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David Howarth (Cambridge) (LD): In view of the lateness of the hour, I shall make only one point. There is something odd about the EU budget: 80 per cent. of it is made up of items whose main motivation is redistribution—CAP, regional structural funds and regional development. Only about 10 per cent. of the EU budget provides any sort of public service, and that includes the 6.6 per cent. proposed for research and development in the 2007–13 financial framework. That is very different from a normal national budget. In the UK, for example, the Budget contains about 55 per cent. for redistributive measures and about 30 per cent. for public services. If the EU is to be popular with the population of Europe, there must be some change in the balance between public services and redistribution.

It could be argued that some public services are best provided to some degree at European level. For example, environmental questions such as alternatives to air travel need to be dealt with at European rather than national level. Similarly, the kind of equipment and capital investment needed for vast scientific research programmes is plainly beyond the reach of many nation states and that, too, needs to be dealt with at supranational level.

As many Members have pointed out, we must also consider the balance within the redistributive part of the budget. Forty per cent. of the whole budget—half the redistribution element—goes to agriculture and rural development. Whatever the situation might have been in the 1950s, do we really believe that the major redistribution problem in Europe at present is between urban and rural areas? No one believes that. Nowadays, 76 per cent. of the population of Europe is urban, and the figure is closer to 90 per cent. in countries such as Britain. There must be a change in the balance of redistributive budgets that better reflects our current problems.

Mr. Hayes: Leaving aside the hon. Gentleman's remark about the rural and urban split—he would not argue that the importance of rural areas depended solely on the number of people who live there—on public services and spending, he is implying that as well as spending money the EU would have competence for the areas of public spending that absorb the greater part of
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national budgets such as health. Does he assume that competence and spending would go together, or would he separate them?

David Howarth: The budgets would be only for those functions that the EU can take up under the existing arrangements.

Finally, we need radical change, not just incremental change, in the distribution of the budget among different projects. My main fear is that, because of the events of 2003 and the fundamental rupture caused by the Iraq war, the Government and the Prime Minister cannot bring about that change.

6.41 pm

Mr. Graham Brady (Altrincham and Sale, West) (Con): I am sorry that the hon. Member for Cambridge (David Howarth) had to cut short his speech on European affairs because I had not heard his argument before. I hope that he will resume it in our next debate, and I look forward to hearing the rest of it.

The hon. Member for Bury, North (Mr. Chaytor) said that Conservative contributions to European debates become better and wiser as the debate progresses. As I always make the winding-up speech for the Opposition, I am tempted to agree with him. I apologise to the few contributors whom I did not hear. I had the pleasure of hosting a meeting with Altrincham grammar school for girls, which has introduced an exciting and progressive scheme to train Chinese teachers to teach GCSE classes in science, IT and maths in the English language. That illustrates the fact that while we debate great changes in the world and the UK, the more far-seeing people in the country are getting on with it and are responding to the great challenges that we face.

I am delighted that the right hon. Member for Paisley and Renfrewshire, South (Mr. Alexander), the Minister of the month, will respond on behalf of the Government. Today, the Prime Minister repeated his view that we need a fundamental debate about the future of Europe. Yesterday, he said that we have a "moment of opportunity". I agree, but instead of offering the leadership that Europe needs and seizing that opportunity, he says that we need to pause for reflection for several months. Nine days ago, in his statement to the House, when asked what the Government would say at the European Council, the Foreign Secretary said:

The Council meets tomorrow—we could not be any nearer the time—yet we have not heard anything from the Foreign Secretary about the position that the Government will take at the end of the week.

Many interesting views have been expressed in our debate, and excellent maiden speeches were made by the hon. Member for Belfast, South (Dr. McDonnell) and my hon. Friends the Members for Croydon, Central (Mr. Pelling) and for Ruislip-Northwood (Mr. Hurd). My hon. Friend for Ruislip-Northwood ingeniously moved the debate on from a discussion of dead parrots to Winnie-the-Pooh. My hon. Friend the Member for Woodspring (Dr. Fox) set out the Conservative vision of a more flexible, modern, outward-looking European
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Union doing less, but doing it better. The right hon. and learned Member for North-East Fife (Sir Menzies Campbell) correctly identified the concentration on the rebate over the past few days as a diversion from more important questions that need to be faced. However, he refused to accepted an invitation from my right hon. Friend the Member for Hitchin and Harpenden (Mr.    Lilley) to express opposition to the ratchet whereby powers are transferred to the EU but can never be returned to the member states. The hon. Member for Lanark and Hamilton, East (Mr. Hood) said that he preferred the Foreign Secretary when is angry, and wanted an EU that is closer to the people.

My right hon. Friend the Member for Richmond, Yorks (Mr. Hague), in a typically perceptive and amusing speech, rightly drew attention to the massive dislocation between Governments and peoples across Europe. He congratulated the Foreign Secretary on starting the spread of referendums across Europe, but perhaps he should have given some credit to the previous Minister for Europe, who told us a few months ago that he had confronted the Foreign Secretary and apparently said—I paraphrase—"Jack, we're stuffed. We've got to give way on a referendum", so he may have had some part in that great persuasion.

My right hon. Friend went on to describe the seven positions that the Prime Minister has held on a referendum, and what he called the three great tensions in European policy, between enlargement and integration, democracy and centralisation, and economic reality and political goals.

We had a number of other interesting contributions, including those from the hon. Member for Stroud (Mr. Drew) and from my right hon. Friend the Member for Hitchin and Harpenden, whom I have already mentioned. The hon. Member for Luton, North (Kelvin Hopkins) spoke of the need for a European Union without uniformity, where member states are free to take a more social democratic or a more liberal approach, as they choose—something with which, from a very different perspective, we agree.

My right hon. Friend the Member for Skipton and Ripon (Mr. Curry) spoke of the massive forces that are being exerted on European trade and the CAP from external sources, the World Trade Organisation talks and the power of global investment. My right hon. Friend the Member for Charnwood (Mr. Dorrell) welcomed the rejection of the constitution because he believes that something much better and more oriented towards creating a genuine market economy can be put in its place.

All those interesting, compelling and sometimes visionary views were expressed about the future of Europe, but from the Government we heard nothing on the key challenges that face us. The Foreign Secretary spoke about the possible changes in the way UK regional funding or agricultural funding might be found and the fact that such funding might come from the UK, not from EU budgets.

I return to the point that I made in an intervention on him. If we maintain the level of contribution that we make at present, but spend regional funding or agricultural funding from UK Government resources, not from the EU, it is in effect an increase in our net contribution. That is the typical sleight of hand by the
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Government that we must watch for. There are two ways to increase the net contribution to the European Union budget. One is to increase the gross contribution and the other is to reduce the amount that we get back. From what the Foreign Secretary said earlier, it seems likely that the second of those might be the Government's preferred alternative.

The debate that we have had about the rebate, as the right hon. and learned Member for North-East Fife commented, has been a diversion—an elaborate charade. The Prime Minister could have prevented the extended discussion of the rebate if he had just made it clear from the outset that the British rebate is not negotiable. Britain has an absolute veto on the removal of the rebate. If the Government had just been firm, this week's discussions would have been so much more productive. The only conclusion that can be drawn is that discussion of the rebate has been convenient for the British Government, as it has been for the French. President Chirac has been able to bash the British, and the Prime Minister can swing his handbag and grandstand about his battle to save the rebate.

Meanwhile, there has been silence about the real challenges facing the European Union—the challenge of establishing a new and very different direction. A less centralised, less uniform, less regulated European Union is what the people are crying out for, and it is what businesses struggling to compete under the burden of red tape so badly need—but on this the Prime Minister and the Foreign Secretary have been silent. They apparently believe that the future direction of Europe and of Britain's relations with the EU is too important to share with the House or with the British people.

These debates are meant to be the nation's opportunity to hold the Government to account and to scrutinise the negotiating position of the British Government prior to the Council meeting, but today the Government have treated the House and the British people with contempt. Our future will be decided behind closed doors by Governments who have plainly learned nothing from the sharp rebuke delivered in the French and Dutch referendums just a couple of weeks ago.

6.49 pm

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