Multiannual Financial Framework

Rebecca Long Bailey Excerpts

Wednesday 7th December 2016 General Committees

[The Chair]

We now move to questions, which we have until 10 am to consider. I remind Members that questions should be brief and that this time is for questions; there is an opportunity for debate when we have finished questions.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

It is a pleasure to serve under your chairmanship today, Mr Hanson, and indeed to serve opposite the Minister, in my first European Committee. I have a few brief questions. I will put the first three together, because they are all on a similar theme, and it will give the Minister adequate time to respond.

First, as the Minister has said, revised proposals were put forward at the European Council meeting of 15 November. However, as far as I am aware, full details of the revised proposals are not publicly available. Can he outline exactly what has been removed from or revised in the documents, other than that which he has referred to already? Indeed, does he have a date by which the revised proposals will be available?

Secondly, as far as I am aware, the proposals include a doubling of funds for the flexibility instrument and emergency aid reserve, and a new EU crisis reserve. However, the Minister has stated that there will be no new special instruments. Will the crisis reserve fund therefore not go ahead, and, if not, how does the Commission plan to deal with any unforeseen needs in the next four years?

Lastly in this suite of questions, the Minister’s letter to the European Scrutiny Committee said that the commitments proposals for special instruments have been reduced from €3.4 billion to €129 million per annum. Clearly, that is a colossal change of direction, not a minor tweak, so can he confirm exactly what funding will be allocated to which special instruments?

[Mr Gauke]

I thank the hon. Lady for her questions, and I welcome her to her first debate in a European Committee; I confess that this is not my first. It is good to see her in her place.

First, the hon. Lady asked how the proposals have changed since the initial Commission documents. I refer her back to the points I outlined in my opening remarks, but let me be clear: to begin with, top-ups or spending increases to lower priority budget headings have now been financed largely with reallocations, instead of using unallocated margins. We obviously welcome that. Secondly, the proposals for increasing special instruments capacity have been reduced from around €4 billion to €150 million per annum, with increases in just two special instruments. The new special instrument has been dropped, and I will come back to that in a moment. Caps on underspends that can be carried forward have only been raised marginally. Some ability to reshuffle funds between special instruments has been retained.

I will make two observations in respect of where we have got to following the work undertaken by the presidency on these proposals. First, from the perspective of a member state advocating budgetary restraint, this is clearly a move in the right direction. I have attended the negotiations on annual budgets for the past three years, and the dynamic is striking: the Parliament generally calls for a relaxation of controls; the Council of Ministers, although it contains a range of views, generally takes a more budgetary disciplinarian approach; and the Commission tries to broker a position. It is clear that the presidency proposals supported our view pretty strongly.

Secondly, as I said earlier, we believe that there should be greater scope for flexibility to respond to particular needs. In that context, it is better that that is funded by reallocations as much as possible; it should not come back to member states for more money. Again, we welcome the approach that has been set out. The crisis fund has been dropped because of a consensus that it is not required.

The hon. Lady’s third question was about special instruments. No changes have been made to the MFF ceilings. Proposals for placing special instrument repayments above ceilings were dropped early on. The emergency aid reserve increase was reduced from €220 million to €20 million per annum. The flex instrument increase was reduced from €530 million to €130 million per annum, and, as I say, the crisis reserve was dropped.

The hon. Lady asked when the full details would be released. I have outlined the main important areas, and it is now a question of reaching a conclusion on the mid-term review. I am not sure that I can update her about the date at this point.

[Rebecca Long Bailey]

In the written statement on 18 November, the Government confirmed that the UK had in fact abstained on the revised MFF proposals. Given that the documents before us would increase spending on great projects such as the youth employment initiative and Horizon 2020, can the Minister explain the rationale for abstaining and the reasons for the Council’s expediting this matter?

Finally, the documents state that the negotiations for the next MFF will begin next year. The remainder of the current MFF takes us up to 2020, by which time we may have been out of the EU for up to a year, according to the Government’s current timetable. Will the Minister confirm what role the UK will play in negotiating the next MFF? What will happen to our allocation of funding for the remainder of this framework if we have severed ties before 2020?

[Mr Gauke]

On the mid-term review, as I have explained, the current proposal ensures that the payment ceilings that we signed up to over this seven-year deal are preserved. Therefore, we would not be looking to oppose the proposed mid-term review. The proposals are essentially neutral, with respect to what we would expect to pay over the MFF period, but we recognise that some commitments and functioning are likely to outlast our membership. On that basis, we took the view that the most appropriate approach for us to take is to abstain. We think that is the most constructive approach in the circumstances.

The hon. Lady asked what our approach to the future MFF will be. She may be familiar with the answer. This will play into our negotiations for Brexit. In those circumstances, the point at which the negotiations will start for the next MFF will be in 2018. We can assume that we will be in the middle of Brexit negotiations at that point, and our role in the next MFF will also be discussed in those negotiations; I think that the two are linked.

On the hon. Lady’s point about why the mid-term review was expedited, the presidency was keen to make progress and show that the budget proposals could be delivered quickly. That is something we welcome. Sometimes these matters can drag on for some time, but where it is possible to make quicker progress, we should do so. I hope that that is helpful.

--- Later in debate ---

[Rebecca Long Bailey]

As we have already discussed, we are here to debate the proposed changes to the current multiannual financial framework. As I am sure we all know, the framework was adopted in December 2014 and allows the European Union to spend up to €960 billion or 1% of EU GNI in commitments and €908 billion or 0.95% of EU GNI in payments between 2014 and 2020.

The framework divides EU spending into five broad categories: smart and inclusive growth, representing 47% of commitments; sustainable growth and natural resources, representing 39%; security and citizenship, which represents 2%; and global Europe and administration, both 6% of the total budget. As we know, it was agreed that the Commission would review the framework by the end of 2016. The documents before us lay out the Commission’s conclusions and proposals for revision as a result of that review. The Commission’s assessment was that the MFF has proven flexible in its ability to respond to unforeseen challenges, such as the refugee crisis, but it acknowledged that greater tools may be needed to ensure flexibility for the remainder of this framework and to redirect funds into priority areas. The Commission therefore suggested in the documents a package of financial proposals, which would total £11 billion of additional funding in 2017 to 2020, while still staying within the agreed 2014 spending ceilings. The additional funding would be found by reallocation from other areas. In addition to that financial package, the Commission proposed substantial changes to the financial regulation of EU funds.

The proposals would provide greater funding for really important initiatives, such as the youth employment initiative, and €400 million for Horizon 2020, which the Opposition wholeheartedly support. They would also increase the EU’s ability to respond to unforeseen crises by doubling funding for the flexibility instrument and emergency aid reserve, and by creating a new European Union crisis reserve.

The proposals are all well and good, but as we know they have since been superseded by an agreement made at the Council on 15 November. This agreement appears to contain significant changes to the proposals. As we have heard, however, the new proposals are unavailable for public scrutiny, and the Minister is unable to provide a date. I am concerned—as I am sure other hon. Members are—that there seems to be little merit in scrutinising the documents when we do not know which parts of them are still relevant and which elements have been discarded. We have only the points that the Minister made. His letter suggests that the current proposal is considerably more limited in scope than what is presented in these documents.

As the 19th report of the European Scrutiny Committee outlines, the commitment proposals for special instruments have been reduced from around €4 billion to €150 million a year, and there are no new special instruments. That is a substantial change. I appreciate that it is not entirely the Minister’s fault, and I note that he said the process moved faster than expected.

Turning to a wider issue with the multiannual financial framework, as I briefly mentioned earlier, we are discussing EU funding until 2020, by which time we will have left the European Union. The Government have so far given no guidance on whether we will still receive our allocation of the funding once we have severed ties or whether they will make up the shortfall if we do not. Regions across the country need confirmation now about whether the funding on which they rely will be available as planned until 2020, and about what plans will be in place to support them when EU funding ceases.

It is also important to know whether we will have any influence or place in the agreement of the next framework, which is due to begin next year. What happens, for example, if our eventual deal includes paying into the EU, as was alluded to in the media over the weekend, without having a say in how EU funds are allocated? I am concerned that the Government have not indicated a long-term strategy for the Brexit negotiations, or for mitigating the negative effects when we leave. Therefore, they have a lot of work to do to convince me and my constituents that that is not the case. However, I am glad that they will make a start today by accepting Labour’s Opposition motion, which will be debated on the Floor of the House this afternoon.

In conclusion, the Opposition will not oppose the motion before the Committee, but I want to put on the record our concern that the Government have agreed to revised proposals for the MFF before due scrutiny by the House was possible.