Thursday, November 22, 2012

UK would not be ‘biggest loser’ of EU budget failure

We have a letter in the FT today pointing out that the UK would not be the biggest loser if there is no positive outcome from the talks on the EU's long term budget - a fact we have noted at length in two recent flash analyses. We have also highlighted in recent blogs that the UK is far from alone in threatening a veto.

In an article a couple of days ago the FT suggested that if there was no deal on the long term budget the UK would be the biggest loser since the current budget framework would rollover (increasing for inflation), thereby taking it above the UK government's demands and increasing the UK's contribution.

See below for our full response letter:

Sir,

You say that “if there is no agreement” in on-going talks over the next long-term EU budget, the UK could become the “biggest loser” (“EUbudget: the trillion-euro split”, Analysis, November 21). This is incorrect. It is true that “the 2013 budget ceiling would be repeated – plus inflation – for each successive year” and that this would be higher than the freeze the UK has called for. However, this scenario would be far worse for other countries than for Britain.

First, newer member states would probably lose out on a large share of the cash that is due to be allocated to them in the new budget period. Second, unlike the UK’s rebate, all other correction mechanisms – such as the Swedish or Dutch – expire in 2013 and would need to be renegotiated under unanimity rule. Finally, and most importantly, the UK’s net contribution under a rollover is about €3bn higher than under the current proposal by European Council president Herman Van Rompuy. However, the Van Rompuy proposal also includes a reduction in the UK rebate of between €3.5bn and €7bn, meaning the UK contribution would overall be lower under a rollover.

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