European Communities (Finance) Bill

Orders of the Day – in the House of Commons at 4:25 pm on 19th November 2007.

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Order for Second Reading read.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury 4:26 pm, 19th November 2007

I beg to move, That the Bill be now read a Second time.

We have a rare treat today—a Treasury double-header, as Sky Sports might say. The Bill implements the decisions agreed at the December 2005 European Council under the UK presidency and gives effect to the new own resources decision for the financial perspective from 2007 to 2013. That agreement was in our long-term national interest. It is good for Britain and good for Europe, and today I shall explain why. It is good for Britain because it not only preserves our rebate but will see it rise in value during the next six years. It is good for Europe because it provides investment to help the emerging economies of eastern Europe prosper, which in turn and in time will benefit our own economy, as have all previous EU enlargements. The Bill will help to pay for European enlargement.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

I thank the Minister. He says that under the deal, the British abatement will increase. Will he confirm, though, that Britain's net contribution to the EU budget will increase by £2.3 billion a year?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I will come to the changes implemented by the decision, but the point that I was about to make when the hon. Gentleman intervened is that it is not enough for the Conservative party to say that it is a supporter of European enlargement; it is not enough to support the end goal without taking the sometimes difficult decisions that will allow that goal to be met. It is simply not good enough to flinch from decisions on the issues that stand in the way of making EU enlargement a success. I shall return to his precise point and make the positive case throughout my remarks.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

The Minister mentioned that the agreement will benefit eastern European states, but is he aware that some of those states are already struggling to spend the money that they have been given, and that they have a big backlog of money from the European Union that they have not been able to spend?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I respect the hon. Gentleman's knowledge of eastern Europe, but he will understand that the rate at which countries can draw down allocations from the EU budget determines the size of the contribution that others make. He will understand that the position of the wealthier nations is protected.

Photo of John Baron John Baron Opposition Whip (Commons)

The Minister will remember that the Government's original position was that the rebate would be given up only if there were meaningful reform of the common agricultural policy. Given that there has been none and that, having sacrificed our rebate—or a large part of it, anyway—we will pay in 20 per cent. more than France in the coming years, but get back only half what France gets back, does he understand why British taxpayers believe that they are being short-changed by the Government?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

The hon. Gentleman has raised a range of points that I will address in the substance of my remarks. As I have said, I want to make a positive case for what Britain agreed in 2005. That agreement brought Britain and France into rough parity on net contributions to the European Union. The Government made a clear request for a review of the European budget as part of that agreement, which we secured. We can address all the hon. Gentleman's points.

Today, I expect to hear variations on the refrain that what is good for Europe cannot possibly be good for Britain and that Europe's interests and Britain's interests are essentially incompatible, and I intend to meet that argument head-on. The Government reject that isolationist and negative thinking, although we do not uncritically accept everything that Europe says. The deal secured by the Prime Minister and the former Prime Minister, Tony Blair, is €160 billion cheaper than the original proposals from the European Commission.

Photo of Bill Cash Bill Cash Conservative, Stone

Will the Chief Secretary indicate in straightforward and simple language how much less will be made available to the regions of the United Kingdom from funds such as the structural funds?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I will come on to that point in my remarks, if the hon. Gentleman will hold his horses. I ask him head-on whether, if he supports the EU, he supports enlargement. If so, will he accept that a contribution should be made by this country to the cost of enlargement? As English regions improve their competitiveness, as I am pleased to say Merseyside has recently done, is it not right that the available funds should go to support the regions of Europe that most need that extra investment?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

The Chief Secretary is right that it is important that the parts of Europe that need structural funds receive them. Cornwall, in which my constituency is situated, will continue to receive those funds. Does he agree that the funding available is also based on the amount of match funding available from the Government? It is unfortunate that the Government are not match funding at similar levels to those achieved on objective 1 funding.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

The hon. Lady is right on that strict technical point. I hope that she accepts that Cornwall will continue to benefit from structural and cohesion funding. To pick up the point made by Mr. Cash, funds will continue to be available to the less well-developed regions of Britain. Merseyside has recently improved its competitiveness, but challenges remain in Cornwall and, I believe, the western highlands. Parts of this country will still benefit substantially from funding to improve their competitiveness.

Photo of Ian Davidson Ian Davidson Labour, Glasgow South West

Many of us are and always have been in favour of expansion and of contributing money to the new accession countries, but why is France the biggest recipient of funding from the EU budget? The Chief Secretary, the present Chancellor and the present Prime Minister should not get the blame for this appalling document, because we can all agree that a bad boy did it and ran away.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

My hon. Friend knows my background, and I do not agree with him at all. Indeed, it is possible to argue that in this financial perspective we make ground on the traditional complaint aired by many Eurosceptics over the years. I am comfortable with the deal. I come back to where I started: the deal is good for Britain and shows that Britain is a middle-ranking net contributor among the wealthier nations.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

If the Minister cares to read page 32 of the excellent paper prepared by the Library for this debate, he will see in the final column on net contributions for 2006, which is before the next budgetary round kicks in, that France made a net contribution of €3,140 million and the UK made one of €4,086 million. France is therefore up with the UK and Germany as a major net contributor. I am afraid that the notion that France is a net recipient is 20th century truth, but 21st century mythology.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

My right hon. Friend is absolutely correct: France is a net contributor, as is this country. As I have just said, France's contributions will grow twice as fast in this financial perspective—as, incidentally, will Italy's. That is why I come back to the point that the agreement is good for this country.

Let me give an indication of the net contributions that we will make. Table B11 of the pre-Budget report document shows that the estimates for the net expenditure transfers to EC institutions are £5.6 billion for 2007-08, £5.5 billion for 2008-09 and £5.7 billion for 2009-10.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

The Minister has mentioned France's and Italy's net contributions. In the interests of transparency, will he give a commitment to the House to publish official Treasury estimates of the net contributions of all member states? My understanding is that, to date, the Treasury has officially published only an estimate of the French net contribution.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I should say to the hon. Gentleman— [Interruption.] If he holds his horses, I shall give him his answer. It is not common practice for one EU state to publish details about others in a haphazard and cherry-picking way; the Commission makes those figures available. I have said clearly this afternoon that, on the basis of figures in the public domain, Britain's net contributions will be in rough parity with those of the French. I hope that he is satisfied with that answer.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I shall give way first to the right hon. Gentleman and then to the hon. Gentleman.

Photo of John Redwood John Redwood Conservative, Wokingham

Will the Minister tell us what our total gross contribution as a country will be between 2007 and 2013?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I will answer the right hon. Gentleman, but Members are tempting me to the meat and detail of my speech before I have reached them. The overall gross contribution will rise—the figure is a rough one; obviously, we are talking about forecasts—by about 3 per cent. a year during this financial perspective. I shall come directly to the figures later. Obviously, there was a bigger increase in the net contribution rather than the gross contribution.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I apologise to the hon. Gentleman; he has waited a long time.

Photo of Philip Davies Philip Davies Conservative, Shipley

The Minister has been generous in giving way. He takes the view that the deal is good for Britain and that spending all that money is in our interest, and I disagree fundamentally. The Court of Auditors has refused to sign off the accounts for the 13th year running. Even if one accepted the Minister's argument, one would still have to ask how on earth he can say that it is in British taxpayers' interests to keep giving more and more money to a body open to so much fraud and whose accounts the auditors will not sign off. Is there, anywhere in the world, any other organisation whose accounts have not been signed off by auditors, but to which the Treasury would agree to keep giving more and more money?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I hope that the hon. Gentleman will keep his seat, because I am going to read out one of his own quotations later—a treat that we can all look forward to. The statement issued by the Court of Auditors last week showed some progress, but it was disappointing, and there needs to be further progress. Let me refer him to a report by the House of Lords on this issue, which states that

"the failure to give a positive Statement of Assurance does not tell the whole story...Firstly, we argue that a lack of a positive Statement of Assurance does not necessarily indicate that high levels of fraudulent or corrupt transactions have taken place."

[ Interruption. ] I simply refer the hon. Gentleman to that learned document on the European accounts, which he should consider before he indulges in his sweeping and ill-informed generalisations about what those accounts mean.

Photo of Bill Cash Bill Cash Conservative, Stone

May I try to correct something on which I think that the Minister—I say this in all fairness—misled the House just now, as did Mr. MacShane? "Misled" is perhaps overdoing it, but they inadvertently got their figures a little muddled. The figures on net contributions per head, which are of extreme interest to individual members of the electorate, produce a quite different answer from that proposed by the right hon. Member for Rotherham. In the United Kingdom, we pay €124 per head, which is the third most. Denmark pays the second most, with €127, and the Netherlands pays the most—€241. Germany's net contribution per head is only €100, while France pays only €50. Does not that rather blow his argument out of the water?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I know that the hon. Gentleman gets heated on these matters, but I urge him to use temperate language. I have not misled the House. He has brought his own set of figures to the debate. The point that I was clearly making was that on the basis of gross national income, the agreement that we are about to discuss—I hope that he will begin to let me discuss it in more detail—leaves France and Britain in rough parity in terms of our overall contributions to the EU budget. I stand entirely by what I said.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

Assuming that Mr. Cash is reading from the same document as me, the UK is at the bottom of the column, where it says that the figure is €68 per head. He read out the Swedish figure of €124 per head. I am tempted to say something to him in Swedish, but it would be helpful if he were able to read a column of figures before contributing to the debate.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

If anybody is watching at home, I will leave it to them to draw their own conclusions about who has been misleading the House.

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. I think that we should now move on. People are quoting different sets of figures, which are matters for debate. Perhaps we can now proceed.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

A visit to an optician's in Stone might be in order, too.

This Government will continue to make the positive case for an enlarged and prosperous European Union as being directly in our national and economic interest. Britain benefits from being part of an open, prosperous Europe of 500 million people. The EU is Britain's largest market by far, and—I hope that Conservative Members will listen to this point—it follows that British business needs a Government who engage constructively in discussions about the operation and rules of that market. It is precisely because we engage constructively, rather than grandstanding and posturing, that we secure results that are in the national interest.

To aid our debate today, let me put some facts on the table. First, the Bill and the agreement that it implements will preserve the British rebate in full on all spending on the EU15 and on all agricultural spending on the EU27, irrespective of their accession dates. The abatement has the same basis as it did at its inception at Fontainebleau in 1984. The rebate will be disapplied only on non-agricultural expenditure, which primarily supports economic development in the member states that have joined the Union since 30 April 2004.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I shall give way to the hon. Gentleman, but let him answer this question: does his party support helping those countries to improve their economic development?

Photo of Peter Bone Peter Bone Conservative, Wellingborough

The Minister said that it was in our economic interest to be in the European Union. When we went into the Union, we had a trade deficit with the EEC of £1.327 billion. That was recalculated to be £11.3 billion, and today's balance of trade deficit with the European Union is £38 billion. That represents 80 per cent. of our trade deficit. When we went in, it was only 50 per cent. How is that an economic positive?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I fear that some more dodgy Tory figures are being quoted there.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

On a point of order, Madam Deputy Speaker. Those figures were given to me by the Library.

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

That is not a point of order for the Chair, but the matter is now on the record.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I am glad about that.

The hon. Gentleman may not like it, but the EU is our largest trading partner. It accounts for 57 per cent. of our economy, and if he is arguing against that, I would like to see him justify what he says to the businesses in his constituency.

Photo of Quentin Davies Quentin Davies Labour, Grantham and Stamford

Will my right hon. Friend take it from me, because I know a tiny bit about it, that Conservative statements on this matter have to be treated with the greatest degree of scepticism? A large number of Tories have no problem at all in making completely contradictory statements on anything to do with the EU because their actual agenda is to destroy our relationship with the Union in the first place.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

My hon. Friend says it all. There speaks the true voice of experience and reason in this debate.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Harriet Harman QC (Leader of the House of Commons)), Leader of the House of Commons

I hope that the true voice of reason will continue now. The more important point about workers in this country is that if the new accession countries had not come into the European Union, they would still have been competing with Britain on jobs, but on the basis of weaker health and safety regulations and weaker workers rights; they would have been competing in the bargain basement. We need them to develop economically so that we can all compete on the basis of added value.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

My hon. Friend makes an incredibly important point that produced silence from the Opposition Benches. Outside this Chamber, British businesses will understand his point and why it holds true for them and the competitiveness of this country. It is also true that the amount of trade that this country has with the A8 countries has increased significantly since their accession to the EU. It is a question of having not just a level playing field, but more trade as well. That has got to be good for the British economy.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

The right hon. Gentleman is making a valiant attempt to defend the indefensible. If the deal is such a good one for Britain, will he tell us why, when the previous Prime Minister came back from Brussels with it in his knapsack, the present Prime Minister ran around briefing every journalist he could get his hands on that it was a bad deal for Britain and that he would never have signed up to it?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

This was a deal that the former Prime Minister and the current Prime Minister jointly agreed, and if the hon. Gentleman and his hon. Friends will let me, I want to explain why. He has not exactly given me a chance to do so in the debate so far.

Photo of Siôn Simon Siôn Simon Labour, Birmingham, Erdington

Will the Minister explain, because we find it difficult to understand, why Conservative Members interrupted him when he was talking about the disapplication with regard to economic development in accession countries in order to tell him about the deficit? How on earth can British markets be expanded unless economies are developed and expanded in the rest of the Union? It is economic illiteracy, and it is ridiculous.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

It certainly is, and I am grateful to my hon. Friend for making the point. Any informed commentator listening to this debate outside will understand what he has just said. I would be interested to hear the discussions that the Opposition have with the CBI on such matters, because many of its members take a very different view from that which they put forward.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I would very much like to make some progress from my first point, and that is what I shall do.

Secondly, on latest forecasts the rebate will rise in value over this financial perspective, not fall, to an average of €6 billion a year from 2007. As the former Prime Minister told the House, overall the abatement will get us back around €41 billion in this budget period, which is more than in the last one. Thirdly, the agreement will see sensible, restrained growth in the overall budget. The latest forecasts are that the budget will fall below 1 per cent. of EU gross national income in commitment terms by the end of the financial perspective. Overall, the budget will grow by just 7 per cent. across the financial perspective, as compared with growth of 17 per cent. in 1988 and 22 per cent. in 1994. I wonder which Government negotiated those EU budgets.

Photo of Ian Davidson Ian Davidson Labour, Glasgow South West

May I clarify one point with the Minister? He says that our rebate is going up, but will he confirm that the rebate is a percentage of the difference between what we pay in and what we receive back? If the rebate is rising, the gap between what we pay in and what we receive is also rising. Rather than being enthusiastic about the rebate rising, we should look for it to fall, so that our gap falls, too. Surely that is the case.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

My hon. Friend is correct that that is how the rebate is calculated. Indeed, the first line of article 4 of the Council decision on own resources says:

"The United Kingdom shall be granted a correction in respect of budgetary imbalances."

Those on the Opposition Benches who claim that the rebate has been lost in the decision simply have not read the own resources decision. My hon. Friend's point about the gap is correct, but that is because there is a disapplication of the rebate on economic and structural spending in the new member states, as I have explained. With those countries having been welcomed into Europe, our judgment is that the right thing to do morally is equip them to compete competitively. If we did not do that, we would be in breach of our responsibilities as a full member of the European Union. That explains the gap to which my hon. Friend has drawn the attention of the House.

Let me put on record more facts about the Bill. Fourthly, in response to Mr. Redwood, the UK's contribution is forecast to rise on average by 3 per cent. in real terms from 2007 to 2013. Fifthly, in answer to my hon. Friend's question a moment ago, new member states will receive €158 billion in structural and cohesion funds in this financial perspective—a 250 per cent. increase on the previous financial perspective period. The share of new member states' receipts will rise from 24 per cent. of the total to 56 per cent. in 2013. Lastly, because of the shift in spending from west to east, all wealthier nations will see their net contributions rise, some by more than others. In this financial perspective, French and UK net contributions will be in rough parity, with French and Italian contributions rising twice as fast as ours.

Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

If we cut to the chase, are there not two key questions? One is: is the United Kingdom a member of the European Union or not? It is a club and there is a price to pay for belonging to a club, and I think that the price is well worth paying. The second question, the answer to which ought to be clear on the Labour Benches at least, is: are we in favour of redistribution of wealth? We certainly are on these Benches, particularly with regard to the Government's magnificent record both in international development and within the European Union, with redistribution of wealth from the west to the east, so that ultimately we will all be richer. So I have two questions: are we in or are we out, and are we in favour of redistribution of wealth?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I say yes to the first question. My hon. Friend has tempted me to give a non-new Labour answer to the second question, so perhaps a fudge is in order— [ Laughter. ] I am joking, of course. He has made his point incredibly well. Let us cut to the chase, as he suggested. We support making a contribution to help the countries of eastern Europe to prosper. That is the crux of this debate. That is the difference. Let me get to that point.

The Leader of the Opposition said in a speech in March this year:

"The British Conservative Party has long championed EU enlargement...In recent years, the transition from Soviet totalitarianism took place more smoothly than many imagined possible, thanks to the prospect—now fulfilled—of EU membership for the countries of Central and Eastern Europe. But the work is not yet done."

He is right; the work is far from done. The economies and infrastructure of the new EU member states need considerable investment and support before those states will be able to compete in the market on an equal footing, and that process of regeneration is now just beginning in earnest. The Leader of the Opposition is the self-styled champion of those countries, but what kind of champion does the easy bit, providing the fine words, but then looks shiftily away when asked to back up those words with real financial commitments from the wealthier, established EU nations? The countries of eastern Europe need real champions who are prepared to step up to the plate, not fair-weather friends whose words are worth nothing at all.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

I feel very cross with the Minister for suggesting that we do not want to help the eastern European countries. My grandfather came to this country from eastern Europe during the war, and we on the Opposition side of the House feel passionately about those countries. Our problem is that we do not expect the United Kingdom to have to stump up all the cash; France, Germany and the others should do so as well. The Minister's comments are outrageous.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

Perhaps the hon. Gentleman's are, too. How on earth can he justify voting against the Bill tonight, if he says that he favours providing the support to help the economies of eastern Europe? How on earth can he troop through the Lobby to oppose the Bill when all the wealthier nations of Europe have agreed to make contributions to aid the economic development of eastern Europe? As I said to Julia Goldsworthy, Cornwall has benefited from structural funding, as has Merseyside. We have seen their economies improve. Ireland and Spain have benefited from the funding, and their economies have also improved. All our business benefits from those enhanced and improving economies, yet the hon. Gentleman wants to deny those opportunities to the economies of eastern Europe, even though his party claims to support them. That is disgraceful.

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells

The Minister's case seems to be that public expenditure in eastern Europe is bound to be a good thing. Would he, however, put his own money into a company whose accounts had been rejected by the auditors for 13 years? If not, why does he want to increase the sum of public money to be committed over seven years, when the European Union has failed its audit test for the past 13 years?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

Because I favour the development of the European Union and the peace and prosperity that the European Union has brought. It is delivering unparalleled living standards to its member states, principally the member states of longest standing. That is how I justify the measures. If the right hon. Gentleman had been listening to me, he would know that I said that they would bring much-needed social and economic regeneration to the parts of Europe that most need it. The long-term benefit of those arrangements will come to our economy, because they will increase our trade with those countries and build more prosperity in them. As my hon. Friend Chris Bryant said a moment ago, they will also create a level playing field on which British companies can compete with companies in those countries when selling goods into the world market.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

Perhaps we can get back to focusing on the Bill. Will the right hon. Gentleman confirm that its purpose is to incorporate the own resources decision into the definition of the European treaties? It is not going to make any difference to the spending budget. It is about how the cost of meeting the budget is divided up between the member states.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

The hon. Gentleman is being extremely nit-picking. I invite him to read the own resources decision, and to look at the table in it that spells out how the rebate will be retained on all agricultural spending, and on all spending in the EU15. As I have described—it would be good if Mr. Hammond read the decision before making his claims—it spells out how the rebate will be disapplied in respect of economic and structural spending in the new member states. That is how it affects the overall budget. Yes, there is an annual EU budget process, but it is informed by the own resources decision, which the hon. Gentleman has clearly not bothered to read.

Photo of Siôn Simon Siôn Simon Labour, Birmingham, Erdington

Assuming that these are the same Tories who so recently raised xenophobic mayhem about the number of eastern European migrant workers in the UK, can the Minister explain what he believes is more likely to be the effect of the sort of economic development in eastern Europe that the measure is underwriting on the very ways of these migrant workers who were so recently subject to such disgraceful scaremongering by Conservative Members?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

My hon. Friend is absolutely right to point to that complete contradiction. As we have seen with previous EU enlargements, there may have been an immediate increase in the number of people using their ability to move around Europe, but in the long term people are more likely to return to their country of origin, particularly if that country is experiencing economic development and prosperity. This is a long game—not a short-term gimmick to be played in the House this afternoon—that will bring benefits over a generation rather than over a few months. My hon. Friend is absolutely correct.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

My right hon. Friend is struggling manfully to cloak his dodgy deal in respectability by constantly focusing on help for eastern Europe. If we were asked for a simple straight fiscal transfer to help eastern European countries, that would be one thing, but the reality is that Chirac attacked our rebate simply because we were threatening the common agricultural policy once again. If we got rid of the CAP, we could all give generously to eastern Europe.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

My hon. Friend may be in search of perfection, but we work within the existing structures to improve and make steps forward where we can. He will know that as part of this package, a commitment was secured to review the operation of the CAP and we intend fully to engage in that review. Generally, I would remind my hon. Friend that this is a good deal for the reasons that I am outlining. I cannot help it when I am drawn by interventions on other points, but I am firmly making a positive case today.

Photo of Ian Davidson Ian Davidson Labour, Glasgow South West

I am grateful to my right hon. Friend for giving way, which is helpful in allowing us a degree of dialogue. I want to make it clear that I do not believe that he is one of the bad boys, but I do think he is a bit of a rascal in seeking to polarise the debate by suggesting that anyone who has any reservations about any negotiated settlement is necessarily in favour of withdrawing altogether or of giving nothing to eastern Europe. That is most certainly not the position of Labour Members who have reservations. Surely the Minister would accept that we have made virtually no progress in reforming the CAP during this settlement and that although the submission of additional money for eastern Europe is welcome, it does not necessarily go to the right people there. It is almost entirely devoted to channelling the common agricultural policy, which, certainly in this country, helps the undeserving rich rather than the deserving poor—so will the Minister resign?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

Thanks very much! I know that my hon. Friend is feeling bad because Scotland lost at the weekend, but that is no reason for him to take his nastiness and resentment out on me. This financial perspective does include reform of the CAP. I do not have the precise figures to hand, but it drops reasonably significantly as an overall percentage of the budget and member states are being asked voluntarily to shift spending away from simple direct support into helping improve the sustainability of local rural economies. So, yes, there is reform. If my hon. Friend is asking me whether that is enough, I would have to say no. We want more reform of the common agricultural policy. That is the very clear position of the British Government and we believe that we have secured the means—through the review of the process—to achieve it. It is not perfection. I am not arguing that the EU budget and the recently agreed own resources decision represent perfection. We have made progress and continue to do so, because that benefits us all.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Harriet Harman QC (Leader of the House of Commons)), Leader of the House of Commons

Many people may be right to argue for CAP reform, which we would all like to see for moral reasons—not least to do with our trade with Africa and South America. However, does the Chief Secretary accept that we have to recognise that if we did not have the CAP that would probably mean that the French would give money to French farms and the Polish to Polish farms and that the amount of subsidy would increase rather than decrease? That was why Tory Governments always argued that there should be a strong CAP.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I suspect that they said that because they knew that that would benefit many constituencies represented by Conservatives—it is not something that we hear from Conservatives very often. My hon. Friend has made an important point.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

The Chief Secretary said that CAP spending will fall as a percentage of the EU budget as a whole, but according to figures produced by Open Europe it will rise slightly. Will he confirm that in real terms the CAP budget will increase by 12 per cent. in total spending from this financing period to the next?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

Of course, the overall budget is increasing in size. The figures to which I referred a moment ago in answer to my hon. Friend Mr. Davidson were percentages of the overall budget. I was trying to illustrate that the overall percentage of spend from the EU budget on agriculture will decrease in this financial perspective. I do not doubt the figures that the hon. Gentleman mentioned, but comparing the overall percentage gives a better indication of how agriculture spending is being reformed in this financial perspective.

Photo of John Baron John Baron Opposition Whip (Commons)

The Chief Secretary is being very generous and is encouraging a proper exchange of views. He is being slightly disingenuous in the sense that he is forgetting the fact that the Government's original position was that we would not sacrifice any part of our rebate unless there was reform. He has said that there may be reform, but how can there be reform when the French have publicly stated that they will veto any cuts to any future CAP spending?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

The rebate exists because of distortions in the way that money is spent around the EU. The rebate will remain as long as that is the case. That is the clear position of the Government. I said to Mr. Gauke that I did not doubt the figures that he gave, but our figures say that the CAP budget will decrease from £55 billion in 2007 to £51 billion in 2013. The Conservative Front Benchers need to check their figures a bit more before they come rolling into a debate such as this and making all sorts of big claims, as they have been.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

Does the Chief Secretary agree that there are concerns that pillar two of the CAP is being cut, when more resources should have been switched to it? An opportunity was lost to try to undertake such reform.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

The hon. Lady makes an important point. The agreement invited member states voluntarily to move spending from pillar one to pillar two. If my memory is correct, the UK has decided to switch about 14 per cent. of overall agricultural spending. That is indicative of our desire to see reform in the way in which support to rural communities is spent. We hope that other countries will do the same. In the long term, it is our aim for all agricultural spending to be migrated in that way.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

Conservative Members have suggested that France will veto any reform of the common agricultural policy. However, page 27 of today's economic section of Le Figaro states—I shall not read it out in French—that France, the principal beneficiary of the CAP, already knows that it will have to adapt to a lowering of agricultural expenditure in the EU. I could read more from the article. Conservative Members should get up to date.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

As a simple lad from the north-west, I have never read page 27 of the economics section of Le Figaro—perhaps I should. My right hon. Friend makes a good point, which illuminates our proceedings.

Photo of Philip Davies Philip Davies Conservative, Shipley

The Chief Secretary said earlier that giving more money to countries in eastern European would benefit British business. Local businesses in West Yorkshire want more money for local infrastructure to help transport. The Government cannot afford to give it. According to them, it is all about spending priorities. Is the right hon. Gentleman genuinely trying to argue that businesses in West Yorkshire will benefit more from building up the infrastructure in eastern Europe than from doing that in West Yorkshire?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

The hon. Gentleman betrays alarming ignorance of those matters. Businesses in West Yorkshire have benefited over the years from European structural and cohesion funding. I am now looking at details of programmes throughout Yorkshire that support the growth and competitiveness of the region. Why does not he recognise and celebrate that rather than trying at every opportunity to whip up anti-European feeling?

It is in our national interest for our net contribution as a percentage of national income to be roughly equal to that of France and less than that of the Netherlands, Germany and Denmark. That confirms Britain as a middle-ranking net contributor among the wealthier nations. It also fulfils our long-standing commitment to budget discipline. In 1994, a budget of 1.2 per cent. of EU gross national income was agreed. In the current financial perspective, the budget will be less than 1 per cent. of EU GNI, which is nearly 20 per cent. lower. That represents a saving of €160 billion compared with the Commission's original proposal. For the first time, CAP spending will not be the largest item of expenditure in the EU budget. Instead, it will be sustainable growth. The budget is disciplined, with a fair contribution from Britain, which preserves our abatement. The Bill will secure our national interest.

However, there is a bigger picture to consider. It is emphatically in Britain's long-term interest to provide for the fair financing and enlargement of the European Union. We thus bring British business immediate market opportunities and secure Europe's long-term competitiveness. Achieving a fair deal was the challenge that faced the UK presidency in 2005, but we met it. It means that new member states will experience a 250 per cent. increase in structural funding on the previous financing period.

Britain has been a strong supporter of enlargement and we are proud of the part that we played. That enlargement has made a huge contribution to establishing our central and eastern European partners as the free democracies and vibrant economies that they are today. It is right that we should stand by them and that they should not be denied the economic investment that has benefited Britain and other parts of western Europe so much. As I said earlier, it is also firmly in our interest. Allowing our partners in central and eastern Europe to grow and develop strengthens them and strengthens Europe, making us all more secure. A more developed Europe will be better able to meet the common challenges that we face, such as climate change and security. [Interruption.] I can hear Conservative Members chuntering. We have heard about attempts by the Leader of the Opposition to form a new political party in the European Parliament—the grandly named Movement for European Reform. It sounds good, but the problem is that there is neither much European nor a great deal of movement about it. So far they have recruited the Czech ODS party and, to fanfare earlier this year, the Bulgarian Union of Democratic Forces party. There has, however, been a slight setback. On 14 September, the president of the European People's party, Wilfred Martens, said:

"Six months ago, I said that it is not compatible for a member party of the EPP to join initiatives like this 'movement' and at the same time remain in our party. Today I am glad that the UDF understands and shares our position".

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

On a point of order, Madam Deputy Speaker. The matter commented on by the Chief Secretary—the internal relationships of the Conservative party with its sister parties throughout the European Union—has nothing to do with the EU rebate.

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The occupant of the Chair will determine whether a comment is in order.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

If the hon. Gentleman listens, he will find that my point is far more pertinent than many of the interventions that I have taken in the debate so far.

As I was saying before I was rudely interrupted, the EPP announced the withdrawal from the Movement for European Reform of the Bulgarian UDF. So then there were two. Incidentally, one of them sees no need for a referendum and is in favour of the new EU reform treaty. What does that leave? It leaves the British Conservative party completely isolated in Europe. Is that what British business needs from a party seeking to represent business interests in this country's biggest single market?

I hope that the hon. Member for Runnymede and Weybridge will enlighten us on progress in the establishment of the Movement for European Reform. Can we conclude that nobody wants to join this new Tory club? Might some of the Conservatives' potential new friends have been put off by their weasel words on the financial commitment that they are prepared to make to the enlargement of the European Union? I hope that he will address those points later. One of his MEPs, Caroline Jackson, has said:

"I don't know how David Cameron will deal with the pledge"—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. We have heard a sufficient amount on that topic now. Perhaps the right hon. Gentleman will move on.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I hope that the hon. Member for Runnymede and Weybridge will enlighten us, as we deserve to be told. He and his colleagues have been left completely isolated in Europe.

We are making this case today because it is in our enlightened self-interest to support enlargement.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

The right hon. Gentleman has thrown up lots of smoke over the past few minutes. Let us get back to the main point. He is saying that giving up the rebate is in Britain's interests and is the right thing to do. Why, then, did his previous Prime Minister go off to Brussels with a position that the rebate was non-negotiable?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

The hon. Gentleman keeps saying that we are giving up the rebate, but he has not listened to a word that I have said this afternoon. The own resources decision outlines in detail the arrangements for the British rebate. Perhaps he will read that again before making a further intervention. I have said to him that the basis on which the rebate is calculated remains the same for the EU15 and is being disapplied in respect of structural and cohesion funding in the new member states. He disagrees with that position. I have simply been making the point, particularly in relation to his and his right hon. and hon. Friends' efforts to woo partners from eastern Europe, that their failure to back our commitment, and to put up real resource to support the commitment to enlargement, means that nobody wants to join this new Movement for European Reform. They are on their own in Europe. All the western European economies have agreed to make this contribution to improve the competitiveness of eastern Europe. The Conservatives are completely isolated.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

Does the right hon. Gentleman recall one of his predecessors as Chief Secretary to the Treasury, Mr. Smith, saying about the rebate and enlargement:

"we will benefit from abatement on any new expenditure incurred as a consequence of both enlargement and the ceilings in the existing EU 15... the United Kingdom will benefit very considerably from the application of the abatement to any new expenditure on enlargement."?—[ Hansard, 3 July 2001; Vol. 371, c. 145.]

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I cannot make myself any clearer to the hon. Gentleman than I already have. I told him at the beginning that the value of the rebate rises in this financial perspective. I have also told him that Britain receives immediate economic benefits from increased trade with the new member states, and will in time receive even greater economic benefits.

It is possible that people in those new member states listen to these debates. They will note the position taken by the British Conservative party, and they will hear those words about having always championed enlargement. What are they to conclude when the hon. Gentleman and other Conservative Members argue against the funding that will make an enlarged European Union more prosperous, and stand in the way of all the progress that they claim to want?

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

If this is such a good deal for Britain and our eastern European friends, why did the then Chancellor of the Exchequer seek to reopen negotiations when it was brought back by the then Prime Minister? Why did he think it was such a bad deal then?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

The hon. Gentleman is now raising spurious points. I think I owe it to you, Madam Deputy Speaker, to make some progress.

Overall, the single European market has created an additional 2.75 million jobs across the EU in the 15 years since it was established, and increased gross domestic product by 2.2 per cent. or €225 billion. Enlargement is strengthening and widening that single market: it is now half a billion consumers strong, and the largest market in the world. That helps our partners to grow, and helps make Europe more prosperous. It is not to our cost, but to our benefit.

Let us look at the facts of earlier enlargements. After the 1986 enlargement, United Kingdom exports to Spain increased by a quarter. After 1995, exports to Sweden rose by a similar amount. The benefits that EU membership can have are demonstrated by the fact that since our closest neighbour, the Republic of Ireland, joined the EU it has received almost €53.5 billion from the EU budget. Between 1993 and 2003, the EU supported more than 120 major infrastructure projects. That has helped Ireland's exports rise from €1.1 billion in 1973 to €88.4 billion by 2005. In 2003, gross national product per capita was more than three times its 1973 level in real terms.

Ireland also demonstrates that the economic development of our partners is good for Britain, a point entirely lost on Conservative Members. It increases trade, and creates new opportunities and new jobs. Between 1998 and 2006 alone, UK exports to Ireland have doubled. Such development has particularly benefited Merseyside, which is one of this country's poorest regions and receives objective 1 funding.

The Conservative party's claim that the Bill secures us nothing in return is self-centred and narrow-minded, but also wrong. As I have said, the Bill will disapply structural and cohesion funding, and in time that spending will benefit Britain. Just as development funding in Ireland helped Britain to increase trade from a buoyant Irish economy, we will gain the long-term benefits of a prosperous eastern Europe.

Already British firms are making the most of the opportunities that the recent accessions have brought. In 2006, UK exports to the A8 countries amounted to £8.8 billion, a 36 per cent. increase in the first full year after accession. Tesco, Unilever, Vodafone, BP and International Power are already investing in our new single-market partners, and UK foreign direct investment in the A8, which averaged just over £860 million in the three years before accession, was more than twice that amount—nearly £2 billion—in 2005, the year after accession. Enlargement is good for those economies, and provides economic opportunities for our largest companies.

Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

I think that my right hon. Friend is being a little unfair to the Conservative party. After all, widening rather than deepening was John Major's policy, and he was absolutely right in that regard.

I believe that some Conservative Members recognise that the enlargement of the European Union is good for the UK economy. What they do not understand are negotiations. I spent a great deal of my professional life negotiating in business, in the private sector, and I know that if one obtains all that one wants in negotiations with a partner with whom one frequently negotiates, that partner will get back at one next time. The Conservatives do not understand that there is wave upon wave of negotiations in an entity such as the European Union, and that if one pushes too hard for something on one occasion, one will not obtain it on the next. They do not understand the need to play it for the long term.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

My hon. Friend is absolutely right, and what we have witnessed this afternoon provides ample illustration of the very point he makes. Conservative Members will make knee-jerk statements to please the newspapers and party members in their constituencies. They will come out with such rhetoric because they know it will be good for their personal standing within their local Conservative party when they next return to their constituency for a meeting—they will probably pass around the relevant volume of Hansard. What that does not do, however, is show any understanding of proper negotiation in Europe—of how to get a good deal for Britain and be a constructively engaged partner in EU discussions. They have not learned anything from their previous failures in this area.

Photo of Ian Davidson Ian Davidson Labour, Glasgow South West

The Minister is displaying a degree of cruelty that I had not expected. Being nasty to the Conservatives on this matter is too easy; the phrase "fish in a barrel" springs to mind. Does he agree that simply because the Conservatives are bad, it does not necessarily mean that we have to accept everything that the European Union puts in front of us? Does he not agree that this is, in fact, not a particularly good deal for us? [Interruption.] Does he not agree that while we are in favour of expanding the EU there is no reason why we should pay for it disproportionately, and that we have effectively been taken to the cleaners and— [Interruption.]

Photo of Ian Davidson Ian Davidson Labour, Glasgow South West

Thank you, Madam Deputy Speaker. There are times when support from the Opposition Benches is not helpful.

Does my right hon. Friend agree that simply because something is good for the EU as a whole, that does not necessarily mean that it is automatically fully good for us? Will he also remind us whether he and his colleagues were in favour of joining the euro, and—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The hon. Member has made his point.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

Interestingly, on that last point, in fact I was not; I am happy to put that on the record today.

I say to my hon. Friend that I am just making a positive case for Europe and for our engagement in it. Opposition Members might think that someone such as me might be defensive on these matters, but that is not the case at all. I have come to the Chamber today to say that the deal was not perfect in every respect but it serves our interests and moves us forward, and it moves the EU forward. I am quite happy and comfortable to be standing at the Dispatch Box making that case.

There are wider economic benefits. Migration from central and eastern Europe is much discussed and I recognise the challenges it poses to some of our communities, but there are indisputable benefits to British business and the British economy. A8 migration contributed about £6 billion a year to the British economy between autumn 2001 and the middle of last year, and those workers from central and eastern Europe who have come to Britain taking advantage of the free movement of labour are likely to make a stronger net contribution to public finances. The Bank of England reported last year that overseas workers have played a significant role in boosting the pool of available labour and helping to ease labour shortages. Britain is experiencing direct and immediate benefits in increased trade, extra jobs and the benefits of migration from enlargement—a process that the December 2005 agreement consolidates.

Britain has also benefited, and will continue to do so, from structural and cohesion funding. Between 2000 and 2006, the UK received about €15 billion of those funds, going to projects that benefit constituencies in all parts of the country. That has contributed to the economic development of some of our poorest regions. Merseyside alone has received more than £300 million of European social fund investment, and Cornwall has also received a significant sum—the hon. Member for Falmouth and Camborne mentioned that. UK regions that still need funding will continue to receive it—to answer a point made by the hon. Member for Stone, who has now left his place—but as areas such as Merseyside grow stronger it is right that the focus switches to the poorest EU regions, particularly the new member states.

Before I conclude, may I turn to the budget review and the future of Europe? The figures I have been quoting this afternoon support the case that we need to be even more hard-headed in prioritising funding towards the future challenges that Europe faces collectively, if it is to secure value for money. As well as the benefits I have already outlined, we have secured a frank and honest process of challenge and review of the EU budget to ensure that Europe is helping to equip itself to face the challenges of the future. As the Prime Minister and the Foreign Secretary set out in the recent "Global Europe" pamphlet, the EU has spent too long focused on institutional questions. Europe needs to move on from that debate and focus on the issues that matter to its citizens: competitiveness; jobs; migration; the environment; and security. It needs to meet the challenges of globalisation and play its full part in the wider world, and to do that, its budget needs reform.

Some change has been made, as I said to my hon. Friend Rob Marris, but he is correct in saying that too much expenditure—40 per cent.—still goes on the common agricultural policy, and more than 50 per cent. of economic investment spending continues to go to the richer member states. Without reform, the EU cannot meet its future challenges and we will not see the global Europe that we need. So it is clearly in Britain's interest—and in Europe's—that the budget is reformed. The fact that the agreement that this Bill implements provides for a review of the budget, including the CAP, is the third reason why the Bill will implement a good agreement for Britain.

As part of the budget review, the Government will work with their partners to make the case for a reorientation of the budget towards areas such as innovation, tackling climate change, international development and migration. That does not mean any lessening of our commitment to budget discipline—far from it—and spending resources effectively will remain at the heart of our approach.

Philip Davies enticed me earlier into talking about the European Court of Auditors' report, and I told him plainly that much more progress must be made in this area. In addition to the measures that we have championed over recent years, such as the establishment of the European Anti-Fraud Office, former Commissioner Kinnock's work on Commission reform, the shift to activity-based budgeting and accruals accounting, and the Commission's 2006 action plan following the UK presidency's work, we will go further. We have made proposals for increased national parliamentary scrutiny of EU funds through the publication of an annual consolidated statement of EU expenditure, prepared to international accounting standards and audited by the National Audit Office.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I shall give way to my hon. Friend —[Interruption.]

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Harriet Harman QC (Leader of the House of Commons)), Leader of the House of Commons

I am grateful for that round of applause from Conservative Members. Surely the important point about the auditors' figures is that nearly all the problem areas involve member states' expenditure rather than the Commission's. We and the Commission have been trying to argue for some time, although Conservative Members have been opposed, for the Commission to have increased powers to investigate how that money is spent in member states. Is it not incumbent on those who argue against qualified majority voting sometimes to explain what the problems are?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

My hon. Friend has tempted me on to matters that this House will debate in a few weeks' or a few months' time. He is correct in the substance of what he says. That contradiction is so often at the heart of what the Opposition call for. We have been leading the case for the reform of financial transparency and accountability in Europe, and we will continue to do so. We plan to present our consolidated statement in the spring of next year and, as I have said, it will be audited by the NAO. The European Court of Auditors pointed to such examples as being the way to improve standards of financial transparency across the European Union. I am pleased that we are playing a leading role in making that happen.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I shall give way, for the last time before I finish, to the hon. Gentleman.

Photo of Philip Davies Philip Davies Conservative, Shipley

I am pleased that the Minister acknowledges that work needs to be done. Does he accept that reform is much more likely to take place if we were to withhold our payments until matters have been sorted out and that it is much less likely to happen if we keep paying more and more money and asking the EU whether it minds doing something about it?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

My hon. Friend the Member for Wolverhampton, South-West made a good point before. He asked whether or not people should just come clean. The hon. Gentleman has not declared this, but he is a member of the "Better off out" group; I believe that six Tory MPs are involved. All his questions need to be understood in that context. I do not think that I could try your indulgence by quoting him at length, Madam Deputy Speaker, although I did promise a quote from him earlier. It would have gone along the lines of how pleased he was that the Leader of the Opposition was now letting him campaign—he is off the leash—as a Back Bencher to make the case for being out of Europe. Is that correct? Does he remember giving such a quote to the BBC website?

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

He is nodding. If the leader of the Conservative party is allowing Members such as the hon. Gentleman to make the case that we are better off out, is it not time—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The Chief Secretary has made his point, so perhaps we could now proceed with the debate.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I shall now proceed to my conclusion, Madam Deputy Speaker—[Hon. Members: "Hooray!"] Well, I have allowed many interventions.

I shall recap the three reasons why hon. Members should give the Bill a Second Reading tonight. First, it secures a rising British rebate within a more disciplined overall budget—fact. Secondly, it serves our national economic interest—more jobs, more exports—by helping the countries of eastern Europe to prosper. Thirdly, it paves the way for a critical look at how we reshape the EU budget to prepare for the big challenge of the future that we face in common with our European partners. The EU has made Europe and Britain more secure and more prosperous. On this side of the House, we are pro-European, but we are not uncritical and we are hard-headed. We are prepared to stand up for Britain's national interest. We do not posture or grandstand. We will get the reform that Europe needs, but it will be within the context of making the case for engagement with the European Union.

This is a good Bill for the British taxpayer, for the British economy and for Britain's future, and I commend it to the House.

Photo of Ian Davidson Ian Davidson Labour, Glasgow South West

On a point of order, Madam Deputy Speaker. Would it be in order for me to move a vote of thanks to the comrade Minister, on the basis that, while still partially deluded, he has been generous in taking interventions?

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

That is not a point of order for the Chair, although the Chief Secretary certainly was generous in taking interventions.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury 5:36 pm, 19th November 2007

This is a very small Bill, with one operative clause, although after the Chief Secretary's speech I am grateful that it does not have 30 clauses. That one operative clause contains, however, the single biggest spending commitment in the whole of the Government's legislative programme. It is a £7.4 billion bill, addressed to the British taxpayer, and an hour and six minutes of obfuscation from the Chief Secretary has not changed that.

This is a stealth Bill, sneaked in without a mention in the Queen's Speech and completely ignored in the Prime Minister's speech in the debate that followed. Far from being something of which the Government are proud, it is a Bill that dare not speak its name. The Prime Minister has done with this Bill exactly what he always does with bad news: he has tried to slip it in under the radar in the hope that nobody will notice it.

It is in order to congratulate the Chief Secretary, who made a valiant attempt to defend the completely indefensible. He gave a fair impression of a man who has been living in a complete vacuum since 1999. He stood here and told us that the own resources decision that the Bill will implement is a great victory for Britain, despite the fact that his own Government told us for years—until they gave way in December 2005—that they would fight tooth and nail to avoid that. The Government are not proud of the Bill, and neither should they be. Incidentally, it is interesting to note that the Chancellor is not in his place to support the Chief Secretary.

The agreement that the Bill implements is a bad deal for Britain, and the Chief Secretary knows it. We know it, too, because when the former Prime Minister signed away Britain's rebate, the current Prime Minister briefed every journalist he could find that it was a bad deal, that it was all Tony Blair's doing and that he would never have agreed to it. A Treasury official put it this way at the time:

"We have ended up giving away much more than we expected and with precious little to show for it in return".

A senior aide to the then Chancellor—no prizes for guessing who—told the press that the sell-out would inevitably lead to public spending cuts. No wonder the Government want to get this Bill out of the way at the very beginning of the Session with as little noise as possible. It is an embarrassment and reminds us again of some of this Government's serial failings, such as duplicity, in repeatedly breaking their promises on Europe; incompetence, in failing to obtain anything in return for our money at the negotiating table; and fiscal incontinence, in throwing away yet more hard-earned taxpayers' money for nothing in return.

Photo of Chris Bryant Chris Bryant PPS (Rt Hon Harriet Harman QC (Leader of the House of Commons)), Leader of the House of Commons

Clearly, the hon. Gentleman does not like this deal, but, as he knows, in negotiating a different one he would have to persuade other countries to sign up to it. Can he name just one other country, or party, in Europe that would support his proposals? Secondly, if there is a Conservative Government, will they renege on the measure if it has already gone through Parliament?

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

It is not the kind of proposal that I would suggest; it is the kind of proposal that Tony Blair went to Brussels to suggest—that we negotiate a reduction in the British rebate in exchange for sustainable reform of the common agricultural policy, to achieve objectives for this Government and objectives appropriate for the British taxpayer.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

I shall address the hon. Gentleman's point later in my speech.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

I do not want to fall into the same trap as the Chief Secretary and extend my remarks beyond an hour, so I will give way to the hon. Gentleman in a moment.

The Chief Secretary said that giving away the rebate was the right thing to do. It was all so different back in 1999, when the then Prime Minister said that the rebate was non-negotiable. He maintained that position as late as June 2005, when he reiterated it to the House of Commons in ringing tones:

"The UK rebate will remain and we will not negotiate it away. Period."—[ Hansard, 8 June 2005; Vol. 434, c. 1234.]

His then Chancellor, now the Prime Minister, took the same view. When asked in an interview whether the rebate was non-negotiable, he replied simply, "Yes".

I remember the then Prime Minister's statement in the Chamber—I was sitting at the end of the Opposition Front Bench—and thinking that the commitment he had made was so clear and unequivocal that even he could not possibly wriggle out of it. I should, of course, have known better. Within two weeks, we had a West-style 180(o) clarification of those words, when he said that the rebate was

"an anomaly that has to go".

Perhaps we should all have realised that he had been trying to say that in the first place. There was a further "clarification" on 29 June, when, attempting to defend his volte face, he said:

"Of course, if we get rid of the common agricultural policy and we change the reason why the rebate is there, the case for the rebate changes."—[ Hansard, 29 June 2005; Vol. 435, c. 1293.]

That is not exactly "the rebate will remain and we will not negotiate it", but it is a perfectly respectable negotiating position and one that we made it clear we could support. Radical reform of the CAP in exchange for a corresponding reduction in the British rebate would provide a satisfactory outcome for the UK taxpayer and at the same time move the EU from the disastrous agricultural protectionism that damages consumers and developing economies alike, and which the Prime Minister described as a prerequisite for making poverty history.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

I realise that I spoke for a long time, but if the hon. Gentleman believes that the deal gives away too much—even though, as I said, Britain as a net contributor will be in rough parity with France and the middle-ranking wealthier nations—will he say how much the Conservative party would be prepared to pay to support economic development in eastern Europe? Anything? Between the amount the Bill implements and nothing? How much exactly would it be?

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

The right hon. Gentleman completely misses the point of the debate, which is the own resources decision—the contributions of individual member states to the agreed disbursement budget. Nobody suggests that as a result of the Bill the amount disbursed under the EU budget will change, although if we chose not to support the Bill the composition of the contributions would change. I remind the right hon. Gentleman that under this proposal the UK will contribute an additional £19 billion net over the next seven years. If the rebate had not been given away we would still contribute an extra £12 billion over that period. There is, rightly and properly, an increased contribution to pay for the increase in the size of the Union—the price of enlargement.

I shall continue with my narrative, if I may. The Prime Minister went off with his team to Brussels with clear objectives: first, to cap the budget at 1 per cent. of European Union gross national income; secondly, to shift the focus of EU spending from agriculture, with the ultimate objective of scrapping the common agricultural policy; and, thirdly, to keep the British rebate unless and until that reform was complete. So how did they do? They failed on every single one. The budget that this lot signed up to added more than £25 billion of extra spending. The Prime Minister claimed after the event that that reflected the cost of enlargement, but without reform, Ireland, whose per capita GDP is 30 per cent. higher than the EU average, is getting more per head than Lithuania, Slovakia or Poland. France will remain the EU's biggest recipient and the UK the lowest net recipient per capita.

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation

The hon. Gentleman feels that the Government did not drive a hard enough bargain, but let us talk real politics, not fantasy politics. What tactics does his party have that he believes would have achieved agreements from some other EU member states that were not achieved by this Government? I and my party have talked to colleagues from our sister parties in—I am talking personally now—Spain, France, Germany and Greece to explain why we want changes to the common agricultural policy and other things. What sister parties could the hon. Gentleman speak to? Why does he think that the Conservative party could drive a better bargain than our Labour Government?

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

If the hon. Gentleman listens, he will find that the burden of my argument is that this Government have failed in their principal duty to protect the interests of the British taxpayer, not as defined by me or by my right hon. and hon. Friends, but as defined by the former Prime Minister and by the current Prime Minister in the December 2005 negotiation.

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation

What would the hon. Gentleman's party—

Photo of Hugh Bayley Hugh Bayley NATO Parliamentary Assembly UK Delegation

What would the hon. Gentleman's party advocate to achieve a better agreement?

Hon. Members:

Veto.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

The hon. Gentleman has heard my hon. Friends' answer. The decision required unanimity so there was no need to concede the point without substantive reform of the common agricultural policy, which the then Prime Minister promised the House he would deliver.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

I shall in a moment.

Far from scrapping the common agricultural policy, the Government agreed to an increase in its budget in every year to the 2013 horizon. In fact, it emerged later that, despite the rhetoric, the UK Government did not table specific proposals for reform of the common agricultural policy during the negotiations. What they did achieve was a review, which, surreally, will be conducted during the French presidency of the Union, so I advise my right hon. and hon. Friends not to hold their breath. We can only speculate on the hilarity that will have been occasioned on the Quai d'Orsay by this display of British negotiating prowess.

The UK team came back with no 1 per cent. cap on the budget and no reform, let alone scrapping, of the CAP. In accordance with the Prime Minister's formula, that meant no surrender of the British rebate, right? I am afraid that that was wrong. They returned not only empty-handed but with a pledge to send more bounty, in the form of a £7.4 billion reduction over the years 2008 to 2013 in the rebate that would have been payable to the United Kingdom were the own resources decision not to be implemented in UK legislation.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

I shall in a moment.

It was a truly humiliating defeat, for which British taxpayers will have to pay, not only in the next six years but ever after, because the new, lower rebate is now the basis of future budget negotiation.

Photo of Ian Davidson Ian Davidson Labour, Glasgow South West

Does the hon. Gentleman agree that it is entirely inappropriate and unilluminating for Government Members to try to disguise the fact that we got a bad deal simply by attacking the Tories for having no policies and being completely useless?

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

I have to congratulate the hon. Gentleman on his elegant question. If I were in the Chief Secretary's position, I would do what he has done today: throw up lots of smoke and hope that everybody goes to sleep by the end of the debate.

Photo of Quentin Davies Quentin Davies Labour, Grantham and Stamford

Talking of throwing up smoke, has the hon. Gentleman not noticed the two most salient aspects of the agreement? One is that the weighting of agriculture in the EU budget—that is to say, the proportion of agriculture to total spending—is falling, and the other is that the French contribution's rate of increase is higher than ours.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

I hesitate to be cruel to the hon. Gentleman, but I say to him what the Chief Secretary said to me earlier: read the papers before you come into the Chamber. The agreement has nothing to do with agricultural spend. It has to do with the own resources decision—the contribution made by individual members. That is what the Bill will implement.

Photo of Quentin Davies Quentin Davies Labour, Grantham and Stamford

The hon. Gentleman criticises me for not doing my homework, but that is far from the case. Does he accept that the two matters are obviously linked? It is extremely important that we consider both sides of the bargain. He is continuing to evade the point. He does not want to recognise an enormously important achievement—that the weighting of agriculture in total EU spending has been reduced as part of the package. Why does he not recognise the facts when they happen to be in favour of the Government rather than of his own party?

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

The hon. Gentleman refers to the link or otherwise between the spending decision and the own resources decision. I shall come to that point in a moment.

To return to the result from Brussels, the limit on the cost to the UK of the reduced rebate will end in 2013. Failure to reach agreement on a budget for the period after 2013 would have a devastating effect on the UK contribution, because the rebate reduction would become uncapped. We would have no effective veto, and thus no negotiating power, during negotiations on the EU budget for the period from 2013—and our partners in Europe would know it.

There is one further twist to the tale. The Prime Minister, when he was Chancellor of the Exchequer, put it about that he was against the deal. When it was announced, the Treasury pointedly refused to endorse it and denied all responsibility, because it was worried that the deal would force future spending cuts. According to the Treasury briefing, the current Prime Minister was "quietly fuming". What did he do? This April, it became known that having failed to claw back some of the rebate through negotiation, he too had caved in and agreed to accept the original deal—the deal that he had previously condemned. So much for his powers of persuasion on the international stage.

That is the sorry tale behind the Bill, although, of course, that could never be discerned from reading it. We, the Parliament of the United Kingdom, whose responsibility is to our electorate and our UK taxpayers, are invited to give the Bill a Second Reading, thus giving effect to what was done—in our name, but in complete contradiction of everything promised to us in this House—at Brussels in December 2005. If we do so, by 2010 the UK taxpayer will be footing the bill for an extra £1.9 billion a year—a sum roughly equivalent, fittingly enough, to the total Foreign Office budget—as a result of the sell-out on the rebate. That is in addition to the increase in the UK contribution to the underlying budget—£1.5 billion a year on average for the period 2007 to 2013—to deal with the cost of enlargement. Taking into account the loss of the UK rebate, which will increase our share of total EU costs, and the growth in the budget during that period, the UK's net contribution will more than double, from £2.8 billion a year on average under the previous financial perspective to an estimated £7.3 billion in 2013.

Photo of John Baron John Baron Opposition Whip (Commons)

May I tempt my hon. Friend to speculate about why we caved in on the rebate? Given that it was non-negotiable and that there has been no meaningful reform of the common agricultural policy, does he think that there is a connection between our sudden cave-in and the recent statement by the French that they thought Tony Blair would make an excellent President of the EU?

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

That is an extraordinarily interesting piece of speculation better made from the Back Benches than from the Dispatch Box. I leave my right hon. and hon. Friends to draw their own conclusions.

The choice before the House when the Question is put this evening will be whether to endorse or reject the sell-out of the British rebate. It is not about the overall EU budget or the financing of enlargement, which the Government have tried to spin; it is about the division of the total budget cost into individual contributions. It is about whether we are prepared to throw away the hard-won victory of 1984.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

The hon. Gentleman keeps making that point, but he is completely confused. The 2007 to 2013 budget and the own resources decision that determines how that budget will be financed are inseparable; they are part of a package. If he reads the own resources decision, he will see that it sets out a schedule for how the payments will be calculated and indeed how the British rebate is to be calculated. How on earth can he continue to make the point that the two things are not part of the same issue?

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

The calculation of the amended rebate is a purely mechanical process to give effect to the political decision made in Brussels. If the Chief Secretary looks at his own Bill and the decision that it implements—he looks terribly perplexed—he will see quite clearly that the decision deals with the calculation of own resources, not the overall financial perspective and the total budget.

The question that we must decide tonight is whether we are prepared to throw away the hard-won victory of 1984, which recognised the budget system's unfairness to Britain and enshrined the rebate that we are now being asked to sacrifice—the rebate, I remind the Chief Secretary, that the former Prime Minister said could not be negotiated unless and until the CAP was scrapped or radically reformed.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

The hon. Gentleman is straightforwardly wrong. I have the own resources decision here. Clearly, he has not read it, but article 4 sets out the precise terms by which the UK rebate will be calculated between 2007 and 2013. That is the framework by which the EU budget will be determined in the next financial perspective. [Interruption.] It is part of the package. The two things sit together.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

I advise the Chief Secretary to stop digging. He is right that the own resources decision sets out the mechanism by which the British rebate adjustment will be calculated—of course it does—but it does not set out the EU budget, which is what he has been spouting on about for most of the debate.

Let me come to the critical point. If we decline to give the Bill a Second Reading, what will happen? Will the roof fall in? Will the sun not rise in the east tomorrow morning? Nothing will happen. Life—even life in the EU—will go on exactly as before. The existing own resources decision will continue in force, indefinitely if necessary. The total expenditure budget will not be affected. The only difference will be that member states' contributions will continue to be assessed on the same basis as they were last year and the year before. The UK will remain the EU's second largest net contributor, but we will have £7.4 billion more to spend on British priorities; perhaps we could use it to reverse some of the Government's most recent round of stealth taxes or reduce the £143 billion that the Chancellor plans to borrow in the next five years.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

Is the hon. Gentleman saying that he would be happy for the UK to be a net recipient, benefiting from additional contributions from eastern Europe?

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

No. As I said to the Chief Secretary, the UK's net contribution will rightly increase substantially, without the change proposed in the Bill, to finance enlargement. The Chief Secretary is trying to have his cake and eat it. He wants to give away our rebate on top of that increase, which we will pay anyway as the EU budget increases.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

It is right that our contribution will increase to pay for EU enlargement in eastern Europe. Our contribution is calculated by taking away the value of expenditure and the rebate from the overall gross contribution. The hon. Gentleman misunderstands the situation. If he agrees that it is right that our contribution should increase, the net contribution should be calculated by reference to the rebate itself.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

I know that the Treasury operates only a static model. The Chief Secretary would be right if everything else were static, but the budget is increasing. If the Bill is passed tonight, as he knows, our contribution will increase by an element that reflects the surrendered rebate and by another element that reflects the underlying increase in our contribution to the EU budget. If we do not give away the rebate, the UK contribution to the EU budget will still increase.

I know that I am damning the Chief Secretary with faint praise, but even he could make a better fist of spending £7.4 billion of British taxpayers' money than the EU. Last week, the European Court of Auditors refused to sign off the EU accounts for the 13th year in a row. The accounts are riddled with material errors and irregularities—for example, the irregularity that receipts are still not collected for MEPs' expenses, and the material error by which money earmarked for agriculture is spent on golf clubs. That is to say nothing of the £3.8 billion a year that the EU spends on propaganda—public relations staff, pamphlets, teaching aids, school trips and cartoons. There is the originally named "Captain Euro", whose mission is apparently to uphold the EU's values—perhaps he could find time to fight fraud and waste as a sideline.

At a time when many priority areas of public spending are under intense pressure in the UK, how can this Government contemplate giving away £7.4 billion of British taxpayers' money in exchange for absolutely nothing? That money would pay for 45,000 nurses, 37,000 teachers, 42,000 prison places or, if the Chief Secretary prefers this currency, 1.2 million hip replacements. It would also pay for much-needed equipment for our front-line troops in Afghanistan and Iraq.

We are used to this Government's casual attitude to public money: £5.7 billion was wasted on tax credit overpayments; £3 billion was spent on nine NHS reorganisations in nine years; and £141 million was wasted on an abandoned Department for Work and Pensions IT programme. We are used to tough rhetoric on Europe followed by craven surrender, and we are used to broken promises: there were broken promises on the referendum; a promise has now been broken on the rebate; and no doubt promises will be broken on the red lines. The Bill is so objectionable, because it embodies all those failures of government in one measure.

We were promised that the rebate would be non-negotiable, yet it was surrendered without a fight. The Government talked tough about how they would force the scrapping or at least the radical reform of the CAP, but the CAP will remain untouched. At a time when our public services are feeling the squeeze, when our troops in the front line are short of equipment and when our schools are falling down the world league table, this Government propose casually to chuck away £7.4 billion of our money. By giving away our rebate, which has been worth £54 billion since it was negotiated in 1984, without securing anything in return, this Government have manifestly failed in their paramount duty to protect Britain's interests.

We have a chance to salvage the situation. By rejecting this Bill tonight, Parliament has the opportunity to rectify the damage caused by the incompetence and duplicity of this Labour Government, to stand up for the interests of Britain and British taxpayers against an Executive who have broken their promises and betrayed the people's trust, and to send a clear message that Britain's hard-won rebate is not for giving away. I urge hon. Members to seize the chance this evening to send the Government back to the negotiating table in 2008, in parallel with the promised budget review, and to enter into a good-faith discussion about the rebate, the budget and the future of the CAP on the clear basis that all three are linked and that there will be no change to the British rebate formula unless there is long-term, sustainable reform of the CAP. This is our last chance. If the Bill is passed, Britain's rebate, and with it the principal lever to secure sustainable reform of the CAP, will be gone. I urge hon. Members to deny the Bill a Second Reading and to keep the cause of EU reform alive.

Photo of Denis MacShane Denis MacShane Labour, Rotherham 6:05 pm, 19th November 2007

EU finance is horrendously complicated, and I wish the Chief Secretary and Mr. Hammond, who spoke with considerable passion and eloquence, luck as they grapple with that problem.

EU finance is to the 21st century what the Schleswig-Holstein question was to the 19th century. As a historian, Mr. Deputy Speaker, you will remember the Schleswig-Holstein question. Lord Palmerston said, "Only three people in the country understand the Schleswig-Holstein question. One is dead; one went mad; and I'm trying to forget."

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

Order. If there are only three and I am one of them, I hope that the right hon. Gentleman will clarify the situation.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

I was referring to your knowledge of parliamentary history, Mr. Deputy Speaker, and not to your expertise on the frontier regions between Denmark and Germany.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

The Chief Secretary was extraordinarily generous in giving way, and as a result his speech lasted for well over an hour, which was not his fault because most of the time was taken up by interventions. The shadow Chief Secretary was also generous in giving way. I want to make my points—but I will give way to my hon. Friend.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

My right hon. Friend began his speech by correctly stating that the system of European finance is complex. I agree with him, and have suggested on many occasions that we should replace it with a simple system of fiscal transfers from rich nations to poor nations and get rid of all the complication in between. Is that not a good idea?

Photo of Denis MacShane Denis MacShane Labour, Rotherham

I will come on to that point, because part of this debate is about a transfer from a very rich nation—our own—to some very poor nations. I am disappointed by the mean-minded approach that we have heard from Opposition Members so far on that matter.

We need to go back into parliamentary history, although not as far as Lord Palmerston. When Baroness Thatcher brought back the rebate in 1984, one MP asked:

"Does she agree that, compared with the target that she set four and a half years ago, yesterday's settlement is a humiliating failure for Britain, in which the only flag that she raised for Britain was not the Union Jack but the white flag of surrender? If that is not so, will she confirm that despite all the sabre-rattling about rebates, Britain's net contributions in the past five years of Tory Government have been £100 million per year higher in real terms than they were under the Labour Government?"—[ Hansard, 27 June 1984; Vol. 62, c. 1005.]

That was my right hon. Friend Mr. Straw, now the Secretary of State for Justice, who is a distinguished friend of all Labour Members and a stunningly successful Minister.

The then Prime Minister was also taken on by the then leader of the Labour party, who is now Lord Kinnock. In the same debate, he said:

"the right hon. Lady agreed to a 40 per cent. increase in VAT contributions to the Common Market. Will she confirm that the Government's public expenditure plans make no provision for that addition beginning from 1986? Therefore, where will that extra 40 per cent. come from?"—[ Hansard, 27 June 1984; Vol. 62, c. 995.]

I think that Conservative Front Benchers will do me the courtesy of saying that there is a little similarity between the points that they have made and the points made in that debate 23 years ago.

Photo of Jim Cunningham Jim Cunningham PPS (Mr Mike O'Brien, Minister of State), Department for Work and Pensions

My right hon. Friend mentioned Baroness Thatcher; it is worth mentioning that during that period she was going to sort out the common agricultural policy, but got bought off by the rebate. That is what actually happened.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

At the time of Mrs. Thatcher's premiership, spending on the CAP was significantly higher—about 80 per cent. higher—than it is today. It has come down consistently in real and percentage terms, and it is still going down. One can put nominal figures on that: it has gone up from—whatever you like—€40 billion to €43 billion, but that has to be seen in the context of the share of member states' GDP that goes towards EU financing as a whole. Does Daniel Kawczynski want to intervene?

Photo of Denis MacShane Denis MacShane Labour, Rotherham

He will come in later, I am sure.

During the debate that I mentioned, senior members of my party—its leader and one of its brightest young stars—were roaring with Europhobic and mathematically illiterate nonsense at the good deal that the then Prime Minister had brought back. Later in the debate, she was challenged about why she was not spending the money on British priorities—a point that was also made today by the shadow Chief Secretary to the Treasury. Lady Thatcher said, "Are you saying that we should not help the poor people of Portugal?" She stood there and told the Labour party to be generous to poor countries in Europe. In effect, she agreed to a significant increase in the overall budget—to 1.4 per cent. of European GDP, an increase of about 40 per cent. The EU budget is now lower as a share of European GDP. Again, I salute Margaret Thatcher; there are things in Europe that can be done better collectively than through the mechanisms of 27 national states. She was right then, and this Government are right now. I invite Conservative Members and Front Benchers to become a little more Thatcherite; it will not do them any damage at all.

Philip Davies has left his place; he wants us to quit the European Union, and some other hon. Members are joining him. Mr. Cash has quit his place, probably to prepare for the longer debates that will take place when the ratification treaty comes back to this House. We are left with the cream and core of the intelligent Conservative party, who understand the figures, and I am sure will make wise contributions.

So far, we have seen from its Members' interventions the Conservative party that we know and love: right-wing, reactionary, righteous, rabid and utterly contemptuous of the notion that Britain should lend any help to countries and people to whom we owe a debt of honour—and not only that. Playing his usual surrogate accountant's role, the Chief Secretary went on and on about how much money we make from Poland and other such countries. That is true, by the way, but Britain is achieving a nobler ambition through this Bill and its proposals on EU financing—to discharge a debt of honour, which we owe particularly to Poland.

The hon. Member for Shrewsbury and Atcham and I share a concern and a family connection with Poland; he is welcome to make an intervention later. In the past century or so, British history has not been generous vis-à-vis Poland. Tory appeasement betrayed Poland to the Russians and the Nazis in 1939, and at Yalta Churchill allowed the division of Europe, and allowed the communists to take control of Poland. In the 1970s a Labour Government even objected to the raising in Gunnersbury of a memorial statue to the victims of the NKVD executions in Katyn in 1940.

As a Government, we have discharged some of that debt by leading the encouragement to Poland to join the EU. To give it credit, in 2004 the Conservative party did not join the rabid tabloid press and its campaign to stop Poles from coming to work here. There were some remarks, but the party did not vote against the Bill in question. I think that the hon. Member for Shrewsbury and Atcham was the shadow spokesman on Europe at the time; we worked together on the issues.

When I was Minister for Europe, something upset me considerably as I went round the eastern European countries and spoke to people. I was asked why they—the people of Poland, Hungary and the Czech Republic—were signing cheques, for €50 million or €74 million, directly to Her Majesty's Treasury to pay for the British rebate. I could talk about France and the common agricultural policy, but it was not cutting much mustard; such countries were signing cheques to HMT as part of the rebate.

That is how the rebate works; it is not an aggregate sum of money, some of which we do not pay, although that is what people think; it is paid directly by national Governments. I did not have an answer for those countries. After the stunning success of Labour Governments who, after the disastrous economic policies of the preceding Government, have seen national wealth more than double in the past 10 years, how could we, one of the richest nations—not only in Europe, but in the world—say to eastern European Governments, "Your poor people have to pay money to our rich nation"?

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

I agree that Britain has helped Poland and other eastern European countries tremendously. The right hon. Gentleman mentioned Margaret Thatcher. In 1990 she was instrumental, in the Paris club of lending nations, in getting rid of Poland's debts. However, the way to help countries such as Poland in future is through increased trade and helping British companies trade liberally with Poland, not constantly giving it handouts, as the Bill purports to do.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

I do not want to make this a Polish-Polish debate, but I ask the hon. Gentleman to reflect a little on what he has said. In 1982, the communist secret police in Poland put me in prison for taking money to the underground Solidarity union. The following year, Britain imposed swingeing visa controls against allowing Poles to come into the United Kingdom. The year after that, Mrs. Thatcher was talking about that faded communist hack Gorbachev as a man with whom she could do business. I accept that once the Poles had won their freedom, Mrs. Thatcher came round to accepting that that was a good thing. However, I wish that she had been a bit stronger in her support when I was in prison, and when the Poles needed to come to this country a bit more easily.

Thanks to the joint work of the Labour and Conservative parties in facing down the anti-eastern-European tabloid press, Poles have been able to come here. However, the tabloids are once again screaming against the eastern European ladies and gentlemen working here.

Yes, I accept that Britain will now pay a bit more. I have no problem with that, because we have had a good deal from the rebate in the past 24 years. Despite what the shadow Chief Secretary said, we are not, in per capita terms, the largest or second largest contributor to the EU budget. Page 32 of the very good Library report shows that we paid 68 euros per head last year. The Netherlands pays four times as much, at 241 euros per head; Denmark pays twice as much at 127 euros per head; Sweden pays 124 euros per head, while Germany pays 100 euros per head. France and Austria pay 50 and 40 euros per head respectively. Those countries, too, are pretty fed up with the assumption that Britain does not have to pay its fair share.

Photo of Bill Cash Bill Cash Conservative, Stone

I should like to take this opportunity with regard to a point—not exactly an allegation—that I made earlier. I am grateful to Mr. MacShane for correcting himself to a certain extent just now. He specifically mentioned France, which brought me to my feet earlier. Per head, we pay considerably more than France and Italy, but that is without prejudice to the fact that I had said that we contributed much more than we do. I wanted to correct that for the record.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

The Francophobia that always infects these debates is jolly good fun, but there are 25 other member states apart from France and the United Kingdom, in the European Union, and the figures vary. I fully accept that there are grotesque anomalies such as Luxembourg. I am getting into some gruesome detail which I would not want to inflict on the House, but the plain fact is that the Netherlands—our trusty old Protestant ally for 300 years—pays four times, pro rata, what we pay. Why on earth should the Dutch always have to pay part of the British bill? That is how they will see it—ditto the Swedes and the Germans. The Germans have spent 4 per cent. of their gross domestic product, year on year, on East Germany following unification. That is twice to two and a half times what the United States put into western Europe under the Marshall plan. The Germans, with a much bigger problem to solve than we have ever had to face—the incorporation of a bankrupt third-world country, the German Democratic Republic, into the western German Federal Republic—have made huge personal sacrifices as a nation, yet still pay proportionately far more, 35 per cent. more, on last year's figures, than we do. The figures against us are much worse, in terms of Germany, the Netherlands and some of the Nordic countries, during the recent past.

If we get into arguments that simply state that whatever happens we must pay less than everybody else, the European Union might as well pack up shop. I fully accept the shadow Chief Secretary's point about the common agricultural policy. I do not deny that for one second. The figure is coming down as a share. Let me read more—I might even be tempted to do it in French this time—from today's Le Figaro, which says in the course of a long article: "France now accepts that there will have to be a reduction in European Union agricultural expenditure. The debate among the 27 member states will start under the French presidency in the second half of next year. That is when the next pluriannual budget, 2013-2020, will be adopted." I would love the Conservatives to address this issue, as well as my own Government, because we are not good enough at explaining to partners with sufficient force and vigour that the way in which the European Union budget is constructed is not necessarily the best way for Europeans.

The biggest defenders of the CAP are not the French but the Irish. Ireland—an English-speaking country with a centre-right conservative party, Fianna Fáil, in power—is passionate in defending the CAP. I would invite the Conservatives to talk to Fianna Fáil; I cannot do it, because it is not in the same political family as the Labour party. I would even ask my right hon. and hon. Friends on the Front Bench to create a special EU CAP reform persuasion budget that could be given to the Conservatives, so that they could go to talk to all the ruling centre-right parties in Germany, Poland, the Nordic countries, Netherlands, and France—but, as we know, the Conservatives want to effect a total rupture with the EU's other centre-right ruling parties. The UK is extremely badly served by a neo-isolationist attitude whereby they will not go and network politically for the common goals that most people in Britain, across parties, would support.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

My right hon. Friend has made several references to Ireland. If I were Irish, I would be very enthusiastic about the CAP and the structural fund policies, because the Irish are massive net beneficiaries from the budget. At its peak, it went as high as 5 per cent. of GDP, which in British terms would be £60 billion. A net inward transfer of funds from the EU totalling £60 billion might make us rather more enthusiastic.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

I am terribly sorry, but page 34 of the Library report shows that in 2006 Ireland received €475 million of structural fund expenditure, while Britain received €3,021 million. [ Interruption. ] My hon. Friend is right in per head terms; I cannot disagree with that. However, I am making a different point: if we want Ireland, France, Germany and other countries to change, we must engage with them. Believe it or not, this debate is not being listened to right now by the good people of Ireland as they settle down to their boiled ham and cabbage and a good pint of Guinness.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I return to my previous point. If the system of contributions and receipts from the EU was proportionate to the relative degree of prosperity in the different nations, everyone would be happy.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

My hon. Friend is talking through his hat. Ireland was so poor when it joined in 1973 that the amount of net transfers from the UK economy would have been absolutely enormous. The idea that each country goes round with a begging hat saying, "I'm poor, please give me some money", simply will not work. I respect my hon. Friend—although he does not like the EU and the way it works, he has always taken a consistent, cheerful and friendly position on it—but we have to work with what we have, and if we want to change it, we have to engage, network and discuss. That is what the Conservatives completely and resolutely refuse to do.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

The right hon. Gentleman has been talking about Ireland. I must tell him—we get on quite well with one another, so I hope that he will take this on board—that the Irish Government have just spent £300 million of taxpayers' money on propping up the Irish dairy industry. I am chairman of the all-party group on dairy farmers. How can our dairy farmers in the west of England and Wales compete when the Irish are so flagrantly contravening the spirit of the common agricultural policy?

Photo of Denis MacShane Denis MacShane Labour, Rotherham

I wonder whether that is a wise intervention on the afternoon when we have learned how much money we are giving to Northern Rock. If the Irish subsidy, subvention or support is against EU state aid provisions, let it be taken to the European Court of Justice. To be fair, my right hon. Friend the Chancellor of the Exchequer made it clear that any aid that the British Government choose to give to protect the 1.5 million borrowers and savers in Northern Rock must be within EU rules.

Hon. Members have spoken as if Britain were a net contributor to the EU in all areas and we got nothing back in return. In fact, last year's structural fund expenditure figures show that the UK gets a third more than France, 20 per cent. more than Belgium and nearly twice as much as the Netherlands. We get more than Slovenia, one of the accession member states, and—the hon. Member for Shrewsbury and Atcham might want to listen to this point—only €1 per head less than Poland. The world's fourth largest economy gets from the EU only €1 per head less in structural funds than Poland, which, despite its enormous economic progress, is still a not very rich EU country.

I want reform of the CAP. What we are debating was, in effect, set in stone in 2002 with the agreement between the then French President, Jacques Chirac, and the then German Chancellor, Gerhard Schröder, to maintain CAP expenditure at a fixed amount, not as a percentage amount. That was in the context of the Iraq conflict and, frankly, a deep worsening of relations and divisions within the EU. If we want to achieve desired British goals of getting some reduction as regards the CAP, we will have to look at linking up, making networks, making the argument and going out to persuade people. These decisions are not taken in some closed caballing session in Brussels. They are taken by parliamentarians like ourselves in Paris, Dublin, Germany and Rome, and we need to talk and network far more with them ahead of decisions being taken.

We might also decide that the common agricultural policy could focus its attention on the poorer farmers in Britain—the hill farmers, the sheep farmers and those with a very small income—and increase the support that goes to rural development. But what did I read yesterday in The Observer? It was suggested that the richest recipients of CAP aid, such as the Duke of Marlborough and all the Tory-supporting ex-aristocracy, are receiving hundreds of thousands of euros. The British Government, who like a duke when they see one, will try to defend outrageous payments to the richest cereal and agro-industrial companies in Europe, as well as to some very rich individuals in our country. We have to consider motes and beams before we lecture other countries on those issues.

My hon. Friend Kelvin Hopkins mentioned Ireland, which has become very rich since it joined the EU. I welcome that. I went on holiday to Ireland as a small boy, and it was a very poor country then. I saw cattle driven through the streets of rather big towns. In the 1950s, almost every second Irish male had to emigrate to find a job.

Photo of Bill Cash Bill Cash Conservative, Stone

I would like to draw to the right hon. Gentleman's attention an extremely interesting book by Roy Foster called "Luck and the Irish". I heard Roy Foster on "Today" or the Andrew Marr programme the other day, explaining that although there is no doubt that the EU contributed to the manner in which the Irish have become far more wealthy, which I greatly enthuse about, it was to do with the American money that was invested and the cutting of tax rates.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

I do not know whether the hon. Gentleman really thinks that the Ireland of the 1920s, 30s and 40s, or even the 1950s, was a rich and successful country. The kind of ultra-nationalistic independence that he believes in usually bankrupts and impoverishes a country very quickly.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

I was in Edinburgh on Saturday, and I wept. I did not drink Italian coffee or eat spaghetti for a whole 24 hours. However, the Scots must have their point.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

I am grateful to the right hon. Gentleman, who has such a fine Scottish surname, or perhaps it is Irish. Does he think that Ireland would be as successful today if it were not independent?

Photo of Denis MacShane Denis MacShane Labour, Rotherham

Ireland is successful today because it plays a full role in the European Union. Were Scotland to quit the Union, I would be interested to see the price it would have to pay to enter the EU, because it would be a tricky renegotiation. However, we are veering way off the subject.

What counts is that the Irish used the moneys that they got from the EU better than almost any other country. They were combined with enormous investment in education and a sensible taxation policy—a point that I concede to the hon. Member for Stone. None the less, are we saying that after 1973, Britain should not, to a lesser degree than Germany or the Netherlands, have made significant fiscal transfers that have allowed Ireland as a nation during the past 33 years to become richer and happier than it ever was when it was an independent state before it joined the EU, or when under English control? I do not think so. It must have been in our interests to do so. It is why Ireland today is a country of immigration, not emigration. Immigration brings its own problems, as we know, but it is far better to be a country that is so successful it needs to attract workers to do jobs that nationals are not prepared to do.

That ought to be our ambition for the rest of Europe. Many hon. Members will remember travelling to Spain, southern Italy or even bits of France not so long ago and being able to see rural and social poverty. It was quaint, and it was nice for the British ex-pats who could buy houses and drinks that did not cost very much, but now it is far better that Italians and Spaniards can, in contrast to their position in the 1950s and 1960s, stay in their own countries, and that those countries are rich enough to attract people to work in them. That is my ambition for Poland and the Baltic states. In order to achieve that ambition, some generosity on our part, and some lessening of the assumption that it is only the Germans, Dutch and Swedes that should pay, would be welcome.

We can see the success that membership of the European Union brings to all countries. I have explained why it makes us all more wealthy, and I hope that the figures are not in question.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

No, I will not, if the hon. Gentleman does not mind.

In 1960, about 14.6 per cent. of GDP was in exports to what are now EU member states. That figure is now closer to 60 per cent. Britain's wealth has doubled in the past 10 years, principally on account of our membership of the EU.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

I love my hon. Friend Mr. Mitchell, but he has not been in his place since the beginning of the debate, and neither has Mr. MacNeil, so I shall not give way. I will do so to those who have been here since the start of the debate.

As well as making us more wealthy, it transpires that membership of the EU makes us more healthy. A new book that has just become available in the Library, in the new arrivals section, contains a marvellous statistic showing that between 1965 and 2004, the life expectancy of the British male increased by 13 years. In the United States over the same period it increased by only eight years; in France, it increased by 10 years and in Norway by just seven years. Membership of the European Union is allowing us to live longer; I would have thought that all hon. Members would welcome that.

This modest Bill will allow financing of the European Union that has been negotiated, agreed and signed, and on which our word has been pledged. The shadow Chief Secretary to the Treasury is quite right to say that we can veto it and reject it, but he would have a hard time explaining to the Poles, Hungarians, Czechs and other eastern Europeans who are the principal beneficiaries why we should continue the current practice, which will come to an end once the Bill becomes law, of their sending large cheques to Her Majesty's Treasury. It is not worthy or honourable. The Conservative party is not anti-Polish or anti-European, but it seems to be absolutely locked into a philosophy of rejecting anything that helps the EU to grow.

This time last week, the shadow Foreign Secretary, Mr. Hague, made endless appeals in a fine and effective speech for more European Union action. He said that EU Foreign Ministers had wasted opportunities and that they ought to do more on Iraq. I agree with him. On Burma, he says that the EU should tighten

"targeted sanctions against the military regime".—[ Hansard, 12 November 2007; Vol. 467, c. 419.]

I cannot disagree with him. He also said that EU Ministers need to show collective strength over Zimbabwe. I agree with him, but if he wants those desired goals to be achieved, there is a problem. It is not possible to demand more action from partners in Europe—I might add the case of Afghanistan or one or two other places—at the Dispatch Box while allowing members of one's party to campaign openly for withdrawal from the EU, or while writing articles and making the bulk of one's speeches utterly contemptuous of our partners. When the Leader of the Opposition talks about one-legged Lithuanians, the Opposition have a problem. When members of the Public Accounts Committee say, "We're going to have to get tough—these guys coming in to talk to us are foreigners", we see the subconscious xenophobia deep at the heart of the Conservative party.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

Does the hon. Gentleman wish to intervene?

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

Order. The right hon. Gentleman really must bring his remarks closer to what he himself admits is a modest Bill. I have allowed him a fair degree of tolerance, but I think that he has been somewhat extravagant in dealing with a modest measure.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

Any rebuke from you is always well merited, Mr. Deputy Speaker. I just think that we should help one-legged Lithuanians, and the Bill will do that. If Conservative Members find it difficult to understand just how offensive some of their anti-European bile is, that is a problem for them.

To conclude, the Bill gives a legal mechanism to discharge a debt of honour to many friends in eastern Europe. We shall not be paying as much per capita as some other countries. France and to a lesser extent Italy will significantly increase their contributions under the new regime. Were this debate taking place in the French National Assembly, many deputies would be arguing that the Brits were again getting off scot-free and that the French were paying a massive increase in the bills for Europe— [ Interruption. ] The hon. Member for Na h-Eileanan an Iar, speaking for the Scots nats, seems again to be joining up with the rabid anti-Europeans slightly to his right, in arguing— [ Interruption. ] Mr. Walker keeps making remarks from a sedentary position. He is entitled to do that, but if he wants—

Photo of Charles Walker Charles Walker Conservative, Broxbourne

Does the right hon. Gentleman not recognise that it is this type of speech that gives debates about Europe such a bad name? He has spoken for 37 minutes, two minutes of which has been worth listening to and 35 minutes of which has been utter drivel. Please can he spare us any more of this torture?

B

Well said Charles, I am sure some of the speakers just love the sound of their own voice.

Submitted by Brian Perry

Photo of Denis MacShane Denis MacShane Labour, Rotherham

After 13 years I am torturing a Conservative MP. There we are—happiness is mine. When the hon. Gentleman has been here a bit longer, he will realise how utterly focused, short, relevant and to the point my speech has been.

It is time to return to the debate of 1984, when Margaret Thatcher brought back a similar deal and was bitterly attacked by the then Opposition, who were gripped by a paranoid Euroscepticism of bile and hostility to the notion of being generous to poorer nations in Europe, and stayed in opposition for another 13 years. I commend to the House the Opposition's opposition to the Bill.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury 6:43 pm, 19th November 2007

It is a great pleasure to follow Mr. MacShane. He said that we would all live longer thanks to the European Union. It was a great pleasure to spend some of those extra minutes listening to him. I am sure that they did not feel wasted.

The right hon. Gentleman made two important points, somewhere in his speech. One was that we should remember that it is not as if we do not get anything back at all in this country. I come from a part of— [ Interruption. ]

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

On a point of order, Mr. Deputy Speaker. I am sorry to interrupt the proceedings, but is it in order for Back-Bench Members to speak to civil servants in the Box during the debate?

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

Only Ministers or Parliamentary Private Secretaries should approach the Box.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

As I was saying, the right hon. Gentleman made two important points. The first was that we should remember that we get something back from the European Union and that it is not just the new member states that benefit from matters such as structural funds. Some of the poorest parts of Europe are in this country, such as Cornwall, where GDP per head of population is still less than 75 per cent. of the European average. It is right that some of those resources should be directed towards helping to boost growth in the economy there.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I sympathise entirely with the hon. Lady's concern about poor regions in Britain, including Cornwall, but would that not be better addressed by a vigorous and generously funded national system of regional assistance?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

It would be fantastic if that were the case, but unfortunately it was a hard fight even to get Cornwall recognised as a distinctive economic region in its own right, something that neither the Conservatives nor the current Government were prepared to countenance. Only through the work of the then MEP Robin Teverson, now Lord Teverson, was the area identified as an economic entity in its own right.

The second point that the right hon. Gentleman made was about the need for reform of the common agricultural policy and about how we should make the most of our opportunities. However, as I shall explain, we had an opportunity but we passed up on it.

We on the Liberal Democrat Benches are not going to engage in anti-European rants. We have always been clear that we take a constructive, pro-European approach, which we do not intend to change. We welcome the fact that the EU has brought a period of unparalleled peace and prosperity to Europe, and that there has been successful integration with new member states. However, that does not mean that there is no need for a proper public debate about the future of Britain's relationship with the European Union.

Over our 35 years as a member state we have seen the EU widen its membership and share sovereignty, from Mrs. Thatcher's Single European Act to a succession of treaties agreed by both Conservative and Labour Governments. The EU has changed beyond recognition since 1973, which means that the need for a renewed debate has never been greater. Since 1997 Labour has given away powers, but has refused to make the positive case for Europe and engage in a proper debate about the direction of the EU. The Conservatives, who promoted closer integration without referendums while in government, now indulge in populism of the worst kind, calling for a referendum to mask their own divisions. So let us have that proper debate.

That debate could be achieved by a referendum on Britain's membership of the EU. That was raised on the Liberal Democrat Benches during the debate on the Loyal Address, and I was proud to walk through the Lobby supporting our amendment, which would have delivered that. I was disappointed that the Conservatives chose to oppose such a proposal, or are they afraid that too many Conservative Members would vote to withdraw from the EU altogether? Instead, the Conservatives will use the debate on the treaty as a proxy for that debate, despite the fact that it has much narrower terms. I am sure that those opposed to EU membership altogether will take the opportunity to air their views then, but much of the treaty is in fact about the practicalities of dealing with an enlarged EU, such as whether we need 27 Commissioners.

We need to see the Bill in the context of that wider debate about a constructive approach. Although the Bill is short, it gives effect to the new own resources decision made by the European Council on 7 June 2007. The Bill sets out the new financial framework for the EU for 2007 to 2013, the basis of which was agreed under the UK presidency in Brussels, in December 2005. We on the Liberal Democrat Benches believe that the EU is good for the UK. We support measures to enable smooth running of the expansion of EU membership, and we believe that it would be wrong to defend an arrangement under which we were recipients of funding from eastern Europe. Those measures were part of the negotiations for a new financial framework—a part that we wholeheartedly supported, because we wish to support the poorer parts of the European Union, which means those in the UK as well as in the new accession states.

The key point is that the negotiating objective was to trade the rebate against fundamental change. The question we must ask is: could the Government have done more in trying to achieve that fundamental negotiating objective? The Minister has not conceded today that the end result was a bad deal for the UK. It was a bad deal because the former Prime Minister totally failed us in the negotiating process during his six-month presidency of the EU. He seemed to think that any deal was better than none at all. The result is a bad deal, caused by the Government failing to identify, let alone secure, their objectives. That result is more the legacy of the former Prime Minister than the vision of the current one, which is probably why he chose not to raise it in the Queen's Speech.

The former Prime Minister, Tony Blair, liked talking about grand ambition and using radical rhetoric about reforming the EU, but when he had his golden opportunity he failed to deliver. He totally mishandled the negotiating process before it had even started. He spent most of 2005 saying that the rebate was non-negotiable. Clearly, however, it was negotiable, and was actually being negotiated at the time he was saying that it was not. Rob Marris spoke earlier about negotiating skills; perhaps he should have shared some of his expertise with the then Prime Minister, who completely failed in that regard.

Such a position resulted not only in the Government looking foolish. It also meant that they could not open up terms of compromise from anyone else. Perhaps it would have been better to say, "Okay, we'll put our rebate on the table if you're prepared to talk about the serious reform of the common agricultural policy." But they did not, so they had absolutely no hope of delivering reform of that kind. The best that they could do was to cave in on the rebate, while giving the pathetic excuse that it related only to the expansion elements, and not to those linked to the CAP.

This was the area of greatest opportunity, and of greatest failure. Too much was given up in return for too little reform. There was an opportunity for a long-term strategy to be put in place, but the former Prime Minister bottled it. Instead of a long-term sustainable solution to CAP reform being found, the issue was effectively kicked into touch, with a full review of EU spending and resources by the Commission scheduled to report in 2008-09. In other words, it will become someone else's problem.

Today's debate has highlighted the fact that the urgent need for CAP reform has still not been addressed. We have seen significant reform, but we need to go further. It was good to see the reforms in 2003. Despite the problems that the Government have had with the administration of the single farm payment, it is less bureaucratic than its predecessor systems, and it is no longer awarded on the basis of production. However, there is still a need to go further, to increase trading opportunities for developing countries while safeguarding the changing rural economy. The Government should have been more ambitious in what they believed they could achieve.

The Treasury set out its vision, to "stimulate and inform debate", on 2 December—about the same time as the meeting in Brussels took place. This gave an indication of where it believed the EU needed to be in 10 to15 years' time. Operating on that time scale, the Brussels Council should have been crucial to taking the first steps, yet that opportunity was missed. The Treasury document highlighted many of the issues that need to be tackled and, yes, tariffs remain one of the key obstacles to further and more fundamental reform. The Government's position in 2002, in failing to secure a renegotiation of the CAP, not only undermined their position at the summit in Brussels in 2005, but also impacted on the subsequent World Trade Organisation negotiations.

Instead of kicking the issue into the long grass with the review, the Government should have looked much more closely at potential co-financing arrangements and at splitting the responsibility 50-50 between the EU and the national Governments. This would have had a much greater impact on the rebate than the measure that we are debating here today and the sums of money that we are talking about.

The Chief Secretary to the Treasury talked about the way in which resources had been allocated across from pillar one to pillar two of the common agricultural policy. Those are the kinds of issues that really should have been pushed at the Brussels Council. Such an approach at Brussels would have helped to bring decision-making powers—and with them, decisions over resources—back from Brussels to a more local level within the UK. That would have put money back into rural communities, using public money for the delivery of public goods. It would have encouraged food to be produced and sold locally to high animal welfare and environmental standards, which would have cut food miles and ensured sustainability. Fundamentally, it would have made a real difference, but the opportunity to get those changes moving was wasted.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

I am delighted that the hon. Lady agrees with us that the Bill seeks to implement a bad deal. Will she make it clear that the Liberal Democrats will be joining us in voting against it?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

The Conservatives will be joining us in opposing the Bill's Second Reading today. We oppose the Bill not because we object to the principle of what could have been achieved, but because it is being expressed as such a wonderful achievement by the Government. They have not admitted to the failures involved in their negotiation of the deal in December 2005.

People's concerns revolve around what things cost, and whether they think that they are getting value for money. The Bill deals with the overall cost, and not the effectiveness of the spending. I wonder whether it would be useful to draw those two matters together. Other Members have mentioned the problems with the European Union audit process. When the draft documents were debated earlier last year, the Government made it clear that it was important to have tougher audit constraints in place. We support them in their intent— [ Interruption. ]

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

Order. I am sorry to interrupt the hon. Lady. I do not know whether she is being disturbed by her colleague behind her, but I certainly am. Sedentary comments are generally not helping the debate.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

Thank you very much, Mr. Deputy Speaker.

I was saying that other Members have mentioned the problems with the European Union audit process, and Ministers made it clear, when the draft documents were debated earlier last year, that tougher audit trails and constraints needed to be in place. We support them in their intent, but that will mean national Governments, as well as the EU, taking on responsibilities. Perhaps it will mean taking more responsibility down to national level, as some of the problems are caused by centralising too much of the detail at EU level. This issue was highlighted in the past week or so, when we learned that the EU auditors had refused to sign off the EU's financial accounts for the 13th year in a row. One of the issues identified by the report was poor knowledge of complex rules.

The applications for structural funding in my constituency involved an incredibly complicated process, but the layers of complication often came not from Europe but from the regional body administering the structural funds. One of the most frustrating things was the fact that the goalposts were moved during the application process. The example that always springs to mind relates to industrial buildings and work spaces, for which funds were available. Because there were a lot of applications going in, however, the Government office for the south-west decided to raise the environmental standards required. That was great, but unfortunately there was no one available to assess those standards.

We can see from that example how these complications can arise. The fact that the Department for Work and Pensions has failed to have its accounts signed off for the past 13 or 14—or is it 17?—years shows us that it is not just the European Union that has difficulty in dealing with these issues. The Government must sort themselves out as well as demanding improvement in Europe. Clearly, there are lessons to be learned at national and Europe-wide level. If we can do that, we shall achieve greater clarity and help to inspire confidence.

The Government should concede where they failed in this set of negotiations. They should admit that it would have been better to have had no agreement under Blair's presidency, rather than an agreement that was nothing but a bad deal for the UK. If, like us, they want the European project to succeed, aspects of the Union must be fundamentally reformed. They should accept that the greatest failure in this whole process was not on the part of the EU, but on the part of our then Prime Minister in giving up part of the rebate without securing fundamental CAP reform. Achieving that reform would have been a legacy to be proud of, but it is one that this Government have failed to achieve.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North 6:57 pm, 19th November 2007

I am pleased to be able to speak in a European debate, and in particular to speak on the Bill that will give effect to the deal signed up to by our previous Prime Minister last December. That deal will cost Britain billions in future years and, as has already been pointed out, will bring very little to Britain in return, at least in material terms. The deal was described by The Economist as a very poor one for Britain. The Economist is hardly the kind of Eurosceptic, leftist magazine that I would support, but it said that no deal would have been better than that deal. I certainly agree with that.

The previous Prime Minister negotiated—if that is a fair description—the deal at the last minute, at the end of Britain's presidency of the EU. It was also done in a rather spontaneous and arbitrary manner that apparently shocked and astonished other politicians, who felt that they would at least have had to refer back to their Cabinets and Governments before making such a dramatic decision. The fact that our then Chancellor of the Exchequer was not with the previous Prime Minister at the time might have made it rather easier for him to do that deal. Perhaps he knew that he was soon to leave office, and that it would be left to his successor to pick up the tab. That is precisely what has happened, and one suspects that, behind the scenes, our new Prime Minister is, unsurprisingly, not happy about the deal.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

At the time, it was greatly publicised on television that the then Prime Minister, Mr. Blair, was in constant telephone contact with the current Prime Minister and that he ran everything by him. My understanding is that the current Prime Minister was very much aware of what we were signing ourselves up to at the time.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I sincerely hope that they were speaking on the telephone, but it may be that they did not have the degree of harmony that one would hope for in taking such a big decision. Perhaps some of this friction between the former and the present Prime Minister that has been talked about in recent days was in evidence. I have never believed those stories myself, but perhaps there is some substance to them after all.

The Government and my right hon. Friend the Chief Secretary have constantly emphasised the importance of giving assistance to the newer member states, which are distinctly poorer than ourselves. That is a noble and respectable objective. However, the debate was really about the common agricultural policy and its genesis was the suggestion by us that the CAP should be reformed and the budget for it reduced. President Chirac was already smarting from his defeat in the referendum on the constitution; he was extremely angry and looking for someone to lash out at. He saw Britain attacking his CAP and there was also the issue of our budget rebate, so it was President Chirac who forced the debate about our rebate on to the agenda.

At that point, we should have responded robustly and said "no deal"—at least until the cost of the CAP was substantially reduced. In my view, of course, we should entirely abolish it. I have said many times here and in Committee that the CAP should simply be abolished and agricultural support returned to member states. Member states are best able to judge what their own agricultural industries require and what subsidies, if any, are required. Under that system, they would also be democratically accountable. The subsidies would have to be accounted for in a direct way at elections, which is absolutely right.

Indeed, I would go further. Much has been made of structural cohesion funding, but here again it is an inefficient way of subsidising or trying to help the poorer regions. It would be much better for member states to decide what subsidies were appropriate for their regions and to pay for them out of their own budgets rather than have to go through the circuitous budgetary processes of the EU. Money is lost in inefficiencies—no doubt in fraud and corruption as well—and there is frictional wastage in distributing aid in that way. I am sure that I am not alone in being slightly annoyed when I spot notices around my constituency and elsewhere that are funded by the EU—indicated by the yellow stars on the blue background. That is effectively our money being used, yet it is claimed that it is European money. If we were a poorer nation and we were receiving a net contribution, that would be fine, but we are actually net contributors and only some—certainly not all—of that money is redirected back to Britain.

As a socialist, I am strongly in favour of redistribution from those who can afford it to those who are in need. If we did that in a sensible, fair and non-corrupt way, it would represent a sensible way forward—but we do not do that through the structures of the EU. I have said before and I will keep on saying that a system of simple fiscal transfers from the richer to the poorer nations of Europe would be a much more efficient and much fairer way of doing things. The relevant member states could then decide how to allocate those extra funds to their own peoples, and be democratically accountable to them in doing so. We should repatriate agricultural policy and leave regional and structural funding to member states, not have it allocated through the EU.

Various estimates have been made of the cost of the EU to Britain. This Bill will cost us an extra £7 billion by 2013—

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

Certainly in terms of borrowing it is, but that was a debate for earlier today.

Other costs are associated with the CAP, such as higher food prices and market distortions. It is estimated by the OECD that that costs Britain £15 billion a year, so the CAP is not just a matter of subsidies to the budget, but a real further cost in higher food prices as well. The CAP should be abolished, not reformed. Reform can mean many things to many people, but it usually means not very much to anyone. The reality is that reform has been gradual—a bit here, a bit there—and sometimes it is two steps backwards rather than two steps forwards. The reform programme has not been a great success.

We should have used the lever when the budget was being negotiated. We should have refused to agree until serious progress was made towards the eventual abolition of the CAP. We could have argued for that on the basis that what was saved could be used directly to help the poorer nations of Europe that are struggling to advance the living standards of their peoples. That would be far preferable.

A number of estimates of the cost of EU membership have been made. There is a Swiss view—Switzerland is outside the EU—set out in a Europe 2006 report. It states that full EU membership would cost the country 1 per cent. of the Swiss national income. Well, 1 per cent. of national income in one year may not seem very much, but if it is compounded over many years or decades, it becomes a very large sum of money indeed. It has been estimated elsewhere that the cost of the European budgetary and economic arrangements to Britain is about 0.5 per cent. of our gross domestic product. Again, that may not sound much in one year, but if we compute it over 40 or 50 years, it becomes a very substantial sum. Many of us have argued that how the EU is constituted at the moment does not actually benefit the peoples of Europe economically, so we would do better to have different economic arrangements—not to break up the EU entirely, but to have different economic arrangements within it, with each member state deciding what is most appropriate for its own economy.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

The hon. Gentleman is making a thoughtful argument about the need to abolish the CAP. Does he have similar views about the common fisheries policy?

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

Indeed. The hon. Gentleman is right to mention that. There may not be a lot of fishing in Luton, North, but we eat fish. I have seen an estimate that if something is not done, all the fish will be fished out of the seas by about 2020, which would be a tragedy for the whole world, as we cannot replace fish stocks. We have to guard fish stocks and I believe that member states would be best at guarding their own fish stocks when they knew that their futures depended on them. When fishing is going on in other people's fishing waters, far less concern will be expressed than when it is a matter of protecting one's own waters. Giving each member state responsibility for its own fish stocks in its own fishing waters would be a sensible way of protecting fish stocks for everyone.

I am afraid that I cannot support this Bill tonight. It would be dishonest for me to go through the Aye Lobby on this particular Bill. However, I would like to support what the Foreign Secretary said the other day. He argued that we should not promote the development of Europe as a superstate, but that Europe should be an association of independent and democratic nations. I agree absolutely and I have made that point very strongly in the past. What we are seeing is a constant drift towards that superstate and at some point we have to start saying no. We could start to say no by abolishing the CAP and restoring some of the functions carried out by the EU to member states. We could then work together on a co-operative, fraternal and sororal association of states to everyone's benefit. That would not only benefit everyone's living standards in Europe, but would improve our relations with our neighbours as well. We would not have so many arguments with our French neighbours—I must say that I love France very much and go there every year for my holidays—if the CAP did not exist. I suggest that we should take a much tougher line next time. Sadly, I cannot support the Bill tonight.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West 7:09 pm, 19th November 2007

I realised, slightly to my surprise, that I had been missing EU debates over the past few months, so I could not resist the opportunity to participate in the first of what will probably be three opportunities to discuss EU-related business in the next few months. It has been a pleasure to listen to at least some of the contributions, perhaps most especially that of Kelvin Hopkins. I frequently come to the same conclusions as he does: for instance, his conclusions on repatriating agriculture and regional policy are eminently sensible. I usually come to those conclusions for opposite reasons; none the less I strongly commend the courage that he showed by making it clear that he will vote with his conscience this evening, rather than being cowed into going along with the party line.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I should have said that when we talk about such issues, it is a matter of not left or right, but democracy. We might agree on that.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

The hon. Gentleman makes his point well, as ever.

We are debating a small, defined Bill that will implement an agreement that was made in December 2005. The House last had an opportunity to debate the deal on 8 May 2006. It does little credit to the way in which we deal with EU business in the House and in this country that the Bill simply gives legal force to an arrangement that has been in effect since 1 January. Now, 11 months later, the House has the chance to debate a Bill that will implement the deal that was made by the former Prime Minister, Mr. Blair, nearly two years ago.

The Bill and the deal that it will implement are bad measures, but they are also bad because of what they say about the state of the EU and of Britain's ability to negotiate a better arrangement and a better deal within the EU. The Bill is bad not least because this is a time of tightening public finances, when the Treasury and the Government face more difficult decisions about funding and public services in this country. The situation could become considerably more difficult in the year ahead, and even worse in the year after that.

The Bill represents a change in our financing commitments to the EU that, according to the excellent Library note produced for the debate, will contribute to a net increase in the UK's contribution of £2.3 billion every year. That is a cause of considerable concern. The Chief Secretary seemed to try to justify it on the grounds that although it might cost us more, that was okay because it would also cost France more. I am not sure that that explanation would cut much ice with my constituents or with his.

The Chief Secretary went on to say that the rebate had not been cut, but rather that parts of it had been disapplied—as far as I can see, that amounts to the same thing. The rebate applies to fewer aspects of EU funding than it used to. Even though the absolute amount of the rebate may rise in line with our rising contribution—that point was made earlier—we will effectively see a cut in the scope of the rebate, which will contribute to an overall substantial increase in the net contribution from this country to an unreformed EU.

A number of Members have already well made the point that the Prime Minister at the time, Mr. Blair, went to Brussels with an absolute commitment that he would achieve radical reform of the CAP and that only in those circumstances would it be acceptable to negotiate away part of our rebate. Instead, he returned with nothing.

My good friend Mr. MacShane, a former Europe Minister, is no longer in the Chamber. One of the pleasures of participating in European business—although you are looking a little sceptical, Mr. Deputy Speaker, if I may say so—

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

Order. All the speeches I hear in this House are a pleasure.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

I shall try not to end that state of affairs.

It is a pleasure that we tend to attract the same cast list to participate in such debates and we occasionally see the spectres of former Ministers for Europe. Only one such former Minister has made a speech so far this evening, but, as a former shadow Minister for Europe, I might be falling into the same habit.

The right hon. Member for Rotherham seemed to suggest that CAP reform would require endless negotiations. He talked about networks and even suggested that the Government should create a new fund to pay the Conservative party to lobby in Europe in favour of CAP reform. I do not support state funding of political parties, so I would find that rather difficult to justify, but I can see that his logic is such that after the woeful inability of the Labour Government to negotiate CAP reform, he is even prepared to accept the job being subcontracted to the Opposition instead.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

The right hon. Member for Rotherham talked a great deal, but he missed out one key possibility that was available to Mr. Blair two years ago: to use the strongest card that we had, which was won by Lady Thatcher in 1984—the British rebate. As my hon. Friend Mr. Hammond said in his opening speech, we always made it clear that we would support sensible measures to negotiate the reduction and CAP reform balanced against a reform of the British rebate. Instead, we got a hopelessly one-sided deal.

So, what is the upside to the deal that was secured and the arrangements that we are considering? Mr. Blair certainly failed to secure the prize of his key objective of CAP reform. Not only did he give up billions of pounds of British taxpayers' money but, more shamefully, he gave up a key bargaining point. He was wholly culpable for the fact that we conceded that crucial part of the British rebate while getting nothing in return. We should not readily forgive or forget that.

It should not be a surprise to right hon. and hon. Members of any party that the deal is so unpopular, but that could easily have been missed. The Chief Secretary is an affable, likeable man. It would have been easy to draw the conclusion from the tone and demeanour of his lengthy opening speech—I accept he was generous in giving way—that the Government were presenting a great triumph. One might expect Her Majesty's Opposition to be most dismayed by the sacrifice of such an important part of the British budget rebate and cross about the Government's failure in Brussels in 2005, but I was delighted that Julia Goldsworthy confirmed that her party would vote against the Bill. The Liberal Democrats are the most Europhile and federalist party in the House of Commons

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

And the smallest— [ Interruption. ] They are not quite the smallest; we should give credit to one or two others who are in the Chamber.

When we debated the matter in May 2006, Dr. Cable, who led for the Liberal Democrats, made his position clear. He said that the deal was bad and that it had come about because the Government had failed to secure their negotiating objectives. I am therefore delighted that the hon. Member for Falmouth and Camborne maintains that position, under the leadership of the hon. Member for Twickenham. Given that he has given such a strong lead on the matter, perhaps the Liberal Democrats should consider keeping him.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

Does the hon. Gentleman agree that, for a United Kingdom that faces a £39.6 billion deficit in the next six years in the public sector borrowing requirement, to give up the rebate—or at least part of it—is puzzling?

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

It is puzzling at the very least—incomprehensible is how most of our constituents would view it.

The deal that Mr. Blair made is therefore unpopular with Conservatives, Liberal Democrats, and, it has just been confirmed, Scottish nationalists.

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

Indeed—and a few good men and true on the Labour Benches.

As my hon. Friend the Member for Runnymede and Weybridge reminded us, not only Opposition parties were unhappy with the deal. The then Chancellor of the Exchequer, now Prime Minister, was reported to be quietly fuming. There was considerable press comment, clearly stimulated by Treasury briefings. Several newspapers reported that "Mr. Brown was unhappy" that the deal would cost the UK an extra £1 billion a year and that he had not taken part in final negotiations. Attempts were clearly made to distance the then Chancellor from the deal that Mr. Blair had made. Unattributed briefings on 18 December 2005 stated that Mr. Blair had "freelanced" to strike a deal on Friday night and early Saturday morning, without speaking directly to his Chancellor. It was also reported that the disclosures threatened to open up a fresh and damaging rift between the two men and that, under the deal that followed 17 hours of intensive talks, Mr. Blair promised to surrender a further £1.7 billion of the rebate first secured by Margaret Thatcher in 1984. My maths is not that good, but I believe that that is £100 million given up for every hour of the negotiations.

The then Prime Minister, who had set himself such a clear target and easily identified goal, suffered a remarkable defeat in the negotiations. There was further criticism that the way in which the deal was structured would lead to costs being "back-loaded". It was suggested that a time bomb had been left for the new Prime Minister who would take office in the next year or two. It was reported that the costs would gradually rise from zero in 2008-09 to £1.9 billion a year by 2013.

This Second Reading debate and the Bill, however short, are allegories of everything that brings the House's dealings with EU business into disrepute. We are being asked to approve another £2.3 billion a year after, not before, the event. We all know that the deal was bad. Conservatives, Liberal Democrats and even the Prime Minister, when he was Chancellor, opposed it. As the right hon. Member for Rotherham told The Daily Telegraph shortly before the deal was made:

"Even out and out pro-Europeans like me could not accept a one-sided deal that only removes the rebate. That would be very difficult to get through."

Photo of Graham Brady Graham Brady Conservative, Altrincham and Sale West

The right hon. Gentleman is not here at the moment, but we will watch carefully to ascertain whether he makes it difficult to get the deal through by joining us in voting against the Bill. The Government are indeed trying to force through a one-sided deal under which they have given up the rebate and achieved nothing in return.

Today, the Chief Secretary assured us that the Government believe that the deal is good, and suggested that it has the Prime Minister's support. That is why they will try to force it through. The debate is welcome because it is an opportunity for all hon. Members to nail their colours to the mast. On the one side are our constituents' interests, and our need to defend their hard-earned money and to stand up for the important case for reforming the CAP to reduce food prices in the UK and remedy the damage that it does in the developing world. On the other side is the Labour Government's need to maintain face. Even though the previous Prime Minister was responsible for the failed negotiations, we are being asked to believe that the current Prime Minister now supports something to which he clearly objected violently at the time.

Today is the first of several opportunities to debate EU matters in the coming months—in some ways, it is the most fundamental opportunity. Only if the UK is prepared to use its negotiating hand, stand firm and, even at the risk of unpopularity from time to time, stand up for the national interest will we achieve the right deal for Britain and the right reforms in the EU. The Government, in presenting the deal and introducing the Bill, not only surrender £2.3 billion of British taxpayers' money but give up our strongest hand in EU budget negotiations in future.

Photo of Quentin Davies Quentin Davies Labour, Grantham and Stamford 7:26 pm, 19th November 2007

I rarely agreed with Mr. Brady when I sat on the same Benches as he. Judging by his speech, it is no more likely that I shall agree with him in future, on the subject of our debate. However, he is an honest and able man. He is always courteous in debate and in private discussion. It is therefore a pleasure to follow him in the debate. Doubtless we shall both take part in other debates on the subject in future—in the near future if we are so lucky as to catch your eye, Mr. Deputy Speaker.

Let me say at the outset that I believe that the settlement is superb and I am unambiguously delighted that we have secured it. I shall vote for the Bill with enthusiasm. Indeed, it would be unedifying—to use a stronger word, obscene—if we enforced against much poorer countries in eastern Europe the rebate that we secured in the 1980s under Margaret Thatcher against countries that were much richer than us at the time, such as France, Germany, the Benelux countries and the Nordic members of the Union. It would be taking money from someone who was much poorer.

Daniel Kawczynski sincerely regards himself as a great advocate for Poland—a country for which, although I do not have his family connections, I have always had the greatest admiration, for a host of reasons, and I am delighted to have so many young Poles in my constituency doing such a good job and being such good citizens. I find it extraordinary that the hon. Gentleman, given that he honourably and naturally takes that position, should say that we should enforce against Poland the mechanism that we secured to defend our interests when we were much poorer than the average member of the Community, as it was then called. I hope that he will reconsider the matter, although I do not know whether he will do that in time to change his vote tonight.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

The hon. Gentleman knows that this is only the start. Further waves of relatively poor countries will enter the EU. Is he claiming that he is prepared for Britain to have even less money in future, when those other waves of poor countries join the EU from the Balkans and beyond? The Foreign Secretary made a speech this week in which he said that he looked forward to an EU of which countries from north Africa and the middle east were also members.

Photo of Quentin Davies Quentin Davies Labour, Grantham and Stamford

I did not listen to that speech, but I do not think for a moment that the Foreign Secretary suggested that north African countries should join the European Union. He was taking about a free trade agreement, which is a different matter, and something that we already have with a number of countries outside the European Union. The hon. Gentleman has got that speech wrong; perhaps he would like to look at the record again and get it right.

As for further enlargement, the only country for which that is more or less established is Croatia, a small country that will create minimal and insignificant strains on the budget. Beyond that, Serbia and Moldova are possibilities. There is great scepticism about going much further than that. That is a different point, however, and you will correct me, Mr. Deputy Speaker, if I get dragged down into discussion of the natural limits of enlargement.

When I left the Conservative party, I said that it had become irretrievably cynical and opportunistic, and this evening's debate has shown how true that judgment was. There are only two possibilities: either the Conservative party is engaged in deliberate obfuscation or it is extremely confused. Its policies on the European Union generally, and enlargement specifically, completely lack coherence. It says that it is in favour of enlargement, but it is not prepared to pay for it.

M

Quentin Davies should bone up on the accession situation for countries in South Eastern Europe. Macedonia is already a Candidate country which puts it significantly ahead of both Serbia and Moldova in the pecking order. Meanwhile, Bosnia-Hercegovina, Albania and Montenegro are roughly at the same stage as Serbia (pre-candidate status known as the Stabilisation and Association Agreement). At the Salonika summit of June 2003, the EU gave a firm commitment that ALL South East European countries would become members of the EU at some point in the future.

Submitted by Misha Glenny

Photo of John Redwood John Redwood Conservative, Wokingham

At the next election the hon. Gentleman might wish to fight a seat representing people in a much poorer part of the country than he currently represents—for example, a seat in the inner cities. How much extra tax should such people have to contribute to pay to Poland?

Photo of Quentin Davies Quentin Davies Labour, Grantham and Stamford

The hon. Gentleman knows something about economics, and about something called a dynamic model, in which the indirect and subsequent consequences of any action must be taken into account. I believe that the settlement will result in enhanced revenues for the European Union as a whole: we will all have more money to play with.

That point has already been made this evening, using the example of Ireland. It is wonderful for us that Ireland has become so prosperous. I do not say for a moment that Ireland has become prosperous only because it has been in receipt of cohesion and structural funds. The Irish are extraordinarily enterprising people, and once released from the autarky pursued by their Governments in the initial generations after independence, some take-off was likely. Since the Whitaker report in the 1960s, they have invested in education in a big way. As Members on both sides of the debate have said, they have pursued sensible and attractive tax policies. It must be a matter of delight to us that not just Ireland but Portugal and Spain have been completely transformed since they joined the European Union, because it contributes to our prosperity.

Photo of Quentin Davies Quentin Davies Labour, Grantham and Stamford

I shall give way to Mr. MacNeil who is going to ask me, of course, whether Scotland would do better in the European Union if it were independent.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

If the hon. Gentleman chooses to answer his own question, he is more than welcome to do so. I was going to ask him to what he attributes Iceland's success. He has said X, Y and Z about the European Union and Ireland, but Iceland has come from exactly the same baseline and has done just as well, if not better in some sectors.

Photo of Quentin Davies Quentin Davies Labour, Grantham and Stamford

Having been shadow Secretary of State for Northern Ireland for three years, I know a little about Ireland, but I must make the terrible confession that I have never made a study of Iceland. I hope that the hon. Gentleman will forgive me if I do not embark on an analysis of Iceland's economic experience now.

The second big problem is that the Conservative party has shown this evening that it does not want to face up to the facts. I put to Mr. Hammond the two most striking facts—I described them as salient—about the package. One was that for the first time the share of agriculture in total spending is now on a downward path. That is enormously important, as it means that the issue of agricultural spending is being resolved over time. As anyone who can do elementary logic will know, the curve could be steeper or less steep, but we are going in a direction in which the common agricultural policy problem will inexorably be resolved. The hon. Gentleman did not want to recognise that.

The second fact that I put to the hon. Gentleman was that, under the settlement, France and Italy will increase their contributions at twice the rate of those of this country. That is also unprecedented, and an extraordinary achievement. Signor Prodi and Monsieur Sarkozy will have a much more difficult time defending this settlement in their national assemblies than the Government will have here. I have some sympathy for them, and I am glad that we have reached this sensible compromise, for all the reasons that I have mentioned. The hon. Gentleman did not even recognise those facts. I intervened twice, and his response was to run away from them and evade the points that I made.

I must tell Mr. Gauke and the hon. Member for Runnymede and Weybridge, who is not in his place at present, that if they are serious about wanting to come into power, being in denial about the facts is a very bad basis for statesmanship and a disastrous basis for government— [Interruption.] I did not hear that point; if Mr. Walker wants to make an intervention, I shall certainly take it. Members have been generous in taking interventions this evening, and I am happy to live up to that convention.

The third problem, which goes back to good faith, or perhaps just to a lack of information or understanding on the part of Eurosceptics, both in the Tory party and in many parts of the press, is the rubbish and systematic, libellous and defamatory nonsense talked the whole time about the Court of Auditors and corruption and waste in the European Union. It is perfectly true that the Court of Auditors has regularly put reserves on the accounts that it has signed. [Interruption.] I will give way again to the hon. Member for Na h-Eileanan an Iar, but I hope that I can proceed after his intervention.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

Before we move on to the subject of corruption, we should acknowledge the deep, inbuilt, structural problems in the common agricultural policy. Crofters in the highlands of Scotland get less favoured area support of tens to twenties of pounds per hectare, whereas farmers in Luxembourg, other parts of Scotland, England and the European continent get support of up to thousands of pounds per hectare.

Photo of Quentin Davies Quentin Davies Labour, Grantham and Stamford

The hon. Gentleman will forgive me if I do not burn the midnight oil to discover the rates of payment to crofters in the Highlands and Islands. His figures might be right or wrong; I am afraid that I cannot comment on that.

A regular feature of Eurosceptic rhetoric both from Conservative Members and from the press has been to say that the European Union is a sink of corruption, that the Court of Auditors has never approved the accounts, and to ask how we can go on being part of such an organisation. Of course it is true that every human organisation is exposed to fraud, corruption, mismanagement or waste; there is no such thing as perfection in these matters. If I look back to the Conservative Government, there were egregious cases of waste and, indeed, corruption in the national health service in Wales at one point. We have also had corruption in local government. One can never clear that up completely. This country has a very good record, and northern Europe as a whole has a very good record and good traditions in this matter, particularly Germany, Scandinavia and the Netherlands. Therefore, by world standards, such cases are few and far between, but they exist in all institutions.

I suspect that the hon. Member for Altrincham and Sale, West knows this, but I do not know whether the other Conservative Eurosceptic Members do, or whether they are genuinely bemused by their own rhetoric or that of the Tory press. The fact of the matter, however, is that the Court of Auditors has not for many years put a reserve on the Commission's accounts. It has criticised not the Commission or the institutions of the Union, but the member states, which in many cases distribute the money.

The logic behind the criticisms made of waste or corruption in the European Union is that we should have a federalist policy, and that member states should stop distributing structural funds and agricultural support of various kinds. The Commission should do it directly, and there is every chance, given its record, that it would do it very well. I have a little experience of the Commission, and it is a superb bureaucracy. There are few bureaucracies around the world that are so professional, good, clean, well motivated, efficient and so small in relation to the money that they are disbursing—even if it has 20,000 people, that is a small number in comparison with bureaucracies around the world and the money that they disburse. Getting 300 directives through and creating the single market in a few years was a formidable achievement. I am not advocating a federalist policy, but that is the logic of what Conservative Members are saying—they will not like it, but I ask them to examine honestly the logic of their criticism.

The problem lies in the member states, not in the Commission. If the Conservative party thinks that a radical solution is required, it ought to be a federal solution, extending the competence of the Commission and reducing the role of the member states. That would be a logical solution, but is it the solution that the Conservative party is suggesting? No, because the Conservative party will not recognise reality. The Conservative party will not draw the logical conclusions from its own position. The Conservative party will simply go on talking contradictory nonsense—for that it is what it is: it is contradictory and it is nonsense, and it is about time that it was exposed as such. But that is extremely difficult in this country, because the Eurosceptic press will never reproduce the points that I am making. [Interruption.] Of course it will not: we know that. So the public are genuinely bemused about the issue, which is extremely worrying. Here is a consistent and systematic libel—it is no less a libel for being consistent and systematic, and for being pursued for many years—which has infected public opinion about the European Union.

Photo of Quentin Davies Quentin Davies Labour, Grantham and Stamford

Will the hon. Gentleman give me a moment?

I do not think the Eurosceptics should be proud of that achievement. I do not think they should be proud of having deceived the public. I think they should be ashamed of using such methods, and I hope that the more honest among them will now examine the facts. I hope that they will look at the report from the European Court of Auditors, which they will find in the Library. If they do, they will see that I am right. The reserves, I repeat, relate to the member states' role in the disbursement of Union funds, not to the Commission and the other institutions of the Union itself. That is very important.

It is clear to me that the Conservative party is engaged in pure political opportunism. The Conservatives do not wish to draw the logical conclusions of their own policies, and they do not wish the public to draw those conclusions. They want to be all things to all men. They want to go in for doublespeak. They want to go around the Conservative clubs and talk to the chauvinists there. We all know that such people exist in Conservative clubs throughout the country, and I have met a great many of them over the past 20 years. The Conservatives want to go around those clubs and say, "Get these nasty foreigners out. We aren't going to let our country be taken over by France and Germany," and so on. They want to come out with all that rhetoric, which will be popular in their constituencies and with the Tory party, but they know that it will not play with those on the middle ground of politics, so they will say to those people, "Oh no, we really believe in our membership of the European Union; we're totally signed up to it."

I can give two reasons—indeed, I could give more—why it is clear that the Conservatives are not genuinely signed up. One is their policy on the European People's party, which was a gratuitous unprovoked insult to those who had been their best friends for generations. [Interruption.] That is what it was, and how can they possibly expect it to be forgotten? We are talking about having a relationship with someone, signing an agreement agreeing to sit with someone—in this case, in the European Parliament—for five years, and then saying "We're going to tear up this agreement because we don't like it. We're going to spit in your face." Do the Tories really think that if they ever came to power, that would be forgotten? Do they really think that a bank of good will would be waiting for them if, by some awful mischance, they ever found themselves in Downing street? They would be far less well placed to negotiate anything on behalf of this country; that is absolutely clear.

What will happen if the House turns down the Bill tonight? Let us again draw the logical conclusions from the Conservatives' position, for they do not want to do it themselves. There will be an unnecessary and gratuitous crisis in our relations with the European Union. People will say, "The British Government signed up to this, and then backed out of it." The east Europeans will say, "My goodness me! We thought that the British were our friends, we thought that they supported us in enlargement, and now the Tory party has got itself a majority in Parliament"—if that were ever to happen, which I trust it will not—"and turned the deal down." It would take a long, long time to restore our reputation for good faith after that.

I put it to you, Mr. Deputy Speaker, that there are only two possible explanations. Either the Tory party has not realised the logic of its position, or it has, and it wants a crisis in our relations with the EU. That is why the Tories talk nonsense about pulling out of the common fisheries policy or the social chapter. It is really shorthand for creating a crisis and putting us in an impossible position—a position in which we could not pursue the principles that they have set out, and will I suppose set out in their manifesto, and still maintain our full membership of the European Union. That is a very serious matter for the House, and I am glad that the Tories have so blatantly revealed what is clearly their agenda.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham 7:44 pm, 19th November 2007

Thank you for calling me to speak in this important debate, Mr. Deputy Speaker.

If the Bill is passed tonight, it will set a dangerous precedent. It will mean that every time a new wave of relatively poor countries joins the European Union, we in the United Kingdom will somehow have to give up more of our taxpayers' money to support those new member states. As I told Mr. Davies, the Foreign Secretary has stated publicly that he wants to expand the European Union to include countries in north Africa and beyond. The hon. Gentleman disputes that. Only time will tell, but what is genuinely agreed on all sides is that Turkey will inevitably wish to join the European Union and become a full and active member.

I met the Serbian Foreign Minister today. He spoke of his concern about the possibility of Kosovo's becoming independent. If that happens, Kosovo will want to join the European Union as well. Many other poor countries either wish to join the EU or are in the process of actively submitting application forms. Ukraine, Georgia, Bosnia, Macedonia—all those countries are very poor, and will require massive financial assistance. At a time when budgets are being tightened here in our own country, with an ageing population and a massive borrowing requirement, the Government want us to go on bailing those countries out. I understand that we, as a nation, are already £700 billion in debt.

Photo of Andy Burnham Andy Burnham The Chief Secretary to the Treasury

Given the thrust of the hon. Gentleman's remarks, does he agree with the comments of his party leader in a speech to the conference of the Movement for European Reform on 6 March this year? He said:

"The prospect of eventual Turkish membership is hugely important—not just for Turkey itself, but to demonstrate to the Muslim world that the EU is not an exclusive Christian club."

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

No, I do not wish Turkey to be a member of the European Union. As I said, we are currently £700 billion in debt as a nation, and this year alone we borrowed £34 billion. My constituents will find it extremely difficult to comprehend how the Government could forgo such a huge rebate when we are borrowing so much money and our own public services are at breaking point.

The Chief Secretary says that this is all about helping eastern European countries, and that we in the Conservative party are against eastern Europeans because we oppose the Bill. I feel very angry and upset about his comments. Never, in two and a half years, have I sat in the Chamber and been so incensed and appalled as I am by rhetoric of that kind. The Chief Secretary claims that we are against Poles because we are not prepared to give them huge financial subsidies. I feel very insulted by him. This is the arrogance of power. This is what the Labour Government are all about: they cannot justify giving up the rebate, so they want to insult us by saying that we are against eastern Europeans. What I object to is our country, the United Kingdom, footing almost the entire bill for the assistance of eastern European countries.

Of course all of us in the Chamber want to help those countries, which underwent a terrible experience during the days of communism and the iron curtain. However, we have helped them a great deal in the past. It was Britain, and Margaret Thatcher, who insisted that they enter NATO and become members of the European Union. We wrote off all the debts that they had incurred during the days of communism. We have always stood by the Poles, far more than many other European Union countries, and what the Minister said was very misleading.

K

I agree 100% with what Mr Daniel Kawcsynski
has said in this debate.
It is a great shame that only 4 MPs from Labour had the strenth of character to oppose this bill

Submitted by KEN TYRRELL

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

Order. I am happier if the word "misleading" is used as little as possible in debates, and, if it is used, is preceded by the clarification that no deliberate intent was implied.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

Yes, of course I retract that and apologise, Mr. Deputy Speaker.

We are also one of the few countries that have allowed Poles and other eastern Europeans to come in and work, and they have made a tremendous contribution. The way to help the Poles, however, is to facilitate trade between our two countries; we should do everything possible to help British companies trade with Poland and other eastern European countries. Vast state subsidies and giving up our own rebate are not the answer.

Photo of Kitty Ussher Kitty Ussher Economic Secretary, HM Treasury

The hon. Gentleman talks about helping the Poles. Does he think it would be helpful to them if we—the UK—got a windfall from enlargement and their joining the EU?

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

Nobody is talking about us getting a windfall from them. Conservative Members are scrutinising the Government on how they managed to give up such a large slice of our UK rebate, which is a totally different matter.

The Minister will not be surprised to hear that I have been to eastern Europe on many occasions. During visits to farms in Romania, for instance, we find that they are taking a great deal of our British taxpayers' money, but simply not complying with the rules and regulations that our farmers have to comply with.

We should have stood up for the British national interest during these negotiations. As hon. Friends have said, we should have used the veto in these discussions on the rebate. We are too important and big a country not to be able to stand up and use our veto. That would have been possible, and it should have been used.

We have tremendous support across Europe, not necessarily over the rebate but certainly over the future of the EU. Many eastern European countries are very troubled about Brussels railroading them on some of their concerns and the Franco-German control of agenda setting in the EU. They want to challenge that stranglehold, and they look to the UK for leadership. I feel passionately about that and will try to help my party find the right-of-centre partners in eastern Europe that the Minister spoke about. [Interruption.] He laughs from a sedentary position, but there are in fact many young right-of-centre politicians across Europe, such as myself, who feel passionately about having a European Union of sovereign states that trade and want to work together in co-operation, but also to guard their own sovereignty. There are a lot of them; I can assure the Minister that I myself have spoken to many young right-of-centre politicians from across eastern Europe who will work together to ensure that that happens.

In 1984 Margaret Thatcher showed that it was possible for the UK to fight for a rebate, and I wish to take this opportunity to acknowledge the tremendous courage she displayed all those years ago in standing up for our country's interests. It is clear that the current Prime Minister played a large role in the debacle over handing back our EU rebate. He was in constant contact with the former Prime Minister—Blair. He has built a reputation of having been an iron Chancellor, but he displayed a great deal of weakness over the EU rebate.

I wish to put it on the record that I am very disappointed about the lack of help from Poland and other eastern European states in the negotiations over the UK rebate. I have openly stated to many politicians from Poland and other eastern European countries how disappointed I am that they did not come to our aid over these critical negotiations. Britain has done more for Poland than any other European country has, and it is very disappointing that on this one occasion when Britain needed help and support from her allies in eastern Europe, Poland and others did not do anything to support us. Britain was, after all, at the forefront of getting them into the EU.

Little has been said about the accounts, which have not been signed off. The hon. Member for Grantham and Stamford suggested that Opposition Members were trying to whip up hysteria about them. While trying not to be rabid on the issue, I must say to him that it is concerning if the media report repeatedly, year after year, that there have been complications and difficulties with the auditing of accounts. All of us want to ensure that those accounts are watertight and can be presented to constituents as representing value for money.

Photo of Quentin Davies Quentin Davies Labour, Grantham and Stamford

Will the hon. Gentleman confront for a moment a point that I put, which is the truth: the criticism is not to do with the Commission, as the problems are in the member states? If he understands that, he will see that this issue cannot be used as an argument against the EU itself. It is not the EU or its institutions that are in any way corrupt or wasteful—or if they are, it is only to a very minor degree—and the auditors have not made such a suggestion for years. The problems exist in member states, and especially some in southern Europe. The problems could be resolved by having a more federalist concentration of power in the EU. Does he want that?

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

No, I do not want that, but I want the accounts to be properly vetted so that there is more transparency.

Eastern European countries are struggling to spend the existing vast sums of money that they have been given. During my various trips to Warsaw, people have confided in me that there are difficulties with some of the time scales that the EU has given the Poles to spend the money on infrastructure, as they are unrealistic. It is expecting the Poles to spend billions of pounds on building vast motorway networks across the country when that will simply not be feasible within the time frames given, due to environmental considerations and all the other complications that, as the Minister will be aware, major infrastructure projects inevitably bring about.

The Minister did not mention at all in his speech where the money was going, and I was slightly disappointed about that. If he is so confident that this British taxpayers' money will be of great benefit, it is a disappointment that he did not have one or two examples to share with the House as to what it could be spent on. I would have liked to hear an assurance from the Minister that some of the money would be spent on helping these countries reduce their carbon dioxide emissions. Owing to its communist past, Poland has hugely inefficient steel plants, such as Nowa Huta in Krakow, that belt out hundreds of thousands of tonnes of emissions. It would be at least nice for some of the money to be spent on helping countries to reduce their CO2 emissions, so I look forward to hearing in the winding-up speech how some of the money will be spent.

The Minister spoke a lot about eastern Europe, but he did not mention British overseas territories. Having spoken to representatives of the Cayman islands, the Turks and Caicos islands and many other British overseas territories, I know that they get a raw deal from the EU. They are currently experiencing terrible problems in getting their hands on money to which they are entitled under European Union terms. Will the Minister assure me that the rebate that he has given away does not affect British overseas territories, and will he give me a commitment that he will help the Governments of the Cayman islands and the Turks and Caicos islands get what they are entitled to? They are fighting to get their fair share and they are coming across a great deal of red tape and bureaucracy.

Julia Goldsworthy mentioned her concerns about parts of rural England not receiving their fair share of money. I represent a rural part of the UK—Shropshire—that has massive underinvestment in basic public services.

If I may, I shall explain why I am so vehemently opposed to this outflow of money to eastern Europe. The reason is the problems that we face in the United Kingdom on public services. I visited Coleham primary school in Shrewsbury in my constituency. Its headmistress has worked out that she receives £711 less per pupil than the average per child funding—I am not talking about the best schools—and that equates to a £300,000 shortfall for one primary school in my constituency. I asked how that affects her. She said, "Clearly we cannot buy certain books or put the heating on when we would like, and we have various problems." How can we be experiencing such problems in the fourth wealthiest country in the world, yet at the same time be giving so much to eastern Europe?

The Royal Shrewsbury hospital is millions of pounds in debt. I have told the relevant Minister that we have a huge funding shortfall. Our local education authority is ranked 145th out of 149 LEAs for funding. Later this evening, I shall present a 16,000-signature petition that aims to prevent the closure of Shrewsbury ambulance control centre. Can one imagine such a thing? At the same time, the socialists are giving my taxpayers' money to the eastern Europeans—it is unbelievable.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

With the greatest respect to the hon. Gentleman, rather than arguing against giving money to the eastern Europeans, could he not argue against nuclear weapons and make sure that money was not being wasted on weapons of mass destruction and instead was helping his constituents?

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

No. The hon. Member for Grantham and Stamford said that he did not want to give an analysis on Iceland, and I will not start giving an analysis on nuclear weapons.

I believe that much of this is about how effective the negotiators were in dealing with the rebate. Today, if one speaks to Icelandic politicians—we are returning to the theme of Iceland—one finds that they still talk in derogatory terms about how Roy Hattersley negotiated the fishing stocks between Britain and Iceland back in 1978. They still laugh at that. In political circles in Reykjavik it is still talked about, and people there say that the poor negotiation and his poor performance as a negotiator cost the United Kingdom millions of pounds. The deal before us will be talked about in 20, 30 and 40 years' time as an appallingly bad negotiated settlement that has cost our taxpayers and our children billions of pounds.

Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby 8:03 pm, 19th November 2007

I do not want to follow on from what Daniel Kawczynski said, but I must put him right on Iceland. What he mentioned was not done by Roy Hattersley and it did not happen in 1978, because he was not in the Foreign Office at that time. The settlement was in 1976 and the proposals that Roy Hattersley turned down were made in 1974. The hon. Gentleman would have done better to stay off Iceland altogether. Apart from that, he made a good speech.

This is a nice opportunity to take part in one of the three-monthly contests between Eurosceptics and Euro-enthusiasts on which we spend so much time in this House. It is nice to welcome two new Ministers in the field as umpires or referees in the contest—my congratulations to both of them. I shall not put forward a view that accords with their policy or with official policy, because I shall not vote for this measure, and I would not want to give the impression that speeches by Labour Members will be, with one exception, that of my hon. Friend Kelvin Hopkins, panegyrics on Europe.

I am sorry that my hon. Friend Mr. Davies—my new Friend—has left the Chamber, but it was good to see him get all that accumulated bile about the Conservative party off his chest. I am sure that it did him a lot of good. It was interesting to see, but I do not think that those views will do him as much good under our new leadership as they would have done under the previous leadership until July—the bid is a bit late.

The basic problem that we face with this Bill is that it adds to the costs of belonging to the European Union, which are already unacceptably high for this country. After Germany, which is much more generous and committed towards Europe, we have long been the second highest contributor. That situation has been compounded by the concessions made on the rebate by our previous Prime Minister, whose name slips my mind temporarily, earlier in the year without much consultation with Labour Members.

The rebate was negotiated wisely by Mrs. Thatcher, because it addressed some of the problems that the structures and financing of the European Union placed on this country unfairly and unequally. However, it was wrong to give up any part of that rebate, and in particular to do so without concessions in the negotiations in return. One should not just make generous impulsive offers and throw all one's cards on the table

Europe is a matter of continuous negotiation, albeit a rather annoying and embittering one. In the negotiation, one must play one's cards and games in return for sacrifices. My concern is that there were no reciprocal gains and we got nothing in the negotiations, either on the treaty, which was also in play and being negotiated at the same time, or on the budget situation that has been so damaging to this country. Before those concessions, our contributions, which will increase under this Bill, were between £7 billion and £8 billion gross over the past few years.

Photo of David Taylor David Taylor Labour, North West Leicestershire

The previous Prime Minister, when negotiating rebate reform, stated that European partners had arrived at a quid pro quo in respect of CAP reform. Just weeks later, the then President Chirac said to French farmers that the CAP was safe and unchangeable until 2020. Does my hon. Friend think that that quid pro quo is likely to be delivered any time soon?

Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby

The so-called concession on the CAP was not worth the paper that it was not written on. Our experience of the CAP indicates the difficulty. The new settlement will be in 2013, but I do not imagine that we shall get any substantial concessions from the French. Indeed, this reminds me very much of the Berlin negotiations on Agenda 2000, when some concessions had been made on the CAP but then in marched President Chirac who cancelled the whole lot and took them back. This issue has been impossible to address. Every party in this country has promised at every election a fundamental reform of the CAP, but we have not got one.

My hon. Friend the Member for Grantham and Stamford said that the negotiations have set the CAP expenditure on a remorseless downward path, but that is nonsense. It has been reducing as a proportion, but it has been increasing as a total, and it still represents well over half the annual EU budget going to 5 per cent. of the EU electorate. That goes to show what the EU's preoccupations are, so he was wrong to say that there has been a concession.

Photo of David Taylor David Taylor Labour, North West Leicestershire

I am not even sure that the trend is downwards. The overall proportion of allocated expenditure that the CAP took in 2006 was 46.7 per cent and in 2005 it was 46.2 per cent. It is floating up slightly, not floating down as my hon. Friend—perhaps inadvertently—suggested.

Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby

My hon. Friend is a fount of wisdom and sagacity, and I am always delighted to be corrected on any issue that is damaging to the European Union. So the trend is up for the proportion now, although it had been heading down for some time. Anyway, the CAP is very boring and I want to move on—

Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury)

The hon. Gentleman mentions the CAP. There is no question but that it needs reform and we all have our own issues with it, but at 0.4 per cent.—less than half a per cent.—it has provided secure food supplies for decades in Europe. It has also, to some extent, been a social tool to protect the most fragile economies in some of the most remote and rural areas. We all want to see changes in the subsidies for big agro-business, but what other changes would the hon. Gentleman make that might weaken or damage the good things that the CAP has delivered for many decades for a small proportion of Europe's income?

Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby

I do not want to make changes: I just want to scrap it. That would be the sensible thing to do, because then we could support our own agriculture in our own way. That is enough for now on the CAP, but the key point is that it is a massive budgetary contribution to a small section of the European economy.

Before the changes proposed in this Bill, our gross contribution to Europe over the past few years was between £7 billion and £8 billion a year, and our net receipt—the money that the EU graciously gives us back—was between £3 billion and £4 billion a year. That is our money with their costs deducted to spend on purposes that they see fit. It annoys me, as it does my hon. Friend the Member for Luton, North, to see on every dogs' home or retirement home for eurocrats the sign with the stars saying that it was built with European money. It was not built with European money, because it is our money that we have been given back, with their costs deducted. We could spend all that money for our own purposes much more effectively—and certainly not on the CAP.

J

Well Said Austin!

Submitted by Josephine White

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

In some ways, I agree with the hon. Gentleman. Indeed, if one looks further north—latitude may have something to do with it—Norway and Iceland spend more money per capita supporting their own agriculture to ensure a secure food supply than do EU members. A secure food supply is not dependent on the existence of the CAP.

Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby

Yes, and I am grateful to the hon. Gentleman for making that point.

The Bill will increase our gross contribution to £10 billion—which will rise to some £20 billion after 2013—and the net receipt to £6 billion. I ask those hon. Members who say what a benefit the system is to the rest of Europe to envisage how many roads, schools, hospitals and health centres could be built here, at our discretion and for our purposes, if we were not making that annual contribution. We are told to rejoice that Italy and France are now beginning to pay something after all the years of paying nothing, but the proportionate increase in their contribution is less than in ours, and we have been making the second highest contribution.

Our Government's contribution is about 0.5 per cent. of our GDP, and that is important, because that is the growth from which the people of this country benefit, but it is not our only contribution to Europe. We also make contributions to European institutions of £1.8 billion in total, including for instance the blessings of the Galileo project, which is to send 20 flying pigs into space to bounce back a location system that we get free from the Americans at the moment, so that our motorists and defence forces can pay for it. I come back to the CAP—I am sure that Stewart Hosie will rejoice. The net cost of the CAP to us, by the OECD's estimate, is £15 billion a year. That is partly in distortions to the market, but it is also the cost of not buying the cheaper food that is available on world markets, and being forced to buy the overpriced production from Europe. What could we do with that £15 billion?

Then there is the cost of the European regulations that are showered on us, some necessary and some not. Estimates vary and some are higher than others, but let us say £25 billion a year. Add that lot up and we are contributing between £45 billion and £60 billion a year to belong to that institution. It is some 2 per cent. of GDP, so in other words our growth would have been 2 per cent. faster each year had we not been making those contributions. That growth is cumulative, so at the end of 10 years our economy would have been that much more powerful—and that much better able to contribute to the needs of developing countries.

Cumulative growth has been lost, and that is a burden that has been assumed without asking the British people, and it is also a loss across the exchanges. We are in a substantial and growing balance of payments deficit, and we are adding to that by the flow across the exchanges. We have already suffered damage to manufacturing in this country. When we joined, we had a surplus in manufacturing trade with Europe. Now we have a steadily growing annual deficit. We have paid for that in previous years through a surplus with the rest of the world, but that has now gone, too. There is a massive drain on the balance of payments, which will only get worse if we carry on this course.

Where has all that money gone? Where does the £45 billion to £60 billion go? My right hon. Friend Mr. MacShane, who is working hard for his European knighthood or whatever will come at the end of his long travails, said that it was going to help the Poles. Well, that is a wonderful purpose, and I am glad to help the Poles. I do not mind them: in fact, I quite like them coming here to help us, because our contribution does not keep them there. But what right has my right hon. Friend, or any other of my right hon. and hon. Friends, to be so generous with our money for those purposes?

Where has the money gone? It cannot all have gone to pay Mrs. Cresson's dentist the massive sums that he was receiving for advising in her office. It cannot all have gone on corruption, which adds 10 per cent. to so many budgets—all of them unqualified. My new hon. Friend the Member for Grantham and Stamford was quite wrong to say that it was not the Commission's spending, because it is the programmes that the corruption occurs in, and Europe is responsible for those programmes. Is the money going to the Spanish, to build fishing vessels to come and catch our fish and take it off to Spain? Is it going to farmers in the Republic of Ireland and France? I am sure that they do better out of the CAP and the aid than do the Poles, who are the poorest in Europe. Where is our money going and what benefit do we get from it?

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

The hon. Gentleman makes an important point about the amount of money that will flow out of our country to eastern Europe. Is he aware that the debts of some countries in eastern Europe, such as Poland, are nothing like the national debt of this country, which is more than £700 billion and rising? So it is nonsensical for our British taxpayers to give Poland money when our national debt is increasing at a much faster rate than its is.

Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby

If I accepted that specious point I should be criticising my leader and I would never ever do that. Let us say that there is a contribution across the exchanges rather than an assessment of the budgetary position.

What benefits do we get? There is a mantra. The Government and Euro-enthusiasts always tell us that inestimable benefits flow from Europe. They say inestimable, as a reason for not estimating them. Year after year I have tabled questions asking for a balance sheet of the gains and losses of our membership of the EU. Lord Pearson, who represents the provisional wing of the UK Independence party in the House of Lords, tables an annual motion asking for a balance sheet, but we are never told what the benefits are.

We are told that many jobs are dependent on Europe. That is just not true; those jobs would exist whether we were in the EU or out of it. Exports and trade would continue.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

It is argued that one of the benefits of EU membership involves fiscal transfers. Does the hon. Gentleman agree that there may also be many inestimable benefits to the European economic area, witness Iceland, Norway and Switzerland?

Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby

The countries that have done best economically are outside the European Union, especially smaller countries such as Switzerland and Iceland. They do not have to bear the EU's burdens, so they have had much faster growth than us. EU growth has been laggard.

What benefits do we get? We certainly cannot claim the common fisheries policy as a benefit. No one would defend that. Nobody seems to claim the CAP as a benefit, apart perhaps from the hon. Member for Dundee, East who said it brought stability, but it brings stability at enormous cost and distorts our market.

Nobody would say that the other common policy—foreign and defence policy—has achieved much. How successful was it in Yugoslavia? It was largely responsible for breaking up Yugoslavia. The EU was pushed into intervention in Kosovo by President Clinton. Look how united and solid the EU was on Iraq, where it fell into squabbling camps. In Afghanistan, we are being left to bear the brunt of the fighting and death while German troops have to clock off for tea at 5. Again the burdens fall on us.

As my hon. Friend the Member for Luton, North said, there have been two surveys of the costs and benefits. The Swiss drew up an honest balance sheet for their Department of Foreign Affairs. It indicated that the burdens of Europe would take 1 per cent. from their annual growth. A French think-tank—pro-Government—obviously influenced Sarkozy, who wants the European Bank to lower the exchange rate and interest rates to make the euro more competitive. The French survey showed that economic and monetary union has damaged growth and turned Europe into the high-unemployment, low-growth blackspot of the advanced world. There have been glimmerings of growth in Germany—I am sure my new hon. Friend the Member for Grantham and Stamford would intervene at this point—but the EU is growing far slower than any other part of the world.

Photo of David Drew David Drew Labour, Stroud

Recently there has been a softening of attitudes towards the euro, especially by the UK media. The euro has appreciated against the dollar and that could be seen as a sign of success, but in many respects it has become even more restricted as a currency, which presents even greater dangers were we ever to join it. Does my hon. Friend agree?

Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby

I am grateful that we did not join the euro. Our present Prime Minister kept us out. The euro is going up as the dollar comes down. People are coming out of dollar stocks and there is a policy of benign neglect of the dollar, which improves the US exporting economy because it is picking up as domestic consumer demand falls, but European manufacturing will suffer. The problem for us is where we should be in that equation. My view is that we should try to reduce the exchange rate through lower interest rates, although I do not want to go into that.

I want to know what benefits we are getting from the contribution enshrined in the Bill. Euro-enthusiasm has in some respects replaced socialism as a credo on the Labour Benches. The Liberals believe in "My Europe, right or wrong", or perhaps "My Europe mainly right, very occasionally wrong but we don't talk about it". However, the wealth of nations is built by hard-headed realism, not by impulsive romantic gestures, not by naivety and certainly not by being the slave of a dead ideology—Keynes' critique—repeating a pointless mantra about the inestimable benefits of EU membership.

We have to be realistic and hard-headed. The reality is that we would be better off out, sloughing off the burdens of Europe, trading with the wider world and co-operating with the nations with which we share problems rather than achieving that co-operation by financing a huge superstructure of marble palaces in Brussels, a play-away Parliament, a massive bureaucracy and all the failed programmes that go with it. That is the reality.

Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby

No, I am grinding slowly to a halt. It is a painful process for the House that I do not particularly want to interrupt.

Reality is not mindlessly handing over money to every demand or mindlessly saying that we benefit from an institution that is in fact doing us harm, and which is constructing over our heads a state that will be set above our own nation state. We need an honest, objective measurement of the benefits and debits of membership—I hope we shall be given it by our Government. That would be a sensible basis for making a decision about our relationship with Europe. The decision may take the Euro-enthusiast direction that my new hon. Friend the Member for Grantham and Stamford and my old friend, the right hon. Member for Rotherham, want, but it may not. People may ask, "Why should we spend all this money? Why should we donate all this money and suffer disadvantages and losses? Why shouldn't we build up our economic strength and decide our economic destiny?"

Let us see the balance sheet; then we can decide whether we are prepared to pay. Naivety is interesting and useful—perhaps necessary—in courtship, but it is no basis for a long marriage.

Photo of John Redwood John Redwood Conservative, Wokingham 8:28 pm, 19th November 2007

In 1984, as a young man, I was the chief policy adviser to the then Prime Minister. One of my proudest moments in that job was when she returned from a difficult negotiation in the European Community where, thanks entirely to her skill, determination and perseverance, she obtained for the UK a most important reduction in the amount that we had to pay into the European Economic Community.

It was a great negotiation because to achieve that rebate, that lady had to persuade all the other member states to her point of view. She could not block the payments that we were making because a Labour Government had agreed them. She knew they were far too high, and it was her consummate skill as a negotiator and politician that slowly persuaded all the other member states, reluctantly and gradually, to the view that Britain was getting an extremely raw deal; it was paying far too much, and justice required that more of the money should be left in the United Kingdom.

As a result, the Government whom she led and those led by her two successors were able to spend more money on British public services chosen freely by the elected representatives—the majority party in this House—or to return more money to the British people to spend on their own families and businesses through tax reduction, which I greatly welcomed. That makes tonight particularly tragic, because a subsequent Prime Minister, Mr. Blair, went to a European negotiation at which all he had to do was say no. He need not have given any of that money away. He did not need any of the skills that Baroness Thatcher required to win us the rebate—he had all the cards in his hand. He merely had to say no unless and until the other members of the European Union saw the justice of the case that he was making.

When the former Prime Minister moved his position, from the excellent one that there was no need to give up the rebate and that it was not negotiable, to the position that it was negotiable, I and many of my right hon. and hon. Friends had misgivings. The Opposition were prepared to listen, however, and see whether it was feasible to negotiate a much better deal on the spending side of the account, whereby the British position would not worsen, while that of all members of the Union would improve if spending could be reduced on agriculture. Such spending gets in the way of efficient agriculture in many member states and prevents developing countries from getting fair access to our markets.

Some of my right hon. and hon. Friends withheld their criticism to wait and see whether the then Prime Minister had some negotiating skills. It beggars belief that he had absolutely no negotiating skills at all. Armed with the veto, he threw it away. Armed with a strong case to win over the new member states and the Nordic member states to the proposition that the common agricultural policy was bad and should be reformed, he was unable to persuade any of them. Tonight, we have a House of Commons with Labour Members almost in denial and about to vote through a disaster for the United Kingdom in the form of an extremely large bill that we cannot afford and do not want.

The Chief Secretary to the Treasury, who opened the debate, showed bravado and obviously implied that he thinks everyone in the country is a fool. He tried to present the Bill as some kind of negotiating success and a way of increasing the rebate. Yes, of course it increases the rebate, because it increases the spending by so much more. It means that Britain will end up paying far more in the seven years of the proposal than if nothing had been given away in the negotiations.

I notice that the Economic Secretary to the Treasury, who is on the Treasury Bench, has no intention of intervening, because she knows that I am absolutely right about the huge expense. The documents reveal costings of £7.4 billion at the current euro-sterling exchange rate. Given the parlous state of the national accounts, we know that every penny of that £7.4 billion will have to be borrowed. If it were borrowed over, say, a 20-year period at 5 per cent.—the Government might be able to do that—there would be another £7.4 billion of interest on top of the £7.4 billion of capital that will need to be paid and then repaid over the 20 years of the debt. I leave out the interest on the interest, which would add to the sum even more. On the Government's own admission in the explanatory notes to the Bill—they are riddled with errors, of course, but I do not think that this figure is an error—the minimum cost to the state and the taxpayer will be £7.5 billion, which, in practice, will mean £15 billion or more, because they will have to borrow it and we will have to pay interest on it.

If we look beneath the Government's guidance, we see that the true bill to the taxpayer and the British Government will be far bigger. This Government have signed up to a set of spending plans that mean that, on average, every year over the seven-year period the United Kingdom will have to pay £10 billion into the European Union, after knocking off the smaller rebate, which is still in place thanks to Baroness Thatcher. That means that, in practice, there will be an underlying spending increase of £70 billion over a seven-year period. Using my simple sum, if the Government borrowed that over 20 years at 5 per cent., we are talking about £140 billion of first-round interest payments and capital repayments, just to see us through the seven years. At the end of the seven years, of course, we know that we would be on another escalator, because our bargaining position would be greatly weakened thanks to the Government's foolishness in giving away this most important principle and allowing the rebate to be weakened.

We know that the present Government are careless with public money. They say that any Conservative plan to spend a few hundred million or the odd billion on a tax cut would produce a black hole, yet along comes a mortgage bank in trouble and they can suddenly find £24 billion without batting an eyelid. Now we discover that they can apparently pledge this country to pay £70 billion over the cycle of the budget proposal. We know that they can propose that only because they intend to borrow every penny of it, just as presumably they are borrowing every penny of the £24 billion that they have so far made available to Northern Rock.

The Chief Secretary to the Treasury produced several arguments, in the course of a long and rambling speech, for why the budget was a good deal for Britain. There was the strange argument that the rebate was going to increase, whereas we all know that there will be a worsening of the rebate and increased spending. There was then the argument that we should be extremely grateful and welcoming of the fact that, as a result of our much bigger contribution to the European Union kitty, there would be more spending in countries outside the United Kingdom. He implied that he believes that, as soon as a country gets European Union spending, it becomes more prosperous and its growth rate rises. That is a curious argument.

During my time in politics in Britain, I have seen some parts of the United Kingdom receive European Union money. We know that they have been receiving it because, as has been pointed out in the debate, one condition of it is that recipients have to stick the 12-star flag logo all over the sign boards for the projects, whereas I believe that under British law they are not allowed to put a Union flag on anything that we fund directly. Somebody rightly pointed out that the money is ours anyway, because we put more in than we get back. We know that some places have been getting that funding.

If we look, as I have, at the income levels and growth rates in the places that receive that funding, we see two interesting things. First, the poorest parts of the country receive the money. That is not surprising, as the main condition for getting it is that they start as the poorest parts of the country. The other thing that we discover is that, under this Government in the past decade, those areas have also had the slowest growth rates. The money is clearly not kick-starting those parts of the country into greater prosperity; it is part of the problem that is holding them down.

Photo of John Redwood John Redwood Conservative, Wokingham

I see Julia Goldsworthy, a Cornish seat, becoming agitated, but she must know that the Cornish rate of growth has been much less than that of London or the south-east. London and the south-east are not main recipients of European aid, whereas Cornwall is. If receiving subsidy and aid triggered a big increase in the growth rate, one would expect Scotland to have been the fastest growing part of the United Kingdom in the past decade, as it has had so much extra money from all sources. Instead, we discover that Scotland has been about the slowest growing part of the United Kingdom.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

The right hon. Gentleman is correct that there is still a large gap between Cornwall and the rest of the country, not only in GDP per head of population but in income. However, the rate of growth is now faster than the England average.

Photo of John Redwood John Redwood Conservative, Wokingham

Growth rates in London and the south-east are far greater than that in Cornwall, which demonstrates that European Union money is not managing to do what the hon. Lady hopes. I should be delighted if that money were well spent, but one of the big problems with European Union money is that under the rules, it must be put into schemes that it would otherwise not have been put into—by definition, marginal schemes or even those that are not thought very worth while.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

Could not the argument be made that the issue is not actually about subsidies at all? The rate of growth in the Republic of Ireland, for example, has been double that in the United Kingdom. That has happened because Ireland left the United Kingdom and set its own tax structure to suit itself. Perhaps that is not happening in Scotland because Scotland is not independent so that it can compete, match and beat the Republic of Ireland.

Photo of John Redwood John Redwood Conservative, Wokingham

This is not a debate about Scottish independence, but I agree that cutting the tax rate is a very good way to accelerate the growth rate. The Chief Secretary to the Treasury seemed to think that subsidies to the Irish agricultural sector were the main cause of accelerated Irish growth. There is no evidence from the Irish economy that the agriculture sector has led the growth; it has been led by the service and manufacturing sectors. That is definitely the result of very low corporation tax.

Photo of Bill Cash Bill Cash Conservative, Stone

On the Irish economy, my right hon. Friend might not have been here when I made the point that there is an excellent book by Mr. Roy Foster called "Luck and the Irish" demonstrating that the money put in by the European Union has been less effective in increasing Ireland's prosperity than American money and tax reductions.

Photo of John Redwood John Redwood Conservative, Wokingham

I am grateful for my hon. Friend's endorsement of my case. So much European money went into the agriculture sector in Ireland, but that is not the great success story. The success story is in those sectors that have attracted large sums of foreign capital to create new businesses, which in turn have attracted a lot of talented Irish people back to Ireland to discover that it is a place where they can have very good careers.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

Some economists argue that the agriculture subsidies not only did not help the Irish economy but hindered it in some ways, because resources were allocated to a less productive sector of the economy than they might have been.

Photo of John Redwood John Redwood Conservative, Wokingham

Again, the hon. Gentleman makes a helpful and sensible intervention. I hope that Ministers are listening; they might learn from it.

To return to my argument, all too often the projects financed by the European Union are marginal, or, in economists' terms, sub-optimal—not those that one would choose for oneself. That is the role of the scheme. As the sage from Great Grimsby was saying a few minutes ago, would it not be much better if in some cases we could choose the projects ourselves and spend our own money on them without the middleman—without having to send the cheque to Brussels and then get some of it back after jumping through various hoops to prove that the project is one with which we would not otherwise have gone ahead? It is a rather crazy way to spend money.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

Does the right hon. Gentleman think that there is a benefit to investing in high-risk projects? Those projects often give the opportunity for the greatest returns, although they might not be viable in their own right or have the resources to take on that risk themselves.

Photo of John Redwood John Redwood Conservative, Wokingham

The hon. Lady should read a history of the 1970s, when we had a Government who thought that backing winners was a good idea, and every one turned out to be a flop or a loser. Maybe we are returning to that in the Government's latest approach to choosing investment projects and dealing with European Union funding. One begins to worry.

The Chief Secretary's next argument was that this had not all been in vain. Although perhaps in his more honest moments he accepts that we are talking about a very big bill—at least £7.5 billion and maybe £70 billion—he said, "Ah, but there will definitely be agricultural reform." That has already been revealed as a curious opinion given the attitude of the French, who will be in the chair of the European Union when the so-called review occurs. The language of the European Union has already downgraded the review, and the French have made it clear that they do not wish major reforms of the common agricultural policy to occur under their chairmanship. We come back to the question of how to negotiate. I always thought that when negotiating, if one is minded to make a concession in order to gain a concession from the other side, one makes sure not to make one's concession until the other side makes theirs. That is what good negotiating is about. It is quite extraordinary to make a massive concession for 2007, and then say that in five or six years' time, somebody might discuss making a concession the other way. Why on earth should they give us anything when we have negotiated in such a stupid way?

Photo of Oliver Heald Oliver Heald Conservative, North East Hertfordshire

Does my right hon. Friend agree that the French position is that the major reform of agriculture has already taken place? Further negotiation is not even a glimmer in their eye.

Photo of John Redwood John Redwood Conservative, Wokingham

My hon. Friend makes a powerful point. As others have revealed in this debate, it is not even clear that the proportion spent on agriculture is falling, although it is certainly clear that the amount spent on agriculture continues to rise. That is the French agenda, which has a lot of supporters in the European Union. I do not believe that the Government have a majority in Europe to support a significant change, and they certainly do not have unanimity on fundamental change, which is what they require.

Even worse, we know that quite a bit of the £70 billion that we have been asked to contribute will be spent on programmes to which the auditors will not be able to give a clean bill of health. Extraordinarily, Mr. Davies has told us that that does not count, because such fraud, malpractice or misspending occurs in member states rather than as a direct result of European Commission action. However, all that money is spent under European Union rules.

Photo of Angus MacNeil Angus MacNeil Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Environment, Food and Rural Affairs)

I am grateful to the right hon. Gentleman for giving way again; he has been very kind. To control misspending, does he agree that there should be a cap on the amount that certain individuals receive, which would mean that people such as the Duke of Westminster, who is a very wealthy landowner, would not receive obscene amounts from the CAP?

Photo of John Redwood John Redwood Conservative, Wokingham

I do not want to personalise the debate in that rather unsophisticated way. However, I make common cause with the hon. Gentleman in saying that too much money is spent through the CAP. The CAP should be reformed and that money should be repatriated. Too much money is also spent through a lot of other programmes. As the auditors have revealed, regardless of who technically spends the money, it is spent on European programmes, and all too often it is spent wastefully or even fraudulently, which should be a grave concern to us all.

I cannot say to the people of Wokingham, "I voted tonight to make sure that you will pay more tax in order to spend another £70 billion over the next EU budgetary period, and some of that money will be wasted, frittered or even spent fraudulently." As someone who looks at the auditor's reports from time to time, I cannot satisfy myself that that money will be well spent from now on and that we should relax. The money would be more likely to be well spent with proper investigation and control if it were spent closer to the people who paid the tax, rather than if it were to go through the intermediation of a remote and bureaucratic system of government on the continent before coming back here or to other member states to be spent by officials.

One of the myths of the EU is that it has a small and very effective bureaucracy. By remote control, the EU employs hundreds of thousands of bureaucrats throughout EU member states. Those bureaucrats might as well work for the EU, because they are doing the EU's bidding—I am glad that that is not the case, because they would be asked to do even more things with which many of my hon. Friends and I undoubtedly disagree.

I urge all sensible Labour MPs to vote against the Bill tonight. Those who vote for it will vote for more British taxpayers' money to be spent in faraway places, sometimes on fraudulent, incompetent or badly run schemes. They will vote for this country to borrow yet more money, which it cannot afford, and to pay yet more interest. They will vote for a further deterioration in the way in which this country's budgets are run by this Government. They will vote for the results of a negotiation that was so maladroit that our previous Prime Minister gave away a wonderful set of opportunities that another Prime Minister had negotiated for us without getting anything in return.

This is an extremely sad day for the United Kingdom. It is a sad day for this Parliament, and it is a day that Ministers will come to rue. Ministers should understand that they are in a big borrowing hole. They have the black hole of Northern Rock, and they have the black hole of this Bill. Labour Members will find that there is less public spending for their constituencies, and Conservative Members will find that there are fewer opportunities to cut the burden of tax on the British people so that we can prosper more.

Photo of Ian Davidson Ian Davidson Labour, Glasgow South West 8:49 pm, 19th November 2007

"We surrender; now let us negotiate." That seems to have been the Government's stance when they went to Brussels. Throughout the discussions—during the original negotiations, subsequently and again today—an entirely false dichotomy has been posed. We supposedly have either to accept anything at all that the European Union proposes, or to leave the EU, which would result in the collapse of civilisation as we know it. Those are not the alternatives— [Interruption.] I am glad to see the Chief Secretary nodding in agreement.

Remember that exactly the same position was put forward when joining the euro was mooted. For a period, people said that if we did not join, the economy would collapse: 10 zillion jobs were going to go, and there would be a wasteland from John O'Groats to Land's End. Well, we did not join the euro, and lo and behold, the economy has gone from strength to strength, thanks not only to the brilliance of the former Chancellor, who is now the Prime Minister, but to the correctness of that decision.

Nowadays, not only can I not find anybody in favour of Britain joining the euro, but I find it almost impossible to find anybody who was ever in favour of it—such has been the process of re-education.

Photo of Ian Davidson Ian Davidson Labour, Glasgow South West

I see the Economic Secretary to the Treasury shaking her head; I presume that she is still one of the true believers, as befits somebody who used to be the chief economist for Britain in Europe—hardly an impartial organisation on such matters.

It would be right for us to reject the proposals and for the Government to stand up for British interests. The budget negotiations were meant to rely on real reform as a quid pro quo for additional payments from the United Kingdom, but it is absolutely clear that there has been no real reform in the EU budget as a result of our conceding a substantial chunk of our rebate.

The Prime Minister and I completely agree on the need to repatriate to the United Kingdom expenditure on structural funds. As has been said, no value whatever is added by the process of passing money to Brussels, handling fees being taken off, and some of the money coming back to us for projects in this country. All that involves is a transfer of political power to Brussels, which allows politicians there to make decisions about which projects should be supported and which should not, and under which rules. Such issues would be far better handled in this country. It would be much better to dispense with the system whereby Brussels handles the structural funding throughout the European Union, and I shall come in a moment to how I think that ought to be done.

I have similar thoughts about the common agricultural policy in the UK. As far as I can see, for a long time there have been very few reforms in the CAP. As has been said, the policy basically operates as a wealth transfer system, whereby poor consumers pay more for their food so that wealthy farmers can benefit. It is an obscenity that, as has been mentioned, people such as the Duke of Westminster receive enormous sums from the CAP, and will continue to do so under this scheme. Under the proposals, the undeserving rich will continue to get richer from the CAP and that financial system.

It is completely false to suggest that I, or many of my hon. Friends who intend to vote against this budget, oppose aid for eastern Europe. I have been in favour of widening the EU for a long time, so that is a calumny that we should in no way be prepared to accept. However, it is not helpful to handle the money that we wish to give to eastern Europe as it is currently being handled. In our relationship with eastern Europe, we should adopt two models from the Department for International Development. First, where we have little confidence in the internal systems of the country involved, we should be prepared to say, "Yes, we're willing to support this project, but we'll handle it. We'll seek your help and assistance, but we will not hand the money over to the local equivalent of the Mafia, so that they can take away a huge proportion of it instead of making sure that those who deserve it receive it."

The second method is direct budget support. Where we have confidence in the Governments of the recipient countries, it is far better to give them aid in their budgets, as we do with many African countries that have met various good governance standards, so that they, rather than some bureaucrat in Brussels, can determine how that money should be spent. It has always seemed absurd to assume that the European Union and its bureaucrats sitting in Brussels know better what is needed in Latvia, Lithuania and other parts of eastern Europe than the people in those countries do. If we support devolution in this country, we should support devolution in the form of direct budget support across the whole of Europe.

Let me turn to some concerns about the detail of the system that the Government have not yet touched on. Does the Minister accept that the Government have, as they confirmed in a written answer, agreed to a last-minute £1 billion increase in the administration budget merely to ease the passage of the proposals in Brussels? Why did we concede an extra £1 billion in sweeteners? That is log-rolling, and I can see no reason why we did it, or why we expect the British public to pay our share of it.

Following the agreement in December 2005, we were told, "That's it—enough is enough. This is the agreement and this is what we are going to stick to." Yet two months later the Government agreed to an increase in the European budget of £2.7 billion. Why was that? It seems to display a certain inability to strike even a bad deal and then stick to it. Saying, "We surrender, but if you're not happy with that, we'll surrender again later on," is not the best way of dealing with these matters.

We have been told that the Government are very keen on transferring money to eastern Europe. However, we should be absolutely clear that it remains the position that Ireland and Belgium will be net recipients from the budget, as are Luxembourg and several other wealthy countries, whereas a country such as Cyprus, with a gross domestic product half that size, will end up as a net contributor. That is absurd. Per head, the top three recipients of EU funds will be old member states—Luxembourg, Belgium and Greece. That does not display a transfer of wealth from the EU's old western members to its new eastern members. France will be the largest single recipient of money from the EU under the negotiated settlement, which is meant to be about transferring money to the east.

I fail to understand how the Government can possibly defend this as a good deal. If this is good deal, I dread to think what a bad deal would have been. It is noticeable that the Government have refused to produce statistics indicating their estimates of how much every other country in the EU will pay in and receive—except for France. If they are prepared to do it for France, I cannot see why they are unwilling to do it for other countries, unless they feel that there is something to be ashamed of.

I mentioned that Luxembourg will get the most in EU spending per person, followed by Belgium and Greece, and I would be grateful if the Minister would justify that to me. This does not strike me as being a reform budget. Spain was previously the largest recipient of funds, but it has been replaced by France, and that transformation does not seem to be a brilliant piece of negotiating. Ireland is the second richest country in the EU, with an income per head 30 per cent. above average, yet it will get more money out of the budget than it puts in. I do not understand the logic of that position.

In fact, the CAP currently transfers money from the poorest states to richer countries such as France and Spain. I am happy to give way