As I was saying, the 2005 British Presidency decided to help the EU emerge from the French/Dutch referenda debacles by pushing for a new EU Budget.
Like everything which is amazingly complicated, this is in fact quite simple.
All sides agreed that a bigger EU following the 2004 enlargement meant a bigger EU Budget for 2007-2013. But how much bigger? And who should pay for it?
Central Thing to Grasp: Every member state in fact Gives into the EU pot, and every member state in fact Gets something from it.
But some Give to the pot a lot more than they get – the so-called ‘net contributors’. The net Givers of course want to keep down EU Budget increases – they alone pay for them.
Some Get a lot more from the pot than they pay in – the so-called ‘net recipients’. The Getters want to increase the Budget as much as possible – it doesn’t cost them anything, and they Get. Party time!
Some Getters have (as planned) done so well from earlier Budgets that they are poised to move from being net Getters to net Givers: see eg Spain and Italy. They want to stay as Getters for as long as possible. They cynically tend to want the Budget to be increased, as they see this as their best chance to carry on Getting more than they Give.
Those who Give in the 2005 situation were the taxpayers/governments of the UK, France, Germany, Netherlands, Austria and Sweden, give or take Denmark.
Those who Get were the govenments/citizens of all the other European Union countries, plus the European Commission as the EU major spending engine and the European Parliament, which (a) wanted a bigger Budget as (b) it wanted more say in spending decisions.
The small group of Givers had their divisions, with arguments around their relative contributions and how they should be weighed. In total cash terms the UK of course stood to give far more than eg the Netherlands, but in terms of contributions per capita the Dutch were paying notably more than the Brits.
The large group of Getters likewise had their divisions, with arguments around who had already had Enough and who in principle should be getting More, and why.
One other major sub-plot was the issue of the UK Rebate. This gives a basic guide to that interesting EU financial phenomenon. In a nutshell, it is an arrangement whereunder the UK gets back some of what it puts in, to keep a fairer balance of net giving among the largest Givers.
A key Rebate Point: the wily Europeans so arranged the way this mechanism worked that every member State has an EU budget item showing ‘Contribution to UK Rebate’. NB This does not necessarily mean that the net Getters are actually paying us anything from their own money – they are just giving us back some of what we have given to them via our payments into the total pot, from which they all have gained one way or the other.
The argument was heard for years that the UK Rebate was rising inexorably, and that this was obviously unfair: the UK was now much richer than when the Rebate had been agreed with Mrs Thatcher in 1984. Plus it meant that the ‘contributions to the UK rebate’ by the poorest member states were also rising.
The UK was the Sheriff of Nottingham, taking from the poor to give to the rich. Shame on us.
To which the UK’s brisk answer was/is:
- of course the total value of the Rebate rises over time. That’s because the whole point of the Rebate is that it is linked to our contributions – our payments into the pot. Our payments into the pot rise over time as we get richer, so because we give more, we get more back.
- but we are still giving far more than we are getting, and notably a lot more than, say, France
- the device is basically an accounting mechanism to keep UK contributions in some sort of sensible balance with other large Givers.
- so, if the poorer member states’ so-called ‘contributions to our Rebate’ go up, that is only because we are giving them more money! They should stop whinging and shower us with kisses of gratitude.
Poland, where I was serving as HM Ambassador, was at the heart of these swirling arguments:
- First, as a new member state it stood to do well from the increased Budget.
- Second, as by far the biggest new member state it hoped to Get by far the biggest slice of the extra funds made available
- Third, under its new Centre Right government just elected in autumn 2005 there was a feisty "it’s pay-back time" mood. Western Europe in general and the Brits in particular had lumbered Poland with Communism at Yalta in 1945, so in the name of European Solidarity we the UK Presidency now should give Poland anything it wanted.
Thus the stage was set for a lively ding-dong.
Those who Gave inevitably going to be denounced by would-be Getters and the Commission/Parliament as Euro-Scrooges.
And HM Ambassador in Warsaw was going to have a busy time trying to sell the UK national and Presidency positions.
To be continued.