By Bruno Waterfield - 5th December 2005
London has offered to shave €8 billion from Britain’s annual rebate in a bid to secure an EU budget deal in ten days time.
The British EU presidency has tabled detailed Brussels expenditure proposals for the period 2007 to 2013.
In a bid to heal deep EU divisions over the level of spending, expenditure priorities and Britain's annual rebate, London has offered to pay an extra €1.1bn a year to Europe's poorest countries.
Unveiling the new ‘financial perspective’, UK foreign minister Jack Straw has set the scene for bitter battles ahead of an EU summit on December 15.
Battle front one
The first fault-line will be the UK’s “tough budget discipline” imposed on the original 2004 European Commission spending projections for 2007 to 2013.
London is seeking to slash Brussels budgets by €178bn – axing the original seven-year expenditure total from €1025bn to €847bn.
Straw’s penny pinching will take down EU budgets to an average 1.03 per cent of Europe’s Gross Income.
Some EU leaders will be dismayed that the compromise package is even lower than proposals tabled in June – set at €871bn or 1.06 per cent.
Downward pressure on EU spending reflects intense political pressure from Europe’s net contributors – the national treasuries that pay out more than they receive in benefits.
Battle front two
The second budget battle front will open in the East with new EU member states set to lose €14bn in cuts to ‘structural and cohesion’ funds targeted at Europe’s poorest areas.
To sugar the bitter pill, Britain has offered €8bn from the UK’s annual rebate – increasing London’s contribution in 2007 to 2013 from €50bn to €58bn.
“We have been asked to make a fair contribution to structural and cohesion funds in new member states,” Straw said.
“This offer is a fair one.”
“This is the equivalent of halving the value of the rebate in respect of structural and cohesion funding in the ten new member states.”
Straw has dangled the giveaway but has left open to the EU summit to determine how the cash is raised.
“This could be achieved either by not applying the rebate to a proportion of structural and cohesion funding in the new member states, or by a technical route to increasing our gross contributions,” he said.
Battle front three
The UK has given two options: to trim the annual rebate by the proportion that is calculated against ‘structural or cohesion’ funding.
Or, Britain will receive the same annual rebate but actually pay out a higher rate of EU contributions from national VAT collection.
On his third front, Straw insists that UK would fight to get the full value of a rebate against EU agriculture funding and other expenditure.
Britain argues that under original proposals, and without a rebate, it would pay twice as much as France and Italy.
Under the new proposals, Straw claims London will stump up “roughly the same” as Rome or Paris.
Fourth front - France
Britain’s fourth front – set to be facing France – is a call for a wide-ranging spending review and the possibility of change within the 2007 to 2013 period.
Straw has suggested the European Commission report on expenditure in 2008, after which a “pathway to reform” could be made.
Rows over the level of EU farm subsidies have formed the backdrop to the current round of budget talks.
EU agriculture funding is frozen – at the demand of France in 2002 – leaving the only room for cuts from the regional policy payments aimed at giving Europe’s poorest areas infrastructure and economic growth.
The ‘structural and cohesion’ cash is a victim of a bitter fight between the UK and France over farm subsidies and the British rebate.
Farm cash fight
France is urging the UK to end the rebate to help fund enlargement, but London is refusing while Paris retains a lock on agriculture cash that benefits French farmers.
Paris will accept a review of farm spending in the budget mid-term, in 2008 or 2009, but without any cuts until 2014 or beyond.
London insists that without reform Britian will hang on to an annual ‘cheque’, agreed in 1984, to ease its EU financial burden on farm payments that benefited British farmers less than their continental counterparts.
Charm offensive
UK leader Tony Blair begins a frenetic round of diplomacy to sell budget deal under his term of the EU presidency, which expires on December 31.
He hosts London meetings with leaders from Portugal, Finland, Slovenia, Sweden on Thursday.
He meets premiers from Ireland, Greece and Spain an talks to Luxembourg leader Jean-Claude Juncker on Friday.
'Unacceptable'
European Commission President José Manuel
Barroso declared that the EU executive was opposed to the proposals.
“As it is, the UK presidency proposal is unacceptable. It is simply not realistic,” he said.
“This proposal amounts to a budget for a ‘Mini Europe’, not the strong Europe that we need.”
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