2012 Budget: Europe at a discountPosted: May 6, 2011
As all donuts come with a hole, it is impossible to speak on the European budget without getting to the issue of rebates.
Indeed, governments are repeating it, euro-skeptics have been claiming it for years: the European Union is costing us and the investment return are, we are told by some, small. That is for this reason that rebates have been invented, and for our entrainment pleasure, there is whole collection of them.
The Grand Mother of all
Let’s start by the first, the most famous, of all rebates, the one that open the door to all the following : the rebate granted to the United Kingdom, also know as the British rebate.
This rebate was born in 1984 at the Fontaibleau council summit. There, Margaret Thatcher stated “I want my money back !“. At the time, 80% of the European Budget went to the Common Agricultural Policy (CAP, now just between 40 and 50% of the budget), but the agricultural sector in Great Britain was rather small, therefore the British contribution to the EU budget had only small return in the UK.
Since, 66% (two-thirds) of the British net contribution (contribution to the budget minus the fund received via European Programs) are refunded.
In the 2011 budget, the British contribution to Europe was 13 billions euros (12% of the total budget) after a 3 billion rebate. [*]
The counter British rebate
The refund to the United-Kingdom is paid for by an increase in the contribution of other member states, proportionally to the importance of their economy. But of course, this extra-cost is not to the liking of everybody. Since 2002, Austria, Germany, the Netherlands and Sweden have the right to a reduced extra contribution and are paying only 25% of their normal share on the British rebate.
As a consequence, the other member states are paying for the British rebate, which is of the order of the total contribution of Belgium to the European Budget.
Fixed discounts for the Netherlands and Sweden
Still in the spirit of “I’d like to pay less, please”, the EU says “yes, no problem” to the Netherlands and Sweden. Both benefit from a fixed discount to their contribution (after taking into account the extra need to pay for the British rebate) of respectively 625 and 142 millions of euros (in the 2011 budget).
As for the British rebate, the charge of this discount is divided between the member states (including the UK otherwise it would be too simple)
This discount is in place only in the multi-annual framework for 2007-2013, but they might as well put a fight for the discount to be renewed when expiration approaches. (see the details of the reduction here, article 2, paragraph 5 (pdf))
The list of rebates and discount would not be complete without mentioning the reduced rate of holding on the VAT for Austria, Germany, the Netherlands and Sweden. While for other member states 0.3% of the collected VAT goes to the EU budget, Germany is transferring only 0.15% to Brussels, Austria 0.225% and only 0.1% for the Netherlands and Sweden. This reduced VAT rate is also expected to expire in 2013.
This collection of rebates is transferring the burden of the European budget to member states that do not benefit from such discounts; or simply reducing the volume of the budget. Even if most of the discount are schedule to terminate in 2013, the current general opinion toward the European budget is not pointing to a large generosity of the member states. We might even see more and more request for discounts and refunds that could lead the budget negotiations to dead-ends.