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Tuesday, July 24, 2012

Cameron should veto the EU budget unless he gets a better deal

On the Telegraph blog, we argue:

At a meeting of Europe ministers today, the UK government is set to be outvoted on the size of the EU’s 2013 budget. Having pushed for a freeze without a last-minute deal, Britain will be forced to accept a 2.8 per cent increase. This is a compromise position that gives scant consolation to UK taxpayers who will have to fork out an additional £350 million for no good reason whatsoever. Unbelievably, the Commission and some member states were pushing for a 6.8 per cent increase.

Decisions on the annual budget are decided by so-called qualified majority voting system (QMV) with the European Parliament also having to give its assent. This is the issue on which the UK is set to get stuffed this week. However, each member state has a veto over the EU’s long-term budget – known in Brussels speak as a Multiannual Framework (MFF) – which usually covers a seven-year period.  This underlines how incredibly important it is for the UK government to utilise its veto to get the EU’s long-term budget right.
Unfortunately, in talks over the EU's long-term budget (set to run between 2014 and 2020) – also up for negotiation at the moment – the UK is merely pushing for a freeze to overall spending. While this strategy has some merits, it won’t achieve anything above and beyond what could be achieved by simply vetoing the MFF. This is because under EU rules, if a new deal over the MFF can’t be reached, the previous year’s budget is carried over, adjusted to inflation – exactly the real terms freeze that the government is currently pushing for. This is not a shrewd negotiating strategy.

So what should the UK government do instead?

There is no shortage of EU spending areas to reform. For example, it’s madness that, as Europe grapples with a solvency, competitiveness and banking crisis – all at once – around one-third of the EU budget still goes towards subsidising landowners, irrespective of whether they’re engaged in any meaningful economic activity.

But the UK government would secure a hugely disproportionate benefit by one simple move: repatriating the EU’s so-called structural funds back to Britain and other wealthy states. The structural funds are meant to help poorer regions catch up with richer ones, but in reality a large portion of the money is merely being recycled between some of Europe’s richer regions and countries, and spent on projects with little, no or negative comparable impact. Of the 37 regions under the EU’s classification system, 35 pay more in to the system than what they get back. This means that many disadvantaged UK regions – such as the West Midlands and Northern Ireland – end up as net contributors.

As argued for by the previous Labour government, and as recommended by the Commons Local Government Select Committee (alas, only from 2020), the UK should push for the repatriation of these funds for member states with a GDP of 90 per cent or above the EU average. This would achieve the following:
UK taxpayers could save almost £13 billion gross, and £4 billion net over seven years and the overall size of the EU budget is reduced by 15 per cent

-23 out of 27 EU member states would pay less into the EU budget, with France gaining the most (around €12 billion over seven years)
-All post-communist member states that joined in 2004 and 2007 would do better from the funds
-By streamlining and slimming down the funds, they could become far better tailored around regions’ individual needs
-The government, and Mr Cameron in particular, would get instant credibility on Europe

Those countries that would lose out – Spain, Italy and Greece –need a different kind of financial support to that currently is offered by the funds anyway. For example, 30 per cent of the funds in Spain still go towards roads and infrastructure – the opposite of what the country with its bust construction sector needs. This would be the best opportunity of putting this right.

In terms of a simple and easy to communicate policy proposal, this is an open goal. In terms of negotiation dynamics, despite it only ever being able to deliver a freeze, as opposed to an end to UK payments, Britain’s veto is still powerful. Not having a new MFF in place would be extremely messy and most member states, including the new ones that want a new deal to benefit from phased-in farm subsidies, have huge incentives to strike a new bargain. The UK will almost certainly get something substantial in return if it sticks to its guns.
Mr Cameron would waste a perfectly good EU veto – and a chance for a massive credibility boost on Europe – by letting this one slide.


Rik said...

The EU is trying to put itself more and more on the map as an extra layer of government.
Basically that is the last thing Europe needs. Europe needs less costs and less red tape to become competitive again and remain able to pay all those high (from a worldwide perspective) wages.

Assuming one way or another the UK will keep links/ remain a memebr of the EU. It should have 2 strategic goals:
-get to an arrangement with the EU re membership that is acceptable to its citizens;
-streamline the EU (the UK will always be confronted with the EU, this is a globalised world whether we like it or not. So an efficient/cost effective Europe will always benefit the UK).
Your proposal looks to do all of it. Simply stabilise the budget will likely give to little pressure. Bring the enemy under stress and recon that way where the weak points are.
-pre-cook them for a reneg re memebership and at the same time likely reduce the contribution.
-start working on the weak points of the EU (like the regions) but also the farm subsidies should be attacked.

Probably best to first drop it with Merkel cs iso directly vetoing it, so they know what is coming. Might not be useful to play hardball in public from the start. Furthermore the position of parties within the EU likely become more clear.
You still can always do that when the more friendly alternative doesnot work. The other way around is not always possible. When it starts really to play some articles in the British press might help as well. It is also a bit new (not in the headlines at this moment) in this respect. Would be nice if 'your Dave' could 'blaim' the UK voter for his actions. pressure but still a good working relation.

Fully agree on your conclusion re Spain, Italy and Greece, however I have difficulties to follow your way of reasoning.

Ray said...

It is naive to the limit to say that we can get a better deal whilst remaining inside the EU,of what value have their previous promises been? People have been questioning the direction Open Europe is going recently comments like this don't help.
We must get out and only go back if we have a new deal set in concrete with escape clauses. They have proved over and over that they lie and break their own law as and when it suits them, why trust them now suddenly.
Sorry to bring down the level of conversation, but the only comparison that springs to mind quickly is that the EU is like the Banker on "Deal or no Deal" trust him at your peril.

Rollo said...

This is a shameful disaster. We are cutting our own budgets by 10% or so, firing nurses and soldiers and coppers (but not MPs, worse luck) We must simply refuse to pay any more to this corrupt body. A reduction of 10% would be a good first step ( we had this before Blair gave it away in exchange for being allowed to be, the thieving twerp: President of Europe, which he didn't become). But every penny spent is our hard-earned being chucked away. Cameron, do your duty for once; they are never going to let you fill Blair's shoes.

DerekR said...

Rollo is right. Just don't pay. Whatever the so called Court of Justice says, the Treasury holds the funds, and should keep hold of them.
To find out the sort of skullduggery that the so called "Elite" use to get their own way, I suggest that "The Great Deception" by Booker and North is worth reading.
And no,I don't get commission.

christina Speight said...

(Rik is always first with a verbose ramble - does he get a preview?_)

Not paying sounds simple but it has the same effect as withdrawing but rather messily. Far better to veto everything in sight, all the details as well as the top line figures. And while we are at it why not put on the table the restoration of the full rebate. That will cause a sensation and when they scream 'we can't afford it' point out that they can't afford anything at all - they're broke and so would we be without the rebate.

A thoroughly pro-active and aggressive stance would do wonders for all concerned.

Rollo said...

Veto? What? Where? How. Cameron did not veto the fiscal treaty, he said he would not take part, so he was side-stepped and they carried on the same; Cameron gained zero from the strong position he was in.
There will be no chance to veto anything. The acquis communautaire means that there is no renegotiation. The only thing that could give him some muscle is to say: We are leaving unless... But he has tossed this opportunity away. What do you call someone who tosses away our national interest? It statrs with a T: Traitor.

Bugsy said...

Rollo is right, all the talk about vetoing, renegotiation, not paying. It all boils down to that one thing an IN?OUT referendum.

The leaders of Europe and their beaurocratic minions are hooked on power, want more money to play with and don't care who gets hurt in the process.