EU budget: is UK really isolated and can Cameron 'win'?

Nov 20, 2012

Desperate to agree an EU budget freeze, Britain looks isolated - and that's exactly what some EU countries want

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A EUROSCEPTIC tide in Britain is putting David Cameron under huge pressure as he prepares for a summit this week at which the EU will ask for an inflation-busting five per cent increase – and Britain will seek a freeze.

The 22 November summit comes at a time when most EU countries are having to cut their domestic spending – a point the PM made to business leaders at the CBI yesterday.

The PM will have to take a robust line in negotiations, with euroscepticism rising in the UK. Polls show the anti-Europe UK Independence Party riding high on 10 per cent and at the weekend, a survey for the Observer showed that 56 per cent of Britons would vote to leave the EU. Last month, the House of Commons rejected Cameron's proposal to freeze the EU budget – MPs called for a cut instead.

David Cameron might well wish to persuade his fellow European leaders to back a cut to the EU budget, but experts are agreed it simply won't happen because it has to be a unanimous call and some countries get more out than they put in. Instead, the best he can hope for is a real-terms freeze in the budget - and it is this that he will aim for on Thursday. In doing so, the PM claims to have the support of the European people. He told the CBI yesterday: "I feel I have got the people of Europe on my side in arguing that we should stop endlessly picking their pockets and spending more and more money through the EU budget, particularly when so many parts of the EU budget are not well spent."

Even a real-terms freeze in the EU budget is unlikely, but Cameron does have allies, such as the Netherlands, Germany and Sweden. While the EU wants a budget from 2014-2020 of €1.1 trillion, Germany wants to shave off €100bn and the UK wants to remove €170bn, according to the BBC's Gavin Hewitt. But unlike the UK, says Hewitt, Germany expects to compromise. If negotiations lead to anything other than a budget freeze, Cameron will most likely wield his veto.

Because of the need for a unanimous decision, if any of the 27 leaders at the summit vetoes the new budget agreement, the default position is to agree a budget for 2014 only rather than the full seven years 2014-2020. This is based on the previous year's figures (ie those for 2013, which are still under dispute) plus inflation of 2 per cent. This does not need a unanimous decision – a majority vote will do.

Not really, although that is the media perception. Six countries besides the UK have threatened to use their veto, says The Times, which explains that "the British government has understood that the impression of British obstructiveness is useful for France and other net contributor states".

These countries have "their own strong objections to the maximalist proposals put forward by the EC, the demands of the poorer eastern and southern states and also to the latest cost-cutting plan from Herman van Rompuy, President of the EU leaders' council".

France wants to protect the huge subsidies the EU gives to its farmers under the Common Agricultural Policy, from which Van Rompuy has proposed cutting some €25 billion, according to Reuters. France has suggested that the budget rebates of Britain, Germany, Sweden and the Netherlands ought to be reviewed, with one minister describing these rebates as "neither clear, transparent nor fair". Complicating matters further, Denmark also now wants to negotiate a rebate – and is one of those threatening a veto.

Either a compromise driven through by Germany and Britain or a British veto. In the latter case, the default rules [see 'Then What Happens?' above] kick in meaning that Britain's contribution to the EU budget will increase anyway. And the 2014-2020 budget will have to be tackled at some point...

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