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20 Jun 2008 : Column 1215

The statement represents a step forward in transparency and I welcome it, but such initiatives will be effective only if the elected bodies of other member states and their federal tiers take a similar interest. It is heartening to see that our campaign is making some progress in Europe: we are being joined by the Netherlands and Denmark, and some other member states are taking similar initiatives—indeed, I went to talk to our Portuguese colleagues, who are interested in the idea. Each is trying to work up a programme tailored to their own needs. One of the difficulties is that the French are violently opposed to the idea. I do not why they should be violently opposed to tracking how EU money is spent in their own country.

Lord Commissioner of Her Majesty's Treasury (Steve McCabe): Violently?

Mr. Leigh: They are very strongly opposed—not in the sense of physical violence, but every time we make this proposal in the Council of Ministers or the European Parliament, it receives a “non” from our French colleagues. However, there is no reason why opinion should not change under President Sarkozy—a French President whom I greatly admire. There is a great opportunity, given that President Sarkozy’s thinking is much more in line with ours, and I hope that he can change the French Government’s attitude.

Partly as a result of the French action, many member states are waiting to see how our efforts fare, so we are, as usual, in the vanguard with the Danes and the Dutch. We will see what happens. Until more member states follow suit, progress toward strengthening the scrutiny of EU expenditure will be stymied—it simply will not work. That raises the question of what our own Government are doing to convince other member states to improve the transparency of their own use of EU money and whether the Commission is taking tangible action to support such efforts. I hope that the Minister will make a point of arguing that other member states should follow our Government’s excellent endeavour.

Mr. Chope: Has my hon. Friend seen the report the Government produced yesterday, “Global Europe : vision for a 21st century budget”? At paragraph 2.11 is the statement that

Does he think that that is realistic, given the opposition that he has described from the French Government and others?

Mr. Leigh: No, but at least as a result of the campaign the Treasury is producing the report and starting to identify the problems. We are starting to work out what is going wrong in our own country. There is no point lecturing other people unless one gets one’s own house in order. To give the Treasury due credit, it now doing that, and the report published yesterday is the first part of a long programme. To be frank, I see no reason why the French and every other nation should not conclude that it is in their interests to follow how EU money is spent. We will continue the campaign.

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In recent years, we have expended a lot of energy discussing the shortcomings of the EU accounts. Some progress has been made, but the Commission and member states need to root out the complexity and bureaucracy that entangle EU programmes. Greater efforts also need to be made to measure what European taxpayers are getting for their money. We need to convince colleagues in member state Parliaments to take a greater interest in how EU money is spent. Unless all that happens, I fear that we will be here again discussing these issues in much the same way in five years. However, Bills such as this, debates such as this and what the Government are doing are all part of good progress. Let us continue it.

11.15 am

Mr. Edward Davey (Kingston and Surbiton) (LD): Let me make it clear at the start that I have no objection in principle to the Bill. There can be no objection to an audit that is independent and genuine. I have been reading the Bill to check that there are no points on which I fundamentally disagree with the hon. Member for Christchurch (Mr. Chope). There are some details that I shall question in general debate, but I have found nothing in principle that I believe should prevent the Bill from receiving its Second Reading.

I hope that the hon. Member for Gainsborough (Mr. Leigh) does not mind my saying that his speech was both fascinating and fabulous. His predecessor, the former right hon. Member for Haltemprice and Howden, was also a distinguished Chairman of the Public Accounts Committee, and I enjoyed many debates with the right hon. Gentleman along similar lines to this morning’s. There seems to be a fairly large degree of agreement across the House on some of the financial accounting minutiae. I served with the hon. Gentleman and the right hon. Member for West Dorset (Mr. Letwin) on the Bill that became the Government Resources and Accounts Act 2000, when we considered modernisation of the framework that Gladstone bequeathed to this House. Some useful work was done in connection with that Bill that has some parallels with what ought to be done in the EU. Scrutiny of that Bill also showed that further progress was needed.

I do not know whether I have to declare this as an interest, but in 2000 I wrote a pamphlet, “Making MPs work for our money: The reform of Parliament’s scrutiny of the budget”. When I entered Parliament, although I knew it in theory, I was dismayed by the lack of financial scrutiny that goes on here. The hon. Gentleman is correct: ex post, this House and this country do some fantastic work through the NAO, the Audit Commission, the district auditors, the Public Accounts Committee and other such bodies.

Mr. Syms: Speaking from 14 years’ experience as a local councillor, I think that local government has a lot to teach Parliament about how to control money. In local councils I have seen many arguments over small sums of money badly spent and good accountability. Here, measures tend to shoot through while we debate other subjects.

Mr. Davey: The hon. Gentleman brings me to my point. As I was saying, ex post, this House, this country and local authorities do very well, but ex ante, as the Budget goes through the House, we do shockingly
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badly—far worse than local authorities up and down the country, where councillors question budget items before the money is spent. Indeed, some right hon. and hon. Members might be surprised to hear that even the EU does better than this House.

Mr. Leigh: Will the hon. Gentleman support the campaign that I am waging—so far unsuccessfully—in the Liaison Committee to persuade my colleagues to set up a Budget Committee? The Government carry out their spending review three years in advance, but there is no proper scrutiny by this House of how the money is to be spent. We need a separate Select Committee to do the equivalent, before the money is spent, of what the Public Accounts Committee does afterwards.

Mr. Davey: I would genuinely like to see the hon. Gentleman’s proposal. I will agree to consider it if he agrees to read my 2000 pamphlet, where I make a set of recommendations on how we could improve ex-ante scrutiny of public expenditure. In the pamphlet, I drew on a report written for the OECD that looked at how 27 Parliaments scrutinise budgets ex ante. I have to tell the House that this country performed worst on all the objective criteria. I carried out a detailed analysis of how reform of ex-ante scrutiny came about in the USA, Sweden and New Zealand. The case of New Zealand was particularly interesting, not least because its traditions are similar to those of the House and because it uses the Westminster model of democracy.

It is absolutely clear that we could perform far better with some very modest reforms. We should have something like an estimates office—the equivalent of the National Audit Office, but answerable to this House—to look at budgets as they are presented, and before a decision is taken on them. It could serve Committees. On the point made by the hon. Member for Gainsborough about whether there should be a Budget Committee or departmental Select Committees, I think that we should look at the European Union—

Mr. Deputy Speaker (Sir Michael Lord): Order. The hon. Gentleman saw that I was about to rise to remind him that he is concentrating rather too much on domestic matters. Perhaps he should remind himself of the title of the Bill that we are debating.

Mr. Davey: You are absolutely right, Mr. Deputy Speaker; I was slightly carried away, but in my defence, I may say that my points were made in response to the excellent speech of the hon. Member for Gainsborough.

Coming back to the Bill, there are a few questions to ask before I come to how the audit would work. There is the issue of frequency to consider. The hon. Member for Christchurch proposes that the audit be carried out every five years. I am not sure whether that is the right frequency. When it comes to something as important and valuable as the European Union, I do not think that referendums or audits should be done so frequently. I would not object to an audit being done perhaps every 15 years, but five years seems a relatively odd period for such an important and indeed expensive piece of work. I am sure that the hon. Gentleman would not want to waste taxpayers’ money on too-frequent audits, which may be the result of the Bill.

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I will come to another issue of substance that the Committee considering the Bill would need to look at; I hope that the hon. Gentleman can reassure us on the subject when he winds up the debate.

Mr. Mark Francois (Rayleigh) (Con): We make a net contribution to the European Union of almost £3 billion a year; why would an audit of that money once every five years be too frequent?

Mr. Davey: I think that the hon. Gentleman’s figure is wrong; the amount is actually slightly greater. I understand that it is about £4.69 billion, but I am sure that there are different ways of working out contributions. I have no problem with our considering the amount of money that he mentions—the public expenditure. That should be audited every year under current processes. However, the Bill of the hon. Member for Christchurch goes far wider.

Clause 2 refers to the terms of reference. Although they make some sense, I am not sure whether they are drawn widely enough, as the rest of my speech will show. Bodies such as the European Union have quite a number of indirect but absolutely critical benefits. I will go on to talk about peace, the spread of democracy and human rights. I do not want to shy away from an argument based simply on easily quantifiable financial costs and benefits, but there are benefits that are more difficult to quantify. When the hon. Gentleman makes his winding-up speech, I would like reassurance that his terms of reference will cover the sorts of issues that I am talking about.

Mr. Syms: The hon. Gentleman is right; if one talks to young Czechs and Poles, one finds that many of them do not see the EU in purely economic terms, but see it as moving on from the communist past that they have had to put up with. They see the EU more as an exercise in civilisation and democracy.

Mr. Davey: I shall come to those points directly, because I want to talk about the concept of peace. We now enjoy peace in western Europe, southern Europe and central and east Europe, and looking at history, that is unusual. Decades of peace have meant that we have not seen tens or hundreds of thousands, or millions, of citizens of Europe slaughtered on the battlefields of Europe, and that is relatively unusual. The question is: what role has the European Union played in that, and what role does it continue to play? I have never sought to argue that the past 63 years of peace in Europe are down solely to the European Union; clearly, that would be nonsense, and it would ignore the importance of NATO, the alliance with the US, the US umbrella in the time of the Soviet Union, the nuclear deterrent, and the economic growth that would have happened without the European Union. All those things have played an important part in keeping the peace.

I am interested to know how the hon. Member for Christchurch thinks that the EU membership audit commission should go about the difficult task of working out cause and effect—working out what role the European Union has played, and continues to play, in keeping the peace. What is the probability that our country would have been involved in a war or armed conflict if there had been no European Union? I seriously think that
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that has to be assessed if the audit is to be correct. Frankly, I could not support the Bill if it did not consider those pretty fundamental questions. I would want to be sure that the terms of reference covered that issue. What assumptions would he wish the commission to make in respect of the value of lives—the lives of British servicemen and women that might have been at risk if we had had more wars because the EU was not there to play a role in preventing them?

Mr. Chope: The hon. Gentleman will see that clause 2(b) mentions “national security and defence”, so many of the concepts that he talks about would be included under that provision. If he is suggesting that we should have some sort of historical treatise on what has happened in Europe since the last war, I point out that that would not be the proper role for the Bill, because we are trying to look forward, rather than back.

Mr. Davey: The hon. Gentleman raises a difficult issue that his commission would have to deal with: how would it consider the benefits that have accrued, and the benefits that will arise, and how does the intergenerational aspect of the costs and benefits work? If one accepts the thesis that the European Union has played an important role in keeping peace, one must accept that without it, we would be living in a very different—a much less secure—Europe today. His commission has to grapple with that, and I hope that he will not shy away from the issue.

The hon. Member for Poole (Mr. Syms) intervened to talk about the importance of democracy, and pointed out that in 2008, a Polish citizen, or a citizen of the Czech Republic, may well have a different view of the EU’s historical importance and their country’s membership of it from that of a British person. We are quite a long way away from earlier wars and from those very difficult, dark days, but they are very much in the memory of people who have recently joined the European Union, who have escaped the shackles of communism and dictatorship, and who really value their freedom and human rights, which they feel are better protected as a result of their country being a member of the European Union.

Mr. Cash: We have just had several months of debate on the Lisbon treaty Bill and its political and economic impacts, both in a historical context and in the context of planning for the so-called future. The Irish people have just given their verdict on the issue. Does he not think that trying to mix up the broader historical landscape to which he refers with the narrower, more precise economic questions that arise under the Bill would be detrimental, and that the merit of the Bill is that it deals with those narrow questions? May I briefly add that unfortunately I will have to leave, as I have to attend my nephew’s wedding? However, I will listen with interest to the rest of what the hon. Gentleman has to say.

Mr. Davey: I think I speak on behalf of the whole House in saying that we are very disappointed that the hon. Gentleman will not be present for much longer, as we enjoy his speeches, not least because they are exceedingly well informed and researched. May I on behalf of the House wish the hon. Gentleman’s nephew and his wife-to-be the greatest happiness in the years to come living in Britain, and in Europe?

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On the intervention, I think it would be the wrong approach for the audit to be narrow and conducted simply in financial terms, although I also think that if it were, the outcome would show a big positive from membership of the European Union. My support for the EU is not based simply on financial and economic grounds—although I think it is in the interests of the UK to be in on those grounds. The benefits are much broader. If we look at our membership of the EU in the historical context of peace, human rights and democracy, we begin to see the essence of the EU ideal. I was grateful when the hon. Member for Christchurch intervened to say that part 2 of the terms of reference is aimed at capturing such matters; I am much happier because of that clarification.

Of course, there are many causes of the emergence of more democratic nations in Europe, particularly in southern, central and eastern Europe. I do not claim that the EU is the only contributor to that welcome development. The collapse of the Soviet Union, and all the reasons behind it, are probably more important—and the rise of some of the nationalist movements in central and eastern Europe has contributed, too.

All this shows what a difficult job the commission will have to do; it will have to conduct a thorough and comprehensive analysis and get through some tricky issues. I am reminded of Sir Nicholas Stern’s recent work in looking at the potential costs and benefits of climate change. I refer the hon. Member for Christchurch to that study. The Stern review of climate change had to deal with some difficult risk and probability analysis, using some clever econometric and mathematical models to work out the monetary value of any particular scenario. The hon. Gentleman’s audit would have to do much the same in looking at democracy, human rights and peace. Although I think the commission would be engaged in a laudable exercise, I also think it would have to do some tricky work, such as assessing the value to Britain of having more democracies.

One can take a very narrow view and say that it is good that there are more countries such as China whose economies are growing and that are able to trade with us, and that we need not worry about other aspects of life in those countries. However, I believe that people in Britain and Members of this House are concerned about the human rights of the Chinese people and the lack of democracy in China, and I believe that that applies within the European context, too. I hope that the audit would look at that.

I also hope that the audit would look at what the EU enables Britain to achieve by working with other partners which it might find difficult to achieve if it were outside the EU. Let me give a couple of examples. The EU is leading the way internationally in measures to deal with climate change. We have had a lot of problems working with our American colleagues on this issue, as they have been very reluctant to take the next step. Also, Australia, Japan and other countries that are leaders in the world have been unprepared to sign Kyoto and to make more commitments. Within the EU, we have managed to get many other countries to work with us to start addressing these issues at both global level and within the European context. I wonder how this audit would analyse that cost and benefit. Would it be more difficult to achieve these sorts of agreements if we did not have the EU,
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which has processes and develops closer relationships between countries so that they can trust each other and take another step forward?

Mr. Francois: The hon. Gentleman said in his opening remarks that he has no objections in principle to the Bill, so may I ask him a simple question? Do the Liberal Democrats support the Bill, or not?

Mr. Davey: Yes.

Mr. Leigh: Oui.

Mr. Davey: Oui—or “yes” in whatever language we want to use; I shall not go on, as I do not wish to be ruled out of order again. I have no problem with the Bill. All I am doing is setting out some of the issues that I hope any commission established through this proposed legislation would address. It would be vital that it did so. However, if we did not have cast-iron assurances on Third Reading that those issues would be addressed, I would be less willing to support the Bill. Nevertheless, in principle and on the face of things, having read the Bill and having already got assurances from hon. Member for Christchurch, I think it moves in the right direction.

There are other issues to do with the nature of international co-operation that the institutions of the EU make possible, and that would be more difficult to address if we were not members of it. Let me give a practical example, following the problems to do with bovine spongiform encephalopathy and how that affected the beef industry in our country. The Americans have not yet allowed British beef properly into USA markets. When there was a similar situation to do with the French, we were able through the European institutions to take them to court and force them to do so. The British beef industry was then able to start exports into the French market. Without the EU, I suggest that that would have been—I shall pronounce the following word in the French manner—“impossible”. I hope the audit would be able to take account of many such benefits. When we have genuine disputes with countries, our farmers—or whatever industry is involved—can be put at a disadvantage if there is not a dispute mechanism to sort them out.

Mr. Evans: I sort of accept the hon. Gentleman’s point, but the position is not quite so clear. I am sure he has been following the spat between President Sarkozy and our Trade Commissioner, Peter Mandelson. Sarkozy is now on the record as putting much of the blame for the Irish “No” on Peter Mandelson’s negotiation of the reduction in food growth by 21 per cent. when 800 million people are starving in this world. Can the hon. Gentleman therefore appreciate that these matters are not quite as clear as he is saying?

Mr. Davey: The hon. Gentleman simply shows how difficult such an audit would be, as it would have to take into account many matters. My purpose is to make sure that if and when this audit is conducted, it is genuinely comprehensive and is not narrow and focused on only one aspect. It is quite difficult to make a full assessment of some of these issues, which are vital to the interests of business in this country.

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