EU Budget (Surcharge)

Ed Balls Excerpts

Monday 10th November 2014 Commons Chamber

[Ed Balls (Morley and Outwood) (Lab/Co-op)(Urgent Question)]

To ask the Chancellor of the Exchequer if he will make a statement to clarify his agreement on the European Union budget surcharge.

[The Chancellor of the Exchequer (Mr George Osborne)]

Last month the previous European Commission presented Britain with a bill for £1.7 billion, which it insisted must be paid by 1 December. The Prime Minister spoke for British taxpayers when he said that that was completely unacceptable, and we set about getting a better deal. Following intensive discussions with the new Commission and at the ECOFIN meeting last week, we have achieved such a deal. I can tell the House that we have halved the Bill, have delayed the Bill, will pay no interest on the Bill, and have changed the rules of the European Union so that such unacceptable behaviour never happens again.

Let me briefly give the House the details. At the European Council last month, the Prime Minister made it clear to the Barroso Commission that while annual adjustments to contributions were a regular part of EU membership, a sudden and unprecedented demand for a £1.7 billion payment on 1 December was unacceptable. He secured the agreement of all 28 Heads of Government that it should be discussed by the Finance Ministers as a matter of urgency. That meeting took place last Friday, and followed two weeks of intensive and constructive discussions with the new Budget Commissioner, Vice-President Georgieva, and other member states.

As a result of those discussions, we achieved unanimous agreement that, first, expecting payment on 1 December was indeed unacceptable. The budget rules will therefore be rewritten to allow for a delay in any payment. In Britain’s case, that means that we will pay nothing this year, and will instead make payments in two instalments in July and September, in the second half of next year. Secondly, the suggestion that we might have to pay interest charges was rejected, and it was agreed unanimously that no interest would be charged on the delayed payments. Thirdly, in our discussion with the new European Commission, it was agreed that a full rebate would apply to the British payment, that the rebate would be specific, that it would be in addition to any other rebate that we might expect next year, and that, for the first time ever, it would be paid at the same time as any money owed.

It had not been clear that we would receive a rebate, let alone such a large one. No one in the House had suggested that we would. Only my right hon. Friend the Member for South Cambridgeshire (Mr Lansley) had even asked a question about it. Indeed, it was only confirmed that we would receive a rebate, and a large one, by Vice-President Georgieva on 6 November, last Thursday evening. This means that Britain’s payments have been halved, from £1.7 billion to about £850 million.

Finally, all member states agreed with us that the entire episode had been unacceptable, and a deal was therefore reached to make a permanent change in European law so that this would never happen again.

In the face of this budget challenge, we have far exceeded the expectations and predictions that preceded Friday’s meeting. We have achieved a real result for Britain. The whole episode reminds us of the reform that we need in Europe—reform that Government Members believe should be put to a vote of the people of Britain.

[Ed Balls]

If this is such a good deal, why did the Chancellor not offer to make a statement? Why was he dragged to the House this afternoon? Talk about smoke and mirrors, Mr Speaker—I can barely see you through the Chancellor’s fog and bluster!

Is not the truth that the Chancellor failed to reduce our contribution by a single penny? All he is doing is simply counting the rebate that was due anyway—a rebate that was never in doubt—in an attempt to fool people into thinking that the bill has been halved. His so-called victory is nothing more than a con trick.

The Chancellor claims that the rebate was somehow in doubt, but that claim has been contradicted by everyone else. The EU Budget Commissioner was very clear when he said, on 27 October, in a statement on the backdated gross national income revisions,

“the UK will benefit from the UK rebate for the additional payments”.

On Friday, having been asked whether the rebate was in doubt, the Vice-President of the Commission replied, “No, absolutely not.”

On Friday, the Treasury was telling journalists that the Government had legal advice that the UK rebate somehow might not apply. If the legal advice exists, the Chancellor should publish it. Mr Barroso’s spokesperson, Mr Mark Gray, has directly contradicted the Treasury’s claims, saying:

“Commission position on this clear at European Council—rebate was never in doubt”.

The Conservative MEP Daniel Hannan agrees. He said—[Interruption.]

[Mr Speaker]

Order. There is far too much noise in the Chamber. I wish to hear the views of Mr Daniel Hannan. Let us hear them.

[Ed Balls]

I’ll tell you what Mr Hannan said. He said:

“it’s not credible to claim that it was ever in doubt”.

The Dutch Finance Minister said that of course this

“mechanism of the rebate will also apply”

on the new contribution:

“So it’s not as if the British have been given a discount today.”

The Austrian Finance Minister said that

“the amount cannot be put in question”,

and the Irish Finance Minister confirmed

“the UK will pay the whole amount.”

They are queuing up to contradict the Chancellor.

Let me ask the Chancellor this: can he name a single Finance Minister who is willing to go along with his desperate attempts to pull the wool over people’s eyes? And it is worse. The Financial Times reported:

“Officials involved in the closed-door negotiations between finance ministers said Mr Osborne did not complain about the overall bill.”

He didn’t even complain about the overall bill, Mr Speaker! I have here the minutes of Friday’s ECOFIN meeting: 21 pages, and not a single reference in those 21 pages to the UK rebate or the amount Britain owes being reduced.

Is it not now clear that the Chancellor totally failed to get a better deal for the taxpayer? He did not reduce Britain’s backdated bill by a single penny. The British people don’t like being taken for fools, and his attempts to fool them have totally unravelled.

[Mr Osborne]

No, the British people do not like being taken for fools which is why the shadow Chancellor is in opposition. The shadow Chancellor is one of those people who is wise neither after the event nor before the event. How do we know that? He wrote an article in The Guardian last Friday. It appeared alongside another article called “Labour is doomed” by one of his colleagues, and in his article he set out four tests that I had to pass. The first test, he said, was that we needed a coalition of support, and he asked me about that again today. We had unanimous support around the ECOFIN table for the deal that was agreed. The second test he set me before the ECOFIN council was that we needed the support of Germany. Well, we went to Berlin and the German Finance Minister was central to the deal that we did. Thirdly, in this article, he said:

“The Prime Minister should be clear about whether he intends to take the EU Commission to the European Court of Justice if they insist on the deadline of 1 December.”

Well, we do not have a deadline of 1 December any more, because we did not challenge the law; we changed the law.

So three tests passed, and here is the fourth and final test the shadow Chancellor set us: he said that the interest rates on any delayed payments should be fair. Well, I disagree. I do not think we should pay any interest at all, and we are not, but what is revealing about this fourth test is the number he himself gave for the fines Britain might face. He said:

“Britain could face a…fine of £114,000 a day.”

Does he confirm that that is what he said in the article: £114,000 a day? [Interruption.] Well, he has given himself away because £114,000 a day happens to be the EU penal interest on £1.7 billion, so the shadow Chancellor, who stands before us today and says he always knew the rebate would apply, is the same shadow Chancellor who on Friday said we would paying £1.7 billion.

And of course the word “rebate” never appeared once in that article or, indeed, in any intervention from the Labour party on this issue. This whole question from the shadow Chancellor today is based on the absurd charade that he would stand up for Britain’s interests in Europe, but he gave away billions of pounds of the rebate, he signed us up to billions of pounds of eurozone bail-out, and he still refuses to give the British people a say on our future in Europe. May I suggest to him that he should leave the strong leadership in Europe to us, and he should get on with throwing over the weak leadership in the Labour party?

--- Later in debate ---

[Mr Osborne]

I always knew that the hon. Gentleman asked questions that had been prepared by the shadow Chancellor, but I have never before seen those questions being handed over in the Chamber. Nor do I think his embellishment of the question added much to it. If the rebate was always going to apply, and to such an extent, why did neither he nor any other Labour Member raise the matter? Why was it not mentioned in the shadow Chancellor’s article in The Guardian? The shadow Chancellor says that the outcome was obvious, but the estimate of a £114,000 fine was based on a number of—

[Ed Balls]

indicated dissent.

[Mr Osborne]

He says no, but the penal rate is 2% above base, and 2% above base per day on a £1.7 billion charge is £114,000. Is that just an amazing coincidence?

--- Later in debate ---

[Mr Osborne]

Some of us remember inheriting a budget deficit of 11.5% from the previous Labour Government. It has fallen by more than a third. We will get the forecasts from the Office for Budget Responsibility in December.

[Ed Balls]

It’s going up!

[Mr Osborne]

Let us get it on the record that the shadow Chancellor says that the budget deficit is going up. We will wait for the forecasts at the beginning of December and see who is right.