European Union (Finance) Bill

John Redwood Excerpts

Thursday 11th June 2015 Commons Chamber

[Mr Gauke]

As I have said, the estimated cost over the previous seven years was £6.6 billion, and in future it will be about £2 billion a year. I understand the point that the hon. Gentleman is making: he want us to clear up yet another mess that was created by the last Government, although I acknowledge that he was as disappointed by his Government as we were. As for what the UK Government can do about the financial position, let me explain what we did in the 2013 negotiations. Whereas the last Government had agreed to an 8% increase in the spending ceiling, we proceeded with an agenda that was in the UK’s interests. This time, the two sensible things that we could do to protect the British taxpayer were to get the overall budget down and to protect our rebate, and that is precisely what we achieved.

The agreement that the Prime Minister secured back in 2013 was good for Europe and good for the United Kingdom. At the time, some argued that it was not possible, and that the interests of the UK were in some way incompatible with the wider aims of the European Union, but the Government showed them that they were wrong.

[John Redwood (Wokingham) (Con)]

Does the Bill not endorse a system that takes £12 billion of our taxpayers’ money and spends it elsewhere on the continent, while we receive not a penny of benefit? If the British people voted “out”, they could presumably be given a £12 billion tax cut to celebrate our leaving the European Union.

[Mr Gauke]

My right hon. Friend has taken me in the direction of the wider issue of our EU membership. As became clear this week, the people of the United Kingdom will have an opportunity to vote on that, but this is the system that applies while we are members of the European Union. My right hon. Friend may wish to present his argument during a future debate, but what cannot be in doubt is that the Prime Minister’s achievement during the 2013 negotiations constituted a huge improvement on the record of the last Government. It protected the rebate, and it ensured, for the first time, that we were able to reduce the overall expenditure of the EU over the multi-annual financial framework period.

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[Mr Gauke]

The deal Scotland gets includes support from the structural funds which have been protected as a consequence of decisions made by the UK Government in the last Parliament.

Turning to the deal secured on the revenue side, as hon. Members may be aware, the system by which EU member states finance the annual EU budget is set out in EU legislation known as the own resources decision—ORD for short. At the 2013 February Council, there was strong pressure from some member states, the Commission and the European Parliament to reform the way member states finance the EU budget. These included proposals to introduce a financial transaction tax and do away with the UK rebate, or at least change the way it works.

The Prime Minister stood his ground and made it clear that the UK would not agree to such proposals, nor agree to anything that changed the way our rebate worked. It was a specific objective for the UK that this new financing system would require no new own resources or EU-wide taxes to finance EU expenditure, and no change to the UK rebate, and that is precisely what we achieved.

The political agreement at the 2013 February European Council was accurately reflected in the financing arrangements which all EU member states agreed unanimously at a meeting of the Council of Ministers in May 2014. Under the agreement, which this Bill will implement, the Prime Minister protected what is left of the UK rebate, and this is maintained without any change throughout the life of this agreement.

The agreement also ensures there will be no new types of member state contributions and no new taxes to finance EU spending over this period. The new ORD does not make any changes to the way that the EU budget is financed. There are some changes in the detail of the ORD compared with the previous one, however. For example, it reintroduces reductions in the GNI-based contributions of the Netherlands and Sweden, and introduces small reductions in these contributions for Denmark and Austria. The UK will contribute to these small corrections, which will mean an additional £16 million in contributions from the UK per year compared to the last ORD; that is around 0.1% of our total gross contribution in 2014. Moreover, this will be largely offset by changes in other corrections.

[John Redwood]

I congratulate the Prime Minister and the Minister on defending Britain’s interests against a far worse settlement, but is it not also the case that under the pre-existing agreements if Britain grows more quickly than the euroland, which it is doing and appears that it will carry on doing, we will get caned by having to pay more tax?

[Mr Gauke]

Part of the calculation of member states’ contributions is based on the size of their economy. That means that bigger economies pay more and smaller ones pay less. As an economy becomes relatively bigger, it makes a bigger contribution. That is the factual situation; that is how it works.

I referred earlier to the corrections and the small reductions in the contributions from Denmark and Austria. The UK has always supported the principle of budgetary corrections set out at the 1984 Fontainebleau European Council, which gave us our rebate. In the absence of any meaningful reform on the expenditure side of the budget, we believe that those member states that make disproportionately large net contributions to the budget in relation to their prosperity, such as the UK, should receive corrections.

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[John Redwood]

Is there any extra tax demand that the EU makes on us that the Labour party disagrees with?

[Barbara Keeley]

We are actually supporting the Bill—

[John Redwood]

So the answer is no.

[Barbara Keeley]

Yes, indeed. I am making the point that we need to make this process clearer, and I would have thought that the right hon. Gentleman and the Minister would agree with that. It is a difficult technical process, but the people outside this place need to be able to understand it. In my view, they do not.

[John Redwood]

What do people not understand? The EU is taking £12 billion of our money, and this Bill is going to give it more.

[Barbara Keeley]

I think people do understand that. The point is that the benefits are not understood. [Interruption.] The right hon. Gentleman has his view, and other people have a different one. The process could be made clearer, and it is my contention that we will have to do that. As we put this important decision in front of people in the coming months, they will have to be able to understand this better than they do at the moment.

Interestingly, the European Commission recently sent hon. Members a document promising to tell us “How the European Union works”. We have a host of new Members with us today, and I do not know whether any of them have seen that document in among the mountain of material that has landed on them recently. It is a 40-page document, but it contains only two short paragraphs—indeed, 10 lines—about the EU budget. It does not give figures for that budget, nor does it describe how the money is spent. Yet in the months ahead, as I said, that will be a key aspect of the debate for the people of this country.

The debate in the House in February 2013 and other debates since have focused on the fact that substantial reform of priorities is still needed in the EU budget. We have had questions about the balance of agriculture spending, but the Labour party believes that growth and jobs should continue to be prioritised by cutting back even further on agriculture spending and other similar priorities. Spending on the common agricultural policy fell as a proportion of the budget from 55% in 1997 to 46% in 2010. We welcome the continued decline in agriculture spending as a share of the European budget; it will drop from 41% of EU commitments in 2014 to 35% in 2020. The difficult reflection for people outside Parliament, however, is that with agriculture making up only 1.6% of the total output of the European Union, why does it still account for 30% to 40% of the budget? There is still much more to do.