Reform Of The EU'S Staff Regulations
The Committee consisted of the following Members:
† Barwell, Gavin (Croydon Central) (Con)
† Elphicke, Charlie (Dover) (Con)
Gapes, Mike (Ilford South) (Lab/Co-op)
† Heath, Mr David (Somerton and Frome) (LD)
† Hilling, Julie (Bolton West) (Lab)
† Hopkins, Kelvin (Luton North) (Lab)
† Lidington, Mr David (Minister for Europe)
† Murray, Sheryll (South East Cornwall) (Con)
Shannon, Jim (Strangford) (DUP)
† Thomas, Mr Gareth (Harrow West) (Lab/Co-op)
† Vickers, Martin (Cleethorpes) (Con)
† Zahawi, Nadhim (Stratford-on-Avon) (Con)
Elizabeth Otto, John-Paul Flaherty, Committee Clerks
† attended the Committee
European Committee B
Thursday 17 July 2014
[Sir Alan Meale in the Chair]
Reform of the EU’s Staff Regulations
11.30 am
The Chair: Mr Hopkins, as the member of the European Scrutiny Committee, do you wish to make a brief explanatory statement about why you have referred the documents to this Committee? You have up to five minutes.
Kelvin Hopkins (Luton North) (Lab): It is a pleasure to serve under your chairmanship, Sir Alan. It may be helpful if I briefly explain the background to the documents that are the subject of today’s debate.
The staff regulations set out the terms and conditions of employment for some 55,000 EU staff. They were last overhauled in 2004, when Neil Kinnock was the Commissioner responsible. They cover pay and pensions, working hours, travel and subsistence allowances, performance and promotion and the so-called solidarity levy, which is paid by staff on top of income tax. A very contentious element is the annual adjustment to pay and pensions according to a fixed formula called “the method”. The present reform of the regulations is complemented by an inter-institutional agreement to reduce the numbers of EU officials by 5%. The staff regulations have a significant impact on the overall EU budget. They determine some 70% of the spending under the EU budget for administration, which for the period 2014 to 2020 is set at some €62 billion.
The negotiations on these amendments were difficult and took place at a time when, in parallel, the operation of “the method” for 2011 and 2012 was separately under litigation and negotiation. That and the report of the European Court of Auditors on the substantive reform package were debated in European Committee B on 12 June 2013.
The eventual outcome was a freeze in salary and pensions for 2011 and a 0.8% increase for 2012. The European Scrutiny Committee drew attention to that disappointing outcome as a related example of the Government failing to achieve their objective of “very substantial reductions” in the administrative spending of the EU institutions.
The reform of the staff regulations was eventually adopted last October in the face of the non-blocking minority led by the UK. Some key outcomes are as follows. Working hours increase from 37.5 hours to 40 hours a week. “The method” remains, with amendment, but now without the possibility of departing from the formulaic adjustment even in exceptional circumstances. The pension age increases to 66 for officials working in or after 2013, with a minimum retirement age of 58. The solidarity levy has been set at 6% for most staff and 7% for approximately 200 top staff. There are reductions in travel and subsistence allowances. Yearly monitoring of performance becomes mandatory, and advancement becomes subject to a satisfactory report. Some flexibility
is introduced for institutions to adopt “justified and appropriate measures” to redress geographic imbalances. The UK, for example, is under-represented in the EU institutions.The Government, supported by the European Scrutiny Committee, had pressed for much more substantial reform to promote real budgetary restraint in the EU. They did not succeed. Since then, the Government have informed the Committee that they have been thwarted in their efforts to secure sufficient information, as requested by the Committee, from the Commission to quantify the costs of each of the main heads of expenditure foreseen by the revised staff regulations.
The European Scrutiny Committee first recommended this debate on the regulations on 23 October 2013, the day after the formal adoption of the reform and prior to the regulations coming into force on 1 January 2014. Its intention was to enable hon. Members to explore with the Minister the haste in concluding the negotiations, the disappointing outcomes of negotiations on staffing, the cost savings that will result from this package of reforms, and now, the reasons for the Government’s delay in scheduling the debate.
The Chair: I call the Minister to make an opening statement.
11.34 am
The Minister for Europe (Mr David Lidington): I very much welcome the fact that we are serving under your chairmanship again, Sir Alan. In the Government’s view, the European Union needs genuine and far-reaching reform. That message came through clearly in the European parliamentary elections from citizens in many EU member states. A key element of the reforms needs to be a recognition by EU institutions that they need to give a better account of and show greater economy in the way in which they spend taxpayers’ money. Moneys need to be directed at policies that deliver jobs, growth and competitiveness, and every effort needs to be made to find savings in areas to do with administration.
Given that context, this final package of reforms to the staff regulations does not go nearly far enough. It does not create a modern EU civil service fit for the 21st century nor reflect the realities of the economic situation in which millions of families throughout the European Union are having to make extremely difficult decisions about their own household and personal finances. That was why the United Kingdom voted against the compromise text and, along with our likeminded allies, tabled a minute statement to express our disappointment and our intention to continue to push for further reforms.
Nevertheless, as the hon. Member for Luton North pointed out, we negotiated some useful reforms this time: some will have an immediate impact and others will provide a foothold for further change in the future. The most notable of those was the freeze to EU staff salaries in 2013 and 2014, coupled with an increase in required working hours from 37.5 to 40 hours per week without any equivalent pay increase. Both of those measures will have a significant impact on the salary bill for EU staff. Following this freeze, a new salary adjustment method will be introduced which automatically updates all salaries, pensions and allowances on an annual basis. Notably, the salary adjustment method will now be
subject to an upper limit which will cap annual real pay increases to 2%, a welcome element of restraint but not in our view sufficient.Moving on to reforms of the pensions system, the statutory pension age will be raised to 66 for officials starting work in or after 2014 and that will be combined with an increase in the minimum age for early retirement to 58. A degree of reform was also achieved on the solidarity levy which EU officials pay from their basic salary each month as revenue for the EU budget. That levy will be increased from 6% to 7% for approximately 200 of the most senior, and therefore best-paid, staff in the European Union institutions. We also secured some additional flexibility for the institutions to address the geographical imbalances among officials and a 2017 report on progress. These are useful hooks for the UK to raise this important issue again in the future.
On the second category of reforms that provide useful footholds for the future, I should like to draw the Committee’s attention to changes to the exception clause. As a result of the recent court ruling, the Council was able to deliver a cash freeze to EU staff pay for 2011 and a 0.8% increase for 2012. That is a substantial reduction from the 1.7% increase in both years originally proposed by the Commission. The Commission estimates that this will save €1.5 billion across the current multiannual financial framework period. The fact that the matter had to go to court at all highlighted the need for the exception clause to be reformed.
Following the reform of the staff regulations, the exception clause will now be triggered automatically rather than by the Council on the basis of a qualitative decision that exceptional circumstances exist. A threshold that automatically freezes EU staff salaries in times of economic crisis brings simplicity and efficiency. It should eliminate the need for lengthy legal challenges. We judge that the threshold now set of below minus 3% EU GDP for a given year is far too extreme, but we believe that the introduction of a threshold of a trigger point is worth having. A key objective in a future round of negotiations should be to make that threshold less extreme and less generous than is currently provided.
In terms of the result, we felt particular frustration that we were unable to achieve more over allowances. We achieved small reductions on the travel and subsistence allowances, rather than the complete overhaul we wanted. Finally, there are provisions on transparency and data, including recognition of the
“need for transparency in relation to the personnel costs incurred by each institution and agency with respect to all categories of staff employed by them”.
I hope that all Committee members will share my view that we have a right to expect the EU institutions to provide transparency on publication of data, because that is, after all, about how European taxpayers’ money is being spent.
The European Scrutiny Committee has requested further information on the financial costs of the new staff regulations, but I am afraid that only the Commission is able to provide the information and, despite repeated requests, it has refused to share its calculations with us or any other member state.
I hope that the new provisions on transparency will give us a foothold to increase data sharing in this area and enable us to provide more detailed information to
Parliament in future. However, for the time being, I share the Committee’s sense of deep frustration at the lack of available data, which, frankly, ought to be readily forthcoming.We must consider the reform of the staff regulations in the broader context of the multiannual financial framework deal agreed by the Prime Minister at the February European Council in 2013. This delivered a real-terms cut in the multi-year EU budget framework for the first time in history. The MFF ceilings should be regarded as absolute limits on annual spending, rather than as spending targets to which the institutions should aspire. Through annual budget negotiations, the Government will continue to make the case for lower administrative spending, when it comes to setting priorities within the EU.
The commitment of the institutions to a 5% reduction in headcount by 2017 is another important way in which we will continue to rein in spending. This Government have been active in ensuring that these issues remain on the agenda of working groups, to better hold the Commission to account for the commitments that it has given.
In summary, the negotiations on the staff regulations were difficult and I am disappointed that a more significant level of reform was not achieved. However, there are some interim opportunities for further reductions in costs and Treasury colleagues and I will continue to promote our ambitious agenda to create a modernised and much more cost-effective European Union.
The Chair: Members might like to know that we now have until 12.30 pm for questions to the Minister. I remind them that their questions should be brief. It is open to any Member to ask questions and I will judge whether it is correct to pursue supplementary questions.
Mr Gareth Thomas (Harrow West) (Lab/Co-op): May I start by taking the Minister back to one of his penultimate points on the failure to get detailed, official costings from the Commission on what the staff regs would mean in practice, in terms of admin spending? He said that he has repeatedly requested that information. Will he say what the Commission’s rationale was about why it would not provide that information? Has he raised that matter formally or did the Foreign Secretary raise it formally with President Van Rompuy?
Mr Lidington: On the latter point, it is not a matter for President Van Rompuy, because, serving as President of the European Council, he has no sway over the administrative costs or the degree of transparency shown by the Commission and other EU institutions. We pressed the Commission mostly at official level. To be honest, I cannot recall whether we raised the matter directly. I am pretty certain it would have come up in a conversation I have had with Commissioner Šefcovic, who is responsible for the institutions. Our permanent representative in Brussels, now Ivan Rogers and previously Sir Jon Cunliffe, has been pushing on this issue consistently and has made it clear that this was something that Parliament, not just Ministers, expected to see.
The Commission, in the end, said that it simply did not have such data available—that those did not exist. I have to say that I find that almost incredible, although
I have to take the Commission at its word. It seems to me a most extraordinary system, if there is financial and budget planning without any detailed costings of the particular changes to staffing arrangements. Any business and any responsible public sector institution knows that those sums need to be done fully.The Commission has said that it made calculations about potential savings from the limited reforms that have been introduced, which are in turn based on MFF costings. What it has talked about, I emphasise again, has been savings from ceilings rather than targets: savings from the maximum permitted level of expenditure. It has not sat down and said, “These are the figures for spending on these particular salary costs, allowances, pensions and so on for staff.” I think we are entitled to see those. I hope that Mr Juncker and the new Commission turn over a new leaf and provide greater transparency, because it is what we are all entitled to expect.
Mr Thomas: I agree that it is incredible that the data are not available, but given the concerns of the European Scrutiny Committee, it feels similarly incredible that neither the Minister nor the Foreign Secretary have raised the issue. It may not be the direct responsibility of Mr Van Rompuy, but in that he represents the interests of all nation states, one would have thought that Ministers might have been bothered to elevate the issue to him in order to get him to press Commission officials to give proper, transparent data to those nation states.
Mr Lidington: With great respect to the hon. Gentleman, he misunderstands the relationship between the different EU institutions. The European Council is the meeting place for Heads of State and Government. It does not have any legislative function—in fact, the treaties explicitly bar it from any legislative function—nor does it employ more than a small number of staff. It is the Commission that is the big spender in terms of EU institutions, although there are others—the Committee of the Regions, the European Parliament, the European Economic and Social Committee and so on—that also have budgets of their own, and it is the Commission that tabled the proposals on staffing regulations. The regulations were presented to the Council by the European Commission, and it is there, as the custodian of EU spending, that we rightly look for the explanations that taxpayers would expect.
Mr Thomas: I notice that the Minister has glossed over the point about his not raising the issue. It is a matter for which he and the Foreign Secretary are responsible. Why were Ministers not pressing directly for the information, instead of just leaving it up to officials?
Mr Lidington: I really think that the hon. Gentleman is making mountains out of molehills. There is no doubt on the part of the Commission about how strongly the United Kingdom Government felt about the issue, although we would not have made repeated requests to the Commission had we not believed that the provision of the information was important. There is no misunderstanding on the Commission’s part about the significance of the question. Rather than trying to make some pretty feeble party political points, the hon.
Gentleman would be better off constructing a bipartisan critique of the Commission and working across the House to put pressure on the European institutions to deliver what our voters and taxpayers expect them to provide.Mr Thomas: It would have been nice to get involved in that sort of bipartisan work, but in the first place it requires the Minister to be able to get the information so that one can indulge in bipartisan critique. I say gently to him that he is a good Minister, but he appears to have been asleep at the wheel on this particular issue, not least given the consistent concerns of the European Scrutiny Committee.
None the less, let us move on to another question. How much was the Minister hoping the Commission would be able to save? How much was he pressing for in terms of savings from this budget?
Mr Lidington: We were looking not just for the maximum possible savings but for a restructuring of the system of additional payments and allowances, so that we had a system that was not only much more transparent, but much simpler than the one we have today, where there is not only a salary, but household allowances, an additional payment if the person is married, an additional payment if the person has children and an additional payment if the person is posted to an EU state other than their home EU state. Even if that is a posting from Belgium to Luxembourg, they still qualify for the extraterritorial posting allowance.
We also wanted a reduction in Heading 5 of the multiannual financial framework, which is the heading of which the funding of the staff regulations provides part. The MFF sets the ceilings of actual cost. Heading 5 sets the maximum that can be spent on administrative costs. The staff regulations do not lay out figures; they set out a framework of the rules that should govern how staff pay, allowances and pensions are settled. We got a reduction in the overall ceilings in the MFF, but we did not get what I would have liked to see, which was a bigger proportionate reduction in Heading 5. I argued that in open Council and bilaterally with the Commission. Cutting the administrative costs in Heading 5 would have been a very good signal for the EU to send, and would have allowed greater headroom to focus on measures to create jobs, promote growth and provide greater scientific innovation within Europe. It is a great regret that they did not do that.
Mr Thomas: The Minister said that he and other Foreign Office Ministers wanted to get a restructuring. One can certainly support that aspiration, but how much was the Minister trying to save from this heading? As a result of pressure from the Opposition, which led to a vote in the House, the Government finally agreed to press for a reduction in the MFF, but one expects Ministers to follow through on the details. I gently ask again: how much was the Minister hoping to save from this particular heading?
Mr Lidington: The hon. Gentleman protests too much and neatly glides over the fact that part of the problem that this Government faced was our inheriting a situation in which the United Kingdom’s net contributions to the
European Union had gone up significantly, because of the sell-out that took place under the Government of whom he was such a distinguished Minister.The objective of the Prime Minister, the Chancellor and the Foreign Office in the negotiations was first to get the greatest possible reduction in the overall ceilings of the MFF. We said from the start of the negotiations—we said this openly in the House—that that, ahead of any decisions on sub-headings in the budget, was our key priority. We were not prepared to trade off, as some partners wished us to do, additional spending or protected spending in the areas that we favoured in return for allowing others to see an increase in agriculture or regional spending that would have led to upward, rather than downward, pressure on the overall budget ceiling. Secondly, we argued that our other key priority was to maintain the United Kingdom’s abatement intact. We succeeded in both those objectives.
An important but subsidiary objective was to get a reallocation of priorities within the different budget headings of expenditure. We were partially successful on that. We managed to get a measure of reduction in agriculture and structural cohesion spending, but the changes were not as far-reaching as we would have liked. We did not secure as significant a reduction in Heading 5 administrative spending as my ministerial colleagues and I wished to see, but the overall MFF required unanimous agreement from all countries—both those that favour the high spending and those that want to see a reduction in spending. The Government can hold their head up high, particularly compared with the budgetary record of our immediate predecessor. The deal that we came back with has protected the United Kingdom’s abatement, which is worth billions to this country, and has resulted in a lower overall ceiling on EU expenditure—the very first time that that has happened in the history of the European Union.
Mr Thomas: Let me keep it simple for the Minister this time. How much is he hoping to save as a result of changes to the staff regs?
Mr Lidington: I will try to be simple for the hon. Gentleman. The staffing regulations do not and cannot specify the figures that he is asking for. The staffing regulations provide the framework of rules within which money is allocated to individual members of staff. The sums of money involved are determined by the ceilings established in the MFF. Had we managed to get a big reduction in heading 5, administrative spending, that would have created a lower ceiling on what it was possible to spend on staff, and that would then have driven the necessity for a more far-reaching change to the staffing regulations than there was a majority to secure at the end of the day.
I have given an explanation, but only the Commission, which is the employer of most of the staff, the custodian of how the rules apply and the writer of cheques to people, is able to provide the detailed costing that the hon. Gentleman has asked for, and the Commission tells us that it does not have such calculations.
Mr Thomas: I am surprised by the Minister’s answer. The explanatory memorandum that he sent on 16 January states:
“The Commission has advised that it expects the proposed changes to result in savings of €1.3 billion by 2020, with a further €1.1 billion per annum following that.”
Is that an acceptable level of savings for the Minister, or did he want double that? What was the objective in terms of financial savings under this heading?
Mr Lidington: The hon. Gentleman is getting confused again. I will try to be clear at the cost of repeating myself. The figures that the Commission has presented as savings are savings based upon maximum permitted spend, upon the ceilings set out in the MFF. The Commission has always fought shy of saying what the costs would be. That is the difficulty that the Government have had in providing the information that we would wish to provide to the Scrutiny Committee.
Mr David Heath (Somerton and Frome) (LD): It seems to me there are two classes of member states where one might have expected an enthusiasm for substantive reform in this area. First, there are member states that are substantial net contributors to the EU budget that are facing domestic austerity, but nevertheless will end up footing the bill for the administration of the EU. The second are member states that, as a result of economic difficulties, have had massively to cut the terms and conditions of their own public servants, and the disparity between those domestic public servants and those who work within the European Union is becoming wider all the time.
Did the Minister’s colleagues in Council, who represent the countries that fall into such categories and who were not part of the minority led by the UK, explain how they would justify their position to their electorate, or indeed to the diplomatic service sitting behind them who will probably have been paid a lot less?
Mr Lidington: My hon. Friend makes a telling point, but it is for other Governments to explain their position. If I can summarise the approach of some of the net recipient countries as I understand it, their priorities were to maintain or increase the EU spending programmes that provided significant receipts to those Governments. For example, in their negotiations, France, Ireland, Lithuania and Poland—perhaps not so much Poland, but the other three—were always clear that maintaining, or even increasing, agricultural spending was absolutely key. For Poland and most of the central eastern European countries, maintaining or increasing spending on structural and cohesion funds was the key objective.
When it came to the debate about administrative spending, and, later, to the debate about the staffing regulations, that was a less significant issue for most countries than it is for us. Heading 5 represents roughly 7% of the total MFF. The administrative spending covered by the staffing regulations is about 70% of that 7%. For those other countries, therefore, the short answer is that they had other fish to fry, and their budgetary negotiating priorities lay elsewhere, rather than with dealing with this question.
Mr Heath: I am certainly familiar with the priorities in agriculture spending, as the Minister will recognise. However, is there not a realisation that every penny that goes on administrative spend is not available for programme
spends in recipient countries? The lesson that really has to be learned is that, at some stage, the gravy train (continuation) order has to be brought to an end.Mr Lidington: I completely agree. Every Government in European Union member states should, frankly, see a reduction in administrative costs as a win for them and their electorates.
Kelvin Hopkins: The negotiations were shut down very quickly at a meeting of COREPER by the Commission and its collaborators in the European Parliament. Was that simply a way of getting the debate out of the public’s mind so that the Commission could carry on as usual and stop Britain raising these issues?
Mr Lidington: At the risk of sounding cynical, I think that EU institutions had a vested interest, or felt their staff had a vested interest, in keeping any changes as light as possible. It is also the case that there is a reluctance on the part of a number of people at senior level in the institutions to challenge long-established privileges, which are, of course, championed by the trade unions of the staff employed by the European institutions.
The history of the negotiation is that trilogues between the Parliament, the Council and the Commission ended on 18 June last year, and the COREPER vote followed on 28 June. The staffing regulations were agreed by the Council of Ministers on 10 October and came into force on 1 January this year. Once the Council had adopted its final position—once it was clear that we no longer had a blocking minority to hold to a hard line—the trilogues and the votes happened quickly.
The negotiation in the Council had been going on since December 2011, when the draft proposal was published, so it was a prolonged negotiation. Then, largely at the initiative of the European Parliament, it became tied politically to the outcome of the overall MFF negotiation. A number of member states took the view that, although they would have liked greater economy on staffing matters and more changes to the staffing regulations than were achieved, that was relatively small beer in terms of the overall context of the MFF, so they were prepared to see a deal done.
The other thing that needs to be borne in mind is that we wanted to make sure that the salary freeze for 2013 and 2014 went through. The Commission was telling the Council that it had legal advice that if the freeze on salaries for those two years was not implemented promptly, it could become illegal. That was another reason why some people moved towards accepting that outcome, even if some states—other than us and our like-minded allies—regarded it as far from perfect.
Kelvin Hopkins: As someone with strong trade union associations I understand entirely that staff will want to negotiate for better pay. However, there is a principle in trade unionism and negotiation called comparability. How do the salaries at the Commission and the European institutions compare with those of staff working in Governments and Parliaments in the member states and those of our own excellent departmental and parliamentary staff in particular? The suspicion is that they are paid substantially more to buy their loyalty.
Mr Lidington: EU institutions’ staff enjoy a pay, pensions and benefits package that is far more generous than that of civil servants in central Government departments in the United Kingdom as well as, we believe, in the majority of EU member states. We raised that discrepancy with the Commission as well as the fact that year-on-year salary increases for EU staff amplify that gap, especially in a context where civil servants in this country had a cash pay freeze for two years followed by annual increases of just 1%.
During the negotiation, after our representations on those lines, the Commission produced a data table that showed that, apparently, EU staff were worse off than their UK counterparts. That was used by those representing EU staff to attack our position, but those figures were inaccurate in the extreme. To give a few examples, the EU claimed that its officials retired later than British civil servants, but that was based on out-of-date information: the current UK scheme limits early retirement to 55 and ordinary retirement is moving to match the state pension age, which is currently 65 and is planned to increase to 68. After this reform, EU officials’ standard retirement age will increase to 66. EU staff benefit from an automatic salary adjustment that has increased their salaries every year in the period during which British civil servants have had a pay freeze or a 1% increase, with the single exception of 2011, which was after a lengthy court case.
To look at other forms of remuneration and benefits, only about 0.5% of UK civil servants earn more than €100,000 a year, whereas about 28% of EU Commission staff earn more than that. Even if we go beyond the top-earning EU civil servants, on 2013 calculations the average EU official with an average salary and average family of two children gets more in allowances each year—more than €32,000—than the average UK civil servant earns, as the UK median basic salary is €31,900. Of course, UK-based civil servants do not get allowances at all, so excluding salary and just looking at allowances the average EU official gets more than the average British civil servant’s salary package, which illustrates the hon. Gentleman’s point.
Kelvin Hopkins: I thank the Minister for that excellent information. Normally employers try to reduce expenditure by constraining pay rises and, naturally, employees try to increase them through negotiation. In this situation the Commission, which is in effect the employer, is doing the opposite: it is trying to increase salaries. I say that it is doing that to buy their loyalty.
Mr Lidington: I always enjoy debating with the hon. Gentleman. On this point—this is perhaps unusual—we are in almost complete agreement. I completely accept his point that the duty of trade unions is to fight their corner for the interests of their subscription-paying members. However, one would expect a negotiation to take place between employer and union, with an outcome that represents a compromise between the two. In the present case, the employer—the Commission—was doing almost nothing to have such a negotiation, but was working with the staff trade unions against the Governments of member states. Of course, it is the Governments of member states who have to go to their taxpayers to ask them to fork out from their hard-earned salaries to pay the staff costs of the EU.
Nadhim Zahawi (Stratford-on-Avon) (Con): Sir Alan, if you were listening to this debate or reading its transcript and saw the line of questioning by the shadow Minister, you could be misled to think that the previous Government had a strong track record of being financially prudent with UK taxpayers’ money.
Will the Minister remind us how much of the rebate was given away by the previous Government, and how much did the EU budget go up under them?
Mr Lidington: In the 2005 negotiations, the then-Government agreed to a reduction in the rebate of something like a quarter of the total. They did so because they agreed to treat various elements of the budget as unabatable in the future, when they had been abatable since the Fontainebleau deal.
I understand, from memoirs written by significant players at the time, that one of the difficulties was that the then-Chancellor and the then-Prime Minister were not in the habit of sharing information with each other, so it was difficult for there to be a coherent United Kingdom position. The previous Government have a record of being ill co-ordinated on budgetary negotiations, and the outcome harmed the interests of British taxpayers considerably. That legacy is one with which this Government have had to wrestle.
Mr Thomas: I am fond of the hon. Member for Stratford-on-Avon, not least because he backed us in the crucial vote that forced the Government to take a tougher line in EU budget negotiations. I therefore entirely understand his need to re-ingratiate himself with his leadership.
Regarding the further amendments that are likely to the next staff regulations—apparently before the next multiannual financial framework negotiations get under way in 2020—will the Minister tell us what work is being done by the Foreign Office to prepare for negotiations on those regulations? How does he think we can avoid the debacle we are now debating?
Mr Lidington: Legally, the staffing regulations do not have to be addressed again until 2023. The hon. Gentleman is right that it is reasonably likely that they will, in practice, be looked at simultaneously with the next MFF negotiations. That has tended to be the pattern. If I have been mistaken, I will correct the record later, but that is my understanding.
It will be for my colleagues in the Treasury, as well as the Foreign Office, to decide on what our strategic objectives and tactics should be. We will certainly continue to take every opportunity to make the points made by my hon. Friend the Member for Somerton and Frome about the contrast in pay between civil servants in most member states and those in the EU institutions, and about the fact that every euro spent on administration is a euro that cannot be spent on measures that might contribute directly to job creation, at a time when millions of people on this continent are unemployed. As we get closer to when those matters come to be renegotiated in detail, we will come forward with proposals.
Mr Thomas: I would be grateful if the Minister could encourage his officials to start some work on that area. When I take over his desk and his job I do not want to
have to get them starting from scratch in this area. So he could be helpful here. Does he think this is an issue that Lord Hill might take up in his new role?Mr Lidington: If I may deal first with the hon. Gentleman’s earlier point. There is a bit of uncertainty about whether things have to be reopened in 2020 or 2023 because the exception clause and solidarity levy expire in December 2023 and the staff regulations need to be renewed before December 2023. There are some minor provisions that calculate averages that expire in 2020. So it is possible that the Commission will choose to renegotiate before 2023 to avoid two separate negotiations and to link staffing regulations to the next multiannual financial framework.
It is a perfectly honourable ambition for the hon. Gentleman to hold, but I think he is counting a number of chickens. At the moment we are using the working groups to continue to request additional data so we can hold the institutions to account for how much money they are spending and also for the quality of outcome that they are getting for particular levels of administrative spending. I think that that information as we dig that out will enable us to be in a more powerful negotiating position next time round and to go and make the argument to colleagues in other Governments that this is something that should matter more to them as well. We continue to work with those member states who were alongside us when it came to the vote against the MMF—the Dutch, the Danes, the Austrians and the Czechs—and we are looking to enlarge that group for the future.
Sheryll Murray (South East Cornwall) (Con): Bearing in mind the ambitions of the shadow Minister, could my right hon. Friend remind us what the Labour party achieved the last time it was negotiating? For example, who signed up to the bail-out mechanism which the present Government had to rectify to protect UK taxpayers’ money?
Mr Lidington: Again, my hon. Friend is right to remind us that not only did the last Government sign us up to a mechanism that would have helped to bail out eurozone countries in difficulties, but they did so on their last weekend in office knowing that they were making a decision and entering into a commitment that they would have no responsibility for implementing. It is a significant achievement of this Government, and this Prime Minister personally, that they managed to extricate the United Kingdom from that mess into which the previous Chancellor of the Exchequer managed to entangle us.
I did not respond to the hon. Gentleman’s point about Lord Hill. Obviously it is yet to be settled exactly what role he will play in the next Commission. Having known him for more than 25 years I can say with absolute confidence that he has skills and experience that will equip him not only to be a first-class United Kingdom commissioner but a man who will show energy and determination to help drive through policies that will make Europe as a whole work better in terms of competitiveness, job creation and growth for the future. That is something that will be in the interest of citizens of every member state.
Nadhim Zahawi: I just want to set the record straight, Sir Alan. I am likewise fond of the shadow Minister, not least because he is probably one of the better performers in his team. I wish him well in the future leadership election. I would certainly back him for that. In the four years and two months of being in this House I have never backed Labour on any vote so he may want to check his records.
The Chair: I am not quite sure that there is question there.
Mr Thomas: I am grateful for the opportunity to come back again. I want to ask the Minister about the attractiveness of these terms and conditions for staff working in the Commission in the light of the comparatively low levels of Brits working in the Commission and to what extent he thinks that there is an opportunity—perhaps through publicity about this package or through other conversations that he is having both domestically, with UK civil servants, and with the Commission—to turn around the low representation of Brits in the Commission.
Mr Lidington: Since coming to office, the Government have made a big effort to address the under-representation of the United Kingdom in the institutions. We established an EU staffing unit in April 2013 to address the issue and to try to reverse the trend. Even before that, we had put together a package of support for what was a relatively small number of people but people who could be mentored to try to fast-track them through the EU application process. Again, from a quite early stage, we mounted an effort to communicate, via universities throughout the United Kingdom, careers advisers, heads of language departments and students directly, the opportunities that there were for rewarding careers in the European institutions. There is a very long way to go.
I do not think that the salary package is a deterrent for anyone wanting to work for the European institutions, unless they are making a comparison with big financial services bodies in the private sector. The right comparator would be comparable public sector jobs in this country or other countries, and on that basis people get a very good deal. I think that there are deeper issues to do with this country’s long history—made worse under the last Government—of neglecting language teaching in schools. Also, our economy is so globally intertwined that perhaps, if people are looking to work abroad for part of their career, Brussels seems a bit less attractive than the opportunity to work in New York or Singapore, or Rio in the future. However, we need to press on as a Government, because it is in our interests to have more UK citizens in those institutions.
Mr Heath: May I add my own views on Lord Hill of Oareford? I found him an excellent and capable colleague when I was Deputy Leader of the House and I can think of no better way of reinforcing our criticism of the unelected European Commission than by sending there someone who, in common with the present Commissioner, has never been sullied by offering himself up for democratic election.
Mr Lidington: I note my hon. Friend’s comments.
Mr Thomas: The discussion that we have been having about the noble Lord Hill is important in this context, because as the most senior British insider in Brussels, he will potentially have an opportunity to influence debate about future changes to these staff regulations. Surely, given the concern that there has been on both sides of this Committee about the lack of data that we have been able to get about the detailed costings, making that a priority for Lord Hill might be a very useful exercise. With that in mind, perhaps the Minister will be able to update us on whether the Prime Minister intends to follow through on his commitment to offer some pre-European parliamentary scrutiny of Lord Hill for this Parliament.
Mr Lidington: On the first point, obviously when Commissioners take office they are not subject to a mandate from their national Government. They act as members of the college taking decisions, one hopes, on their merits. I certainly hope that my noble Friend Lord Hill will have in mind our experience in this country of the disparity between paid allowances at EU level and those of national civil services. I hope that other members of the Commission will also recognise that these current arrangements for their staff are indefensible in the eyes of European taxpayers.
On the hon. Gentleman’s point about hearings, the Commissioner-designate is not a Government officeholder. It is not a matter of the Government deciding to require the nominee to appear in front of the Committees of the two Houses. It is for Lord Hill himself to decide how he wishes to respond to those invitations.
The Chair: I thank the Minister, though we seem to have drifted slightly away from the scope of the motion. There appear not to be any more Members who want to ask questions so we will proceed to debate the motion.
Motion made, and Question proposed,
That the Committee takes note of European Union Document No. 18638/11, a draft Regulation amending the Staff Regulations of Officials and the Conditions of Employment of other Servants of the European Union; further notes that this Regulation is now in force; further notes that the UK voted against the Regulation at the Council of Ministers in October 2013; regrets that, in the context of the first real-terms cut to the multi-year EU Budget framework secured by the Prime Minister in 2013, the final Regulation was not more ambitious in achieving genuine reform and real budgetary restraint in the EU Institutions; and welcomes the modest reforms and savings that were achieved.—(Mr Lidington.)
12.26 pm
Mr Thomas: Perhaps I was a little harsh at the beginning towards the Minister. He is the only pro-European left on the Government Front Bench. Those of us in the House who are pro-European should cherish him a little more.
The draft regulations amending the staff regulations of officials and the conditions of employment of other servants of the European law constitute, I understand, the legal framework of employment and working conditions of some 50,000 individuals who work in the EU’s institutions and agencies. Together, these regulations are effectively responsible for a substantial proportion, almost 70%, of EU spending on administration, which constitutes roughly 7% of the budget for 2014 to 2020. That is, in essence, just over £43 billion of expenditure
by the EU. We know that the Government wanted that figure to be lower. What we do not know is by how much. I say gently to the Minister that it would have been useful to have had more clarity earlier from him about his overall target for the reduction of spend in this area.In reply to my hon. Friend the Member for Luton North, the Minister explained a little what he thought the motivations were for the hasty decision to conclude negotiations on the regulations and take the vote in COREPER. That surely underlines all the more the regrets that Ministers perhaps did not take the issue more seriously in their bilateral discussions with other member states. Although it is good that UKREP and Foreign Office officials were pushing this case, in my experience of European negotiations, it is when Ministers push hard that there is a chance of making things happen in the further discussions that the officials then take forward.
I am disappointed that there was not more effort by the Minister. I recognise that he has a difficult diary, having to fight off Eurosceptic demands around the EU referendum. Nevertheless, given the concerns that were expressed consistently by the European Scrutiny Committee in this area, it appears to us as though Ministers’ eyes drifted away from this particular ball. It would be helpful to have a little more clarity from the Minister on the negotiation intentions for future changes to staff regulations. We can never start pressing on those issues too soon. It might be useful to continue pressing the Commission to produce a detailed analysis of the costs of the existing staff regulations and their implications.
Sheryll Murray: The hon. Gentleman is talking about costs. Will he tell us exactly how much of our rebate Labour gave way when it entered negotiations?
Mr Thomas: I apologise to the hon. Lady for not backing her elevation to the Front Bench harder than I have backed the elevation of the hon. Member for Stratford-on-Avon, but she might do well to go back to previous EU budget negotiations and look at our success on, for example, reducing the proportion of the EU budget taken up by the common agricultural policy. I am sure she will be delighted with our progress on that.
Sheryll Murray: The hon. Gentleman has just mentioned the reduction in the cost of the common agricultural policy, but he has not answered my question. How much of the rebate did Labour sign away?
The Chair: Order. I warn the hon. Member for Harrow West that, again, we seem to be drifting from the scope of the regulations. Will he conclude his remarks?
Mr Thomas: Okay. Tempting as it is, I better not follow the hon. Lady’s line of questioning to avoid incurring your displeasure, Sir Alan.
In my questions to the Minister, I said that Opposition Members have pushed hard for Ministers to take a tough line in the multiannual financial framework negotiations, and we are delighted to have support from both sides of the House. The Government, although late in the day, sided with the House on that question, but Ministers need to follow through on the detail of
EU budget negotiations. The staff regulations might not excite huge public interest, but they are nevertheless a key area in which a little more progress could have been made.In the light of our discussions and the concerns within the European Scrutiny Committee on how unsuccessful the Government have been in their negotiations on the staff regulations, I hope that the Minister will take the opportunity of the many conversations he will have with Lord Hill to impress on him the importance of taking up this issue when he goes to Brussels. As part of that, perhaps the Minister will impress on Lord Hill and the Prime Minister the need for the noble Lord to face proper parliamentary scrutiny here in the UK before he goes to face such scrutiny in the European Parliament.
12.33 pm
Kelvin Hopkins: The European Scrutiny Committee was seriously concerned about these matters, and rightly so. The Government are clearly still concerned, but it is important that we keep pressing them to negotiate or to apply pressure on such matters. Some 40 years ago, I was a young staff member of the TUC economic department. We had a colleague who, having no particular view on the European Union—or the Common Market, as it was then called—was suddenly offered a job in the European Commission at a mind-boggling salary. He was not subject to British taxation—the standard rate was then 33p in the £1, or 33%, and the top rate was 83%—but some other much more modest taxation, plus allowances. His monthly take-home pay was a multiple of what we were earning at the TUC, and we were not badly paid ourselves, so I had an early understanding of what staffing in the European Commission was like. Not surprisingly, overnight he became a tremendous enthusiast for the Common Market. That is a genuine story, although it sounds amusing now. He was a eurosceptic and voted no in the referendum. In fact, he reinforced my view that we should vote no in the referendum, which I did.
I should also mention the 2005 deal, for which I partly blame myself because I was one of the Back-Benchers who nagged our Front-Bench team about the cost of the common agricultural policy. I went on and on about it, and I was pleased when the Prime Minister took it upon himself to try to negotiate a better deal on the CAP, so I was slightly optimistic that we might get a deal out of it. What happened was that President Chirac and the French dug their heels in and said, “Don’t touch the common agricultural policy or we will take away our bat.” It was like stirring up a hornets’ nest; it was quite tense. In exchange for the non-deal on the CAP, we gave away part of our budget rebate, about which many Labour Members were concerned at the time. I repeatedly said it was not a good deal, and I was supported by The Economist , a magazine not known for its left-wing tendencies or euroscepticism, which said that the deal was so bad that no deal would have been better than that deal. The sting in the tail is, as I have suggested, that if the Government are serious about this they should try to get back what was given away. I look forward to the Minister thinking about that and possibly challenging the European Union to get back what was given away in 2005. That would be a sensible way forward, although it might be fraught with some political difficulty.
It is clear to me that the European Commission wants to ensure loyalty to the Commission, the European Union and the future super-state of Europe, or whatever it is. It does not want people simply to take their money and be loyal to their countries. I will not be bought and desert my loyalty to my country in that way, but some people no doubt will. It is the way of the world that some bureaucrats are attached less to principles than to high salaries. The European Commission knows what it is doing in creating an enormous cohort of extremely loyal, highly-paid people who will ensure the European Union is raised above the interests of member states. That is the reality that underlies our discussion.
I take some issue with the shadow Minister, my hon. Friend the Member for Harrow West, who talked about being pro-European, but I am pro-European: I am passionate about Europe, I am culturally European and I go to Europe for my holidays—indeed, next week I shall be making researches into the vineyards of Burgundy. I try to speak French, in a way, and other languages. I love European music and everything else about Europe. However, Europe is not the European Union. The European Union is a form of government. It is like loving Britain, which I do—it is my country—without loving the coalition Government. There is a difference between loving Europe—the continent, the people, the culture, the history and the music—and loving the way it is governed through the European Union. I want to see a different form of government in the European Union based on independent member states co-operating voluntarily, rather than being governed by a superstructure at the European Union level. This proposal is about the European Union buying the loyalty of bureaucrats by paying them large salaries. I hope that one day we can start to challenge that more seriously.
The Chair: I am very grateful that you enlightened us about your holiday plans.
12.39 pm
Mr Lidington: I thank the hon. Members for Harrow West and for Luton North, and my hon. Friends the Members for Stratford-on-Avon, for South East Cornwall and for Somerton and Frome for their questions and contributions to the debate. I also thank the hon. Member for Harrow West for the compliments he was kind enough to bestow. Having done this job for more than four years, I look back with some bemusement at the previous Administration’s merry-go-round that managed to go through 12 Europe Ministers in 13 years, which I think was some sort of record in its own right. I wish him equal longevity to myself as the shadow spokesman for European affairs.
The hon. Gentleman had a bit of a nerve in lecturing this Government on negotiating tactics for European budgetary matters, because as both my hon. Friends the Members for South East Cornwall and for Stratford-on-Avon and the hon. Member for Luton North said clearly, the previous Government’s record shows that they not only failed to secure the modest changes to staffing regulations that we have, but threw away—whether
deliberately or in a fit of absence of mind I am uncertain—a considerable proportion of the United Kingdom’s budget at a direct cost to taxpayers in this country.Kelvin Hopkins: Will the Minister say here and now that he will do his best to try to get back what was given away?
Mr Lidington: I am happy to say that I want a budget for the European Union that maximises savings and focuses much more rigorously than the current budgetary framework on those areas of spending that will give real value added in terms of job creation, competitiveness and economic growth, because, frankly, that is what matters to most people in Europe.
The hon. Member for Harrow West asked in particular about agriculture. The Government’s wish when the multi-annual financial framework negotiations began was to see an agreement to phase out altogether the classic system of farm support through pillar one payments, because we view that as an outmoded system for helping the countryside. It is one thing to say that one might provide assistance for the rural economy, for remote and mountainous areas and for the environmental stewardship benefits that flow from a successful agriculture sector, but the old-fashioned method of farm support was invented in the aftermath of world war two and it should not have that central place in EU spending today. We were not able to achieve that objective, although we did secure a reduction in agriculture’s share of the European budget, but we remain committed to securing further agricultural reforms in the future.
Our key priorities ahead of any decisions on individual budget heads, including administration, were to secure downward pressure on the overall level of spending—because that is the key element of control available—and to protect the value of the UK’s abatement and both of those were secured. It would have been better if, alongside the hon. Gentleman’s questions and his criticisms, which he is free to make, he had given the Government credit for managing to secure the protection of the abatement and those significant savings in overall EU spending, which are more than any previous Governments managed to do.
We remain committed to seeking further reform; we are not simply sitting back and waiting until 2020 or 2023 when any formal negotiation is likely to take place. We are using the discussions in the working groups in Brussels, which have been ongoing since the conclusion of these negotiations, to press for the detailed data that will strengthen the case for additional reform of staffing regulations and administrative costs and press the arguments for greater transparency, which European citizens in every member state have the right to expect, and to use that information to build momentum for more far-reaching reform next time around.
The Chair: We come to the conclusion of the debate. We have had an interesting journey through Europe, via staffing regulation changes.