The UK Government has attacked plans for an inflation-busting rise in EU spending as “completely unrealistic” in the midst of a recession which has forced national austerity measures across Europe.
The controversial proposal from Brussels comes just days after British Prime Minister David Cameron hosted Commission President Jose Manuel Barroso at Downing Street and told him the hard-pressed public would not understand anything above an increase in line with inflation – a real-terms freeze.
The plans attracted double criticism from the Government, with both the Treasury and Downing Street dismissing them as “unrealistic”.
Mr Barroso unveiled his plans last night after getting approval from fellow commissioners, and hit back at governments condemning the budget without having studied it.
“This is an extremely serious, credible proposal, and to say ’no’ to something which was only adopted two or three hours ago is not serious or credible.”
He went on: “I would issue this plea to all capitals – before saying you don’t agree at least read the proposals.”
The Commission says its plans will give the EU an average annual budget over seven years from 2014 of €140bn a year.
That, say officials, amounts to 1% of the combined GDP of the 27 member states - the same GDP share as the current EU budget.
But in cash terms it represents an increase of more than 10% – way above inflation. And the Treasury estimates it would add £10bn (€11bn) to the UK’s contributions to the Brussels coffers over the seven-year period.
The UK Government response issued by the Treasury said: “The European Commission’s proposal is completely unrealistic. It is too large, not the restrained budget they claim, and incompatible with the tough decisions being taken in countries across Europe.”
Europe’s Budget Commissioner Janusz Lewandowski countered that most national budgets in the EU have actually been growing – but at lower increases since the recession.
Only four national budgets are not growing, he insisted – those of Greece, Ireland, Portugal and Spain, where the economic squeeze is worst.
A Downing Street spokesman joined condemnation of the plans, reminding Brussels of a letter published last December by Britain, France and Germany urging that the EU creed “should not be to spend more, but to spend better”.
The Downing Street statement said: “The EU budget increase that the Commission has proposed today is unrealistic. Britain and the EU’s other largest payers made clear in December that the EU budget should be frozen, and we will stick to that.
“The EU has to take the same tough measures as national governments are taking across Europe to tackle public deficits. That means a restrained EU budget focused on the things that will get our economy growing.”
The Commission’s budget plans include raising funds from a direct EU tax from a levy on European banks – a “Financial Transactions Tax”.
Mr Barroso also warned of a complete rethink of the rebate system under which Britain has benefited from billions of pounds off its EU bills for more than 25 years because of an imbalance between the country’s level of contributions compared with EU budget support back to the UK in grants and subsidies.
The Commission president warned: “There is no room for thinking about getting your fair share of your money back. The time has come to reform the system of rebates... it is of the utmost complexity.”
The Downing Street spokesman warned: “Britain will also oppose new EU taxes which will introduce additional burdens for business and damage EU competitiveness. And we will continue to protect the rebate – without it, the UK’s net contribution as a percentage of national income would be the largest across the EU, twice as large as France’s and Italy’s, and almost one and a half times bigger than Germany’s.”
Last night’s unveiling sets the scene for months of wrangling over the final budget figures as bartering goes on between the Commission, the European Parliament, and ministers from EU member states.
Mr Barroso said that this was “the start of a negotiation”, adding: “It’s a process: it would be the greatest surprise of my life if some member state started by supporting our proposals.
“It’s natural that some say it is too much, but I would really like to know if they could come with proposals that at the end would be accepted by 27 member states.
“Some capitals forget it is a Union of 27 and not 15 (as it was until 2004) and that enlargement brings obligations to those member states which are on average much poorer. Solidarity with member states is at the heart of our proposals.”
He insisted: “These budget proposals are for the period beginning in 2014. It would be a complete mistake, just because of the current moment of very serious fiscal constraint, to make it impossible for the EU to invest in the future.
“Our offer is reasonable, realistic, credible and takes fully into account the considerations of member states who are quite rightly extremely vigilant on spending.”
And he predicted: “I think the final result will not be far from what we have proposed today.”