Mr.
Gauke: May I turn to the Galileo project, which the
Minister raised? She will be aware of the Select Committee on Transport
report published in November last year, which
stated: “It
would be entirely unacceptable to proceed with the Galileo project at
this stage without fresh, independent and rigorous evaluations of the
balance between costs and
benefits.” The
preliminary draft budget proposes an increase in expenditure on the
Galileo project of some €62 million—a 20 per cent.
increase. Is she satisfied that there has been sufficiently rigorous
evaluation of the costs and benefits of that project to support that
further increase in
expenditure?
Kitty
Ussher: No, not entirely, but things are going in the
right direction. I was at the heart of the negotiations last November
on whether to start funding the Galileo project. We felt that the
proposal that we ended up with had costs and benefits far more clearly
articulated, and that the net benefit was much clearer than it was when
hon. Members on the Select Committee on Transport undertook that
work. It
is probably worth placing on record that when I was in Brussels at the
end of November negotiating on that matter, I made efforts to speak to
the late Member for Crewe and Nantwich, Gwyneth Dunwoody, who took me
to task in her usual way. I wanted to ensure that there was at least an
understanding in Parliament of what the situation we faced was: there
was a programme that could be of benefit to the entire
world—certainly to the EU and the UK—and there was a
blocking minority against it, for tactical rather that principled
reasons. We felt that if we broke that blocking minority in a certain
way we could extract far greater benefit for UK industry, and that is
what we sought to do. Mrs. Dunwoody held me to account when
I came back to the Committee to explain what we had done. I hope that
if we look at the record there will be a greater understanding of the
pressures that were faced. I think that we did exactly the right thing
in the
circumstances.
Mr.
Gauke: Further to that answer, does the Minister still see
the Galileo project as purely for civilian use, or will it also
possibly have a military capability? Could she also expand on what she
sees as the benefits to the UK of that
project?
Kitty
Ussher: I understand that the project is supposed to be
entirely civilian in use. It could provide huge benefits to the UK, not
just regarding the supply chain and immediate jobs, but by producing
huge long-term
economic effects. Having a satellite system that can rival the GPS can
put downward competitive pressure on price; having two systems in the
world will act as a spur to economic development. That is potentially
hugely advantageous to us. I must emphasise that we are at an early
stage, and we must be completely rigorous in ensuring that the project
plans that eventually come forward represent value for money. It is all
right to be in favour of the principle, but we should focus our efforts
on how it is implemented. That message is now permeating the European
Commission, which is
useful.
Mr.
Brady: In the period that the budget has been under
preparation, there has been a depreciation of sterling against the
euro. Will that have any bearing on the net contribution that the UK
makes to the EU, either with regard to the calculation of the abatement
and other payments or the return of unspent
budgets?
Kitty
Ussher: Yes, it will. My understanding is that the
entirety of the accounts are conducted in euros, as is our net
position, so the appropriate exchange rate will apply when the money is
finally
returned.
Mr.
Brady: I am grateful for that response, but will the
Minister give the Committee some sense of what the overall impact of
that will be in the current
circumstances?
Kitty
Ussher: Obviously, it will depend on what the exchange
rate will be in 2009, and we are not yet there. Had the hon. Gentleman
asked these questions in a more discursive manner, I would have been
able to respond to his list at the end, but I shall nevertheless
endeavour to do so.
Mr.
Browne: Does the Minister think that the points just made
by the hon. Member for Altrincham and Sale, West add strength to the
case for Britain joining the single currency at an early
opportunity?
Kitty
Ussher: No, we have made our position entirely clear. We
have five tests that remain unaltered by the strength of the euro at
any moment, and we will, as always, provide an assessment in the
Budget.
Mr.
Gauke: Turning briefly to the Galileo project, does the
Minister think that the project’s commercial rationale is
significantly altered by the fact that it is now forecast to come into
operation in 2013, whereas it was originally envisaged to be available
from 2008, and does that affect the Government’s considerations
in that area?
Kitty
Ussher: Yes. The initial proposal was for a public-private
partnership project with a definite time scale and costs attached to
it. The negotiations broke down, and we were extremely worried by the
effect on value-for-money of the changed circumstances, with regard to
both time scale and financing. That is why we negotiated, quite
effectively, to reduce the impact on the EU taxpayer. That is not to
say that it is not a valid project, which it is. We must continue to
ensure that it has a realistic project plan that represents the best
value for money for the UK taxpayer.
Mr.
Gauke: On page 7 of the Treasury’s memorandum,
heading 1, which deals with sustainable growth, states that the
Government
“intends to
scrutinise and suggest appropriate reductions to commitment and payment
levels” and
ensure
“that payment
levels more accurately reflect absorption capacity.”
Could the Minister
enlighten the Committee more fully on what that means and its
significance in that context?
Kitty
Ussher: There was a difference between the amount that we
had been trying to spend and the amount actually spent, so there is
clearly a problem with fulfilling the deal all the way through. We do
not want to get into a situation in which there is a huge underspend
simply because we were not able to assess in advance whether we had the
project planning teams in place to spend the money. We think that that
leads to rather lax budgetary pressures that allow people to raid that
pot of money for their latest pet project. However, it is
improving.
Mr.
Gauke: I am grateful to the Minister for that answer. Has
that concern arisen as a consequence of past experience of the EU
budget?
Mr.
Brady: I do not know whether I shall get such a precise
response to my question. What actions are the Commission and the UK
Government taking to ensure proper financial management of EU funds by
other member
states?
Kitty
Ussher: Other member states are sovereign bodies, but we
feel that we can lead by example in that area and intend to publish
extremely shortly a consolidated fund analysis of the moneys coming
into the UK from the EU to show that the audit arrangements are
effective. A number of countries are following our example in this
area. We continue to put pressure on our colleague countries as a
result of the work of the European Court of Auditors. There is some
good news in that a greater amount of EU spending than in previous
years has got over that hurdle, but we still think that there is an
extremely long way to go. We can use the European Court of Auditors
route and we can demonstrate by example the right way to do it. We will
continue to do both. Ultimately, it is up to other countries to
implement their own
procedures.
Mr.
Browne: I am grateful for that response. I want to follow
it up because the majority of EU money is spent by member states. There
is surely a legitimate concern among UK taxpayers that our money, which
could be spent within the UK, is funding projects throughout the EU.
Many of those are worthy and legitimate, but waste or even fraud is
taking place using EU money that has come in part from the UK. That is
surely a concern for our Government. It is surely reasonable that we
should do our utmost to ensure that money spent by other EU member
states is spent wisely and legitimately.
Kitty
Ussher: The answer is, of course, that we are doing our
utmost. We are genuinely putting an enormous amount of resource into
this area. The hon. Gentleman mentioned fraud, but there is no evidence
that fraud is rife. A report in 2006 from the other place made that
clear. The EU’s anti-fraud watchdog, OLAF, puts fraud at about
0.3 per cent. of the budget. That compares quite well to the spending
activities of national member states. I am not trying to apologise and
we should not be complacent, but sometimes tabloid perception is not
the same as
reality. The
hon. Gentleman’s wider point is correct. About 80 per cent. of
EU funding is done through member states and we must continue to ensure
that it is spent in the most effective way. We have taken a lead in
improving the situation through a number of initiatives. The use of
activity-based budgeting means that the budget lines and what they are
being spent on are far clearer to external scrutiny. As I said, we are
publishing a consolidated statement on the use of EU funds here, which
we encourage other countries to follow. The general answer to his
question, apart from on the fraud point, is
yes.
Mr.
Brady: I was pleased that the Minister referred in her
opening remarks to her concern that the European Court of Auditors has
been unable to sign off the accounts for so many years. What are the
Government doing to ensure that the accounts can be signed off this
year or within a foreseeable time
scale?
Kitty
Ussher: In a sense, it is up to the European Commission to
do that. As I said in reply to the hon. Member for Taunton, we want to
lead by example by exposing our spending lines to the scrutiny of our
own audit body, the National Audit Office. We think that that sends a
signal that we are going in the right direction. We spearheaded the use
of activity-based budgeting. We want to ensure that there is a greater
focus on outcomes in all EU activity so that incentives are aligned in
the right direction. There have been a number of changes to the audit
procedure and in everything that we do we want to focus outcomes on
performance to make it harder for funds not to be spent in the correct
way. We are doing everything that we can think of. If the hon. Member
for Altrincham and Sale, West has any further ideas, I will be happy to
take them on
board.
The
Chairman: If there are no more questions from hon.
Members, we will proceed to the debate on the
motion. Motion
made, and Question
proposed, That
the Committee takes note of the unnumbered Explanatory Memorandum from
HM Treasury dated 2nd June 2008 relating to the Preliminary Draft
Budget of the European Communities for the year 2009; and supports the
Government’s efforts to maintain budget discipline in relation
to the budget for the European Communities.—[Kitty
Ussher.] 5.19
pm
Mr.
Gauke: I think that we have had a helpful and useful
debate. I am grateful to the Minister, who has tried to assist the
Committee as much as possible. She has provided straightforward and
informative answers, for which we are grateful. None the less, the
Opposition have three concerns with the preliminary draft budget before
us. I touched upon the first point in questions. I
fear that I may have started to outline my argument, and I am grateful
that you dissuaded me from pursuing that, Mr. Bercow. The
preliminary draft budget was produced prior to the referendum in the
Republic of Ireland on the Lisbon treaty. When it was produced, it was
widely expected that the Lisbon treaty would come into force in January
2009. Given that there would have been certain assumptions about how
the European Union would be working and about how it would be spending
its money, there would have been expenditure set out within the budget
which may not necessarily be valid
anymore. I
come back to and wish to highlight the administration issue. I note
what the Minister has said but, none the less, a 5 per cent. increase
in administration costs is very significant. Given that the expectation
a few weeks ago was that the European Union would have a president of
the European Council and a high representative in 2009, one could be
forgiven for suspecting that there was slack—as it
were—put into the administrative budget because it was going to
be used, in part, to fund those additional posts. The Government have
said, in the document before us and this afternoon, that they hoped
that the cost of the additional posts could be found from
reprioritisation. I agree with the Government; there is clearly scope
for the costs to be found from the administration
budget. I
do not want to run through an argument about the rights and wrongs of
the Lisbon treaty and I am sure that you do not want me to,
Mr. Bercow. However, the Government’s position that
the Lisbon treaty is not dead is—to put it
mildly—unfortunate. Their refusal to state that it is continues
to place pressure on a small country—the Republic of
Ireland—and on other countries, such as the Czech Republic to
ratify the treaty, notwithstanding the views of the people of Ireland.
If the Government were to adopt a different approach and say that the
Lisbon treaty was dead, that also ought to guide the way in which they
approach the negotiations on the budget in July. The European Union
needs to look again at its budget in the light of the Lisbon treaty not
being in force in January. It is a further indication that the
Government are failing to recognise or are participating in the
collective failure to recognise the views of the people of the Irish
republic, and that is
unfortunate. Putting
aside the detail of the Lisbon treaty, there is also, of course, its
direction, which is to an increased role, in, for example, foreign and
common security. As the hon. Member for Taunton makes clear, there are
savings within that budget, but there are also increases in particular
areas. The budget, as a whole, suggests the EU taking an increased role
within that field where a lot of us would have concerns. Equally, the
same point could be made with regard to freedom, security and justice,
in respect of which substantial increases in certain elements of the
budget are consistent with the direction in which the Lisbon treaty was
taking the EU, although it was rejected by the people of the one
country given the opportunity to vote on it,. That is my first
objection to this
budget. The
Government may have more sympathy with my second objection, which is
that, at a time when everybody is finding it a little bit more
difficult and the economy is not performing as well as it
was—not just in the UK, but elsewhere—it is essential
that we have rigour in
assessing public spending. The European Union should not be immune from
that. There are some real opportunities for savings here that are, to
some extent, being missed. I highlight agriculture in particular. We
are seeing a 4.8 per cent. increase in expenditure on
agriculture, which is a €2 billion increase for market support
in this area, at a time when food prices are high and when the
arguments for subsidising agricultural production in this
way—specifically, in respect of those farmers for whom the
market has moved in their favour, although I do not begrudge them
that—and providing additional support are particularly weak.
That is an especially pertinent concern given the Government’s
stated purpose on many occasions, including today, to reform the common
agricultural policy. Tony Blair, when Prime Minister, said that he
would only give up our rebate in exchange for a substantial reform of
the common agricultural policy. He gave up a substantial element of our
rebate, yet we have not seen that reform. There has been a promise of a
review, but nothing much coming from that. On the evidence of this
document, we will not be seeing any substantial reform of the common
agricultural policy in 2009. That is a missed opportunity. There is a
chance for real savings to be achieved, yet it is being
missed. In
respect of the Galileo satellite navigation programme, there is not so
much a saving but an increase in expenditure. We touched on that and I
do not need to dwell on the subject. I have read the report produced by
the Transport Committee in November 2007 and the Government’s
response to it published in January. There are already considerable
concerns about this expenditure. An additional €62 million will
be spent in this area next year by the EU and the UK is picking up some
17 per cent. of the costs. The UK has already spent more than
€250 million on this project, the total cost of which is
estimated to be in the region of €10 billion. The Transport
Committee said that, throughout the process, there has been a lack of a
rigorous cost-benefit analysis. The concern remains that this is a
grandiose project for the glorification of the European Union, without
a commercial rationale behind it, which is why the private investors
have withdrawn from it. We are concerned about this
project. There
is a lack of an address to the changed circumstances with regard to the
Lisbon treaty and a lack of rigour in controlling public
spending—from what the Minister has said, she shares some of the
concerns about that—and a question about whether some of the
expenditure would be better made by member states. I highlight
international development in that regard. Quite a lot of evidence
suggests that the EU is not the best deliverer of aid. The right hon.
Member for Birmingham, Ladywood (Clare Short) has, on occasions,
described the EU as the worst deliverer of aid in the world. It has a
reputation for not targeting particularly successfully, whereas in the
UK the percentage going to low-income countries increased from 62 per
cent. to 81 per cent. from 1990 to 2004.
Over the same
period, with the EU, the figures have fallen from 63 per cent. to 32
per cent. A survey has shown that 21 per cent. of EU aid money arrives
more than a year late compared with 3 per cent. from other aid donors.
That is also an area of concern and the argument needs to be made that
more could be done by member states, rather than the EU. I am not
making a case of an absolute nature, but that matter needs to be looked
at.
We touched
upon administrative failures and fraud within the EU budget. This is
not necessarily the occasion to debate those matters at length because
we will have other opportunities to do so. I do not therefore intend to
dwell on that point, but it is recognised by members of the Committee
from all parties that the EU’s performance with regard to
administrative failures is not all that it might be and that the
European Court of Auditors has never signed off the EU accounts. I take
the point made by the hon. Member for Taunton that much of that matter
is to do with expenditure by member states, but there is also a
monitoring role for the European Union in relation to that. Genuine
concerns have also been raised about the expenditure of the European
Commission on areas such as research. That comes directly from the
European Commission and so the problem is not entirely to do with
member states. In the light of that, the point also needs to be made
that the EU needs to do less and needs do it better. A growing budget,
which is what we are seeing, does not create the ideal circumstances in
which to tackle the issue of administrative failures and fraud. The EU
does not deserve an increased budget on the basis of its previous
performance. The
budget does little to tackle the real concerns that many have about the
performance of the European Union. It does little to provide
reassurance to taxpayers that our increased contributions to the EU are
being well spent in the interests of the UK and wider Europe as a
whole. We continue to have concerns about the budget as it takes little
account of the concerns of the people of the UK and elsewhere, who fear
that the direction the EU is taking will make it more remote and out of
touch, and that it will fail to address the concerns of the 21st
century. 5.33
pm Mr.
Browne: This has been a useful debate and it is
particularly timely because the European Union and its member states
need to consider their response to the global credit crunch, the
reduced rates of economic growth in EU member states, and
Europe’s diminishing share of world GDP. I understand that that
is forecast to roughly halve between now and the middle of the century,
which corresponds with the rise of countries such as China and their
influence. When framing a budget for the European Union, there is a
need to decide what the role of the European Union is and what vision
it is putting forward for our continent in the decades ahead.
The first
question I asked in the first part of our deliberations was
deliberately aimed at driving at precisely that point. My view, which
is one widely held among the political circles of the United Kingdom,
is that a French/Belgian/mainland western European vision—if one
can call it that—of a future European Union is more statist and
protectionist than is received to be good in this country. It is
entirely in our interests that the United Kingdom rejects that
approach, because it is a cul-de-sac in terms of the economic
prosperity of our
citizens. I
wish there were greater consensus on the matter. I share the
free-market beliefs of the hon. Member for South-West Hertfordshire. I
only note in passing that at the same time as he was criticising the
emphasis on increased agricultural subsidy, the Conservative party has
a debate in the House of Commons today on food
security, which is a euphemism for greater protectionism in the
agricultural industry. I occasionally feel like a lone voice—or
perhaps it is me and Peter Mandelson—in championing the need for
free-market economics, but that has often been the case for my party as
we have fought protectionism and trade restrictions over previous
centuries. My
second point is that the greatest achievement of the European Union in
the past 10 to 15 years has been expansion from 15 to 25, then 27 and
soon to be more member states. That has helped the European Union to
embed our values of democracy, free markets, free speech and free trade
in eastern European countries that previously came under the auspices
of the Soviet Union. I urge the Minister to continue to push for
western European nations to take an enlightened view on how we can
assist eastern European nations to increase their economic prosperity.
In my view, that is entirely within our national interest as well as
being, obviously, within the interests of the countries in eastern
Europe. I
am more concerned than the Minister appears to be about the policy
priorities of the European Union. It seems to me that the European
Union has to make a case to its population for why it should
exist—what it is adding in value for the taxpayer. That may be
in part about the political benefits that it brings to countries in
eastern Europe. I would accept that on the credit side of the ledger.
It may be about helping to negotiate on the world stage in respect of
trade. It is potentially strongly in our interest as a country that the
European Union is able to bring that role to
bear. However,
the European Union needs to be alert and alive to other challenges.
Climate change is an obvious one, but I suggest that organised crime
and terrorism is potentially a very useful area for the European Union
better to co-ordinate activities throughout our continent. It surprises
me that that part of the budget is being reduced when the
administration budget, which other hon. Members touched on, is being
increased. That seems a totally perverse set of priorities. In the
current climate, any organisation that believes that it needs to employ
more administrative staff but reduce its emphasis on counter-terrorism
is out of line with the mood of the population, particularly as the
European Court of Auditors has been unable to sign off the accounts for
the past 13 years. There is a particular need for the
European Union to show that it is trying to be more lean and more
administratively efficient, rather than less
so. I
shall end on a topical note by referring to the Lisbon treaty, which I
regard as being of far less consequence than the Conservative party
does. It seems to be quite a modest treaty compared with many of those
that the Conservative party, when it was in office, supported with such
zeal and enthusiasm, without feeling the need to detain the British
public with a referendum. One benefit of the Lisbon treaty was surely
that it tried, however imperfectly, to frame an administrative
arrangement that could accommodate 27 member states working together,
rather than 15 or fewer. It will be a lost opportunity if the Lisbon
treaty is not eventually enacted. I urge the Minister to press other
member states to examine ways in which we can make the workings of the
European Union more manageable,
more transparent and less of a burden in administrative terms. Perhaps,
as an unfriendly gesture, she could suggest to President Sarkozy that
there should be one European Union language—English, which most
people understand. That would massively cut some of the translation
overheads as well as being a good opening gambit for negotiations with
the French. We could then go down the path of a more outward-looking
and flexible Europe, to which the Minister and I both aspire. 5.40
pm
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