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ESTIMATES
Motion made, and Question put forthwith, pursuant to Standing Order No. 145 (Liaison Committee),
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Future European Union Finances
[Relevant documents: Thirty-fourth Report of the European Scrutiny Committee, Session 2003–04, HC 42-xxxiv, paragraph 13; Seventh Report of the European Scrutiny Committee, Session 2004–05, HC 38-vii, paragraph 1; Ninth Report of the European Scrutiny Committee, Session 2004–05, HC 38-ix, paragraph 1.]
Mr. Speaker: I inform the House that I have selected the amendment in the name of Plaid Cymru and the Scottish National party.
4.10 pm
The Financial Secretary to the Treasury (Mr. Stephen Timms): I beg to move,
That this House takes note of European Union documents No. 11607/04, Commission Communication: Financial Perspectives 2007–2013, No. 11741/1/04, draft Decision on the system of the European Communities' own resources and draft Regulation on the implementing measures for the correction of imbalances, No. 11745/04, draft for renewal of the Inter Institutional Agreement on budgetary discipline and improvement of the budgetary procedure, and No. 11752/04, Commission Report: Financing the European Union—operation of the own resources system; supports the Government's efforts to refocus the European Community budget towards the Union's key priorities in line with the principles of subsidiarity and European Union value added and stabilise the budget at no more than 1 per cent. of European Union Gross National Income; shares the Government's concern over proposals for new flexibility instruments; opposes the Commission's proposals for a Generalised Correction Mechanism; and in particular supports the Government's view that the Commission's overall proposals are unrealistic and unacceptable.
I welcome the opportunity to examine the Commission's communications for the next financial perspective of 2007 to 2013, its draft proposals on the system and operation of the European Community's resources and on the implementing measures for the correction of imbalances, and its draft on the renewal of the inter-institutional agreement. Taken together, the documents outline the Commission's proposals for the policies and financial decisions that underpin negotiations on the future financing of the European Community budget. This will be the first full financial perspective for a European Union of 25 members, so we are at a significant point in the history of the EU. It is thus appropriate that the debate is taking place on the Floor of the House and at a time that will allow it to inform the negotiations that will take place in the next few weeks.
The Government take the view that the next financial perspective is an important opportunity to increase the effectiveness and transparency of EU expenditure and to consider how allocations within a limited budget can best be applied in support of the European Union's priorities, especially the Lisbon strategy. That is why we have proposed that all budget spending be focused on objectives, with an emphasis on policy outcomes rather than simply budgetary inputs. Decisions should be based on evidence with a proper evaluation of budgetary policy. The budget should be based on a proper assessment of both existing and new areas of spending. It should be decided whether the Union is the best institution to tackle specific matters. We have proposed that there be sound financial management and budgetary discipline, and we should make sure that spending throughout the EU is distributed equitably.
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That view has put us at the forefront of calls for further reform. The budget should be stabilised at no more than 1 per cent. of European Union gross national income, or €815 billion over seven years on a commitments basis. That represents a 6.5 per cent. real-terms increase compared with the current financial perspective, and we believe that it is both realistic and affordable.
Mr. Ian Davidson (Glasgow, Pollok) (Lab/Co-op): Will the Minister clarify whether the 1 per cent. limit is a firm commitment? Will the Government refuse to budge from that and give an undertaking that, if necessary, they will veto any proposals that would take Britain's contribution beyond the present level and the budget beyond 1 per cent.?
Mr. Timms: The Government are making such a firm commitment, and I am pleased that that is gathering support from other member states—six countries signed the letter containing the 1 per cent. aim. As I shall say in a moment, there is a clear indication that several other member states are moving in the direction of supporting our position on that.
While we respect the Brussels agreement to press for a more liberalised and market-focused agricultural sector, including the reform of the sugar and dairy sectors, and support further modulation, we want to refocus the structural and cohesion funds of the lowest-income member states within an overarching framework agreed by all member states. Spending should be refocused within internal policies on a smaller number of initiatives with demonstrable added value, particularly research and development, freedom, security and justice. We also aim to improve the effectiveness of external actions in support of the EU and UK external objective—external to the EU—to which the millennium development goals are central, while retaining flexibility to cope with crises such as the tsunami if the need arises.
The Commission has not as yet responded adequately to the challenge that those aims present. In its communications of February and July 2004, which are before the House today, the Commission proposed a total budget for 2007–13 of more than €1 trillion. That is a real-terms increase of 34 per cent. compared to the current financial perspective, with little justification being provided for such a large increase and little prioritisation between the different elements. For example, 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 go to the new member states, where they would have the greatest effect.
Despite our commitments at Monterey, the Commission proposes a regionally based policy approach to external actions—external to the EU—which would make it harder rather than easier to refocus the budget on low-income countries and the millennium development goals.
Adam Price (East Carmarthen and Dinefwr) (PC):
Does the Commission not propose to focus the vast majority of structural funding on the poorest regions within the EU, including poor regions within relatively
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prosperous member states? It proposes that the vast bulk of the funding go to the poorest regions within Europe overall.
Mr. Timms: The hon. Gentleman will recognise that there is not much value in rich EU countries swapping funding between themselves in the interests of their own regions. It makes much more sense for the Governments of the better-off countries to fund their regional development. As the hon. Gentleman knows, we have given a domestic guarantee for regional funding in the UK.
For all these reasons, I suggest to the House that the Commission's current proposals are neither realistic nor acceptable. The proposals for increased flexibility instruments are not necessary, as they would hamper sound budget discipline. Responding to unforeseen needs is best done through reprioritising spending and agreeing appropriate budgets for each heading.
The Commission also proposes some major changes to the financing of the EC budget, with its suggestion of a generalised correction mechanism. The intention would be to replace the UK abatement and, according to the Commission, reduce differences between net contributors at comparable levels of prosperity. That is completely unacceptable. It is neither fair nor principled. As proposed, it would widen rather than narrow the disparities between the large net contributors, and would cost the UK €5 billion a year by 2013. The proposed mechanism would also institutionalise the failure to redress the inequities on the expenditure side of the budget. Large receipts are going to countries of similar wealth to the UK, which receives the least in per capita terms. This means that the abatement remains fully justified. The continuing inefficiencies and inequities on the expenditure side of the European budget and the resulting unfairness of the UK position mean that the abatement is not up for negotiation.
As I said to my hon. Friend the Member for Glasgow, Pollok (Mr. Davidson), I am pleased to tell the House that, as the negotiations progress, our views on both budget discipline and reform are gaining increasing support among other member states, including the newest members. The Dutch presidency progress report to the European Council in December showed that there is widespread dissatisfaction with the Commission's proposals among member states. The documents before the House contain information on the advances achieved by the Dutch presidency. The progress report also demonstrates that a budget of 1 per cent. of EU gross national income is viable, credible and affordable. As I have said, we are working closely with the other five signatories of the 1 per cent. letter—France, Germany, Sweden, Austria and the Netherlands—to make sure that the principles of budget discipline continue to form a central part of negotiations.
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