European Union Committee: Multiannual Financial Framework

Lord Hannay of Chiswick Excerpts

Tuesday 19th June 2012 Grand Committee

[Lord Hannay of Chiswick]

My Lords, so far the negotiations over the European Union’s multiannual financial framework for the period after 2013 have been pursued in what can described only as a pretty desultory manner. However, that period of treading water is now necessarily coming to an end as the deadline to complete negotiations gets nearer. That means that the report that we are debating today and the Government’s response to it are particularly timely. The challenges ahead are formidable and the timing of the denouement of these negotiations could hardly be worse, as the eurozone crisis comes to a head.

The new framework will need to be fully consistent with the objectives of fiscal consolidation to which the member states have collectively subscribed, while seeking to shift EU spending towards value-added programmes that will contribute to an overall European growth strategy such as is likely to be endorsed at next week’s meeting of the European Council. The tensions between these two sets of objectives are pretty obvious and we already see them being played out in the much larger context of individual member states’ spending plans and priorities. Total concentration on one of these objectives at the expense of the other will lead only to deadlock at the EU level and will be neither politically nor economically viable.

Following the very welcome introduction given by our chairman, the noble Lord, Lord Boswell, I will concentrate the main body of my remarks on the proposals for the EU’s future expenditure in the fields of justice and home affairs—it is dealt with in a section of our report that was contributed by the sub-committee that I chaired—before making a few more general comments. On JHA spending, two salient points stand out. Here, the noble Lord, Lord Bowness, and I speak across a divide that is not a real divide. The first is that it is a small proportion of overall EU spending, some 0.9% of the total, if one takes the figures from the 2012 budget, the same 0.9% if one uses the figures in the Commission’s 2013 budget, which we all agree are excessive, and yet again some 0.9% if one follows the Commission’s proposals for the next framework period. It is not even faintly comparable in any way with the much larger blocks of spending on agriculture, which the noble Lord, Lord Carter, has spoken about, and the structural funds.

The second salient point is that JHA spending has nevertheless been rising pretty rapidly in recent years—from €354 million in 2007 to €1.4 billion in the 2012 budget. However, at least in the view of my committee, this rise is attributable in large part not to slack control but rather to decisions by member states faced by international challenges—such as drug trafficking, serious organised crime, cybercrime and illegal immigration—to do much more collectively than in the past through EU instruments and institutions to combat these challenges. This has led to the establishment of such bodies as Europol and FRONTEX. The strengthening of the latter was identified in the Government’s 2010 national security strategy as one of our national priorities. Any reduction in real terms to JHA spending post 2013 would cut into activities that relate to our national security. For that reason, we support the application to the JHA chapter of the overall guideline that the Government have agreed with a number of like-minded member states; namely, that the whole of post-2013 spending remains steady in real terms. However, we would not support a freeze in nominal terms—in effect, a quite sharp reduction—which has, at times, appeared to be the Government’s objective. It would be helpful if the Minister could confirm that it is the overall guideline of a post-2013 freeze in real terms that will be our national objective both generally and so far as JHA spending is concerned.

There are also some more detailed concerns, on one of which we have conducted several rounds of correspondence with the Home Office. It relates to the Commission’s intention to propose the establishment of a cybercrime centre at Europol. The committee and the Government are at one in supporting this proposal, which represents a welcome shift in the Commission’s thinking away from any idea of setting up a new and separate agency, but we believe that the Home Office’s position that a new cybercrime centre at Europol should be financed within Europol’s existing budget is neither viable nor negotiable. Will the Minister say which part of Europol’s existing workload, all of which appears to be of real value to this country, we propose should be cut? In any case, it surely does not make sense to take such a Procrustean approach to individual budget lines. Should we not be working to get more resources for a high priority, such as Europol and a cybercrime centre, from other parts of the budget? That has, after all, been the approach of successive Governments over many years. Going away from it now is only too likely to alienate the other like-minded member states with which we need to work in harmony if we are to get a good outcome. Perhaps the Minister could have another look at this matter. I do not ask for a response on such a detailed matter, but I would be grateful if he would take another look at it.

Turning back to more general views, I shall mention three: the need to work closely with a group of like-minded states that support a freeze in real terms; the duration of the new framework; and the rebate. No doubt there will be tensions within the group of like-minded states about the detailed application of the real-terms freeze. Some will want more of this and less of that than we do. The attitude of the new French Government will also be important and could be problematic, particularly on matters relating to agriculture, but it is important that we approach our dealings with these member states with which we have agreed a broad guideline in a spirit of give and take and with a willingness to compromise, otherwise we will soon enough find that the unity of the group will dissolve, and if that happens we will be a good deal less likely to secure our negotiating objectives.

On the question of the duration of the post-2013 framework, I merely echo the points made by the noble Lords, Lord Boswell and Lord Maclennan. The Select Committee has consistently opposed a seven-year period or even—as the Commission suggested one year—a 10-year period and expressed a clear preference for a five-year period, which is the actual treaty obligation. We took that view when the last framework was negotiated. If we had been heeded then, we might be in a better position now. However, we were not. The arguments for a five-year period seem to us even stronger now than before. No member state would dream at this stage and conjuncture of settling expenditure trends so far ahead as seven years; after all, our own Government do not go beyond three years. Nor would it be likely to fix a duration of the mandate to be so different from that of the codecider, which, in the EU’s case, is the European Parliament. I hope the Government would see the logic of a five-year settlement and move in that direction if others favour it.

Finally, there is the rebate. No doubt we shall find ourselves on our own on this issue, as we always do. This is, unfortunately, a zero-sum game and there is nothing we can do to change that. However, in defending the continuance of the rebate as a residual, to be based on actual budget outcomes—on which the committee’s report gives the Government full support—we need to put forward as persuasive a case as we can. There are not many signs of that being so at present. The fact that the Commission has put forward a lump-sum rebate approach would seem to demonstrate that it has forgotten the lessons of the period between 1980 and 1984, when such an approach was tried, with results that can only be described as aberrant. The fact that the Commission’s director-general for the budget could trot out to our committee the old chestnut about the rebate representing a “juste retour” approach, and argue that it does not reflect the greater relative prosperity of the UK and the EU of today compared with that of 1984, would indicate that he is lamentably ignorant of the extent to which the UK’s net contribution after the rebate has increased in recent years.

All this points to an urgent need to explain to all concerned the realities of the situation and the deficiencies of any ex-ante, lump-sum approach. The Minister knows very well that we are giving him full support on this issue. However, we have to be a bit more persuasive and take these arguments seriously rather than simply say: “It needs unanimity to change it, so get lost”. That may be the underlying reality of the situation, but if we wish to keep our alliance together, we need to be a bit fuller in our explanations of why we believe it to be justified.

As a final point, no Government have an easy hand to play in these complex but important negotiations, least of all our own Government. The unanimity requirement for deciding on a multiannual financial framework provides us with considerable leverage but is also a temptation to an unreasonably rigid approach. If we are to hold together the strong alliance the Prime Minister has constructed around a fiscally responsible outcome, and avoid undermining the EU budget’s contribution to any EU-wide growth strategy that is agreed next week, we will need to negotiate with flexibility as well as determination.