European Union: Budget

– in the House of Lords at 2:55 pm on 14th June 2005.

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Photo of Lord Barnett Lord Barnett Labour 2:55 pm, 14th June 2005

asked Her Majesty's Government:

What progress they have made in the current negotiations on the European Union budget.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, the Government are currently negotiating both the annual budget and the next financial perspective. In both areas the Government are working effectively with like-minded member states to ensure budget discipline and value-added for spending at EU level. Other member states have taken a keen interest in the UK's ideas and we are confident that the negotiations will result in an outcome in the best interests of both the UK and the EU.

Photo of Lord Barnett Lord Barnett Labour

My Lords, I thank my noble friend for that Answer and appreciate that it is difficult for the Treasury to find short answers to say nothing. Would not the simple answer to my Question have been, "Not a lot"? My noble friend has nothing to apologise for; we understand that the Prime Minister is under a little pressure at present. Does he accept that in practice it means a challenge for the Government to make clear that a major alternative is possible; namely, substantial reform of the budget perspective? In those terms, will he make clear that there is no need to rush for this; it will not be settled next week, next month, or indeed this year, and it would not matter if it were because it does not come into force until 2007? Will my noble friend give us a clear assurance that the Government have no intention of making even the tiniest concession on the budget rebate without it being agreed clearly that there will be major reform of the budget including, not least, the common agricultural policy?

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, I thank my noble friend for his supplementary question. I am sorry if the answers are too long; I shall try to get them to match the length of the questions in future.

I agree with my noble friend that it would be fine if we could settle the issue this month, but it is important that we get the right answer rather than get it quickly. On what has been achieved, the parameters of the 2006 budget are already largely in place and it is much easier to make progress on that than on the financial perspective for the next seven years.

In many ways, the discussion about rebate is a distraction. The key issue is the expenditure side of the equation. The continuing inefficiencies and inequities on the expenditure side of the budget and the resulting unfairness of the United Kingdom position mean that the abatement remains fully justified and is not up for negotiation. If there is a fundamental review and debate about the future of Europe, including the financing of the European Union, everything will be up for discussion.

Photo of Lord Biffen Lord Biffen Conservative

My Lords, is it not the Government's objective to secure a reduction in Community financing of the common agricultural policy, single payments, payments on animal welfare and payments on environmental protection? If so, would it be in the context that payments in that direction could be made by national governments out of national resources?

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, the Government's policy is to continue to seek to bear down on expenditure under the CAP, particularly following the success in 2003 of the new financing arrangements.

If the funding of agriculture were returned to member states, it would have to happen across the piece. We are not optimistic that that will happen quickly but one of the Government's objectives is to reduce spending on the CAP. We regard the agreed levels as ceilings not targets. It cannot be right that so much of the budget—some 40 per cent—is spent on agriculture.

Photo of Lord Tomlinson Lord Tomlinson Labour

My Lords, does my noble friend agree that referring to this as a rebate is not helpful? In fact, it is a corrective mechanism that was never intended to be renegotiated. As my noble friend said, it was intended to be a reform of the expenditure side of the budget, which, when so reformed, will mathematically eliminate the need for any payments back to the United Kingdom. The real challenge is for the other countries of the European Union—not only France, but also major net beneficiaries such as Spain—to renegotiate the expenditure side of the budget so that the need for the corrective mechanism disappears.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, I agree with my noble friend's assessment. Calling it a rebate is incorrect because it never gets paid over in the first instance. It is simply deducted from the contributions that we make in a subsequent year. The assessment is right. Unless we tackle the inequities of the expenditure side, we will not make progress on this issue. If we do, it is not so much a matter of negotiation, it is a matter of arithmetic as to what will happen to our net contribution.

Photo of Lord Newby Lord Newby Spokesperson in the Lords, Treasury

My Lords, does the Minister envisage that as part of the Government's negotiating policy they will argue that the structural funds should no longer be receivable by the UK and should go simply to the poorer new accession states? In that case, what action do the Government envisage they will take to make sure that those regions which are currently beneficiaries of EU structural funds do not lose out in future?

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, the Government would want the structural funds to be concentrated on only new member states, as well as Greece and Portugal, which fall below 90 per cent of the EU average. Domestically, the Government have given a guarantee that should our position prevail on this, a guarantee will ensure increased domestic regional spending in the UK based on the funding that UK regions might have expected under a status quo scenario after enlargement.

Photo of Baroness Noakes Baroness Noakes Spokespersons In the Lords, Treasury, Spokespersons In the Lords, Work & Pensions & Welfare Reform

My Lords, whether or not we are talking about a rebate or a corrective mechanism, the Minister will be aware that Commissioner Mandelson has said that it is wrong for the UK to expect poorer countries to pay for any amount, thereby saying that the UK should give up around £300 million of its rebate. Does the Minister agree that Commissioner Mandelson was wrong to get involved in that way?

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, I have set out the Government's position. It is for Commissioner Mandelson to answer himself on what he has said.

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour

My Lords, if this is a negotiation, one cannot expect either side—I am thinking particularly of Britain and France—to make unilateral concessions. In any negotiation, any trade union official would say that either it can be conducted in decibels or with a view to reaching some sort of outcome. Is it not right to see Mr Mandelson's contribution in that light?

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, that might be right, but in any negotiation it is important that the participants are clear on the parameters. In relation to the rebate, or the abatement as is probably a more appropriate term, the Government have set out their position, which I dealt with earlier.

Photo of Baroness Ludford Baroness Ludford Liberal Democrat

My Lords, do the Government believe that this country might have learnt its lesson? Had we been in at the beginning of the European Community, the CAP would never have been shaped as it was. When we exclude ourselves from a project or we are semi-detached, as is the case now with asylum, immigration and law enforcement, we will never be full beneficiaries from the policy. Have the Government learnt that lesson from the past 50 years of the European Union and the European Community?

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, we are where we are on those issues. We cannot rewrite history. It is always important for a judgment to be made on what is in the UK's best interest on all of those issues. When we enter into agreements, that is the key judgment which should underpin our decisions.

Photo of Baroness Oppenheim-Barnes Baroness Oppenheim-Barnes Conservative

My Lords, does the Minister agree that we are where we are because inequalities and inefficiencies have been allowed to continue for far too long? In many cases, no one on that side of the House questioned them until the matter of the rebate arose. We are paying for what was not done in the way of vigilance in the past.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, I am not sure that I can speak for the Government in the 18 years between 1979 and 1997. But certainly this Government have been diligent in seeking to make sure that the budgetary process reflects value-added at the European level and that we have tight budgetary discipline, which has been a key plank of the Government's approach to those matters.