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Dawn Primarolo: In his uncompromising message to Finance Ministers in European-level discussions, the Chancellor of the Exchequer made it clear that, when each member state has to take tough decisions on spending and show fiscal discipline, it is unacceptable and unrealistic for the Commission to propose a 25 per cent. increase in its spending. He also told Finance Ministers that it would be wasteful and inefficient to increase spending on current Commission programmes that do not match the European Union's economic reform priorities and in some cases, such as the common agricultural policy, work against them. The Government's view is clear about the negotiation that is necessary on the financial perspectives and where we are starting from.

Indeed, as the Prime Minister set out to the House in December last year, the Government view a budget of 1 per cent. of EU gross national income, with growth and reprioritisation, as adequate to meet the needs of an enlarged Union. That view is shared by the heads of five other member states—Germany, France, Sweden, Austria and the Netherlands—who have also written to Commission President Prodi, arguing for a budget stabilisation around 1 per cent. of EU gross national income.

With that in mind, the Government believe that EC budget spending should be objectives-focused, with the emphasis on policy outcomes rather than budgetary inputs; that it should be evidence-based, with a proper evaluation of budgetary policy; that it should be based on a proper assessment—again, I think this is what the right hon. Member for Wokingham was driving at—for existing and new areas of spending, of whether the
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Union budget is the best instrument for adding value at the EU level; and that it should ensure sound financial management, budgetary discipline and an equitable distribution of spending across the EU, consistent with value-added principles and objectives. It is the Government's view that the Commission has failed to respond adequately to the challenge posed for the next financial perspective.

Mr. George Howarth (Knowsley, North and Sefton, East) (Lab): As my right hon. Friend may have expected, I have received a communication from our colleague the Member of the European Parliament for the North West, Arlene McCarthy, who asked me to stress that she fully supports the Commission's proposals. For my own part, I am concerned about the effect on objective 1 status on Merseyside, particularly on many of the ongoing projects and schemes across Merseyside and in my constituency that are addressing problems that need to be addressed. Will my right hon. Friend agree to meet local authority leaders, myself and parliamentary colleagues to discuss our concerns so that we can hopefully reach an equitable solution?

Dawn Primarolo: I am always happy to facilitate meetings between Members of the House and Treasury Ministers, including myself, as my hon. Friend requests, so that I will be able to explain clearly to Members of Parliament and the colleagues whom my hon. Friend wishes to bring to such a meeting the Government's intentions with regard to reform of the structural funds and the benefits that that will bring. If he will forgive me, I shall return to that matter later in my speech when I discuss the cohesion report.

On the common agricultural policy, the Government are a leading advocate of CAP reform, pressing for a more liberalised and market-focused agricultural sector. Last year, we succeeded in a significant reform of the CAP, for the first time largely breaking the link between tax-funded subsidies and production. This year, we secured yet more reform, including an end to the specific subsidies for tobacco from 2010 and a significant reduction in trade-distorting support for cotton, which is a key product for some of the world's poorest countries. The Government will continue to press for CAP reform, with the next stage likely to be the reform of the sugar regime.

For external actions, the Government would like the next financial perspective to refocus development assistance on poverty reduction and achieving the millennium development goals, to enhance the EU's capacity for crisis management and conflict prevention and to improve flexibility across the budget to respond to unexpected spending needs.

For present internal policies, the Government will seek to focus spending on a smaller number of initiatives that demonstrate added value, especially in supporting the Lisbon agenda objectives and in pursuing freedom, security and justice objectives.

I turn now to the Commission's communication on the third cohesion report. Again, that is a wide-ranging document that examines changes in economic and social differences between member states, regions and social groups and how member states and EU policy may be affected by these changes. In terms of the link with the
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wider Commission proposals for EC budget expenditure, it sets out the Commission's proposal for the reform of the structural and cohesion funds for the period 2007 to 2013. The Commission's proposals in that regard focus on the three objectives of convergence, regional competitiveness and employment, and European territorial co-operation. To meet those objectives, the Commission proposes increasing spending by 30 per cent. from €260 billion over the current financial perspective—2000 to 2006—to €336 billion, or 0.41 per cent., of EU gross domestic product, over the period 2007 to 2013. Including, as now, expenditure on the proposed single rural development and fisheries instruments, spending would rise by around 40 per cent. to €370 billion, or 0.46 per cent. of EU GDP.

Despite the fact that with enlargement the richest parts of the Union would become more than 10 times richer than the poorest, the Commission proposes that less than half of the structural and cohesion funds should go to the new member states where they add most value.

The Government do not share that view of the future of the structural funds. Following a UK-wide consultation on the future of the funds last year, the Government proposed an EU framework for devolved regional policy. Under that approach, all EU member states would agree to pursue common objectives in support of regional development, but delivery would be substantially devolved and decentralised to give member states and regions the freedom and flexibility that they need to pursue their own strategies.

Mrs. Claire Curtis-Thomas (Crosby) (Lab): As my right hon. Friend will know, the north-west has received multi-billion-pound investment through the objective 1 funding programme. I welcome her comments on devolving budgets, but given the region's concerns about the future of funding, will she, as my hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth) requested, agree to meet local chief executive officers and Members of Parliament so that we can talk further about the investment that is needed to underpin our economy and our robust employment situation?

Dawn Primarolo: I see the potential for a long queue outside my office. I understand that the Minister for Industry and the Regions has met my hon. Friend and her colleagues for discussions. I would not wish to deny Members access to Ministers to discuss such important issues but I emphasise that preventing the costly recycling of funds is at the heart of reform. Let us consider the instruments that are already in place in the United Kingdom and the further commitments that have been made, for example, through regional development funds, the role of local authorities and the funding streams for employment, enterprise and competitiveness. We must ensure the continuation of the Government's commitment to economic growth in all regions and nations of the United Kingdom and of our support for those regions in that development.

Although I would be happy—another Treasury Minister may have to be happy—to discuss this important matter with my hon. Friend the Member for
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Crosby (Mrs. Curtis-Thomas) and others, I stress to her that it is inappropriate for any member state to pay an increased contribution to get less back when arrangements could be secured in the negotiations to support the development of the regions.

Adam Price (East Carmarthen and Dinefwr) (PC) rose—

Ms Candy Atherton (Falmouth and Camborne) (Lab) rose—

Mr. George Howarth rose—

Dawn Primarolo: I shall give way to the hon. Member for East Carmarthen and Dinefwr (Adam Price) shortly. A few Labour Members want to intervene and I have a feeling that I shall be in meetings until Christmas at this rate. However, I shall not forget the hon. Gentleman. First, I shall give way to my hon. Friend the Member for Falmouth and Camborne (Ms Atherton).

Ms Atherton: I do not wish to add to the length of the queue outside my right hon. Friend's door but I ask her to acknowledge that the Commission is calling for the poorest region in both the United Kingdom and the north of Europe—Cornwall—to receive the full tranche of 2007 objective 1 funds. Will she make a commitment that the Government will work with Cornwall to ensure that we enjoy the same employment and other opportunities as other parts of the European Union, north, west, central and south?

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