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Mr. Eric Forth (Bromley and Chislehurst): Perhaps those of us who have always thought that enlargement was a big mistake should vote against the Bill, as it may be our only opportunity to express that point of view. Beyond that, given the excellent wisdom and judgment of the Irish people, expressed recently in a referendum, about what the Chief Secretary is now claiming for enlargement—they were not conned for a moment—will he now give us a referendum on Nice before we make the final commitment?

Mr. Smith: No, and I have no intention of joining the right hon. Gentleman in ascribing motive or advice to

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Ireland; it is a matter for the Irish people to sort out. I said that I thought, genuinely, that there was a measure of understanding on both sides of the House that enlargement was a good thing.

Mr. Forth: Nonsense.

Mr. Smith: That speaks volumes about the attitude of the Conservative party to this major historic opportunity to entrench greater stability, prosperity, freedom and respect for democratic rights in central and eastern Europe, of which every hon. Member should be proud.

Mr. David Drew (Stroud): On connecting the agricultural changes to enlargement, does my right hon. Friend agree that it is essential that the changes to the CAP are in place as soon as possible? Otherwise, any talk of expansion will be completely out of the question. That is particularly true of the dairy regime, where the introduction of Poland would completely wreck any CAP funding, unless that funding was completely changed beforehand.

Mr. Smith: The Berlin conclusions represented a significant step forward in terms of the momentum behind reform of the CAP, and the fall in total expenditure between 2002 and 2006 is an achievement. No one underestimates the force of the argument that my hon. Friend advances. Further reform of the CAP must accompany enlargement. That is one way in which we can secure welfare gains for the existing populations of the EU, as well as the economic benefits that I have described for the peoples of central and eastern Europe.

The Berlin reforms are an important part of a continuing process of reform in Europe, which the UK is leading. At Lisbon, Europe's Governments signed up to economic reforms to enhance labour market flexibility and capital and product market modernisation, bringing more open markets and greater competition. At Stockholm, the EU pressed ahead with measures to meet the strategic goal of raising the EU's productivity and employment performance beyond that of the best in the world by 2010.

Those measures will complement the Government's domestic efforts to raise productivity and we will continue to advocate this reform agenda so that we see the completion of the single market in utilities, energy, telecoms and financial and professional services. We want a reformed Europe that is outward looking, rather than inward looking, that actively pursues multilateral trade liberalisation and closer transatlantic trading links through the launch of a new world trade round and that lives up to our responsibilities to relieve the debt of poor countries and tackle global poverty.

We also support administrative reform in Europe to cut out waste, fraud and corruption. The Government fully support Neil Kinnock's reform programme to modernise the administration of the Commission, and it was, of course, my right hon. Friend the Chancellor of the Exchequer who proposed the establishment of the new European anti-fraud office, with independent powers to seek out and tackle fraud against the EC budget.

Mr. Bercow: Will the right hon. Gentleman give way?

Mr. Smith: No, I want to make progress; I have given way a lot.

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On EC finances, CAP reform, enlargement and honest administration, the Government and the Bill are on the side of modernisation and progress, with constructive engagement for change. It is instructive to compare the Bill with the previous European Communities (Finance) Bill, which was introduced in the House by the right hon. and learned Member for Rushcliffe in 1994. Unlike this Bill, that measure increased the ceiling on EC spending, did nothing to cut fraud and waste or to reform the CAP. In introducing it, he argued:

That Bill, which became the European Communities (Finance) Act 1995 and which would be repealed under this Bill, increased the United Kingdom's contributions. He said that it would do so by "about £250 million." Who voted for that Bill? The right hon. and learned Member for Rushcliffe certainly did so—he has been consistent in such matters.

Mr. Bercow: I certainly did not.

Mr. Smith: The hon. Gentleman was not even here then.

Who else appeared on that Division list? Yes, the right hon. Member for Haltemprice and Howden (David Davis) is on that list. The hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) is also there, as is the right hon. Member for Devizes (Mr. Ancram) and, yes, the right hon. Member for Kensington and Chelsea (Mr. Portillo), the then Member for Enfield, Southgate. All today's Tory leadership contenders voted for those higher contributions. That shows that the right hon. and learned Member for Rushcliffe can get most of the rest of the Tory party in the Division Lobby behind him on Europe—even though they were losing the argument then, just as they are now.

It was not just the charms of the right hon. and learned Member for Rushcliffe that got the Tory party to vote for the 1995 Act, nor even the then Prime Minister's having made it a vote of confidence; their argument then was that the House had to support the British Government in honouring their international obligations and commitments. If that were true then, it is equally true now, and Opposition Members should support the Bill. However, the more important reason why they should support it is that ours is a better Bill, based on a better agreement.

This Bill is tougher. It will stabilise contributions and it will keep the EC budget to the same ceiling. It will tackle fraud and waste. It will reform the CAP and it will enable enlargement to proceed. The Berlin conclusions represent an important step in the on-going process of reform in Europe; they show that by engaging with Europe Britain can win the arguments and secure change. The Bill, under which the Berlin agreement will be ratified, will involve stronger controls on EU spending, the beginnings of a more effective agriculture policy and no increase in the own resources ceiling. The agreement is a good deal for the United Kingdom and an important step for the EU, and I commend the Bill to the House.

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3.54 pm

Mr. James Clappison (Hertsmere): I am not sure about the billing that the right hon. Gentleman gave me, but I welcome him on his return to the Dispatch Box on what I think is the first occasion that he has spoken from it since his reappointment as Chief Secretary to the Treasury. I also intend to pay him a compliment by saying that, having now heard his arguments for several months, I know that he never betrays the merest hint of doubt or timidity in putting the Government's case; he stays resolutely on message however overwhelming the evidence to the contrary. I have listened carefully to his arguments that the agreement was a good deal for Britain, but the more he was cross-examined by my hon. Friends, the more tortuous, unconvincing and lengthy his arguments became.

The Chief Secretary asked us for our view, so I shall make it clear. We do not share the Government's evident sense of self-satisfaction or the description of the budgetary decisions that are embodied in the Bill as a negotiating success. Much needs to be done to reform the European Union budget and these decisions do not even begin to reform it. The outcome is disappointing for United Kingdom interests.

The House will be aware that there are long-standing, natural and legitimate United Kingdom concerns about the EU budget, about the unbalanced nature of the Community's expenditure policy, about the incidence of fraud and waste in the EU's spending policies and about the net cost to the United Kingdom of the EU's revenue and expenditure policy. We believe that, in the decisions that are embodied in the Bill, the Government have missed an opportunity to do something about those concerns. The cost of that missed opportunity will be borne by taxpayers and households in the United Kingdom.

I was interested to hear the Chief Secretary's history lesson. He took us back to the legislation of the 1980s and 1990s, and he went as far back as the time when Geoffrey Howe was responsible for such issues. Hon. Members will have noticed what a big point the Chief Secretary made about the abatement mechanism and how he claimed that it was an achievement of this Government to have continued it. However, I gently remind him of who exactly negotiated the rebate in the first place. It was negotiated by a Conservative Prime Minister in the face not only of the natural hostility of other European member states that were representing their interests but of the predictions from Labour Members that the then Prime Minister would go to the negotiations in Fontainebleau and return with not a penny piece. Amid all that hostility, it was a Conservative success and a real achievement to have negotiated the rebate mechanism that has saved much more than £20 billion for this country. Indeed, it will save us £2 billion this year.

The United Kingdom, however, remains a net contributor to the European Union and, in the last calendar year, made a net contribution of just over £4 billion. As the Chief Secretary said, the own resources decisions provide for the continuation of that abatement mechanism, but although he tries to trumpet that as a success, it would appear on closer examination that, while the position of the United Kingdom remains the same, that of other member countries has been improved by the decision.

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Given the requirements of European treaty making and decision making, it would have been difficult for the Government to fail to bring back the abatement mechanism, because they have a veto. Although they had a veto to protect their position on that, they did not succeed in taking the United Kingdom's position any further forward by returning any more resources to this country from the net contribution that we make to European Union funds.

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