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His then Chancellor, now the Prime Minister, took the same view. When asked in an interview whether the rebate was non-negotiable, he replied simply, “Yes”.

I remember the then Prime Minister’s statement in the Chamber—I was sitting at the end of the Opposition Front Bench—and thinking that the commitment he had made was so clear and unequivocal that even he could not possibly wriggle out of it. I should, of course, have known better. Within two weeks, we had a West-style 180(o) clarification of those words, when he said that the rebate was

Perhaps we should all have realised that he had been trying to say that in the first place. There was a further “clarification” on 29 June, when, attempting to defend his volte face, he said:

That is not exactly “the rebate will remain and we will not negotiate it”, but it is a perfectly respectable negotiating position and one that we made it clear we could support. Radical reform of the CAP in exchange for a corresponding reduction in the British rebate would provide a satisfactory outcome for the UK taxpayer and at the same time move the EU from the disastrous agricultural protectionism that damages consumers and developing economies alike, and which the Prime Minister described as a prerequisite for making poverty history.

Andy Burnham: I realise that I spoke for a long time, but if the hon. Gentleman believes that the deal gives away too much—even though, as I said, Britain as a net contributor will be in rough parity with France and the middle-ranking wealthier nations—will he say how much the Conservative party would be prepared to pay to support economic development in eastern Europe? Anything? Between the amount the Bill implements and nothing? How much exactly would it be?

Mr. Hammond: The right hon. Gentleman completely misses the point of the debate, which is the own resources decision—the contributions of individual member states to the agreed disbursement budget. Nobody suggests
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that as a result of the Bill the amount disbursed under the EU budget will change, although if we chose not to support the Bill the composition of the contributions would change. I remind the right hon. Gentleman that under this proposal the UK will contribute an additional £19 billion net over the next seven years. If the rebate had not been given away we would still contribute an extra £12 billion over that period. There is, rightly and properly, an increased contribution to pay for the increase in the size of the Union—the price of enlargement.

I shall continue with my narrative, if I may. The Prime Minister went off with his team to Brussels with clear objectives: first, to cap the budget at 1 per cent. of European Union gross national income; secondly, to shift the focus of EU spending from agriculture, with the ultimate objective of scrapping the common agricultural policy; and, thirdly, to keep the British rebate unless and until that reform was complete. So how did they do? They failed on every single one. The budget that this lot signed up to added more than £25 billion of extra spending. The Prime Minister claimed after the event that that reflected the cost of enlargement, but without reform, Ireland, whose per capita GDP is 30 per cent. higher than the EU average, is getting more per head than Lithuania, Slovakia or Poland. France will remain the EU’s biggest recipient and the UK the lowest net recipient per capita.

Hugh Bayley: The hon. Gentleman feels that the Government did not drive a hard enough bargain, but let us talk real politics, not fantasy politics. What tactics does his party have that he believes would have achieved agreements from some other EU member states that were not achieved by this Government? I and my party have talked to colleagues from our sister parties in—I am talking personally now—Spain, France, Germany and Greece to explain why we want changes to the common agricultural policy and other things. What sister parties could the hon. Gentleman speak to? Why does he think that the Conservative party could drive a better bargain than our Labour Government?

Mr. Hammond: If the hon. Gentleman listens, he will find that the burden of my argument is that this Government have failed in their principal duty to protect the interests of the British taxpayer, not as defined by me or by my right hon. and hon. Friends, but as defined by the former Prime Minister and by the current Prime Minister in the December 2005 negotiation.

Hugh Bayley: What would the hon. Gentleman’s party—

Madam Deputy Speaker: Order. Is the hon. Member for Runnymede and Weybridge (Mr. Hammond) accepting a second intervention?

Mr. Hammond indicated assent.

Hugh Bayley: What would the hon. Gentleman’s party advocate to achieve a better agreement?

Hon. Members: Veto.

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Mr. Hammond: The hon. Gentleman has heard my hon. Friends’ answer. The decision required unanimity so there was no need to concede the point without substantive reform of the common agricultural policy, which the then Prime Minister promised the House he would deliver.

Mr. Davidson: Will the hon. Gentleman give way?

Mr. Hammond: I shall in a moment.

Far from scrapping the common agricultural policy, the Government agreed to an increase in its budget in every year to the 2013 horizon. In fact, it emerged later that, despite the rhetoric, the UK Government did not table specific proposals for reform of the common agricultural policy during the negotiations. What they did achieve was a review, which, surreally, will be conducted during the French presidency of the Union, so I advise my right hon. and hon. Friends not to hold their breath. We can only speculate on the hilarity that will have been occasioned on the Quai d’Orsay by this display of British negotiating prowess.

The UK team came back with no 1 per cent. cap on the budget and no reform, let alone scrapping, of the CAP. In accordance with the Prime Minister’s formula, that meant no surrender of the British rebate, right? I am afraid that that was wrong. They returned not only empty-handed but with a pledge to send more bounty, in the form of a £7.4 billion reduction over the years 2008 to 2013 in the rebate that would have been payable to the United Kingdom were the own resources decision not to be implemented in UK legislation.

Mr. Quentin Davies: Will the hon. Gentleman give way?

Mr. Hammond: I shall in a moment.

It was a truly humiliating defeat, for which British taxpayers will have to pay, not only in the next six years but ever after, because the new, lower rebate is now the basis of future budget negotiation.

Mr. Davidson rose—

Mr. Davies rose—

Mr. Hammond: I give way to the hon. Member for Glasgow, South-West (Mr. Davidson).

Mr. Davidson: Does the hon. Gentleman agree that it is entirely inappropriate and unilluminating for Government Members to try to disguise the fact that we got a bad deal simply by attacking the Tories for having no policies and being completely useless?

Mr. Hammond: I have to congratulate the hon. Gentleman on his elegant question. If I were in the Chief Secretary’s position, I would do what he has done today: throw up lots of smoke and hope that everybody goes to sleep by the end of the debate.

Mr. Davies: Talking of throwing up smoke, has the hon. Gentleman not noticed the two most salient aspects of the agreement? One is that the weighting of agriculture in the EU budget—that is to say, the proportion of agriculture to total spending—is falling,
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and the other is that the French contribution’s rate of increase is higher than ours.

Mr. Hammond: I hesitate to be cruel to the hon. Gentleman, but I say to him what the Chief Secretary said to me earlier: read the papers before you come into the Chamber. The agreement has nothing to do with agricultural spend. It has to do with the own resources decision—the contribution made by individual members. That is what the Bill will implement.

Mr. Davies: The hon. Gentleman criticises me for not doing my homework, but that is far from the case. Does he accept that the two matters are obviously linked? It is extremely important that we consider both sides of the bargain. He is continuing to evade the point. He does not want to recognise an enormously important achievement—that the weighting of agriculture in total EU spending has been reduced as part of the package. Why does he not recognise the facts when they happen to be in favour of the Government rather than of his own party?

Mr. Hammond: The hon. Gentleman refers to the link or otherwise between the spending decision and the own resources decision. I shall come to that point in a moment.

To return to the result from Brussels, the limit on the cost to the UK of the reduced rebate will end in 2013. Failure to reach agreement on a budget for the period after 2013 would have a devastating effect on the UK contribution, because the rebate reduction would become uncapped. We would have no effective veto, and thus no negotiating power, during negotiations on the EU budget for the period from 2013—and our partners in Europe would know it.

There is one further twist to the tale. The Prime Minister, when he was Chancellor of the Exchequer, put it about that he was against the deal. When it was announced, the Treasury pointedly refused to endorse it and denied all responsibility, because it was worried that the deal would force future spending cuts. According to the Treasury briefing, the current Prime Minister was “quietly fuming”. What did he do? This April, it became known that having failed to claw back some of the rebate through negotiation, he too had caved in and agreed to accept the original deal—the deal that he had previously condemned. So much for his powers of persuasion on the international stage.

That is the sorry tale behind the Bill, although, of course, that could never be discerned from reading it. We, the Parliament of the United Kingdom, whose responsibility is to our electorate and our UK taxpayers, are invited to give the Bill a Second Reading, thus giving effect to what was done—in our name, but in complete contradiction of everything promised to us in this House—at Brussels in December 2005. If we do so, by 2010 the UK taxpayer will be footing the bill for an extra £1.9 billion a year—a sum roughly equivalent, fittingly enough, to the total Foreign Office budget—as a result of the sell-out on the rebate. That is in addition to the increase in the UK contribution to the underlying budget—£1.5 billion a year on average for the period 2007 to 2013—to deal with the cost of enlargement. Taking into account the loss of the UK rebate, which will increase our share of total EU costs, and the
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growth in the budget during that period, the UK’s net contribution will more than double, from £2.8 billion a year on average under the previous financial perspective to an estimated £7.3 billion in 2013.

Mr. Baron: May I tempt my hon. Friend to speculate about why we caved in on the rebate? Given that it was non-negotiable and that there has been no meaningful reform of the common agricultural policy, does he think that there is a connection between our sudden cave-in and the recent statement by the French that they thought Tony Blair would make an excellent President of the EU?

Mr. Hammond: That is an extraordinarily interesting piece of speculation better made from the Back Benches than from the Dispatch Box. I leave my right hon. and hon. Friends to draw their own conclusions.

The choice before the House when the Question is put this evening will be whether to endorse or reject the sell-out of the British rebate. It is not about the overall EU budget or the financing of enlargement, which the Government have tried to spin; it is about the division of the total budget cost into individual contributions. It is about whether we are prepared to throw away the hard-won victory of 1984.

Andy Burnham: The hon. Gentleman keeps making that point, but he is completely confused. The 2007 to 2013 budget and the own resources decision that determines how that budget will be financed are inseparable; they are part of a package. If he reads the own resources decision, he will see that it sets out a schedule for how the payments will be calculated and indeed how the British rebate is to be calculated. How on earth can he continue to make the point that the two things are not part of the same issue?

Mr. Hammond: The calculation of the amended rebate is a purely mechanical process to give effect to the political decision made in Brussels. If the Chief Secretary looks at his own Bill and the decision that it implements—he looks terribly perplexed—he will see quite clearly that the decision deals with the calculation of own resources, not the overall financial perspective and the total budget.

The question that we must decide tonight is whether we are prepared to throw away the hard-won victory of 1984, which recognised the budget system’s unfairness to Britain and enshrined the rebate that we are now being asked to sacrifice—the rebate, I remind the Chief Secretary, that the former Prime Minister said could not be negotiated unless and until the CAP was scrapped or radically reformed.

Andy Burnham: The hon. Gentleman is straightforwardly wrong. I have the own resources decision here. Clearly, he has not read it, but article 4 sets out the precise terms by which the UK rebate will be calculated between 2007 and 2013. That is the framework by which the EU budget will be determined in the next financial perspective. [Interruption.] It is part of the package. The two things sit together.

Mr. Hammond: I advise the Chief Secretary to stop digging. He is right that the own resources decision sets out the mechanism by which the British rebate
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adjustment will be calculated—of course it does—but it does not set out the EU budget, which is what he has been spouting on about for most of the debate.

Let me come to the critical point. If we decline to give the Bill a Second Reading, what will happen? Will the roof fall in? Will the sun not rise in the east tomorrow morning? Nothing will happen. Life—even life in the EU—will go on exactly as before. The existing own resources decision will continue in force, indefinitely if necessary. The total expenditure budget will not be affected. The only difference will be that member states’ contributions will continue to be assessed on the same basis as they were last year and the year before. The UK will remain the EU’s second largest net contributor, but we will have £7.4 billion more to spend on British priorities; perhaps we could use it to reverse some of the Government’s most recent round of stealth taxes or reduce the £143 billion that the Chancellor plans to borrow in the next five years.

Julia Goldsworthy: Is the hon. Gentleman saying that he would be happy for the UK to be a net recipient, benefiting from additional contributions from eastern Europe?

Mr. Hammond: No. As I said to the Chief Secretary, the UK’s net contribution will rightly increase substantially, without the change proposed in the Bill, to finance enlargement. The Chief Secretary is trying to have his cake and eat it. He wants to give away our rebate on top of that increase, which we will pay anyway as the EU budget increases.

Andy Burnham: It is right that our contribution will increase to pay for EU enlargement in eastern Europe. Our contribution is calculated by taking away the value of expenditure and the rebate from the overall gross contribution. The hon. Gentleman misunderstands the situation. If he agrees that it is right that our contribution should increase, the net contribution should be calculated by reference to the rebate itself.

Mr. Hammond: I know that the Treasury operates only a static model. The Chief Secretary would be right if everything else were static, but the budget is increasing. If the Bill is passed tonight, as he knows, our contribution will increase by an element that reflects the surrendered rebate and by another element that reflects the underlying increase in our contribution to the EU budget. If we do not give away the rebate, the UK contribution to the EU budget will still increase.

I know that I am damning the Chief Secretary with faint praise, but even he could make a better fist of spending £7.4 billion of British taxpayers’ money than the EU. Last week, the European Court of Auditors refused to sign off the EU accounts for the 13th year in a row. The accounts are riddled with material errors and irregularities—for example, the irregularity that receipts are still not collected for MEPs’ expenses, and the material error by which money earmarked for agriculture is spent on golf clubs. That is to say nothing of the £3.8 billion a year that the EU spends on propaganda—public relations staff, pamphlets, teaching aids, school trips and cartoons. There is the originally named “Captain Euro”, whose mission is apparently to uphold the EU’s values—perhaps he could find time to fight fraud and waste as a sideline.

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