Charles Crawford: How the EU Budget process really works - Part II

This is the second instalment of a two-part series looking at the EU Budget. Click here to read the initial instalment, published yesterday.

Charles Crawford served in the Foreign and Commonwealth Office for 28 years, latterly as British Ambassador in Sarajevo, Belgrade and Warsaw. He left the FCO in 2007 and was on the Conservative Party candidates' list prior to this year's general election. He blogs here.

Fascinating though all this is, isn’t it insane that EU budgets are going up when there is such a squeeze on national public spending across Europe? How can the UK stop that?

As previously explained, within a Financial Perspective period annual EU budgets are expected to rise, as actual planned spending by the Getters rises. The significance of what David Cameron achieved in Brussels at the October European Council was twofold.

First, by nimble diplomacy he held back what otherwise would have been a notably larger annual annual increase - remember that the UK alone cannot block any annual increase, so we need to muster a blocking minority to do so.

Second (and more important), the UK got into the Council Conclusions a key sentence looking ahead to the next major Financial Perspective negotiations:

Heads of State or Government stressed that, at the same time as fiscal discipline is reinforced in the European Union, it is essential that the European Union budget and the forthcoming Multi-annual Financial Framework reflect the consolidation efforts being made by Member States to bring deficits and debt onto a more sustainable path.

Translated into English, this means that it makes no sense for the European Union to expect a generous deal over the next Budget period (ie up to 2020) - the next Budget settlement will have to reflect the fact that many member states are having to make serious public spending cuts at home.

This is, of course, not the same as saying that the EU budget will have to be cut in real or nominal terms - there would have been no consensus for that statement. But it lays down an important political marker, which creates a context for a stern British position as and when needed.

Keep an eye open for the language in the December Council Conclusions, when London again will press for language about how the European Union must support member states' attempts at financial "consolidation".

In a few months’ time, the familiar weary battle will unfold in Brussels as the next Financial Perspective negotiations get under way. The Commission, cheered on by the profligate European Parliament, will announce an indicative budget increase for the period until 2020.

Some in the Commission will be calculating that the increase it proposes is not going to happen, but that nothing is lost by over-bidding at the beginning.

Other, saner heads will be worried that a ludicrous increase as proposed in 2005 simply won’t be credible under current circumstances, and will waste time and risk damaging the EU’s wider credibility among the general public: a policy of reculer pour mieux sauter (as they say in the French-speaking parts of Belgium) may be wiser.

But it is hard to imagine that the Commission will not propose some sort of increase, including ample negotiating fat. At that point the throng of ravenous Getters will clamour their agreement. The small group of Scrooge-like Givers will insist that that increase is unacceptable at a time of urgent "consolidation". An unseemly, extended haggling will ensue.

The final bad-tempered result will be far closer to what the Givers want and can defend publicly - after all, it's their (ie our) money.

Back in 2005 the UK was both helped and disadvantaged by having the Presidency:

• We were able to use our Presidency to manipulate the whole debate and steer towards a final budget which was far less than the Commission demanded.
• On the other hand, the Presidency is expected to be generous to the European idea and not represent narrow national interests. 
• Tony Blair nonetheless could have used a strong British position following the French and Dutch referendum debacles to drive an even tougher bargain on the budget and CAP reform. 
• But Tony Blair was a true ‘European’. He really believed that a reasonable Budget outcome was needed to get the EU back on its feet after the Constitutional Treaty fiasco. Maybe he also privately hoped that by demonstrating such pro-European zest his coronation as the first new-style EU president under the Lisbon Treaty would be guaranteed. ‘Twas not to be.

Next time round the global financial climate will be far less propitious. The UK will be represented by a Conservative government determined to deliver a result which makes sense in domestic British terms.

An opportunistic Labour opposition might well find common cause with Eurosceptic Conservative MPs. Why support a new EU budget deal up to 2020 which leaves most EU processes (and officials) plumply well off, when public sector spending cuts across the UK are starting to hurt? David Cameron has no plans to end up in that political black hole.

The challenge for London now is publicly to project inflexible hard-nosed frugality and budgetary responsibility at home - not too bad so far? - and make clear publicly and privately in Brussels that the EU has no choice but to do the same.

While that is happening, London needs to work closely with the other Givers, especially Berlin and The Hague (maybe even Paris), to make sure that the Getters scale back their expectations. Much better that all those Getters grow up and this time round avoid a reckless battle they are bound to lose, instead plugging in their iPods and listening to Pink Floyd:

Money, so they say
Is the root of all evil today
But if you ask for a rise
It's no surprise that they're giving none away