Examination of Witnesses (Questions 91-99)
MR CHARLES
GRANT AND
MS RUTH
LEA
11 JANUARY 2006
Q91 Chairman: Welcome. We are delighted
that you have been able to come along to our first session in
2006 about developments in the European Union. Can I ask you for
your assessment of the British Presidency and what you think it
meant both for the European Union and resolving the internal crises
and also for the British position within the European Union.
Ms Lea: It did seem to be a rather
disappointing performance, but two or three things of supreme
importance were decided. Firstly, there clearly was the Budget
for 2007 to 2013, and arguably, of course, it was a very disadvantageous
agreement in the end for Britain; and the Chancellor of the Exchequer
has made it very clear that we will be losing another 7 billion
over that particular period by way of our abatement. The Government
was making the point that it wanted to negotiate the abatement
in connection with the reform of CAP, but that, of course, did
not happen and will not happen for quite some time. The other
point I would make is on the talks about enlargement. Turkey is
now a candidate country, which was agreed in October, as it should
be; similarly Croatia. Those are the two major achievements—if
"achievements" is the right word to use—of the
British presidency.
Mr Grant: I would agree with some
of that. I agree about enlargement. I think that the Turkish deal
in particular was really on a knife-edge, and might not have happened.
The incredibly hard work by the British politicians and diplomats
really helped that to happen, perhaps, as I say, against the odds.
It is not just Turkey and Croatia but the whole of the Balkans
has a prospective for membership now, thanks to the achievements
of the last six months. It was not at all certain that the EU
would agree that Macedonia should be a candidate, which they have
now agreed; nor was it certain that the EU would agree to start
talks on stabilisation agreements with Serbia and Bosnia, both
of which are very important for giving them a perspective of modernisation
and reform. The whole western Balkans has done rather nicely out
of the British presidency, and none of that was certain to happen.
On the Budget I take a different view from Ruth. One would have
liked a different deal, with a radical agreement to reform the
CAP and so on, but I think it was the best deal that was possible
in the circumstances. I part company from some commentators and
my former employers at The Economist who would have said
it was better to do no deal at all. The important thing is that
there was a deal. The details are less important, and the fact
that it is off the agenda is a good thing. It was a poisonous
thing while it was on the agenda. If we had not done a deal, we
would have spent the rest of this year arguing about it instead
of dealing with real problems in the real world. Today we can
worry about the Lisbon process of economic reform; we can worry
about enlargement, and we can worry about the Services Directive
or whatever, so I am very happy that it is out of the way. On
the single market generally, I think there were some modest successes
in the presidency. We did not get very far with the Services Directive,
but that was not the Government's fault. There was an agreement
on the so-called REACH Directive on chemicals testing, which was
a sensible compromise. There was a lot of progress on liberalising
aviation between Europe and America, which was encouraging. From
a British point of view they succeeded in stalling any attempt
to reach an agreement on a working time directive that would have
taken away British opt-out. From the British point of view, on
the single market side they did all right.
Q92 John Horam: How has that left
the perception of the UK's role in the European Union? What do
people now think about the UK following the presidency?
Ms Lea: I was surprised at how
badly the British image suffered during the presidency because
there were a lot of negotiations. Obviously the Budget was a very
poisonous affair, as Charles has said. One of the aspects discussed
in relation to the Budget was the idea that money should be concentrated
on the new accession states and not so much on the relatively
rich Member States that still take a lot of structural funds from
the EU. That, in itself, seemed wholly sensible, although it did
not get anywhere, but in relation to the way the debates developed,
when Britain was arguing about keeping its abatement, its rebate,
it seemed as though we were "taking money away from the new
accession states". The way it seemed to be handled seemed
to give the British image rather a bad deal, if I may say so.
Q93 John Horam: Do you think it stuck?
Ms Lea: The image did get stuck,
and it did not look particularly impressive.
Q94 John Horam: Has the result modified
that perception or is it still the feeling that somehow Britain
rather mismanaged it?
Ms Lea: I think now, because the
Budget has been settled, it has been hugely to our disadvantage.
I say that because the cuts in the abatement are quite substantial.
I suspect that from the Brussels perspective, at the end of the
day, because a deal was done—and, if I may say so, Britain
did in the end give up rather a lot—that probably did improve
its image.
Mr Grant: I would agree with some
of that. I had thought that when the deal was done the east Europeans,
who had been so annoyed with us when we were trying to cut their
money, would be quite relaxed and happy and go back to being friends
with us. It is not actually true. From my own conversations—
Q95 John Horam: They are still annoyed,
do you think?
Mr Grant: They are, more than
I thought they would be. I think that although on the substance
of the major issues we have already discussed the British presidency
did well, it did not do so well on the style. I am a little concerned
myself that we still have a bad image in east European countries.
This is partly the natural British arrogance towards dealing with
smaller countries.
Q96 John Horam: We tried rather hard
to have a good image with east European countries.
Mr Grant: We had a very good image
at the start of the British presidency. The image was very good
earlier this year for the reasons we are aware of, and then it
started going wrong in June, when Britain vetoed the deal that
most countries were prepared to sign up to. The east Europeans
were particularly unhappy with the delay on agreement on the Budget.
The British diplomats were rather surprised at how badly the east
Europeans took it. I think that we took them for granted and assumed
they were our natural friends, that they could not stand the French
and that they would follow our lead. However, when they saw their
own economic interests being affected by British policy they got
rather annoyed. Subsequently during the presidency I do not think
we spent enough time scratching their backs and being nice to
them. Of course it is difficult: the presidency is so busy. I
heard, for example, complaints that during the night when we finally
did the deal on the Turkish accession that the east European foreign
ministers were upset at being left waiting in a room, and nobody
talked to them for twelve hours and told them what was happening.
Maybe if Jack Straw had spent half an hour with them, he would
not have had that extra half hour with the Austrians that did
the deal. I am not saying the British necessarily got it wrong,
but there is a perception amongst the east Europeans that we are
arrogant and haughty, and that we take them for granted.
Ms Lea: Can I add to that, because
I think that what Charles has said is of great interest and great
significance. When there was the accession of the 10 new countries
Britain felt very much that they were in their camp, and they
no longer appear to be in their camp. That is one of the real
outcomes of the British presidency. Britain, of course, had always
pushed for widening because they wanted extra people on their
side, so to speak, who would be economic reformers and who wanted
to have more free markets. There was the feeling when the new
countries came in that these were reform countries; these were
the ones that were friends with America. Britain was, if I may
say so, feeling rather complacent about the idea that they would
be their natural allies. I suspect that the situation over the
last six months has changed quite significantly.
Q97 Mr Illsley: I want to ask you
one or two questions on the Budget, in particular our involvement
in the rebate. You mentioned in your opening statement that the
Chancellor of the Exchequer has said it will cost an extra 7 billion
over the period. Is that on top of the reported amount of 14 billion?
Ms Lea: Which 14 billion is this?
Can I just say where I got the 7 billion from? That was in a written
statement to the House of Commons on 20 December. It was a question
by John McFall to Gordon Brown. I have got the numbers here, and
according to Gordon Brown the estimated extra costs would be 500
million in the financial year 2007; nothing in 2008; a billion
in 2009; and between 1.6 and 1.9 for 2010 to 2012. That is where
I got the figure of 7 billion from. I am not quite sure what the
14 billion is.
Q98 Mr Illsley: I was looking at
newspaper reports at the time, the more extreme newspaper reports
at the time.
Ms Lea: These are Treasury figures.
The significance for Mr Brown is that they are very much back-end
loaded. The withdrawal of the abatement is very much back-end
loaded into the further period into the Budget. That is at a time
indeed when you do have a slow-down in public expenditure, so
clearly it has quite serious implications for the Treasury's budgets.
Q99 Mr Illsley: Is there any significance
in the increase in the UK rebate, the increases you are talking
about?
Ms Lea: Again, I do not have those
particular numbers; all I have is the Treasury estimates of the
extra costs of the final negotiations and positions they thought
they were in. I must say that I did trawl through the website
to find some extra numbers to get the breakdown but without a
great deal of positive reaction. Those are just the numbers that
I have got.
Mr Grant: I would disagree that
the deal we got was particularly unfair. As far as I understand,
British net payments into the EU Budget over the next seven years
will be about the same as France, and much less than Germany.
That sounds to me a fair deal. Britain is a net contributor, but
it is one of the richest countries in Europe. I am not saying
that the Budget deal was perfect; I think the Spanish and the
Irish did too well out of it: they are rich countries that have
ridiculously high net payments to them. However, if you look at
the big countries of the EU, we did pretty well. The rebate gets
bigger every year automatically: because the Budget gets bigger
every year the rebate itself gets bigger every year, and it is
harder and harder to justify it given that we are so rich and
that there are so many poor countries in the EU. Of course, we
should not give it away until there is a total reform of the CAP
but I think that will come, hopefully. The discussion on that
will come in 2008.
Ms Lea: I would question that
we will be paying the same as France. I would be very surprised
if that were the case.
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