Barroso’s application of EU budget rules politically inept

The European Commission’s announcement of adjustments to the contributions to the EU budget may well be a simple matter of applying the rules agreed by all the member countries, but the way it’s been handled (by the outgoing Barroso Commission) was politically inept.

The agreed rules are that each country pays into the EU budget in proportion to its level of prosperity (the size of its economy). Several countries’ payments (including Britain’s) have been underestimated for nearly two decades. The Commission is seeking to adjust for this.

But why announce the adjustment as a single item, without making any link to the other amending budget that is apparently going through, that will reduce everybody’s contributions because of the money the EU has received from fines on multinational companies that were caught out running cartels? Why demand payment with such a short deadline — given that it doesn’t give the EU any extra money, simply recalibrates the payments key? It cannot be a matter of urgency, especially as not even the “winners” were expecting this.

There is bound to be a wrangle about this. The various countries that are expected to pay more — from Greece to Italy, the Netherlands and Britain — will see to that. With all the other problems awaiting the new European Commission when it takes office in a few days time, this is not exactly what they needed.

But questions should be asked at national level too. Is it true that the Treasury knew about this already a week ago? If so, why the silence from George Osborne? Was he hoping to hush it up until after the Rochester & Strood by election? Surely not!

A one-off payment covering twenty years of underpayment is a much smaller issue compared to the real questions over the EU budget: what should the EU budget be used for? In my view, it should focus more on those items where spending at European level can save money at national level by avoiding duplication or by economies of scale, such as on research.

I have been asked how the British rebate fits into all this, and even, if all member states contribute in proportion to their level of prosperity, then why does Britain have a rebate at all?

This is because, while Britain’s contributions may be broadly proportional to others, its receipts from EU spending are far less than the average member state. This is in part because a large chunk of EU spending is on agriculture, and Britain has a relatively small agricultural sector. For this reason it was agreed back in the 1980s that Britain would receive a special refund amounting to roughly two thirds of the difference between its contributions and receipts from the EU budget. This remains in place and lessens Britain’s net contribution.