Despite David Cameron’s insistence that the independence referendum is a matter for Scots, he keeps on sending his personal emissaries up here to lecture us on the apparent benefits of the Union. The latest one to do so was William Hague who ventured north last week to point out how much worse off we will be if we vote for independence. The reason for this was the loss of the UK’s famous budget rebate. Cue for warning headlines such as, UK warns Scotland its EU budget contributions could soar and An independent Scotland would end up subsidising England’s EU rebate. Scary stuff, though of course all this does is to provide confirmation that an independent Scotland will be such a rich and wealthy country that we can afford to help out our poorer and heavily indebted neighbour to the south. Didn’t see that headline either. All this talk about Scotland losing its share of the UK rebate is of course only relevant if Scotland remains part of the EU and we have not been cast adrift or expelled. So really we have two Unionist myths demolished in a couple of headlines. Perhaps we should ask William Hague to come up here more often.
Behind all these claims about the rebate and its loss to an independent Scotland is the assumption that the rest of the UK will retain unchallenged and unchanged the current UK’s membership of the EU and its assorted opt-outs and exceptions. Various legal opinions have been offered to this effect. But it cannot be stressed often enough that a legal opinion is just that, an opinion, albeit probably a very expensive opinion. It remains merely an opinion until such time as it is accepted or rejected. In the case of the rUK that will come when, after Scottish independence, the rUK makes some kind of application to the other EU states asking for their approval of this continuity and their approval for the continuance of all these famous opt-outs and in particular the continuance of the budget rebate. But what if some member states say no, non, nein. We are constantly told that Scotland’s application to join/rejoin/stay in will require the unanimous approval of all 28 member states. But will this unanimity not also apply to rUK’s application to retain all the soon to be former UK’s opt-outs and exceptions? While no-one is likely to want to expel rUK, some member states might well want to use this opportunity to put in some conditions. They seem to be very keen to do so with Scotland, so why not with rUK? What about a deal with rUK whereby it gets to retain its membership on condition it gives up the rebate, or at the very least agrees to significant changes to it? After all just about all the other 27 member states resent the UK’s budget rebate, they have to pay for it. In typical faux imperialist arrogance the UK’s leader never seem to be willing to consider that the rUK may not be in the strongest position when it comes to negotiating a deal. In fact the likes of William Hague seem to live in a world where rUK will not have to negotiate anything – the rest of the world will just do what we tell them. A position that was comprehensively destroyed the previous week when the UK Treasury was forced by the markets to issue a statement that rUK would honour all UK debt in the event of Scottish independence. William Hague and the Foreign Office seem to be a bit behind the curve here.
When it comes to the calculation of the UK rebate there are a couple of points worth making. The first is that some kind of rebate deal was always on the cards. Right from the start of the UK’s membership of the EU it was recognized that there would be a continuing and significant imbalance between what the UK paid into the EU and what it received back. This was particularly important in the 70s and 80s as the UK was then one of the poorest member states. The reason for this budget mismatch was, and continues to be, the Common Agricultural Policy (CAP) of the EU. The UK gets relatively little out of this spending, which remains by far the biggest element in the EU budget. Over 70% in the 80s and still just over 40% today. Here it is worth noting that if our great and prescient leaders in Westminster had joined the EU at its inception in the 1950s there would be no CAP, or at the very least it would be a completely different CAP, one which benefited UK agriculture as much as French and German. Yet another example of how we continue to pay for the incompetence of UK decisions.
The UK budget rebate, though it continues to be controversial, was resolved on the basis of a principle. This principle is set out in the original European Council agreement from 1984, where it states; “However, it has been decided that any Member State sustaining a budgetary burden which is excessive in relation to its relative prosperity may benefit from a correction at the appropriate time.” In the case of the UK this correction was defined as a rebate of 66% of the difference between what the UK contributes to the EU budget and what it gets back. This remains the basic formula, though as the EU has expanded to the east, most of the EU spending in these new member states is not covered by the UK rebate. This means in effect that the rebate is reducing in value. To complicate matters the Netherlands, Sweden, Austria and Germany have their own rebates, in an attempt to put a limit on how much they have to pay for the UK rebate. Another point to note is that the existence of the rebate is a disincentive for the UK to apply for EU funding. The more EU money that comes to the UK, the lower the rebate.
What might all this mean for an independent Scotland? In the first place, given that the UK rebate is controversial, the other member states may use the opportunity provided by Scottish independence to force through its abolition, or a substantial change in its calculation. If on the other hand the rebate continues in its present form, it is worth noting that the UK rebate is not simply the result of Maggie Thatcher’s handbag, so fondly projected by her sycophants. Rather it was a negotiated agreement which was based on the recognition by all that no member state should be expected to sustain an excessive budgetary burden. As such if it can be shown that an independent Scotland would also suffer from such an excessive budgetary burden, it would be difficult for the rest of the EU to ignore this fact. As the smaller rebates for the Netherlands, Sweden, Austria and Germany illustrate, the EU tends to work in a spirit of negotiation. Finally if there was to be no rebate for an independent Scotland it would then be in a position to apply for the maximum funding from the EU budget.