Europe's great money trick

Why the row about EU cash? - Will we pay billions more? - Where does it all go, anyway?
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The Independent Online
Q. Why is there a row over cash for the EU?

A. The European Union wants more of it. Some Tories think it gets too much already and doesn't look after what it has. So they want to prevent Britain from agreeing to an increase in its contribution to the EU budget. Unfortunately for the penniless souls in Brussels, the debate in Parliament coincided with the release of a report detailing financial shenanigans across Europe which made them look like spendthrifts.

Q. Coincidence or conspiracy?

A. Coincidence, but a neat one. The Court of Auditors releases its annual report at this time every year. The increase in the budget has been on the books since a financial deal at the Edinburgh summit in 1992, though it only kicks in next year. Until now, agreement had been blocked because of an arcane row over milk quotas with Italy. Once that was solved, the budget could increase.

Q. How much more will we have to pay?

A. Total British contributions will go up from pounds 7bn in 1992 to pounds 10bn in 1996. That's about pounds 400 per taxpayer.

Q. So we are paying billions more to Brussels?

A. Yes, but we'll also get billions more back - about pounds 4.5bn, compared to just under pounds 3bn. European money goes to help depressed regions in Britain, education and research as well as to farmers. And because Baroness Thatcher bashed the table often enough, we also get a special rebate. That will go up to about pounds 2.2bn from pounds 2bn. Overall, our net contribution will be about pounds 3.5bn from 1996, up from about pounds 2.2bn - pounds 100 per taxpayer. It would have gone up anyway over this period, because of inflation and economic growth. The Government estimates the increase, above the inevitable increase for inflation etc, will be about pounds 250m a year by the end of the decade, pounds 10 per taxpayer.

Q. Why does the EU need more cash anyway?

A. Over the next decade, Europe is supposed to be coming together in an economic union. The aim is to help reduce the gap between rich and poor, in particular through a large new fund for the poorer southern countries. Britain signed up for this principle at Maastricht in 1991, in a treaty that has been ratified by the House of Commons. John Major put his name to the money in 1992. That is why he says he can't go back on it now.

Q. Where does all the money go to?

A. About half of the EU's pounds 60bn budget goes on agriculture, though the proportion is declining. More of it is given straight to farmers, and less is used to subsidise exports - a policy that had created huge loopholes for fraudsters. The other big chunk is for poor areas and countries. Together, these two categories account for 80 per cent of spending. Administration, foreign policy, education and training and research all fit into the remaining 20 per cent. The total budget looks huge, but it's about a quarter of British government spending for seven times as many people.

Q. Don't EU bureaucrats live lives of luxury?

A. Yes. Compared to the low-paid, they do. Compared to MPs or journalists, it's about even. Salary scales are generous but the work is often gruelling; the bureaucrats are highly qualified and most could earn more in the private sector.

Q. Couldn't they use existing cash better?

A. Yes. At least, that is the message of the annual report from the Court of Auditors. It accuses the Commission, the EU's executive, of wasting billions through poor administration, lousy programmes and incoherent policies.

Q. Does that mean massive fraud?

A. There is fraud on a large scale in Europe, but probably more cash is wasted through silly policies or poor control. Fraud can be detected and corrected, though the present system makes it difficult. But when the rules are properly applied, cash can be wasted just as easily, and there's no redress.

Q. Is the EU doing anything about fraud?

A. It has set up a new, tougher anti-fraud unit. It has a telephone number for informers and may introduce rewards for good tips. The very fact of the Court's report - and the attention it received - shows that abuse is taken more seriously than in the past. That said, it still goes on - especially in Italy, the source of half the farm fraud discovered in 1993.

Q. Why does Britain pay more than anyone else?

A. It doesn't. That honour goes to Germany, both absolutely and per capita. By the end of the century, because of changes to the budget, five countries will pay more per head. Some rich countries still get off very lightly, however, especially the richest of the lot - the Luxembourgers. This tiny bankers' enclave gets more per head from the EU than any other state but Ireland.

Q. Will the Commission put a stop to that?

A. Ask Jacques Santer, the next President of the Commission. Actually, don't bother: he comes from the plucky little Duchy.

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