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Mr. Bercow: My hon. Friend will recall the intervention of the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) who highlighted the disgraceful fact that for nine successive years—this year will be the 10th—the European Court of Auditors has refused to sign off the European Union's accounts. Is he aware that for the year 2003 the Court of Auditors' report found that no less than 89 per cent. of the EU's humanitarian aid expenditure to Zimbabwe was lost through currency manipulation by that corrupt regime? On that specific example of waste and misuse of public funds, what is the Commission doing to ensure that it is not taken for a ride in future, as it has been in the past?
Mr. Spring: I am grateful to my hon. Friend for making that point. I shall touch on the question of how international aid has been handled by the European Union.
On the essential point made by the hon. Member for Crewe and Nantwich and my hon. Friend, it is beyond disgrace that we contribute substantial sums of taxpayers' money to the functioning of the European Union when it is impossible to square the accounts. In any private company, that would quickly result in its bankruptcy or a lawsuit. It is greatly to our regret that, despite all the promises, that situation continues.
My questions are important because, as the Government freely admit, the Commission's proposals are unacceptable in their current form. It seems that no progress has been made on improving them since June last year, so it is useful to know what scope there is for achieving improvements and how long we have to achieve them. The crux of the matter is that it is essential that the Government explain how they will achieve improvements in the proposals. We need significant improvements on both the main issues at stake.
I want to speak about those two issues: the proposal for a new own resources decision and, first, the proposals for renewing the inter-institutional agreement setting out a new financial perspective for the period 2007–13.
I note that in the context of the new IIA, the Commission proposes a new classification of expenditure to increase flexibility by avoiding unnecessary ring-fencing, with five main expenditure headings. The explanatory memorandum to the European Scrutiny Committee states that
"The Government welcomes the Commission's proposal to retain the fundamentals of the previous IIA . . . breaking down expenditure by broad categories called headings".
Does the Financial Secretary agree with the headings proposed? Similarly, I note the Government's concerns regarding the new proposals for flexibility, expressed in the motion. I am a little perturbed that expressing
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concern is not exactly the same as expressing opposition. While in his memorandum he states that he rejects proposals for a procedure to revise ceilings through a trialogue meeting between the Parliament, the Council and the Commission, and states that there is no need for a growth adjustment fund, he appears equivocal on the issue of the replacement for the current flexibility instrument. He states that he
"will consider the Commission's proposals for a new reallocation flexibility, replacing the existing 'flexibility instrument.'"
Has he now carried out that consideration? If so, what were his conclusions?
Perhaps a bigger issue is the ceiling on the EU budget. The financial framework set out in the "Proposal for the renewal of the Inter-Institutional Agreement"—the IIA—sets a maximum ceiling on the budget of 1.24 per cent. of EU GNI. I believe that that is the same as the ceiling at the moment. Slightly alarmingly, the ceilings proposed by the Commission in December 2004 appear to be higher: the maximum is 1.3 per cent. and the Commission's proposed spending amounts to 1.26 per cent of GNI.
As the Financial Secretary has said, those ceilings are too high. We should be aiming at a budget of 1 per cent. of GNI. The letters sent from the Governments of the UK, France, Germany, Sweden, the Netherlands and Austria to Romano Prodi in December 2003 made the point that a 1 per cent. limit would still allow for annual increases in the EU budget above the growth rates of national budgets in most member states.
The issue of the EU budget is particularly thorny, because—as my hon. Friend the Member for Buckingham (Mr. Bercow) made clear—the EU has a reputation for spending its money badly. Fraud is one reason for that, but I will not dwell on that point as my colleague the shadow Paymaster General spoke on it in Committee very recently. Suffice it to note that for the 10th year in succession, the European Court of Auditors felt unable to sign off the European regional aid funds.
In the explanatory memorandum, the Government flag up four issues on which they think that the EU should reform its approach. The issues raised are the common agricultural policy, structural funds, the Lisbon strategy and overseas aid. I am unclear as to whether those are the priorities to which the Government refer in their motion calling on the European Community budget to be refocused
Perhaps the Financial Secretary would confirm that or, alternatively, explain to which priorities the motion refers.
In any case, the four issues to which the Government refer in the memorandum are undoubtedly major issues and I shall make brief comments on them. As I understand it, under the Commission's proposals, the amount earmarked for the CAP reflects the agreements reached at the Brussels European Council in October 2002. That was the occasion when right under the nose of the British Government, France and Germany stitched up a deal to keep CAP spending unchanged up to 2013. We should not forget that more than 40 per cent. of the EU budget still goes on the CAP. The Economist noted on 5 March:
"Yet it may be possible to reopen the Chirac Schroder deal . . . it sets ceilings not targets for spending. In the Doha round of trade talks, the EU has offered to scrap export subsidies for farm
- products. And, because past reforms of the CAP switch spending from production linked subsidies to direct payments, the case for financing these nationally, not at EU level is growing. If France's Government wants French farmers to have higher incomes than Greek farmers, why not pay for them themselves."
Mr. Davidson: What would be the Conservatives' target figure for expenditure on the CAP, if we were to have a Conservative Government?
Mr. Spring: I was about to move on to our policy, so I thank the hon. Gentleman for pre-empting me.
The Government claim to be a leading advocate of CAP reform. According to the Paymaster General, the Chancellor has
"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."—[Official Report, 15 June 2004; Vol. 422, c. 704.]
Since the debacle of 2002, the Government have had some success in achieving reform, and we welcome that. However, the CAP results in artificially high prices for consumers, harms the interests of third-world producers and leads to low incomes and red tape for farmers. My party has long campaigned for its reform, and the recent decision to break the link between farm subsidies and production is good news. CAP reform must now be taken further, and cross-compliance conditions should be reduced. I would welcome a commitment from the Minister that that process is under way.
British farmers must be given the freedom to produce for the world marketplace. We will therefore press for the full decoupling of subsidy from production across the EU and for an end to trade-distorting export subsidies in all appropriate cases. Our first target will be the appalling waste of £600 million of taxpayers' money in subsidising tobacco production annually.
We support the new single farm payment and press for it to be implemented with a minimum of bureaucracy and red tape. We will simplify the rules on cross-compliance and work for the return of more local and national control over agricultural policy, and we will stop the gold-plating of European legislation by British officials in the Department for Environment, Food and Rural Affairs.
Mr. Davidson: Perhaps I missed it, but I failed to catch the figure that a Conservative Government would want to be spent on the CAP by the EU as a whole. Will the hon. Gentleman give us a figure that he believes that the Government should be aiming towards?
Mr. Spring: I have laid out what our policy will be when we win the next election in a few weeks' time—I am sure that that is why the hon. Gentleman is concerned about the issue. After that, and after the vote on the European constitution, which the good sense of the British people will reject, there will inevitably be a negotiation process about all the structures of the European Union.
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