2003 Draft Preliminary Budget

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Ruth Kelly rose—

Mr. Luff: I think I am about to be enlightened.

Ruth Kelly: I should explain to the hon. Gentleman that ''PM'' means ''pour memoire''. It is a device inserted in the documents to keep the budget line alive even when there is no specific amount to be entered.

Mr. Luff: Well, I am so glad that I asked that question, as it has changed my understanding of the documents. I am deeply grateful to the Minister. It is always as well to ask the damn-fool questions in this life, because one often gets the most interesting answers. I have learned that one should not be afraid to ask questions that make one look stupid.

The information is useful indeed, because I now know that nothing is being spent in refunds on barley, grain, malt, durum wheat flower, groats or meal. No money on groats this year—what a great sadness. However, it would be helpful if columns 9 and 10 showed the percentage increase so that we could read those useful indicative figures, which would be more valuable if they were in full.

I raise another interesting point. When one sees a sharp increase in expenditure, one has to be a little careful. On page 145, volume 4, book 3, the European Aviation Safety Agency is mentioned. I imagine or guess that that is a post-11 September reaction. This year, the commitment appropriation is €1,750,000 and the non-compulsory expenditure payment appropriation is €1,400,000. In the coming year, the budget will go up to €9,240,000 for the commitment appropriation and €7,350,000 on expenditure. By any

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standards, that is a huge increase. I suspect that there is an explanation, but I did not ask the Minister about it during questions because I thought that she might need a little time to answer.

I could go on fleshing out such examples, which highlight the importance of examining the detail of the budget documents. My hard work on the remaining three volumes will go undiscussed by the Committee in the interest of making progress. I am grateful to the Minister for her answers and wish her success at the European Council. Many of her expressed objectives in the memorandum are shared across the House.

5.49 pm

Jane Griffiths (Reading, East): I refer to the transport safety actions on page 35 of volume 0, which show a large increase in the allocation for transport safety—€53.2 million, or 83.3 per cent. That is to be welcomed, but it seems that the proposal for the new Marco Polo programme, which is intended to move freight from road to other transport modes, has not been considered in conjunction with the particular difficulty between the UK and France and the great difficulties experienced in transporting freight that goes to and from the UK via the channel tunnel, despite recent initiatives at Sangatte. I wonder about the efficacy of the Marco Polo programme, if that other situation is not addressed in the coming 12 months. Will the Minister comment on that?

5.50 pm

Mr. Hopkins: First, may I say what a pleasure it is to serve under your chairmanship, Mr. Benton. It is also, once again, a great pleasure to debate these matters with my hon. Friend the Financial Secretary. We have discussed them many times before and I hope that she will forgive me if she has heard before some of what I say today. I may repeat some points, but they are nevertheless important.

One can make light of the fact that we have such vast documents in front of us and I must confess that the hon. Member for Mid-Worcestershire has read rather more of them than I have. However, I have browsed through the key documents and the explanatory memorandum, and I have examined a number of the statistics, which are particularly significant. The financial perspective statistics and diagrams on page 55 of volume 0 show, rather disturbingly, that there will not be much change in the ratio between spending on agriculture and spending on other areas in the European Union, probably over the next six years and certainly over the next four.

If one examines the columns carefully, one finds that there is a slight increase in the ratio of agricultural to structural spending, which suggests that we are not making much progress. Time and again we are told that there will be fundamental reform of the common agricultural policy, but in reality we tiptoe round the edges in case we cause too many difficulties with other member states.

We must face up to the fundamental reform of the CAP at some point. I would even go so far as to suggest abolition and replacement by another system

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of agricultural subsidy. If only we could persuade one or two other member states that that would be, in the long term, beneficial to them as well, we would certainly reduce some tensions in the European Union. If we want the EU to succeed, it is important to ensure that we remove areas that cause stress and tension. The CAP does so constantly.

As and when enlargement is finalised, we must face up to the reality that the CAP is outmoded, if it ever worked at all, and should be abandoned and replaced by something more sensible. I suggest that we might replace it with a system of deficit funding rather than price maintenance. There has been a shift in that direction during recent years, and we should not accept the price maintenance approach, which creates surpluses that are then dumped in other markets to the detriment of poorer countries.

I ask the Minister—I do not expect her to respond in detail now, but it is worth the European Union's time and certainly that of the Government—to investigate the possible distributional effects among member states of abolition of the CAP. I suspect that they would not be as serious as they might have been some time ago. When the Common Market was formed, France was a major beneficiary and other countries benefited, but that is changing and I suspect that the distributional changes would not be as great as they would have been then.

Abolition might be to everyone's advantage and make Europe and the European Union more popular in the world generally, because we would be able to look other people in the eye and say, ''We don't indulge in too much subsidy, so why should you?'' America is heavily subsidising agriculture, but we cannot complain because we do the same. That is to the disbenefit of Britain as part of the EU. More importantly, however, it is to the disbenefit of those poorer nations that are primary producers.

I hope that my hon. Friend the Financial Secretary tells us one day what might be the distribution effects of complete abolition. I would also like her to explore the possibility of other forms of agricultural subsidy—perhaps a repatriated subsidy arrangement—that could allow a return to a more sensible arrangement that enables us to target subsidies more effectively.

We could have a deficit funding system rather than price maintenance and we would not produce surpluses—our farming community would probably be happy with a Government who did that. It would certainly be beneficial in terms of our budget contribution. I ask my hon. Friend to look seriously at fundamental reform and possible abolition, and perhaps to come back one day and explain the possibilities and how they might affect us and other member states.

The second point that I raised during question time is the fact that the common fisheries policy is causing serious friction between member states. I would not say that we have fished out the seas around Britain, but we have substantially depleted fishing stocks, particularly in the North sea. We cannot deny that the CFP has been the real cause. If the more extensive national fishing limits had been maintained, I suspect

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that member states would have looked after their own fish stocks more effectively than the EU has under the CFP.

It is significant that the country with the best fishing stocks in western Europe is Norway, which is not a party to the CFP. Norway looks after its stocks because fishing is fundamental to its economy. The industry may not be so important to us, but it is still significant. We have lost out because of the freefall in fishing caused by the unsuccessful attempt to impose quotas and so on. I ask my hon. Friend to consider what might happen if we could substantially extend national fishing limits. Some might say that we would be abandoning the CFP, but I would say that it was fundamental reform—let us use a code word again. However, extending national limits again so that those nation states to which fishing is important can defend their own would be to the benefit of all.

If, together, we looked after our fishing stocks, we could sustain our fishing fleets and fishing industries and look forward to a better future for everyone, with more fish in the seas surrounding the EU. That is fundamental. I do not want to point the finger and say that other countries are stealing all our fish, but it would benefit the whole EU if we went for fundamental CFP reform, or even its abolition, with a substantial extension of national fishing limits.

Another point that occurs to me is that although we are sensibly not in the single European currency, our currency fluctuates against the euro and it is currently falling. Sterling has been substantially overvalued for some time, and settling down against the euro will affect our net contribution, because we are net contributors. It will cost us more if our contribution is denoted in euros, but if it is denoted in sterling we shall benefit when the euro moves in our direction in a substantial devaluation or depreciation of sterling against the euro. Indeed, some time ago the Treasury leaked the idea that a depreciation of 20 or 30 per cent. might, in the end, be sensible. That could have a significant effect on our net contributions and we ought to consider it.

Another of my concerns is regional inequality in Britain and in the European Union. One of the problems with the EU is that there is no provision for sufficient fiscal transfers to enable the living standards and the economies of different parts of Europe and different regions to converge. We have a serious problem in Britain and, so far, EU regional structural policies have been insufficiently beneficial to make a difference to our regional inequalities.

Last week, the Trades Union Congress published a document on regional policy, urging the Chancellor, in his spending review, to invest a lot more in regional policy. In a past life, I was responsible for TUC regional policy and I demonstrated that regional policy can reduce differences in living standards and economic activity between British regions. We must move further in that direction because, as the TUC has reminded us, Britain has the widest regional divergences of any country in the developed world apart from Mexico, which is relatively much poorer than us. Nevertheless, it was a surprise to find that the inequality is so great.

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Relying on European Union structural funds to overcome the problem will not solve it. Relying simply on market forces and on people getting on their bikes to look for work, as a certain Conservative politician suggested, will not work either. We need substantial regional funding increases, and I suggest that they should be nationally based and much increased.

We cannot rely solely on the European Union budget, even if there is a substantial shift from agricultural to structural fund spending. We sometimes make light of these debates, which are very enjoyable, but we are discussing serious matters. The lives of people in the north of England are much worse than those of people in the leafy counties of the south-east. I am a south-east MP, so I am aware that some parts of our region are relatively prosperous. We have to address that by considering national regional policies.

Finally, my hon. Friend the Member for Reading, East (Jane Griffiths) mentioned investment in transport infrastructure. The trans-European network initiative is important for Britain. We are peripheral to the core of the EU, and it is vital that we have good transport links if our economy is to compete effectively in a single market. We must have more investment in infrastructure, and it would be helpful if Europe addressed that need, particularly in our case. I support the central railway, which will be a dedicated freight line from Liverpool to Lille, via the channel tunnel. I have spoken about that in the House several times.

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