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The Great EU Budget Fightback: Rhetoric or Reality?

03/11/2014 17:52 GMT | Updated 03/01/2015 10:59 GMT

This week will be a build-up to Friday's high noon over the £1.7bn EU budget bill. Will George Osborne want war or peace? Osborne has backed Cameron's bid not to pay by 1 December and not to pay a bill "anywhere near" the £1.7bn. So with Rochester beckoning expect blood-curdling rhetoric to appease Ukip masking last minute diplomacy to reach a deal. The question whether a compromise is possible.

The answer is yes, because the money demanded is not required for the 2014 budget leaving wiggle room for renegotiated payments to be made over a long period. But politically Osborne is in a tight spot as the budget story has got worse. Hot on the heels of the Commission's unwelcome demand for this year's EU budget, the ONS' annual Pink Book revealed on Friday that the UK's contribution to the EU last year rose to £11.27bn - much higher than the £8.6bn the Treasury had forecast and a 32% increase on 2012.

This double-whammy means that Cameron's repeated line that he is the first prime minister to reduce the EU budget sounds a little hollow. With the cost of our membership back centre-stage it is unlikely that Osborne can resist a Nigel-like anti-Brussels rant. The trouble is that such an approach won't persuade the public, won't win allies and won't win Rochester.

Osborne won't persuade the public because, according to YouGov's Sunday Times poll , they are convinced that the government is mostly to blame for all of this. 69% knew that the UK had agreed to the current system of calculating EU payments. 60% believe that the PM and Treasury knew the £1.7bn bill was coming way before the October 25 summit. On both of these issues fewer than 18% blame the wicked Commission. So, irate demands for 'our money back' won't cut much mustard with the voters.

Nor with allies who are political enough to recognise the UK's difficulty but unimpressed by the government's faux indignation. All member states knew higher bills would be coming from January, May or a fortnight ago depended on who you listen to.

So Osborne has to decide how much sceptic noise to make and how many allies to lose. In rising degrees of blood-curdling, here are his options:

1. He could build a coalition to review the way the figures were calculated. Although the ONS signed them off, the figures are opaque. There is likely to be support for a review which would kick the subject into the long grass.

2. He could build a coalition to block the change. The budget will be subject to a vote among member states and the UK and other net losers have a blocking minority. Unfortunately for Osborne rejecting the amending budget would mean the UK and almost every member state would pay more so backing is unlikely.

3. He could take the commission to court on the basis that lumping backdated calculations into one demand is disproportionate and unjust.

4. He could simply refuse to pay, upping the ante and causing a crisis which could result in fines and interest.

Whichever option he takes, the associated rhetoric will be violent. But with Ukip shouting that the EU isn't worth a penny piece and only exit will end the Commission's stealth tax, nothing Osborne can do will outflank Nigel and Rochester will fall. Far better to press for budget reform and seek allies to make a muddled system fairer and clearer.