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European Affairs

– in the House of Commons at 4:21 pm on 14th December 2005.

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Question again proposed.

Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Margaret Beckett, Secretary of State), Department for Environment, Food and Rural Affairs 4:41 pm, 14th December 2005

May I congratulate my right hon. Friend the Foreign Secretary on the UK presidency, and wish him, the Prime Minister and other Ministers all the best for the forthcoming European Council? As a former Member of the European Parliament, I recall that we held the presidency in 1997, not long after our election victory in the UK, when the introduction of the single currency was under way. I was interested to hear my right hon. Friend the Foreign Secretary say that he had saved the pound, only to qualify that achievement with reference to the five economic tests, because I believe that, one day, the UK will join the eurozone, from which it will benefit greatly.

Since then, there has been a great deal of change in Europe. When I became a Member of the European Parliament in 1994, just 12 member states were represented. Three more countries joined the European Union, and last year, another 10 states joined. The progress of those countries and the way in which they have developed since the fall of the Berlin wall in 1989 and the fall of communism are a tremendous achievement and testament to the popularity and success of the EU in recent years. I am therefore dismayed that many hon. Members should take a negative view of the EU. We need only look at recent history to see the role that it has played in maintaining peace, prosperity and democracy and understand why countries are clamouring to join. The EU is the key to peace, prosperity and political stability, as is NATO, which many of those countries have also joined.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

My hon. Friend talked about prosperity, but is it not the case that the eurozone has grown more slowly than the Organisation for Economic Co-operation and Development area in general and, in recent years, more slowly than Britain? Economically, it has not been very successful.

Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Margaret Beckett, Secretary of State), Department for Environment, Food and Rural Affairs

The failure of certain countries in the eurozone to grow at a good rate compared with the UK has much to do with structural economic reforms that need to take place, many of which have been discussed by hon. Members on both sides of the House and which include the labour market and competition policy. The competition authorities in Brussels would have liked to improve many aspects but member states have dragged their feet. It is a matter not just of monetary policy, but of the labour market and economic policy adopted by those countries.

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

The hon. Gentleman says that the EU has been heavily involved in bringing prosperity to Europe. Is it not the case that the four countries with the highest average incomes in Europe are Liechtenstein, Iceland, Switzerland and Norway, none of which is in the EU?

Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Margaret Beckett, Secretary of State), Department for Environment, Food and Rural Affairs

That is the case, but the hon. Gentleman is not comparing like with like when he compares countries such as Liechtenstein and Norway with countries such as Italy, France, Germany and the UK. Even though they are not members of the EU, the countries that he mentions benefit from the European free trade zone, which operates alongside the EU. However, they have none of the advantages of being able to influence the rules of the single market, which we operate as members.

I look forward to welcoming Bulgaria and Romania into the EU in 2007 and, further down the track, Croatia and Turkey. Previous speakers have mentioned the importance of Turkey. Like other parts of central and eastern Europe, it will benefit from economic and political security through membership of the EU. Also, as has been mentioned, it is a Muslim country and its accession will get rid of the myth that the EU is some kind of Christian club. That in itself will be a huge achievement and send a signal to the rest of the Islamic world that the west is not anti-Islamic and that it is pro-people, irrespective of their religious backgrounds. I congratulate my right hon. Friend the Foreign Secretary on brokering the historic deal on 3 October.

On the budget and EU perspectives for the period 2007 to 2013, it is important that some agreement is achieved, even if it is less ambitious than our original aims. Hon. Members have mentioned the possibility that France may scupper an agreement because of disagreements over the common agricultural policy. Having witnessed the Make Poverty History campaign over the past 12 months, none of us in our own minds can justify the $2 a day spent on European agriculture, as against the $1 a day spent on people in the poorest countries of the world.

Whatever agreed position is adopted at the Council—I assume there will be agreement—I hope that at the trade summit and the Doha round in Hong Kong, any agreement reached on agricultural subsidies is brought back to the EU, and the EU perspectives in the budget for 2007 onwards adjusted accordingly. Although this week is important for determining a budget for 2007 onwards, it is not the end of the story. We will then be involved in multilateral trade talks in Hong Kong and their implications.

It is not right, as hon. Members have said, that 40 per cent. of our budget is spent on farm subsidies. There is €8 billion on offer for enlargement, for expenditure such as structural fund payments. Let us be honest—those countries must restructure their economies if they are to become valuable trading partners in the European single market, which will benefit them and us. As the European Union becomes bigger, more trade will take place, which will make the EU more prosperous. The €8 billion is not wasted money, because it helps those countries to develop, which, as I have said, benefits them and us.

Despite remarks by Conservative Members, the rebate remains intact. The rebate was negotiated before enlargement, and none of the money that relates to the EU 15 is being given up. The money that is being given up is to help the enlargement countries and, as someone who still describes himself as a socialist, I have no problem with that. The UK will still receive more money that it has in the past through the rebate, and that money will be spent on development in different parts of the UK, so I think it a win-win situation, providing that agreement is obtained on the budget in the European Council.

It would be ludicrous if did not make some movement on the rebate. As has been said, when it was agreed in 1984 France and Germany were far more prosperous than the UK. If things were left as they are, the UK would be the second lowest contributor as a proportion of national income, which cannot be right when so many poor countries have joined the EU.

The failure of the referendums in Holland and France has cast doubt on the future of Europe, and it has perhaps led to a more cautious approach on what Europe is and what it is about. There is nothing wrong with change in itself, and hon. Members have discussed a period of reflection. The Hampton Court summit, which the Prime Minister organised, concerned such reflection, and I shall discuss that matter in greater detail.

This afternoon, Conservative Members have discussed the constitution for a long time. Some of them are not satisfied with dancing on its grave and want to dig up the body and swing it around, which is ridiculous. Given the failure of those referendums, we must ask ourselves what Europe is about in the 21st century. What are the relevant structures for Europe and what are the imperatives for financing Europe in the 21st century? The CAP and the structural funds must play a huge role in the answers to those questions.

As other Labour Members have said, the rebate will not disappear as a whole, and it will not be on the table as a whole until we achieve significant CAP reform. We have already seen some progress, which is why I am unhappy about the degree of negativity in the House. Tremendous progress has been made on sugar reforms, which will save €3.5 billion to €4 billion and which were secured by my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs.

On the Lisbon agenda, the shadow Foreign Secretary said that there had been little progress in this Parliament. As hon. Members will know, the Lisbon agenda goes back to the Portuguese presidency of six or seven years ago. It is down to national member states to implement it. The European Union can make decisions but it cannot implement them without the co-operation of individual national Governments. It is disingenuous to pretend that the issue is just for the EU institutions, and it presents it in an unrealistic and a bad light.

Everybody wants a more dynamic and competitive knowledge-based economy in Europe, but it will take time. The six months of a British presidency is not sufficient, nor was the six years since the Portuguese presidency. Changes in culture will be required. We cannot restructure other countries' economies—that must be done by their national Governments. The CAP is important in relation to budget reform. However, if we could spend money on research and development to develop knowledge-based technologies and economies instead of spending it on agriculture, we would get more bang for our euro in terms of expenditure from the central pot of the European Union. We need value for money.

I was a little dismayed to hear the shadow Foreign Secretary speak in the same way that he did when he was Leader of Her Majesty's Opposition, with continual doom and gloom and negativity about Europe. Many Conservative Members shed crocodile tears over money spent on the CAP, but when they were in government they were happy to give those heavy subsidies to farmers in their own constituencies. The double standards of the Conservatives' attitude towards Europe will lead to their losing considerable credibility. Withdrawal from the European People's Party would be a huge mistake that the new Leader of the Opposition will come to regret. When I served in the European Parliament, I met the headbangers to whom Mr. Clarke has alluded. In my experience, what Sir Menzies Campbell said about certain Members of the European Parliament is completely accurate. It is ironic that he should mention Sir Robert Atkins, who replaced me as a Lancashire MEP in 1999. That is why I am speaking in this House today.

We are seeing more of the same old Europhobia—in favour of enlargement but asking for a referendum on Nice so that people could say no, and in favour of a referendum on the constitution, again so that people could say no. The constitution would have given new powers to national Parliaments, which would have made enlargement work better and allowed for a repatriation of powers that is now not possible given the existing treaties. What we have seen today is vintage Conservative Euroscepticism. Europe-bashing will not substitute for responsible foreign policy.

The British presidency has been successful because it has been positive. I mentioned the sugar reform, which has improved the quantity and quality of development aid. Sixty per cent. of the €4 billion has gone into the global fund to tackle AIDS, TB and malaria. The EU has been able to move mountains in terms of tackling climate change, as we saw from the historic deal in Montreal.

The successful European security and defence policy was mentioned. Work on the Rafah border between Gaza and Egypt has enabled the peace process to go forward. We expect progress in Hong Kong in the EU and World Trade Organisation negotiations. There has been progress on financial services action plans and directives on services, which account for approximately two thirds of Europe's GDP. Progress has been made on chemicals, for example, through the Registration, Evaluation and Authorisation of ChemicalsREACH—programme, which balances health and environmental concerns with industrial competitiveness.

The work on counter-terrorism measures has been mentioned. The EU has been in action in Bosnia to promote peace and stability. The meeting at Hampton Court was an initiative of the Prime Minister's, which led to debate on the future of Europe and the changes that are needed to meet the challenges of globalisation. There were new initiatives for research and development and universities. Demographic changes in Europe, energy supply security and immigration were also discussed.

It has been a good presidency and I congratulate the Prime Minister, the Foreign Secretary and other Ministers on their success, for which they deserve credit. Europe in the 21st century is a new Europe. It has 25 members and will possibly soon have 27 and then 30 members. Peace, prosperity and political stability have been the key to Europe and we still need the original ingredients that were used to achieve those aims. However, the threats that the new Europe faces are different from those that confronted the old Europe.

The two big issues for the new Europe are not communism and fascism but globalisation and terrorism. The changes that we want and have tried to promote through our presidency are part and parcel of dealing with globalisation. The recent arrest with regard to the 21 July attempted bombings has shown the value of European co-operation, with the introduction of the European arrest warrant before our presidency.

The constitutional referendums in France and Holland were a setback, as is slow progress on the Lisbon agenda. However, the history of Europe shows that it must go forward, even if that means two steps forward and one step back. That approach will take Europe into the 21st century and make for a prosperous and harmonious Union in the future. The Hampton Court meeting was about that. We need more Hampton Courts. The European institutions need to adapt to the blue-skies thinking that happened there.

Our future and destiny continue to lie with the European Union. I believe that the constitution contains much good for the betterment of Europe. I believe that, one day, this country will join the European currency. Perhaps that will not happen this decade, but it makes sense for the future and for a Europe that works in the 21st century.

Photo of Elfyn Llwyd Elfyn Llwyd Shadow PC Spokesperson (Home Affairs), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Defence), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Foreign and Commonwealth Affairs), Shadow Spokesperson (Justice) 5:02 pm, 14th December 2005

I join in the welcome to Mr. Hague on his return to the Front Bench. He made a good speech and although I did not agree with parts of it, the House will benefit from his presence on the Front Bench.

The Commission proposes to modify objective 1 and I shall speak briefly about structural funds as they affect Wales today. Hitherto, no one has mentioned objective 1, which is vital to Wales. Before I deal with the subject, I simply want to say that I accept that reform of the CAP is a given and that we should be prepared to consider an aspect of the Fontainebleau repayment. I also agree with the Foreign Secretary's opening remarks that the more prosperous countries in the European Union should be prepared to assist the incomers who are in need.

I want to confine my main comments to objective 1, which the Commission proposes to modify to highlight the economic convergence aspect. It may become known as the convergence objective. Regions will be eligible if the GDP per head is less than 75 per cent. of the average for the enlarged EU. That is not a fanciful figure. There are already three such areas in the UK, of which west Wales and the valleys is one. Unfortunately, at present anyway, that area is still hovering around the 75 per cent. mark. So it is not fanciful to talk about this; it is the reality. I live in the middle of that area. There will be transitional funding for regions that currently qualify but which will cease to do so as a result of enlargement, and there will be money for whole member states whose GDP is below 90 per cent. of the European average.

In January this year, the Commission published new statistics on GDP per head. These included figures for the average for 2001–02, which will determine the eligibility for the structural funds. Under the heading "Revised eligibility statistics", west Wales and the valleys is among those areas listed as being below the 75 per cent. threshold, with a GDP at that time of 73.8 per cent. of the EU average, and only 67.35 per cent. of the average for the pre-enlargement 15 EU member states, compared with 73.8 per cent. of the average for the EU 15 in 1999.

Obviously, Wales has benefited to a certain extent from objective 1 funding, and we are as desperate as anyone else to ensure that we continue to do so. However, it appears from recent press releases and from statements by Ministers that the UK Government seem almost to have planned for 2007 on the assumption that only one objective 1 funding area will remain in the UK—perhaps Cornwall. Speaking in Newcastle in June 2004, the then Secretary of State for Trade and Industry said:

"We know that there are challenges in terms of the future of EU funding. The EU has expanded, and most of the new member states are poorer than average. Our ability to provide regional selective assistance will be severely limited . . . But reform of the EU Structural and Cohesion Funds must focus on provision for the poorest member states".

I have already prefaced my remarks by saying that I agree with that in principle. Unfortunately, however, there are still parts of Wales, Cornwall and Scotland that qualify as being poor.

In a letter dated 17 January 2005 to the Chair of the House of Commons European Scrutiny Committee, the then Financial Secretary to the Treasury listed six objectives of UK Government policy in the present EU budget discussions. They included

"for the Structural Funds, to refocus support on the poorest Member states, within an EU framework".

That appears almost to rule out any further European structural objective 1 funding for parts of the UK.

The Competition Commissioner, interviewed in the Financial Times on 26 January, argued that even regions falling below the 75 per cent. figure should not be eligible for UK Government state aid, as distinct from EU aid, if they were within member states that were not relatively poor. That would rule out west Wales and the valleys, as well as some regions in eastern Germany. The Governments of the United Kingdom, France and Germany have all objected to this, even though it appears to be UK policy.

So the level of funding for the new convergence objective depends on an unresolved argument about the EU budget as a whole, including the total size of the budget and the proportions allocated to agriculture and other budget headings.

Photo of Robert Walter Robert Walter Conservative, North Dorset

The hon. Gentleman and I were involved some years ago in discussions about bringing on objective 1 funding for Wales. I am sure that he will remember that part of the Treasury's problem—this may or may not be helpful to him—is that the combination of the match-funding and the abatement of the rebate means that the Treasury actually meets 70 per cent. of all the EU regional aid that is provided.

Photo of Elfyn Llwyd Elfyn Llwyd Shadow PC Spokesperson (Home Affairs), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Defence), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Foreign and Commonwealth Affairs), Shadow Spokesperson (Justice)

The hon. Gentleman is right, and that has always been a problem, although it is rarely spoken about as factually correct. In a strange sort of way, if the rebate goes, we might be in a better position if we retain objective 1. [Interruption.] That is not a perverse argument, but a perfectly logical one, as it happens.

Photo of Elfyn Llwyd Elfyn Llwyd Shadow PC Spokesperson (Home Affairs), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Defence), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Foreign and Commonwealth Affairs), Shadow Spokesperson (Justice)

Perhaps it is a perverse system, as Chris Bryant comments from a sedentary position, but there we go.

As I have said, the Government have stated six objectives, and I have referred to what the Financial Secretary said. We really must impress on the Government the need to ensure that objective 1 funding remains available for west Wales and the valleys—I am trying not to be parochial, but the fact is that the area qualifies in any event.

The 1 per cent. ceiling, which was put forward in a joint letter on behalf of the Governments of the UK, France, Germany, Sweden, Netherlands and Austria in December 2003, is important, but the recent EU enlargement, as we know, has increased the EU population by about 30 per cent. but its total GDP by only 5 per cent. That is the pressure with regard to assisting those who are most in need. That implies further pressure to raise EU expenditure as a percentage of EU GDP. The number of farmers, as we know, has increased by 50 per cent.

There are problems in the European Union—I am not saying that everything is hunky-dory—such as not signing off the accounts. I accept that. There are also problems from the UK Government perspective. The Court of Auditors has referred to the UK's persistent errors in transactions, failure to comply with regulatory requirements, delay in closing the 1994–99 structural programmes and poor forecasting of expenditure. Those are genuine problems that need to be sorted out.

All of a sudden, we have arrived at the 11th hour of the UK presidency. It is as if Christmas has leapt up on us, but we knew Christmas was coming six months ago. The Prime Minister is having great difficulty in settling the budget, and I am not altogether surprised. There has been some handbagging and some megaphone diplomacy. It seems to me that the last thing that one would do to the French and Germans is to say that one is going to do away with the CAP—any fool can see that that will not engender any assistance from them. Equally, grandstanding on the Fontainebleau rebate, which has been a thorn in our partners' sides for some time, will not engender any co-operation either. We are now at the last hour, however, and we must find some way forward. If we do not do so, the structural funds to which I refer seemingly disappear. Among other areas of the UK, west Wales and the valleys will certainly suffer.

The Government have been a little lax. It appears that four months of inaction have led to some bad drafting that has been rejected by all but Malta. They are only a few days away from the discussions and apparently nowhere near a deal.

I am also concerned about the low level of the budget and funding for structural funds. The Commission's proposal is €336 billion, Luxembourg's is €306 billion, while the UK's proposal is €296 billion. That means that, whatever happens, there will be less money available for structural funds within the UK. Added to that is the problem of a funding gap because of a late decision. Many projects in the west Wales and valleys region are dependent on European funding, and those involved do not know at this stage what will happen. If there is no decision, some form of alternative money will have to be found, or the schemes will have to be wound up. If there is no decision this week, and we lose out on convergence, will the Government support statistical effect status, and will they guarantee to make up the shortfall in funding caused by the delay and their late and possibly bad negotiating? Will they guarantee that match funding will be provided?

New GDP figures are due from Eurostat in January. That means that if the budget is not agreed at this week's summit, some areas may not qualify. The new figures may show that the GDP of west Wales and the valleys is marginally above the EU per capita average of 75 per cent. I understand that the Minister for Industry and the Regions has said that if west Wales and the valleys qualifies, Wales as a whole will receive roughly what it receives now from the EU, but if it fails to qualify Wales will receive only about two thirds of what it receives now.

I should like the Minister to consider whether objective 1 money could be spent on housing. The UK presidency apparently proposes such spending for the 10 new EU states, but rules it out for us. Will the Minister tell us where is the logic in that?

West Wales and the valleys is a large and vital part of Wales. The position has improved—it would be wrong of me to say otherwise—but there is still much work to be done. Concern about the loss of structural funds is widespread, as has been made clear in yesterday's and today's press in Wales. We are told, for instance, that

"Welsh MEP Eluned Morgan, on a whirlwind tour of north west Wales"

—presumably she flew over it—said

"This December meeting is critical because it stands the best chance of getting the best deal for Wales."

In fact, it is the last chance. It would be a disaster if we failed to hang on to the money.

I will not labour the point, but I felt that it was important to make it as strongly as I could. Others—in local government, for example—have expressed concern. Denbighshire county council's European officer has said that up to 250 council jobs could be lost if the budget talks fail. There is a similar story from Ynys Môn county council and from Sheila Potter, Conwy county council's head of regeneration. If we do not retain our designation, Wales is in danger of losing about £1bn over the next seven years. More important, there is a distinct possibility of our losing convergence status over the following seven years, which would have even more dire consequences for us.

The Foreign Secretary said that my point about objective 1 would be responded to by the Minister for the Middle East. Will the Minister answer this question as well? Some 10 years ago, my party and I referred to all the jollity surrounding where the Conservatives might or might not be sitting in the European Parliament. At the time, my party sat with the European Free Alliance. We discovered a rather unsavoury character there—indeed, a bunch of them—and left the group within a week or so. The Minister discovered that, and sent out a very nasty press release calling Plaid Cymru all kinds of things for having sat with the "nasties", albeit for only a few days. The "nasty" concerned was Silvio Berlusconi. May I ask the Minister what advice he gives the Prime Minister when the Prime Minister holidays in the home of Silvio Berlusconi?

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs 5:19 pm, 14th December 2005

I think that Mr. Llwyd must be mistaken. As a neighbour of the Minister, I am certain that he has never issued a press release in his life—unless we include his putting a post-it note on an exhibit in the Turner exhibition describing it as conceptually difficult to understand. If we are going to talk about press releases condemning people, I should point out that the hon. Member for Meirionnydd Nant Conwy frequently issues press releases about me that call me all sorts of things that I would not want to bring up in the House.

It is very good to come to the regular gathering of the anoraks—

Photo of Elfyn Llwyd Elfyn Llwyd Shadow PC Spokesperson (Home Affairs), Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Defence), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Foreign and Commonwealth Affairs), Shadow Spokesperson (Justice)

I really do resent that remark. I have been a Member for nearly 15 years and in that time not one Member in any part of the House has had occasion to say what the hon. Gentleman just said.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. It would probably be generally beneficial if we got back into a moderate tone and to the substance of the debate.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

I am very grateful for your guidance, Mr. Deputy Speaker.

It is nice to welcome everybody this afternoon to our regular meeting of anoraks who express an interest in the European Union. We seem every time to be pretty much an identical set of people, but it was good to welcome Mr. Hague among us today. It is also good to have my neighbour, my hon. Friend Dr. Howells, the Minister for the Middle East, to wind up for us. He is not normally an aficionado of such debates, so I hope that this one has proved enlightening.

I particularly want to congratulate Mr. Walter on his speech. He gave the best articulation I have yet heard of why the European Parliament and the EU itself should have an explicit responsibility for European security and defence policy. All his argument led toward that, although I doubt whether that is quite where he intended to take it.

The most important issue that we have to debate as we move toward this weekend of negotiations, which the Government will chair, is the budget. Few Members of the House would want us to start from our current position or, for that matter, from the position of five or 10 years ago. The honest truth is that the EU budget is one of the most complicated and recondite pieces of administration in the world. There are remarkably few people, even in the body politic or, I suspect, even among us here today, who fully understand precisely how either side of the budget—the expenditure and the process of contribution by member states—is arrived at. The ordinary member of the public stands not the barest chance of understanding the complex arrangement of customs duties, sugar levies, VAT-based contributions and gross national income-based contributions.

The ordinary member of the public does not stand a chance of understanding the way in which the system of contributions has changed, either. The tectonic plates of the way that the EU is financed constantly shift. For example, the element of the entire EU budget that came from VAT-based contributions was 40 per cent. in 2000 and 37 per cent. in 2001, yet this year it will account for only 15 per cent. The whole premise on which the budget is put together is constantly changing and difficult to understand.

Furthermore, as many Members have said today, EU expenditure is not geared toward proper priorities for a 21st century European Union. We have referred many times this afternoon to the €46.5 billion spent in 2004 on the common agricultural policy, and many Members have also referred to the fall in the percentage of the EU's total budget that that represents—from 70 per cent. in the 1970s to a mere 45 per cent. today. Very few would accept, however, that that is enough of a change.

The complexity of the way in which the budget is put together is best explained simply by looking at the Luxembourg proposals that the then presidency put forward earlier this year, and which were of course rejected by the UK and four other member states. The proposals state that

"the rate of call of the VAT resource shall be frozen at 0.30 per cent."

I do not suppose that many in this Chamber, let alone in the wider population, could tell us precisely what that means. The proposals continue:

"for the period 2007–2013 the rate of call of the VAT resource for Germany, the Netherlands and Sweden shall be fixed at 0.15 per cent . . . on top of the collection costs foreseen in Article 2(3) of the own resource decision, for the period 2007–2013 the Netherlands and Sweden shall be allowed to retain an additional benefit equivalent to 10 per cent. of the amounts referred to in Article 2(1.a) and 2(1.b) of the same decision."

It is difficult to see how anyone could think that an open, transparent and sensible way of putting together a budget.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I must say that, for once, I agree entirely with what my hon. Friend says about the complexity of the budget, but I have suggested many times that if the net contributions to the European budget and the net receipts were in proportion to the level of prosperity in each member state—measured by GDP per head or some other measure—everyone would be happy and we would all understand it.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

My hon. Friend is an eternal optimist, but arriving at universal happiness around the EU about the budget is going to be slightly more difficult than that. I believe that we should try—certainly by the time we reach the next round of budget talks in 2013—to provide a much more principled budget, based on

"from each according to his ability, to each according to his need", which is similar to what my hon. Friend has just said. Such a principle is, however, difficult to apply.

Photo of Robert Walter Robert Walter Conservative, North Dorset

I am interested in how the hon. Gentleman is developing his argument, as I believe that the same approach was developed by Baroness Thatcher when she was Prime Minister and was negotiating the Fontainebleau rebate. She argued that, on the basis of our gross domestic product, we were contributing too much to the European Union.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

The question of how to decide whether a country is or is not a wealthy nation should be fully taken into account. I was about to say that although one might want to assert a simple principle—that the wealthiest contribute the most and the poorest receive the most—it remains complex and difficult to achieve because, as we heard from the hon. Member for Meirionnydd Nant Conwy, countries have both wealth and poverty. One of the oddities of the present structure of the financing system is that it is in the member state's interest to be rich but to have areas of poverty that attract moneys from the EU. That is the best way of ensuring that the net contributions are as low as possible. As I say, that is one of the genuine complexities of the position.

I suspect that we would all accept that member states as presently constituted are, in many regards, a mere quirk of the history of the past five centuries. That explains, for example, why Austria and Hungary are separate and why the Czech Republic is separate from Slovakia and so forth. Aspects of history have, in a sense, produced the member states of Europe today. Within those member states, there may well be significant regions and areas of wealth and of extreme poverty. As the hon. Member for Meirionnydd Nant Conwy would agree, it took a considerable degree of effort to draw up a map that included all the poorer areas of Wales, which is precisely the problem that we constantly face in attempting to build a budget for the EU that is based simply on principle.

The second difficulty is that the relative wealth of member states may change quite dramatically over a period of five to 10 years. The economic success of the UK, Spain and Ireland has meant that the relative contributions and receipts of those three countries have changed quite dramatically. The ability of the UK agricultural industry to reform itself has laid it open to receiving fewer subsidies than other countries.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

The hon. Gentleman is making a powerful argument and I think that I agree with him, but is it not just plain daft that the net contribution of the UK, per head of population, is more than 50 per cent. higher than that of France? Surely that cannot be right.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

I agree. Another principle that we should strive towards as far as humanly possible is that the big, prosperous countries, which are in many ways remarkably similar in their financial structure, should contribute broadly the same. It depends on how we choose to cut the cake of wealth. Whether we analyse it in terms of gross domestic product, gross national income per head or ability to buy will affect the conclusions that we reach about which country is the richest. Consequently, we end up with a lengthy debate between the Netherlands and Spain about how to assess each country's wealth precisely. That is one of the complexities.

I am constantly surprised at how discussions between colleagues from France, Spain and Greece feature arguments in favour of the CAP that, translated into English, would be almost the same, word for word, as those put forward by the Countryside Alliance. Moreover, I have always been perplexed to hear Conservative Members argue forcefully in this Chamber on a vast range of topics in a vein similar to that adopted by the Countryside Alliance, and then be the most aggressive opponents of the CAP.

However, Mr. Cash gave the game away this afternoon. What he is really interested in is repatriating agricultural subsidy to member states, because that would mean that each country could go on giving as much money as it wanted to its own farming and agriculture. I am less interested in reforming the CAP than in ensuring that agricultural subsidies across Europe fall substantially. Such a fall would mean that this country was not competing in the agriculture sector on an unfair basis with the poorest countries in the world, and that we did not prevent those countries from earning a decent living.

I believe that those Conservatives who argue most ferociously against the CAP are not really interested in doing away with agricultural subsidy, but that they are interested only in doing away with elements of the EU.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I agree with much of what my hon. Friend has said, but would not giving back agricultural policy to member states mean that we could choose to have lower prices and subsidies? That cannot happen under the CAP.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

I am delighted that my hon. Friend agrees with nearly everything that I have said. He has said that twice in one afternoon, which must be something of a record, although it does worry me slightly. However, what he does not recognise is that an agricultural subsidy free-for-all in Europe would lead to dramatically increased subsidies in Spain, Greece, France, Germany and Italy. That would give us a far greater problem with the WTO, and mean that we would stand not an earthly chance of delivering anything for countries in Africa, Latin America and south-east Asia. There is therefore a strong moral obligation on us to argue for reduced subsidies. In the interests of internationalism—and of socialism, for that matter—we must try to do our best by the poorest countries in the world. I therefore think that it is vital that we retain a version of the CAP, but we must make sure that it is a restrained version.

The question of structural funds is slightly different. I agree with the hon. Member for Meirionnydd Nant Conwy that we need a process to make sure that economies that are peripheral—in the geographical rather than the political sense—have a chance to prosper. It is important that the Rhondda in Wales, or Ronda in Spain, or places in eastern Europe, have equal opportunities to prosper—

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

As the hon. Gentleman suggests, Cornwall is another example. Only by sharing prosperity around Europe will we stand a chance of creating a just and fair EU.

The question is whether repatriating large amounts of structural funds would open the door to a vast expansion of inappropriate state aid in the eastern bloc, in those countries that have joined the EU most recently, and in those that intend to do so in the future. My worry is that any extension of state aid in Poland and Hungary would not be in the interest of the south Wales valleys, as the competition would be entirely unfair and unsustainable. Again, we want to maintain a structural funds system that brings money not only to the poorest countries but to some of the richest countries.

That takes me to the UK abatement, which, of course, like many aspects of the budget, is not as simple as it sounds. I would guess that most of my constituents, in so far as they know about the abatement at all, would presume that it is a fixed amount of money that we get back every year—that we get a cheque for £2 billion or £3 billion, or whatever, every year. Of course, the abatement is far more complicated than that, because of several determining factors. It is proportional to 66 per cent. of the net contributions in the previous year. Of course, net contributions cannot be finally adducted until four years after the year in question, because we do not know precisely what the expenditure will have been in each member state and, consequently, we cannot know what each member state's net contribution will have been. Also, most people will not realise that, by definition, our abatement will therefore rise and may frequently fluctuate. Over the past few years, it has fluctuated between €5.2 billion and €5.7 billion a year.

People might also think that the system is straightforward in that we get some money back and everyone else pays a little bit extra. Broadly speaking, that is true, except that it is not entirely true, because Germany, the Netherlands, Sweden and Austria pay only a quarter of the extra share of our abatement. France and Italy pay nearly half of our abatement. Of course, that might explain the major problem that we have in negotiations with France. There is a row not just about the CAP and the UK abatement, but about the fact that France and Italy between them effectively pay half our abatement—notwithstanding the fact that, as Mr. Bone mentioned earlier, France is not one of the larger contributors to the EU, because of its receipts under the CAP and structural funds. Nevertheless, politicians—especially President Chirac, who is wanted for a third term by a mere 1 per cent. of his country's population and is not particularly popular—obviously have an opportunity to play to their home market and perhaps to fight unfairly.

Given the way that the abatement is structured, the new 10 countries will pay €290 million of our abatement this year. If there were no UK abatement, France's net contribution would therefore be a mere €1.6 billion and ours would be €9.9 billion. So it is right—indeed, it is entirely ethically and morally justifiable—that the Government should hold to the idea that the UK abatement must continue, but I disagree with some people because I do not believe that the structure of the abatement can remain exactly as it is today. First, it places a particular emphasis on some nations, not on others. Secondly, it places a requirement on new member states—some of the poorest in the EU—to contribute towards our UK abatement, which can only lead to resentment against the UK among those members states' populations. That cannot be in our long-term political interests.

We were the country—I include hon. Members on both sides of the House—that argued most forcefully for the enlargement of the EU. The right hon. Member for Richmond, Yorks said that we should provide a hearty welcome for the new members of the EU. I do not think that that means that we can invite them to dinner, sit them down at the table and say, "Sorry, we all just had Christmas dinner, but you're now going to have mulligatawny soup." We must be able to provide a clear sense that the welcome is met by the financial requirements that must surely fall on us.

I believe that there should be a principled rebate. We should welcome the new members and pay our fair share. As I told the hon. Member for Wellingborough, the major, prosperous nations should pay in proportion to one another. That is what we should strive to achieve, because the biggest irony of our situation is that, as I said earlier, given the present structure of finance, rich countries with poor areas do best. Repatriation of agricultural and structural funds might be possible under some form of co-financing, but the last thing we want is a free-for-all.

I want to stray slightly into the area of how the House carries out European business. We hold debates such as this regularly and the speeches are more or less interesting, but we are poor at scrutinising the process of European legislation coming into UK law. For the most part, we undertake it through statutory instrument, or secondary legislation, which is debated—I use the word generously—for an hour and a half at most in Committee, with no opportunity to amend. That provides us with only scant understanding of how the EU genuinely affects us.

We tend to consider that European policy is always part of foreign policy, whereas in fact it is largely part of domestic policy. Sometime today, the Government will probably finally agree an artists resale right for the UK, to meet our obligations under the directive passed last year, which we have to put in place by 1 January 2006—we shall have to proceed at quite a pace to do that. When the matter is eventually debated, it will be for only an hour and a half upstairs, even though it is remarkably controversial for some people. To my mind, it is a great progressive measure that will enable many UK artists who struggle on a remarkably small amount of money to retain some of the value of their reward.

Photo of Philip Davies Philip Davies Conservative, Shipley

Does the hon. Gentleman agree that one of the problems is that there is so much European legislation? Will he acknowledge that about two thirds of all the laws applied in this country each year come from the EU rather than from Westminster? That is probably why there is not enough time to scrutinise all that stuff. We are overloaded.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

Indeed. There is certainly a lot of legislation, but there is plenty of opportunity to debate it. Unfortunately, remarkably few of us attend the debates. We need a halfway house between the full legislative process that we undertake for UK-originated Bills and the one and a half hour statutory instrument procedure that allows no amendment and no great degree of debate.

We need an opportunity for Ministers who attend Council meetings to report back. While I worked in Brussels for the BBC, the number of times that Ministers agreed something that was never reported in their country was extraordinary. We do not need an oral statement every time a Minister has attended a Council, but a written statement should be made to the relevant Committee after each Council meeting.

Furthermore, there should be a specified period for Europe questions—

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Lord Falconer of Thoroton, Secretary of State), Department for Constitutional Affairs

The hon. Gentleman agrees; he wants his hour in the sun, and I am sure he would be well tanned by the end of it.

A Europe Question Time would be an important part of the accountability process for our membership of the EU. One of the difficulties is that, due to the ballot, there is all too often no question on the EU from month to month in Foreign and Commonwealth questions.

I do not want to intrude too much on private grief in the Conservative party, but I am perplexed that a party with a certain degree of respect in the European Parliament and certain positions of responsibility, including a vice-presidency, a quaestorship and various committee responsibilities, should choose to walk away from every element of influence that it enjoys. That is a matter of concern not only for the Conservative party but for the whole country, because, for instance, before a summit there is normally a meeting, organised by political grouping, of Opposition leaders. I would have thought that a leader of the Conservative party—the Leader of Her Majesty's loyal Opposition—would want to meet other people in his political grouping, such as the new Chancellor of Germany. By leaving the European People's party, it is almost certain that the Conservative party will lose influence for not only itself, but this country.

I hope that Mr. Cameron—or the right hon. Member, if he has become a member of the Privy Council yet—understands the system whereby groupings are organised in the European Parliament, although I wonder whether he does. If he does not, he might like to know that an alliance must be formed with at least 19 Members from at least five countries, because otherwise a party's Members stand no chance of being a rapporteur on a Committee, of being a Committee Chair or deputy Chair, or of getting the opportunity to speak for more than one minute in the European Parliament at any one time. All that will be impossible unless he can find new people to join him.

I have looked through the list of non-attached Members of the European Parliament. It includes Philip Claeys, Koenraad Dillen and Frank Vanhecke. They are all from Belgium and are members of Vlaams Belang. In case anyone is uncertain about what that party is, it is the renamed Vlaams Blok party, which was condemned by the Belgian Government for being fascist and originally founded to ensure that there was an amnesty for former members of the SS. That party is one possibly ally.

Another individual is Jana Bobosíková, who is from the Czech Republic. There are plenty of French MEPs: Bruno Gollnisch, Carl Lang, Fernand Le Rachinel, Jean-Claude Martinez and Lydia Schenardi. Of course, the two most famous members of that group are Jean-Marie Le Pen and Marine Le Pen. Those people are members of the Front National.

Italy is even better. Its MEPs include Alessandro Battilocchio, Gianni De Michelis, Gianni Rivera, Luca Romagnoli and Alessandra Mussolini. That is great because the Conservatives will have a choice between the fascists and the communists, which is a delight. It is always difficult to talk about Austrian politics without mentioning Jörg Haider's old party, but the two possible Austrian candidates for supporting the Conservatives' new grouping are Andreas Mölzer and Hans-Peter Martin. Of course, there are four Polish Members representing the Polish Peasant party, none of whose names I will be able to read out.

Finally, and perhaps most importantly, the Conservatives might want to combine with other British Members of the European Parliament. There is Ashley Mote, who represents the UK Independence party. There is James Hugh Allister, who represents the Democratic Unionist party—[Interruption.] They have one ally. There is also Roger Helmer, but the Conservatives might have difficulty getting him on board as they only lost him just last year. Finally, there is Robert Kilroy-Silk. It says on my list that he represents the UK Independence party, but I think that that is somewhat out of date.

In a sense, I beg the Conservative party to reconsider its position on the issue for the simple reason that it will do its own future no good. This is not a caring Conservative party, but the most ideologically driven Conservative party that we have yet seen.

Photo of David Gauke David Gauke Conservative, South West Hertfordshire 5:48 pm, 14th December 2005

I thank Chris Bryant for his kind thoughts about the Conservative party, even though I did not agree with a word of it—[Interruption.] He was kind to address matters affecting the Conservative party, but we have more important issues to talk about today.

Following the defeat of the European constitution through referendums in the Netherlands and France, there was an opportunity for Europe to readdress fundamental issues. The Government talked about a pause for reflection, but there has been no adjustment to the European model and no change. The European model continues in an integrationist manner. I wish to attend to one specific aspect of that with regard to criminal justice. We live in a world of consensus politics these days. We can probably find a consensus in the House and in the country on criminal justice. I think that we all believe that criminal offences that are committed in the UK should be defined by the House. Presumably, we believe that criminal penalties should be determined by the House and the UK courts. I hope that no one takes that to be an extreme or unrepresentative view. I hope that even the hon. Member for Rhondda supports the view that criminal justice and the determination of crimes and penalties should be a matter for UK institutions. The Government recognise that that is the case.

In a debate last week in a European Standing Committee, the Under-Secretary of State for the Home Department, Mr. Goggins, was clear on the matter, and I will quote him. He said:

"It would be completely unacceptable for the operation of the criminal law in this country to be determined in Brussels or anywhere else."

When pressed further, he said:

"I am happy to reinforce the fact that changes to criminal law are a matter for this Parliament."

I pressed him on concern about approximation of criminal laws. "Approximation of criminal laws" was the wording used in the European constitution. Despite the fact that that constitution is not proceeding, it appears that the European Commission is working on the basis that "approximation of criminal laws" is the correct approach. I asked the Minister whether this would mean that we would all have to follow particular European crimes, if Europe and other member states determined what a crime should be. Again, he was clear. He said:

"I can visualise a situation where the United Kingdom might find itself in a minority of one but would still hold on to the view that criminal law is a matter for this Parliament. Whatever views are held by different hon. Members or different political parties, we should be able to hold a common view about that."—[Official Report, European Standing Committee C, 8 December 2005, c. 12–13.]

I think that we have a consensus on this subject.

We must have regard, however, to a European Court of Justice decision of 13 September. I shall provide a little background. The Commission adopted a proposal for a directive on the protection of the environment through criminal law. The Council of Ministers refused to adopt it. Eleven of the 15 member states claimed that the Community could not prescribe criminal penalties and instead adopted a framework decision. The Commission appealed to the European Court of Justice, which, as I have said, reached its determination on 13 September. The ECJ concluded that because environmental law is a first pillar matter, the imposition of criminal sanctions is a matter for the Commission and the Council of Ministers, acting sometimes through qualified majority voting and the European Parliament.

The logic is that that approach should apply not only to environmental law but to other matters where the EU has power to legislate. That would include single markets, consumer protection and cross-border mobility. It has been suggested by some analysts in this area that criminal procedure should also fall within the European Community's ambit if it relates to a first pillar matter.

On 23 November, the Commission issued its communication on its view of the ECJ judgment. It states that the judgment of 13 September recognises

"the exclusive competence of the Community to adopt criminal law measures to ensure the effectiveness of Community law."

It states also that the scope of the judgment

"exceeds by far the field of the environment taking the whole range of community policies."

It proposes not only to change the basis of legislation relating to environmental law, to scrap the framework decision and to change the bringing in of a directive, but to provide directives to cover areas such as money laundering, computer-related crimes, maritime pollution, corruption, human trafficking and euro and bankcard counterfeiting. That runs counter to the Government position that criminal law is a matter for the British Parliament. When I pressed the Minister in Committee on the matter, he was less certain than he had been about the position on criminal law and Europe, saying that

"member states will have to consider it and come to their own conclusions. We are currently doing so."

That was three months after the judgment. He went on to say that

"we . . . wish that the ECJ had not taken the course that it did. We reflected very carefully about the consequences of that, and we retain very strongly the view that criminal offences and sanctions should be a matter for member states."—[Official Report, European Standing Committee C, 8 December 2005; c. 13–15.]

That is the Government position. The British Parliament and all parties represented at Westminster believe that we should have exclusive power to determine and define criminal offences and the appropriate penalties. The European Commission thinks differently. That is not the case in general—the Commission is not arguing that it has the right to act in every area of criminal law, solely in substantial areas that fall under the first pillar does it believe that it has that right.

The European Court of Justice agrees with the Commission, and there is nothing—if I am wrong, I would be grateful if the Minister would correct me—that we can do about that. The Commission's view has been confirmed by the ECJ and, in areas that fall under the first pillar, including European Community law, it is the exclusive right of the European institutions to lay down what the criminal law is, even though some of those areas are subject to qualified majority voting. Astonishingly, someone in this country can be convicted of a crime that has not been determined by the democratically elected Chamber but by European institutions. The penalties that apply will not be determined in the UK but in Brussels.

That substantial constitutional change has taken place without a vote—there has certainly not been one in this country—or a debate, which is why I am keen to raise it today, and despite the fact that European integration, on almost every test, is unpopular and unsupported by the populations of the Netherlands and France. If a referendum on the European constitution were ever held in Britain, it would no doubt be defeated. There has been a substantial grab of power by the EU in the few months since the House last debated European matters. That has taken place almost unnoticed but, increasingly, criminal law is becoming a matter for Europe, not the British Parliament. That is consistent with the general direction that Europe is taking.

Realistically, the constitution will not be ratified, but steps have still been taken to increase integration. We oppose the establishment of the post of European public prosecutor—I am grateful that the Government have made their position clear—but steps have none the less been taken at the European level to develop the proposal. There is a host of other areas in which similar action is under way, but I am grateful for the opportunity to highlight to the House a specific and important constitutional matter that has been changed without any democratic accountability whatsoever.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North 5:59 pm, 14th December 2005

We have had a long and interesting debate, in which a certain amount of change has taken place. The tectonic plates may not have moved, but certainly the sands are shifting, which I very much welcome. We are now talking about things that I used to raise a year or two ago, such as doing away with the common agricultural policy.

For once I find myself substantially in agreement with my hon. Friend Chris Bryant. He emphasised that the EU budget is a mess and has been for a long time. It needs to be rationalised and made fairer. Mr. Llwyd spoke of his concern that structural funding might be taken away from Wales as a result of the entry of poorer new member states. He ought to be saying to the Government that every pound taken away should be replaced by the British Treasury. In his position, I would be arguing that strongly. Many Labour Members represent areas that receive such funding and, if it is taken away, it should be replaced by the Treasury.

Photo of Colin Breed Colin Breed Shadow Minister, Environment, Food & Rural Affairs

I am grateful to the hon. Gentleman for saying that. Does he agree that the way that money is spent is better organised and controlled in the region where it is to be spent, rather than being directed from central Government, particularly the Treasury?

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I agree. Perhaps democratic local government could have more of a say. In general, it is better for decisions to be made closer to where people live and where the funding is to be spent. Funding coming from the British Government rather than the EU would be better spent, and there is a parallel in the aid budget for the rest of the world. The Department for International Development does a much better job than the EU. If more funding went through DFID and less through the EU, the people who benefit would benefit more.

I take issue with the hon. Member for Meirionnydd Nant Conwy on another point. He spoke about handbagging, as though we had started the argument that has caused the impasse in the budget. To go back to the politics of it, if he remembers, following the victory of the French people in their referendum—I put it that way because that is the way I see it—it was the French President who immediately wanted to deflect attention from what he saw as his failure by attacking the British rebate. He raised the issue.

Shortly afterwards, I suggested in my modest way in a debate in the Chamber that if the French President wanted to open the question of our rebate, we should open the question of the CAP. If there were no CAP, there would be no need for a rebate. I do not suppose that the Prime Minister listens very much to what I say, but he took up the same theme not four or five days later, and I am very pleased about that. He put together a reasonable argument, but the handbag was first raised by the President of France, not by Britain.

We must appreciate that the problems arise entirely from the CAP. It is time to consider a way of abandoning the CAP and to state our intent to get rid of it over a period, in a sensible and negotiated way, not in a big bang.

Photo of David Taylor David Taylor Labour, North West Leicestershire

Is my hon. Friend aware of a document that has been produced by the Treasury and the Department for Environment, Food and Rural Affairs jointly that envisages just that as an option by 2020? Does he share that ambition and does he agree that it ought to be achieved earlier than that—perhaps by 2013?

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

My hon. Friend took the words out of my mouth. I was about to suggest a five-year phasing-in period. We heard a sensible suggestion from Sir Menzies Campbell, who spoke about co-financing, whereby some subsidy comes from national Governments and some from the common agricultural policy. If that was phased in, it would reduce the level of the CAP by 20 per cent. a year over a five-year period and replace it as national Governments choose with national funding. We could adopt a phased, sensible approach and we might even persuade countries not to take actions that were unacceptable and that had damaging effects on the outside world.

Much of the argument today has been made by hon. Members who would normally be the free traders—people who believe in economic liberalism. I do not share their view that the CAP is an instrument of economic liberalism and free trade and helps the third world. Even socialists have argued that. I do not believe that to be the case. If agricultural policy were repatriated, perhaps in a phased way, we could persuade individual countries, and certainly our own country, to reduce the level of overall subsidies to agriculture.

At the same time, I do not think it politically feasible to suggest that others should abandon subsidising their own agriculture, which is fundamental to the culture and economy in some countries. One cannot say to the French, "Get rid of all subsidies and go for free trade in agriculture", because the effect would be politically devastating. We cannot expect the French to do that, because we would not withdraw selected subsidies from our own agriculture. I keep mentioning Welsh hill farmers—I hope this goes down well with Welsh Members—who are part of our culture. Small-scale livestock farming is beneficial to the countryside, and if a degree of subsidy is appropriate, let us proceed with that policy.

Sometimes countries want to maintain a degree of agriculture for strategic reasons. The Czech Republic used to be able feed itself, but since it has joined the European Union, it cannot do so, which is upsetting.

Photo of Colin Breed Colin Breed Shadow Minister, Environment, Food & Rural Affairs

Does the hon. Gentleman believe that food security for every European country is an important aspect of agricultural policy?

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

Some food security is necessary, but trade in agriculture will always occur, because we must import those things that we cannot produce.

Agriculture should be decided democratically within each member state. Some member states would have larger sectors than us, but we would maintain our own distinctive style. For example, I would like to see us abandon the large-scale production of sugar beet. It would be beneficial if we started to produce biofuels, which provide CO 2 -neutral green energy. We could use the open spaces in East Anglia in which sugar beet is currently grown to produce biofuels, and my approach would involve national production.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

Is the hon. Gentleman aware that sugar beet can be used as a biofuel?

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

If we were to use it as a biofuel rather than dumping it on Malawi, I would be very pleased. Selling cheap subsidised sugar to the Malawians is not the way to proceed, when they can produce sugar themselves.

I want briefly to discuss the effects of the CAP by considering EU agricultural spending per head in member states with comparable living standards to our own: in Ireland, agricultural spending—these are rough figures and might be out by a few euros here or there—amounted to €460 per head of population in 2004; in Denmark, the figure was €275; in France, €160; and in Britain, €65. Ireland, which has a similar standard of living to our own, has seven times the subsidy per head for agriculture; Denmark, which is a richer country than Britain, has four times as much subsidy; and France, a big country which is comparable to Britain, has two and a half times as much subsidy. The position on subsidies is nonsense.

I agree with those hon. Members who have argued that we should provide more for the newer member states and if any redistribution takes place, it should be towards them and not the richer western European nations. If we compare the subsidy per head in Spain and Poland, which have similar populations but different living standards—Spain is considerably richer than Poland—Spain spends €150 per head and Poland spends €15 per head, which means that spending differs by a factor of 10.

Hon. Members have discussed structural funding and I have examined the structural funding tables for 2004. The Spanish get 10 times more in structural funds than the Poles. I know that such funding is phased over a period. We keep saying that we want to be generous to those countries, but we are not being generous, and the fault lies with the CAP.

Britain is being guilt-tripped about our rebate, which is justified on the basis that we are the least favoured by the CAP among the western European nations. The problem is not our rebate but the CAP. If we were to get rid of the CAP tomorrow, reduce contributions accordingly and repatriate spending, we could examine what we need to do and allow the situation to settle down. In that case, the budget would be more understandable, which would allow us to adjust it to make sure that poor nations receive according to their living standards and that we give according to our wealth.

We should not accept any accusations of guilt from the big beneficiaries of the CAP and we should not back off. I am glad that my right hon. Friend the Foreign Secretary is negotiating for us, because I have great confidence in him. I am pleased that he is batting for Britain on this very sticky wicket. I am not sure that members of the Commission understand cricketing metaphors—if they played cricket, we might get a bit further. My right hon. Friend is doing the best job in difficult circumstances. I hope that he will emphasise that the main issue is not our rebate but the CAP. If we want to help the poorer nations more, we can, but first we have to deal with the CAP.

We must move towards an EU budget—I have said this many times before in these debates—that is fair and equitable according to the living standards in the different member states, which means that the rich give most and the poor receive most. That is completely screwed up by one simple fact—the existence and operation of the CAP. I urge my Front-Bench colleagues to consider how to move away from the CAP and towards a more sensible approach to agriculture.

Many people argue that, if we got rid of the CAP, member states would subsidise their agriculture even more and we would have a worse problem. I do not think that that would happen, because a Government's own taxpayers would have to bear the cost of the subsidies and they would be under pressure not to spend too much and to reduce those subsidies. At the moment, they are spending other people's money—largely British money, in fact. It is always easier to spend other people's money than one's own. In Britain, we would stop subsidising Tate & Lyle to the tune of nearly €200 million a year—a ridiculous amount. We would also stop subsidising some of the very wealthy farmers—the landed gentry who in the past were represented by Conservative Members. Indeed, royalty, including the Duchy of Cornwall, gets these subsidies. If we did that, other countries might do the same, especially if we appealed to them to play their part in helping the world's poor to find their way forward.

I would go further. I am not automatically a free trader. If a poor country wanted to restrict imports of subsidised agricultural products from countries such as France, we should let them do so in order to protect their own farmers. Simple free trade and forcing them to open their markets to our goods will not help them in any way. There are two sorts of protectionism—by the rich to help themselves and by the poor to ensure that they have a chance in this difficult and competitive world.

Photo of Peter Bone Peter Bone Conservative, Wellingborough 6:13 pm, 14th December 2005

Thank you, Madam Deputy Speaker, for calling me to speak in this European affairs debate. It is a great pleasure to follow Kelvin Hopkins. I listened very carefully to everything that he said, and I am afraid that I could not disagree with one word.

The hon. Gentleman covered some of the topics that I wanted to address. As he said, it is extraordinary that we are going into the World Trade Organisation negotiations with a European Union position whereby we are not prepared to make proper cuts to the tariffs, and yet we are asking some of the developing countries to make huge cuts in their protection. That is "Alice in Wonderland" politics.

I have learned two important things while listening to the debate. First, the new leader of the Conservative party must be absolutely right to take Conservative MEPs out of the European People's Party because his decision has been so hotly disputed by Government, Liberal and Plaid Cymru Members. That is good enough for me—he must be right.

Photo of Colin Breed Colin Breed Shadow Minister, Environment, Food & Rural Affairs

Does the hon. Gentleman accept that the proposal has been roundly abused by Conservative Members of the European Parliament?

Photo of Peter Bone Peter Bone Conservative, Wellingborough

That intervention simply proves that we must have a party that speaks with one voice in Europe. Perhaps the Members of the European Parliament should be more in tune with the new leader.

Let us think about the pause for reflection. I understood why that happened after the French and Dutch victories over the constitution, but it must have ended by now. Early in his speech, the Foreign Secretary let slip that the euro is dead and the pound is safe. That must be new Government policy. It is good news. If nothing else, I have learned that, and I hope it is widely reported.

What is the European Union? Someone said that it was a little like a large public limited company. It spends a great deal of money and has a huge budget. I thought about that and realised that there is no proper control over the plc. The auditors have not signed the accounts for 11 years. If the EU genuinely resembled a plc, it would have gone bust and its directors would have been imprisoned. Clearly, that was not the right definition.

I therefore thought that I would ask my son Thomas. He is a bright lad, but he is only four. I sat him down and asked, "Thomas, can you tell me what a large area of land is called that has a president, courts, a parliament and taxes people?" He asked, "Is it a piece of land that has a flag and. Members in a parliament?" When I said "Yes", he replied, "Don't be silly, Daddy, that's a country." Unfortunately, that is way that the EU has gone.

Labour Members have expressed the federalist approach with some clarity. I do not doubt their sincerity and it is right that they make their point. They believe in a central country called Europe with nation states that become regions, rather like a united states of Europe.

Photo of David Taylor David Taylor Labour, North West Leicestershire

Does the hon. Gentleman accept that Europhiles are not confined to the Labour party and that Eurosceptics are not confined to the Conservative party, as evidenced by the fine speech of my hon. Friend Kelvin Hopkins?

Photo of Peter Bone Peter Bone Conservative, Wellingborough

All I said was that, today, the federalist case was made eloquently by Labour Members. However, I do not believe that they are right. We need a Europe of nation states that is based on free trade and co-operation. I welcome enlargement—I should like the EU to be enlarged much more and include the North American Free Trade Agreement area so that we have a proper free trade area and not a superstate in Europe.

The budget surprises me most. When we joined the European Economic Community, nobody spoke to me about a budget of £600 billion. That is so much money that nobody can comprehend the sum. The EU now is much nearer the federalist position than mine. I cannot believe that it simply happened, but it did. How did we get into that position? There was no great debate in this country about whether we should be part of the EU. No referendum took place. Suddenly, one sunny winter's morning, we woke up in the EU.

How did it happen? I put it down to the salami approach. If we try to eat a salami sausage in one go, we spit it out in disgust. It is horrible and we cannot possibly taste it. Yuck. Some of the powers of this country have gone to the EU slice by slice. We can put up with each piece individually, but over the years we will find that we have become part of the superstate of the European Union.

The elite of Europe—the Commissioners and the failed politicians who run the European Union—have got a bit ahead of themselves and started to believe their own spin. They said, "Why don't we have a constitution, and why don't we put it to the people of Europe?" Of course, that is where they fell down because the people of Europe rejected it. I have a real fear that the bureaucrats, Commissioners and politicians in Europe are simply going to say, "Okay, we can't get this through using a constitution, so we'll use the salami approach that has worked so well over the years. We'll just put the bad bits in piece by piece, so that nobody really notices."

I want to talk about the democratic deficit in the European Union. We have heard that countries are queuing up to come into the EU, and that may well be right. However, it is their Governments who are queuing up to come in, and they never ask the people. If the European Union can impose such regulations and conditions on countries coming into the union, why cannot it impose the simple regulation that a country has to hold a referendum of its people before it can come in? We would then know that that country really did want to come in.

That is a suggestion for the future, but we have a problem in this country now. We were never asked whether we wanted to be in the European Union. There is a strong argument for holding a referendum every 10 years to see whether the people of this country want to stay in the EU. That would take the issue out of the daily political argument, because people would know that, every 10 years—

Photo of David Taylor David Taylor Labour, North West Leicestershire

What country does the hon. Gentleman live in?

Photo of Peter Bone Peter Bone Conservative, Wellingborough

Well, it seems to me to be a reasonable approach.

We talked about Romania and Bulgaria earlier. They have just escaped from the yoke of the Soviet Union, and the great thing is that they now have democracy. However, they have been brought into the European Union without any consideration of their people's wishes. That seems fundamentally wrong.

I want briefly to talk about the £600 billion budget. We have talked about the budget largely in generalities today, but there has been a lot of spin about the rebate. Can we just look at the actual figures? In 2005, this country was taxed £12.7 billion, and at the end of next year, we might get back £3.6 billion. So the taxpayers of the United Kingdom will have paid £9 billion in 2005 alone to belong to the free trade area called the European Union. That £9 billion could have been spent on many things in this country. I would have liked to see a new hospital and a new secondary school in my constituency, for example, and they would have cost only a fraction of that £9 billion that we are giving to the European Union. People will say, "Ah, but we get a lot of that money back." According to the figures, we will get £4.8 billion back, but we get it back to spend on the projects that the European Union decides we can spend it on. So we give the European Union our money, and it makes bureaucratic regulations to determine what we can spend it on. What a weird world we live in.

There has been much talk of the Prime Minister giving away our rebate, but I do not believe for a minute that he will do so. I am sure that he will pull a rabbit out of the hat. But let us just assume that he did give it away. The United Kingdom would then have to pay five times the amount that France pays into the European Union. This is a topsy-turvy world and the Government have failed in their presidency of the European Union. It is time that we got the European Union sorted out, and time that we got the common agricultural policy scrapped.

Photo of Nia Griffith Nia Griffith Labour, Llanelli 6:24 pm, 14th December 2005

I very much welcome the publication today of the UK presidency's proposal on the financial perspective 2007–13. Leading European Union member states in agreement on such an immensely important issue as the budget for 2007–13 is tremendously challenging. It is particularly challenging when we remember that any agreement must be unanimous and that every member state wants to go home with a victorious message. Everybody wants to be a winner, and that is all the more difficult now that we have an EU of 25.

Our proposal shows magnanimity and generosity and leads the way. We have put an offer on the table to start the drive towards tackling CAP reform. It is a sensible offer, which reflects our increased prosperity as well as our sincerity and determination to do business. The way to ensure that that document is seriously and sensibly considered is to make sure that as many member states as possible have a good message to take home. No fewer than 13 individual member states are specifically mentioned in the proposal, as they will benefit from specific funds such as the regional development or rural development funds. In addition, there is the progressive proposal that will ensure that new EU states can access funds more easily, with less reliance on match funding—real funds that they can use, rather than theoretical funds that they cannot access. That is a good message to take home. Furthermore, several of the richer countries not mentioned in the proposal will welcome the overall reduction in the overall percentage of EU funds, which will be a good message for them to take home.

It is vital that the financial framework for 2007–13 is decided as soon as possible, so that all member sates can begin their planning in good time to be able to take advantage of the funds available in 2007. Not least, of course, we need an early settlement, which will mean that forward planning can begin in our areas, which have, until now, benefited from objective 1 funding, and which will benefit from transitional funding in 2007–13. Those areas include west Wales, the Welsh valleys, the Scottish highlands, Northern Ireland and parts of England. I also welcome the Chancellor's assurances that if EU funding to those areas is reduced, the Treasury will ensure that the shortfall is made up to ensure the continuity of the excellent economic progress that has been made in those areas.

Photo of Colin Breed Colin Breed Shadow Minister, Environment, Food & Rural Affairs

Does the hon. Lady agree that it is not only important that the Treasury provides the money to make up any shortfall, but that the control and direction of the spend of that money lie in the region concerned?

Photo of Nia Griffith Nia Griffith Labour, Llanelli

Indeed. It is extremely important that there is a firm partnership between UK-level, EU-level and regional-level auditing.

That brings me, lastly, to the good message that we will bring home. What have we done? We instigated the proposals, put the UK rebate on the table and paved the way for CAP reform. We proposed a reduction in our rebate that reflects not only our prosperity but our determination to make real progress on EU budget reform. That reduction, however, has been linked to an overall reduction in the EU budget.

I therefore welcome this realistic document, and I very much hope that, later this week, my right hon. Friends, through this document, will make substantial progress towards setting the EU on the path to genuine budgetary reform.

Photo of Graham Brady Graham Brady Shadow Minister (Europe) 6:28 pm, 14th December 2005

As ever, we have had an interesting and wide-ranging debate. I am pleased to follow Nia Griffith, not least because she managed to squeeze so much into three minutes, and I am sure that there would have been much more had she had more time. Llanelli, of course, has produced many great parliamentarians, not least my right hon. and learned Friend Mr. Howard.

Earlier, we heard from Sir Menzies Campbell, who endorsed our position that the rebate should only be negotiated in return for CAP reform. He raised the prospect of reform of the CAP to return its funding streams to national Governments. That view was later endorsed by Kelvin Hopkins, whose contributions to these debates the Opposition very much value, although we do not always agree with everything that he says. I know that he is reassured by that.

Keith Vaz, a former Minister for Europe, spoke about the Foreign Secretary's panache and charm and about having voted for him in The House Magazine awards. We were privileged to hear what might well be his last intervention from the Back Benches. He is clearly working very hard to return to his earlier brief, although he is currently looking after the Westminster kids' club party, where I would have been were I not in the Chamber, as one of the co-hosts.

The Foreign Secretary advised Members to back a horse rather than putting money on his chances of success in the budget negotiations. Some Members may find that a bit rich, given the Foreign Secretary's own readiness to gamble £6 billion of British taxpayers' money this week in the European Council.

My hon. Friend Mr. Cash said that enlargement would inevitably lead to a looser, freer European Union. My hon. Friend Mr. Bone spoke passionately on behalf of his constituents, particularly the younger ones—notably one Thomas Bone. He put the case for much wider free trade, bringing in countries outside the EU. We strongly endorse that.

My right hon. Friend Mr. Heathcoat-Amory rightly reminded us that for 11 years the European Court of Auditors has refused to sign off the EU's accounts. My hon. Friend Mr. Gauke spoke of the way in which the EU is extending its influence and powers even without the constitution that was rejected earlier in the year. My hon. Friend Mr. Walter expressed concern about the failure of the British presidency to make itself accountable to the Assembly of the Western European Union, not once but twice. He also issued a plea for the small but necessary funding in that regard. I am sure that the Minister will sign a cheque as soon as he leaves the Chamber.

Mr. Hendrick produced the astonishing revelation that he still believes that Britain will join the eurozone. We hoped that he would go on to tell us what he expected Father Christmas to bring him shortly, but sadly he left us in suspense.

Opening the debate, my right hon. Friend Mr. Hague was the living embodiment of the new politics. [Hon. Members: "Where is he?"] He will be back shortly. The winding-up speeches began slightly earlier than expected.

My right hon. Friend warmly congratulated the Foreign Secretary on the opening of Turkish accession talks, and I am delighted to echo his tribute. [Hon. Members: "Here he is!"] As ever, my right hon. Friend is on time. It is just that we started a little early.

Not only will Turkey's eventual EU membership bring benefits; the process of reform and development that will precede it is important, and the Minister and the Foreign Secretary can be proud of their role in that process. I suspect that they will also be relieved—relieved that, whatever may happen over the next few days, there will be at least something to show for the six months of the British presidency. It is all too clear that, to date, no one in the European Union is terribly impressed by anything else that they have done.

There is too much relevant material for me to quote from all of it, but I shall cite one or two of the comments that have been made. The French Minister for European Affairs recently said:

"Five months have passed and there is still no proposal likely to shape an agreement. There is not even a proposal setting out figures. Many delegations were surprised by this method of conducting budget negotiations."

The Belgian Foreign Minister was quoted by diplomats as saying:

"We are sitting here wasting our time."

The Portuguese Foreign Minister said:

"They have done nothing about the financial prospects . . . We are not going to get any numbers today, just words."

One Brussels civil servant is quoted as saying:

"the British presidency—you don't see it, you don't feel it, it's very curious".

Mr. Marco Incerti, an EU expert at the Centre for European Policy Studies, said:

"the famous speech by Tony Blair raised expectations, but those that criticised Blair for just saying nice words are being proved right".

That was reported in The Times on 22 September.

The last comment, from Mr. Incerti, hits home hardest. As was pointed out by my right hon. Friend the Member for Richmond, Yorks, our EU partners have learnt something about the Prime Minister and his Government over the past six months—something that it has taken the British people much longer, with far more pain, to discover. They have seen the dramatic difference between the fine words and high aspirations in the Prime Minister's speeches and his dismal record of underachievement, lack of delivery and lack of direction.

It all started so well. On 23 June, the Prime Minister told the European Parliament:

"Just reflect. The Laeken Declaration which launched the Constitution was designed 'to bring Europe closer to the people'. Did it? The Lisbon agenda was launched in the year 2000 with the ambition of making Europe 'the most competitive place to do business in the world by 2010'. We are half way through that period. Has it succeeded? I have sat through Council Conclusions after Council Conclusions describing how we are 'reconnecting Europe to the people'. Are we? It is time to give ourselves a reality check. To receive the wake-up call. The people are blowing the trumpets round the city walls. Are we listening?"

That wake-up call came in June with the referendums in France and the Netherlands. But six months on, the British Government show every sign of having overslept. Instead of replacing the crisis of political leadership with a real vision and a new direction—a move towards a more flexible European Union—we have had six months of business as usual. We have had the same old arguments, the same resort to horse-trading and the quest for a deal that makes everyone equally unhappy.

In recent weeks, we saw the undignified spectacle of the Prime Minister engaged in what Bronwyn Maddox of The Times described as a

"doomed last-gasp diplomatic mission" to find a friend somewhere in eastern Europe. We should note the danger of agreeing to what Mr. MacShane—sadly, he is not with us today—described to The Daily Telegraph as

"a one-sided deal that even out-and-out pro-Europeans like me would find it hard to support."

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation

What proposal would the Conservatives have come up with, had they been in government, to achieve a budget settlement?

Photo of Graham Brady Graham Brady Shadow Minister (Europe)

We very much agree with the Prime Minister's aspiration, but the crucial difference is how hard one is prepared to negotiate. My hon. Friend Damian Green summed up the situation brilliantly the other day when he described the Government's stance as a "pre-emptive surrender". They have been prepared to put concessions on the rebate on the table; originally, they said that they would do so only in return for CAP reform. However, without any promise of reform—without even a promise of discussion of reform—they have been prepared to cave in and to give further concessions.

Photo of Graham Brady Graham Brady Shadow Minister (Europe)

The hon. Gentleman can try again.

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation

The hon. Gentleman must have misheard my question. What proposal would his party have come up with that, in his view, would have broken the deadlock?

Photo of Graham Brady Graham Brady Shadow Minister (Europe)

We would have stuck to the Government's policy and not caved in at the first opportunity. They set out a very good, solid negotiating position in June. The Prime Minister spoke in the European Parliament and there was a great deal in what he said that we endorse and would be happy to support; but instead, the Government caved in at the first opportunity.

The day before the Prime Minister spoke to the European Parliament, the Chancellor of the Exchequer spoke in his Mansion House speech of the pressing need for radical reform of the EU. He spoke of a "new urgency" and of

"questioning not just what is the right policy for the European economy but what is the right balance, economically and politically, between national decision making and European decision making to fit us to meet these challenges. So questions that Europe might find it easier to avoid—how we reform inefficient state aids, especially in farming; how we might break out of all too the familiar stand off in trade with the one other advanced global power, north America; how, with 20 million unemployed and almost half of them half long term unemployed, we reshape and modernise the European social model—are questions that must be addressed if we are to meet the challenge of globalisation."

He continued:

And we should start with agriculture. In 2013 Europe will still be spending almost 40 per cent of its budget on protecting and sheltering inefficient and counterproductive agricultural subsidies. The reason why Tony Blair has made the reform of the budget such an important issue is that the failure to reform the budget impedes the very economic changes we need."

The Prime Minister and the Chancellor were right to prioritise reform of the CAP, but that makes it all the more startling that not a single concrete proposal emerged until a week or so ago. A joint document from the Treasury and the Department for Environment, Food and Rural Affairs—the Foreign Secretary referred to it earlier—set out the costs of the CAP, which are staggering on the Government's own assessment. It states that the

"economic analysis, even on conservative estimates, suggests the CAP will leave the EU economy around €100 billion poorer over the period of the next financial perspective (2007–13); . . . The financial cost to ordinary citizens— this is according to the Government's own document—

"is much greater—around €100 billion each year, according to OECD estimates, half from taxpayers and half from consumers owing to higher food prices. This is an average cost to an EU family of four of about €950 a year, with only around €20 of this spent as EU money on targeted environmental programmes".

The Government were right to flag up the huge importance of fundamental reform of agricultural policy, but yet again, they have achieved nothing to that end during the British presidency.

Several hon. Members:


Photo of Graham Brady Graham Brady Shadow Minister (Europe)

I have an embarrassment of choice before me, but I give way first to the hon. Member for Preston.

Photo of Mark Hendrick Mark Hendrick PPS (Rt Hon Margaret Beckett, Secretary of State), Department for Environment, Food and Rural Affairs

The hon. Gentleman fails to refer to the £3.5 billion to £4 billion that will be saved from the CAP budget by the sugar reforms.

Photo of Graham Brady Graham Brady Shadow Minister (Europe)

That, however, is not the fundamental reform of the CAP that the Government talked about at the beginning of the presidency, and it will not save the €100 billion relating to the next financial perspective or the €100 billion a year that the Government acknowledge to be the cost of the CAP.

A pathetic signal of defeat and pessimism in respect of the Government's negotiations is the fact that the vision set out in the Government paper focuses on

"where we need to be in 10 to 15 years time, and why. It does not set out a route map for getting there."

They have no idea—and not just for the six months of the British presidency—about how to get to where they want to be in 15 years' time.

Photo of Bill Cash Bill Cash Conservative, Stone

On that very question of the route map, I entirely agree with my hon. Friend's comments on the Government's position, but does he accept that clear decision-making will be necessary on the Conservative Benches in order to reclaim the powers that are needed to give effect to economic enterprise, to engage in open markets, deal with the CAP and ensure that democracy remains where it should be—namely, in this House?

Photo of Graham Brady Graham Brady Shadow Minister (Europe)

I am grateful to my hon. Friend and I look forward to further more, detailed conversations with him on that subject.

Here lies the real tragedy of this EU presidency. It is not that Conservative Members regard it as a failure or that the Government have damaged their relationships with so many EU partners; the real tragedy is that they have failed to live up to their own laudable objectives. If, following the rejection of the constitution, there was a crisis of political leadership in Europe, it is worse now. If there was a pressing need for economic reforms, it is even more pressing six months on. If there was an overwhelming need for fundamental reform of the CAP in June, the need for a better world trade deal makes the case even stronger today.

It was notable that even the Foreign Secretary made little effort to claim that the presidency has been a great success. We are keen on political consensus, but we are sorry to see the firm consensus developing around Europe—that the British presidency has been a failure. It may be that no deal is achieved on the budget this week. If that is so, the Government will have squandered reserves of good will for nothing. If, however, a deal is done, it looks increasingly as though it will be the worst of all possible worlds—bad for the new member states, no reform of the CAP and billions more being taken from British taxpayers.

We agreed with so many of the objectives set out in June, so it is with real sadness that we move towards the end of this British presidency with no real prospect of agreement on the key challenges facing Britain and the European Union.

Photo of Kim Howells Kim Howells Minister of State (Middle East), Foreign & Commonwealth Office 6:43 pm, 14th December 2005

May I add my words of welcome to Mr. Hague, particularly as he and I entered the House together on the same day? I also welcome Mr. Brady to his new position. It is good to see them both on the Front Bench.

I apologise for the absence of my right hon. Friend the Minister for Europe, who is required to be in Strasbourg today. Instead, Madam Deputy Speaker, you are stuck with me, fresh from witnessing the devastation of the earthquake in Kashmir and the fight to relieve poverty, corruption and the corrosive effects of the heroin trade in Afghanistan. Those scenes put this debate in perspective: it is very good to be back in Britain and in Europe—and to be Welsh is very heaven—because hon. Members should try living out there.

As in every debate preceding a European Council, we have had a vigorous discussion about the key issues that European leaders will address tomorrow, and about many other matters in which the EU plays a role. Many important questions have been raised, and I shall attempt to answer at least some of them.

As my right hon. Friend the Foreign Secretary set out so clearly, the focus of tomorrow's European Council will be to agree a budget for the European Union for the period from 2007 to 2013 that is fair and meets the needs of an enlarged EU in an increasingly competitive global economy. My right hon. Friend the Prime Minister stated at the start of the UK presidency that, to get the budget right, the EU needs to decide what direction it takes in the future. Under our presidency, we have begun that debate.

At the informal meeting at Hampton Court in October, EU leaders agreed to take forward, in a number of key areas, an agenda to meet the challenges of globalisation. Those areas include research, development and innovation, as well as university reform and the university sector in Europe. I shall come to those important points in a moment, as they were raised by the right hon. Member for Richmond, Yorks. Other key areas include the development of a European energy policy and the impact of changing demographics in Europe.

In Brussels tomorrow, EU leaders will discuss how to follow up the Hampton Court agreement. They will also consider progress on the EU's strategies to promote growth and create new jobs, and to manage migration and curb illegal immigration. The leaders will also consider ways to take forward the important agreements reached at the UN conference on climate change in Montreal. In that connection, I am sure that I reflect the feelings of the House when I take this opportunity to congratulate my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs. She led the EU delegation in Montreal, and played a crucial role in bringing about those agreements.

I turn now to some of the questions raised in the debate, in which there was much discussion about economic reform and how that can be taken forward. I understand that the job of Opposition Front Benchers is to give us a battering whenever they can and, in opposition, we did the same thing. However, it is churlish to say that we have not worked very hard over the past six months to make progress towards a focused and results-oriented set of reforms that will create jobs and boost skills. Our priorities have included better regulation, and real progress has been achieved on impact assessment and simplification. Another priority has been the chemicals directive, on which we reached agreement on Monday, and progress has also been made on the services directive and the working time directive—both of which I know have been of great concern to the House.

Adapting to globalisation is one of the biggest challenges facing Europe. We have worked to develop a consensus on how we should respond to these challenges through economic reform, and we have made some progress. At the most recent ECOFIN meeting, EU Finance Ministers built on the discussions at Hampton Court and for the first time set out their views on the reforms needed to maximise the benefits of globalisation. Those reforms were raised by many hon. Members in the course of today's debate, and they include improving the regulatory environment, completing the single market in services, and achieving an ambitious and balanced multilateral trade agreement. They also feature improved regulatory co-operation.

Our conference on better regulation in Edinburgh provided an unprecedented opportunity for business, officials and Ministers to meet and discuss the twin themes of competitiveness and consultation. In November, EU Finance Ministers agreed on a common method for measuring the administrative costs of regulation, and supported Commission proposals for a lighter touch and more effective regulatory framework in the financial sector. The Austrian and Finnish presidencies are committed to carrying that work forward, and that is something that we ought to remember.

The right hon. Member for Richmond, Yorks quite properly credited my right hon. Friend the Foreign Secretary with the Turkish accession negotiations, and I want to reflect that as well. He also spoke about something about which I feel very strongly. He talked about the way in which, all too often, we have genuflected towards the Lisbon agenda but failed to make real progress in key areas. Sir Menzies Campbell also spoke eloquently about that issue and how we might lift that agenda and take it forward, and we have been trying very hard to do so.

I have told the right hon. Gentleman before that every leading economy in the world has great universities. The way in which European universities have been sliding down the world scale has troubled me. The lists of the world's best universities are dominated by the Americans and British. I still have the scars of taking the Bill on tuition fees through the House, but it is no coincidence that the extra funding that is going into British universities is helping them to remain in the first division of universities in the world.

I very much hope that the right hon. Gentleman will take that very difficult argument into the Conservative party. It took a lot of courage to take the Bill on tuition fees through the House, and I hope very much that he will argue for a consensus on the issue. We must get more funding into our universities. We must ensure that our universities right across Europe interact with the economy around them, so that we can start to address the Lisbon agenda issues; we are not doing so at the moment.

Hon. Members mentioned Will Hutton and Wim Kok's committee's report on competitiveness—something that we must work very hard to take forward, and the right hon. Gentleman was right to highlight it. I remember attending the Council of Ministers when, as a rapporteur, Will Hutton gave his report on that key issue, and the body language showed that Ministers were either not concerned with the subject or too frightened to take forward that agenda in their own countries. It is extremely important to understand that issue, and I am very glad that it was raised.

We have seen the publication of the document on the future of agricultural policy, drafted by the Treasury and the Department for Environment, Food and Rural Affairs. It came in for a bit of stick because of the lateness of its publication. I do not think that six months is a very long time in which to draft such a document—it is a difficult one to draft—and to come up with answers about how to reform the CAP is not easy, as we have all learned from the debate.

The right hon. Member for Richmond, Yorks asked about the European Court of Justice judgment on the protection of the environment using criminal law and whether that represented a new power for the Commission. We should look closely at the whole ECJ judgment, which reiterates that criminal law is not generally a matter for the European Community. Only in specific circumstances where criminal sanctions are necessary to uphold European Community rules can the Commission introduce proposals, but they must still be approved by member states. The judgment interprets the current treaties; it is nothing to do with the constitutional treaty. I hope that that helps.

Photo of Kim Howells Kim Howells Minister of State (Middle East), Foreign & Commonwealth Office

I have almost no time. I will to try acknowledge something that the right hon. Gentleman said earlier.

The right hon. and learned Member for North-East Fife raised, as he put it, the lack of substantial achievement during our presidency. He spoke, quite properly, of course, of geopolitics, the new power across the globe—as did my hon. Friend Mike Gapes, who is absent from his seat—and the rising economic and political power of China and India.

Other Members drew our attention to one of the basic notions that drove forward the growth of the EU, and which I am old enough to remember: there were two great poles of influence—America in the west and Japan in the east—and we would be competing with those great powers. There are at least four great powers now. There is no question but that India and China will be very different powers. The right hon. and learned Member for North-East Fife drew our attention to the important point that they will be great political powers. How should we come to terms with them? How do we begin to compete, for example in research and development? How do we pool together for the great projects in which we shall certainly need to be involved? Whether in communications or science-based industries, there are big questions and I am sorry that we have not had time to discuss them. They are at the core of what we should be doing in the EU from here on, which returns to the point made by the right hon. Member for Richmond, Yorks about the Lisbon agenda. We need to concentrate hard on that. If we want a mission, there it is.

I am about to contradict myself. Members spoke about the great single market inside Europe, but in fact it has by no means been completed. I come from the energy sector—try selling electricity to the French, although I would not wish to name a country. Sure enough, the market has been pushed forward, even more starkly so for financial services. In the UK, we excel in financial services and if we were let loose on many of the still highly protected markets in many European countries we would create many more jobs in this country, making economies abroad much more efficient and growing those markets. We must certainly take that forward. The single market in services has only just been completed and the implementation is only just beginning in many countries. We need to consider that.

My hon. Friend Hugh Bayley raised an important issue. We have been talking in that special Euro language, to which Mr. Cash and I have listened so many times. My hon. Friend the Minister for Europe is not in the Chamber; he speaks that special euro language—the problem is that half the time I do not understand a word of it. My hon. Friend the Member for City of York said, in effect, "Hang on a minute. Actually lots of money has been allocated to the new economies in the east but they can't spend it." They cannot spend it because they do not yet have the governance capacity to do so.

Mr. Llwyd, who is a friend of mine, knows that in its first year the Welsh Assembly was paralysed by arguments about how the European structural and cohesion funding should be spent. That was a difficult issue. The point is important: we are dealing with a great continent where people are at different stages and there are problems of underdevelopment. We must remember that and make careful judgments.

Mr. Heathcoat-Amory and the hon. Member for Stone made challenging, thoughtful speeches. The hon. Gentleman said something that was reflected in the words of my hon. Friend Kelvin Hopkins. He said that we might not be seeing seismic shifts, but that there were shifts in the sand and we were talking a much more pragmatic language. I, too, sensed that during the debate. I was extremely interested, for example, in the idea that we should look at how institutions respond to the great challenges that have been mentioned—whether the growth and influence of China and India or our ability to compete in big international markets. We have to ensure that the institutions evolve to meet those challenges.

The hon. Member for Altrincham and Sale, West is an excellent parliamentarian and debater, but my hon. Friend the Member for City of York put his finger on something when he asked the hon. Gentleman what the Conservatives would have done. What did the hon. Gentleman say? He said that they would have stuck to the Government's policy. That is pathetic. That is the same ancient whinge about the EU—that is all. Look at all the years the Conservatives were in power. What did they do about reforming—

It being Seven o'clock, the motion for the Adjournment of the House lapsed, without Question put.