The proposals are a serious setback for David Cameron who opposed any fresh
EU institutional changes and recently renewed his "referendum lock" pledge to hold a popular vote on any future treaty that involves any loss of British sovereignty. The European Commission plan to overhaul the way the EU is financed, including the end of the rebate by 2013, has coincided with a French and German call for new treaty within two years, developments that risk ending the coalition's political truce on Europe.
Jose (acute accent on the e) Manuel Barroso, the Commission President, yesterday published new proposals to review how the EU's growing budget is financed. In a bid to bring Brussels spending "closer to EU citizens", he has tabled plans to move away from complicated national contributions paid by Treasuries, a system include the British rebate or "correction", towards a more "transparent" system of new European taxes. "We need to take another look at the byzantine set of corrections and trade-offs. I believe it is high time to promote a system that is understood by citizens," he said. "We encourage everybody to engage in an open debate without taboos."
Nicolas Sarkozy and Angela Merkel's demand on Monday night for a new EU treaty to prevent future Greek-style euro zone crises will put the government under intense pressure to hold a vote on the EU from many Tories, who were angry at Labour's refusal to hold a referendum on the Lisbon Treaty. The demand for "revision" to the Lisbon Treaty by 2013 from President Sarkozy and Chancellor Merkel will put the Prime Minister on a collision course with them at an EU summit on "economic governance" to be held in Brussels on Oct 28. Bill Cash, the Conservative chairman of House of Commons European scrutiny committee, signalled that there will be backbench Tory demands for a referendum on a new EU treaty and opposition to any question of touching the "non-negotiable" rebate.
"This must not only be refused on the basis of not giving new powers to the EU but we have to have a referendum," he said. "With the rebate and tax proposals, the EU is making demands that are completely unacceptable to the British people." Douglas Carswell, the Eurosceptic Tory MP for Clacton, warned that a Conservative-Lib Dem peace pact over Europe was in danger of unravelling because of the new EU demands. "The coalition managers have said they do not want to do Europe. Whether we like it or not Europe is going to be an issue," he said.
The rebate, first secured by Margaret Thatcher in 1984, is worth £3 billion a year. Its loss would deeply undermine George Osborne's spending review which runs up until 2015, potentially meaning that Britain could have to pay over £6 billion in extra payments to the EU in the two years after 2013. Also deeply controversial for Britain, and other countries including Germany and France, is the idea that Brussels budgets can be funded by EU taxation via "a separate EU VAT rate, a share of an EU energy tax or of an EU corporate income tax". "It would be completely unacceptable for governments to hand the unelected European Commission the powers to raise taxes from citizens. The EU budget is in urgent need of reform and remains hugely wasteful, but this won't be solved by giving the EU new powers to demand more money," said Stephen Booth, a spokesman for Open Europe.
