Budget row escalates as UK bill could reach € 3.6 bln
The row over a hefty top-up to the UK’s contribution to the EU budget worsened on Monday as Prime Minister David Cameron repeated he would not pay, and the EU Budget Commissioner warned there was no possibility of delaying payment without re-opening questions over the UK’s rebate on the European budget.
Failure to pay could result in a fine of up to EUR 250,000 per day, a sum which could double if the bill remained unpaid after a year, EurActiv understands.
The bill is in fact more than the EUR 2.1 bln referred previously. The total due on December 1 is actually EUR 3.591 bln, EU sources explained.
The UK would however receive a one-off rebate of EUR 1.491 bln under a separate amended budget for 2014 currently under negotiation, and expected to be agreed on before the December deadline. That amended budget would reduce the amount owed to EUR 2.1 bln.
The EU budget is partly financed on the basis of the national income of member states. The bill arises from adjustments to gross national income figures posted by member states which lead to adjustments in their contributions to EU budget.
The UK’s bill is particularly large because its Office for National Statistics has brought several sectors – including the UK’s strong charitable sector – into line with European norms.
As a result of the recalculation, £74 bln (EUR 94 bln) was added to Britain’s measured gross national income (GNI) in 2013.
In a statement to Parliament in Westminster Cameron repeated earlier complaints that the payment was “not acceptable”, and said he had the support of Greece, Italy, Malta, the Netherlands “and others”.
“We are not paying on 1 December and we are not paying a sum anything like that,” he told MPs in London during a statement on last week’s EU summit.
“We will challenge this any way possible. We will crawl through this with exhaustive detail,” he said, adding that “to use British understatement, this has not enhanced the position of the EU in the UK.”
The leader of the opposition Labour Party, Ed Miliband, said that the Commission’s handling of the surcharge was “cackhanded and unacceptable”, but accused Cameron of negligence for not dealing with the problem earlier.
“He is asleep at the wheel and the British people are paying the price,” Miliband told UK MPs.
In Brussels, the EU Budget Commissioner Jacek Dominik told journalists he was “surprised by the reaction” in Britain because “up to this moment there was no single signal from the UK administration that they had problems with this figure.”
There was “no possibility” under current EU rules to give Britain more time to pay the bill. A change to the law would
need support from a qualified majority from EU governments and this would be “extremely difficult”, Dominik said.
Dominik said that Cameron would be in line to receive an increased UK budget rebate next year arising from the same UK GNI increases. “So, I think that would be extremely difficult to explain to member states, why on Monday you like this data and on Tuesday you don’t like it,” the budget commissioner said, adding: “If you open this act for future negotiations, you open up a Pandora’s box.”
He warned that, if the money was not paid by 1 December, the European Commission would send the UK government a letter asking for reasons for the delay. There would “be a moment (if no response is delivered) that the Commission will start imposing late… fines”.
If Cameron carries through his pledge not to pay the bill, and if it has not been reduces by the amending budget, the UK faces a punitive interest payment of around 2.5% of the total bill rising to 5.5% per annum if it remained unpaid after one year.
EUR 2.1 bln is equal to a fifth of the UK’s annual transfer to Brussels. Other countries, such as Germany, and France – which has struggled to balance its budgets – will get rebates under the plans. An emergency meeting of EU finance ministers will be held on 7 November to discuss the bill.
The row takes place against a tense background with a high profile by-election next month that will be scrutinised for evidence of rising Euroscepticism since traditional Conservative voters are likely to move over to the more hardline Eurosceptic U.K. Independence Party (UKIP).
A victory for UKIP will up pressure on Cameron to toughen his stance on the EU in the run-up to next year’s general election in May. The Tory leader has promised a referendum on the UK’s EU membership in 2017, if the Conservatives are elected