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Friday, 7 November 2014

George Osborne’s European triumph

Today, as a result of negotiations with EU finance ministers over the UK’s additional contribution to the EU budget following upward revisions to UK GDP, George Osborne said:

“Today I can say this: instead of footing the bill, we have halved the bill, we have delayed the bill, we will pay no interest on the bill.”

This would have been quite a result, given that any reduction in the UK’s contribution would have meant some other EU countries getting less than they expected. All the more remarkable given that the Financial Times reports that:

“Officials involved in the closed-door negotiations between finance ministers said Mr Osborne did not complain about the overall bill. Instead, the debate focused on delaying the payment, which will allow the British government to pay after the general election in May.”

So was “halving the bill” a last minute gift from other EU finance ministers? Had the Commission gifted the UK some money without telling anyone else what it intended to do? Neither, of course. The Chancellor had made that bit up. He had simply subtracted the UK rebate, which the UK was going to get anyway. Treasury officials tried to suggest that this rebate had been in doubt before separate talks with the Commission, but the FT reports Commission officials as saying that the rebate was never, ever in doubt.

So while the rest of the world reported that the UK had failed to get its additional contribution cut, the UK media dutifully repeated the Chancellor’s claim that it had been halved. BBC journalists were clearly suspicious about what had gone on, so their website led with “Osborne's EU budget claim challenged”. But they couldn’t bring themselves to actually report that Osborne’s claim to have negotiated a halving of our additional contribution was wrong. After all, he is the UK Chancellor, so surely he wouldn’t pretend he had done something he had not. Some lowly MP might play fast and loose with numbers, but not the man in charge of the UK’s finances. I suspect many in the media have still not fully appreciated what a unique Chancellor George Osborne is. 

When the UK’s leading supermarket chain, Tesco, discovered that they may have overstated their profits by mistiming some payments, four senior executives, including its UK managing director, were suspended while the matter was investigated. "Disappointment would be an understatement," said Tesco chief executive Dave Lewis. So will the UK’s chief executive, David Cameron, be reprimanding the Chancellor over his false claims? No, because given the stress that Cameron put on reducing the total additional contribution just before the negotiations, it is clear he was in on the deceit. Unlike Tesco, they think this kind of deception is just part and parcel of their business, and of course they also think that they can get away with it.   


14 comments:

  1. I think the Tesco analogy goes a bit further than you suggest, Simon. If the FT is to be believed, some of the EU rebate is being brought forward from 2016 in order to meet the full bill in 2015, meaning we will only get 1bn euros in 2016.

    This is rather like Tesco drawing forward future income into into its figures in order to boost short term profits and deceive shareholders about how well the business is doing. Tesco are now under invesitgation from the SFO, of course.

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  2. Though to be fair Chris Cook has a different version, about the rebate for previous years being bigger than it first appeared because the revised GNI figures lead to a higher rebate, and that it is this that is offsetting the 2015 payment.

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  3. rebate, which the UK was going to get anyway."

    I'm sure you can point me to where you said, before yesterday, that the UK "was going to get" the rebate.

    "the FT reports Commission officials as saying that the rebate was never, ever in doubt."

    Well they would say that, wouldn't they?

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    1. Just because the (utterly useless) British press didn't pick up on that part of the story, it doesn't mean the EU wasn't talking about it.

      Here's Budget Commissioner Jacek Dominik at an October 27th press conference.

      "Let me point out in this respect that the UK will benefit from the UK rebate for the additional payments in 2014. This will be budgeted in May 2015 when the UK rebate is recalculated."

      http://europa.eu/rapid/press-release_SPEECH-14-723_fr.htm

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  4. Even LBC managed to have Tory MEP Daniel Hanan saying that the Cameron-Osborne explanation was duff.

    You know you're BBC is in trouble when...

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  5. This debate reminds me of Andrew Lang’s famous quotation: ’He uses statistics as a drunken man uses lamp-posts...for support rather than illumination’!

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  6. If this Tory government is going to be reelected (I guess the Liberal Democrats will not be a factor), Great Britain can't be helped anymore.

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  7. Yet another example of why there will never be a true fiscal union to save the EU. Can anyone imagine this much press complaining about minor redistributions from wealthy New York state to Alabama? Never.

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    1. You mean: yet another example why there won't be true fiscal union for the EU so long as the UK stays in the EU. It's the UK as usual clogging up the works. It doesn't matter whether the government is Tory, UKIP, or Labour; the UK is poison to the EU - and what's more, it likes it that way.

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  8. So, we have a Chancellor who at best fluffs his lines; at worst not only can he not do sums, he actually makes the answers up with glee.

    Well, they do say that those who can do numbers become scientists, those who can't do the arts (Modern History for Gideon, but journalism must be in there) and those who are good at both become Economists... or not.

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  9. 'So was “halving the bill” a last minute gift from other EU finance ministers? Had the Commission gifted the UK some money without telling anyone else what it intended to do? Neither, of course. The Chancellor had made that bit up. He had simply subtracted the UK rebate, which the UK was going to get anyway.'

    When the blog of an academic puts it more clearly and succinctly than either the opposition or the media, you cease to wonder how the government continues to get away with it.

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  10. And all this because the government to make debt look smaller and to boost share prices have "improved" the definition of reported nominal GDP so that it looks bigger retroactively.

    Since the EU contributions are proportional to reported nominal GDP, and other countries have "improved" their definition less than the UK, the UK reported nominal GDP looks like having grown larger and thus the contribution has to be larger.

    But the press etc. do not seem fond to point out that the larger UK contribution is due directly to the UK government's decision to "improve" the definition of reported nominal GDP to make it looks larger.

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  11. Once the details of what THE CHANCELLOR said around lunch time on friday was looked into it was a lie. But the media spun the story that he has done something great.

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  12. Not sure if my maths/understanding is right on all this but I thought the impact of raising our GDP estimates produced a backward adjustment over the last 11 years of £1.7bn or lets say £200m in 2014 and an increase in the rebate of c£500m each year from now on. The recalculation could have been spun as a triumph right from the beginning.

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