EEC, EC and the EU: UK Financial Contributions

Robin Walker Excerpts

Wednesday 19th April 2017 Westminster Hall

[The Parliamentary Under-Secretary of State for Exiting the European Union (Mr Robin Walker)]

I congratulate my hon. Friend the Member for Kettering (Mr Hollobone) on securing the debate. Like you, Mr Chope, he has been a doughty champion for UK taxpayers and the UK national interest over a number of years.

My hon. Friend asked about the UK’s total net financial contribution to the EEC, EC and EU since 1 January 1973, the year that the UK joined the European Economic Community. Neither the UK nor the European Union publishes an aggregate audited figure representing that contribution. However, details of annual UK public sector contributions to the EU budget are published in a document entitled “European Union Finances”, most recently in February 2017. In the past three years our net contributions to the EU budget were £9.7 billion in 2014, £10.7 billion in 2015, and £8.6 billion in 2016. It is true that UK has been a net contributor every year, with the exception of 1975, since our accession to the European Economic Community. Our status as a net contributor reflects the fact that the UK is one of the largest economies in Europe and, indeed, in recent years has outperformed many of the others. However, there are no aggregate audited figures in the public domain that represent our net contribution over all that time.

[Graham Stringer]

The Minister mentioned audited reports. If I were a councillor anywhere in the country I would be sent to prison if I paid money to organisations with unaudited books. Why do we keep making contributions to the EU when it has not had audited books for 20 years?

[Mr Walker]

The hon. Gentleman raises an important point, which was well made during the referendum debate, which determined that we should end the relationship in which vast contributions were made.

Aside from the issue of auditing, to aggregate the figures a range of complexities and variables would need to be addressed, such as differences—as my hon. Friend the Member for Kettering mentioned—between the cash value of our payments and the real-terms 2017 prices, exchange rate fluctuations, and corrections to contributions in future years. Although the House of Commons Library paper includes a list of the UK contributions since 1973, no consolidated figure has been released by either the EU or the UK Government. The net contribution figures that I mentioned earlier are based on the UK definition, which includes the EU revenue generated through traditional own resources, VAT contributions and gross national income share of contributions. That is then netted off against the public receipts received through EU funding and the UK rebate. Private sector receipts do not flow back through the Government, so they are not included in the net contribution calculations.

As my hon. Friend also mentioned, the UK Government led by Margaret Thatcher successfully secured the rebate in 1984, which was introduced in 1985. It sought to correct a particularly pronounced imbalance between the amount the UK had to contribute and the receipts it received. The rebate was designed to reimburse around two thirds of the difference, thereby reducing the UK’s net contribution, although the exact method of calculation—like many things in the European Union—is highly complex, because certain areas of EU spending are excluded. The last Labour Government gave away some of the rebate, which contributes to the higher level of our recent contributions. I assure my hon. Friend that, encouraged by his exhortations, we will pay close attention to the detail of the rebate, including the timing of its payment, in our approach to the coming negotiations.

The European Commission also publishes outturn data on all member states’ contributions to the EU budget and their receipts on a calendar-year basis. The figure that gives for the UK’s net contribution are different from the numbers derived from the Office for Budget Responsibility’s forecasts and UK data. The main reason for that difference is that the European Commission’s numbers take into account all of the UK’s receipts, including those that go directly to UK-based recipients, such as funding for research paid to UK universities.

On 29 March, the Prime Minister confirmed the Government’s decision to invoke article 50 of the treaty of the European Union, acting on the democratic will of the British people. The article 50 process is now under way, but while we remain a member of the EU, the UK will continue to play a full part in EU business, including EU budget negotiations. We will remain committed to budgetary restraint and ensuring that we live within the current deal on the multi-annual financial framework. However, it is important that, once we have left the EU, control over how our money is spent will reside with the UK’s Government and Parliament—something I know that all the hon. Members in their places have campaigned for over many years.

We will also need to discuss how we determine a fair settlement of the UK’s rights and obligations as a departing member state, in accordance with the law and in the spirit of the deep and special relationship that we seek with the EU. I cannot prejudge the outcome of the negotiations. Debate over UK payments according to the rights and obligations of our membership is only speculation at this stage. However, I will address some of the key aspects of our financial settlement with the EU. As the House of Lords EU Committee’s report acknowledged, there are a range of opinions about the legal interpretation of existing obligations between the UK and the EU—both liabilities and assets. There is also significant uncertainty over those potential rights and obligations, and how to calculate the UK share.

Disagreement and uncertainty over the potential assets and liabilities of a member state leaving the EU are to be expected when this process has never been undertaken before. The House of Lords EU Committee’s report, “Brexit and the EU Budget”, which my hon. Friend the Member for Kettering rightly praised, notes that:

“The total UK contributions to and receipts from the EU budget are variable, difficult to calculate, and subject to interpretation. It is therefore difficult to reach an unequivocal figure for the UK’s current commitments.”

It also notes that different approaches can be taken to calculating any UK share of the EU budget as a departing member state. It concluded that the process of disentangling the UK from current financial contributions will be a matter for negotiation and dependent on the political decisions made—which is the point my hon. Friend quoted.

[Mr Hollobone]

One of the weapons my hon. Friend has at his disposal, as the hon. Member for Blackley and Broughton (Graham Stringer) said, is that Her Majesty’s Government operates audited accounts; our accounts are true. When negotiating with Michel Barnier, my hon. Friend can make the point again and again to him that his accounts are not audited; whereas our figures are verifiable, his are not.

[Mr Walker]

My hon. Friend makes an excellent point, and the Government certainly have confidence in our figures, as we always do. The fact that they are audited adds strength to that confidence.

In addition, as my hon. Friend and the House of Lords report mentioned, the UK is one of the largest shareholders in the European Investment Bank, and we benefit from investment opportunities that that bank supports. As we exit the EU, we will need to address questions over our future relationship with the European Investment Bank. There may be European programmes in which we might want to participate in future. We are an active participant in Horizon 2020, for example—the EU’s main funding instrument for collaboration on research and innovation.

The UK has a proud history of leading and supporting cutting-edge research and innovation within the EU. As we exit the EU, we would welcome agreement to continue to collaborate with our European partners on major science, research and technology initiatives. If so, it is reasonable that we make an appropriate contribution. However, that will be a decision for the UK as we negotiate the new arrangements. There are clearly various ways in which that could be done, and the Government are confident that we can achieve an outcome that works in the interests of both sides. That would form part of a new deep and special relationship between the UK and the EU.

As the European Union considers its future and the UK builds its new role in the world, we will also redefine our relationship with the EU and our neighbours in Europe. The Prime Minister has now set out the Government’s plan to achieve a new positive and constructive partnership between the UK and the European Union. The UK is a country that meets its international obligations. It is in the interests of both the United Kingdom and the European Union to agree a new partnership in a fair and orderly manner, with as little disruption as possible.

We want to play our part in making sure that Europe remains strong and prosperous and able to lead in the world, projecting its values and defending itself from security threats. We want a deep and special partnership that takes in both economic and security co-operation. However, as the Prime Minister set out in her Lancaster House speech on 17 January 2017, having been a net contributor to the European budget since we joined the Common Market in 1973,

“the days of Britain making vast contributions to the European Union every year will end.”

My hon. Friend the Member for Kettering called for us to be extremely robust in our approach. I assure him that, as befits the tough reputation of my Secretary of State, we will be robust in defending the UK’s national interest throughout the process.

Question put and agreed to.