EU budget row: why the delayed reaction?

The more you dig into the EU budget surcharge question, the more the conduct of the British government and David Cameron becomes questionable — as it becomes clear that they actually knew about it months ago.

Remember the song and dance when the government announced to great fanfare that the UK economy was bigger than previously thought, due to changes in the way they measure this? Well, if you declare that your economy is — and has been for several years — bigger than anyone thought, you might pause for a second to think about the knock-on effects that might have.

It means, for instance, that your promise to commit 0.7% of GDP to development aid will require more spending. It means that any international organisation where your membership fees are calculated based on your national wealth is likely to cost you more. From the United Nations to NATO, the European Union and no doubt others, your share of the dues is likely to increase.

This is particularly obvious in the case of the EU, where the governments of member countries — not least Britain — rejected a proposal two years ago to allow the EU to levy a tax of its own, and instead insisted that the EU should be mainly financed by national contributions calculated on the basis of Gross National Income. All European countries, including Britain, unanimously agreed a system for calculating this.

National officials from each country meet every year in May to establish the figures and again in the autumn to review them against the latest data. They also correct overestimates and underestimates made in previous years, all on the basis of figures supplied by the governments concerned.

In other words, this has not been sprung on hapless governments blissfully unaware of what was underway — despite Cameron’s attempt to paint it that way.

But, even if this obvious consequence had not occurred to Cameron or Osborne, it had been spelled out for them already in May! The opening paragraph of the document, published on 29 May 2014 by the UK’s Office for National Statistics, explicitly points out that the changes will be used in the calculation of the contribution to the EU budget.

The Financial Times took the view in its leader on Saturday that, given that this is a one-off payment to cover an eleven-year underpayment of £150m a year, Cameron is overreacting:

The £1.7bn figure is a one-off payment which accounts for less than 0.1 per cent of UK gross national income. Since it is a top-up to UK contributions covering 11 years, Britain is being asked to pay an extra £150m a year over the period. A sum like this would barely deserve a footnote in the UK’s annual accounts.

Perhaps, in light of the fact that he knew it was coming, “contrived overreaction” would be a better way of describing it. Was he holding this issue under wraps until the EU summit so as to get maximum publicity for a rant against “Brussels” to show UKIP voters how “tough” he is? Or was he trying (successfully) to deflect media coverage of the summit away from the subjects that actually were on the agenda, notably climate change, where the tough new targets he signed up to will not be popular with his backbenchers? Or did he genuinely think that the tone he adopted will help him win concessions?

As I said on Friday, the outgoing Barroso Commission has been inept in the way it handled this, and the new Juncker Commission will have to look at how to proceed. Even if the Commission has to apply the rules agreed and adopted by all the member states, there is surely some room for flexibility, rather than demanding that all arrears are paid by 1 December.

But, given what we now know about how long the UK government knew about this without seeking to change it, one can now wonder if the UK government really wants to solve the matter, or whether Cameron simply wants to use the issue for purposes relates to the civil war on Europe within the Conservative Party.

To quote the Financial Times leader again, there “no longer seems to be any limits to the concessions” that Cameron is willing to make to the Eurosceptics and that he “looks like someone who will do anything to save his premiership and his party, whatever the cost to his country”.

Update: Two more pieces of evidence that this was on everyone’s radar long before Cameron was “shocked” by it. One: a briefing paper from January, detailing the new calculations agreed by national officials and identifying which countries would be asked to pay more. Two: a meeting held in June, at which a member of the Bank of England’s monetary policy committee spoke, where a scheduled topic of discussion (led by the Dutch representatives) was specifically how to handle the upcoming adjustment!