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Thursday, November 01, 2012

Why David Cameron can threaten to veto the EU budget

Over on the Spectator's Coffee House blog, we argue,
When in 1996 the US Congress threw out Bill Clinton’s Federal budget they precipitated a partial shutdown of the US Government. However, anyone looking at the growing prospect of a UK EU budget veto and cheerfully imagining Eurocrats being shut out of their offices on 31 December 2013 will be disappointed. Because when it comes to EU budgets, a veto is not quite a veto – the EU will continue one way or another to claim its dues.
Nethertheless, a UK veto is not meaningless. Not least because, as we have set out here, the scenarios that could play out after a UK veto may not be that much worse for the UK than those already on the table (including, ironically, the UK’s own suggested ‘freeze’). It is important to realise that a ‘freeze’ in the overall EU budget could actually mean a rise in the UK’s net contribution. This is because the UK’s rebate only applies to spending in the ‘old’ member states and so shifting funds to the newer states would leave the UK out of pocket. We estimate that even under a ‘freeze’ the UK’s net contribution could rise by between €1 billion and €2.4 billion over seven years.
After a veto there are broadly two possibilities. The first is that the EU carries over its 2013 budget ceilings, adjusted for inflation. Member states would then have to negotiate an ad hoc deal, based on a Qualified Majority Vote rather than unanimity, which could see the overall EU budget increase above and beyond anything Cameron wants to see. However, this could actually mean a limited rise in the UK’s net contribution as the rebate reduction would not kick in.
Secondly, and less likely, the European Parliament could tear up the current budget altogether. Should they do so, the Commission could then table a completely new proposal for the annual budgets without any spending ceilings. These would be subject to QMV and could also lead to a large increase in the UK contribution.  This would also be a major act of hubris as MEPs aren’t exactly popular as it is.
However, a clear majority of member states desperately want a new deal. The new member states would lose out from the previous year’s budget. In addition, all other budget corrections – including the Swedish and Dutch rebates on the UK’s rebate – will expire in 2013, while the UK rebate would stay, meaning many net contributors would also stand to lose if there’s no new deal.
This all gives the UK veto potency which should be used all the way up to 2014 to push for radical reform of the largest spending items such as the Common Agricultural Policy and to repatriate EU regional policy.

10 comments:

Rollo said...

Baldry announces on radio 4 that there is simply no way that we can obtain a reduction in real terms on our payments. Amazing that there could be no way that our elected government could not choose to pay less to an unelected foreign power demanding more of our money. What gun are they holding to our head? How will we suffer if we leave? All we would do is regain independence. Get out now, and perhaps allow Baldry and his kin to follow Philby, Mclean, Blunt and other traitors into exile.

Average Englishman said...

I get a distinct sense of 'deja vu'. It is said that life is full of surprises but I don't see any coming soon regarding the UK's relationship with the EU.

So, the EU broke a 'solemn pledge' to reform the Common Agricultural budget when the UK rebate was reduced with the agreement of Tony (the treacherous) Blair. No surprise there.

Then the EU decided that it really must have more money for some new offices, jets, Merc's, etc., and its budget must increase, notwithstanding that most of Europe's people are going broke and its previous budgets have not been passed by the auditors as correct. No surprise there.

Most of the EU's politicos see nothing wrong with the status quo described in the previous two paragraphs and are happy to agree a new higher budget; mostly because they are net recipients of largess from the EU. Again, no shock result there.

A British Prime Minister makes Eurosceptic noises and has a long list of reasons why he should get tough with Brussels. No surprises here. So he'll grow a backbone, stand up for his financially beleaguered countrymen, threaten to leave the whole sordid undemocratic mess if major changes are not agreed pronto and actually mean it. Er no, I don't think so; that would really be a surprise and as noted previously, that doesn't seem to happen when it comes to UK-EU relations. Cameron will huff and he'll puff and he'll blow nobody's walls down and he'll come back to London after making some noise and giving Barroso and his chums a good laugh, claiming some spurious non-existent victory for common sense and the UK tax payer. Then there will again be no surprises and all will be normal.

One day and the sooner the better, the UK will elect a true statesman as Prime Minister who will be prepared to take tough decisions in the interests of UK citizens and then finally, he or she will lead us out of the EUSSR back to the big wide trading world where the UK people belong. Until that glorious day (which I am sure will come sooner or later), all we have is hot air and higher taxes as a result.

Merlin where are you? it's time to leave the sinking ship.

christina speight said...

You report "French Europe Minister Bernard Cazeneuve warned - - yesterday that “France would not be able to support” the compromise for the 2014-2020 EU budget put forward by the Cypriot Presidency, due to the proposed reduction of CAP funds."

It must have escaped the notice of M. Caseneuve and Open Europe that when Britain surrendered a large part of its rebate it was in return for a promise to reform the CAP. This promise has been broken and Britain's rebate should be restored in full - and retrospectively too.

France has consistently refused point-blank to honour a solemn deal and is the country responsible for this.

Denis Cooper said...

There's no good reason why the UK Parliament should accept that "the EU carries over its 2013 budget ceilings, adjusted for inflation."

A straightforward reading of Article 312 TFEU, as approved by the UK Parliament, would not allow for an adjustment for inflation.

No person of average intelligence would have thought that:

"4. Where no Council regulation determining a new financial framework has been adopted by the end of the previous financial framework, the ceilings and other provisions corresponding to the last year of that framework shall be extended until such time as that act is adopted."

actually meant:

"4. Where no Council regulation determining a new financial framework has been adopted by the end of the previous financial framework, the ceilings and other provisions corresponding to the last year of that framework shall be extended with automatic 2% a year inflation-proofing until such time as that act is adopted."

And it's questionable whether it should be held to mean that; as this is a treaty article which has been approved by all the national parliaments as it stood, it is not clear that the three EU institutions involved in the 2006 Interinstitutional Agreement have the legal authority to modify its meaning in the way suggested.

It always amuses me when the UK government warns people not to be taken in by doorstep cheats, when one of its own departments, the FCO, is quite content to be complicit in the deceptions practised on behalf of its beloved EU.

Rik said...

Life is full of challenges and opportunities, this is an example of a situation being both at the same time.
Lost the vote of course not positive, but seen in the big picture of a EU-reneg a lot of positives.

-The EU got clearly the message that party time is over at the UK's expense. Decisionmaking in the EU (for a new treaty) is highly complicated unavoidable a large part of the communication has to go this way (via media). Continue till it is really brandmarked in all brains, but the next step that if the EU leaves they lose 10% or so of their budget and markets won't like it (Greece leaving the Euro is peanuts compared to that most likely).
Throw in a bit: 'democracy has to be improved', sounds nice anyway and less selfish to the backbenchers at the other side (and it costs nothing).

-Cameron can use his Parliament and voters as the ones putting really the pressure on things. Better keep a good personal relation for a very long term negotiation. Most of the time spoiling the relation early is at a cost (like most likley Draghi's with Weidmann and Monti/Rajoy towards Merkel will appear to be lateron). You simply are likely to need them somewhere in the process.

-Labour can hardly move back now. Which gives even more pressure to the EU. This probably opens the possibility to start the reneg earlier. 2015 and after a next election is most likely too late and not workable in several ways. The treaty has to be renegged from an Euro pov earlier and voters and backbenchers might go for a stampede (it is still 3 year from now too long to deal with angry people). Simply should start earlier. Also doubtful of Cameron has enough credibility in this matter to ask for that (push it over a next election). Most likely he has not and would simply not be reelected.

-Mr Clegg of course is not enthousiastic. Which also has its pros and cons. Likely a lot of doubters donot like his way of reacting and will be more likely to move right.
Second is Mr Clegg is still not aware that this or a referendum on an in/out is going to happen (and latest 2015). With as the 3 most likely possible outcomes in this respect.
-He is not longer in the government (basically after a next election) and has no influence at all and is likely to face an out from the sideline.
-Labour wins next election. And goes for an in/out (out of his hands as well). Likely outcome an out again.
-He helps Cameron now to manage the problem and gives it the best chance that a) EU membership (but in a reneg form) will be maintained in an referendum and b) he can put some stuff in from his side as well.
He might not like this third option but in his view this is far better than hope none of the parties gets a majority in the next election and they take him in with as condition that the EU stuff is done the LibDem way. Not very likely to happen. A bit of the political equivalent from:'If you not can be with the one you love, love the one you with'.

Rik said...

A point I missed with all commentators (only with Christina on an earlier post). The UK has partly given up its rebate UNDER CONDITION. This condition (modernise agricultural policy) has not be met.

christina speight said...

TO "OPEN EUROPE" EDITORS!

PLEASE can we revert to getting comments here before the next day. THAT is a useless gap in building a debate?

Jesper said...

According to Swedish newspapers the Danes have threatened to use their veto. The spin in most of the press seems to be that the UK is alone in trying to reduce the EU budget.

It seems certain that the EU budget will be a political disaster for EU institutions and my guess is that PR-spin is going to be used to try to shift blame. Looks like the UK has been singled out for the role as scapegoat.

Jesper said...

Swedish media reports that Sweden is alone in strongly opposing the budget.
UK media reports that UK is alone in strongly opposing the budget.

How is it reported in Denmark, Germany, Netherlands, Finland etc? Are all those countries reported to be alone in strongly opposing the budget in their home media?

Which countries will never ever under any circumstances whatsoever use their veto?

Negotiators tend to have walkaway points, if they don't then, according to negotiating theory, they are bad negotiators.

The budget negotiations should have been planned for 5 years. This situation reeks of a failure to start the negotiations in time. Three weeks to go and the organisation with 18 failed audits in a row is trying its best to shift the blame for its failure on to its funders.

Open Europe blog team said...

Thanks Jesper – all very good questions. For the moment, at least four member states have threatened to use their veto – although for very different reasons. You’ve already mentioned the UK and Sweden. Denmark is ready to use its veto unless it gets a rebate of 1bn DKK (over £100m) from the 2014-2020 EU budget. France has also said it would veto the budget if CAP funds weren’t, at least, kept at current levels. Other countries, such as Germany and the Netherlands, have rejected the European Commission’s proposal – but haven’t explicitly threatened to use their veto. More in general, we think all EU member states have their own ‘red lines’ when it comes to negotiating the seven-year EU budget.