EU Referendum


EU budget - the lies they tell


08/11/2014



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If you actually want to know what has happened at a Council of Ministers meeting, a good starting point is to look at the press release (communique). In the case of the recent Finance Ministers' meeting, therefore, the first place to look for verification of Mr Osborne's claims to have cut the supplemental demand for �1.7bn is to look at this press release.

Strangely, this is not exactly rocket science - EU institutions have been issuing press releases for several decades, so they are not uncommon things to expect. And in this case, we see in the relevant release, a statement from the presidency:
The Commission has informed of the outcome of the annual corrections to the VAT-and GNI based own resources, pursuant to Article 10, paragraphs 4 to 8 of Regulation (EC, Euratom) No 1150/2000. In particular due to the major revisions of the GNI of several Member States, their additional contributions to the EU budget will be substantial. In addition, the regulatory delay until the payment date of the first working day of December is short. This may result in exceptionally high fiscal implications for those Member States.

The Council therefore invites the Commission to come forward with a proposal for a targeted and limited amendment to the Council Regulation No 1150/2000 to take account of such exceptional circumstances. This should allow for the Member State concerned to defer the required payment over a reasonable period of time (no later than 1 September). For the sake of equal treatment of all Member States, deferral should then be an option for all if the overall sum of the GNI balances is exceptionally high. Taken into account the tight deadlines, this amendment should come into effect by the 1 December this year (retroactively if needed).

At the same time, recognising the need to address the unprecedented increase of unpaid claims across all headings and programmes in the EU budget, the Council agrees to work constructively, including the use of the flexibility instruments agreed in the MFF 2014-2020, to adopt a position on the draft amending budgets for 2014 in a timely manner, while recalling the position already adopted by the Council on the draft budget for 2015.
The key paragraph is the second one, where we see the reference to Regulation (EC, Euratom) No 1150/2000. This was the same instrument to which I drew attention in my earlier piece. The change of record thus seems to be a "proposal for a targeted and limited amendment" to the regulation to allow Member States with "exceptionally high balances" to defer the required payment over a reasonable period of time, up to 1 September next year.

That is the only substantive change, and one which had already been agreed between the presidency and the Commission. If there were to be changes to the amounts payable, there would have to be a legal base for this. This would require a major overhaul of the regulation, in turn requiring a proposal to that effect, and the application of the full amendment procedure. Yet, as we see, there is no such proposal.

Following a reduction of the UK contribution, there would then have to be a corresponding increase in payments from other Member States. This would require a prolonged period of negotiation, on top of the new law adapting the existing payment framework. Of this, there is no sign.

Should the Commission simply be reducing UK payments unilaterally (for which it has no legal authority), it would then have to amend the budget. But there is sign of a new budget, and the last substantive Draft Amending Budget still stands. Rather, the Council is enjoined "to adopt a position on the draft amending budgets for 2014 in a timely manner".

Thus, whatever went on yesterday, the UK liability for �1.7bn was not reduced at this Council. The Guardian is right to dispute the claim, therefore, even if it hasn't nailed the reason why Osborne's claim is fraudulent.

What in fact has happened is that Mr Osborne has been indulging in a little creative PR off piste. The Council meeting is a red herring - the deal has been done in les couloirs of the Commission. 

As far as the Commission is concerned, the Treasury admits liability to the whole �1.7bn - thereby keeping the books balanced. But it will only physically pay about half of it. The Commission, in turn, will bring forward the UK's rebate payment from 2016 - which includes the normal adjustment for supplemental payments. Then, instead of physically paying it to the UK, it will remit it to its own account, to offset the current liability.

Because this current supplement is unusually large, Britain's 2016 rebate will be larger than it might otherwise have been (final rebates are worked out two years in arrears). With the enhancement, the European Commissioner responsible for budget issues, Kristalina Georgieva, is suggesting that "preliminary calculations" indicate that the UK will have physically to pay only about �1bn of the supplement (slightly less than half). The rest will come out of rebate. 

Trading the current payment against our future rebate, however, achieves the political effect of taking the bulk of the payment off the books, and concealing the physical transfer of funds. And since the UK reports EU transfers on a financial year basis, while the Commission uses the calendar year, there is scope for even more confusion and obfuscation.

The fact remains, though, that the amount the UK will have to pay the EU hasn't changed. It is exactly the same now as it was yesterday morning, before Mr Osborne's famous "victory" -  about as substantial as Mr Cameron's famous "veto".

Why they think they can get away with it is moot. But Mr Cameron having fooled most of the media into believing in a non-existent veto, Mr Osborne probably believes his sleight of hand is enough to convince the electorate that there has been "a result for Britain".

Since this is the way they usually handle EU matters - feeding us with a diet of lies, deceit and half-truths - and most of the time they get away with it, there is a good chance that the lies will work again. However, this time they have been outed very early in the play. We will see whether it sticks.

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