The EU Referendum Bill passes another hurdle - but time is running out

EU Referendum Bill rises again

The Conservative party's attempt to force an EU Referendum in 2017 onto the statute book is back in the guise of Bob Neill's Private Member's Bill (remember James Wharton's bill was killed of by the Lords back in January). Once again, the bill has passed at second reading stage in the House of Commons (283 MPs voted in favour and none were brave enough to vote against).

So what are its prospects for success this time around?

The Bill will now go to Committee stage where the best strategy for those who wish to scupper it (without been seen to be overtly doing so) will be to amend the bill in order to prevent it from being 'parliament acted' - something which will happen automatically if the Bill is rejected outright or is still stuck in the Lords by the time parliament is dissolved for the general election. Since the unsuccessful Bill has to be exactly the same on both occasions, if Labour and Lib Dem MPs manage to - for example - extend the franchise to 16 and 17 year olds as happened in the Scottish referendum, the Parliament Act could not be used. The exact make-up of the committee (will any pro-referendum Labour MPs be included?) could prove crucial.

Another problem is that unlike James Wharton - who topped the Private Members' Bill ballot last time around - Bob Neill only came third, so his Bill is behind the two other PMBs in the parliamentary pecking order. Both are relatively contentious themselves - one seeks to fundamentally reform the so-called 'bedroom tax' and the other aims to enshrine the government's to spend 0.7% of GDP in foreign aid - so the more time they spend in Committee stage, the longer it will take for Neill's Bill to progress to that stage.

If however it does navigate its way through the Commons unamended, then it will be for the next UK Government to either hold the referendum as instructed, ignore the law or seek to reverse the legislation. Either way, it will have served its primary purpose - convincing a sceptical electorate that the Conservatives are serious about a referendum.

Have the SPD and German unions endorsed TTIP? Not quite...

While the Labour Party's conference dominated the coverage in the UK over the past few days, its German sister party, the SPD, held its own 'mini' conference over the weekend. Opposition to TTIP - the EU-US free trade deal currently being negotiated - was a big factor at both, certainly we picked up on this in Manchester.

Ahead of the SPD's conference, several local and regional SPD associations tabled motions calling on the party leadership to suspend the negotiations due to concerns about investor-state dispute settlement (ISDS) - a mechanism which allows investors to sue governments - as well as the potential watering down of labour laws and environmental standards.

In order to head off the opposition, the Economy Ministry - headed by SPD leader Sigmar Gabriel - issued a joint position paper on TTIP along with the DGB - Germany's trade union confederation including the country's largest trade unions like IG Metall and Ver.di. The paper praises elements of TTIP but pledges that any moves to eliminate non-tariff barriers to trade (such as parallel regulatory regimes) will not threaten Europe's high employment, consumer and environmental standards, and calls on both parties to ensure "compliance with core ILO standards" - something which has little hope of getting past Congress.

On ISDS, they key passage reads:

“Investment protection provisions are generally not required… In any case, investor-state arbitration and unclear definitions of legal terms such as ‘fair and just treatment’ or ‘indirect expropriation’ must be rejected.” 

The SPD and German trade unions have therefore endorsed TTIP in principle, although the mass of caveats that made this possible will hugely complicate the negotiations and could wipe out many of its expected gains. It does however remain unclear to what extent the paper is binding on the SPD, as it includes the caveat that the German Economic Ministry and the DGB "do not have the same stance on TTIP on all points”.

Significantly, in approving the paper, party delegates insisted that its provisions should also be applied to the EU-Canada free trade deal (CETA) which has already been largely concluded and due to be signed off by Commission President Jose Manuel Barroso and Canadian PM Stephen Harper later this month pending implementation. CETA, which many see as the blueprint for TTIP, includes ISDS and could therefore face last-minute opposition having largely flown under the radar up until now.

In a separate development, which could delay CETA even further, the German government and the European Commission are at odds over whether national parliaments will need to ratify the deal alongside the European Parliament; the Commission says no, but Berlin argues that as a "mixed agreement" with some of the issues, goods and services covered by CETA falling outside of the EU's sole jurisdiction, the Bundestag and Bundesrat should also get to scrutinise the agreement and vote on it. The German government has said that it is willing to go all the way to the ECJ.

All in all, it looks like progress towards concluding ambitious trade agreements with Canada and the US will be rather rocky.

Miliband vague on most EU issues but categorical on energy

Labour leader Ed Miliband addressed his party conference in Manchester this afternoon. While the focus was on ‘togetherness’, the NHS and his various encounters with members of the public with useful bits for his speech, there were a couple of mentions of the EU and related issues. On the topic he said:

“Let me say it plainly: Britain’s future lies inside not outside the European Union. And the way we reform the EU is by building alliances, not burning them. And it’s why all those who want to leave, including in the Conservative Party, are now a huge threat to the prosperity of our country.”

Miliband went on to add that he saw the need for EU reform in areas such as “the economy, migration and other big issues”. He also cited the UK’s failed opposition to Jean-Claude Juncker’s Commission Presidency as evidence that UK Prime Minister David Cameron cannot achieve reform in Europe, since all countries simply believe he is pandering to his party.

Ultimately the EU section was a side note to the main messages of his speech. Once again there was no detail about exactly which reforms Labour would pursue with regards to the EU, no mention of whether a referendum would be held or not and only vague talk of alliance building with no clear message of how this would be achieved other than by not being the Conservative Party. He also glossed over the fact that the Labour Party ostensibly supported the anti-Juncker push by the UK and that the negotiations over Juncker seem to have resulted in the UK securing a prime post in the new Commission – one many thought they would never get.

Interestingly, there was a bit more detail at one of Open Europe's fringe events with Shadow Europe Minister Gareth Thomas stating that he (and presumably his party) support a red card for national parliaments as well as a specialised European affairs committee to better scrutinise all EU legislation. Certainly commendable if they prove to be concrete Labour policy.

One final interesting point on substance from Miliband regarding energy:

“[We are] making a clear commitment to take the carbon out of our electricity by 2030.”

This is a pretty bold statement (although he did hint at something similar last year), which essentially says that all of the UK’s electricity consumption will be met by renewable sources in 2030. To put that into context current renewable share of electricity generation is around 16%, and is due to rise by to 30% by 2020 – that is if the UK meets its EU set targets (quite a big if at this point).

To achieve the current 2020 target, according to government impact assessment, the Renewables Directive costs £4.2bn per year over the course of a decade. Miliband’s target would essentially involve tripling the increase of renewables over the same timeframe up to 2030 – exactly how much would such a policy cost per year!? (We’d hazard a guess at…a lot). As the graph above from the National Grid shows, most forecasts expect the UK to still have a sizeable chunk of electricity generation from gas and coal, mostly due to the cost and complexity of overhauling the entire grid and the intermittent nature of renewables (note - we have an upcoming paper on these issues and more soon so stay tuned).

All of this also takes place in a context where carbon prices (via the EU ETS) and targets are set and negotiated at the EU level. Will Miliband unilaterally commit to such an approach when it seems likely few, if any, other EU members would sign up to it? We've highlighted before the potential conflict between Labour's energy policy and the EU. Again, more detail needed but at least here there are some interesting questions to chew over.

Once the dust from Scotland's 'No' settles, what are the implications for the UK's EU renegotiation?

Act in haste - repent at leisure?

The big question over Scottish independence may have been settled but the campaign has thrown up a whole host of further questions concerning the UK's constitutional settlement that will need to be addressed in the near future. We look at some of these questions and at how they could impact on the UK's EU reform agenda. 

What’s the plan and schedule for devolution negotiations and implementation?

When it looked like a 'Yes' vote might be on the cards, the Tories, Labour and the Lib Dems pledged a new raft of powers for the Scottish parliament over areas like taxes, spending and welfare, with proposals due to be tabled in January. Speaking this morning, Cameron announced that discussions over a new settlement for the rest of the UK and England in particular - would take place "in tandem with, and at the same pace as, the settlement for Scotland".

Given that this will include - in Cameron's words - "a decisive answer" to the long-standing West Lothian question (ensuring "English votes on English laws"), it remains to be seen whether this timetable is realistic (some MPs are calling for a full constitutional convention). Labour have said they are committed to "looking at the issue" but the party is divided, with some senior figures including Gordon Brown and Douglas Alexander rejecting the option of Scottish MPs being excluded from votes only affecting English matters (which could deprive a potential Labour government of a majority on such votes). We simply do not know how far-reaching this shake-up will be and a quick and amicable cross-party consensus cannot be taken for granted.

Could this spill over into the general election campaign?

If the devolution question isn't on the way to being settled, it could conceivably play a large role in the general election campaign; the Tories and UKIP would take up the English cause, Labour and the Lib Dems would be stuck somewhere in the middle while the SNP would play the 'another broken promise by the Westminster establishment' card (unless the Scottish and English questions are considered separately). Not only would this displace debate about EU reform from the campaign, but growing English resentment at Scotland's privileged position within the UK could further boost the UKIP vote. Nigel Farage is already deftly positioning himself to take advantage. A strong UKIP vote would of course put pressure on any government (particularly a Conservative one) to take an even tougher line during the EU renegotiation.  

How will it impact the EU renegotiation/referendum timeline?

If the Tories end up back in government but still have to wrap up the constitutional questions it could prevent the government from hitting the ground running on EU reform and renegotiation. Given the scale of the challenge this is far from ideal. Furthermore, as we have warned before, we believe that Cameron is already behind the curve on finalising targeted reforms and road testing them with governments and business across Europe. In the end though, it is hard to see how Cameron could get away with shelving his planned 2017 EU referendum, given the pressure he would be under from his own party.

Martin Schulz's revenge: Will the European Parliament block the UK's EU Commissioner?

If you read our press summary this morning (if not, do sign up!) you would have seen - before anyone else outside Germany incidentally - that Lord Hill, the UK's nominee for EU Commissioner, is already at risk of becoming a victim of an increasingly assertive European Parliament.

Martin Schulz – the ‘European Commission Presidential candidate’ who was re-selected President of the European Parliament after his socialist group in the EP came second in the European elections - was made persona non grata by Labour in the run-up to the European elections.

He was seen as too federalist, and someone who would only give Ed Miliband additional headaches shortly after Labour ruled out an In/Out referendum. He’s had a rough ride in the UK over the Spitzenkandidaten, where he clashed head on with the Tories and most other British people. He may now take his revenge.

Speaking to Deutschlandfunk radio this morning, he said of Lord Hill:

"I cannot imagine that, with his radical anti-European views, provided that he has them, [Lord] Hill can get a majority in the European Parliament…It will become clear if Mr Hill approaches us without prejudice, and that will certainly influence whether or not he gets a majority."

The European Parliament cannot formally reject individual Commissioner-nominees, but can veto the entire European Commission. Therefore, MEPs have de facto 'blackmailing powers' to pick off individual nominees. Interestingly, Schulz added that a rejection of Lord Hill in such a way "cannot be ruled out".

In fairness, Schulz was asked a clearly leading question when making these comments:

"David Cameron has proposed the eurosceptic Jonathan Hill as [the UK's] next EU Commissioner, and [he's] a determined sceptic of the euro and the EU. Can one assume that the next EU Commission  will become significantly more eurosceptic, blocking things from the inside?"

So, is this posturing or is Schulz meaning business? Well, as for now, we should treat the comments with caution. Even if Schulz is serious, he will need to get a majority of MEPs to agree that Hill should be rejected on basis of "radical anti-European views, provided he has them". Hill isn't exactly on record spewing out Farage-type anti-EU slogans. The point about Lord Hill is that he's a very different type of political operator altogether: he's someone who strikes deals, rather than engaging in shouting matches or trading in platitudes.

Schulz will struggle to build a case on this one - not least since Lord Hill seems like exactly the type of pragmatic, deal-maker type person MEPs should like. Still, it's a strong statement from Schulz.

The anti-EU vote: Spot the difference

Question: What's the difference between these two opinion polls for this month's European elections?

Answer: Ok, the percentages in the bottom graph are slightly higher, but there is a striking similarity.

The top graph plots the front runners in the French European elections: Marine Le Pen's Front National, the centre-right opposition UMP, and Francois Hollande's governing Parti Socialiste.

Meanwhile, the bottom graph plots the latest European election poll results for UKIP, Labour and the Conservatives.

There is always a tendency to see the anti-EU/government/establishment phenomenon as unique to one's own country. These European elections are likely to prove otherwise.

Ed Miliband confuses with a new EU referendum lock he says is "unlikely" to be triggered

Ed Miliband will today set out the Labour Party's position on an EU referendum. Previewing his speech in today's FT, Miliband says:

"I am announcing that the next Labour government will legislate for a new lock: there would be no transfer of powers from the UK to the EU without a referendum on our continued membership of the EU."

So, unlike the existing 'referendum lock' put in place by the Coalition, it would not simply be a referendum on a specific transfer of power to the EU or treaty change but would mean that any proposed transfer of powers to the UK would trigger a straight In/Out vote.

It is not entirely clear whether Labour would therefore repeal the existing referendum lock and replace it with theirs. If not, we might be faced with the strange situation of two referendums - one on the specific treaty change and one on whether to remain in the EU altogether - with no guarantee that they would go in the same direction. If they do replace it, then we could be left with a much blunter instrument, where any transfer of power requires an In/Out referendum. Far from ideal if you wish to stay in the EU but also want to push for reform or dislike the transfer of power on offer.

Miliband himself notes that it is "unlikely" that his referendum lock will be triggered, emphasising that "there are no current proposals – from either the EU or any member state – for a further transfer of powers from Britain. Therefore it is unlikely there will be any such proposals in the next parliament." However, what would happen if, for example, the fiscal compact were to be incorporated into the EU treaties as is envisaged? This would not be a transfer of powers per se but would potentially alter the UK's relationship with the EU substantially.

In the rest of the article Miliband is keen to stress his reform credentials, saying that:

"I know the reputation of the EU is, with reason, at a low ebb. If Britain’s future in Europe is to be secured, Europe needs to work better for Britain. And Britain needs to work more effectively for change within the EU."

Labour has so far been rather vague about its proposals for reform. The Labour leader cites three main areas in his article. On economic competitiveness:

"Europe must do more to address common economic challenges by improving competitiveness, tackling youth unemployment and building an economy that better promotes prosperity."

On EU migration:

"A Labour government would work with our EU partners to lengthen the existing transitional arrangements for countries joining the EU so that their citizens have to wait longer before gaining rights to work here. There should be reforms to rules allowing people to claim child benefit or child tax credit when their children live abroad. And we should look at ways to make it easier to deport people who have recently arrived in this country when they commit crime."

On the democratic deficit:

"The agenda for change, however, must address people’s concerns about how power is exercised in the EU. This means giving back more control to national parliaments. And it means responding to concern that the EU is intent on an inexorable drive to an ever closer union. I am clear this is not Labour’s vision for Europe."

These proposals all sound very much like what David Cameron, and others, have been saying on EU reform.

But, on Labour's conditions for a referendum, it remains to be seen what political impact it will have. On the one hand, Miliband has raised the prospect of a vote (presumably in an attempt to avoid accusations of denying people a say). But, with the other, he is saying that the likelihood of his conditions ever being met is very small. What will the British electorate and other EU governments make of that?

Nick Clegg: EU referendum a question of "when not if"

With David Cameron away in the US, Nick Clegg took to the dispatch box for Prime Minister’s Questions today. Unsurprisingly, there was no shortage of references to EU referendums, most of them of a hostile nature. Ahead of today’s debate on the ‘referendum amendment’ to the Queen’s Speech, Clegg was repeatedly asked why he would not support the calls for an in/out referendum as pledged in the infamous 2008 Lib Dem leaflet (calling for a “real” referendum on Lisbon) and in the party’s 2010 manifesto.

Clegg responded that this issue had been settled by the passing of the 2011 EU Act which contains a ‘referendum lock’ in the event of EU treaty change, and accused the Tories of “moving the goalposts” with their policy of an in/out referendum in 2017.

But, within this bit of rhetorical politicking, Clegg said something rather interesting. He said that, due to the 'referendum lock', it was a matter of "when, not if" there is an EU referendum "because the rules are bound to change" as a result of developments in the eurozone.

Clegg accuses Tories of moving goal posts on EU referendum BUT says matter of 'when not if' as EU rules bound to change triggering a vote
— Nick Robinson (@bbcnickrobinson) May 15, 2013

Well, if the rules are "bound to change" why aren't the Lib Dems actively supporting David Cameron's proposals to reform the UK's relationship with the EU - or at least putting forward their own vision - and then putting that to a referendum ? Or would the Lib Dems rather the rest of the EU changed the rules without active input from the UK Government? Good luck winning any kind of referendum on that basis Mr. Clegg.

The Coalition's mid-term review on Europe: Bland and blander

Yesterday saw the publication of the Coalition's 'mid-term review', the aim of which was to "take stock of progress in implementing the Coalition agreement" and to set out the government's objectives for the remainder of its period of office.

The Europe section of the review was arguably the blandest part of what was a very bland document overall. So hardly exciting. The government highlighted the "referendum lock" on future treaty changes, disentangling the UK from the eurozone bailouts, and establishing the single European patent as its "achievements" (the first and third are genuine achievements). Like all UK governments in recent decades, it also stressed the need to remove the burden of unnecessary regulation and to secure a tough EU budget settlement.

As ever, the differences within the parties on Europe - though you wonder if they aren't sometimes more perceived than real -  mean that the Government seems unable to set out a 'grand vision'. As the Sun noted in its leader today, 'Europe' remains the "elephant in the room". To be fair, the Labour party, which has the luxury of the purity of opposition, has also failed to set out where, exactly, it wants the UK in Europe.

In other words: we're all still waiting for Cameron's EU speech...

Cameron’s EU budget veto is a powerful tool for change

Over on the Telegraph blog, we argue:

Labour has joined the battle over the EU’s next long-term budget. The budget, to run between 2014 and 2020, will be discussed at an EU summit on 22 and 23 November. David Cameron wants a “real terms freeze” (based on the cash that was paid out from the 2011 EU budget), Labour says he should go for a “real terms cut”, though it is not clear how that is defined. A motion will be debated on Wednesday in Parliament calling for a cut in the EU budget. It’s not binding, but if Labour MPs side with Tory backbenchers it could be embarrassing for the Government. The discussion is generally confused. 

Cameron is running short of allies in Europe for his real terms freeze – the Swedes and the Dutch are still with him. Cameron looks unlikely to back down, however, and it may come to him vetoing it. So what happens if Cameron vetoes the EU budget? The spin from some is that the talks move to QMV, and Cameron is toast anyway.

It’s a bit more complicated than this, however. If there’s no agreement by the end of 2013, there are two, broad possible outcomes:

Carry over the current EU budget:  If EU leaders fail to reach a deal before the end of next year, the 2013 budget structure is carried over, adjusted to inflation (the standard GDP deflator of 2pc). How the cash is allocated is decided by Qualified Majority Vote (QMV) rather than unanimity, circumventing the UK’s veto.

The point is that the UK uses 2011 payments as its baseline figure and this is likely to be considerably lower than the budget allocations or the overall ceiling for subsequent years. The combination of QMV and switching baseline scenario could therefore substantially increase the size of the EU budget, compared to both Cameron’s proposal and the various compromise deals floating around.

Tear up the budget completely and create a new proposal: The European Parliament could go rogue, tearing up the so-called “inter-institutional agreement” between itself and EU ministers, meaning that each year the Commission has to table a completely new proposal for the annual budgets although without any spending ceilings. These, also, will be subject to QMV.

So is Cameron’s veto pointless? Not at all. For a range of reasons, many EU countries would will desperately want to avoid this minefield:

• Under a “no deal” scenario, EU leaders will need to decide some 55 separate EU spending areas, through individual QMV decisions, all subject to a cobweb of disagreements. This would be hugely time-consuming.

• The powerful block of new member states would lose out massively from the previous year’s deal being carried over, since under the new budget period they are expected to receive proportionately more money. They will badly want a new deal.

• In addition, the UK isn’t the only country with a “rebate”. But unlike the UK’s rebate, all other budget corrections – including the Swedish and Dutch rebate on the UK’s rebate (yes, there’s such a thing) – will expire in 2013, while the UK rebate remains constant (courtesy of Margaret Thatcher). Many net contributors are therefore keen on a new deal.

• For its part, it would take a lot of nerve for the European Parliament – which is already struggling with democratic legitimacy – to tear up the inter-institutional agreement altogether (I dare them).

There’s another twist involving the UK’s rebate which may not make an ad hoc deal appear that bad for the UK either. Even under  Cameron’s “freeze”, the UK’s net contribution could go up by between €1bn (2.2pc) and €2.4bn (5.4pc) over seven years, as more cash would go to new member states not covered by the UK rebate. Under a “no deal” this effect may be mitigated to a significant extent, meaning the UK’s net contribution wouldn’t be greatly affected (for the detail, see here).

Cameron could have done some other things – including repatriating structural funds for richer member states – but at least he’s trying to achieve some change and do the right thing.  Ultimately, this episode shows just how politically and economically unsustainable the EU budget is. It needs to be one of the first items up for re-negotiation as the UK seeks new EU membership terms.

Never mind the Tories – What will Labour do about Europe?

Over on the Guardian's Comment is Free section, we argue:

When talking to diplomats, policymakers and journalists from around the EU, by far the most common question I get is: "What do you think the Tories will do on Europe?"

That question may soon have to be revised. It may not be the Tories, but the Labour party that will decide Britain's place in Europe – possibly even pushing it out altogether.

Much can happen before 2015, but there is a possibility that the Tories could suffer defeat at the polls at the next elections. Then Brussels' biggest fear – a sweeping Tory-led renegotiation of the UK's EU membership terms – will not materialise, at least not any time soon. Instead, either as part of a Lib-Lab pact or majority government, the ball will be in Labour's court. So what will Labour do?

In its 2015 election manifesto, the Conservative party could well promise renegotiation followed by a referendum on the result. It's far from set in stone, but increasingly likely. Tory scepticism on Europe as an issue may not allow David Cameron to get away with less. Labour effectively has two choices in how to respond:

Option one: Gamble on Europe not being an electoral issue.

The thinking is that the EU always ranks low on the list of voters' concerns. National elections are never fought over Brussels. This is only partially true. Europe is a low priority if presented as a single issue – but the fact is, it's not. To varying degrees, it permeates other issues such as the economy, general trust in politicians and, most importantly, immigration (which consistently ranks high) – something that is likely to be established by the current government's "balance of competences" review. Labour could try ducking the question in a campaign, but if the Tory party manages to successfully tap into the public's growing hostility towards the EU status quo – and with the eurozone's demands for greater integration unlikely to go away – it could really hurt Labour.

Option two: Promise a referendum of their own and so neutralise the Tories' pledge.

The Labour party is unlikely to promise a public vote on a renegotiated EU deal – in large parts, they have already rubbished the idea – so it will have to be a straight in/out vote. The plan would be to call a referendum shortly after the elections, campaign for a yes, win the vote and move on to other business.

This would be a massive gamble. The experiences of François Hollande in France and Mariano Rajoy in Spain show that political honeymoons are rare in today's EU politics. And heaven knows what Europe and the British economy will look like in 2015/2016, with the Greek bailout package set to expire, for example. If the referendum coincides with, say, a major new drive for more EU integration, with fresh demands put on the UK; and with a large number of Tories campaigning to leave (more likely in opposition), the British public may be pushed over the edge. It would then be Labour that unintentionally pulls the UK out of Europe.

There may be some options in between, such as promising a referendum on forthcoming treaty changes – or pledges to pursue some milder reforms – but that will not sound overly convincing. And even leaving aside the referendum issue, Europe could hit Labour like a steam train: in a few years' time, the free-standing "fiscal treaty" is meant to be incorporated into the EU treaties. Will Labour nod that through, given that it effectively codifies the Bundesbank-style austerity, much criticised by Ed Balls and co? Will it veto Germany's plans for a fiscal discipline commissioner, if they materialise? How will it relate to the evolving eurozone banking union and potential accompanying treaty changes? Will it tear up the coalition's EU "referendum lock"? The more the eurozone agrees to do in common, the harder it will be for the UK to stand still. In fact, the eurozone crisis means that the status quo is no longer an option for Britain.

The problem is that, fundamentally – and much like the Tory leadership itself – it does not yet appear that Labour knows what it wants for the UK in the multi-tier Europe that is developing. The previous Labour administration's policy of simply sitting in the "euro waiting room" and hoping the public would come along for the ride is no longer credible. However, the wing of the party that said it always opposed euro membership has yet to articulate what its alternative plan is.

There are a lot of good and clever people on Labour's front benches. So far, it has suited Labour to treat Europe as a coalition piñata. Not for much longer. Labour now has the chance to develop a coherent and positive European vision and a plan of its own – designed around a flexible model for EU co-operation, in which Brussels does less in the UK, but does it better. Bank on the status quo or Tory splits, and both the party – and Europe – may be in for some unexpected surprises.

Labour and ‘Europe’: substance or party politics?

Open Europe has just returned from holding two fringe events at the Labour Party Conference (write ups of these to follow here), an occasion that can be a useful barometer for assessing opinion within the party.

Shadow Foreign Secretary Douglas Alexander used our joint event with BNE and CER to state that “there is almost total unanimity for Britain’s continued membership in the European Union.” And, though Alexander made several valid points (including the Tories' poor handling of the announcement of the 2014 EU JHA block opt-out) it's clear that in large part, Europe simply remains a stick with which to beat the Tories. Shadow Cabinet Minister Jim Murphy’s suggestion that, “at some point, there will have to be a referendum on the EU” would seemingly fall into that category. Mr Murphy added "My preference would be an in-or-out referendum when the time comes” and that “almost everyone” in the Labour Party would campaign to stay in the EU, “because it is good for our economy and good for Britain”.

It must be extremely tempting for Labour to go for that in / out referendum and witness the Tories tearing themselves apart (or so the thinking goes). But a) that's hardly a noble motive for putting a hugely important issue to the people (Labour likes to talk about putting national interest before party) and b) it would be an absolutely massive gamble: if held now, the "in" side would almost certainly win, but in 2015-16, all kinds of unpredictable stuff could have happened in Europe that would change the equation. The dropping popularity of Hollande and Rajoy, just months after entering office, is a reminder that 'political honeymoons' are shortlived in European politics these days. Therefore, even calling a referendum right after being elected is no guarantee.

There was much talk of lost ‘influence’ at the conference but little of substance to suggest how Labour’s approach would be different to the current government on the fundamental issues such as the fiscal treaty (would the party opposed to 'mindless austerity' really want to sign a treaty enshrining the doctrine?), the EU budget (Labour recognise the need for reform as do the Lib Dems and the Conservatives), and banking union (Although it does not necessary like to admit it, a Labour government would need to go out to bat for the City in Europe).

However, encouragingly, there are some senior figures in the party who are willing to enter into a debate about the future of the EU. Shadow Treasury Minister Chris Leslie told our joint fringe meeting that the tensions between Eurozone-level decision making and national democracy were “at risk of undermining the European settlement.” He added that the Eurozone needed to find an answer to the question of how to “hold accountable those who make executive decisions in the Eurozone.”

He said that the continuing EU budget negotiations were the “next big diplomatic test” for the UK and that he was disappointed that there was not enough focus on the content of the budget – an argument we have made both of the CAP but also the Structural Funds, where a previous Labour Government policy would actually save the UK around £4bn over the budget period and better focus the remaining EU funds. In contrast, the current government has taken a somewhat less assertive approach (contrary to popular belief).

Campaign to devolve EU regional policy gathers momentum

Last Friday, the Parliamentary Select Committee for Communities and Local Government's inquiry into the European Regional Development Fund, to which Open Europe submitted both written and oral evidence, published its final report. Among others, the report recommended that:

“We support the principle of repatriating regional policy funding, provided funding could be protected and ring-fenced over the long-term to ensure that the poorest English regions continued to receive the same level of support they would have received under the current system.” 

 In our recent report on the subject, Open Europe recommended that:

"Limiting EU regional spending to poorer countries [GDP below 90% of the EU average] would be a win-win situation for both Britain and Europe. It would channel more cash to the newest member states and allow the UK to spend exactly the same amount on its regions as it does now, with the option of adding the several billion that it would save from streamlining the structural funds. It would also eliminate a range of additional costs and allow the Government to radically improve the targeting of funds towards poorer areas and to viable projects.” 

We are therefore delighted that MPs accepted the central tenet of our recommendations, especially as Open Europe was the only organisation profoundly critical of the status quo to submit evidence. However, we consider that there is a realistic prospect of the government being able to secure this reform in 2014 – and that the government should be prepared to veto the next MFF, currently up for negotiation, in order to make this demand more credible – whereas the Committee sees this as an objective for 2020 and beyond.

Just to briefly recap the arguments why the reform would be a win-win for the UK and Europe:

• While it can generate added value in individual cases, involving all member states in EU regional spending, irrespective of their relative wealth, is economically irrational. In richer member states, the structural funds mostly serve to redistribute income within the same regions. As the Commission itself has admitted, this exercise creates “considerable administrative and opportunity costs”;
• Over the 2007-2013 EU budgetary period, the UK is contributing roughly £29.5bn to the funds, and getting back around £8.7bn. Of the 37 regions in Britain under the EU’s classification system, 35 are net contributors to the structural funds, with only West Wales and Cornwall net beneficiaries. Some relatively poor areas lose out substantially; for example, the West Midlands, which has the lowest disposable income per capita in the UK, pays £3.55 to the structural funds for every £1 it gets back;
• Limiting the structural funds to poorer countries would result in 23 out of 27 EU countries paying less into the EU budget than at present. - all new EU member states would be better off. The UK would save around £4bn net over seven years in addition to the £8.7bn it currently gets back through the structural funds. This option could therefore attract strong political support in many capitals, especially given the current need for governments to make savings;
• Domestically, it could enjoy cross-party support given that it was originally a policy championed by the previous Labour government, and areas represented by Labour MPs stand to be the biggest winners under this reform. 

All in all, the campaign to reform EU regional policy is gathering momentum...

Not so bullish now? The short term prospects for Spain inside the eurozone

In a new briefing, Open Europe assesses the state of the Spanish economy in light of recent budget proposals, announced by the Spanish government in full today. Spain is not the “next Greece” - it remains a serious and diverse economy, with relatively good administration and infrastructure. However, the increasing exposure of its banks to potentially toxic loans, the difficulty in curbing Spanish regions' spending and the risk of reforms not taking effect quickly enough, all raise serious questions as to whether the Spanish economy will make it through without some sort of external help.

Key Points

• Given its size, the fate of the Spanish economy will also largely decide the fate of the euro. €80bn of €396bn (1/5) in loans that Spanish banks have made to the bust construction and real estate sectors are considered ‘doubtful’ and potentially toxic, meaning at serious risk of default, with the banks only holding €50bn in reserves to cover potential losses. Already dropping, house prices could potentially fall another 35%, meaning that Spanish banks will almost certainly face hefty losses as more households default on their mortgages.
• In such a scenario, the Spanish state is unlikely to be able to afford to recapitalise its banks, meaning that the eurozone’s permanent bailout fund (the ESM) would have to step in, shifting the cost to eurozone taxpayers.
• As domestic banks are currently the main buyers of Spanish government debt, this could also lead to major funding problems for Spain. The chances of a self-fulfilling bond run on Spanish debt would increase massively in this scenario, threatening to push the whole country into a full bailout.
• Containing spending in the Spanish regions is also key to Spain rebalancing its books. The level of unpaid debt on the balance sheets of local and regional governments has risen by €10bn (38%) since the start of the crisis (now topping €36bn). This will likely be paid off by the central government, increasing the country’s debt and deficit.
• Spain’s various reforms, particularly to the labour market, are welcome, but are themselves not enough to stop a bond run, as it will take time before they bite. The country’s long- term unemployment has now reached 9% of the economically active population, and youth unemployment reached 50.5% last month. This is threatening the long term productivity of the economy and whether Spanish society can sustain this level is unknown.

A Spanish bailout is far from a forgone conclusion, but more work needs to be done to avoid one. Open Europe recommends:

• Spanish banks double their provisions against souring loans and commit to thorough stress tests.
• Strengthen labour market reforms, particularly to relieve the welfare burden on state finances, including: end wage and pension indexation to inflation, reduce size and duration of benefits, limit collective bargaining, reduce redundancy costs and improve the business climate.

However, these reforms will only stand the test of time if they enjoy political buy-in across Spanish society and are seen as democratically legitimate, rather than being imposed from outside.

To read the report in full, please click here,
http://www.openeurope.org.uk/Content/Documents/Pdfs/Spain2012.pdf

Senior Labour MPs back devolving structural funds back to the UK

This is an interesting development. Amid everything else that's happening on the Europe-front, a bunch of Labour MPs today come out in force, backing the idea of devolving EU structural funds back to the UK. In a letter to the Guardian, 17 Labour MPs, including former Cabinet Ministers Bob Ainsworth and Jack Straw, urge the Coalition to adopt the policy first floated by Gordon Brown, to focus the structural funds exclusively on the poorer member states.

The letter reads:

In the context of the growing euro crisis, it is interesting to note that Gordon Brown – while he was chancellor of the exchequer – argued strongly for the repatriation of EU structural funds. Writing in the Times in 2003, he said: "When the economic and social, as well as the democratic, arguments on structural funds now and for the future so clearly favour subsidiarity in action, there is no better place to start than by bringing regional policy back to Britain."

The article was written in support of a Treasury document called A Modern Regional Policy for the United Kingdom, published in March of that year. The paper argued that there was much time and money being wasted in processing contributions from countries such as Britain, only to send the contributions back in the form of structural funding.

Much easier and simpler, the then chancellor seemed to be saying, to let Britain keep the cash and get on with the job of using our own structural funds. The pressure group Open Europe has calculated that Britain would have been better off by something like £4.2bn if Brown's system had been adopted. What is more, some of the most deprived UK regions are currently short-changed by the structural funds, because EU allocations are based on inflexible, one-size-fits all criteria. For instance, the West Midlands has the lowest disposable income per capita in the UK, yet pays the EU £3.55 for every £1 it receives back in structural funding, according to Open Europe estimates. In contrast, if Labour's policy had been pursued, each region would have experienced a rise in the amount of subsidies they receive by around 45% compared with now. For example, Cornwall would have received an additional £207m over seven years.

Alan Johnson, also argued in 2003, that regional policy ought to be "resourced domestically in richer member states, like the UK, with the institutions and the financial strength to do it. This would end the unnecessary and inefficient recycling of funds between richer member states, like the UK, via Brussels ..."The Cameron government seems to have abandoned any attempt to change EU structural funding to concentrate on trying to freeze the EU budget – a strategy which has already failed. Perhaps this government could take a look at what was being argued for a few years ago – it could benefit us all.

John Cryer MP, Jack Straw MP, Katy Clark MP, Thomas Docherty MP, Dennis Skinner MP, Gisela Stuart MP, Andrew Smith MP, Mike Wood MP Robert Ainsworth MP, John McDonnell MP, Kelvin Hopkins MP, Jeremy Corbyn MP, Grahame Morris MP, Ian Lavery MP, Ian Davidson MP, Frank Field MP, Graham Stringer MP

One for the Coalition to ponder...

A closer look at Labour’s “new” EU policy

Earlier this week Labour make a concerted effort to re-launch its EU policy, an area which we recently argued had become somewhat ambiguous, aside from some populist noises concerning the free movement of workers. Shadow Foreign Minister Douglas Alexander, who barely referenced Europe in his conference speech, compensated with a dedicated speech on the issue, preceded by an op-ed in the Guardian entitled “Labour's mature patriotism over Europe”.

The Guardian’s political editor Patrick Wintour described it as a “major rethink”, over at the Spectator, Peter Hoskin blogged that: “Alexander drags Labour closer towards the Tories on Europe”, while over at Labour List John Worth - a Labour blogger - professed himself to be disappointed by the new “Tory light” policy. Yet a day later the Telegraph's Ben Brogan wrote that "Labour remains committed to big Europe", while the Guardian's Michael White agreed, adding that: to the relief of residual pro-Europeans in his own party and beyond, Alexander opted to “push against simplistic scapegoating promoted by the porn peddlers and tax-dodgers of Fleet Street (sic)… albeit unheroically”.

So why has the reaction been so confused and contradictory? This is partially because the full speech was more nuanced and contained a number of caveats and qualifications, whereas the shorter op-ed piece had hinted at a more profound shift in Labour's policy; most likely this was intentional, as it allowed Labour to seize the headlines over the issue and create the impression they were more in tune with public opinion, which has become increasingly critical of the EU.

So has Labour's EU policy shifted significantly towards a comitment to EU reform, or has nothing fundamentally changed aside from tone and emphasis? Lets look at Alexander’s speech in greater detail:

“being the Party intent simply on defending today’s European status quo would be wrong for Labour and wrong for Britain... we have a real opportunity to achieve the fundamental and necessary reforms to, for example, the Common Agricultural Policy, the Common Fisheries Policy, the way that the EU budget is spent... the unnecessary second home of the European Parliament”

Welcome as this commitment to reform is, it can hardly be described as groundbreaking; in government, Labour had consistently made the case for EU reform. The problem, in our view, was that they conceded too much and achieved too little in response, in particular on the UK’s rebate and CAP reform. For example:

Tony Blair today warned European leaders he would not discuss Britain's controversial £3bn rebate without a full debate about the EU budget, including the common agricultural policy.
Guardian, 13 June 2005

UK Prime Minister Gordon Brown has said economic reform within the European Union "must accelerate" if the 27-nation organisation is to prosper.
BBC, 21 February 2008

Caroline Flint, Minister for Europe, said: "The Common Agricultural Policy in its current form doesn't serve the best interests of the farming industry or consumers across Europe, which is why we've consistently pushed for far-reaching reform.
Telegraph, 31 March 2009

Moving on, the media have also picked up on Alexander’s line that:

“But as in the past, in the future, the economics will transcend the politics in Labour’s approach – and that means joining the single currency is not on Labour’s agenda.”

Again, it doesn’t strike us as through there has been a road to Damascus moment here; the UK-in-the-euro brigade has been haemorrhaging former supporters, and it could hardly be said that it was on anyone’s agenda at present. Ed Balls has not been shy in claiming the credit for having kept the UK outside the euro, so again, this can hardly be seen as a change of Labour policy.

This leaves us with the one interesting and genuinely new development: Alexander’s views on Treaty change, the possible repatriation of powers from Brussels, and Britain’s future in the EU in the context of greater eurozone integration, something we have highlighted as a potential risk. Here is the key passage:

“a two speed Europe... would pose fundamental risks – not only to the UK’s financial services industry but more broadly to our interests within the Single Market. A better way forward would be to engage now with the reality that Germany is seeking treaty change that enforces greater discipline within the eurozone and seize this opportunity to safeguard the rights of non-euro members. Within that challenging but realisable agenda for reform, of course the issue of the present balance of powers can be considered, but to suggest at this time that repatriation should be Britain’s overriding priority... miss reads profoundly the risks and the realities of the present situation.”

A few points to make here. Firstly, speaking only a few weeks ago, Labour leader Ed Miliband indicated that Treaty changes would be a distraction, so Alexander’s agreement that the UK ought to use upcoming Treaty negotiations to maximise the its national interest is certainly a policy shift. The idea of examining the balance of power between London and Brussels, as well as a pragmatic approach to maximising the UK's national interest is very much a nod towards the Government's current approach, albeit the Conservatives are keen to go much further than the Lib Dems. Secondly, given the risks of ending up on the wrong side of both events and public opinon, Labour has little choice but to acknowledge the need for safeguards to protect Britain and other euro 'outs' from being outmaneuvered by a potential eurozone 'bloc vote', even if Alexander did not elaborate on what these safeguards would be.

However, as we have argued (for example in our recent paper on the EU's social & employment laws), with Europe likely looking at a new long-term political settlement, it may be necessary for the UK to go above and beyond the Single Market and look at areas where certain EU powers and competencies ought to be brought back to the national level. Here Alexander is a bit vague - while acknowledging that the balance of powers could be considered, he argues against repatriation, which would mean that such a consideration would be no more than an academic exercise. He also specifically argued against bringing home social and employment law, arguing that:

In my view, it is not in Britain’s national interest for our national discourse to be dominated by concerns about the reach of Brussels as we enter an era of international economics defined by the rise of Beijing…If this Government were to scrap the social chapter, I think many people would see it as an attempt, not to limit the rights of Brussels but to limit the rights of working people in Britain.

We would argue that the two are connected; given the rise of developing countries like China, it is even more vital that not only the UK but the EU as a whole does not retreat into outdated, uncompetitive, one-size-fits-all model but introduces reforms that will enable it to compete with the emerging economies. As we argue here, this doesn't have to involve compromised workers' protection, for example.

So in conclusion: some interesting developments but as for a “major rethink”? Possibly, but we’re not yet convinced...

Eurosceptics Anonymous?

BBC Radio 4 last night featured quite an interesting debate about 'euroscepticism' across the political spectrum, and in the Conservative party in particular. The main point was that while euroscepticism remains a broad concept, it has settled into more recognisable forms. In the context of the Labour party, this has resulted in hostility towards the free movement of labour and capital within the EU, which we explored in greater detail here. For the Tories, this has evolved away from what might be described as a fixation with sovereignty in the abstract sense towards a more practical critique of Brussels’ tendency for wasteful spending and over-regulation, which resonate better with the man and woman on the street.

However, what really caught our attention is the notion that, apparently, many Tory MPs are shy about criticising the EU too openly. The programme even featured a couple of contributions from MPs who only spoke on the condition of anonymity, with actors reading out their comments, which led presenter Ed Stourton to compare them to persecuted dissidents in an authoritarian regime. Really? It's probably true to a certain extent - as described by one of the anonymous MPs - that UK outright withrawal is “the love that dare not speak its name" too openly in certain Tory quarters. But seriously, it really isn't that difficult to find Tory MPs who will go on record to have a go at the EU, or to call for re-negotiating.

It felt a bit, well, fabricated.

Ed Stourton did make some astute observations, however, when summing up the programme:

In formal terms Britain will have a veto over any changes which need to be agreed by the full EU rather than just the Eurozone members. And in diplomatic terms Britain often has more clout than at first appears; it is just too big a player for other members of the EU to ignore altogether.

The fact is that the dabate is evolving on to one of how to secure UK influence and safeguards against unwarranted intrusions into the Single Market or financial services, for example, should the eurozone integrate further and start acting as a block. The UK would be in a strong political and moral position to ask for safeguards and/or powers back, should eurozone leaders change the basic rules of EU integration.

A shame over a 30 minute programme, although touching on it briefly, the BBC didn't devote more time to looking at how the evolving situation in Europe is changing the parameters of the UK debate.

Does Labour have an EU policy?

The Labour Party conference has provided a belated opportunity to focus on the opposition party’s policies, and our interest naturally gravitated towards what Eds Milliband and Balls would have to say on the UK’s relations with the EU, and crucially their views on the burning issue of the eurozone crisis.

An early indication of Labour’s attitude towards the EU in opposition came from Lord Maurice Glassman (pictured), tasked by Miliband to develop a new intellectual framework for the Labour Party. Glassman’s ‘Blue Labour’ critique took aim at many targets (with no quarter given), including the EU, in particular its dominating legalistic institutions (a criticism we share) and the free movement of people and capital (which we think on the whole has benefited the people of Europe).

Ed Miliband, Ed Balls and other key Labour players have been busy developing this argument at party conference, in particular emphasising they had been wrong to allow unhindered access to the UK’s labour market to the eastern Europe accession countries in 2004. In an interview with Sky News, Miliband said: “We got it wrong in a number of respects, including underestimating the level of immigration from Poland, which had a big effect on people in Britain”, while Hazel Blears claimed that Eastern Europeans claiming generous UK benefits “creates a real sense of grievance and justifiably so” (even if research has shown immigrants are less likely than natives to receive state benefits or tax credits).

On the eurozone crisis, shadow Chancellor Ed Balls somewhat bizarrely argued (15 mins in) that Greece, the country at the centre of the problems did not have a debt problem:

“The crisis in Greece is fundamentally caused by the euro, an assumption about the interest rate which has turned out not to prevail… its not a crisis caused by debt, it’s caused by a liquidity crisis caused by a global financial crisis and a failure of the eurozone to act.”

While we certainly echo that the euro is a major problem, Balls appeared somewhat confused on the nature of this crisis. In fact, he may well find himself in a minority of one if he genuinely believes Greece is facing a liquidity rather than a solvency crisis. The markets (and increasing numbers of eurozone policymakers) know that Greece cannot sustain its debt burden in the long term, and are waiting for the inevitable default, something Balls did not mention.

Finally, in terms of gauging Labour’s general approach to EU issues in opposition, Miliband broadly backed the coalition government’s approach, saying that:

"We want a Europe that works for people in this country and I think that's the most important thing… let's get stuck in, let's engage and let's get Europe to grow. That's the priority, not referenda or constitutional changes or any of that stuff.”

While the reflection and internal debate is very welcome, as the Spectator’s Coffee House blog notes, “despite the interventions from Miliband and Balls, the party is bereft of a policy in this area”. And anyone wanting to get an idea of the Labour party's vision for Europe would have been disappointed by Miliband’s leader’s speech this afternoon, which barely referenced the EU or the eurozone. In fairness, Labour's Shadow Europe Minister Wayne David did say some encouraging things at a recent Open Europe event on EU justice and home affairs, which suggested he would press the Government on this issue, although again, he was vague on what specifically a Labour government would do. David has recently also gone pretty hard on the proposed increases to the EU budget.

Needless to say, given the crucial and fast-moving nature of events currently unfolding in Europe, it is vital we have an opposition that sharpens its focus and is able to hold the government to account.

We have a feeling that it's in the area of free movement of people and workers that Labour could face it's greatest temptation to move in a more populist direction...

Keep on moving?

For those of us obsessing about EU politics, 2011 is likely to be remembered as the year when the EU's two flagship projects - the Single Currency and free movement - came under unparalleled strains.

The former is based on utterly flawed economics, while the latter - albeit on balance benefitting Europe - remains a difficult sell to electorates, particularly during times of low growth and unemployment. Denmark has made headlines for seeking to restrict free movement this year (though only by re-introducing some tighter customs checks).

With the rise of populist parties around Europe, there's a clear risk that the mood is turning against the idea of open borders in Europe. In this context, yesterday's remarks from Labour peer Lord Glasman - described by the Fabian Review as a "leading policy adviser and Ed Miliband’s magus" - are very interesting. Lord Glasman seems to have some strong things to say about New Labour's immigration policy, and in an interview with the the Fabian Society, he outlines how he wants to see the UK renegotiate its free movement arrangement with the EU:

“We’ve got to re-interrogate our relationship with the EU on the movement of labour. The EU has gone from being a sort of pig farm subsidised bloc ... to the free movement of labour and capital. It’s legalistic, it’s administrative, and it’s no good. So I think we’ve got to renegotiate with the EU.”

If he means what he says, this is pretty radical stuff. It would be very interesting to know exactly how Lord Glasman envisions a re-ordered EU-UK relationship on labour movement. Is he talking changes to the Posted Workers Directive, for example, which was the source of contention during the strikes in Lincolnshire in 2009? Such a move, while symbolically hugely significant, would actually only affect a few ten thousand workers in Britain (we've looked at the Directive and the related ECJ rulings here)? Is he discussing other measures to ensure 'British jobs for British workers', such as changes to the Procurement Directive, to ensure that UK firms - and therefore workers - get the jobs (there have been some calls to that effect in the wake of the Bombardier controversy)? Or is he suggesting that the UK should completely repatriate control over labour market entry in the UK, meaning a whole new EU-UK relationship?

The good news here is that a key Labour player is discussing EU reform. The bad news is that - while somewhat vague - there could be an implicit suggestion here that Britain should jump on the slippery slope towards protectionism, undermining one of the actual benefits of European cooperation: the Single Market.

The debate itself is much welcome though.

Is your MEP in favour of EU taxes?

One of the main effects of the Lisbon Treaty was that MEPs were given a lot more power over EU decision-making, at the expense of national governments and parliaments (since the Treaty also transferred substantial powers away from member states, and therefore national parliaments.) This was an element of the Treaty which governments clearly didn't think through properly. In practice, the European Parliament has its own logic, its own cycle and its own agenda, which doesn't really correspond to public opinion in member states. In short, to give so much power to cheerleaders of further EU integration at a time when further EU integration is the last thing most citizens want was a pretty silly idea.

National governments are now paying the price.

If you want a clear example, consider MEPs' vote this week on the shape and size of the EU's next long-term budget (likely to run between 2014 and 2020). The Lisbon Treaty gave MEPs full co-decision powers over the long-term budget, meaning an effective veto over anything national governments decide.

In the vote this week, MEPs voted 468 against 134 (with 54 abstentions) for the 'big three', defying what many national governments had called for:

• An increase of at least 5% to the EU budget over its 2013 level
• A direct EU tax to fund the EU budget
• A phasing out of all national rebates, including the UK's.
  

The phasing out of the rebate is politically complicated as it pits net contributors that have a rebate from the EU budget (such as the UK) versus the net contributors without a rebate (such as Denmark and France), so let's leave this one for a sec. However on the first two, you'd be hard pressed to find support amongst citizens (at least in those states that have to cough up) for any increase to the EU budget or an EU tax (for a whole range of reasons). As we've repeated so many times that it's getting old, MEPs are doing themselves no favours by constantly churning out their demands for more - ranting like this is hardly going to score them many points with citizens either. Their biggest hurdle, we suspect, will be Germany (which will contribute the most to the EU budget by far post-2014).

So, how did the UK MEPs vote? The table at the bottom gives a break-down of their votes on key amendments.

From the looks of it, Lib Dem and Labour MEPs voted in favour of an EU tax, while Lib Dem MEPs seem to have voted against an amendment calling for national rebates to be maintained. So if Lib Dem MEPs had their way, both the UK's gross contribution (under the 5% increase) and its net contribution (because the rebate would be scrapped) would increase pretty significantly.

We also note that the Lib Dems stated in their election manifesto for the European elections in 2009 that

"We do not see the need, in the current context, for any significant growth in the budget’s size, nor the abolition of the British rebate."

The Lib Dems' voting record this week doesn't suggest that they honoured this pledge - or are we missing something (i.e. was there any other amendment to the same effect that they voted for instead?).

Anyway, check out the table to see how your MEP voted (click to enlarge).