Budget proposal suggests farm subsidies cuts

Britain’s rebate would be kept alive, but farm subsidies would be cut under the latest budget proposal presented today ahead of the European Union summit.

The proposal from Luxembourg Prime Minister Jean-Claude Juncker, who is chairing the two-day summit, suggests a freezing of the British rebate until 2013, after which a reduction of the rebate would be linked to cuts in farm handouts.

“Any change to the level of the UK budgetary correction after 2013 will depend … on the evolution of market-related expenditure and direct payments in agriculture post 2013,” said the proposal.

The proposal also foresees cuts in EU farm handouts of €6bn during the 2007 to 2013 budget years and lowers overall contributions from EU member states.

The plan is to be discussed by EU leaders tomorrow. However, the 25-nation bloc remains far apart on future spending plans and several nations have clashed openly on the issue.

France and Britain have highlighted the deep split, with French President Jacques Chirac demanding an end to Britain’s rebate, which has averaged €4.5bn a year since 1984. It was almost €5.2bn in 2004 and is likely to rise in the years ahead.

Britain’s 24 EU partners argue the rebate must go, arguing it is unfair and must be corrected. Other nations who contribute per head more to the EU budget than Britain, like the Netherlands and Germany, want a general rebate for all EU countries.

British officials have said the rebate can only go if EU budget-keeping is reorganised because farm subsidies still gobble up at least 40% of spending, keeping European food prices high and keeping out cheaper imports from Africa and other poor nations.

The Netherlands, Germany, France, Austria, Sweden, and Britain are all net payers, contributing more to the EU budget than they get back in benefits. They want spending in 2007 to 2013 capped at 1% of the EU’s annual gross national income.

France, and other mostly eastern European nations, are sure to object to an overall cut in EU-wide farm subsidies of €6bn between 2007 and 2013. Agricultural spending by the EU is set at €42.8bn this year, but would remain steady between €43bn and €41bn over the next seven years.

Previous proposals saw farm spending rise to €48.6bn a year in 2007 to 2013.

Meanwhile, the Netherlands was already objecting to cuts in contributions in return for cuts in research and development subsidies.

The proposed EU budget foresees overall spending of around €870bn over the next seven years.

The EU leaders have all said a deal on future spending plans would show their citizens that the EU remained important and functioning, following the rejections by French and Dutch voters of the proposed European Constitution two weeks ago.

That EU charter was meant to streamline the way the EU makes decisions and bolster its role in the world.