Kinnock vows staff deal will stay within budget

Date: 28/09/00

By Simon Taylor

EUROPEAN Commission Vice-President Neil Kinnock will promise governments this week that the planned overhaul of officials' pay and pensions will not break the tight ceilings on EU spending set by member states last year.

In a bid to win finance ministers' support for his reform drive, Kinnock will tell them that the 375 additional posts the Commission is seeking can be funded from the budget agreed by member states in March 1999.

He will also insist that the planned shake-up of the staff pensions fund and moves towards more merit-related pay need not increase the financial burden on Union taxpayers.

The seven-year budget deal struck by EU governments in Berlin last year stipulated that spending on personnel in all the Union's institutions should not exceed €6.026 billion in 2006, the last year covered by the current budget agreement. That accord provided for an extra 1,000 posts to be created in the Union's institutions to cope with additional responsibilities, but some of these have already been allocated to the European Court of Justice and Council of Ministers.

However, Kinnock will tell ministers that even with the extra costs associated with the new Commission posts, there should be €110 million left in the kitty. "Finance ministers want to know 'will the reform stick within the financial perspective until 2006?' Even with the 375 extra posts, the reform will stay within the ceiling," said one official.

But member state budget experts warn that Kinnock's attempts to fulfil his pledge will depend on existing staff taking up the offer of early retirement. "If people do not apply to take part, there is no way that Kinnock will get the savings on salaries that he is predicting," said one.

The Commissioner is hoping that the commitment to keep a tight lid on spending will boost support for one of the most crucial parts of his reform plan - his request to delay discussions on an overhaul of staff pay and pensions until the middle of 2002. This is designed to ensure that these talks do not jeopardise other aspects of the reform strategy, many of which will be nearing completion by then.

According to a study by international accountancy firm KPMG, member states face a €14-billion bill to fund staff pensions over the next 25 years. German Finance Minister Hans Eichel has called for a reduction in the level or length of Commission pensions, while the UK and Denmark have proposed an increase in officials' individual contributions.

The Commissioner argues that reforming the pension scheme need not add to the cost because changes can be made to the retirement age, the rate of contribution and the level of the final pension. He also maintains that moving to a more merit-related pay scheme should not cost more than the existing arrangements.

Under the current system, staff can earn salary increases of 5-7% simply as a reward for a certain number of years of service. Kinnock is planning to reduce the number of increments, but double the number of steps within each grade to offer more scope for promotion based on performance.

European Commission Vice-President Neil Kinnock is set to promise governments that the planned overhaul of officials' pay and pensions will not break the tight ceilings on EU spending set by Member States in March 1999.