27 October 2014

European Voice: Commission fights back against UK budget criticism

Commission sources were quick to point out that the Commission has no leeway to extend the UK’s payment deadline, since 1 December is set down in budget rules from 2000 as the day when adjustments are to be credited or debited to the member states. (Should the UK refuse to pay, it will eventually be charged penalty interest on the sum outstanding.)

Nor, they said, does the Commission have any say over the size of the adjustments, which are the result of the recalculation of figures for gross national income (GNI), a measure of a country’s economic output that determines around three-quarters of its contributions to the EU’s annual budget. Annual budgets are based on GNI projections, but adjustments are made each year once actual figures are available, and they may also be made reaching further back – for example, when new methodologies are applied retroactively.

“There is no active role for the Commission, there’s just a passive one to collect all the relevant data provided by statistical offices and then distribute the burden according to the share in GNI of a particular member state,” he said. “This is a very technical exercise.”

But Dominik was forced to acknowledge that the cumulative effect of adjustments this year meant that the figures involved were far higher than in previous years, pushing the issue beyond a “technical exercise” into the realm of the political. In September, the member states switched to a new methodology for calculating GNI and other statistical measures.

This in turn prompted national statistical offices, in co-ordination with Eurostat, to clean up the data from previous years to resolve any outstanding issues before the new methodology takes effect (currently expected in 2016). One of the corrections applied by the UK’s Office for National Statistics was to include charities in its GNI calculation, which resulted in a higher GNI for the years since 2002. Incidentally, as Dominik also stressed, the same GNI calculation will also lead to a €500 million increase in the UK’s rebate – the money that it gets back from the EU budget each year.

The adjustments across all the member states yielded a theoretical increase of €9.5bn in their contributions to the EU budget – money that the Commission cannot simply add to the annual budget, since it is set by the member states and the European Parliament each year. Therefore, the Commission also proposed, through an “amending budget”, to redistribute this theoretical yield among the member states according to their current GNI. The member states and the Parliament are now required to approve that proposal before it can take effect. “The Commission is not gaining a single cent out of this process,” Dominik said.

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