A tale of two budgets

news: A tale of two budgets

IN THE UK, the Chancellor has produced his latest budget. Given its various sweeteners, there could just be a General Election soon…

Meanwhile, across the Channel, a different budget is under discussion that also affects the UK election timing – how big should the EU budget be for the next seven-year period, and where should the money come from? The answers depend on who you ask.

The largest contributors want it to go down. Germany and Britain want to cap the budget at one per cent of Gross National Product. The 10 new Member States want to increase it to around 1.2 per cent – as they are the poorest countries, they would only gain. Their argument is that, unless the budget does increase, they would lose out significantly compared with the money shared out in recent years among the 15 older Members. There is simply not enough in the current pot to give them the same deal. They do have a case.

We say that a better way of freeing up funds to help the new Members is to cut back spending on the Common Agricultural Policy (CAP). This largely benefits France, soaks up nearly half the total budget and is prone to widespread fraud. France says that, if we want to put the CAP on the table, then the UK rebate has to be put on the table too. The problem is that 24 out of the 25 Member States agree.

Back in 1984, Margaret Thatcher famously insisted on getting a chunk of “our” money back, securing a rebate now standing at over three billion pounds sterling a year. But the UK still remains the second largest net contributor despite this rebate. The claim by new Member States that their own budget contributions are partly paying to fund the UK rebate is therefore most misleading.

Nevertheless, the argument remains that, if Member States really do want to open up the issues of the size of the kitty and how much is spent on what, then everything – and that means everything – has to be on the table. By definition, that includes the UK rebate. However, it is significant that, apparently at the request of the UK, the EU has quietly decided to postpone any final decision until a special budget summit in June.

Something tells me that this agreed delay has to be for a good reason. The most likely is that the Government’s current silence on the issue suggests Labour feels compelled to negotiate the rebate away, but needs to hold a General Election first. Certainly, Tony Blair would not dare hold one afterwards! That is the most convincing reason yet, why he will call it for May.