» Wednesday, December 14, 2005

EU Budget

Asked how we expected discussions to go when President Barroso had said the UK’s proposals were not good enough and the French were calling for a complete review of the rebate mechanism, the Prime Minister’s Official Spokesman (PMOS) said we also believed in a review. We had said that if the Common Agricultural Policy (CAP) was on the table then the rebate was on the table. There were different ways of skinning a cat. In terms of the overall reaction at this stage it was important that people recognised that there was a pattern to how Europe approached these matters. We never believed that we would arrive at a situation where today we could say there was a deal. People had concerns and we had acknowledged many times that this would not be anybody’s ideal deal. In the end people had a choice and that choice was whether to accept what may not be the ideal deal, but was at least a "bird in the hand" particularly for the accession countries, or hold out for some future deal that may never arrive. The issues were not going to go away nor get any simpler. We believed that there was momentum towards a deal and we would see what happened when we got to Brussels.

Asked how much room for manoeuvre there was on the deal, the PMOS said that we had always said that the situation was very tight. It remained very tight. We were not huffing and puffing here. We were trying to be realistic. We accepted that further discussions would be necessary and the place to have those would be in Brussels.

Asked if there was more momentum towards a deal than there was a week ago, the PMOS said we believed that people were seriously engaging but we had to be, from our perspective, realistic and recognise that we were posing difficult choices for people. We always knew we would be. We had difficult choices that we had faced up to by accepting that we would have to forgo part of our rebate towards the accession countries for their infrastructure spending. It was going to be difficult, but equally there was a realisation around Europe that this was the time to do a deal.

Asked to characterise the changes in the proposals since last week, the PMOS said that the key point amounted to a modest increase in the size of the overall EU budget from 847 billion euros to 849 billion euros. The overall ceiling remained below 1.03%, so it had not changed. Our increased share of that resulted in an increase in our net contribution of 5 billion euros over 7 years, in other words less than 100 million euros per year. This was actually less than other countries of similar size in terms of net increase. France went up 8 billion euros, Italy 7 billion euros and Germany 1 billion euros. In terms of the percentage increase it was very very small. What we had primarily worked at was meeting member states’ particular needs and in particular allowing the accession countries access and the ability to use their monies faster and more effectively. This was the key.

Put to him that he was trying to kick the ball into both goalmouths at the same time, the PMOS said welcome to the real world. What we were trying to do was to produce a budget, which we had said all along, was not ideal from any point of view, not least of all our own as we wanted CAP reform now. The point was could you get a deal that was realistic but which also promised a rational assessment of the budget before too long. That was the point of the mid-term review and why it was so important and fundamental to us.

Asked how the Prime Minister planned to run the council, the PMOS said he would be in Strasbourg from 11am UK time tomorrow, then in Brussels from around 3pm UK time where the Prime Minister would have some bilateral talks to begin with, followed by the council dinner. The important thing was that nobody should be under any illusion that there was some sort of magic wand that we could wave and suddenly make everything different. It would not be like that. This was a realistic proposal which accepted that there would be pain all round, but the gain was that Europe would have a budget and the gain for the accession countries in particular was that they would be able to access their money now rather than having to wait for some NeverNeverland. They would be able to access it under a quicker way than previous proposals and get an injection of some 260 billion euros. That was a significant amount of money and a significant increase in the amount they could access now.

Asked what the pain for France was, the PMOS said that the context of all this was that you would see a large shift in what was called structural and cohesion funding from rich member states to poorer member states. We believed that was right because you were investing in the accession countries. In those terms others would pay a lot more than we were. The Sun had suggested this morning that we were going to pay 47% more, but what they had not taken into account was our rebate. So it was the Sun "wot lost the rebate". No doubt the reason they were not at the briefing this afternoon was because they were looking for it. If you looked at the figures in terms of percentage increase others would pay more. For example Ireland would pay 92% more, Spain would pay 95% and France would pay considerably more as well, over 100%, double our percentage increase. This reflected the shift in structural spending. What we would end up with was a situation where for the first time since 1984 we would have rough parity with similar sized countries. Historically, since 1984 we had paid twice as much as France had. We would be getting parity for the first time with this proposal.

Put to him that the Foreign Secretary, in the debate, had failed to give an assurance that the structural funding that went to areas in the UK would be protected, the PMOS said he could not comment on the specifics but we recognised that as part of the shift to helping the accession countries there would be pain for this country as well as others. We thought that was fair because it was the accession countries that were the poor countries of Europe. In terms of the trade flows it worked. If you looked at the experience of Spain and Ireland and how much more our trade had grown with them, our trade with Spain and Ireland had increased by £27billion per year between 1989 and 2003. That was a lot more than we had invested through the structural funds. So overall prosperity rose and that then allowed member states to help the poorer members.

Asked to clarify some figures, the PMOS said under our revised proposal the overall EU budget would increase by 2 billion euros. The increase on the UK’s net contribution would be 5 billion euros over the 7 years, after the abatement. The 8 billion euros (£5billion) figure was the proportion of our rebate that we were forgoing for the accession countries structural and cohesion funds. The headline figure did not change despite the extra 5 billion euros because of the rounding up of figures.

Asked why Poland was getting such a huge increase in structural and cohesion funding, the PMOS said that Poland had particular needs and what we were trying to do was address particular needs. It was a large amount of money. Poland like everybody else would have to make a decision as to whether it was in their national interest to get access to a large amount of new aid now or wait for some theoretical deal further down the line even though it may never arise. There was a problem where people talked about the previous proposal as if it had been an agreed deal but it was not. Six countries in Europe had rejected it.

Briefing took place at 16:00 | Search for related news

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