2002 Draft Budget

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Mr. Flight: A study by Deutsche Bank shows the figure for structural expenditure going up to about 67 billion euros, and a 16.6 billion euro increase in CAP expenditure. Surely the question is whether that would stay, given the 1.25 per cent. limit resulting from Berlin, and whether, in practice, member states would be willing to finance an increase to that extent.

Ruth Kelly: I do not, for a second, deny that there are pressures on the EU budget that need to be addressed. However, we should not halt the process of enlargement merely because we are bogged down in arguments about the long-term shape of the common agricultural policy. There are pressures from various sources, many of which the hon. Gentleman will recognise. No doubt, there will be similar pressure to look at the operation of structural funds, post-enlargement and in the longer term. We shall keep an open mind about how to deal with the future form of structural funds.

Both the hon. Member for Arundel and South Downs and my hon. Friend the Member for Luton, North talked about the possible renationalisation of CAP budgets, which Germany proposes. I would not say that that is the position held by Germany; it is one of the arguments in the debate. The UK remains committed to reform and it is important to find ways of negotiating that will carry pro-reform CAP members with us. Although we intend to use every opportunity to progress the matter, it is important to be realistic about the prospects for reform.

Fraud has been mentioned many times. I very much welcome the remarks of the hon. Member for Arundel and South Downs about Neil Kinnock's efforts in that area. The appointment of Mr. Kinnock as Vice-President with special responsibility for reform was one of Romano Prodi's first acts when he became President of the European Commission. The Commission has already produced a code of conduct for Commissioners and for Commission officials, published a charter for whistle blowers, established new, fairer, arrangements for appointments to senior posts and started a major modernisation of financial management procedures that will establish clear lines of responsibility for preventing fraud and waste.

The Commission cannot be streamlined overnight; it is a large, bureaucratic institution and it will take time for reforms to be implemented. It is important that the process of reform should allow sufficient time for consultation and that, where new posts are created, the procedures allow for the right people to fill them. In due course, we shall see improvements in the allocation of budgets, a crackdown on fraud and irregularities and a much more streamlined process, with direct lines of accountability throughout the Commission. The Prime Minister called for a root-and-branch reform of the Commission. I hope that that is what we shall see.

The hon. Member for Arundel and South Downs talked about transparency in the EU budget and said that fishing was mentioned in three separate places. Of course, the budget is not as clear as might be desirable. However, the move towards activity-based budgeting will enhance its transparency. We hope that that will be in place on a trial basis by 2003, so that people have time to get used to its operation before the final version is introduced. Of course, it will always be possible to find examples that strike one as slightly odd at first, or even second, sight.

The hon. Member for Arundel and South Downs mentioned the system for allocating grants, which we should perhaps consider. However, those who use the European opera centre in Manchester are also beneficiaries of such grants, so we do benefit from them in certain circumstances.

I am sure that the hon. Gentleman's call for greater transparency was not made in support of Prodi's calls for a new EU tax. Transparency can mean many different things to different people. The UK remains committed to rejecting a Euro tax, and I have made it clear several times that we would not consider introducing one. Instead, we must maintain firm discipline over the overall budget to ensure that it is well allocated.

My hon. Friend the Member for Luton, North mentioned the need for progressivity, and he may welcome the move in the EU's recent ``own resources'' decision towards a greater use of GNP as a basis for allocating expenditure, because it will introduce an additional element of progressivity.

I cannot comment on OLAF's expenditure budget, although I noted the remarks of my hon. Friend the Member for Reading, East with interest. I am sure that there is a justification for that budget, although I wonder what it could be. Perhaps we should delve into the matter to find out what OLAF proposes to spend its budget on. My hon. Friend raises an interesting point.

The hon. Member for Arundel and South Downs mentioned some of the ways in which the EU's internal budget is allocated. The largest single category is spending on research, most of which flows from legislative decisions on multi-annual envelope spending. The Council ensures in its negotiations that such decisions are respected. At the July Budget Council, a margin of 110 million euros was established, which is higher than that in the agreed draft budget.

I agree that reform is needed in relation to category 4 and external actions, particularly to ensure that EC aid is spent efficiently and allocated in the right areas. We have debated that at length, so I shall say no more about it. We have also commented on the use of category 5 spending and on EU administrative spending. I repeat that the UK is committed to making savings within that budget, and different Community institutions should pool resources, particularly on matters such as translation and the use of facilities. I hope that significant savings will be achieved from that source in the future.

This has been an interesting debate. I hope that hon. Members agree that we should ensure that sufficient aid is available to meet our priorities, particularly in Afghanistan and the surrounding region. We should retain a margin as regards the common agricultural policy and category 1 so that we can claim for foot and mouth disease. Overall, we should continue to press for a firm budget-disciplinarian approach and to engage other member states on that basis.

Question put and agreed to.


    That the Committee takes note of the Draft General Budget of the European Communities for the financial year 2002 (Volumes 1, 3, 4, 5, 6, 7, 8 and 9); and supports the Government's efforts to maintain budget discipline in the Community.—[Ruth Kelly.]

Committee rose at six minutes to Six o'clock.

The following Members attended the Committee:

Roe, Mrs. Marion (Chairman)
Barrett, John
Cairns, David
Griffiths, Jane
Hopkins, Mr.
Johnson, Mr. Boris
Lepper, Mr.
Palmer, Dr.
Picking, Anne
Williams, Hywel

The following also attended, pursuant to Standing Order No. 119(5):

Caplin, Mr. Ivor (Hove)
Flight, Mr. Howard (Arundel and South Downs)
Kelly, Ruth (Economic Secretary to the Treasury)

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