European Standing Committee B
Wednesday 11 November 1998
[Mr. Roger Gale in the Chair]
Agenda 2000: Financial Aspects
[Relevant documents: European Community Document No. 7138/98, Commission report on the functioning of the Loan Guarantee Fund and draft Council Regulation (EC, EURATOM) amending Regulation (EC, EURATOM) No. 2728/94.]
10.30 am
The Chairman: Good morning, ladies and gentlemen. Members of the Committee may remove their jackets for their greater comfort if they wish to do so. Before I call the Minister to make her opening statement, I should tell members of the Committee and others present about the arrangements for 11 o'clock. I propose to suspend the sitting as close as possible to 11 o'clock to enable those who wish to do so to observe two minutes' silence. At that time, I will interrupt whomever is on his feet, unless 11 o'clock conveniently strikes when somebody has just finished speaking. I will then invite members of the Committee who want to observe the silence to stand for the relevant two minutes. The sitting will resume two minutes after 11 o'clock. I hope that we shall be able to hear the chimes of Big Ben; otherwise, I will rely on the Annunciator.
10.31 am
The Economic Secretary to the Treasury (Ms Patricia Hewitt): I am grateful for the chance to set our discussion in context. As hon. Members will be aware, Agenda 200 encompasses four rather challenging dossiers. First, there is the enlargement of the European Union to incorporate 10 states from eastern Europe plus Cyprus; secondly, there is reform of the common agricultural policy; thirdly, there is reform of the structural and cohesion funds; and, fourthly, there is a financial package for the next seven years.
The documents before us set out the Commission's proposals for the fourth of those dossiers. There are four documents. The first two, which were published in March, concern the expenditure side of the account and deal respectively with budgetary procedures and spending ceilings. The third and fourth documents, which were published in September and October respectively, deal with the revenue side. The documents are closely interconnected, which is why the most effective approach to parliamentary scrutiny is to deal with all four together. There are also links with enlargement and policy reform. I will be happy to deal with those linkages, but I hope that hon. Members understand that I am a Treasury Minister and not an expert on agriculture, structural policy or enlargement.
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When one looks further, however, one sees that the proposals are more expansionary and that the need for tight finance is more pressing. Actual spending is substantially less than the ceiling for 1999, and of course, all of this relates to commitments the value of the new contracts that the Community can take out. The value of spending on existing contracts is much lower still about
85 billion ecu for 1999. That is the figure with which we should compare the Commission's proposal of 105 billion euros for 2006. In other words, the proposal represents a
23 per cent. increase over the current level of payments.
In the Government's view, that is an inadequate response to the challenges that we face. In particular, it is essential that we ensure that there are sufficient resources in the budget to make successful and affordable enlargement possible. Furthermore, European approaches to public spending are now much more disciplined as a result of the stability pact criteria.
There is no need to spend all the money. The Commission proposes a further real increase in common agricultural policy spending, a 19 per cent. real increase in the structural and cohesion funds and large increases in other types of spending. I should stress that all of that money is for the current 15 member states. The costs of enlargement will come on top.
The Government therefore advocate that by 2006, the EC budget for the existing 15 member states should be stabilised at about the present level of spending. That will in turn produce a spending level of some 20 billion euros less than the ceiling proposed by the Commission. I am happy to say that our position is shared by several other member states.
As I have said, the level of spending has important effects throughout the dossier. I shall dwell briefly on its implications for contributions. Britain and the other member states are currently paying for about 85 billion ecu of spending. The cost of those contributions is causing public concern in a number of states, notably Germany, the Netherlands, Austria and Sweden.
Mr. John Wilkinson (Ruislip-Northwood): And the United Kingdom.
Ms Hewitt: Of course.
The further increases in spending and therefor in contributions proposed by the Commission are precisely the wrong response, not least because of the further additional contributions that will inevitably arise from enlargement.
Relative to the Commission's proposals, the stabilisation of spending that I have described would save about 1 billion euros from Germany's net contribution by
2006, and 250 million euros from that of the Netherlands. The Government understand the widespread concern in those countries about net contributions, because Britain has experienced the problem for such a long time. We seek to co-operate to ease the problem, so long as the United Kingdom's existing abatement, which remains well justified, is not undermined. We are, for instance, exploring with interest the Commission's idea of partial reimbursement of direct payments under the CAP, known more briefly as co-financing. Hon. Members will doubtless want to address that issue.
I hope that throughout the debate, hon. Members will recall that the Government are engaged in negotiation. For that reason, in the same way as my predecessor, I might sometimes have to choose my words with care and be a little less forthcoming about the Government's view than the Committee, and I, might like. I know that hon. Members will understand the need not to prejudice the Government's negotiation in this extremely important matter.
Mr. John Whittingdale (Maldon and East Chelmsford): I am grateful to the Economic Secretary to the Treasury for setting out the background to the documents. She will be aware that a considerable proportion of the document about the financing of the European Union is devoted to the United Kingdom abatement and to the need for reform. The Prime Minister is on record as stating that he will maintain the UK budget rebate, and the Economic Secretary to the Treasury has repeated today that the Government believe that the rebate continues to be amply justified. Will she make it clear that the Government will not accept any change to the present formula for calculating of the rebate, and that they will veto any proposal to change it?
Ms Hewitt: I am happy to repeat the assurance that my right hon. Friend the Prime Minister gave in the House last week. The Government will not accept any weakening or reduction of our abatement. I draw the hon. Gentleman's attention to the Commission's report on own resources, which explicitly states:
"even after the rebate the United Kingdom remains a larger net contributor to the EU budget than Member States with a higher capacity to pay" .
Dr. Stephen Ladyman (South Thanet): I welcome you, Mr. Gale, to the Chair.
Before the Committee questions the nitty-gritty of the documents, I should like to refer the Minister to paragraph
3.40 of the Court of Auditors special report 6/98, which is headed "The need for a measure of data quality" . In the paragraphs under that heading, the Court of Auditors points out that unless the data on which we base our decisions are reliable and accurate, those decisions are not likely to be good. In those paragraphs, although it is stated that these statistics have been gathered
The Chairman: Order. This type of hybrid sitting always presents a problem. I remind members of the Committee that the first hour of the debate is devoted to questions to the Minister. Members should not, therefore, delve too deeply into the substance of what I recognise are very complex documents. That can be done in the hour and a half following questions. If the hon. Gentleman would be kind enough to put his question to the Minister, I am sure that she will try to answer it.
Dr. Ladyman: I am just coming to that, Mr. Gale. Paragraph 3.40 states that the data are inaccurate as they have been gathered from different sources using different measures. Can my hon. Friend tell us whether the corrections that it is necessary to apply to the data have been applied so that they are accurate? If she cannot tell us that, can she give us an idea of when the data will be sufficiently accurate to allow decisions to be made?
Ms Hewitt: I may need to come back to my hon. Friend on that point. However, we share his concern about the quality of statistical data across the Community. The Office for National Statistics has been working closely with the statistical authorities of other member countries to improve the quality of data collection so that we have comparable statistics across the Community on which we can base this and other decisions.
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