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8th Aug 2020

EU commission warns UK about its rebate

  • The UK will have to pay fines if it doesn't cough up €2.1bn (Photo: Ken Teegardin)

The UK has to pay its outstanding €2.1bn bill by 1 December or face monthly penalties, EU budget commissioner Jacek Dominik said Monday (27 October) in a press conference.

Dominik said he was "surprised" to witness the "anger" of British Prime Minister David Cameron who last week vowed not to pay the bill at such short notice.

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The commissioner said British officials knew since 17 October, when all member states were presented with their corrected share of the EU budget, based on changes in their gross national income (GNI) compared to what they had projected.

"What is extremely important is to remember that these figures are presented by member states based on their own statistics and approved by Eurostat," Dominik said.

For the UK, the adjustments to the GNI go as far back as 2002, meaning that the UK has constantly contributed less than it should have to the EU budget. The British statistical office has adjusted the way it calculates GNI to also include the revenues of non-profit organisations and the shadow economy.

"I know my UK colleagues, they are very experienced with budgets, calculating everything. They never raised this issue with me, we could have at least gotten a hint," said the commissioner, who met all the finance minsters in Luxembourg earlier this month and discussed the EU budget.

Asked if Britain could delay or pay the bill in tranches, Dominik said such measure would require a qualified majority among member states in the EU council.

"It would be extremely difficult to do it. The regulation on own resources also concerns the British rebate, if you open up this act for future negotiations, you open a Pandora box," he said.

The British rebate, negotiated in the 1980s by Prime Minister Margaret Thatcher is worth €5.9 billion this year and would increase by over €500 million next year using the same GNI calculations that led to the increased contribution.

"I think that it would be extremely difficult to explain to other member states why on Monday you like this data and on Tuesday you don't," Dominik said.

He said that in case Britain does not transfer the money by 1 December, the EU commission will first write a letter asking for explanations. If the explanations are not credible and the payment continues to be delayed "for weeks or months", the EU law foresees penalties of at least two percent of the total bill plus 0.25 percent for each month of delay.

Dominik also stressed that the money is going back to other countries that have paid too much into the EU budget and "no single cent" from this British contribution will be spent by EU institutions.

The EU is actually paying back an extra €420 million this year, as it had extra revenues from its own taxes, Dominik said.

Apart from Britain, the Netherlands, Bulgaria, Greece, Malta, Italy, Ireland, Cyprus and Latvia also have to pay extra. France is the biggest beneficiary of the recalculation, with over €1bn in reimbursements. Eighteen other EU states are also getting money back.

Cameron remained defiant about the surcharge on Monday however.

"We reject this scale of payment. We'll be challenging this in every way possible, we'll crawl through this in exhaustive detail," he told British parliament.

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