EC demands £9.5bn for unpaid bills


The European Commission has challenged austerity-conscious EU governments by demanding another 11.2 billion euro (£9.5 billion) to cover unpaid bills this year.

The move - instantly condemned by a UK Government spokesman as unacceptable - follows a deal on the EU's long-term budget in February which Prime Minister David Cameron hailed as the first to cut costs in real terms. But Euro-MPs warned at the time that acceptance of cuts came with a catch - more cash would be needed to cover outstanding commitments this year.%VIRTUAL-SkimlinksPromo%
Now the European Commission has tabled a "draft amending budget" claiming the extra cash for what the budget commissioner described as "a snowballing effect of unpaid claims transferred on to the following year".

Commissioner Janusz Lewandowski - effectively blaming Mr Cameron and others who pressed, ultimately successfully, to keep spending down in line with national restraints - said: "This (extra budget demand) cannot come as a surprise. In recent years voted EU budgets have been increasingly below the real needs based on estimates from member states."

Mr Lewandowski went on: "The ostrich policy can only work for so long: postponing payment of a bill will not make it go away. Not one cent of the extra amount we request today is for the EU institutions. It will merely allow the EU to play its share of infrastructure or science projects that member states agreed to start in the past." He added: "I am confident that the Council (EU governments) and the European Parliament will deliver on their commitments to avoid any shortfall in payments and take a swift decision on this proposal."

A Commission statement said the EU budget needed the top-up - involving extra contributions from national coffers - "to reimburse beneficiaries of EU-funded programmes completed across Europe in 2012 as well as to honour Cohesion Policy (money for poorest EU regions) claims that will fall due in 2013".

The statement said the bulk of the proposed draft extra budget would, if agreed "in full" by ministers and MEPs, "allow all the legal obligations left pending at the end of 2012, as well as those arising before the end of 2013, to be covered in this year's (2013) budget". The statement said the extra budget covers "claims from beneficiaries of EU funds (member states, regions and towns, universities and scientists, NGOs etc) for projects completed across Europe; it also includes member states' estimates for payments they will expect from the EU this year".

Commission officials pointed out that they were demanding far less than the 16 billion euro (£13.6 billion) many MEPs are insisting upon for outstanding financial commitments for 2013 in exchange for final approval of the long-term "austerity" EU budget for 2014-2020. Only two weeks ago, European Parliament president Martin Schulz warned that "Parliament will not even start negotiations (on the long-term budget) until all unpaid payment claims for 2012 are covered".

But Conservative MEPs promised "fierce resistance" to the Commission's budget top-up, which, although less than the amount being sought by the Parliament, still exceeds the size of the EU bailout just agreed for Cyprus. Richard Ashworth, the leader of the Tory MEPs and a negotiator on the Parliament's Budget Committee, slammed the Commission demand as "confrontational and disruptive".

Financial Secretary to the Treasury Greg Clark said: "This is a totally unacceptable request from the Commission at a time when most EU member states are taking difficult decisions to reduce public spending. It is extraordinary that the Commission should demand an increase in the EU budget that is bigger than the rescue package that was agreed for Cyprus earlier this week."

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EC demands £9.5bn for unpaid bills

The Chancellor has cut the price of beer. He said a planned 3p rise in beer duty tax was being scrapped and replaced by a 1p cut on a pint of beer.

While lower interest rates are intended to boost borrowing for business and keep costs down for mortgage customers, the Chancellor brings another Budget devoid of encouragement for savers. Faced with near 0% interest rates and 3% inflation, there is no help for those who need to save for the future, or those that already live on their savings in retirement.

"Low interest rates are making life ever harder for people reliant on their savings. Their spending power is being reduced and their standard of living eroded on a daily basis," said Simon Rose of Save Our Savers. "The attack on savers is short-sighted and undermines the country's prospects for investment, growth and retirement."

A major headline-grabbing measure to help struggling first-time buyers is the new Help-to-Buy scheme. Made up of two parts, the first commits £1.3bn to shared equity loans that enable first-time buyers to borrow up to 20% of the value of a new build home towards a deposit, providing they can contribute 5% themselves. The loans will be interest free for five years and be repayable on house sale. The scheme will cover all new properties up to £600,000 in value – around 90% of all new homes in the UK.

The second is a Mortgage Guarantee for lenders, intended to help all families who are struggling with deposits. The scheme will make £130bn worth of mortgages available from 2014 and enable lenders to offer loans at higher-to-loan value, which will Mr Osborne said will "dramatically increase" the availability of mortgages. The guarantee will run for three years and apply to bold old and new property. Stephen Noakes, Mortgage Director at Lloyds Banking Group, commented: "We are very supportive of innovation in the housing market and believe that the mortgage guarantee scheme, will give a much needed boost to the housing market and most importantly address the issue of accessibility. "Crucially, this scheme will not only help first time buyers but also second steppers, a key segment of the housing market that is also in need of more support and attention. Whilst the property market is likely to continue to be challenging, the fresh support announced today will have a real knock on effect across the whole of the housing market and we expect it could help around 50,000 people a year."

Payment of taxes is the "glue that holds the economy together" the Chancellor said as he reaffirmed his commitment to crackdown on evasion and the professional services that advise on it. "With more measures to rein in Corporate Tax avoiders, the Chancellor has sent a clear message that aggressive avoidance is no longer acceptable," said Martin Hook, Managing Director of research and development tax specialists, Alma Consulting Group. "This will have a significant impact on the Big 4 and other firms who market tax avoidance schemes and will need to consider the morality of the schemes that they sell and the spirit of the tax legislation."

As was widely predicted, Osborne froze the fuel duty hike due in September 2013. He announced that his repeated scrapping of this duty has saved the average Ford Focus owner £7 on every tank of petrol.

Stating his commitment to helping entrepreneurs get ahead and recognising that the cost of employing people is a huge burden to small firms, the Chancellor announced a surprise move with National Insurance relief of £2,000. Called the Employment Allowance, he said the new measure means than 450,000 small businesses – which account for one third of all companies in the UK - can employ one person earning £22,000 or four people earning the minimum wage, without paying National Insurance.

"The Employment Allowance will certainly be a massive boon for small businesses. Not least because most weren't really expecting it," said Jonathan Elliott, managing director of MakeItCheaper.com. "Put it another way, a £2,000 saving for a typical small business is the equivalent of cutting their annual energy bill in half or putting 1,250 litres of free fuel in its fleet of vehicles." Yet the Government fell short on support for new enterprises, explains John Williams from Kuber: "Noticeably absent from the Chancellor's speech was any news of extending or enhancing the Enterprise Investment Scheme (EIS). Many were hoping to see the Government offer more help to start-up companies looking for second round finances, but nothing materialised."

There was bad news for public sector workers, who will see pay increases limited to 1% in 2015/2016. The government will also revisit 'progressive pay' which sees pay increase automatically each year which he said was 'difficult to justify' given that private sector pay has been frozen or cut. The armed forces, however, will be exempt from this.

Feeling the pressure on help working families, the Chancellor made a welcome announcement that working parents will receive a contribution from the Government towards the cost of childcare. Working parents will receive 20% - equivalent to the basic rate of tax - of their yearly childcare costs, up to a total of £6,000 per child. He said the move will save a typical working family with two children under 12 up to £2,400 a year.

Also, leaked this morning was the news that the Chancellor will raise the income tax threshold to £10,000 from April 2014 – a move he said will give 2.4million people at tax cut of over £200 each a year, as well as lifting two million people out of income tax altogether.
Yet while both moves are widely welcomed, they do little to counter the austere measures of previous Budgets, explains Clare Francis, editor-in-chief at MoneySupermarket.com:"Giving with one hand may be a positive, but taking away with the other through other tax increases and benefit cuts means that people are no better off. "In fact, the cumulative effect of this and previous budget changes, combined with wage stagnation and rising living costs means millions are worse off and an increasing number of families are on the breadline, struggling to make ends meet every month."
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