Connecting Europe Facility

Mark Hoban Excerpts

Thursday 19th January 2012 Commons Chamber

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I beg to move,

That this House takes note of European Union Documents No. 16176/11 and Addenda 1 and 2, No. 16499/11, No. 16006/11 and Addenda 1 and 2, No. 15629/11 and Addenda 1 to 35, No. 15813/11 and Addenda 1 and 2, relating to the European Commission’s draft regulations on the Connecting Europe Facility in the next Multiannual Financial Framework 2014-20; supports the Government’s view that at a time of ongoing economic fragility in Europe and tight constraints on domestic public spending, the Commission’s proposal for substantial increases in EU spending in this area compared with current spend is unacceptable and incompatible with the tough decisions being taken to bring deficits under control in both the UK and countries across Europe; considers that spending in this area should focus on identifying and providing genuine EU-added value, and not on spending where domestic governments and the market are better placed to act; and further supports the Government’s ongoing efforts to reduce both the Commission’s proposed budget for the Connecting Europe Facility and the overall level of spending in the next Multiannual Financial Framework 2014-20.

The European Commission’s proposal for a connecting Europe facility for transport, energy and telecommunications infrastructure cuts across the work of Government. I am therefore grateful that I have been joined in the Chamber by ministerial colleagues from the Department of Energy and Climate Change, the Department for Transport and the Department for Culture, Media and Sport, in putting forward the Government’s case on the motion.

Matters of deficits, spending and growth are at the top of all of our concerns, not just here in the UK, but across Europe. Those issues go to the very heart of the continued instability in the euro area. That ongoing instability vindicates the Government’s decision to get ahead of the curve, cut our deficit and impose strict financial discipline on our budget.

[Mr William Cash (Stone) (Con)]

Whereas many hon. Members will agree with the sentiment of the Government’s motion, the idea that we should contribute to the EU indirectly through the International Monetary Fund on the scale that is proposed is unacceptable.

[Mr Hoban]

My hon. Friend’s point is outside the topic of the debate this afternoon. He is aware of the Chancellor of the Exchequer’s comments and assurances on that matter.

As I have said, at home, we have taken tough decisions to tackle our deficit and demonstrated leadership. We expect exactly the same leadership on spending in Europe from the European Commission, but whether on the annual budget or the financial framework, such leadership has been completely lacking. Instead of finding ways to cut spending or to drive better value for money, the Commission, through the connecting Europe facility, proposes to increase spending on transport, energy infrastructure and telecommunications by 400% as part of a multi-annual financial framework that increases payments by more than €100 billion over its duration.

Just as at home, where we have prioritised spending on growth while tackling the deficit, the Government would like a higher proportion of a restrained EU budget spent to promote sustainable growth. The proposal does not achieve that objective. We are arguing that spending should be lower, and that what spending remains should be focused on areas that offer genuine added value across the EU.

[Mr John Redwood (Wokingham) (Con)]

A number of people who have written to me condemning the High Speed 2 project have alleged that Britain has to build it under the EU network ruling. Will the Minister confirm that Britain remains free to make its own decision on whether to have High Speed 2?

[Mr Hoban]

My right hon. Friend is, as is often the case, spot on. There is no requirement under the proposal for us to build High Speed 2.

[Kelvin Hopkins (Luton North) (Lab)]

Following the intervention from the right hon. Member for Wokingham (Mr Redwood), is not the nation state rather than the EU the best place to judge how much should be spent, what it should be spent on and how efficiently it should be spent?

[Mr Hoban]

The hon. Gentleman makes an important point. There is a debate to be had on where such decisions should be taken and what our priorities should be. That is why it is important for us to impose discipline on the EU budget and try to influence debate on it to ensure that when money is spent, it is spent well and wisely in pursuit of our objectives.

Let me remind the House of three key aspects of the Commission’s proposal for the next financial framework: first, an increase in the budget of more than €14 billion a year compared with a freeze on current levels; secondly, a new financial transactions tax to fund the EU budget; and thirdly, an end to the UK’s permanent rebate. That financial framework proposal and the proposals to increase spending through the connecting Europe facility are unacceptable.

In November, the House agreed that the Commission’s financial framework was

“unacceptable, unrealistic, too large and incompatible with the tough decisions being taken in the UK and in countries across Europe to bring deficits under control and stimulate economic growth”.

[Graham Stringer (Blackley and Broughton) (Lab)]

I am following the Minister’s logic carefully and agree with him, but would it not be more sensible to set an objective of reducing the European budget by around a third, which is the cut that has been imposed on local government?

[Mr Hoban]

I will set out the Government’s position on the financial framework in my own sweet time.

Continuing financial instability in the eurozone owing to unsustainable levels of public debt makes the case for restraint stronger: the EU budget must be part of fiscal consolidation, not immune to it. As the Prime Minister has stated, alongside leaders from France, Germany, the Netherlands and Finland, the maximum acceptable increase in EU budget size until 2020 is a freeze in current payment terms.

Since November’s debate on the financial framework, we have made significant steps towards achieving that goal. In the face of a Commission proposal to increase the 2012 budget by 4.9%, the UK led the European Council in demanding, and achieving, a restriction of the 2012 budget to a real freeze to 2011 payments. In pursuit of a real freeze in payments, the UK’s position must, and will, be consistent and clear in annual budget negotiations, financial framework negotiations and negotiations on the individual spending programmes that make up the framework, of which the connecting Europe facility is one.

[Mark Reckless (Rochester and Strood) (Con)]

When the Minister refers to seeking to achieve a real-terms freeze, what deflator or measure of inflation is he using?

[Mr Hoban]

The measure that is used in these discussions is the forecast of inflation provided by the EU, which is currently 2%.

The nature and size of these spending programmes are negotiated in parallel with the negotiations on the overall financial framework. That means that the eventual size and shape of the financial framework are influenced by negotiations on those individual programmes. Given our call for a real freeze, any increase in the size of individual programmes means a corresponding decrease in other programmes.

[Mr James Clappison (Hertsmere) (Con)]

My hon. Friend is making a compelling case. Will he confirm, as appears from the documents before us to be the Government’s view, that in just one of the documents—that on the trans-European networks—the European Commission is proposing a €40 billion increase above the level of the freeze he described?

[Mr Hoban]

In that €40 billion, there are three components. At the moment, about €6 billion is spent. The proposal before us represents an increase of €24 billion, which takes us to €30 billion. In addition, there is a transfer of €10 billion from structural funds, which gets us to the €40 billion figure. The actual increase is €24 billion, or about 400%. I think the whole House would agree that an increase of that scale is not acceptable. The €24 billion increase set out in the documents has to be seen in the context that the Commission’s financial framework proposal is €100 billion more than a real freeze. The Government cannot accept the Commission’s proposal for an increase in the facility, and we will argue for significant reductions to it.

[Mrs Anne Main (St Albans) (Con)]

In discussions with the Commission about the proposed increases in spending, what justification does the Commission give regarding the ability to afford this extra spending, given the crisis afflicting the eurozone?

[Mr Hoban]

Of course, in a way, the Commission’s view is that it is probably somebody else’s problem to resolve the financing. It put forward measures in the multi-annual financial framework that will increase the amount of money flowing to Europe. It has put forward an EU-wide financial transactions tax, which we object to. Its view is that if such a tax went ahead, the revenues would go not to member states, to spend at their discretion, but to the European Commission to spend. As part of its financial framework, the Commission also proposed the end to our rebate—another proposal we would reject.

The Commission would look to member states to meet the cost of these projects, which is why it is absolutely vital that we work with like-minded allies to restrain the EU budget and ensure that we can spend more money at home, while less money goes abroad. [Interruption.] The hon. Member for Nottingham East (Chris Leslie) chunters, but if he had listened to my speech, he would have heard me say that we have signed a letter with the Chancellor in Germany, Angela Merkel, and with the French President calling for a real-terms freeze in payments. That is the sort of alliance we can build in Europe. I will come to the hon. Gentleman’s amendment later, but I am rather bemused: the Labour Government talked tough in EU negotiations, but they happily gave away our rebate, costing this Government €10 billion over the life of this Parliament.

[Mr Peter Bone (Wellingborough) (Con)]

The Minister is being far too generous to Labour Members. Over the last five years of the Labour Government, our net contribution to the EU was an extortionate £19 billion. Under this Government, it will be £41 billion, because Labour gave away a large part of Mrs Thatcher’s rebate. That is a disgrace, and Labour should be held to account for it.

[Mr Hoban]

I like to be generous in politics, but the previous Government were generous in giving away our money, by giving away part of the rebate. I will come back to that in a moment.

[Dan Byles (North Warwickshire) (Con)]

My understanding—I was not in the House at the time, so perhaps my hon. Friend can help me—is that the rebate was given up in exchange for reform of the common agricultural policy. Will my hon. Friend update us on how well that is going?

[Mr Hoban]

My hon. Friend is absolutely right: there were bold and tough words from the previous Government about being prepared to give up part of our rebate for real reform of the CAP. Well, we gave up our money, but we did not get real reform. That was typical of the Labour party’s reactions when it was in government: lots of tough talk, but no action to back it up.

[Kelvin Hopkins]

Will the Minister give way?

[Mr Hoban]

I will give way just once more, but then I want to try to make some progress.

[Kelvin Hopkins]

Like Government Members, I was opposed to giving up that great tranche of our rebate. The Government have made much of the issue. Is it not time they started trying to renegotiate the rebate to get it back again?

[Mr Hoban]

We have made it absolutely clear that the rebate is there to stay, and that is one of the key parts of our negotiating strategy.

I want to say a few words about infrastructure spending. The Government have made it clear that focused infrastructure improvements are a domestic priority. When undertaken wisely, it is clear they can boost growth, protect the environment and improve lives. In his autumn statement, my right hon. Friend the Chancellor announced investment of £100 million in the creation of up to 10 super-connected cities across the UK with 80 to 100 megabits per second broadband and city-wide, high-speed mobile connectivity. Last week, the Secretary of State for Transport announced details of the new high-speed rail network.

However, the key is having carefully focused investment. When prioritising spending for infrastructure, the Government have taken the wider economic context into account. The urgent need to reduce our domestic deficit has meant that we have had to choose our investments carefully and focus infrastructure spending on where it can have the most positive effect.

That is the approach the Commission needs to take to European infrastructure spending, focusing affordable levels of spending where they will make most difference. Therefore, while the Government will, first and foremost, argue for a reduction in the overall size of the connecting Europe facility budget, we will endeavour to ensure that the final settlement agreed is focused on spending money where it will add most value. That means spending money only where neither the market nor domestic Governments are better placed to act—the point the hon. Member for Luton North (Kelvin Hopkins) made in his first intervention.

We will be pushing the Commission for additional information to allow us to judge where the money will best aid growth and support our environmental objectives. That is consistent with the Government’s desire to see spending that promotes sustainable growth take a bigger share of a tighter budget in the next financial framework. The ambition of the connecting Europe facility, while laudable, must respect the fiscal realities of Europe.

The Opposition have tabled an amendment to today’s motion. It is rather incredible, in a week when Labour’s policy on deficit reduction has become ever more confused, that the hon. Member for Nottingham East has tabled an amendment calling for an effective deficit reduction strategy. Ever since the shadow Chancellor said on Saturday that

“we are going to have keep all these cuts”,

the Labour party has been totally confused, with its deputy leader later saying:

“We’re not accepting the Government’s austerity cuts, we are totally opposing them”.

So Labour Members accept the cuts, but then oppose them.

Labour Members cannot say they are credible on the budget, because of the legacy they have left. Despite our entering the downturn with the largest structural deficit in the G7, the Labour leader told Andrew Marr this weekend that he did not think Labour spent too much. Let us remind him that it is because of Labour’s record on spending that our triple A rating was on negative outlook when the Labour party left office. That downgrade threat has been lifted because this Government have a credible and effective deficit reduction strategy. One would think that the Labour party would have learned from that, but, no—its five-point plan would add £20 billion to the deficit this year. Rather than seeing an effective debt reduction strategy from Labour, all we have is more of the same: more spending, more borrowing and more debt. So before Labour lectures anybody else on the deficit reduction strategy, it had better get its own house in order.

If that was not bad enough, the hon. Member for Nottingham East has scored another own goal in his amendment by calling for reform of the common agricultural policy—we touched on that earlier. We have heard brave words before from Labour politicians about CAP reform. Tony Blair said that

“the rebate remains because the reason for the rebate remains. Of course, if we get rid of the common agricultural policy and we change the reason why the rebate is there, the case for the rebate changes.”—[Official Report, 29 June 2005; Vol. 435, c. 1293.]

Those were tough words, but as we know, he gave way to the French, sacrificing €2 billion in our rebate a year, which will cost the country €10 billion over the lifetime of this Parliament. In the current financial framework, CAP spending has not fallen, as Labour said that it would, but increased by €3 billion. So it is all very well the hon. Gentleman talking tough in his amendment, but we have heard it before from Labour—all bark and no bite.

Achieving the priorities that the House has supported in the next financial framework will not be an easy task. The Government need to defend the rebate, resist EU taxes and restrain the budget size. The UK can deliver results in Europe, as outcomes in the 2011 and 2012 annual budget negotiations have shown, but to achieve our overall aims we must be constant and vigilant in our resistance to increases in the budget. A 400% increase to infrastructure spending in the EU budget, without any corresponding reductions elsewhere, is unacceptable in the current economic environment. We will work with our allies to cut this programme down to size, delivering fiscal restraint and value for money. Although we are clear that we need infrastructure investment to boost productivity and growth, projects need to be effective and affordable, but the plans in the connecting Europe facility proposed by the Commission are neither. I therefore urge my hon. Friends to support the motion.

[Madam Deputy Speaker (Dawn Primarolo)]

I inform the House that Mr Speaker has selected amendment (a), in the name of the hon. Member for Nottingham East (Chris Leslie). I call him to move the amendment.