Budgeting for failure

Blog by Jeroen Kwakkenbos, Oxfam EU Deputy Head of Office and Aid Lead
Published: 19th September 2023

The mid-term review of the EU's 7-year budget, the Multi-annual Financial Framework (MFF), comes at a critical moment. In an era dubbed "perma-crisis," where humanitarian aid and development cooperation struggle against a cascading stream of constant crises, it's time for the European Commission to face reality. This review is an opportunity for the European Commission to give EU countries a frank appraisal of the financial resources needed to live up to the EU’s ambitions of being a global champion of human rights, poverty eradication, tackling inequality and climate action and a leader in crisis response. The EU countries must respond by allocating more funding so that the EU’s aspirational rhetoric doesn’t turn into empty promises.

The Commission’s proposal lacks political courage and what is needed is a very different proposal. The Commission aims for what seems attainable rather than what's essential. The one thing the Commission gets right is that it cannot meet its humanitarian and development commitments without more money. What it gets wrong is nearly everything else. The proposal on the table paints a picture of an inward-looking Europe at odds with its desire to be seen as a global geopolitical player and development partner. It focuses on its own security and the need to protect industries from foreign competition, with development aid being used as a bargaining chip to keep migrants at bay rather than tackling poverty and combating inequality. It points out the lack of humanitarian aid to meet existing, never mind future, needs.

Meanwhile, the proposed solution, the Solidarity and Emergency Aid Reserve (SEAR), creates competition between dealing with internal or external crises and is a drop in the ocean compared to what is needed. The only ray of light for development cooperation is an increase to the EU aid budget, NDICI cushion, seen by many as a slush fund with little transparency or oversight, but now presented as the only real contribution to development, and once again, a pittance compared to what is needed.

Is this proposal a reflection of the Commission’s lack of ambition, or a cautious calculation of what it thinks EU countries might accept when it comes cap in hand? Regardless, it is not enough and unacceptable. The Commission must break free from the shackles of the European Council’s frugal cliches and disingenuous actors. A clear path exists to drum up revenue as outlined in Oxfam's recommendations to the Spanish presidency of the European Council: tax the ultra-wealthy and reign in the greediest companies profiting from others' misery.

During the Covid crisis, while most Europeans were stuck at home struggling to make ends meet, the richest 1% in Europe pocketed nearly 45% of newly-created wealth. In 2022, while the world's largest food and energy corporations doubled their profits capitalizing on rising inflation, exacerbating global food and energy crises amid millions struggling to feed their families or heat their homes. Meanwhile, the richest countries continue to extract wealth from the world’s poorest countries through debt servicing leaving governments unable to meet citizen’s needs. And yet, rich countries have the audacity to say there’s no more money to fight the climate crisis, provide life-saving aid and end poverty hunger.

Here's a solution: an annual European wealth tax starting at just 2% on millionaires with wealth above €4.5 million ($5 million), 3% on those exceeding €45.7 million ($50 million), and 5% on billionaires. This could raise nearly €250 billion ($267.6 billion).

If the Commission is serious about facing today's challenges and preparing for tomorrow's, it must present a very different proposal. The right policies on taxation and economic policies backed by unwavering political could generate enough revenue to tackle the world’s most urgent challenges while combating global inequality and supporting a just green transition.

The time for half-measures and timid requests for more funding is over. The Commission must take bold steps, demand fairness, and uphold its commitment to human rights, poverty eradication, equality, and climate action. The stakes are too high, and the world can't afford to accept anything less than this.