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Christopher Howarth: David Cameron’s EU Budget deal is a success - but it should not be oversold

Christopher Howarth is a senior Political Analyst at the think tank Open Europe. Prior to Open Europe he worked as a Conservative Foreign Affairs Adviser and senior researcher to a Shadow Europe Minister. Follow Open Europe on Twitter.

Screen shot 2013-02-08 at 15.54.24I can imagine David Cameron’s post-summit EU budget statement already; I have defended the UK rebate, where Tony Blair did not, I have secured a cut in the budget, where Labour did not - something many (i.e Nick Clegg) believed impossible. We have listened to the House of Commons, gone out worked with allies and secured a good deal for Britain. He will then real off quotes from EU leaders saying how tough he was, how upset the French were, etc - a strong leader delivering for Britain, case closed: on to other business.

Not so fast. Today’s EU budget deal, given the realities of EU politics, was indeed a good deal for Cameron. He was up against powerful veto wielding vested interests trying to defend every last indefensible cent of a fundamentally flawed budget. Given that, securing even a small cut in the overall budget is an achievement. However, it would be a mistake for Conservatives to overplay the deal.

So what will Cameron’s EU deal mean for the UK?

First, the remaining UK rebate is secure - an achievement when judged against Tony Blair and Douglas Alexander’s 2005 negotiation, but defending it should not have been too difficult, as unlike other states’ rebates the UK one was legally secure and would have survived a veto. In fact, this is one of the reasons why a UK veto would have reduced UK net payments relative to the current deal.

Second, and importantly, despite securing a real terms cut to the EU budget, the UK’s net contribution (what we pay to the EU after the cash we gets back and the rebate are taken into account) will still go up. This is because the share of the EU budget going to the new EU member states – the ones that have joined the EU since 2004 – will increase. Since this share is not covered by the UK rebate, Britain gets no cash back for its share of the money spent there.

That is a good reason not to overplay the deal. Especially as at some point MPs will be asked to approve an increase in the UK’s contribution and Labour will then claim the Government tried to hide the increase or misled the British people, etc… This is an unavoidable problem brought on by Tony Blair’s 2005 surrender of this part of the rebate, but that will be lost in the noise.

Third, again another reason not to overplay the deal, is that it has not solved the underlying problem with the EU budget. The size, yes - but also what it is spent on. The budget will remain focused on agricultural subsidies and on a centrally-directed regional policy that spends a large proportion of its cash on wasteful projects in the same region were they were raised.

Last, another reason not to overplay the deal is that when the new seven year framework is up and running it could easily turn out to be larger than expected and sold. The EU’s strange accounting system allows for two figures: agreed payments and a higher figure for commitments. The EU consistently commits to more than it can pay leading to a build-up of what the Commission is always at pains to point out are ‘unpaid bills’. Due to the difference between the two it is even theoretically possible, if unlikely, the UK’s Gross contribution could go up. Added to that is the desire to push more spending off the EU’s budget hidden - but still paid for.

 All these could emerge before the House of Commons has its opportunity to vote on the legal mechanism for the budget before the next election. (Tony Blair’s 2005 deal was for comparison voted on in 2007).

So how does this play out politically? Ed Miliband and Labour have two strategies they could pursue. They could take credit for the House of Commons voting for a cut saying, with some justification, it pushed the Coalition out of its comfort zone and by sending a message to other EU leaders helped David Cameron secure a deal. The vote may have surprised and upset some in the Labour and Lib Dem parties but, in truth, there is nothing progressive in defending farm subsidies and the wasteful recycling of regional funds within rich countries. They could alternatively wait for the deal to unravel. and claim indignation when they ‘discover’ that the UK will actually be paying more than expected and claim they were misled by an out-manoeuvred Coalition!

As for Nick Clegg - what will he say? Wel,l he will probably try to take some credit as well claiming a victory for his EU-friendly sunshine policy. But he is on record as saying that there was “absolutely no prospect ” of securing a cut. So presumably did not try very hard to secure one! Clegg he is in his familiar EU conundru, he wants to be able to say that being nice and agreeable to EU leaders delivers results when, in truth, it is astute and determined negotiating backed up by a veto.

So how will it play out in the longer term? Post-2015, having already agreed a seven year deal will make re-opening the EU budget as a part of a future Conservative re-negotiation that bit more difficult. But, for now, we can welcome this deal as a genuine success for David Cameron.


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