Walker's World: The bill for Europe

FRANKFURT, Germany, Dec. 17 (UPI) -- The Court of Auditors of the European Union has announced, for the 13th year in a row, that it will not sign off on the accounts of the EU's $190 billion budget, since it is again riddled with fraud, fiddles and dubious or unaccountable spending.

This unsavory news was circulating as the British Parliament was weighing the European Communities (Finance) Bill. This gives legal force to the deal that Prime Minister Tony Blair reached two years ago on Britain's future contributions to the EU budget. It also comes as Prime Minister Gordon Brown last Friday signed the new European Treaty, to intense outrage in much of Britain.

"We shall never surrender," declared the front-page headline of the Sun, Britain's top-selling tabloid. More than 50 members of Parliament from Brown's own party are threatening to rebel over his refusal to put the issue to a referendum as Brown's predecessor, Blair, had pledged. This anger is likely to be increased by the new EU budget provisions.

The bottom line is that for the budget period of 2007-2013, Britain will be paying very much more for the privilege of being a member of the EU -- $21 billion this year, with more rises to come. To put this into perspective, the entire cost of the 2012 London Olympic Games could be covered just by this year's payment. Or the government could cut corporation tax to less than 20 percent.

The EU has never been wildly popular in Britain, but these steep new bills are becoming a political problem, because Britain now gets less back per capita from the EU budget than any other member state. Britain gets back just over $1,100 a head, while France gets $2,300 per head, and Ireland $4,600. Bizarrely, the richest country in the EU, tiny Luxembourg, gets back a whopping $33,000 a head because of all the EU offices and agencies that are located there.

Britain is not the only victim of the EU's whacky accounting. Ireland, one of the richest countries in the EU, is a net recipient from the EU budget, while Cyprus, whose per capita income is half that of the Irish, is a net contributor.

Worse still, the vast bulk of the EU budget is spent on two sectors that the British government (and public) actively dislike and want to change. These are the Common Agricultural Program and the Structural Funds, which are meant to be used to help poor regions invest in the infrastructure that will help them to catch up with the richer ones.

The CAP takes 42.7 percent of this year's budget, which is $81 billion. But this disguises the real figure because another 12.4 percent of the budget (or $23.5 billion) is spent on "rural development." The CAP is a lunatic nonsense that has helped sink the hopes of a successful Doha round of the world trade talks, because poor countries understandably object to the way the rich Europeans limit access to their food markets, while also subsidizing the prices of the food the EU exports.

Britain has constantly sought to reform the CAP, and has usually failed or been fobbed off with hollow promises. Blair agreed to the new deal that cut the famous rebate that Margaret Thatcher negotiated in the 1980s in return for a solemn promise that the CAP would be reformed. Fat chance. The CAP is so crazy that in 2004 the 10 new (and much poorer) member states from Central and Eastern Europe found themselves paying more into the CAP than they got in return.

Britain also thinks that the Structural Funds, which cost $68 billion this year (36 percent of the budget) are badly spent by the EU, which charges far too much to administer them. The EU's administrative costs have just gone up again by 28 percent in the new budget round, to more than $8 billion a year. This infuriates those members of the European Parliament who note that the auditors routinely refuse to sign off on the budget. Whatever EU taxpayers are paying, they are certainly not getting efficient and trustworthy administration.

The money is sent from London to Brussels, where EU bureaucrats work out how to spend it and then send back a considerably lesser sum to be spent on projects in Britain. Cut out the middle man, argues Brown, and let the elected national governments spend the money as they see fit.

The passage of this bill through the British Parliament will be the more contentious because it coincides with the row over the ratification of the new EU Treaty, which replaces the ill-fated draft EU constitution that was rejected by Dutch and French voters in two referendums in 2005.

With one or two minor changes, the treaty is virtually identical to the constitution, on which the Blair government had promised a British referendum. But Brown insists that the treaty can be ratified by Parliament alone, despite overwhelming support in opinion polls for a referendum. It helps explain why Brown and the Labor government are now significantly behind the Conservative opposition in the polls.

It is worth recalling that Britain's relationship with Europe has become the killer issue for British politics. It broke Thatcher and finished off her successor as prime minister, John Major, when each of them faced bitter internal party revolts -- Thatcher for being too anti-Europe and Major for being too pro-Europe. Brown is now facing his own internal revolt over the question of a referendum on the new EU Treaty. Britain's higher bill for Europe could hardly have come at a worse time.