The new European economic governance: “taxation without representation”?
The possibilities to voice national parliamentary interests with the national budget are eroding as the new and strengthened European economic governance regime is implemented.
“No taxation without representation”. This slogan, voiced by the British colonist in America in the 1750s and 1760s as an objection to imposed British taxes, still resonates today. The right to give consent to the imposition of taxes and consequently the right to have a say in how the collected taxes are spent – the budgetary right of parliament – lies at the heart of modern parliamentary democracies and is still considered to be one of the most fundamental rights of the Dutch parliament.
Yet, in the aftermath of the financial crisis and the following euro crisis this fundamental right is being challenged: The possibilities to voice national parliamentary interests with the national budget are eroding as the new and strengthened European economic governance regime is implemented. The European economic governance is designed to ensure that the Member States’ national budgets remain within the European budgetary limits. As the euro crisis ultimately showed, the old regime has not been entirely successful in achieving this objective. In reaction the European economic governance was strengthened. The existing monitoring and control regimes of national budgets were enhanced and the monitoring was broadened.
The introduction of a new European monitoring cycle, the European Semester, empowers the European Commission to review national budget plans before the budget is prepared or structural reforms are decided upon on the national level (ex ante). The recommendations resulting from this monitoring should subsequently be taken into account when preparing the national budget. The Commission can make recommendations with regard to macro-economic imbalances that need to be addressed or structural reforms that seem to be necessary to ensure sound public finances. In addition, the Commission is empowered to review and comment on the national draft budgets before the approval by the national parliament. The Commission can even ask for a revision of the draft if it does not comply with the budgetary rules.
Although the recommendations of the Commission are of a legally non-binding nature, non-compliance with the recommendations can trigger the power of the Council of the EU to intervene with national fiscal policy and ultimately impose financial sanctions. These developments raise problems with regard to the democratic legitimacy of the national budget: While the expenditure is increasingly determined on the European level, raising revenues is still an exclusive competence of the Member States. Moreover, the national decision-making processes are being restricted. These processes are designed to ensure that national parliamentary interests are adequately taken into account in the national budget cycle. But under the new regime these processes have to take place in an increasingly defined and limited time frame.
This leads to the following questions: What room for manoeuvre is left for national parliaments to have a say on how their money is spent on the national level? And in how far is this affecting the budgetary right of the Dutch parliament? Can it be concluded that the new European economic governance leads to “taxation without representation”?
The question ‘What is the effect of the strengthened European economic governance on national parliamentary participation with the national budget?’ is one of the questions that will be addressed in the workshop ‘The financial crisis and the impact of Europe on national parliamentary and stakeholder interests’ at Leiden Law School’s ILS Conference ‘Room for reflection’ in January 2015.