David Cameron deserved to be defeated on the EU budget

IT is hard to know what David Cameron, the Prime Minister, is playing at. His humiliating defeat at the hands of an unholy alliance of Tory Eurosceptic MPs and Labour opportunists was yet another blow to his authority. The rebels’ cause was a good one: Cameron wants to freeze the EU budget in real terms (and thus increase it in cash terms) but the rebels wanted to cut it in real terms.

Cameron’s position was untenable: he rightly supports real terms spending cuts in the UK so the fact that he was not prepared to go that far with the deeply unpopular EU budget was strange, to say the least. Another, far worse defeat awaits the Prime Minister if he returns from his negotiating trip to the continent in a few weeks’ time with anything other than real cuts or a veto.

One should never forget just how suspect the EU’s budget really is. Last November, for the 17th year in a row, the European Court of Auditors – the EU’s auditors – refused to sign off on how Brussels’ budget was spent in 2010. In language that by accountants’ standards is damning, the Court warned that the EU’s “supervisory and control systems are partially effective in ensuring the legality and regularity of payments” and that “because of the significance of the matters described … the payments underlying the accounts for the year ended 31 December 2010 are materially affected by error.” In other words, there are huge errors or fraud in spending – the Court of Auditors put this at 3.7 per cent of the total budget of €122.2bn, casting doubt on €4.5bn worth of payments, a huge sum of money. The error rate in the cohesion, energy and transport budget was even higher than average at 7.7 per cent. The fact that the EU is so bad at controlling and accounting for its spending means that member states should think twice before entrusting it with even more resources.

The effect of yesterday’s parliamentary defeat for the Prime Minister will be many-fold. The age of deference in the Tory party is coming to an end. He should have done more to manage and reach out to his party; but his aloofness and seeming dislike of his colleagues have left him increasingly isolated. The biggest problem is that the coalition has brought together a rabidly pro-EU party, the Lib Dems – who have not been held to account for their utterly misguided attempts to get the UK to join the euro in the 1990s and 2000s – and an increasingly Eurosceptic Tory party. The Lib Dems are implacably opposed to trying to wrest back even some powers back from Brussels. Tory MPs, meanwhile, are hardening their position and are angry at the EU’s power grab over the City, financial regulation and the rest. There is growing fury, including at cabinet level, at how the EU massively restricts the government’s freedom of action in many areas.

Most Tory MPs now privately or publically back a drastic renegotiation and a growing number support outright withdrawal.

Cameron’s strategy is to try and bid for time, stick with the status quo and hope that something turns up. That isn’t working. The single currency will probably survive for the time being, even if Greece eventually leaves. There may well be another EU treaty soon, something which Cameron will have to put to a referendum in the UK and is bound to lose. At the very least, the UK may soon face an integrated Eurozone block over which it has little influence – but which will nevertheless control huge swathes of UK policy, including many vital regulatory areas.

So which will it be for the UK? More EU, less EU or no EU? We will find out within five years – and perhaps far sooner.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath

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