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Clause 1 — EU finance decision: approval, and addition to list of Treaties

European Union (Finance) Bill – in the House of Commons at 12:34 pm on 23rd June 2015.

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Question proposed, That the clause stand part of the Bill.

Photo of Gary Streeter Gary Streeter Conservative, South West Devon

With this it will be convenient to discuss the following:

Amendment 1, in clause 2, page 1, line 18, leave out subsection (3).

This amendment removes the automatic coming into force of the Act two months after it is passed, which would be incompatible with any of the new Clauses.

Clause 2 stand part.

New clause 1—Report on level of EU budget spending

“(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 14 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 copy of a communication sent by the Treasury to the European Commission requesting a review by the European Commission of the basis of appropriations for the European Union budget, and in particular—

(a) a comparative analysis of commitment or payment as the basis for appropriations, and

(b) a study of whether alternative arrangements might offer in the longer term improved value and enhanced budgetary control.”

The Clause requires Ministers to seek a European Commission study of whether alternative approaches to funding EU activities would offer better value for money and improved budgetary control.

New clause 2—Reform of priorities within the EU budget

“(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 14 days after the date on which the condition has been satisfied.

(3) The condition referred to in subsection (2) is that the Secretary of State shall have laid before both Houses of Parliament a copy of a communication sent by the Secretary of State to the President of the European Council requesting a fundamental review by the Council of Ministers to be completed before 31 December 2015 of budget priorities, waste and inefficiency within the European Union budget.”

The Clause requires Ministers to seek a Council of Ministers review of budget priorities, waste and inefficiency within the EU budget to be completed by the end of 2015.

New clause 3—Accountability and transparency

“(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 14 days after the date on which the condition has been satisfied.

(3) The condition referred to in subsection (2) is that the Secretary of State shall have laid before both Houses of Parliament a copy of a communication sent by the Secretary of State to the President of the European Commission inviting officials to provide the relevant European affairs select committee in each House of Parliament with details of the draft European budget for each financial year before the draft European budget is agreed in the Council of Ministers.”

The Clause would require Ministers to invite European Commission budget representatives to provide details of the draft European budget to the House of Commons European Scrutiny Committee and the House of Lords European Union Committee each year before the EU budget is agreed.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury 12:36 pm, 23rd June 2015

It is a great pleasure to serve under your chairmanship this afternoon, Mr Streeter. Clause stand part, the amendment and the new clauses have been grouped, so if it is convenient I shall start with the two clauses, turn to the new clauses and finish with the amendment, which is consequential and related to the new clauses.

The purpose of the Bill is to enable the UK to give effect to the new own resources decision amending the arrangements for financing the annual budget of the European Union. The amendments were agreed at the February 2013 European Council, and the new ORD, reflecting those amendments, was adopted by the Council of Ministers on 26 May 2014.

Clause 1 is fairly simple: it adds the new own resources decision, adopted unanimously in May 2014, to the list of previous ORDs, recognised under the European Communities Act 1972, thus giving it effect under UK law. When passed, the Bill will become the European Union (Finance) Act 2015 and supersede the European Communities (Finance) Act 2008, which approved the previous ORD. Clause 2 cites this legislation as the European Union (Finance) Act 2015 and repeals the 2008 Act.

For the benefit of hon. Members, I shall explain in a little more detail what the new own resources decision, to which clause 1 refers, means. The new ORD will largely maintain the existing financing system framework, which consists of four pillars: levies and duties on trade with non-member countries in agricultural goods, including sugar; customs duties on trade with non-member countries; the yield from applying a call-up rate to a hypothetical harmonised VAT base for each member state; and a fourth resource based on gross national income—GNI. Those four pillars remain largely untouched in the new ORD, and that is no insignificant achievement. During the negotiations over the multi-annual financial framework and before, there was considerable pressure to change the financing system.

Photo of Nicholas Soames Nicholas Soames Conservative, Mid Sussex

Will my hon. Friend confirm that GNI is assessed in the same way across the whole Community?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

Yes, it is. My right hon. Friend raises an important point and I suspect that he has in mind the issues that occurred last year as a consequence of revisions to our GNI and that of other member states, which meant that an additional surcharge was applied to the United Kingdom. He will of course recall the negotiations that followed and how we ensured that payments were delayed and that the rebate applied to the surcharge. There is consistency in the application in this case and that is very important. There is suitable scrutiny and co-ordination, with Eurostat playing a role.

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe)

The various agreements have been described as a considerable achievement. Under pillar two and the rural development payments, Scotland’s payments will work out at about €12 per hectare. The EU average is €76 per hectare. Would the Minister care to define “considerable achievement” in that light?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I would certainly make it very clear that there was a considerable achievement in the 2013 negotiations that were implemented in 2014. For example, there were calls for changes to the financing system and to introduce new types of member state contributions, but the UK resisted that successfully. There were calls to introduce new EU-wide taxes, including a financial transactions tax, and the UK resisted that successfully. Finally, there were calls to reform the rebate and the Government protected that. That is a considerable achievement.

On the subject of the regional distribution of common agricultural policy receipts, it is only fair to point out that payments per hectare are only part of the story. Although Scotland receives the lowest payments per hectare, Scottish farmers also receive one of the highest payments per farm in the European Union. On average, Scottish farmers receive just under £26,000 compared with England’s £17,000, Wales’s £16,000 and Northern Ireland’s £7,000. I hope that that provides some clarity for the right hon. Gentleman.

Photo of Simon Hoare Simon Hoare Conservative, North Dorset

I note the irony that the House of Commons Library published its briefing paper on the Bill on the bicentenary of the battle of Waterloo. It notes, with its characteristic understatement, that our

“rebate is not popular with other Member States or the Commission”.

May I invite my hon. Friend to make a firm commitment to the retention of our rebate? Will he continue to argue for it and ensure that it is not part of any of the renegotiations on our ongoing membership in the Community?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

Absolutely. I am keen to make that commitment and I am grateful to my hon. Friend for making that point. Those of us who participated in the equivalent debates after the previous multi-annual financial framework was agreed and on the Act that performed the task that this Bill will now perform will recall that we spent some considerable time focusing on the fact that a large part of the rebate had been surrendered by the previous Government for little or nothing, merely a promise of reform of the common agricultural policy that had not been delivered.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I will give way to the hon. Gentleman, because I believe that he participated in that debate.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

Following on from the point made by Simon Hoare, I have said many times in this House that the deal done in 2005 was a terrible mistake. The Government have made frequent references to it. Is it not now appropriate to consider trying to regain what was lost in that deal, particularly because our net budget contributions have been rising so strongly in recent years?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury 12:45 pm, 23rd June 2015

First, I acknowledge the consistency with which the hon. Gentleman has approached these issues. If I recall correctly our debates in 2008 and 2009, he expressed clearly his dissatisfaction with the performance of the Government that he supported, in terms of surrendering part of the rebate.

The other point to make is that the hon. Gentleman should not underestimate the Prime Minister’s achievement in that negotiation. When he went to debate and negotiate on these matters, few believed that he would be able to reduce the overall budget in real terms, but he succeeded in doing so. Today’s debate is focused not so much on the expenditure side, although I think we will discuss expenditure thanks to the Opposition’s helpful amendment and new clauses—I was going to say “probing amendments”, but we shall see—but what happened was also very important on the revenue side. It was a considerable success that we were able to resist new types of member states’ contributions, new EU-wide taxes and attempts to reform the rebate. That is of some note.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I will touch on the smaller changes to the own resources decision in a moment, but first it gives me great pleasure to give way to a fellow Hertfordshire Member of Parliament.

Photo of Oliver Dowden Oliver Dowden Conservative, Hertsmere

I congratulate the Government on their success in keeping the EU budget down. Will the Minister confirm that the Government will continue to keep pressure on the EU to make sure that it continues to live within its means, not just for this budget settlement but for future budget settlements?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I will certainly make that assurance and indeed, I will set out in a little detail what we are doing in that field. I referred to my hon. Friend as a fellow Hertfordshire MP. However, if I remember correctly, at the time of the negotiation, he was part of the team in Downing Street who were involved in the undoubted success. It is characteristic of his modesty that he did not draw attention to that point, but I daresay that a lot of the credit for the successful negotiation lies in his hands.

Smaller changes to the own resources decision affect some member states’ contributions and the balance between the pillars of the own resources system. Those are somewhat detailed, but I hope it will be helpful to set them out for the Committee, because they are, in essence, at the heart of the Bill and clauses we are debating.

Specifically, the smaller changes include the following: the member states’ retention rate for traditional own resources—TOR—which covers member states’ collection costs for customs duties, is reduced from 25% to 20%. That change will have no impact on the ultimate cost of the EU budget to the UK on account of the UK rebate. For the period 2014 to 2020, the ORD also reintroduces the reduced rate of call for VAT-based contributions for Germany, the Netherlands and Sweden. Austria will revert from its reduced call rate over the 2007-2013 multi-annual financial framework to a standard call rate of 0.3% over the 2014-2020 MFF. The financial benefit of the changes to the UK depends on technical factors. Even so, on current estimates, those changes point to a benefit of approximately £150 million over the course of the MFF.

Photo of Alan Mak Alan Mak Conservative, Havant

My constituents are still reeling from Labour’s great recession. Will my hon. Friend assure me that the Bill will not result in any new taxes or new contributions from the UK?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I can certainly give that assurance. Thanks to the success that the Prime Minister achieved in the negotiations in 2013, no doubt ably assisted by my hon. Friend Oliver Dowden and others, that certainly is the case.

Photo of James Morris James Morris Conservative, Halesowen and Rowley Regis

Was not another of the Prime Minister’s substantial achievements in those negotiations to shift the debate about the future finances of the European Union on to Britain making a contribution to the competitiveness of the European Union, and making sure that resources were allocated to improve competitiveness for business?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

My hon. Friend makes a good point. He anticipates comments that I will make later relating to how we can ensure that the money is not just controlled and reduced, but better spent. There is a criticism, which I suspect is shared by Members from all parts of the House, that the money that the European Union spends in its various ways is not used as efficiently and is not as focused on improving our competitiveness as it might be. There are encouraging signs that there is a greater focus on that. I will return to that shortly.

I was running through the various technical changes in the own resources decision. I have touched on the changes to the retention rates. May I also touch on the changes in relation to GNI-based contributions?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

Before I do so, I will give way to my hon. Friend.

Photo of Simon Hoare Simon Hoare Conservative, North Dorset

I am grateful to my hon. Friend for giving way a second time; he is being very generous. My constituents in North Dorset and people across the south-west want to have confidence that Her Majesty’s Government will in no way acquiesce to a change in our rebate as part of any negotiations. We all understand that the UK’s agreement is contingent on any changes to the rebate. I invite the Minister to make the commitment that the rebate is not part of any renegotiation, that it is absolutely off limits and that this Government will always continue to defend our rebate.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I give the assurance that the Government will always defend our rebate. Perhaps it might be helpful to the Committee if I make the point that I made on Second Reading about the scale and significance of the partial surrender of our rebate by the Labour Government. According to the European Commission, the disapplication of the UK rebate cost the UK about €9 billion over the seven-year period of the previous multi-annual financial framework. Thereafter, with the abatement disapplication fully phased in, the cost to the

UK is about £2 billion a year. That is a significant sum, particularly given the fiscal circumstances that we continue to face.

Frankly, the question of what was achieved in return for the surrender of that partial rebate might be asked. Perhaps we will hear an answer to that later this afternoon, but I have not heard a convincing answer yet.

Photo of Kevin Foster Kevin Foster Conservative, Torbay

The Minister has outlined how the European Union is currently funded through contributions from member states. Some in the European Parliament argue that that system should be replaced by direct taxes levied by the European Union. Will the Minister confirm that the British Government would resist any such move?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

Yes, we would resist such a move. It would be a fundamental change to the nature of our relationship with the European Union, and one that would go in entirely the wrong direction for the United Kingdom. There were calls in the negotiations for such a step to be taken. There were calls, for example, for a financial transaction tax to be introduced to finance EU spending. We resisted that. The Prime Minister was very clear in ruling it out from any deal.

Photo of Mark Garnier Mark Garnier Conservative, Wyre Forest

My hon. Friend talks about the financial transaction tax, but the City is an incredibly important contributor to the UK economy and it has a significant turnover. Will he assure us that the Government will not allow the European Union to attack the City from a different direction as it looks for alternative sources of revenue from the jewel in our economic crown?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I certainly give that assurance. There was a strong push for a financial transaction tax, which would have had a particular impact on the United Kingdom, given that we have the pre-eminent financial centre not just in the European Union, but in the world. That could have been damaging for the City of London. We resisted it and we will continue to take that approach.

To make a broader point—although I will not go too far down this route, Mr Streeter—it would be more helpful if there was an acceptance in the European Union that the City of London is a jewel in the crown, to use my hon. Friend’s phrase, not just of the United Kingdom, but of Europe as a whole. We should have the pre-eminent financial centre in the United Kingdom, and trying to damage it would be disadvantageous to all within the European Union.

Photo of Antoinette Sandbach Antoinette Sandbach Conservative, Eddisbury

Will the Minister welcome the confirmation from the Office for Budget Responsibility that in cash terms, the payment from the UK will be the same in the 2019-20 financial year as it is in 2014-15, which in real terms is a reduction of 7%? Will he encourage the Government to ensure that my constituents in Eddisbury do not pay a greater proportion of their taxes into an ever-increasing European budget, and to seek further reductions of a similar scale?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

My hon. Friend is absolutely right. It is noticeable that our contributions are lower than they were in the last year of the previous multi-annual financial framework, not least because of the achievement of the

Prime Minister in February 2013. Of course, we continue to suffer the unfortunate effects of the previous negotiation, when part of our rebate was lost, amounting to £2 billion a year. None the less, we have made considerable progress thanks to the steps that were taken in 2013.

For the period from 2014 to 2020, the ORD reintroduces reductions in the GNI-based contributions of the Netherlands and Sweden, and introduces a reduction in those contributions for Denmark. The UK will contribute to those small corrections, but that will largely be offset by changes to other corrections.

Lastly, the ORD lays down the own resources ceilings at 1.23% of total member states’ GNI for payments and 1.29% for commitments, and sets out the method for calculating subsequent changes to those ceilings following the introduction of the European systems of accounts 2010 by all member states.

The Bill will give UK approval to the new ORD and is the last UK action that is necessary to deliver the 2013 deal on the budget.

Photo of Matt Warman Matt Warman Conservative, Boston and Skegness

I admire the level of detail we are going into in this debate and I know that we all find it fascinating, but my constituents often say that they would like to hear details that they can understand, such as household-level figures. I note from the briefing that we are paying the equivalent of a £10 a month subscription per person. Will my hon. Friend confirm that when we talk about the renegotiation, we will do our utmost to talk in language that everyone outside this House can understand, as well as going through the fine detail?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

My hon. Friend makes a good point. I confess that I have set out rather detailed points. I know hon. Members in the Chamber will be capable of understanding them, but they will not necessarily cause great excitement among the many hundreds of thousands if not millions who are currently viewing the debate. My hon. Friend puts his view of the nature of our contributions in clear language. It is important that we have a Government who are determined to ensure that we get a good deal within the European Union and that we are careful in how we spend money there.

Photo of Thomas Tugendhat Thomas Tugendhat Conservative, Tonbridge and Malling 1:00 pm, 23rd June 2015

I note again a matter that is of great interest to the electors of Tonbridge, Edenbridge and Malling. The budget will be 7% lower in real terms by 2020, which is very welcome, but will the Minister say more on the consequences to the EU budget of the UK’s position, because we are rather hoping that 7% is the beginning and not the end?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

My hon. Friend touches on the point made by my hon. Friend Antoinette Sandbach, who drew attention to the fact that our net contributions are forecast to be lower in 2019-20 compared with 2013-14. In fact, our net contribution in 2019-20 will be £9.3 billion compared with £10.2 billion in 2013-14, which is clearly lower in cash terms but also lower in real terms. My hon. Friend Tom Tugendhat raises the issue that we should make a strong case for budget discipline. He wants to ensure that we appreciate that we are dealing with taxpayers’ money. Whether UK taxpayers’ money or taxpayers’ money from the wider EU, that money has to be spent wisely. That is a good point, and I will return to it later when we deal with the Labour new clauses and amendment.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I will give way to the right hon. Gentleman. I see he has made more contributions in this Parliament than anyone bar a handful of senior Ministers.

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe)

I am pleased to say that I have drawn level with the Chancellor on this morning’s assessment.

I admire the dead bat that the Minister is showing to his Back Benchers, but can he answer this point: is it the Prime Minister’s objective in the European renegotiations to lower the UK’s budget contribution, and if so by how much?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

The right hon. Gentleman refers to my dead bat, but I thought I had played a flourishing cover drive. The Prime Minister has set out objectives for a renegotiation, which will then be taken to the British people, who will decide our future as members of the European Union. We believe we should do a wide range of things to ensure that Europe works better for its members. We have consistently argued the case for fiscal discipline and we are not alone in making that case. Indeed, the Bill itself demonstrates that there is strong support for a fiscal disciplinarian approach within the European Union—the fact that we were able to negotiate a reduction in the multi-annual financial framework was a considerable achievement. In those negotiations, we had the support of member states such as Germany, France, Sweden, the Netherlands, Denmark and others.

Photo of Alan Mak Alan Mak Conservative, Havant

My hon. Friend Simon Hoare made a very important point about protecting the UK’s rebate, which is important to my constituents in Havant and throughout the country. Will the Minister confirm how much of the UK rebate the Labour Government gave away?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I will certainly make that point. It was estimated by the European Commission to be of the value of €9 billion over the previous MFF period. In this MFF period, it would be in the region of £2 billion a year, which would be a considerable loss. The Government will not be repeating that.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

I would like to take the Minister back to the intervention of Alex Salmond, because the Minister did not really answer him. In an article in The Sunday Times this week, one Conservative MP said of the Prime Minister’s intentions that he was keeping things up his sleeve, and that:

“He’ll try to negotiate a lower net contribution to the budget.”

It is definitely being said that the Prime Minister is holding that in reserve. Will the Minister comment on that?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

We have consistently argued the case for money being spent more wisely and for greater European Union public spending restraint. We have already made progress with that argument—we made progress in 2013 and the Bill relates to the negotiation, although it is on the revenue rather than the expenditure side. We will consistently argue that case.

Photo of Mark Garnier Mark Garnier Conservative, Wyre Forest

I am grateful to the Minister for giving way—he is giving us a lot of his time. He mentions fiscal prudence and spending taxpayers’ money wisely. Two things that epitomise the wastefulness of the European Union are the Strasbourg circus—the waste of money moving the whole Parliament to Strasbourg—and the fact that the accounts have not been signed off for some two decades. The Prime Minister is working very hard to achieve fiscal prudence, but does the Minister agree that the mood around the whole EU is behind him in dealing with that? The problem is not unique to the UK. The Prime Minister has the wind in his sails and support from the rest of the EU to deal with those problems.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

My hon. Friend makes an important point. I would perhaps go further: it is not just member states that recognise that things need to change and that there needs to be better value for money. Vice-President Georgieva, who has responsibility for the budget, also recognises the need to ensure that money is spent in a better way. The Prime Minister has consistently set out that there are two sensible objectives: to cut the whole budget and to protect the rebate. We will continue to make that case.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I thank the Minister for giving way once again. Matt Warman, who is not in his place, made a useful point about expressing our contributions in terms that the citizens will understand—contribution per head, per month or whatever. Would it not be useful to look at the expenditure side of, for instance, the common agricultural policy, and say how much that costs in net terms per head of population, and how much it has cost over many decades in higher food prices? People would be very interested to know that.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

The hon. Gentleman draws me into deeper waters and wider issues. Perhaps I should resist, Mr Streeter, before you advise me not to spend too much time on the common agricultural policy and some of its costs. It is worth pointing out that the CAP as a proportion of expenditure by the EU is falling and has fallen fairly significantly. The hon. Gentleman’s point is about making things clearer and ensuring that the British public have a better understanding of where their money is spent. There is a wider point, because that does not apply only to EU contributions. I am sure that he and all hon. Members welcome the fact that Her Majesty’s Revenue and Customs sends out tax statements to the British public so that they can see details of where money is spent in various Government Departments and the details of the money spent on our net contribution to the EU.

The scrutiny Committees of both Houses closely scrutinised and cleared the proposal for the new ORD, which was agreed unanimously by member states in May 2014. The Bill and the Prime Minister’s 2013 deal demonstrate that, working with allies, we can achieve change in Europe, and secure a good deal for the UK and for Europe. I commend the clauses to the House. They should stand part of the Bill.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I will certainly give way, before I deal with the new clauses.

Photo of Bill Cash Bill Cash Conservative, Stone

I am happy to wait if the Minister wishes to deal with the new clauses. I will come back at that point.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I am grateful to my hon. Friend. New clauses 1, 2 and 3 and amendment 1, all tabled by Barbara Keeley, would require the Treasury to undertake a series of actions prior to the Act coming into force. New clause 1 would require the Treasury to inform both Houses that it has formally requested a review by the European Commission into alternative ways of running the EU budget and a comparative analysis of commitments and payments as the basis for appropriations for the budget. New clause 2 would require the Treasury to request a fundamental review by the Council of Ministers of EU budget priorities, waste and inefficiency. New clause 3 asks for the Chancellor to issue an invitation to the Commission to provide further details of the draft budget to scrutiny Committees. Amendment 1 would delete subsection (3) of clause 2, which would mean that the Act would not come into force until 14 days after the conditions specified in each new clause were met.

We recognise the concerns underlying the amendments. Nevertheless, the hon. Lady will recall that the Bill relates exclusively to the financing of the EU budget, while the amendments relate to the separate, although equally important, issue of EU budget expenditure. On that basis alone, we reject them.

Photo of Thomas Tugendhat Thomas Tugendhat Conservative, Tonbridge and Malling

My hon. Friend talks clearly about financing and the details of various percentages going up or down. Does he recognise that what he is really talking about is setting the tone on the agreement we have in the European Union? The UK can play its part as a good partner in the EU, but the EU can help to play its own role in promoting what we all recognise is a growing economy in Europe, and not just a redistribution of wealth.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

The deal that the Prime Minister reached in February 2013 was clearly a success, as our negotiating objectives were met. I am sure my hon. Friend and most of us would hope and expect similar success to be achieved in the months ahead.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

I invite the Minister to remind himself of a similar debate we had in January 2008, in which he and his hon. Friends on the then shadow Treasury team tabled a strikingly similar new clause that asked for a report on the review by the European Commission covering all aspects of EU spending. It was a very robust debate and he was a signatory to that new clause. He rejects my new clause, but it is very similar to the one he tabled in 2008.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I am tempted to point to the remarks made by the hon. Lady’s colleagues in setting out the reasons why that new clause should have been rejected. She might not have been persuaded, but I am tempted to say that six years on, after much reflection, I can see some value in them. The stronger argument I would perhaps make is that in contrast to what happened some years ago, when the previous Labour Government negotiated away part of our rebate, we have just had a successful negotiation in 2013. Let me set out the progress that is being made on that agenda. If I may, I will give a little detail on the substance, putting aside the point that the Bill focuses on the revenue, rather than the expenditure, side of things.

Photo of Bill Cash Bill Cash Conservative, Stone 1:15 pm, 23rd June 2015

On the reference in new clause 3 to

“the relevant European affairs select committee in each House of Parliament” as my hon. Friend knows, the European Scrutiny Committee always goes through all the budgets, makes reports regularly and has the power to invite anybody, including officials from the European Commission. In addition, it receives explanatory memorandums from the Government—in fact, from the Minister himself. I would like to make some further remarks about this later, but I agree very much with what he says in rejecting the Opposition’s proposals.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I am grateful to my hon. Friend for those remarks. Let me come straight to new clause 3, as he has raised that point.

Along with many across Europe, we share the concern that lies behind new clause 3 that the EU is not sufficiently accountable to EU citizens. Hon. Members will need no reminding that the Prime Minister has already made it clear that strengthening the role of national Parliaments is a central tenet of his reform programme. Within the existing legal framework, the Government already take the role of national Parliaments in scrutinising EU proposals very seriously. That is why, when the European Parliament requested the formation of a high-level group on own resources to review the EU financing system, we insisted that national Parliaments, as well as the European institutions, were given a voice as part of the consultation. We therefore amended the joint declaration on the formation of the group explicitly to take account of input from national Parliaments.

We do all we can to ensure the transparent and effective scrutiny of each year’s annual budget negotiations. An explanatory memorandum is deposited as soon as possible after the publication of the draft EU budget each year. That is followed by debates in both Houses and regular ministerial updates at significant stages of the negotiation process.

We are committed to working with both scrutiny Committees to make this process as efficient and effective as possible for all parties. However, we believe that requiring the Government to write to invited officials to appear before the scrutiny Committees would add little to the scrutiny process and would be a very peculiar precedent, for all the reasons set out by my hon. Friend Sir William Cash. It would add little because the Committees can, and have, invited officials to appear before them. For example, in June 2014, Nadia Calvino, the Director-General of the European Commission budget, gave evidence to the Lords EU Economic and Financial Affairs Sub-Committee.

It really should not be the place of Government to determine who the scrutiny Committees should see. It is for the Committees of both Houses to decide for themselves who should appear before them and when. It would be a peculiar precedent for the Executive to begin to interfere with that freedom, no matter how benign the initial intention.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

I appreciate the point made by the Chairman of the Select Committee, the hon. Member for Stone, but the Minister cannot have it both ways. In a debate in October 2012, Greg Clark, speaking for the Government, complained strongly—I referred to this in a previous debate—that Ministers had asked the Commission to model costs of €5 billion, €10 billion and €15 billion in relation to staffing. That very reasonable request was bounced back with the very insulting comment:

“We declined as it’s a lot of work and a waste of time for our staff who are busy with more urgent matters…we are better educated than national civil servants. We’re high fliers, not burger flippers”.

If the Minister is expecting us to believe him, when such a simple request on a staffing issue is not taken seriously, then we do have some points to make.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I will return to that point. My remarks, when the hon. Lady intervened, were in respect of new clause 3 and the European Scrutiny Committee. I have been very clear that it would be a curious thing to do to place this in legislation and for the Executive to take that role upon themselves. I very much echo the remarks made on that by my hon. Friend the Member for Stone.

Photo of Bill Cash Bill Cash Conservative, Stone

Let me add one further point before I deal with the matter in substance. The European Scrutiny Committee’s most recent report, which in this respect has been accepted by the Government, recommended that each Committee, including the Treasury Committee, establish a rapporteur to consider these questions. We could effectively work with the Treasury Committee to ensure, if necessary, that there would be an even deeper examination of the Treasury aspects.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

We obviously welcome scrutiny in this area. If the European Scrutiny Committee or other Committees seek the Government’s support, for example, in bringing over Commission officials to give evidence, the Government would of course gladly support them. Let me offer that hand of co-operation if I may, but I do not see a strong case for placing this within the legislation. Indeed, I would go further and say that it would be inappropriate for us to do so. That deals with new clause 3.

We do not believe that the proposal, which would require the Government to write to various European institutions to invite them to undertake a review of one or other aspect of the EU budget, would really add to the work that the Government have undertaken and continue to undertake to improve the expenditure of the EU budget.

Photo of Edward Argar Edward Argar Conservative, Charnwood

My hon. Friend Tom Tugendhat rightly highlighted the welcome reduction in the contribution, which is good news for my constituents in Charnwood, as it is for his. That was in stark contrast to results achieved in negotiations by previous Governments. As the Minister and my hon. Friend Mark Garnier mentioned, while the focus may be on revenue and not expenditure, it is important that the money is well spent. Will the Minister reassure me that he will continue to push the case for reform of how the EU spends money to ensure that it is well spent, well audited and that the accounts are signed off?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I thank my hon. Friend for his excellent intervention. The answer to his question lies at the heart of our response to new clause 1. He raises an important point.

New clause 1 requires the Government to write to the Commission to review the basis of appropriations for the EU budget to see whether “alternative arrangements” would provide better value for money. Although the link between appropriations and value for money is an important one, it is not of the first order. The Government’s first priority is to control spending directly, not through the system of appropriations. Cutting low-value expenditure is the first and most important way of improving the quality of EU spending.

In delivering an historic real-terms cut to the budget, the Government took a decisive step. Within a smaller budget, we also made sure that expenditure was reoriented towards areas that provide higher value for money. Spending on the common agricultural policy will fall considerably as a proportion of the total budget, while spending on research and development and other pro-growth investment will increase. So it is possible to operate within the system of appropriations, if appropriate control is in place.

The new clause none the less raises the question of whether the system of payments and commitments is appropriate for delivering value for money. It is a question that we must ask. It is true that it is an unusual budgeting system and it is not the way in which the UK Government budget. If the EU were starting from scratch, we would not advocate using that system. Yet I do not think anything would be gained by requesting a review of the system—for one simple and compelling reason. The proposed review in new clause 1 has already been set in motion by the new Budget Commissioner, Vice-President Georgieva, through her recent “budget for results” initiative. We obviously cannot say what the review will include, but its terms of reference are widely drawn, providing ample space to review the current budget system, including the system of appropriations, and to explore possible alternative approaches that would offer better value for money and improved financial management.

The UK has publicly welcomed that initiative and has shared its expertise. The Chancellor has made it clear to other Finance Ministers during ECOFIN meetings that that is the UK’s position. The initiative will involve member states, the European Parliament and the European Court of Auditors.

Photo of Wes Streeting Wes Streeting Labour, Ilford North

I am grateful for that update, but perhaps the Minister will tell us what the Government are going to do proactively in terms of their own priorities to deliver the value for money that he talks about, beyond the generalities that we have heard all morning about better value for money, better spending and better priorities. Can we have some specifics? How will the Government exert real influence on that important review?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

The most important thing we can do is reduce the EU budget because that then focuses the mind of the European institutions to ensure that the money they are able to spend is prioritised in the right way. I come back to how the money is spent and the importance of focusing more on items that will help ensure a more dynamic European economy—more on research and development, for example—and proportionately less on the common agricultural policy. That is something that all hon. Members should support. That has been achieved.

Photo of Graham Jones Graham Jones Opposition Assistant Whip (Commons)

I think the Minister has answered my question. It was about the common agricultural policy, and he has just walked into the answer.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

Walked into it? I ran with enthusiasm into the answer, and I am glad that I anticipated the hon. Gentleman’s point.

Photo of Kevin Foster Kevin Foster Conservative, Torbay

I thank the Minister for generously giving way to me a second time. Does he agree that the European Commission did not propose a single euro of savings when the negotiations started, so it would be strange to ask it to conduct the review to secure better value for money, as the new clause demands? In essence we would be asking the poacher to review how the poaching is getting on.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I take my hon. Friend’s point. We are, I hope, moving in the right direction. The new Commission has been in place for the past few months or so, and the early signs are—I shall return to the point—that it appears to be more focused on the task. I think there is a link: there was a reduction in the EU budget, which has somewhat focused the mind.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

Following what Kevin Foster has said, would it not be sensible and appropriate for our Government to carry out a comprehensive review of how we think the budget should operate, and make that a firm public submission, whatever is undertaken by the EU itself?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I am grateful for the hon. Gentleman’s intervention, which he makes in a characteristically constructive way. Clearly, it is important for us to work with other like-minded member states to ensure that we get the focus we need and the prioritisation of expenditure in the areas that add the most value. There are different ways of achieving that, and we can discuss that. It is only fair to note, however, that some progress has been made, as I shall touch on in a few moments.

New clause 2 imposes a requirement on the Government to request a review by the Council of Ministers of the EU

“budget priorities, waste and inefficiency” in advance of ratification. The new clause relates not to financing, but to expenditure, so I again point out that we will reject it. Although the Government recognise the need to cut down on wasteful spending, requiring the Government to write and ask for a review of waste and inefficiency would add little to what the Government are already doing in this area. We know that there is waste and inefficiency in the EU budget. We need action, not words—and action is what the Government have taken. Our most important step has been to cut the EU budget. Just as Governments across Europe are making tough decisions to consolidate public finances, the multi-annual financial framework deal negotiated by the Prime Minister has forced the EU to make tough decisions to bear down on waste and to economise. By imposing restraint on the EU budget, we can create a culture change in the Commission. The days of Commission officials measuring their success by how much of the budget they have been able to spend should be behind us.

Photo of Peter Grant Peter Grant Scottish National Party, Glenrothes 1:30 pm, 23rd June 2015

I could understand the Government’s reluctance to incorporate the amendments in legislation if they did not deal strictly with the narrow interpretation of the Bill, but in view of what they ask the Government to do, I cannot see why the Government should be reluctant to take any of those actions. Why do they not simply give an undertaking to do so? Then we would not need the amendments, and we could all agree on something.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

In the case of new clause 2, which relates to how we deal with the way in which the Council of Ministers works, we are making progress and taking action, which includes cutting the budget. In the case of new clause 1, I do not need to undertake to write a letter calling for the Commission to do something that it is already doing. As for new clause 3. I have already made it clear that I do not think it would be appropriate for us to impose on members of the European Scrutiny Committee something that is a matter for them.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

I am slightly surprised that the Minister is unable to take on board what was actually a very sensible suggestion. He says that overall budget restraint is sufficient, and that there is no need for a focus on “waste and inefficiency”. As I mentioned earlier, back in 2012, the right hon. Member for Tunbridge Wells tried to introduce measures to reduce the staffing budget and asked for modelling, but that request was rejected. Commission representatives should not feel that they can bounce back to UK Ministers simple requests that really would help decision making.

Time and again, Members on both sides of the House raise issues relating to the Commission’s staffing costs. If that is the response that the Minister has been receiving—he is not admitting it today, but the right hon. Member for Tunbridge Wells mentioned it during another debate—we really must press the matter. It is not good enough simply to accept that everything is fine and we do not have a problem. We must push the case for enhanced scrutiny.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

We care a great deal about eliminating waste and inefficiency in the EU budget. The question is how we should do that. Let me say first that, if we can reduce the MFF, that will place a much greater onus on the Commission to eliminate wasteful expenditure.

The hon. Lady made a perfectly fair point about what happened back in 2012. However, the Prime Minister’s negotiation triumph in 2013 has reduced the MFF, and we are now seeing signs—which we were not seeing three years ago—that the Commission is focusing much more on the issue. Vice-President Georgieva described the 2015 budget, which was agreed last December, as

“a budget of responsibility… a tight budget that reflects the tight fiscal conditions in our Member States.”

She said that it was

“a very focused budget, focused on the priorities that we have established in the new Commission.”

She added:

“It is directed towards investments in competitiveness, for instance supporting the innovative nature of our businesses. It is also a budget where tight controls on spending will allow us to achieve the best possible results.”

Vice-President Georgieva’s “budget for results” initiative, which focuses on better rather than more spending, has come about as a direct result of the imposition of restraint at the top. The United Kingdom is engaging constructively with the initiative, and is working actively with the Commission to ensure that momentum is maintained through regular meetings at political and technical levels. We are working with our allies to increase support for the initiative and to ensure that all member states are represented in discussions. We look forward to the first meeting of the inter-institutional working group in mid-July and to contributing to the “budget for results” conference in September.

Because of what we have achieved in reducing the budget, we are seeing a culture change, but we need to ensure that the momentum is maintained. If the Labour party supports that, I am delighted, but we must remember that it was Labour that surrendered part of our rebate and failed to impose the discipline that we needed.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

Again, I am surprised by the Minister’s response. Let me remind him of a point that I made on Second Reading. When Labour Members voted with rebels in the Conservative party, they strengthened the Prime Minister’s hand before he went into negotiations by insisting that the MFF be cut. The Minister really ought to acknowledge that. Surely it helps if, on every occasion, Members in all parts of the House can be strong in saying that we want enhanced scrutiny, and that is what we are trying to do through our new clauses today.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I cannot but throw back the record of the Labour Government in that regard.

Photo of James Cartlidge James Cartlidge Conservative, South Suffolk

It is difficult to listen to what Labour Members are saying about new clause 2 without remembering what happened when they were in government in the United Kingdom. Let us not forget the huge increase in the number of people they employed, including outreach workers and people with non-jobs. Given the vast inefficiency and waste of all those years, it seems a bit rich for Labour Members to expect us to take lectures on the subject.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

That is a very good point. However, you would not wish me to be detained too long, Mr Streeter, by the fact that various candidates for the leadership of the Labour party appear to be recognising that too much money was spent before the crash, and that not all of it was spent in an efficient manner.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I give way to the hon. Lady, who may share that view.

Photo of Carolyn Harris Carolyn Harris Labour, Swansea East

Does the Minister believe that enough is being done to ensure the transparency of budget decisions that are made at EU level?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

The hon. Lady has asked a good question. In the context of the review that the Commission is undertaking and the focus on a budget for results, transparency is certainly important. The Government’s record is clear: we want more transparency in relation to all expenditure, whether at UK or EU level, and I think that more can be done in that regard.

The hon. Member for Worsley made an important point about administrative expenditure. As part of the MFF deal, EU staff salaries were frozen in 2013-14, and EU institutions committed themselves to a 5% headcount reduction by 2017 and an increase in statutory pension age to 66 for officials who started work in or after 2014. I would be the first to accept that those reforms do not go far enough, but, working with like-minded member states, the Government will continue to press the EU institutions to show maximum restraint when it comes to administrative expenditure.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

Are this Minister and other Ministers having more success than their right hon. Friend Greg Clark had back in 2012, when the European Commission dismissed his very reasonable request for some modelling on staffing costs? Are the Commissioners being any more helpful nowadays?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

Some progress has been made since then. The Commission has improved its transparency record, partly thanks to the Government’s ongoing work. In particular, it released a payments plan containing much more detail on payment forecasts. I accept that we can go further, and that UK citizens expect more, but requiring the Government to write a letter inviting officials to attend Select Committee meetings will not really deliver that. What is required is constant vigilance and discipline. We have shown that, and it is delivering results.

Photo of Bill Cash Bill Cash Conservative, Stone

Earlier, the hon. Member for Worsley raised the question of how the proposals for budget reduction came about. As I am sure the Minister remembers only too well, I was one of the so-called rebels, although actually we were not really rebels at all: all that we were doing was asking the Government to listen, which is exactly what happened, because our amendments were accepted. The then Financial Secretary to the Treasury—or perhaps the Economic Secretary—paid tribute to us for having presented the proposals, and everything was hunky-dory.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I am grateful for the constructive tone that my hon. Friend brings to the debate; he has a history of so doing. He has argued for greater efficiency and transparency in the expenditure of the European Union for many years, and I am grateful to him for that.

I should also point out that we are providing technical assistance to the Commission as it considers all the options for enhancing performance on the budget.

We are sharing our expertise in areas such as value for money, spending area objectives and improving budgetary performance—for example by removing adverse incentives and improving accountability and transparency.

Photo of Luke Hall Luke Hall Conservative, Thornbury and Yate

My constituents were aghast when the previous Labour Government gave away our rebate. Will the Minister confirm that the Bill will ensure that there will be no further such concessions as long as this party is in power?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I am more than happy to give my hon. Friend that assurance. When we debate the scrutiny of expenditure, it is worth bearing it in mind that allowing us to make a bigger contribution than we otherwise would involves a cost to the UK taxpayer. The fact that budgets were allowed to increase significantly also means that the focus on getting value for money could be lost. If we are to eliminate wasteful expenditure, it is important that we bear down on the overall budget, because that has a big impact. That is a clear area of difference—if I may put it that way—between the two parties. We have placed a consistent focus on controlling expenditure, whether at UK or EU level.

The next opportunity to look wholesale at the priorities of the EU budget will be the mid-term review of the MFF. That review is required under the agreement reached on the MFF, and it must take place by 2016. The Opposition’s calls for a review appear to add little to the review that is already planned. The Government will engage constructively with the Commission, the Council and the European Parliament to look at further ways in which spending can be improved.

In the meantime, the Government are taking every opportunity to bear down on wasteful spending and to highlight it where it is identified. That is reflected in our having voted against the discharge or approval of the EU budget for the past four years. Until the European Court of Auditors is able to give a positive statement of assurance on the EU accounts, we will continue to work with allies in calling on the Commission to do better. I note that this position is not the one that the previous Labour Government took.

Together with our allies, Sweden and the Netherlands, we have issued a joint counter-statement calling on the Commission and member states to take proactive steps to reduce the level of error in the EU accounts by simplifying regulatory frameworks and increasing the training and guidance available to national officials. By supporting the European Court of Auditors’ calls for more focus on performance and added value in the EU budget, we have helped to change the Commission’s focus from compliance to results.

The Government are also playing their part in the work being undertaken to simplify the rules governing the implementation of structural funds. In the past, the Commission’s focus has too often been on compliance, fostering a tick-box culture with little care for performance. A structural fund simplification agenda was launched earlier this month by Commissioner Cretu, and those involved will meet for the first time next month. The budget for results initiative, to which I have already referred, will provide another valuable opportunity for this Government to continue to insist on maximum efficiency and results in relation to EU spending.

Of course, we are also keeping up the pressure on the Commission in the annual budget negotiations and in response to in-year requests for more funding. We have a strong track record of pushing back against draft amending budgets, to ensure that value-for-money criteria are met, and we regularly challenge the Commission to identify opportunities for reallocation rather than coming to member states with requests for more money. The Government are constructively engaging with the work that I have outlined, in order to ensure the best possible deal for the United Kingdom.

Photo of John Redwood John Redwood Conservative, Wokingham 1:45 pm, 23rd June 2015

Has my hon. Friend seen the work of the so-called five presidents of the euro area, which sets out how they wish to press for full fiscal union, with a euro Treasury and a euro budget under central control. Will he assure the Committee that we will have nothing to do with any of that?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

Yes; my right hon. Friend makes an important point about the euro area. No doubt he will have heard the speech delivered by my right hon. Friend the Chancellor of the Exchequer at the Mansion House a couple of weeks ago, in which he made it clear that one of our priorities in the UK’s negotiations ahead of any referendum will be to ensure that the “euro-outs”—the European Union member states that are not in the eurozone—are properly protected and do not find themselves disadvantaged by the eurozone countries working together to the disadvantage of the “euro-outs”. That is a real priority for the United Kingdom.

Photo of Bill Cash Bill Cash Conservative, Stone

I am sure that my hon. Friend appreciates the difficulties inherent in this matter. It is all very well to want to disaggregate the eurozone from the non-euro member states, but the reality is that we are all part of the same European Union. Any attempt to make a change of this kind would involve a fundamental change to our relationship with the EU and would therefore require a treaty change by any reasonable standards. Does he appreciate how serious the position would be if we neither sought nor achieved that objective?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

It is important that we meet that objective.

On the subject of the report, I would make the point that we benefit from the single market and do not want to stand in the way of the eurozone resolving its difficulties, but we will not let the integration of the eurozone jeopardise the integrity of the single market or disadvantage the United Kingdom in any way. That is one the important objectives in our negotiation with the European Union, and it is exactly the point that the Chancellor of the Exchequer was making in his Mansion House speech. My hon. Friend Sir William Cash and my right hon. Friend John Redwood are right to raise the importance of this point, which we fully recognise.

Photo of John Redwood John Redwood Conservative, Wokingham

The five presidents’ press release and work programme, which will result in a White Paper, are about taking over the European Union budget and using it for transfers throughout the eurozone. Clearly, Britain does not want to be part of that. I was asking the Minister about the budget, not about single market regulations.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

The point about our position applies across the piece. To be fair to my right hon. Friend, certain eventualities that he predicted many years ago have come to pass. Because of the current situation in the eurozone, substantial reform could well be needed so that the members of the single currency are able to co-ordinate fiscal policy to a greater extent, with greater fiscal transfers and so on. That raises issues for the eurozone members which do not apply to other members of the European Union that have access to the single market but would not wish to partake in any such arrangement. We would need to ensure that if that is the direction the eurozone goes in, the position of the euro-outs is protected. Ensuring that access to the single market remains in place for all 28 member states is an important part of that, which is why I mentioned it. We need to ensure that our position is protected. That is the point I wish to make, and I fully understand the points that my right hon. Friend is making.

Finally, amendment 1 has been proposed in order that the conditions set out in new clauses 1, 2 and 3 are consistent with the terms of commencement in the Bill. I have explained to the Committee why we will not be supporting the new clauses, and we thus reject the amendment. While I have the opportunity to do so, I wish to identify a typographical error in the explanatory notes. The second line of paragraph 6 refers to a VAT-based rate of call of 15% for Germany, the Netherlands and Sweden, whereas it should have read 0.15%. I draw the Committee’s attention to that in case it caused consternation among right hon. and hon. Members.

In conclusion, let me assure the hon. Member for Worsley that, having made important progress in 2013, this Government are focused on ensuring maximum restraint, budgetary control, value for money and transparency in EU spending. I therefore welcome the spirit of her proposals, but requiring the Government to request that the Commission or the Council of Ministers review these issues adds little to the real work that has been done and continues to be done to improve the working of the EU budget. That work began with the Prime Minister’s historic deal, which cut the budget in real terms and protected the current system of financing—we should not forget that that is what this Bill is about. That work continues through the budget for results, through the Government’s continued engagement on the annual budget and through the discharge of the budget, and it will continue during the mid-term review of the MFF.

With those few, brief introductory remarks, I urge the hon. Lady not to press her proposals to a Division and I urge hon. Members to support the clauses set out in the Bill.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

Before we go any further, may I point out that my constituency is now called Worsley and Eccles South? The people of Eccles would rightly be very upset if we left them out of the equation; Eccles is a very important town in my constituency.

I rise to speak to the new clauses standing in my name and those of my hon. Friends. We are dealing with a slight complexity, in that the Bill is simple but drafted in such a way as to make it complex to amend. Amendment 1 is therefore a technical paving amendment which can bring in the new clauses, so it is that amendment that we will push to a vote, if necessary.

The Bill relates to agreement of the own resources decision that will be incorporated into UK law, based on the agreement reached at the February 2013 European Council. The Minister covered that at great length over the past hour and 20 or so minutes. Decisions on UK contributions reaching €14 billion are brought into sharper focus in a week when Ministers are discussing cuts to tax credits for the low-paid and have not been prepared to rule out cuts to financial support for disabled people. We find ourselves in a serious and austere financial context, so we must ensure that we look at every aspect of value for money, budgetary control and the reform of priorities within the EU budget.

When we debated the MFF in this House in October 2012, the Government’s motion talked about agreeing that we must see

“significant improvements in the financial management of EU resources by the Commission and by Member States and significant improvements in the value for money of spend”.—[Hansard, 31 October 2012; Vol. 552, c. 295.]

The last debate contained many examples, some of which I shall refer to, showing that we are not there yet. I am sure the Minister would agree, so what we are simply trying to do with the new clauses is find ways in which we can enhance value for money assessments, budgetary control and the reform of priorities. That is very important to many of the Members in the Committee today and to Members throughout the House.

The proposals standing in my name and those of my hon. Friends will assist greatly in ensuring that reports are made to this House on value for money and budgetary control, and on budget priorities and waste and inefficiency within the EU budget. Examples have been given in interventions that give us an understanding of the extent of concerns about this out in the country—which we explored on Second Reading—and those can only increase.

Photo of Thomas Tugendhat Thomas Tugendhat Conservative, Tonbridge and Malling

Would the hon. Lady let me know which of her hon. Friends are so supportive of her? There appears to be somewhat of a dearth of support.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I rise to assure my hon. Friend that I am supporting her very strongly today.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

I think the hon. Gentleman will see when we come to the vote that we do have support.

Our new clause 3 would also improve accountability and transparency by inviting EU budget representatives to appear before the European Scrutiny Committees in this House and the other place each year before the EU budgets are negotiated. I appreciate the points made by Conservative Members that of course there should be no interference with the work of the European Scrutiny Committee in this House, but what we have tried to do in these new clauses is send the strongest statement we can send and give the strongest possible support to all those in this House who want to see these important aspects of value for money and budgetary control put in place.

Photo of Bill Cash Bill Cash Conservative, Stone

I am sure the hon. Lady would appreciate the fact that the European Scrutiny Committee functions by virtue of the Standing Orders of the House of Commons. Leaving aside the merits of this proposal, if there were to be a stream of requirements imposed by Parliament on the manner in which the European Scrutiny Committee, an all-party Committee containing many Labour Members, were to conduct its business, the life of the Committee would be made pretty intolerable and its purpose would probably be undermined.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

I very much take that point on board.

New clause 1 requests a review by the European Commission of the basis of appropriations for the European Union budget and a study of whether alternative arrangements might offer improved value and enhanced budgetary control. On Second Reading, I highlighted a concern about the growing gap between the ceiling on spending commitments and the ceiling on payments. That gap, as agreed in the settlement of February 2013, is between €960 billion on commitments and €908 billion on payments. As I pointed out in the earlier debate, that gap has crept up from an average of 2.6% to the current 5.4%, and it is projected to rise to 5.7% in the period from 2014 to 2020. We must now seriously question whether that gap is manageable.

The Commission describes the system as follows:

“Commitments are tomorrow’s payments, and payments are yesterday’s commitments. Commitments are planned future payments whereas payments are legal obligations from the past…if every year the increase in commitments is much higher than that in payments you end up promising many partners to pay their future bills but find yourself unable to pay those bills when they arrive years later.

This is what has been happening over the last years: as many commitments were made years ago for projects that are being completed now”.

That is a key issue with the drive to smaller EU budgets, yet, as the Commission says,

“many bills related to projects remain unpaid and have to be rolled over to the following year. This leaves no choice to the Commission but to call for increases in payments.”

Photo of John Redwood John Redwood Conservative, Wokingham

I entirely agree with the hon. Lady about the need to get better value for money in a smaller budget and to bring down the commitments. Does she have some individual proposals on things that could be taken out of the EU budget for which the Government should argue?

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

I think that we could get to that if we had the information in the review that I am calling for, but what I want first is an examination of the system. This system is a recipe to drive up budgets rather than a way to control them.

Commitments are being made at a level of up to €14 billion a year more than payments. We have had years when the commitments have been €14 billion more, and that means bills being rolled forward, or staying unpaid, which is unacceptable. It is not a sensible system, and I think that the Minister actually acknowledged that. If it is not a sensible system, we should not be going along with it.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North 2:00 pm, 23rd June 2015

My hon. Friend is making a fair point. It has been suggested that, in real terms, we should be paying 7% less into the European Union budget by—I think—2020. Given what she has just said, is it not likely that that will not turn out to be true, and we will not see a reduction of that kind?

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

Indeed, that is a very real fear. If we look down the list of commitments and compare it with the payments made, we will see the level of commitments that are still to roll forward, which is a very frightening prospect. I go back to the point that I have just made. This is a system designed to drive up budgets. We support what has taken place and recognise that the House voted for it back in 2012, but unless this system changes we will be in a situation in which commitments are being made in the period up to 2020 of €960 billion, which is €52 billion more. It is a serious matter. Clearly, it is serious if the Commission is taking on budgets and then not paying bills, but it is the upward pressure on the budget process that is the great concern.

In our last debate on this Bill, the hon. Members for Corby (Tom Pursglove), for North East Somerset (Mr Rees-Mogg), and for Daventry (Chris Heaton-Harris) and my hon. Friend Kelvin Hopkins referred to a range of concerns that their constituents had about EU finance, how the EU budget is spent and the need for control of the budget. That is a point to which we will keep returning.

In the debate of 15 January 2008 on the Committee stage of the European Communities (Finance) Bill—I have already mentioned this—the Financial Secretary, then shadow Treasury Minister, and his shadow Treasury colleagues called for a report on “all aspects of EU spending”. Clearly, both the Opposition then and the current Opposition have had concerns about this. The Minister and his colleagues called for that report in 2008. I hope that we still have time in the rest of this debate for him to repent his view that we do not need further reviews.

As I have mentioned, there were complications in the wording of the amendment in 2008. I have read through the debate. The difficulty that the hon. Gentleman and his hon. Friends on the shadow Treasury team at that time ran into was that the amendment called for Treasury certification that it

“considers the outcome of the review is satisfactory to the interests of the United Kingdom”.

That seemed to be the sticking point. We have avoided such complications in this Bill by tabling simpler amendments that ask for an analysis of the basis used for appropriations and the study of alternative arrangements.

The Minister has said that such a review is ongoing. Will he tell me at this point when we will see that review?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

On the timing, we are expecting it in 2016.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

Will he clarify at which point in 2016? [Interruption.] No, it is just some time in 2016.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

The Minister can hear the comments being made by Members from sedentary positions. Clearly, we are working through a crucial time in the run-up to the referendum, and the budgetary information, with all the decisions that have to be made, will be crucial for the people out there.

In our amendments, we have expressed the wish to have these reviews and the reports. We want to send out the message that this House is serious about scrutinising the EU budget.

At the end of our debate on Second Reading, the Economic Secretary talked about the need for scrutiny on the payment gap. She told us that the European Commission has committed to publish more frequently its analysis on payment forecasts. I join the hon. Lady in welcoming an enhanced level of information on the EU budget, but believe that much more needs to be done on that. Does the Minister agree now—after both of us have spoken on the matter—that it is time that the EU moved away from a system in which it can make commitments of billions of euros more than it can pay, creating pressure on member states to ever-increasing budgets?

New clause 2 calls for a reform of the priorities in the EU budget, and specifically requests a review by the Council of Ministers of budget priorities and waste and inefficiency in the EU budget. The Minister has mentioned reviews that are already taking place, but I do not think that he mentioned a review of priorities of the kind that our new clause invites.

On Second Reading, I raised the need for further reform of budget priorities. Labour believes that expenditure on growth and jobs should continue to be prioritised by cutting back even further on agriculture spending.

The Financial Secretary to the Treasury told us that overall spending on the common agricultural policy will fall by 13%, compared with the last financial period, and that spending on research and development will increase by 4%. As welcome as that fall in agriculture spending is, we believe that the level of spending is still too high compared with spending to support growth and jobs. The Minister has responded to points made by his own side today, but he has not really got to the nub of the point.

As I said on Second Reading, agriculture accounts for only 1.6% of the European Union’s total output. If that is the case—I think that we will keep returning to this point—is it still appropriate that it accounts for 30% to 40% of the budget?

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe)

Is the hon. Lady saying that, in the opinion of the Labour party, agricultural support and spending are too low in Wales?

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

I am not making that point in particular. What we are asking for in this clause is a review of budget priorities. We can see from the percentages that competitiveness for jobs and growth is the most important. I am not making specific points about specific countries. Under the new method of agricultural spending, I think that there is a great deal of flexibility for allocating the funding between countries.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

My hon. Friend made a very strong point about the CAP. If there were no CAP, would it not be sensible for us to subsidise sections of our own agriculture according to what we think is right rather than what the European Union thinks is right?

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

Indeed we could. Let me go on and make a few more points about the proportion that is allocated to that very important priority of competitiveness for jobs and growth. In 2014, only around €15 billion will be spent by the EU on that budget priority compared with over €41 billion for market-related spending and direct payments for agriculture. There is no sense in a system that takes that vital priority—vital for every part of the EU—of competitiveness for jobs and growth and spends so little on it. Out of the €6.3 billion of European Union funding allocated to the UK in 2013, only 23% was spending on jobs and growth compared with 63% on agriculture. It is the balance that we are calling into account.

As my hon. Friend the Member for Luton North said on Second Reading, although the proportion of the budget for agriculture has been falling, there has been a fairly significant increase in money terms over the past eight years. As long as this balance seems wrong to people, it will be very hard for many of us to explain on the doorstep why we are spending only 23% of European Union funding in the UK on jobs and growth but 63% on agriculture. Some hon. Members might find such an explanation easier in their constituencies than others, but it is a difficult argument.

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

I am very sympathetic to what the hon. Lady is saying. My one concern would be that if there are reforms, they do not disadvantage some farmers in North East Somerset and other rural constituencies to favour spending on the continent. Reform is quite right, but it needs to be fair for the United Kingdom’s farmers.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

The more reviews that we carry out of those priorities, the more that we develop our understanding of where the money is going. Earlier, Matt Warman called for these matters to be discussed in a language that his constituents could understand, and I do not think that they are discussed in such a way. Having ploughed through very many debates and very many documents in relation to the Bill, I do not think that those matters are understood. The hon. Gentleman is quite right.

The Economic Secretary to the Treasury said she accepted that expenditure on the CAP is

“still too high both in absolute terms and as a proportion of the overall budget.”—[Hansard, 11 June 2015; Vol. 596, c. 1426.]

If that is what the Treasury team currently feel—that it is still too high, both in absolute terms and as a proportion of the overall budget—what are we doing to understand that better, to review it and to change it?

It is my assertion that previous reviews have not led to the level of reform that we want to achieve. It was our purpose in tabling new clause 2 to keep focus on that vital issue. When most member states are finding it necessary to make very difficult decisions—clearly, we are in that position ourselves—about their own budgets and spending, the European Union must ensure that expenditure is efficient and focused on addressing the major concerns that member states face. As my hon. Friend Chris Leslie said in the October 2012 debate:

“The next seven years of the EU budget should prioritise jobs, growth, infrastructure and practical programmes that rejuvenate fragile economies.”

As I mentioned on Second Reading, this is much needed when we still have 735,000 16 to 24-year-olds in the UK looking for work. That should be our focus—those young people.

We need a better balance of funding and we need the European Union to provide a better framework and strategy to achieve growth and jobs. Looking deeper into the detail, and the spending commitment to the EU’s smart and inclusive growth priority, only a quarter of that is spent on competitiveness for jobs and growth, and three quarters on the EU’s cohesion policies, including structural funds. It probably is not appropriate today to open up further debate about the use of structural funds. That is often discussed when we are discussing EU finance, but as my hon. Friend also said:

“Savings can be made on aspects of EU structural funds that…are too often committed in a haphazard manner and depend on outdated commitments rather than future priorities. Unless structural funds contribute to positive economic development, they cannot be justified.”—[Hansard, 31 October 2012; Vol. 552, c. 304.]

The Opposition say strongly that the proportion of the EU’s smart and inclusive growth expenditure that goes towards securing competitiveness for jobs and growth is too small. That important area of spending accounts for around a quarter of the EU budget in 2014, but that rises to only 27% across the whole six-year period.

Photo of Bill Cash Bill Cash Conservative, Stone

Does the hon. Lady appreciate that much of what she says in terms of generalities is understandable, and is reflected very much in European Commission documents, which I have been looking at for the last 30 years, one way and another, on the European Scrutiny Committee, but that the inherent problem is the fact that every time there is a need to argue for jobs and growth, the answer from the European Commission is to give more subsidies, more bail-outs, and more cohesion and structural funds, when actually what is needed is deregulation and to provide people with a means of increasing productivity and jobs and to deal with youth unemployment?

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

I hesitate to say that I think we agree on this point, but I think we do. [Interruption.] All right, then: we enthusiastically agree on this point. It is very clear indeed that, particularly with youth unemployment, we have a serious problem. It is a problem throughout the EU. We must spend more on that and we must find a way of doing so. Although the Minister spoke at great length, he did not tell us at any point what the difference would be between the ongoing review in the EU and the existing commitments. We want to send a very strong message. Until the Bill is passed, it is our last chance for a considerable period to make these points strongly to the EU, and we believe that we should do so.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport), Shadow DUP Spokesperson (Equality)

One issue that concerns me in the area that I represent is the fishing industry. There is to be a review of the common fisheries policy. One thing that could come off the back of that is our young people getting jobs in the boats, because up until now they have not been encouraged to do so.

We need not just a better common fisheries policy, but encouragement and incentives for our young people to take the jobs in the local fishing boats, and thereby create employment and prosperity for them as well. Does the hon. Lady agree?

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

Indeed. We have focused a great deal on agricultural spending and the CAP, but I do not think any of us would say that there has been a fair deal for people in the fishing industry. Fisheries policy, in many places, has been a disaster and has caused great problems for our fishing industry. It is a shame and a pity if, as I think is the case, young people no longer believe that they can have a career in fisheries.

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe)

Given that many people who represent fishing constituencies would agree with the hon. Lady on that point, does she not find it passing strange that in all of the possible treaty amendments that have been listed as possibilities for the Prime Minister’s soon-to-be-considered renegotiation stance, not once have I heard from the Government Front Bench that a treaty renegotiation on the common fisheries policy is any part of the Conservative party’s priorities?

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury) 2:15 pm, 23rd June 2015

That is strange, but I cannot answer for the Minister. He may want to intervene for himself now or at some later point.

I have emphasised jobs and growth, but this EU budget priority also includes policies and programmes to promote vital areas of research and innovation—infrastructure, education, training and enterprise development. My hon. Friend Paul Blomfield has been a staunch advocate of the importance of EU funding for research and development in the UK. In 2012 he said:

“The more the EU invests in research and innovation, the more the UK benefits, because the quality, breadth and depth of UK research puts us in a position whereby we gain disproportionately from European research programmes.”—[Hansard, 31 October 2012; Vol. 552, c. 292.]

It is self-evident that competitiveness for jobs and growth should be more of a priority, but also that we would benefit more if the priorities were switched to increase funding for research and innovation.

Serious consideration of reform of the EU’s spending priorities is needed if we are to use the EU budget, as the Opposition believe we should, as a mechanism to promote future jobs and growth in the UK and other member states. We can only get that change of spending priorities if we keep a focus on the balance between competing priorities and continue to drive down wasteful and inefficient spending.

Much was said on Second Reading, as I am sure the Minister recalls, about what hon. Members consider to be wasteful and inefficient spending. Some Members might cover that again today, but we have already talked about staffing costs and administration costs, and the costs of the move between Brussels and Strasbourg. Other items of waste and inefficiency can also be drawn to the Minister’s attention.

We have already discussed new clause 3, and I do not need to keep on emphasising this, but in tabling it we did not in any way want to disturb the balance between the Government and the scrutiny Committees. I hope that hon. Members accept that. However, points have been raised in previous debates on why we need that relentless scrutiny. My hon. Friend the Member for Nottingham East said in the debate on the multi-annual financial framework that we need

“a relentless focus on the justification behind detailed expenditure.”—[Hansard, 31 October 2012; Vol. 552, c. 304.]

The Financial Secretary to the Treasury said on Second Reading:

“Many in Europe agree with us that the EU is too uncompetitive, too democratically unaccountable and too inflexible to the concerns of citizens in its member states.”—[Hansard, 11 June 2015; Vol. 596, c. 1389.]

That is a very poor situation that we find ourselves in.

Photo of Bill Cash Bill Cash Conservative, Stone

The hon. Lady referred to the need for relentless scrutiny. I have a thought in my mind that maybe some people think that the European Scrutiny Committee, at least over the last five years, has indeed been relentless in its scrutiny, and that goes for all members of the Committee, which has produced many unanimous reports. Is she effectively prepared not to press her amendment because of the problem I gave about the constant stream of legislative requirements that might interfere with our status as a European Committee?

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

Indeed, we could do that. We would definitely want to press the other new clauses, but there was no intention to upset that balance. It has been suggested that the Minister could solve these matters by giving some kind of undertaking on the matters raised in our new clauses. We do not resile from the position that we want to send out the strongest possible message from this House that we are serious about scrutiny. The European Scrutiny Committee is of course relentless in its focus on those matters, and so too must the House be relentless. Doubtless we will have many more reports and reviews.

When in opposition, the Minister was part of the team that tabled an amendment to get a report, as I mentioned earlier. It was not agreed to at the time, but the Commission review went ahead anyway. The results of that report, which was published in 2010, were interesting. Its main finding—it was a very substantial finding—was that the current rules for the EU budget make it slow to react to unforeseen events, while too many complexities hinder its efficiency and transparency.

This is a week of tumultuous events for the European Union. The situation we find ourselves in with the EU budget, with its complexity, its slowness to react, the difficulty in balancing priorities and the fact that it does not represent the priorities that we think are important, means that it is clear to all—there is often broad agreement on this in the House, and I am sure that there will be today—that it is past the time when it needs to change.

Our remaining amendments would assist in ensuring that reports are made to the House on value for money, budgetary control and, importantly, budget priorities and waste and inefficiency. I commend them to the Committee.

Photo of Bill Cash Bill Cash Conservative, Stone

I have already said much of what I need to say on new clause 3, which is my main concern today, so I will make only a few points. Basically, new clause 3 is inappropriate. The European Scrutiny Committee does its job relentlessly, as the shadow Minister has just indicated, so there is no need for the new clause. We can invite officials to it if we wish to, and we do on occasion, but we are perpetually scrutinising the budget and recommending matters for consideration on the Floor of the House.

Imposing on the European Scrutiny Committee legislative functions that would be monitored by other Government Departments could cause enormous difficulty by interfering with its Standing Orders functions. Under the Standing Orders, the Committee has to form a judgment on what is of political and legal importance. We can invite European Commission budget representatives to see us, and indeed we can also recommend to the Treasury Committee, for example, that it might wish to do the same, so we already have various means at our disposal.

It is not necessary for me to repeat the points that I have already made in interventions. I am grateful to the shadow Minister for agreeing not to press new clause 3 and putting that on the record, so that in future nobody else is tempted to impose on the European Scrutiny Committee, or indeed on any Select Committee, legislative requirements that might in one way or another interfere with their discretionary judgments under the Standing Orders.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

I hope that the hon. Gentleman will accept my assurance that we have no intention of doing that, but I also hope that he will agree that it is important to send out the strongest possible message that we are focusing on these matters relentlessly throughout the House, and that the European Scrutiny Committee will continue its excellent work.

Photo of Bill Cash Bill Cash Conservative, Stone

I am extremely grateful to the hon. Lady. I hope that she will not mind my mentioning the fact that she is sitting in glorious isolation on the Opposition Front Bench, and with nobody behind her, other than my friend Kelvin Hopkins, who is not known to be enthusiastic about all matters European. Perhaps the relentless scrutiny to which she refers could be improved by having a few more Labour Members here to support her.

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe)

It is a great pleasure to follow what must be the briefest speech I have ever heard from Sir William Cash on this subject—it is wonderful to see him able once again to stand in his place today.

Let me turn to the question of EU finance and agriculture. I know that agriculture is not a subject that much concerns the Conservative party; the Tory party these days is much more likely to be concerned with asset stripping, rather than agricultural production, and with financial derivatives, rather than agricultural crops—that is what gets its pulse moving.

I was concerned when Barbara Keeley said that far too much of the European Union budget was consumed by the common agricultural policy. The fundamental reason for that—we did not hear this simple point from the Government Benches—is that the common agricultural policy is one of the few policies that financially is effectively under the competence of the European Union. If the European Union had competence over health, for example—I doubt that there is much support for that, from me or anyone else in the House—its agricultural budget would be totally dwarfed by what it spent on health. The dominance of the agricultural budget is a factor of its being one of the European Union’s relatively few common policies.

Of course, it is possible to argue that there should not be direct farm payments. Indeed, that was the argument that Mr Paterson took into the CAP negotiations. He started from the position that the UK Government, without much opposition from Members from rural constituencies in the Conservative interest, thought that there should not be direct farm payments, and he found himself in a minority of one in the negotiations; his position was not supported by any other member state. It was therefore decided that we were to continue with farm payments. Therefore, if we have a common agricultural policy, and it is a substantial part of the European Union’s budget, it is reasonably important to ensure that our share of the agricultural budget as component nations in these islands is fair and competitive, because our agricultural production has to compete in that common market with that in other member states.

Does the Minister really think that the share allocated to UK agriculture, and to Scottish agriculture in particular, can be counted as a considerable achievement, as he claimed in his opening remarks? Let us remind ourselves of some of the facts. Under pillar one of the CAP budget, it was agreed that the lowest that any member state should receive in support was €196 per hectare. It was agreed in negotiations that each country in the original 15 would work to that minimum. Scotland receives substantially less than that—just over half of that payment per hectare. That is going to cost Scottish agriculture about £1 billion in the period to 2019.

Photo of Mark Garnier Mark Garnier Conservative, Wyre Forest

The right hon. Gentleman said from a sedentary position during the Minister’s speech that that was because Scottish farms are the biggest in the UK. It would be helpful if he could give a little flavour of the size of Scottish farms compared with English, Welsh and Irish farms, and how the numbers break down.

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe)

I was going to move on to that very point, because the Minister’s reply to my intervention inspired me to go to the Library in search of some figures. I will answer that point in a moment.

Let me move on to pillar two, the second major aspect of agricultural support. I have been doing some comparisons and looked at what would have happened if in negotiations Scotland had achieved from pillar two the same amount of agricultural support as the Republic of Ireland, which in many ways is a comparable country with regard to land area and agriculture as a share of the overall economy. The answer is that Ireland has achieved a budget four times the size of Scotland’s budget under pillar two—€2.19 billion compared with €478 million—in the years to 2019.

Given that it has been decided that the common agricultural policy should continue and that farm payments should continue to be made, how will it be possible for Scottish agriculture to compete effectively when it gets such a dramatically lower share than the minimum allocated to any other EU country? Far from getting an excellent deal on pillar two to compensate for the poor deal on pillar one, Scotland gets a miserable share in comparison with comparable countries.

That brings me to the point made by Mark Garnier. The Minister said that the comparison of support per hectare does not really matter. I would say that it is exactly what matters, given that agreements per hectare, per country govern the size of the overall budget.

As the Minister said, for the share per farm or per estate, there is a different figure and a different comparison. We have some very large farms and very large estates in Scotland. Indeed—this is the point that I was checking in the Library—500 companies or individuals own half of the country. That is how imbalanced is the concentration of ownership in Scottish agriculture and Scottish land. If someone is receiving a lower payment per hectare, that tends to favour and militate for even further concentration of land ownership.

I took the Minister’s reply to me, when he alighted on a very significant point, as a coded call for the fairer distribution of land ownership in Scotland. I was inspired to look at an article in an edition of The Spectator only last month entitled “David Cameron’s father in law offers to adopt a ‘Rob Roy’ style Scottish accent to stop ‘Mugabe-style’ land grab by SNP”. In that article, Viscount Astor, presumably in The Spectator to get to the wide audience that the Conservative party was after in this European debate, was extremely suspicious of the SNP Scottish Government’s proposals on land reform, which are being enunciated in the Scottish Parliament this very day. I am delighted to reassure the Minister that no Mugabe-style land grab is intended; we are just seeking a fairer distribution in agriculture so that family farms and communities across Scotland get a more equitable distribution of the land holdings. That also helps to answer his point. It cannot be seriously argued that we should look at payments per individual farm or estate—whether of 200, 300 acres, or, in the case of Viscount Astor, 20,000 acres. That cannot be used as a serious argument in relation to the imbalance of agricultural support.

Substantial insult has been added to injury in these matters. The European Union, after representations from the Scottish Government and others, tried, in a minimalist fashion, to address these imbalances, which had occurred due to the total incompetence of the UK Government’s negotiations and their stance on the CAP. It decided to allocate €220 million as convergence money to take account of the fact that there was such an imbalance in support per hectare in the United Kingdom—in Scotland, in particular—compared with the rest of the Europe. All of that €220 million is to be distributed geographically across the UK instead of accepting that the UK is getting it because of the dramatic imbalance in terms of the huge land holdings in Scotland and the very, very low payments per hectare. I have heard that described in National Farmers Union meetings in Scotland as akin to embezzlement by the United Kingdom Government. That is how it is regarded. I hope that the Minister will at least revisit the issue of the convergence money, or if not, another issue that should be revisited—getting a fairer distribution of agricultural support.

An industry in a competitive position in a common market with other industries must have a fair distribution of support in order to compete effectively.

Photo of Kevin Foster Kevin Foster Conservative, Torbay 2:30 pm, 23rd June 2015

I have been listening with interest to the right hon. Gentleman’s points about funding for Scotland. How does he think this support would be getting on without the benefit of the UK’s rebate?

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe)

One of the reasons we do so incredibly badly in many European programmes as regards funding is that the Treasury’s interest, when looking at additionality, as it calls it, is always to minimise EU expenditure. Although it is perfectly acceptable for the Government to defend the rebate, it is less acceptable to look at every European programme and try to minimise expenditure on it, because in doing so, we lose some of the alternative opportunities that the hon. Member for Worsley and Eccles South talked about. If the Treasury looks at every European programme and says, “How do we minimise spending?”, what follows as a natural consequence is that our share of that spending is also diminished. In the case of the common agricultural policy, it is possible to make a direct connection with the negotiating stance of the right hon. Member for North Shropshire, who was trying to abolish farm payments altogether and got the miserable, unfair and inequitable distribution of support that has been the end result of the CAP negotiations.

The Minister—I am not sure if it was a dead bat, a glorious drive through covers, or a catch at slips—rather evaded the direct question of what is the Prime Minister’s negotiating stance on the budget. The Minister said, after being passed a note, that the Prime Minister’s stance was to cut the whole budget and to protect the UK rebate. Let me point out that that has been the Government’s stance and policy since they took office in 2010; it is not a particular stance for these renegotiations. What the Minister is being asked—we really would like an answer—is whether the Prime Minister has a specific target in mind in renegotiations for changes in the EU budget or the UK contribution to it, and if so, what it is. Failure to answer that question throughout the debate adds to the no doubt unworthy, but considerable, suspicion shared across this Chamber that the Prime Minister is adopting this nebulous approach to what are his negotiating aims so that whatever he comes back with can be announced as a fundamental achievement. That does not stand scrutiny in this Committee, but even more importantly, it is a particularly poor campaigning argument in favour of the European cause.

I hope that the Minister—the last man in—will rise to the occasion by confirming that he is in favour of more equitable distribution of land ownership in Scotland and by giving us an insight into the Prime Minister’s true negotiating hand in the coming arguments and discussions in the European Union.

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

The speech by Alex Salmond is tremendously important and gets to the heart of one of the issues we have with the common agricultural policy, although, not surprisingly, I look at it in a different way from the question of socialism and land holdings that the SNP is going for.

The issue, as has been discussed in the European Scrutiny Committee, is that over the years our farmers have increasingly become so efficient and large that there has been a good deal of consolidation. That applies very much in my constituency among dairy farmers. The number of dairy farms has reduced significantly and they are bigger farms proportionately, but European subsidies tend to go to smaller farms disproportionately. Therefore, we find that British farmers are disadvantaged. I entirely agree with the right hon. Gentleman that if, under a system of farming subsidies and a competitive framework, that means that people are getting handouts from the European Union, British farmers—farmers in the United Kingdom—do not get the equivalent subsidies to farmers on the continent, they are disadvantaged because their cost base is automatically higher and their profitability is reduced. Therefore, when we are arguing for careful consideration, overview and oversight of expenditure in the European Union, and reductions in the common agricultural policy, we have to ensure that the cuts are made in a way that is fair to the UK farmer. Even if our end objective is the entire elimination of agricultural subsidies, it must be done in a way—

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport), Shadow DUP Spokesperson (Equality)

As I am sure the hon. Gentleman is well aware, the farms in Northern Ireland are smaller. They are greater today than they were, say, 20 years ago, but they are still not big in comparison with those on the UK mainland. Does he agree that there needs to be consideration for the farms in Northern Ireland, particularly in my constituency of Strangford? He seems to be referring to farms that are very large. In Northern Ireland, we have farms with an average of 150 acres.

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

I am very sympathetic to farmers and I ought to declare an interest as I have a little land in Somerset, although sadly not a great deal and I do not farm directly. If I did, I would certainly count as a very, very small farmer. In the past a slice has been taken from the biggest receivers of European subsidies, so the farms that have been the most consolidated and efficient lose subsidies at a faster rate than other farms. I think that protection is already in place—

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe)

That is why the protection built into the agricultural settlement of €196 per hectare is so important, and why it is so disadvantageous that it is almost half that figure in Scotland. That is why the minimum per hectare is so important.

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

Being more traditional, I prefer a minimum per acre, but otherwise I am broadly in agreement with the right hon. Gentleman. I agree that it is not right to look at the issue purely in terms of the landowner, because that discourages consolidation. As Conservatives, we are in favour of efficiency in all industries, but the subsidy system across Europe not only disadvantages our farmers, but discourages consolidation and efficiency. That cannot be the right approach.

Photo of Peter Grant Peter Grant Scottish National Party, Glenrothes

Is the hon. Gentleman telling us that consolidation and enlargement always equal efficiency? Does he not recognise that, especially in agriculture, there are significant community and social benefits to allowing small, family owned farms to continue in existence?

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

There are great advantages to having small, family owned farms, but we need an efficient agricultural system that provides the food and produce the country needs. I do not think one should be unduly sentimental for agriculture against other industries. As a lover of the countryside and of our rural traditions, I am tempted to fall in line with the hon. Gentleman, who represents Glenrothes. The constituency was called Central Fife when I stood there—unsuccessfully, just for the record. However, although I am sympathetic to his point, I think it is important to have efficient agriculture first when spending other hard-pressed taxpayers’ money. It ought not to be entirely about sentimentality.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

It is a great pleasure to follow Mr Rees-Mogg. Before I turn to the main part of the my speech, I would like to comment on what he has just said. Some 34 years ago, my then 11-year-old son had a discussion at his primary school about what was then called the Common Market. He was asked about the common agricultural policy, which he knew a lot about because he listened to me at home. His teacher asked him, “What is the CAP?” He said, “It’s the common agricultural policy.” His teacher asked, “What is that about, then, Daniel?” He said, “It’s a way of subsidising inefficient small farms,” and 34 years on, the hon. Gentleman has raised exactly the same point. Some things do not change very much. I think my son is the same age as the hon. Gentleman.

It is also a great pleasure to follow my hon. Friend Barbara Keeley, who sits on the Front Bench, and support two of her new clauses and her amendment. On new clause 3, I am pleased that she has acceded to the sensible point made by Sir William Cash, the Chair of the European Scrutiny Committee, of which I am also a member. I will, however, support my hon. Friend in the Lobby later on her other new clauses.

I have spoken probably 100 times in European debates in this Chamber over the past 18 years. I have said some of what I am going to say today a number of times before, but in order to make an effect in politics I think we must sometimes repeat messages over and over again, hoping that, in time, one’s colleagues, particularly those on the Front Bench, will listen, agree, take note and act accordingly.

I was also much taken by the hon. Gentleman’s comment that when he rebelled he was trying to help his Front-Bench colleagues. That is a splendid idea. If ever I am moved to rebel in future, I shall tell my Whip that I am trying to help our Front-Bench colleagues and I hope she will accept it in that spirit.

The most interesting new clause is new clause 2, which is about expenditure. I have said many times that I believe that the common agricultural policy ought to be repatriated to member states for them to decide how to subsidise their own agriculture, and that the CAP’s structures should be dismantled. We would certainly benefit from that financially in more than one way, including by not paying in so much. We could subsidise at exactly the same level and possibly in exactly the same way, but still be better off because we would not be paying into something where we are net losers.

Beyond that, food prices have, over decades, been higher than they would have been if we were not in the CAP and could buy food on world markets. Indeed, one of the markets we could buy in would be within the European Union itself. There are some low-cost food producers, particularly in eastern Europe, from whom we might buy food. A year or two ago, the Chairman of the ESC and I visited Lithuania, where I discovered, much to my surprise, that Lithuania used to be self-sufficient in food production. Now it is being paid to not grow food, and large swathes of land in Lithuania are lying fallow. It is nonsense that a poorer country that was self-sufficient is now being paid to not grow food. If it were allowed to grow as much food as it liked and we could buy it at relatively lower prices, that would be a very sensible arrangement. The CAP should be repatriated to member states, something which I think would, in the end, be to everyone’s advantage.

Photo of Angus MacNeil Angus MacNeil Chair, Energy and Climate Change Committee 2:45 pm, 23rd June 2015

I do not know whether the hon. Gentleman has ever been to Iceland, Norway, the Faroe Islands or places further north of Scotland, but he would see greater use of land there than in the highlands and islands of Scotland, because the agricultural support is so much better. On repatriation, would there not be a danger to some countries that the Anglo-Saxon or Anglo-American model of economics would suck out the little money that is there and give it to London, which does not put it around its own state? At least with Europe we have some sort of guarantee that we will get the money, even though we are among the least favoured areas of the land.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

The hon. Gentleman’s point tempts me to talk at greater length about a broader, more socialist approach to running the world, with which I strongly agree. If I did so, however, I think I would set too many hares running and Mr Williams would call me to order very quickly.

The CAP is nonsense. We ought to abolish it and repatriate agricultural policy to member states. We can decide in our own country which parts of agriculture should be subsidised and to what extent, and we can decide where and when we buy food. We might choose to subsidise to keep agriculture sustained in this country for strategic reasons. During the second world war we needed to produce food for ourselves, and all countries have to bear those sorts of factors in mind when deciding what they produce.

Interestingly, Alex Salmond obviously does not like the common agricultural policy or the common fisheries policy very much. I am surprised that the SNP is in favour of the European Union at all.

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe)

The hon. Gentleman is mistaken. I think that the CAP is a failure of UK Government negotiation, as I have tried to explain. On the CFP, however, he is on much stronger ground: I would support a treaty amendment to change it substantially and remove it from central control.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

We are in strong agreement on that point. I have said many times in this Chamber that we ought to give notice of withdrawal from the CFP if it is not abolished in total. Countries could then manage their own fisheries with a 200-mile or 50/50 limit. In that way, fish stocks could be recovered, because they would be managed at a national level and we would license fishing for our own fishermen. In addition, if any other fishing boats came from outside, they would have to be licensed and managed properly.

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe)

To pursue my point, is it not strange that the Government never mention treaty amendment to the common fisheries policy as an objective, even though it would certainly be within the competence of this financial Bill? Everything else is mentioned as an objective in the renegotiation, but to my knowledge the Prime Minister has never identified the common fisheries policy as something that he is even trying to get change on, far less a treaty amendment.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

The right hon. Gentleman makes a strong point. That is one of my red lines, and I shall put that case to the Prime Minister when I have an opportunity. I have said that many times before in the Chamber.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport), Shadow DUP Spokesperson (Equality)

As I said earlier, I represent the constituency of Strangford, and the fishing industry is particularly important to me. We have had a cod recovery programme in the Irish sea for the past 10 to 12 years, and there are greater numbers of cod than there have ever been during that time and the fish are bigger. However, Europe restricts our fishermen’s ability to fish those cod. That is an example of why we need a new common fisheries policy that local people can control and have an input in.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I shall move on to my other points in a second, Mr Williams, but I agree with Jim Shannon that if member states control their own fisheries, they will be able to stop irresponsible fishing and the plundering of fish stocks by other nations.

Photo of Greg Knight Greg Knight Conservative, East Yorkshire

Going back to what the hon. Gentleman said a few moments ago about agriculture, is he aware that many farmers do not want to leave the EU because they feel they would be treated less generously? However, if Britain came out of the Union, would we as a net contributor not have more money to spend on farming if we wished to do so?

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

The right hon. Gentleman makes a strong point. I have said that if we were outside the EU, we would be better off financially and could choose what we subsidised, how and to what extent. We could choose what sort of farming we wanted to sustain. I have made the point before that small hill farmers in Wales, who are part of our rural culture, ought to be preserved. They might not be very efficient, but we could perhaps choose to subsidise them. For other forms of farming we might choose to maintain the subsidies at the current level, but we would make that choice democratically through our Government and this Parliament.

Photo of Angus MacNeil Angus MacNeil Chair, Energy and Climate Change Committee

The glib answer that has often been given to me in the House in years past as to why we should maintain the common fisheries policy is that fish do not have passports. Of course that neglects the reality that there are three types of stocks: migratory stocks, non-migratory stocks and straddling stocks. We can look at what happens in countries that control their own fisheries, such as Iceland. Jóhann Sigurjónsson, the chief fishing scientist of Iceland, tells me that its fishing has so improved, and trawlers are catching the cod stocks so much more quickly, that fishermen are actually getting frustrated. They are being so successful and doing their work in so little time that they want to go and catch more. That is a sign of their success, having managed their own stocks for a number of decades.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

Indeed. The hon. Gentleman is well ahead of me in his expertise in the matter, but the basic point is that we should control our own fish stocks and manage them properly.

I have one or two other points to make about expenditure in the EU budget. From time to time we have discussed international aid. My view, and I think the view of the Department for International Development, is that we would spend international aid better than it is spent through the European Union. We would target and manage it better and try to ensure that it was spent in a less corrupt way in certain countries. Countries would do better to manage their own aid donations abroad than have them dealt with through the European Union. Aid is therefore another component of the EU budget that could be taken away.

Then we come to structural funds. Again, I believe that member states, particularly our own country, are best able to judge what regional assistance they need to provide. We could target that assistance better than when it is decided by the European Union. As part of our regional policy, we might want to have state aid to assist the growth of manufacturing in some of the less successful regions of our country. Manufacturing is too small as a proportion of our economy, and if we want to expand and improve our manufacturing sector to help investment, we might want to use state aid, which is forbidden under the EU arrangements.

Photo of Angus MacNeil Angus MacNeil Chair, Energy and Climate Change Committee

Is not the great danger that the high priest of the austerity cult, the Chancellor of the Exchequer, would drive austerity further and we would not see the spending that we currently see in areas of Wales and in the highlands and islands of Scotland?

Photo of Angus MacNeil Angus MacNeil Chair, Energy and Climate Change Committee

He would keep it all in London. If that were to happen, we would need full fiscal autonomy, or indeed independence, to ensure that areas of Scotland were well protected.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

I thank the hon. Gentleman, but it is a counsel of despair to say that because we cannot trust our own Government, we have to go to the European Union. I was on a march through London opposing austerity last Saturday, and there were tens of thousands of people there who felt strongly about it. Even though we may have Governments we do not like from time to time, we have the chance of pressurising them in the short term and getting rid of them and replacing them with more progressive Governments in the long term.

Pressurising Governments is what I do in politics, as I think Members of all parties do. I want to see the Government elected in this country governing this country, not giving away our powers so that we are governed by a bureaucracy in Brussels or wherever.

I have mentioned spending on the CAP, aid, structural funds, regional policy and so on. If we had responsibility for those things, some of the fiscal transfers that effectively take place between the richer and poorer countries in the European Union might no longer happen. If we want fiscal transfers, the way to do it would be for us to make substantial contributions to a fund that could be allocated to the Governments of less well-off countries. Lithuania, Latvia, Poland or wherever could benefit from donations, but they would go to those countries’ Governments, who would decide how that money ought to be spent in their countries. It would not be about the European Union subsidising certain sectors in a way that may or may not be beneficial to those countries. As I said, in Lithuania, and no doubt in other countries, they are being paid not to grow agricultural products and their own food. That is nonsensical, and I wish to see an end to it. If we want fiscal transfers, let them be up front. Let us contribute to a fund that poorer countries in the EU, or in a new association of member states, could draw on. That would be a more sensible way forward.

Of course, that would loosen the bonds of the European Union. We would not have decisions about all sorts of sectors being made by the Commission in Brussels. They would be made by democratic Governments, and we would have a looser association of states within Europe, which would be a much more sensible way of operating. I support what my hon. Friend the Member for Worsley and Eccles South said, and I support her probing new clauses and her amendment 1, which we hope to be voting on soon.

Photo of Peter Grant Peter Grant Scottish National Party, Glenrothes

Tapadh leibh—thank you, Mr Williams. I apologise for not being able to say that in Welsh despite your attempts at tuition last night. I will keep practising.

It struck me after hearing the first two speakers in the debate that we had spent an hour and 45 minutes discussing the Bill and the only point of contention appeared to be whether the Government should write letters, and, if so, how many. If we are serious about sorting out great European institutions that are inefficient and have a lot of waste, I suspect that many of the audience of millions watching live on television will ask us to hold a mirror up to our own face. A debate such as this surely cannot be what this place was designed for.

I have found it quite interesting that, although in theory the Bill is about agreeing how the European Union brings in its money, a lot of today’s discussion has been about what happens to the money afterwards. One big problem with the way the European Union manages—or does not manage—its finances is there is still a complete divorce between decisions on how much money it needs and who pays it, and on how much money is going to be spent and how. Until the European Union brings those two big decisions closer together, we are always likely to have anomalies.

We talk all the time about what the EU costs, but at some point in the future perhaps we will talk about the benefits we get—or could hope to get—from it. I am an accountant by profession, and, if it is true that an accountant is someone who knows the cost of everything and the value of nothing, the Government Benches are today full of accountants. We have had a lot of questions about whose fault is it that costs have gone up, and who gets the credit for costs coming down. We have not heard an awful lot about the benefits, and that is worrying when we are approaching a referendum that could see us torn out of the European Union—even if we vote to stay in. Talking about the benefits should mean talking about not just getting more money out than we put in, however, because it does not take a genius or even an accountant to work out that not everybody in the European Union can carry on taking out more than they put in.

As a trading island state, surely there is a benefit to the removal of trade barriers. I can remember the trade wars, as a wee boy, when the United Kingdom did something to upset the French, so the French discovered that British lamb was no longer fit for French consumers, and in retaliation, and completely by coincidence, the United Kingdom discovered that French apples did not quite come up to our standards—and so it went on. It was great for lawyers; it was probably quite good for the politicians; but it did not help the producers of those foodstuffs, because they spent longer arguing about who was allowed to buy and sell what, and less time producing and making their businesses more efficient.

We should never allow ourselves to forget that this year we mark 70 years since the United Kingdom was at war with Germany. I do not think that condition has existed at any time before 1945. I have been back through the books and cannot find a period of 75 years without a major war between the countries of western Europe. Surely that has to be celebrated, and it is no coincidence that it started with the establishment of the common market and with European nations looking for ways to settle their disputes without going to war. That has to be a massive benefit of continued co-operation among European nations.

My position, and that of the Scottish National party, is that we want to be citizens of the European Union in such a way that we can have a state of co-operation with our European neighbours without losing the sovereign rights of the people of Scotland. We want our co-operative relationship with our neighbours across the North Sea to be exactly the same as that with our neighbours across the Irish Sea and, indeed, across the River Tweed.

There has been a lot of talk about the common fisheries policy and common agricultural policy. It should hardly be a surprise that Scotland does not get a good deal out of the common agricultural policy, because the longest-serving, most respected Agriculture Minister in the whole of Europe, possibly in the whole world, is not allowed to take part in those discussions, as he is not a Minister of a member state. We are represented by somebody who has not even been elected—who has never faced the test of public accountability at the ballot box. We in Scotland have an Agriculture Minister who is quite possibly unique in the world, in that he holds the full confidence of his Government and the absolute trust of farmers at the same time, but he is not let through the door to be part of those discussions.

It should not be any surprise that the common fisheries policy has never worked for Scotland, when Luxembourg gets a vote on it and we do not. Luxembourg’s population is the same size as Edinburgh’s. I do not consider myself to have a coastal constituency, but my constituency has a bigger coastline than Luxembourg—indeed, my constituency has a coastline. Is it any surprise that so many of the major pillars of EU policy do not work in the communities where they have an effect, when so many decisions are taken by people who represent nations that do not have a fishing industry, and where agriculture is peripheral to their economy, rather than central not only to their economic but social well being, as in nations such as Scotland and, indeed, Northern Ireland and Wales?

A Conservative Member asked about the SNP’s position on Europe. I would love to see what deal Scotland could get out of Europe if we had a voice in Europe. At the moment every representation that we make to Europe has to go through the Westminster filter, and I do not blame that filter for changing them to act in the interests of the majority of the citizens of the United Kingdom. We are outnumbered by 10, 11, or 12-1 in population terms, so the representations that the UK Government make to Europe will always be loaded towards what they see to be in the best interest of the major nation.

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe) 3:00 pm, 23rd June 2015

My hon. Friend makes an interesting point about the likely outcome of Scottish negotiations in Europe, but it is highly unlikely that any Scottish negotiator would come back with less agriculture support than the minimum awarded to every other European nation.

Photo of Peter Grant Peter Grant Scottish National Party, Glenrothes

I do not know whether that is a bid to be the first independent Scottish ambassador to the European Union, but if I am in a position to put anybody’s name forward I shall certainly bear in mind my right hon. Friend. He makes a valid point, which is related to the question he has asked repeatedly and on which he has still not had an answer: what the Prime Minister’s negotiating position and priorities are going to be. The fishing industry is not a massively important part of the United Kingdom’s economy; it is a massively important part of the economies of some nations that make up the United Kingdom. The negotiations are, however, always carried out through the Westminster lens, and it is as seen as a major achievement when all we come back with is, “Not too many things have got worse.” We talk about aspiration. I think aspiration means we want things to get better, not to think we have achieved a lot when we come back from negotiations and have not had to lose too much.

The European Union does not mange its finances very well at all. We do not need to be accountants to work that out. Most companies would not be allowed to continue if they went 20 years without having their accounts signed off. Sometimes we need to look, however, at how we manage the part of it for which we are responsible. Some questions today, particularly those from Barbara Keeley on the Labour Front Bench, about scrutiny of the European budget and the performance and financial management of the European Union, were pointing to weaknesses in the way this House holds Europe to account. That points either to a lack of involvement of members of the European Scrutiny Committee, or to the fact that it has not been given sufficient powers. There are many weaknesses in the way European finances affect the responsibilities of this Chamber, and changes could be made to the way this House holds Europe to account, but their delivery does not necessarily mean having to threaten to walk away from Europe altogether.

As I said in an earlier intervention, I do not see why the amendment needs to be put to a vote. It does not contain anything that the Government should be reluctant to do. I defer to Sir William Cash, who has left the Chamber, and his expertise on the procedures of the House and the position of the EU Scrutiny Committee, but it is time to put on a statutory basis a process whereby the Government ask things of Europe on our behalf—and which no Government in their right mind should be reluctant to do. How could any Government not want to ask Europe to be more accountable, or to think a wee bit more carefully about its spending priorities before it sets them? I hope that we see an outbreak of common sense among Government Members.

The United Kingdom’s position in whatever negotiations the Prime Minister has would be strengthened if we could find a way for this Bill to be amended and approved unopposed. If the proposed changes are put to a vote, I am minded to go with them. It would be sad if it were a matter of public record that this Committee had divided on such an important matter—on the crucial question of whether we wanted the Secretary of State to write a letter to Europe.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

We have had a wide-ranging debate over the past two and a half hours. Peter Grant was not far off the substance of the matter before us: the disagreement is over whether there should be placed in statute a requirement to write a letter.

I recognise the spirit of the proposed changes before us, and the need for us to improve the value of expenditure in the European Union, to cut down on waste and to increase transparency. We strongly support and have advocated those points.

I have to say that writing to the Commission, asking it to review the issues, will not particularly achieve the objectives we have heard set out, but the Government have taken action and continue to do so to improve EU spending. That began with the Prime Minister’s historic deal, cutting the budget in real terms. It has forced the Commission to prioritise, which we very much welcome, and it has led to the Commission’s budget for results initiative. The UK is playing an active role in that process, and we continue to push the Commission to bear down on waste in its responses to the EU budget discharge process. The Government are contributing to the simplification proposals from the Commission, and the UK will continue to fight for restraint in the annual budget.

Those steps have led to concrete results: the Commission has become more transparent and has shifted more funding into pro-growth spending. We certainly make no apologies for that—although there appears to be some resistance to it in some parts of the House—and the UK’s contributions will be lower for every year in this seven-year deal period than in the final year of the last MFF deal. That is a saving of almost £8 billion over the forecast period compared with 2013-14.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

If the Minister is resisting the amendments, and it sounds as though he is, will he tell the Committee whether he is happy with the balance of priorities in the spending on competitiveness for jobs and growth, which was a key point that I spent time discussing? He seems to be resisting any attempt to put forward a review or report that would make it easier for the House to push for changes, so is he happy with the current balance?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

In the 2013 negotiations, we achieved a shift towards a greater proportion of expenditure being on pro-growth measures, such as research and development, and away from other areas of expenditure that contribute less to growth. That includes the common agricultural policy. The hon. Lady says that it is a small amount. Actually, it was not; there was significant progress in terms of a reduction in the common agricultural policy, with more spending on those areas where we think there could be greater added value. That is the right direction. I again have to draw the contrast with the surrender of £2 billion a year in respect of our rebate for common agricultural policy reform that we did not see—I am afraid that that is the record of the last Labour Government with the 2005 deal. I therefore believe that we are moving in the right direction.

If the hon. Lady is asking, “Would we like to go further?”, then, yes, I very much support that view. We want to go further and see a greater emphasis on expenditure that provides better value for money for UK and EU taxpayers. That is very much what we want, but I question the idea that the letter she is calling for will make any difference, particularly when we are seeing progress with the Commission’s budget for results initiative. The working group will meet for the first time in July and there will be a major conference in September 2015. We want to continue that approach during the mid-term review, which, as I said, will occur in 2016.

Photo of Barbara Keeley Barbara Keeley Shadow Minister (Treasury)

The Minister was unable to give a date. Mid-term reviews are one thing, but we are moving towards a referendum, as we all know. We are all going to have to build this case for our constituents and for the campaign out there, and we need the information sooner. The slow trundling-on of the EU Commission will not suit our need for that information in this country, in this year and the next. I invite the Minister to come to my constituency and try to explain that this is a really good deal—the split between competitiveness and growth, and the amount that is spent on research and development—when we really should be pushing for that for our economy. We need to explain that and we need the review to be done sooner. He cannot even say when it is going to be done in 2016—it may be too late.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

The MFF will be in 2016, as I said. The reality is that trying to transfer expenditure in the way we certainly want to—and from what the hon. Lady is saying, she also wants to, although it does not seem to have support in all parts of the House—is a major task. We have made progress. If she is saying that the situation is frustrating and she would like to go faster, I am not disagreeing with her, but I am afraid that that is the way the European Union works. We have clearly made progress and I do not think it does her cause any good to downplay our progress.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I was going to turn directly to the common agricultural policy, for which the right hon. Gentleman is such an enthusiast, subject to his complaint that he would like Scotland to have a greater share of the money that comes to the United Kingdom.

During the renegotiation, we faced the fact that the UK’s CAP receipts would fall over the next budgetary period in real terms. The conclusion was that the fairest way of allocating that cut was through an equal, proportionate reduction in both pillars across the United Kingdom. To have allocated more funding to Scotland or any other part of the United Kingdom would have meant deeper cuts across the rest of the United Kingdom. That was why the Government took the steps we did.

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe)

Rather than bemoaning the £2 billion the Labour party lost in respect of the budget rebate, will the Minister revisit the €220 million of convergence money that the Government chose not to distribute by hectare, which is the basis on which we got it in the first place? Does he realise how much bitterness that decision caused in the rural communities of Scotland? It no doubt contributed to the Conservative party’s worst election result in Scotland for a century last month.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I will briefly make two points to the right hon. Gentleman. There is no additional money for the United Kingdom. Over the next funding period, the UK’s direct payments will fall by about €500 million compared with 2013. The most appropriate way of allocating that cut, as I said earlier, is to share it equally between England, Scotland, Wales and Northern Ireland. To have given more money to Scotland would have meant a greater reduction across the rest of the UK.

If the right hon. Gentleman objects to that approach, let me put it in context. Regions are allocated structural funds according to a Commission formula that was agreed as part of the MFF deal, which takes into account, among other factors, regional wealth relative to the EU average. As a result of the new EU formula for allocating structural funds, there would not have been a fair distribution across the UK, with each of the devolved Administrations set to lose out significantly. In 2013, the Government decided to correct that. As a result, Northern Ireland’s allocation was increased by €181 million, Scotland’s by €228 million and Wales’s by €375 million. That meant that all parts of the UK were subject to an equal cut. We believe that that delivered the fairest deal for England, Northern Ireland, Scotland and Wales. However, the right hon. Gentleman chose not to draw the Committee’s attention to that example of equal treatment, which benefited Scotland.

Photo of Alex Salmond Alex Salmond Shadow SNP Westminster Group Leader (International Affairs and Europe)

The Minister would probably get more information from The Scottish Farmer than he is getting from his civil service briefs. There was €220 million of convergence money to take account of the fact that per hectare, particularly in Scotland, we were receiving so much less than the minimum that was allocated to other countries. The question is quite a simple one. The vast majority of people think that it would have been fair to distribute that convergence funding per hectare, because that was why we were getting it. Why was that not done, and will he revisit that bad decision?

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

I say again that the right hon. Gentleman really must look at the overall treatment. When we look at agriculture spending and the structural funds, we see that there has been fair treatment of each part of the United Kingdom to ensure that no one part suffers as a result of changes to the EU budget. I say to him that if we can find savings in the common agricultural policy, we should do so.

We have had a wide-ranging debate. When it comes down to it, I believe that there is support for the clauses in the Bill, but it appears that the Opposition wish to press their new clauses that call on us to write letters calling for action, ignoring that that action is already being taken and that there is already going to be a review of the MFF by the Council of Ministers. The Commission is already following the Prime Minister’s historic deal by focusing on prioritising expenditure. I am afraid that the letters that the Opposition propose will achieve nothing of substance and do not belong in a Bill that is focused on revenue, rather than expenditure. I therefore urge Barbara Keeley not to press her amendment and new clauses, and urge hon. Members to support the clauses of the Bill.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.