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Select Committee on European Union Minutes of Evidence

Examination of Witnesses (Questions 1 - 19)




  1. Minister, may I welcome you on behalf of the Select Committee and say how pleased we are to find that you are still in office after this long period, which is unusual. It must be merit alone that causes that. Can I also say I am grateful for you coming so soon after the summit in Helsinki. I hope that we can look forward in our diaries to plotting meetings as close to European councils as is possible in the future. Would you care to start by introducing your colleagues, and, perhaps, saying a word or two?

  (Mr Vaz) Thank you very much, my Lord. On my left-hand side I have Mark Lyall Grant, who is Head of the European Union Department (Internal) at the Foreign Office. On my right is Colin Roberts, who is Head of the Common Foreign and Security Policy Department at the Foreign Office. Mr Roberts is making his first appearance, but Mr Lyall Grant, I am sure you will recall, has made previous visits. I am delighted to be here so soon after the conclusion of the Council in Helsinki. I regard the Council as being very successful for Britain. We went to Helsinki with a number of key objectives concerning enlargement, the IGC and, also, defence policy. We came away with all our agenda completely met in full and, therefore, to that extent, it was an extremely successful Council for us. I know that when the Prime Minister spoke to the House yesterday he reiterated the enormous support that Britain had achieved from our European partners. Unfortunately, elements of the press do not agree, and having been to Helsinki for two days and then reading certain sections of our press it was as if they were in a parallel universe—certainly not at the Council I attended. Britain's role was valued, respected and highly regarded, and we were very pleased that all our objectives were met.

  2. Thank you. I shall not follow you down that particular track. I think we probably want to get into rather more detail, having had the discussions in the Chamber yesterday on the statement, but thank you for that. Can we start on the subject of enlargement. It has been a matter which this Committee has been studying in various forms for some time now. One of the things that emerges, not unexpectedly, from Helsinki, is that we are now back to a sort of regatta start—which, it was suggested, was quite the wrong way of doing it a year ago. Nevertheless, this is where we are. Is there any fear that putting the extra people on to the starting point is going to slow down the process at all, particularly for the people who are already on their way?
  (Mr Vaz) No, there is not. Can I say how much I valued the report that your Lordships produced on enlargement, and I think everyone acknowledges the work which this Committee has done on this very important subject. That is, perhaps, the key historic decision that came out of Helsinki. We have, in effect, a new European Union as a result of enlargement, and the presence of the new applicants within the negotiation process will focus the Union on the key issues that will affect the people of Europe into the next century. There, perhaps, was a fear initially that there might be a brake put on the original—if we can call them—"first wave" of six, but I think that we can happily dispense with language like "the first wave" and "the second wave"; these applicants are real applicants, they have now been confirmed, they are due to start their negotiations next year and they will make, I think, good speed in ensuring that their applications are looked at very carefully. However, I do not believe that any of them, frankly, will catch up with the six that are already within the negotiation process. The simple reason is that 23 chapters of the acquis have already been opened up for the first six, and it will take some time for the others to catch up. There is no question, however, of a brake being put on any of the original applicants or a fast track being given to any of those that have just been confirmed. I think that all countries feel very strongly that they should get on with it as quickly as possible, and from the Commission's point of view, Commissioner Verheugen is, if I may say so, well-suited to his job. He realises how important it is for the applicants that progress is made, and they will do their best to get on with the applications.

Lord Howell of Guildford

  3. Minister, as you say, we now have a new European Union, and that is pretty radical stuff. I gather it involves, eventually, up to 13 new countries being welcomed in with 170 million people. Was there at Helsinki a realisation that this really raises fundamental questions about the Union and its coherence and that it will not just be a matter of changing one or two bits of mechanism but changing the entire structure to cope with 28 or 30 countries? Was there, also, a realisation that all kinds of new derogations and exemptions will have to be extended to the new countries, which are very diverse, on a similar basis to existing members, and vice versa? Did those sort of ideas come into the discussion?
  (Mr Vaz) I think the discussions have focused on the very special nature of the decision. There is acknowledgement that the Union that we see at the moment is quite different from the original six. Therefore, the structures have to change. I do not believe they have to be fundamental changes; I think what has to change is the way in which the Union operates—it has to modernise and it has to reform. That is why the IGC decisions were so important. We have always said to our partners that we think that next year's IGC should be short and focused, because unless you get the structures right, and unless you have a European Union that is accountable and transparent, efficient and effective, you cannot deliver to the new applicants when they come in. Every single part of Britain's agenda on the IGC—that is that it is going to look at the size and composition of the Commission; the issue of the weighting of votes on the Council as well as the possible extension of qualified majority voting—will be fundamental in the way in which things are going to proceed. On the question of transitions or derogations, we are not in favour of creating a two-tier European Union and we would want to see transition periods kept to a bare minimum. However, you know more than anybody else, sitting on the Committee, that in these negotiations and within the European Union all applicants will ask for differences because countries are different. I would be amazed if there were not some granted, but the United Kingdom's position is that transition periods, if any, should be kept to the minimum and derogations should be as few as possible.

  4. Can I follow that up, my Lord Chairman? Was there any suggestion that when this great, expanded Union exists the one bit that will not be included, although it is entirely surrounded by eventual member countries, will be the Balkan area? There are very good reasons why they cannot join tomorrow morning, but was there any thought that in the longer term they, too, should be embraced in the Union, and, indeed, only when they are embraced is there likely to be an end of the running sore of the Balkans in the flank of Europe?
  (Mr Vaz) I think that is one of the visions. As you know, my Lord, there are no limits to who can join the Union—or apply to join—apart from the fact that they should be in Europe. The Treaty allows you to make an application if you are in Europe, but, as you say, the Balkans are not ready. We recognise there is a need to support countries in those areas that are stable, and that is why we look at the partnership and co-operation agreements that have started in a number of those countries as being a way forward. The expectation and the ambition to join is clearly there. I felt the heat of it from countries like Romania at Helsinki; they were really desperate to come in. Although we had the drama of Turkey at the end, I was quite convinced, sitting there, that Turkey would accept the very good package that had been put forward, and the simple reason is that this had been part of Turkey's vision for many, many years, and it was good to see that vision realised. However, I think that all countries need to understand that there are tough negotiations ahead; you cannot just join the European Union without making sure that you can comply with all the criteria necessary, and they understand that.

Lord Lamont of Lerwick

  5. Minister, could I ask you about the proposal, which I believe was ruled out by the Finns but which the Benelux countries wanted to put forward, which was, in effect, for a two-tier Europe; that the Treaty should be divided into two with an operational part and that there would be greater flexibility for that part to go ahead with greater integration in the future, while the wider Europe remained the same? I understand it was a proposal put forward by Belgium, Luxembourg and Holland, backed by Italy and the Commission. Mr Schroeder, after the meeting, said that he thought it was a very interesting proposal. Do you think that is likely to come back later in the Portuguese Presidency?
  (Mr Vaz) I do not think so. It is clearly an issue that is going to be discussed and is going to be raised—indeed, it was raised with me by my fellow Europe Ministers. I do not think that there is an appetite for a two-tier Europe in the way in which you describe. Clearly, a number of countries feel that they want to move in a particular direction, but I think it would send the wrong signals to start dividing up the Treaties in this way to those countries that seek to belong to one Europe. That has been kicked into touch, but I am not saying it will not come up again. The issue of closer co-operation between certain countries is one that has surfaced before, but I do not think it is necessary; I think we have mechanisms that exist at the moment to ensure that where there is agreement and where countries can go forward, they have done so quite legitimately through the existing courses.

  6. Can I also ask whether you are absolutely confident that the budgetary provisions, as agreed at the Berlin meeting, are sufficient for enlargement, and whether you feel absolutely certain of that? It does seem a bit asymmetric to enlarge by one-third the population of the European Union and to spend up to 2006 only one-tenth of the budget.
  (Mr Vaz) I do think it is enough and I do think that the figures are right. I do not see there is any need to change them.

Lord Tomlinson

  7. My Lord Chairman, can I come back very briefly to this point about transition periods, on which, you will recall, you were very emphatic to the Committee when you gave evidence last time? I just refer you to paragraph 6 of the Conclusions, where it says: "It emerges that some candidates will not be in a position to meet all the Copenhagen criteria in the medium term". Are you saying that that is now an argument for longer transitional periods, or that those countries will not be in a position to accede as long as they are in that position? That needs to be one or the other and I would just be interested to know which one you think it is.
  (Mr Vaz) I am not going, my Lord, to pick out individual countries, but I think that it would be totally unfair to give any individual country long transitional periods and, therefore, create in the European Union a two-tier system. I think it is important that we should look at the individual circumstances of those countries and make sure that they are not, in any way, hampered. I do not think, as a matter of course, we should be saying that there should be derogations of any length or any amount and any long periods of transition. I do not think that would be acceptable, and I do not think it would be acceptable to those who are just applying. Of course, I went to Poland, and the Committee has been on its own travels to these applicant countries and you will know the points that have been put to you from those countries, but I am convinced that everyone ought to be treated fairly and that we should do our best to make sure that they all comply. They will need to comply with the criteria and satisfy those who have conducted these negotiations if they are going to get in.


  8. There is a danger, though, is there not, that a lot of these applicant countries, particularly the ones that are, perhaps, more advanced than the others, will feel that the existing members are using this as a roadblock to stop them becoming members of the European Union, and the political implications of that are very serious indeed.
  (Mr Vaz) If there was evidence of this being abused I would understand that sentiment, but there is not. There is a general feeling amongst all European countries that we want an enlarged Europe. The sticking point, of course, as you know, was over Turkey, and that was just confirmation of candidate status, but as far as all the other countries are concerned there is a general view that we want them in, and everyone is doing their best to make sure that no deliberate obstacles are put in their way. Of course, they have to comply with the political and economic criteria, otherwise it is not going to work. Nobody has put obstacles in their way, and Commissioner Verheugen, when I met him last week in Brussels, was emphatic about this; it is part of the vision for Europe, we have to have a wider Europe and those countries need to be encouraged to believe that they have a future in Europe. I think people will feel betrayed if they feel that obstacles are being put in the way. So there is no question of any of our European colleagues trying to do that, I can assure Lord Tomlinson.

Lord Tomlinson

  9. Just so that I am absolutely clear, if they are not meeting them in the medium term, which would imply fairly long transitional periods, you are saying that they would still have some way to go before they had completed their compliance with the Copenhagen criteria and, therefore, that would, at that stage—while still wanting them to join—preclude them from membership.
  (Mr Vaz) I am saying that all the countries will have to satisfy the criteria, and all those countries will have to negotiate with the Commission if they are unable to meet any of the points that have been raised in the discussions concerning the acquis. That has always been the case, but I can promise you that that will be done in a fair way and not as a way of trying to prevent them from coming in. Everyone will be treated fairly.

Lord Wallace of Saltaire

  10. I hope the European Union would not wish to be less generous to some of these Eastern European states as it was to Spain, Portugal and Greece. I recall post-transition periods of up to ten years before dossiers were given to Spain, Portugal and Greece, and I hope we are not wishing to be tougher to this round of entrants. I really wanted to ask you about the envisaged time-scale. Those that originally talked about a very short focused IGC in 2000 were originally talking about adding another IGC in 2002 before countries come in. Can you confirm that that has now sunk without trace and that this IGC is intended to clear up the reforms which are needed before the first round of six entrants come in? Can you give us any indication? We understand that no fixed timetable is thought desirable, but can you give us the sort of time-scale which you consider to be reasonable and the sort of longer time-scale which the British Government would begin to feel is unreasonable?
  (Mr Vaz) First of all, my Lord, I saw your excellent performance on On the Record, but I did feel it was a little bit pessimistic. The United Kingdom is doing its best on this issue and has had a leadership role in trying to encourage the countries of the former Soviet Union and Eastern European countries to come into the European Union. Certainly, on the visits that I and my predecessor, as ministers for Europe, have made, if there has been a point of contention we have come back to London, contacted Brussels and sought to help and tried to make sure that any misunderstandings have been dealt with. I think it is very difficult to impose a rigid timetable, although I understand—for the reasons you have set out many times before—why it is important to do so. You have a timetable, you are ambitious in trying to make sure that you finish your negotiations on time. We do not want to impose a timetable, we are quite happy if the applicant countries say to us (as many have said to me) that they want to complete the negotiations by 2001 or 2002, and we will not stand in their way. We have got our own deadline, and that is that we want to make sure that we are ready to receive them by 2002. If they complete by 2001, then there will have to be ratification and they will be in by 2003, but I think it depends on the individual countries. Some are better placed than others, and if they complete their negotiations, the current state of the acquis negotiations or discussions, as you may know, is that 23 chapters have been opened and the Portuguese intend to open the next eight while they have Presidency. The IGC, we very much hope, will be completed by December 2000. In my initial discussions with the French they were not overly ambitious about completing them, but they are now. I think everyone would like to get this over with by December 2000. I certainly do not want to spend my entire life as Minister for Europe attending IGC meetings—exciting though they are. I very much hope that this will be the only IGC in my lifetime as Minister for Europe (although I take Lord Tordoff's point that we do not last very long!). I think having another one again soon would be totally unacceptable; we want to finish all the outstanding points necessary for enlargement so that the countries can come in to a European Union that is ready to receive them. We want them in as quickly as possible.

  11. The delicate question of how far these countries should be allowed to sit on the edge of the table of the IGC, so that we do not bounce them with something that they have to agree when they come in. Was progress made on the question of what sort of observer status they might be given at Helsinki?
  (Mr Vaz) I, personally, have no problem with anyone observing anything we do. The relationship with the applicants is very, very good. As soon as the Council meeting was over the Heads of Government and Foreign Secretaries met with the Foreign Secretaries and Heads of Government of all the applicant countries. Indeed, our Foreign Secretary, in particular, went out of his way to talk to all the applicant countries because he knows all the foreign ministers extremely well, as, indeed, did the Prime Minister. The Prime Minister spent a great deal of time with his opposite numbers at that lunch. I met with all the European Integration Ministers (which is what they are called in the applicant countries) and I assured them that as far as the IGC is concerned if we can be of any help in keeping them informed, I, personally, have no objection to them sitting and watching—although not participating, because they are not members. I think there ought to be transparency. I do not know if you found this, but I certainly found that they felt they were not being kept informed, they did not know what was happening. This is going to be their Europe and they have a right—not a right to decide—to know, and I am quite happy and relaxed to allow them to be there sitting and watching what is going on.


  12. So you are saying they would be allowed in as official observers, as it were?
  (Mr Vaz) This is why we have hand-maidens, in case Ministers go too far. That is why I said it was my personal view. What are you pointing me to, Mark? He is pointing me to paragraph 19 of the Conclusions, which is very helpful. Let us hope this endorses what I have just said. "The Presidency will take the necessary steps to ensure that candidate states are regularly briefed in the existing fora on the progress of discussions and have the opportunity to put their point of view on matters under discussion".
  (Mr Lyall Grant) Perhaps I can just add to that, my Lord Chairman, that I think what paragraph 19 means is that in practice the candidate countries will not be in the negotiating room for the IGC but they will be briefed by the Presidency before and after meetings. We have set up, as the Minister was saying, arrangements whereby we will also be briefing candidate countries bilaterally. They did not actually ask for more than that in the IGC, and so Helsinki has confirmed that they will not actually be in the room, but they will be kept closely informed.
  (Mr Vaz) We have no problem with that; we want them to be kept closely informed because we think this will affect Britain.

Baroness O'Cathain

  13. Minister, this is fascinating stuff. One of the questions I was going to ask was the question Lord Wallace has just asked about the timetable. I understand there is not a fixed timetable, but I got the impression from what you were saying that, perhaps, there was a reluctance on the part of the existing, old European Union—as we are going to call it now—to hurry the thing along. Surely, the effects of having this huge enlargement hanging over us, where we are going to have to almost double in size in terms of countries (though not necessarily in terms of population) will lead to an unsettling and destabilising of the existing, old European Union. So it is in everybody's interests to try and hurry it along as soon as possible. Do you actually have an ideal timetable in your mind for all eleven (we talk about the six being ready by 2003 and then the next five)? The second part of my question is, if there are any of the eleven who, for whatever reason, are never likely to make it—and there could be, for example, reasons why one or two might not ever make it, and certainly not subscribe to these Copenhagen rules—what would be the procedure? Would they be told "Sorry, you are out", or "We cannot extend this beyond the year 2010" (just plucking a figure from the air)?
  (Mr Vaz) I think it would be very difficult to pick and choose which countries are going to be in and out before most have even started negotiating. I think there is a danger about ideal timetables. Ideally, we would like them in as soon as possible, but I think that we have our own time-scale and we have to be ready by 2002.

  14. For the first?
  (Mr Vaz) For whoever gets to meet the criteria. I think there is no kind of "first wave" and "second wave" any more, although I think it would be a very ambitious (and we say we should not use these terms but we go back to them all the time) "new six" if any of them caught up in the space of the next six months, I would have thought. However, I think that, generally speaking, we want them to complete their negotiations as quickly as possible. Some have said to me that they are going to be ready by 2001, but then, of course, you have ratification and you have entry by 2003/4. I think the danger of this is that you then say to countries "This is the timetable" and if, for whatever reason, there is a hold up, expectations get dashed and public opinion starts to drift, and it becomes very bad. We are very conscious, for example, as far as Turkey is concerned (which, of course, is not starting its negotiations and has just been confirmed as a candidate) that if we had sent negative messages out, what effect would that have had on the people of Turkey and the vision that that country has to be part of one Europe? We have to be very cautious with timetables, but what we have to do, as a Union, is not allow our methods and the way in which we conduct ourselves to be a bar to other people joining. At the moment the IGC has not yet started. That could be a real problem.

  15. However, Minister, do you not also subscribe to the view that there should not be a bar to the continuing upwards and onwards of the existing members, because if they are spending all their time on negotiations for the enlargement of eleven—and I have always been a pro-enlargement person—there could be a situation where there is a real diversion and there is still an enormous amount to do within the existing framework.
  (Mr Vaz) You are right, there is a lot to do and there is a big agenda, but the Commissioner responsible, Commissioner Verheugen, has a very large staff—and they are very able and they are pursuing the negotiations. The Finns have done extremely well in opening the number of chapters they have—there are only eight left—and I think progress is being made.

Lord Willoughby de Broke

  16. I simply wanted to ask something about the CAP. It is not mentioned at all in this document but, surely, that is one of the stumbling blocks to any new candidate for membership of the European Union, bearing in mind that there does not seem to be any more money coming in. You said that you do not want a two-tier Europe, but how are you going to solve the hurdle of the Common Agricultural Policy vis-a-vis the new entrants, bearing in mind they have such large rural, or agricultural, sectors—Poland, Hungary and Romania? They are, basically, farming and agricultural countries. Is money going to be offered to them, or are they going to be second-class EU citizens?
  (Mr Vaz) They will have to negotiate their positions as every other country has done, and as we have done when we applied to join the European Union. Your Lordship is right, however, that the Common Agricultural Policy remains a problem and has remained a problem for several British Governments. We want to see it reformed and we will continue to play our part in ensuring that it is reformed. Agriculture will remain an issue to be discussed as the negotiations proceed and there will have to be solutions found to the problems that these countries experience, but there is no question of additional money being made available. We are very firm in our belief—and I have restated it today—that the Common Agricultural Policy of the Union needs to be fundamentally reformed.


  17. Is there any recognition in the rest of Europe that that is the case, because here we have an utterly unbalanced equation? This Committee and its Sub-Committees have reported on this over and over again, until we are almost sick of doing so. I know the previous British Government also believed in CAP reform but there does seem to be no recognition in some other parts of Europe that this is going to be necessary.
  (Mr Vaz) There may not be in the countries immediately near to the United Kingdom—for example, France—but they have always had a reason to support the Common Agricultural Policy because it has benefited them. I can assure you, my Lord Chairman, that in the discussions I have had with my fellow European Ministers there is a great deal of frustration, and countries realise that this is what we have got to reform. Half of all the expenditure goes on the CAP, and we have got to do something about it. Otherwise, you know, people are simply not prepared to pay more. The public—not just in the United Kingdom but in other parts of Europe—will not pay more in order to subsidise the ambitions of one particular country.

  Chairman: Which takes us neatly on to taxation.

Lord Williams of Elvel

  18. Can I ask the Minister to focus particularly on paragraph 34 of the Presidency conclusions, which, for the purposes of the Committee, I will read out. "All citizens resident in a Member State of the European Union should pay the tax due on all their savings income". Can I ask the Minister—leaving aside tax havens, which we all know about—what does the expression "savings income" actually mean? All those who are practised in this particular trade know that there is really no difference between income and capital gains. Furthermore, savings come in many forms—through investment in houses, investment in life insurance policies which produce tax-free allowances, investment in annuities—and the distinction between capital gains and income is really, if I may say so, Minister, very seriously out-of-date. Could the Minister give us an idea of the Council's thinking about what savings income actually means?
  (Mr Vaz) My Lord, it means exactly what it says. It is so brief and so succinct because it was important in view of the background to the position that the rest of the European Union countries have taken as far as the draft Savings Tax Directive is concerned, which was principally drawn up to stop savings going from Germany to Luxembourg. As you will find with European documents and the language that is used, it is broad enough for all countries to support and that is a good, general, broad principle, and I do not want to sub-divide it because I do not think it would be helpful to do so. It is not for me, as a mere third-tier minister in these matters, to try and second-guess the European Council.

  19. If we take the words "savings income" what it appears to me to mean is income and not capital gains. Would my impression be right?
  (Mr Vaz) It is "savings income" whatever one would describe "savings income" as.

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