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Cameron's EU budget battle

Gavin Hewitt | 16:08 UK time, Thursday, 28 October 2010

For some weeks now David Cameron has been arguing against the proposed 6% increase to the EU budget. He and his ministers have used words like "outrageous" and "unacceptable".

UK PM David Cameron in Brussels, 28 Oct 10

The prime minister made "freezing" the budget his ambition. "We can't ask our members of the public to pay more in the UK and have to pay more in Europe as well." Yesterday in the House of Commons he was back in the same groove. "We've called for a cash freeze in the size of the EU budget for 2011," he said.

The expectation grew that after a honeymoon with Europe the prime minister was intending to go into battle to avoid Britain paying an extra £900 million a year. Gradually it took root that his greatest priority was to get the EU budget under control.

Then late yesterday and early today his officials briefed that he had accepted that a freeze on the 2011 budget was impossible. The curious part of this is that it was known over the summer that a freeze was not on the cards. Back then the EU Council of Ministers had agreed that they would settle for an increase of 2.9%. Britain did not agree to this, but without a veto had to accept it. An increase of 2.9% would mean that Britain would end up paying an extra £500 million.

That was the agreed negotiating position for talks with the European Parliament, which had voted for a 6% increase. Those negotiations, under the auspices of the Commission, are about to get under way. It would be very difficult if not impossible for Britain to change the EU Council's position.

The second curious fact is that the budget for 2011 is not formally on the summit agenda. David Cameron will have to raise it on the fringe of the discussions or in bilateral meetings. So the attention of the UK press is on an issue that barely warrants attention elsewhere.

Now Downing Street has stressed that the prime minister is playing a long game and that his main interest is in the budget that runs between 2013 and 2020. Negotiations over that are just beginning and David Cameron is searching for allies. He is not alone. The Danes, the Dutch, the Swedes, the Austrians and a few others share his view that at a time of austerity Europe has to join in.

And that brings us to the main agenda of the summit. The 27 heads of government are focused on setting up a new system to ensure that there is no re-run of the Greek debt crisis. In future there will be sanctions to prevent countries running up excessive deficits. There is also a plan to set up a permanent crisis mechanism in place of the current bail-out funds that are due to expire in three years.

Chancellor Merkel has surprised and angered some other leaders by insisting that such significant changes require a change to the Lisbon Treaty. She wants any change to be legally watertight, knowing that it would be examined by the German constitutional court. Angela Merkel seems to have an ally in President Sarkozy, but few others.

Mr Cameron is against treaty change. It if involved new powers going from Westminster to Brussels then it might trigger a referendum in Britain. But that is unlikely. Britain has an opt-out from any sanctions.

He is instinctively opposed to treaty change for another reason. Some of his backbenchers may see it as an opportunity to try and claw back some powers to London.

But in the horse-trading that is how business is done in Europe, Mr Cameron might just offer to back a treaty change if Chancellor Merkel and President Sarkozy were to support him in his campaign to restrict future increases in EU spending. He is a leader in search of new allies.

It was interesting to note that when David Cameron arrived in Brussels he focused in his public comments on resisting a 6% increase. He did not refer to the 2.9%. It could be that he is preparing the ground for eventually having to agree to a final increase above the 2.9% but lower than 6% - still enough for him to claim a kind of victory.


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