The UK budget rebate

[ShadesWolf]

This is a very interesting subject, would we like to discuss :bow:

The following info is from the BBC website:

WHY DOES THE REBATE EXIST?

The UK won the rebate in 1984, after the then prime minister Margaret Thatcher threatened to halt payments to the EU budget.

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"We are not asking the Community or anyone else for money," she said at a summit in Fontainebleau. "We are simply asking to have our own money back".

The UK was then the third poorest member of the Community but was on course to become the biggest net contributor to the EU budget.

This was mainly because the UK had relatively few farms, so it got a relatively small share of farm subsidies, which at the time made up 70% of Community expenditure.

The formula for determining how much a country paid into the Community budget was also unfavourable to the UK. It was in effect penalised for raising more revenue from VAT than most other member states and importing more goods from countries outside the Community.


HOW BIG IS THE REBATE?

The rebate in any given year is equivalent to 66% of the UK's net contribution in the previous year.

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Between 1999 and 2001 it came to between 4.4bn and 4.9bn euros. Provisional figures for the years from 2002 to 2005 show it fluctuating between 5.2bn and 5.7bn euros.

However, the final calculation of the rebate for a given year is only made four years later. The rebate for 2000 is adjusted in 2004, the rebate for 2001 is adjusted in 2005, and so on.

This means that rebate for a given year and the the amount of rebate money received by the UK in that year are different things.

The bar chart shown here gives UK Treasury's figures for the flow of rebate payments.

The European Commission says the high figure for 2001 is mainly due to adjustments to the rebate accounts for 1997 and 1999, which in both cases benefited the UK.

The rebate is on course to rise significantly after 2007, because net contributors to the EU budget will soon have to start paying more, to cover the growing cost of EU enlargement.


But the European Commission says the UK "will be largely shielded from the extra cost" because of the rebate.

It says that under its proposals for the 2007-13 budget - now the subject of heated debate - the rebate would average about 8bn euros per year

WHO PAYS FOR THE REBATE?

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Broadly speaking, the UK's 24 EU partners pay for the rebate in proportion to the size of their economies.

However, four major net contributors to the EU budget - Germany, the Netherlands, Sweden and Austria - pay only a quarter of what would otherwise be their share. In other words, they have a "rebate on the rebate".

The result is that France and Italy, between them, pay about half of the total. This may help explain why French President Jacques Chirac has campaigned so vigorously against the rebate.

Altogether, the 10 new member states paid a total of 290m euros towards the rebate in 2004. This may not be much, but they still resent having to contribute to the rebate of a country far richer than they are.

The UK's European Commissioner, Peter Mandelson, said in June that it was "surely wrong to ask the poorer new accession states to pay for any part of the rebate".

However, some British experts disagree.

One argues that as long as the poorer states remain net beneficiaries, and receive a fair share of EU funds, the question of how this share is calculated - and whether or not they contribute to the UK rebate - is a mere "book-keeping issue".

Another argues that it is just as reasonable for the new states to contribute to the British rebate as to the "French rebate" - the payments made to French farmers - or to the agricultural subsidies received by other wealthy countries, such as Denmark and Ireland.

WHO CONTRIBUTES MOST TO THE EU BUDGET?

Germany, with the largest economy in Europe, made the largest gross contribution in 2004.

It also made the largest net contribution - the amount a country pays in to the EU budget minus the amount it gets back in the form of EU spending.


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However, the UK's net contribution would have been bigger even than Germany's, had it not been for the rebate.
Although France and Italy made a larger gross contribution, the EU also spent a lot more money in those countries than it did in the UK.


If France had not paid 1.5bn euros towards the UK rebate, its net contribution would have been just 1.6bn euros, while without the rebate the UK would have made a net contribution of 9.9bn euros.






NET CONTRIBUTIONS AND NATIONAL INCOME

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A country's net contribution can also be measured in other ways - as a proportion of gross national income (GNI) or the amount paid per head of population.

On both these scales, the Netherlands came top in 2004 - with a net contribution amounting to 0.68% of GNI or 194 euros per capita - followed by Sweden and Germany.

None of these countries is happy that the UK gets a rebate, while they do not.

The UK's net contribution as a proportion of GNI (0.26%) and per head of population (77 euros, or £53) was the fourth largest in the EU in 2004.

But the European Commission has calculated that if the rebate continues in its present form, the UK will drop behind France, Italy, Austria, Denmark and Cyprus, to ninth place.

On the other hand, if the rebate is abolished, the UK will become the biggest net contributor as a proportion of GNI in the period 2008-13.


THE UK'S RISING PROSPERITY

The UK succeeded in winning its rebate in 1984 because it was one of the poorest countries in the EU yet one of the biggest net contributors.

The Fontainebleau summit agreed that any member state shouldering an "excessive" budgetary burden relative to its level of prosperity should qualify for a budget "correction".

However, the UK is now one of the richest countries in the EU. It is more prosperous than most of the old EU members (the EU15) and a lot more prosperous than the 10 members which joined in 2004 (the EU10).

Meanwhile, the amount of the EU budget spent on agriculture - the area where the UK loses out - has consistently declined.

It accounted for 70% of EU spending in 1984. Now it accounts for less than 50%, and it is destined to fall below 40% by 2010.

The European Commission argues that is unfair for the UK to get a rebate while other net contributors "with similar or lesser prosperity" do not.

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ALTERNATIVES TO THE REBATE

Simply abolishing the rebate without making other changes to the budget would place a heavy burden on the UK.

On the other hand, leaving the rebate as it is would see the burden on the UK becoming much lighter.

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The European Commission has proposed a "generalised correction mechanism" which would give a form of rebate to all large net contributors.

More precisely, any country making a net contribution of more than 0.35% of GNI would get a rebate of 66% on the excess. The maximum rebate would be capped at 7.5bn euros.

Another proposal, put forward by the Luxembourg EU presidency in the first half of 2005, is to freeze the UK rebate at its current level, with a view to phasing it out in future.

Both ideas would lead to a major increase in the UK's contributions to the EU.

Experts also point out that the correction mechanism would benefit other wealthy countries, at the UK's expense, while leaving the position of the poorer countries unchanged.

WHAT DOES THE UK WANT?

In June 2005, Britain said it would give up the rebate if there was a fundamental reform of the EU budget, leading to the removal of the "imbalances" which led to the creation of the rebate in the first place.

The UK also argued that, in order to meet the challenges of the 21st Century, more money should be spent on research, and less on agricultural subsidies.


In December 2005, the UK proposed a budget deal, under which the UK would give up part of its rebate, without any cuts in farm spending. However, the proposed budget would be smaller than that previously proposed by the European Commission or Luxembourg's EU presidency.

Prime Minister Tony Blair said that the UK wanted "rough parity on a national income basis between Britain and like-sized countries".

The UK has also talked about passing responsibility for some subsidies to farmers and poorer regions back to national governments.

Foreign Minister Jack Straw told the UK parliament in June 2005 that richer EU states should "finance their own regional policies".

He went on: "One proposal on the table to which we can certainly give some support is the nationalisation of part of CAP spending. In other words, individual member states would be given greater responsibility for financing their spending on agriculture.

"That would not amount to fundamental reform, but it would be a step in the right direction."

[Kralizec]

I love the way France is bitching about how the UK needs to make "a gesture of solidarity" by cutting the rebates, while the UK even with those rebates is still a larger net contributer then France ~:joker:

I thoroughly agree with the UK position. There will always be need of some farming, but the sector needs to be drasticly changed to be competitive while being undependent on structural subsidies. Underdeveloped countries should get some farm subsidies to bring their farming on the same level as we, farm subsidies wich should gradually phase out to prevent farmers from becoming dependent on them- like the French farmers.

I disagree with our government's position that the Netherlands should get a rebate. Rich countries like ours (and France, and the UK, etc) have a responsibility to help our less fortunate eastern neighbours build their economies. But we have no obligation to help French farmers uphold their inefficient and uncompetitive businesses wich have no future anyway.

[yesdachi]

Hats off for a well-prepared post! :bow: Loads of info for someone not familiar with the situation to learn from. I have one question, what is all the farming money spent on?

[JAG]

I do have a huge problem with the rebate, the new poorer states who entered the EU last year, should not be forced to give money in the form of our rebate, to us, our economy is far stronger and we as a country are far richer. We should do our share and give up the rebate.

However, I believe Blair is right on this issue in stating that in exchange for us giving up the rebate we should sort our CAP and our riduculous agriculture spending in the EU. I think that is fair, if another deal similar comes up - which we are seemingly seeing the start of at the moment - then I would support that too.

The rebate is unfair, but so is the structure and spending of the EU budget as a whole, it all needs to be sorted out.

[Geoffrey S]

As with so much of the EU the rebate is a relic of different times. It's still relevant in the way that Britain contributes more to the EU than a nation such as France, yet receives less in turn, but particularly now the EU contains many new members it needs adjusting to the present situation.

And it's not just the rebate that needs adjustment. So many things were put in place when the EU was a smaller entity, and are out of date nowadays. At some point a large-scale overhaul is going to be necessary. Rather sooner than later, too.

[Crazed Rabbit]

I find it funner that the leaders of some countries, who always hold confrences on giving money to the world's poor, insist on farming subsidies, thus making the poor people of the world uncompetitive and ending the easiest way for them to rise out of poverty.

Crazed Rabbit

[JAG]

I find it funner that the leaders of some countries, who always hold confrences on giving money to the world's poor, insist on farming subsidies, thus making the poor people of the world uncompetitive and ending the easiest way for them to rise out of poverty.

Crazed Rabbit

Agreed, unfortunately both your country and mine do it, our protectionist policies cause huge problems, yet we insist on third world countries to open up their markets.

[Meneldil]

Well, a good first step would be to stop the constant increase of farming subsidies, then to definitly stop wasting huge amounts of money for agriculture.
Europe wanted to be the storehouse of the planet, but currently, these subsidies are just hampering the poorest 3rd world countries, and bring us a whole lot of issues.

[Brenus]

“But we have no obligation to help French farmers uphold their inefficient and uncompetitive businesses wich have no future anyway.” I think you missed the point. The subsidies to the French Farmers were and still are to push them to decrease the production. Without them, the French Farmers, in order to get a normal income will over-produce… They aren’t paid because they are inefficient, they are paid because they too efficient… You left your anti-French feeling overcome the reality…~D
“Europe wanted to be the storehouse of the planet, but currently, these subsidies are just hampering the poorest 3rd world countries, and bring us a whole lot of issues.” So the solution is to ruin our farmers and to buy our food to the countries which starve. Oh yes, their leaders will push for that, they will export their food to our supermarkets, the local population won’t be able to afford to pay the price… How that will resolve their problems? It will just put dependence on them…
We did that with the coffee, Cocoa, tea, bananas. Let’s do it for wheat, and other oranges, cereals… Let’s take the bread from their mouths to feed our Mc Donald… That is THE solution…~:confused:

[Marcellus]

I do have a huge problem with the rebate, the new poorer states who entered the EU last year, should not be forced to give money in the form of our rebate, to us, our economy is far stronger and we as a country are far richer. We should do our share and give up the rebate.

It should be noted of course that it is not the case of them giving money to us because of the rebate, but rather us giving less money to them.

I completely agree with the principle of us giving more money to the new EU states to help them develop. I do not, however, want to give money to French farmers. We should keep the rebate as a negotiating tool to try to make the EU budget more balenced and less focused on agriculture, then when this objective has been achieved, give it up.

Tony Blair's proposed reduction will free up more money for the new states whilst still maintaining a rebate for Britain large enough to use in negotiations in the future, and so I support it.

[Kralizec]

“But we have no obligation to help French farmers uphold their inefficient and uncompetitive businesses wich have no future anyway.” I think you missed the point. The subsidies to the French Farmers were and still are to push them to decrease the production. Without them, the French Farmers, in order to get a normal income will over-produce… They aren’t paid because they are inefficient, they are paid because they too efficient… You left your anti-French feeling overcome the reality…~D

You're off a bit. What made farmers over produce in the past was product related subsidies, leading to great surpluses in the past. Now most EU countries limit their production with quotas, and also to tie their subsidies not to the production, but the size of the farming companies. French farmers are not being bribed to produce at a slower rate then they potentially can ~;)

So without subsidies of any kind, there wouldn't be overproduction. The problem is that many other countries such as the US also protect their farmers. What I don't understand is why the WTO isn't doing anything against this form of protectionism wich is clearly hurting third world countries wich can't afford to support their farmers.

[Meneldil]

You're off a bit. What made farmers over produce in the past was product related subsidies, leading to great surpluses in the past. Now most EU countries limit their production with quotas, and also to tie their subsidies not to the production, but the size of the farming companies. French farmers are not being bribed to produce at a slower rate then they potentially can ~;)


Quite not. The subisidies were at first supposed to help increasing the production, but they are now a way to avoid constant whining from the farmers, who produce much more than needed, and thus have to sell their goods at a ridiculously low cost. Even with the quotas, French farmers produce much more than what they can sell. They aren't bribed to produce at a slower rate, but they are bribed to not whine and bitch.


So the solution is to ruin our farmers and to buy our food to the countries which starve. Oh yes, their leaders will push for that, they will export their food to our supermarkets, the local population won’t be able to afford to pay the price… How that will resolve their problems? It will just put dependence on them…
We did that with the coffee, Cocoa, tea, bananas. Let’s do it for wheat, and other oranges, cereals… Let’s take the bread from their mouths to feed our Mc Donald… That is THE solution…

Farmers represent what ? 1% of the active population ? 2% at most. We would be as effective if half of them stopped to produce useless goods (less over-production => higher costs)
Each year, we see the same thing happening : farmers destroy their goods because they can't sell them. That's unbelievable, knowing how many people are starving in the world.
The 'country which starve' are starving for a lot of reaons. One of them is that they can't compete with European and American state financed farmers.

Stopping the subsidies to our farmer isn't the solution, but it would surely help. Furthermore, wasting billions of euros on something as irrevelant as farming while we could spend this money on the research against AIDS, or other important stuffs isn't the solution either.

[Brenus]

“Farmers represent what ? 1% of the active population ? 2% at most. We would be as effective if half of them stopped to produce useless goods (less over-production => higher costs)” I agree with that. We should stop the hypocrisy and just tell the farmers to keep the landscape clean, to become the gardeners of France in order to attract tourists and house buyers, becoming part of the tourist industry and not anymore in the Farmers and Fishermen Industry…~:)
The only problem will be what if, like for oil, a cartel decided to play on the supply when only few countries will supply all the world… And the collateral demand to do so is that prices of production have to stay low to be interesting for US and EU. So, we are not speaking of development here, but to keep the 3rd or 4th world countries in the … mud in order to be able to exploit them. The ruin of the French (and English, Germans, Polish, Spanish etc ) will be in the price to pay.~D

“The 'country which starve' are starving for a lot of reasons. One of them is that they can't compete with European and American state financed farmers.” Yeap, and the reasons are not the protectionism or subsidies, the reasons is the race to profit for the benefit of the richer, like the ones who have computers and access to internet…
The problem is I saw from my own eyes what happened, in real life. The peasants, farmers will sell their produce to the people who pay more. So, us. The local population working for £10.00 per month won’t have access to their production. Of course, because free market, we will change of suppliers if the prices will become less attractive. It dooms the economy to go to low costs, meaning low wages, except the big US EU companies…
I will be more explicit. When I went to Russia for MSF, I had to cross Ukraine. We had to stop for food. I just bought all the food in the store in a small village because for me it wasn’t expensive. So, the local population was left with nothing until the next supply.
In Iraq, same situation: One of our doctors paid our cleaning lady the salary of a teacher. She did it for good reasons. It was not too much; she wanted to be a nice person. But, it became more profitable to work for the foreigners than for the local institutions. Multiply that by the numbers of NGO and charity organisations and you got a problem. Of course, the prices of the local market increased because we could afford it. It was still cheap. Well, except for the local population which didn’t work for us… Same things happened in Niger, Zaire and Yemen, Serbia, Bosnia, Croatia and other places where I went to work.~D

Now, about the rebate, Blair is just playing on the anti-French feeling of the English population, or, more precisely, on the anti-French feeling of the Sun newspapers or others populist media. If he succeeds to convince the English that the French are the badies, he will get away with it. All my English colleagues still don’t see why they should be in EU. Try to explain them that if they are out they will loose markets and money is difficult. They don’t understand that if they still have orchards, it is thank to the framers’ subsidies. In one hand the English demand France to stop the illegal immigrants to come in England (why should be a French problem f England isn’t in EU?) and in other hand they don’t want to participate to the cost. That is, I think, the English Free Market they want. They just ignore the fact that the building of Europe wasn’t to built a market, but to avoid a 3rd WW.~:)

[Louis VI the Fat]

I want my money back!!!

The UK, after twenty years of French foreign aid, is no longer one of the poorest countries in Europe like it was in 1984. You don't need the rebate anymore.

I don't see why the rebate and the CAP should be linked to each other. The rebate was installed because Britain had an underperforming economy, France gets a lot of CAP-money because she has a succesful agricultural sector.

[Incongruous]

That post was the biggest load of crap I have ever read.
Bloody Craupod!:knight:
C'mon come get some... I... I know people from Newcastel... and others!...:hide:

[Crazed Rabbit]

I don't see why the rebate and the CAP should be linked to each other. The rebate was installed because Britain had an underperforming economy, France gets a lot of CAP-money because she has a succesful agricultural sector.

Successful economies don't require huge amounts of subsidies.

Crazed Rabbit

[Marcellus]

France gets a lot of CAP-money because she has a succesful agricultural sector.

France gets a lot of CAP money because it has a large agricultural sector. The problem with the CAP is that it puts such a large percentage of EU funds into such a small sector. If that particular sector is large in that country (e.g. in France), then that country benefits massively. If it is small (e.g. in Britain), then it doesn't. If there were a similar policy in, say, a particular services sector or in manufacture, then Britain might do better.

[Kralizec]

Quite not. The subisidies were at first supposed to help increasing the production, but they are now a way to avoid constant whining from the farmers, who produce much more than needed, and thus have to sell their goods at a ridiculously low cost. Even with the quotas, French farmers produce much more than what they can sell. They aren't bribed to produce at a slower rate, but they are bribed to not whine and bitch.

How does that invalidate anything I said? I already said that overproduction was encouraged by product-related subsidies, and when the EU wanted to do somethign about it they changed to income related subsidies.


Successful economies don't require huge amounts of subsidies.

Crazed Rabbit

In that case, the US economy (economy?) must be unsuccesful, because they're just as protective of their farmers?

[Meneldil]

France gets a lot of CAP money because it has a large agricultural sector. The problem with the CAP is that it puts such a large percentage of EU funds into such a small sector. If that particular sector is large in that country (e.g. in France), then that country benefits massively. If it is small (e.g. in Britain), then it doesn't. If there were a similar policy in, say, a particular services sector or in manufacture, then Britain might do better.

Agreed. I can't believe people are supporting the CAP. It costs billions and billions of Euro, only to support 1% of the French population, and 2% of our GNP. This money could be used for much more useful stuffs, like for example, research, or funding the newest and poorest EU members. The main aim of the EU isn't IMO to support the french farmers.

Right now, the common feeling among the french population is : "We're one of the biggest funder of EU, so we don't give a crap about what other members think". In fact, a lot of countries provide more money to the EU than us, simply because we get back a huge part of our EU funding through some useless subsidies.
The Brits are always described as being vehemently anti-EU, as being European traitors working for the US, yet the almost give as much money as France.

Of course, the rebate should be scraped now, since UK is wealthier than France, but I think France isn't entitled to whine about the rebate, given the huge amount of subsidies we get.


Now, about the rebate, Blair is just playing on the anti-French feeling of the English population, or, more precisely, on the anti-French feeling of the Sun newspapers or others populist media.

Isn't the same thing happening here ? After the many crisis Chirac had to face lately, he decided to turn the popular attention against these damn brits and their damn rebate. In fact, as far as I know, it was Chirac who started to speak about the debate, not the other way around.

[Kralizec]

The Brits are always described as being vehemently anti-EU, as being European traitors working for the US, yet the almost give as much money as France.

The Brits actually pay slightly more per capita then the French (netto). I agree with the rest of what you said, htough.

[Prodigal]

Nice starter post, I actually enjoyed reading it.

This whole things fraught with political pit falls, but I'm almost certain the rebate, subsidy issue thing could be quickly cleared up by everyone in the EU invading france, & selling it off in bits on e-bay. The french could be shipped off to Quebec, or somewhere swampy in the US where they speak cajun.

[Slyspy]

How much would La Rochelle go for on e-bay? I liked it there and it would look great in my back garden.

[Papewaio]

NZ and Australia would be able to supply a lot more food to the EU relatively cheaply even after you get rid of the subsidies... one of the problems with the EU is that it is so internally focused (imagine that Europeans doing that ~:cool: )... that its policies are in fact driving down the average standard of living by hampering free trade with external countries.

[Tsavong]

Farm subsides should go or be cut back, the money should do in industries that are or could make the EU more wealthy and powerful
and there is no way farming in France can do that


if French farms are successful why do they need a subsidy?

[ShadesWolf]

Farm subsides should go or be cut back, the money should do in industries that are or could make the EU more wealthy and powerful


Wind and tidal power. A good percentage of the EU is surrounded by sea, so this could be a good technology to get into.

[Meneldil]

I'm sure Hungary would agree :san_wink:

[Tsavong]

hehe :san_wink:
I was thinking of improving are influence over the world that’s all :p
getting more exports from the EU made my EU business etc
:san_cheesy: