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Mrs. Louise Ellman (Liverpool, Riverside) (Lab/Co-op): The Prime Minister has reported that Iran was condemned for its President's recent remarks about Israel. Did that refer to Iran's threat to wipe Israel off the map or was it to do with holocaust denial? What discussions took place about how to prevent Iran from acquiring nuclear weapons?

The Prime Minister: I can tell my hon. Friend that it was in respect of the remarks about holocaust denial, as
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we had already condemned at an earlier Council the comments about the state of Israel. We will continue to work closely with our European partners and with the United States to try to make sure that Iran faces up to its international responsibilities. As my hon. Friend rightly implies, those remarks caused enormous offence right across the international community and raised a whole range of doubts and concerns about the Iranian regime.

Peter Viggers (Gosport) (Con): These proposals have enormous financial implications, so what opportunity will the House have to debate and then vote on them?

The Prime Minister: I am sure that there will be plenty of opportunity to debate them. It would be nice if at least one of the Conservative Members who are asking me questions would confirm whether they accept that we have to pay something for enlargement. Surely that must be right.

Ed Balls (Normanton) (Lab): Given that in the 21 years since the rebate was first negotiated in 1984, we have yet to see any fundamental reform of the common agricultural policy, does the Prime Minister think that this weekend's deal brings forward the prospect of serious CAP reform? What tangible steps does he believe that the Government and hon. Members can take between now and 2008 to make the prospect of real reform more likely?

The Prime Minister: The important thing is that the Commission's review will relate to the whole of the budget, including the CAP, abatement and everything to do with how the EU is financed. The EU will then have to take decisions on the basis of that review, but I   think that there is increasing recognition that we need that fundamental restructuring. It was never going to happen this December; it was going to happen only once a deal was secured for the short term this December and then followed up by a mid-term review that would allow us to make that fundamental reform. It is possible to achieve that, but it will mean increasing the pressure for change within Europe. Frankly, that is best achieved by forming alliances with other like-minded countries in the EU, and those alliances would all have been put at risk if we had not tried to secure a proper budget in the meantime.

Dr. John Pugh (Southport) (LD): What provision is made in the settlement for structural funds received by Cornwall and Merseyside?

The Prime Minister: I do not know the exact details, but perhaps I can write to the hon. Gentleman on that matter. Overall, of course, one has to accept that the structural and cohesion fund budget gets switched from the wealthy to the poor. That is true.

Tom Levitt (High Peak) (Lab): Does my right hon. Friend agree that we had a rebate in the first place only because others acknowledged that there were injustices in the system? As we work towards getting rid of those injustices—and, more importantly, as we work to ensure that they are not meted out on those more vulnerable or
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weaker than ourselves—it is natural for the rebate to be adjusted accordingly. Does he agree that the deal is not only honourable and—

Mr. Speaker: Order. One supplementary question is fine.

The Prime Minister: There is a simple way of testing the proposition that my hon. Friend has rightly raised. Between 1984 and 2004, we paid roughly double the net contributions that France paid, but for the next financial period and for the first time in the history of the European Union, we will be in parity. That is why, frankly, it is so absurd to say that we have somehow got nothing from the deal. We have actually achieved parity for the first time. Naturally, both France and Britain will have to pay more if we want to see developments in eastern Europe.

Underneath all the debates and arguments lies an important question—not just about budget reform, but in relation to enlargement—about the direction of Europe. Do we want further enlargement of the EU? Macedonia is a small country so enlargement can happen fairly easily there, but Croatia and Turkey are also coming up for membership. There is no way that we will be able to create the right context of consent across Europe for those major enlargements—I happen to believe that they are in the long-term interest of this country—unless we have a more rational budget. Such a budget will have to be decided in the future.

Mr. Richard Shepherd (Aldridge-Brownhills) (Con): When the Prime Minister made a statement to the House and stressed that the rebate was non-negotiable, he must surely have been aware that the EU had expanded to the east and that the common agricultural policy was dire and had grievous effects on the third world and the poorest nations, which the Government claim to be dedicated to helping. Does he realise that the House and the country believe that he threw away a good negotiating hand for nothing?

The Prime Minister: Except that the rebate is rising and we have to pay our fair share of enlargement. But anyway, let me read out to the hon. Gentleman what I actually said back in June:

not now, but midway through the next financial period—

I went on to say:

That is precisely what I have secured.

Mike Gapes (Ilford, South) (Lab/Co-op): The Prime Minister referred to the importance of our relations with the 10 new member states of the European Union, and he will be aware that one of them—Slovakia—will have the presidency of the EU in 2008. Is he also aware that there will be great support in the Balkans generally for
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the decision to give Macedonia candidate country status? Peace and security in the Balkans is vital for all of us in Europe and without this agreement, it could have been put at risk.

The Prime Minister: My hon. Friend is of course absolutely right and that is another reason why this agreement is so important. Some Opposition Members seem to think that countries hold the presidency for a year, when, in fact, they hold it for six months. As my hon. Friend rightly says, the other presidency in 2008 is Slovakia, which is of course a great supporter of reform, but in any event, the real point that he makes is worth emphasising. In the end, we want to see the European Union expand to take in those Balkan countries that for decades—for centuries, even—have been a huge problem for the whole development of the European Union. If we ended up having no budget in respect of this enlargement—relating to central and eastern Europe—there is no way that we could have prepared the ground for future enlargement to include those Balkan countries. Whatever people may say about agreements such as this—there is always criticism of them—in the end, we had to do two things: to get an immediate deal that secures the short term and to get a process agreed that allows us to get the longer-term reform. My hon. Friend is absolutely right: had we not done the first thing, the enlargement that I assume all of us want to see—toward Croatia and Macedonia and, in time, other Balkan states—would have been put at risk.

Mr. Brian Binley (Northampton, South) (Con) rose—

Mr. Speaker: I call Mike Penning.—[Interruption.] I mean Mr. Brian Binley.

Mr. Binley: I am most grateful, Mr. Speaker; you may call me what you wish.

There is clearly going to be a shortfall in respect of Treasury expectations and the lost rebate. Will the Prime Minister make it up through direct taxation, indirect taxation or more stealth taxes?

The Prime Minister: Actually, as a result of the agreement, we start off with a zero percentage of the   costs of enlargement and build up over time. I   assume from what the hon. Gentleman said that he does not agree with paying any money toward enlargement, which is not very sensible.

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