Recession wins Britain its EC rebate

Click to follow
THE European Commission yesterday dealt an embarrassing blow to the British government, in a confidential report to ministers on Britain's rebate from its contributions to the European Community budget.

To the relief of British officials, the report recommends that the rebate, under which Britain has got back almost pounds 9bn of the contributions it has paid to the Community over the past five years, should remain unchanged. But the Commission's reasoning may embarrass the government. It argued that the justification for the rebate to endure is that Britain has become dramatically poorer in relation to its EC partners over the past eight years.

In 1985, according to the Commission paper, Britain's GDP per head was 3.1 per cent higher than the EC average. By 1992, although Spain and Portugal had dragged down the average, its per capita GDP was 5.5 per cent below it. On some counts, Britain is the fifth poorest EC member.

Officials in Brussels gave out the figures with barely disguised glee, noting the irony that it was Margaret Thatcher who demanded the rebate by threatening to bring EC business to a standstill, and who was in charge of the British economy for six of the eight years from 1985 to 1992 during which its ranking plummeted.

The rebate was put in place originally because Britain paid highly for its EC membership, but received less than other countries from the Common Agricultural Policy, which absorbs some two- thirds of Community spending.

The rebate has already been renewed once since 1984 with little difficulty, but diplomats in Brussels feared its discussion would lead to an unholy row. Yesterday's report, however, is likely to calm the dispute. It recommends the Council of Ministers to consider three options: to leave the rebate as it is; to leave unchanged what Britain receives, but to rejig the way other countries contribute; or to reduce the rebate slightly, by cutting on EC aid to Spain, Portugal, Greece and Ireland. Because Britain is a contributor to the Cohesion Fund, which channels aid to the EC's poorest four, this exclusion would reduce the net British contribution. Britain's most vigorous opponent over the rebate has been Germany, which has seen its standing as the paymaster of the EC damaged by the strains of unification.