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Mr. Graham Brady (Altrincham and Sale, West) (Con): If the Foreign Secretary is saying that the UK will replace the regional funding currently paid from the EU with money coming directly from the British Government, is that not effectively the same as increasing the EU budget? Would we not be paying for something for which the money previously came back from the EU?

Mr. Straw: I am sorry for the hon. Gentleman, but he needs to understand the fundamental difference between money that we choose to spend ourselves, which is approved by the House, and money allocated centrally by the European Union. One proposal on the table to which we can certainly give some support is the nationalisation of part of CAP spending. In other words, individual member states would be given greater responsibility for financing their spending on agriculture. That would not amount to fundamental reform, but it would be a step in the right direction.

Lembit Öpik (Montgomeryshire) (LD): I am interested by the Foreign Secretary's assurance that the Government would ensure that nations and regions would get compensatory investment to replace the European money that they stand to lose. What would be the benchmark with which the Government would judge whether the same amount would be given? For example, would that be objective 1 funding in 1999 or 2003? I ask
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because it is crucial, especially for rural and deprived areas in Britain, to know what we will need to compare that investment with.

Mr. Straw: I understand the hon. Gentleman's concern. My area has benefited from European Union funding, so I confess that I am not without a constituency interest in the matter. I cannot answer his question because we do not know the denominator about which we are talking. We do not know how the overall budget will come out, or what the balance of spending for the structural and cohesion funds will be. However, I have put my statement on record.

Rev. Ian Paisley (North Antrim) (DUP): The Foreign Secretary will no doubt be aware that an announcement was recently made to farmers that the CAP had been secured after a mid-term review. Is he suggesting that the process will be reopened and that the farmers will not know their future, bearing it in mind that agriculture is the mainstay of our economy in Northern Ireland?

Mr. Straw: Of course I appreciate that agriculture is one of the mainstays of the economy of Northern Ireland. I was actually present at the October 2002 European Council. The decisions about the mid-term review for the current financial perspective did not set in concrete the CAP for the next financial perspective, as is made clear in the text. The conclusions on direct payments begin with the words:

The European Council set a ceiling for total annual expenditure for market-related expenditure and direct payments under category 1.A, but did not set a floor. It is thus entirely consistent with what was agreed in October 2002—and with common sense—for us to push for further reform of the CAP, if we can achieve it.

Sir Menzies Campbell (North-East Fife) (LD): The House will welcome the last passage of the Foreign Secretary's speech, in particular the justification that appears to exist for those issues to be reopened. Irrespective of the level at which the budget is finally set, does he agree that a far higher amount of fiscal control is vital and that much more must be done to eliminate waste, inefficiency and corruption?

Mr. Straw: I entirely agree. In the rather quaintly named Foreign Ministers conclave on Sunday and three weeks ago, there was a lot of smoke and mirrors, but we were not locked in and there was no conclusion. In both discussions, I made the point to my Foreign Minister colleagues that our proposals for 1 per cent. GNI were in no sense inconsistent with the European Union being more effective—in other words, seeming to do more for its citizens. It is unacceptable for the European Commission to propose, as it did in its 1.26 per cent. budget proposals, a real-terms 5 per cent. increase in administration costs when we all know from our experience—this is a cross-party issue—that we get greater efficiency and better delivery if we turn the screw on costs. It is amazing what can be achieved. That is why
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we have proposed a similar approach for the Commission budget as for domestic administration budgets. Our budgets are going down by 5 per cent.

Mr. Owen Paterson (North Shropshire) (Con) rose—

Mr. David Curry (Skipton and Ripon) (Con) rose—

Mr. Straw: I shall give way to the right hon. Member for Skipton and Ripon (Mr. Curry) later. [Interruption.] It is always about the subject under discussion, but I have given way half a dozen times and need to make progress. If I do not, there will be complaints that I have taken up other hon. Members' time. [Hon. Members: "No."] Yes, there will be.

As one of the European Union's richer nations, the United Kingdom makes a net contribution to the EU budget, helping to support poorer member states, particularly new members in central and eastern Europe. The rebate that the UK receives on that contribution corrects for the fact that we are the lowest net recipient per capita of any member state, in part because of the small size and the efficiency of our agricultural sector. Without the rebate, our contribution would be out of all proportion to the UK's relative prosperity and economic weight within the European Union. Without the rebate, from 1995 to 2003 we would have paid 15 times more than France and 12 times more than Italy. Even with the rebate, we have still paid two and a half times as much.

When the UK's rebate was agreed at Fontainebleau in 1984, the European Council stated in its conclusions:

In other words, the only way to resolve the current inequity in contributions between the EU's members is not through moving the UK's rebate—nor would we accept that—but, instead, through a fundamental review of EU expenditure. Until and unless such a rebalancing of spending takes place, the UK's rebate remains fully justified and we will, if necessary, use our veto to protect it.

Mr. Curry: On agriculture, the right hon. Gentleman knows that we have embarked on a lengthy transition from one form of support to another that will last for several years until 2010 or 2012. Other member states are doing the same. Is he suggesting that that transition will continue to its term or will be interrupted by a new mechanism of support halfway through, or is he merely talking about cutting the cost of it? If the Government have a new model of support in mind and precise reform proposals, will he put them in the Library so that we can see them?

Mr. Straw: What we want to do immediately is to get fundamental reform of the common agricultural policy back on the agenda. I appreciate that the right hon. Gentleman and many other hon. Members on both sides of the House have farmers in their constituencies. Although Blackburn may appear to be an entirely urban area, the constituency contains dairy and hill farmers. Half the area is agricultural land, not urban land. Notwithstanding those interests and the concern of the
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agricultural community, under the Commission's proposals the CAP, which takes up 40 per cent. of total EU spending, will be €1,000 billion a year, but it assists only 5 per cent. of Europe's populations and distorts that assistance towards the better-off countries. Everyone knows that that cannot go on. Nor can the situation continue in which we spend at least €2 a day for every cow in the EU.

We have to deal with those issues sensibly. We want reform of the CAP back on the agenda. As I explained to the leader of the Democratic Unionist party, the hon. Member for North Antrim (Rev. Ian Paisley), that is in no sense inconsistent with what was agreed in Brussels in October 2002.

Mr. John Maples (Stratford-on-Avon) (Con): The Foreign Secretary links the rebate precisely to reform of the CAP. I understand why, because one gives rise to the need for the other. However, it might be difficult to get that reform, and there are other things that we want from the EU, such as implementation of the services directive, genuine completion of the single market and external tariff reform—perhaps even their elimination. If we could get some or all of those things in place, which would hugely benefit the British economy, would it be worth negotiating on the rebate in that context?

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