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Hugh Bayley: What proposal would the Conservatives have come up with, had they been in government, to achieve a budget settlement?

Mr. Brady: We very much agree with the Prime Minister's aspiration, but the crucial difference is how hard one is prepared to negotiate. My hon. Friend the Member for Ashford (Damian Green) summed up the situation brilliantly the other day when he described the Government's stance as a "pre-emptive surrender".
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They have been prepared to put concessions on the rebate on the table; originally, they said that they would do so only in return for CAP reform. However, without any promise of reform—without even a promise of discussion of reform—they have been prepared to cave in and to give further concessions.

Hugh Bayley rose—

Mr. Brady: The hon. Gentleman can try again.

Hugh Bayley: The hon. Gentleman must have misheard my question. What proposal would his party have come up with that, in his view, would have broken the deadlock?

Mr. Brady: We would have stuck to the Government's policy and not caved in at the first opportunity. They set out a very good, solid negotiating position in June. The Prime Minister spoke in the European Parliament and there was a great deal in what he said that we endorse and would be happy to support; but instead, the Government caved in at the first opportunity.

The day before the Prime Minister spoke to the European Parliament, the Chancellor of the Exchequer spoke in his Mansion House speech of the pressing need for radical reform of the EU. He spoke of a "new urgency" and of

He continued:

The Prime Minister and the Chancellor were right to prioritise reform of the CAP, but that makes it all the more startling that not a single concrete proposal emerged until a week or so ago. A joint document from the Treasury and the Department for Environment, Food and Rural Affairs—the Foreign Secretary referred to it earlier—set out the costs of the CAP, which are staggering on the Government's own assessment. It states that the

this is according to the Government's own document—

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The Government were right to flag up the huge importance of fundamental reform of agricultural policy, but yet again, they have achieved nothing to that end during the British presidency.

Several hon. Members rose—

Mr. Brady: I have an embarrassment of choice before me, but I give way first to the hon. Member for Preston.

Mr. Hendrick: The hon. Gentleman fails to refer to the £3.5 billion to £4 billion that will be saved from the CAP budget by the sugar reforms.

Mr. Brady: That, however, is not the fundamental reform of the CAP that the Government talked about at the beginning of the presidency, and it will not save the €100 billion relating to the next financial perspective or the €100 billion a year that the Government acknowledge to be the cost of the CAP.

A pathetic signal of defeat and pessimism in respect of the Government's negotiations is the fact that the vision set out in the Government paper focuses on

They have no idea—and not just for the six months of the British presidency—about how to get to where they want to be in 15 years' time.

Mr. Cash: On that very question of the route map, I entirely agree with my hon. Friend's comments on the Government's position, but does he accept that clear decision-making will be necessary on the Conservative Benches in order to reclaim the powers that are needed to give effect to economic enterprise, to engage in open markets, deal with the CAP and ensure that democracy remains where it should be—namely, in this House?

Mr. Brady: I am grateful to my hon. Friend and I look forward to further more, detailed conversations with him on that subject.

Here lies the real tragedy of this EU presidency. It is not that Conservative Members regard it as a failure or that the Government have damaged their relationships with so many EU partners; the real tragedy is that they have failed to live up to their own laudable objectives. If, following the rejection of the constitution, there was a crisis of political leadership in Europe, it is worse now. If there was a pressing need for economic reforms, it is even more pressing six months on. If there was an overwhelming need for fundamental reform of the CAP in June, the need for a better world trade deal makes the case even stronger today.

It was notable that even the Foreign Secretary made little effort to claim that the presidency has been a great success. We are keen on political consensus, but we are sorry to see the firm consensus developing around Europe—that the British presidency has been a failure. It may be that no deal is achieved on the budget this week. If that is so, the Government will have squandered reserves of good will for nothing. If, however, a deal is done, it looks increasingly as though it will be the worst of all possible worlds—bad for the new member states, no reform of the CAP and billions more being taken from British taxpayers.
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We agreed with so many of the objectives set out in June, so it is with real sadness that we move towards the end of this British presidency with no real prospect of agreement on the key challenges facing Britain and the European Union.

6.43 pm

The Minister for the Middle East (Dr. Kim Howells): May I add my words of welcome to the right hon. Member for Richmond, Yorks (Mr. Hague), particularly as he and I entered the House together on the same day? I also welcome the hon. Member for Altrincham and Sale, West (Mr. Brady) to his new position. It is good to see them both on the Front Bench.

I apologise for the absence of my right hon. Friend the Minister for Europe, who is required to be in Strasbourg today. Instead, Madam Deputy Speaker, you are stuck with me, fresh from witnessing the devastation of the earthquake in Kashmir and the fight to relieve poverty, corruption and the corrosive effects of the heroin trade in Afghanistan. Those scenes put this debate in perspective: it is very good to be back in Britain and in Europe—and to be Welsh is very heaven—because hon. Members should try living out there.

As in every debate preceding a European Council, we have had a vigorous discussion about the key issues that European leaders will address tomorrow, and about many other matters in which the EU plays a role. Many important questions have been raised, and I shall attempt to answer at least some of them.

As my right hon. Friend the Foreign Secretary set out so clearly, the focus of tomorrow's European Council will be to agree a budget for the European Union for the period from 2007 to 2013 that is fair and meets the needs of an enlarged EU in an increasingly competitive global economy. My right hon. Friend the Prime Minister stated at the start of the UK presidency that, to get the budget right, the EU needs to decide what direction it takes in the future. Under our presidency, we have begun that debate.

At the informal meeting at Hampton Court in October, EU leaders agreed to take forward, in a number of key areas, an agenda to meet the challenges of globalisation. Those areas include research, development and innovation, as well as university reform and the university sector in Europe. I shall come to those important points in a moment, as they were raised by the right hon. Member for Richmond, Yorks. Other key areas include the development of a European energy policy and the impact of changing demographics in Europe.

In Brussels tomorrow, EU leaders will discuss how to follow up the Hampton Court agreement. They will also consider progress on the EU's strategies to promote growth and create new jobs, and to manage migration and curb illegal immigration. The leaders will also consider ways to take forward the important agreements reached at the UN conference on climate change in Montreal. In that connection, I am sure that I reflect the feelings of the House when I take this opportunity to congratulate my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs. She led the EU delegation in Montreal, and played a crucial role in bringing about those agreements.
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I turn now to some of the questions raised in the debate, in which there was much discussion about economic reform and how that can be taken forward. I understand that the job of Opposition Front Benchers is to give us a battering whenever they can and, in opposition, we did the same thing. However, it is churlish to say that we have not worked very hard over the past six months to make progress towards a focused and results-oriented set of reforms that will create jobs and boost skills. Our priorities have included better regulation, and real progress has been achieved on impact assessment and simplification. Another priority has been the chemicals directive, on which we reached agreement on Monday, and progress has also been made on the services directive and the working time directive—both of which I know have been of great concern to the House.

Adapting to globalisation is one of the biggest challenges facing Europe. We have worked to develop a consensus on how we should respond to these challenges through economic reform, and we have made some progress. At the most recent ECOFIN meeting, EU Finance Ministers built on the discussions at Hampton Court and for the first time set out their views on the reforms needed to maximise the benefits of globalisation. Those reforms were raised by many hon. Members in the course of today's debate, and they include improving the regulatory environment, completing the single market in services, and achieving an ambitious and balanced multilateral trade agreement. They also feature improved regulatory co-operation.

Our conference on better regulation in Edinburgh provided an unprecedented opportunity for business, officials and Ministers to meet and discuss the twin themes of competitiveness and consultation. In November, EU Finance Ministers agreed on a common method for measuring the administrative costs of regulation, and supported Commission proposals for a lighter touch and more effective regulatory framework in the financial sector. The Austrian and Finnish presidencies are committed to carrying that work forward, and that is something that we ought to remember.

The right hon. Member for Richmond, Yorks quite properly credited my right hon. Friend the Foreign Secretary with the Turkish accession negotiations, and I want to reflect that as well. He also spoke about something about which I feel very strongly. He talked about the way in which, all too often, we have genuflected towards the Lisbon agenda but failed to make real progress in key areas. The right hon. and learned Member for North-East Fife (Sir Menzies Campbell) also spoke eloquently about that issue and how we might lift that agenda and take it forward, and we have been trying very hard to do so.

I have told the right hon. Gentleman before that every leading economy in the world has great universities. The way in which European universities have been sliding down the world scale has troubled me. The lists of the world's best universities are dominated by the Americans and British. I still have the scars of taking the Bill on tuition fees through the House, but it is no
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coincidence that the extra funding that is going into British universities is helping them to remain in the first division of universities in the world.

I very much hope that the right hon. Gentleman will take that very difficult argument into the Conservative party. It took a lot of courage to take the Bill on tuition fees through the House, and I hope very much that he will argue for a consensus on the issue. We must get more funding into our universities. We must ensure that our universities right across Europe interact with the economy around them, so that we can start to address the Lisbon agenda issues; we are not doing so at the moment.

Hon. Members mentioned Will Hutton and Wim Kok's committee's report on competitiveness—something that we must work very hard to take forward, and the right hon. Gentleman was right to highlight it. I remember attending the Council of Ministers when, as a rapporteur, Will Hutton gave his report on that key issue, and the body language showed that Ministers were either not concerned with the subject or too frightened to take forward that agenda in their own countries. It is extremely important to understand that issue, and I am very glad that it was raised.

We have seen the publication of the document on the future of agricultural policy, drafted by the Treasury and the Department for Environment, Food and Rural Affairs. It came in for a bit of stick because of the lateness of its publication. I do not think that six months is a very long time in which to draft such a document—it is a difficult one to draft—and to come up with answers about how to reform the CAP is not easy, as we have all learned from the debate.

The right hon. Member for Richmond, Yorks asked about the European Court of Justice judgment on the protection of the environment using criminal law and whether that represented a new power for the Commission. We should look closely at the whole ECJ judgment, which reiterates that criminal law is not generally a matter for the European Community. Only in specific circumstances where criminal sanctions are necessary to uphold European Community rules can the Commission introduce proposals, but they must still be approved by member states. The judgment interprets the current treaties; it is nothing to do with the constitutional treaty. I hope that that helps.

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