Block grants are a more sensible way to finance public services. Unlike most public spending (or for that matter, most private spending) in the EU, block grants are not tied to the exchange rate as they can be used to compensate the EU member country for spending the money elsewhere. That’s good, because, like other transfers from the public sector to the private sector, the net effect is on reducing the public sector’s total spending. So why should this be a bad thing?
First, there is good reason to favour spending public money in the EU on public services, by which people are expected to be able to enjoy the public goods in their country rather than waiting for a better deal elsewhere: more people use public services (if you assume no more people would live there) or make a purchase on public products (in the UK for example, less cars are bought on public transport than were bought before the reforms, due to the higher subsidy that comes from EU funding), and people live better and live well at home in that country than they would in poorer countries. If these benefits are not available to the general population, then fewer people are likely to feel an emotional connection to the public service – and people with stronger emotional connections to public services tend to support a bigger public sector. If Europe is to increase its share of GDP from 1% now to 2%, it is essential to provide better public services in Europe; if you want to see GDP return to its pre-crisis peak, then you must make sure citizens of poorer countries have better access to them.
Second, it is less expensive to use block grants than the EU budget: according to the EU’s own calculations, block grants are roughly 10% cheaper than the EU budget every year. That means EU citizens are actually getting less money for the same services.
Third, there is no political incentive for people to lobby for block grants when they can give their money to another organisation if they believe their money isn’t going to the right place (as happened in the case of Europe’s biggest charity after it was criticised for allegedly misusing grant money). The UK has an even greater tendency to use block grants to lobby for money – as much as 60% compared to the EU average of 20%.
Fourth, in terms of effectiveness, the EU’s own data confirm those who argue that block grants should be abolished immediately. There are good reasons to believe that, contrary to claims made by those in favour of block grants, spending the money elsewhere actually works better
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