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Mr. Mark Prisk (Hertford and Stortford) (Con): Last Tuesday, I attended the summit of the European Union's small business organisations here at the Palace of Westminster. At that meeting I was struck by the overwhelming view of the small businesses of the new entrants to the EU that under the British presidency of the EU the Lisbon agenda has not progressed one whit. What has gone wrong?

Mr. Straw: I do not accept that for a second.

First, just yesterday, we were able to gain political agreement in the European Council on the chemicals directive, which could have affected very adversely small and large businesses alike throughout Europe in the chemicals industry, including many British businesses. We now have unanimous agreement on what is called REACH—the chemicals directive—which will ensure higher environmental standards without damaging British business.

Secondly, we in the United Kingdom have led what has been called the four presidency engagement to secure deregulation across the Union. The result of that is tangible: at long last the Commission has grasped this agenda—like turning round a tanker. Commissioner Günter Verheugen, who is in charge of deregulation, announced at a conference in Edinburgh not long ago that 68 key sets of regulations would be turned back, and that many others will be revised. In addition, with the Netherlands, we co-chaired a meeting on rolling back the powers of the EU centrally so that much more power was delegated and devolved to individual member states.

Yes, progress on Lisbon has been frustrating for all parties and for all Governments who are committed to seeing an open economy in Europe. That has been because of the difficulties faced by some Governments—not the United Kingdom and not some others—who failed to take account of the fact that the world is changing. We are now subject to serious open competition from countries such as India and China, and the EU must change, or it will not survive. We have done a great deal on that.

Keith Vaz (Leicester, East) (Lab): Do not all the reports indicate that Britain has done better on the five-year plan set out in the Lisbon agenda than other EU countries? Under our presidency there has been progress, but will my right hon. Friend assure the House that when our presidency has ended we will push that agenda forward so that other European countries and the Commission are able to co-operate in order to reach the rest of the benchmarks?

Mr. Straw: My hon. Friend talks simply about progress within the United Kingdom. We have done extremely well and met almost all the Lisbon targets. The problem has been other EU member states.

I return to the issue of enlargement. The budget that we have tabled proposes that, given the need to pay towards the cost of enlargement, the EU spends about €150 billion on structural and cohesion fund projects in the new member accession states. That is a very significant increase—more than five times the support that they have been receiving up to now. Because relative prosperity and priorities have changed, there is
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a corresponding and significant drop in structural and cohesion fund receipts for every western European member state. Amounts and proportions vary, but, for example, Spain will receive just over half in the next financial perspective of what it received last time and Ireland will receive less than a quarter.

Significantly, even if there were no change in any of the budget arrangements, our net contribution would stand to rise by €11 billion from €39 billion in the current financial perspective to €50 billion in 2007–13, mainly because of enlargement. I have heard no one from any party in the House say that it should not stand to rise. I therefore suggest that the question before the House is not whether we should pay a fair contribution towards enlargement, but what that contribution should be.

As part of its recommended budget, the Luxembourg presidency proposed back in June that our contribution should rise by €36 billion, or 93 per cent., from €39 billion in this financial perspective to €75 billion—€25 billion above that default setting of €50 billion. We told the Luxembourg presidency emphatically that that was totally unacceptable.

Under our proposals, we have proposed a total net contribution of €58 billion—an increase of €8 billion above the €50 billion floor. We judge that to be a fair contribution. Were we not to make an offer of such magnitude, our contribution would not fairly reflect our position as one of the most prosperous nations in the EU. On the other hand, countries such as the Netherlands, Sweden and Germany would be making contributions way out of line with their prosperity, and that would not be fair either.

Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): The Foreign Secretary will undoubtedly be aware that many regions in the United Kingdom, such as the highlands and islands, for example, have benefited greatly from EU structural funding. I am grateful to see in the latest budget proposals that the Government have given up on proposals for repatriating European funds entirely to countries such as the United Kingdom. Will the right hon. Gentleman assure the House that structural funding for regions such as the highlands and islands will not be negotiated away in the small hours during the final round of talks, and that we can be sure that such places will continue to benefit substantially from EU structural funding into the future?

Mr. Straw: My right hon. Friend the Chancellor set out in—I think—December 2003 his approach and our approach towards structural and cohesion funding in the new financial perspective. I do not know whether a deal will be struck tomorrow, the next day or the next. I cannot say precisely what its conditions will be. I can say that the area for negotiation is narrow. Of course we take account of the needs of regions such as the highlands and islands, which will continue, or should continue, to qualify for structural and cohesion funds. The hon. Gentleman will excuse me if I do not give him an exact guarantee at the moment, because that would be to anticipate the negotiations.

Mr. Charles Walker (Broxbourne) (Con): I thank the Secretary of State for giving away. [Laughter.] I am
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sorry, I meant giving way. Giving up all or part of our rebate causes my constituents a great deal of concern. It is difficult to sell it to them as a positive, bearing in mind that they face the closure of their accident and emergency department because of a £16 million shortfall in funding. They would much rather that some, if not all, of the money that is to be given up remained in the UK to be invested in the health service.

Mr. Straw: I apologise to the hon. Gentleman, as his constituency does not spring immediately to mind.

Mr. Walker: It is Broxbourne.

Mr. Straw: Indeed. The hon. Gentleman's party has long supported enlargement, and Conservative Front and Back Benchers have called for money to be put into structural and cohesion funds for eastern European countries. That money must come from somewhere, and it can only come from the more prosperous western European member states.

Mr. Graham Brady (Altrincham and Sale, West) (Con): It should be taken from funds for the common agricultural policy.

Mr. Straw: We have sought to reform the CAP, and we have done a great deal more than the previous Government did under John Major and Margaret Thatcher, when there was virtually no reform year after year. We want more reform, but I do not believe that the Poles, Czechs and Hungarians should be punished for the obduracy of a number of western European member states that have benefited unjustifiably from the CAP.

People in my constituency, which is not very different from Broxbourne, have benefited directly from the money that we have already put into structural and cohesion fund projects in, for example, Ireland and Spain. In the 15 years from 1988 to 2003, we contributed about £500 million towards structural cohesion fund projects in those two member states. In return, there has been a £27 billion annual increase in trade with those countries, which has certainly benefited firms in my constituency and, I suggest, in Broxbourne. We are not beggaring ourselves by offering that money—we are helping ourselves directly. Building up the economies of eastern Europe provides economic benefits and increases the political stability and the overall happiness of those societies.

Mr. William Cash (Stone) (Con) rose—

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy) (PC) rose—

Mr. Straw: I always give way to the hon. Member for Stone (Mr. Cash), but first I shall give way to the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd).

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