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Sir Menzies Campbell: I wish to develop the theme. I am sure that Struan Stevenson would be happy to sit around the same table as the hon. Member for Stone. It suggests to me that the first task of the right hon. Member for Richmond, Yorks—to persuade these men of foresight and common sense to change their view—will prove formidable. We look forward to hearing reports on his success in that respect. Then our old friend, the right hon. and learned Member for Rushcliffe (Mr. Clarke)—unhappily, he is not in his place on this occasion—used words such as "headbanging", which suggests that his appetite for Europe has not been diminished by his relative failure in the leadership contest for his party.
Mr. Cash: I think that the right hon. and learned Gentleman and others—I heard one of his colleagues on the "Today" programme this morning—are misunderstanding the arguments that are emerging, albeit slowly, about the future shape of Europe and the need for serious reforms in the interest of individual member states and perhaps of Europe as a whole. I believe that there will be a change in the words used to characterise people such as myself who have taken a view—that we should reject the idea of an all-embracing European constitution and reject centralisation—that was previously described as "nutty". That viewpoint is now gaining much greater purchase, and there will be further changes in other member states.
Sir Menzies Campbell:
Let me say straight away that I do not regard, and never have regarded, the hon. Gentleman as nutty. He takes a particular view of Europe that I do not share, but I admire the fact that he has not departed from that view and that he takes every opportunity to advance it. Also, he never joined UKIP, which, if I may say so, is a clear indication that he does not fall under the category of nuttiness or anything similar. It is clear, however, that those who represent his party's interests in the European Parliament are going to need an awful lot of persuading that they should not associate with the conservatives of the EU countries. If
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I may say so, I was impressed by what the Foreign Secretary had to say about the national interest, as reflected in an article written by my hon. Friend the Member for Eastleigh (Chris Huhne) in one of this morning's broadsheet newspapers.
Let me finish on the bright spot of Turkey and Croatia, which I believe represent a substantial achievement on the Government's part. There will be difficulties and the Turkish Government and people must understand that, however strong the advocacy of the US on their behalf, the Copenhagen criteria must be met. They must be met, furthermore, not just in letter or form, but in substance. The EU cannot and should not reduce its standards, however politically desirable it may be to bring in the first Muslim country. There can be no doubt, however, that what has happened is a substantial achievement by the Government, so the Foreign Secretary and the Minister for Europe most certainly deserve recognition.
I also want to mention briefly the more open attitude towards the Balkan states. Let us remind ourselves that when the former Yugoslavia broke up, the constituent parts were necessarily outside the European Union. They were outside of it because of political and historical events. The former Yugoslavia imploded with all the devastation—including Srebrenica, where perhaps 200,000 people were killed—that came with it. I venture to suggest that had those countries been members of the EU, much of that terrible bloodshed would not have taken place. Slowly and painfully, not always immediately successfully, these constituent parts of the former Yugoslavia are coming to a better understanding and realisation of democratic institutions and tolerance. Unfortunately, tolerance is not always evident: 18 months ago, Kosovo provided a glaring and unpleasant example.
As long as these countries have the prospect of becoming members of the European Union, it seems to me that they have a much better chance of achieving the levels of stability, conformity with the rule of law and democratic institutions that are necessary. The stimulus and inducement of EU membership is extremely significant. We talk about the details of the budget that are so important to us because we are members. They have an impact on our financial circumstances and our economic opportunities. However, we should remember that a much larger prize, in many ways, remains to be achieved—the continuing enlargement of the EU in order to provide a bulwark for democracy in a part of the world that went to war three times in 100 years.
2.39 pm
Hugh Bayley (City of York) (Lab): The forthcoming EU summit is clearly in our minds, but the purpose of politics is not just to deal with the here and now; it is also to think and plan strategically about the welfare of our country and of future generations—our children and grandchildren. We need to face up to the fact that the EU's long-term economic prospects are poor.
Compared with the US, China or India, our competitiveness is falling quite sharply. We have the problems of an ageing and shrinking population and underfunded pension systems. The European Commission estimates that, by the middle of this century, the UK's share of world gross domestic product will have halved. Goldman Sachs has said that the EU's relative decline will be even greater, and that our share of global GDP will fall by something like two thirds.
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Therefore, if we want to survive as a major player in world markets and retain a strategic role in global affairs—in respect of climate change, peace and security and combating terrorism, for instance—we need to set in train urgent and radical reform of our national economies. We need to invest more, especially in science and technology, to increase our productivity and competitiveness, and to create new products, and especially new services, to sell in world markets. We need to save more, especially to fund an ageing population in retirement. We need to continue to reduce the costs of doing business, and to pursue energetic welfare-to-work policies.
The UK has taken a lead in Europe on all those policies. That is why our economy is performing better than other EU economies. It is why our growth rate has been higher in recent years, and why our unemployment rate is significantly lower.
In a rapidly globalising world, few problems can be solved by one country acting alone. The economic challenges that I have described cannot be solved within the boundaries of our country. The right hon. and learned Member for North-East Fife (Sir Menzies Campbell) spoke eloquently about the need for trade reform, and there are other problems that can be addressed only in partnership with other countries, including the quest for environmental sustainability, international migration, immigration and asylum, organised crime, the international drugs trade and terrorism.
We therefore need to co-operate internationally, not least with the other EU states. On this morning's "Today" programme, I heard a Conservative MEP bemoan the fact that the EU has the competence to negotiate on the UK's behalf in the World Trade Organisation, and that it is Peter Mandelson rather than the Secretary of State for Trade and Industry who represents the UK's interests. The MEP made the case that UK trade policies are more progressive and would be more likely to achieve agreement in the WTO than the compromise position proposed by Commissioner Mandelson. That is to ignore the fact that the WTO works on the basis of unanimity, and that if one country in the EU can veto CAP reform and the reduction of agricultural subsidies, so can one country in the WTO.
I believe that the CAP is the stumbling block when it comes to making substantial progress in the development dimension of the current WTO round, and that it must be changed. Separating our trade representation from Europe would not help us to reform the common agricultural policy, as that must be done within Europe. All of that means that backing away from Europe is not the solution. We need the EU to deal with the global problems that I have set out, but we need a reformed, modernised and more effective EU that is fit for the 21st century.
First of all, we should begin by reforming the EU budget. I believe that the Government are right to press for a reduction in overall EU spending. We need to rein in state spending to improve our economic competitiveness in respect of emerging economies such as China, India and Brazil, and in relation to the US.
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Secondly, the Government are right to agree to pay towards the costs of structural reform in the 10 new EU member states. Those reforms will make those states richer, and us richer too. That is what has happened with every EU enlargement to date. The resources that the EU put into Greece, Spain and Portugal made those countries and all other member states richer, because we trade with one another and our economies are interdependent.
However, I do not believe that my right hon. Friend the Prime Minister's proposal to reduce the overall budget slightly will impede aid needed for the new EU member states. The Financial Times reported today that, in the first two years since its accession, Poland has been allocated €8.6 billion in structural funds but that to date it has spent only 4.3 per cent. of that amount and has committed only about 50 per cent. of it. The newspaper also said that, so far, the Czech Republic has spent only 2.6 per cent. of the €1.7 billion that it has been allocated. The accession countries will therefore get the money that they need to carry out the necessary structural reforms even under the slightly reduced overall budget that the UK proposes.
Thirdly, the UK is right to propose changing the EU rebate, because circumstances have changed. All 10 new member states have much lower average incomes than the UK, and eight have emerged from the shadow of communism. I have many disagreements with Margaret Thatcher, but she was nevertheless a tough and determined opponent of communism. She wanted to free states from the dictatorship under which they existed. That was because she believed in freedom, not because she wanted them to pay a rebate to the UK Treasury. She was not fighting to ensure that Estonia, Latvia, Poland and the Czech Republic would subsidise the UK.
In his youth, the right hon. Member for Richmond, Yorks (Mr. Hague) was a passionate admirer and supporter of Margaret Thatcher, so I am sorry that he should seem to fudge on the question of whether the accession states should make a contribution to the UK rebate. Our Government are right to say that that burden should not fall on them.
Another way in which circumstances have changed since 1984, when the rebate was agreed by EU member states, is that the UK is much more prosperous now. In 1984, unemployment stood at 3,298,000, or 12.1 per cent. of the work force. On the same measure, it has now fallen to 4.9 per cent. The UK average income, or GDP per capita, was £5,750 in 1984, but now it is £19,537. Even adjusting for inflation, that represents a real-terms increase of 62 per cent.
I looked this morning at the report in the Financial Times of the 1984 EU summit when the rebate was agreed. It said:
"the one-nation deal for the UK is based on an explicit acknowledgement that it is a relatively poor member state".
In relative terms, the UK was poor then, but it is not now. Average incomes here are higher than in Germany, France, Italy or Belgium.
Fourthly, the Government are right to say that we will not abandon the rebate without reform of the CAP. The CAP is bad for families: according to a recent parliamentary answer, the average family of four would save £5 a week on food if the CAP were scrapped.
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The CAP is also bad for taxpayers: to that average family of four, the cost of CAP subsidies amounts to a further £3 or £4 a week. That means that the CAP leaves the average family worse off by nearly £10 a week. The CAP is also bad for the EU because it is a totally perverse misuse of its overall resources: 40 per cent. of EU spending goes on the CAP, whereas 5 per cent. of the EU's population works in agriculture and produces only 2 per cent. of the EU's output.
CAP reform is necessary to remove a roadblock in the way of progress in the WTO negotiations. It is necessary for global trade justice, and it is a precondition for the economic reform that the EU needs to make to secure our own future prosperity. Oxford Economic Forecasting calculates that the EU's GDP could be boosted by €200 billion a year, which would create hundreds of thousands of new jobs in the EU, if CAP subsidies were ended and EU tariffs were cut.
It is necessary not just to reform the CAP; perhaps the Minister can also ensure that the UK team takes to the summit the need to reduce tariffs. We have tariffs of more than 100 per cent. on many foodstuffs: 170 per cent. on lamb, 120 or 130 per cent. on beef and 100 per cent. on rice. It is utterly absurd to impose that burden on consumers in the EU, particularly on those in this country, which is such a large net food importer. We in the UK alone would benefit by £20 billion a year—about £1,500 per family of four—if that economic liberalisation, the abandonment of the CAP and a reduction in tariffs were made. Developing countries would gain at least twice as much as a proportionate of their national income as we would in the EU.
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