Hans Herbert von Arnim

‘Fraudulent and Unacceptable’?The Uncontrolled Growth in Allowances in the European Parliament*

This note queries the legal basis for M.E.P.s' allowances which is regulated by the unpublished "Rules Governing the Payment of Expenses and Allowances to Members". These rules are based solely on decisions of the Bureau of the European Parliament, aprocedure hardly compatible with Art.190 (5) EC, which stipulates that the financial status of Members of Parliament is to beregulated by the Plenary of the Parliament after seeking the opinionof the Commission and with the consent of the Council. Furthermore, the "rules" facilitate a number of malpractices, which contravene several Treaty provisions. Often, the amount of reimbursed expenses is much higher than the actual expenses,and the pension systems can lead to double payments.

I. Introduction

During the last two and a half decades, European MPs have awarded themselves extensive reimbursements of costs and retirement pensions which burden the European budget with  hundreds of millions of Euros per year. 

The relevant - and up to present largely unknown -  regulations, laid down in the 63 page long “rules governing the payment of expenses and allowances to members”[1] are formulated by the Bureau of the Parliament.[2] The actual amounts are generally not mentioned in these rules but are either linked to the salary of European civil servants and therefore are indexed or are determined separately by the Bureau. The Bureau consists of the President of the Parliament, his 14 Vice-Presidents and five so-called Quaestors, with an advisory capacity.[3] The deliberation process concerning the reimbursement regulations is completely divorced from the Plenary of the European Parliament, the public, the Council and the Commission.

The basic income of European Parliamentarians, however, is paid out of national budgets and is regulated nationally. Concerning their basic salary, European MPs generally are accorded the same status as national MPs. Members from Germany, for example, receive 7,009 Euros per month – like their counterparts in the German Bundestag. Their Austrian colleagues receive 8,750 Euros, Italian MEPs receive 10,975 Euros, Spanish MEPs receive 3,056 Euros, MEPs from the United Kingdom receive 7,107 Euros. French European MPs earn a basic salary of 5,205 Euros.[4] The old-age-pension schemes for MEPs are similar to those of their national counterparts. Only France and Italy differ from this general rule (see III. 1a).

The planned Statute for Members of the European Parliament, which had been adopted by the Parliament in 2003,[5] was supposed to harmonise the basic salary and the old-age pension of European MPs at a high level. All Members, no matter where they come from, were supposed to earn 50 percent of the salary of a judge at the Court of Justice of the European Communities, which currently amounts to 18,106 Euros. Accordingly MEPs would have earned a basic salary of 9,053 Euros per month. Correspondingly high retirement pensions, invalidity pensions and survivor’s pensions were provided. Through this Statute the retirement regulations of the Bureau of the European Parliament would have become obsolete for new Members,[6] but would have been continued in force for existing Members.[7] The whole system of expense allowances paid out of the European budget, however, should not have been dealt with by the Statute but should have been given separate form and regulated by the Bureau alone.[8] The Statute, however, failed on January 26, 2004 due to Germany, France, Austria and Sweden exercising their veto in the Council.[9] Therefore the rules governing the payment of expenses and allowances to members (including their old age pensions schemes) are still in force. In the following, the most important regulations will be subject to a closer look and some general comments.

II. Expense allowances

1. Subsistence Allowance

European MPs receive a tax-free allowance of 262 Euros per day generally meant to cover overnight accommodation, subsistence and transport in Brussels or Strasbourg. This allowance is paid irrespective of the actual expense incurred.[10] The subsistence allowance is generally paid for each day of sittings of the European Parliament, its committees and its other bodies for which the Parliamentarian signs his name in an attendance list.[11] The same is true for “intermediate days” between sittings and for so-called “free Fridays” if the MEP has attended a meeting the day before.[12] Per month this allowance usually totals about 3,500 Euros. Those MEPs spending the night in low-priced hotels, hiring an apartment in Brussels (where most sittings take place) - as apparently most MEPs do[13] - or letting themselves being invited by lobbyists can save a considerable tax-free extra salary. MEPs pursuing their second occupation as lobbyists can also cash in the subsistence allowance because the proof that parliamentarians actually took part in parliamentary activities is handled too laxly. The subsistence allowance is payable when MEPs have travelled to Strasbourg or Brussels at the beginning of the week, have left on Thursday or Friday, have claimed their travel costs and have “proven” their attendance through their signature in a attendance register.[14] MEPs are entitled to the subsistence allowance for free Fridays when signing their name in the attendance lists.[15] This is also true for sittings that were cancelled.[16] The Court of Auditors stated quite rightly: “A signature in an attendance register does not prove that the Member concerned actually participated in Parliament’s work”.[17] The existing regulation clearly favours misuse. Therefore Dutch MEPs have bound themselves in a code of conduct to claim the subsistence allowance only for those days actually spent in parliamentary activities.[18]

When commenting on the subsistence allowance, one has to keep in mind that it is generally paid for one day more than overnight accommodation is necessary. In addition, MEPs have only recently been given extra vouchers for the use of taxis in Brussels and Strasbourg, even though the subsistence allowance is meant to cover costs of transport at the place of the Parliament.[19]

The subsistence allowance is reduced by 50 percent for each day on which a Member has been absent for more than half of the roll-call votes. These votes take place on “Tuesday, Wednesday and Thursday of Strasbourg part-sessions and the second day of Brussels part-sessions”.[20] This regulation could be one reason for the strange habit of the European Parliament to hold its votes in one block: votes do not take place immediately after the discussion of the subject in the Plenary as would be logical (and as is done in the German Bundestag for instance). Votes on different drafts are taken together in a voting marathon. This way parliamentarians can avoid a reduction of their subsistence allowance even if they were not present when the subject was actually debated in the Plenary but just took part in the vote.

2. Travel expenses

For flights to and from Brussels or Strasbourg[21] costs for the highest economy class tickets are reimbursed in a lump sum.[22] For a return-ticket from Berlin to Brussels this amounts to approximately 1,000 Euros. The full amount is reimbursed even if the MEP has taken a low cost airline for only 200 Euros. Such expense-account fiddling to which a so-called distance allowance[23] from 112 up 538 Euros depending on the distance has to be added, can bring up to 30,000 Euros per year for a German MEP[24]  - tax-free of course.

Every ordinary citizen claiming inflated expense reimbursements lives in fear of being called to book. Not so European MPs. The European Parliament has invented for itself a fraudulent system and legalized it at the same time.[25]

European MPs can also claim travel costs when they travel by car. Whether they actually carried out the travelling, or if the weekend is spent in Brussels for personal and private reasons is not verified. A personal declaration from the MEP is sufficient. Members then are entitled - apart from the distance allowance - to 0.67 Euros per kilometre for the first 500 kilometres and to 0.28 Euros per kilometre for the rest of the distance.

The Bureau of the European Parliament has modified the regulation of travel cost reimbursement in a decision of May 28, 2003. These modifications were supposed to enter into force together with the new Statute. Now, after the failure of the Statute the new regulations remain suspended. In any case, the new regulation also seems problematic. Up to the present MEPs can only claim the “unrestricted normal fare” for economy class travel. In future they shall be entitled to business-class-tariffs even if only after the presentation of receipts. This regulation will probably be even more expensive for the tax-payer than the present regulation. There is no reason why MEPs should use low-cost-airlines when benefits are to their personal income whereas they do not need to use them when benefits are to the tax payer. All the less is it plausible why flights in the economy-class should not be good enough anymore and why business-class-tariffs shall be reimbursed.

3. General expenditure allowance

Additionally, a general expenditure allowance of 3,700 Euros is granted for costs related to the mandate, usually incurred in the country of origin. Once again, this general expenditure allowance is paid as a lump sum regardless of the actual costs.[26] In Strasbourg and Brussels MEPs are entitled to a subsistence allowance and have fully set up offices and transport facilities at their disposal. In Germany many costs covered by the general expenditure allowance are already paid by the German tax payer so there is in many cases a considerable extra tax-free salary remaining. This has also has gone on record. In one case the Oberverwaltungsgericht Sachsen-Anhalt explicitly stated that a German MEP had virtually the complete expenditure allowance and the complete per diem allowances at his personal disposal, due to the considerable payments in kind out of the national budget.[27] 

For European MEPs from the new Member States the general expenditure allowance seems all the more excessive. Price and income standards are very low in these countries. In Poland the average income amounts to 438 Euros, in six other new Member States it is below 400 Euros. The low living standard considerably lessens the costs related to the mandate so that presumably the lion’s share of the general expenditure allowance will actually be an tax-free extra salary.

4. Personal staff

European MPs are allowed to hire personal staff for an amount up to 12,576 Euros per month.[28]

The financial development of costs for personal staff of MEPs is extraordinary “dynamic”: While in 1980 an average amount of 32,346 Euros was provided for personal staff of MEPs, this amount totalled 142,731 Euros in 2002 – four and a half times as much. For 2003 an increase to 153,000 Euros per MEP (plus 7.2 percent) and for 2004 an increase to 165,396 Euros (plus 8.1 percent) per MEP is provided. For the European Court of Auditors, these increases are in no way “transparently explained”.[29]

With regard to the skills and duties of personal assistants, nobody sees fit to make further inquiries. MEPs do not even want to publish the names of all of their employees regardless of a provision in the rules governing the payment of expenses and allowances to members providing for a list of all names of assistants to be drawn up.[30] This is all the more true for those assistants employed in the home country. Often relatives or friends are employed at public expense without anyone knowing whether they actually support the representative in his duties, or whether they are just employed in order to increase the family income.[31] When the Santher-Commission had to retire, similar nepotism was in play – with fatal consequences.

European MPs from the new Members States will also receive 12,576 Euros for the employment of personal staff regardless of the low standard of living and the low level of prices in their home countries. With this amount they can employ one assistant in Brussels and additionally 15 assistants at home based on the rate of average income there. Consequently, they can employ a multiple of the “manpower” Western MEPs can afford.

Due to the reigning economic conditions in the new Members States the temptation to employ relatives will presumably be high there. Why should MEPs from the Czech Republic or from Hungary not happily copy the example given by western MEPs? Is a scenario of, for example, Polish MEPs employing their whole family completely unrealistic?

What is just as equally left unverified is whether personal assistants to MEPs are in fact employed for party activities. This way indirect party financing out of public funds is encouraged. When regulating the newly introduced European system of party financing which will enter into effect in June 2004 the authors took great care to prohibit any financing of national parties from the European budget, directly or indirectly.[32] But within the regulations concerning the personal assistants of MEPs for which ten times as much money is spent as for the party funding, no such restriction is applied.

MEPs are privileged within their parties and are given an advantage that cannot be matched by possible opponents when it comes to the nomination of candidates for the European elections. Representatives from the new Member States can - if they use their funds to employ party partisans - considerably increase their personal influence in their party. This inflates party personnel and threatens the principle of internal party democracy.

III. Pensions

1. Retirement pension

The retirement pension of MEPs is regulated - just like their basic allowances - by the different Member States according to the regulations for national MPs and paid out of their national budget (see above I). However, the Bureau of the European Parliament has invented two different pension schemes. These pension schemes provide MEPs with somewhat crazy pension entitlements just at a time when - due to demographic changes and high unemployment rates - ordinary citizens suffer from retrenchments in their pension schemes.

a) complementary pension scheme

In 1981 a complementary pension scheme was introduced for those MEPs whose country of origin does not entitle them to a pension at all or entitles them to a pension considerably lower than that of their national colleagues.[33]

The former position applies to Italian MEPs; they do not receive an retirement pension from their home country. Instead, European tax-payers pay them the very generous retirement pensions received by their national colleagues through the complementary pension scheme of the European Parliament. After only five years of membership they receive a pension entitlement of 25 percent of the basic salary, that is 2,744 Euros. After ten years they receive 38 percent of the basic salary – 4,171 Euros. To finance these pensions MEPs from Italy contribute 8.6 percent of their basic salary, the lion’s share is paid out of the European budget.

The second position is true for French MEPs. French law entitles them to a comparatively low old age pension, which is increased through the complementary European system to the high level of pensions received by Members of the French Assemblée Nationale. This way French MEPs receive a pension entitlement of 45 percent of their basic salary after only two legislative periods. This amounts to 3,916 Euros. French Parliamentarians also contribute to their pensions but this contribution only covers a small part of the costs.

This leads to the curious result that Italian MEPs not only receive the highest allowances of all MEPs in the European Parliament, but that the additional European pension scheme also provides them with the highest retirement entitlements - paid out of the European budget. French MEPs - by courtesy of the European budget - also receive a high pension entitlement after only two legislative periods. There is no reason whatsoever why German and other tax payers should pay Italian and French MEPs a retirement pension which their home countries explicitly deny them. There is even less reason why these pensions should be considerably higher than those to which MEPs from the paying countries are entitled.

b) additional pension scheme

In 1990 an additional (voluntary) pension scheme was introduced for all MEPs, also for those whose retirement is already fully taken care off by national regulations or by the just mentioned European system.[34] About 400 of the existing 626 MEPs participate in this pension scheme. About 100 former MEPs already receive a pension from this pension fund.

The amount of the pension is linked to the salary of Judges at the Court of Justice of the European Communities and therewith increases every year. For an entitlement a minimum membership of three years is necessary. Per membership year an entitlement of 253 Euros is granted (2004).[35] One legislative period gives an entitlement of 1,265 Euros per month, usually paid from the age of 60 years on. That is more than most MPs from the new Member States will receive as basic salary. After their accession there will be an absurd disproportion between salaries for active parliamentarians and old-age pensions. After 20 years of membership the maximum pension entitlement of 5,097 Euros per month is granted, outdoing even most of the parliamentary salaries of MPs in the old Member States. Costs are covered to one third by contributions of the MEPs[36] and to two thirds by the European budget.

These entitlements are in most cases added to national pension schemes which mostly are not taken into account, so that MEPs can achieve two entitlements for one and the same membership period. In Germany, however, other pension entitlements are offset against this additional pension scheme.

The high and in most cases double pension scheme leads to the result that former MEPs in most Member States can receive a retirement pension at a rate higher than the salary which they received when still an active parliamentarian.

2. Invalidity pension and survivor’s pension

Additionally a generous pension in case of invalidity and  - in case of death - for the survivor’s is granted. Here costs are borne by the European Parliament alone. Pension entitlements from national schemes are taken into account.

In case of invalidity[37] MEPs receive 5,431 Euros per month and for every dependent child another 905 Euros. For a Member with three children this amounts to a total of 8,146 Euros. For MEPs from Slovakia or Hungary where MPs will presumably receive between 800 and 900 Euros as basic salary, invalidity can be - even if this may sound cynical - somewhat like an financial jackpot.

In case of death[38] of the MEP the surviving spouse receives a survivor’s pension of 4,527 Euros plus 905 Euros for every dependent child. Any existing salary earned by the survivor is not taken into account.

IV. General comments

1. Lack of control

The overview shows: the rules governing the payment of expenses and allowances to members contain several intolerable deficiencies. Additionally it is formulated in an overcomplicated manner and is hardly comprehensible. Such a faulty regulation was only possible because the decision process blatantly lacks effective means of control. However, they assume special importance when the Parliament takes decisions on its own behalf. This is what is laid down in Article 190.5 EC which stipulates that  the “regulations and general conditions governing the performance of the duties of Members” are to be regulated by the Plenary of the European Parliament after seeking the opinion of the Commission and with the approval of the Council. The discussion in the Plenary and the publication of regulations in the Official Journal lead to a minimum of public control which is not guaranteed when the decision is taken by the Bureau. For the same reason the German Constitutional Court had rejected the regulation of parts of the parliamentary allowance by the Bureau of the German Bundestag.[39] If the Bureau decides on its own, the ordinary MEP has no direct responsibility for the decisions taken. In any case, at least for German voters, it is impossible to call MEPs to account in the elections, due to the rigid candidate list system.

The opinion of the Commission and the approval of the Council deciding with a qualified majority are further necessary mechanisms of control against abuse of power within the decision process. All of these hurdles would be swept away if the Bureau is left to make decisions on its own as has been the case until now.

2. Violation of Article 190.5 EC and the principle of democracy (Article. 6, 1 EC)

The regulation of all the mentioned allowances by means of a simple decision of the Bureau of the European Parliament does not correspond to the process laid down in Article 190.5 EC. The Rules of Procedure and the corresponding rules concerning cost reimbursements may not violate the European Treaties. In defence of its action the European Parliament, however, cites a decision of the Court of Justice of the European Communities of 15.9.1981 concerning a case of the year 1975/76[40]. Meanwhile the situation has completely changed: At the time reimbursements were still a long way from reaching their present level. Above all, Article 190.5 EC, introduced by the Treaty of Amsterdam was not yet in existence. Article. 190.5 EC now clearly provides the Parliament - that is, its Plenary - with the competence to lay down the “regulations and general conditions governing the performance of the duties of Members”. It envisages a decision of the Plenary of the Parliament after seeking the opinion of the Commission and with consent of the Council. There is no reason why regulations concerning costs related to the mandate should not belong to this category. Additionally the cost reimbursements often contain a considerable extra income for parliamentarians which undoubtedly is to be regulated according to the procedure of Article 190.5 EC. Also the principle of democracy which is laid down in every Member State - in Germany for instance in Art. 20 of the Basic Law - mandates the cooperation of the Council. For Germany this has been clearly set down in the Maastricht-Decision of the German Constitutional Court of 1993.[41] The European Parliament alone - due to the lack of an homogeneous European electoral law and due to the lack of democratic infrastructure as for instance in the existence of a coherent European public opinion - does not possess sufficient democratic legitimation for laying down such regulations as the Bureau has done under the aegis of its rules governing the reimbursement of expenses.[42]  Concerning old-age pensions, invalidity pensions and survivor’s pensions which undoubtedly represent an income and which is unaffected by the decision of the Court of Justice of 1981, it is clear that a regulation has to be made in accordance with Art. 190.5 of the Treaty and that a simple decision by the Bureau on its own will not suffice. The European Court of Auditors also clearly insists on a regulation of the matter according to Article 190. 5 EC.[43]

Therefore the whole “rules governing the payment of expenses and allowances to members” lack the necessary legal grounding.

3. Procedural abuses

The regulations adopted by the Bureau are not only supposed to cover expenses related to the exercise of the mandate but also aim at reducing differences in income of MEPs due to varying national regulations. In the case of travel costs the European Parliament admits this openly. Possible tax-free extra income when using low-cost airlines is justified by the Parliament wanting to provide an ‘add-on’ to Parliamentarians receiving a lower income as for instance to those from Spain (3,056 Euros), Portugal (4,024 Euros) or Finland (4,541 Euros) with an add-on in the same way as the subsistence allowance and the general expenditure allowance are justified which may also contain an extra tax-free salary. Such an argumentation is neither appropriate nor justified. It is not appropriate because it cannot explain why for instance MEPs from Germany, Italy or Austria can also profit from this system despite of their high home salaries. But apart from this fact, the argumentation lacks every grounding. In Brussels or Strasbourg parliamentarians already receive sufficient expense allowances without regard to their home salary so that there is no need for compensation there. Concerning their home salaries which are intended to cover costs of living for MEPs (and their families), a harmonisation is even less required. As long as equality in electoral law across Europe does not exist and as long as living standards within Member States vary as considerably as is the case, there is no reason to harmonise the basic home salaries of European Parliamentarians at a high level. It would even lead to an even greater remoteness of MEPs in terms of income and it would completely put into disarray the structure of politicians’ salaries in most of the Member States.[44]

4. Violation of the principle of public economy, misuse of public funds and violation of equity of taxation

The regulations of expense allowances which often provide MEPs with a legal additional income legally should be labelled a misuse of public funds and a violation the principle of public economy.[45] As far as they clearly aim to provide an extra salary they also violate the prohibition against misuse of public funds.[46] Aiming to provide MEPs with an extra income under the label of expense allowances  is a misuse.[47] Both principles are binding European law. 

Providing MEPs with doubled pensions for one and the same period of membership also is inappropriate and violates the principle of public economy. Insofar as differences in basic salaries are to be compensated through these pension schemes they are to be qualified as a misuse of public funds.

The European Court of Justice has also stated, that regulations violating the appropriate reimbursements for travel costs and subsistence allowances are illegal.[48] Additionally the Court brought up the possibility of taxation: Insofar as allowances paid as a lump sum are too high or in reality represent a disguised income such allowances can be subjected to national income tax by the Member States due to the fact that up to present the income of MEPs is to be regulated by the Member States.[49]

In the meantime Article 190.5 has been incorporated into the Treaty. A corresponding Statute for Members of the European Parliament, however, does not yet exist. The basic salary of MEPs is still to be regulated by national Parliaments. Accordingly, national taxation of the salaries of MEPs remains legal. It even seems indicated: exemption of tax for exorbitant lump-sums violates the principle of equity in taxation[50] and creates another injustice which should be abolished by the Member States, such as Germany for instance.

5. Reprisals against critics

Critics daring to challenge some the deficiencies described have had to face massive reprisals. Instead of rectifying the deficiencies, identified by the critics, the authorities seek to squash their voices: “The empire strikes back.”

MEP and former frontrunner of the Austrian social-democrats, Hans-Peter Martin was excluded from the parliamentary group of the SPE in February 2004 after having called into question deficiencies in the regulations concerning travel-costs and subsistence allowances (II 1 and 2).[51]

When the European Court of Auditors stated in November 2003 that the Bureau of the European Parliament had no right to establish a pension scheme and that therefore the whole system lacked the necessary legal grounding, one of the Quaestors of the European Parliament tried to defame the responsible Member of the Court of Auditors and urged the President of the European Parliament Pat Cox to exert his influence on the Court.[52]

The correspondent of the German magazine “Stern”, Hans-Martin Tillack, who reported about the amounts given to relatives of MEPs employing them as personal assistants quoted from an unpublished list compiled by the European Parliament. He was thereupon arrested soon afterwards, his office was searched and his material was seized.[53]

V. Remedy

The regulations are legally and politically untenable and need to be changed considerably:

1. Concerning the subsistence allowance, Regulations concerning the proof for attendance need to be tightened up.

2. The general expenditure allowance should be indexed according to the prevailing standards of living and price levels in the respective home countries. 

3. It should be verified whether the amounts of the subsistence allowance and the general expenditure allowance are still justified. In any case they are no longer to be used as a disguised extra income.

4. For flights only the actual costs should be reimbursed up to a maximum of the highest economy-class-tariff. Travels by car have at least to be proven.

The so-called distance-allowance is to be abandoned. With regard to the per diem allowance and the general expenditure allowance there is no need for such an allowance.

5. The costs for the employment of personal staff should be limited to two personal assistants as was the case in 1993 and 1994. If not, the lump-sum is to be indexed according to the standards of living in the different Member States – at least for the part of the money used for employment of staff there. The employment of relatives as personal assistants ought to be abolished.

6. Reform is especially needed for the retirement, invalidity and survivor’s pension schemes. Paying Italian and French MEPs considerable pensions out of the European budget is unjustified. Pension schemes for MEPs ought to be regulated by national parliaments, just like it is the case in all the other Member States. Double pensions are untenable and should be abolished immediately.

7. Concerning the decision process, the whole regulation of reimbursements has to be laid down in a Statute adopted by the Plenary after seeking the opinion of the Commission and with the consent of the Council as it is laid down in Article 190.5 EC.

8. To leave the regulation of retirement pensions in the hands of the Bureau of the European Parliament is completely out of the question. But it should not be included in the Statute either. Pension schemes – just like the basic allowances – should be regulated by the Member States. Harmonising them does not make sense as long as differences in electoral law as well as varying living standards prevail. This is demonstrated by the complete          inappropriateness of the European retirement scheme and the level of income in the new Member States. The regulation of Basic allowances and retirement pensions should therefore remain with the national parliaments and should not be incorporated in the Statute.[54]

(aus: Eurpean Law Review, October 2004, S. 698-710)

Stand: 22.10.2004