2003 Draft Preliminary Budget

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Mr. Luff: I am not committing the Opposition to any policy in this context, but I think it has been proposed that the track laid for the great central railway could be used for a high-speed passenger line, supplementing the west coast main line, so it may have more uses. I have some sympathy with the hon. Gentleman.

Mr. Hopkins: I thank the hon. Gentleman for that information, and I am aware of the alternative use. Although we are digressing from the EU budget, freight could be taken off the east coast and west coast main lines, freeing them up for passengers, as is done in France. Last year, I looked at the French railways, which have segregated passengers and freight. That is one initiative on the continent of Europe, which has a more sensible approach to railways than we do. We could learn a lot from how such railways—publicly owned state systems, for example—are run.

The EU could address that issue to good effect, with particular benefit to peripheral economies such that in the north of Britain. I do not expect definitive answers from my hon. Friend, but I hope that she takes what I have said into account in future European Councils.

6.5 pm

Ruth Kelly: I would like to say how much I welcome the change in tone in this debate, which has been constructive and useful. I welcome the contributions made by my hon. Friends, and I particularly welcome that made by the hon. Member for Mid-

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Worcestershire. I congratulate him on his first outing in a European debate and I reassure him that should he wish to pursue these matters further, volumes 6 and 9 will be published by the Commission during the next two weeks and volume 2 will follow, so there will be an opportunity for him to peruse those if he so wishes.

I will try to deal with some of the points raised—briefly, important though they are. The hon. Member for Mid-Worcestershire points to category 5 and the use of the flexibility instrument in dealing with the administrative pressures, pre-enlargement. In the negotiations, the UK will stress that the administrative budgets of Community institutions should be subject to the same budget discipline as the national budgets of member states. That should be the general approach. We want the growth to be restricted and we believe that the 3.5 per cent. allowed within the financial perspective ceilings is sufficient to absorb the extra pressures. At the Council on Friday we will be pressing for the budget to be reduced and for the use of the flexibility instrument to be avoided.

The hon. Gentleman points to the uncertain impact of growth rates on the share of GNP and the budget share accounted for by various member states. The share will vary with the growth rate, but the figures and the proposed budget are based on the percentage of member states' forecast gross national product. Clearly the outcome will be influenced by the actual growth rate.

The hon. Gentleman points to the fact that there is a surplus in the 2001 budget of nearly €15 billion. Such a surplus is unwelcome, particularly as this is the second successive year when a large surplus has occurred. It is difficult to say with precision, in advance, how much will be spent in a particular year, although we continue to press for further reform and more realism in the assessing of budgets so that they reflect what is likely to be spent rather than overbudgeting, as has happened in the past.

The hon. Gentleman also points to the issue of fraud at the EU level. We believe that any level of fraud associated with the EC budget is unacceptable and will continue to work with the Commission and other member states to fight it. We take financial management reform extremely seriously and are working with the Commission and other member states to make improvements such as the introduction of clearer and simpler regulations to reduce errors, as the hon. Gentleman suggested.

The latest report on the fight against fraud, which was published on 3 July, shows that the level of reported irregularities in most sectors has fallen. That is encouraging, although we cannot be complacent and cannot read too much into one year's figures. Last year's high figures, for example, included amounts for a small number of long-running court cases, so it is not surprising that this year's figures are somewhat lower. We continue to monitor such incidents, but we should take care not to confuse financial irregularity with fraud, as there can be genuine administrative errors, which are classified under the same heading.

The hon. Gentleman asks who is likely to pay for enlargement. I have some good news on that front,

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because when the Berlin financial perspective ceilings were set, it was assumed that there would be six member states joining the European Union. It is now more likely that 10 new member states will join, but that they will still be able to do so under the existing ceilings.

In some respects, it is something of a success story that we have been able to accommodate those new entrants in the original budget. The proposals are still under negotiation, but we are determined to secure affordable enlargement under the Berlin ceilings. As the hon. Gentleman pointed out, pre-accession funds are not to be spent until after enlargement. The reason is that uptake has been slow, in part because it has taken time for SAPARD agencies to be accredited. However, apart from two, all are now accredited, and we expect payments to pick up in due course. We are certainly determined to see pre-accession funds going to candidates before they join, to enable restructuring to go ahead.

Valuable points have been made about the common agricultural policy, and I am well aware of the interest of my hon. Friend the Member for Luton, North in such matters. We made valuable progress at Berlin in reforming the common agricultural policy, as well as on price cuts, major commodities and the introduction of support for rural development and the environment, but I agree that reform needs to be faster and deeper. That is our aim in this year's mid-term review.

I certainly agree that a review is necessary to benefit taxpayers and consumers not only in nation states but in developing countries. We want to remove the link between subsidies and production, to shift support so that we pay for public and environmental goods and to allow greater market access for other countries. Therefore we welcome the Commission's proposals, because they form an excellent basis for discussion. The points raised by my hon. Friend about the distributional impact of getting rid of the CAP are interesting. I do not share his optimism that we can reach that point so quickly, but we want to move in that direction.

The hon. Member for Mid-Worcestershire spoke about the aid budget. I am pleased that he supports the Government in trying achieve greater focus on poverty. We certainly welcome the 12 per cent. increase in the Asia budget line. The hon. Gentleman mentioned the fact that appropriations for the western Balkans and Latin America are down by 11 per cent. and 5 per cent. respectively, while proposed spending on Mediterranean partner countries, including pre-accession aid to Turkey, Malta and Cyprus, has increased by 5 per cent. On balance, the provisional budget slightly increases the focus on poverty, and we are determined to continue pushing in that direction.

The hon. Gentleman raised several detailed points, which I shall deal with extremely briefly. On sheepmeat and goatmeat, last year's reform of the sheepmeat regime led to a one-off budgetary saving in 2002, which is why there seems to be a large increase in 2003. [Interruption.] I see that the hon. Gentleman appreciates that point.

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On political parties, we now have a commitment to show support for European political parties transparently. We welcome that. The inclusion of political parties as a separate item reflects Parliament's agreement that such support should be shown directly in the budget lines. In previous years it was tied up with other elements of the European Parliament budget, so we welcome that improvement in transparency.

I should like to correct the hon. Gentleman's impression in relation to the European Monitoring Centre on Racism and Xenophobia. Commitment appropriations have increased to €3.2 million in 2003 from €3.1 million in 2002. I believe that the hon. Gentleman referred to payment appropriations.

Mr. Luff: I think that I said 2001.

Ruth Kelly: The hon. Gentleman corrects me, but anyway, the appropriations will increase in 2003.

The hon. Gentleman referred to the increase in the commitment for the European Aviation Safety Agency for 2003. Commitments for 2002 set up the agency, so the increase reflects the increase in operational cost requirements. That will provide an audit function for airport safety and harmonisation of air safety standards, which I am sure the Committee will agree is important.

My hon. Friend the Member for Reading, East rightly referred to the importance of the Marco Polo programme, and made a valuable contribution. The issue is being considered in greater depth in a Council working group, which will make proposals.

There has been a lot of interest in fisheries and other such issues. I can tell my hon. Friend the Member for Luton, North that we need to ensure that stocks are not further depleted, and also to ensure that policy is based on the best science available. We support reforms that tackle overfishing, and I agree with him that we need to provide a sustainable future for the industry.

I assure members of the Committee that in the course of the Council's budget discussions on Friday, and before we establish the draft budget, we will be joined as usual by the Parliament's Committee on Budgets. It will point out to us its priorities for the budget, which we will monitor extremely carefully. Then the Parliament will hold its First Reading in October, when on past form it can be expected to bring its own proposals for spending, which are not included in the Council's draft budget. That is one reason why we need to maintain margins in the draft budget. In any event, we will continue to scrutinise proposals for additional expenditure carefully and to argue for any reduction in the margins to be focused on Government priorities, including further improvement in the poverty focus and external spending, on which we hope that the Parliament will share objectives similar to those of the UK.

We also hope that the Council will succeed in further increasing the proposed margin for traditional CAP support. The Commission's proposals for an increase of just 0.9 per cent. in 2002 already involve a slight cut in real terms. We want the Council to go

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further, while ensuing that the Commission nevertheless has sufficient funds to meet the UK's claims in respect of foot and mouth disease. We shall also press for increased margins below the Berlin ceiling in other categories, and for realism in matching the level of commitments and payments.

I look forward to a successful ECOFIN on Friday, and I thank the Committee for generally endorsing the Government's approach.

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Question put and agreed to.


    That the Committee takes note of the unnumbered Explanatory Memorandum from HM Treasury dated 5 July 2002 relating to the Preliminary Draft General Budget of the European Communities for the financial year 2003; and supports the Government's efforts to maintain budget discipline in the Community.

Committee rose at seventeen minutes past Six o'clock.

The following Members attended the Committee:
Benton, Mr. Joe (Chairman)
Cairns, David
Farrelly, Paul
Francis, Dr.
Griffiths, Jane
Hopkins, Mr.
Palmer, Dr.
Picking, Anne
Tami, Mark
Walter, Mr.
Wilkinson, Mr.

The following also attended, pursuant to Standing Order No. 119(5):
Caplin, Mr. Ivor (Hove)
Kelly, Ruth (Financial Secretary to the Treasury)
Luff, Mr. Peter (Mid-Worcestershire)
Wright, Mr. Anthony D. (Great Yarmouth)

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Prepared 16 July 2002