15:20 - The Committee divided: - Ayes: 254 / Noes: 301 - Question accordingly negatived.
The Financial Secretary to the Treasury (Mr David Gauke)
It is a great pleasure to serve under your chairmanship this afternoon, Mr Streeter. Clause stand part, the amendment and the new clauses have been grouped, so if it is convenient I shall start with the two clauses, turn to the new clauses and finish with the amendment, which is consequential and related to the new clauses.
The purpose of the Bill is to enable the UK to give effect to the new own resources decision amending the arrangements for financing the annual budget of the European Union. The amendments were agreed at the February 2013 European Council, and the new ORD, reflecting those amendments, was adopted by the Council of Ministers on 26 May 2014.
Clause 1 is fairly simple: it adds the new own resources decision, adopted unanimously in May 2014, to the list of previous ORDs, recognised under the European Communities Act 1972, thus giving it effect under UK law. When passed, the Bill will become the European Union (Finance) Act 2015 and supersede the European Communities (Finance) Act 2008, which approved the previous ORD. Clause 2 cites this legislation as the European Union (Finance) Act 2015 and repeals the 2008 Act.
For the benefit of hon. Members, I shall explain in a little more detail what the new own resources decision, to which clause 1 refers, means. The new ORD will largely maintain the existing financing system framework, which consists of four pillars: levies and duties on trade with non-member countries in agricultural goods, including sugar; customs duties on trade with non-member countries; the yield from applying a call-up rate to a hypothetical harmonised VAT base for each member state; and a fourth resource based on gross national income—GNI. Those four pillars remain largely untouched in the new ORD, and that is no insignificant achievement. During the negotiations over the multi-annual financial framework and before, there was considerable pressure to change the financing system.
Sir Nicholas Soames (Mid Sussex) (Con)
Will my hon. Friend confirm that GNI is assessed in the same way across the whole Community?
Mr Gauke
Yes, it is. My right hon. Friend raises an important point and I suspect that he has in mind the issues that occurred last year as a consequence of revisions to our GNI and that of other member states, which meant that an additional surcharge was applied to the United Kingdom. He will of course recall the negotiations that followed and how we ensured that payments were delayed and that the rebate applied to the surcharge. There is consistency in the application in this case and that is very important. There is suitable scrutiny and co-ordination, with Eurostat playing a role.
Alex Salmond (Gordon) (SNP)
The various agreements have been described as a considerable achievement. Under pillar two and the rural development payments, Scotland’s payments will work out at about €12 per hectare. The EU average is €76 per hectare. Would the Minister care to define “considerable achievement” in that light?
Mr Gauke
I would certainly make it very clear that there was a considerable achievement in the 2013 negotiations that were implemented in 2014. For example, there were calls for changes to the financing system and to introduce new types of member state contributions, but the UK resisted that successfully. There were calls to introduce new EU-wide taxes, including a financial transactions tax, and the UK resisted that successfully. Finally, there were calls to reform the rebate and the Government protected that. That is a considerable achievement.
On the subject of the regional distribution of common agricultural policy receipts, it is only fair to point out that payments per hectare are only part of the story. Although Scotland receives the lowest payments per hectare, Scottish farmers also receive one of the highest payments per farm in the European Union. On average, Scottish farmers receive just under £26,000 compared with England’s £17,000, Wales’s £16,000 and Northern Ireland’s £7,000. I hope that that provides some clarity for the right hon. Gentleman.
Simon Hoare (North Dorset) (Con)
I note the irony that the House of Commons Library published its briefing paper on the Bill on the bicentenary of the battle of Waterloo. It notes, with its characteristic understatement, that our
“rebate is not popular with other Member States or the Commission”.
May I invite my hon. Friend to make a firm commitment to the retention of our rebate? Will he continue to argue for it and ensure that it is not part of any of the renegotiations on our ongoing membership in the Community?
Mr Gauke
Absolutely. I am keen to make that commitment and I am grateful to my hon. Friend for making that point. Those of us who participated in the equivalent debates after the previous multi-annual financial framework was agreed and on the Act that performed the task that this Bill will now perform will recall that we spent some considerable time focusing on the fact that a large part of the rebate had been surrendered by the previous Government for little or nothing, merely a promise of reform of the common agricultural policy that had not been delivered.
Kelvin Hopkins
Following on from the point made by the hon. Member for North Dorset (Simon Hoare), I have said many times in this House that the deal done in 2005 was a terrible mistake. The Government have made frequent references to it. Is it not now appropriate to consider trying to regain what was lost in that deal, particularly because our net budget contributions have been rising so strongly in recent years?
Mr Gauke
First, I acknowledge the consistency with which the hon. Gentleman has approached these issues. If I recall correctly our debates in 2008 and 2009, he expressed clearly his dissatisfaction with the performance of the Government that he supported, in terms of surrendering part of the rebate.
The other point to make is that the hon. Gentleman should not underestimate the Prime Minister’s achievement in that negotiation. When he went to debate and negotiate on these matters, few believed that he would be able to reduce the overall budget in real terms, but he succeeded in doing so. Today’s debate is focused not so much on the expenditure side, although I think we will discuss expenditure thanks to the Opposition’s helpful amendment and new clauses—I was going to say “probing amendments”, but we shall see—but what happened was also very important on the revenue side. It was a considerable success that we were able to resist new types of member states’ contributions, new EU-wide taxes and attempts to reform the rebate. That is of some note.
Oliver Dowden
I congratulate the Government on their success in keeping the EU budget down. Will the Minister confirm that the Government will continue to keep pressure on the EU to make sure that it continues to live within its means, not just for this budget settlement but for future budget settlements?
Mr Gauke
I will certainly make that assurance and indeed, I will set out in a little detail what we are doing in that field. I referred to my hon. Friend as a fellow Hertfordshire MP. However, if I remember correctly, at the time of the negotiation, he was part of the team in Downing Street who were involved in the undoubted success. It is characteristic of his modesty that he did not draw attention to that point, but I daresay that a lot of the credit for the successful negotiation lies in his hands.
Smaller changes to the own resources decision affect some member states’ contributions and the balance between the pillars of the own resources system. Those are somewhat detailed, but I hope it will be helpful to set them out for the Committee, because they are, in essence, at the heart of the Bill and clauses we are debating.
Specifically, the smaller changes include the following: the member states’ retention rate for traditional own resources—TOR—which covers member states’ collection costs for customs duties, is reduced from 25% to 20%. That change will have no impact on the ultimate cost of the EU budget to the UK on account of the UK rebate. For the period 2014 to 2020, the ORD also reintroduces the reduced rate of call for VAT-based contributions for Germany, the Netherlands and Sweden. Austria will revert from its reduced call rate over the 2007-2013 multi-annual financial framework to a standard call rate of 0.3% over the 2014-2020 MFF. The financial benefit of the changes to the UK depends on technical factors. Even so, on current estimates, those changes point to a benefit of approximately £150 million over the course of the MFF.
Alan Mak (Havant) (Con)
My constituents are still reeling from Labour’s great recession. Will my hon. Friend assure me that the Bill will not result in any new taxes or new contributions from the UK?
James Morris (Halesowen and Rowley Regis) (Con)
Was not another of the Prime Minister’s substantial achievements in those negotiations to shift the debate about the future finances of the European Union on to Britain making a contribution to the competitiveness of the European Union, and making sure that resources were allocated to improve competitiveness for business?
Mr Gauke
My hon. Friend makes a good point. He anticipates comments that I will make later relating to how we can ensure that the money is not just controlled and reduced, but better spent. There is a criticism, which I suspect is shared by Members from all parts of the House, that the money that the European Union spends in its various ways is not used as efficiently and is not as focused on improving our competitiveness as it might be. There are encouraging signs that there is a greater focus on that. I will return to that shortly.
I was running through the various technical changes in the own resources decision. I have touched on the changes to the retention rates. May I also touch on the changes in relation to GNI-based contributions?
Simon Hoare
I am grateful to my hon. Friend for giving way a second time; he is being very generous. My constituents in North Dorset and people across the south-west want to have confidence that Her Majesty’s Government will in no way acquiesce to a change in our rebate as part of any negotiations. We all understand that the UK’s agreement is contingent on any changes to the rebate. I invite the Minister to make the commitment that the rebate is not part of any renegotiation, that it is absolutely off limits and that this Government will always continue to defend our rebate.
Mr Gauke
I give the assurance that the Government will always defend our rebate. Perhaps it might be helpful to the Committee if I make the point that I made on Second Reading about the scale and significance of the partial surrender of our rebate by the Labour Government. According to the European Commission, the disapplication of the UK rebate cost the UK about €9 billion over the seven-year period of the previous multi-annual financial framework. Thereafter, with the abatement disapplication fully phased in, the cost to the UK is about £2 billion a year. That is a significant sum, particularly given the fiscal circumstances that we continue to face.
Frankly, the question of what was achieved in return for the surrender of that partial rebate might be asked. Perhaps we will hear an answer to that later this afternoon, but I have not heard a convincing answer yet.
Kevin Foster (Torbay) (Con)
The Minister has outlined how the European Union is currently funded through contributions from member states. Some in the European Parliament argue that that system should be replaced by direct taxes levied by the European Union. Will the Minister confirm that the British Government would resist any such move?
Mr Gauke
Yes, we would resist such a move. It would be a fundamental change to the nature of our relationship with the European Union, and one that would go in entirely the wrong direction for the United Kingdom. There were calls in the negotiations for such a step to be taken. There were calls, for example, for a financial transaction tax to be introduced to finance EU spending. We resisted that. The Prime Minister was very clear in ruling it out from any deal.
Mark Garnier (Wyre Forest) (Con)
My hon. Friend talks about the financial transaction tax, but the City is an incredibly important contributor to the UK economy and it has a significant turnover. Will he assure us that the Government will not allow the European Union to attack the City from a different direction as it looks for alternative sources of revenue from the jewel in our economic crown?
Mr Gauke
I certainly give that assurance. There was a strong push for a financial transaction tax, which would have had a particular impact on the United Kingdom, given that we have the pre-eminent financial centre not just in the European Union, but in the world. That could have been damaging for the City of London. We resisted it and we will continue to take that approach.
To make a broader point—although I will not go too far down this route, Mr Streeter—it would be more helpful if there was an acceptance in the European Union that the City of London is a jewel in the crown, to use my hon. Friend’s phrase, not just of the United Kingdom, but of Europe as a whole. We should have the pre-eminent financial centre in the United Kingdom, and trying to damage it would be disadvantageous to all within the European Union.
Antoinette Sandbach (Eddisbury) (Con)
Will the Minister welcome the confirmation from the Office for Budget Responsibility that in cash terms, the payment from the UK will be the same in the 2019-20 financial year as it is in 2014-15, which in real terms is a reduction of 7%? Will he encourage the Government to ensure that my constituents in Eddisbury do not pay a greater proportion of their taxes into an ever-increasing European budget, and to seek further reductions of a similar scale?
Mr Gauke
My hon. Friend is absolutely right. It is noticeable that our contributions are lower than they were in the last year of the previous multi-annual financial framework, not least because of the achievement of the Prime Minister in February 2013. Of course, we continue to suffer the unfortunate effects of the previous negotiation, when part of our rebate was lost, amounting to £2 billion a year. None the less, we have made considerable progress thanks to the steps that were taken in 2013.
For the period from 2014 to 2020, the ORD reintroduces reductions in the GNI-based contributions of the Netherlands and Sweden, and introduces a reduction in those contributions for Denmark. The UK will contribute to those small corrections, but that will largely be offset by changes to other corrections.
Lastly, the ORD lays down the own resources ceilings at 1.23% of total member states’ GNI for payments and 1.29% for commitments, and sets out the method for calculating subsequent changes to those ceilings following the introduction of the European systems of accounts 2010 by all member states.
The Bill will give UK approval to the new ORD and is the last UK action that is necessary to deliver the 2013 deal on the budget.
Matt Warman (Boston and Skegness) (Con)
I admire the level of detail we are going into in this debate and I know that we all find it fascinating, but my constituents often say that they would like to hear details that they can understand, such as household-level figures. I note from the briefing that we are paying the equivalent of a £10 a month subscription per person. Will my hon. Friend confirm that when we talk about the renegotiation, we will do our utmost to talk in language that everyone outside this House can understand, as well as going through the fine detail?
Mr Gauke
My hon. Friend makes a good point. I confess that I have set out rather detailed points. I know hon. Members in the Chamber will be capable of understanding them, but they will not necessarily cause great excitement among the many hundreds of thousands if not millions who are currently viewing the debate. My hon. Friend puts his view of the nature of our contributions in clear language. It is important that we have a Government who are determined to ensure that we get a good deal within the European Union and that we are careful in how we spend money there.
Tom Tugendhat (Tonbridge and Malling) (Con)
I note again a matter that is of great interest to the electors of Tonbridge, Edenbridge and Malling. The budget will be 7% lower in real terms by 2020, which is very welcome, but will the Minister say more on the consequences to the EU budget of the UK’s position, because we are rather hoping that 7% is the beginning and not the end?
Mr Gauke
My hon. Friend touches on the point made by my hon. Friend the Member for Eddisbury (Antoinette Sandbach), who drew attention to the fact that our net contributions are forecast to be lower in 2019-20 compared with 2013-14. In fact, our net contribution in 2019-20 will be £9.3 billion compared with £10.2 billion in 2013-14, which is clearly lower in cash terms but also lower in real terms. My hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat) raises the issue that we should make a strong case for budget discipline. He wants to ensure that we appreciate that we are dealing with taxpayers’ money. Whether UK taxpayers’ money or taxpayers’ money from the wider EU, that money has to be spent wisely. That is a good point, and I will return to it later when we deal with the Labour new clauses and amendment.
Alex Salmond
I am pleased to say that I have drawn level with the Chancellor on this morning’s assessment.
I admire the dead bat that the Minister is showing to his Back Benchers, but can he answer this point: is it the Prime Minister’s objective in the European renegotiations to lower the UK’s budget contribution, and if so by how much?
Mr Gauke
The right hon. Gentleman refers to my dead bat, but I thought I had played a flourishing cover drive. The Prime Minister has set out objectives for a renegotiation, which will then be taken to the British people, who will decide our future as members of the European Union. We believe we should do a wide range of things to ensure that Europe works better for its members. We have consistently argued the case for fiscal discipline and we are not alone in making that case. Indeed, the Bill itself demonstrates that there is strong support for a fiscal disciplinarian approach within the European Union—the fact that we were able to negotiate a reduction in the multi-annual financial framework was a considerable achievement. In those negotiations, we had the support of member states such as Germany, France, Sweden, the Netherlands, Denmark and others.
Alan Mak
My hon. Friend the Member for North Dorset (Simon Hoare) made a very important point about protecting the UK’s rebate, which is important to my constituents in Havant and throughout the country. Will the Minister confirm how much of the UK rebate the Labour Government gave away?
Mr Gauke
I will certainly make that point. It was estimated by the European Commission to be of the value of €9 billion over the previous MFF period. In this MFF period, it would be in the region of £2 billion a year, which would be a considerable loss. The Government will not be repeating that.
Barbara Keeley (Worsley and Eccles South) (Lab)
I would like to take the Minister back to the intervention of the right hon. Member for Gordon (Alex Salmond), because the Minister did not really answer him. In an article in The Sunday Times this week, one Conservative MP said of the Prime Minister’s intentions that he was keeping things up his sleeve, and that:
“He’ll try to negotiate a lower net contribution to the budget.”
It is definitely being said that the Prime Minister is holding that in reserve. Will the Minister comment on that?
Mr Gauke
We have consistently argued the case for money being spent more wisely and for greater European Union public spending restraint. We have already made progress with that argument—we made progress in 2013 and the Bill relates to the negotiation, although it is on the revenue rather than the expenditure side. We will consistently argue that case.
Mark Garnier
I am grateful to the Minister for giving way—he is giving us a lot of his time. He mentions fiscal prudence and spending taxpayers’ money wisely. Two things that epitomise the wastefulness of the European Union are the Strasbourg circus—the waste of money moving the whole Parliament to Strasbourg—and the fact that the accounts have not been signed off for some two decades. The Prime Minister is working very hard to achieve fiscal prudence, but does the Minister agree that the mood around the whole EU is behind him in dealing with that? The problem is not unique to the UK. The Prime Minister has the wind in his sails and support from the rest of the EU to deal with those problems.
Mr Gauke
My hon. Friend makes an important point. I would perhaps go further: it is not just member states that recognise that things need to change and that there needs to be better value for money. Vice-President Georgieva, who has responsibility for the budget, also recognises the need to ensure that money is spent in a better way. The Prime Minister has consistently set out the fact that there are two sensible objectives: to cut the whole budget and to protect the rebate. We will continue to make that case.
Kelvin Hopkins
I thank the Minister for giving way once again. The hon. Member for Boston and Skegness (Matt Warman), who is not in his place, made a useful point about expressing our contributions in terms that the citizens will understand—contribution per head, per month or whatever. Would it not be useful to look at the expenditure side of, for instance, the common agricultural policy, and say how much that costs in net terms per head of population, and how much it has cost over many decades in higher food prices? People would be very interested to know that.
Mr Gauke
The hon. Gentleman draws me into deeper waters and wider issues. Perhaps I should resist, Mr Streeter, before you advise me not to spend too much time on the common agricultural policy and some of its costs. It is worth pointing out that the CAP as a proportion of expenditure by the EU is falling and has fallen fairly significantly. The hon. Gentleman’s point is about making things clearer and ensuring that the British public have a better understanding of where their money is spent. There is a wider point, because that does not apply only to EU contributions. I am sure that he and all hon. Members welcome the fact that Her Majesty’s Revenue and Customs sends out tax statements to the British public so that they can see details of where money is spent in various Government Departments and the details of the money spent on our net contribution to the EU.
The scrutiny Committees of both Houses closely scrutinised and cleared the proposal for the new ORD, which was agreed unanimously by member states in May 2014. The Bill and the Prime Minister’s 2013 deal demonstrate that, working with allies, we can achieve change in Europe, and secure a good deal for the UK and for Europe. I commend the clauses to the House. They should stand part of the Bill.
Sir William Cash
I am happy to wait if the Minister wishes to deal with the new clauses. I will come back at that point.
Mr Gauke
I am grateful to my hon. Friend. New clauses 1, 2 and 3 and amendment 1, all tabled by the hon. Member for Worsley and Eccles South (Barbara Keeley), would require the Treasury to undertake a series of actions prior to the Act coming into force. New clause 1 would require the Treasury to inform both Houses that it has formally requested a review by the European Commission into alternative ways of running the EU budget and a comparative analysis of commitments and payments as the basis for appropriations for the budget. New clause 2 would require the Treasury to request a fundamental review by the Council of Ministers of EU budget priorities, waste and inefficiency. New clause 3 asks for the Chancellor to issue an invitation to the Commission to provide further details of the draft budget to scrutiny Committees. Amendment 1 would delete subsection (3) of clause 2, which would mean that the Act would not come into force until 14 days after the conditions specified in each new clause were met.
We recognise the concerns underlying the amendments. Nevertheless, the hon. Lady will recall that the Bill relates exclusively to the financing of the EU budget, while the amendments relate to the separate, although equally important, issue of EU budget expenditure. On that basis alone, we reject them.
Tom Tugendhat
My hon. Friend talks clearly about financing and the details of various percentages going up or down. Does he recognise that what he is really talking about is setting the tone on the agreement we have in the European Union? The UK can play its part as a good partner in the EU, but the EU can help to play its own role in promoting what we all recognise is a growing economy in Europe, and not just a redistribution of wealth.
Barbara Keeley
I invite the Minister to remind himself of a similar debate we had in January 2008, in which he and his hon. Friends on the then shadow Treasury team tabled a strikingly similar new clause that asked for a report on the review by the European Commission covering all aspects of EU spending. It was a very robust debate and he was a signatory to that new clause. He rejects my new clause, but it is very similar to the one he tabled in 2008.
Mr Gauke
I am tempted to point to the remarks made by the hon. Lady’s colleagues in setting out the reasons why that new clause should have been rejected. She might not have been persuaded, but I am tempted to say that six years on, after much reflection, I can see some value in them. The stronger argument I would perhaps make is that in contrast to what happened some years ago, when the previous Labour Government negotiated away part of our rebate, we have just had a successful negotiation in 2013. Let me set out the progress that is being made on that agenda. If I may, I will give a little detail on the substance, putting aside the point that the Bill focuses on the revenue, rather than the expenditure, side of things.
Sir William Cash
On the reference in new clause 3 to
“the relevant European affairs select committee in each House of Parliament”
as my hon. Friend knows, the European Scrutiny Committee always goes through all the budgets, makes reports regularly and has the power to invite anybody, including officials from the European Commission. In addition, it receives explanatory memorandums from the Government—in fact, from the Minister himself. I would like to make some further remarks about this later, but I agree very much with what he says in rejecting the Opposition’s proposals.
Mr Gauke
I am grateful to my hon. Friend for those remarks. Let me come straight to new clause 3, as he has raised that point.
Along with many across Europe, we share the concern that lies behind new clause 3 that the EU is not sufficiently accountable to EU citizens. Hon. Members will need no reminding that the Prime Minister has already made it clear that strengthening the role of national Parliaments is a central tenet of his reform programme. Within the existing legal framework, the Government already take the role of national Parliaments in scrutinising EU proposals very seriously. That is why, when the European Parliament requested the formation of a high-level group on own resources to review the EU financing system, we insisted that national Parliaments, as well as the European institutions, were given a voice as part of the consultation. We therefore amended the joint declaration on the formation of the group explicitly to take account of input from national Parliaments.
We do all we can to ensure the transparent and effective scrutiny of each year’s annual budget negotiations. An explanatory memorandum is deposited as soon as possible after the publication of the draft EU budget each year. That is followed by debates in both Houses and regular ministerial updates at significant stages of the negotiation process.
We are committed to working with both scrutiny Committees to make this process as efficient and effective as possible for all parties. However, we believe that requiring the Government to write to invited officials to appear before the scrutiny Committees would add little to the scrutiny process and would be a very peculiar precedent, for all the reasons set out by my hon. Friend the Member for Stone (Sir William Cash). It would add little because the Committees can, and have, invited officials to appear before them. For example, in June 2014, Nadia Calvino, the Director-General of the European Commission budget, gave evidence to the Lords EU Economic and Financial Affairs Sub-Committee.
It really should not be the place of Government to determine who the scrutiny Committees should see. It is for the Committees of both Houses to decide for themselves who should appear before them and when. It would be a peculiar precedent for the Executive to begin to interfere with that freedom, no matter how benign the initial intention.
Barbara Keeley
I appreciate the point made by the Chairman of the Select Committee, the hon. Member for Stone, but the Minister cannot have it both ways. In a debate in October 2012, the right hon. Member for Tunbridge Wells (Greg Clark), speaking for the Government, complained strongly—I referred to this in a previous debate—that Ministers had asked the Commission to model costs of €5 billion, €10 billion and €15 billion in relation to staffing. That very reasonable request was bounced back with the very insulting comment:
“We declined as it’s a lot of work and a waste of time for our staff who are busy with more urgent matters…we are better educated than national civil servants. We’re high fliers, not burger flippers”.
If the Minister is expecting us to believe him, when such a simple request on a staffing issue is not taken seriously, then we do have some points to make.
Mr Gauke
I will return to that point. My remarks, when the hon. Lady intervened, were in respect of new clause 3 and the European Scrutiny Committee. I have been very clear that it would be a curious thing to do to place this in legislation and for the Executive to take that role upon themselves. I very much echo the remarks made on that by my hon. Friend the Member for Stone.
Sir William Cash
Let me add one further point before I deal with the matter in substance. The European Scrutiny Committee’s most recent report, which in this respect has been accepted by the Government, recommended that each Committee, including the Treasury Committee, establish a rapporteur to consider these questions. We could effectively work with the Treasury Committee to ensure, if necessary, that there would be an even deeper examination of the Treasury aspects.
Mr Gauke
We obviously welcome scrutiny in this area. If the European Scrutiny Committee or other Committees seek the Government’s support, for example, in bringing over Commission officials to give evidence, the Government would of course gladly support them. Let me offer that hand of co-operation if I may, but I do not see a strong case for placing this within the legislation. Indeed, I would go further and say that it would be inappropriate for us to do so. That deals with new clause 3.
We do not believe that the proposal, which would require the Government to write to various European institutions to invite them to undertake a review of one or other aspect of the EU budget, would really add to the work that the Government have undertaken and continue to undertake to improve the expenditure of the EU budget.
Edward Argar (Charnwood) (Con)
My hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat) rightly highlighted the welcome reduction in the contribution, which is good news for my constituents in Charnwood, as it is for his. That was in stark contrast to results achieved in negotiations by previous Governments. As the Minister and my hon. Friend the Member for Wyre Forest (Mark Garnier) mentioned, while the focus may be on revenue and not expenditure, it is important that the money is well spent. Will the Minister reassure me that he will continue to push the case for reform of how the EU spends money to ensure that it is well spent, well audited and that the accounts are signed off?
Mr Gauke
I thank my hon. Friend for his excellent intervention. The answer to his question lies at the heart of our response to new clause 1. He raises an important point.
New clause 1 requires the Government to write to the Commission to review the basis of appropriations for the EU budget to see whether “alternative arrangements” would provide better value for money. Although the link between appropriations and value for money is an important one, it is not of the first order. The Government’s first priority is to control spending directly, not through the system of appropriations. Cutting low-value expenditure is the first and most important way of improving the quality of EU spending.
In delivering an historic real-terms cut to the budget, the Government took a decisive step. Within a smaller budget, we also made sure that expenditure was reoriented towards areas that provide higher value for money. Spending on the common agricultural policy will fall considerably as a proportion of the total budget, while spending on research and development and other pro-growth investment will increase. So it is possible to operate within the system of appropriations, if appropriate control is in place.
The new clause none the less raises the question of whether the system of payments and commitments is appropriate for delivering value for money. It is a question that we must ask. It is true that it is an unusual budgeting system and it is not the way in which the UK Government budget. If the EU were starting from scratch, we would not advocate using that system. Yet I do not think anything would be gained by requesting a review of the system—for one simple and compelling reason. The proposed review in new clause 1 has already been set in motion by the new Budget Commissioner, Vice-President Georgieva, through her recent “budget for results” initiative. We obviously cannot say what the review will include, but its terms of reference are widely drawn, providing ample space to review the current budget system, including the system of appropriations, and to explore possible alternative approaches that would offer better value for money and improved financial management.
The UK has publicly welcomed that initiative and has shared its expertise. The Chancellor has made it clear to other Finance Ministers during ECOFIN meetings that that is the UK’s position. The initiative will involve member states, the European Parliament and the European Court of Auditors.
Wes Streeting (Ilford North) (Lab)
I am grateful for that update, but perhaps the Minister will tell us what the Government are going to do proactively in terms of their own priorities to deliver the value for money that he talks about, beyond the generalities that we have heard all morning about better value for money, better spending and better priorities. Can we have some specifics? How will the Government exert real influence on that important review?
Mr Gauke
The most important thing we can do is reduce the EU budget because that then focuses the mind of the European institutions to ensure that the money they are able to spend is prioritised in the right way. I come back to how the money is spent and the importance of focusing more on items that will help ensure a more dynamic European economy—more on research and development, for example—and proportionately less on the common agricultural policy. That is something that all hon. Members should support. That has been achieved.
Graham Jones (Hyndburn) (Lab)
I think the Minister has answered my question. It was about the common agricultural policy, and he has just walked into the answer.
Kevin Foster
I thank the Minister for generously giving way to me a second time. Does he agree that the European Commission did not propose a single euro of savings when the negotiations started, so it would be strange to ask it to conduct the review to secure better value for money, as the new clause demands? In essence we would be asking the poacher to review how the poaching is getting on.
Mr Gauke
I take my hon. Friend’s point. We are, I hope, moving in the right direction. The new Commission has been in place for the past few months or so, and the early signs are—I shall return to the point—that it appears to be more focused on the task. I think there is a link: there was a reduction in the EU budget, which has somewhat focused the mind.
Kelvin Hopkins
Following what the hon. Member for Torbay (Kevin Foster) has said, would it not be sensible and appropriate for our Government to carry out a comprehensive review of how we think the budget should operate, and make that a firm public submission, whatever is undertaken by the EU itself?
Mr Gauke
I am grateful for the hon. Gentleman’s intervention, which he makes in a characteristically constructive way. Clearly, it is important for us to work with other like-minded member states to ensure that we get the focus we need and the prioritisation of expenditure in the areas that add the most value. There are different ways of achieving that, and we can discuss that. It is only fair to note, however, that some progress has been made, as I shall touch on in a few moments.
New clause 2 imposes a requirement on the Government to request a review by the Council of Ministers of the EU
“budget priorities, waste and inefficiency”
in advance of ratification. The new clause relates not to financing, but to expenditure, so I again point out that we will reject it. Although the Government recognise the need to cut down on wasteful spending, requiring the Government to write and ask for a review of waste and inefficiency would add little to what the Government are already doing in this area. We know that there is waste and inefficiency in the EU budget. We need action, not words—and action is what the Government have taken. Our most important step has been to cut the EU budget. Just as Governments across Europe are making tough decisions to consolidate public finances, the multi-annual financial framework deal negotiated by the Prime Minister has forced the EU to make tough decisions to bear down on waste and to economise. By imposing restraint on the EU budget, we can create a culture change in the Commission. The days of Commission officials measuring their success by how much of the budget they have been able to spend should be behind us.
Peter Grant (Glenrothes) (SNP)
I could understand the Government’s reluctance to incorporate the amendments in legislation if they did not deal strictly with the narrow interpretation of the Bill, but in view of what they ask the Government to do, I cannot see why the Government should be reluctant to take any of those actions. Why do they not simply give an undertaking to do so? Then we would not need the amendments, and we could all agree on something.
Mr Gauke
In the case of new clause 2, which relates to how we deal with the way in which the Council of Ministers works, we are making progress and taking action, which includes cutting the budget. In the case of new clause 1, I do not need to undertake to write a letter calling for the Commission to do something that it is already doing. As for new clause 3. I have already made it clear that I do not think it would be appropriate for us to impose on members of the European Scrutiny Committee something that is a matter for them.
Barbara Keeley
I am slightly surprised that the Minister is unable to take on board what was actually a very sensible suggestion. He says that overall budget restraint is sufficient, and that there is no need for a focus on “waste and inefficiency”. As I mentioned earlier, back in 2012, the right hon. Member for Tunbridge Wells tried to introduce measures to reduce the staffing budget and asked for modelling, but that request was rejected. Commission representatives should not feel that they can bounce back to UK Ministers simple requests that really would help decision making.
Time and again, Members on both sides of the House raise issues relating to the Commission’s staffing costs. If that is the response that the Minister has been receiving—he is not admitting it today, but the right hon. Member for Tunbridge Wells mentioned it during another debate—we really must press the matter. It is not good enough simply to accept that everything is fine and we do not have a problem. We must push the case for enhanced scrutiny.
Mr Gauke
We care a great deal about eliminating waste and inefficiency in the EU budget. The question is how we should do that. Let me say first that, if we can reduce the MFF, that will place a much greater onus on the Commission to eliminate wasteful expenditure.
The hon. Lady made a perfectly fair point about what happened back in 2012. However, the Prime Minister’s negotiation triumph in 2013 has reduced the MFF, and we are now seeing signs—which we were not seeing three years ago—that the Commission is focusing much more on the issue. Vice-President Georgieva described the 2015 budget, which was agreed last December, as
“a budget of responsibility… a tight budget that reflects the tight fiscal conditions in our Member States.”
She said that it was
“a very focused budget, focused on the priorities that we have established in the new Commission.”
She added:
“It is directed towards investments in competitiveness, for instance supporting the innovative nature of our businesses. It is also a budget where tight controls on spending will allow us to achieve the best possible results.”
Vice-President Georgieva’s “budget for results” initiative, which focuses on better rather than more spending, has come about as a direct result of the imposition of restraint at the top. The United Kingdom is engaging constructively with the initiative, and is working actively with the Commission to ensure that momentum is maintained through regular meetings at political and technical levels. We are working with our allies to increase support for the initiative and to ensure that all member states are represented in discussions. We look forward to the first meeting of the inter-institutional working group in mid-July and to contributing to the “budget for results” conference in September.
Because of what we have achieved in reducing the budget, we are seeing a culture change, but we need to ensure that the momentum is maintained. If the Labour party supports that, I am delighted, but we must remember that it was Labour that surrendered part of our rebate and failed to impose the discipline that we needed.
Barbara Keeley
Again, I am surprised by the Minister’s response. Let me remind him of a point that I made on Second Reading. When Labour Members voted with rebels in the Conservative party, they strengthened the Prime Minister’s hand before he went into negotiations by insisting that the MFF be cut. The Minister really ought to acknowledge that. Surely it helps if, on every occasion, Members in all parts of the House can be strong in saying that we want enhanced scrutiny, and that is what we are trying to do through our new clauses today.
James Cartlidge (South Suffolk) (Con)
It is difficult to listen to what Labour Members are saying about new clause 2 without remembering what happened when they were in government in the United Kingdom. Let us not forget the huge increase in the number of people they employed, including outreach workers and people with non-jobs. Given the vast inefficiency and waste of all those years, it seems a bit rich for Labour Members to expect us to take lectures on the subject.
Mr Gauke
That is a very good point. However, you would not wish me to be detained too long, Mr Streeter, by the fact that various candidates for the leadership of the Labour party appear to be recognising that too much money was spent before the crash, and that not all of it was spent in an efficient manner.
Carolyn Harris
Does the Minister believe that enough is being done to ensure the transparency of budget decisions that are made at EU level?
Mr Gauke
The hon. Lady has asked a good question. In the context of the review that the Commission is undertaking and the focus on a budget for results, transparency is certainly important. The Government’s record is clear: we want more transparency in relation to all expenditure, whether at UK or EU level, and I think that more can be done in that regard.
The hon. Member for Worsley made an important point about administrative expenditure. As part of the MFF deal, EU staff salaries were frozen in 2013-14, and EU institutions committed themselves to a 5% headcount reduction by 2017 and an increase in statutory pension age to 66 for officials who started work in or after 2014. I would be the first to accept that those reforms do not go far enough, but, working with like-minded member states, the Government will continue to press the EU institutions to show maximum restraint when it comes to administrative expenditure.
Barbara Keeley
Are this Minister and other Ministers having more success than their right hon. Friend the Member for Tunbridge Wells had back in 2012, when the European Commission dismissed his very reasonable request for some modelling on staffing costs? Are the Commissioners being any more helpful nowadays?
Mr Gauke
Some progress has been made since then. The Commission has improved its transparency record, partly thanks to the Government’s ongoing work. In particular, it released a payments plan containing much more detail on payment forecasts. I accept that we can go further, and that UK citizens expect more, but requiring the Government to write a letter inviting officials to attend Select Committee meetings will not really deliver that. What is required is constant vigilance and discipline. We have shown that, and it is delivering results.
Sir William Cash
Earlier, the hon. Member for Worsley raised the question of how the proposals for budget reduction came about. As I am sure the Minister remembers only too well, I was one of the so-called rebels, although actually we were not really rebels at all: all that we were doing was asking the Government to listen, which is exactly what happened, because our amendments were accepted. The then Financial Secretary to the Treasury—or perhaps the Economic Secretary—paid tribute to us for having presented the proposals, and everything was hunky-dory.
Mr Gauke
I am grateful for the constructive tone that my hon. Friend brings to the debate; he has a history of so doing. He has argued for greater efficiency and transparency in the expenditure of the European Union for many years, and I am grateful to him for that.
I should also point out that we are providing technical assistance to the Commission as it considers all the options for enhancing performance on the budget. We are sharing our expertise in areas such as value for money, spending area objectives and improving budgetary performance—for example by removing adverse incentives and improving accountability and transparency.
Luke Hall (Thornbury and Yate) (Con)
My constituents were aghast when the previous Labour Government gave away our rebate. Will the Minister confirm that the Bill will ensure that there will be no further such concessions as long as this party is in power?
Mr Gauke
I am more than happy to give my hon. Friend that assurance. When we debate the scrutiny of expenditure, it is worth bearing it in mind that allowing us to make a bigger contribution than we otherwise would involves a cost to the UK taxpayer. The fact that budgets were allowed to increase significantly also means that the focus on getting value for money could be lost. If we are to eliminate wasteful expenditure, it is important that we bear down on the overall budget, because that has a big impact. That is a clear area of difference—if I may put it that way—between the two parties. We have placed a consistent focus on controlling expenditure, whether at UK or EU level.
The next opportunity to look wholesale at the priorities of the EU budget will be the mid-term review of the MFF. That review is required under the agreement reached on the MFF, and it must take place by 2016. The Opposition’s calls for a review appear to add little to the review that is already planned. The Government will engage constructively with the Commission, the Council and the European Parliament to look at further ways in which spending can be improved.
In the meantime, the Government are taking every opportunity to bear down on wasteful spending and to highlight it where it is identified. That is reflected in our having voted against the discharge or approval of the EU budget for the past four years. Until the European Court of Auditors is able to give a positive statement of assurance on the EU accounts, we will continue to work with allies in calling on the Commission to do better. I note that this position is not the one that the previous Labour Government took.
Together with our allies, Sweden and the Netherlands, we have issued a joint counter-statement calling on the Commission and member states to take proactive steps to reduce the level of error in the EU accounts by simplifying regulatory frameworks and increasing the training and guidance available to national officials. By supporting the European Court of Auditors’ calls for more focus on performance and added value in the EU budget, we have helped to change the Commission’s focus from compliance to results.
The Government are also playing their part in the work being undertaken to simplify the rules governing the implementation of structural funds. In the past, the Commission’s focus has too often been on compliance, fostering a tick-box culture with little care for performance. A structural fund simplification agenda was launched earlier this month by Commissioner Cretu, and those involved will meet for the first time next month. The budget for results initiative, to which I have already referred, will provide another valuable opportunity for this Government to continue to insist on maximum efficiency and results in relation to EU spending.
Of course, we are also keeping up the pressure on the Commission in the annual budget negotiations and in response to in-year requests for more funding. We have a strong track record of pushing back against draft amending budgets, to ensure that value-for-money criteria are met, and we regularly challenge the Commission to identify opportunities for reallocation rather than coming to member states with requests for more money. The Government are constructively engaging with the work that I have outlined, in order to ensure the best possible deal for the United Kingdom.
John Redwood (Wokingham) (Con)
Has my hon. Friend seen the work of the so-called five presidents of the euro area, which sets out how they wish to press for full fiscal union, with a euro Treasury and a euro budget under central control. Will he assure the Committee that we will have nothing to do with any of that?
Mr Gauke
Yes; my right hon. Friend makes an important point about the euro area. No doubt he will have heard the speech delivered by my right hon. Friend the Chancellor of the Exchequer at the Mansion House a couple of weeks ago, in which he made it clear that one of our priorities in the UK’s negotiations ahead of any referendum will be to ensure that the “euro-outs”—the European Union member states that are not in the eurozone—are properly protected and do not find themselves disadvantaged by the eurozone countries working together to the disadvantage of the “euro-outs”. That is a real priority for the United Kingdom.
Sir William Cash
I am sure that my hon. Friend appreciates the difficulties inherent in this matter. It is all very well to want to disaggregate the eurozone from the non-euro member states, but the reality is that we are all part of the same European Union. Any attempt to make a change of this kind would involve a fundamental change to our relationship with the EU and would therefore require a treaty change by any reasonable standards. Does he appreciate how serious the position would be if we neither sought nor achieved that objective?
Mr Gauke
It is important that we meet that objective.
On the subject of the report, I would make the point that we benefit from the single market and do not want to stand in the way of the eurozone resolving its difficulties, but we will not let the integration of the eurozone jeopardise the integrity of the single market or disadvantage the United Kingdom in any way. That is one the important objectives in our negotiation with the European Union, and it is exactly the point that the Chancellor of the Exchequer was making in his Mansion House speech. My hon. Friend the Member for Stone (Sir William Cash) and my right hon. Friend the Member for Wokingham (John Redwood) are right to raise the importance of this point, which we fully recognise.
John Redwood
The five presidents’ press release and work programme, which will result in a White Paper, are about taking over the European Union budget and using it for transfers throughout the eurozone. Clearly, Britain does not want to be part of that. I was asking the Minister about the budget, not about single market regulations.
Mr Gauke
The point about our position applies across the piece. To be fair to my right hon. Friend, certain eventualities that he predicted many years ago have come to pass. Because of the current situation in the eurozone, substantial reform could well be needed so that the members of the single currency are able to co-ordinate fiscal policy to a greater extent, with greater fiscal transfers and so on. That raises issues for the eurozone members which do not apply to other members of the European Union that have access to the single market but would not wish to partake in any such arrangement. We would need to ensure that if that is the direction the eurozone goes in, the position of the euro-outs is protected. Ensuring that access to the single market remains in place for all 28 member states is an important part of that, which is why I mentioned it. We need to ensure that our position is protected. That is the point I wish to make, and I fully understand the points that my right hon. Friend is making.
Finally, amendment 1 has been proposed in order that the conditions set out in new clauses 1, 2 and 3 are consistent with the terms of commencement in the Bill. I have explained to the Committee why we will not be supporting the new clauses, and we thus reject the amendment. While I have the opportunity to do so, I wish to identify a typographical error in the explanatory notes. The second line of paragraph 6 refers to a VAT-based rate of call of 15% for Germany, the Netherlands and Sweden, whereas it should have read 0.15%. I draw the Committee’s attention to that in case it caused consternation among right hon. and hon. Members.
In conclusion, let me assure the hon. Member for Worsley that, having made important progress in 2013, this Government are focused on ensuring maximum restraint, budgetary control, value for money and transparency in EU spending. I therefore welcome the spirit of her proposals, but requiring the Government to request that the Commission or the Council of Ministers review these issues adds little to the real work that has been done and continues to be done to improve the working of the EU budget. That work began with the Prime Minister’s historic deal, which cut the budget in real terms and protected the current system of financing—we should not forget that that is what this Bill is about. That work continues through the budget for results, through the Government’s continued engagement on the annual budget and through the discharge of the budget, and it will continue during the mid-term review of the MFF.
With those few, brief introductory remarks, I urge the hon. Lady not to press her proposals to a Division and I urge hon. Members to support the clauses set out in the Bill.
Barbara Keeley
Before we go any further, may I point out that my constituency is now called Worsley and Eccles South? The people of Eccles would rightly be very upset if we left them out of the equation; Eccles is a very important town in my constituency.
I rise to speak to the new clauses standing in my name and those of my hon. Friends. We are dealing with a slight complexity, in that the Bill is simple but drafted in such a way as to make it complex to amend. Amendment 1 is therefore a technical paving amendment which can bring in the new clauses, so it is that amendment that we will push to a vote, if necessary.
The Bill relates to agreement of the own resources decision that will be incorporated into UK law, based on the agreement reached at the February 2013 European Council. The Minister covered that at great length over the past hour and 20 or so minutes. Decisions on UK contributions reaching €14 billion are brought into sharper focus in a week when Ministers are discussing cuts to tax credits for the low-paid and have not been prepared to rule out cuts to financial support for disabled people. We find ourselves in a serious and austere financial context, so we must ensure that we look at every aspect of value for money, budgetary control and the reform of priorities within the EU budget.
When we debated the MFF in this House in October 2012, the Government’s motion talked about agreeing that we must see
“significant improvements in the financial management of EU resources by the Commission and by Member States and significant improvements in the value for money of spend”.—[Official Report, 31 October 2012; Vol. 552, c. 295.]
The last debate contained many examples, some of which I shall refer to, showing that we are not there yet. I am sure the Minister would agree, so what we are simply trying to do with the new clauses is find ways in which we can enhance value for money assessments, budgetary control and the reform of priorities. That is very important to many of the Members in the Committee today and to Members throughout the House.
The proposals standing in my name and those of my hon. Friends will assist greatly in ensuring that reports are made to this House on value for money and budgetary control, and on budget priorities and waste and inefficiency within the EU budget. Examples have been given in interventions that give us an understanding of the extent of concerns about this out in the country—which we explored on Second Reading—and those can only increase.
Barbara Keeley
Indeed, that is a very real fear. If we look down the list of commitments and compare it with the payments made, we will see the level of commitments that are still to roll forward, which is a very frightening prospect. I go back to the point that I have just made. This is a system designed to drive up budgets. We support what has taken place and recognise that the House voted for it back in 2012, but unless this system changes we will be in a situation in which commitments are being made in the period up to 2020 of €960 billion, which is €52 billion more. It is a serious matter. Clearly, it is serious if the Commission is taking on budgets and then not paying bills, but it is the upward pressure on the budget process that is the great concern.
In our last debate on this Bill, the hon. Members for Corby (Tom Pursglove), for North East Somerset (Mr Rees-Mogg), and for Daventry (Chris Heaton-Harris) and my hon. Friend the Member for Luton North (Kelvin Hopkins) referred to a range of concerns that their constituents had about EU finance, how the EU budget is spent and the need for control of the budget. That is a point to which we will keep returning.
In the debate of 15 January 2008 on the Committee stage of the European Communities (Finance) Bill—I have already mentioned this—the Financial Secretary, then shadow Treasury Minister, and his shadow Treasury colleagues called for a report on “all aspects of EU spending”. Clearly, both the Opposition then and the current Opposition have had concerns about this. The Minister and his colleagues called for that report in 2008. I hope that we still have time in the rest of this debate for him to repent his view that we do not need further reviews.
As I have mentioned, there were complications in the wording of the amendment in 2008. I have read through the debate. The difficulty that the hon. Gentleman and his hon. Friends on the shadow Treasury team at that time ran into was that the amendment called for Treasury certification that it
“considers the outcome of the review is satisfactory to the interests of the United Kingdom”.
That seemed to be the sticking point. We have avoided such complications in this Bill by tabling simpler amendments that ask for an analysis of the basis used for appropriations and the study of alternative arrangements.
The Minister has said that such a review is ongoing. Will he tell me at this point when we will see that review?
Barbara Keeley
Will he clarify at which point in 2016? [Interruption.] No, it is just some time in 2016.
Peter Grant
I do not know whether that is a bid to be the first independent Scottish ambassador to the European Union, but if I am in a position to put anybody’s name forward I shall certainly bear in mind my right hon. Friend. He makes a valid point, which is related to the question he has asked repeatedly and on which he has still not had an answer: what the Prime Minister’s negotiating position and priorities are going to be. The fishing industry is not a massively important part of the United Kingdom’s economy; it is a massively important part of the economies of some nations that make up the United Kingdom. The negotiations are, however, always carried out through the Westminster lens, and it is seen as a major achievement when all we come back with is, “Not too many things have got worse.” We talk about aspiration. I think aspiration means we want things to get better, not to think we have achieved a lot when we come back from negotiations and have not had to lose too much.
The European Union does not mange its finances very well at all. We do not need to be accountants to work that out. Most companies would not be allowed to continue if they went 20 years without having their accounts signed off. Sometimes we need to look, however, at how we manage the part of it for which we are responsible. Some questions today, particularly those from the hon. Member for Worsley and Eccles South (Barbara Keeley) on the Labour Front Bench, about scrutiny of the European budget and the performance and financial management of the European Union, were pointing to weaknesses in the way this House holds Europe to account. That points either to a lack of involvement of members of the European Scrutiny Committee, or to the fact that it has not been given sufficient powers. There are many weaknesses in the way European finances affect the responsibilities of this Chamber, and changes could be made to the way this House holds Europe to account, but their delivery does not necessarily mean having to threaten to walk away from Europe altogether.
As I said in an earlier intervention, I do not see why the amendment needs to be put to a vote. It does not contain anything that the Government should be reluctant to do. I defer to the hon. Member for Stone (Sir William Cash), who has left the Chamber, and his expertise on the procedures of the House and the position of the EU Scrutiny Committee, but it is time to put on a statutory basis a process whereby the Government ask things of Europe on our behalf—and which no Government in their right mind should be reluctant to do. How could any Government not want to ask Europe to be more accountable, or to think a wee bit more carefully about its spending priorities before it sets them? I hope that we see an outbreak of common sense among Government Members.
The United Kingdom’s position in whatever negotiations the Prime Minister has would be strengthened if we could find a way for this Bill to be amended and approved unopposed. If the proposed changes are put to a vote, I am minded to go with them. It would be sad if it were a matter of public record that this Committee had divided on such an important matter—on the crucial question of whether we wanted the Secretary of State to write a letter to Europe.
Mr Gauke
We have had a wide-ranging debate over the past two and a half hours. The hon. Member for Glenrothes (Peter Grant) was not far off the substance of the matter before us: the disagreement is over whether there should be placed in statute a requirement to write a letter.
I recognise the spirit of the proposed changes before us, and the need for us to improve the value of expenditure in the European Union, to cut down on waste and to increase transparency. We strongly support and have advocated those points.
I have to say that writing to the Commission, asking it to review the issues, will not particularly achieve the objectives we have heard set out, but the Government have taken action and continue to do so to improve EU spending. That began with the Prime Minister’s historic deal, cutting the budget in real terms. It has forced the Commission to prioritise, which we very much welcome, and it has led to the Commission’s budget for results initiative. The UK is playing an active role in that process, and we continue to push the Commission to bear down on waste in its responses to the EU budget discharge process. The Government are contributing to the simplification proposals from the Commission, and the UK will continue to fight for restraint in the annual budget.
Those steps have led to concrete results: the Commission has become more transparent and has shifted more funding into pro-growth spending. We certainly make no apologies for that—although there appears to be some resistance to it in some parts of the House—and the UK’s contributions will be lower for every year in this seven-year deal period than in the final year of the last MFF deal. That is a saving of almost £8 billion over the forecast period compared with 2013-14.
Barbara Keeley
If the Minister is resisting the amendments, and it sounds as though he is, will he tell the Committee whether he is happy with the balance of priorities in the spending on competitiveness for jobs and growth, which was a key point that I spent time discussing? He seems to be resisting any attempt to put forward a review or report that would make it easier for the House to push for changes, so is he happy with the current balance?
Mr Gauke
In the 2013 negotiations, we achieved a shift towards a greater proportion of expenditure being on pro-growth measures, such as research and development, and away from other areas of expenditure that contribute less to growth. That includes the common agricultural policy. The hon. Lady says that it is a small amount. Actually, it was not; there was significant progress in terms of a reduction in the common agricultural policy, with more spending on those areas where we think there could be greater added value. That is the right direction. I again have to draw the contrast with the surrender of £2 billion a year in respect of our rebate for common agricultural policy reform that we did not see—I am afraid that that is the record of the last Labour Government with the 2005 deal. I therefore believe that we are moving in the right direction.
If the hon. Lady is asking, “Would we like to go further?”, then, yes, I very much support that view. We want to go further and see a greater emphasis on expenditure that provides better value for money for UK and EU taxpayers. That is very much what we want, but I question the idea that the letter she is calling for will make any difference, particularly when we are seeing progress with the Commission’s budget for results initiative. The working group will meet for the first time in July and there will be a major conference in September 2015. We want to continue that approach during the mid-term review, which, as I said, will occur in 2016.
Barbara Keeley
The Minister was unable to give a date. Mid-term reviews are one thing, but we are moving towards a referendum, as we all know. We are all going to have to build this case for our constituents and for the campaign out there, and we need the information sooner. The slow trundling-on of the EU Commission will not suit our need for that information in this country, in this year and the next. I invite the Minister to come to my constituency and try to explain that this is a really good deal—the split between competitiveness and growth, and the amount that is spent on research and development—when we really should be pushing for that for our economy. We need to explain that and we need the review to be done sooner. He cannot even say when it is going to be done in 2016—it may be too late.
Mr Gauke
The MFF will be in 2016, as I said. The reality is that trying to transfer expenditure in the way we certainly want to—and from what the hon. Lady is saying, she also wants to, although it does not seem to have support in all parts of the House—is a major task. We have made progress. If she is saying that the situation is frustrating and she would like to go faster, I am not disagreeing with her, but I am afraid that that is the way the European Union works. We have clearly made progress and I do not think it does her cause any good to downplay our progress.
Mr Gauke
I was going to turn directly to the common agricultural policy, for which the right hon. Gentleman is such an enthusiast, subject to his complaint that he would like Scotland to have a greater share of the money that comes to the United Kingdom.
During the renegotiation, we faced the fact that the UK’s CAP receipts would fall over the next budgetary period in real terms. The conclusion was that the fairest way of allocating that cut was through an equal, proportionate reduction in both pillars across the United Kingdom. To have allocated more funding to Scotland or any other part of the United Kingdom would have meant deeper cuts across the rest of the United Kingdom. That was why the Government took the steps we did.
Alex Salmond
Rather than bemoaning the £2 billion the Labour party lost in respect of the budget rebate, will the Minister revisit the €220 million of convergence money that the Government chose not to distribute by hectare, which is the basis on which we got it in the first place? Does he realise how much bitterness that decision caused in the rural communities of Scotland? It no doubt contributed to the Conservative party’s worst election result in Scotland for a century last month.
Mr Gauke
I will briefly make two points to the right hon. Gentleman. There is no additional money for the United Kingdom. Over the next funding period, the UK’s direct payments will fall by about €500 million compared with 2013. The most appropriate way of allocating that cut, as I said earlier, is to share it equally between England, Scotland, Wales and Northern Ireland. To have given more money to Scotland would have meant a greater reduction across the rest of the UK.
If the right hon. Gentleman objects to that approach, let me put it in context. Regions are allocated structural funds according to a Commission formula that was agreed as part of the MFF deal, which takes into account, among other factors, regional wealth relative to the EU average. As a result of the new EU formula for allocating structural funds, there would not have been a fair distribution across the UK, with each of the devolved Administrations set to lose out significantly. In 2013, the Government decided to correct that. As a result, Northern Ireland’s allocation was increased by €181 million, Scotland’s by €228 million and Wales’s by €375 million. That meant that all parts of the UK were subject to an equal cut. We believe that that delivered the fairest deal for England, Northern Ireland, Scotland and Wales. However, the right hon. Gentleman chose not to draw the Committee’s attention to that example of equal treatment, which benefited Scotland.
Alex Salmond
The Minister would probably get more information from The Scottish Farmer than he is getting from his civil service briefs. There was €220 million of convergence money to take account of the fact that per hectare, particularly in Scotland, we were receiving so much less than the minimum that was allocated to other countries. The question is quite a simple one. The vast majority of people think that it would have been fair to distribute that convergence funding per hectare, because that was why we were getting it. Why was that not done, and will he revisit that bad decision?
Mr Gauke
I say again that the right hon. Gentleman really must look at the overall treatment. When we look at agriculture spending and the structural funds, we see that there has been fair treatment of each part of the United Kingdom to ensure that no one part suffers as a result of changes to the EU budget. I say to him that if we can find savings in the common agricultural policy, we should do so.
We have had a wide-ranging debate. When it comes down to it, I believe that there is support for the clauses in the Bill, but it appears that the Opposition wish to press their new clauses that call on us to write letters calling for action, ignoring the fact that action is already being taken and that there is already going to be a review of the MFF by the Council of Ministers. The Commission is already following the Prime Minister’s historic deal by focusing on prioritising expenditure. I am afraid that the letters that the Opposition propose will achieve nothing of substance and do not belong in a Bill that is focused on revenue, rather than expenditure. I therefore urge the hon. Member for Worsley and Eccles South (Barbara Keeley) not to press her amendment and new clauses, and urge hon. Members to support the clauses of the Bill.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
Repeal, extent, commencement and short title
Amendment proposed: 1, page 1, line 18, leave out subsection (3).—(Barbara Keeley.)
This amendment removes the automatic coming into force of the Act two months after it is passed, which would be incompatible with any of the new Clauses.
Question put, That the amendment be made.
Mr Gauke
I beg to move, That the Bill be now read the Third time.
The Bill gives UK approval to the financing aspects of the 2013 EU budget deal. As hon. Members will recall, in 2013, the Prime Minister secured a deal that delivered the first ever real-terms cut to the EU budget and preserved our rebate. If we are tightening our belts at home, we should not be spending more through the EU—and thanks to the Prime Minister’s historic deal, we are not. It is a good deal for the taxpayer now and over the coming years.
In addition to forcing restraint on EU expenditure on the revenue side, it was a specific UK objective that there would be no new types of member state contribution; no new EU-wide taxes to finance EU spending; and no change to the UK rebate. That is precisely what we achieved. The political agreement at the February 2013 European Council was accurately reflected in the new own resources decision. This sets out the system of financing the EU budget until 2020, and was agreed unanimously by member states at a meeting of the Council of Ministers in May 2014.
Hon. Members will have noted that the ORD reintroduces reductions in the gross national income-based contributions of the Netherlands and Sweden, and introduces small reductions in those contributions for Denmark and Austria. The UK will contribute to these small corrections, but this will largely be offset by changes to other corrections. The UK has always supported the principle of budgetary corrections set out at the 1984 Fontainebleau European Council, which gave us our own rebate. In the absence of any meaningful reform on the expenditure side of the EU budget, we believe that those member states that, like the UK, make disproportionately large net contributions in relation to their prosperity, should receive corrections.
The Bill will give UK approval to the unanimous agreement on the new ORD—an agreement that maintains the existing system of financing the EU budget. That means no new types of member state contributions; no new EU-wide taxes to finance EU spending; and, crucially, no change to our rebate.
This agreement is in our national interest. It also serves as an important reminder of what can be done when we are tough, constructive, positive and determined in negotiations with European partners. The agreement that will be implemented by this Bill is a good deal for Britain and a good deal for Europe, and I commend it to the House.