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Mr. Wilkinson: I draw the Minister's attention to an article in The Sunday Telegraph by Daniel Hannan MEP. Is he aware that the two MEPs we have discussed have to reimburse the European Parliament for an extra amount of no less than £11,500? If those two gentlemen can make such a profit on their travel expenses in such a short time, does that not indicate that the generality of their colleagues are probably not doing too badly? We just do not know how much they are making on the side.

Mr. Vaz: The hon. Gentleman is right. It is an example of transgressing the 11th commandment—they got caught. One does not know what the others are doing, but it is wrong to cast aspersions on them. The hon. Gentleman makes it difficult for me to choose between The Sunday Telegraph and The Times— I am surprised that he has not mentioned the Daily Mail. Their pro-European attitude is obvious to anyone who reads them.

I ask the hon. Gentleman not to be seen to be the defender of the system. I know that he believes in the cause of the butcher, the baker and the candlestick maker. I do not know the employment of the other gentleman involved. One is certainly a butcher, the other is a fisherman, but I do not know what the metric man does for a living. Their causes may be perfect—the right causes to adopt—but it is the principle that matters. Although the hon. Gentleman supports the cause, and points out that others might be doing things differently and have not been found out, he must accept that our constituents are concerned about this matter. We must therefore give it consideration.

The Chairman: Since there are no other questions, I invite the Minister to move the motion.

Motion made, and Question proposed,

    That the Committee takes note of European Union Documents Nos. 9712/00, relating to the proposed Statute for Members of the European Parliament, and 9560/00, relating to the audit of the expenditure of the European Parliament's political groups; supports the Government's efforts to secure agreement on a Statute for Members of the European Parliament; and notes the Nice European Council's agreement on a legal basis for a Statute to regulate the funding of European political parties, as recommended by the Report of the Court of Auditors.—[Mr. Vaz.]

4.59 pm

Mr. Richard Spring (West Suffolk): I welcome you as Chairman of this afternoon's proceedings, Mr. McWilliam and thank the Minister for setting out the details behind the documents for our consideration this afternoon. It certainly made up for what was not quite the same grasp of detail in his answers.

The debate covers two distinct proposals, to which I shall refer in turn.

First, I shall talk about the MEPs' statute, before turning to some of the more controversial consequences of the Court of Auditors report into the expenditure of the European Parliament's political groups.

The idea of a statute has something of a history. It has been under discussion in one form or another for the best part of two decades, but remains contentious. European Union Ministers rejected the draft statute from the European Parliament's president and the leaders of the three main groups, instead proposing their own. They are now, seemingly, unable to agree among themselves on some of the more sensitive issues. There is cross-party consensus on many aspects of the proposals contained in the report by the Group of Eminent Persons and the European Parliament recommendations. However, I shall raise one or two matters about which the Opposition have some concerns.

The proposals for tightening up the expenses regime in the independent report mirror suggestions supported for some time by Conservative Members of the European Parliament. A fair and visibly transparent system should be put in place and expenses should be directly related to cost. There is no division on that issue, I believe. However, the latest proposals on travel costs, for example, do not go far enough in meeting those aims. My hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) alluded to some of the problems. From the letter written in December by Pierre Moscovici, the French Minister for Europe, to the European Parliament's president, it seems that Ministers expressed similar concerns through the General Affairs Council. Will the Minister update the Committee on the chances of those concerns being reflected in the final statute?

The Conservatives' greatest concern about the document agreed by the leaders of the three main groups focuses on the issue of salary and taxes. As allied members of the European People's party/European Democrats group, Conservative MEPs are not bound by that document and have made clear their opposition to aspects of it. I assume that, as full members of their groups, Labour and Liberal Democrat MEPs are so bound.

Mr. Moscovici's letter to the European Parliament's president in December made it clear that Ministers regarded the suggested figure of 8,420 euros a month as too high a salary. An average of the parliamentary allowances is the only basis for calculation that would be acceptable to our fellow citizens. The Government apparently agree with that view, but how much success have Ministers had in putting their case to the European Parliament?

A difficulty faced by the European Union institution as a whole has been its dissociation from the peoples of Europe. I make no party political point about that, but the low turnout in European elections and the widespread sense of alienation and disaffection about the institutions of the European Union are matters of great concern to all of us.

Does the Minister agree that we must ensure that that dissociation must not happen in the case of MEPs? Proportional representation and a common European Union salary would not help the situation. I am sure that the Minister would agree that considerable practical difficulties stand in the way of MEPs associating with the areas that they represent, because there is no direct link. That presents a problem and is a reason why disaffection about the whole process of the European Union exists in many member countries.

Does the Minister recognise the danger that such a salary presents? Even if the salary were set at a reasonable level, it might increase disproportionately in years to come because of exchange rate fluctuations, or a link with top-level official salaries. We would have no control over those matters. The Minister observed that there was a direct link between the salaries of British MEPs and of Members of the House of Commons.

We are especially concerned about the proposal in both the Group of Eminent Persons report and the European Parliament president's report that MEPs should be subject to a special European Community rate of income tax. I believe that the Minister will agree with our view on that matter, which is straightforward. Conservatives believe that MEPs should pay the same rates of tax as the constituents that they represent. They should pay national rates of taxation, not a Community rate. I hope that the Government will agree with us, that the Minister will, in due course, restate their position and that we shall receive clarification on the matter.

The Court of Auditors report into the funding of political groups in the European Parliament is extremely valuable. It is comprehensive and detailed and examines many spheres in which the rules need to be strengthened and enforcement improved. It is already leading to welcome tighter controls across the board in the spending of public money by political groups in the European Parliament. The European Parliament circulated a comprehensive set of new rules in December, which are to be welcomed. However, the report has also led to a development that is far from welcome to Opposition Members.

A proposal for a Council regulation on funding for pan-European parties was agreed by the Commission at its meeting last week. It follows directly from the auditors' anxiety about current procedures for channelling money from political groups in the European Parliament to pan-European parties such as the European People's party, the Party of European Socialists and the European Liberal, Democrat and Reform party, and the auditors' desire for greater transparency.

Such anxiety is justified. It is right and proper for such funding from groups to transnational parties to be stopped. The Court of Auditors said that such transfer had no legal basis, but any shortfall in funding that transnational parties suffered as a result should be made up by their component national parties. Instead, the Commission wants to fund pan-European parties directly using taxpayers' money. That is totally unacceptable. First, it is wrong in principle for the EU to regulate political parties. Secondly, it is wrong for pan-European political parties, as opposed to parliamentary groups, to be funded by the taxpayer. Thirdly, the measure is in effect and practice discriminatory. I understand that both UK Commissioners share our anxiety. I should like clarification of the Government's stance on that important point.

In agreeing the proposal last week, the Commission said that:

    ``holding political views favourable to European integration is not a precondition to obtaining the status of a European political party, nor for receiving Community financing''.

I am sure that we should all be grateful for small mercies. However, does the Minister recognise that giving the money to pan-European political parties means that, in Britain at least, the effect is exactly the same?

That point is crucial. Unlike Labour and the Liberal Democrats, the Conservative party is not a pan-European political party. Evidence given to the Select Committee on Foreign Affairs before the Nice Council suggests that the Foreign Secretary may have made the fatal mistake of believing his own rhetoric on the issue. He seemed genuinely to believe that we were members of the EPP. We are not. Conservative MEPs are allied to the EPP/ED group in the European Parliament, but that is not a political party. Nor is the European Democrat Union, which is an association of centre-right parties across the European continent that has no intention of incorporating as a European political party. We have no relationship with the transnational EPP, which is such a party.

I recognise that national parties will not be funded directly, but the pan-European parties, of which the Labour and Liberal Democrat parties are full members, would be funded directly from the taxpayer. Surely that will boost their ability to promote their case. It may also mean that the national parties benefit from having to pay lower subscriptions.

The overall effect in Britain will be to disadvantage the one mainstream political party that does not favour further political integration in the EU. We are discussing public funds paid by British taxpayers of all political persuasions and none. Does the Minister not regard such discrimination as entirely unacceptable?

Such discrimination is not a coincidental effect. It is obviously more likely that a party that favours much further European integration will want to sign itself up as part of a pan-European party. Indeed, Labour politicians have welcomed the fact that the Conservative party will be disadvantaged as a result of our political views. One Labour source was reported in The Times of 17 January as saying that it would serve the Leader of the Opposition right because it would mean that he was

    ``hoist by his own Eurosceptic petard''.

On 25 January, Simon Murphy, leader of Labour's MEPs, said that we were victims of our own extremism. By that, he meant our insistence on standing up for the views of the majority of his fellow countrymen on European political integration, for which I make no apology. Indeed, he is Labour leader only because the crushing defeat that the Labour party suffered in the European elections led to the voluntary retirement of two of its more prominent members.

The Conservative party is not alone. In France, the Gaullist RPR is not a member of a transnational party. The main centre-right parties in two of the four larger member states of the EU would therefore lose out, and I am sure that the Minister would not regard that as fair. The effect of such a discriminatory measure wholly justifies the term ``funds for federalism''. It works systematically to the advantage of federalist parties.

It is reported that both UK Commissioners opposed the plans. In The Times of 25 January, Neil Kinnock reportedly objected for

    ``reasons of democracy and political common sense''.

Does the Minister share Commissioner Kinnock's common sense and belief in democracy? If so, will he assure the Committee that any such proposal will be vetoed by the Government in the Council of Ministers, or was the report in The Times of 17 January right to state that the Foreign Office had indicated that it was broadly supportive of the measure?

Does the Minister realise that signing away our national veto in that area, as the Prime Minister did at Nice, was the height of folly? It means that further regulation of parties and new conditions on funding could be introduced later without the Government being able to block them. That would be fundamentally undemocratic. The British people should be able, through Parliament and the House of Commons, to decide whether our political parties should operate under a legal framework.

The proposal is all too typical of the EU's reaction to problems. The Commission rightly seeks to tackle abuse of existing EU procedures, but it is doing so by introducing new EU competences. The European Union should tackle abuse by doing less, not more. That is the ultimate lesson to have been learned from recent crises in fraud and maladministration in the EU. It is a lesson that EU institutions and the Government need to start learning.

5.12 pm

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