Greg Lance - Watkins (Greg_L-W)
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is what gives the remaining 10% a bad name!
EU Budget Suppliment Debacle Deepens! Leaving all in some confusion yet showing just how emasculated these United Kingdoms are in democratic terms as vassals of the EU.
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MEMO
Brussels, 24 October 2014
REVISION OF MEMBER STATES’ GNI CONTRIBUTION – Q&A
1. Who decides to increase Member states’ GNI contribution to the EU budget and why?
The different types of own resources of the EU budget and the method for calculating them are set out in a Council Decision on own resources and its implementing regulation. Thus the rules relating to the calculation of Member states’ contribution based on their respective Gross National Income are established in the own resources legislation.
In May of each year the Commission and representatives of each Member state meet to establish the estimated GNI of every member state for the year to come. That specific source of income for the EU budget is then adopted in agreement with the Member states.
Each autumn, the Commission and representatives of each Member state meet a second time, this time to check whether there are differences between the original GNI estimates and the “real” GNI for the previous year, and whether there any further adjustment to older GNI data, still based on the figures provided by each Member state.
Member states’ individual GNI contribution is then adjusted upwards or downwards to compensate for the adjustments. This is a purely mathematical, technical process. So much so, that member states agreed that the Commission can implement the adjusted figures by 1 December every year without any need to submit a proposal to the Council and/or to the European Parliament.
2. Does this year’s technical adjustment take into account the new method to calculate member states’ GDP (ESA 2010)?
No. This new method to calculate member states’ GDP will have no impact on their GNI contribution to the EU budget until the new own resources decision comes into effect, which is probably 2016.
3. Why does this year’s technical adjustment see such big increases of contributions to the EU budget for some member states?
This year’s adjustment includes GNI re-calculation dating back to 2002 for most member states and to 1995 for one, as there were a number of unresolved issues that had accumulated over the last years. The decision to resolve these historic issues now results from a joint effort of member states in cooperation with Eurostat. With all these issues now cleared, future such corrections will again be rather minor, as they were in recent years.
Some member states have consistently reported too low values for their GNI over the last years, this obviously explain the size of some adjustments upwards.
4. Why has the Commission decided to act just now?
As explained earlier, the adjusted GNI contributions must come into force by 1 December at the latest. However, the earlier in the year you calculate the real GNI for that given year the less accurate you are. The Commission must therefore find a compromise between announcing the revised GNI figures as late as possible in order to be as accurate as possible, and as early as possible in order to give member states enough time to adapt to the new figures. This year, member States were informed of the budgetary impact of the new data on 17 October.
5. Do those adjustments always increase member states’ GNI contributions?
Not at all; it mostly depends on member states themselves as the basis for such revision is the figures provided by the member states. If your recorded GNI for any given year is lower than what was estimated at the beginning of the year, your GNI contribution will go down.
George Osborne under pressure over EU budget row
European Union officials warned Britain in January that new bills were coming, and produced figures showing that the UK was likely to have to pay higher fees this autumn
David Cameron in Brussels for the European Council. Photo: REX
By Tim Ross and Richard North
7:41AM GMT 26 Oct 2014
The European Union warned Britain months ago that it was facing a massive increase in its EU membership fee, according to documents seen by The Telegraph.
A furious David Cameron vowed on Friday that he would not pay an “appalling” and unexpected demand for an extra £1.7 billion in British contributions to the EU budget by the December 1 deadline.
However, The Telegraph can disclose that EU officials warned member states in January that new bills were coming, and produced figures showing that Britain was likely to have to pay higher fees this autumn.
The disclosure cast doubt on Mr Cameron’s claims that he had been ambushed out of the blue by the demand for more money on the eve of the Brussels summit on Thursday.
The development will intensify pressure on the Prime Minister and George Osborne, the Chancellor, over why Britain was apparently so unprepared for the extra surcharge.
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In other developments as the row grew:
:: Treasury ministers are to be hauled before MPs this week to explain why Mr Cameron was not informed of the impending£1.7 billion charge from the European Union;
:: Mr Osborne is preparing to launch talks with other European finance ministers, ahead of a meeting on November 7 at which the dispute is expected to be discussed. The Chancellor will raise Britain’s concerns with the German Finance Minister, Wolfgang Schaeuble, and others, when they meet in Berlin this week at a global forum on tax transparency;
:: Senior Treasury officials are meeting this weekend, and will be speaking to their counterparts in the Netherlands, Italy, and Greece to build an alliance of countries to fight the extra demands for money.
:: Labour’s Treasury spokesman, Chris Leslie, wrote to Mr Osborne demanding that the Chancellor set out what he knew, when about the demand for more money. Mr Leslie told Mr Osborne he had “serious questions to answer”about how long the government had known about the potential for Britain to be hit with such a massive surcharge;
:: A senior Member of the European Parliament warned that Mr Cameron would have to pay the £1.7 billion, saying the confusion was “an entirely British affair” and that the rest of Europe “expects” the UK to pay up;
:: It emerged that Britain would face EU fines worth more than £1.3 million a day for every day the country refuses to pay the extra bill.
The call for the extra cash, which followed a review of member states’ economic performance since 1995, was described by Mr Cameron as “completely unacceptable”.
The detailed demand for £1.7 billion was first sent to EU member state governments on October 17, several days before the information reached the Chancellor.
The Chancellor has said he learnt about the bill “earlier this week”, but it appeared to catch the Prime Minister off guard.
On Saturday, Sir Bill Cash, chair of the Commons European scrutiny select committee, announced that ministers from the Treasury would be summoned to explain the apparent lack of action over the bill which left Mr Cameron exposed at the summit.
Sir Bill said: “I’m calling in Treasury ministers next week to my committee so that we can go through how this happened in addition to what they have to say about the way in which they intend to handle it from now on.”
“So we’ll have a proper examination which will obviously include looking at the system itself which I’ve already described as crazy.”
The extra £1.7billion bill is a result of changes in the way national accounts are calculated across the world, which have had the effect of increasing Britain’s GDP by more than the European average. This meant Britain’s required contribution to the overall EU budget would also increase by more than the EU average.
Different EU member states make different contributions to the EU budget, depending on their national incomes.
On January 16, European statisticians said the EU-wide average increase resulting from the change in the way national accounts are calculated was a rise of 2.4 per cent in GDP. For Britain, the projected figure was higher, between 3 per cent and 4 per cent.
A prominent MEP warned Mr Cameron yesterday that Europe “expects” Britain to pay the surcharge by the December 1 deadline.
“It appears the Prime Minister was surprised by this in Brussels,” said Alexander Graf Lambsdorff, vice-president of the European Parliament.
“And that I can understand, because a bill of €2bn, £1.7bn, is significant enough to be informed about before you go to a summit and then are confronted with it in a surprising way. But that is an entirely British affair. The rest of Europe expects you to pay and that’s that.”
On Saturday, The Telegraph reported that Angela Merkel, the German Chancellor, had told Mr Cameron he should have anticipated the European Union’s demand.
According to a diplomatic record of talks between European leaders seen by the paper, the German Chancellor told the Prime Minister the call “did not come out of the blue”.
“I understand that it is difficult to come up with €2 billion [£1.7billion] David, but this should have been expected,” Ms Merkel said.
The European Commission president, Jean Claude Juncker, also told Mr Cameron to “show some political courage” over the call.
Monday 27 October 2014
Something of the story behind the story on Mr Cameron’s £1.7bn began to emerge in the Sunday Telegraph yesterday, with lead writer Tim Ross kindly adding my by-line to the copy. The Mail on Sunday, however, went for a fictional version of events, going for Mr Gove’s incredible theory that the Barroso personally dumped a £1.7 bill on the UK as an act of revenge.
The Financial Times though, is coming up with a completely different version of events. The £1.7bn figure, it tells us, is a one-off payment which accounts for less than 0.1 percent of UK GNI, representing a top-up to UK contributions covering 11 years. Thus, the paper says, Britain is being asked to pay a “modest” adjustment of an extra £150m a year over the period, a sum that would barely deserve a footnote in the UK’s annual accounts.
Now, the Mail is saying much the same thing, that “the European Commission issued the demand to the UK after using rules dating back to 1995 and finding Britain’s economy has grown faster than expected, so must pay a greater share to Brussels”.
This, one assumes, is based on the Commission Q&A on the revision of Member States’s GNI, which I only saw last night. Contradicting completely my report on the application of ESA 2010, it states that this year’s technical adjustment does NOT take into account the new method of calculating member states’ GNIs. This new method, it says, will have no impact on their GNI contributions to the EU budget until the new own resources decision comes into effect, which is probably 2016.
To the question of why this year’s technical adjustment sees such big increases of contributions to the EU budget for some member states, the Commission tells us that this year’s adjustment includes GNI re-calculation dating back to 2002 for most member states and to 1995 for one.
There were, we are told, a number of unresolved issues that had accumulated over the last years. The decision to resolve these historic issues now results from a joint effort of member states in cooperation with Eurostat. With all these issues now cleared, future such corrections will again be rather minor, as they were in recent years. This seems to be borne out by sight of an (undated) information note to member states, which sets out the sums involved, on which much of the media publicity has been based.
As to the legal authority to apply retrospective adjustments, the Commission cites Council Regulation No 1150/2000 of 22 May 2000 implementing Decision 94/728/EC on the system of the Communities’ own resources. It would seem that Article 10(8) applies, referring to Article 3(2) of Directive 89/130/EEC on the harmonization of the compilation of gross national product at market prices.
There is nevertheless something very odd about the Commission Q&A, because it cites Council Decision 2007/436/EC on the system of the European Communities’ own resources, as being the basis for calculating the Members’ contributions. Yet, as we see here, that Decision has been repealed and replaced by Council Decision 2014/335/EU on the system of own resources of the European Union. It takes effect from 1 January of this year.
The crucial thing about this updated Decsion is that it tells us that Member States’ GNIs “shall mean an annual GNI at market price, as provided by the Commission in application of Regulation (EU) No 549/2013 (ESA 2010)” – thereby installing the new European System of Accounts, except that pro temp contributions were to be based on ESA 95 because ESA 2010 had not been available at the time of the adoption of this Decision.
But, the Decision went on, “the contributions should be adapted as soon as all Member States have transmitted their data on the basis of ESA 2010”. “In the event that there are any amendments to ESA 2010 which entail a significant change in the level of GNI”, it then said, “the ceilings for own resources and for commitment appropriations should be adapted again”.
On this basis, it would appear that the Commission is wrong in claiming that ESA 2010 does not apply. Its own legislation says it does, and unless there is an unknown factor here, the new standard applies to the current figures and the adjustments.
Therefore, what I think has happened is that, guided by Directive 89/130/EEC, the UK and other Member States have revised their GNIs retrospectively using ESA 2010, which has given rise to the adjustments recorded. But it must also be remembered that the procedure requires Member States to calculate their own GNIs, and send the results to the Commission. This is not something the Commission does for us – we do it for ourselves.
Thus, as far as the awareness and the advance notice goes, my previous report would seem to be accurate (unless or until we see further developments). The UK was informed that changes were in progress. It is unlikely that Mr Cameron can claim that the Commissions was not entitled to the money it is claiming, as the sum is based on data provided by the UK – presumably calculated by the ONS – in accordance with well-established procedures.
Since the ESA 2010 changes have been flagged up continuously, the UK government – and therefore Mr Cameron – can have no justification for saying they didn’t know what was coming.
Seldom though have I met a more complex scenario – where the Commission also seems to be getting it wrong. Even Mr Barroso didn’t seem to know what was going on. And that may just provide a small window of opportunity for Mr Cameron. It the Commission itself is all at sea, he could claim that it is unfair to expect him to know better.
Of course, his “Rolls-Royce” civil service could have told him, except that Rolls-Royce cars is now owned by the Germans. That is perhaps why Mrs Merkel was in the know and Mr Cameron wasn’t.
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Greg_L-W..
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