Wednesday, February 23, 2005

We have become more powerful III

"And for all of those that say, if you look at the last thirty years, we have lost power to Brussels, actually it isn’t true. In the last, certainly in the last eight years, as we, the Labour government, have been more involved in Europe, so we have become more powerful and more prosperous, better able, literally to implement a patriotic case for the European Union."

Jack Straw
Foreign Secretary

BBC Today Programme, 9 February 2005

While Bush has spent two days in Brussels, largely meeting the same people with different hats, in what The Times has called his "groundhog day", UK chancellor Gordon Brown has had a much better time of it, on an official visit to China.

But even there, thousands of miles from the capital of the evil empire, he could not escape the baleful influence of Brussels.

According to The Times business section, he is facing "a showdown with Europe" that could threaten to derail a rescue deal for ailing carmaker MG Rover.

Gordon's problem is that he has promised of a multimillion-pound tax break as a "sweetener" to the Shanghai Automotive Industry Corporation, which is interested in taking over the Rover plant. It has been speculated that the company could be allowed to defer its VAT payment, which could be more than £50 million.

The government is anxious to see a deal between the two sides complete before the expected general election in May. MG Rover’s Longbridge factory employs 6,500 and is in the middle of some key marginal seats.

No sooner said, however, than Gordon was reminded that, under EU competition rules, subsidies and tax advantages to an individual company are illegal unless there are special circumstances, such as the company being in a designated underdeveloped area.

Yesterday, Jonathan Todd, the EU commission's competition spokesman, said: "As a matter of routine, the commission would look at any benefits to Rover to assess whether these could be considered to be state aid, and if so, whether they are compatible with EU rules."

Undoubtedly a little embarrassed to be reminded that the real government of Britain was threatening to derail his plans – in a country where "face" is everything – Brown tried to brush aside concerns over EU rules, claiming that his deal would not infringe them.

The fact remains, however, that the arbiter of whether they comply with the rules remains with Brussels and Brown cannot proceed unless and until his masters give him permission – yet another example of how we have become more powerful.

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