» Monday, December 19, 2005

EU Budget

Asked if the budget was going to cost £2 billion off the rebate, as mentioned in the Financial Times, the Prime Minister’s Official Spokesman (PMOS) said he was not sure that was what the Financial Times had actually said. The amount of the rebate that we were foregoing was 10.5 billion euros, and that worked out at about £1 billion a year. Of course the overall cost of the budget did go up, but that was the same for everybody, and if people looked at the costings, France was paying 116 % more than it currently did, Italy was paying 135% more, Ireland was paying 90% more, so in terms of overall net contributions, our increase of 63% was considerably less than others’. Why where we paying more? We believed it was right to pay for the development of the Accession Countries, and it was in this country’s medium to long-term benefit to do so. If the level of trade we had had with countries such as Ireland, Portugal or Spain was looked at, which had developed in the last period, it more than paid for the amount of contributions that we had had to put in. We believed that the same would be true on the Accession Countries.

Asked for further information on the conversations during the negotiations between the Prime Minister and the Chancellor, and could anyone in the Treasury feel that the Chancellor was left out of the negotiations, the PMOS said that as people knew, he did not comment on Ministers’ meetings with the Prime Minister. As the Treasury had also confirmed, Treasury officials were present throughout, as were No10 and FCO officials. This was a Government negotiation, agreed by the Government.

Asked how the Prime Minister felt about the praise he had received from President Chirac, and did he feel it was a Franco/German plan, or a German plan that made the breakthrough, the PMOS replied it was an EU plan. With regards to what other leaders said, that was a matter for them. The Prime Minister believed that this was a deal in Britain’s interest; the rebate went up, and we had achieved for the first time since 1984, rough parity in contributions to countries such as France and Italy. From 1984 to 2005, we had paid double what France had paid. We had achieved our aim of maintaining a build-up of momentum to get a reformed EU budget, and we did so with the support of many of the countries in the Accession 10, and throughout Europe. This was reflected round the table in the early hours of Saturday morning, and that would not have been the case if we had not done a deal. If we had not done a deal, we would have alienated many of our potential allies in Europe.

Asked if we accepted the part in the Financial Times piece that the amount of money we would forgo on the rebate did rise over a seven year period, and if so, was there not a danger that whatever the figure was at the end of that period, it would be phased onto the next financing period, the PMOS said that the obverse of what the journalist said would be that we would benefit from not having to pay extra at this stage. The period after 2013 was an open book, therefore change would only come about by unanimity at that stage as well. Before then, we would have had the mid-term fundamental review of the budget, and that would change the perspective again. In terms of the conclusion of the World Trade Organisation (WTO), that would also change the perspective. The idea that somehow or other, there was an inevitability about what happened in 2014 we believed was mistaken.

Asked how we dealt about France and Ireland both saying that they would veto any mid-term review proposals to cut the Common Agricultural Policy (CAP), the PMOS said the reality was if we had agreement on what should happen to the CAP at this stage, then it would be very simple. A deal would have been done on that basis now. The fact of the matter was, it was not just France and Ireland, but about 10 other countries as well who were opposed to changing the CAP now. The Prime Minister had made it clear in June that what he was not looking for was an overnight abolition of CAP, as he knew that was not achievable, however much we may desire it. What the Prime Minister was looking for was a process, and if people looked back, that was in his statement in June.

The PMOS said that what we had was a process, carried out by the Commission, in which the Commission President said there would be no taboos. That was something that we did not have before, and that process was what was important. The important thing was that whenever there was going to be a review, countries would state their position, and whenever that review reported, countries would have to address the reality of what it said about how the EU responded to the challenge of globalisation. That was the basis on which countries would have to respond at that point.

Asked if it was true that the German Government was supporting us on reform, the PMOS said the reality was that the new German Government had expressed a more open approach to meeting the opportunities, and challenges of globalisation. The reality was that because we had done a deal which looked after their interests, the Accession Countries believed that we were allies in pushing for reform, thus bettering their economies as well. That would not have been the case if there had not been a deal. Therefore, the pressure for reform was much greater this morning than it was last week; that was because we got a deal. If we had not got a deal, that pressure would have been much weaker.

Asked which part of the public sector would pay for the £2 billion a year that was being surrendered to the EU, the PMOS said that in terms of finances, the Treasury were the best people to ask. The PMOS pointed out that people should be realistic about this, and look at the percentage that the cost constituted in the overall UK budget. That was quite low, as the Treasury pointed out. The PMOS said people should also look at this deal compared to what Luxembourg proposed, which was 12 billion euros more. The PMOS also said that the EU budget today in terms of GNI was bigger than it was going to be under this financial perspective, so the overall EU budget was going down, not up. Our net contribution increase was much lower than that of other countries, so if people believed that the Accession Countries should be given a chance to raise their prosperity, because that was in our national interest, then this was a good deal. However, if people did not believe that, then they had to accept that the result would be that the Accession Countries would be much poorer, and they would not achieve the EU average, and therefore, they would not be allies in the fight for reform.

Put to him that the PMOS should concede that public spending would "obviously" have to take a "knock", and somebody would be a loser, the PMOS replied that he did not concede anything, as he was not in the business of talking about Government finances. That was the role for the Chancellor and the Treasury.

Put that in terms of the review of the funding, it was the EU Commission who first came up with the proposals for this period of and they were for a tighter budget, the PMOS said that as President Barroso said at the press conference, there would be no taboos in terms of any subject and that included the CAP and the rebate. The Commission was also very well aware both of the reality of globalisation, and also of the gathering pressure within countries for reform. This was not a static situation, and the PMOS made the distinction between arguing the case for a bigger budget for the Commission, and looking at the overall balance of that budget. We would put forward our views, as would other countries, but in the end, this would be an objective analysis of what Europe needed to spend its money on as we faced the future.

Put that this was an economic "limbo", the PMOS said that this was looking at the future of the budget, and as he had said, the reality by 2008 would be different to what it was at the moment. The pressure to respond to globalisation could only get bigger, not smaller.

Asked if the Prime Minister had discussed the budget deal with the Chancellor, the PMOS replied that he did not get into logging and recording discussions the Prime Minister had with his colleagues.

Asked how much of a problem did the Prime Minister think he had in obtaining ratification from the European Parliament, the PMOS replied that the European dignitaries would no doubt want to take account of the comments of the other heads of Government after the deal. The recognition by the Accession Countries about what this deal allowed them to do was to get at the money they needed more quickly in order to deliver real prosperity. The EU Parliament would want to take that into account, and they would not want to put obstacles in the road of those countries getting their money as quickly as possible. That would be a matter for the European Parliament.

Briefing took place at 9:00 | Search for related news

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