European Union Committee: Multiannual Financial Framework

Lord Dykes Excerpts

Tuesday 19th June 2012 Grand Committee

[Lord Dykes]

My Lords, my response to the melodious and Parnassian beauty of the descriptions of the noble Lord, Lord Harrison, today is to express admiration for his work in the sub-committee, particularly in the area that he was talking about, and to thank him very much. It removes from me the need to go into some of those areas myself, which I shall observe with some enthusiasm and try to be brief. Indeed, unlike previous speakers, I do not have a written text today. If anybody has heard this terrible story before, I apologise in advance. There was a Yorkshire vicar in the pulpit on a Sunday—I will try the accent, but do not laugh—who said, “I am afraid I do not have my usual written sermon today, because I have been so busy during the week. There were two scout camps and the guides were going away as well. I had three funerals to do and four weddings to prepare, so I don’t have one of my usual written sermons that you enjoy so much. I am relying exclusively on divine inspiration this evening, but next week you will get a proper sermon again”.

In that spirit, I will focus on only one or two things. First, I thank the noble Lord, Lord Boswell, for his report as the new chairman and wish him well for the future. This is an important exercise. One can say without complacency that the Commission’s long-term planning for these budgetary constructions worked pretty well in the previous period as well, with some ragged bits and pieces and the continuing British anxiety about the rebate. Whether the rebate was originally intended to last for ever I am not sure. I do not think that that was the case. It is interesting to reflect that, if it now involves everybody in a general recasting of the GNI component of the structures, that may be a totally different thing that the Commission can propose. I hope that it would be accepted.

There is a very small amount of money in this European Union budget, despite the recent years’ growth, with €150 billion as the first figure for the new period and €140 billion at the moment, or thereabouts. The actual expenditure is always less than the amounts allocated, year in, year out. So it is quite a virtuous budget with no debts and no borrowings; the receipts have to equal the payments, by law, and there is no exception to that. It is a very good example which certain states in the United States should look at closely. However, it belongs to the whole Union and is a very tiny mechanism in comparison with what the national member Governments do, and we have to be realistic about that. The timing now could mean that the considerations of long-term planning for a five or seven-year period in future can be irrelevant to the immediate crisis in the eurozone and the fact that there is a developing deflation—some would say a quasi-slump—in a good number of the member states, including the ominous signs in Britain after our recent double-dip recession. No one knows exactly—predictions are always difficult, particularly when they concern the future, as one sage observed—how this will pan out.

In the mean time, the budget has been improved in recent years, and that will be built on in future. I believe that about 80% of the outlays are shared with the administration of the member states, so there is a low level of mistakes, according to the Court of Auditors, in comparison with the millions of transactions every week, month and day. The amount of fraud is minuscule, as we know. So the general support for the budget, philosophically and in this Committee’s discussion, is reflected by the speakers, who feel that it is a good rather than a bad thing to have, although it is very small indeed. Now it has a greater orientation towards long-term investment and cohesion, perhaps bringing the EIB not into the budget itself but into some of the long-term outlays that will be needed for infrastructure spending and improvement. Then the trans-European networks are developing, along with other aspects of transport policy, which allows us to have a much better future. I hope that it will be successfully negotiated by the member states and the Commission.

I wish to comment briefly on what was enunciated by the section in the original report up to 2014 on page 23, from paragraph 57 onwards. For example, paragraph 58 says:

“Greater use of EIB financing and higher contributions from the private sector are desirable”,

because the Commission, with the public money available to it from the member states and its own resources, cannot do much more in comparison with what national Governments will do in future to deal with their own economic crises. The particular national economic crises in the member states will probably not spare many, although Austria and Sweden may be examples. Many member states will be confronted by these problems, so we must take great care in future to make sure that we succeed in avoiding the slump over the whole European Union that is threatening to develop.

It is interesting to see, at the beginning of the summary of the second report, at the end of the second paragraph, the admonition that,

“withdrawing funds from an ailing economy only risks making matters worse”.

That is the general proposition that may apply to more than just one or two member states.

If the Government can in future—and I wish the Minister well with these complicated negotiations—link the construction of this new period for the MFF to the immediate medium-term problems facing member states, that would be good indeed. In a phantasmagorical moment, one could imagine that if the slump was allowed to develop and continue because austerity programmes were not relaxed at all, as Governments endlessly waited for demand somehow to pick up automatically of its own accord without the necessary injections of new long-term capital, the EU budget might look like the combination of a kind of Tennessee Valley Authority and one or two other of those special measures that Roosevelt brought in to deal with the terrible recession and slump in the United States. It is in that spirit that I hope that this exercise is successful when negotiations are concluded, and I hope that the Minister will reassure us that national Governments are alert to and aware of the dangers that we all face.