Prime Minister David Cameron statement on the EU budget

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

This statement was delivered in the House of Commons.

Mr Speaker, I’m sure the whole House will join with me in sending our best wishes to Pope Benedict following his announcement today.

He has worked tirelessly to strengthen Britain’s relations with the Holy See.

And his visit to Britain in 2010 is remembered with great respect and affection.

Pope Benedict’s message on that visit of working for the common good is something that spoke to our whole country and I am sure his successor will continue to provide a voice of inspiration for millions around the world.

Mr Speaker, last week’s European Council agreed the overall limit on EU spending for the next seven years, starting in 2014.

When these multi-year deals have been agreed in the past, spending has gone up.

But last week we agreed that spending should come down.

By working with like-minded allies, we delivered a real terms cut in what Brussels can spend for the first time in history.

Mr Speaker, as the House knows, the EU Budget is negotiated annually.

So what we were negotiating, initially at the Council last November - and again last week - was the not the individual annual budgets but rather the overall framework for the next seven years.

This includes the overall ceilings on what can be spent, effectively, the limit on the European Union’s credit card for the next seven years.

Mr Speaker, during the last negotiation, which covered the period 2007-13 the last government agreed to an increase in the payments ceiling of 8 per cent - to €943bn.

Put simply, this gave the EU a credit card with a higher limit - and today we are still living with the results of allowing the EU’s big spenders to push for more and more spending each year.

In fact only last year, while Member States were having to make tough decisions to tighten their belts at home, the big spenders succeeded in increasing the 2012 European budget by another 5 per cent compared with the previous year.

If no deal had been reached, the existing ceilings would have been rolled over and annual budgets could have continued to soar for the next seven years.

And because annual budgets are negotiated by qualified majority voting, it can be difficult to constrain spending in these annual negotiations.

But buy contrast the seven year limits are agreed by unanimity.

So this was our chance to get the ceilings down with what we can afford.

The European Commission produced an initial proposal for increasing the payments ceiling still further to €988bn.

This was strongly supported by a number of Member States.

Now, the first negotiation took place at the Council in November.

And although the President did then reduce this during the Council itself, it was still some way short of the real terms cut we were looking for.

So together with like-minded allies from a number of countries including Germany, Sweden, the Netherlands and Denmark - we rejected the deal on the table and told them to think again.

At this Council, we made further progress.

Together with like minded-allies - many of whom, like Britain, actually write the cheques - we achieved a proper look across all the areas where spending in the Commission proposal could be cut.

And while there are areas where we could and should go further, not least on reforming the Common Agricultural Policy and reducing the bureaucratic costs of the European Commission, we agreed a real terms cut in the payment limit - to €908bn.

Mr Speaker, that is €80bn lower than the original proposal.

It is €35bn lower than the deal agreed by the last Government, which is still in operation today.

And it is €60bn lower than the emergency arrangements which would have come into place if we hadn’t got a seven year deal.

But my aim was not simply to cut the credit card limit.

I wanted to set the limit at a level that would deliver at worst a freeze and at best a cut in the actual spending over the next seven years.

And this is indeed what this deal delivers - a real terms cut.

If you take the latest complete budget - the one for 2012 - and freeze spending at that level for the next seven years you would have spending of €932bn.

Our new payments limit means spending cannot rise above €908bn.

So we have slashed €24bn off a real freeze on the last completed budget.

Now of course, the budget set in 2012 - which Britain voted against - was unacceptably large.

But even against the average of the last two completed years, 2011 and 2012, this deal still delivers a real terms cut.

Of course this deal must now be voted on by the European Parliament.

And the European Council has said that it is prepared to accept some flexibilities about how spending is divided between different budget years and areas of spending.

But we are absolutely clear that this must be within the framework that the Member States have now agreed.

And the EU’s seven year budget will now cost less than 1% of Europe’s gross national income for the first time in its history.

Mr Speaker, let me say a word about how this deal is likely to affect the UK’s contribution a word about how it is likely to affect what the UK receives from the EU, for research, for our regions, and for our farmers and a word about what this means for growth and competitiveness across the European Union as a whole.

On the UK’s contribution, the House will remember how the last government gave away almost half of our rebate.

This has had a long term and continuing effect on the UK’s net contributions.

And it’s worth remembering why.

Because when the European Union spends money on, for example, structural funds and cohesions payments in Eastern European countries, the UK no longer gets a rebate on this money.

As a result, almost whatever budget deal was done, our net contributions were always going to go up.

But as a result of this deal they will be going up by less.

The only two sensible things we could do to protect the British taxpayer in these negotiations were to get the overall Budget down and to protect what is left of our rebate.

And that is exactly what we have done.

Now while the actual amount that the UK contributes will depend on technical factors like the size of the annual budgets, economic performance and exchange rates  - as a result of this deal, we now expect the UK’s contribution to the EU to fall as a share of our Gross National Income.

As for the rebate this government inherited, it is now completely untouched.

As ever, throughout these negotiations, it was attacked repeatedly.

But I successfully rejected all the calls for change.

Under this government, the British rebate is safe.

Now in terms of what the UK receives, I wanted to make sure our universities are well placed to receive research work, our poorest regions are treated fairly compared with others and our farmers continue to receive support for the environment schemes they put in place.

On these points, the section of the budget that includes spending on research innovation and university funding is up by over a third and this money is handed out of the basis of quality, so Britain’s universities are particularly well-placed to benefit.

We have ensured that structural  funds will continue to flow to our poorest regions, Britain’s share will remain broadly the same, at around €11 billion.

And while we have cut spending on the Common Agricultural Policy overall, we have protected the flexibility which will allow us to direct funds to support both the environment and the livelihoods of our farming communities.

Overall, this is a better framed budget in terms of growth, jobs and competitiveness.

It is disappointing that administrative costs are still around 6 per cent of the total.

But overall spending on the Common Agricultural Policy will fall by 13 per cent compared with the last seven year budget.

Research and Development - and other pro-growth investment - will now account for 13 per cent rather than 9 per cent of the total budget.

Mr Speaker, reform of EU spending is a long term project.

But this deal does deliver important progress.

Working with allies, we took real steps towards reform in the European Union.

It is a good deal for Britain.

A good deal for Europe

And above all a good deal for all our taxpayers.

That is what we have delivered.

And I commend this statement to the House.