EU: Britain proposed a new EU budget yesterday that would cut the funds available to new member states and reduce overall spending by the bloc between 2007 and 2013.
The proposed €846 billion budget would also shave seven billion euro off rural development funds for the 15 pre-enlargement states compared to a previous EU budget proposal made under the Luxembourg presidency in June.
The British proposal was immediately criticised by the European Commission president Jose Manuel Barroso, who called it a "budget for a mini-Europe and not the Europe that we need". It is also expected to come under pressure from the 10 new member states, which are set to lose €14 billion in funding under the new plan.
The proposal would reduce the EU budget to 1.03 per cent of gross national income, compared to the 1.06 per cent Luxembourg proposal, which gained the support of 20 states, including Ireland.
But it will be more palatable to the paymasters of the EU such as Germany, which could save one to two billion euro between 2007 and 2013.
To help secure a deal, Britain has also proposed giving much greater flexibility to the 10 new member states in how they can spend EU funding. It says states such as Poland could not spend their full allocation in the budget during the time allowed.
It is proposing to allow new member states to co-finance projects using private funds; reduce the amount of state co-financing for projects from 20 per cent to 15 per cent; extend the timeframe for completing projects from two to three years; and to spend EU funds on housing projects. It hopes the 10 new member states will be content with getting some money as soon as possible rather than hoping for a better budget deal under the Austrian presidency during the first half of 2006.
Britain, which in June pledged not to reduce its EU budget rebate until there is reform of the common agricultural policy (CAP), has included plans for a fundamental review of the EU budget in 2008-2009. It says the review should cover all aspects of revenue and expenditure, including the common agricultural policy (CAP) and the UK rebate. Crucially, states would all have to agree to any reform.
However, Britain has proposed cutting up to two billion euro off CAP by not increasing the budget to pay for funds to accession states Romania and Bulgaria.
The Irish Farmers Association said yesterday the Government should reject the British proposal because future enlargements would be borne by Irish farmers. It also criticised the seven billion euro cut in rural development funds for older member states.
Meanwhile, Britain has opened the possibility for reform of its rebate, which was agreed under Margaret Thatcher in 1984, by proposing to pay an extra eight billion euro over seven years into the EU exchequer. It will pay this cash by either foregoing part of its annual rebate or paying more in VAT receipts to the EU.