European Communities (Finance) Bill

My Lords, it is a pleasure to follow the noble Lord, Lord Dykes, whose speech did not surprise us. No word of criticism about the European Union has ever been known to come from the noble Lord, Lord Dykes. What did surprise me was that when he reviewed the Third Reading of this Bill in another place, he selected the only Back-Bench Member to speak in favour of the Government, who happened to be a Labour Back-Bencher. He did not reflect what his own colleagues in another place actually said or did because his own colleagues voted with the Conservatives against the Third Reading of this dreadful Bill. It gives me no pleasure whatever to take part in this Second Reading debate. The Government should be ashamed that they are asking Parliament to ratify one of the worst financial deals in Europe that any Government have ever done. That is saying something because an awful lot of bad financial deals have been done in Europe over the years and your Lordships’ House should be ashamed to be part of the process. We have had some excellent speeches this evening, laying bare the dreadful truth of this Bill. My noble friend Lord Waddington gave an excellent historical account of the betrayal of the UK’s interests. I shall be repeating some of that and make no apology because it is important to understand the scale of what has happened. The noble Lord, Lord Barnett, dazzled or perhaps confused us with his mastery of the figures. His conclusion was that we should not have a referendum, which I found surprising. I would only say to him that that question is a very simple one and I look forward to debating it with him when the other Bill comes here. We also had my noble friend—I still call him my noble friend—Lord Pearson and the noble Lord, Lord Stoddart, who ranged more widely, as they do, into cost-benefit analysis. I shall not be tempted down those lines today, however tempting they are. In 1984, the UK’s interests were the keen concern of the Prime Minister at the time, my noble friend Lady Thatcher. She tenaciously and skilfully fought for our country. To do that she had to alter the financial settlement with which a previous Labour Government had saddled us. She had to persuade all of the other countries in the EU. She did it and obtained the rebate mechanism which has delivered a total of £54 billion to the UK economy by the end of last year. It was a triumph. The Government’s hand in going into the last own resources discussion could not have been stronger. Changing the rebate requires unanimity. As my noble friend Lord Waddington has already pointed out, Mr Blair portrayed himself as the defender of the UK. He said, "““The UK rebate will remain and we will not negotiate it away. Period””.—[Official Report, Commons, 8/6/05; col. 1234.]" And of course Mr Brown agreed with the statement that the rebate was ““justified and not-negotiable””. As ever, the public cannot believe a word that this Government say. We could not believe them when they said in their manifesto that they would give the people of Britain a referendum on the EU constitution and we should have known not to believe them when they said that they would protect our rebate. The details of the rebate calculations are not important. The essence of the rebate is that it reduces the UK’s contribution to Europe to a more reasonable level. If the rebate had remained untouched by the Government’s ham-fisted negotiations in 2005, the UK would be paying €10.5 billion less, or £7.8 billion at current exchange rates. In fact, this is expressed at 2004 prices, which is how the Government have chosen to continue to present the EU budget figures, including in the Explanatory Notes.. The only thing that we know for certain is that the final outturn cost to the UK will be higher. I do not need to spell out for the House the financial position of the Government, which is getting tighter by the day. Last week, the Institute for Fiscal Studies calculated in its green budget that the Chancellor would need £8 billion of tax rises in order to keep within the Government’s fiscal rules. The National Institute of Economic and Social Research came up with £9 billion. Does anyone seriously doubt that we can afford the voluntary handout to the EU of nearly £8 billion, which is the consequence of this Bill? Other noble Lords have referred to what the rebate could be spent on, but the issue is really whether we could save by making cuts in expenditure or in tax rises in the UK. The Government claim that the rebate is going up in absolute terms in the next financing period. Of course, it is going up because the totality of EU expenditure is going up at an alarming rate, which is where the real problem lies. Enlargement has increased the size of the EU budget. We accept that some overall budgetary increase is a necessary part of enlargement—a policy we support—but we do not accept that the level of the EU budget itself is correct, and I shall return to that later. We should have used our rebate leverage to work on that, but we did not. I know that the Government like to present the Bill as the inevitable consequence of enlargement but that is a long way from the truth. The Bill does not affect the decision on total spending; it is just about the rebate. If Tony Blair had not abandoned his country’s interests in late 2005 our rebate would be roughly 25 per cent higher going forward. As it is we now have the double-whammy of a reduced rebate and higher underlying spending. Our average net contribution to the EU over the period 2000-06 was around £3.3 billion. Over the period to 2013, still at 2004 prices, it will be on average £2.3 billion higher, which is a rise of more than 40 per cent. I agree with other noble Lords that we should look at the figures before the EU gives us back some of our own money. The figures are quite bad enough when considered at a net level. The structure of the rebate giveaway is about as bad as it could be for the UK. It ratchets up over the period so that the rebate as a proportion is much greater at the end than at the beginning. When we go into the next negotiation round, when the rebate reduction will cease to be capped, our rebate will be on a strong downward trend. The annual contribution paid net by the UK to Europe at the end of the next financing period is €6.4 billion at 2004 prices, and when inflation is added this will double our past rate of spending. That is likely to damage our prospects for a sensible negotiation in the next round since we will be arguing from such a low rebate base. I turn to the underlying spending settlement. If the EU spent less, our rebate would normally be lower in monetary terms, but at least the net cash transfer to the EU would also go down. We believe that the EU should spend less. I remind noble Lords of the conclusion of the report Funding the European Union, to which the noble Lord, Lord Barnett, referred. That report—the 12th report of the 2006-07 session—states: "““If real reform of the expenditure side were secured the scale of, and possibly the need for, the UK abatement would be reduced. The pressing need for reforms is on the expenditure side: reform of the revenue side, as addressed in this report, is desirable but less important””." We thought that the Government shared those sentiments. The worst example of spending, which is inefficient and unfair, is the common agricultural policy. It accounts for nearly 47 per cent of the overall allocated expenditure in the EU. The amount spent on it is set to rise over the period to 2013. When Mr Blair began his retreat from his stance on the rebate—it was that, "““we will not negotiate it away. Period””—" he replaced it with some tough sounding words on CAP reform. But he blew it. He ended up giving away the rebate without any reform whatever. When he tried to explain his sell-out on the rebate to Parliament, he said, "““we also agreed on a fundamental review of all aspects of the EU budget, including the common agricultural policy … it is then possible for changes to be made to this budget structure in the course of this financing period””.—[Official Report, Commons, 19/12/05; col. 1564.]" I wonder whether Mr Blair was just fooling himself or deliberately misrepresenting the likely outcome. When the Commission’s discussion document on the budget review finally appeared, it clearly indicated that there would be no changes in the financing period up to 2013. Worse, it concentrated on the revenue rather than the expenditure side of the budget. The French Agriculture Minister announced to the French nation immediately after the budget was agreed that there would be no review of CAP. The then President Chirac followed that up by publicly declaring that the current CAP was safe until at least 2020, and current President Sarkozy has declared that CAP reform must feature more protection for French farmers—that means more money for French farmers. Similar sentiments have been muttered in the Club Med countries, Ireland and Germany. CAP is not the only necessary target for reform. Regional funds remain unreformed. The wasteful Commission will see its spending rise by 28 per cent in real terms when it is plain for all to see that this is wholly the wrong direction to travel, especially since, as referred to earlier today, for the 13th year in a row the Court of Auditors have declined to give the EU’s accounts a clean bill of health. When do the Government realistically expect any meaningful budget reform to take place? Do they still expect some reform in this financing period? What do they think is the honest timetable to achieve reform of the CAP? This Bill does not deliver a fair result to the British taxpayer. It will deliver an annual bill of around £30 to every UK citizen. We will pay 20 per cent more than France even though our economy is only 6 per cent bigger. Ireland, the second richest country in the EU, will still be a net recipient from the EU. The highest spending per capita is in Luxembourg, which is ludicrous. Any system of funding that produces these results is not fair and ought not to be allowed to continue. This Government had a veto back in December 2005. They not only failed to use it, but also set the UK up for further rounds of financial pain at the hands of our European neighbours. They have not even apologised. The Government have let the people of the UK down. We are invited to conspire with them by approving this Bill. It is a money Bill, so, as we were reminded by the noble Lord, Lord Stoddart, it is outside the powers of your Lordships’ House to do more than nod it through. From those on these Benches, it will not get so much as a nod to see it on its way.