The EU budget rebate

European Council backstage March 2013
European Council backstage March 2013 by European Council, on Flickr.
The No campaigners keep repeating their scaremongering stories about the EU ad nauseam:

A spokesman for Better Together said: “As part of the UK we get special deals in the EU.

“What Alex Salmond needs to be honest about is what would happen to our opt-outs on the Euro and the no borders immigration scheme, as well as what would happen to our rebate.”

I don’t know why they even bother mentioning the Euro any more. As discussed previously on this blog and in many other places, Scotland does not currently fulfil the criteria for joining the European currency, and it seems unlikely that Scotland would be able to introduce the Euro before 2023, even if it became a political priority. Also, Sweden has demonstrated how any EU country can stay out of the Euro without having a formal opt-out by refusing to join the Exchange Rate Mechanism (ERM-II).

The no borders immigration scheme is a novel way to refer to Schengen. Schengen is actually a wonderful idea, which allows people to travel freely across Europe without ever needing to produce a passport. However, the UK and the Republic of Ireland decided not to join this and to continue with their own Common Travel Area (CTA) instead. The whole idea of the CTA would fall apart if Scotland joined Schengen instead, so it would probably lead to all of the British Isles joining Schengen shortly afterwards if this happened. I would expect the rUK to put up a big fight to keep Scotland in the CTA for this reason. There’s a good discussion of this on Wings over Scotland.

The last point made by Better Together was the UK rebate. There are actually huge problems with the way it works:

The rebate distorts UK funding negotiations with the EU. Normally, countries and independent agencies within each country bid to receive central EU funds. The UK government is aware that two-thirds of any EU funding will in effect be deducted from the rebate and come out of UK government funds. Thus the UK has only a one-third incentive to apply for EU funds. Other countries, whose contributions into the budget are not affected by funds they receive back, have no incentive to moderate their requests for funds.

I wouldn’t be surprised in the slightest if this was the reason for Westminster’s recent decision to block Scotland’s access to EU funding for tackling youth unemployment:

Westminster’s decision to stand in the way of Scotland accessing EU funding to help tackle youth unemployment has been branded one of the clearest examples of Westminster’s anti-Europe agenda “actively damaging” the job prospects of people in Scotland.

The European Youth Guarantee provides young people under 25 an apprenticeship, training place, job or the chance to continue in education within four months of leaving education or becoming unemployed. However, the UK Government does not support the scheme, meaning that young people lose out on the EU support available to them.

In Scotland the Opportunities for All scheme already guarantees an offer of work, training or education for young people in a similar way to the EU’s Youth Guarantee – but the Westminster Government’s stance means that Scotland is unable to benefit from this EU funding.

Of course, an independent Scotland might try to apply for as much EU funding as possible, rather than trying to obtain a rebate like the UK’s. To take just one example, as pointed out by Business for Scotland, Scotland currently receives the lowest agricultural support in the entire EU. If we play our cards well, we might well manage to receive more money in this way than the rebate would have given us.

However, if Scotland doesn’t manage to receive significantly more funding after independence, it’s worth pointing out that Denmark, the Netherlands, Sweden, Austria and Germany are now also receiving various rebates, and it’s therefore not a mechanism unique to the UK any more:

Future correction mechanisms (ORD 2014-2020) subject to approval:

The UK rebate will continue to apply; Denmark, the Netherlands and Sweden will benefit from gross reductions in their annual GNI contribution of €130 million, €695 million and €185 million respectively. Austria will benefit from gross reduction in its annual GNI contribution of €30 million in 2014, €20 million in 2015 and €10 million in 2016; reduced VAT call rates for Germany, the Netherlands and Sweden will be fixed at 0.15 %.

Of course, given that Scotland after independence will be a richer country than the rUK, it’s completely fair if we have to pay a wee bit more in EU membership fees. At the same time we should be able to get substantial amounts of benefits back from the EU, much more than we currently get, and if we still need some sort of rebate, I’d expect other small rich EU countries like Denmark and Sweden to be our allies in the budget negotiations.

Focusing solely on the UK’s rebate is not the right approach, and it reveals a lack of understanding of how the EU works. Of course Scotland will continue to do well out of our EU membership, and probably significantly more so after independence.

5 thoughts on “The EU budget rebate”

  1. On the “richer” point in your last paragraph. If McLaren and Armstrong are right (humour me please!) in claiming that Scotland’s GNI is less than that of the UK, then in terms of EU contributions Scotland would not be reckoned richer as these are GNI- rather than GDP-based.

    1. An excellent point! If London continues to be the location of the HQ of companies operating mainly in Scotland, that could lower Scotland’s EU membership fee and raise the rUK’s. If I remember correctly, a member state’s contribution is 1.24% of GNI, so the exact value of Scotland’s GNI will be very important in this respect.

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