European Communities (Finance) Bill

My Lords, this important Bill was brought to your Lordships’ House on 16 January, the day after its remaining stages in the Committee of the Whole House in the other place, which is normal for treaty-type Bills, and Third Reading. But the Bill is not just important, it is essential to fulfil the European Council agreement between the sovereign member Governments of the member states, which was concluded to make an adjustment. As we know, the adjustment gives effect to the Council decision of 7 June last year on the own resources change and the complex new formula for the replacement mechanism. I am grateful to the noble Lord, Lord Barnett, for his exegesis of these complicated matters. Perhaps he will agree with me that it also shows that all budget calculations and examinations have their complexities, disutilities and complications—not just the European Union. There is a special additional element in the blending of the national cultures of each member state. Although the debates in the other place gave rise to the usual semi-hysteria from certain Members—only a small number—about these wicked EU treaties constantly sapping the very life-blood from the heroic but embattled Britannia, they also brought out the need to exercise proper scrutiny of complicated new measures, which by their very nature are hard to follow even for the cognoscenti. This Parliament rightly prides itself on a robust and proper system of scrutiny of all EU legislative instruments. We sometimes in this House make a little too much fuss regarding communications which are, after all, not legislation, but policy assertions. In this case there was an understandable anxiety in the Commons that there was not enough time for a review of these new spending modalities and the budget implications for the UK of the new treaty arrangements and the EU budget, as it would be. However, broadly the Government were right to remind the other place that the consequences of not agreeing to ratify this legislation would be to throw open the whole system and go back to the previous formula. Furthermore, scrutiny does not and should never mean scrutiny to oppose a measure. It is also vital to inform and explain to Members of Parliament in both Houses and the public and sometimes to improve legislation as it goes through each member state. I always contrast in both Houses the extreme speed with which most other major treaties on our membership of other international organisations are understandably passed on the nod in this Parliament, basically because everyone automatically agrees that they are a good thing. People feel that there is no need for a lengthy debate. In this case, a small, noisy and eccentric minority of Members dislike intensely, indeed hate—that is not too strong a word—our membership of the European Union. I agreed with much of what the noble Lords, Lord Stoddart and Lord Pearson, said about some of the budget and trade figures, but the noble Lords confirmed yet again their wish for us to leave the Union. But there are probably 50 to 100 good reasons for our membership, and the budget calculation is only one aspect. That is the reality that the British public, in so far as they follow this complicated matter, would probably agree with. Only Europe gets the fierce and unusual scrutiny that we see every day, especially—and again, quite rightly—with our vividly accurate reports from the EU Select Committee and various sub-committees. Secondly, these treaty Bills are often the result of extended and painful negotiations by our sovereign Government with all the other sovereign Governments—sovereignty writ large in the European Union—to reach a sometimes complicated compromise. As each party makes concessions, it would be easy every time to scream that we have sold out to wicked foreigners, because they would normally be in the majority against our unique position with the budget rebate. However, reaching a decision on behalf of the British people is precisely what our elected Government are there for—the exercise of governmental sovereignty on behalf of the electors of this country. That is the essence of parliamentary democracy. The anti-Europeans cannot have it both ways, moaning about a so-called loss of sovereignty which applies as much to our elected Government as to the Parliament where they secure their regular majority. For all its faults, warts and blemishes, that is the system. It is also worth remembering that the EU budget system, unlike that of many sovereign member states, apparently now including Britain, is constantly virtuous, since the mechanism ensures that, broadly speaking, the outgoings always equal the receipts, at least over a significant period of time. This is naturally so as it is an allocation system, like the money allocated to local authorities. On the subject of local authorities in Britain, the number of staff directly employed by the Commission in Brussels—even allowing for enlargement to a much greater union, and including overseas missions—is still smaller than that of an average county council in the United Kingdom. We all know the four sources of the resources in this mechanism. I will not go into detail, save to refer, as the Minister did, to the reduction in the VAT call-up rate—compensated for by increasing the GNI-based contributions of all but two member states. This has produced a much better adjusted system that allows for the latest economic differences between member states. Paragraph 9 of the Explanatory Notes explains the complicated adjustment arising from the UK surrendering a small part of its rebate. I would not read it out even if I had time, but it is a very telling paragraph. When this unique concession was secured by the Tory Government in the mid-1980s, I do not recall that it was intended to last for ever. Perhaps British Governments hoped that it would, but that was not the agreement in the European Union. It has already lasted 20 years, with the latest, very modest adjustment. The principle of gross contributions by member states was always that of an automatic formula mechanism, not the strident Sun newspaper concept of ““Give us back our money””. As far as the net contributions applied, ours quickly got out of line in relation to our GDP and output measurements. However, this was not the fault of the other member states—it was because our total farm output was less, pro rata, than that of others, and because we imported far more from third countries, particularly from the old Commonwealth countries. The situation was relatively difficult. I will quote from the other place on one matter, which summed that up very well. Rob Marris, from the Labour Benches, said: "““My right hon. Friend spoke briefly about the origins of the rebate. Was it not the case that Mrs. Thatcher was able to negotiate the rebate because the structure of the UK economy in those days was markedly out of line with the structure of the economies of France in particular, and of Germany? Those structural differences—the differing proportions of GDP raised ""from the agriculture sector in contradistinction to that raised from industry and the service sector—have changed, particularly in France and Germany. The rebate negotiated by Mrs. Thatcher and the basis on which it was negotiated were almost bound to change over time, as the economies of those other main rich western members of the EU changed””." The Minister, Andy Burnham MP, now Secretary of State for Culture, Media and Sport, said: "““My hon. Friend is absolutely correct. The point … is how the decision that we are debating to some extent reforms the way in which the own resources decision is constructed””.—[Official Report, Commons, 15/01/08; col. 845.]" That is how people should now regard this matter. A comparison can also be made with Germany, which has always contributed the biggest amount to the EU, usually with no complaints in the German press and perhaps with only rare complaints from a small number of Members in the Bundestag. It is a given datum and accepted as part of Germany’s contribution, being the biggest economy. Today, we also need to note carefully paragraph 16 on page 3 of the Explanatory Notes concerning the 12 new member states. That sets out the essence of the adjustment in this scheme. Our contribution will now be limited to £10.5 billion at 2004 prices over 2007-13, as the Minister himself stated. This is now roughly equal to France’s contribution but much less than that of Germany. It was a classic response from the opportunistic Mr Tony Blair, trembling as usual lest he displease Mr Rupert Murdoch and the ““Daily Wail””, when he claimed that the other countries—as usual, to secure peace and quiet with the recalcitrant British, as sadly they regularly perceive us to be—had promised a thorough review of the EU budget and the common agricultural policy from 2013. The farm review proposals will be promulgated soon—perhaps even during the Slovenian presidency—and legislation may follow in that six-month period or perhaps under the French presidency. We shall see how it turns out. While farmers everywhere have to expect a long-term erosion of the subsidy system, production subventions have already virtually ceased to exist in their old form. However, in reality, no member state can allow farmers to starve, and therefore even in the future compromises will be needed. Some kind of support system, even a residual one, will have to continue. France has been mentioned, and I declare an interest in that I also live there. No one can say that France has not adjusted to the decline in farming with a fall in the population involved now down to below 3 per cent, which was the traditional British figure 10 to 15 years ago. The Third Reading in the other place brought out a number of other important matters. As I emphasised earlier, the budget adjustment was literally unavoidable to support very useful non-farm support budgets in the eastern European member states. I assume all noble Lords here will agree that that was a very worthy objective. Secondly, there was the sense that the amendment to new Clause 1 in the Commons was somewhat mischievous to say the least. However, I think it had the come-uppance that it deserved. EU contributions, even with the bearable and modest increase, remain a tiny part of total UK government spending. Indeed, the Minister alluded to it being a net contribution of 1 per cent plus. For that, we get enormous benefits from our membership of the European Union, especially in the creation of a huge number of jobs and two-way trade. As the noble Lords, Lord Stoddart, Lord Pearson and Lord Waddington, said, as a country we have traditionally had a disturbingly high deficit compared with other advanced countries in the world. The United States may be an exception at the moment because the US trade deficit, as well as the budget deficit, is enormous and out of control. Unfortunately, the Tory party remains totally isolated in the EU and, in particular, in the European Parliament. That is very noticeable when one visits and talks to the Members there. I predict that, if it intends to remain deeply and fundamentally hostile to virtually all aspects of our membership, as was shown in the Commons debates in Committee and at Third Reading, that will be another, possibly vital, factor in explaining why an election victory will not be in the bag, as some Conservative Members in the other place tend to believe because of their lead in the polls. If that is so, I trust that Mr Gordon Brown or his successor will continue the recent, brand new trend, after Mr Blair’s contortions and changes of mind, including on the referendum for the European Union reform treaty, of showing more enthusiasm for our 34-year membership. Mr Brown has begun to do that. ““Britain for a new Europe”” was mentioned when he addressed a recent conference. After all, like all the other member states—the old 12 or the old 15—we should be getting used to our membership of the European Union by now.