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Mr. Edward Davey (Kingston and Surbiton): The hon. Member for Bexleyheath and Crayford (Mr. Beard) made an interesting speech, but rather oversold the Bill by suggesting that it was of such great historical importance. I am afraid that he might have been thinking of the European Communities (Amendment) Bill, which will be considered tomorrow. That Bill has a place in history, but I do not think that the Bill before us can be given the same billing. It is a modest measure that arises from the modest decisions taken at the Berlin summit. Indeed, its modesty explains why it is disappointing, as the agreement reached at Berlin was a missed opportunity for the European Union.

Mr. Beard: Does the hon. Gentleman agree that if there had been no agreement on financing the European Union after expansion, no expansion would have occurred?

Mr. Davey: To that extent, the hon. Gentleman is correct, but the idea that the budget would suddenly disappear was not on the cards at Berlin and is something of an Aunt Sally.

The modesty of the Bill was revealed by the Chief Secretary to the Treasury, who told us that the triumph in the negotiations was what was defended and did not happen. He told us that Britain did not lose its abatement and that the ceiling on spending was not raised, but he did not try to sell the Bill to the House in respect of any positive way forward for the European Union and Britain.

Some of the missed opportunities relate to lack of reform and to the whole budget process. We need to be more ambitious in this House and in the European Union in looking for wider budgetary and common agricultural policy reform. One of the objectives of debates such as this, not only in the House but at European Union level and in the summits, should be to take the money out of the EU altogether. Tory Members should not become excited; I am not suggesting that there should be no budget at the European level and would not agree with such a suggestion. We must, however, focus the debate about money in the EU on policy and activity, not on pork-barrel politics. Much of the debate is currently about which country gains what, but we must move discussion away from that perspective and consider the purpose of the EU and the benefits of spending on particular EU policies and activities.

Mr. Redwood: How can the hon. Gentleman possibly say that this is a modest Bill? It is staggeringly expensive: there will be a cost of about £60 million a year for every word in it, and it is a huge sting on British taxpayers. We are shown how Liberals care about other people's money when we see that they do not understand how much is involved or how much will be wasted or lost through fraud.

Mr. Davey: I am disappointed by that intervention. As the Chief Secretary made clear, the right hon. Member for Wokingham (Mr. Redwood) voted for such Bills, which provided for taking similar amounts of money from the British taxpayer. The right hon. Gentleman is wrong again.

I want to develop the point about taking money out of the political debate on the European Union. As the hon. Member for Bexleyheath and Crayford said, the amounts

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of money are small, and if we could remove their consideration from the debate we could focus on the EU's genuine benefits. They include the single market, benefits to internal and external security, environmental protection, and the EU's greater international standing and ability to negotiate trade agreements. British taxpayers, companies and citizens gain most from such benefits. The money debate is irrelevant in many ways. We do down the European project by always allowing the debate to revert to relatively small amounts of money—I stress the word "relatively" before the right hon. Member for Wokingham leaps to his feet.

The Berlin decision and the process that underlies the Bill are regrettable. When we debate local government grant settlements, we appreciate how complicated the formulae for sharing the money between United Kingdom local authorities have become. They are even more byzantine than EU formulae. However, as we try to reform those processes for local government and national Government spending, we should share some of the lessons on budgetary reform with other EU countries, many of which are taking similar action. We are not learning the lessons of local and national budgetary reform collectively at European level.

Why do we not consider budget making that focuses on outcomes and outputs? The Chief Secretary has been proud of his public service agreements. They suffer from a few problems, but they represent a move in the right direction. The EU needs to focus similarly. Hon. Members may be surprised to learn that some improvements have been made, primarily through the initiatives of British Commissioners. The draft budget for 2001 was the first at European level to be divided into policy areas. That is an amazing change, which should have happened many years ago. It is the sort of change that we need to be able to analyse European spending sensibly and move away from pork-barrel politics, which the Conservatives go on about but which miss the point.

The previous Conservative Government should take credit for some interesting developments in ensuring that European spending has a legal basis. I should have liked the Berlin agreement and the Bill to move further on that. The previous Conservative Government took a case to the European Court. They contended that some spending by the European Commission had no legal basis. The Labour Government continued with the case and the spending was successfully challenged. That was a UK triumph. Ensuring for the first time that EU spending lines have a legal basis has meant improvements in European budget making. However, much remains to be done, and the Bill is therefore disappointing.

I should like to set out other aspects of budget reform that the Government should consider. If possible, they should use the Bill or any future European meetings to press them. I pay tribute to Nick Clegg, Liberal Democrat Member of the European Parliament for East Midlands. He wrote an interesting article entitled "Spring Cleaning the EU. Doing Less to Do More". I owe some of the ideas on budgetary reform that I am about to set out to Nick Clegg's experience at the European Commission and Parliament. For example, he argues that far too many lines in the EU budgets deal with very small amounts of money. In other words, small pots of money are put forward in a very grand way and attached to grand-sounding policy initiatives, but they mean very little and amount to no more than a row of beans.

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He argues in his paper that we should delete all those small lines in the budget which together amount to significant, although not huge, sums of money. In that way, the budget could be cut.

We need to pursue the idea that there should be no budget allocations in the EU budget that are not related to core EU areas. The European Union, backed by the European Parliament, often puts forward small amounts of money that have nothing to do with the core competencies and functions of the European institutions. We should press for those to disappear under the philosophy of subsidiarity.

Mr. Howard Flight (Arundel and South Downs): Does the hon. Gentleman have in mind, in that proposal, such matters as EU embassies around the world?

Mr. Davey: That may be one of the areas in question, although EU embassies around the world relate to some of the core functions of the EU, namely security and international relations. The EU clearly has more of a core role there than it has in, for example, tourism in the UK.

I should also like to see other changes. Commissioner Patten's analysis and scrutiny of the way in which the allocation of external aid from the EU has been carried out, or not carried out, in recent years would bear another look. The Government should push for Commissioner Patten's reforms in that area to be adopted.

Mr. Bercow rose

Dr. Palmer rose

Mr. Davey: I give way to the hon. Member for Broxtowe (Dr. Palmer).

Dr. Palmer: Is the hon. Gentleman seriously suggesting a total ban on EU spending outside the core areas? Is he thinking of running for the Conservative leadership?

Mr. Davey: To the hon. Gentleman's second question I can give a resounding no. On the first question, I would not want a complete and utter ban because that could become too inflexible. However, we need a massive reduction in those areas because they are straining the European Commission and the institutions of Europe unnecessarily. Much official time surrounds the spending of small amounts of money: putting forward the bids and tenders, auditing and monitoring them, and so on. We are wasting the abilities of Commission officials on paltry policy initiatives. We need to ensure that Commission officials—the bureaucracy—in Brussels focus on what they are there for, namely international co-operation between members of the European Union.

Mr. Bercow rose

Mr. David Heath (Somerton and Frome) rose

Mr. Davey: I give way to my hon. Friend.

Mr. Heath: Will my hon. Friend assure me that he will not resile too far from the position that he admirably

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sketched out? I entirely agree with him that it is essential that the European Union should stick to its core competencies, and that those should be far better defined than they are at present. I do not like the idea of slush funds that can be dipped into around Europe, and he is absolutely right to focus on that issue.

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