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To reply to the hon. Gentleman directly, the cost of disapplying the rebate to non-agricultural spending in the accession countriesthat is essentially what we are discussingis capped at €10.5 billion. That is the maximum cost of those changes. However, as I said to the right hon. Member for Hitchin and Harpenden
(Mr. Lilley), that is the consequence of a policy of enlargement. It is not possible to argue that enlargement is a one-way process from which the UK gains no benefits. Later, I shall give the Committee figures showing that, already, British companies are doing significantly more trade with companies from the accession states. New opportunities have opened up for British business, as has happened after every round of enlargement, such as when Spain, Sweden and the Republic of Ireland joined the EU, so it is good for the British economy. That contrasts with the view often expressed by the Conservatives that it is a one-way street with no benefits for this country.
Rob Marris: My right hon. Friend spoke briefly about the origins of the rebate. Was it not the case that Mrs. Thatcher was able to negotiate the rebate because the structure of the UK economy in those days was markedly out of line with the structure of the economies of France in particular, and of Germany? Those structural differencesthe differing proportions of GDP raised from the agriculture sector in contradistinction to that raised from industry and the service sectorhave changed, particularly in France and Germany. The rebate negotiated by Mrs. Thatcher and the basis on which it was negotiated were almost bound to change over time, as the economies of those other main rich western members of the EU changed.
Andy Burnham: My hon. Friend is absolutely correct. The point he urges me to move on to, as he did in his previous intervention, is how the decision that we are debating to some extent reforms the way in which the own resources decision is constructed. That is what this decision does. For example, the current arrangements for VAT-based contributions are amended in the own resources decision, with the maximum call-up rate reduced to 0.3 per cent. The effect of that is that member states residual contributions based on gross national income will increase, further developing the trend toward fair and transparent contributions. People might say that that is only a small step forward, but that is how we have to approach such matters. We make progress where we can.
The decision also contains some reform of the common agricultural policy. That, too, is welcome, but it is clear that this country does not believe that the reform is anywhere near enough. That is why we secured the overall budget review as part of the overall package. It was clear at the time that none of the package was agreed until all of it was agreed. There was no pick-and-mix option.
Mr. Jenkin: May I correct the Chief Secretary on a point of fact? The EU had only 12 member states at the time of the Fontainebleau agreement, since when we have had several rounds of enlargement and continued with the same rebate mechanism. There was no conditionality based on enlargement to rich or poor countries during that period. The present proposal is a wholly new departure, which flies in the face of the assurance that the then Prime Minister gave the House:
The UK rebate will remain and we will not negotiate it away. Period.[ Official Report, 8 June 2005; Vol. 434, c. 1234.]
Andy Burnham: We have been over this ground already today. We have preserved the basis of the rebate. The hon. Gentleman is right to correct me. Although I was 14 at the time, I remember Spain joining the EU shortly afterin 1986, I think it was. However, I hope that he accepts that the spirit of my remarks is correct: that the rebate was an acceptable way of calculating fair contributions for the members of the European Union at that time. After the accession of Spain and then the Republic of Ireland, proportionately more structural funding was diverted to those countries to fund their economic development, and the same principle now applies to the accession countries of the former eastern bloc.
Mr. Jenkin: I am mystified by what the Chief Secretary is saying. In previous enlargements, the EU admitted both rich countries, such as Finland and Sweden, and much poorer countries, such as Spain, Portugal, Greece and Ireland, yet the arrangements for the rebate were not changed. The whole premise of his argumentthat we have to change the rebate as a condition of enlargement is, if I may say so, absolute rubbish. His Government are committingto quote the figure that the Library has given us£7.4 billion over the planned period for absolutely nothing, other than to advertise their utter weakness. At the same time, they cannot pay the police properly.
Andy Burnham: The hon. Gentleman is advancing a pub argument. He knows that such matters are periodically reviewed by all members of the EU and that the deal that this country secured during the process of negotiation was for approximately €160 billion less than the European Commission originally proposed. Let me ask him a direct question. Did he believe that there would be a cost to EU enlargement? Did he think that the countries of western Europe would have to make a financial contribution to the enlarged European Union? I reckon that when his right hon. Friends were advocating enlargement, they were not thinking, Well say yes, but not at any cost to the United Kingdom.
Mr. Jenkin: I am grateful to the Chief Secretary for cross-examining me on that matter. I accepted that there would be costs to admitting some of the very poor former eastern bloc countries, but I believed the Prime Minister when he said that the rebate was non-negotiable and that the negotiations on admitting those countries were conducted on that basis. Why have the Government breached their assurance? The Chief Secretary has no explanation, and I have demonstrated that the argument that he has advanced so far is completely false.
The hon. Gentleman is entitled to reach that opinion. I said clearly that the own resources decision maintains the basis of the rebate as it was first agreed among the 12 countries of the EU, which shortly thereafter became 15. That rebate has remained in place ever since, and stays in place on that basis. It is calculated on all spendingagricultural and non-agricultural spendingin the EU 15. Different arrangements are made for the accession countries
and the rebate is disapplied on non-agricultural spendingessentially, spending to support economic development.
As I say, the hon. Gentleman is entitled to his judgment that that is the wrong thing to dothat that is not how we should pay for enlargement. In return, I say to him that, as a result of this decision, Frances net contributions grow at a significantly greater rate than this countrys do. We have secured the rebate, which will increase in value throughout the course of this financial perspective, and, at the same time, we shall have a fair way of funding the enlargement of the European Union. That seems to me to be a good deal for this country.
Mr. Davidson: May I clarify whether the rebate arrangement is the same as it was at the time of Second Reading: the rebate is a proportion of the net amount that we hand over to the European Union? If the rebate is increasing, that is an indication that the net amount we are handing over is increasing, so it is not something to be praised, but something to be anxious about.
Andy Burnham: I understand my hon. Friends point. He is correct that that is how the rebate is calculated, but overall, the European Union budget will grow by about 7 per cent. over the course of the financial perspective. That too is a product of the negotiations led by this country, andto repeat what I said to the hon. Member for North Essex (Mr. Jenkin) a moment agoit is significantly lower than the European Commissions original proposals. The fact that we have secured a lower budget is good news for Britain.
Opposition Members make pointsI was going to call it hypocrisyabout prudence and keeping spending in check. The right hon. Member for Wokingham (Mr. Redwood) was right to make those points, and I accept thema person in my position needs to listen carefully to what he saysbut I hope that he will acknowledge that the growth of the European budget throughout the period in which his Government were in power was in the double digits.
Mr. Charles Walker (Broxbourne) (Con): The Chief Secretary is being most generous in giving way. Surely he is mistakenthe Prime Minister cannot negotiate a deal. He can make an agreement in principle, but it is not a deal until this sovereign House has voted on it. I shall tell the Chief Secretary what a deal is; a deal is to pay police officers a proper rate.
Andy Burnham: In all matters, the Government will take decisions that support economic competitiveness and strength. That applies to public sector pay as well as to matters relating to the European Commission, and that is the basis on which we move forward.
Mr. Bone: Will the Chief Secretary confirm that net contributions under the prudent and great settlement that this Government have achieved will be £3 billion higher in 2011 than in 2006, an increase of more than 50 per cent.?
Before I was interrupted, I was being challenged with the fact that the real increases negotiated by the Conservative Government for the financial perspectives in 1988 and 1994 were 17 and 22 per cent. respectively over the five years of the deals. The right hon. Member for Wokingham said it himselfthey are not figures with which he agreed, or of which he is proud. They stand in stark contrast to this Governments deal.
Mr. Redwood: The Chief Secretary is misrepresenting what I said. I thought that those increases were too high when they were agreed, but the budgets then were much smaller than today. If he thinks that they were unreasonable, surely he is proving that his own budget is a scandal, as it is so much bigger.
Andy Burnham: It is a bit late for the right hon. Gentleman to say that he did not agree with those budget increases. If I recall correctly, he was a member of the Cabinet when the 22 per cent. increase in the EU budget was negotiated. He cannot just wave away any responsibility for that; it is what his Government negotiated in 1994. I would also argue that spending on the common agricultural policy was responsible for a hefty chunk of that increase. Let us remember how things developed over time, and consider the deal in that context.
Rob Marris: I think that the United Kingdom should be a full member of the European Union. One of the very few good things that the John Major Government did was to decide, after winning the debate in the European Union, to go for widening rather than deepeningthat is, for more members rather than closer co-operation between members. That position was taken initially only by the United Kingdom, with some support from Denmark. What surprises me is the following, on which I would like my right hon. Friend to comment. It is intellectually coherent to say, We are against enlargement, as it is to say, We are in favour of enlargementas I ambut recognise that in reality there will be a cost to that enlargement. There is indeed a cost to that enlargement. However, does my right hon. Friend agree that it is not intellectually coherent to say that one is in favour of enlargement, particularly to eastern Europe, where countries are still very poor, but that there will be no cost to that enlargement? That is intellectually incoherent rubbish.
I agree entirely with my hon. Friend. That point has been illustrated. Opposition Members were trying to compare that enlargement to the
accessions of Spain, Sweden and the Republic of Ireland. By historical standards, the accessions of first the A8 countries and then the further two former eastern bloc countries are completely different, and when taking such a historic step the European Union has to look again at what it does. As my hon. Friend rightly says, it is simply not possible for the Opposition to say that they support the principle but not come up with the financing for it.
Andy Burnham: How many interventions do the Opposition want me to take? The Oppositions position probably explains why, at the last count, they had one other member in their new European grouping, having previously had two. I hope that the shadow Chief Secretary to the Treasury will enlighten us, if there have been recent additions to the club, but I believe that they are still in a grouping of two in the European Parliament. He looks puzzled.
Mr. Davidson: I am grateful to my comrade the Minister for giving way, because it allows us to have a decent debate. On intellectual coherence, does he agree that it is entirely intellectually coherent to be in favour of expansion and of paying the additional moneys associated with it, while not being in favour of a budget that includes the obscene amounts of money spent on the common agricultural policy, not being in favour of the way in which the structural fund is handled, and being in favour of a number of other changes? It is not fair or reasonable to suggest that someone who is in favour of enlargement automatically must be in favour of everything in the budget. It is possible to take another point of view.
Andy Burnham: That is a completely legitimate position to take, but it does not give sufficient recognition to the way in which the European Union operates, which is, almost by definition, through a system of compromise, in which the best available deal for the whole Union is sought. I accept that my hon. Friend may not find the deal acceptable, but, as ever, the position is not ideal; one gets the best possible for ones country, and that is what we have sought to do. Let me go through the detail
Stewart Hosie: I apologise, Mrs. Heal. The Minister said that the hon. Member for Glasgow, South-West (Mr. Davidson) set out a perfectly reasonable position, but that the Government could not do as he suggested because the EU sought compromise. I understand that it seeks compromise, and I agree with much of what the Minister said about maintaining the rebate in respect of the EU15 and changing it only in respect of the accession states, with no change to the basis of agricultural funding. However, why does that preclude us from receiving proper information on all the issues, which concern every hon. Member in the House, before ratification is required next January?
Andy Burnham: We have provided that detail. The deal has not been done in secret. Parliamentary answers have been given. An example that springs to mind is a reply given to the hon. Member for Surrey Heath (Michael Gove). We laid out on the record detailed figures about the effect of the agreement on the United Kingdom. I have the figures. There was a table showing gross contribution before abatement, the abatement, total receipts expected and the net contribution. Those are detailed figures that we put before the House.
I am grateful that the hon. Member for Dundee, East says that he agrees with much of what I am saying. I am not against detailed parliamentary scrutiny of the deal. I began my remarks by saying that the deal has been negotiated. My hon. Friend the Member for Glasgow, South-West (Mr. Davidson) and others may reject it if they believe that it is not good enough. That is the right of any hon. Member, but it is not possible to go back and negotiate line by line with our European partners.
Andy Burnham: I shall make progress and get some facts on the record about the effects of the own resources decision. Appropriation ceilings will be frozen at the levels set for the 2000 to 2006 budget period. The ceiling on annual appropriations for payments is 1.24 per cent. of EU gross national income, and for appropriations for commitments it is 1.31 per cent. of EU GNI. Appropriations for commitments are forecast to fall below 1 per cent. of EU GNI during the budget period.
As I said earlier, the current arrangements for VAT-based contributions will be amended, with the maximum call-up rate reduced to 0.3 per cent. By increasing residual contributions based on GNI, that will further develop the transparency and the fairness of the budget.
Between 2007 and 2013 only, the maximum rate of call on VAT-based contributions will be further reduced for Austria, Germany, Netherlands and Sweden, to 0.1 per cent. for Netherlands and Sweden, 0.15 per cent. for Germany and 0.225 per cent. for Austria. For the same period, gross reductions in GNI contributions of €605 million per annum for Netherlands and of €150 million per annum for Sweden are introduced. Both those amounts are in 2004 prices.
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