EUROPEAN UNION ENLARGEMENT REPORT: PROPOSALS FOR STABILISATION OF THE EU BUDGET

  Thank you for your letter of 23 February concerning a possible contradiction between two memoranda supplied by the FCO.

  I am assured that there is no contradiction and I hope the following information supplied by European Union Department clarifies the position.

  As explained in Memorandum 001/99 [see Appendix 11, pp. 41-44], under the Commission's proposals, we estimate that the UK net contribution would rise gradually (in real terms) from around £3.1 billion in recent years to around £4.1 billion by 2006.

  With stabilisation, the UK's net contribution to the EU budget in 2006 would be 0.45 billion Euro (£0.3 billion) lower than it would be under the Commission's proposals. This is the point made in Memorandum 010/99 [Appendix 15].

  Combining this information, the Committee might like to note that, under stabilisation, our net contribution will rise from about £3.1 to about £3.8 billion, rather than to £4.1 billion.

  If EU15 spending is stabilised, the main cause of this increase is spending in the six new Member States which, it is assumed, will have joined the European Union by 2006, and in the remaining applicants who will still be receiving pre-accession aid in 2006.

  I am sorry for the misunderstanding and hope that the position is now clear.