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Labour calls for cut in EU budget in sign that they are ready to play Eurosceptic card against Cameron

By Tim Montgomerie
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One of the alliances that Number 10 has most feared is between Eurosceptic Tory backbenchers and the Labour Party. It feared it on the IMF bailout and it fears it on the EU budget.

In an important intervention in tomorrow's Times (£) Ed Balls and Douglas Alexander make the case for a real terms cut in the EU budget:

"Labour will argue against the proposed increase in EU spending and instead support a real-terms cut in the budget... When we speak of budget reform, some will want to focus only on cuts to “EU fat cats” in Brussels. But we should not be distracted by a debate simply about bureaucracy: administration represents only about 6 per cent of EU spending. The big areas for reform lie elsewhere. Far too much money still goes on agricultural subsidies, instead of on policies to promote growth, cohesion and development or to support the EU’s vital role in international affairs. So further reform of the Common Agricultural Policy (CAP) must not just be discussed but implemented. The CAP amounts to about £45 billion and the UK makes a net contribution of about £1 billion per year. Although the butter mountains of the past are long gone, the need for reform is no less urgent. The CAP is an obstacle to international trade liberalisation, creates too few jobs and introduces distortions so there is not a level playing field. The EU cannot afford this waste. EU structural funds — currently used to promote growth and investment in the EU — must be reformed if they are to deliver the vital support that Europe now needs. These funds make up around 35 per cent of annual EU expenditure but are distributed according to overlapping and, at times, competing objectives agreed decades ago. Today that money must be spent on promoting growth and jobs in deprived areas. Schemes that do not meet this threshold can no longer be justified."

I agree with every word.

This is clever politics from the Shadow Chancellor and Shadow Foreign Secretary in at least four ways:

1. It will appeal to the Eurosceptic family including The Sun, Mail and 70% of Britons (including a large proportion of Labour's target voters).

2. It is a rare fiscally responsible position from a fiscally irresponsible party.

3. It creates a headache for Cameron and potential tensions with his Europhile LibDem Coalition partners.

4. It diverts attention from the GDP figures and the implications of good economic news for Labour's big bet on economic failure (Anthony Wells notes today that the Coalition's economic ratings are bouncing upwards).

And is it a sign of Labour Euroscepticism to come? Will Miliband embrace a referendum before Cameron? Over to you Prime Minister.