UK Chancellor warning over interest on €2bn EU bill

A senior British minister has warned the European Commission not to impose interest penalties on the UK from December 1st over its refusal to pay an extra €2.1 billion towards the EU's budget.

In the House of Commons yesterday, chancellor of the exchequer George Osborne repeated prime minister David Cameron's declaration – one much criticised in Brussels – that he will not pay the bill.

"We are not going to be rushed into something that is not in the interests of the British taxpayers," the financial secretary to the treasury, David Gauke, later told the House of Commons's EU scrutiny committee.

“We do believe that it would be wrong for a member state to find themselves being levied with significant interest payments as the current regulations suggest,” Mr Gauke told a hurriedly-arranged meeting.

‘Bizarre outcome’

The committee’s chairman, Conservative MP

Bill Cash

, said the rules that led to the last-minute demand and produced “such a bizarre outcome” are based on provisional numbers that are subject to later amendment.

Equally, he said the figures produced by other EU states underplay economic activity because they exclude the black economy: “These figures are based upon a very dodgy dossier,” Mr Cash told Mr Gauke.

Agreeing that figures from other states are questionable, Mr Gauke said the European Court of Auditors last December raised questions about the level of scrutiny shown by the European Commission when it investigated the truthfulness of the number.

“What is clear is that for this system to work fairly there needs to be a consistent approach with regard to the statistics of all member states. And if, for example, the UK’s approach is out of line with other member states, that could result in an unfair treatment,” he said.

Rejecting criticism that London was slow in spotting the problem, Mr Gauke said UK officials were informed of the surcharge at a meeting in Brussels with junior European Commission officials on October 17th.

“Senior officials worked up advice on the following Tuesday,” he told MPs. “That was shared with the chancellor. The PM was informed on the Thursday, the 23rd. That was the day that I was first informed. The chancellor was aware beforehand.”

Saying it was “long-standing practice” that adjustments are made to member states’ contributions, Mr Gauke said: “Changes are made in every year. Sometimes countries pay a little more, or a little less.”

However, the numbers this year are “of a different order of magnitude”, totalling €10 billion worth of readjustments”.

Meeting of ministers

The chancellor of the exchequer will speak with fellow EU finance ministers, including Ireland’s

Michael Noonan

, about the crisis at a scheduled Ecofin meeting in Brussels on Friday.

Saying that Mr Osborne would go into the talks with a “flexible” attitude, Mr Gauke said it was not “reasonable” to put forward a demand for a €2.1 billion extra payment on contested figures and then to expect it to be paid six weeks later.

Every year the membership contributions of EU states are subjected to all kinds of last-minute revision, but this is the first year that a number of countries – the United Kingdom and the Netherlands particularly – have been faced with significant bills.