Preliminary Draft Budget 2009

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Mr. Gauke: I am glad that we agree that the 5 per cent. increase in administration costs is unjustifiable, but the only way that it could be justified, or at least explained, was if it was intended to fund those additional posts. As those additional posts do not appear to exist on the face of the budget, I again put it to the Minister that there is a strong case for the administration budget to be reduced, as we are now in a different situation from that in which the preliminary draft budget was produced.
The Chairman: Order. Before we go any further, I will say gently to the hon. Gentleman that this sitting has been purposefully divided into an opportunity for question and answer exchanges and an opportunity for debate. Of course, an element of discretion and judgment is to be used in distinguishing between the two, but it is in order at this point for right hon. and hon. Members only to ask questions, rather than pursue debating points. There will be an opportunity for the later in the second phase.
Kitty Ussher: Thank you for your guidance, Mr. Bercow. I want to maintain the technically non-partisan spirit that the Committee has rightly enjoyed in previous occasions, but must suggest that the hon. Gentleman is seeking to extrapolate a broader political point from the facts before us.
Mr. Browne: Tory MEP expenses.
Kitty Ussher: “Tory MEP expenses”, I hear from the hon. Member for Taunton. I would be extremely tempted to go down that path and might leave it dangling as a stick to incentivise the hon. Member for South-West Hertfordshire into going in the right direction.
We think that a 5 per cent. increase in administration in unacceptable. In the past, concerted efforts on that budget line have yielded results: we managed to reduce it by €52 million last year. The proposed increase in the administration costs is not the result of any kind of budgetary effect of implementing the Lisbon treaty—if indeed it will be implemented. I have repeatedly emphasised that work has stopped, pending the decisions of the Irish, but if we were to get to that stage and it was necessary, we would expect an amending letter to come in. Therefore, it is not reflected in this draft budget.
That issue relates to an extremely serious point about value for money. There are upward pressures on administration costs that come from the way that the budget is drafted, and it is unacceptable that those costs should increase, particularly when the overall level of the budget is going down and when countries across the EU are undertaking efficiency exercises, in some cases quite effectively, that are similar to the Gershon exercises in the UK.
The 5 per cent. increase appears to be covering the posts linked to existing decisions on enlargement. That does not necessarily mean that, although we are in favour of enlargement, we think increased expenditure is justified, and I will continue to make that point with my colleagues from other member states. It is important to make it absolutely clear that Lisbon is not making that figure go higher, it is going higher for other reasons and it needs to come down regardless of Lisbon.
Mr. Browne: Does the Minister, on the contrary, take the view that there are aspects of the Lisbon treaty that should lead to administrative savings within the European Union because it streamlines the process by which decisions are taken? One of the ways that we might try to have a more effective European Union budget in administrative terms would be to proceed with the treaty.
Kitty Ussher: We have obviously ratified the treaty here. The hon. Gentleman can draw his own conclusions about whether we should proceed with it. In terms of the costs savings, as I have said, we think that there are some cost savings to be made by merging existing teams. We not sure whether that will cover all of the additional expenditure required. This may end up being a cost-neutral exercise anyway, although we suspect that it will not. If it is not, there need to be cost savings from within existing agreed budget ceilings. We will push for that very hard with like-minded member states, as and when Lisbon is ratified, which it may not be. We are not doing anything now. That is the point.
Mr. Brady: May I refer the Minister to document 1, submitted by the Commission? Paragraph 2.4 sets out five areas where appropriations can be entered in the budget without a legal base. Can the Minister tell us what the total of those areas is, and in particular, the total under exemption 2, which is preparatory actions? I do not know whether that is specific to the Lisbon treaty or wider. I should be interested to know the figures.
Kitty Ussher: I am afraid that the nature of this question and answer part of the debate is such that I cannot give the hon. Gentleman a precise answer now, but there is no reason why I should not be able to do so later on this afternoon. I will certainly endeavour to respond then.
Mr. Gauke: May I return to the issue of agricultural spending, which the Minister has already mentioned? The preliminary draft budget proposes a 4.8 per cent. increase, which is nearly €2 billion, in market-related support and direct payments in relation to agricultural markets. At a time of rising food prices—the Minister says that we are winning the battle on the reform of the common agricultural policy—does she think that that figure is acceptable?
Kitty Ussher: It goes without saying that we think far more can be done on the CAP generally. We therefore need to separate in our minds, as I attempted to do in my opening remarks, what we are trying to achieve in the routine annual budget negotiations from the broader reform of the CAP. We will, of course, continue to bear down on all aspects of the CAP now. We do not particularly see it as justified, but we accept that this year is not the time to have the debate on wider reform of the CAP. We will pursue that energetically elsewhere.
Mr. Gauke: I am grateful for that reply. May I turn to heading 4 of the preliminary draft budget, which concerns the EU as a global partner? Another area where there is an increase is overseas aid and international development. The Opposition have no objection to increased expenditure on international development, but what is the Minister’s assessment of the EU as a deliverer of aid compared with the Department for International Development ?
Kitty Ussher: Obviously we want the same value for money as applies in DFID programmes to be extended across the whole of the EU. There is a case for common external action in some areas. It is useful to be able to demonstrate real EU concern in some areas. It sends a powerful international diplomatic signal as well as technically enabling us to combine resources to give a more targeted response in certain areas. Also, it does not presume that the UK can do everything in all parts of the world. However, I am not an expert in this area.
We are supportive of the proposals under heading 4, whether they are about development co-operation in Asia or wider aid for the rehabilitation and reconstruction of Afghanistan. Kosovo and Palestine are areas where we think that it would be good to demonstrate that the EU is capable of acting. We also think that transitional assistance in adjustment support for sugar protocol countries is valid.
Mr. Browne: The Minister talked in her introductory remarks about a switch in emphasis with cohesion funds. Presumably that is towards the 12 member states that have joined in recent years and away from western European nations. Will she comment on the specific implications of that for Britain, particularly for areas such as Cornwall that have benefited from such financial support? Will she reflect on the irony that the Irish seem to be particularly unenthusiastic about EU cohesion despite being the recipients of more cohesion funds than most nations?
Kitty Ussher: Two separate things are going on here. First, parts of the UK are currently receiving welcome and significant amounts of funding recycled through EU sources and they will continue to do so through this year’s budget. That is great. Secondly, there is a broader point about reforming the EU budget. For the best part of five years, our position has been that taxpayers’ money is spent more effectively through EU economic, structural and cohesion funding when focused on the poorer member states. To me, it seems wrong to send money via Europe back to the UK. That does not mean that we do not support domestic regional funding. The usual domestic prioritisation process will ensure that our regions and nations have an appropriate level of funding.
Mr. Browne: I think that most people in the Committee would recognise that although the GDP per capita in most eastern European countries is increasing at a greater rate than ours, it is still a long way behind. Those countries are therefore the natural recipients of most of the money targeted at trying to raise living standards across the EU. Putting that to one side, so that the people of this country understand fully, what are the implications of the switch of emphasis for communities in the UK that currently benefit from such funds? It is true that the money has been recycled through the system and that there is a case for not doing that. Nevertheless, some communities in this country are the recipients of that funding. How much longer can they expect to be so?
Kitty Ussher: We published a policy document on this matter in 2003 for our EU partners as part of our negotiating strategy, which said that we thought that UK regional funding should be funded through our own mechanisms, such as the regional development agencies. We were unsuccessful in winning that argument. Given that, I am delighted that places such as those areas that the hon. Gentleman represents were successful in obtaining funding from an EU source.
We are now at the beginning of a wider review of the entire EU budget so we continue to make the broader points that we made. Since we do not yet know if we will succeed in that, it is too early for me to say specifically, with a pound sign, what the effect will be on regions of the UK were we to succeed. I make the general point that we have a strong regional policy in this country and we believe that we have effective ways of ensuring that it demonstrates value for money. Nothing that happens at European level will detract from that.
Mr. Brady: I have another detailed question and so I do not mind if the Minister answers this when she has had further inspiration. I think it is correct that, according to the expenditure analysis by policy area, there is €150 million for information, society and media, and €20 million for communication. I should be interested to have a breakdown of where that is to be spent, looking at different member states, especially with a comparative figure between 2008 and 2009 with reference to the Irish Republic.
Kitty Ussher: I would be happy to do so when I sum up the main debate.
Mr. Gauke: May I return to the subject of international development and, in the spirit of inquiry, raise a specific concern about the EU’s performance in this area? The Minister has alluded to the issue of the targeting of EU resources on the poorest countries. Does she share the criticism that is often made of the EU which is that, unlike the UK which increasingly targets its overseas aid on the poorest countries, the trend in the EU is the reverse? Very often it does not go to the poorest but sometimes to neighbouring north African countries rather than those areas that are suffering the most significant poverty.
Kitty Ussher: The EU intervenes in a number of different areas and a number of different countries for different reasons, not necessarily simply on the basis of poverty reduction, important though that is. There is also an enormous amount of work that different EU countries can do simply by working together as colleagues without having an income line coming through the EU budget itself. It very much depends on what needs to be done and the best way of achieving that. For example, and I should have said this previously, in some of the countries such as Afghanistan and Iraq, large scale infrastructure projects are needed. We simply could not do that alone but everybody agrees that it needs to be done somehow. It comes back to the general point that we believe EU action should be taken where the overall sum is more than its parts and we achieve something by working together. That will not necessarily mean that we should simply focus on the poorest, important though that is.
Mr. Gauke: I am grateful for that answer. May I highlight one area where there is some controversy, which is the EU’s expenditure on international development that is within the Palestinian territories? Does the Minister share the concern of many that there is insufficient rigour in ensuring that funding going to the Palestinian territories does not end up in the hands of militant groups, which often use it to fund educational projects that spout anti-Semitic propaganda?
Kitty Ussher: Obviously we would be extremely concerned if we thought that that was the case. If the hon. Gentleman has any specific examples, I should be happy to look into them.
Mr. Browne: Section 3 is entitled “Citizenship, freedom, security and justice”. My understanding is that the Government are supporting reductions in the budget in that area and looking for further ways to reduce spending. Given that migration and—a separate issue—terrorism are rightly preoccupations of society in this country and across the EU, and given that there is a huge benefit in trying to co-ordinate policy across all 27 member states, is it wise to try to reduce expenditure in those sensitive areas?
Kitty Ussher: The important thing is to ensure value for money. We feel that it can be done more effectively. I am not sure that we are in a position now to get into the detail, but we would be worried if we thought that the EU’s capability of action in an area where it should act would be undermined. As a general point, it is probably worth saying that we think that parts of heading 3a complement national efforts in an extremely helpful way, so it is not a large concern.
Mr. Brady: The budget for the seventh framework programme for research amounts to some €6.7 billion. Can the Minister tell us what percentage of that is being spent in the United Kingdom, and how confident are the Government that we are getting a fair proportion of EU research expenditure?
Kitty Ussher: The hon. Gentleman is probably putting me on the spot more than any other member of the Committee at this point. A large proportion is being spent in the UK, and we are working extremely hard to ensure that more is spent. I was involved in negotiations on the Galileo project to that extent—although that is perhaps a slightly different funding stream. Again, I will have to come back to him on the detail.
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