2002 Draft Budget

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Jane Griffiths: I agree with many of the arguments made by my hon. Friend the Member for Luton, North, although not with his conclusions, by and large. It is a virtue of Committees like this that such opinions can be aired.

The anti-fraud office was set up for the most laudable reason imaginable—to combat fraud. Having had the opportunity to visit the Commission and other EU institutions during the previous Parliament, I am well aware of the lack of transparency and lines of accountability in those institutions. Perhaps I lack skill in deconstructing the figures presented to the Committee in this large number of documents, but the anti-fraud office's budget of 10 million euros for entertainment expenses caught my eye. I could not find such a significant sum allocated for entertainment expenses in other parts of the institution.

According to the limited explanation provided, anti-fraud office representatives are not permitted to buy lunch or pay for any other kind of entertainment for staff of the Commission or of other EU institutions. However, I am at a loss as to why it would be part of their duties to buy lunch for anyone at all. We should be seeking further scrutiny and transparency and that small aspect of the operation of the anti-fraud office sounded alarm bells for me. Transparency in the work of the anti-fraud office should be pursued so that it can achieve the aims for which it was established. However, it is not clear to me how we can pursue it.

5.31 pm

Dr. Palmer: I congratulate the hon. Member for Arundel and South Downs on representing a vacuum with such verve. It is a shame that more of his Conservative colleagues were not in the Committee. No other Conservative Members are present. There was one, but I believe that he had a deadline to meet for The Spectator.

For the purposes of our debate, it is a pity that there is a period between the disappearance of the former Conservative policies and the arrival of the new ones. At this stage, we do not know whether—

Mr. Flight: Let me assure the hon. Gentleman that although the fisheries policy is subject to review, it may end up exactly the same as before.

Dr. Palmer: When I worked in business, we normally had a policy until we had another one. The Conservative party seems to go through a middle phase where it does not have a policy at all. That applies to many of the hon. Gentleman's criticisms. For example, he expressed scepticism about the Socrates programme, but I did not hear him say that he wanted to abolish it. I await correction on that point.

Mr. Flight: My point was that some things in the Socrates programme were perfectly worthy but others were clearly a gravy train. The programme is in need of financial discipline.

Dr. Palmer: We all wish the hon. Gentleman well in his struggle with the haze of Conservative policy.

Let us turn to the real world. The proposals before us seem to be in line with the prognoses that the Committee has discussed in earlier years. We all welcome the prospect of a brake on the spending on the common agricultural policy—so trenchantly criticised by my hon. Friend the Member for Luton, North. There is even the long-term prospect of a reversal of the trend. Rather than going into detail on the figures, I would like to follow my hon. Friend in putting down a marker for discussion of the figures as they evolve in the coming years. If—it is a big if—the trade talks result in a decision to reduce or even abolish agricultural subsidies in the long term, that will result in a dramatic change to the entire structure of the European Union budget.

The current budget structure is, to some extent, an historical accident. The common agricultural policy was developed at a time when most of the founders of what was then the European Community expected that parallel policies for industry, the environment and other areas would be developed. That has not happened to the degree that was expected, so we have a lopsided construction. We have a huge appropriation for agricultural support, but relatively little for other areas.

As the Economic Secretary said, Britain is a net contributor. We therefore tend to be sceptical about all forms of spending, because we assume that we will end up paying more than most. If European agricultural subsidies are reduced even more quickly and more substantially than hitherto anticipated, we shall have the opportunity to reduce the overall budget. We shall also be able to take a focused approach on joint environmental action and joint action to promote economic and technological change in Europe in a way that is difficult for countries to achieve on their own. The North sea provides a classic example: if we make great efforts to keep it clean but the other countries bordering it do not—or vice versa—a good deal of our effort will have gone to waste. I urge the Economic Secretary to keep in mind the need for sensible development in other areas to match the reduction in wasteful agricultural subsidies that we all seek.

I welcome what the Economic Secretary said about the importance of using overseas aid for poverty reduction, compared with the more politically focused aid programmes. Nevertheless, as I have in each of the past three years, I express regret that we continue to reduce the aid given to southern Africa. As the Prime Minister said, although we gave aid when Afghanistan last had a major crisis, we all headed for the horizon as soon as it was over and left them to it. I am sorry to say that we are doing something similar in southern Africa. We were extremely pleased when the apartheid regime was replaced. We wished the people well and made a few trade concessions, but we have now disappeared over the horizon. I do not wish to be a doomsayer, but southern Africa is not yet so stable and so reliably poised that it can achieve long-term economic and democratic success. We should not be quite as relaxed about it as the figures would suggest.

4.38 pm

Ruth Kelly: It has been a very interesting debate, and both sides have made useful and thoughtful contributions. I found it informative, and it has provided me with room for thought.

Before responding, I shall set out in a little more detail the negotiation position that we shall adopt later this week—I understand that it will be after midnight on Wednesday. The Council seeks to leave adequate margins below the ceilings of categories 1, 3, 4 and 5, to enable unforeseen or new spending to be proposed in-year without creating pressure on the financial perspective ceilings or requiring significant redeployment, which could disrupt Commission planning. The Commission's preliminary draft budget and the Council's draft budget both need margins, although the Council proposes higher margins than the Commission. The European Parliament's amendments tend to lead to smaller margins, requiring greater redeployment if new demands arise within a given year.

The Government particularly welcome the greater margin in category 1 and the inclusion of significant appropriations in the veterinary fund to allow payments to member states affected by foot and mouth disease. I clarify my earlier remark that 800 million euros have been allocated to the UK within the draft budget over 2001-02 together. I have further good news on agriculture. The Commission has now prepared its autumn rectifying letter for agriculture, and further savings are possible. They would increase the margin in that category to 2 billion euros, yet leave the same sum for foot and mouth disease.

The Council's wisdom in leaving large margins—particularly in category 4, for external actions—will allow us some latitude to meet the increased needs in Afghanistan and its neighbours, particularly following the events of 11 September. I shall press for more resources, in the draft budget, for humanitarian aid in Asia, to respond to the new demands in the region.

I increasingly enjoy encountering the hon. Member for Arundel and South Downs in debate. He is refreshingly open and honest in his reproach and has today praised the outstanding efforts of, for example, Neil Kinnock, in trying to reform the Commission. Neil Kinnock is the first person to take on that task. The hon. Gentleman pointed out that there are costs involved in EU membership, but he did not so clearly explain the benefits. It is wrong to consider those aspects in isolation.

The European single market of 370 million people is the biggest in the world. Participation in it is estimated to have increased output across Europe by 1.5 per cent. That fact alone would pay for our next contribution, even before taking into account the many other benefits. For example, UK exports to the single market were worth £97 billion last year. Trade with the rest of the EU supports up to 3.5 million British jobs and the single market brings inward investment to the United Kingdom. Last year, it created 50,000 jobs in the UK. I urge hon. Members to bear in mind both sides of the equation.

Members on both sides of the Committee talked about the pressures of enlargement on the EU budget, especially on the common agricultural policy. The United Kingdom is a strong supporter of enlargement. We realise that it will bring pressure to bear on various parts of the EU budget, but I do not think that enlargement will be unable to go ahead without CAP reform. The Commission enlargement strategy paper, which was published last week, confirmed that enlargement involving 10 new states is affordable with respect to the financial framework ceilings agreed at Berlin. That does not mean that we should not reform the CAP; of course we should, and, as I have explained, we are at the vanguard of attempts to do that. However, negotiations about the CAP should not preclude us from allowing the accession of new member states from eastern Europe. That would be wrong and we should keep the two matters separate to some degree.

I hope that we shall be able to use the opportunity of mid-term CAP reviews in 2002 for significant reforms, to redress the serious economic distortions that, as my hon. Friend the Member for Luton, North pointed out, occur as a result of the CAP. I hope also that we shall be able to stabilise expenditure at sustainable levels. The world trade talks will be another impetus for reform. We should grasp the nettle now and encourage our partners to do likewise.

It would be wrong to say that we have not yet managed significant reform of the CAP. While we may dispute how far the process went, what happened at Berlin was the most significant reform of the CAP since its creation, and the UK was at the heart of the process. Significant price cuts for cereals, beef and dairy were achieved and further reviews were promised. Although the reform does not go far enough or take effect as fast as we should like, it is right to recognise that we have made significant progress. The reforms are worth about £70 a year for consumers—a real result for people in this country and others.

The CAP reforms led to a shift from production subsidies towards income-related subsidies, an issue that is of interest to my hon. Friend the Member for Luton, North. That goes some way towards enhancing sustainable development of the environment and of the rural economy. It is an important part of our approach to the negotiations in Brussels, and we shall continue to press for it.

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