European Union (Finance) Bill

Lord Davies of Oldham Excerpts

Wednesday 8th July 2015 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, I thank the Minister for his introduction to the Bill, which has attracted widespread attention among noble Lords, as we see from the speakers’ list today. However, that does not detract from the significance of the measure or from our party’s support for the Bill, which I will indicate in a moment. Following yesterday’s debate on financial regulation in Europe, it is certainly a pleasure to get another opportunity to contribute to the important discussion about how the UK can play a constructive role within the European Union. Today, as in yesterday’s debate, we focus on somewhat technical, but nevertheless very important, EU regulation.

As the Minister so clearly laid out in his opening remarks, the Bill gives effect to the new financing system of the European Union, which will fund the latest spending framework agreed by the European Council in February 2013, and in so doing will give parliamentary approval to the Own Resources Decision from 2014 to 2020 relating to the multiannual financial framework—the MFF. It is therefore an important landmark in the development of a European position.

Of course, we do not oppose the Bill in principle, but there are ways in which it could have been improved, which I shall set out as best as I can. I pay tribute to the efforts of my colleagues in the other place, who all identified possible improvements, to which the Government did not become particularly attached. We might have a slightly better response today, although noble Lords will recognise that this is a money Bill, so there is no question of the legislation being amended at this point. Nevertheless, it is important to clear the ground of what the argument is and chart the way forward in European budgetary procedures.

We welcome the cut to the EU budget that was agreed several years ago. The EU could not possibly have continued to increase its budgetary demands on member states when every state, in responding to the crisis of the world recession, was cutting its own budget. Of course, the UK Government were implementing cuts in public spending and squeezing family budgets, and today’s Budget indicates that there is precious little let-up in that respect. As I am sure the Minister will recall, it was Labour votes in the previous October, during the debate in the other place on this very issue, which gave the Prime Minister a clear mandate to call for reduced budgetary demands.

The backdrop to today’s debate is a Budget presented a short time ago to the other place, and it certainly draws into focus the issue of priorities and what a responsible, sensible and compassionate Government could have done to manage the country’s finances better. I think we will hear a lot about priorities over the coming weeks, months and years. They reveal what matters to a Government and what is at the top of their to-do list, and it is equally true that for the Community this Bill is part of that issue today.

How we and our European partners decide to spend the budget tends to send out important signals about intent and ambition regarding what we want to achieve. That is why we are pleased that there has been a modest increase in funds for growth, for infrastructure, for research and development and for innovation. However, as I argued in yesterday’s debate, we have to do more to ensure that the UK is driving this agenda in Europe. Out of the €6.3 billion of EU funding allocated to the UK in 2013, only 23% was spending on jobs and growth, compared with 63% on agriculture. Over the decades, not a great deal has changed in that regard.

At Second Reading in the other place, the Economic Secretary to the Treasury said that she accepted that expenditure on the CAP,

“is still too high both in absolute terms and as a proportion of the overall budget”.—[Official Report, Commons, 11/6/15; col. 1426.]

I emphasise how much this side of the House agrees with that. Only a quarter of the commitment to the EU’s smart and inclusive growth priority is spent on competitiveness in jobs and growth, while three-quarters is spent on the EU’s cohesion policies, including structural funds. So there is not that necessary impetus towards jobs and extending employment opportunities which, sadly, we need. We still need to focus on young people who are unemployed and underemployed, and that is true in this country, although we recognise that the figures for a number of other European member states are even more dramatic in terms of the problems facing young people in getting jobs. There is also a modest increase in EU research development. It will be recognised that the question of science and technology in the European Union was raised by my noble friend Lord Hunt, and I know that we need to press very hard on development there too.

Along with ensuring that priorities are gradually refocused, we are also keen to ensure that a review of EU budget appropriations is conducted by the European Commission, specifically the growing and worrying gap between commitments and payments, and whether, in the longer term, alternative arrangements might offer improved value and enhanced budgetary control. I should think that not a single Member of your Lordships’ House is not in favour of enhanced budgetary control of European Union expenditure.

It is therefore welcome to hear that Kristalina Georgieva, the Minister responsible as the new Budget Commissioner, is looking at some of these issues in her recent “budget for results” initiative. I understand that our Minister cannot pre-empt what will be in that report or any conclusions it might reach, but will he at least tell the House whether we can expect that report to be published before the referendum? How often will a review of this nature take place? We believe that it should be kept under regular review, not least to ensure that the gap between commitments and payments is kept under rigorous control. Currently, as agreed in February 2013, €960 billion will be spent on commitments and €908 billion on payments. The gap has crept up from an average of 2.6% to the current 5.4%, and is projected to rise to 5.7% by 2020. This is a worrying feature of EU finances and I hope that the Minister will reflect this anxiety and the determination of the Government to keep a very close eye on this crucial issue in the near future.

We want to control budgets, not drive them up. The budget report in 2010 found that current rules for the EU budget make it slow to react to unforeseen events, while too many complexities hinder its efficiency and transparency. I think we can all say, “Hear, hear” to that.

Not only do we want greater accountability and transparency in the budgetary process, it is also crucial, particularly in the coming months, that this way of working is applied to all aspects of the European Union. It is of particular significance to this country, where we are going to ask our fellow citizens to engage in a referendum after the Prime Minister has committed his approaches to Europe to effect what changes he can. It surely behoves us to spread an understanding of the EU budget as widely as we can. Our electorate are scandalously underinformed at this time, and I do not see how we can conduct an intelligent debate about the future of the UK’s role in the European Union unless clear facts on budgetary expenditure and receipts are before the electorate. This could include inviting EU budget representatives to appear before the European Scrutiny Committee. I am not undermining the work that the committee does, but we are all proud of the excellent record of our own scrutiny committee on European legislation and its work will be important in the next 18 months to two years in preparing for the referendum, whenever it comes.

We all recognise that this is a week of tumultuous events for the EU—events that still have not reached full definition. The situation that we find ourselves in with the EU budget—with the EU’s complexity, slowness to react and difficulty in balancing priorities that we think important—means it is clear to all that it is past the time when it needs to change. Let us balance this with a belief that the best way to bring about change is to be a constructive and committed partner in the EU budgetary process and the European Union. I hope the Minister will confirm that he has introduced the Bill today in that context. We of course wish the Bill well.