposal of the new Commission. When you know that 80 % of our money is in shared management with Member States, within those parameters we have very significantly increased in certain areas. In investment for jobs and growth, migration and for Head-ing 4 for external action.

We are now going to come up with an amendment of the budget but what we have done in our original proposal is about alignment with the priorities driven by the surrounding environment.

Secondly, we are much more focused on horizontal alignment. We have multiple programmes, they are managed by different Directorates-General, by different ministries in our Member States or local author-ities. And often we have, in the same location, one project doing one thing and another doing a different thing and they don’t connect. And the question is how we can promote connectivity across these, how we can bring down the silos and how we can also help our Member States to get different objectives aligned so we get higher value for money.

I will give you one example. In rural areas, we are using cohesion funds for internet connection, for con-nectivity. So we get money from a different budget area to also fulfil the objective of rural development.

I was recently visiting a small village where from different pockets of the budget there was support for agriculture, for development of tourism and of course a road. And if we didn’t have the road, the other investments would have been meaningless because no one would be able to get there! So that kind of holistic thinking is what we want to do more of.

And thirdly, it is absolutely critical that we are agile with the budget as the priorities shift.

Right now, as we are sitting in this room, our colleagues are working on a package for the refugees.

We have already pushed our budget in that direction; we have a total of EUR 5.8 billion, of which EUR 1.2 billion was additional money since May. And we are looking for ways in which we might be able to do even more. I am talking about the budget for 2015-2016, for these 2 years.

It is absolutely critical that we are agile with the budget as the priorities shift.



How we can quickly respond, in an environment that is quick to change, is absolutely essential for the way we use our taxpayers’ money.

In our first budget proposal we also underpinned the Investment Plan for Europe. It is a very important example of a speedy delivery on a commitment to citizens. In record time, the Parliament, the Council and the Commission, we managed to boost investment capabilities for Europe, creating a guarantee fund that underpins EUR 315 billion, our objective for private investments.

Multiple objectives is going to be the name of the game - you take one euro and you see how you can make out of this euro five or six things.

I am thinking of, for example, energy efficiency. You take money and you put it into building insulation. This creates jobs, boosts investments locally, reduces energy consumption, reduces our energy footprint, and CO2 footprint. It creates higher value because the value of the building, of the property, goes up, and it also helps us with energy security. One euro - multiple results. We will have to be thinking about it more and more.

I will give you one very recent example - milk. The crisis in the milk sector came at the same time as the ongoing refugee crisis. Two crises at the same time, both very serious, one affects our farmers, the other one affects practically everyone. So we looked at ways in which we can help the farmers but also provide nutrition for the refugees. That kind of thinking, how we can achieve dual objectives, multiple objectives, we have to embed in our work.

Secondly, how do we spend? Well, here we have three big avenues of change: one is a more agile budget. Mak-ing the budget more agile, that is where we would have many conversations with our authorising authorities. I am very glad that there are many people here from the Council and from Parliament because we need to work together and figure out how we can create more agility for the budget. So, as things change we can move mon-

ey faster, and that would mean a change in the Financial Regulation.

I was a Commissioner for Humanitarian Aid for 5 years. Humanitarian Aid is a wonderful example, very agile funding that does great things. There we can move over night. Something happens, the next morning we help. But then we move to how we use money in our own Member States, Solidarity Fund, something happens, 6 months later, 9 months later, we are able to fund. And obviously, this is not what we can afford in this fast moving world of ours. So we have to think of where we can credibly, with good financial controls, introduce more agility in the budget.

Secondly, simplification. Commissioner Cretu is here and I know Commissioner Hogan will be coming. I saw Commissioner Moedas just walking in. They will tell you a lot about the need for simplification. Just take one change we made, and this is simplified cost options. One small change, multiple days of extra capacity for researchers to work because they do not have to fill in a separate form for every little penny they will get from us. You get a pen; you fill a form. A waste of time of very smart people in Europe. So that kind of simplification - simplifying rules in a way that helps us to be more effective as well as orienting our controls towards the risk profile. Higher risk, higher controls, lower risk, simpler controls. And that is absolutely paramount for us to be more effective with the budget.

We have to think of where we can credibly, with good financial controls, introduce more agility in the budget.



And last but not least, be able to use the small EU budget as a magnet to crowd in funds in good pro-grammes, like we do with EFSI. Use the EU budget to crowd in private sector investments in research and development, in infrastructure, in digital markets, make sure that our budget packs a big punch we design its use so we can leverage funding, especially private funding.

We know that our economies are not short of cash, our financial system is full of money but money is not moving because of perceived high risk. Our budget can help on that.

Third, how we are assessed? And now I am going to make sure that the audience is included. When I use this term, what is the first term that comes to mind. How is the EU budget assessed? What is the word that comes to mind? A measurement, an indicator. Error rate! Yes, thank you very much!

When we think of the performance of the budget today, the one measurement that is well established and it is an accurate comparator year-on-year is the error rate. What was the error rate last year? Last year it was 4.7 %, with additional recalculations it would be 4.5 %, the year before it was 4.8 %, the problem with

this is the Court of Auditors has a benchmark of 2%. We are aiming to get to 2 %. Twenty years in a row we have not been able to get to 2 %, mostly because in areas of shared management, where we work with Member States, it is not so easy, it does not depend only on us.

In the areas we are responsible for - mostly 2 % or less. When I was a Commissioner for Humanitarian Aid, it was under 1 %. We controlled it. So we have to continue to work on that, but in terms of assessing, we believe there are two important steps to be taken.

One, most important, to look at what the project delivers, in terms of outcome and even better, impact. We can build a road with 0 % error rate but if it goes nowhere, it is still a road to nowhere, and it is a 100 % waste of our taxpayers’ money. So we have to bring this, what is the use, what is the impact, how are we generating household income, how are we lifting standards, how are we generating jobs? These are the measurements we need to get accustomed to.

And when it comes down to error rate, we in the Commission have been working for some time on what we call residual error rate. What is the error rate after corrections of irregularities have been made? Why do we think this is important? Because, in the end, in a multiyear project what matters is, how is the project implemented until the very end. What is the end result? And actually we want to encourage people to make corrections. If you calculate a residual error rate, you inject an incentive for timely corrections of what, very often is, exactly this - an error, an error. Not fraud, not stealing the money, to which, by the way, 0 tolerance.

So we are thinking of assessment that allows us to capture things like contribution to growth rates. There are studies that show that cohesion in the previous 7 years has led to an increase of GDP in Latvia by 2.1 %, Lithuania, 1.8 %, Poland, 1.7 %. We have studies that show that in our research programmes, of the researchers that have been hired, 143 000 of them, after the end of the project, 43 % maintained their job, they continued with their work. Or studies that show that 1 300 patents have been registered in EU-funded projects, some of them quite revolutionary. We have to capture that kind of impact of projects of the budget, concentrate more on it.

Look at what the project deliv-ers, in terms of outcome and even better, impact.



Finally, how do we communicate? Let’s face it, we have a communication problem, we have a reputation problem with our citizens. Not because we are not transparent. We are one of the most transparent organisations I can think of. Everything we do, you can find somewhere. But it is chaotic, it is difficult to find, it is sliced in so many ways by so many groups in the Commission, or in Member States, that it becomes impossible to put together a coherent picture.

We are also very concentrated on communications and I have a small presentation to make. We have been thinking what we owe to our people. In this modern world, we think we owe them an app, and actually some of my guys here have it on their iPhones and iPads. This is still a pilot, and the idea is an app where you can click and you can find any project that is funded by the EU. You can find it on a map. We now have 518 projects loaded; obviously this is a work in progress, but I encourage everyone to check it out.

This is a question that we always have to ask when we look at projects: what is the added value, why should this be done by Europe and not by the country itself.

Let me finish with a very simple message. This can be done. This is a very big shift for the budget to be more agile, more efficient, more capable to deliver results for our people. We have no time to waste and the Commission certainly cannot do it on our own; we can only do it by working with the Parliament, working with the Member States and the broader community that is engaged on this matter.

We have our work cut out for us, but together we can do it and our people, you, your families, your neighbours, your friends, you deserve no less.

Best of luck to us getting this done.

We are one of the mosttransparent organisations I can think of.



Speech by Dr. Wolfgang SchäubleFederal Minister of Finance, Germany

Vice-President Georgieva,

When you invited me to your conference a couple of months ago, we both could not have known that Europe would today be facing the biggest refugee challenge since the Second World War.

The European Union must respond to this challenge. If more needs to be done, I am confident that the Union and the Member States will take the necessary steps.

As is so often the case, these challenges also have an impact on public budgets. We will have to mobilize money from the European budget, but the integration of refugees will also require national budgetary measures.

In times of new budgetary challenges, finance ministers have to act quickly to mobilise money for new priorities. Therefore, your conference calling for a more results-oriented EU budget could not have been more timely!

Of course, public money cannot do the trick alone. If we decide to mobilise taxpayers’ money to address the challenge of immigration, the real response must be a political one: We need to take an urgent second look at the EU’s migration policy.

This includes how we secure our borders, and how we manage and control immigration. This is one of the greatest challenges the Union has ever seen!



Europe also will have to get more involved in efforts to foster peaceful prospects in countries which are very unsecure places today and offer no perspective to their citizens.

Apart from the question of how we will cope with the actual challenge of immigration, I think we should use the planned review of the Multiannual Financial Framework (MFF) to take a fresh look at our Euro-pean budget.

I propose that we think ‘out of the box’ and look at the budget in terms of more coherent EU policy. I am sure our budget - which today amounts to about EUR 140 billion per year - can make a difference, much more than it does today.

This is also an issue of credibility. We must work to convince European citizens that public money - and especially European money - is really spent in a way that brings sustainable benefits to our economy and our citizens. Otherwise the criticism and skepticism towards Europe will increase.

For the funding period from 2014 to 2020, we have nearly EUR 1 trillion available to implement Euro-pean policies. But most of this money is spent not to address current challenges, but rather is allocated on the basis of historical reasons:Political compromises based on national interests led to the current structure and priorities of the EU budget.

If we want to spend European taxpayers’ money better, we have to overcome this type of spending based on old priorities, and instead spend money with a view to achieving real European added value.

Instead of thinking about budgeting extra money, we should first and foremost take a look at current European spending. The EU budget needs to be targeted more towards specific aims.

European money needs to be focused on results. Or, in other words, we must set the right priorities. European money has to be spent to achieve European objectives.

Let me outline three proposals for what the EU budget of the future could look like:

First:Most money is still spent on national policies. Over 70 % of the EUR 1 trillion in the current financial

framework is being used to replace national spending.

From 2014 to 2020, we plan to channel EUR 420 billion into national budgets to support national ag-riculture policies. Another EUR 360 billion is being handed over to national policy makers for national projects with very little connection to the policy recommendations we agreed to.

European money is financing non-European policies. And in some countries this European money is not spent in a proper way. But that is a different story.

It is the responsibility of Member States and the European Parliament to ensure that European taxpayer money is spent on the right priorities. And to be quite frank: It is the responsibility of the European

I am sure our budget can make a difference, much more than it does today.

We must set the right priorities. European money has to be spent to achieve European objectives.



Commission to ensure that European taxpayer money is spent in a proper way.

So, my first urgent proposal is this: European money should be spent on things that deliver a clear European added value. Today we understand that border controls and migration policy can only be done at the European level. The same goes of course for environmental policy and energy policy, and also for policies enabling our industry to make full use of the possibilities offered by digital technology. Foreign affairs is another area where we have to build a European policy.

My second proposal aims at achieving more coherent policies within the European Union. Every year, the European Commission proposes a budget that contains around EUR 140 billion in spending, as I mentioned. And every year the Commission adopts country-specific economic policy recommendations

aiming to identify the main challenges for every Member State. I have some ideas on how to improve this process, but that is for another conference.

So, how can we link these recommendations to the EU budget? Or in other words: How can we use the EU budget to foster national ownership and implementation of the country-specific recommendations? I think there is a simple way to do this: namely, we should systematically use European money to help finance the implementation of the political priorities which we have agreed on in the European Semester.

To be quite frank: I propose to use the money that is spent for cohesion policy and parts of the agriculture budget to support reform efforts in the Member States. The national projects which benefit from financing from the European funds should be systematically designed to implement the country-specific recommendations. The Commission needs to make this the precondition for financing national projects.

Let me emphasize that these two proposals will not necessarily cost extra money. The available money is sufficient, if it is spent on the right things. Therefore, we should keep the overall ceilings of the MFF. However, we could create more flexibility within the financial framework.

That’s my third proposal.

The current MFF includes some flexibility. However, if this flexibility is used up, we will have to raise the expenditure ceilings if new challenges arise.

If we want to deal effectively with new challenges and new priorities in the future, and, in particular, if we want to be able to react in a rapid and unbureaucratic way, we will need to ensure more flexibility in the European budget.

This flexibility should be built into the next MFF in a way that ensures funds are available for unfore-seen purposes without breaking the ceilings.

Europe faces a completely different set of challenges today, due to the processes of globalization and digitalization. Given today’s interconnected and networked world, these challenges quickly turn into

European money should be spent on things that deliver a clear European added value.

Flexibility should be built into the next MFF.



European challenges, regardless of where they originate. So using the EU budget as a tool to solve these challenges is the right thing to do.

If we don’t succeed in this effort, if Europe fails to solve its problems, then we shouldn’t be surprised if Europeans lose their trust and confidence in the EU and start seeing the EU as the problem, not the solution. After all, we have always argued that one of the key reasons why the EU is so important is that individual countries are unable to solve many of today’s challenges on their own.

The refugee crisis is an important case where we must now prove that Europe really is the answer. So once again: here is a crisis that also presents an opportunity. Let’s make the most of it!



Summary of the speech by Dr. Maroš ŠefčovičEuropean Commission Vice-President for Energy Union

All countries in the world needed to take action and invest resources in shifting to a climate-resilient economy. The EU had a leading role in the fight against climate change and the Commission was already implementing ambitious measures, integrated throughout many EU policies. The Energy Union strategy would allow us to fundamentally shift ‘our economic model to a sustainable, low-carbon and climate-resilient one, underpinned by ambitious targets for reducing greenhouse gas emissions, increasing the share of renewables and improving energy efficiency.’The EU budget is the most important and the most innovative tool to achieve our climate objectives: 20 % of it is committed to climate-related action. This represents around EUR 180 billion in overall investments up to 2020 and an estimated EUR 30.8 billion for the 2016 budget alone. This ‘mainstreaming’ means that all climate objectives must be pursued in relevant Commission policies, while considering the climate impact of all policy actions.In agriculture, at least 30 % of the budgeted EU funds will be used for climate-related projects. Regional policy is allocating more funds for energy efficiency. EU climate objectives are also integrated in research and science, development and many

other policies, and many commissioners are actively engaged to ensuring that money is well spent.The Commission can achieve the best results with the available budget only if ‘our sector policies are coherent with each other, if we have a solid tracking and monitoring system that allows us to systematically assess our progress and strengthen the action.’Public budgets alone cannot deliver the financing needs for fighting climate change. Yet public budgets can be used to mobilise private capital by reducing the risk for investors as ‘we need to avoid spending public money where the private sector can deliver.’ The recently created European Fund for Strategic Investments, sometimes called the ‘Juncker investment plan,’ aims to use the EU budget to unlock private investments in key areas for the EU economy.‘Climate action is a natural multiplier.’ Therefore, investing in actions addressing climate change also serves multiple other objectives, such as better living standards and a stronger economy. In short: ‘climate action is extremely good value for taxpayers’ money.’

‘The costs of inaction — both human and economic — are simply too high’

Vice-President Šefčovič expected concrete results from the Paris Climate Summit at the end of 2015. He envisaged a ‘new global agreement which will be ambitious, legally binding and will set a clear path for keeping climate change in check.’ The increasing number of severe weather events in and outside Europe was worsening the living conditions of the poorest and was also a factor for migration. Climate change remained a global challenge: it was already now changing the human existence and would keep changing it in the future.



Summary of the speech by Marianne ThyssenEuropean Commissioner for Employment and Social Affairs

1. Have we succeeded in allocating funds where they are most needed, where they support EU priorities?The European budget must deliver the highest added value and results that matter for the people of Europe and beyond. This must be done through achieving well-designed and targeted policies that contribute to growth and job creation. In the case of the European Social Fund, accomplishing such results means aligning operational programmes with the country-specific recommendations given by the Commission to Member States in order to foster smart, sustainable and inclusive growth.

2. Are we — Commission and Member States — organised to achieve maximum impact for each euro spent?Maximising the results achieved with the EU budget is one of the main goals during the new budget period. One way to achieve this is to diversify the financial instruments that are being used. In the new multiannual financial framework, a more widespread use of financial instruments, notably loans and guarantees, will give greater multiplier effects. Therefore, the Commission has created FI-COMPASS, a new platform designed to provide practical know-how and learning tools on the use of financial instruments, to support managing authorities, microfinance providers and others involved.For funds to have a greater impact, specific preconditions also called ‘ex-ante conditionalities’, must be in place in Member States and regions.

Examples include the presence of an overall employment strategy and putting in place a monitoring system.Simplification is also among the tools used to max-imise the impact of funds. Simplified procedures in employment and social policy ‘have already led to savings of resources, reduction of the error rate and re-focusing on the attainment of objectives.’ For several years in a row, the Court of Auditors ‘has detected no errors in the European Social Fund transactions for which simplified cost options have been applied.’ Commissioner Thyssen’s objective is that 50 % of Social Fund expenditure is implemented through simplified cost options by 2017. Simplification is a tool that allows us to ‘move our focus away from bills towards policy results.’

3. Can we convincingly demonstrate the impact of our spending?Thousands of projects managed by Member States or other intermediaries need to be monitored and evaluated. The ‘structural funds are the front runners of a real performance framework that will allow us to measure results’ said Commissioner Thyssen, recalling that new, result-oriented provisions are already in place. These include a performance reserve to reward implementation of successful programmes with more funding, and financial penalties for non-performing ones. In the end, ‘beyond figures and indicators, we need to demonstrate to citizens the relevance of EU spending and its impact on their everyday life.’

‘We want an EU budget focused on results, but we also need to be able to provide evidence of these results!’

In approving the 2014-2020 multiannual financial framework, Member States had demonstrated their determination to focus on the quality of expenditure, ensuring that all funding instruments will be used as effectively as possible. Commissioner Thyssen believed that, as the programming phase of the current multiannual financial framework is coming to an end, now was the right time to take a closer look at the performance of the EU budget and to provide answers to the following three key questions.



Summary of the speech by Dr Marc RobinsonMember of the OECD Advisory Panel on Budgeting and Public Expenditures

For the latter, the basic principle is to aim for a performance-informed budgeting system that structures the budget around the desired results, uses performance information (indicators and evaluation) and tries to integrate performance considerations in funding decisions. The aim is to align money and priorities and to encourage agencies to maximise their effectiveness and efficiency. Experience in other countries, such as Australia and New Zealand, shows that the attempt to build a mechanical link between funding and results does not work at the level of the entire budget.

Secondly, it should not be assumed that just because performance information is available, it will be used in budget decisions. In many countries, the budget document includes thousands of pages of performance indicators, performance plans and reports, but in practice their effect on budget al-locations is limited. For example, the performance budgeting system review in one Member State revealed a basic design flaw: during budget preparation, the only subject for discussion in the bilateral negotiations between the finance ministry and spending agencies was money. ‘In design and implementation, there is nothing more fundamental than making sure that performance really counts in budgetary decisions.’ The other crucial factor is the need to remove or reduce barriers to resource allocation, such as having to commit certain funds to programmes irrespective of their effectiveness, or having a civil service employment regime where it is impossible to move staff from non-performing programmes to other areas. A traditional, very rigid civil service system

prohibits introducing performance into resource allocation in a meaningful way.Another reason why performance budgeting is more difficult in the public sector and at a supranational level is the complexity of services. The outcomes of research or economic development programmes are by nature long-term, difficult to measure or attribute only to the intervention isolating external factors. Facing these limitations requires a sense of realism, rather than considering the exercise futile.Vague objectives such as ‘to strengthen the cohesion between EU Member States’ should be defined better as a first step to deciding what outcomes to measure. Outcome measurement itself must improve. In research, for instance, it is important to measure the outputs, such as patents. Measuring their rate of commercialisation to assess the outcomes is also extremely important and is often neglected precisely because many outcomes are long-term or will remain ultimately unmeasurable. In this context, impact evaluation is very important.

While getting the basics of a performance-based budgeting system right is essential, there are some add-ons that can be incorporated too. The idea of a performance reserve, being a certain amount of money as a reward for good performance, is an excellent example of that. Another example is performance targets. There is often a tendency to want to set performance targets — linked to the budget — for everything. ‘In setting targets, you have to be careful not to set more than you could monitor and manage, not to set targets for things over which you have very little control, and to very clearly distinguish between the objectives and targets.’

‘In design and implementation, there is nothing more fundamental than making sure that performance really counts in budgetary decisions.’

Dr Robinson focused on key issues for implementing an effective performance budgeting system, noting that getting the right design is of crucial importance. The basic starting point is that there is no single model: ‘It is a question of designing your performance budgeting system to suit the circumstances.’ There is a clear distinction between performance budgeting systems designed to operate in a specific sector (education, health) and those encompassing the entire budgeting system of a government or the European Commission.



Panel 1: Performance in the public sector: theory and practiceModerator: Ann Mettler, Head of the European Political Strategy Centre

From left to right: Kevin Cardiff, Dr Marc Robinson, Carlos Moedas, Ann Mettler, Corina Creţu

BACKGROUND

The debate on performance-based budgeting among policymakers continues in the context of fiscal pressures faced by EU Member States. The OECD defines performance-based budgeting as ‘budgeting that links the funds allocated to measurable results.’ There are three broad types: a) presentational performance budgeting where information on targets and/or results is presented for greater transparency and accountability, but does not play a role in decision-making; b) performance-informed budgeting where past and/or future performance is taken into account in the budget decision-making process, but is not used to determine the actual amounts allocated; and c) direct performance budgeting, which allocates resources directly based on the results achieved.

The advantages of implementing performance-based budgeting are a greater focus within governments on achieving tangible results, and improvements in monitoring, planning and policy design, transparency and public accountability. A common challenge of performance-based budgeting is the complexity of measuring performance in the public sector and selecting appropriate indicators. Analysing the contribution of the budget to achieving the outputs and outcomes, which are subject to a number of external factors beyond the intervention logic, is also a recurrent issue.

As regards the EU budget, a performance-informed approach is in place. The draft budget is accompanied by performance information on all spending programmes. This performance framework establishing objectives, performance indicators and results is defined in the legal basis. The Commission reports annually on the performance of programmes financed by the EU budget. An evaluation report on the Union finances based on the results achieved is required by the Treaty along with the financial statement and annual accounts. The EU budget discharge granted by the budgetary authority is therefore also on the basis of performance information.

At present, 19 EU Member States have embarked on some type of performance-based budgeting reform. Such a vast experience can provide important lessons for the EU and help identify further performance synergies between national and EU budgets.

SpeakersCorina Crețu, European Commissioner for Regional PolicyCarlos Moedas, European Commissioner for Research, Science and InnovationKevin Cardiff, Member of the European Court of AuditorsDr. Marc Robinson, Partner at PFM Results, Member of the OECD Advisory Panel on Budgeting and Public Expenditures



The first panel concentrated on the theory and practice of performance-based budgeting in the public sector, and more specifically regarding the EU budget. The moderator, Ann Mettler, and all the speakers considered that measuring performance in the public sector is harder and more complicated than in the private sector.

In his keynote speech, Dr Marc Robinson pointed out that ‘there is no single model of performance-based budgeting systems.’ Such systems should be individually designed around specific objectives, which have to be measured. A performance system designed to measure performance in education and health should be based on requirements, specifications and structures that are different from those applied to a performance system designed to analyse, monitor and measure the performance of an overall national budget. A performance system should ‘not mechanically link performance to funding but rather to the broad category of a programme or a budgeting system’ or, in other words, a system for making performance-informed budget decisions. Performance information such as indicators and evaluations should support funding decisions, aligning funding with priorities, and, in the meantime, motivating agencies to maximise their effectiveness and efficiency.

Performance considerations should be present in the design and implementation of programmes, but there are some obstacles to incorporating them into allocation decisions. The necessary conditions are, firstly, the presence of a flexible and mobile organisation, able to focus and refocus on new priorities and administration, and secondly, the ability to overcome the reluctance to introduce performance in policy areas such as economic development and research, in which results are complex to measure and only obtainable in the medium to long term.

In addition, to improve the overall quality of a management system such as that of the Commission,

it will be necessary to improve the clarity of the objectives to be achieved. It is also important to focus performance systems not only and exclusively on output measurements but also on outcomes. Last but not least, in some cases it is important to analyse the results in a qualitative manner: user satisfaction was among the examples mentioned.

In designing a performance system, you could also apply some ‘add-ons’ such as the performance re-serves in the EU’s multiannual budget that could incentivise and benefit those who perform well and penalise those who do not. Setting performance indicators should, however, be limited to achievable targets that can be verified and monitored.

In the discussion following Dr Robinson’s speech, the panellists agreed that performance should be part of the entire policy cycle and process; it

‘Performance should be part of the process, part of the

expectation, part of the demand of the whole process, from top

to bottom.’

‘There is no single model of performance-based budgeting

system’

Ann Mettler



cannot be limited to the higher budgetary level, i.e. Member States and Commission. Moreover all the implementing levels, such as regions and other sub-national authorities should, as Mr Kevin Cardiff stressed, be ‘part of the process,

part of the expectation, part of the demand of the whole process, from top to bottom.’

All panellists underlined that although the theory on performance-based budgeting has been adopted in recent decades by many governments, its impact on daily policymaking has often been disappointing. Furthermore, the results and information derived from performance systems have often not been used in the decision-making process. As Commissioner Carlos Moedas underlined, ‘public budgets can be unfair’ because they are often based on historical legacies and therefore performance is seldom the factor that influences the allocation of funds.

In addition, panellists shared a common view that it is almost inevitable that performance-based budgeting could partially result in just ‘government talking to itself.’ However, it should also have an impact on how the budget is communicated to citizens.

Discussions also noted that selecting the indicators is a complex job, that output indicators should be present alongside outcome indicators, and that sometimes indicators could be contradictory. Commissioner Moedas suggested that technology could help to achieve a better understanding of results and performance, in particular allowing ‘big data and information systems to work with each other.’ According to Commissioner Moedas, the

big volume of information available today, together with the possibility to correlate meta-analyses of the output and indicators, are the key elements to better measure outcomes.

The panellists underlined that with the new multi-annual financial framework the Commission has introduced elements to reduce the administrative burden on beneficiaries. It was pointed out that simplification also requires collaboration and trust among beneficiaries and grant providers, and good cooperation with Member States. The European Research Council was mentioned as a good example of spending, with a good balance between control and trust, since too many controls can easily stifle innovation and research.

Another element that emerged from the debate is that, in the past, the focus has been mainly on spending of funds instead of results. As Com-missioner Corina Creţu underlined, ‘absorption is not a guarantee of impact’ and Member States together with managing authorities should have the courage to take risks to invest in sectors that can create jobs and growth.

‘We have to allow big data and information systems to work

with each other’

Carlos Moedas



Focus on Policy: EU budget in climate actionModerator: Nadia Calviño, Director-General of DG Budget

Nadia Calviňo and Maroš Šefčovič (Rachel Kyte participated via videoconferencing)

BACKGROUND

Climate change is one of the defining challenges of our time. It has far-reaching implications for our economy and society. This requires global efforts by all EU Member States and other countries, and also by economic sectors, public and private institutions and other social groups, to integrate climate change consciousness into everyday activities.

The EU and the World Bank are two leading players in the global shift to a low-carbon, climate-resilient growth model. Having set ambitious and detailed targets for reducing greenhouse gas emissions by 20 % by 2020 and 40 % by 2030, the EU is actively moving towards a low-carbon, climate-resilient economy.

To meet the challenges and investment needs posed by climate change, the EU institutions agreed to adopt a 20 % target for climate-related expenditure in the EU’s multiannual financial framework for 2014-2020. This target is to be implemented and tracked through a ‘mainstreaming approach’, which means that climate action should be integrated across all major policy areas and spending programmes over the seven-year period.

The European Commission has developed and put into practice an approach for tracking climate-related spending in the EU budget. It uses the OECD’s ‘Rio markers’ as a statistical code for tracking those elements of funding programmes that can be considered to deliver climate action. In general, the approach is applied consistently across the various programmes financed under the EU budget, while allowing for some fine-tuning to accommodate the specific requirements of each programme.

Applying this tracking methodology for the 2016 draft budget, the Commission has identified an es-timated 20.6 % as climate-related expenditure (approximately EUR 31 billion out of EUR 150 billion). This amount, coupled with the funds directly allocated by Member States, is placing the EU in the lead of global climate action.

Yet the EU accounts for only 11 % of global greenhouse gas emissions. To achieve the EU policy objective of keeping global temperatures in check, it is vital that others around the world also take action. Active support to the poorest and most vulnerable countries in scaling up the necessary invest-ments is necessary. In this context, the World Bank plays a key role at the forefront of the global fight to tackle climate change. A key multilateral body, it delivers policy advice and finance to many parts of the world. The EU and the World Bank are working closely to deliver a sustainable future.

SpeakersDr. Maroš Šefčovič, European Commission Vice-President for Energy UnionRachel Kyte, World Bank Group Vice President and Special Envoy for Climate Change



The panel ‘Focus on policy: EU budget in climate action’ discussed the role of the EU budget in fighting climate change, which remains one of the defining challenges of our time, and has far-reaching implications for our economy and society.

Vice-President Maroš Šefčovič underlined that the EU must be at the ‘forefront of action’ in this area, internally and externally, because ‘the costs of inaction — both human and economic — are simply too high.’ Internally, the Energy Union strategy will lead to a fundamental shift of the economic model to one that is sustainable, low-carbon and climate-resilient, underpinned by ambitious targets for reducing greenhouse gas emissions, increasing the share of renewables and improving energy efficiency. Besides the coherent policy framework that is already set up, the EU budget has been identified as a crucial tool in fighting climate change. The EU’s 2014-2020 budget provides for 20 % to be invested in climate-related actions or around EUR 180 billion. In 2016, an estimated EUR 30.8 billion of the commitments made under the EU budget will be climate-related. Vice-President Šefčovič also stressed that ‘to make sure the money is well spent, we have to monitor and keep track of the spending.’

A public budget like the EU budget cannot cover all financing needs on its own. However, it can be used to mobilise private investments in key areas for the EU economy. With this in mind, the Commission has already created the European Fund for Strategic

Investments, aiming to reduce the perceived or real risks for private investors, so they find it attractive to invest in low-carbon and climate-resilient actions. In this context, Vice-President Šefčovič pointed out that ‘climate action is a natural multiplier and extremely good value for taxpayers’ money.’ The EU is also active externally helping the poorest and most vulnerable and supporting other countries in shifting their development path to a low-carbon economy.

Ms Rachel Kyte, Vice-President of the World Bank, began by underlining that climate change is a priority on the political agenda and a fundamental challenge for the World Bank, which operates as a financial institution, a development financier, and a client-driven development bank. The World Bank has radically changed its approach after a long journey, where ‘climate conversation has gone well beyond project selection […] into the DNA of the financial organisation.’

The European Union has provided an example with its history of setting ambitious environmental targets, therefore ‘the world needs Europe to lead the shift towards a low-carbon economy,’ said Ms Kyte.Compared with earlier years, there is now a change in how climate change is being discussed. In the recent past, the focus was on the benefits of climate action, now the focus is on resilience to climate

‘We need to make sure the money is well spent… we have to monitor and keep track of the spending’

‘The world needs Europe to lead the shift towards a low carbon

economy.’



change. This change of focus has helped to create a coalition of allies covering various categories and sectors, such as city leaders, private business and community leaders. Climate change will affect all prospects of economic development, making it more difficult to achieve the desired results, and it will threaten to unravel the progress made by developing countries in the past 25-30 years in eradicating poverty and building prosperity. The effect of climate change is the ‘ultimate threat intensifier’ for its future costs in terms of lives, infrastructure, human health and food security.

The main goal, expected to be achieved in Paris,

was to build an economy with zero net emissions by the end of this century or sooner, obtaining an economic balance with the planet, which would then be capable of supporting a prosperous life for all its inhabitants. The World Bank Group, together with its international partners, has arrived at a common definition of what ‘funding mitigation’ means and how mitigation is measured in terms of financial flows. They have also come up with common principles on how to measure adaptation. The capacity to measure where previous investments have been made is a ‘key element to build trust,’ emphasised Ms Kyte: ‘This is a vital element to ensure that an agreement between the developed

countries to help less developed countries with the costs of mitigation will be reached in Paris’.

The World Bank Group also wants to fully and effectively involve the private sector in climate-smart projects and climate-smart development. Experience shows that, when funding climate action, the main focus should be on investments in resilience, in order to increase cost-effectiveness in development efforts and, hopefully, to reduce the level of funding spent on relief. In this regard, the Philippines and Vietnam are two countries where steps have been taken to internalise climate policy into the budgeting processes.

Smart development means investing in the infrastructure that is needed, whatever the economic downturn, and that a way should be found to stimulate private financing to flow into places where it normally doesn’t flow easily — even at times when the international economy may be facing constraints.

Dr. Maroš Šefčovič



Panel 2: Key Features of the EU Budget’s PerformanceModerator: Marianne Thyssen, Commissioner for Employment and Social Affairs

From left to right: Michael Theurer, Marianne Thyssen, Pierre Gramenga, Phil Hogan, Duarte Rodrigues

BACKGROUND

The multiannual financial framework for the period 2014-2020 has introduced important provisions to reinforce the performance of programmes financed under the budget. The EU budget’s focus on results was boosted by: a) increased amounts for research and innovation, education, SMEs, the Connecting Europe Facility, and climate mainstreaming; b) a minimum share of the Social Fund budget dedicated to the fight against social exclusion; c) increased leverage for investments through facilitating the use of innovative financial instruments, an approach boosted by the EUR 315 billion investment plan; d) reinforced economic governance, such as macroeconomic conditionality of European Structural and Investment Funds; e) more targeted indicators for a stronger performance orientation; and f) a simplified delivery system.

The new legal basis includes a performance framework with a limited number of objectives and indicators to facilitate the monitoring of results achieved. This performance framework includes a performance reserve for European Structural and Investment Funds. Until the end of 2018, 6 % of all operational programmes are frozen and will be released only after a performance review, establishing which priorities passed the programme milestones and are therefore on track to achieve objectives by the end of the period. Furthermore, the so called ex-ante conditionality aims to secure a higher effectiveness and to raise the prospects of success in EU cohesion spending.

Programme statements attached to the draft budget provide a multiannual overview of the objectives pursued, results achieved and resources allocated per programme. The draft budget therefore enables the budgetary authority to take performance-informed decisions throughout the multiannual financial framework period.

Moreover, the multiannual financial framework aims to increase efficiency by reducing administrative burden, including ‘gold-plating’, simplifying procedures and harmonising rules, and providing easier access to funding. Simplification and cost-effectiveness of control systems are therefore two key factors for better budget performance. Because of their shared management of 80 % of the EU budget, Member States play a key role in ensuring the effective implementation, and a focus on results, on the ground.

SpeakersPierre Gramegna, Minister of Finance, LuxembourgPhil Hogan, European Commissioner for Agriculture and Rural DevelopmentMichael Theurer, Member of the European Parliament, Committee on Budgetary Control Duarte Rodrigues, Board Member of the Portuguese Cohesion and Development Agency



The panel sought to highlight key performance features of the EU’s 2014-2020 multiannual financial framework and to identify success factors that would enable the Commission and Member States to share best practices at EU and national level.

Commissioner Thyssen opened the discussions by reminding the audience that the current multiannual financial framework must deliver value for money in a cost-effective way, which should be achieved through well-designed and targeted policies. Simplification in the European Structural and Investment funds is not only a tool to enable beneficiaries and administrations to comply with the rules, but also a way ‘to move our focus away from bills towards policy results.’ Structural funds have always been the ‘front runners’ both by implementing a performance framework and by introducing benefits and incentives for the programmes that perform best.

All panellists focused their interventions on how to better plan, manage and assess policy towards performance-based budgeting. Mr Gramegna highlighted the broad consensus around the necessity to apply performance-based budgeting in order to achieve a better performance from public budgets. Mr Theurer shared the same view, adding that transparency should be taken into account as well: ‘I really think that a performance-based budget could be a way to come to a more transparent and focused budget and to a more efficient use of money.’

Introducing performance-based budgeting is a complicated task but a necessary one, said Mr Gramegna, drawing attention to the fact that Luxembourg has already started to implement performance-based budgeting in its national budget. Mr Rodrigues pointed out that, at the first stage of performance budgeting in any policy area, the capacity to set clear objectives is essential. This type of budgeting can only be viable if it has a well-defined intervention logic — part of a strategic

planning behind it. In this regard, information and data gathering is of key importance to design a policy with a strategic aim. Mr Rodrigues also stressed the necessity ‘to spend more time discussing the results than discussing the planning,’ giving as an example the current programming period, where the planning for cohesion policy took almost two years before moving to implementation stage.

In the implementation phase, rules, procedures and benchmarks are equally important but, emphasised Mr Gramegna, they need to be reasonably simple to avoid becoming a further administrative burden. Mr Rodrigues stressed the importance of making sure that the implementation in a multilevel system should be based on setting the right mix of incentives and rules. In the case of cohesion funds, the selection criteria are the key elements of performance and are based on a continuous inflow of information. Mr Gramegna highlighted the importance of a simple regulatory framework for small actions and projects; this could allow small Member States, such as Luxembourg, to be able to implement projects financed by European programmes, such as European Social Fund, without an overwhelming administrative burden.

The evaluation of results, according to Mr Gramegna, should be considered in broader

‘We need to spend more time discussing the results than

discussing the planning’

Pierre Gramegna



economic terms, even when not all technical objectives have been achieved. The full economic impact of a given action or project should be the key element to evaluate its success or its failure. More focus on results implies less focus elsewhere since resources in the public sector are limited, said Mr Rodrigues. According to Mr Theurer, the EU budget has focused too much on compliance and error rates, and too little on results.

The panellists agreed that the EU budget should enable us to pursue our priorities but also to respond to emergencies, such as the current refugee

crisis. Political courage should prevail and — as Mr Gramegna said — we must make sure that we do not get bogged down in procedures. All the speakers stressed the importance of communicating the results achieved properly — in a simple and effective way. Mr Rodrigues also suggested having a wide public debate on the results achieved.

Commissioner Hogan’s comments focused on the benefits of the common agricultural policy. He pointed out that a solid framework for managing, monitoring and evaluating the common agricultural policy is already in place and it includes annual reporting on results. This sector has been constantly scrutinised by the European Parliament

Michael Theurer

and the Court of Auditors, with the European Commission taking all necessary steps to lower the level of errors. According to Commissioner Hogan, Europe’s agricultural policy is a success in terms of results — exports of EU agricultural products have risen, thereby contributing to growth by creating jobs.

Commissioner Thyssen concluded that, in order to focus on results, there is a need to build the capacity for better planning, implementing and assessing of EU policies. It is also important to have an inter-institutional dialogue and communication with Member States to keep improving in this regard. Finally, it is very important to communicate the results to citizens. The Commissioner finished by adding: ‘One thing is sure — that the approach based on results and performance will continue to guide our thinking on the future of public investments, and of course — there is always room to improve.’

‘The approach based on results and performance will continue to guide our thinking on the future

of public investments’



Panel 3: Outlook: an EU Budget Focused on ResultsModerator: Kristalina Georgieva, European Commission Vice-President for Budget and Human Resources

From left to right: Mari Kiviniemi, Dr. Mateusz Szczurek, Kristalina Georgieva, Jean Arthuis, Dr. Wolgang Schäuble

BACKGROUND

Pressure on Member States’ finances and the fall in available public resources have led to closer scrutiny of public budgets. At the European level, the reduction of resources in the multiannual financial framework 2014-2020 is imposing a clear budgetary constraint that makes it imperative to focus on effective delivery and added value. The economic rationale of for each item of expenditure must be justified better. And the results achieved must be communicated better to citizens, to whom national governments and the European Union are increasingly accountable for every euro spent.

The initiative EU Budget Focused on Results aims to increase accountability for the EU budget by means of a renewed focus on results. Management and budgetary authorities at EU and national level should further step up their efforts for a more effective contribution to the results of programmes. This will better respond to the expectations of stakeholders who are rightly concerned with outcomes and results, and to compliance with rules. The 2014-2020 multiannual financial framework includes improvements in this direction.

The new multiannual financial framework has also introduced a new concept; ‘macroeconomic conditionality’ strengthens the link between the European Structural and Investment Funds and the respect for European economic governance rules (e.g. rules under the stability and growth pact, country-specific recommendations). These types of mechanism may broaden the impact of the EU budget beyond its immediate financial impact on beneficiaries.

Member States are the main players to ensure that implementation and evaluation is based on meaningful information on programme performance. Looking ahead, political agreement is necessary on what we want to achieve with the EU budget and how best to do so in the short and medium term — for the current multiannual financial framework mid-term review and for the next post-2020 multiannual financial framework.

In a similar vein, the question of how to finance the EU budget will also play an integral role in the efforts to optimise its effectiveness and legitimacy. For the moment, this is the subject of a separate process.

SpeakersDr Wolfgang Schäuble, Federal Minister of Finance, GermanyDr Mateusz Szczurek, Minister of Finance, Poland Jean Arthuis, Member of the European Parliament, Chair of the Committee on Budgets Mari Kiviniemi, OECD Deputy Secretary-General



The keynote speaker of the panel, Germany’s Minister of Finance Dr Wolfgang Schäuble, argued that the refugee crisis is ‘one of the greatest challenges the Union has ever seen’ and that the EU budget should be mobilised to face this challenge. According to Mr Schäuble, the budget ‘is spent not to address current challenges, but is rather allocated on the basis of historical reasons.’ In this context, the review of the multiannual financial framework should be seen as a chance to take a fresh look at how the EU budget can help to achieve European objectives. Mr Schäuble suggested three ways to achieve such results.First, the budget ‘should be spent on things that deliver a clear European added value’ — for example, border controls and migration policy, energy and environmental policy.’

Secondly, the European economic semester requires policies that are more coherent, linking country-specific economic and social policy recommendations addressed to Member States, with the EU budget. For Mr Schäuble, this goal could be achieved through systematic use of European money for cohesion policy and agriculture to help finance the implementation of political priorities under the European semester. National projects that benefit from European financing should be designed to implement the country-specific recommendations. Mr Schäuble pointed out that these two proposals were structural and would not necessarily cost extra money.The third specific proposal was to increase the flexibility of the EU budget, starting from the current 2014-2020 multiannual financial framework and integrating it into the next post-2020 budget. Such increased flexibility would provide the means to deal effectively ‘with new challenges and new priorities in the future’, enabling the European Union to ‘react in a rapid and non-bureaucratic way.’

Mr Schäuble concluded by warning that ‘if we do not succeed in this effort, if Europe fails to solve

its problems, then we should not be surprised if Europeans lose their trust and confidence in the EU and start seeing the EU as the problem, not the solution.’Dr Szczurek, Poland’s Finance Minister, argued that the ‘EU budget does deliver results’ — offering as an example cohesion policy, which has had a crucial role in public investments and in stabilising the economy of many Member States during the peak years of the economic crisis. The minister pointed out that some financial instruments, such as the European Fund for Strategic Investments, have limits and that they should be targeted — in particular, but not exclusively — also at ‘non-bankable’ sectors.

There was unanimity among the participants regarding the importance of performance in public management. In this context, Mr Arthuis highlighted the necessity not to confuse performance culture with an excessive use of indicators. Performance and performance-based budgeting, according to Mr Szczurek, are already in the EU budget and specifically ‘cohesion policy is at the forefront of performance-based budgeting in the EU budget.’

Regarding the achievement and implementation of

Dr Mateusz Szczurek

‘The refugee crisis is one of the greatest challenges the Union

has ever seen’



performance, Ms Kiviniemi recommended — on the basis of OECD experience — that a result and performance framework had first of all to be an intrinsic feature of the budgeting system, and the framework should be aligned with a greater vision of what the organisation is trying to achieve. She stressed the relevance of performance monitoring as a learning tool, not a decision tool. Both Mr Szczurek and Mr Arthuis called for a stronger focus on evaluating and understanding the results

achieved; this would also be a useful input to the programming stage of the subsequent post-2020 multiannual financial framework. In addition, Ms Kiviniemi underlined the importance of responding to growing demand by citizens for more transparency and visible results.

Panellists expressed different points of view on the issue of increasing flexibility in the EU budget. Mr Arthuis called for more flexibility and in this context argued for a shorter five-year period. Mr Szczurek, on the contrary, argued for a longer period and a shorter agreement period, since it is necessary to assess the operation of a previous multiannual financial framework before deciding on a new one. In his view, the duration of the multiannual financial framework should not be the budget’s main flexibility instrument.

The moderator, Vice-President Georgieva, added that a shorter multiannual financial framework would be complicated to achieve as long as it still takes two years for the institutions to agree on it.

Reallocating resources according to changing needs is an integral part of flexibility in the budget. All participants agreed that, at the moment, the mechanisms to modify the allocation of resources are not sufficiently efficient. In this regard, Mr Szczurek highlighted that one should be careful in changing priorities; existing programmes that are already in line with EU priorities should not be negatively affected in the process.

Macroeconomic conditionality and the role of Member States in the implementation of the EU budget were also widely discussed, in particular by Mr Schäuble and Mr Szczurek. Both underlined the importance of country-specific recommendations and macroeconomic conditionality. But where Mr Szczurek defended the relevance of shared management and subsidiarity principles in implementing the EU budget, Mr Schäuble focused on the reduction of the number of country-specific recommendations for countries, but making them more binding on Member States.

In their final remarks Mr Schäuble and Vice-President Georgieva stressed the absolute necessity to find an immediate solution to the refugee crisis. Vice-President Georgieva concluded that the EU budget is not only about money but it represents the underlying values of the European project.

Jean Arthuis

‘The EU budget does deliver results’



The framework of performance-based budgeting in the EU is set down in the Treaty on the Functioning of the European Union and the Financial Regulation applicable to the general budget of the Union.

The performance of the EU budget, including the activities that are funded by it, is mainly assessed against the principles of sound financial management — i.e. economy, efficiency and effectiveness — that are also the widely accepted staples of performance management in general. The broader performance management framework provides for: 1) setting objectives and targets; 2) aligning organisational structures, resources and processes to the objectives; 3) effectively using performance data to manage, monitor or reorient EU operations; and 4) exercising accountability to stakeholders.

The annual EU budget falls under the multiannual financial framework, which is the EU’s long-term spending plan. It lays down the maximum annual amounts (‘ceilings’) that the EU may spend in different political fields (‘headings’), currently over a period of seven years, from 2014 to 2020. The annual budgets must be adopted within the ceilings of the framework thus providing predictable financial programming and budgetary discipline in the longer term.

The multiannual financial framework is part of a comprehensive package that also comprises the set of sector-specific legislation defining the conditions of eligibility and the criteria for the allocation of funds for each EU spending programme. These regulations also set specific performance requirements for the programmes. The regulations for the programmes include a performance framework with a limited number of objectives and corresponding indicators, thus enabling the monitoring of results achieved.

The objectives and indicators defined in the legislation for each programme over the multiannual period are incorporated into programme statements annexed to the draft budget. This provides a clear overview of the objectives pursued, the results achieved and the resources allocated through the programmes financed under the EU budget. Thus, the approach applied to the EU budget is considered performance-informed budgeting in OECD terms. The actual results obtained, as well as the implementation, are reported in annual activity reports by directorates-general. These, in turn,

are summarised in the synthesis report adopted by the European Commission.

The functioning of the 2014-2020 multiannual financial framework will be reviewed by the Commission in 2016, taking full account of the economic situation at the time as well as the latest macroeconomic projections. This is the 2016 mid-term review.

Each year, the Commission submits to the European Parliament and the Council an annual evaluation report on the Union’s finances based on the results achieved as part of the annual discharge procedure on the implementation of the EU budget. It allows the European Parliament to examine the performance of the EU budget in addition to compliance, legality and regularity of budget implementation.

There are therefore various categories of information that contribute to the annual budget discharge: the annual accounts and a financial statement on the assets and liabilities of the Union, information on the legality and regularity of spending, information on progress made in the implementation and management of financial programmes, and information concerning the results achieved.

One of the best examples of the new performance features in the 2014-2020 multiannual financial framework is a performance reserve (6 % of total allocations) for European Structural and Investment Funds. Until the end of 2018, 6 % of all operational programmes are frozen and funds will only be released after a performance review in 2019. The review will establish which priorities passed the established milestones and are therefore on track to achieve the given objectives by the end of the period.

Annex: Performance budgeting in the EU budget



EU Budget for Results Web Application

The European Commission published a new Web app with a collection of more than 500 EU funded projects, and counting. The app was officially launched by Vice-President Georgieva at the EU Budget for Results Conference, in Brussels, on 22 September 2015.

The project collection is accessible via either a world map or through searching different categories. It is the first Web app managed by the European Commission’s Directorate-General for Budget, with contributions from other Commission departments. The Web app purpose is to highlight the effective use of EU resources that benefit the citizens. Each featured project provides information on the project results that contribute to improving the lives of people in Europe and everywhere in the world.The projects relate to fields from employment, regional development, research and education to environment, humanitarian aid, energy and many others.

The Web app is the result of a pilot project that is currently assessed for a further development. The app is available in English, for the time being, and it can be accessed with both desktop and mobile devices.

Visit the Web App: ec.europa.eu/budget/euprojects/

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