'Net contributions' have broken the European debate

Every seven years, the leaders of EU Member States get together to agree on the budget for the next seven years (known as the Multiannual Financial Framework in the lingo). The EU's central institutions have fairly limited ways of raising money - only skimming from a few different sources of revenue that are raised EU-wide - so they have to rely on contributions from the states in order to fund all the EU's policies and agencies. To introduce a bit more stability into this system, the contributions are agreed for seven-year periods, with the total funds split between the different areas of EU policy-making. Inevitably the negotiations to decide this medium-term budget are fraught, with states all doing their utmost to defend their interests and to ensure that the collective European funding gets directed towards their national priorities.

This is exactly what EU governments are doing now. And the process is taking quite a while. The latest negotiations, which happened this week, failed to produce a final agreement. We could be in for weeks or months more of this. One of the regular causes of deadlock in these negotiations is the reluctance of 'net contributors' to give any more money. Who are the 'net contributors'? These are the countries who give more to the EU budget than the EU spends back in their countries. The amount they give is determined by their national wealth (roughly 1%) while the EU's spending is determined by need. This inevitably means that there is a certain degree of redistribution from richer countries to poorer ones.

This dynamic has been present in the EU for a long time and to some extent the disputes occurring today are nothing new. However, over the last decade, there has been a shift - with three principal causes.

First, from the fallout of the financial crisis, some states ceased to be seen as worthy recipients of solidarity funding but were instead given the black mark of wasteful spenders. There is a greater suspicion over whether EU funds are being used responsibly by all EU states or whether some are just milking the system.

Second, crises over the rule of law in Poland and Hungary have raised serious questions about the role of EU funding in propping up corrupt governments. The right-wing populists in these countries have worked out that they can use the European money to build up their own voter bases and to deepen the pockets of elite networks in politics, business and the media, whose loyalty to the party can then be assured.

Third, and most importantly, we have seen the steady elevation of the 'net contributor' to a hallowed status. 'Net contributors' are in some sense a cut above the rest. After all, they don't need this as much as the others - they can simply keep the money and walk away. Considering some of the rhetoric, you could even come to believe that they are an aggrieved party, that the requirement to fund the EU without getting all the money back is somehow an imposition or an affront. It is then only with the greatest reluctance that these countries will hand over their share of the European funding. It is a very one-sided and one-dimensional view whereby the EU is principally a cost and where the only benefits are the literal amount of money that gets spent in your country out of the EU budget.

Now, this is not an attitude that every country adopts. France is a net contributor but is actually pushing for more European spending. However, it is a point of view that has grown in intensity and which is spreading across European states.

In the current negotiations, this idea is represented by the 'Frugal Four' - a term to designate four countries (Austria, Denmark, Sweden and the Netherlands) who have declared that the next seven-year budget should be capped at 1% of the EU's total wealth. They have said that they will fight to the last in order to stop a significant increase in their contributions. And they are taking this fight for a more austere Europe to the wild free spenders who believe that the EU budget should be nearer the dizzying height of 1.1%. The fact that the debate on this minor difference is so intense, so fierce and so genuine, shows how the captivating idea of the 'net contributor', and the resentment and entitlement it can produce, has sunk deep into the European public debate. That two of these four countries (Denmark and Sweden) are led by centre-left parties, who should notionally support redistribution and more effective public spending, only reinforces the argument.

Arguably the best example of this belief came from the EU referendum debate in the UK. The idea that the EU costs the UK '£350m a week' became emblematic of the Leave campaign and is probably one of the most successful campaign communications strategies of all time (putting aside a mostly friendly media). It was the ultimate encapsulation of the 'net contributor' concept because it represented the next step up in the process, dropping 'net' in favour of simply 'contributor'. Not just some but all benefits from the EU were discarded in favour of presenting the total contribution alone. Faced with this version of the reality, it's no surprise that many people baulked at the cost.

The UK case is an extreme example of the impact of the 'net contributor' mindset on public debate but even within the EU, we can see its corrosive effect on vision and solidarity in Europe. Setting the European budget should be a more inspiring moment. It should be a moment for reflective, strategic thinking and should promote substantive policy debates on the future direction fo Europe. It could represent the pooling of common endeavour as states seek to create a more perfect union. Instead, under the creed of the 'net contributor' it is reduced to the most demeaning of disputes, largely robbed of common vision and representing only the fight to get one's own maximum return. And it has gifted us the truly absurd scenario of the rebates, whereby some rich states get extra money back for no reason other than they believe they don't get a big enough return otherwise.

But there is a secret in this debate that few are willing to tell. A secrecy that is so frustrating because it unveils the utterly pointless nature of these arguments. The truth is there are no net contributors at all. The economic benefits that come from the Single Market alone outweigh the costs of contributing to the budget for every single EU state. Across the EU, it amounts to an average bonus of €2000 per person per year. Going further, spending that boosts growth in the poorer states is inevitably a benefit to the richer states who will gain as their closest partners become wealthier. And these are purely the raw economic benefits. Who is doing the maths to calculate the value gained from Erasmus, both for the individuals involved and for the society whose citizens are gaining invaluable new skills? Who is working out the benefit from the Galileo satellite? Or the new joint defence projects? Or the countless pieces of scientific research? Can we accurately measure all of these by simply reading lines off a budget spreadsheet? It seems doubtful.

The 'net contributor' then is a figure that does not exist. Instead of getting caught up in fights over scraps, EU national governments should speak this truth plainly and clearly and should refocus on what they actually want the budget to be for and what they want the EU to do. Only from a consensus on these points can you actually determine how much money you will need for the next seven-year budget (to be paid for by the fairest method conceivable - and the one currently used - that each pays according to their means).


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