There was a better way

The Economist's Charlemagne today claims that by opposing the incredible 60 percent rise of the British contribution to the EU budget, the Conservative Party is turning its back on "such ideas as promoting free trade, the pursuit of economic growth and the defence of Western values."

By doing so, Charlemagne risks perpetuating the myth that the only way of paying for the EU's new members to integrate was to increase an already bloated and misdirected EU budget.

Charlemagne summarises Tony Blair's 2005 budget deal as follows:

To cut a long story short, Mr Blair was snookered by the French, among others...The French very cleverly managed to force the British into a position where they had to choose between defending their rebate and cutting funds earmarked for the new member states from the ex-Communist block who had joined a year earlier.

The article goes on to argue that the Conservatives' hostility to the budget rise is "purely about British money going to Brussels" and that the increase was imperative for enlargement to be a success.

It says the Conservatives are dismissing one of "Britain’s greatest victories in more than 30 years of EU membership, securing valuable allies for the cause of Atlanticism and open markets and burying forever any thoughts of turning Europe into a federalist superstate."

Charlemagne concedes that Blair's budget deal was "not brilliant" as it was supposed to prompt a review and reform of EU agricultural spending which, surprise, surprise, has not so far materialised. It should also be noted that central and eastern European countries received a very poor deal when it came to their share of agricultural spending.

But the rest of Charlemagne's argument seems to rest on the notion that EU regional spending is a 'good' in itself. He writes that EU funds for new members "have a long record of improving infrastructure such as motorways, ports and railways for the general benefit of trade and growth."

If only it were so for the 50 percent of EU regional spending that is spent in the EU's 15 richest states. This money does nothing to boost trade and growth but is simply a money-go-round which helps keep countless EU (and UK) bureaucrats in work.

Of course, having invested so much political capital in enlargement, it is only right that the UK ensured that the EU takes its responsibilities to its new members seriously. What is not forgivable is that the UK failed to make others understand that enlargement fundamentally changed the 'rules of the game' and that the EU's budget should reflect that.

As we have argued in the past, the EU's regional policy needs fundamental reform. It simply does not make sense for the UK to send money to Brussels to only see it sent to countries of equivalent wealth to be spent on highly prescriptive and dubious projects. The EU's 'structural funds' should only be spent in countries that need it such as those whose GDP is 90 percent or below the EU average. The rest should be scrapped.

This is perhaps what Conservatives should consider arguing for. It would have many useful effects: Firstly, it would still allow money to be spent where it is needed most, thus fulfilling the UK's commitment to the policy of enlargement. Secondly, it would result in a net and gross decrease in the UK's EU budget contribution. And third, it would allow them the political victory of reclaiming powers from Brussels by returning regional policy to the UK.

Instead, it seems that Shadow Europe Minister Mark Francois is following the mantra of "try, try again" by saying he would offer a deal painfully similar to Blair's in 2005. The Telegraph reports that Francois is suggesting giving up more of the UK rebate, if the Conservatives "thought there was genuine reform available.”

Seeing as this worked so well in the past (not), why not play 'hard-ball' and actually refuse to agree the next budget at all, unless the new deal is palatable. This would force the EU to live on a budget paid out in 'provisional twelfths'. This is a bargaining chip which is only available every seven years. The Conservatives, if elected, will still have the energy and the room to manoeuvre in the next round of budget negotiations (due in 2011-12) and what better way to prove that they are serious about reforming the EU?