European Union Committee: Multiannual Financial Framework

Lord Maclennan of Rogart Excerpts

Tuesday 19th June 2012 Grand Committee

[Lord Maclennan of Rogart]

My Lords, I currently have the honour to serve on the sub-committee chaired by the noble Lord, Lord Carter of Coles, the fourth sub-committee of the Select Committee upon which I have served. However, I do not propose to follow him on the subjects that he has been talking about today. The report is very timely and we need more time to consider what an appropriate budget for the European Union should be, in very changed circumstances from those in which the Commission began its deliberations.

The current debt crisis could leave us with very different parameters. It seems somewhat artificial to contemplate total budgetary expenditure in such an uncertain situation. Priorities are expressed within the multiannual financial framework with which we can agree or disagree. Broadly, the committee is in agreement with most of the direction, although there is the very major issue of the common agricultural policy, on which I should declare an interest as a partner in a farming enterprise.

One of the conclusions referred to by our chairman, the noble Lord, Lord Boswell—and his presence and remarks are most welcome—was that the duration of the multiannual financial framework is too long. While that is an important view to express at this time, the uncertainties connected with the budget proposals are not conceivably going to be resolved before the end of this period. I strongly support the term of this framework being reduced from seven to five years.

There are other general principles to which we have drawn attention. I would mention the requirement for greater flexibility in spending, as between the different heads, with a controlled mechanism for moving funds towards the spelled-out objectives. With growth and competitiveness scarcely recognised as the principal targets of the Union within the ministerial councils—though I am happy to see that there is some movement in that direction—and against the backdrop of the debt crisis and the threat of contagion from Greece and Spain to other countries, we need to recognise that cohesion is vital. It is satisfactory that the largest head of expenditure is standing at a proposed 36.7% of the budgetary proposals. This is, however, only 1% more than in the current multiannual financial framework. One may wonder legitimately whether that shift of priorities is sufficient to deal with Europe’s situation. It is also welcome that among the categories of regions for assistance a new one has been proposed: the transition region. That is a move towards greater flexibility.

The principles of pan-European development and redistribution of finances seem not incompatible with each other. Both are legitimate and as the report indicates we should be moving gradually towards concentrating on poorer states in the long run, but if we are to avoid a fracturing of the European Union we must acknowledge that the stronger nations will have to help other nations to pull themselves up. These interests are inextricably bound together.

The position in Greece cannot be overlooked while we are considering these matters. I was very struck by an article in the Wall Street Journal at the weekend by five distinguished economists from academic backgrounds, some of them or most of them out of Greece, who advocated that Greece should be given help by the European Union to,

“achieve immediate structural reforms to radically improve the ease with which business can be conducted, and to reduce tax evasion, eradicate corruption in procurement and liberalize the labor and product markets. It must do all this while also ensuring supervision over Greece by competition authorities, improving efficiency in its justice system and health sector, and opening access to its artificially closed markets in transportation, pharmaceuticals and engineering, among others”.

It is to be hoped that with the formation of a Government in Greece, those matters will be addressed as a matter of urgency by the European Union partners. That brings me to something slightly outside of the framework of the report—that we require a forum for considering the debt crisis and matters such as the bank situation that does not simply involve the repetitive meeting of the Council, but continues and sits until these critical matters have been resolved. The process of Heads of Government getting together and lecturing each other from the sidelines or indicating to their domestic communities what they are not prepared to have makes diplomatic negotiation much more difficult. Consequently, I hope that our Government might contemplate suggesting that the eurozone crisis merits a continuity of consideration until resolved, and that we Britons should be involved in that process although not in the eurozone, because the Government have recognised that we are crucially affected by it and have the power to influence the outcomes through not only the decision-making process of the Union but the fact of our being a relatively strong country. We have to alter our institutional approach if we are going to deliver the sort of outcomes required.

I turn, briefly, to some of the particular headings of expenditure referred to in the MFF. On research, the 46% increase over present funding proposed of €80 billion is extremely welcome, not least because it will enable us, if we persist effectively, to improve capacity and the excellence of our work to enable us to increase. On education, the 70% increase proposed from the current MFF to €19 billion is also highly appropriate and crucial for long-term growth. I was distressed to see that the Minister described that increase as “unrealistic”.

Personal enthusiasm for the arts makes me welcome the indication that we are to see a 37% increase over the separate existing programmes for creative industries. As we know in this country, they too stimulate growth. Expenditure to acquaint our citizens with what is being done in the European Union is also of great importance, since there is a lack of understanding at large as to the beneficial effects that the EU can have on our place in the global economy.

There is another omission that is the responsibility of the Commission and which needs to be rectified in further meetings: how much of the budget is to be spent on the new European External Action Service and should it be ring-fenced? It would be interesting to know the Government’s view of that.

I conclude with a reference to a recommendation on the European Court from my former sub-committee, which was chaired by the noble Lord, Lord Bowness. Our view, which the whole committee accepted, is that, because of the greatly increased volume of work being done by the European Court of Justice, we cannot cap at the present level or reduce in any way the funding that is required to enable the Court to tackle these matters. It would have a devastating effect on the operation of the Union if we suffered the sort of delays in obtaining justice that are common in the European Court of Human Rights.

This is an important report and I hope that it will be noticed. I do not have much doubt that it will be. I have heard members of the European Commission referring to House of Lords reports as being among the best reports from the most distinguished think tanks of which they aware in Europe.