European Union Committee: Multiannual Financial Framework

Lord Teverson Excerpts

Tuesday 19th June 2012 Grand Committee

[Lord Teverson]

My Lords, I will echo one or two of the points made my noble friend Lord Dykes. Although we are sometimes very critical of EU finances we should remind ourselves that we have a ceiling of around 1% of GDP—I think that it is 1.23% at the moment. We have to have a balanced budget. We look seven years ahead and maybe five would be better. We have a strong and frustratingly active audit process that seems to give the rest of the organisation a bad name, but it is very thorough. If many member states copied that model, or perhaps even if we did in some areas, we might not be where are at the moment.

My own committee, now called the External Affairs Sub-Committee—a name easier to understand than it used to be—was pleased with most of the way that heading 4 on external affairs was looked at. We agreed with the Government in seeing this as an area where Europe was particularly important; in that cliché, it added value on a global scale. There were important roles that it was fulfilling.

An area which has generally been seen as an EU success in the past—certainly over the past two decades—is its exercise of soft power, driving and motivating the instinct of other European states which want to shed the shackles of central economies or dictatorial regimes and to join the body politic of Europe and the European Union. It thereby reinforces the commitment to both social democracy in terms of economy, liberal democracy, politics and trade, and to an open and outward-looking global view. It has been very successful in that area. Under this process, some €70 billion is expected to be spent on the external affairs area, which is a relatively modest part of the almost €1 trillion which is being talked about for this seven-year period. That €70 billion is spent on development policy and all the things that have to be done in helping pre-accession candidate nations move towards membership. As we learnt in some of the recent accessions, we have to ensure that things such as energy, border control, civil administration, corruption and organised crime are set right before new member states join. It is spent on partnership programmes, particularly in the east but also in the Mediterranean—our own are close to home—through to humanitarian aid and all the stability initiatives, development and nuclear safety.

One area of interest, although not a large area of the budget, was a particular instrument for Greenland. That seemed quite strange at the time, but I am sure that under Arctic policy, Greenland is going to become even more important.

The European budget, through different mechanisms, tends to pay for civil missions of CSDP, although not on the whole the military planning procedures. It pays for civilian missions as well. That is part of the EU outside its borders.

Where did we have some criticism? I am grateful to those who have mentioned the European External Action Service. That did not come under our purview because it is in administration. The External Action Service is relatively new; it came out of the Lisbon treaty. It is a major conduit through which the EU relates to the rest of the world. Its remit runs from trade through to all sorts of other issues, and high priority matters for the European Union. Yet its budget within this process is hidden within administration. Where it was in the accounting perhaps did not matter so much, but we felt strongly that, as an effectively separate institution, it ought to be separated out and we ought to be able to appraise it.

We were also quite surprised that there seemed to be what we would know as contingency lines throughout heading 4. Although we understand that flexibility is important in this area, the Commission and the External Action Service rightly point out that we cannot predict the number of natural disasters, for which Europe contributes important humanitarian assistance to the rest of the world, or what they will be over the coming one, two or three years. We do not know where political issues, like helping Libya get back to stability, will arise from year to year. The flexibility in there is right, but the contingency areas perhaps add a little too much fuzziness to how the budget is assembled.

The other area that has been mentioned by noble Lords is the European Development Fund, which is not the total development budget of the European Union but that which is used within what I think of as the African, Caribbean and Pacific countries. That lies outside this framework. Clearly, to a business or any other organisation, that makes no sense whatever. Unfortunately, I am told that the calculations show that if it fell within the framework, it would not help the UK’s budget contribution, which is a shame. However, I am sure that there ought to be some way around that. We need to bring that area in and include it as part of the overall external policy.

As the External Affairs Sub-Committee, we were happy that this went in the right direction and that Europe’s role in the broader world was recognised as being important. We are at one with the Government in understanding that, although it must happen in a way that is cost-effective. Certainly, over the period, the total spending of the External Action Service should not grow, despite some of the start-up costs.

I shall make one or two further comments as an individual Member of this House, as opposed to as chairman of the sub-committee. First, on regional policy, I am lucky to come from a part of the United Kingdom that benefits greatly from convergence funding, although we should like not to be in that position. Unfortunately, it looks as though Cornwall and the Isles of Scilly will again qualify for convergence funding in the next period that we will look at. It is important that regions graduate out of this area of state-welfare benefit drip. It is a shame that that has not happened, perhaps because of the way that the economy works at the moment. However, I feel strongly that, in the longer term, we should not move to excluding certain developed states from convergence funding or cohesion funding.

Why is that? The European Union—particularly the Commission, which is in charge of these programmes —tends to be far more objective than national Governments over who should receive these funds. I am certain that if my part of the world had not fallen within the European Commission’s definition of a NUTS 2 region—of GDP per inhabitant being less than 75% of the EU average—it would never have received the aid that it needs to become a thriving economy in the future. That objectivity is important and it should not depend on which member state your region happens to be in. Spreading the rest of the cohesion funding very thinly, even over transitional areas, is wrong. Transition should be of a sort whereby you move from being a convergence area to being a normal area and are helped over a period.

I hope my noble friend Lord Carter will forgive me but I have always been very sceptical about international fisheries agreements. They are far better than they used to be; they are now called fisheries partnership agreements and there are 16 of them. On the whole, they are an excuse to get rid of European fleets from someone else’s waters, where states that are even less able to protect their waters than we are have been completely fished out. The money goes towards helping those fishing communities to look after themselves, but it often does not get much further than the national capitals. While I am sure that the system is much better than it used to be, I am still very sceptical about it.

Turning to climate change, this programme ends in 2020. We have three very strong targets for carbon reduction, energy efficiency and renewable energy. Therefore, it is quite coherent that we should have a strong programme there.

Although it not an area in which I have ever been much involved, one of the greatest added-value areas of Europe ought to be its research capability, which seems to be going down in our national economies. If there is one way in which the Commission’s goals for our competitiveness, world position and employment can be fulfilled over this seven-year period, it is by having a much stronger research base. I should dearly like to see a significant proportion of this budget go to that area, to make Europe competitive in the very different world that will arrive by 2020, when this programme ends.