Draft European Union Budget

Baroness Hoey Excerpts

Thursday 12th July 2012 Commons Chamber

[Chris Leslie]

The hon. Gentleman was perfectly free to table his own amendment, and he pitches a perfectly respectable position. I thought that it was important to draw the Government into adopting a stronger stance, and a reduction in real terms is, at the very least, the place where we need to see the Government, but we could not get them even to that point. He has seen the motion; it falls short in so many ways.

Real-terms cuts are required now to the EU administrative budget, because in the UK we are in a double-dip recession, thanks in part to the Government’s failure on economic growth. The economy shrank in the last quarter of 2011 by 0.4%, and in the first quarter of this calendar year by 0.3%. Borrowing hit £18 billion in May, up £3 billion on the same month last year, and pressures on the UK’s finances are increasing: domestic tax revenues have fallen and income tax receipts are 7.3% down on the year to May. Today the Office for Budget Responsibility, in its fiscal sustainability report, cites projections suggesting that the public finances are likely to come under pressure in the longer term, and states:

“In the absence of offsetting tax increases or spending cuts this would widen budget deficits over time and eventually put public sector net debt on an unsustainable upward trajectory.”

There is much more evidence than ever before of the need for us to strengthen the Government’s negotiating stance. That is why it is just not good enough for the Government to say, “There’s not much we can do about it. It’s a qualified majority vote this year. We’re in a terribly difficult position,” and why in our amendment we have, sadly, had to point out that the Government have failed to win alliances for a tougher position on the budget. That is where we are today.

There was the phantom veto in December last year, when nothing was actually vetoed—everything went through with the agreement of the other EU countries, and the Prime Minister succeeded simply in alienating the UK’s negotiating position. Now, when we need to make strong arguments about reducing budgets, few are listening and open to ideas because of the stance taken by the Prime Minister in those negotiations.

[Kate Hoey (Vauxhall) (Lab)]

I want whoever is in power in this country to negotiate over our budget in a much tougher way. Does my hon. Friend agree that perhaps the only way for us to get the European Union to take us seriously is to say that we will not pay any more than what we think is a fair contribution and increase? Indeed, given all the waste, there should be not an increase, but a decrease.

[Chris Leslie]

That is why we need to change the approach of Ministers in negotiations. We have to come to a settlement. This year, we are on the cusp of Ministers having a veto power over the seven-year spending review period. This is the moment when we need them to be particularly firm.

--- Later in debate ---

[Chris Heaton-Harris]

If it was done as a simple transaction, that would be the case.

The Commission’s budgetary expenditure is divided into five headings. “Sustainable Growth”, which mainly involves the EU structural funds, and “Preservation and Management of Natural Resources”, which relates to agriculture and the environment, are the biggest items and accounted for 87% of EU spending in 2012. “Citizenship, freedom, security and justice”, which relates to social policy, crime and policing, and “The EU as a global player”, which involves foreign policy issues, were the smaller items of the budget. The heading, “Administration”, relates to the finances of the staff of the European Commission and other institutional expenditure, such as that of the European Parliament, the Committee of the Regions, the Economic and Social Committee and various other EU agencies and quangos.

[Kate Hoey]

I hope that the hon. Gentleman’s attention has been drawn to the wonderful little DVD that has been sent to a number of Members by Marta Andreasen, who has done a terrific job of showing all the waste that has gone on and how massive amounts of taxpayers’ money are being wasted. If we stopped that waste, we would not have to increase the budget, but could cut it. Would he like to ensure that every Member of Parliament can see the DVD?

[Chris Heaton-Harris]

It is not often that I would commend anything to do with a politician from the UK Independence party. However, if we look at the front page of the Financial Times from 1 August 2002, we see sitting beside Marta Andreasen at the press conference one of the MEPs for the East Midlands, who is now the MP for Daventry. She was the first person to hold the role of chief accountant of the European Commission who had an accountancy qualification. I am very keen that her expertise is shared. I have seen the DVD and it is well worth looking at.

The Minister set out some obstacles to the reform of the budget, and they are great. When there are big vested interests, with big countries getting way more money out than they will ever put in, there is no chance of reducing the budget under qualified majority voting. As I have tried to explain, we are one of the biggest net contributors, and we will continue to be so way into the future. However, we will always be outvoted on budgetary matters under qualified majority voting, because more countries gain from our expenditure than pay themselves.

Blocs exist to protect certain things. There is the bloc of net gainers, but France, which is a net contributor, exists in another bloc to protect one of the big areas of spending: the common agricultural policy. It does not want any major changes to the CAP, because that is how it diminishes its net payments to the EU. With such vested interests built in, reform of the European budget is much easier said that done, as the Opposition prove in their amendment.

Another problem with the EU budget is that its own auditors do not sign it off. This is the 17th consecutive year in which the European Court of Auditors, having checked the legality of EU spending, has refused to give it what is called a positive statement of assurance. Essentially, it has refused to sign off the accounts. As the Financial Secretary said, we must consider that alongside the fact that the European Commission constantly asks for much more money to spend but then cannot spend it properly. Until recently, it was running up massive surpluses in its own accounts.

There are also aberrations that people do not like. The latest is that we are told that EU chiefs are splashing out on a new £350 million headquarters, at a time when everybody else is having to cut their budgets. That new headquarters, by the way, is in Luxembourg, where MEPs no longer go because they are based in Brussels and Strasbourg. There is obviously too much money in the system. The case for reform is therefore greater now than it has ever been.

Although the European Council will not formally adopt its position on the European Commission’s proposed EU budget for 2013 until 26 July, member states’ ambassadors to the EU reached a deal on it yesterday, as the Financial Secretary mentioned. The Commission has proposed an overall 6.8% increase in payment appropriations compared with 2012, which amounts to about £7.2 billion—a decent sum. As he said, the member states’ position agreed yesterday means a £2.9 billion increase in payments. That is an increase of 2.79%, which can be compared with the EU inflation rate of 1.9%.

The Financial Secretary and I know that the UK, the Netherlands and Sweden all oppose the deal and will vote against it at the Council on 26 July. However, if we are the only three states to do so, the budget will be adopted by a qualified majority of countries in the blocs that I outlined, which want to receive more than they put in. If the estimated UK gross contribution of 11.3% to the 2012 EU budget were replicated, under yesterday’s deal the UK would pay about £12.2 billion gross into the budget next year.

Essentially, we are just about to increase the EU budget, and our part of that increase is £330 million. That would pay a year’s basic salary to 18,500 Army privates, the average basic salary to 10,500 NHS-qualified nurses, or a year’s basic salary to 12,500 police constables.