UK digs in against EU budget increase

European Commission president Jose Manuel Barroso presents the EU budget
European Commission president Jose Manuel Barroso presents the EU budget. Photo: AFP/Getty Images

By Alex Stevenson

Downing Street has dismissed proposals to increase the European Union's budget to one trillion euros as "unrealistic".

The European Commission recommended hiking the budget for the 2014-2020 period by five per cent yesterday, despite opposition from Britain, France and Germany last December.

The seven-year spending period proposes spending more on research, education and transport and less on agriculture.


Britain is already making clear its deep opposition to the draft budget, however, triggering a major clash between the EU's larger and smaller states.

"Britain and the EU's other largest payers made clear in December that the EU budget should be frozen, and we will stick to that," a No 10 spokesman said last night.

"The EU has to take the same tough measures as national governments are taking across Europe to tackle public deficits. That means a restrained EU budget focused on the things that will get our economy growing."

Much of the EU is determined to secure the budget's progress - including the European Commission's president, Jose Manuel Barroso.

"This is an extremely serious, credible proposal, and to say 'no' to something which was only adopted two or three hours ago is not serious or credible," he told reporters.

"There is no room for thinking about getting your fair share of your money back. The time has come to reform the system of rebates. It is of the utmost complexity."

The European parliament's budgets committee chair Alain Lamassoure was among those speaking out in favour of the proposed changes.

"No salvation today without budgetary austerity, no power tomorrow without investing in the future," he said.

"I am glad to see that the Commission's proposals reflect the main priorities of the European parliament: spend better where Europe is necessary to save money elsewhere."

Under the EU's budget proposals the City would be worst hit by a new financial transactions tax which would pay for the additional £93 billion needed for the spending increases.

"Britain will also oppose new EU taxes which will introduce additional burdens for business and damage EU competitiveness," the No 10 spokesman added.

That position is set to generate controversy in Britain, however, as campaigners seeking more taxation on the banks rally behind the EU's proposal.

"It's no longer a question of 'if' Europe will implement a bank tax, but 'how' they use the money," David Hillman, spokesperson for the Robin Hood Tax campaign, said.

"The UK government should wake up and smell the coffee. Other governments are moving ahead with a bank tax, whilst we are letting our financial sector off the hook."

Recent research suggests over half of Europeans are strongly in favour of a financial transaction tax, they point out. The UK economy's reliance on the City for growth could shift public opinion in Britain, however.

Britain's EU rebate, won by Margaret Thatcher and successfully defended since then, looks like coming under threat once more, as another review of current arrangements will take place. Downing Street said it would continue to protect the rebate.

"Without it, the UK's net contribution as a percentage of national income would be the largest across the EU, twice as large as France's and Italy's, and almost one-and-a-half times bigger than Germany's," No 10 said.

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