Last week’s European Council agreed an overall limit on EU spending for 2014-2020.
The EU’s annual budget is negotiated each year but every seven years a framework is agreed, which includes an overall limit on what can be spent. This is a hugely important moment - annual budgets are negotiated by qualified majority voting so the UK can be out-voted by countries that are net beneficiaries of EU spending (last year, at a time when nearly all member states were having to make tough decisions to tighten their belts at home, the net beneficiaries succeeded in increasing the EU budget by another 5 per cent), but the seven-year frameworks have to be agreed by every EU member so this was our chance to ensure that the EU budget is affordable.
Every time these seven-year frameworks have been agreed in the past, spending has gone up. During the last negotiation, which covered the period 2007 to 2013, the last Labour Government agreed to an 8 per cent increase in the limit to €943 billion. This time, the European Commission produced an initial proposal for increasing the ceiling still further to €988 billion. This was strongly supported by a number of member states.
But by working with like-minded allies like Germany, Sweden, the Netherlands and Denmark, the Prime Minister delivered a real-terms cut in what Brussels can spend for the first time in history, with the ceiling set at €908 billion. That is €80 billion lower than the original proposal; €35 billion lower than the deal agreed by the last Government; and €60 billion lower than the emergency arrangements that would have come into place if the Prime Minister had refused to sign the deal. The UK’s contribution to the EU will still go up because of Labour’s decision to give away almost half of our rebate, but our contribution as a share of our gross national income is expected to fall. And the Prime Minister successfully protected what remains of our rebate.
In terms of what the EU budget will be spent on, funding for research, innovation and universities - which should boost growth - is up by over a third. This money is handed out on the basis of quality, so Britain’s universities are particularly well placed to benefit. Britain’s share of the structural funds, which go to less well-off areas, will remain broadly the same. Spending on the Common Agricultural Policy will fall overall, but the Prime Minister protected the flexibility that allows us to direct funds to support both the environment and the livelihoods of our farming communities.
Overall then, this is very good deal for Britain. It now needs to be approved by the European Parliament. Ed Miliband refused to say whether Labour MEPs would vote for it, despite claiming to support it himself. The contrast between a Prime Minister who is providing leadership abroad and a Leader of the Opposition who doesn’t seem to be able to lead his own party couldn’t be stronger.