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Lord Barnett: My Lords, I consider it a privilege to pay tribute to such an excellent maiden speech. I would have liked that maiden speech even if I had not agreed with almost everything in it, which I did. Not all maiden speakers manage to relate their maiden speeches to the relevant debate—this debate concerns the European Union budget—but in this case the noble Lord certainly did so. That is no surprise, of course.

In a moment I shall refer to some of the points that the noble Lord made on the constitution, with which I gather he had a little to do. As we all know, the noble Lord was a very distinguished diplomat. He was head of the Foreign and Commonwealth Office. Indeed, he also served in the Treasury as Principal Private Secretary to one or two Chancellors, two of whom are present. Even if he had not had that unfortunate job to do, his service in the Treasury indicates what a brilliant mind he has. That service occurred after I left the Treasury.

The noble Lord, Lord Kerr, has had a tremendous career in the Diplomatic Service. That career is very well known. I hope that his career in the Lords will prove to be an excellent one, as, indeed, is indicated by his maiden speech. It will be a great pleasure for all of us to hear him speak on many occasions. I hope that noble Lords will recognise that what the noble Lord has said today is an excellent foretaste of the speeches we can expect to hear from him. He adds a great deal to this House and to the contribution that we will be able to make as the House of Lords in the future. I am delighted to offer my personal congratulations again on such an excellent maiden speech.

I thank my noble friend Lord Radice and his committee for this excellent report. It sets out the facts clearly, and anyone who reads it will find it as excellent a report as I did. The trouble is that the report is obsolete already. I regret to say it, but the French and Dutch referendums have changed the landscape both in relation to the European Union constitution proposal and to the budget that we are debating today. Obviously, the budget is at the very heart of the European Union and the way in which it should be run. Those referendums, however we interpret them, show very clearly that the people of Holland and France do not like the way in which the European Union is run. It would be foolish of us not to recognise that straight fact. Whatever my right honourable friend the Foreign Secretary is saying at present, and whatever my noble friend Lord Radice said about the
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treaty being put in cold storage—as has been said by the noble Lord, Lord Kerr, and others—it is more than just cold storage. To talk about resuscitating it and saying we should all have referendums is absurd and a nonsense. The sooner we recognise that, the better.

However one analyses the reasons for the "No" votes—and many analyses have already been given in various newspapers and commentaries—the fact is that the treaty was most certainly never read by the great mass of the Dutch and French populations, as it has not been read here in the UK and would not be whether we had a referendum or not—510 pages is quite a lot for the average person to read. I doubt very much that they would do so.

Equally, I regret that my noble friend Lord Radice in his excellent opening remarks suggested that our Select Committee reports in your Lordships' House—and this is a good example of the excellent kind of reports that the House of Lords produces—will not be read by many in the United Kingdom, let alone France, Holland or Germany for that matter. It is a shame, because they should read it; there are a lot of excellent facts in the report.

If we had a referendum on the European Union budget in almost any country there would almost certainly be a "No" vote. As I said, it is right at the heart of the way that the European Union is run. The electorate will not have read the fact in this well documented report—my noble friend Lord Radice has already referred to it—that over recent years the budget has declined as a percentage of GNI. That will not stop everyone assuming, and newspapers commenting, that it has gone up regularly every year. As this report brings out, the plain fact is that European Union member states have increased their budgets far more than the European Union budget itself. We see in paragraph 12, page 13, that national budgets,

The budget of the European Union actually fell. I doubt if that would be heard by many people in the country or be expressed in any newspapers, whether in leaders or comments, but it is a fact.

So what does a believer in democracy who also, like me, has been very much pro-European Union, do in these circumstances? First, as a parliamentary representative, whether elected or not, we must represent the facts as we see them. As we have seen from the two referendums and almost certainly would see from a referendum in the UK and in many other countries across Europe, people do not like what has been going on. So what do we do about the budget now? I start with paragraph 137 on page 47. It is a statement of the obvious:

They certainly should not be rushed, and I am sure that they will not be rushed. The chance of agreement on anything at the present time—whether the budget or anything else—is pretty slim.
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That being said, the negotiators on the budget, let alone the public, will not care a jot about the facts of this report or of the excellent Sapir report, to which my noble friend Lord Radice referred both today and in the report. As has been made clear, France and many others will insist on the abolition of the UK rebate right at the start of any discussions. They will go on about it not only then but throughout any discussions. The only compromise for the UK would be—as the report brings out and as my noble friend said—if the common agricultural policy were not just reformed, as recently, but scrapped. If it were scrapped, that would do two things. First, it would substantially reduce the size of the budget. Secondly, it would make it much fairer to the UK; not only to the UK but to many others in the European Union. President Chirac, and Schroeder, and anyone else who presses the UK's Chancellor and Prime Minister to abolish the rebate should be told in clear terms, "Yes, we will agree to consider the rebate, provided you consider the abolition of the common agricultural policy".

I noted what was said by Martin Wolf, a highly respected journalist on the Financial Times, who was a witness. He said that if you get rid of agricultural spending, there is no case for a rebate. I am sure that most sensible people—I am excluding no one at the moment—even possibly a few round the Finance Committee table that I have attended over the years would recognise the reality of that. The fact is that it would delay any potential deal. That is the only compromise that the UK should accept; no other compromise is possible.

As the Committee brings out in this report, the present budget has its priorities all wrong. The lack of economic growth throughout the European Union was obviously a factor in those "No" votes. High unemployment, low economic growth, and dislike of the leadership in both countries were factors, but the lack of economic growth was at the heart of it. We should perhaps send copies of the report to the next Finance Committee meeting in Brussels; it might be helpful to them to have it in front of them. Paragraph 13 clearly brings out that if they change their priorities there will be a better chance of economic growth in the European Union, where growth has sadly not been too good in recent years.

However, recognising that the referendum is a start, we will have to accept that the European Union—if we are listening to those views in Europe—will have to be on a smaller scale, at least to begin with. I hope that we will still achieve integration and I hope that some of the aims stated in the excellent maiden speech by the noble Lord, Lord Kerr, will be achieved. Certainly, it would be helpful if there were more openness in the meetings that reach the decisions that are crucial to all of us.

Initially, we shall have to do less. I regret that, but those are the facts as we see them. The public may eventually regret that we are unable to make further progress.
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EU Constitutional Treaty

4 pm

Lord Triesman: My Lords, with the leave of the House, I shall now repeat a Statement made by the Foreign Secretary in another place. The Statement is as follows:

"With permission, Mr Speaker, I should like to make a Statement on the EU constitutional treaty, following the "No" votes in the referenda in France and the Netherlands last week. I shall be explaining why we have decided to postpone the Second Reading of the European Union Bill.

"At the end of 2001, European leaders met at Laeken in Belgium to consider the future of the EU. Just three months before, the world's sense of order had been shattered by the atrocity of 11 September.

"Reviewing the progress made within the EU over previous decades, European leaders said that the Union,

"It was this Laeken declaration which led to the Convention on the Future of Europe and to the intergovernmental conference which followed it. Negotiations in the IGC were hard fought, but the United Kingdom achieved all its key objectives. My right honourable friend the Prime Minister and I therefore had no hesitation in recommending the new treaty to Parliament and to the country. We did so, not least, because the EU's organisation plainly needed reform better to cope with the new challenges set out at Laeken and with the enlargement to 25 member states.

"So, the treaty includes: a reduction in the size of the European Commission; a much better voting system which benefits the United Kingdom; an end to the six-month rotating presidency, with replacement by a full-time president of the Council and team presidencies; better arrangements for involving national Parliaments in EU legislation; and greater flexibility through "enhanced co-operation", to allow groups of member states to co-operate more intensively while others go at their own pace. And we kept our national veto in all key areas of concern.

"The Prime Minister and I signed the constitutional treaty in Rome on 29 October last. But like any other EU treaty it requires ratification by every one of the EU's member states—now 25—before it can come into force. As of a week ago, nine countries had approved the treaty through their parliamentary processes and one, Spain, by referendum. In the last week, however, as the House and the country are very well aware, in referenda the electors in France voted "No" by 55 per cent to 45 per cent and in the Netherlands by 62 per cent to 38 per cent.

"The constitutional treaty is the property of the European Union as a whole. It is now for European leaders to reach conclusions on how to deal with the situation.
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"To give effect to the UK's commitment to ratify the treaty by referendum, we introduced the European Union Bill in the last Parliament and it was given a Second Reading by this House by a majority of 215 on 9 February. The Bill fell on the calling of the general election. It was reintroduced in this new Parliament on 24 May—before either the French or Dutch referenda—and it would, in normal circumstances, have been scheduled for its Second Reading very shortly.

"However, until the consequences of France and the Netherlands being unable to ratify the treaty are clarified, it would not, in our judgment, now be sensible to set a date for Second Reading. There is also the need for further discussions with EU partners and further decisions from EU governments. The first opportunity for collective discussion within the EU will take place at the end of next week when the heads of state and government meet in the European Council.

"We shall of course keep the situation under review and ensure that the House is kept fully informed. I should emphasise that it is not for the UK alone to decide the future of the treaty and it remains our view that it represents a sensible new set of rules for the enlarged European Union. We reserve completely the right to bring back the Bill providing for a UK referendum should circumstances change. But we see no point in proceeding at this moment.

"As I commented during last week, these referendum results raise profound questions about the future direction of Europe. The EU has to come to terms with the forces of globalisation in a way which maximises prosperity, employment and social welfare. There are other larger questions: how we can strengthen the force for good of the EU in foreign policy, along with aid to poorer countries and trade. How can we ensure value for money for our citizens and better regulation? How can we make a reality of the widely agreed concept of subsidiarity, ensuring that decisions are made at the lowest level possible?

"All these issues have long been central to the United Kingdom's priorities for the European Union and will be so for our EU presidency which begins on 1 July. The continuing issues of enlargement and future financing will also be on our agenda. At the start of the presidency, I will publish the latest in our series of White Papers on the EU and make an accompanying Statement to set out our priorities in more detail.

"Let me conclude by saying this. The European Union remains a unique and valuable achievement, central to the United Kingdom's prosperity and well-being. The world's largest single market has enabled the businesses and people of this country to earn new prosperity by trading freely across borders. European co-operation has broken down barriers to travel, work and leisure. And the EU remains a vital engine of peace, democracy and reform.
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"The EU does now face a period of difficulty. In working in our interests and the Union's interests, we must not act in a way which undermines the EU's strengths and the achievements of five decades".

My Lords, that concludes the Statement.

4.7 p.m.

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