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Lord Barnett: My Lords, I do not expect the noble Lord to be quite so violent as my noble friend Lord Shore, but I was putting in perspective the cost, at £1 billion, out of £925 billion GDP. That is all I was doing.

Lord Boardman: My Lords, I appreciate the noble Lord's point. It is still a substantial sum of money. The unfortunate point is that it is never openly presented to the public.

The expenditure side was not the object of our inquiry; however, it arose in various forms. First, manifest inefficiency and fraud, which is topical, was one of the first points. As I am a farmer and therefore have an interest to declare, I shall not comment on the CAP. I agree with the point in the committee's report that those who qualify for EMU should not be allowed in on the Cohesion Fund. In relation to the Structural Fund, many noble Lords who have visited parts of Europe where some of that money has been spent--for example, the island of Madeira--must wonder about such lavish expenditure at public expense. The report touched on co-financing. Co-financing has advantages, provided that the savings made are not applied by the Community in other ways so that the total bill by the Community is as large as it was before the Community passed part of that burden on to the nation states. I believe also that member states must be bound to make up the deficiency received from the Community to whatever grant was co-financed. It will mean that those states which make a large CAP contribution, such as France and Ireland, will inevitably suffer severely from

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any co-financing. On that basis, I assume that obtaining the support of such countries for this method is somewhat remote.

I hope that the report, which has been prepared over a short period, is of some help to the Government in their forthcoming negotiations in Berlin.

8.54 p.m.

Lord Bruce of Donington: My Lords, it is normally easy for me to find common ground with the noble Lord, Lord Boardman. I was therefore surprised to hear him complain today that there had been so much argument about expenditure on the European Union when the title of the report referred to future financing. On reflection, I believe the noble Lord will agree that in the latter part of his excellent address to your Lordships he himself ventured onto the expenditure side.

It is immediately clear, if one is to bring the question of fairness and justice into the financing of the European Community, that one must have regard to how the sums are expended to the benefit of the various states that contribute. Therefore I must repudiate that whole approach, and emphasise that it is vital that we concentrate on the expenditure of the European Union, particularly under circumstances where regularly, year after year, a sum of 3 billion ecus (£2 billion) disappears into thin air. I should have thought that the expenditure did merit some consideration. Indeed, the whole question arose from the Commission's own proposals in that regard, which followed the plan for the year 2000. I refer, for the purposes of greater accuracy, to the communication published by the European Commission on 7th October last year. In that document the whole case for the revision of the scheme for financing the European Union was set out, together with a considerable endeavour to show how the benefits were distributed and how, therefore, the whole matter could be made clearer.

On the question of budgetary balance, the Commission states at page 17 of its report:

    "Budgetary balances (also called net balances), measured by the simple difference between contributions to and receipts from the EU budget, represent only a narrow view of, and fail to fully account for, the benefits accruing to Member States from participating in the EU".
It is precisely because the Commission, with all the skills available, either indigenously or as a result of the lush hiring of consultants, has been unable to specify in any monetary terms the benefit, for example, that the United Kingdom might have received in return for the contributions it has made--always, of course, agreeing immediately that every member state has to pay for the cost of administration. That cost should be shared roughly proportionately among member states.

At page 21 of the report, the Commission elaborates. It states:

    "Graph 7 shows that the mechanism has been effective in reducing substantially the negative balance [the British abatement] of the United Kingdom. However, even after the rebate the United Kingdom remains a larger net contributor to the EU budget than Member States with a higher capacity to pay".

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So the case for something reasonably approaching--I am careful not to say absolutely equal monetary terms--a juste retour is clearly envisaged.

I congratulate my noble friend on the report. It has been a matter of infinite ingenuity to secure the result that was achieved. The difficulty is that it is a unanimous report, and in that it differs substantially from the reports produced by Select Committees in another place. There, differences of opinion on the Select Committees are permitted, indeed encouraged, because they make for sharper thinking and greater articulation of arguments, and they provoke discussion. I doubt whether noble Lords are surprised to learn that that does not apply to the Select Committees of your Lordships' House. A tradition has grown up which is not in the Companion to the Standing Orders, nor in the Standing Orders themselves.

Lord Grenfell: My Lords, will my noble friend give way? I am grateful. Perhaps I should inform the House that at the beginning of the inquiry I told the committee that I did not regard unanimity as an end in itself and that if necessary I should be quite happy to see differences of opinion and minority views expressed in print. So although I may have been transgressing what might be an old tradition in these committees, I changed it in my committee.

Lord Bruce of Donington: My Lords, I immediately accept that and congratulate my noble friend on having taken that attitude. Perhaps I was harking back to when another report emanated from Sub-Committee A. It was dealt with by the full European Committee, drafts were presented and, in my innocence, I submitted 129 amendments to the draft. Some 20 were accepted, but thereafter, immediately Parliament resumed and even though the statutory year had passed, I was eliminated from all Select Committees on European legislation. It is not a matter of great gravity. At a later, more convenient stage I shall present the House with the facts in a like manner. But that is what happened.

I congratulate my noble friend on having advised the committee accordingly. Nevertheless, the report was unanimous. Whether it was due to the personal magnetism of the noble Lord or his close colleague, my noble friend Lord Barnett, we shall never know. On looking down the list of members of the committee, and having the honour of knowing most of them personally and liking all of them, I was surprised to see them arrive at an agreed opinion. However, that is the way it is, and the report suffers a little because of it.

That is nowhere better illustrated than by the events that followed immediately after the draft report was closed and the various documents became available. At page 23 of the report the committee unanimously came to the view which was referred to by the noble Lord, Lord Howell:

    "we have virtually no knowledge of what we are paying--or what we are paying for".

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That seems an extremely frank admission by the committee, speaking unanimously. It was supplemented by the report of the wise men, which states in its concluding paragraph on page 144:

    "It is becoming difficult to find anyone who has even the slightest sense of responsibility. However, that sense of responsibility is essential. It must be demonstrated, first and foremost"--
I emphasise the words "first and foremost"--

    "by the Commissioners individually and the Commission as a body".

Did they ever pause to wonder what an extraordinary statement that is? It was a virtual admission. In any negotiated settlement, with whom are we going to negotiate? If we are to negotiate a different formula for determining the abatement negotiated by a previous Conservative Prime Minister, with whom shall we negotiate? People who have no sense of responsibility? We have reached a point where we ourselves as a committee and as a House do not know what the money is being spent on. I leave your Lordships to contemplate that possibility. What confidence can we have?

It is clear, on reading the report, that considerable changes must take place, both in the type and composition of the Commission. And there must be a complete clean-out of those who have no sense of responsibility and of those who so conducted the Commission's affairs that the committee of this House could not be certain what the money was spent on or how much it was. I suggest that that is an inferior position in which to place your Lordships' House.

I would have hoped that that proposition would have been received with acclamation. We must have people who are not of necessity politicians. The Government have already demonstrated a certain scepticism about politicians by ensuring that the interest rate is controlled independently by a bank and not politicians. There is therefore an instinctive disgust of politicians. What we want at commissioner level is not another series of politicians but skilled administrators, managers and those on whose integrity we can rely; in a word, people we can trust. If we follow that precept we may find that we do rather better in Europe than before.

My noble friend Lord Barnett referred to peanuts and all the rest of it.

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