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UK under rebate and peer pressure before budget summit

UK under rebate and peer pressure before budget summit
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The rebate Britain won for itself in 1984 has been fought over repeatedly. But in a bloc of 25 members the old row has come to a showdown. Things had heated up so much when the leaders last got together that host Britain wrote in the invitations: ‘we’re not going to talk about this’. Britain’s money-back arrangement dates from when it was one of the European community’s poorer countries.

Analyst Jorge Nuñez, with the Brussels-based think-tank CEPS, says the formula is no longer considered fair.

“The mechanism did not take into account that the country would get richer — one of the big mistakes, since the more you pay the more you get back: 66% of the net. According to solidarity rules, the wealthier you are the more you should contribute to the budget. With the UK, the wealthier they get the more they get back from the rebate.”

Looking at the figures for 2003, Britain paid something over 13 billion euros into the common budget. It benefited from the European fund to the tune of about six billion euros. That made it a net contributor, almost seven billion out of pocket. The rebate allows it to claim back two thirds of this, based on what it does not take from the Common Agricultural Policy, or CAP.

Earlier this year, Britain said it would give up the rebate if the EU’s farm subsidy system was stripped down. After all, London says, it was agriculture which originally unbalanced payment distribution.

The CEPS analyst gives his perspective: “I call the CAP the French rebate, a bit provocatively, but it has a similar effect, in the sense of who benefits. France gets a disproportionate amount, given the wealth of the country; They are one of the rich countries.” More free-market-oriented voices in the EU say member states should co-finance the farm bill. Britain is among those who would benefit, and so would new members.