Future EU Finances and Own Resources
John Healey (Financial Secretary, HM Treasury; Wentworth, Labour)
The questions that the hon. Gentleman raises are questions for OLAF. Surely he would not contest that we need such a body at the heart of the European Union. We also need the independent internal audit unit that the Commissioner has set up.
The inter-institutional agreement and the own resources decisions are the final parts of what has been a long difficult negotiation on the financial perspective. As the first negotiation of a union of 25 member states, it was bound to be complex. It is, however, a unique opportunity to modernise the budget and set out a process that will lead to a budget more fit for purpose for the European Union of the 21st century.
In the first place, the agreement ensures budget discipline. Rejecting the Commission's proposal for a budget of €1,025 billion, member states have instead agreed a budget of €864 billion, or 1.048 per cent. of EU gross national income. By 2013, the starting point for future negotiations, the budget will be about 1 per cent. of EU gross national income—its lowest level for 20 years.
The budget also allows for an historic shift in spending from the old member states of the Union to the new central and eastern European member states. It supports our long-argued UK commitment to EU enlargement. Over the coming years, the funds forthe new member states will increase from less than€30 billion to more than €170 billion—a sevenfold increase. These funds aid their economic development, and they will not only make them more prosperous and more stable, but bring significant benefits to the UK too. UK exports to the eight eastern European new member states totalled in 2004 £5.3 billion—up by around 230 per cent. over those of the previous decade. Access to these new and growing markets will benefit UK consumers and UK business.
The historic enlargement of the EU, combined with the intensifying global challenges on the economy, poverty, the environment and security, meant that the financing of the EU could no longer be viewed in the manner that it had been prior to 2004. As the Prime Minister said, as the EU's strongest supporter of enlargement, it was fair and right that the UK contributed properly to the costs of enlargement.
We have consistently argued, however, and carried out the argument in the negotiations, that the UK abatement remains justified because of the inequalities and inefficiencies on the expenditure side of the budget. The December Council conclusions that were agreed say:
"The UK budgetary correction mechanism (the 'UK abatement') shall remain".
The UK abatement remains, the abatement mechanism remains unchanged and the deal in December means that the UK will continue to receive the abatement in full on all EU spending in the old member states and on agricultural spending in the new member states, but we will forgo the increase in the abatement resulting from the economic development spending in the new member states and therefore will no longer receive an abatement on spending that contributes to the growth and the prosperity of Europe's poorest countries. As a result of those changes, the UK's net contribution will, for the first time, be similar to that of France and that of Italy—member states that are comparable to the UK in size and prosperity.