No More Rebates In EU Budget After Brexit, Commission Urges

The European Commission on Wednesday urged EU states to drop the system of asking for rebates from their budget contributions if and when the UK leaves under Brexit.

The request was part of a general message from the EU's executive telling member states to quickly sort out the bloc's 2021-2027 long-term budget plan so its contours are fixed by the end of the year.

Up to now Britain, the EU's second-biggest economy, got a hefty rebate on its contributions to the bloc's budget under a concession won in 1984, five years after then UK leader Margaret Thatcher famously demanded "I want my money back."

Similar refunds were also offered to other wealthier EU states, resulting in complicated budget haggling and calculations. Consequently those states pay proportionally less in net terms than some poorer ones.

The Commission has called the rebate system "opaque" and "skewed".

A European summit next week was meant to tackle the issue of the long-term budget, known as the MFF, for "multiannual financial framework".

But Brexit now looks certain to suck up all the air in the room.

And if Britain leaves by an October 31 deadline, as London wants, then there will be less money in the pot -- and five countries including Germany are against having to dig too deep to help make up the shortfall.

"The current challenges are considerable and Europe cannot allow itself to delay adopting its long-term budget," the EU budget commissioner, Guenther Oettinger, told a media briefing.

The Brexit gap

Member states have already been intensely negotiating since mid-2018 on the basis of a Commission proposal calling for a multi-year budget of 1.3 trillion euros ($1.4-trillion) .

That equates to each member state contributing 1.114 percent of its gross national income (GNI).

At that level, it would cover only half the budget gap left by Britain's absence. The other half of the missing British contribution is meant to come from cuts to EU spending.

Oettinger said that the budget gap left by Brexit would be 12 billion euros the first year, then 84 billion over the following seven years.

But the five frugal countries want the contribution capped at 1.0 percent of GNI, Austria's finance minister, Eduard Mueller, said before a budget meeting in Luxembourg.

That would leave far less money for "new priorities" the EU wants to finance, such as common defence and migration, unless spending is drastically cut on traditional outlays such as building infrastructure in poorer member states and supporting agriculture.

Oettinger said that, "at 1.0 percent, we won't make it".

Some ideas for new revenue streams include tapping the carbon trading scheme or creating a tax on non-recyclable plastics.

The European Parliament has expressed concerns that the budget situation could become even more complicated if the new Commission taking office next month announces costly new initiatives, notably on tackling climate change.