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'Smoke and mirrors' over EU bill

George Osborne was accused of resorting to "smoke and mirrors" after he claimed to have halved the additional bill Britain will pay towards the European Union budget from £1.7 billion to £850 million.

The Chancellor said a deal reached in a summit with fellow EU finance ministers in Brussels amounted to a "result for Britain" which was "far beyond what anyone expected us to achieve".

David Cameron, who had staked his credibility on refusing to pay the demand, said the deal was "very good news" and the "negotiations have gone well for Britain".

But critics said that the reduction had been achieved only by bringing forward a rebate to which the UK would have been entitled anyway .

Shadow chancellor Ed Balls said the deal had not saved the UK "a single penny" and accused Mr Osborne and the Prime Minister of "trying to take the British people for fools".

Downing Street insisted that this was not the case, saying there had been no guarantee that the UK's regular rebate would be applied to the extra surcharge - demanded after a recalculation of Britain's gross national income (GNI) relative to the other 27 member-states - and that the Chancellor had succeeded in having it applied at a rate of half the total demand, rather than the usual one third.

Speaking to reporters in Brussels, Mr Osborne said Britain would pay the £850 million in two instalments in the second half of 2015 - after the general election - and would pay no interest on the delayed payment, which had initially been due at the start of next month.

"I nstead of footing the bill, we have halved the bill, we have delayed the bill, we will pay no interest on the bill. And if there are mistakes in the bill, we will get our money back," said the Chancellor

"We have also changed permanently the rules of the European Union so this never happens again. This is far beyond what anyone expected us to achieve, and it's a result for Britain."

Speaking in No 10 the Prime Minister said: " I was presented with a bill for £1.7 billion and told I would have to pay it by December 1. I said very clearly we're not paying that bill on the first of December, and we're not paying anything like that amount.

"So these negotiations have gone well for Britain because we have halved the amount, we're not paying the amount until next year - we'll be paying half the amount next year - and we won't paying any interest on it. This is good progress - the Chancellor has done well."

He said the outcome was "far from inevitable", adding: "T he bill has been halved, the bill has been delayed, no interest is being paid on the bill and we've changed the rule so that this can't happen again. That is very good news."

But Mr Osborne's European counterparts appeared to contradict the Chancellor's account of the deal.

Irish finance minister Michael Noonan said he did not know the basis on which Mr Osborne made his calcuation, adding: "The instalments will be paid over a period of time. My understanding is that the UK will pay the whole amount, but there will be no penalties attached."

Dutch finance minister Jeroen Dijsselbloem said: "The UK has ... a rebate, which they have had for a very long time and of course this mechanism of rebate will also apply on the new contribution.

"So it's not as if the British have been given a discount today. The old mechanism of the rebate will also apply on the UK contribution, which will increase."

And Austria's Hans Joerg Schelling said: "Whether the money is to be paid in instalments or as a lump sum is a discussion we can have. But the amount cannot be put in question."

The European Commission's vice-president with responsibility for the budget, Kristalina Georgieva, said the additional contribution being demanded from the UK meant that its rebate was also increased, leading to a "downward correction" in the overall sum to be paid.

The rebate of around one billion euros would normally be payable in the spring of 2016, but in these exceptional circumstances it will "converge" with the payment.

"The adjustments for the UK mean that the UK has to pay more, but also that, as a result of this increase, the UK rebate will go up," she said.

"Given that payments no more are due for exceptional large sums on December 1, but they would be spaced over a longer period of time, then the payment and the rebate would match in time.

"So in this sense, factually, yes, what the Chancellor has said, that when time comes for payment it would be downward corrected by the rebate, is accurate."

Mr Balls said: "David Cameron and George Osborne are trying to take the British people for fools. Ministers have failed to get a better deal for the British taxpayer. Not a single penny has been saved for the taxpayer compared to two weeks ago when David Cameron was blustering in Brussels.

"By counting the rebate Britain was due anyway, they are desperately trying to claim that the backdated bill for £1.7 billion has somehow been halved. But nobody will fall for this smoke and mirrors. The rebate was never in doubt and, in fact, was confirmed by the EU Budget Commissioner last month.

"The fact is, the Treasury knew about this issue for weeks and weeks, but the Chancellor was asleep on the job. And David Cameron and George Osborne have totally failed to make the alliances we need in Europe to get a better deal for the British taxpayer."

Ukip economic spokesman Patrick O'Flynn said: "It is far from clear what actual reduction, if any, George Osborne has secured in this surcharge.

"If it does turn out that the Chancellor has been engaged in spin and is pretending the application of a rebate formula, which would have applied anyway, is a reduction secured by him, then he will have dug himself into an even deeper hole.

"But even if we take him at face value, if he really thinks that paying the EU an extra £850 million, on top of our existing record net contribution, constitutes a good deal for Britain, then he must have taken leave of his senses. It is a rotten deal that presents UK taxpayers with an intolerable spectacle."

Ukip leader Nigel Farage said: "Osborne (is) trying to spin his way out of disaster. UK still paying full £1.7 billion, his credibility is about to nose-dive.

"Borrowing what we are rightfully owed in the future to pay an unfair bill being levied now is not a victory. It's a sham."

The director of pro-reform thinktank Open Europe, Mats Persson, said: "Osborne has effectively secured two things: an interest-free delay in the payment and the UK's rebate being applied at the same time, which is what accounts for the reduced bill. So it's true that Britain will pay £850 million - half of the £1.7 billion bill.

"Farage has walked in to Osborne's trap by suggesting that Britain will pay the full amount, but it may well have been the case that the Government was always going to get its rebate, meaning that we've been tilting at windmills for weeks.

"Given all the confusion and drip-feeding of information, in no way is this a template for future EU renegotiation."

As early as October 27 - four days after news of the £1.7 billion demand emerged - Mr Cameron made clear that he understood it may be subject to the UK's rebate, telling MPs in the House of Commons: "One of the important questions that needs to be asked and properly answered about this proposed sum of money ... is how much of it is applicable for the rebate. Obviously, that would make a potentially significant difference to the amount."

Asked if it was a good deal for Britain, Deputy Prime Minister Nick Clegg replied: "As the Prime Minister said, as I always said, the invoice, the bill that was presented to us was something that we were never going to pay on the very short deadline we were given and we were not going to pay in the amount and way in which it was presented to us.

"And I think that George Osborne has taken the right approach today to make sure that of course we abide by the rules, the burden sharing rules, that exist within the European Union, but that we don't do so, as we've said all along, on the timetable and on the scale that was presented to us out of nowhere, a big surprise, at the recent EU summit."

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