EU agree to ‘vet’ national budget plans

This story seems to have crept under the radar screen and not made major headlines in the last couple of days - on Monday EU finance ministers agreed that they should scrutinise and ‘vet’ each other’s national budgets before they are fixed by the home government. The EU President Van Rompuy, quoted in this report from EU Business, has said that the idea is to give the EU a chance to re-jig and adjust national spending priorities, before the budget is approved, in order to ensure that they fit with the bigger picture of competitive imbalances between the EU economies.

This strikes me as a significant move away from sovereignty over national fiscal policy and towards EU fiscal harmonisation. Britain was represented at the talks by Conservative financial secretary to the Treasury Mark Hoban, who does not want the plans to apply to countries outside the eurozone and is quoted by the BBC as saying that British budgets would continue to be first presented to UK MPs. “There is no question of anyone other than MPs seeing it first.” he said. “Once the Chancellor has presented it to Parliament, it is of course publicly available.”

According to a Treasury spokeswoman, under the European Communities Act of 1972, the British budget has to be first presented to the UK Parliament.

The move is, no doubt, linked to the need to ensure that the EU and eurozone remain financially credible and to the Special Purpose Vehicle (SPV) which will enable the 16 nations that use the single currency (17 when Estonia joins in January) to access cheap emergency loans and loan guarantees, should they find themselves unable to raise money on the open market to pay their debts. With austerity drives ‘sweeping across Europe’, public sector strikes in Spain and alarming reports today suggesting that ratings agency Fitch might consider downgrading the UK’s credit rating if the pace of deficit reduction was not increased, the need for drastic action is clear. But surely the suggestion that the UK government’s budget plans should be approved by EU ministers before they are presented to parliament here is the sort of idea that would have had Margaret Thatcher swiping the other EU leaders with her handbag?