George Osborne rebuked for boasting he halved £1.7bn EU surcharge

MPs have criticised George Osborne for exaggerating claims that he halved a £1.7bn surcharge imposed by Brussels last year when Britain’s rebate automatically cut the figure to £850m.

A committee of MPs has stopped short of accusing the chancellor of misleading parliament, but said he should have known how the rebate applied before he boasted on TV and to MPs about his success at the negotiating table.

The all-party Treasury select committee said: “The suggestion that the £1.7bn bill demanded by the European Union was halved is not supported by published information.”

The committee’s reproach is a blow to Osbornebefore the general election, when the Tories are expected to come under fire from Eurosceptics inside the party and from Ukip over the size of the UK’s EU contribution.

David Cameron told the European commission at the time that public support for the EU had dropped by 10% as a result of its actions. The EU increased Britain’s contribution following a review of the UK economy going back to 1995 which found it had performed better than previous estimates.

Andrew Tyrie, the chairman of the Treasury committee, said the method used to calculate the rebate was well known and was not subject to negotiation.

He said: “The terms of the UK’s rebate calculation are set out in EU law. It should, therefore, have been clear that the rebate would apply.

“The government got a good deal for the UK by securing an interest-free delay to the EU bill. But by overstating its success on the rebate, it distracted attention from this achievement.”

Osborne told parliament that “hard-fought” negotiations had won huge concessions from the European commission after the government was slapped with an extra £1.7bn contribution to the EU budget coffers.

At the time, following a meeting of EU finance ministers in Brussels and talks with the European commission vice-president in charge of budgetary affairs, Kristalina Georgieva, he said: “Instead of footing the bill, we’ve halved the bill.”

The chancellor asserted that the bill was for £850m – to be paid by 1 September in two instalments, one by the deadline, the other in July.

Osborne later told the committee it had not been clear whether the UK would qualify for a rebate since Brussels unveiled the bill. His comments were refuted by EU officials who said that a negotiated cut would have been unique since Britain’s gross contributions to the EU budget have automatically benefited from the rebate since the 1980s.

Chris Leslie, the shadow chief secretary to the Treasury, said the report was damning and “exposed George Osborne’s claim to have halved the EU budget surcharge to be totally untrue”.

He said: “Too many times, this chancellor has desperately tried to use smoke and mirrors to fool the British people. He has been caught out again and his credibility is further undermined. People will now treat the false claims he makes in the coming weeks with the contempt they deserve.

“He must now apologise to taxpayers for making this completely false claim.”

The Treasury said: “The deal the chancellor secured on the surcharge was not a technical clarification, it was a hard-fought negotiation that halved the payment and delivered a real result for Britain. We note that the committee did not raise the possibility of the rebate applying at any point before the result of the negotiation was announced.”

Powered by article was written by Phillip Inman, economics correspondent, for on Friday 27th February 2015 00.01 Europe/ © Guardian News and Media Limited 2010