The European Union budget: Too timid by half PROTRACTED budget rows have been blowing up in the European Union ever since Margaret Thatcher first wielded her handbag almost 30 years ago. The EU summit on November 22nd-23rd honoured this burdensome tradition by failing to fix the EU budget for 2014-20. Instead of seeking to restore growth to Europe or designing permanent repairs to the euro in place of sticking-plasters for Greece (see article), the EU's leaders once again worked themselves into a lather over not very much at all. Although the headlines screamed about a budget worth a whopping €1 trillion ($1.3 trillion), this is actually spread over seven years. In fact, the entire EU budget takes only around 1% of the block's annual GDP, compared with almost 50% for total national public spending. Furthermore, the gap between the most austere and the most extravagant proposals that were on the table in Brussels was a lot smaller than this. At the end of the day, only a little over €30 billion a year separated the two - or about 0.05% of government spending, a margin that in the context of national budgets most political leaders would not even bother to debate. That the EU managed to fall out over such piddling sums is embarrassing, especially for a club already held in low esteem by most Europeans and by the rest of the world. It does not help that the annual budget for 2013 is also in dispute. But far worse, if less noticed, was the politicians" failure, yet again, to re-examine the real purpose and scope of the EU budget. Although relatively small, the EU budget matters to some groups of people, most obviously poorer net recipients and vested interests like agriculture. The budget also has to be agreed on unanimously (including with the European Parliament), giving everybody at the table a veto. The combination of these two factors tends to favour the status quo: poorer countries can keep their "cohesion funds," France protects subsidies under the common agricultural policy (CAP), Britain preserves its special rebate and big net contributors such as Germany hold down total spending. The EU budget has therefore turned into a shameful anachronism. When social-welfare budgets are being slashed everywhere and Europe is crying out for policies that boost growth, it is wrong to devote 40% of EU spending to farmers - especially because much of the money goes to the best-off. It is also wrong that almost two-fifths of the cohesion funds, which take another 40% of the budget, should go to countries with a GDP per head above 90% of the EU average. Spend better with less The budget should be redesigned from scratch, making it smaller and more focused on promoting economic growth. The CAP has already largely shifted away from trade-distorting production subsidies towards direct income payments. These should be phased out, and until they are gone they should be financed half by national governments, half by Brussels. Cohesion funds should also be cut and directed solely at countries with a GDP per head well below the EU average. That would make them a better model for the kinds of transfers that are likely to become necessary between richer and poorer members of the euro zone. Some of the money saved by these two changes would be better used to support cross-border infrastructure and large R&D projects that might actually raise long-term growth in Europe. It would also mean that the present convoluted system of special budget rebates, which are now paid to Austria, Germany, the Netherlands and Sweden as well as to Britain, could be junked. Administration should be cut, not just by reducing the excessive pay and pensions of Eurocrats but also by scrapping advisory bodies, like the Committee on Regions and the Economic and Social Committee, which serve no useful purpose. Ending the European Parliament's monthly travelling circus to Strasbourg would alone save some €180m a year. These changes would cut EU spending by more than a quarter, make its distribution fairer and do a lot more than the current budget to promote growth. If Europe's crisis-weary leaders want to show the world that they are serious about reform, what better place to start?