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Mr. Simon: Will the hon. Gentleman cast his mind back to the protracted debates on the Maastricht treaty? If it is so easy to do and if the adverse
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consequences of our rejecting a European measure such as this—forcing the Government to go back to Europe and renegotiate—are so negligible, why was the Major Government reduced to such shambolic performances night after night after night all those years ago?

Mr. Hammond: I was not here then and nor was the hon. Gentleman. The answer is no, I will not cast my mind back; I will press on and make some progress instead.

The outcome of the review is subject to individual veto by member states. Without something for us to offer our partners in the process of that review, Ministers, however well intentioned—I am prepared to give them the benefit of the doubt on that, as I shall assume that they go into such negotiations well intentioned, if naive—will not achieve the UK’s objectives.

Mr. Simon: On a point of order, Sir Michael. Will you please explain whether there is a level of patronising beyond which the hon. Gentleman ceases to become merely irritating and becomes unparliamentary?

The Second Deputy Chairman of Ways and Means (Sir Michael Lord): The way in which hon. Members address the Committee, provided that it is within the normal terms of reference, is entirely a matter for them.

Mr. Hammond: Thank you, Sir Michael. In any case, if I have not reached that level yet, I will continue to practise.

Ministers will not achieve the UK’s objectives by giving away their bargaining chips as the price of admission to the game rather than trading them in the game itself. That is not generally regarded as good practice. This is all about the negotiating competence of the Government. The truth is that Labour walked away from the table at Brussels as good as empty-handed. The only thing that it brought back was the promise of a review, and unless we give some teeth to that promise and show that this Parliament will insist on its being delivered in good faith, it will have effectively come away with nothing. We must take the opportunity to restore the Government’s negotiating position, because the British people would expect us to deal with their failures at Brussels in 2005.

The new clause sets a test for the review having taken place, and for its conclusions being satisfactory to the United Kingdom Government of the day. That will restore some of the bargaining power that the Government have thrown away. The rebate concession was agreed on the back of a pledge; let us see that pledge delivered on in good faith. Let us test the Government’s assertion that they have secured a genuine and far-reaching review of EU finances.

The hurdle that we set was deliberately not set high. There is no objective test of whether the outcome of the review is in the United Kingdom’s interest; the new clause simply requires the Government of the day to align themselves with the outcome as being

We ask the Government to sign up to that outcome, and to say clearly and loudly to the British people,
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“Yes, this is the outcome for which we gave away £7 billion”—and counting—“of Britain’s budget rebate.” If the Government do not believe that they will be able to do that—if they themselves have no confidence in the review, and no expectation of a satisfactory outcome—what on earth were they doing trading the rebate for a review in the first place?

The new clause would give Ministers a tool with which to bargain, to ensure that the review is meaningful and far-reaching and can lead to a genuine overhaul of the EU’s finances rather than a whitewash. We are in a very different place economically from where we were in the summer and autumn of 2005. The economy faces many pressures, and many people who might have taken a much more cavalier attitude to the billions of pounds involved in 2005 will certainly take a different view today.

If the new clause is carried and if the review is not concluded by the end of 2008—incidentally, there is absolutely no reason why it should not be, given that the UK will now have an incentive to offer its partners to proceed with it speedily—the existing own resources decision will remain in force. The ceiling will not fall in, there will be no crisis, there will be no question of renegotiating the budget and the financial perspective or of cancelling enlargement. The position will be exactly as it is now, with the previous own resources decision implemented and continued. When the new own resources decision comes into effect as a result of the Treasury’s certifying that it is satisfied with the outcome of the review, it will have effect retrospectively. Provided that the review is fair and open and the Treasury is able to certify that it considers the outcome satisfactory to the UK’s interests, the own resources decision will be implemented in full in due course.

Andy Burnham: Has the hon. Gentleman made any inquiries of the European Commission about when the review is likely to be concluded, so that the process can then take place?

Mr. Hammond: Paragraph 80 of the Council’s decision at Brussels in December 2005 sets out parameters for a review that will take place in the financial year 2008-09, and unless there is slippage we expect it to be completed by the end of that financial year.

As we make our decisions this evening, we must bear in mind that this really is the last chance not only to save the British rebate, but to maintain the leverage that will allow us to secure meaningful reform of the common agricultural policy in the future. If we can secure new clause 1, we will not be back in the place where Tony Blair and the Prime Minister promised us we would be in the summer of 2005, but we will be in a much better position than we would be in if the Bill were passed unamended this evening. We will also have sent a signal that Parliament intends to exercise effective and positive oversight of what our Government are negotiating on our behalf, and furthermore that Parliament intends to ensure that what is promised in those negotiations is delivered.

The message that we need to send to our partners in Europe by agreeing to the new clause is that we in this Parliament respect Governments who, while being fully signed-up members of the EU, fight vigorously for their national interests. Britain intends to do the same
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from now on, and if our Government have not the backbone for the fight, this Parliament has.

Dr. Cable: I am rather tempted by the new clause. As I said in the clause stand part debate, there was a major failure in the negotiations to establish a link between the rebate and agricultural policy. It seems in principle, unless the Minister can persuade us to the contrary, that the new clause provides a mechanism for retrieving the situation.

Let us look carefully at what the Prime Minister said about the review in his statement to the House in December last year, when he brought back the agreement. He clearly thought that he had extracted a major concession in return for the negotiations on the rebate. He said:

The two subsequent sentences are crucial. The Prime Minister said:

Of course it is possible, but why should the Governments who resist reform of the common agricultural policy agree? What possible incentive is there for them to do so? The French Government will almost certainly refuse to renegotiate. What possible leverage do the British Government have in carrying through the Barroso recommendations?

The following sentence is even more substantial. The Prime Minister continued:

That is terribly important, because we keep being reminded—rightly—that if the negotiations fail, there will be disastrous consequences for the world economy, for Europe and for the United Kingdom.

During the last few weeks, Mr. Mandelson has been ominously quiet. There is a real and growing worry that the negotiations may fail, primarily because of difficulties in the American Congress but also because of the intransigence of agricultural interests in Europe. In the next few months, we may well be faced with disastrous circumstances in which our negotiations fail for the first time since the second world war, opening a Pandora’s box of protectionism. The British Government should be, and according to much of their rhetoric will be—and we hope they will be—in the vanguard of efforts to prevent that from happening. However, what negotiating clout do they have in making other EU members come to an agreement with the Americans at the World Trade Organisation? There is no leverage; there is no negotiating position if it has already been conceded.

Mr. Lilley: The hon. Gentleman makes an important point. He mentioned that Peter Mandelson has been ominously quiet, but I do not know whether he is aware that today Commissioner Danuta HÃ1/4bner has not been quiet, and that she has made a speech: “Reform of the EU budget: Time for a debate without taboos”. She says that, as well as considering the agricultural policy,
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a central part of the review should concern the corrective mechanisms—the British abatement that remains. Therefore, what we have started could eliminate what we retain, rather than secure any benefits for what we have already given away.

Dr. Cable: That is a helpful intervention. I do not know how significant those Commissioner’s comments are, but they seem to be genuinely worrying.

In his initial remarks, the Minister tried to alarm us—perhaps rightly, as we need to understand the Government position better—about the consequences of this legislation not being ratified on time. It is a nuclear weapon in many respects, but we need to understand how the nuclear bomb actually works in these circumstances: what would be the practical consequences of detonating it?

8.30 pm

It is my understanding that on the financial front we would revert to the earlier own resources formula, which in purely financial terms would be better for the UK, so it is clearly not a deterrent in that sense. There is also the mechanics of how payments are made, and whether failure to ratify on time would affect the normal running of payments through the EU. Again, I confess ignorance on that: I do not know at what point a failure to achieve legislative closure affects the day-to-day payments. There is a section in the explanatory notes that I am afraid I do not understand, but the Minister might be able to explain it. It states:

The implication is that the changes are already in operation and that they will be retrospectively validated by this legislation, so there is nothing to stop these payments occurring now. There is also an implication that the deterrent—the nuclear bomb—is, in the end, largely an issue of face or prestige: the British Government cannot get their own legislature to agree a piece of legislation, which is very embarrassing. But is it more than embarrassment? That is the question that we have to answer.

If the Government can explain that holding up this legislation in order to achieve these necessary improvements will do serious damage to the functioning of the EU and Britain’s role within it, I would be hesitant to support the new clause, but if all that is at stake is a little embarrassment at the beginning of 2009—which might, indeed, have the effect of stiffening the Government’s spine in what then might be difficult negotiations about the review—I cannot see the harm. As somebody who is a pro-European, I want the Government to explain convincingly to me why I should not support the new clause.

Mr. Lilley: I am grateful for the opportunity to contribute to the debate, and I return to the subject of the own resources of the European Community with some nostalgia, as it was the subject on which I made my maiden speech some years ago, on which I had my maiden rebellion against my Government, and on
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which I made my maiden criticism of the then Prime Minister, Mrs. Thatcher, nearly bringing my career to a premature end. She was seduced—or so it seemed to me—by the argument that in return for a promise from the European Union to be more moderate in its future spending, she should concede an increase in the own resources of the European Community. I asked her at Prime Minister’s questions whether she would follow that logic and reward a drunkard who had signed the pledge by giving him a bottle of whisky. She was not best amused, and I was told my career would not proceed any further. I was wrong, of course, as Mrs. Thatcher was in the process of securing for Britain the rebate that has enabled us to save billions of pounds of contribution to the EU, whereas the present Government are doing the reverse.

I mention this because I think it shows that, having been critical of my own Government, I have a reasonable licence to be critical of this Government on this issue. My position in both cases is as someone who does not want to see a waste of public expenditure through an increase in spending that will not be properly monitored or controlled, and will not be in the interests of the taxpayer. I fear that what we are being asked to do today will result in that. That is why I welcome the new clause tabled by my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), because it says that we should not go ahead with this increase in the own resources—the new structure reducing Britain’s abatement by up to £10.5 billion—unless we get something in return.

Unfortunately, as far as one can see, the Government’s negotiating process so far has not got anything in return. Indeed, the negotiating position of the former Prime Minister, Tony Blair, has been rather like that scandalously sexist aphorism, “When a lady says never she means maybe, when she says maybe she means yes, and when she says yes she is not a lady.”

The former Prime Minister started off saying never:

He then went on to say maybe:

Finally, he conceded a reduction in the rebate completely, but he said that he was getting something in return—a reform of the agricultural policy, or at least a promise of a review of it.

Accepting new clause 1 would enable us to see whether we have anything in return for the concessions made, and I cannot see how the Minister can possibly object to it. It proposes that the Treasury shall go ahead with implementing the new structure of own resources only if it can certify that we have secured a concession. It would be left to the Treasury’s judgment whether it could honestly say that we had secured the concession—the review—that we were promised, and which Tony Blair told this Parliament he had been offered. The Treasury would be able to say whether it had been substantively achieved, so I invite the Minister to say that he will accept the new clause. If he cannot, will he say frankly and openly that he rejects it because he cannot envisage circumstances in which the
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Treasury will be able to say that the promises given to this House will be delivered? That would be an appalling position.

The case for retaining our rebate persists. It was based on the fact that the structure of the British economy is such that when the same rules are applied to us as are applied to other member states they result in an unfair burden on us relative to the advantages that we get. Even after the changes that have occurred, and those planned in this settlement, are taken into account, this country will receive the lowest amount of European spending per head of any of the 27 countries in Europe. We will receive a quarter of that received by Ireland, whose gross domestic product per head, we are now told, is above ours, and we will receive half that received by France, whose figure was only marginally below ours before the recent exchange rate changes.

Despite that, the contribution that we make is significantly greater than that of many other countries. The Government have been prepared to give us the figures only in respect of France, but the contribution per head that British people will make to the European budget is 20 per cent. greater than that of France. Our net contribution is set to rise significantly under this settlement, as I mentioned in an intervention that the Minister was kind enough to take. The net contribution is rising faster than the generality of public expenditure is planned to do in this country—so much so that our net contribution to the European budget as a share of total public expenditure will rise by half over the time span of the current spending process.

This is a very inequitable arrangement as far as British people are concerned. It was right to secure an abatement to try to offset some two thirds of the differential between the money that we put in and the money that we get out. Mrs. Thatcher was able to secure it because she had a very good case, she argued forcefully and she persuaded her partners to give it to her. According to the Government, we now have to reduce that abatement and to accentuate again the inequities that the correction mechanism was designed to redress. “Correction” is the word used in the European documents. The correction is to an inequity that Britain otherwise faced.

We will get nothing in return, because the CAP budget will continue to rise. According to House of Commons figures, the CAP budget remains 48 per cent. of the total expenditure of the EU. Others claim that it has risen from 40 per cent. a few years ago to 44 per cent. Lord Patten said a year or so ago:

So, far from our having secured some degree of reform already that is resulting in a reduction, it remains overwhelmingly a budget that goes on the CAP.

The other part is spent on structural funds, and I want to ask the Chief Secretary whether the Government have made any progress in securing the reform that the present Prime Minister sought when he was still Chancellor. In 2003, he wrote in The Times:

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In a Government document entitled “A modern regional policy for the UK”, the UK Government argued that member states with GDP per capita above 90 per cent. of the EU average should no longer receive structural funds money. Instead the money should be retained by them and spent by them, because, the Prime Minister has argued,

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