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Debate: British EU rebate

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Should Britain give up its annual rebate on its payments to the European Union?

Background and Context of Debate:

Member states of the European Union make an annual payment to the EU budget, according to the relative size of their economies. The EU Commission then spends this money, most heavily on the Common Agricultural Policy and regional aid for poorer areas. This means that some countries do better in purely financial terms from EU membership than others. Some richer countries, such as Germany, Sweden, the Netherlands and Britain pay out more the EU than they receive back in CAP payments or regional aid - they are net contributors to the budget. Other countries, mostly ones with larger agricultural sectors and relatively poor regions (e.g. Portugal and Greece) receive more from the EU than they pay in - they are net recipients. France and Italy’s contributions and receipts are roughly in balance. The actual budget is agreed (as a percentage of European GDP - currently it is 1%) for a seven year period. The budget for 2007-2013 is being negotiated at present (winter 2005-06). When Britain joined the EEC in 1974 it was unusual in having a relatively small farming sector and few region which were considered poor in European terms - this meant that its net contribution to the European budget was very large compared to other member states. In 1975 the Labour Government of Harold Wilson renegotiated Britain’s membership and won agreement in principle that Britain might get some of its net contribution back each year - a rebate on its payments. In reality nothing happened until the 1980s, when Conservative Prime Minister Margaret Thatcher famously demanded “I want my money back”. After five years of argument, backed by Thatcher’s threat to veto any expansion of the EU budget until she got her way, a British rebate of was agreed at Fontainbleu in 1984. As a result, 66% of Britain’s net contribution to the EU budget is returned to it each year - the sum being funded from the contributions of the other member states. In 2003, for example, Britain paid 9.97 Euros into the EU budget and would have benefited from 1 billion Euros of EU spending in Britain - it would have made a net contribution of about 9 billion Euros to the EU budget. But because of the rebate, 5.2 billion euros was returned to Britain, reducing its overall net contribution to 3.8 billion Euros. No other country has such a rebate and almost all EU leaders and commentators outside Britain have argued for many years that it is time for the rebate to be ended. This has made budget negotiations uncomfortable for British Prime Ministers at times, but as every country has a veto in the seven-yearly EU budget negotiations the rebate has survived for two decades. The rebate has come under particularly close examination in the most recent round of negotiations, with demands from all 24 of Britain’s EU partners that it be given up in the interests of fairness and European solidarity. Risking the anger of the Eurosceptic British press, Prime Minister Tony Blair has shown willingness to give up part of the rebate in order to achieve a budget settlement for 2007-2013. In December 2005 a summit of European Heads of Government reached agreement on the next budget period, including this partial British concession on the rebate, but at the time of writing this has yet to be agreed by the European Parliament and so could still fall apart. The case below largely focuses upon whether the rebate should be given up entirely, but the last two pairs of arguments also touch on the possibility of a partial concession on the rebate.

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Fair? Is the UK rebate fair?

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Yes

  • The EU-UK rebate is an undeserved exception. No other country has a similar arrangement to pay back part of its contribution to the EU budget. Germany, the Netherlands and Sweden all make a bigger net contribution to the EU than Britain does (in proportion to the size of their populations), yet they do get special treatment. Britain knew how the EU operated when it chose to join more than thirty years ago - if it didn’t like the structure of the budget, whereby rich countries pay more than poor ones, it could have stayed outside. In any case, a few billion Euros a year is a small sum to pay for access to a huge continent-wide market.


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No

  • The UK rebate is fair; UK's contributions to EU CAP are outweigh benefits. Without it Britain would pay far more into the EU than it ever received back. This is because most of the EU’s budget goes to pay for the costs of the Common Agricultural Policy and regional aid programmes. The UK’s farming sector is a very small part of the economy, and very few of its regions count as poor in Europe-wide terms, so Britain receives little funding back from the EU. The rebate recognises this and returns two-thirds of the UK’s net EU contribution (payments less receipts) every year. Even with the rebate, the UK is still the second biggest net contributor (proportional to population) of all the EU states. Over the past ten years Britain has contributed 2? times as much to the EU budget as France has - and without the rebate it would have been 15 times as much!


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Agreement: Do circumstances of past negotiations give cause to ending rebate?

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Yes

  • UK rebate no longer justified; UK economy stronger since negotiations Britain was in dyer straights when rebate was agreed; now it's not. When the rebate was agreed over twenty years ago, Britain was poor after decades of decline. In fact it was the third poorest state in the then EEC, so the size of its net contribution to the budget was clearly unfair. Now the UK is one of the richest countries in the world and the rebate is no longer justified. The sums involved are small compared to the overall UK budget - much less than the margin of error in the Chancellor of the Exchequer’s tax and spending plans. It is partly (perhaps largely) because of Margaret Thatcher’s achievements in power that the UK is so strong economically, so agreeing that the rebate is no longer necessary is a tribute to her legacy, not a betrayal.


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No

  • The rebate could never be regained, if lost. Margaret Thatcher fought for four years to win the rebate for Britain, famously wielding her handbag at EU summits until it was agreed. Giving it up is a clear betrayal of Thatcher’s legacy and shows the present government’s unwillingness to stand up for Britain’s interests in Brussels. There is no chance of any future British Prime Minister being able to repeat Mrs Thatcher’s achievement of 1984, so once the rebate is given up, it can never be regained.


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Argument #3

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Yes

  • Ending rebate will help stimulate EU agricultural reform. It is worth giving the rebate up in exchange for serious reform of the EU budget, particularly of the Common Agricultural Policy which spends 40% of the EU’s budget on 2% of its workers. The CAP not only wastes taxpayers’ money, it also raises the cost of food for European consumers, ruins the environment and prevents poor farmers in the developing world from trading their way out of poverty. Even in its own terms it is a disaster, for most CAP money goes to a small number of rich landowners running huge agribusiness estates, not to small-scale peasant farmers preserving the traditional rural way of life. If offering to give up the British rebate helps to get agreement on reform, then it is a sacrifice well worth making. The agreement to review the EU budget, including agricultural funding, in 2009 is excellent news and follows a number of reforms to the CAP made over the past few years.


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No

  • Giving up the UK rebate is unnecessary in achieving serious EU-CAP reform. If the CAP were abolished, Britain’s net payments to the EU would automatically be much smaller anyway, so the rebate (66% of the difference between the UK’s contributions to the EU and its receipts from it) would also shrink away to insignificance. CAP reform is worth doing for its own sake, and other EU countries will only agree to it once they realise that fact - offering up the rebate will make no difference. In any case, even if the rebate was a useful bargaining chip to be cashed in, there is no chance of Chirac’s France (or Eire, Spain, Greece, Italy, Belgium, etc.) agreeing to changing the CAP at present, so Britain should hold on to it. The prospect of a EU budget review in 2009, to include the CAP, means nothing - any country can veto reform at that point and France and Eire have already said that they will do so.


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Argument #4

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Yes

It is worth giving up the rebate to remove a constant source of tension and ill-feeling between Britain and its European partners. Until the rebate is abandoned, Britain will never be at the heart of Europe. This limits our ability to promote our other interests in Europe, as every argument always ends up back at the rebate, and weakens our moral authority. Because preserving the rebate has always been the Prime Minister’s priority, every other British goal has been given up instead. This led to bad deals for Britain over the ERM, at Maastricht, and in 2002 when Tony Blair accepted a Franco-German agreement to leave the CAP unreformed until 2013.


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No

Britain does not want to be at the heart of Europe - it wants to be in the EU, but not run by the EU. Even if the rebate went, the UK would remain outside any EU “core group” of countries, as it has chosen not to join the Schengen agreement on passport free movement, and to stay outside the Euro. Both these decisions have very wide political and popular support in the UK, and neither will be changed even if the rebate was weakly given away. So tensions will continue between Britain and its European partners, but at least by defending the rebate they will know that the UK is prepared to stand up for its interests and respect it.

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Argument #5

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Yes

The rebate is bad for Britain and the EU as it leads to a complacency in the UK about the way the EU is run. Knowing that two-thirds of Britain’s net contribution will be returned anyway, British politicians and civil servants have not had to be serious about tackling waste and corruption at Brussels. Giving the rebate up would focus British minds much more clearly upon how the EU operates and would lead them to demand higher standards, both of the Commission and of their own elected representatives in the Council of Ministers and the European Parliament.

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No

The EU is a vast wasteful bureaucracy which is beyond reform. Anything to limit Britain’s contribution to this monster with pretensions to becoming a super-state is desirable. Many in the UK would prefer that we withdrew altogether, but if we can’t at least we should “starve the beast” by limiting the amount of money we give it to do harm with. Even if you think Britain should stay in the EU, you must recognise that the rebate is one of the only things that makes EU membership acceptable to ordinary people. Giving up the rebate is likely to swing British opinion strongly in favour of withdrawal.

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Argument #6

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Yes

Britain should give up the rebate in solidarity with the new member states. Most of the ten recent entrants to the EU are still struggling to overcome the legacy of communist rule and are much poorer than the previous 15 member states. As one of the richest EU members, Britain has a moral responsibility to contribute its share of the money needed to allow the new member states to make a success of EU membership. It also has a self-interest in contributing to their economic development, for as they become richer their citizens will increasingly buy the services and media exports in which Britain specialises. Yet under the current rebate arrangements the British rebate will soar from 4 billion Euros a year to 7 billion by 2013. This is because as development funding is taken away from poorer areas of Britain (e.g. Cornwall, parts of Wales) to be redirected to Eastern and Central European countries which need it much more, Britain’s net contribution to the EU budget will go up and so its rebate will automatically increase. Indeed, the new member states will be contributing payments towards Britain’s rebate - clearly something which Britain cannot attempt to defend.

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No

Britain should not feel sorry for the new EU members and give up its rebate out of pity for them. They chose to enter the EU and accepted the terms of membership - including the rebate arrangements. Indeed, it could be argued that membership was not necessarily good for the former communist states - having escaped one bureaucratic and ideological superstate, they have now chosen to be ruled by another, exchanging Moscow for Brussels. EU membership will impose thousands of unnecessary regulations upon them and tie them to a “European social model” which is clearly failing in the western states - both these things will hold back their economic growth and leave them poorer than they could have been outside the EU. Even the development aid they will receive will largely be wasted, through corruption and because it has to be spent in ways Brussels demands rather than in locally productive investment. And if Britain did wish to be nice to the new member states, it could do so without giving up the principle of the rebate. Tony Blair’s proposed at the December 2005 summit that Britain would not seek rebate payments linked to new member states agricultural and regional aid spending, but should keep the rebate in terms of spending in the original 15 EU countries.

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Argument #7

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Yes

Britain should not alienate its natural allies among the new member states by insisting on the rebate. Like Britain, the new member states are largely economically liberal, anti-federalist regarding the future of the EU, and pro-American in terms of foreign policy. They also recognise that Britain promoted the cause of their membership throughout the 1990s and appreciate its willingness to grant immediate free movement to their citizens who wish to work in Britain. In all these ways they are closer to Britain than to France or Germany, the two big states who have traditionally dominated EU decision-making. Enlargement presents Britain with a great opportunity to influence the future direction of Europe in partnership with these new states, but this opportunity will be lost if British insists on the rebate regardless of Central and Eastern European opinion.

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No

As noted in point 6 above, the rebate could be given up just for spending in the new member states but still applied for spending in the “old states”. In any case, the common interests which tie Britain to the new member states are far more important than any budget row, so there is no long-term danger of alienating potential allies. Those EU leaders who are most critical of the rebate are ignoring the EU’s real and serious problems - persistent 10% unemployment, the rejection of the EU constitution by voters, the challenge of globalisation, the failure to make the single market in services work fairly, corruption and waste at Brussels, etc. The new member states recognise these problems and tend to see the possible solutions in the same way that Britain does.


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Pro/con resources

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Yes


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No

  • This section needs more pro/con resources.


References:

This article is based on a Debatabase entry written by Alastair Endersby. Because this document can be modified by any registered user of this site, its contents should be cited with care.

Motions:

  • This House would give up Britain’s EU rebate
  • This House doesn’t want its money back any more
  • This House would show solidarity with Central and Eastern Europe
  • This House believes Britain’s EU rebate can no longer be justified
  • This House condemns le cheque Britannique

In legislation, policy, and elsewhere:

See also

External links and resources:

Books:

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