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I imagine David Cameron is feeling pretty smug today and with good reason. He has achieved what many doubted possible – the first ever cut in the EU’s budget. With reductions in both commitments (the maximum spending ceilings) and payments (the direct contributions from governments) of around 35 billion Euros each, he can face down Labour, UKIP and his own rebellious MPs by justifiably claiming a political coup. The EU has been reined in, next stop repatriation.

But in the rush to cut, has Cameron sacrificed reform of the EU budget? Agricultural spending remains stubbornly high, as does regional spending, both areas where the UK gains comparatively little. Depressingly, it will be another seven years before the next opportunity to reduce the Common Agricultural Policy (CAP), around 38% of EU spending under this deal.

So where did they find the cuts? In the areas where the EU should actually be spending money – projects that will create jobs and growth and give us a competitive advantage vis a vis the USA and the emerging world. Research spending, vital to life sciences and advanced manufacturing such as the aerospace industry, will receive a smaller than needed increase while the Connecting Europe Facility has been cut by a further 5.1 billion Euros from the Commission’s original proposal. This fund was designed to finance big transport, energy and telecommunications infrastructure, exactly the sort of projects that Nick Clegg said the coalition government had mistakenly slashed. This error has now being repeated in the EU budget. Only last week David Cameron was in Liberia praising the role of development policy in eradicating extreme poverty. And yet, development spending faces a real term cut.

To be fair on Cameron, he was dealt a tough hand. The Commons vote last year backed him into a corner whereby success was only ever going to be judged by how much the budget did or didn’t increase. However, it’s difficult to shift the nagging feeling that an opportunity has been wasted. It’s likely that a better deal could have been found if the UK had focused instead on a substantial increase in research and infrastructure spending paid for by a reduction in its own rebate and a greater cut in the CAP and administration costs. Imagine if the EU spent 38% of its budget on research instead of agriculture, it would be the innovation powerhouse of the world. While unrealistic in the short term, substantial moves in this direction could have been taken and have been lost in the stampede to get a smaller budget. Short term politics have trumped long term economics.

So what’s next? The European Parliament has the power to approve or veto the budget and the leaders of the four largest political groups, representing 80% of MEPs, have signaled they will not accept the budget in its current form. They have chosen their demands well by focusing on how the money is raised and spent, rather than its level, but they have to be aware of the enormous political and media pressure that will now be brought to bear to simply rubber stamp the agreement. If they resist, they must do so in the knowledge that they will not achieve all their demands and must avoid discrediting the Parliament in the process. It has been reported that some MEPs are considering holding a secret ballot so they have the anonymity to defy their national governments (and voters). This is lunacy. The Parliament took a huge step forward in representative democracy in its Common Fisheries Policy vote this week and to follow this up with a cowardly secret ballot would be one step forwards, two steps back.

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One thought on “Cameron’s pyrrhic EU budget victory

  1. Pingback: Bloggingportal.eu » Blog Archive » The Week in Bloggingportal: Show me the money, Jean Monnet and Margaret Thatcher!

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