It can be found in the pdf document on the "method" mentioned in the post. It compares the percentage difference between the UK share of nominal VAT receipts across the EU and the UK share of allocated expenditure i.e. that which can be identified as being spent in Member States and applies the difference (i.e. a percentage) to the total of allocated expenditure. The UK gets back two-thirds of this amount.
Got it?
Maybe not! Apart from the civil servants from the major states and Commission, very few do. They are now on their second generation.
But the result is an EU budget craft weighed down with inconsistencies and perverse effects. The most obvious is the fact that the lower the UK level of receipts, the higher the rebate. The other major perverse impact derives from the fact that higher receipts by the new Member States, the lower the UK share and the higher the rebate. (Remember, we are dealing in percentages).This explains the ridiculous situation Blair got himself into via-a-vis the Poles during the 2005 negotiations. Brown, of course, insisted on the 10.5 billion euro cap because it is impossible to predict with accuracy the impact of the mechanism. He also delayed signing off on the deal until he was assured of becoming PM. (Check the timetable!).
Germany, of course, under Schroeder pulled its irons out of the fire and left France, Italy and Spain with the major share of the cost of funding the rebate.
However arcane the topic, it is of enormous significance and all research is worth the effort. The system simply cannot continue. The issues are political, not budgetary. How could the UK expect to be exonerated from the cost of funding it share of the cost of Enlargement?
Ignore the detail! Concentrate on the basic anomaly
DOCM:
But:
How could the UK expect to be exonerated from the cost of funding it share of the cost of Enlargement?
The pdf document also goes into the further complication of the reduction of the rebate:
As from the 2008 correction, to be budgeted for the first time in 2009, total allocated expenditure, referred to above under (a) second hyphen and (b), shall be reduced by total allocated expenditure in Member States that have acceded to the EU after 30 April 2004, except for agricultural direct payments and market-related expenditure as well as that part of rural development expenditure originating from the EAGGF guarantee section.
The "reduction in the rebate" ensures the UK pays some share at least in the costs of enlargement (minus CAP, and even if it's limited to €10.5bn). And the method applied is not the same as it has been since Fontainebleau in 1984. It is considerably more complicated.
Look, I'm sorry I didn't address "the point" as you see it or as you think it should be. "The point" to me was to straighten some of the UK media and "think tank" bluster, while precisely offering a moderately detailed walk through the elements of the EU's revenue and the UK correction.
I suggest you write a piece that simply says the UK rebate is an anomaly. You won't get many people disagreeing with you.
But you are still missing the point. The entire system is based on a flawed foundation - the UK rebate mechanism - and, this being the case, it has no logic. The added complications to which you refer are simply a reflection of this.
Because the GNP revenue resource has become such a large element, however, there is a balance of sorts relating the contributions of Member States relative to their GNI (GDP). The repeated negotiations that have taken place have been aimed at achieving a better balance, notably for Germany, the Netherlands and Sweden. In other words, the result to be achieved guides the various additional mechanisms adopted and not the other way round. It also explains the various sweeteners handed out at various times.
It is not in the interest of the UK to draw attention to the rebate mechanism and the other major contributors seem almost too embarrassed to admit that they agreed to it in the first place.
The question posed is a political one.Can a mechanism, agreed in haste when the VAT base for the UK was unusually high, but in circumstances where VAT was seen as likely to be the main source of revenue for the future, continue? The answer, it seems to me, to be no if for no other reason that it has become almost unworkable in an EU of 27.
The UK rebate mechanism - as opposed to the issue of the entitlement of the UK to a rebate - is the bad ingredient in the overall sauce. It is not a one-sentence anomaly.
You may take it that UK media not alone do not understand the mechanism, they do not wish to.
What is at issue is not the sums involved, as such, which are tiny relative to national budgets with the actual net transfers being even smaller, but the political question "who benefits and who pays?".
This is a wide one and worth looking at. An element, by way of example, would be that the UK is a very half-hearted member of the club, disagrees with some of the activities undertaken, does not use some of the facilities, notably the currency used by the club, and, to cap it all, wishes to be compensated for the cost of this. However, it does supply much of the heavy lifting with regard to the heavies at the door,notably those troublesome Al Qaida people, and this is a consideration other members have to bear in mind?
One could go on in this vein. But the key question remains: how does one come up with an alternative mechanism which seems fair to all concerned.
The Financial Perspectives for the period 2014-2020 is a topic that might appeal more than the European Parliament for which, you will have gathered, I do not have a particularly high regard.
However, it does supply much of the heavy lifting with regard to the heavies at the door,notably those troublesome Al Qaida people, and this is a consideration other members have to bear in mind?
Um, what "heavy lifting?" And on what fictional planet is Al Qaeda "heavies at the door?"
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
This is a consideration that Continental countries tend to bear in mind. In other words, the UK's relationship with them is not confined to the economic one.
Indeed, one of the reasons that Blair is a credible candidate for President of the European Council is because of this very fact.
If you lift your gaze a little bit, you will see that most countries of Europe, whether in NATO or not, have some involvement in either Iraq or Afghanistan. They are there because of the threat that I identify. What fictional planet are you on?
It is a fact of life that two Member States of the EU, the UK and France, are the only countries with a capacity to project major military power.
And under which sane foreign policy doctrine does the EU want to "project power?"
most countries of Europe, whether in NATO or not, have some involvement in either Iraq or Afghanistan.
Against the wishes of respectably solid majorities of their populations.
Good little client states of the empire.
They are there because of the threat that I identify.
You have identified no threat. You have claimed that a threat exists, but you have yet to demonstrate it.
Oh, and the politicians, pundits and assorted Serious People who encourage pissing our blood, treasure and political capital away in American colonial wars are the same people who didn't see the crash coming. And who didn't see the dotcom crash coming either. Nor, in case of the older ones, did they see S&L coming. Not precisely my preferred clearinghouse for reality-based policy analysis. But I guess tastes differ...
As it happens, I would agree with a lot of your emotion in the matter but not the logic as far as this thread is concerned. What is under discussion in this thread is the question of the UK's contribution to the budget of the EU. My point is simply that other EU countries include in their assessment of the appropriate response more than the figures contained in the actual budget.
Whether you like it or not, the UK and France are the major military powers in Europe, holders of nuclear weapons and permanent members of the UN Security Council.
As to the threat, I said that I had identified it, I did not say that I agreed with it. Indeed, I think the involvement of the West in both Iraq and Afghanistan to be a disaster. The only reason many countries are involved is that they have had their arms twisted to become involved by the US as part of its "out of area" doctrine for NATO. Or, as Bush might have put it, "those that are not with me are against me". There are welcome signs that this approach is changing under Obama, promoted by every bomb that explodes under NATO personnel. Whatever they are, the Taliban are not stupid.
Calm down and read what others write. And stay with the topic under discussion.
Emotion is one thing, logic is another.
Whether you like it or not, the UK and France are the major military powers in Europe,
There are no major military powers in Europe - haven't been since the Suez Crisis. Just minor powers with delusions of grandeur.
holders of nuclear weapons
And we should care about that for what precise reason, again?
and permanent members of the UN Security Council.
Where they will vote in lockstep with Washington on every remotely important issue. Now, if the UK and France were to actually leverage their seats in the UNSC to promote legitimate European interests, I could see a point of compensating them for their efforts. But as far as I can tell that's not the case for the UK at all, and neither is it most of the time for France.
I will respond to your last point as it seems to me to be the only one relevant to the thread. It is not a question of compensating the UK for anything. The UK went into the EU with its eyes open and the other Member States have responded in kind. The simple contention that I make is that, in confronting the inevitable budgetary funding crisis that is looming for the next financial perspectives, the other Member States will take into account the overall context of their relations with the UK and not just the budgetary one. They have always done so in the past. I do not see why they should not do so in the future.
I have identified the central bone of contention as the nature of the UK budget rebate mechanism.
it does supply much of the heavy lifting with regard to the heavies at the door,notably those troublesome Al Qaida people, and this is a consideration other members have to bear in mind
was relevant to the discussion of the UK rebate, then it would seem logical to accept further debate on the matter without suggesting that it is off-topic.
I do not know technically how to lift quotations - especially partial one - out of the contributions of others and I do not intend to find out. It is the most tiresome feature of this blog that I have noted to date.
I would also disagree with your contention that it is the mechanism - or even the existence of the rebate itself - that is the bone of contention. The rebate is merely a symptom of a much larger problem of British obstructionism, "special relationship(s)" and delusions of grandeur.
There is a quib in the English-speaking press that Russia cannot join the European Union because it would want to deal with the rest of the Union on an equal footing: One vote to Russia and one vote to the rest. This seems to me to be a case of projection.
There are a number of other major contributors:
(of course, they won't do so because the domestic rural politics dominate their policies on this topic)
The rebate distorts UK funding negotiations with the EU. Normally, countries and independent agencies within each country bid to receive central EU funds. The UK government is aware that 2/3 of any EU funding will in effect be deducted from the rebate and come out of UK government funds. Thus the UK has only a 1/3 incentive to apply for EU funds. Other countries, whose contributions into the budget are not affected by funds they receive back, have no incentive to moderate their requests for funds.
This is a perverse effect of the rebate.
On your third point, I wrote wrt the UK:
The sum of the two resources in TOR, agri/sugar levies plus customs duties, (mostly customs duties for the UK), is often close to equalling the VAT (3rd) resource, and is even projected to go beyond it in 2009 (presumably as domestic consumption takes a greater hit from the recession than the UK's trading activities do, even though they diminish). The UK is the second biggest TOR collector in the EU, after Germany and before the Netherlands and Belgium.
Trading economies; big ports. As I suggested, TOR should be considered as EU own resources, as the levies and duties apply to the entire single market, member states simply collecting them on the EU's behalf (and receiving 25% to cover costs).
On the VAT resource, the Treasury document referenced above has an interesting table, (2A p 54), that shows 3rd resource payments by member state for the years 200-8, with projections for 2009. From which it is clear that France is the biggest contributor of this resource, followed by Germany, Italy, and Spain, before the UK.
3. The figures for VAT contributions are after taking account of the UK abatement.
The own resource based on value added tax (VAT) is levied on Member States' VAT bases, which are harmonised for this purpose in accordance with Community rules. The same percentage is levied on the harmonised base of each Member State. However, the VAT base to take into account is capped at 50 % of each Member State's GNI. This rule is intended to avoid that the less prosperous Member States pay out of proportion to their contributive capacity, since consumption and hence VAT tend to account for a higher percentage of a country's national income at relatively lower levels of prosperity.
I agree that the 'traditional own resources' should not be seen so much as a contribution to the EU budget for trading states, but there is a minor argument that the UK is an island which traditionally trades a lot with the world outside of the EU and as a result it does not merely trade on goods to other EU countries, like Belgium and the Netherlands. Still, the resulting 'imbalance' should be negligible.
On your first point, I agree and would additionally note that EU funds generally come with a co-funding requirement that would be relatively high in the UK, so the question isn't merely whether they get a bit less of a grant (because getting 1/3rd of a grant is still free money that should outweigh administrative costs), but rather something that can fundamentally change the calculus of whether a project is worth the cost.
On the second, yes, the VAT resource is capped. It is estimated that the UK gains an advantage from this capping (see the reason given in the EU document you quote), and the first "complication" in the calculation of the UK rebate is to allow for this by subtracting from the initial rebate amount a sum called the "UK advantage".
See this pdf for details.
In the pdf referred to, I would refer you to the table (page 11?) which shows the contributors to the cost of the UK rebate. France 27.37%, Italy 22.47%, Spain 13.99%, Germany 6.22%(?). Schroeder must have been one smart guy with a calculator.
I repeat. There is no logic to the system and looking for it only adds to the illogicalities. Special cases can be made for all Member States. The so-called "Rotterdam effect" in the case of The Netherlands, for instance.
One can look at it from the point of view of the game where one starts building a tower with childrens' blocks but the block marked "UK rebate mechanism" at the base is out of perpendicular. Every additional block is added in one direction or another try and keep the tower stable. But fall it will.
The only rough guiding principle that has emerged is that contributions should be related to wealth. "Each contributes according to capacity and receives according to need". The problem is that there is no agreement on what constitute legitimate needs e.g. the CAP. The results to date have been tailored to (a) trying to meet the GNI criterion and (ii) to the extent that this is not met, making those Member States insisting on an unbalanced view of needs (France for the CAP, Spain and Italy for continued cohesion spending) pick up the tab for the UK rebate.
The issues are political, not budgetary.
