Funding of European Political Parties

The Committee consisted of the following Members:

Chair: Mr Edward Leigh 

Coffey, Dr Thérèse (Suffolk Coastal) (Con) 

Elliott, Julie (Sunderland Central) (Lab) 

Hendrick, Mark (Preston) (Lab/Co-op) 

Hilling, Julie (Bolton West) (Lab) 

Knight, Mr Greg (Vice-Chamberlain of Her Majesty's Household)  

Leech, Mr John (Manchester, Withington) (LD) 

Lidington, Mr David (Minister for Europe)  

Ollerenshaw, Eric (Lancaster and Fleetwood) (Con) 

Qureshi, Yasmin (Bolton South East) (Lab) 

Rees-Mogg, Jacob (North East Somerset) (Con) 

Reynolds, Emma (Wolverhampton North East) (Lab) 

Simpson, David (Upper Bann) (DUP) 

Spencer, Mr Mark (Sherwood) (Con) 

John-Paul Flaherty, Committee Clerk

† attended the Committee

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European Committee B 

Monday 10 June 2013  

[Mr Edward Leigh in the Chair] 

Funding of European Political Parties 

4.30 pm 

The Chair:  Does a member of the European Scrutiny Committee wish to make a statement? 

Jacob Rees-Mogg (North East Somerset) (Con):  Mr Leigh, may I say what a pleasure it is to serve under your chairmanship? I would like to explain briefly the background to the Court of Auditors’ opinion before turning to the reasons why the European Scrutiny Committee recommended it for debate. 

The principal purpose of the Court of Auditors’ opinion is to assess the extent to which the financial accountability and transparency of European political parties and foundations are addressed effectively by proposed regulations on their statute and funding. The regulations themselves were cleared from scrutiny following a debate on 6 February in a European Committee. 

The Court addresses funding received by European parties from the EU budget and other sources of finance, such as contributions from members, donations and loans. It acknowledges that the proposed regulations address some of the weaknesses in the current regulatory regime, but identifies some outstanding issues that could lead to misuse of EU funds. For example, it considers the definition of “donation” in the draft regulations to be too narrow, leaving outside their scope certain transactions that are financially beneficial to European parties. Other areas of concern are the inclusion of public authority donations; inconsistency in the thresholds for individual member contributions and outside donations; the use of financially advantageous lending arrangements to circumvent restrictions; and fines being left at the discretion of the European Parliament. 

The Court also highlights the absence from the draft regulations of sanctions for donors of irregular payment; mandatory fines for impeding the Court or European Parliament in their auditing roles; funding regulation of individual European election candidates; and compulsory consistent accounting and reporting requirements for European parties. The Court argues for the involvement of independent, external auditors selected by the European Parliament and for more detailed drafting of general funding eligibility requirements. 

The Government’s initial response was that the opinion 

“is a welcome contribution which will play a useful role in informing negotiations as they move forward”. 

They shared the Court’s view that the proposed regulations should not dilute 

“current levels of accountability, financial propriety or transparency”, 

and that reporting requirements should be “consistent and robust” throughout the EU. 

The European Scrutiny Committee asked the Government to explain what action they proposed to take, both independently and with other member states, to ensure

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that the Court’s concerns would be pursued in future negotiations regarding the regulations, with particular emphasis on the donation definition. In response, the Government said that they had already referenced the Court’s opinion during negotiations—as had other member states—and would continue to do so. 

The European Scrutiny Committee concluded that the Court’s reservations about the draft regulations merit further discussion. Will the Minister tell us what progress has been achieved in amending the draft regulations to reflect those concerns? Will he also give us a general update on the negotiations? 

4.33 pm 

The Minister for Europe (Mr David Lidington):  I, too, welcome you, Mr Leigh, to the Chair. I thank my hon. Friend the Member for North East Somerset for his opening statement on behalf of the European Scrutiny Committee. 

As my hon. Friend said, on 6 February this year we debated the substance of the draft proposals from the European Commission for two regulations about the status and funding of European political parties. Today’s debate has been called regarding the opinion of the Court of Auditors on those drafts. 

The European Commission’s view is that its proposals would enhance the role of European political parties and help to develop what the Commission terms a truly pan-European political space, in order to facilitate public debate and counter the widespread public disaffection with how EU decisions are taken—something that we have seen in many different states. 

I remain, as I was on 6 February, sceptical about the value of the Commission’s proposals as a means to address the democratic deficit in Europe. The peoples of Europe look primarily to national Parliaments and national Governments as their representatives. As the Prime Minister has said, enhancing the role of national Parliaments in a European context is the most effective means by which to address the democratic deficit of the European Union. 

The United Kingdom continues to pose questions on the rationale underpinning the proposals, and we will do so in future negotiations. Since February’s debate in Committee, working group discussions in Brussels have considered the Court of Auditors’ opinion, and the discussions continue. Not just the United Kingdom, but other member states have discussed the concerns and criticisms made by the Court of Auditors and how they might best be addressed. So far, no revised text of either regulation has yet been tabled by the Commission, so the texts on the table remain those that we debated in Committee in February. In future negotiations, the United Kingdom will seek to address the concerns raised by the Court of Auditors, as well as continue to pose questions on the underlying rationale of the proposals. 

I move on to the various points made by the Court of Auditors. As Committee members will know, European political parties and political foundations are not EU institutions, so they do not normally fall within the remit of the Court of Auditors. However, because they receive funding from the European Union, the Court of Auditors is empowered to carry out audits of parties and foundations, based on the examination of records and on the spot visits to their premises. Under article 322

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of the treaty on the functioning of the European Union, the Court of Auditors must be formally consulted before the European Parliament and the Council can adopt a regulation to amend the financial regulations. Its opinion, in response to that formal consultation, is what we are discussing today. 

The opinion acknowledges the basic premise of the Commission’s proposals, which is to increase the visibility, recognition, effectiveness, transparency and accountability of European political parties and foundations. The Court of Auditors also acknowledges that there are some shortfalls in the provisions currently in force in European law and that the Commission’s proposals seek to address some of those. However, the opinion goes on to say: 

“some further issues need to be addressed in order to encourage a European political culture of independence, accountability and responsibility, to strengthen scrutiny and avoid the potential abuse of the funding rules.” 

The first of the Court of Auditors’ key recommendations is that the definition of donations laid out in the Commission’s draft is too narrow. For instance, it does not adequately cover the donation of goods and services; it does not regulate donations from private entities in non-member states or international organisations; and it does not explicitly exclude donations from public authorities of EU member states. The European Scrutiny Committee indicated in its April report the desire to see the definition appropriately broadened to capture a wider range of transactions that are financially advantageous. Such a step would also minimise the potential for the misuse of EU funds. 

I agree that the original definition of donations was too narrow. In the continuing negotiations, the United Kingdom has pushed and will continue to push for a broader definition that more closely matches our own domestic set-up and that encompasses all types of transaction that would be financially advantageous to the European political party or foundation concerned. 

On the sanctions regime for irregular donations and contributions, the Court of Auditors recommends a less discretionary approach than that proposed by the Commission, under which the amount of a fine would be a multiple of the irregular amounts involved. That approach would give the European Parliament a more administrative and political role in the sanctions process—a recommendation with which I agree. The Government’s position remains that administrative and political decisions should be separated, and we will continue to explore the detail of that in further negotiations. 

The Court of Auditors also rightly identifies a risk that the rules on donations and contributions could be circumvented by parties or foundations receiving loans with particularly advantageous conditions attached to them. It is our view that the draft regulation should be amended to include specific provision on the rules surrounding loans to European political parties or foundations, especially on the provision of loans below market value. This, again, would reflect the safeguards that we have written into our own domestic rules. We will work with European partners to press for amendments to the draft regulation to address the potential loophole concerning loans. 

I agree, too, with the Court of Auditors’ concerns about donations from private entities in non-member states, from international organisations or from the public

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authorities of EU member states. Prohibiting donations from such sources would bring the proposals in line with our domestic approach in the United Kingdom. As the Committee is aware, however, some domestic political parties from non-EU member states are members of European political parties that would be governed by the arrangements set out in the Commission’s draft proposals, so this is a tricky technical issue to address in the context of the negotiations. We will continue to explore how best to tackle that with our European partners. 

I broadly agree with the recommendations and concerns set out by the Court of Auditors throughout its opinion, but I also want to highlight one specific but important issue where the Government disagree with the Court’s view. On direct donations to candidates or elected representatives, I do not agree that the rules for the funding of European political parties should also apply to individual candidates or elected representatives. Paragraph 15 of the Court of Auditors’ opinion notes that the legal basis for any such proposal should be article 223 of the TFEU. Measures under that article require the unanimous agreement of the Council and, under the European Union Act 2011, they require an Act of Parliament for this country to agree. 

I resist what the Court of Auditors proposes in that regard, because rules regarding the funding of campaigns of candidates for European elections and for national or regional elections rightly fall within the competence of member states, rather than of the European Union. I hope that the Committee agrees that the funding of individuals who represent UK citizens in the European Parliament is something best regulated by our domestic provisions on funding for political candidates. Unlike the remainder of the Court of Auditors’ recommendations, which are concerned with a genuinely pan-European issue, this last one is a domestic issue. Individual candidates are first and foremost candidates from national political parties, and their funding is therefore not an issue appropriately dealt with at EU level. 

With that exception, I broadly welcome the Court of Auditors’ opinion. Certainly its expertise in the field has been useful in informing member states’ ongoing negotiations. 

Emma Reynolds (Wolverhampton North East) (Lab):  It is a pleasure to serve under your chairmanship, Mr Leigh. 

The Minister has set out in a letter to the European Scrutiny Committee, and today in his opening statement, that he agrees with the concern expressed by the European Court of Auditors that the current definition of “donation” is too narrow. Can he say a little more about what progress is being made in this regard? Is he confident that, at the conclusion of the negotiations on the regulations, that definition will be broadened? 

Mr Lidington:  As I said in our debate on 6 February, at the end of the day the current regulations come forward under treaty provisions that rely on qualified majority voting, rather than unanimity, so we do not have a right of veto, whereas we would—I hasten to add—in that one area where we disagree with the Court of Auditors’ opinion. 

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I confess that we find the current position somewhat frustrating. A large number of criticisms and comments have been made by member states—not only by us—about different aspects of the Commission’s draft, but, so far, although there have been vigorous discussions within the working groups, no revised text has been tabled. Until we see the next iteration of the text, it is difficult to make a firm judgment as to the readiness of the Commission to move in response to the criticisms that have been made. 

There is certainly, however, widespread dissatisfaction among member states with various details of the Commission’s draft, so I am reasonably confident that we can get the sort of agreements that we are seeking. However, it would be misleading the Committee for me to say that we were yet in a position to come to a clear verdict on the chance of exactly what will be achieved. 

Emma Reynolds:  As we discussed in February, the proposed regulations involve a shift from a grant-based system to a contribution-based system. The Court of Auditors seems to be content with that shift as long as there is ex post justification of the funds being used. Is that the Government’s position? 

Mr Lidington:  Our position remains, as I said in February, that although we want a rigorous audit after expenditure, the proposed two-year time period to be allowed between expenditure and audit is too long. We also think that it is a mistake to do away completely with the requirement in the current rules for a budget, or at least some sort of statement as to what finances are wanted for, in advance of money being disbursed. As I said in the debate in February, we think that there are problems with the existing arrangements and that some of what the Commission is proposing has merit. 

For example, the Commission’s proposal to raise significantly the permitted limit for donations from non-public sources to European political parties is, in principle, a good thing. I am much less keen on the proposals on co-financing, which seem to lead us towards a situation in which such European political parties still remain too dependent, from my point of view, on revenue from European taxpayers, rather than having rules that give them an incentive to go out and seek public support and public financial contributions. 

Emma Reynolds:  The European Scrutiny Committee asked a very direct question to the Government about their position on the proposal to withdraw funding from two specific European political parties—namely the European Alliance for Freedom and the Alliance of European National Movements. In the Minister’s letter to the Chair of the European Scrutiny Committee, he suggested some principles by which he is approaching the issue. Will he give us a direct answer to the question of whether the Government are against or for the proposal? 

Mr Lidington:  My view—again, as I said back in February—is that the principle involved should be that a political party or foundation loses funding when it breaks the rules that govern the propriety of its expenditure.

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I do not think any member of the Committee has a problem with that. I do have a problem with the idea that the European Parliament, acting as a political body, should make a political decision to exclude some political movements, or transnational political parties, from funding because the majority in the European Parliament disagree with those movements’ or parties’ policies—rather, it should be because there has been impropriety in their spending. 

On the proposed moves against the two groups to which the hon. Lady alluded, I should say that there have been no further developments in the European Parliament since February. We are still waiting to see whether that initiative is taken forward or whether it is just kicked into the long grass. 

The reason why I hesitate before giving an absolute, uncompromising answer to her perfectly fair question is that there is a tension, which I think we all hold in our minds, about the extent to which, in an open, democratic society, we treat as normal democratic forces political parties and movements whose implicit or explicit objective may be the overthrow of those very democratic and pluralist institutions that we stand by. 

All my instincts take me in the direction of being liberal and of saying that we should err on the side of pluralism and diversity and that the majority should not use their voting power to deny a platform, or funding under commonly agreed rules, to a party because they disagree with its policies. However, I also have the thought—we always have, in the back of our minds, the nightmare of Germany in the 1930s—that it is conceivable that one might face a situation in which such a principle might have to be made subject to an exception. 

Emma Reynolds:  Finally, the current regulations state that to qualify as a European political party, such a party must have representation at local, national or European level in a quarter of member states only. As I am sure the Minister will remember, I raised that issue with him in February. I wonder whether he has come around to my way of thinking—he may not have done over the past five months—and decided that a pan-European party should have to be represented in more than merely a quarter of member states. 

Mr Lidington:  The answer is no; the hon. Lady has not won me round to her point of view. I well remember our exchanges on 6 February and, in case my memory was slipping, I looked them up this morning to ensure that my recollection was accurate. However, I do not want to burden the Committee with a repeat of those exchanges. 

The current requirement, whereby to gain recognition a European political party must have support from parties in a quarter or more of member states, strikes me as being about right. I would be uneasy with a system of regulation that appeared to tilt the playing field too heavily against new political forces, that was rather biased towards the larger, well-established political groups and that made it more difficult for challengers to get access to funding. That approach would be likely to add to public disaffection with the EU, which I do not want. 

Jacob Rees-Mogg:  I have quite a number of questions. 

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The Chair:  I am looking forward to all of them. 

Jacob Rees-Mogg:  Thank you, Chairman. The Prime Minister, in his marvellous speech in January, said: 

“There is not, in my view, a single European demos.” 

Does the Minister agree with him and therefore question the ability—if there is no single European demos—to have political parties across the European Union? 

Mr Lidington:  I certainly agree. Not only do I agree, but I have enthusiastically used that same line in formal speeches and in many conversations with my European opposite numbers. 

However, the fact is that we already have a legal framework at the European level that provides for the recognition of European political parties. That no one member state and no one national political party can assemble anything like a majority in the European Parliament has led to the coming together of political families, reflecting different political traditions, within Europe. Such groups have found institutional expression in formal arrangements for European-level political parties. I do not find anything intrinsically objectionable in that, but I agree with my hon. Friend that it is important that we remember where the loyalties and the sense of democratic accountability of our people really lies. 

The United Kingdom is not an exception to the European trend here. If one looks at how people vote in European parliamentary elections throughout member states, in most cases—if not all—it is the state of opinion in each member state, whether or not voters want to give a kick to their national Governments, that determines how they vote in European elections, rather than some consideration about the political families of Europe. 

The Chair:  Order. We have an opportunity for debate later, so let us not have answers that are too discursive. This is the sort of subject that we can ramble on about at some length. Mr Rees-Mogg, will you be brief in your questions? 

Jacob Rees-Mogg:  My questions will be brief individually, but perhaps not so collectively. 

Paragraph 5 of the Court of Auditors’ report, on page 11 of the documents, states: 

“In future, being registered with such a status by the European Parliament will be a precondition for receiving funds from the EU budget.” 

Can the Minister explain what “being registered” means? Does it mean having Members of the European Parliament, or does it simply mean being accepted? 

Mr Lidington:  I will correct this answer later if I am advised that it is wrong, but my understanding is that “being registered” refers to a European political party’s meeting the formal regulatory criteria for recognition and establishment, which will be set out in the Commission’s draft regulation. 

Jacob Rees-Mogg:  I wonder therefore whether the European Parliament, if it is the point of registration, has the ability to refuse a valid registration, or is it a matter without discretion? 

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Mr Lidington:  This is one of the points where we want to nail down the detail in the final version. Our view is that the test should be administrative. If a European political party or foundation meets the criteria set out in the regulations for membership, for financial arrangements and so on, formal recognition by the European Parliament should automatically follow. No political judgment should be imported into such an arrangement. 

Jacob Rees-Mogg:  Following on from the question from the hon. Member for Wolverhampton North East on the banning of two political parties, I turn the Minister’s eyes to page 4 of the document, and the question of 

“the matter of European parties’ compliance with EU founding ‘values’.” 

That matter is essentially an issue of judgment, rather than of pure administration. He will note that the footnote sets out what those values are. Does he think that compliance with those values would be likely to include a political party that was committed to the abolition of the European Union or one that did not believe that the European Court of Human Rights was a suitable jurisdiction for human rights? 

Mr Lidington:  We touched on these issues in our debate on 6 February, and the concerns expressed by my hon. Friend have also been expressed by the British Government. We have been repeatedly assured by the Commission and others that there is absolutely no intention to use compliance to target political parties that question how the European Union is established or even its existence. The intention is instead to provide a safeguard against the rise of outright neo-fascist movements within various European countries, which I think we acknowledge is a genuine risk. We will continue to keep the matter under close scrutiny. 

Jacob Rees-Mogg:  There is an old line that if a man says his word is as good as his bond, one should take his bond; I suggest that the Minister takes the European Commission’s bond in this instance. 

The issue of fines being decided by the European Parliament was touched on. That concerns me, because unlike this Parliament, the European Parliament is not a high court of Parliament. It does not normally have a judicial function or an ability to levy fines, so that would be a significant extension of its power. This Parliament would not claim that power, because fines on political parties not relating to their activities inside Parliament would not be a matter of our privilege. Will the Minister comment on that? 

Mr Lidington:  That is a perfectly reasonable point. It is why, as I said in my opening statement, we welcome the Court of Auditors’ suggestion that the financial penalties should be more automatic than as currently proposed by the Commission. If that suggestion is adopted into the final version of the regulations, it would make the European Parliament’s involvement a matter of administration only, rather than it being given the discretion to use political judgment. 

Jacob Rees-Mogg:  This, you will be glad to know, Mr Leigh, is my final question. How will donations to European political parties be treated for tax purposes and is the Commission potentially getting into tax matters that are outside its bailiwick? If it is going to

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encourage donations from third parties, rather than European parties being entirely dependent on the European Union, would the Treasury be at any marginal risk of loss of revenue? 

Mr Lidington:  I ask my hon. Friend to bear with me. I will try to answer that problem during my final remarks in the debate if advice can be provided. If not, I will write to him promptly about that. 

Motion made, and Question proposed, 

That the Committee takes note of European Union Document No. 6321/13, Opinion No. 1/2013 concerning draft Commission Regulations on the statute and funding of European political parties and foundations and to amend the Financial Regulation (EU, Euratom No. 966/2012) as regards the financing of European political parties; notes that these proposals are still being considered by the Council; and supports the Government’s position that this report is a welcome contribution to ongoing negotiations, and that the UK, along with other Member States, should endeavour to ensure the draft regulations are amended, where necessary, to reflect some of the concerns expressed in this Opinion.— (Mr David Lidington.)  

5.1 pm 

Emma Reynolds:  This is the second time in five or six months that the Committee has discussed the regulation and financing of European political parties, although the difference this time is that we have the opinion of the European Court of Auditors before us. I am grateful to the European Scrutiny Committee for providing us with this additional opportunity. I am sure that by the end of the sitting Committee members will be experts in the finer detail of the new regulation and all its considerations for change. 

The explanatory memorandum for the Commission on the statute and funding for European political parties sets out that the regulations governing European political parties and the rules regarding their funding were established nine years ago. Five years ago, in 2007, these rules were revised and political foundations linked to European political parties were established. Given these changes and the time period, it seems appropriate to take stock of the nine years’ existence of European political parties and consider carefully how those should be best regulated and financed. 

In February, we discussed and agreed—I mentioned it in questions to the Minister—that if there is to be a shift from a grant-paid system to a contribution-based system, procedures must be put in place that guarantee accountability, financial propriety and transparency. I welcome some of the suggestions in the opinion of the Court of Auditors, which I hope will be taken forward in the negotiations on the new regulations. 

I continue to disagree with the Europe Minister regarding the qualification criteria for European political parties. The threshold of parties having representation locally, nationally, regionally or at European level in a quarter of member states is not sufficient. Libertas was given €202,823 ahead of the European elections in 2009, but despite fielding 600 candidates in several member states it gained only one MEP and was quickly disestablished. That funding probably was not appropriate, effective or efficient. In revising the regulations, we have an opportunity to ensure that the threshold is appropriate. It should be

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higher in terms of the number of member parties that the European political parties must have to establish themselves in the first place. 

The Labour party is a member of the Party of European Socialists, which currently is the only European political party that has member parties in every member state. In fact, in some member states it has more than one member party. The Party of European Socialists has another member party in Croatia—its accession will be in a few weeks—the Croatian Social Democratic party, which, incidentally, is in government. 

In total, the PES has 32 full member parties from the soon-to-be 28 member states of the EU and a further number of associate member parties. The Labour party regards the PES as a useful platform for sharing ideas with sister parties across the EU, but as I mentioned in February—I am sorry to repeat myself again—one area worth underlining is that the PES plays a particularly crucial, critical and valuable role in promoting democracy beyond the EU’s borders and providing a useful vehicle through which the Labour party can establish working relationships with other like-minded social democratic parties, particularly in the fledgling democracies in the wake of the Arab spring and in the Balkans, where there is still a lot of work to be done. The PES’s role in that regard is particularly effective. 

Mark Hendrick (Preston) (Lab/Co-op):  I thank my hon. Friend for giving way. 

As someone who has been an active member of the PES in the European Parliament—in fact, I was the Socialist group’s co-ordinator on the economic and monetary affairs committee—I believe the idea that there is not a European demos is absolute rubbish. There is a European demos. The fact that someone in this country from Poland can vote for the Labour party, rather than having to go back to Poland to vote for the social democrats there, and that a British person can go to Poland and vote for the Polish social democrats instead of having to come home to vote for the Labour party here, shows what a pan-European movement we have and shows how those ideas and principles can spread across nations. The idea that people vote just to kick the Government in the teeth is not correct; I think many people, particularly supporters of our strand of thinking, vote for positive reasons. 

Emma Reynolds:  Having worked and lived in different member states, I agree that there is an opportunity for European citizens living in another EU member state to vote in local and European elections, but they cannot vote in national elections without gaining the nationality of that member state. In that sense, there are opportunities for our citizens in Brussels, Paris or Berlin, or elsewhere, to get involved in political activity or just merely to participate in those elections. In my experience of the Party of European Socialists, particularly when we are in opposition, there are many opportunities for us to learn from member parties that are in government or that are also preparing to go back into government. Given that we share values with those parties, they are, more often than not, a much better point of reference than other political parties in our own country. In that sense, the platform that the PES provides is invaluable. 

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In conclusion, I hope that the new regulations are appropriate, and I have sought to suggest some improvements. If there is a change from ex ante to ex post granting of EU funding, it has to go hand in hand with adequate safeguards for transparency, financial propriety and accountability. I think I said in February that I am a pro-European. I believe that the UK is stronger as a member of the European Union. That does not make me a soft friend or a critic of the EU, however; I am a friendly, constructive critic of the EU, and I think that, in all of these matters, in order to inspire more confidence in our membership of the EU, and more widely in the EU as a whole, we have to ensure that moneys are spent in an efficient, effective and transparent way. 

5.9 pm 

Jacob Rees-Mogg:  I am very suspicious of these proposals, as Members will not be surprised to know, but I think the report of the European Court of Auditors is good and sensible in setting out some of the problems. The fundamental problem is that our money is essentially being used for European propaganda to try to pretend that there are European political parties and that we are, as the hon. Member for Preston wanted to argue, part of a single European demos, on which I agree with the Prime Minister that we are not. 

The hon. Member for Wolverhampton North East is absolutely right to be concerned about the ex post facto justification of spending money. That seems to me to be an opportunity for fraud and waste. We need to demand that people set out clearly what they will use the money for in the first place, rather than once they have spent it; there is little chance of getting it back when we say that we will now check how the money has been spent. That is an important point made by the Court of Auditors. 

As I said in my questions, the court is absolutely right to raise issues relating to the powers of the European Parliament. The European Parliament is not a court; it ought not to be judging whether political parties are behaving correctly, because that is anti-democratic. There is already an incumbency bias, which is to say that if a party is already set up and has its hooks into other European nation states, it has a greater ability to get money. That makes it much harder for a brave little party coming forth, which might be fighting for a nation’s independence, to get funds. If public money is to be available, such a party should equally be able to get money, in the same way as the incumbents, the establishment and those who worship the bureaucracy. I am keen to be rigorous about that. 

We should note that in this country we do not fund our parties centrally from the state; we require our parties to raise their funding for themselves. That is a good democratic principle, which encourages people to give money to and work for what they believe in, rather than being on a boondoggle or gravy train, getting money out of the state for doing very little. The principle of state funding is a bad one; once it has been accepted, however, it is right that it should be under the closest possible scrutiny. I am broadly in sympathy with the Government’s position in watching this like a hawk, but I hope that in the negotiations that we will have on re-establishing our position in Europe we can look at whether the practice can be stopped altogether. 

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5.12 pm 

Mr Lidington:  I am grateful to the hon. Member for Wolverhampton North East and my hon. Friend the Member for North East Somerset for their comments. I will not rehearse the detail of the debate that the hon. Lady and I had a few months ago about the criteria for recognition and grant giving to a particular European political party. I probably share her view about Veritas, but the decision to recognise it and grant a sum of money was made by the relevant authorities within the European Parliament. One of the upsides of the Commission’s proposals compared with the current legal arrangements is that they would link money more directly to the level of a party’s representation in the European Parliament. There would be a pot of cash split between all eligible EU political parties; 15% of the pot would be distributed in equal shares between the eligible political parties, and the remaining 85% distributed pro rata to each recognised political party’s representation within the European Parliament. 

Jacob Rees-Mogg:  Does not that proposal encourage incumbency? We may not like Veritas, or think that Robert Kilroy-Silk is necessarily the figure on whom we would like to model ourselves most, but insurgent parties coming from nowhere have a place in political life and should not be less funded than an incumbent purely because they are new. 

Mr Lidington:  It is not an unreasonable test to say that a political party should have greater access to EU funds if it can show that it can achieve a certain level of representation within the EU. As I said, however, any party that gets representation in the European Parliament would be entitled to some element of funding, even if it had the very minimum number of MEPs to take it over the required threshold for recognition. 

I can, however, give my hon. Friend the Member for North East Somerset some reassurance on the issue of taxation, which he raised earlier. We have been clear in negotiations to date that tax matters remain the responsibility of member states. We are not the only ones making that point; a number of other member states are also very much concerned to safeguard their position with regard to competence in tax matters. Article 16 of the draft regulations has been a particular cause for concern. As I said, we have pushed for that to be excluded, among other amendments that we have been seeking, but only when we see a revised version of the text will we be able to gauge how successful we have been in making our case. 

I welcome what both my hon. Friend and the hon. Member for Wolverhampton North East said about the importance of rigorous financial scrutiny. That is an absolutely essential element—the core element—of any changes that are finally agreed. Such additional rigour will be widely welcomed in all of the 27—soon to be 28 —member states by people of all political traditions. 

Question put and agreed to.  

5.15 pm 

Committee rose. 

Prepared 11th June 2013