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15 Jan 2008 : Column 851

Rob Marris: Would I be right in thinking that the way in which Netherlands and Sweden were able to negotiate the figures that my right hon. Friend has just given relates precisely to the point that I made earlier—the structure of their economies has changed, but all 27 economies in the EU are different, and that must be taken into account, as the UK economy has been, in negotiations with our partners?

Andy Burnham: That is absolutely the point, and the nature of the complex negotiations that were finalised in 2005. The changes that I am outlining show how we have had to be sensitive to the position of other countries, such as the Netherlands which, even after the own resources decision, is still the largest net contributor in percentage terms to the budget per capita. It is important that we keep working to make sure that the budget is as fair as possible. It leaves the UK a mid-ranking net contributor.

Philip Davies: The Minister said earlier that we were not taking into account the way that the EU operates. The problem for him is that we understand far too well how the EU operates. It is a fraudulent and corrupt organisation. He has said in the past that he is concerned about the level of fraud in the EU budget. My constituents cannot understand why he does not say to the European Union, “You are not going to get one more penny from the UK until you sort yourselves out and make sure that all the money that you are spending is properly accounted for.”

Andy Burnham: The hon. Gentleman makes a very big statement for somebody who represents a party that claims to wish to remain a member of the European Union. He says that it is a fraudulent and corrupt organisation. I do not agree. In its latest report the European Anti-Fraud Office estimates fraud levels of 0.06 per cent. in agricultural spending, 0.41 per cent. in structural fund spending and 0.03 per cent. in pre-accession spending. That is not to say that there should be any complacency on these matters, or that the European Court of Auditors has not shone a light on aspects that could be much better. There is an argument about accounting standards and ensuring that they are very strong. It is quite another thing to say that the European Commission or the European Union—I do not recall which the hon. Gentleman said—is a fraudulent and corrupt organisation. That is a very large statement with which I do not agree, and with which I do not believe his party agrees.

The decision retains the correction mechanism in favour of the UK, the abatement, along with the reduced financing of the correction benefiting Germany, Austria, Sweden and Netherlands. After a phasing-in period between 2009 and 2011, the UK will participate fully in the financing of the costs of enlargement by disapplying all non-agricultural expenditure—money in support of economic development—in the new member states from the abatement. Finally, the additional UK contribution resulting from the reduction in allocated expenditure is limited to €10.5 billion, in 2004 prices, over the period from 2007 to 2013.

In summary, the UK’s abatement remains intact on all agricultural spending. On all expenditure in the EU15 it is preserved and will rise in value. Along with the fact that the ceilings on budget expenditure are
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retained, and that the budget overall will fall to less than 1 per cent. of EU GNI during this budget period, we argue that that makes it a good deal for the taxpayer. At the same time we will, along with other net contributors to the EC budget, pay our fair share of the costs of enlargement. We support enlargement, which we know will be good for Britain, creating new trading opportunities and new jobs.

I believe that I have answered in full the interventions made in the course of this stand part debate. We have an obligation to honour our commitments made to our European partners. By adopting the own resources decision this evening, we will take Britain’s relationship in Europe to a new level that will open up new opportunities for British business.

Mr. Philip Hammond: It was not my original intention to speak, at least in any substantial way, in the debate on clause 1 stand part. The Opposition are placed in some difficulty by the structure of the Bill. It has only one substantive clause, which contains only four substantive words. They are “and 7th June 2007”. I took the view, for better or for worse, that seeking to amend clause 1 was tantamount to voting against the Bill on Third Reading. Indeed, that is what we shall do, if our attempt to amend the Bill through the insertion of new clause 1, which I hope we will have an opportunity to debate later, is unsuccessful.

However, as the Chief Secretary has set out his argument at some length, it is necessary for me to speak briefly to answer some of the points that he raised, in the hope that I will be able to make my substantive contribution to the debate about the Bill in the debate on new clause 1, which I hope we will come to in due course.

The Chief Secretary must recognise that the original position with which his Government went into the negotiations was that the rebate was fully justified and non-negotiable. Both on Second Reading and again this afternoon, he sought to rewrite history to imply that it was always recognised and understood that part of the deal for enlargement would be that the UK had to give away part of its rebate.

However, that is simply not the case. The main enlargement of the European Union was agreed in April 2003 and implemented in January 2004; Bulgaria and Romania signed the treaties of accession in April 2005. By summer 2005, when the then Prime Minister told us that the rebate was not negotiable, “period” and the current Prime Minister told us that the rebate was fully justified and non-negotiable, enlargement was a fait accompli. The Chief Secretary’s Government never envisaged giving away part of the rebate as part of the negotiation for enlargement—or does the Chief Secretary want to tell us that both the former and the present Prime Minister wantonly misled the House when they made those remarks?

A former occupant of the Chief Secretary’s office told the House of Commons:

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In 2005, it was never the Government’s position that the rebate had to be surrendered or even negotiated as the price of enlargement. To say so is simply wrong. The Government supported EU enlargement; after it was secured, they went in to negotiate the “own resources” decision on the basis that the rebate was not up for grabs.

Mr. Jenkin: My hon. Friend has made his point most eloquently. Will he go on to explain why the rebate is necessary? It is not necessary just because of the imbalance of agricultural expenditure throughout the European Union, but because we trade a disproportionately high share of GDP. We import many products that are instantly exported to the European Union. They attract tariff duties that become payable to the European Union, and we suffer as a consequence. As trade has grown, has not the case for the rebate continued to grow?

Mr. Hammond: I am grateful to my hon. Friend, who has saved me the trouble of setting out the case for the UK rebate. We had a wonderful cross-party consensus. We Conservatives believe that the UK rebate is fully justified and non-negotiable; on 25 May 2005, the then Prime Minister told us that the UK rebate was fully justified and non-negotiable. One would think in the ordinary course of events that there would not be a difficulty. Unfortunately, however, things did not turn out that way.

In summer 2005, the Government’s position was exactly the one that the hon. Member for Wolverhampton, South-West (Rob Marris) told us a few minutes ago would be completely untenable. The Government supported the enlargement of the European Union—indeed, they were a passionate advocate of such enlargement—but, to use the former Prime Minister’s words, they believed that the UK rebate was fully justified and non-negotiable. As we try to have a sensible discussion this afternoon, I hope that we will hear no more nonsense about the change to the rebate being an inevitable part of a deal to secure enlargement. Indeed, I suggest that the only enlargement at stake in Brussels in December 2005 was that of the former Prime Minister’s income and ego, if he is in future appointed President of the European Union, as some have suggested.

7.15 pm

The position changed during the course of 2005, following the summer, when the then Prime Minister and then Chancellor were so robust in their defence of the rebate. The Government moved their position and said that they would consider a concession on the rebate, but only in the context of meaningful and significant reform of the EU budget—particularly of the common agricultural policy. The then Prime Minister said that if we got rid of the CAP and changed the reason why the rebate was there, the case for the rebate would change. I do not think that any Conservative Member would disagree with that. For that reason, the principal thrust of our argument this evening will be to try to improve the Bill and put some backbone back into the Government’s negotiating
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position through the insertion of new clause 1. I shall not go into the detail of that now, Mrs. Heal, as you would not welcome it.

Rob Marris: I thank the hon. Gentleman for his usual generosity in giving way, which I have experienced many times before. Does he believe that the European Union could have enlarged to 27 member states, as it has, without a financial cost to the United Kingdom?

Mr. Hammond: The hon. Gentleman will know that if the Bill is passed tonight and the “own resources” decision is ratified, there will be an increased cost to the United Kingdom; the United Kingdom’s contribution will increase as a result of enlargement. So the answer to the question is no: I do not believe that enlargement would have been possible without an increase in costs to the United Kingdom, and that increase will be borne. However, the Government are asking us to bear a larger increase in costs than would otherwise have been the case, because of the sacrifice of the rebate. I put the question back to the hon. Gentleman: what was the then Prime Minister doing going into the December 2005 negotiations supporting enlargement but with the position that the rebate was non-negotiable, or, as it later transpired, negotiable only in exchange for significant changes to the EU budget?

Rob Marris rose—

Mr. Hammond: I shall be fascinated to hear the answer to that question.

Rob Marris: I do not know much about the hon. Gentleman’s former working life, although he knows a bit about mine. I have spent many hours of my working life in negotiations. In negotiations, people start with a position, and sometimes with a reserve position. Sometimes, in life, politics or commercial negotiations—I was doing the latter—people learn something and their position changes. That is the benefit of public political debate, and of having commercial negotiations face to face, in spite of video-conferencing.

I have not spoken to the former Prime Minister about the issue, but I would have thought that he learned things and changed his position during the negotiations. That is an honourable and reasonable thing to do. If one is not prepared to do that, one is in a strange position as a politician. We constantly say that we want democracy in public debate, but we cannot have that unless people are prepared to consider changing their positions.

Mr. Hammond: That was an exercise in the rewriting of history that Stalin would have been proud of. The facts are these: the Government run by the hon. Gentleman’s party supported the enlargement of the European Union, and in summer 2005 clearly told the House of Commons that enlargement was perfectly compatible with the position that the British rebate was fully justified and non-negotiable. His Government hung to that position until they decided that they would negotiate the rebate, but only in exchange for meaningful and significant reform of the common agricultural policy. That was a radical change of
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position, but none the less we accepted it as a sensible way to proceed, provided that meaningful reform of the EU budget was really on the table.

On Second Reading, the Chief Secretary claimed that the Brussels decision in December 2005 paved the way for a critical look at how to reshape the EU budget. In reality, the Government came back with only a vague commitment to a review under the French presidency. Later, we shall argue the case for new clause 1, to remedy that hopeless negotiating position.

Let us be clear. The Chief Secretary says that failure to pass the Bill—I take it that by extension, that means to pass it with this clause incorporated in it—will create a political crisis in the EU. This has nothing to do with being pro-EU or anti-EU. We do not call it “anti-EU” when the French Government fight their corner hard in the interests of their taxpayers and citizens. Our new clause addresses the expectation that the UK Government, like all other EU Governments, will fight for the best interests of their citizens and taxpayers within the system. As has so often been the case in their dealings with the EU, this Labour Government have failed to fight for the interests of the UK taxpayer.

The Chief Secretary must recognise how the EU works. It is not anti-European to fight the corner of national interest. The other EU countries do it. That is what sovereign states do in a grown-up relationship, whether negotiating with our European partners or with the US; it is how an elected Government should conduct themselves.

Andy Burnham: Will the hon. Gentleman dismount from his high horse for a moment and tell us whether he considers that the 22 per cent. increase in the EU budget negotiated by the Major Cabinet secured what he is now telling us that he would always do? Was that a good deal—the right deal for Britain at the time?

Mr. Hammond: I remind the Chief Secretary that it was a Conservative Government who achieved the UK rebate in the first place, after years of valiant battle, and it is his Government who are proposing to give it away for absolutely nothing.

This is not how we expect our Government to behave. We expect them to participate constructively in organisations such as the European Union, but also to fight our corner. Why do we have to listen to Labour Ministers telling us that anybody who wants to fight the UK’s corner is anti-European and trying to provoke a crisis in the EU? Does the Chief Secretary think that they have such debates in France, Germany or Italy when those Governments defend their corners and fight vigorously for the interests of their taxpayers?

Andy Burnham: Does the hon. Gentleman agree with the statement made by the hon. Member for Shipley (Philip Davies) less than 10 minutes ago that the European Commission—I think that that is what he was talking about—is a corrupt and fraudulent organisation?

Mr. Hammond: We do not have to take a view on that; we can look at what the Court of Auditors has said about corruption and fraud, misappropriation of the budget and misuse of EU funds. However, we are debating the UK rebate.

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Let me remind the Chief Secretary that after the so-called negotiations in December 2005, perhaps the most damning comment on the performance of the British Government was made by the French Foreign Minister, Mr. Douste-Blazy, who praised Tony Blair as willing to wage a battle for the EU

What an accolade that is for a British Prime Minister from a French Foreign Minister after an EU negotiation! The British people would rather their Prime Minister calmly did the job to which he was elected. With the economy slowing, Government borrowing mounting, public services under pressure, staged pay rises and a dramatic slowdown in funding growth, the British people would rather their Prime Minister fought any proposal to hand over yet more money to the EU—certainly any proposal to do so on an unconditional basis.

Mr. Redwood: Has my hon. Friend noticed that the Chief Secretary clearly does not understand numbers, as he says that John Major’s settlement, which was a lot lower than his, was too high, but that his, which is a lot higher than John Major’s, is just about right? Is not that exactly the kind of arithmetic that has got us into the Northern Rock hole?

Mr. Hammond: It is rather disconcerting if the Chief Secretary to the Treasury cannot add up, but we have learned to live with that kind of impediment.

Rob Marris: I can see where the hon. Gentleman is going, and I think that I understand his position, although he will elucidate further as he goes on. He appears to be suggesting—he will correct me if I misunderstand him—that the interests of the United Kingdom would always be in opposition to the interests of the European Union. I would caution him by suggesting that that is often not the case.

Mr. Hammond: The hon. Gentleman has fabricated that. I did not say that at all. This is how I would like to see things working: the UK Government, when they go in to these European negotiations, being as self-confident in that forum as the French Government or the German Government, and not always afraid that any defence of British interests will be characterised as being anti-EU or anti-enlargement. Why cannot we simply have a sensible debate that says, “We know that we want the EU to enlarge and that we want to embrace the countries of eastern Europe, which is in our interests, but we want to have the most robust discussion about and defence of British national interests when it comes to carving up the cost of dealing with that”?

Mr. Siôn Simon (Birmingham, Erdington) (Lab): Surely the hon. Gentleman can hear himself saying, “Can we have a sensible debate which says that we want enlargement but we don’t want to pay for it?” That is not a sensible debate.

Mr. Hammond: If the hon. Gentleman had been here earlier—

Mr. Simon: I was. [ Interruption. ]

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The First Deputy Chairman of Ways and Means: Order.

Mr. Hammond: If the hon. Gentleman had been here earlier— [ Interruption. ]

Mr. Simon: On a point of order, Mrs. Heal. Is it in order for the hon. Gentleman to keep saying, “If the hon. Gentleman had been here earlier,” when I was here earlier?

The First Deputy Chairman: I think that the hon. Member for Birmingham, Erdington (Mr. Simon) has made his point.

Mr. Hammond: Let me rephrase my comment. If the hon. Gentleman had heard my earlier remark, he would know that the problem for him is that that was precisely the position of his party’s Prime Minister in May 2005—passionately pro-EU, passionately pro-enlargement, and telling the House of Commons that the British rebate was fully justified and non-negotiable.

Rob Marris rose—

Mr. Hammond: I am going to make a little progress. [ Interruption. ] Well, as the hon. Gentleman took the trouble earlier to say how generous I was in accepting his interventions, I have decided to disabuse him of that notion and make a little progress. After all, I told the House that I had not intended to speak on this clause.

On Second Reading, the Chief Secretary said:

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