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Mrs Thatcher’s rebate, and the cost of Mr Blair’s concession

The UK rebate negotiated by Mrs Thatcher in 1984 has, as show in the table below, saved the UK £85.9bn up to 2015, which in today’s (2015) money amounts to £115.4bn, a rather remarkable return for her ‘handbagging’.

Without this rebate, the net UK contribution would have more than doubled over these 28 years, and of course, until the day that a future Prime Minister no longer vetoes its abolition, this grand total will continue to increase. In terms of pounds saved over these years, it amounts to £1424.35, for every man, woman and child of the UK population, or again to put this into today’s money, with the help of HMT’s deflator, £1929.69 for every man, woman and child in the UK.

Criticism of the UK rebate became more intense after the admission of 10 new members in 2004 and the resulting increased pressure on the EU budget. Before the meeting of the European Council in June 2005 to discuss the budget for 2007-2013, President Chirac had said ‘le cheque Britannique’ could ‘no longer be justified. It is from the past.’[1] He suggested that Britain should give it up as ‘a gesture of solidarity for Europe.’[2] One of the aides of Jean Claude Juncker, then president of the Council, said ‘It is the key to everything… a psychological key. If it stays where it is, there are quite a few new member states from eastern Europe who would be financing the rebate, and to many eyes that is not quite decent.’ The Dutch Finance Minister said it was ‘unacceptable’. Peter Mandelson, then trade commissioner of EC, sided with its critics, on the grounds that it was ‘wrong to ask new member states to contribute towards it.’[3]

At this meeting Mr Blair robustly rejected all these criticisms, by pointing out that even with rebate, the UK contribution was still larger than that of France. Supported by the Chancellor and Foreign Secretary, he made it clear that there would be no negotiations about the rebate. The meeting ended with considerable ill-will, especially between Britain and France.

However, immediately after the meeting, the UK assumed the presidency of the Council, and on assuming it, or at some point shortly afterwards, Mr Blair seemed to have a change of heart. The BBC reported him as saying that the rebate was ‘an anomaly that has to go.’[4] In his memoirs he observed that ‘as Europe enlarged it… became unfair to others. This was not hard to see. The figures were there. Agreed. Clear. In pounds, shillings and pence. Or euros.’[5]

Unfortunately, he has never shared those figures with anyone. His account of the summit at which he agreed to amend the rebate is singularly uninformative. ‘We preserved the rebate’, he declared, ‘tied its demise to the CAP, and agreed a break in the budget period where both could be reformed.’[6] He had agreed to abandon the right to a rebate on non-agricultural spending in member states that joined in or after 2004, apparently in the expectation that CAP funding would fall. [7]

It is still not entirely clear how much Mr Blair’s concession has cost and will continue to cost the UK. In the House of Commons on 11th February 2013, Mr Cameron claimed that it had reduced the rebate by 50 per cent. Business for Britain carefully estimated it to be £10.4bn over the years 2007-2013.[8]

However, if we compare the rebates as a mean percentage of the gross total UK contribution over the preceding 22 years with the mean percentage over the years since 2006, it seems to be rather less than the figure given by Mr Cameron, amounting to an overall reduction of around 10 per cent. This means that, up to 2015, it has cost HM Treasury £12.5bn, or in today’s money £13.3bn, and every person in the UK £206.34 (2015).

Or to put it the other way around, had Mrs Thatcher’s rebate not been amended, every man, woman and child in the UK would have benefited by £2136.03 in today’s money. As a result of Mr Blair’s gesture to European solidarity, they have benefited by just £1929.69, though this sum will, of course, increase in the years ahead.

Chapter 15 - table

Sources:  All financial year figures up to 1995-1996 are taken from Departmental Reports of the Chancellor of the Exchequer’s Departments or, prior to 1992, Government Expenditure Plans. Figures for 1996-97 to 2016-17 taken from p.14, European Union Finances 2014: statement on the 2014 EU Budget and measures to counter fraud and financial mismanagement, Cmnd  8974 Dec 2014; p,.17 European Union Finances 2015: statement on the 2015 EU Budget and measures to counter fraud and financial mismanagement Cm 9167 Columns 3 & 4 were calculated with the HM Treasury Deflator https://www.gov.uk/…/gdp-deflators-at-market-prices-and-money-gdp

Notes 

[1] Booker & North, p.548

[2] Booker & North, p.558

[3] Booker & North, pp. 558-59

[4] BBC News “Blair says EU rebate ‘has to go’” (June 2005) http://news.bbc.co.uk/1/hi/uk_politics/4114180.stm

[5] Blair, A Journey (2011), p.535

[6] Blair, p.542

[7] The complex formula for calculating the rebate is described pp.376-8, Change or Go. BfB

[8] ibid p.369. Where the cost of Mr Blair’s concession


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