Cameron set to win a cut in the EU budget - but there's a catch

Even if European leaders agree to a €34.4bn cut in the EU budget, the UK will almost certainly pay more.

David Cameron went into the EU budget negotiations insisting on "at worst a freeze, at best a cut" (Labour and rebel Tories had demanded that he go further and insist on a cut) and after a long night of talks, it looks as if he's secured the "best". For the first time in its history, the EU is set to agree to a cut in its next seven-year budget. Earlier this morning, EU president Herman Van Rompuy tabled proposals that would see the union's spending limit for 2014-20 reduced from €942.8bn to €908.4bn - a  €34.4bn cut and a saving of £400m-a-year for British taxpayers. 

If approved - EU leaders have just taken a two-hour break from the onerous negotiations - a cut would be a triumph for Cameron. He will have defied those who claimed that his promise of an in/out referendum on Britain's EU membership would leave him unable to achieve a successful outcome.

The catch, however, is that regardless of whether the EU agrees to a real-terms cut in its budget, the UK's net contribution will almost certainly increase. This is largely due to a reduction in the British rebate agreed by Tony Blair in 2005 to meet the cost of EU enlargement (a cause the UK had championed) but a cut in the EU budget will look less impressive to voters if it turns out that we'll still be paying more. Tory MP Mark Pritchard, one of those supported a real-terms cut when the Commons voted last October, tweeted this morning: "It will be a historic, but 'bitter-sweet' outcome, if the PM negotiates a real terms cut in the EU budget but sees the UK contribution rise".

In addition, the overall budget will still need to be approved by the EU parliament and German Social Democrat Martin Schulz, the president of the parliament, has been making sceptical noises this morning. He is threatening to veto the proposed deal on the grounds that it would create a structural deficit. "The [budget] in the form currently being proposed, however, would turn what is already a legally highly questionable trend into a structural deficit," he told EU leaders. 

Worst of all, while spending on the bloated Common Agricultural Policy (a slush fund for assorted land-owning dukes, earls and princes) will be €1bn higher than under the previous proposal, spending on transport, telecommunications and energy projects, all vital pro-growth areas, will be €11bn lower. 

Yet given how few expected him to be in a position to announce any kind of cut, Cameron will rightly feel that the summit has been a success for him. Having once refused to contemplate a reduction in spending, EU leaders now make Cameron-esque noises about the need for restraint at a time when EU member states are enduring austerity. The draft conclusion states: "As fiscal discipline is reinforced in Europe, it is essential that the future Multiannual Financial Framework [the seven-year budget] reflects the consolidation efforts being made by member states to bring deficit and debt onto a more sustainable path. The value of each euro spent must be carefully examined." Arch-eurosceptic Douglas Carswell has offered the PM "three hearty cheers" this morning and so will many others in his party. 

David Cameron arrives at the EU Headquarters on February 7, 2013 in Brussels. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Arsène Wenger: how can an intelligent manager preside over such a hollowed-out team?

The Arsenal manager faces a frustrating legacy.

Sport is obviously not all about winning, but it is about justified hope. That ­distinction has provided, until recently, a serious defence of Arsène Wenger’s Act II – the losing part. Arsenal haven’t won anything big for 13 years. But they have been close enough (and this is a personal view) to sustain the experience of investing emotionally in the story. Hope turning to disappointment is fine. It’s when the hope goes, that’s the problem.

Defeat takes many forms. In both 2010 and 2011, Arsenal lost over two legs to Barcelona in the Champions League. Yet these were rich and rewarding sporting experiences. In the two London fixtures of those ties, Arsenal drew 2-2 and won 2-1 against the most dazzling team in the world. Those nights reinvigorated my pride in sport. The Emirates Stadium had the best show in town. Defeat, when it arrived in Barcelona, was softened by gratitude. We’d been entertained, more than entertained.

Arsenal’s 5-1 surrender to Bayern Munich on 15 February was very different. In this capitulation by instalments, the fascination was macabre rather than dramatic. Having long given up on discerning signs of life, we began the post-mortem mid-match. As we pored over the entrails, the curiosity lay in the extent of the malady that had brought down the body. The same question, over and over: how could such an intelligent, deep-thinking manager preside over a hollowed-out team? How could failings so obvious to outsiders, the absence of steel and resilience, evade the judgement of the boss?

There is a saying in rugby union that forwards (the hard men) determine who wins, and the backs (the glamour boys) decide by how much. Here is a footballing equivalent: midfielders define matches, attacking players adorn them and defenders get the blame. Yet Arsenal’s players as good as vacated the midfield. It is hard to judge how well Bayern’s playmakers performed because they were operating in a vacuum; it looked like a morale-boosting training-ground drill, free from the annoying presence of opponents.

I have always been suspicious of the ­default English critique which posits that mentally fragile teams can be turned around by licensed on-field violence – a good kicking, basically. Sporting “character” takes many forms; physical assertiveness is only one dimension.

Still, it remains baffling, Wenger’s blind spot. He indulges artistry, especially the mercurial Mesut Özil, beyond the point where it serves the player. Yet he won’t protect the magicians by surrounding them with effective but down-to-earth talents. It has become a diet of collapsing soufflés.

What held back Wenger from buying the linchpin midfielder he has lacked for many years? Money is only part of the explanation. All added up, Arsenal do spend: their collective wage bill is the fourth-highest in the League. But Wenger has always been reluctant to lavish cash on a single star player, let alone a steely one. Rather two nice players than one great one.

The power of habit has become debilitating. Like a wealthy but conservative shopper who keeps going back to the same clothes shop, Wenger habituates the same strata of the transfer market. When he can’t get what he needs, he’s happy to come back home with something he’s already got, ­usually an elegant midfielder, tidy passer, gets bounced in big games, prone to going missing. Another button-down blue shirt for a drawer that is well stuffed.

It is almost universally accepted that, as a business, Arsenal are England’s leading club. Where their rivals rely on bailouts from oligarchs or highly leveraged debt, Arsenal took tough choices early and now appear financially secure – helped by their manager’s ability to engineer qualification for the Champions League every season while avoiding excessive transfer costs. Does that count for anything?

After the financial crisis, I had a revealing conversation with the owner of a private bank that had sailed through the turmoil. Being cautious and Swiss, he explained, he had always kept more capital reserves than the norm. As a result, the bank had made less money in boom years. “If I’d been a normal chief executive, I’d have been fired by the board,” he said. Instead, when the economic winds turned, he was much better placed than more bullish rivals. As a competitive strategy, his winning hand was only laid bare by the arrival of harder times.

In football, however, the crash never came. We all wrote that football’s insane spending couldn’t go on but the pace has only quickened. Even the Premier League’s bosses confessed to being surprised by the last extravagant round of television deals – the cash that eventually flows into the hands of managers and then the pockets of players and their agents.

By refusing to splash out on the players he needed, whatever the cost, Wenger was hedged for a downturn that never arrived.

What an irony it would be if football’s bust comes after he has departed. Imagine the scenario. The oligarchs move on, finding fresh ways of achieving fame, respectability and the protection achieved by entering the English establishment. The clubs loaded with debt are forced to cut their spending. Arsenal, benefiting from their solid business model, sail into an outright lead, mopping up star talent and trophies all round.

It’s often said that Wenger – early to invest in data analytics and worldwide scouts; a pioneer of player fitness and lifestyle – was overtaken by imitators. There is a second dimension to the question of time and circumstance. He helped to create and build Arsenal’s off-field robustness, even though football’s crazy economics haven’t yet proved its underlying value.

If the wind turns, Arsène Wenger may face a frustrating legacy: yesterday’s man and yet twice ahead of his time. 

Ed Smith is a journalist and author, most recently of Luck. He is a former professional cricketer and played for both Middlesex and England.

This article first appeared in the 24 February 2017 issue of the New Statesman, The world after Brexit