The sudden emergence of a demand by the EU for an extra £1.7 billion from the UK by 1st December is today’s big story. David Cameron has just responded to it in a press conference, saying “If people think I am paying that bill on 1 December, they have another thing coming”. There are a few essential questions:
- What precisely does he mean? That comment could mean a number of different things. It could mean what it implies on a first reading – that he won’t be paying any extra money, full stop. Or it could mean he doesn’t intend to pay “that bill”, ie £1.7 billion but intends to negotiate the amount down. Or that he may pay it later than 1st December, and intends to negotiate the date. Or that he intends to negotiate the amount and the date, but pay something at some point. Notably, George Osborne’s reaction leaves the same possibilities and ambiguities open, too: “It’s unacceptable to be presented with a multi-billion pound demand with six weeks to pay”. (Labour, incidentally, want the amount negotiated but seem fine about paying some extra).
- Where did this demand come from? The short answer is that the British economy has grown faster than was anticipated when the EU budget was agreed. The small print of such arrangements apparently routinely includes provisions to increase or decrease member states’ contributions should their economic performance depart from the projections. In that sense this is a downside of wider success. just like the influx of jobless EU migrants seeking a safe economic haven in these islands. But the economy has also become officially larger because the stattos at the ONS decided to include illegal drugs and prostitution in the official GDP figures. In effect, we’re being punished for economic success and statistical accuracy – something that tells you a lot about how Brussels thinks.
- When did the Government know? The demand came as a surprise to you and to me, but the Chancellor told the BBC that the Treasury was informed last week. That has a number of implications, most notably that Downing Street was aware of it even when they were pressuring Tory MEPs to vote for the new Commission on the basis that they would be amenable to productive renegotiation with the UK. I argued on Monday that was unrealistic and an error – now it turns out there was even more evidence of their intransigence, sitting on Osborne’s desk. Another concern is why this wasn’t spotted months ago – given that eurocrats were aware of the apparently long-standing nature of these provisions in EU budgets, someone in the Treasury ought to have known that they existed, too. Did no-one tap the ONS on the shoulder and remind them that adding in sex and drugs to GDP might be fun, but it would cost us more money?
- What can Cameron do now? The political case for what he ought to do – fight, and fight hard – is clear, particularly with Rochester and Strood coming up. The question of what routes are available to him is less so. He’s called an emergency EU budget meeting, though many other countries including Germany are getting rebates under this recalculation so it’s unlikely they’ll simply agree to cancel it. He’s threatening legal action, but I haven’t yet heard or read anything to suggest the process used to demand this money is illegal – just totally objectionable. Maybe he hopes legal delays will push the issue past the election, though even that wouldn’t save him from the ire of UKIP. The other option would be to simply refuse to pay, come what may. It would undoubtedly be popular to do so, but then he would find himself in the uncomfortable position of having to explain why the British Government no longer believes in the rule of law. Either way, it’s not pretty.