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EU budget demands are a test for Cameron

    From 1st April, the government’s fiscal consolidation was starting to bite. It will be making £16 billion worth of spending cuts this year, whilst increases to VAT and employees’ National Insurance Contributions will squeeze family incomes. Nevertheless, support for the restraint has by-and-large been resolute. Most of the ordinary public recognise the need to close the deficit, and are willing to accept that they will have shoulder some of the burden.

    But this goodwill should not be taken for granted. We have already seen support for operations in Libya sour as hard-pressed families rightly ask “is it right to make cuts at home to fund wars abroad?”. The bilateral aid to Ireland was met with some criticism in the mainstream press, whilst the potential threat of having to make loans to Portugal looms large.

    Other countries are facing similar dilemmas. Ireland and Greece have had deep austerity packages imposed upon them, whilst Spain looks nervously over its shoulder. Many German voters are increasingly anxious that their taxes are being used to bankroll southern Europe.

    This makes it all the more extraordinary that the European Commission has today outlined plans for a large increase in its budget. The unelected, and thus largely politically unaccountable, executive arm of the EU has called for an above inflation 4.9% rise in its annual funding - the estimated cost of which could be as much as £680m according to Open Europe.

    How is such an increase justifiable to British taxpayers? It would mean that all of the efficiencies predicted from the cutting of quangos would be foregone in one fell swoop. And whilst we can argue the pros and cons of bail-outs against the opportunity cost of not acting, the lack of transparency with the Commission’s need for this extra funding means the public are likely to be particularly sceptical.

    This is going to be a big test for David Cameron, who put pressure on the EU (alongside Germany and France) to freeze the budget in real terms until 2020. But the signs of Cameron being up for a fight over this are not particularly strong. Already a Downing Street source has highlighted that the UK has no veto over this (as the framework was agreed to 2013 by Labour), and that last time Cameron pulled off a victory by reducing this year’s increase to ‘only’ 2.9%.

    My suspicion is that the Commission knows that obtaining a 4.9% increase is unlikely, and is setting the bar high to be bartered down to appear to be reasonable. But given the alliance of Merkel, Sarkozy and Cameron in suggesting a freeze for this budget, anything other than that can surely only be seen as an embarrassing climb down.

    Ryan joined the Centre for Policy Studies in January 2011, having previously worked for a year at the economic consultancy firm Frontier Economics.

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