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Bill reported, without amendment.

Order for Third Reading read.

9.15 pm

Andy Burnham: I beg to move, That the Bill be now read the Third time.

This has been a long but good debate. [Hon. Members: “It was short.”] It felt long. I think that Members have been quite clear about where they stand.

Let us be clear. This Government will make the case for being part of the European Union, for playing a constructive part in the European Union, and for making a sensible, practical and pragmatic agreement that helps to take the European Union forward into a new era. In our judgment, the own resources decision, which we are asking the House to incorporate into the law of this country, does precisely that. It is fair to the British taxpayer as it preserves the rebate and sees it grow in size over the financial period that we are discussing, but at the same time it will provide the resources for the social, economic and overall development of a peaceful and prosperous European Union. We all, I believe, have a common stake in that.

Mr. Philip Hammond: Was that the outcome that the Government anticipated in May 2005?

Andy Burnham: We have been over this ground all evening. This Government were clear about what they were seeking to achieve—to preserve the rebate. Whatever fantasy arguments the Opposition wish to advance, at the heart of the own resources decision is an agreement whereby the British rebate rises but is disapplied in respect of non-agricultural spending—the spending that helps economic and social progress in the countries of the former eastern bloc. That is what it pays for. It is absolutely correct to say that the former Prime Minister, Tony Blair, very much had in mind an agreement whereby Britain would retain the rebate and see it rise in value, with a change in the contributions that France makes to the European Union, whereby we now have rough parity between French and British contributions. That is a step forward. I think that he would also have said that Britain should pay its fair share of the costs of an enlarged European Union.

The Conservatives have completely failed to demonstrate that the policy of saying, “We support enlargement but we don’t want to face up to the difficult decision of paying for it”, has a scintilla of credibility across the European Union. We have heard no mention of it this evening, and the right hon. Member for Witney (Mr. Cameron) managed to attract only two other members to the new grouping in the
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European Parliament. I gather that there is now just one, Bulgaria—“and then there was one”. We see a party utterly isolated in Europe. Perhaps the shadow Chief Secretary will update the House on how negotiations are progressing.

Mr. Philip Hammond: I have a question for the Chief Secretary. How would he characterise the position of the British Government in the summer of 2005, when they said that they enthusiastically supported enlargement but that the British rebate was fully justified and non-negotiable? How would he characterise that as anything other than, to use his own words, being in favour of enlargement but not being willing to pay for it?

Andy Burnham: We are going over and over this ground, and the hon. Gentleman will not accept that there is a difference between the application of the rebate in respect of the 15 members of the European Union—

Mr. Hammond: The Government said “non-negotiable”.

Andy Burnham: In my view, there is a difference between the application of the rebate in respect of the contributions and spending that those countries receive and its application in respect of the new member states. We make a clear distinction between those two groups.

Throughout the debate, the Conservatives have failed to give any credible answer about what they would do to contribute to the costs of enlargement. The evidence is clear: they are utterly isolated in Europe. Well, they are not quite isolated; they have one ally among the whole European Union, but some of their new-found friends have dubious connections, we might say. That is not a position of strength, or an intellectual, commanding position from which to lecture us on how to conduct relations in Europe. We have secured a deal that helps to take the EU forward to the next era while securing the British interest.

We have seen a great deal of limbering up tonight for the main event. As was said earlier, I am sure that lots of Conservative Members’ diaries have been cleared for 15 days running, and I am sure that they will probably want more than that.

Mr. Bone: Is the Chief Secretary making a new announcement? I thought that the Government had provided 20 days of discussion? Is this a new announcement that has slipped out?

Andy Burnham: Not at all. I do not think that he has been listening closely to what I said. [ Interruption. ] I believed it was 15, but it may be 20. I am sure that he will be there for all 20 days. I say this to the hon. Gentleman. Am I right that the right hon. Member for Witney said—and I paraphrase—that the country would know that the Conservative party had changed when it stopped banging on about Europe? I remember him saying something along those lines. We have heard a lot of banging on about Europe today.

As I said to the shadow Chief Secretary, we have heard some incredibly inflammable statements— [ Laughter. ] Inflammatory statements, even. We have heard incredibly inflammatory statements from Conservative Members this evening, and I wonder what the parties the shadow Chief Secretary wishes to
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pull into his grouping in the European Parliament would make of sweeping generalisations about the EU—for example, that it is a fraudulent and corrupt organisation. No wonder that their isolation deepens.

We will go forward and defend the agreement. The new clause that the Conservatives brought to the House showed the same level of confusion on these matters as their position on the EU reform treaty does. It would seek to unpick and renegotiate matters once the rest of Europe had moved ahead and reached a sensible agreement.

British business looks to hon. Members and to any party that seeks to form the Government of this country to take a pragmatic approach to Britain in Europe. Yes, it wants us to defend the British interest, but it knows that, above all, its prosperity and that of the British economy is based squarely on good relationships with Europe. As I said, 56 per cent. of British trade is with the European Union. Would Conservative Members serve the interests of British business by leading us to an isolated position, whereby we were the only country to argue against a deal that was struck between 27 members of the European Union? Would that be in the long-term interests of business?

Mr. Philip Hollobone (Kettering) (Con): The Chief Secretary claims that there are great benefits to the British economy in paying a huge membership fee for being in the European Union. However, is not Britain’s trade deficit with the European Union now at record levels and getting worse every year?

Andy Burnham: The hon. Gentleman must make a judgment about that. Conservative Members must be honest and ask themselves whether we are better off out of the European Union. I have mentioned the hon. Member for Shipley (Philip Davies) several times this evening. He is the leading light of the “Better Off Out” group. That is an honest position. It is not honest constantly to seek ways of undermining and criticising but not admitting the true position.

Foreign direct investment from the EU in the UK has quadrupled. It more than doubled between 2001 and 2005. That is worth celebrating. An extra 2.75 million jobs have been created throughout the EU.

Mr. Shepherd: It is not about the budget.

Andy Burnham: Let me put a proposition to the hon. Gentleman. When the Republic of Ireland acceded to the European Union, there was considerable spending on structural funding and projects that enhanced economic competitiveness in the republic. Does he claim that some of the improvements in the north-west economy and that in other parts of the UK do not result from greater trade and partnership with the Republic of Ireland? Does not he accept that we have an interest in stronger economies throughout Europe? Economies that are stronger and are growing create more opportunities for our businesses to trade with them.

Mr. Shepherd: The Chief Secretary claimed that inward investment had increased fourfold under the Government’s maladministration, but that has nothing
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to do with the budget settlement. His point was therefore a non-sequitur. The debate has been most frustrating—the Chief Secretary does not appear to grasp the essentials.

Andy Burnham: Let us get down to brass tacks. The hon. Gentleman might not agree, but my position is that British companies began to do more business with companies in the Republic of Ireland following its accession to the European Union and the benefits that its economy gained from that change. There is already much greater trade between this country and businesses in the accession countries. The hon. Gentleman and his colleagues cannot grasp that there is a mutual interest: we all benefit from each other’s success, which is stimulated by the investment that the own resources decision makes possible.

Investment in the infrastructure of the accession countries means that their economies can grow and that they can develop, move forward and become bigger trading partners for the United Kingdom. That is a clear and plausible argument and I am sorry that the hon. Gentleman does not understand it. It is why we support the own resources decision and why I ask hon. Members to vote for Third Reading.

9.59 pm

Mr. Philip Hammond: I am sorry that the Chief Secretary was so disparaging about new clause 1. It was a modestly phrased measure that could have improved the Bill sufficiently for us to tolerate it and extract something from the negotiations in Brussels in December 2005. As it is, without new clause 1, this is a miserable sell-out of a Bill and I shall have to urge my hon. Friends to vote against Third Reading.

Let us be clear. The premise on which the Chief Secretary’s arguments have rested throughout today is that anyone who questions any aspect of what the Government negotiated in Brussels is promoting the immediate collapse of the European Union and the casting into outer darkness of every country in eastern Europe, but that is simply not true. Being an enthusiastic member of an alliance is not a reason for abandoning the interests of those whom Governments are elected to serve, but this Government did indeed abandon those interests.

In May 2005, the Government told us that the British rebate was fully justified and non-negotiable. In June 2005, it was not to be negotiated away, period. Before the Brussels summit in December 2005, however, the rebate apparently was negotiable, but only for guaranteed fundamental reform of the EU budget and of the common agricultural policy in particular. After the Brussels summit, the position was that we would give away £7 billion over seven years and much more in the future. The rebate was gone—traded for a vague and some might even think cynical promise from our European partners to review agricultural spending under the presidency of the country that is one of the largest beneficiaries of that spending.

It is clear that the French thought that the UK was making a major concession at Brussels, through a Prime Minister who, again to quote the French Foreign Minister of the time, was failing to do his job calmly

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That says it all. The French believed that they had achieved a great victory in resisting even a review of agricultural spending within the 2013 financial perspective. It is not true, as the Chief Secretary asserted it was, that investment in eastern Europe is dependent upon conceding our rebate. If he believed that, how could his Prime Minister have gone into negotiations in the summer of 2005 with the position that he then took?

At a time of huge pressure on UK public spending, the Government should have stood their ground and extracted real and durable budgetary reform, as they promised Parliament and the British people they would, with a mechanism linking the own resources decision, and thus the British rebate, to genuine progress on such reform, instead of a naive wish or hope that that might happen in the future. To their lasting shame, the Government did not do that, adding to a long list of broken promises and incompetent delivery.

Mr. Hollobone: Does my hon. Friend share my concern that, in effect, the British people have been misled? During the general election of 2005, there was no indication from the Labour party that Britain’s membership fee of the European Union would double, from a net contribution of £3.3 billion to at least £6.6 billion. Is that not a huge indictment of the honesty and integrity that we have come to expect from the Government?

Mr. Hammond: My hon. Friend makes a good point. We are entitled to ask this question: when the then Prime Minister and the current Prime Minister pledged that the British rebate would be non-negotiable, in May 2005 and June 2005 respectively, were they simply being naive or was it worse than that? Did they genuinely believe that they could get through the process without conceding the British rebate, but fail to appreciate how incompetent they were at negotiation, or did they know all along that they would have to break that promise?

So £7 billion of potential UK public spending, debt reduction or tax reduction—as some of my hon. Friends might prefer—has been lost. Much worse, however, is the fact that the baseline for future own resources decisions has been shifted downwards, and the cap on the cost to the UK of the surrender of the rebate comes off in 2013. The negotiating ratchet works inexorably against the interest of the United Kingdom.

As the Government contemplate the fiscal and public service delivery challenges that face the UK in 2008, they might come to rue the day that they so casually threw away £1.9 billion a year and rising. When next we hear that this or that objective cannot be achieved because of a funding problem, the British people will remember what happened here tonight.

To Parliament’s shame, we have now become complicit in this sell-out of the UK interest. The hard-fought-for rebate—our principal bargaining tool for reform of the EU budget—is being whittled away before our very eyes, and Parliament watches, apparently paralysed, as the Government betray the British people. This shameful, one single-clause Bill sums up 10 years of this new Labour Government: wasted money, broken promises and incompetent delivery. I urge my hon. Friends to vote against the Third Reading of the Bill tonight.

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9.36 pm

Dr. Cable: Given that those on the Front Benches effectively made their Third Reading speeches in the debate on clause 1 stand part, we do not need to repeat them at great length. I shall simply describe myself as a leading light in the “better off in” group. The Liberal Democrats have no embarrassment in describing ourselves as pro-European. We support British membership and constructive engagement, and we have criticised the present Prime Minister for not being constructive enough. We support enlargement and the financial adjustments necessary to make enlargement possible and to support the weaker countries in eastern Europe. We have no problem with any of that.

We also believe, however, that it is possible to hold those views while simultaneously believing that the British Government should be tough in defending British interests and British financial interests. Countries that have been in the European Union since its inception, including the Netherlands and France, have Governments who take a very tough line on budgetary matters, and there is no reason whatever why British Governments should not do the same. We also believe that the British Government have a particular mission and an obligation to pursue rapid reform of the common agricultural policy, which is damaging to British and European taxpayers and consumers and to the world trade system. They should be tough on those issues.

Our criticism of the Government is that, in these negotiations under the previous Prime Minister, they were weak and made an unacceptable deal. That is why we intend to vote tonight alongside people with whom we would otherwise not share many common views on the European question. It would have been better if the Government had accepted new clause 1, which was objectively helpful. I do not know what their motives were in rejecting it, but if they did not like it, they could have produced their own version of a scorecard to help to strengthen their negotiating position. They did not do so, however.

The outcome of all this is rather unfortunate. The Government will have made a substantial concession on the rebate. They will continue to be party to a European Union that is not reforming the common agricultural policy at anything other than glacial speed. We might well be confronted over the next few months with the collapse of international trade negotiations, caused at least in part by the intransigence of European agricultural interests. The British Government will have absolutely no leverage whatever to prevent any of those things from happening.

The certain consequence of all those things is that British cynicism about the European project will grow. We differ from the British Government in that, although we are a strongly pro-European party, we do not believe that the European project can be advanced by stealth. It has to be advanced with the support of the British public—[Hon. Members: “A referendum.”] That is why we support a referendum on British membership of the European Union— [Interruption.] Let me conclude my remarks.

The danger is that we end up with the worst of all possible worlds, in which the Government win a Pyrrhic victory; they will of course push through the
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legislation, but in a context that will weaken overall British public support for the European project. That is a very negative outcome, and it is the main reason why we intend to vote against the Bill.

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