European Council

Lord Hill of Oareford Excerpts

Monday 11th February 2013 Lords Chamber

[The Chancellor of the Duchy of Lancaster (Lord Hill of Oareford)]

My Lords—

[Lord Tomlinson]

May I ask the noble Lord, Lord Hill, one simple question? We have the Statement on the European Council in the Printed Paper Office, but in the very last sentence it refers to the multiannual financial framework, as set out in document 37/13. I have been now two or three times to the Printed Paper Office, and that document is not available. It makes it very difficult for Members to comprehend the Statement when the principal part of the European Council in discussions on the multiannual financial framework is not available to Members of the House. I apologise to the noble Lord for interrupting him before he starts.

[Lord Hill of Oareford]

I am happy to be interrupted at all times. I apologise for that and will see what we can do to put that right as soon as possible.

With the leave of the House, I will now repeat a Statement made earlier in another place by my right honourable friend the Prime Minister. The Statement is as follows:

“Mr Speaker, I am sure that the whole House will join me in sending our best wishes to Pope Benedict following his announcement today. He has worked tirelessly to strengthen Britain’s relations with the Holy See, and his visit to Britain in 2010 is remembered with great respect and affection. Pope Benedict’s message on that visit of working for the common good is something that spoke to our whole country, and I am sure his successor will continue to provide a voice of inspiration for millions around the world.

Last week’s European Council agreed the overall limit on EU spending for the next seven years, starting in 2014. When these multiyear deals have been agreed in the past, spending has gone up, but last week we agreed that spending should go down. By working with like-minded allies, we delivered a real-terms cut in what Brussels can spend for the first time in history.

As the House knows, the EU budget is negotiated annually, so what we were negotiating, initially at the Council last November and again last week, was not the individual annual budgets but rather the overall framework for the next seven years. This includes the overall ceilings on what can be spent—effectively, the limit on the European Union’s credit card for the next seven years.

During the previous negotiation, which covered the period 2007-13, the previous Government agreed to an increase in the payments ceiling of 8% to €943 billion. Put simply, this gave the EU a credit card with a higher limit, and we are still living with the results of allowing the EU’s big spenders to push for more and more spending each year. In fact, only last year, while member states had to make tough decisions to tighten their belts at home, the big spenders succeeded in increasing the 2012 European budget by another 5% compared with the previous year. If no deal had been reached, the existing ceilings would have been rolled over and annual budgets could have continued to soar for the next seven years. Because annual budgets are negotiated by qualified majority voting, it can be difficult to constrain spending in these annual negotiations. By contrast, the seven-year limits are agreed by unanimity. So this was our chance to get the ceilings down in line with what could be afforded.

The European Commission produced an initial proposal for increasing the payments ceiling still further to €988 billion. This was strongly supported by a number of member states. The first negotiation took place at the Council in November and, although the President did then reduce this during the Council itself, it was still some way short of the real-terms cut we were looking for. Together with like-minded allies from a number of countries, including Germany, Sweden, the Netherlands and Denmark, we rejected the deal on the table and told them to think again.

At this Council, we made further progress. Together with like-minded allies—many of whom, like Britain, actually write the cheques—we achieved a proper look across all the areas where spending in the Commission proposal could be cut. While there are areas where we could and should go further, not least on reforming the common agricultural policy and reducing the bureaucratic costs of the European Commission, we agreed a real-terms cut in the payment limit to €908 billion. That is €80 billion lower than the original proposal. It is €35 billion lower than the deal agreed by the previous Government, which is still in operation today, and it is €60 billion lower than the emergency arrangements which would have come into place if there were no seven-year deal.

But my aim was not simply to cut the credit card limit. I wanted to set the limit at a level that would deliver at worst a freeze and at best a cut in the actual spending over the next seven years, and this is indeed what this deal delivers: a real-terms cut. If you take the latest complete budget—the one for 2012—and freeze spending at that level for the next seven years, you would have spending of €932 billion. Our new payments limit means spending cannot rise above €908 billion, so we have slashed €24 billion off a real freeze on the last completed budget. Of course, the budget set in 2012, which Britain voted against, was unacceptably large, but even against the average of the past two completed years—2011 and 2012—this deal still delivers a real-terms cut.

Of course, this deal must now be voted on by the European Parliament. The European Council has said that it is prepared to accept some flexibilities about how spending is divided between different budget years and different areas of spending, but we are absolutely clear that this must be within the framework that the member states have now agreed. The EU’s seven-year budget will now cost less than 1% of Europe’s gross national income for the first time in its history.

Let me say a word about how this deal is likely to affect the UK’s contribution; a word about how it is likely to affect what the UK receives from the EU for research, for our regions, and for our farmers; and a word about what this means for growth and competitiveness across the European Union as a whole. On the UK’s contribution, the House will remember how the previous Government gave away almost half of our rebate. This has had a long-term and continuing effect on the UK’s net contributions. It is worth remembering why. When the European Union spends money on, for example, structural funds and cohesion payments in eastern European countries, the UK no longer gets a rebate on this money. As a result, almost whatever budget deal was done, our net contributions were always likely to go up, but as a result of this deal, they will be going up by less.

The only two sensible things we could do to protect the British taxpayer in these negotiations were to get the overall budget down and to protect what is left of our rebate, and that is exactly what we have done. While the actual amount that the UK contributes will depend on technical factors such as the size of the annual budgets, economic performance and exchange rates, as a result of this deal we now expect the UK’s contribution to the EU to fall as a share of our gross national income. As for the rebate this Government inherited, it is completely untouched. As ever, throughout these negotiations, the rebate was attacked repeatedly, but I successfully rejected all the calls for change. Under this Government, the British rebate is safe.

In terms of what the UK receives, I wanted to make sure that our universities are well placed to receive research work, our less well-off regions are treated fairly compared with others and our farmers continue to receive support for the environment schemes they put in place. On these points, the section of the budget that includes spending on research, innovation and university funding is up by a third, and this money is handed out on the basis of quality, so Britain’s universities are particularly well placed to benefit. We have ensured that structural funds will continue to flow to our less well-off regions. Britain’s share will remain broadly the same, at around €11 billion. And while we have cut spending on the common agricultural policy overall, we have protected the flexibility which will allow us to direct funds to support both the environment and the livelihoods of our farming communities.

Overall, this is a better framed budget in terms of growth, jobs and competitiveness. It is disappointing that administrative costs are still around 6% of the total, but overall spending on the common agricultural policy will fall by 13% compared with the previous seven-year budget. Research and development and other pro-growth investment will now account for 13% rather than 9% of the total budget. Reform of EU spending is a long-term project, but this deal does deliver important progress. Working with allies, we took real steps towards reform in the European Union. It is a good deal for Britain, a good deal for Europe and, above all, a good deal for all our taxpayers. That is what we have delivered, and I commend this Statement to the House”.

My Lords, that concludes the Statement.

--- Later in debate ---

[Lord Hill of Oareford]

My Lords, I am grateful for the broad welcome given to the Statement by the noble Baroness, Lady Royall. She made the point that this negotiation demonstrated, as I believe it did, that the EU is capable of change. It was not that long ago that some in the party opposite were saying that my right honourable friend the Prime Minister was isolated in Europe. The deal that he managed to strike demonstrated that, by working closely with our allies, particularly with the Nordics, he has been able to secure a good deal and a deal which, overall, will lead to savings, so we are far from being isolated. That is absolutely right in the current climate.

On agriculture, I agree with the noble Baroness that there is more to do on CAP. Generally, in these negotiations one does not always achieve everything that one wants. Britain’s overriding priority was to go for a freeze, or, if possible, a real-terms cut in the overall credit card limit or ceiling, which we have achieved. Some steps were taken and the CAP budget was reduced for the next seven years from a proposed €320 billion to €277 billion, so that is some progress, but I accept that there is more to do.

As regards growth, as the noble Baroness said, the budget for R&D has increased. The Connecting Europe Facility has also been increased. In terms of making savings on where some of those moneys have come from, my right honourable friend was keen to make bigger savings in the administration costs and he was disappointed not to have got those because there is a widespread feeling that we could have done better. We managed to take €1 billion out, but I am sure that more could have been done.

On the noble Baroness’s important points about governance in Africa, the Sahel and the road map for Mali, it is true to say that the overwhelming priority of this Council was sorting out the multi-annual financial framework, so the amount of time spent on some of these other important issues was proportionately less. As regards Mali, at the European Council the contribution made by the French was praised and the United Kingdom gave them strong support. We will contribute by training troops from the west African nations, as the noble Baroness will know. Generally, our approach is to try to develop a more sophisticated, political, diplomatic strategy alongside a military strategy.

The European Development Fund went up by a modest amount, so I am not sure that it was frozen. If I am wrong on that, I shall correct what I have said.

On the gap between the ceiling on payments and the ceiling commitments, raised by the noble Baroness, I understand that that size of gap is not untypical in terms of these negotiations. It is broadly in line with what had been the case in the previous seven-year negotiations. The European Commission also said that it thought that scale of gap was deliverable.

On growth generally, the noble Baroness is right to point to the importance of the trade negotiations and to see whether we can make more progress on the EU-US talks. I know that my right honourable friend the Prime Minister spoke to President Obama not long ago to try to make further progress on that. I also know that good progress has been made on those talks with Canada and negotiations are being taken forward with Japan. Opening up the European Union and encouraging trade is one of the most powerful ways in which to help growth and to get jobs, especially for the young, about which the noble Baroness is concerned.

[Lord Dholakia]

My Lords, I thank my noble friend for repeating the Statement in your Lordships’ House. Perhaps I may say how much we welcome the Statement, and in particular the fact that research and university budgets have not been affected. At a time of economic recession, when national and household budgets are shrinking, it is right that the European budget should reflect the gravity of the situation. However, two elements have been preserved: growth and jobs. Is my noble friend able to quantify the overall impact on growth and jobs resulting from the reduced European Union budget?

[Lord Hill of Oareford]

I am grateful to my noble friend for his overall welcome, and for the support he has given over a considerable period to my noble friends who took part in these important negotiations. I am not able to give a specific calculation of what the contribution of a smaller budget is likely to be to jobs and growth, because so many variables are in play: what happens in the eurozone, what happens to trade, how far we get with these talks and so on. What I am able to say is that the increased line on research and development should be of particular benefit to British universities, given that the money is distributed on the basis of quality—and, as we all know, British universities are renowned for their quality.

[Lord Wigley]

My Lords, will the Leader confirm my understanding that structural funds will continue to flow to regions of economic need. I believe those were the words he used? If so, will he confirm that the funds will remain at the levels that were previously anticipated for qualifying areas such as west Wales and the valleys, and that the source of funding will not be repatriated under last week’s agreement?

[Lord Hill of Oareford]

My Lords, on the question of these important funds, the noble Lord will be aware that the direction of travel, which the British Government support, is to try to make sure that they go to the least well-off regions in the European Union. With the accession of new countries to the east, it is important that they should have those funds. On the noble Lord’s specific question, we currently expect that the overall receipts will be broadly comparable to 2007 to 2013 levels. There will be a domestic application process that the Government will have to go through in due course, as a result of which we will know what the figures are.

[Lord Howell of Guildford]

My Lords, I apologise for not being in my place for the first two minutes of my noble friend’s speech. Is not by far the best outcome of this very satisfactory budget negotiation, on which my right honourable friend the Prime Minister should certainly be congratulated, the fact that it demonstrates that when we go for constructive reform in the European Union, we are not without friends—and indeed, that we are gathering an increasing number of allies? Will my noble friend point out to those who keep talking about Britain being isolated and marginalised that the opposite is the case, and that when we develop our ideas further for European reform, clearly we will have more friends?

Perhaps I might add a second question. I read in the papers this morning that up to 20% of the entire EU budget will now be spent on climate-related and green issues, including energy. Can my noble friend confirm whether that is true? If it is, what can we do to make that expenditure far more efficient in achieving good environmental and energy results?

[Lord Hill of Oareford]

On my noble friend’s second question, I will need to see whether I can provide better particulars on how the figures break down, and what the basis is for the speculation that my noble friend saw—whether it is to do with the energy elements of environment funds through the CAP, for example. I am not sure about that, so I will see what I can do. On his general point, I could not agree more. This outcome shows that Britain was far from marginalised and isolated in the negotiations. It also shows that the pessimistic view held by some that Britain is doomed to fail, and therefore should not go into negotiations with a strong position trying to win others round to our point of view, is entirely wrong.

I remember that many years ago when I was working for the then Prime Minister, John Major, there were similar views to the effect that Britain would never be able to win an opt-out of the single currency or an opt-out of the Social Chapter, but in fact those were both successfully achieved. Similarly on this occasion, there were people looking forward with eager anticipation in the expectation that my right honourable friend the Prime Minister would not be able to secure Britain’s interests. In fact, he has; I agree with my noble friend that by being clear in one’s objectives and by assembling alliances—in this case, with the Germans, the Swedes, the Dutch and the Danish—it is perfectly possible for Britain to secure its objectives, and it will continue to be so.

[Lord Pearson of Rannoch]

My Lords, I hope it will not ruin the Prime Minister’s day if I offer congratulations on a small step in the right direction. However, I think he is going a bit far when he describes the present situation as “a good deal for taxpayers”. Could the noble Lord tell us what this country’s gross and net contributions now become? In 2012, our gross contribution was some £22 billion, of which we got back around £11 billion, so our net contribution was £11 billion a year. That represents the salaries of 1,000 nurses at £30,000 a year every day, which we never see again. Therefore, I still have to query whether this whole arrangement is anything but a disastrous deal for British taxpayers.

More importantly, perhaps, is it true that the European so-called Parliament is going to vote on this new proposal in secret? If so, does that not nicely confirm the nature of this animal? What happens if the EU Parliament votes this down? Do we go back to some 2% inflation per annum for the next seven years? Could he enlighten us on that before we get too overwhelmed by the Prime Minister’s success?

[Lord Hill of Oareford]

I shall do my best to calm the House down, my Lords. I noticed that in the space of the comments of the noble Lord, Lord Pearson, he went from expressing concern about causing my right honourable friend the Prime Minister an anxiety attack by praising him, to rescinding that praise by the end.

On the cost to the British taxpayer, clearly, so far as the negotiation was concerned, the fact that the Prime Minister managed to end up with a credit card limit that was so many billions of euros lower than had been initially proposed is a cause of some modest satisfaction to the British taxpayer. That cost would have been lower if a chunk of our rebate had not unfortunately been surrendered in those negotiations in 2005 in the hope, as I understand it, that there would then be a deal on the CAP: a deal that has not been forthcoming. That explains why, although the overall figures are considerably lower—and they do represent a real-terms cut, which is what everyone wanted—the cost to the taxpayer is nevertheless higher than one would like.

On the European Parliament, like the noble Lord I have read some of the speculation there has been about that. The European Parliament has a role to play in approving the budget, but our position is that that agreement was struck by the 27 member states that are responsible for finding the money. We believe that some of the situations that the noble Lord has invited me to speculate about will not come to pass, but we need to see what happens. I will not be drawn into his alluring hypothetical situations.

[The Lord Bishop of Worcester]

My Lords, we on these Benches wish to join in paying tribute to His Holiness the Pope following his announcement. We give thanks for the outstanding contribution that he has made to the common good as well as to the welfare of the church during a long and distinguished ministry. He is in our prayers, as are those responsible for electing his successor, and as are the many Roman Catholics who will have been distressed and disorientated by his announcement.

Mention of the common good brings me to the EU budget and the welcome announcement that has been made. Can the Leader of the House assure us that the Government will focus their attention on what the budget seeks to achieve as well as on its size? There is a broader question here of what constitutes good stewardship of the resources that Europe has at its disposal. Stewardship requires a way of living that recognises that everything belongs to God and that all resources must be used for his glory and the common good. It requires us to find ways of collaborating with others to make the resources in our possession work for the good of all, as intended by God.

The Leader of the House will know that in 2004 the Sapir report was commissioned by the European Commission to look at ways in which the EU might deliver on the promise made in 2000 of becoming the most competitive knowledge-based economy in the world by 2010. The report argued that:

“As it stands today … the EU budget is a historical relic. Expenditures, revenues and procedures are all inconsistent with the present and future state of EU integration”.

Can we have an assurance that the Government will press for a more radical restructuring of the European Union budget in the time to come?

[Lord Hill of Oareford]

My Lords, I recognise the important points made by the right reverend Prelate on behalf of the Bishops’ Bench in respect of His Holiness the Pope.

On the overall administration of the EU budget, I think my right honourable friend the Prime Minister has made it clear that he shares the sentiment that the way in which it appears to have been going up and up does not suggest very good stewardship—to use the right reverend Prelate’s word. In the years ahead we will carry on trying to bring pressure to bear, as we will in trying to make sure that all the funds that are allocated are spent responsibly and wisely on the ends for which they were intended.

[Lord Tugendhat]

My Lords, I think it is the turn of this side of the House. As a former budget Commissioner, perhaps I may add my congratulations to those of others to the Prime Minister on his achievement. I also emphasise the points made by my noble friend Lord Howell about the importance of alliances. This shows that when alliances are built up, results can be achieved, something that many people would not have believed possible. The way in which the Labour Party voted before the last round of budget negotiations, when it thought that it was setting the Prime Minister an impossible target, is an indication of how effective British diplomacy has been on this occasion.

Finally, does my noble friend agree that there is no stronger supporter of the European Union than Chancellor Merkel? The fact that she is on the same side as us gives the lie to those who argue that you measure support for the European Union by the size of the budget. No one would suggest that British patriotism can be measured by the level of public sector expenditure, and it is a complete fallacy to suppose that one should measure support for the European Union, as so many in the European Parliament do, by the size of the budget.

[Lord Hill of Oareford]

I think I agree with every single point that my noble friend Lord Tugendhat has made. He has underlined the importance of alliances, which is clearly right, and he has drawn particular attention to the strength of the relationship that my right honourable friend the Prime Minister has worked hard to develop with a number of allies, including Chancellor Merkel. It is also true that in domestic politics the level of commitment is not related solely to the size of a budget. Given his experience, I have listened with particular care to my noble friend and I endorse his conclusions.

[Lord Hannay of Chiswick]

My Lords, I hope the Minister will get some pleasure from somebody who is normally a critic of the Government’s European policy saying that I thought an extremely good deal was sealed last week. I am also delighted that the Prime Minister, in his Statement, drew the right conclusion from it, which was that you can get a good deal if you work carefully with your partners.

Was the noble Lord the Leader of the House not slightly surprised that one thing that no one has commented on so far is that the Prime Minister has committed himself to a budget that goes three years beyond the date of the referendum which he has said he is going to call? On this vexed question of the rebate, will the noble Lord the Leader of the House perhaps confirm that the change in the British rebate that took place in 2005 was simply Britain agreeing to pay its fair share of the structural fund spending in the new member states? Does he think that we should not have paid that fair share? We were the primary protagonists of those member states joining.

[Lord Hill of Oareford]

First, I very much welcome the noble Lord’s welcome for my right honourable friend the Prime Minister’s achievement, from a different perspective from that of the noble Lord, Lord Pearson of Rannoch. I am obviously very aware of his background and experience in these matters, so am glad to receive it.

On the noble Lord’s point about the rebate in 2005, my understanding is that the other side of that deal, as it were, was supposed to be reform of the CAP, which, sadly, has not been forthcoming. That will cost the taxpayer in the region of, I think, €8.5 billion. From the point of view of wanting to defend the interests of the British taxpayer, I am extremely glad that my right honourable friend the Prime Minister has taken a robust line on Britain’s abatement. He was pushed to surrender more of it but felt that to do so would be wrong. I am glad that he resisted that pressure.

[Lord Ryder of Wensum]

My Lords, in the event that Scotland votes next year to become an independent nation, and therefore ceases to be a member of the European Union, can my noble friend confirm that the resources normally allocated to Scotland will be reallocated to the other three partners within the United Kingdom: namely, Northern Ireland, Wales and England?

[Lord Hill of Oareford]

My Lords, one thing that is clear in the document that I believe has been published today by constitutional experts looking into some of the implications, were there to be a vote in favour of independence in Scotland, for membership of organisations such as NATO or the European Union is that it is, to say the very least, unclear how things would pan out. However, the assumption that everything would just roll on is certainly questioned. My noble friend is right to highlight those concerns. Difficult and complicated negotiations would need to take place.

[Lord Lea of Crondall]

My Lords, will the noble Lord the Leader of the House agree that, given the complexities of these negotiations and the widely recognised need to explain to the British people how these things work, this is not the right time for the Secretary of State for Education to say that the question of understanding the European Union and its history and geography will be removed from the national curriculum?

[Lord Hill of Oareford]

I always admire the ingenuity with which certain Members of this House manage to broaden the scope of the matter at hand. There are many ways in which we can try to increase public understanding of membership of the European Union, which lies at the heart of why so many people question the nature of our relationship with it. People’s trust in the institutions of the EU does seem to be wearing thin. Whether or not better geography and history teaching will help with that, I leave to others to decide.

[Lord Empey]

My Lords—