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'(1) This Act shall come into force on such day as the Treasury shall by order specify.
(2) The day specified in the order made under subsection (1) shall not be earlier than fourteen days after the date on which the condition has been satisfied.
(3) The condition referred to in subsection (2) is that the Treasury shall have laid before both Houses of Parliament a report on the review by the European Commission covering all aspects of EU spending, including the CAP, and of resources, including the UK rebate, as provided for at paragraph 80 of the "Financial Perspective 2007-13" issued by the European Council in December 2005, including a certificate that the Treasury considers that the outcome of the review is satisfactory to the interests of the United Kingdom.'.— [Mr. Philip Hammond.]
Brought up, and read the First time.
I beg to move, That the clause be read a Second time.
I can see that the Minister, if he ever gets bored with what he is doing, has a whole new potential career ahead of him—coming in here on a Friday morning and giving Mr. Dismore a break. I am extremely grateful to my right hon. and hon. Friends for the self-restraint that they displayed, ensuring that we are able to debate new clause 1. I shall seek to be very brief and not to rehearse any of the arguments made in the stand part debate.
The new clause is genuinely designed to help the Government by re-injecting a bit of backbone into their negotiating position. It would delay the implementation of this change in the own resources decision until satisfactory completion of the promised review of the European Union. It makes explicit the conditionality that the Government claimed was the basis of their final negotiating position.
In the course of the previous debate, the Chief Secretary said that nothing was agreed until everything was agreed. I would suggest, however, that if the new clause were incorporated into the Bill, nothing would be agreed until everything is done. It is about ensuring that what was promised to be done at Brussels in December 2005 is, indeed, delivered. We have already seen that the Government did not go into the negotiations on the basis of having to give away the rebate in order to secure enlargement. That is a spurious argument. What we have emerged with at the end of the negotiations is nothing but the promise of a review. We must now ensure that the promise of the review is turned into a reality.
The Chief Secretary told us earlier that defeating the Bill or substantially amending it, as new clause 1 proposes, would create a political crisis in the EU. I see no reason why that should be the case. If everyone has acted in good faith, our EU partners will know that our Prime Minister gave away a large part of our rebate because he had secured a commitment to a fundamental review—with no red lines and no holds barred—of the EU budget. Presumably, our partners entered into that commitment in good faith. There is no reason whatever why they should find it strange that this Parliament wants to ensure that that review indeed takes place, that it is meaningful and that its outcome is, at least as judged by the Treasury, satisfactory to the UK. This is not an anti-EU position, but a pro-British position. No other Government in the EU believe that there is a contradiction between being pro-EU and being pro their own national interests.
Will the hon. Gentleman cast his mind back to the protracted debates on the Maastricht treaty? If it is so easy to do and if the adverse consequences of our rejecting a European measure such as this—forcing the Government to go back to Europe and renegotiate—are so negligible, why was the Major Government reduced to such shambolic performances night after night after night all those years ago?
I was not here then and nor was the hon. Gentleman. The answer is no, I will not cast my mind back; I will press on and make some progress instead.
The outcome of the review is subject to individual veto by member states. Without something for us to offer our partners in the process of that review, Ministers, however well intentioned—I am prepared to give them the benefit of the doubt on that, as I shall assume that they go into such negotiations well intentioned, if naive—will not achieve the UK's objectives.
The way in which hon. Members address the Committee, provided that it is within the normal terms of reference, is entirely a matter for them.
Thank you, Sir Michael. In any case, if I have not reached that level yet, I will continue to practise.
Ministers will not achieve the UK's objectives by giving away their bargaining chips as the price of admission to the game rather than trading them in the game itself. That is not generally regarded as good practice. This is all about the negotiating competence of the Government. The truth is that Labour walked away from the table at Brussels as good as empty-handed. The only thing that it brought back was the promise of a review, and unless we give some teeth to that promise and show that this Parliament will insist on its being delivered in good faith, it will have effectively come away with nothing. We must take the opportunity to restore the Government's negotiating position, because the British people would expect us to deal with their failures at Brussels in 2005.
The new clause sets a test for the review having taken place, and for its conclusions being satisfactory to the United Kingdom Government of the day. That will restore some of the bargaining power that the Government have thrown away. The rebate concession was agreed on the back of a pledge; let us see that pledge delivered on in good faith. Let us test the Government's assertion that they have secured a genuine and far-reaching review of EU finances.
The hurdle that we set was deliberately not set high. There is no objective test of whether the outcome of the review is in the United Kingdom's interest; the new clause simply requires the Government of the day to align themselves with the outcome as being
"satisfactory to the interests of the United Kingdom".
We ask the Government to sign up to that outcome, and to say clearly and loudly to the British people, "Yes, this is the outcome for which we gave away £7 billion"—and counting—"of Britain's budget rebate." If the Government do not believe that they will be able to do that—if they themselves have no confidence in the review, and no expectation of a satisfactory outcome—what on earth were they doing trading the rebate for a review in the first place?
The new clause would give Ministers a tool with which to bargain, to ensure that the review is meaningful and far-reaching and can lead to a genuine overhaul of the EU's finances rather than a whitewash. We are in a very different place economically from where we were in the summer and autumn of 2005. The economy faces many pressures, and many people who might have taken a much more cavalier attitude to the billions of pounds involved in 2005 will certainly take a different view today.
If the new clause is carried and if the review is not concluded by the end of 2008—incidentally, there is absolutely no reason why it should not be, given that the UK will now have an incentive to offer its partners to proceed with it speedily—the existing own resources decision will remain in force. The ceiling will not fall in, there will be no crisis, there will be no question of renegotiating the budget and the financial perspective or of cancelling enlargement. The position will be exactly as it is now, with the previous own resources decision implemented and continued. When the new own resources decision comes into effect as a result of the Treasury's certifying that it is satisfied with the outcome of the review, it will have effect retrospectively. Provided that the review is fair and open and the Treasury is able to certify that it considers the outcome satisfactory to the UK's interests, the own resources decision will be implemented in full in due course.
Paragraph 80 of the Council's decision at Brussels in December 2005 sets out parameters for a review that will take place in the financial year 2008-09, and unless there is slippage we expect it to be completed by the end of that financial year.
As we make our decisions this evening, we must bear in mind that this really is the last chance not only to save the British rebate, but to maintain the leverage that will allow us to secure meaningful reform of the common agricultural policy in the future. If we can secure new clause 1, we will not be back in the place where Tony Blair and the Prime Minister promised us we would be in the summer of 2005, but we will be in a much better position than we would be in if the Bill were passed unamended this evening. We will also have sent a signal that Parliament intends to exercise effective and positive oversight of what our Government are negotiating on our behalf, and furthermore that Parliament intends to ensure that what is promised in those negotiations is delivered.
The message that we need to send to our partners in Europe by agreeing to the new clause is that we in this Parliament respect Governments who, while being fully signed-up members of the EU, fight vigorously for their national interests. Britain intends to do the same from now on, and if our Government have not the backbone for the fight, this Parliament has.
I am rather tempted by the new clause. As I said in the clause stand part debate, there was a major failure in the negotiations to establish a link between the rebate and agricultural policy. It seems in principle, unless the Minister can persuade us to the contrary, that the new clause provides a mechanism for retrieving the situation.
Let us look carefully at what the Prime Minister said about the review in his statement to the House in December last year, when he brought back the agreement. He clearly thought that he had extracted a major concession in return for the negotiations on the rebate. He said:
"Alongside this agreement on...the modernisation of eastern Europe, we also agreed on a fundamental review of all aspects of the EU budget, including the common agricultural policy...with the recommendation that it begin in 2008."
The two subsequent sentences are crucial. The Prime Minister said:
"As the language in the European Council conclusions makes...clear, it is then possible for changes to be made to this budget structure in the course of this financing period."
Of course it is possible, but why should the Governments who resist reform of the common agricultural policy agree? What possible incentive is there for them to do so? The French Government will almost certainly refuse to renegotiate. What possible leverage do the British Government have in carrying through the Barroso recommendations?
The following sentence is even more substantial. The Prime Minister continued:
That is terribly important, because we keep being reminded—rightly—that if the negotiations fail, there will be disastrous consequences for the world economy, for Europe and for the United Kingdom.
During the last few weeks, Mr. Mandelson has been ominously quiet. There is a real and growing worry that the negotiations may fail, primarily because of difficulties in the American Congress but also because of the intransigence of agricultural interests in Europe. In the next few months, we may well be faced with disastrous circumstances in which our negotiations fail for the first time since the second world war, opening a Pandora's box of protectionism. The British Government should be, and according to much of their rhetoric will be—and we hope they will be—in the vanguard of efforts to prevent that from happening. However, what negotiating clout do they have in making other EU members come to an agreement with the Americans at the World Trade Organisation? There is no leverage; there is no negotiating position if it has already been conceded.
The hon. Gentleman makes an important point. He mentioned that Peter Mandelson has been ominously quiet, but I do not know whether he is aware that today Commissioner Danuta Hübner has not been quiet, and that she has made a speech: "Reform of the EU budget: Time for a debate without taboos". She says that, as well as considering the agricultural policy, a central part of the review should concern the corrective mechanisms—the British abatement that remains. Therefore, what we have started could eliminate what we retain, rather than secure any benefits for what we have already given away.
That is a helpful intervention. I do not know how significant those Commissioner's comments are, but they seem to be genuinely worrying.
In his initial remarks, the Minister tried to alarm us—perhaps rightly, as we need to understand the Government position better—about the consequences of this legislation not being ratified on time. It is a nuclear weapon in many respects, but we need to understand how the nuclear bomb actually works in these circumstances: what would be the practical consequences of detonating it?
It is my understanding that on the financial front we would revert to the earlier own resources formula, which in purely financial terms would be better for the UK, so it is clearly not a deterrent in that sense. There is also the mechanics of how payments are made, and whether failure to ratify on time would affect the normal running of payments through the EU. Again, I confess ignorance on that: I do not know at what point a failure to achieve legislative closure affects the day-to-day payments. There is a section in the explanatory notes that I am afraid I do not understand, but the Minister might be able to explain it. It states:
"The additional UK contribution resulting from the reduction in allocated expenditure is limited to €10.5bn in 2004 prices over the period 2007 to 2013."
The implication is that the changes are already in operation and that they will be retrospectively validated by this legislation, so there is nothing to stop these payments occurring now. There is also an implication that the deterrent—the nuclear bomb—is, in the end, largely an issue of face or prestige: the British Government cannot get their own legislature to agree a piece of legislation, which is very embarrassing. But is it more than embarrassment? That is the question that we have to answer.
If the Government can explain that holding up this legislation in order to achieve these necessary improvements will do serious damage to the functioning of the EU and Britain's role within it, I would be hesitant to support the new clause, but if all that is at stake is a little embarrassment at the beginning of 2009—which might, indeed, have the effect of stiffening the Government's spine in what then might be difficult negotiations about the review—I cannot see the harm. As somebody who is a pro-European, I want the Government to explain convincingly to me why I should not support the new clause.
I am grateful for the opportunity to contribute to the debate, and I return to the subject of the own resources of the European Community with some nostalgia, as it was the subject on which I made my maiden speech some years ago, on which I had my maiden rebellion against my Government, and on which I made my maiden criticism of the then Prime Minister, Mrs. Thatcher, nearly bringing my career to a premature end. She was seduced—or so it seemed to me—by the argument that in return for a promise from the European Union to be more moderate in its future spending, she should concede an increase in the own resources of the European Community. I asked her at Prime Minister's questions whether she would follow that logic and reward a drunkard who had signed the pledge by giving him a bottle of whisky. She was not best amused, and I was told my career would not proceed any further. I was wrong, of course, as Mrs. Thatcher was in the process of securing for Britain the rebate that has enabled us to save billions of pounds of contribution to the EU, whereas the present Government are doing the reverse.
I mention this because I think it shows that, having been critical of my own Government, I have a reasonable licence to be critical of this Government on this issue. My position in both cases is as someone who does not want to see a waste of public expenditure through an increase in spending that will not be properly monitored or controlled, and will not be in the interests of the taxpayer. I fear that what we are being asked to do today will result in that. That is why I welcome the new clause tabled by my hon. Friend Mr. Hammond, because it says that we should not go ahead with this increase in the own resources—the new structure reducing Britain's abatement by up to £10.5 billion—unless we get something in return.
Unfortunately, as far as one can see, the Government's negotiating process so far has not got anything in return. Indeed, the negotiating position of the former Prime Minister, Tony Blair, has been rather like that scandalously sexist aphorism, "When a lady says never she means maybe, when she says maybe she means yes, and when she says yes she is not a lady."
The former Prime Minister started off saying never:
He then went on to say maybe:
"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.]
Finally, he conceded a reduction in the rebate completely, but he said that he was getting something in return—a reform of the agricultural policy, or at least a promise of a review of it.
Accepting new clause 1 would enable us to see whether we have anything in return for the concessions made, and I cannot see how the Minister can possibly object to it. It proposes that the Treasury shall go ahead with implementing the new structure of own resources only if it can certify that we have secured a concession. It would be left to the Treasury's judgment whether it could honestly say that we had secured the concession—the review—that we were promised, and which Tony Blair told this Parliament he had been offered. The Treasury would be able to say whether it had been substantively achieved, so I invite the Minister to say that he will accept the new clause. If he cannot, will he say frankly and openly that he rejects it because he cannot envisage circumstances in which the Treasury will be able to say that the promises given to this House will be delivered? That would be an appalling position.
The case for retaining our rebate persists. It was based on the fact that the structure of the British economy is such that when the same rules are applied to us as are applied to other member states they result in an unfair burden on us relative to the advantages that we get. Even after the changes that have occurred, and those planned in this settlement, are taken into account, this country will receive the lowest amount of European spending per head of any of the 27 countries in Europe. We will receive a quarter of that received by Ireland, whose gross domestic product per head, we are now told, is above ours, and we will receive half that received by France, whose figure was only marginally below ours before the recent exchange rate changes.
Despite that, the contribution that we make is significantly greater than that of many other countries. The Government have been prepared to give us the figures only in respect of France, but the contribution per head that British people will make to the European budget is 20 per cent. greater than that of France. Our net contribution is set to rise significantly under this settlement, as I mentioned in an intervention that the Minister was kind enough to take. The net contribution is rising faster than the generality of public expenditure is planned to do in this country—so much so that our net contribution to the European budget as a share of total public expenditure will rise by half over the time span of the current spending process.
This is a very inequitable arrangement as far as British people are concerned. It was right to secure an abatement to try to offset some two thirds of the differential between the money that we put in and the money that we get out. Mrs. Thatcher was able to secure it because she had a very good case, she argued forcefully and she persuaded her partners to give it to her. According to the Government, we now have to reduce that abatement and to accentuate again the inequities that the correction mechanism was designed to redress. "Correction" is the word used in the European documents. The correction is to an inequity that Britain otherwise faced.
We will get nothing in return, because the CAP budget will continue to rise. According to House of Commons figures, the CAP budget remains 48 per cent. of the total expenditure of the EU. Others claim that it has risen from 40 per cent. a few years ago to 44 per cent. Lord Patten said a year or so ago:
"We are talking about a budget for research and development that's been severely squeezed already in order to accommodate a continuing rise in agricultural spending that will actually go up from 40 to 44 per cent. of the overall community budget."
So, far from our having secured some degree of reform already that is resulting in a reduction, it remains overwhelmingly a budget that goes on the CAP.
The other part is spent on structural funds, and I want to ask the Chief Secretary whether the Government have made any progress in securing the reform that the present Prime Minister sought when he was still Chancellor. In 2003, he wrote in The Times:
"When the economic and social, as well as democratic, arguments on structural funds now and for the future so clearly favour subsidiarity in action, there is no better place to start than by bringing regional policy back to Britain."
In a Government document entitled "A modern regional policy for the UK", the UK Government argued that member states with GDP per capita above 90 per cent. of the EU average should no longer receive structural funds money. Instead the money should be retained by them and spent by them, because, the Prime Minister has argued,
"There are many things that we want to do to encourage local skills and research and development, and local businesses, but we're not able to do because of the existing rules."
So when, under the new clause, the Government report back to the House on whether they have secured concessions, they can tell us whether they have secured the concession, at least for countries such as ours, on regional funds, so that we control that money and use it for British priorities, rather than sending it to Brussels and having it sent back by them, having incurred administrative costs and being earmarked for uses that would not necessarily be the priority of the British people and the British Government.
The former Prime Minister made the concessions that are incorporated in the Bill. At the time, the then Chancellor was leaking to the press that he did not really support that. He thought that Tony Blair was being unduly weak and giving away too much. Now is his chance. He is now Prime Minister and this is the great vision that he has been seeking to put before the British people. He can do what he indicated in leaks that he wanted to do and give his Back Benchers a free vote on this Bill. They will then put him in a strong position to renegotiate and get the sort of deal that he wanted.
I fear that we did not get that deal because the outgoing Prime Minister had other priorities. He was looking to his own future. He did not want to end with a big row in Europe. That might have been in Britain's interests, but it would not have been in his. He made a concession, which was a big contribution to his own future campaign to be President of Europe—an undeclared contribution, which dwarfs those of any member of the present Cabinet. I hope that that mistake, that unfortunate policy and that unfortunate weakness of the previous Prime Minister can be put right.
The new clause would strengthen the position of the Government and the House, and I hope that it will be accepted.
It was clear from what my right hon. Friend Mr. Lilley said that the current Prime Minister made it clear that he disagreed with his predecessor on the deal. Since I entered the House, one thing that I have learned is that a small Bill with a few clauses that is being debated for a short time is a most important Bill, and the Government are trying to get something through the back door.
On the subject of the former Prime Minister and the current Prime Minister, does my hon. Friend think it more than likely that the deal between them was that the outgoing Prime Minister would stand down, as shown in the recent programme "The Blair Years", in return for the undertaking that the new Prime Minister would not oppose either the own resources decision or the European treaty, which we will debate next week?
That seems possible. The previous Prime Minister said that he would serve a full term, which he did not. Some deal must have been done.
Let me address the new clause. We are talking about something of enormous importance to British taxpayers. During the years that Mr. Blair was in power, the contribution to the EU made by British taxpayers, adjusted to today's value of the pound, was more than £100 billion—enough money to run the health service free of charge for this year. We are talking about a change in the formula whereby the EC allocates its budget to individual countries. Each country has the right to debate that new way of raising funds, but I suspect that only this country will have reservations, because only this country is dealt such a bad deal by the formula.
The Chief Secretary was helpful in his opening statement and provided a lot of percentages, but he did not translate them into money. However, a written answer given in January 2006 set the record straight. It stated that in 2007, our net payments to the EU would be £4.7 billion, increasing to £6.8 billion by 2011—an increase of 45 per cent. How can a £2.1 billion increase for British taxpayers be right when we are in the middle of an economic crisis that requires us to have almost a statutory pay limit in the public services?
My hon. Friend has enlightened the House with those figures. They stand in stark contrast with the assurance that the Chief Secretary gave us from the Dispatch Box a few moments ago that our contribution will be some £5 billion across the economic cycle. Either my hon. Friend is wrong, or the Chief Secretary inadvertently misled the House. If the second is the case, the Chief Secretary had better stand up now and put it right.
I can only quote from the table in the written answer given by Mr. Lewis. It clearly stated that in 2011, our net contribution would be in the range of £6 billion to £6.8 billion. I am sure that the Government were not wrong about that fact. Another interesting element of the written answer to which I have referred has to do with the so-called "dodgy money" that we get back from the EU. We give it £14 billion, and then some bureaucrat in Europe sends some of it back, with instructions about where it should be spent. I remember driving around a small village in Wales and reading a blue plaque that stated that what amounted to a motorway had been built by the EU. Of course, there were no cars on it at all, but the Bill means that even the dodgy allocation of returned funds that I have described will be smaller. This year, we will get back £5.6 billion, but it is predicted that we will get only £4.2 billion in each year from 2011 to 2013. It cannot be in the national interest for us to pay substantially more money to the EU and yet get less money in return.
This is an enormously important debate. Thank goodness the Opposition, with the support of the Liberal Democrats, have given the Government a get-out-of-jail card.
I shall try to answer the points raised in the debate on new clause 1, which talks about the "outcome of the review". The heart of the matter is the point at which the certificate to be issued by the Treasury would be debated in the House. When I intervened on the shadow Chief Secretary, his answer summed up the problem with the new clause. He referred me to paragraph 80 of the Commission document, which talks about a White Paper or report to be issued in the relevant time frame, but that is not the same as the "outcome of the review".
What the Minister has described does not make the new clause defective. Instead, it makes it much easier for him to accept the proposal, as all he is being asked to agree is that the Treasury should be required to certify that it
"considers that the outcome of the review is satisfactory to the interests of the United Kingdom."
Further processes may have to be conducted after the report of the review is submitted, but he is merely being asked to sign up to a commitment that the Treasury will certify that report.
No, I do not think that that is what the new clause proposes. It states:
"The condition referred to in subsection (2) is that the Treasury shall have laid before both Houses of Parliament a report on the review by the European Commission...including a certificate that the Treasury considers that the outcome of the review is satisfactory to the interests of the United Kingdom."
I repeat that the review does not conclude with the publication of the relevant White Paper. There is no possibility that the review could achieve its "outcome" before the House has been asked to ratify the own resources decision in January 2009, and that is why I contend that the new clause is defective.
What, in essence, does new clause 1 ask the Government to do? The final sentence of paragraph 80 of the Commission's document states:
"The review will also be taken into account in the preparatory work on the following Financial Perspective."
I am sure that the hon. Member for Runnymede and Weybridge will accept that that is where work on the review will lead, but the logic of the new clause is that the outcome of the financial perspective being debated this evening should be held up until we have achieved a satisfactory outcome from the next financial perspective. The outcome of that review will inform the preparatory work for and the discussions on the next financial perspective—the one that begins after 2013. I say again, essentially, he is asking us to hold up the current financial perspective covering 2007 to 2013, pending the outcome of all of the discussions. The amendment is defective. It would cause us to miss the ratification deadline, and on that basis, I urge hon. Members on both sides of the House to reject it.
Dr. Cable asked a fair question. He asked what would be the practical consequences of not ratifying: would there be serious consequences, or would the provisions of the current financial perspective simply be held up? Let me be plain: there is no formal sanction—no fine or formal proceedings that could be instituted—but implementation of the present financial perspective could be delayed. Backdating to the beginning of 2007 can happen only after ratification.
Let me finish the point. The other consequence is what one might call a diplomatic or political consequence. We have every reason to believe that 26 other member states will ratify the own resources decision into their domestic legislation, so we would face the prospect of being one versus 26 in explaining why we failed to ratify the decision. I do not want to over-dramatise by saying that not ratifying the decision will lead to a complete breakdown, but there would be real consequences to not meeting the ratification deadline.
In his comments, the hon. Gentleman asked whether the effect of that review could be felt before 2013. The answer is that it could. The previous Prime Minister argued for that in securing the review. My point in response to the new clause is that the outcome of the review cannot possibly be known before the ratification deadline.
I will give way one last time to the shadow Chief Secretary, but I am trying to answer seriously the points that were put to me during the debate. There can be no hope that the outcome of the review will be known before the ratification deadline. I have pointed out that there will be consequences of being held to have acted in bad faith and being isolated, which is not what the Government want.
The point that the Chief Secretary made earlier is that the outcome of the review is not the final, definitive stage in preparing the next financial perspective. We accept that. All we are asking for is some clear sign that our partners are taking seriously the obligation into which they apparently entered to have a fundamental review of the EU budget, and that the Treasury, on the basis of the outcome of that review, is satisfied with that decision. That is what we are asking the Treasury to certify.
Secondly, the right hon. Gentleman is quite wrong to say that the current financial perspective will be held up. The current financial perspective is agreed and already operational. The only question at issue is the own resources decision. We will fall back on the existing own resources decision if the Bill falls tonight.
I am disappointed that the hon. Gentleman did not let me finish my point. The Commission document says that there will be a fundamental, no-taboos review. That is what we secured. I have explained clearly why the new clause is utterly defective. It would leave this country totally isolated in Europe. I can only conclude that that is where he and his whole party want us to be.
I beg to move, That the Bill be now read the Third time.
This has been a long but good debate. [Hon. Members: "It was short."] It felt long. I think that Members have been quite clear about where they stand.
Let us be clear. This Government will make the case for being part of the European Union, for playing a constructive part in the European Union, and for making a sensible, practical and pragmatic agreement that helps to take the European Union forward into a new era. In our judgment, the own resources decision, which we are asking the House to incorporate into the law of this country, does precisely that. It is fair to the British taxpayer as it preserves the rebate and sees it grow in size over the financial period that we are discussing, but at the same time it will provide the resources for the social, economic and overall development of a peaceful and prosperous European Union. We all, I believe, have a common stake in that.
We have been over this ground all evening. This Government were clear about what they were seeking to achieve—to preserve the rebate. Whatever fantasy arguments the Opposition wish to advance, at the heart of the own resources decision is an agreement whereby the British rebate rises but is disapplied in respect of non-agricultural spending—the spending that helps economic and social progress in the countries of the former eastern bloc. That is what it pays for. It is absolutely correct to say that the former Prime Minister, Tony Blair, very much had in mind an agreement whereby Britain would retain the rebate and see it rise in value, with a change in the contributions that France makes to the European Union, whereby we now have rough parity between French and British contributions. That is a step forward. I think that he would also have said that Britain should pay its fair share of the costs of an enlarged European Union.
The Conservatives have completely failed to demonstrate that the policy of saying, "We support enlargement but we don't want to face up to the difficult decision of paying for it", has a scintilla of credibility across the European Union. We have heard no mention of it this evening, and Mr. Cameron managed to attract only two other members to the new grouping in the European Parliament. I gather that there is now just one, Bulgaria—"and then there was one". We see a party utterly isolated in Europe. Perhaps the shadow Chief Secretary will update the House on how negotiations are progressing.
I have a question for the Chief Secretary. How would he characterise the position of the British Government in the summer of 2005, when they said that they enthusiastically supported enlargement but that the British rebate was fully justified and non-negotiable? How would he characterise that as anything other than, to use his own words, being in favour of enlargement but not being willing to pay for it?
We are going over and over this ground, and the hon. Gentleman will not accept that there is a difference between the application of the rebate in respect of the 15 members of the European Union—
In my view, there is a difference between the application of the rebate in respect of the contributions and spending that those countries receive and its application in respect of the new member states. We make a clear distinction between those two groups.
Throughout the debate, the Conservatives have failed to give any credible answer about what they would do to contribute to the costs of enlargement. The evidence is clear: they are utterly isolated in Europe. Well, they are not quite isolated; they have one ally among the whole European Union, but some of their new-found friends have dubious connections, we might say. That is not a position of strength, or an intellectual, commanding position from which to lecture us on how to conduct relations in Europe. We have secured a deal that helps to take the EU forward to the next era while securing the British interest.
We have seen a great deal of limbering up tonight for the main event. As was said earlier, I am sure that lots of Conservative Members' diaries have been cleared for 15 days running, and I am sure that they will probably want more than that.
Not at all. I do not think that he has been listening closely to what I said. [ Interruption. ] I believed it was 15, but it may be 20. I am sure that he will be there for all 20 days. I say this to the hon. Gentleman. Am I right that the right hon. Member for Witney said—and I paraphrase—that the country would know that the Conservative party had changed when it stopped banging on about Europe? I remember him saying something along those lines. We have heard a lot of banging on about Europe today.
As I said to the shadow Chief Secretary, we have heard some incredibly inflammable statements— [ Laughter. ] Inflammatory statements, even. We have heard incredibly inflammatory statements from Conservative Members this evening, and I wonder what the parties the shadow Chief Secretary wishes to pull into his grouping in the European Parliament would make of sweeping generalisations about the EU—for example, that it is a fraudulent and corrupt organisation. No wonder that their isolation deepens.
We will go forward and defend the agreement. The new clause that the Conservatives brought to the House showed the same level of confusion on these matters as their position on the EU reform treaty does. It would seek to unpick and renegotiate matters once the rest of Europe had moved ahead and reached a sensible agreement.
British business looks to hon. Members and to any party that seeks to form the Government of this country to take a pragmatic approach to Britain in Europe. Yes, it wants us to defend the British interest, but it knows that, above all, its prosperity and that of the British economy is based squarely on good relationships with Europe. As I said, 56 per cent. of British trade is with the European Union. Would Conservative Members serve the interests of British business by leading us to an isolated position, whereby we were the only country to argue against a deal that was struck between 27 members of the European Union? Would that be in the long-term interests of business?
The Chief Secretary claims that there are great benefits to the British economy in paying a huge membership fee for being in the European Union. However, is not Britain's trade deficit with the European Union now at record levels and getting worse every year?
The hon. Gentleman must make a judgment about that. Conservative Members must be honest and ask themselves whether we are better off out of the European Union. I have mentioned Philip Davies several times this evening. He is the leading light of the "Better Off Out" group. That is an honest position. It is not honest constantly to seek ways of undermining and criticising but not admitting the true position.
Foreign direct investment from the EU in the UK has quadrupled. It more than doubled between 2001 and 2005. That is worth celebrating. An extra 2.75 million jobs have been created throughout the EU.
Let me put a proposition to the hon. Gentleman. When the Republic of Ireland acceded to the European Union, there was considerable spending on structural funding and projects that enhanced economic competitiveness in the republic. Does he claim that some of the improvements in the north-west economy and that in other parts of the UK do not result from greater trade and partnership with the Republic of Ireland? Does not he accept that we have an interest in stronger economies throughout Europe? Economies that are stronger and are growing create more opportunities for our businesses to trade with them.
The Chief Secretary claimed that inward investment had increased fourfold under the Government's maladministration, but that has nothing to do with the budget settlement. His point was therefore a non-sequitur. The debate has been most frustrating—the Chief Secretary does not appear to grasp the essentials.
Let us get down to brass tacks. The hon. Gentleman might not agree, but my position is that British companies began to do more business with companies in the Republic of Ireland following its accession to the European Union and the benefits that its economy gained from that change. There is already much greater trade between this country and businesses in the accession countries. The hon. Gentleman and his colleagues cannot grasp that there is a mutual interest: we all benefit from each other's success, which is stimulated by the investment that the own resources decision makes possible.
Investment in the infrastructure of the accession countries means that their economies can grow and that they can develop, move forward and become bigger trading partners for the United Kingdom. That is a clear and plausible argument and I am sorry that the hon. Gentleman does not understand it. It is why we support the own resources decision and why I ask hon. Members to vote for Third Reading.
I am sorry that the Chief Secretary was so disparaging about new clause 1. It was a modestly phrased measure that could have improved the Bill sufficiently for us to tolerate it and extract something from the negotiations in Brussels in December 2005. As it is, without new clause 1, this is a miserable sell-out of a Bill and I shall have to urge my hon. Friends to vote against Third Reading.
Let us be clear. The premise on which the Chief Secretary's arguments have rested throughout today is that anyone who questions any aspect of what the Government negotiated in Brussels is promoting the immediate collapse of the European Union and the casting into outer darkness of every country in eastern Europe, but that is simply not true. Being an enthusiastic member of an alliance is not a reason for abandoning the interests of those whom Governments are elected to serve, but this Government did indeed abandon those interests.
In May 2005, the Government told us that the British rebate was fully justified and non-negotiable. In June 2005, it was not to be negotiated away, period. Before the Brussels summit in December 2005, however, the rebate apparently was negotiable, but only for guaranteed fundamental reform of the EU budget and of the common agricultural policy in particular. After the Brussels summit, the position was that we would give away £7 billion over seven years and much more in the future. The rebate was gone—traded for a vague and some might even think cynical promise from our European partners to review agricultural spending under the presidency of the country that is one of the largest beneficiaries of that spending.
It is clear that the French thought that the UK was making a major concession at Brussels, through a Prime Minister who, again to quote the French Foreign Minister of the time, was failing to do his job calmly
"as a British Prime Minister".
That says it all. The French believed that they had achieved a great victory in resisting even a review of agricultural spending within the 2013 financial perspective. It is not true, as the Chief Secretary asserted it was, that investment in eastern Europe is dependent upon conceding our rebate. If he believed that, how could his Prime Minister have gone into negotiations in the summer of 2005 with the position that he then took?
At a time of huge pressure on UK public spending, the Government should have stood their ground and extracted real and durable budgetary reform, as they promised Parliament and the British people they would, with a mechanism linking the own resources decision, and thus the British rebate, to genuine progress on such reform, instead of a naive wish or hope that that might happen in the future. To their lasting shame, the Government did not do that, adding to a long list of broken promises and incompetent delivery.
Does my hon. Friend share my concern that, in effect, the British people have been misled? During the general election of 2005, there was no indication from the Labour party that Britain's membership fee of the European Union would double, from a net contribution of £3.3 billion to at least £6.6 billion. Is that not a huge indictment of the honesty and integrity that we have come to expect from the Government?
My hon. Friend makes a good point. We are entitled to ask this question: when the then Prime Minister and the current Prime Minister pledged that the British rebate would be non-negotiable, in May 2005 and June 2005 respectively, were they simply being naive or was it worse than that? Did they genuinely believe that they could get through the process without conceding the British rebate, but fail to appreciate how incompetent they were at negotiation, or did they know all along that they would have to break that promise?
So £7 billion of potential UK public spending, debt reduction or tax reduction—as some of my hon. Friends might prefer—has been lost. Much worse, however, is the fact that the baseline for future own resources decisions has been shifted downwards, and the cap on the cost to the UK of the surrender of the rebate comes off in 2013. The negotiating ratchet works inexorably against the interest of the United Kingdom.
As the Government contemplate the fiscal and public service delivery challenges that face the UK in 2008, they might come to rue the day that they so casually threw away £1.9 billion a year and rising. When next we hear that this or that objective cannot be achieved because of a funding problem, the British people will remember what happened here tonight.
To Parliament's shame, we have now become complicit in this sell-out of the UK interest. The hard-fought-for rebate—our principal bargaining tool for reform of the EU budget—is being whittled away before our very eyes, and Parliament watches, apparently paralysed, as the Government betray the British people. This shameful, one single-clause Bill sums up 10 years of this new Labour Government: wasted money, broken promises and incompetent delivery. I urge my hon. Friends to vote against the Third Reading of the Bill tonight.
Given that those on the Front Benches effectively made their Third Reading speeches in the debate on clause 1 stand part, we do not need to repeat them at great length. I shall simply describe myself as a leading light in the "better off in" group. The Liberal Democrats have no embarrassment in describing ourselves as pro-European. We support British membership and constructive engagement, and we have criticised the present Prime Minister for not being constructive enough. We support enlargement and the financial adjustments necessary to make enlargement possible and to support the weaker countries in eastern Europe. We have no problem with any of that.
We also believe, however, that it is possible to hold those views while simultaneously believing that the British Government should be tough in defending British interests and British financial interests. Countries that have been in the European Union since its inception, including the Netherlands and France, have Governments who take a very tough line on budgetary matters, and there is no reason whatever why British Governments should not do the same. We also believe that the British Government have a particular mission and an obligation to pursue rapid reform of the common agricultural policy, which is damaging to British and European taxpayers and consumers and to the world trade system. They should be tough on those issues.
Our criticism of the Government is that, in these negotiations under the previous Prime Minister, they were weak and made an unacceptable deal. That is why we intend to vote tonight alongside people with whom we would otherwise not share many common views on the European question. It would have been better if the Government had accepted new clause 1, which was objectively helpful. I do not know what their motives were in rejecting it, but if they did not like it, they could have produced their own version of a scorecard to help to strengthen their negotiating position. They did not do so, however.
The outcome of all this is rather unfortunate. The Government will have made a substantial concession on the rebate. They will continue to be party to a European Union that is not reforming the common agricultural policy at anything other than glacial speed. We might well be confronted over the next few months with the collapse of international trade negotiations, caused at least in part by the intransigence of European agricultural interests. The British Government will have absolutely no leverage whatever to prevent any of those things from happening.
The certain consequence of all those things is that British cynicism about the European project will grow. We differ from the British Government in that, although we are a strongly pro-European party, we do not believe that the European project can be advanced by stealth. It has to be advanced with the support of the British public—[Hon. Members: "A referendum."] That is why we support a referendum on British membership of the European Union— [Interruption.] Let me conclude my remarks.
The danger is that we end up with the worst of all possible worlds, in which the Government win a Pyrrhic victory; they will of course push through the legislation, but in a context that will weaken overall British public support for the European project. That is a very negative outcome, and it is the main reason why we intend to vote against the Bill.
It is a great pleasure to follow Dr. Cable. Although we come from different sides of the argument, we have probably reached the same conclusions.
In the final stages of today's consideration, I want to mention how unfortunate it is that so little time has been allowed to debate a Bill that will see £104 billion of taxpayers' money spent over the next few years. It is a great shame that this evening's debate was not allowed to continue until any hour. I have to have sympathy for the Chief Secretary, who battled hard, although I am afraid he has no support on the Government Benches. He did his best while batting on a very sticky wicket, defending the indefensible. He did not deny the fact that as from 2007, we are going to have a net contribution to the EU of £4.7 billion, which is expected to be £6.8 billion by 2011. That cannot be and is not a good deal for the British taxpayer.
My most important point relates to what the Chief Secretary said at the very beginning of the debate—that the EU would implode if we did not agree to the Bill tonight. Let me quote him what Her Majesty's Treasury says about that:
"If any Member State fails to adopt the new Own Resources Decision by
Her Majesty's Treasury says that the whole EU would not collapse. The budget would remain, but on the basis of the existing formula. The Chief Secretary could therefore quite happily have agreed to the new clause tabled from the Opposition Front Bench. That is a missed opportunity, which I believe the Government will rue.
I shall be very brief, as other Members want to speak.
The Government have an obligation to ensure that every red penny of taxpayers' money is spent efficiently. That applies to the money that will be given over by the Government to fund enlargement. Fifteen years ago, I went to Mayo to go fishing, and I had the great pleasure of flying into Knock international airport. It is in the middle of an enormous great bog; it is a very beautiful bog, but a bog nevertheless, with an international airport in it. When one gets out of the plane to get a taxi, one is swept down an amazing highway—a dual carriageway with many beautiful blue signs saying "Made possible by the European Union". After about 7 miles, one reaches nothing more than a cattle track. It would be argued in Ireland that that is effective spending of European money. On being asked why on earth there should be an international airport at Knock, the taxi driver said, "Because somebody had a vision that it needed to be here". We observed rather dryly that it was probably the building contractor. Anyway, that demonstrates the sort of thing we need to guard against as we pass over this money to an expanding Europe.
The Government need to reassure the House over and over again—and prove over and over again—that every penny is being spent effectively. They need to do that because at this moment they are breaking deals with public servants left, right and centre. The Chief Secretary spoke of the importance of not breaking deals, but if somebody is a prison officer their deal has been broken, and if they are a police officer their deal has been broken. It is not impossible—I cannot believe that it is impossible—for the Government to find a few extra millions, £30 million to £60 million, to ensure that at least prison officers and police officers, who do the hardest job in the country, receive the money that they deserve.
I listened to much of the opening skirmishes of the debate on clause 1 stand part, and I am afraid that I heard nothing to convince me that it is in the national interest to give the Bill a Third Reading. I put it to the Chief Secretary that he should take his arguments down to his local pub in the constituency, and tell those who are enjoying themselves there that he has personally put through a Bill that will give the European Union an extra £7.4 billion of taxpayers' money over the planned period of the current financial perspective. I do not think he will get a very good reception.
I am afraid that it is an indictment of the House that this is almost a private occasion for the few Members who are present this evening, and the very few others whom I might be tempted to spy in the House. This is a serious matter. It is extraordinary that, at a time when the pressure is on public spending and given that the rate of growth of public services such as health and education is to be much curtailed in the years ahead, the Government have squandered such a vast sum on the notion, described to us by the Chief Secretary, that somehow we will get back the money that is to be spent in the European Union through our relationship with the European Union.
I want to explore two of those points. The idea that public spending creates prosperity was debunked in the 1970s, and has long been dismissed. There was recently a savage analysis of the efficiency of the European structural funds, showing how inefficiently and wastefully they are spent. That was just adumbrated by my hon. Friend Mr. Walker, who gave the example of Knock airport. I have nothing against Knock itself—
Of course it is a religious shrine. Perhaps the matter has something to do with the Catholic plot that was referred to earlier, and the European Union, but I had better not go there. In any event, there is no evidence that European structural funds are any better spent than other parts of the European Union budget. The European Court of Auditors has failed to sign off the EU's accounts for the last 13 years because it is so concerned about the EU's inability to account for how its money it spent.
We could have a debate about fraud related to structural and cohesion funding, but did I hear the hon. Gentleman correctly? Is he saying that there is no evidence that money from structural funds has not helped the economies of the countries that have received it? Merseyside, in my home region, has received substantial objective 1 funding over many years. Is he saying that the improvement in Merseyside's local economy is unrelated to any impact from structural funding? I find that very hard to believe.
I know that the right hon. Gentleman finds it hard to believe, but what has transformed the Irish economy, for example, is not the structural funding, but the much lower rates of taxation. It is possible, I concede, that the substantial subsidies that the Irish received in previous years allowed them to carry a much lower burden of taxation, but what is leading to the astonishing rates of growth in the eastern European countries is the liberalisation of their economies, the cutting away of bureaucratic interference from Government, and the lower rates of taxation. The fastest growing economies in eastern Europe are those with the most dynamic, enterprise-oriented tax systems. One of the things that is eroding our competitiveness is the inexorable rise of public expenditure and taxation, which will, as the shadow Chancellor, my hon. Friend Mr. Osborne, described, leave Britain in the position of having failed to mend the roof while the sun was shining during the past 10 years.
I have some relevant figures to hand. The Government inherited a national debt of £400 billion in 1996-97. That rose substantially in subsequent years, and by 2012-13—the year this financial perspective ends—we will have a public debt of £810 billion. That should be set alongside the situation in some European countries, which have no public debt at all because they have managed their economies very much more efficiently than we have.
On a point raised by the Chief Secretary, he might recall that three years ago his colleagues in Sheffield were crowing about the fact that Polestar publishing had got a £6 million grant to build a new printing plant in Sheffield. At the time, I raised the concern that that would have a direct consequence for the four existing plants, including the one in Scarborough. This week, Polestar has announced 190 job losses in Scarborough as a direct consequence of that European structural funding going into that objective 1 area in Sheffield. So it is not all good news on objective 1 funding.
I not only welcome what my hon. Friend has said, but I add that if public spending in Scotland and the north-east and north-west was the answer in securing the prosperity of those regions, they would be growing faster than London and the south-east, but they are not. The disparities between those regions and the south of England have widened during this period of Labour government. I think what we need to be looking at is differential rates of taxation throughout the United Kingdom, as the idea that we should have a unitary tax system is holding back the UK—but that is a matter for another debate.
When I think about the money that the House will be committing tonight, I look at my constituency. The Eastern Angles theatre company grant from the eastern Arts Council, for example, is being slashed by £100,000—50 per cent.—which will severely disable that extremely vibrant and capable arts and theatre company that operates throughout the entire region. I also look at the failure of the local health authority to open the Dedham surgery for want of £50,000 a year—not £7.4 billion—and at other surgeries that need to be upgraded. I look at the lamentable state of the A12, which grinds to a halt at least once a week because it is the most stressed piece of dual carriageway in the UK, yet the Government cannot find the money to upgrade it in the way that is necessary for the prosperity of my constituency. I look at the lack of money to spend on special educational needs in Essex schools, despite the fact that Essex is spending above the standard spending assessment on education. I look at the vast overspend on personal social services, particularly child welfare services, in Essex county council, which is not being funded by the Government because they are spending £7.4 billion on the European Union for no reason at all, instead of tackling these problems. This is not banging on about Europe; it is banging on about the needs of my constituency, which this Euro-obsessed Government think are less important than placating other countries' interests in the EU.
I also look at the failure to honour the pay increase of the Essex police in my constituency, which is undermining the morale of the police who are fighting for law and order. I look at the Colchester garrison, which is training for operations in Iraq; 16 Air Assault Brigade is due to go to Iraq next spring. It is meant to have 110 up-armed Land Rovers for training in Iraq; it has six of them, because this Government think it is more important to appease EU interests than to fund our own armed forces. I look at the lamentable story of what happened to Corporal Wright, who was not lifted in good time from a minefield in Afghanistan because there were no helicopters with winches in Afghanistan as there should have been in order to address that matter.
Order. The hon. Gentleman has been here long enough to know that this is the Third Reading of the Bill. He can talk about those things on other occasions, and he would be welcome to do so.
I shall sit down, but I should say that this Bill is about allocating very large sums of money to Europe instead of to those other vital national interests. It is a shame on this Government that they have such a weak European policy that they need to pay the money there instead of using it for our own people.
One of the most interesting events of today was the contribution by the interim leader, if I may call him that, of the Liberal Democrats.
I am sorry; the hon. Gentleman is the former interim leader of the Liberal Democrats. He touched on what unites many of us in this House, strange as it may seem. I profoundly believe in the comity of nations. For the four most recent centuries of this country's history, it has been vitally engaged in what happens in Europe. Our prosperity as a mercantile nation depends on trade. All those things are true. Where we have common interests, surely we should work together for them.
At the heart of this matter is the question of who governs. I am delighted to see the Chief Secretary to the Treasury in his post, but goodness knows what has happened to the Treasury. Contrary to the environmental policies of the Government, he paraded a forest-full of notes, letters and papers. They were pushed across to him along the Benches to assist him in trying to define a very curious position.
As my hon. Friend Mr. Jenkin has just said, this is about who bears taxes, how we negotiate and how we achieve the objectives of those who sent us here. What the Chief Secretary has tried to do in presenting this Bill represents an extraordinary distortion of facts that are on the record. We know what Mr. Blair negotiated and what promises and undertakings were given, as do the Liberal Democrats. This is not about Europe per se, in the sense of people being anti-Europe—that will come next week if we are to engage on a great issue. This is about now, and the Chief Secretary's characterisation of other hon. Members as having a distaff view—if I may put it like that—does no credit to the Government. Each one of us here accounts as best we can for the arguments that we support. We heard the poorest level of distillation, spin and obfuscation. He was confronted with rational arguments and, as often as not, he did not even understand them.
The proposition put during a most distinguished contribution from the Front Bench by my hon. Friend Mr. Hammond, and put by my right hon. Friend Mr. Lilley and by Dr. Cable was a rational argument as to whether the proposal was negotiated worthily and in the British interest—the interest of the people whom we represent and of whom my hon. Friend the Member for North Essex was speaking—and whether we could have done better. The judgment of most independents standing to a side would be to say that this Government did not do at all well.
In the end, we have to stand before our electorate and justify what we are doing. The tranches of money involved are huge, and we are entering a period of great uncertainty in the international situation. All of us know and recognise that, and we tremble in many instances. This Government have committed the taxpayers—the people whom we represent—to laying out sums of money, and they then come to dance in front of the House hoping that their spin will get them out of the situation. That they promised something else is neither here nor there, because they try to rewrite the story of what was promised.
That is the deceit that we have had this evening. The Financial Secretary can keep waving. I take it as an indication that she and the Chief Secretary are drowning, in the terms of the poem. There is no poetry in this debate. It is a sad reflection of how destitute the Government are in the arguments that they now advance to try to show probity. We could get a better deal and the only amendment—
It being Ten o'clock, Mr. Speaker put forthwith the Question already proposed from the Chair, pursuant to Order [this day].