It's that time of the year again…

The Daily Mail has a fondness for publishing stories claiming that the Britain is bailing out the rest of Europe by paying through the nose for the EU budget.

This week they duly claimed that "every household in the UK will be expected to pay almost £400 a year for the privilege of EU membership".

A good line - but based on decidedly warped mathematics. Leaving aside our contributions to the EU budget, which is anyway capped at around 1% of EU GDP, the common market is worth £160 billion to our collective GDP - equivalent to roughly £1500 to every family in the UK.

Similarly bogus is the Mail's claim that Tony Blair "surrendered" the British rebate at the budget review in 2005. The rebate remains part of the budget and will actually increase by 13% (compared to an increase of just 6% for the EU budget as a whole) from an average of £3.9 billion per annum to £4.5 billion. Besides, let's not forget that the rebate exists to offset the imbalance that would otherwise leave Britain paying more than our fair share, not to provide us with a windfall which would leave us paying less than our fair share.

Indeed, claiming that Britain gets a raw deal from the EU budget simply does not stand up. According to a recent House of Commons library report on the EU Finances Bill, in per-capita terms, the UK is not one of the highest contributors to the EU budget. In 2006, the UK paid €68 euros per head. By comparison, the Netherlands pays €241 per head, Denmark €127, Sweden €124 and Germany €100. France and Austria paid €50 and €40 respectively.

Moreover, in structural funds (designed to regenerate the poorest regions of Europe) the UK receives a third more than France, 20% more than Belgium, nearly twice as much as the Netherlands and more than eight other countries. The UK received €3 billion in structural funds (an average of €50 per head). This is one euro per head less than Poland receives. Put plainly, the world's fifth largest economy, receives only €1 per head less than one of Europe's poorest countries.

Besides, while some may baulk at the idea of UK taxpayers providing money to the accession countries, the fact is that investing in economic stability in Eastern Europe benefits us all by increasing the total volume of EU trade, investment and jobs. For example, Britain's bilateral trade in goods with Spain and Ireland (two of the poorest EU countries 20 years ago) is now worth £40bn per year.

It is one thing for the Daily Mail to be sceptical of our EU membership, but it is fatuous for it to suggest that we are paying through the nose for the privilege.

One of the, thus far, little mentioned innovations in the Reform Treaty is the potential effect on CAP reform. The treaty extends the European Parliament's legislative co-decision powers to the field of agricultural legislation. In the EU budgetary procedure too, all EU expenditure will be subject to the approval of both the Council of Ministers and the European Parliament. At the moment agriculture is the exclusive preserve of the Council of Ministers. As I pointed out in my article on the Compass website, opening up the CAP and agricultural legislation to the Parliament, in which MEPs divide along ideological rather than national lines, will increase the levels of scrutiny, democratic accountability and should drive reform in these areas.

Another measure to increase transparency in agriculture spending is the decision last week by EU Agriculture Ministers to publish a comprehensive list of all CAP recipients, which was detailed on the Financial Times blog. The Commission and Member States will now draw up guidelines on how much information countries will have to provide - for example, the UK produces a very detailed list including the precise amount the Queen receives in farming subsidy (£769,000 for her Sandringham farm in 2003/4), but there is currently nothing to stop others from merely publishing generic information ie "a grain farmer in Picardy".

Small steps perhaps, but making the ways in which the EU spends its budget more visible and detailing how the money is spent is, nonetheless, a significant step towards increasing transparency and parliamentary scrutiny.

If you actually wade through the details of the EU budget deal, there are some interesting points which make the deal look even better:

• On agriculture, spending will actually fall by 7.3%. And the new member states will be fitted in under that ceiling - not just the ten who joined last year who are currently being phased in to the CAP, but also Romania and Bulgaria! This amounts to a large reduction (about 20%?) in agricultural spending in the 15 old member states.
• Contrast this with the overall rise in spending in other areas: spending on research (to boost our economic competitiveness - part of what Tony Blair wanted in calling for a more future-oriented budget) will rise by 75% between 2006 and 2013.
• Economic help to less prosperous regions (which will continue to include some UK regions) will rise by about 6%. This means that it, and not the CAP, will be the largest item in the EU budget. Spending on police and judicial cooperation will more than double. External aid will rise by about a third.

Meanwhile, the announcement in Hong Kong at the WTO talks that the EU has agreed to phase out all remainig agricultural export subsidies by 2013 is also welcome news. Coming straight after the summit, it shows that the commitment to further agricultural reform is indeed serious.

Finally, I see that the much-commented-on adjustment to the UK rebate will be phased in over two years in 2009-10, giving the Treasury plenty of time to plan ahead. And as to the equity of the UK's contribution, I note that it will increase by 63%, while French contributions will rise by 116% and those of Italy by 130%. These two countries have the same population as Britain, and the deal means we will henceforth make broadly equal net contributions. As they have slightly smaller economies than Britain, it means their net contribution will be a higher proportion of their economies than Britain's.

So we have a budget deal! Or, at least, a negotiating position that the Council of Ministers can take to the negotiations with the European Parliament in order to decide the final outcome. (This is an aspect that most newspapers seem to have overlooked!)

Even before the deal was clinched, I had to defend the government's position on the BBC's Newsnight programme and on Radio 5, against Tory accusations that it was a sell-out. A "sell-out" that will see the size of the UK rebate increase over the coming years, and the overall size of the EU budget as a proportion of GDP remaining well below what it has been in recent years, despite enlargement! Frankly, nobody else in Europe believes that the UK has been lax in defending its interests - rather the contrary, that it has been too successful.

In fact, Tony Blair had a thankless task in trying to reach an agreement on the budget. He had to reconcile the six countries who wanted to limit EU spending to 1% of GDP with those who wanted a much larger budget. He had to deal with Mr Chirac, who wanted to ring-fence all agricultural spending. He had to deal with the expectations of the new member states, who understandably want the kind of assistance to poorer countries that the EU has provided in the past. He also had to deal with the frankly rather less defensible demands of some long-standing members seeking to preserve their privileges – such as Spain wanting to remain a net beneficiary to a greater extent than the much poorer central European countries, and Luxembourg which, in per capita terms, is both the richest member state and the biggest net beneficiary! He had to deal with all those who thought that a cost-free way (for them!) to increase resources was to eliminate the British rebate. So it is a tribute to his negotiating skills that he secured a deal at all!

In the absence of an immediate new cut in agricultural spending, there will be no change either to the UK rebate, which remains intact, other than the adjustment in favour of the new member states mentioned above. But the absence of a new cut to agriculture should not blind us to the major changes to the CAP that have already been achieved - see my blog entry for 15 December. If I have one criticism of the government, it is that it fails to make people aware of this (and its other) achievements in the EU.

Some thoughts on the budget that have not been highlighted in the media:

• The original British rebate was agreed over twenty years ago when Britain was one of the poorest member states and when 2/3rds of EU spending was on agriculture. It is now one of the richest member states with just over 1/3rd spent on agriculture.
• If the UK rebate was left intact without any adjustment whatsoever, it would see Britain becoming the smallest net contributor by 2013, with only Cyprus paying less. The rebate was never intended to provide us with a windfall, simply to make sure we did not pay more than our fair share.
• Britain's current offer (to adjust the rebate to the benefit of the new, poorer member states) will lead to Britain, for the first time since we joined the EU thirty years ago, paying roughly the same as France and Italy (two countries who are of equivalent size to Britain). In the past, Britain paid more than double what France paid and several times the Italian contribution (in net terms).
• A more radical adjustment of the British rebate will not take place until there is a more radical adjustment of agricultural spending. Britain made this clear from the beginning.
• The current proposals, including the adjustment of the rebate, will lead to Britain paying in an extra €8 billion over 7 years (i.e. €1.14 or £bn.0.77 per year), Britain’s fair share towards the cost of enlargement. This comes to about 2.55 % of our defence budget or just under 4 pence per person per day.
• In practice, helping these poor but high growth economies to develop will boost their demand for British exports: trade with the new member states has already increased by 400% since 1990, 10 times the rate of growth of the rest of the world!
• It is also in our interest to have increasingly stable societies in central and Eastern Europe. The high human and financial (about £4b) costs of sorting out Bosnia and Kosovo demonstrate why this investment now is good value.
• The payments to central and Eastern Europe are lower than envisaged in the Commission’s original proposal – in return, Britain has proposed speeding up procedures so that they can access their dues more speedily.
• Britain is not alone in making overall agreement difficult: Spain insists on remaining a net recipient of EU funding to a far higher degree than the much poorer eastern European countries. France refuses to countenance much more agricultural reform. The Netherlands, Sweden, Germany and Austria also want to limit the increase in their contributions through special arrangements similar to Britain’s.
• The overall level of the EU budget remains limited to just over 1% of GDP and has been coming down as a proportion over the last few years. This means that, with enlargement, we are getting “more Europe for less”. The sums involved are anyway relatively small.
• In any case, the UK rebate will rise from €5 billion to €7 billion (£4.7 billion).