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8 May 2006 : Column 131

The House heard about the history of the Prime Minister’s spectacular sell-out on the British rebate. In 1999, he told The Independent that the rebate was non-negotiable. On 8 June 2005, he reassured the House in the clearest terms:

Less than two weeks later, the rebate was merely

Hence, it was up for negotiation, but only alongside fundamental reform of the CAP.

Then we had Commission President Barroso saying:

that is, to the rebate—

There was complete capitulation when the Prime Minister agreed to surrender £7.1 billion of the British rebate without a single change being made to the common agricultural policy.

Mr. John Redwood (Wokingham) (Con): I am grateful to my hon. Friend, who is making a strong case. Is there not more fraud than there was British rebate, and should not the Prime Minister have been tackling the fraud, not giving away British money?

Mrs. Villiers: I assure my right hon. Friend that I shall come to that in due course. I have great sympathy with his observation.

The Prime Minister’s capitulation was not the last cave-in. The European Parliament added another £2.68 billion to the budget in April. More recently, Budget Commissioner Dalia Grybauskait√" said that EU leaders understated the budget and that the true level over seven years is in excess of £600 billion.

The Prime Minister has failed to prevent a huge expansion in the EU budget, failed to ensure that others pay their fair share—France will still pay 20 per cent. less than Britain—and failed to defend the rebate negotiated with such stalwart courage and determination by Margaret Thatcher over 20 years ago.

Remember that we are not talking about small numbers. The £7.1 billion extra that we will be paying as a result of the rebate sell-out could have wiped out NHS deficits for a start, with several billion left over. It could have paid for thousands of new nurses in our hospitals, teachers in our schools or police officers on our crime-ridden streets. Giving up that money is a betrayal of hard-working families already struggling with the heavy burden of the Chancellor’s stealth taxes. Giving it up without reform of the common agricultural policy is a tragic lost opportunity—a lost opportunity to remedy an injustice that keeps thousands in Africa struggling with abject and unnecessary poverty.

The CAP, as we heard this evening, is bad for consumers, bad for the environment and bad for the developing world. The 2004 Red Book states:

The consumer association, Which?, has calculated that the CAP inflicts throughout the EU some of the highest costs for food in the world, adding £1,000 to the average family’s annual food bill. And the opportunity cost could be even higher: a report by Oxford Economic Forecasting concluded that redeploying CAP funds to better uses, such as research and development, could boost growth by around 1 per cent. of GDP.

The CAP is a pernicious tax on food that hits the poorest hardest. It hits the poor in Britain and the poor in the developing world, more than half of whom depend on farming to survive. The Institute of Economic Affairs estimates that EU agriculture policies reduce food exports from Africa by roughly 50 per cent. The World Bank has concluded that removing barriers to agricultural trade would benefit developing countries by $54 billion.

I am sure we all remember the day last year when thousands of our constituents came to see us to seek our help in making poverty history, including campaigners such as Sheila Gallagher, James Catterson and Marie Pearce from my constituency. On that day, it was no surprise that many carried banners stating “Axe the CAP”, because the unreformed CAP is the single biggest obstacle to trade justice. I think that we were all stunned by the sheer volume of commitment, passion and energy that we witnessed that day, but it was to no avail when the Prime Minister actually came to make the decisions that really mattered at the EU summit in December.

Despite their warm words, the Prime Minister and the Chancellor have manifestly failed to deliver CAP reform trade justice. As Neil O’Brien, director of the think tank Open Europe, put it:

It should make people even angrier that neither the Prime Minister nor his Chancellor has done anything to ensure that the extra billions that we will be paying to Brussels are spent wisely. As my hon. Friend the Member for Shipley (Philip Davies) has pointed out repeatedly, why should we give yet more money to an institution whose accounts have not been signed off by its auditors for 11 years? If the Commission cannot manage its existing multi-billion pound budget, why should we trust it with yet more of the British people’s hard-earned money?

It has become something of an annual ritual for the Court of Auditors to refuse to give a positive statement of assurance about the European Commission’s accounts, but we should not let familiarity desensitise us to the seriousness of the problem. If the treasurer of a Barnet gardening club turned up at its annual general meeting to say, “I can account for maybe a third of last year’s budget, but as for the rest of the money, it could have been lost or stolen—I’m not really sure which”, it would rightly cause outrage, yet that happens every year in Brussels. If accounts are qualified in the
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business sector, confidence in a company collapses overnight, in which case the management finds itself out on its ear in double quick time. Furthermore, failure to get one’s accounts right in the private sector can see directors facing jail terms, yet that happens every year in Brussels. However, the Prime Minister does not seem to have mentioned that unacceptable state of affairs as he blithely handed over billions of pounds more of our money to the European Union.

Back in 1999, when the Santer Commission resigned in disgrace, the Prime Minister promised this House “root and branch reform”. His promises on tackling EU fraud and waste have proved as hollow as his promises on the rebate and on CAP reform. Nearly a decade later, it is still business as usual in Brussels. Nothing has changed since the investigating committee that brought down Mr. Santer’s Commission reported:

Year in, year out, the Chancellor votes in ECOFIN to discharge the Commission’s accounts without protest, and Labour MEPs vote those accounts through in the European Parliament.

Every effort is made to silence those who are brave enough to speak out against that complacency. When Marta Andreasen arrived as the Commission’s chief accountant, she was horrified by what she found. The Commission’s computer systems meant that the large amounts of money could be transferred without leaving any electronic fingerprint. In her words, the accounting systems left

The Commission was not even using double entry bookkeeping, which has been in widespread use throughout Europe since the Venetians invented it more than seven centuries ago. It is a basic tool used by businesses ranging from the largest multinational to the smallest corner shop.

When Marta Andreasen expressed her concerns to her boss, she was ignored by the person whom the Prime Minister put in charge of achieving the root and branch reform that he had promised. That person was, of course, Neil Kinnock. And when she spoke out publicly, it was Neil Kinnock, who once famously castigated Militant for scuttling round delivering redundancy notices by taxi, who had Andreasen stopped by security officials at Brussels airport and served with a fax threatening her with the sack if she did not keep quiet.

Keith Vaz: Let me take the hon. Lady away fromNeil Kinnock to the subject of the debate, which is the budget. I thought that she supported the enlargement of the European Union. If she listened to the opening speech by my right hon. Friend the Minister for Europe and to the rest of the debate, she will know that the deal was agreed to fulfil our responsibilities on enlargement. Why does not she deal with that point?

Mrs. Villiers: I can do so by saying that enlargement should have been funded by radical reform of the common agricultural policy.

Other whistleblowers have received the same shabby treatment as Marta Andreasen. When her colleague, Mr. Jules Muis, spoke our about the “chronically sordid” state of the EU’s accounts, he was told by a
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Commission official: “We have ways of breaking people like you.” By contrast, no action whatever was taken against the people in charge of Eurostat, where more than £3 million went missing, squandered on staff perks including a riding club and a volleyball team and siphoned off into front companies producing bogus research. They were simply shuffled sideways and continue to this day to collect big salaries or fat pensions. Despite a report from the Commission that admitted that there was a “vast enterprise of looting” at the EU’s statistics agency, the only person who was raided by the police over Eurostat was the journalist investigating the scandal.

I urge the House to vote against the motion, because when the Prime Minister agreed the new EU budget in the early hours of Saturday 17 December last year, he betrayed the British taxpayer, betrayed the British consumer, and betrayed millions of the poorest people on the planet.

10.11 pm

The Financial Secretary to the Treasury (John Healey): This has been a wide-ranging debate—in some cases rather wider than the motion. I pay tribute to the European Scrutiny Committee and the work that it does to help both Houses to follow more closely proceedings, operations and arrangements in the European Union. It has played an important part in providing the background to this debate and will play an important role as we seek to put in place the arrangements for the future.

Today’s debate is an important step in the process of agreeing the new EU budget. Following it, the Government will complete negotiations with other member states on the inter-institutional agreement and the own resources decision. The House will have scope for a further full debate when the Government introduce primary legislation to ratify the own resources decision.

Mr. Cash: When?

John Healey: The hon. Gentleman asked that question in his speech, and I will deal with it right now. Ratification of the own resources decision is required by December 2008, and we expect to be able to introduce primary legislation in this House at the beginning of the 2007 Session.

Let me turn to several of the matters that hon. Members raised. The hon. Member for Altrincham and Sale, West (Mr. Brady) and I served together on the Education and Employment Committee when we were both first elected to this House. I recall that he was then rather careful in the arguments that he made and the facts that he used, but his speech today was littered with mistakes, wrong assertions and wrong figures. He is wrong to say that we surrendered the rebate, wrong to say that we gained nothing in returnin the agreement, and wrong about the agreementitself. Far from our showing—in his words—utter incompetence, that agreement was believed by many to be difficult, if not impossible, to achieve. Under the UK presidency we brokered that agreement, which gives the European Union its budget for the future seven-year financial perspective period.


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Mr. Brady: Will the Financial Secretary simply and straightforwardly admit that the Government have given up more than £7 billion of British taxpayers’ money by conceding part of the rebate?

John Healey: No. I am about to deal with some of the wrong figures that the hon. Gentleman used. He made a dodgy start by using a briefing from the Open Europe group. The CAP will not, as he asserted, be between 40 and 44 per cent., but 34 per cent. of the total. He included the 9 to 10 per cent. of the budget that is spent on rural development and used for environmental and other benefits in rural areas, not farmers’ subsidies.

The hon. Gentleman is wrong to say that the Treasury has changed the way in which we calculate payments. In the Budget and the Treasury White Paper on EU finances, we calculate EU payments in exactly the same way as has always been done. He said that the budget was increasing—but it is now for an EU of 25 not 15 countries. In the next financial perspective to 2013, the EU budget will fall to less than 1 per cent. of gross national income in the EU—the lowest level for 20 years.

The hon. Member for Chipping Barnet (Mrs. Villiers) spent most of her contribution conflating and inflating the popular myths about fraud in the EU. In 2004, fraud in the EU budget was €130 million. That is 0.1 per cent. Fraud accounts for 0.02 per cent. of the CAP budget and 0.4 per cent. of the budget for structural funds. The UK has been determined that EU funds should be properly and efficiently spent. The EU anti-fraud office has been heavily promoted and the UK was instrumental in setting it up. The UK strongly supported setting up the Commission’s internal audit unit on an independent basis. The hon. Lady speaks with experience, so I am sure that she agrees that few countries in the EU have championed the cause of bearing down on fraud more strongly than the UK.

Mrs. Villiers: Will the Financial Secretary guarantee that next time the Commission’s accounts appear before ECOFIN for discharge, the British Government will vote against them?

John Healey: The hon. Lady confuses questions about fraud with those about reliability. Our consideration of accounts at ECOFIN will depend on those in the future.

The hon. Member for Twickenham (Dr. Cable), who spoke for the Liberal Democrats but is no longer present, conceded that enlargement had been successful in southern Europe and was increasingly perceived as a success in eastern European. He and the hon. Member for Chipping Barnet were critical of the CAP. However, let me stress to them both that the CAP is being reformed. Under the UK presidency, we were able to put in place the historic liberalising reform of the UK sugar regime. The total value of the CAP will decrease over the new financial perspective, falling to €51 billion a year by 2013. The fundamental review—part of the December agreement and the inter-institutional agreement—will give us the chance to press further towards long-term reform and a vision for the CAP, which sees European farming as capable of being competitive without the need for subsidy or protectionism.


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My hon. Friend the Member for Leicester, East (Keith Vaz) was in something of a minority. However, he put the case clearly and cogently for a forward-looking Europe. He reminded hon. Members that commitment to enlargement has been fundamental to the UK Government’s approach, not only under the current Administration but under the previous one. He also reminded hon. Members that the UK Government have been one of the strongest supporters of EU enlargement and one of its most forceful advocates. He also stressed the importance of the EU’s responsibility in helping the new member states undertake the economic development that they require.

My hon. Friend the Member for Caerphilly(Mr. David) spoke about the responsibility of our mature democracies to help what he called the fragile democracies in eastern Europe. He is right to say that the Government should do that, and we are doing it. We are proud of that commitment.

Mr. Redwood: Will the Minister give way?

John Healey: I will not give way to the right hon. Gentleman. He has not been here during the debate, and I am not prepared to take as absurd an intervention from him as the one he made on the hon. Member for Chipping Barnet.

The hon. Member for Moray (Angus Robertson) said that the UK should pay its fair share for the enlargement of the EU, but he was concerned about the transitional arrangements. The Scottish Highlands and Islands have done very well out of the agreement that was made in 1999, and out of the present financial perspective, and they will continue to benefit from the convergence funding agreed for the next financial perspective. Furthermore, the regional development funding in the UK will largely continue to be sourced directly from the UK Government, not from the European Union.

My hon. Friend the Member for Luton, North (Kelvin Hopkins) and the hon. Member for Stone(Mr. Cash) made speeches rather different from those of my hon. Friends the Members for Leicester, East and for Caerphilly. They both made rather wide-ranging speeches—indeed, they sometimes ranged rather wide of the motion that we are debating—and there was a degree of common ground between them.

The hon. Member for Stone repeatedly accused the Government of misrepresenting the budget figures. He did so in an intervention on my right hon. Friend the Minister for Europe, and again in his speech. In each case, he cited the Budget Commissioner. My right hon. Friend the Minister made it very clear that the Commissioner’s figures on the total budget included counting programmes that are not part of the way in which the European Union calculates its budget. Although she is the Budget Commissioner, Mrs. Grybauskaite’s figures are, sadly, incorrect. No other member state, or the Commission, at any time during the financial negotiations assessed the budget in the way that she now pretends to do.


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