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European Communities (Finance) Bill

Volume 470: debated on Tuesday 15 January 2008

Considered in Committee.

[Sir Alan Haselhurst in the Chair]

Clause 1

Extended meaning of “the Treaties” and “the Community Treaties”

Question proposed, That the clause stand part of the Bill.

I do not intend to delay the Committee for long, but I think that it is worth setting out the arguments that we went over at some length on Second Reading and the key points that constitute the own resources decision that the Bill will incorporate into UK law.

That decision was agreed more than two years ago, and it is fair to say that there has been considerable opportunity for Members on both sides of the House to form a view on it. It is now make your mind up time. This is not a Bill that we can go through line by line and take the bits that we like and remove the bits that Members may be less fond of. We have either to accept the package that was negotiated in December 2005 or signal a wish to go back and renegotiate it.

It is important to say at the outset that there may be seductive—

Surely if we reject the Bill tonight, the current system will stay in place and there will be no need for renegotiation?

In many ways, that betrays the problem with the Opposition’s logic. The hon. Gentleman suggests that it is possible for this country unilaterally to ignore the ratification deadline and just carry on as if nothing has happened, but that would trigger a major reassessment of our relationship with the European Union—[Interruption.] That might indeed be what he wants, as he confirms, but if that is his real objective, his time would be better spent focusing on the 15 days that will be devoted to the EU reform treaty on the Floor of the House. I guess that his diary is already clear for each and every one of those days.

That is the point. This is not a pick-and-mix opportunity. The sweet shop is not open; people cannot just take what they like and leave the rest. We will either accept the measure or we will not. Ingenious attempts to create a third way, as the Opposition new clause seeks to do, are simply unworkable and would lead to the situation that I outlined.

Do the Chief Secretary and the Government intend consistently to tell us that when European Union proposals are put in front of us, we always have to either take them or leave them, and that if we are unhappy with them in any way the only alternative is to throw into the melting pot our relationship with the European Union? That surely undermines the credibility of the idea that Britain is a partner that can argue its corner.

As my hon. Friend knows, there are ample opportunities to debate European business in the House, both in Committee and in the Chamber. The financial perspective was debated at some length following the Council meetings at which those matters were debated. The then Prime Minister came back to the House and debated those matters in this Chamber. The House has had plenty of opportunities to debate the precise shape of the own resources decision and whether to accept it. My point is factual. My hon. Friend will agree that we cannot now go back through the own resources decision and seek to insert amendments from this Committee—[Interruption.] There is an amendment; forgive me, it is a new clause. My point is that we will either accept the decision tonight or we will not.

The Chief Secretary has forgotten the historical function of this House, which is to consent to the expenditure of money. That is the supply side of the question. It is not for the Government to assert that they can do something unless they have the consent of the House. That is the constitutional position. This is a debate. If the House has the courage and determination to say that the decision reflects an inadequate negotiation by the present Administration and by the previous Prime Minister, it has the right to reject it.

That is precisely the point; it is what I said at the start. Hon. Members on both sides of the Committee have the opportunity to express precisely that opinion this evening. The Committee has that ability, but we cannot go back and renegotiate the points contained in the own resources decision or put on hold the ratification of the decision pending the conclusion—[Interruption.]—I ask the hon. Member for Aldridge-Brownhills (Mr. Shepherd) to hear me out—pending the conclusion of the budget review that was also set in train—

On a point of order, Mr. Deputy Speaker. The Chief Secretary is suggesting that it will not be possible to insert new clause 1. If that were the case, surely the new clause would not have been selected this evening?

I can say to the hon. Gentleman that I have selected new clause 1 for debate and, if time allows, it will be debated.

While I am on my feet, and also on a point of order, perhaps I should remind hon. Members that we are sitting in Committee and that the appropriate form of address to the occupant of the Chair is not Mr. Deputy Speaker, but either Mr. Chairman or Sir Alan. I am perfectly happy with the former.

Thank you, Sir Alan. I do not disagree with the point made by the shadow Chief Secretary. Of course, it is well within the rights of the Committee to adopt the new clause. My point is that that would send the clearest of signals that the UK was unilaterally opting out of the own resources decision. The conclusion of the budget review process, which the new clause mentions, will take some time, I would guess. The date for the ratification—the agreed date by which all member states should incorporate the own resources decision into their domestic legislation—is 1 January 2009, which is less than a year away.

I am extremely grateful to the Chief Secretary for giving way again. There is a fundamental point. Sir John Major once went to Edinburgh and agreed certain finance arrangements, and it was claimed that the whole of Parliament was bound by the Prime Minister’s undertaking to European leaders. That cannot ever be the position. Parliament is the authority through which the decision is made. The Government have entered into an agreement, but whether they can honour it or not is entirely dependent on how the House responds.

The hon. Gentleman misunderstands me—wilfully, I believe. I tell him directly that the Committee and the House have the opportunity to reject the proposal this evening. That is his right as a Member of the House and it is the right of all hon. Members. My point was that we cannot go back and renegotiate the own resources decision line by line.

Given that the decision was negotiated some time ago, perhaps when the Government agreed to it they thought that they could afford to give away €10.5 billion of hard-pressed taxpayers’ money. However, they now cannot afford a decent pay rise, awarded by an independent commission, for the police and they are achieving record levels of borrowing and taxation. Should not the Chief Secretary reconsider, in order to be a prudent manager of our money?

As the right hon. Gentleman knows, a very prudent decision was taken to increase public expenditure at a lower rate than predicted levels of growth in the economy. That was the decision made in the recent spending review. The forecasts for the part of the financial perspective that covers the spending review take into account the projected figures. I ask him to consider the fact that the Government have taken prudent decisions within a tighter fiscal framework, overall.

Although the Liberal Democrat approach is different from that of the Conservatives, they are asking perfectly legitimate questions about parliamentary scrutiny. Will the Chief Secretary explain what would happen if the ratification deadline was not met by January 2009? Will he talk us through the nuclear option? What exactly will happen, legally and financially, if that deadline is not met?

I can probably do better. I refer the hon. Gentleman to paragraph 11 of the explanatory notes, which states:

“If any Member State fails to adopt the new Own Resources Decision by 31 December 2008 then the current Own Resources Decision…continues to operate until such time as the adoption process is completed”—

[Interruption.] Opposition Members have reacted, as someone said, as though that were a complete vindication of their position. Such an outcome—it is what Opposition Members want, although they are not saying so—would precipitate a complete breakdown in relationships with the rest of the European Union. I am led to believe—I shall return to the House to correct this if I am wrong—that this country has never failed to ratify an important decision agreed with European partners.

Let us be clear what Opposition Members want. They want that showdown debate with the European Union. If that is the case, they should come out and say so.

I agree with the thrust of the Bill. I am a pro-European who wants to see the European Union work. I want the poorer parts of eastern and central Europe to benefit from objective funding like that from which we have benefited in the past, but I also want to see proper reporting of how the money in Europe is spent. I am not convinced that the review proposed in the new clause cannot be carried out in the year left before ratification is required. I do not want a showdown. I want proper information, and the Minister must be more convincing when he asserts that we cannot conduct the proposed review in a year. I do not think that anyone really believes that.

The deal was agreed more than two years ago, and it is important that the UK honours its obligation to ratify it by the agreed deadline. The House has an opportunity today to debate the pros and cons of the agreement, and I have explained that every hon. Member has a right to accept or reject it. As for scrutiny, the hon. Gentleman will know that in response to the excellent report from the House of Lords, the Government have made a commitment to publish a consolidated statement on EU finances. He is right that the debate could benefit from greater transparency and accountability, and the Government have agreed to facilitate that.

However, it is an entirely different thing to say that a long debate should be held over the course of the next year. That would amount to an attempt to unpick the 2005 agreement, which was based on three pillars. The first pillar was expenditure, or the EU budget. The second was the own resources decision, which had to do with how those funds would be raised. The third element, for which this Government pressed very strongly, was the insistence that there should be a review of the entire budget process in future.

The documentation supporting the negotiation process makes it clear that nothing is agreed until everything is—in other words, that we cannot accept the bits of the negotiation that we like and reject the rest. That was how the negotiations were conducted, and it is not possible for us to go back and say, “We like this bit but we don’t like the rest.”

I am grateful to my right hon. Friend for his patience in explaining the process. It is clear that the House could choose to reject the treaty, with the result that the UK would have to renegotiate it. That would be unwise, in my opinion, but will he assist me by moving on to the substantive questions? How much will the treaty cost us, and on what will the money be spent? I understand that it will go towards funding enlargement. A third question concerns the treaty’s effect on duties on commodities, such as sugar, that are produced by non-member states. Given the EU’s system of external tariffs, that is an especially sensitive matter around the world.

I am grateful to my hon. Friend for his intervention and for his request that we move on to the detail of the own resources decision. That is what I intend to do.

Earlier, the Chief Secretary said that the former Prime Minister brought the deal back to the House for debate and presumably a vote. Will the Chief Secretary remind the Committee of when that debate took place and of the result of the vote? The best that we managed was a statement from the former Prime Minister. We did not get a debate on this issue.

I seem to remember that the former Prime Minister came back to the House on more than one occasion—after the Council in June and again in December, once the decision was made. I accept that the latter occasion was after the event, but the debate on these matters after the June Council was very live and the House had an opportunity to influence events. I repeat that there was a vote on Second Reading, and hon. Members will have other chances in the votes to be held this evening to express their views as to whether they believe the agreement represents a good deal for Britain. I am not going to assert that it is, as all hon. Members must arrive at their own judgment. If they decide to reject a deal that was negotiated in good faith, however, they must bear in mind the damage that might be done to Britain’s interests in Europe.

I do not think that the Minister realises that the opposition expressed this evening by members of various parties would strengthen the Government’s hand. The rebate at the centre of the argument was won by Mrs. Thatcher because she was strong, and it was conceded by the former Prime Minister in the weak days of his dying regime. If the Minister were forced to go back to Brussels because this House did not accept the dilution of the rebate, his position in negotiations for a better deal would be very strong. Mrs. Thatcher was able to get what she wanted because she had the House behind her.

I do not believe that that is how the previous Conservative Government conducted their European negotiations. The right hon. Gentleman will find that there was no showdown and that no macho statements were made. Much of what that Government did was very pragmatic, and that is the same for all Governments. Their approach was based on compromise, with a view to achieving the best available solution. His memory of the period may be rather selective, as I do not believe that it is based on fact.

The deal under discussion preserves the basis of the Fontainebleau Council, at which it was decided that the UK would receive a rebate on all spending in the 15 countries that then made up the EU. The current deal retains that approach, with the difference that it takes account of enlargement and proposes a different financing mechanism for the enlarged EU.

The Conservative party says that it supports EU enlargement—

The right hon. Gentleman nods. Well, this is the decision that pays for EU enlargement. The Opposition cannot say that they support enlargement if they do not accept that it must have a financial cost.

Will the Minister explain how both the current and former Prime Ministers were able to say in May and June 2005, when the deal had been done and the EU had already been enlarged, that the UK rebate was fully justified and non-negotiable? That was their position as they went into the negotiations. They did not begin them saying, “If we want enlargement, we’ll have to give up the UK rebate.”

We went over this on Second Reading. The hon. Gentleman may not have understood that the own resources decision clearly preserves the basis of the rebate, as I have described. He does not want to acknowledge it, but the rebate’s value will rise as a result of the deal that has been reached. That sounds like a pretty healthy and decent outcome to me.

I shall give way to the hon. Member for Shipley (Philip Davies), the leading light of the “Better Off Out” group.

I am grateful, as no one on the Conservative Benches, let alone a Minister, has ever before described me as a leading light. The hon. Member for Wolverhampton, South-West (Rob Marris) urged the Minister to get to the crux of the matter, which is how much extra the Bill will cost the British taxpayer. Will he therefore make that cost explicit, and will he say why the British taxpayer should pay more money to an organisation whose accounts have not been signed off by the auditor for 13 years running because of all the fraud that goes on?

I am happy to acknowledge that the hon. Gentleman is a leading light and the intellectual driving force in the “Better Off Out” group—if that is not a contradiction in terms.

To reply to the hon. Gentleman directly, the cost of disapplying the rebate to non-agricultural spending in the accession countries—that is essentially what we are discussing—is capped at €10.5 billion. That is the maximum cost of those changes. However, as I said to the right hon. Member for Hitchin and Harpenden (Mr. Lilley), that is the consequence of a policy of enlargement. It is not possible to argue that enlargement is a one-way process from which the UK gains no benefits. Later, I shall give the Committee figures showing that, already, British companies are doing significantly more trade with companies from the accession states. New opportunities have opened up for British business, as has happened after every round of enlargement, such as when Spain, Sweden and the Republic of Ireland joined the EU, so it is good for the British economy. That contrasts with the view often expressed by the Conservatives that it is a one-way street with no benefits for this country.

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.

My hon. Friend is absolutely correct. The point he urges me to move on to, as he did in his previous intervention, is how the decision that we are debating to some extent reforms the way in which the own resources decision is constructed. That is what this decision does. For example, the current arrangements for VAT-based contributions are amended in the own resources decision, with the maximum call-up rate reduced to 0.3 per cent. The effect of that is that member states’ residual contributions based on gross national income will increase, further developing the trend toward fair and transparent contributions. People might say that that is only a small step forward, but that is how we have to approach such matters. We make progress where we can.

The decision also contains some reform of the common agricultural policy. That, too, is welcome, but it is clear that this country does not believe that the reform is anywhere near enough. That is why we secured the overall budget review as part of the overall package. It was clear at the time that none of the package was agreed until all of it was agreed. There was no pick-and-mix option.

May I correct the Chief Secretary on a point of fact? The EU had only 12 member states at the time of the Fontainebleau agreement, since when we have had several rounds of enlargement and continued with the same rebate mechanism. There was no conditionality based on enlargement to rich or poor countries during that period. The present proposal is a wholly new departure, which flies in the face of the assurance that the then Prime Minister gave the House:

“The UK rebate will remain and we will not negotiate it away. Period.”—[Official Report, 8 June 2005; Vol. 434, c. 1234.]

That is what he said. Why have the Government broken that assurance?

We have been over this ground already today. We have preserved the basis of the rebate. The hon. Gentleman is right to correct me. Although I was 14 at the time, I remember Spain joining the EU shortly after—in 1986, I think it was. However, I hope that he accepts that the spirit of my remarks is correct: that the rebate was an acceptable way of calculating fair contributions for the members of the European Union at that time. After the accession of Spain and then the Republic of Ireland, proportionately more structural funding was diverted to those countries to fund their economic development, and the same principle now applies to the accession countries of the former eastern bloc.

I am mystified by what the Chief Secretary is saying. In previous enlargements, the EU admitted both rich countries, such as Finland and Sweden, and much poorer countries, such as Spain, Portugal, Greece and Ireland, yet the arrangements for the rebate were not changed. The whole premise of his argument—that we have to change the rebate as a condition of enlargement is, if I may say so, absolute rubbish. His Government are committing—to quote the figure that the Library has given us—£7.4 billion over the planned period for absolutely nothing, other than to advertise their utter weakness. At the same time, they cannot pay the police properly.

The hon. Gentleman is advancing a pub argument. He knows that such matters are periodically reviewed by all members of the EU and that the deal that this country secured during the process of negotiation was for approximately €160 billion less than the European Commission originally proposed. Let me ask him a direct question. Did he believe that there would be a cost to EU enlargement? Did he think that the countries of western Europe would have to make a financial contribution to the enlarged European Union? I reckon that when his right hon. Friends were advocating enlargement, they were not thinking, “We’ll say yes, but not at any cost to the United Kingdom.”

I am grateful to the Chief Secretary for cross-examining me on that matter. I accepted that there would be costs to admitting some of the very poor former eastern bloc countries, but I believed the Prime Minister when he said that the rebate was non-negotiable and that the negotiations on admitting those countries were conducted on that basis. Why have the Government breached their assurance? The Chief Secretary has no explanation, and I have demonstrated that the argument that he has advanced so far is completely false.

The hon. Gentleman is entitled to reach that opinion. I said clearly that the own resources decision maintains the basis of the rebate as it was first agreed among the 12 countries of the EU, which shortly thereafter became 15. That rebate has remained in place ever since, and stays in place on that basis. It is calculated on all spending—agricultural and non-agricultural spending—in the EU 15. Different arrangements are made for the accession countries and the rebate is disapplied on non-agricultural spending—essentially, spending to support economic development.

As I say, the hon. Gentleman is entitled to his judgment that that is the wrong thing to do—that that is not how we should pay for enlargement. In return, I say to him that, as a result of this decision, France’s net contributions grow at a significantly greater rate than this country’s do. We have secured the rebate, which will increase in value throughout the course of this financial perspective, and, at the same time, we shall have a fair way of funding the enlargement of the European Union. That seems to me to be a good deal for this country.

May I clarify whether the rebate arrangement is the same as it was at the time of Second Reading: the rebate is a proportion of the net amount that we hand over to the European Union? If the rebate is increasing, that is an indication that the net amount we are handing over is increasing, so it is not something to be praised, but something to be anxious about.

I understand my hon. Friend’s point. He is correct that that is how the rebate is calculated, but overall, the European Union budget will grow by about 7 per cent. over the course of the financial perspective. That too is a product of the negotiations led by this country, and—to repeat what I said to the hon. Member for North Essex (Mr. Jenkin) a moment ago—it is significantly lower than the European Commission’s original proposals. The fact that we have secured a lower budget is good news for Britain.

Opposition Members make points—I was going to call it hypocrisy—about prudence and keeping spending in check. The right hon. Member for Wokingham (Mr. Redwood) was right to make those points, and I accept them—a person in my position needs to listen carefully to what he says—but I hope that he will acknowledge that the growth of the European budget throughout the period in which his Government were in power was in the double digits.

We are negotiating a lower and more prudent budget. The last Government failed to do that, as the right hon. Gentleman has just acknowledged.

The Chief Secretary is being most generous in giving way. Surely he is mistaken—the Prime Minister cannot negotiate a deal. He can make an agreement in principle, but it is not a deal until this sovereign House has voted on it. I shall tell the Chief Secretary what a deal is; a deal is to pay police officers a proper rate.

In all matters, the Government will take decisions that support economic competitiveness and strength. That applies to public sector pay as well as to matters relating to the European Commission, and that is the basis on which we move forward.

Will the Chief Secretary confirm that net contributions under the prudent and great settlement that this Government have achieved will be £3 billion higher in 2011 than in 2006, an increase of more than 50 per cent.?

The hon. Gentleman needs to explain himself. Is he saying that contributions will be that much higher each year?

The final year? I do not have that particular calculation to hand. I shall come back to the hon. Gentleman on the point, if that helps.

Before I was interrupted, I was being challenged with the fact that the real increases negotiated by the Conservative Government for the financial perspectives in 1988 and 1994 were 17 and 22 per cent. respectively over the five years of the deals. The right hon. Member for Wokingham said it himself—they are not figures with which he agreed, or of which he is proud. They stand in stark contrast to this Government’s deal.

The Chief Secretary is misrepresenting what I said. I thought that those increases were too high when they were agreed, but the budgets then were much smaller than today. If he thinks that they were unreasonable, surely he is proving that his own budget is a scandal, as it is so much bigger.

It is a bit late for the right hon. Gentleman to say that he did not agree with those budget increases. If I recall correctly, he was a member of the Cabinet when the 22 per cent. increase in the EU budget was negotiated. He cannot just wave away any responsibility for that; it is what his Government negotiated in 1994. I would also argue that spending on the common agricultural policy was responsible for a hefty chunk of that increase. Let us remember how things developed over time, and consider the deal in that context.

I think that the United Kingdom should be a full member of the European Union. One of the very few good things that the John Major Government did was to decide, after winning the debate in the European Union, to go for widening rather than deepening—that is, for more members rather than closer co-operation between members. That position was taken initially only by the United Kingdom, with some support from Denmark. What surprises me is the following, on which I would like my right hon. Friend to comment. It is intellectually coherent to say, “We are against enlargement”, as it is to say, “We are in favour of enlargement”—as I am—“but recognise that in reality there will be a cost to that enlargement”. There is indeed a cost to that enlargement. However, does my right hon. Friend agree that it is not intellectually coherent to say that one is in favour of enlargement, particularly to eastern Europe, where countries are still very poor, but that there will be no cost to that enlargement? That is intellectually incoherent rubbish.

I agree entirely with my hon. Friend. That point has been illustrated. Opposition Members were trying to compare that enlargement to the accessions of Spain, Sweden and the Republic of Ireland. By historical standards, the accessions of first the A8 countries and then the further two former eastern bloc countries are completely different, and when taking such a historic step the European Union has to look again at what it does. As my hon. Friend rightly says, it is simply not possible for the Opposition to say that they support the principle but not come up with the financing for it.

How many interventions do the Opposition want me to take? The Opposition’s position probably explains why, at the last count, they had one other member in their new European grouping, having previously had two. I hope that the shadow Chief Secretary to the Treasury will enlighten us, if there have been recent additions to the club, but I believe that they are still in a grouping of two in the European Parliament. He looks puzzled.

I am grateful to my comrade the Minister for giving way, because it allows us to have a decent debate. On intellectual coherence, does he agree that it is entirely intellectually coherent to be in favour of expansion and of paying the additional moneys associated with it, while not being in favour of a budget that includes the obscene amounts of money spent on the common agricultural policy, not being in favour of the way in which the structural fund is handled, and being in favour of a number of other changes? It is not fair or reasonable to suggest that someone who is in favour of enlargement automatically must be in favour of everything in the budget. It is possible to take another point of view.

That is a completely legitimate position to take, but it does not give sufficient recognition to the way in which the European Union operates, which is, almost by definition, through a system of compromise, in which the best available deal for the whole Union is sought. I accept that my hon. Friend may not find the deal acceptable, but, as ever, the position is not ideal; one gets the best possible for one’s country, and that is what we have sought to do. Let me go through the detail—

I am being criticised for not making progress, and for taking interventions. As long as the House recognises that, I give way to the hon. Member for Dundee, East (Stewart Hosie).

I think that the House is well aware of the Minister’s generosity. I want to bring him back to new clause 1, if I may.

Order. I hope that the hon. Gentleman will not take us to new clause 1, because we are debating whether clause 1 should stand part of the Bill.

I apologise, Mrs. Heal. The Minister said that the hon. Member for Glasgow, South-West (Mr. Davidson) set out a perfectly reasonable position, but that the Government could not do as he suggested because the EU sought compromise. I understand that it seeks compromise, and I agree with much of what the Minister said about maintaining the rebate in respect of the EU15 and changing it only in respect of the accession states, with no change to the basis of agricultural funding. However, why does that preclude us from receiving proper information on all the issues, which concern every hon. Member in the House, before ratification is required next January?

We have provided that detail. The deal has not been done in secret. Parliamentary answers have been given. An example that springs to mind is a reply given to the hon. Member for Surrey Heath (Michael Gove). We laid out on the record detailed figures about the effect of the agreement on the United Kingdom. I have the figures. There was a table showing gross contribution before abatement, the abatement, total receipts expected and the net contribution. Those are detailed figures that we put before the House.

I am grateful that the hon. Member for Dundee, East says that he agrees with much of what I am saying. I am not against detailed parliamentary scrutiny of the deal. I began my remarks by saying that the deal has been negotiated. My hon. Friend the Member for Glasgow, South-West (Mr. Davidson) and others may reject it if they believe that it is not good enough. That is the right of any hon. Member, but it is not possible to go back and negotiate line by line with our European partners.

I shall make progress and get some facts on the record about the effects of the own resources decision. Appropriation ceilings will be frozen at the levels set for the 2000 to 2006 budget period. The ceiling on annual appropriations for payments is 1.24 per cent. of EU gross national income, and for appropriations for commitments it is 1.31 per cent. of EU GNI. Appropriations for commitments are forecast to fall below 1 per cent. of EU GNI during the budget period.

As I said earlier, the current arrangements for VAT-based contributions will be amended, with the maximum call-up rate reduced to 0.3 per cent. By increasing residual contributions based on GNI, that will further develop the transparency and the fairness of the budget.

Between 2007 and 2013 only, the maximum rate of call on VAT-based contributions will be further reduced for Austria, Germany, Netherlands and Sweden, to 0.1 per cent. for Netherlands and Sweden, 0.15 per cent. for Germany and 0.225 per cent. for Austria. For the same period, gross reductions in GNI contributions of €605 million per annum for Netherlands and of €150 million per annum for Sweden are introduced. Both those amounts are in 2004 prices.

Would I be right in thinking that the way in which Netherlands and Sweden were able to negotiate the figures that my right hon. Friend has just given relates precisely to the point that I made earlier—the structure of their economies has changed, but all 27 economies in the EU are different, and that must be taken into account, as the UK economy has been, in negotiations with our partners?

That is absolutely the point, and the nature of the complex negotiations that were finalised in 2005. The changes that I am outlining show how we have had to be sensitive to the position of other countries, such as the Netherlands which, even after the own resources decision, is still the largest net contributor in percentage terms to the budget per capita. It is important that we keep working to make sure that the budget is as fair as possible. It leaves the UK a mid-ranking net contributor.

The Minister said earlier that we were not taking into account the way that the EU operates. The problem for him is that we understand far too well how the EU operates. It is a fraudulent and corrupt organisation. He has said in the past that he is concerned about the level of fraud in the EU budget. My constituents cannot understand why he does not say to the European Union, “You are not going to get one more penny from the UK until you sort yourselves out and make sure that all the money that you are spending is properly accounted for.”

The hon. Gentleman makes a very big statement for somebody who represents a party that claims to wish to remain a member of the European Union. He says that it is a fraudulent and corrupt organisation. I do not agree. In its latest report the European Anti-Fraud Office estimates fraud levels of 0.06 per cent. in agricultural spending, 0.41 per cent. in structural fund spending and 0.03 per cent. in pre-accession spending. That is not to say that there should be any complacency on these matters, or that the European Court of Auditors has not shone a light on aspects that could be much better. There is an argument about accounting standards and ensuring that they are very strong. It is quite another thing to say that the European Commission or the European Union—I do not recall which the hon. Gentleman said—is a fraudulent and corrupt organisation. That is a very large statement with which I do not agree, and with which I do not believe his party agrees.

The decision retains the correction mechanism in favour of the UK, the abatement, along with the reduced financing of the correction benefiting Germany, Austria, Sweden and Netherlands. After a phasing-in period between 2009 and 2011, the UK will participate fully in the financing of the costs of enlargement by disapplying all non-agricultural expenditure—money in support of economic development—in the new member states from the abatement. Finally, the additional UK contribution resulting from the reduction in allocated expenditure is limited to €10.5 billion, in 2004 prices, over the period from 2007 to 2013.

In summary, the UK’s abatement remains intact on all agricultural spending. On all expenditure in the EU15 it is preserved and will rise in value. Along with the fact that the ceilings on budget expenditure are retained, and that the budget overall will fall to less than 1 per cent. of EU GNI during this budget period, we argue that that makes it a good deal for the taxpayer. At the same time we will, along with other net contributors to the EC budget, pay our fair share of the costs of enlargement. We support enlargement, which we know will be good for Britain, creating new trading opportunities and new jobs.

I believe that I have answered in full the interventions made in the course of this stand part debate. We have an obligation to honour our commitments made to our European partners. By adopting the own resources decision this evening, we will take Britain’s relationship in Europe to a new level that will open up new opportunities for British business.

It was not my original intention to speak, at least in any substantial way, in the debate on clause 1 stand part. The Opposition are placed in some difficulty by the structure of the Bill. It has only one substantive clause, which contains only four substantive words. They are “and 7th June 2007”. I took the view, for better or for worse, that seeking to amend clause 1 was tantamount to voting against the Bill on Third Reading. Indeed, that is what we shall do, if our attempt to amend the Bill through the insertion of new clause 1, which I hope we will have an opportunity to debate later, is unsuccessful.

However, as the Chief Secretary has set out his argument at some length, it is necessary for me to speak briefly to answer some of the points that he raised, in the hope that I will be able to make my substantive contribution to the debate about the Bill in the debate on new clause 1, which I hope we will come to in due course.

The Chief Secretary must recognise that the original position with which his Government went into the negotiations was that the rebate was fully justified and non-negotiable. Both on Second Reading and again this afternoon, he sought to rewrite history to imply that it was always recognised and understood that part of the deal for enlargement would be that the UK had to give away part of its rebate.

However, that is simply not the case. The main enlargement of the European Union was agreed in April 2003 and implemented in January 2004; Bulgaria and Romania signed the treaties of accession in April 2005. By summer 2005, when the then Prime Minister told us that the rebate was not negotiable, “period” and the current Prime Minister told us that the rebate was fully justified and non-negotiable, enlargement was a fait accompli. The Chief Secretary’s Government never envisaged giving away part of the rebate as part of the negotiation for enlargement—or does the Chief Secretary want to tell us that both the former and the present Prime Minister wantonly misled the House when they made those remarks?

A former occupant of the Chief Secretary’s office told the House of Commons:

“we will benefit from abatement on any new expenditure incurred as a consequence of both enlargement and the ceilings in the existing EU 15...the United Kingdom will benefit very considerably from the application of the abatement to any new expenditure on enlargement.”—[Official Report, 3 July 2001; Vol. 371, c. 145.]

In 2005, it was never the Government’s position that the rebate had to be surrendered or even negotiated as the price of enlargement. To say so is simply wrong. The Government supported EU enlargement; after it was secured, they went in to negotiate the “own resources” decision on the basis that the rebate was not up for grabs.

My hon. Friend has made his point most eloquently. Will he go on to explain why the rebate is necessary? It is not necessary just because of the imbalance of agricultural expenditure throughout the European Union, but because we trade a disproportionately high share of GDP. We import many products that are instantly exported to the European Union. They attract tariff duties that become payable to the European Union, and we suffer as a consequence. As trade has grown, has not the case for the rebate continued to grow?

I am grateful to my hon. Friend, who has saved me the trouble of setting out the case for the UK rebate. We had a wonderful cross-party consensus. We Conservatives believe that the UK rebate is fully justified and non-negotiable; on 25 May 2005, the then Prime Minister told us that the UK rebate was fully justified and non-negotiable. One would think in the ordinary course of events that there would not be a difficulty. Unfortunately, however, things did not turn out that way.

In summer 2005, the Government’s position was exactly the one that the hon. Member for Wolverhampton, South-West (Rob Marris) told us a few minutes ago would be completely untenable. The Government supported the enlargement of the European Union—indeed, they were a passionate advocate of such enlargement—but, to use the former Prime Minister’s words, they believed that the UK rebate was fully justified and non-negotiable. As we try to have a sensible discussion this afternoon, I hope that we will hear no more nonsense about the change to the rebate being an inevitable part of a deal to secure enlargement. Indeed, I suggest that the only enlargement at stake in Brussels in December 2005 was that of the former Prime Minister’s income and ego, if he is in future appointed President of the European Union, as some have suggested.

The position changed during the course of 2005, following the summer, when the then Prime Minister and then Chancellor were so robust in their defence of the rebate. The Government moved their position and said that they would consider a concession on the rebate, but only in the context of meaningful and significant reform of the EU budget—particularly of the common agricultural policy. The then Prime Minister said that if we got rid of the CAP and changed the reason why the rebate was there, the case for the rebate would change. I do not think that any Conservative Member would disagree with that. For that reason, the principal thrust of our argument this evening will be to try to improve the Bill and put some backbone back into the Government’s negotiating position through the insertion of new clause 1. I shall not go into the detail of that now, Mrs. Heal, as you would not welcome it.

I thank the hon. Gentleman for his usual generosity in giving way, which I have experienced many times before. Does he believe that the European Union could have enlarged to 27 member states, as it has, without a financial cost to the United Kingdom?

The hon. Gentleman will know that if the Bill is passed tonight and the “own resources” decision is ratified, there will be an increased cost to the United Kingdom; the United Kingdom’s contribution will increase as a result of enlargement. So the answer to the question is no: I do not believe that enlargement would have been possible without an increase in costs to the United Kingdom, and that increase will be borne. However, the Government are asking us to bear a larger increase in costs than would otherwise have been the case, because of the sacrifice of the rebate. I put the question back to the hon. Gentleman: what was the then Prime Minister doing going into the December 2005 negotiations supporting enlargement but with the position that the rebate was non-negotiable, or, as it later transpired, negotiable only in exchange for significant changes to the EU budget?

I do not know much about the hon. Gentleman’s former working life, although he knows a bit about mine. I have spent many hours of my working life in negotiations. In negotiations, people start with a position, and sometimes with a reserve position. Sometimes, in life, politics or commercial negotiations—I was doing the latter—people learn something and their position changes. That is the benefit of public political debate, and of having commercial negotiations face to face, in spite of video-conferencing.

I have not spoken to the former Prime Minister about the issue, but I would have thought that he learned things and changed his position during the negotiations. That is an honourable and reasonable thing to do. If one is not prepared to do that, one is in a strange position as a politician. We constantly say that we want democracy in public debate, but we cannot have that unless people are prepared to consider changing their positions.

That was an exercise in the rewriting of history that Stalin would have been proud of. The facts are these: the Government run by the hon. Gentleman’s party supported the enlargement of the European Union, and in summer 2005 clearly told the House of Commons that enlargement was perfectly compatible with the position that the British rebate was fully justified and non-negotiable. His Government hung to that position until they decided that they would negotiate the rebate, but only in exchange for meaningful and significant reform of the common agricultural policy. That was a radical change of position, but none the less we accepted it as a sensible way to proceed, provided that meaningful reform of the EU budget was really on the table.

On Second Reading, the Chief Secretary claimed that the Brussels decision in December 2005 paved the way for a critical look at how to reshape the EU budget. In reality, the Government came back with only a vague commitment to a review under the French presidency. Later, we shall argue the case for new clause 1, to remedy that hopeless negotiating position.

Let us be clear. The Chief Secretary says that failure to pass the Bill—I take it that by extension, that means to pass it with this clause incorporated in it—will create a political crisis in the EU. This has nothing to do with being pro-EU or anti-EU. We do not call it “anti-EU” when the French Government fight their corner hard in the interests of their taxpayers and citizens. Our new clause addresses the expectation that the UK Government, like all other EU Governments, will fight for the best interests of their citizens and taxpayers within the system. As has so often been the case in their dealings with the EU, this Labour Government have failed to fight for the interests of the UK taxpayer.

The Chief Secretary must recognise how the EU works. It is not anti-European to fight the corner of national interest. The other EU countries do it. That is what sovereign states do in a grown-up relationship, whether negotiating with our European partners or with the US; it is how an elected Government should conduct themselves.

Will the hon. Gentleman dismount from his high horse for a moment and tell us whether he considers that the 22 per cent. increase in the EU budget negotiated by the Major Cabinet secured what he is now telling us that he would always do? Was that a good deal—the right deal for Britain at the time?

I remind the Chief Secretary that it was a Conservative Government who achieved the UK rebate in the first place, after years of valiant battle, and it is his Government who are proposing to give it away for absolutely nothing.

This is not how we expect our Government to behave. We expect them to participate constructively in organisations such as the European Union, but also to fight our corner. Why do we have to listen to Labour Ministers telling us that anybody who wants to fight the UK’s corner is anti-European and trying to provoke a crisis in the EU? Does the Chief Secretary think that they have such debates in France, Germany or Italy when those Governments defend their corners and fight vigorously for the interests of their taxpayers?

Does the hon. Gentleman agree with the statement made by the hon. Member for Shipley (Philip Davies) less than 10 minutes ago that the European Commission—I think that that is what he was talking about—is a corrupt and fraudulent organisation?

We do not have to take a view on that; we can look at what the Court of Auditors has said about corruption and fraud, misappropriation of the budget and misuse of EU funds. However, we are debating the UK rebate.

Let me remind the Chief Secretary that after the so-called negotiations in December 2005, perhaps the most damning comment on the performance of the British Government was made by the French Foreign Minister, Mr. Douste-Blazy, who praised Tony Blair as willing to wage a battle for the EU

“rather than calmly doing his job simply as a British prime minister”.

What an accolade that is for a British Prime Minister from a French Foreign Minister after an EU negotiation! The British people would rather their Prime Minister calmly did the job to which he was elected. With the economy slowing, Government borrowing mounting, public services under pressure, staged pay rises and a dramatic slowdown in funding growth, the British people would rather their Prime Minister fought any proposal to hand over yet more money to the EU—certainly any proposal to do so on an unconditional basis.

Has my hon. Friend noticed that the Chief Secretary clearly does not understand numbers, as he says that John Major’s settlement, which was a lot lower than his, was too high, but that his, which is a lot higher than John Major’s, is just about right? Is not that exactly the kind of arithmetic that has got us into the Northern Rock hole?

It is rather disconcerting if the Chief Secretary to the Treasury cannot add up, but we have learned to live with that kind of impediment.

I can see where the hon. Gentleman is going, and I think that I understand his position, although he will elucidate further as he goes on. He appears to be suggesting—he will correct me if I misunderstand him—that the interests of the United Kingdom would always be in opposition to the interests of the European Union. I would caution him by suggesting that that is often not the case.

The hon. Gentleman has fabricated that. I did not say that at all. This is how I would like to see things working: the UK Government, when they go in to these European negotiations, being as self-confident in that forum as the French Government or the German Government, and not always afraid that any defence of British interests will be characterised as being anti-EU or anti-enlargement. Why cannot we simply have a sensible debate that says, “We know that we want the EU to enlarge and that we want to embrace the countries of eastern Europe, which is in our interests, but we want to have the most robust discussion about and defence of British national interests when it comes to carving up the cost of dealing with that”?

Surely the hon. Gentleman can hear himself saying, “Can we have a sensible debate which says that we want enlargement but we don’t want to pay for it?” That is not a sensible debate.

On a point of order, Mrs. Heal. Is it in order for the hon. Gentleman to keep saying, “If the hon. Gentleman had been here earlier,” when I was here earlier?

Let me rephrase my comment. If the hon. Gentleman had heard my earlier remark, he would know that the problem for him is that that was precisely the position of his party’s Prime Minister in May 2005—passionately pro-EU, passionately pro-enlargement, and telling the House of Commons that the British rebate was fully justified and non-negotiable.

I am going to make a little progress. [Interruption.] Well, as the hon. Gentleman took the trouble earlier to say how generous I was in accepting his interventions, I have decided to disabuse him of that notion and make a little progress. After all, I told the House that I had not intended to speak on this clause.

On Second Reading, the Chief Secretary said:

“On this side of the House, we are pro-European, but we are not uncritical and we are hard-headed. We are prepared to stand up for Britain’s national interest. We do not posture or grandstand. We will get the reform that Europe needs.”—[Official Report, 19 November 2007; Vol. 467, c. 995.]

The truth is that, after all the posturing and grandstanding, and all that sabre-rattling about non-negotiable rebates, the Government simply did not negotiate hard enough; they were not hard-headed enough. We hope later today to give back to the Government some of the negotiating leverage that they so carelessly threw away.

As we enter 2008 with a slowing economy and a very difficult fiscal picture, with climbing borrowing that must sooner or later be repaid, inflationary pressures getting stronger and the squeeze on public service financing mounting, does the Chief Secretary accept that the priorities of the British people are to address those problems here at home, not to throw billions of extra pounds of our hard-earned rebate, which the Prime Minister told us was fully justified, into the EU’s pot?

This evening will be our last opportunity to secure fundamental reform of the European Union budget. As the British rebate is eroded, our leverage becomes less and less—and that leverage to secure reform is in the UK’s interest and in the interest of some of the poorest countries in the world. Indeed, the Prime Minister told us that if we were to make poverty history, we needed to make the excesses of the common agricultural policy history. Our partners in Europe may think that they have put one over on Tony Blair, but we need to send a message to them that this Parliament is made of sterner stuff.

It would be possible for us to vote against clause 1 stand part, but given the nature of the Bill, we would like to argue the case for new clause 1 in due course, in the hope that it will make the Bill acceptable as a way forward. If we fail to succeed in our argument for new clause 1, I shall ask my right hon. and hon. Friends to vote against the Bill on Third Reading. I say that because voting against clause 1 stand part at this point would essentially have the same effect as voting against the Bill on Third Reading. Therefore, I do not intend to divide the House on clause 1 stand part.

I have a dreadful feeling that this discussion, which should be about value for money and whether we are paying over the odds to belong to the European Union, is degenerating into the old pro or anti-Europe argument, with those who are enthusiastic about Europe saying, “Pay up—give ‘em the money, Barney!”, while those who are more critical and sceptical, such as my hon. Friend the Member for Glasgow, South-West (Mr. Davidson), say that this is a bad deal. And it is a bad deal.

The meat of the discussion is in clause 1. That is the meat of the Bill, unless we are going to fight over the short title, which would seem a rather pointless exercise. It is important to recognise that the meat of this debate on the calculation of the European correction is the generosity shown towards Europe by our previous Prime Minister, who seems to have ended his period in office with extraordinarily generous impulses towards Europe, one of which was detailed in the newspapers this morning: a commitment to provide 60 per cent. of energy generation through renewables in accord with European totals. It is a total that we cannot reach, and it is going to be incredibly expensive even to move towards reaching it, but he committed himself to it.

That is irrelevant to this Bill, as I am sure that you are about to tell me, Mrs. Heal, but what is relevant is his generosity over the rebate. Until that point, we had been told that it was inviolate and sacred, and that it would be there for ever to recognise Britain’s unique situation and contribution, but suddenly it was breached. The interesting question for me is what made our previous Prime Minister so generous on his long march to the Union pour un Mouvement Populaire, fighting against the Socialist candidates in the municipal elections. Was that breach agreed by the Cabinet before the Prime Minister negotiated it? Did the Cabinet authorise the Prime Minister to make that concession? Was it told about it later, or did it authorise it before the negotiations started? We need to know that, and we also need to know what the cost will be.

I was delighted to hear the Chief Secretary say that the figures will be published. I hope that they will be published annually, because the British people need to know what they are contributing towards Europe and what this institution is costing them. We are told that the money is to pay for enlargement. We already pay over the odds to belong to the club in the first place. There have been certain disagreements about the scale of the figures, but those I have had calculated for me show that we are now paying £10 billion a year gross—not euros—and £4 billion a year net. Money comes back to us for projects approved and supported by the EU that we would not necessarily want in the first place, but we do get a return. By 2013, under clause 1, we will be paying £20 billion a year gross under clause 1, and £6 billion a year net.

We are talking about billions here, and an increased contribution of up to £3 billion chucked in just like that. We are fighting the police for a measly £30 million, but we are giving away, on this generous impulse of our previous Prime Minister, up to £3 billion by 2013. My right hon. Friend the Chief Secretary told us that that was for enlargement, and part of it is, but it is also for a lot of other purposes decided by the European Community and not by us. It is only partially for enlargement in any case. If we accept this breach in the rebate, to which we agreed to sustain the enlargement of the European Community that we want—wider, not deeper—are we preparing to say, when the enlargement includes Turkey, that we must agree to another reduction and carving of the rebate? I do not want to say that, and we should not be committed to saying it.

It is a question of money. I think that my figures are accurate, but I hope that the figures will be published annually so that people know what the Bill means to this country, and so that they know how much they as taxpayers are paying to sustain membership of this institution. It is not our only contribution, of course; we are paying £1.8 billion for other programmes. The Organisation for Economic Co-operation and Development calculates that we pay £15 billion to belong to the common agricultural policy—a policy that at every election every party has said will be fundamentally reformed, but it never has been. That policy was to be reformed fundamentally as a condition of our agreeing to the reduction of the rebate, but it cannot be reformed until 2013 in any case, when I have no doubt it will be sustained.

Those are the sorts of contributions we make, and if we add the cost of regulations, we find that membership of this institution costs us about £40 billion to £50 billion a year. I would like those calculations to be made public every year so that we know what is going on, and what we are paying. I would also like them to be calculated in terms of the effect on GDP. The contribution is going to be about 0.5 per cent. of GDP. We are struggling as a party to get an increase in GDP up from a measly 2.5 per cent. This year it will be substantially lower than 2 per cent. but we are accepting an increase in the 0.5 per cent. of GDP contribution we pay to belong to the EU. We need to know the figures because any loss to GDP is cumulative; it goes up all the time. The payment is also a payment across the exchanges. I know that the previous Prime Minister is making a magnificent effort to close the balance of payments through his earnings in the United States, but that will not be enough to deal with the fact that the deficit is now running at about 5 per cent. of GDP. We are adding to it through this increase in the contributions set out in the Bill.

The question we face tonight is one of whether the increase is worth the money. Should we support this increase in contributions to the EU? The new clause proposed by the Conservatives, which we shall discuss later, is worthy and well worth accepting. At this stage, I can say only that we are not getting value for money, and that the contribution is not worth making. We are paying over the odds to belong to a club that is doing serious damage to us anyway, and we should not agree to this contribution. I certainly cannot vote for it.

Like the hon. Member for Runnymede and Weybridge (Mr. Hammond), I had not intended to speak in the stand part debate and was waiting for the interesting discussion of the new clause. However, unlike him, I do not intend to spend 25 minutes saying what I had not otherwise thought it necessary to say.

I shall make a few brief comments on our position. I was provoked by the Financial Secretary, who came in with all guns blazing, telling us that it was make-up-your-mind time. The implication of his remarks was that anybody who wanted to exercise parliamentary scrutiny or was critical of the budget settlement was somehow anti-Europe or anti-enlargement. That is clearly wrong. Liberal Democrats are greatly in favour of the European project, greater participation and enlargement. However, we believe that the settlement that the Government reached is not good and we do not understand why we should vote for it.

I do not agree with many of the things that the hon. Member for Glasgow, South-West (Mr. Davidson) says about the European Union, but he succinctly summarised the issue in an intervention. It is possible to believe that enlargement is necessary, desirable and in the British interest, and that economic and financial consequences are necessary, which means accepting that countries should not continue to support the UK, yet be critical of other aspects of the European budget settlement.

The key point, to which we shall revert when we debate the new clause, is that the previous Prime Minister either did not perceive or would not act on the link between the British rebate and future negotiations on the agricultural budget. The reason for that is a mystery. Doubtless, historians will tell us why he was unable to use that link and that leverage. Not only those on Opposition Benches but the current Prime Minister was unhappy about the previous Prime Minister’s actions. Leaks from the Treasury made it clear that the current Prime Minister was furious that proper, tough financial negotiation was not taking place. It is important to stress that.

We will ascertain shortly whether new clause 1 makes it technically possible to retrieve the position. I do not know—I have an open mind and I will listen to the debate. I simply wanted to intervene now to make it clear that being pro-Europe and in favour of enlargement and of Britain’s adjusting its contribution to take account of that does not mean that we support the Bill and the settlement. It was a bad deal and, unless something happens during the debate on the new clause, we will vote against it.

I welcome the Chief Secretary’s willingness to take so many interventions because that allowed us to hear more about the Government’s position. I was concerned about his saying at the beginning of the debate that, if we did not accept the proposals, it would lead to “a complete breakdown of our relationship with Europe”. If, every time Ministers go off on our behalf to discuss matters in Europe and come back with a deal that is presented to Parliament for a decision, we cannot reject it because it would result in a complete breakdown of our relationship, we have effectively no parliamentary scrutiny and Ministers are self-employed. We should not accept such a line for a moment.

The fact that the previous Prime Minister agreed the settlement does not necessarily bind us for all time. Had I known that he had aspirations to be president of Europe on his way to being president of the world, I would have believed that agreeing the settlement represented an inappropriate conflict of interest and that he should not have been allowed to go on his own.

I agree with the hon. Member for Twickenham (Dr. Cable) when he agreed with me—not an unreasonable position—that it is possible to be in favour of enlargement but unwilling to accept other elements of the budget, such as the common agricultural policy with its obscene overspending and all the waste and extravagance. Let us take the monthly commute between Brussels and Strasbourg, with all the boxes in the lorries and so on. We do not have to accept that as the price of enlargement. We could have enlargement without the continuation of those elements. The Government’s inability to negotiate them away is a cause for condemnation.

The Government defended their position by saying that, if they had left matters to the Commission, they would have been worse. That is probably true. However, I do not know whether the Chief Secretary or his advisers have ever been negotiators, but I suspect that the Commission was adopting the old stance of trying for 10 per cent. and being prepared to settle for 5 per cent. The Commission’s asking for more money and the Government’s beating it down a bit is not an enormous cause for self-congratulation. The Commission made a bid for more money—that is what commissions do. Of course, the Commission wants more money—it is a self-aggrandising organisation. The fact that it is spendthrift and extravagant does not mean that we must accept everything it proposes.

The Chief Secretary tells us that the Government made the best possible deal. Oh no they didn’t. Of course, a better deal was possible. We tend to get movement from the European Union only in times of crisis and difficulty. Rejecting the budget and showing that we are not prepared to accept what the Government have accepted is for the Government’s own good. Everything that I propose to the Government is for their own good, even if they do not always recognise it at the time.

Ministerial positions would be enormously strengthened if the budget were rejected, because Ministers could negotiate much more strongly next time. I wonder what sort of advice the Chief Secretary has been getting from the Foreign Office and elsewhere. Foreign Office officials are so insecure that they are seen outside the building only in groups of eight because they are unwilling to travel anywhere on their own. In those circumstances, we must tell the Chief Secretary, “You’ve done reasonably well, but not well enough.” We ought to send

“him homeward

Tae think again.”

My hon. Friend says that a better deal was possible. I agree with the intellectual construct, just as I believe that it is possible for my hon. Friend to become leader of the Labour party. However, I think it unlikely that my hon. Friend will become leader of the Labour party and, outside the Chamber I will, if he wishes, adduce some evidence to that effect. He says that a better deal was possible; will he adduce some evidence to that effect?

My hon. Friend deserves some credit for being hyperactive in defence of the Chief Secretary. It is noticeable that the Chief Secretary has more officials than Members supporting him. Only one Member and a part-time Member support him—that shows the support that he enjoys on the Labour Benches. The enthusiasm for the proposals among Labour Members is not high—they will vote for them simply out of loyalty to the Government. The vast majority recognise that it is a poor deal.

Britain clearly went into the negotiations with the slogan, “We surrender” and progressed from there. Britain’s essential core position was to get an agreement. It was not willing to countenance circumstances in which it would stand out against the majority.

The evidence is in the reports that we have read. I am sure that my hon. Friend accepts that it is always difficult to prove a negative. Let us consider the French position. The French have always been much more resolute in standing up for the French position than the United Kingdom has been in defending the UK position.

My hon. Friend compares what the UK Government did in the negotiations with the French Government’s actions. Does he accept that French net contributions will grow significantly more quickly during the current financial perspective than those of the UK?

Yes, I do accept that France’s net contribution will grow more quickly than the UK’s, but I also accept that France’s net contribution per head is less than the UK’s. Furthermore, I am aware that France is the largest recipient of EU largesse, albeit not in terms of the balance between incomings and outgoings, but in terms of the amount that it receives. We should also recognise that EU funding is a transfer of money to particular groups from particular groups. One of the reasons I am so hostile to the way in which the EU budget is currently constructed is that the money comes from people in my constituency, who pay higher food prices than they would otherwise, and goes to wealthy farmers who neither need nor deserve it. The deal that we are discussing does nothing to address that. That is why I intend to vote against it.

Again, however, would my hon. Friend not accept that spending on the common agricultural policy will fall as a percentage of the overall cake during this financial perspective?

I return to my original point: the deal is not nearly as bad as it could have been, but it is not as good as it should be. I did not join the Labour party to settle for second best. I wanted to see the best that was possible, both for my people and for the area that I represent. I do not believe that what we have been offered is a good deal: rejecting it is the way to a better deal, which is why I intend to do so.

I shall keep my remarks brief, because once again the Government are not allowing us proper time to deal with the matters before us—clause 1 and the very important new clause 1, which we hope will be moved shortly. However, I cannot let the Chief Secretary get away with the disgraceful arguments that he has produced this evening.

The Chief Secretary first suggested that Mrs. Thatcher used to negotiate and reach compromises, and that that was entirely comparable to the negotiation, sell-out and giveaway that he has again announced to the House. Let us compare the two negotiations. Mrs. Thatcher went to a Community in which the other 11 countries had no interest in letting us keep more of our money. Any one of them could have vetoed her proposal that we should have a rebate. She managed to talk them round from 11-one down to 12-nil in favour, because she had to win by a unanimous vote.

All that the current Government had to do when they went to Brussels was say, “We have a veto and we are not going to give away what Margaret Thatcher so wisely and brilliantly won for the United Kingdom,” but they could not even do that. They gave in under pressure and said, “Oh deary me, no, it would be quite wrong of us to use our veto. We’d love to shell out €10.5 billion over the first period and much more over subsequent periods, because we now realise that we shouldn’t use the veto and we’re here to give in.” The Opposition are delighted that the Chief Secretary gave way so much in this debate, but we are unhappy that Mr. Blair and others gave way so much when they completely mishandled the negotiations.

Labour colleagues of the Chief Secretary are present who believe that the sterling equivalent of that €10.5 billion would be much better spent on public services, which they greatly revere. There are also those on the Conservative Benches, such as me, who believe that, in the light of all the money wasted in public services, that €10.5 billion should be given back to British taxpayers, who have paid all too dearly for the Government’s inefficiency and their bad negotiations in Europe.

The Chief Secretary tells us that we should regard the deal as a negotiating triumph, because although the Government gave away the veto that had been so brilliantly negotiated by a predecessor Prime Minister, they achieved a smaller rate of increase in the budget than the Chief Secretary apparently thinks we achieved 13 years ago. It may be that the Government achieved a smaller rate of increase, but what matters is that the budget increased so much in the early Labour years, after the end of the Tory years, that any increase would be unacceptable. The Chief Secretary cannot get away from the fact that the budget that he is recommending is massively higher than that which was recommended by Mr. Major. For that reason alone I cannot accept it, because it is too big a burden on British taxpayers.

We then heard the myth, which the Government put about, that the proposal is essential for those countries in eastern Europe, which would otherwise be deprived. As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) pointed out, however, enlargement was agreed without the new variant. If we had dug in and used our veto, enlargement would still have happened, but we would not have had to make a disproportionately large contribution to that increased spending in the territories entering through enlargement. Some of the other rich countries of western Europe should also have continued to make a bigger contribution relative to ours, for the reasons that my hon. Friends have already set out.

I hope that my right hon. Friend will not ignore the Chief Secretary’s other two specious arguments. The first was that the deal could have been worse if the Commission had had its way—a suggestion that represents the last resort of the scoundrel. The other was that any objection to what has been negotiated is somehow improper and that the House should not scrutinise the deal that was done. That is the Vichy argument, which has been used by malevolent or misguided Ministers for years in selling this country short.

I am grateful for those extra points. I should like to make some additional ones, to finalise my critique of the Chief Secretary’s position.

The Chief Secretary implied that eastern European countries would be short-changed. That is not true. He also assumed that all the EU spending in those countries will be worth while, but as we know, much of it has been shown to be inefficient, wasteful or even fraudulent by the accounts or by the auditors’ assessment of them. I fear that there will be more such instances in future years. I am sure that the Chief Secretary will be unable to say now that there will be no more such practices, so we may find ourselves financing more unsatisfactory, unnecessary, inefficient or even fraudulent programmes, which my electors are decreasingly in favour of doing.

Finally, the Chief Secretary said that we must understand that we will get more trade for British companies out of enlargement and the greater prosperity of eastern European countries. Of course we will, but that is not contingent on giving away our veto and our budget position. Indeed, I would argue that the main reasons for getting more trade from those countries will apply to non-EU members as well as to EU members. Those reasons are the free trade in the world as a whole, through the general agreement on tariffs and trade, and the fact that some of those eastern European states have wisely decided to set much lower tax rates and create a much more favourable climate for enterprise than this Government are creating for the British companies that have to compete with them.

The Chief Secretary should not suggest that what was negotiated is a great triumph. It was a disgraceful sell-out, and in contrast to the excellent negotiations that my party carried forward when we first won the rebate, it marked an extremely sad day for Britain. Voters of all kinds will know that that goes along with the money wasted on Northern Rock, ID cards and all the other things, as a symbol of what is wrong with this Government.

I shall do my best to respond to some of the points that have been raised, and I shall do so briefly, because there is a desire in the Committee to move on to new clause 1, and I do not want to detain it too long.

I assure the hon. Member for South Holland and The Deepings (Mr. Hayes) that my motivations for putting forward the arguments that I have made do not include malevolence. Nor was it my intention to appear arrogant at the start of the debate, if that is how hon. Members interpreted my contribution. In introducing the discussion, I was simply pointing out that it is not possible to go back and ask for small changes here and there, and for a different own resources decision. Essentially, my point was that there should be proper parliamentary scrutiny of the Government’s actions. However, the way in which business is done is that the Government negotiate on behalf of the country, and the House has the opportunity to accept or reject what they have negotiated. That is the opportunity that hon. Members have this evening, and rightly so. I was simply saying at the beginning that we are not engaged in line-by-line considerations, but deciding whether to give an in-principle endorsement of the deal before us.

My hon. Friend the Member for Great Grimsby (Mr. Mitchell), who is no longer in his place, asked whether the deal was worth the money. I think that he was really asking about our membership of the European Union in overall terms. The tenor of some of the contributions to this debate was that the EU is a one-way street—that the money goes in and nothing comes back the other way. However, it is important to see how this country’s trade with the EU has increased significantly over recent years. That trade now accounts for 56 per cent. of British trade, and it accounted for 63 per cent. of British goods exports in 2006, totalling £150 billion. I could go through a whole range of examples showing that our economy and jobs benefit from this country’s membership of the European Union.

I shall go directly to the question of enlargement, as it is a key theme of our proceedings this evening. Each enlargement of the EU has seen prosperity grow further. When Spain joined, and when Sweden joined, we saw our exports to those countries increase by about a quarter. As a result of such accessions, we have seen direct benefits to British business, British jobs and the British economy. Since the accession of the A8 countries, we have also seen a major increase in UK exports to those countries, totalling some £6.4 billion in 2005, which is up 151 per cent. This process benefits the British economy.

This is not only a question of the financial benefits, which are debated and sometimes disputed. I would expect general agreement in the House that the enlargement of the European Union has deepened democracy in countries such as Portugal and Spain, which have emerged from under the yoke of fascism, and in eastern Europe, which has recently emerged from under the yoke of Stalinist communism. That is good not only for the people who live in those countries but for the people of the United Kingdom.

I entirely agree. The benefits of the decision that the European Union has taken on helping those economies to grow will have real dividends for this country for many decades to come, following this debate.

I want to respond to a couple of the other points that were raised in the debate. The right hon. Member for Wokingham (Mr. Redwood) made a few rather cruel sideswipes about my financial acumen that I felt were a tad unjust. He questioned whether I had understood the maths relating to a 22 per cent. increase in the overall European budget in 1994. I assure him that I can understand that the budget was significantly smaller when that decision was taken. I accept that; I understand it. Let us put that point beyond doubt and on the record.

The right hon. Gentleman watches and questions public spending in great detail. I read his blog, and I see what he says. Would he ever feel comfortable with a 22 per cent. increase in any public sector budget? That is not the sort of thing that he would normally advocate. My maths are pretty okay, actually, and I want to ask him whether he can recall whether Britain’s net contributions in that period went up by a similar order. Was there not a significant increase, albeit on a smaller base, for Britain? Was not there a significant percentage increase in Britain’s net contributions? [Interruption.] He says that he does not know. Perhaps I can help him.

The percentage increase in our contributions from 1994 to 1999 was an increase in gross costs to the UK of—wait for it—73.4 per cent. There is a bit of a difference, really. Okay, they were different times, and it was a smaller European Union and a smaller budget, but let us get some facts on the record. Let us have some long memories in this debate, rather than a few short ones.

On the question of putting facts on the record, the right hon. Gentleman’s Government have already put it on record that the net contribution of the UK as a percentage of its own total managed expenditure is set to rise from 0.64 per cent. to 0.96 per cent. by 2010. That is a 50 per cent. increase in the share of our expenditure that is going to Europe. If he has got a grip on these matters, why is he not keeping that amount down, rather than putting it up?

I have referred to these figures before in the debate. The net contribution is published in the pre-Budget report and again in the Budget, and that is a forecast of payments that the country will make. The figures have been set out quite clearly. I do not have the pre-Budget report to hand, but from memory I think that the net contributions over the course of the spending review that we are about to enter are about £5.5 billion, and will stay at roughly that level over the spending period.

My hon. Friend the Member for Glasgow, South-West (Mr. Davidson), who has also left the Chamber, made the point that we had done reasonably well but not well enough. I accept much of what he said. It is his right as a Member of the House to believe that this is not a good enough deal for this country. That is his prerogative. I would say, however, that if we consider all the elements of the deal, we see that it does the job.

What are those elements? They include a rebate that will rise rather than fall during this financial perspective. That sounds pretty good to me. That is within the context of an overall budget that is significantly lower than was originally proposed. The amount spent on the common agricultural policy over the period will fall in value from €55 billion to €51 billion in 2004 prices. The British and French net contributions will come into rough parity in that period, which is an important step. As my hon. Friend the Member for Glasgow, South-West acknowledged, the net contributions that France will make will increase at a significantly faster rate in this financial perspective than they have done previously. Furthermore, we have secured a budget review, which the Commissioner has said will open up a consideration in which there will be “no taboos”. Everything will be up for consideration, and we shall be able to secure further progress as part of that review.

The allegation from the hon. Member for Runnymede and Weybridge (Mr. Hammond) was that we had meekly accepted everything that was said and not pressed Britain’s interests. As I have just illustrated, however, Britain has demonstrably secured changes that are in our national interest. All the points that I have just made demonstrate that. It is wrong to suggest, as the hon. Gentleman seemed to do, that we have simply accepted whatever was being put forward by Brussels or by other member states.

My hon. Friend the Member for Glasgow, South-West (Mr. Davidson) asserted that a better deal was possible. When I asked him for evidence of that, he was unable to produce any. Similarly, neither were the Opposition. Bearing in mind the benefits of this deal, both in economic terms and in terms of the non-economic elements such as furthering democracy, is my right hon. Friend aware of any evidence that a better deal for the United Kingdom was possible, or that one would be possible if this measure were rejected tonight?

I am not. Throughout the debate, I have said that this was the best possible deal that we could secure. Opposition Members seem to be interpreting that as my saying that it is an ideal, perfect deal. That is not what I am saying. I am saying that we have had negotiations—[Interruption.] The hon. Member for Runnymede and Weybridge is not listening, but I have set out the things that were secured in those negotiations that will benefit this country and that are demonstrably in our national interest. They include a rebate that is worth more to this country over the period, a shift in the amount in percentage terms that we spend on the CAP, and, more than that, reform within the CAP. There is a shift from pillar one to pillar two spending and a voluntary system whereby countries are encouraged to spend more on improving the sustainability of the rural economy rather than just provide subsidies of the sort which my hon. Friend the Member for Glasgow, South-West finds objectionable, so as to help to diversify the regional economy and help people to develop new business opportunities.

All those things amount to progress. They are the product of good negotiations by a committed British Government who are in there fighting for Britain’s interests. At many points in this debate, the argument has been, “Let us reject the Bill tonight, as that will embolden and strengthen Ministers when you go back”—[Interruption.] I am paraphrasing a point that was put to me about strengthening our hand. It is for each party in the House to decide how it wants to conduct its relationship with our European partners. My argument is that going back now to ask for renegotiation would involve a lot of bad faith.

Indeed; it could be substantially worse. I believe that the best way to be heard and get constructive dialogue is not always to adopt a confrontational and knee-jerk response. As I have demonstrated, we have not given it all away.

The tragedy of the Minister’s opening remarks failed to impress, so he is now obviously trying comedy instead. Surely he would not have the House believe that the falling cost of the common agricultural policy is the result of these negotiations. The falling cost of CAP was predicted at the mid-term review five years ago and is a direct result of the move away from production-based subsidies. The savings now being made as a result of this deal are no greater than those predicted then.

As the hon. Gentleman knows, the reform of CAP did not begin with this own resources decision. These matters were debated at great length by the previous Government and subsequently by this Government. I acknowledge a long-running debate on the structure, shape and size of CAP; the point I was making is that there is CAP reform within this own resources decision. Let us be absolutely clear, however: we believe that a much more radical reform of CAP is necessary if Europe is to be ready to face the challenges of the years to come. That was why we wanted a “no taboos” full budget review, which is what we secured. That is the Government’s position and it is our objective in that review to secure far-reaching CAP reform, which is what we will now argue for in the negotiations. In my view, that is the right way to conduct them.

I hear the points made by colleagues this evening. It is a matter of judgment, but our judgment is that it is right to engage constructively and push the British case. In doing so, we are more likely to be heard. Members can see the evidence for that in the detail of the own resources decision.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

New Clause 1


‘(1) This Act shall come into force on such day as the Treasury shall by order specify.

(2) The day specified in the order made under subsection (1) shall not be earlier than fourteen days after the date on which the condition has been satisfied.

(3) The condition referred to in subsection (2) is that the Treasury shall have laid before both Houses of Parliament a report on the review by the European Commission covering all aspects of EU spending, including the CAP, and of resources, including the UK rebate, as provided for at paragraph 80 of the “Financial Perspective 2007-13” issued by the European Council in December 2005, including a certificate that the Treasury considers that the outcome of the review is satisfactory to the interests of the United Kingdom.’.—[Mr. Philip Hammond.]

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

I can see that the Minister, if he ever gets bored with what he is doing, has a whole new potential career ahead of him—coming in here on a Friday morning and giving the hon. Member for Hendon (Mr. Dismore) a break. I am extremely grateful to my right hon. and hon. Friends for the self-restraint that they displayed, ensuring that we are able to debate new clause 1. I shall seek to be very brief and not to rehearse any of the arguments made in the stand part debate.

The new clause is genuinely designed to help the Government by re-injecting a bit of backbone into their negotiating position. It would delay the implementation of this change in the own resources decision until satisfactory completion of the promised review of the European Union. It makes explicit the conditionality that the Government claimed was the basis of their final negotiating position.

In the course of the previous debate, the Chief Secretary said that nothing was agreed until everything was agreed. I would suggest, however, that if the new clause were incorporated into the Bill, nothing would be agreed until everything is done. It is about ensuring that what was promised to be done at Brussels in December 2005 is, indeed, delivered. We have already seen that the Government did not go into the negotiations on the basis of having to give away the rebate in order to secure enlargement. That is a spurious argument. What we have emerged with at the end of the negotiations is nothing but the promise of a review. We must now ensure that the promise of the review is turned into a reality.

The Chief Secretary told us earlier that defeating the Bill or substantially amending it, as new clause 1 proposes, would create a political crisis in the EU. I see no reason why that should be the case. If everyone has acted in good faith, our EU partners will know that our Prime Minister gave away a large part of our rebate because he had secured a commitment to a fundamental review—with no red lines and no holds barred—of the EU budget. Presumably, our partners entered into that commitment in good faith. There is no reason whatever why they should find it strange that this Parliament wants to ensure that that review indeed takes place, that it is meaningful and that its outcome is, at least as judged by the Treasury, satisfactory to the UK. This is not an anti-EU position, but a pro-British position. No other Government in the EU believe that there is a contradiction between being pro-EU and being pro their own national interests.

Will the hon. Gentleman cast his mind back to the protracted debates on the Maastricht treaty? If it is so easy to do and if the adverse consequences of our rejecting a European measure such as this—forcing the Government to go back to Europe and renegotiate—are so negligible, why was the Major Government reduced to such shambolic performances night after night after night all those years ago?

I was not here then and nor was the hon. Gentleman. The answer is no, I will not cast my mind back; I will press on and make some progress instead.

The outcome of the review is subject to individual veto by member states. Without something for us to offer our partners in the process of that review, Ministers, however well intentioned—I am prepared to give them the benefit of the doubt on that, as I shall assume that they go into such negotiations well intentioned, if naive—will not achieve the UK’s objectives.

On a point of order, Sir Michael. Will you please explain whether there is a level of patronising beyond which the hon. Gentleman ceases to become merely irritating and becomes unparliamentary?

The way in which hon. Members address the Committee, provided that it is within the normal terms of reference, is entirely a matter for them.

Thank you, Sir Michael. In any case, if I have not reached that level yet, I will continue to practise.

Ministers will not achieve the UK’s objectives by giving away their bargaining chips as the price of admission to the game rather than trading them in the game itself. That is not generally regarded as good practice. This is all about the negotiating competence of the Government. The truth is that Labour walked away from the table at Brussels as good as empty-handed. The only thing that it brought back was the promise of a review, and unless we give some teeth to that promise and show that this Parliament will insist on its being delivered in good faith, it will have effectively come away with nothing. We must take the opportunity to restore the Government’s negotiating position, because the British people would expect us to deal with their failures at Brussels in 2005.

The new clause sets a test for the review having taken place, and for its conclusions being satisfactory to the United Kingdom Government of the day. That will restore some of the bargaining power that the Government have thrown away. The rebate concession was agreed on the back of a pledge; let us see that pledge delivered on in good faith. Let us test the Government’s assertion that they have secured a genuine and far-reaching review of EU finances.

The hurdle that we set was deliberately not set high. There is no objective test of whether the outcome of the review is in the United Kingdom’s interest; the new clause simply requires the Government of the day to align themselves with the outcome as being

“satisfactory to the interests of the United Kingdom”.

We ask the Government to sign up to that outcome, and to say clearly and loudly to the British people, “Yes, this is the outcome for which we gave away £7 billion”—and counting—“of Britain’s budget rebate.” If the Government do not believe that they will be able to do that—if they themselves have no confidence in the review, and no expectation of a satisfactory outcome—what on earth were they doing trading the rebate for a review in the first place?

The new clause would give Ministers a tool with which to bargain, to ensure that the review is meaningful and far-reaching and can lead to a genuine overhaul of the EU’s finances rather than a whitewash. We are in a very different place economically from where we were in the summer and autumn of 2005. The economy faces many pressures, and many people who might have taken a much more cavalier attitude to the billions of pounds involved in 2005 will certainly take a different view today.

If the new clause is carried and if the review is not concluded by the end of 2008—incidentally, there is absolutely no reason why it should not be, given that the UK will now have an incentive to offer its partners to proceed with it speedily—the existing own resources decision will remain in force. The ceiling will not fall in, there will be no crisis, there will be no question of renegotiating the budget and the financial perspective or of cancelling enlargement. The position will be exactly as it is now, with the previous own resources decision implemented and continued. When the new own resources decision comes into effect as a result of the Treasury’s certifying that it is satisfied with the outcome of the review, it will have effect retrospectively. Provided that the review is fair and open and the Treasury is able to certify that it considers the outcome satisfactory to the UK’s interests, the own resources decision will be implemented in full in due course.

Has the hon. Gentleman made any inquiries of the European Commission about when the review is likely to be concluded, so that the process can then take place?

Paragraph 80 of the Council’s decision at Brussels in December 2005 sets out parameters for a review that will take place in the financial year 2008-09, and unless there is slippage we expect it to be completed by the end of that financial year.

As we make our decisions this evening, we must bear in mind that this really is the last chance not only to save the British rebate, but to maintain the leverage that will allow us to secure meaningful reform of the common agricultural policy in the future. If we can secure new clause 1, we will not be back in the place where Tony Blair and the Prime Minister promised us we would be in the summer of 2005, but we will be in a much better position than we would be in if the Bill were passed unamended this evening. We will also have sent a signal that Parliament intends to exercise effective and positive oversight of what our Government are negotiating on our behalf, and furthermore that Parliament intends to ensure that what is promised in those negotiations is delivered.

The message that we need to send to our partners in Europe by agreeing to the new clause is that we in this Parliament respect Governments who, while being fully signed-up members of the EU, fight vigorously for their national interests. Britain intends to do the same from now on, and if our Government have not the backbone for the fight, this Parliament has.

I am rather tempted by the new clause. As I said in the clause stand part debate, there was a major failure in the negotiations to establish a link between the rebate and agricultural policy. It seems in principle, unless the Minister can persuade us to the contrary, that the new clause provides a mechanism for retrieving the situation.

Let us look carefully at what the Prime Minister said about the review in his statement to the House in December last year, when he brought back the agreement. He clearly thought that he had extracted a major concession in return for the negotiations on the rebate. He said:

“Alongside this agreement on…the modernisation of eastern Europe, we also agreed on a fundamental review of all aspects of the EU budget, including the common agricultural policy…with the recommendation that it begin in 2008.”

The two subsequent sentences are crucial. The Prime Minister said:

“As the language in the European Council conclusions makes…clear, it is then possible for changes to be made to this budget structure in the course of this financing period.”

Of course it is possible, but why should the Governments who resist reform of the common agricultural policy agree? What possible incentive is there for them to do so? The French Government will almost certainly refuse to renegotiate. What possible leverage do the British Government have in carrying through the Barroso recommendations?

The following sentence is even more substantial. The Prime Minister continued:

“This will also allow us to take account of any changes agreed in the World Trade Organisation round”.—[Official Report, 19 December 2005; Vol. 440, c. 1564.]

That is terribly important, because we keep being reminded—rightly—that if the negotiations fail, there will be disastrous consequences for the world economy, for Europe and for the United Kingdom.

During the last few weeks, Mr. Mandelson has been ominously quiet. There is a real and growing worry that the negotiations may fail, primarily because of difficulties in the American Congress but also because of the intransigence of agricultural interests in Europe. In the next few months, we may well be faced with disastrous circumstances in which our negotiations fail for the first time since the second world war, opening a Pandora’s box of protectionism. The British Government should be, and according to much of their rhetoric will be—and we hope they will be—in the vanguard of efforts to prevent that from happening. However, what negotiating clout do they have in making other EU members come to an agreement with the Americans at the World Trade Organisation? There is no leverage; there is no negotiating position if it has already been conceded.

The hon. Gentleman makes an important point. He mentioned that Peter Mandelson has been ominously quiet, but I do not know whether he is aware that today Commissioner Danuta Hübner has not been quiet, and that she has made a speech: “Reform of the EU budget: Time for a debate without taboos”. She says that, as well as considering the agricultural policy, a central part of the review should concern the corrective mechanisms—the British abatement that remains. Therefore, what we have started could eliminate what we retain, rather than secure any benefits for what we have already given away.

That is a helpful intervention. I do not know how significant those Commissioner’s comments are, but they seem to be genuinely worrying.

In his initial remarks, the Minister tried to alarm us—perhaps rightly, as we need to understand the Government position better—about the consequences of this legislation not being ratified on time. It is a nuclear weapon in many respects, but we need to understand how the nuclear bomb actually works in these circumstances: what would be the practical consequences of detonating it?

It is my understanding that on the financial front we would revert to the earlier own resources formula, which in purely financial terms would be better for the UK, so it is clearly not a deterrent in that sense. There is also the mechanics of how payments are made, and whether failure to ratify on time would affect the normal running of payments through the EU. Again, I confess ignorance on that: I do not know at what point a failure to achieve legislative closure affects the day-to-day payments. There is a section in the explanatory notes that I am afraid I do not understand, but the Minister might be able to explain it. It states:

“The additional UK contribution resulting from the reduction in allocated expenditure is limited to €10.5bn in 2004 prices over the period 2007 to 2013.”

The implication is that the changes are already in operation and that they will be retrospectively validated by this legislation, so there is nothing to stop these payments occurring now. There is also an implication that the deterrent—the nuclear bomb—is, in the end, largely an issue of face or prestige: the British Government cannot get their own legislature to agree a piece of legislation, which is very embarrassing. But is it more than embarrassment? That is the question that we have to answer.

If the Government can explain that holding up this legislation in order to achieve these necessary improvements will do serious damage to the functioning of the EU and Britain’s role within it, I would be hesitant to support the new clause, but if all that is at stake is a little embarrassment at the beginning of 2009—which might, indeed, have the effect of stiffening the Government’s spine in what then might be difficult negotiations about the review—I cannot see the harm. As somebody who is a pro-European, I want the Government to explain convincingly to me why I should not support the new clause.

I am grateful for the opportunity to contribute to the debate, and I return to the subject of the own resources of the European Community with some nostalgia, as it was the subject on which I made my maiden speech some years ago, on which I had my maiden rebellion against my Government, and on which I made my maiden criticism of the then Prime Minister, Mrs. Thatcher, nearly bringing my career to a premature end. She was seduced—or so it seemed to me—by the argument that in return for a promise from the European Union to be more moderate in its future spending, she should concede an increase in the own resources of the European Community. I asked her at Prime Minister’s questions whether she would follow that logic and reward a drunkard who had signed the pledge by giving him a bottle of whisky. She was not best amused, and I was told my career would not proceed any further. I was wrong, of course, as Mrs. Thatcher was in the process of securing for Britain the rebate that has enabled us to save billions of pounds of contribution to the EU, whereas the present Government are doing the reverse.

I mention this because I think it shows that, having been critical of my own Government, I have a reasonable licence to be critical of this Government on this issue. My position in both cases is as someone who does not want to see a waste of public expenditure through an increase in spending that will not be properly monitored or controlled, and will not be in the interests of the taxpayer. I fear that what we are being asked to do today will result in that. That is why I welcome the new clause tabled by my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), because it says that we should not go ahead with this increase in the own resources—the new structure reducing Britain’s abatement by up to £10.5 billion—unless we get something in return.

Unfortunately, as far as one can see, the Government’s negotiating process so far has not got anything in return. Indeed, the negotiating position of the former Prime Minister, Tony Blair, has been rather like that scandalously sexist aphorism, “When a lady says never she means maybe, when she says maybe she means yes, and when she says yes she is not a lady.”

The former Prime Minister started off saying never:

“The UK rebate will remain and we will not negotiate it away. Period.”—[Official Report, 8 June 2005; Vol. 434, c. 1234.]

He then went on to say maybe:

“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.]

Finally, he conceded a reduction in the rebate completely, but he said that he was getting something in return—a reform of the agricultural policy, or at least a promise of a review of it.

Accepting new clause 1 would enable us to see whether we have anything in return for the concessions made, and I cannot see how the Minister can possibly object to it. It proposes that the Treasury shall go ahead with implementing the new structure of own resources only if it can certify that we have secured a concession. It would be left to the Treasury’s judgment whether it could honestly say that we had secured the concession—the review—that we were promised, and which Tony Blair told this Parliament he had been offered. The Treasury would be able to say whether it had been substantively achieved, so I invite the Minister to say that he will accept the new clause. If he cannot, will he say frankly and openly that he rejects it because he cannot envisage circumstances in which the Treasury will be able to say that the promises given to this House will be delivered? That would be an appalling position.

The case for retaining our rebate persists. It was based on the fact that the structure of the British economy is such that when the same rules are applied to us as are applied to other member states they result in an unfair burden on us relative to the advantages that we get. Even after the changes that have occurred, and those planned in this settlement, are taken into account, this country will receive the lowest amount of European spending per head of any of the 27 countries in Europe. We will receive a quarter of that received by Ireland, whose gross domestic product per head, we are now told, is above ours, and we will receive half that received by France, whose figure was only marginally below ours before the recent exchange rate changes.

Despite that, the contribution that we make is significantly greater than that of many other countries. The Government have been prepared to give us the figures only in respect of France, but the contribution per head that British people will make to the European budget is 20 per cent. greater than that of France. Our net contribution is set to rise significantly under this settlement, as I mentioned in an intervention that the Minister was kind enough to take. The net contribution is rising faster than the generality of public expenditure is planned to do in this country—so much so that our net contribution to the European budget as a share of total public expenditure will rise by half over the time span of the current spending process.

This is a very inequitable arrangement as far as British people are concerned. It was right to secure an abatement to try to offset some two thirds of the differential between the money that we put in and the money that we get out. Mrs. Thatcher was able to secure it because she had a very good case, she argued forcefully and she persuaded her partners to give it to her. According to the Government, we now have to reduce that abatement and to accentuate again the inequities that the correction mechanism was designed to redress. “Correction” is the word used in the European documents. The correction is to an inequity that Britain otherwise faced.

We will get nothing in return, because the CAP budget will continue to rise. According to House of Commons figures, the CAP budget remains 48 per cent. of the total expenditure of the EU. Others claim that it has risen from 40 per cent. a few years ago to 44 per cent. Lord Patten said a year or so ago:

“We are talking about a budget for research and development that’s been severely squeezed already in order to accommodate a continuing rise in agricultural spending that will actually go up from 40 to 44 per cent. of the overall community budget.”

So, far from our having secured some degree of reform already that is resulting in a reduction, it remains overwhelmingly a budget that goes on the CAP.

The other part is spent on structural funds, and I want to ask the Chief Secretary whether the Government have made any progress in securing the reform that the present Prime Minister sought when he was still Chancellor. In 2003, he wrote in The Times:

“When the economic and social, as well as democratic, arguments on structural funds now and for the future so clearly favour subsidiarity in action, there is no better place to start than by bringing regional policy back to Britain.”

In a Government document entitled “A modern regional policy for the UK”, the UK Government argued that member states with GDP per capita above 90 per cent. of the EU average should no longer receive structural funds money. Instead the money should be retained by them and spent by them, because, the Prime Minister has argued,

“There are many things that we want to do to encourage local skills and research and development, and local businesses, but we’re not able to do because of the existing rules.”

So when, under the new clause, the Government report back to the House on whether they have secured concessions, they can tell us whether they have secured the concession, at least for countries such as ours, on regional funds, so that we control that money and use it for British priorities, rather than sending it to Brussels and having it sent back by them, having incurred administrative costs and being earmarked for uses that would not necessarily be the priority of the British people and the British Government.

The former Prime Minister made the concessions that are incorporated in the Bill. At the time, the then Chancellor was leaking to the press that he did not really support that. He thought that Tony Blair was being unduly weak and giving away too much. Now is his chance. He is now Prime Minister and this is the great vision that he has been seeking to put before the British people. He can do what he indicated in leaks that he wanted to do and give his Back Benchers a free vote on this Bill. They will then put him in a strong position to renegotiate and get the sort of deal that he wanted.

I fear that we did not get that deal because the outgoing Prime Minister had other priorities. He was looking to his own future. He did not want to end with a big row in Europe. That might have been in Britain’s interests, but it would not have been in his. He made a concession, which was a big contribution to his own future campaign to be President of Europe—an undeclared contribution, which dwarfs those of any member of the present Cabinet. I hope that that mistake, that unfortunate policy and that unfortunate weakness of the previous Prime Minister can be put right.

The new clause would strengthen the position of the Government and the House, and I hope that it will be accepted.

I welcome the new clause, which has given the Government a get-out-of-jail card. I am sure that the Chief Secretary will accept it when we come to the end of the debate.

It was clear from what my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) said that the current Prime Minister made it clear that he disagreed with his predecessor on the deal. Since I entered the House, one thing that I have learned is that a small Bill with a few clauses that is being debated for a short time is a most important Bill, and the Government are trying to get something through the back door.

On the subject of the former Prime Minister and the current Prime Minister, does my hon. Friend think it more than likely that the deal between them was that the outgoing Prime Minister would stand down, as shown in the recent programme “The Blair Years”, in return for the undertaking that the new Prime Minister would not oppose either the own resources decision or the European treaty, which we will debate next week?

That seems possible. The previous Prime Minister said that he would serve a full term, which he did not. Some deal must have been done.

Let me address the new clause. We are talking about something of enormous importance to British taxpayers. During the years that Mr. Blair was in power, the contribution to the EU made by British taxpayers, adjusted to today’s value of the pound, was more than £100 billion—enough money to run the health service free of charge for this year. We are talking about a change in the formula whereby the EC allocates its budget to individual countries. Each country has the right to debate that new way of raising funds, but I suspect that only this country will have reservations, because only this country is dealt such a bad deal by the formula.

I am grateful for that intervention, Sir Michael, but I am sure that you would rule me out of order if I were to reply, because we are talking about the new clause in particular.

The Chief Secretary was helpful in his opening statement and provided a lot of percentages, but he did not translate them into money. However, a written answer given in January 2006 set the record straight. It stated that in 2007, our net payments to the EU would be £4.7 billion, increasing to £6.8 billion by 2011—an increase of 45 per cent. How can a £2.1 billion increase for British taxpayers be right when we are in the middle of an economic crisis that requires us to have almost a statutory pay limit in the public services?

My hon. Friend has enlightened the House with those figures. They stand in stark contrast with the assurance that the Chief Secretary gave us from the Dispatch Box a few moments ago that our contribution will be some £5 billion across the economic cycle. Either my hon. Friend is wrong, or the Chief Secretary inadvertently misled the House. If the second is the case, the Chief Secretary had better stand up now and put it right.

I can only quote from the table in the written answer given by the hon. Member for Bury, South (Mr. Lewis). It clearly stated that in 2011, our net contribution would be in the range of £6 billion to £6.8 billion. I am sure that the Government were not wrong about that fact. Another interesting element of the written answer to which I have referred has to do with the so-called “dodgy money” that we get back from the EU. We give it £14 billion, and then some bureaucrat in Europe sends some of it back, with instructions about where it should be spent. I remember driving around a small village in Wales and reading a blue plaque that stated that what amounted to a motorway had been built by the EU. Of course, there were no cars on it at all, but the Bill means that even the dodgy allocation of returned funds that I have described will be smaller. This year, we will get back £5.6 billion, but it is predicted that we will get only £4.2 billion in each year from 2011 to 2013. It cannot be in the national interest for us to pay substantially more money to the EU and yet get less money in return.

This is an enormously important debate. Thank goodness the Opposition, with the support of the Liberal Democrats, have given the Government a get-out-of-jail card.

I shall try to answer the points raised in the debate on new clause 1, which talks about the “outcome of the review”. The heart of the matter is the point at which the certificate to be issued by the Treasury would be debated in the House. When I intervened on the shadow Chief Secretary, his answer summed up the problem with the new clause. He referred me to paragraph 80 of the Commission document, which talks about a White Paper or report to be issued in the relevant time frame, but that is not the same as the “outcome of the review”.

The hon. Gentleman shakes his head and laughs, but that is a very important point. The White Paper would set out strategic, high-level principles, but that is not what the “outcome” of the budget review would be. Therefore, the new clause is immediately defective in that specific regard.

What the Minister has described does not make the new clause defective. Instead, it makes it much easier for him to accept the proposal, as all he is being asked to agree is that the Treasury should be required to certify that it

“considers that the outcome of the review is satisfactory to the interests of the United Kingdom.”

Further processes may have to be conducted after the report of the review is submitted, but he is merely being asked to sign up to a commitment that the Treasury will certify that report.

No, I do not think that that is what the new clause proposes. It states:

“The condition referred to in subsection (2) is that the Treasury shall have laid before both Houses of Parliament a report on the review by the European Commission…including a certificate that the Treasury considers that the outcome of the review is satisfactory to the interests of the United Kingdom.”

I repeat that the review does not conclude with the publication of the relevant White Paper. There is no possibility that the review could achieve its “outcome” before the House has been asked to ratify the own resources decision in January 2009, and that is why I contend that the new clause is defective.

What, in essence, does new clause 1 ask the Government to do? The final sentence of paragraph 80 of the Commission’s document states:

“The review will also be taken into account in the preparatory work on the following Financial Perspective.”

I am sure that the hon. Member for Runnymede and Weybridge will accept that that is where work on the review will lead, but the logic of the new clause is that the outcome of the financial perspective being debated this evening should be held up until we have achieved a satisfactory outcome from the next financial perspective. The outcome of that review will inform the preparatory work for and the discussions on the next financial perspective—the one that begins after 2013. I say again, essentially, he is asking us to hold up the current financial perspective covering 2007 to 2013, pending the outcome of all of the discussions. The amendment is defective. It would cause us to miss the ratification deadline, and on that basis, I urge hon. Members on both sides of the House to reject it.

The hon. Member for Twickenham (Dr. Cable) asked a fair question. He asked what would be the practical consequences of not ratifying: would there be serious consequences, or would the provisions of the current financial perspective simply be held up? Let me be plain: there is no formal sanction—no fine or formal proceedings that could be instituted—but implementation of the present financial perspective could be delayed. Backdating to the beginning of 2007 can happen only after ratification.

Let me finish the point. The other consequence is what one might call a diplomatic or political consequence. We have every reason to believe that 26 other member states will ratify the own resources decision into their domestic legislation, so we would face the prospect of being one versus 26 in explaining why we failed to ratify the decision. I do not want to over-dramatise by saying that not ratifying the decision will lead to a complete breakdown, but there would be real consequences to not meeting the ratification deadline.

If the Chief Secretary believes that the outcome can be assessed only at the end of 2008, why did the Prime Minister in his statement to the House last December specifically refer to the World Trade Organisation negotiations, which must be concluded within the next few months?

In his comments, the hon. Gentleman asked whether the effect of that review could be felt before 2013. The answer is that it could. The previous Prime Minister argued for that in securing the review. My point in response to the new clause is that the outcome of the review cannot possibly be known before the ratification deadline.

I will give way one last time to the shadow Chief Secretary, but I am trying to answer seriously the points that were put to me during the debate. There can be no hope that the outcome of the review will be known before the ratification deadline. I have pointed out that there will be consequences of being held to have acted in bad faith and being isolated, which is not what the Government want.

The point that the Chief Secretary made earlier is that the outcome of the review is not the final, definitive stage in preparing the next financial perspective. We accept that. All we are asking for is some clear sign that our partners are taking seriously the obligation into which they apparently entered to have a fundamental review of the EU budget, and that the Treasury, on the basis of the outcome of that review, is satisfied with that decision. That is what we are asking the Treasury to certify.

Secondly, the right hon. Gentleman is quite wrong to say that the current financial perspective will be held up. The current financial perspective is agreed and already operational. The only question at issue is the own resources decision. We will fall back on the existing own resources decision if the Bill falls tonight.

I am disappointed that the hon. Gentleman did not let me finish my point. The Commission document says that there will be a fundamental, no-taboos review. That is what we secured. I have explained clearly why the new clause is utterly defective. It would leave this country totally isolated in Europe. I can only conclude that that is where he and his whole party want us to be.

Question put, That the clause be read a Second time:—

Bill reported, without amendment.

Order for Third Reading read.

I beg to move, That the Bill be now read the Third time.

This has been a long but good debate. [Hon. Members: “It was short.”] It felt long. I think that Members have been quite clear about where they stand.

Let us be clear. This Government will make the case for being part of the European Union, for playing a constructive part in the European Union, and for making a sensible, practical and pragmatic agreement that helps to take the European Union forward into a new era. In our judgment, the own resources decision, which we are asking the House to incorporate into the law of this country, does precisely that. It is fair to the British taxpayer as it preserves the rebate and sees it grow in size over the financial period that we are discussing, but at the same time it will provide the resources for the social, economic and overall development of a peaceful and prosperous European Union. We all, I believe, have a common stake in that.

We have been over this ground all evening. This Government were clear about what they were seeking to achieve—to preserve the rebate. Whatever fantasy arguments the Opposition wish to advance, at the heart of the own resources decision is an agreement whereby the British rebate rises but is disapplied in respect of non-agricultural spending—the spending that helps economic and social progress in the countries of the former eastern bloc. That is what it pays for. It is absolutely correct to say that the former Prime Minister, Tony Blair, very much had in mind an agreement whereby Britain would retain the rebate and see it rise in value, with a change in the contributions that France makes to the European Union, whereby we now have rough parity between French and British contributions. That is a step forward. I think that he would also have said that Britain should pay its fair share of the costs of an enlarged European Union.

The Conservatives have completely failed to demonstrate that the policy of saying, “We support enlargement but we don’t want to face up to the difficult decision of paying for it”, has a scintilla of credibility across the European Union. We have heard no mention of it this evening, and the right hon. Member for Witney (Mr. Cameron) managed to attract only two other members to the new grouping in the European Parliament. I gather that there is now just one, Bulgaria—“and then there was one”. We see a party utterly isolated in Europe. Perhaps the shadow Chief Secretary will update the House on how negotiations are progressing.

I have a question for the Chief Secretary. How would he characterise the position of the British Government in the summer of 2005, when they said that they enthusiastically supported enlargement but that the British rebate was fully justified and non-negotiable? How would he characterise that as anything other than, to use his own words, being in favour of enlargement but not being willing to pay for it?

We are going over and over this ground, and the hon. Gentleman will not accept that there is a difference between the application of the rebate in respect of the 15 members of the European Union—

In my view, there is a difference between the application of the rebate in respect of the contributions and spending that those countries receive and its application in respect of the new member states. We make a clear distinction between those two groups.

Throughout the debate, the Conservatives have failed to give any credible answer about what they would do to contribute to the costs of enlargement. The evidence is clear: they are utterly isolated in Europe. Well, they are not quite isolated; they have one ally among the whole European Union, but some of their new-found friends have dubious connections, we might say. That is not a position of strength, or an intellectual, commanding position from which to lecture us on how to conduct relations in Europe. We have secured a deal that helps to take the EU forward to the next era while securing the British interest.

We have seen a great deal of limbering up tonight for the main event. As was said earlier, I am sure that lots of Conservative Members’ diaries have been cleared for 15 days running, and I am sure that they will probably want more than that.

Is the Chief Secretary making a new announcement? I thought that the Government had provided 20 days of discussion? Is this a new announcement that has slipped out?

Not at all. I do not think that he has been listening closely to what I said. [Interruption.] I believed it was 15, but it may be 20. I am sure that he will be there for all 20 days. I say this to the hon. Gentleman. Am I right that the right hon. Member for Witney said—and I paraphrase—that the country would know that the Conservative party had changed when it stopped banging on about Europe? I remember him saying something along those lines. We have heard a lot of banging on about Europe today.

As I said to the shadow Chief Secretary, we have heard some incredibly inflammable statements—[Laughter.] Inflammatory statements, even. We have heard incredibly inflammatory statements from Conservative Members this evening, and I wonder what the parties the shadow Chief Secretary wishes to pull into his grouping in the European Parliament would make of sweeping generalisations about the EU—for example, that it is a fraudulent and corrupt organisation. No wonder that their isolation deepens.

We will go forward and defend the agreement. The new clause that the Conservatives brought to the House showed the same level of confusion on these matters as their position on the EU reform treaty does. It would seek to unpick and renegotiate matters once the rest of Europe had moved ahead and reached a sensible agreement.

British business looks to hon. Members and to any party that seeks to form the Government of this country to take a pragmatic approach to Britain in Europe. Yes, it wants us to defend the British interest, but it knows that, above all, its prosperity and that of the British economy is based squarely on good relationships with Europe. As I said, 56 per cent. of British trade is with the European Union. Would Conservative Members serve the interests of British business by leading us to an isolated position, whereby we were the only country to argue against a deal that was struck between 27 members of the European Union? Would that be in the long-term interests of business?

The Chief Secretary claims that there are great benefits to the British economy in paying a huge membership fee for being in the European Union. However, is not Britain’s trade deficit with the European Union now at record levels and getting worse every year?

The hon. Gentleman must make a judgment about that. Conservative Members must be honest and ask themselves whether we are better off out of the European Union. I have mentioned the hon. Member for Shipley (Philip Davies) several times this evening. He is the leading light of the “Better Off Out” group. That is an honest position. It is not honest constantly to seek ways of undermining and criticising but not admitting the true position.

Foreign direct investment from the EU in the UK has quadrupled. It more than doubled between 2001 and 2005. That is worth celebrating. An extra 2.75 million jobs have been created throughout the EU.

Let me put a proposition to the hon. Gentleman. When the Republic of Ireland acceded to the European Union, there was considerable spending on structural funding and projects that enhanced economic competitiveness in the republic. Does he claim that some of the improvements in the north-west economy and that in other parts of the UK do not result from greater trade and partnership with the Republic of Ireland? Does not he accept that we have an interest in stronger economies throughout Europe? Economies that are stronger and are growing create more opportunities for our businesses to trade with them.

The Chief Secretary claimed that inward investment had increased fourfold under the Government’s maladministration, but that has nothing to do with the budget settlement. His point was therefore a non-sequitur. The debate has been most frustrating—the Chief Secretary does not appear to grasp the essentials.

Let us get down to brass tacks. The hon. Gentleman might not agree, but my position is that British companies began to do more business with companies in the Republic of Ireland following its accession to the European Union and the benefits that its economy gained from that change. There is already much greater trade between this country and businesses in the accession countries. The hon. Gentleman and his colleagues cannot grasp that there is a mutual interest: we all benefit from each other’s success, which is stimulated by the investment that the own resources decision makes possible.

Investment in the infrastructure of the accession countries means that their economies can grow and that they can develop, move forward and become bigger trading partners for the United Kingdom. That is a clear and plausible argument and I am sorry that the hon. Gentleman does not understand it. It is why we support the own resources decision and why I ask hon. Members to vote for Third Reading.

I am sorry that the Chief Secretary was so disparaging about new clause 1. It was a modestly phrased measure that could have improved the Bill sufficiently for us to tolerate it and extract something from the negotiations in Brussels in December 2005. As it is, without new clause 1, this is a miserable sell-out of a Bill and I shall have to urge my hon. Friends to vote against Third Reading.

Let us be clear. The premise on which the Chief Secretary’s arguments have rested throughout today is that anyone who questions any aspect of what the Government negotiated in Brussels is promoting the immediate collapse of the European Union and the casting into outer darkness of every country in eastern Europe, but that is simply not true. Being an enthusiastic member of an alliance is not a reason for abandoning the interests of those whom Governments are elected to serve, but this Government did indeed abandon those interests.

In May 2005, the Government told us that the British rebate was fully justified and non-negotiable. In June 2005, it was not to be negotiated away, period. Before the Brussels summit in December 2005, however, the rebate apparently was negotiable, but only for guaranteed fundamental reform of the EU budget and of the common agricultural policy in particular. After the Brussels summit, the position was that we would give away £7 billion over seven years and much more in the future. The rebate was gone—traded for a vague and some might even think cynical promise from our European partners to review agricultural spending under the presidency of the country that is one of the largest beneficiaries of that spending.

It is clear that the French thought that the UK was making a major concession at Brussels, through a Prime Minister who, again to quote the French Foreign Minister of the time, was failing to do his job calmly

“as a British Prime Minister”.

That says it all. The French believed that they had achieved a great victory in resisting even a review of agricultural spending within the 2013 financial perspective. It is not true, as the Chief Secretary asserted it was, that investment in eastern Europe is dependent upon conceding our rebate. If he believed that, how could his Prime Minister have gone into negotiations in the summer of 2005 with the position that he then took?

At a time of huge pressure on UK public spending, the Government should have stood their ground and extracted real and durable budgetary reform, as they promised Parliament and the British people they would, with a mechanism linking the own resources decision, and thus the British rebate, to genuine progress on such reform, instead of a naive wish or hope that that might happen in the future. To their lasting shame, the Government did not do that, adding to a long list of broken promises and incompetent delivery.

Does my hon. Friend share my concern that, in effect, the British people have been misled? During the general election of 2005, there was no indication from the Labour party that Britain’s membership fee of the European Union would double, from a net contribution of £3.3 billion to at least £6.6 billion. Is that not a huge indictment of the honesty and integrity that we have come to expect from the Government?

My hon. Friend makes a good point. We are entitled to ask this question: when the then Prime Minister and the current Prime Minister pledged that the British rebate would be non-negotiable, in May 2005 and June 2005 respectively, were they simply being naive or was it worse than that? Did they genuinely believe that they could get through the process without conceding the British rebate, but fail to appreciate how incompetent they were at negotiation, or did they know all along that they would have to break that promise?

So £7 billion of potential UK public spending, debt reduction or tax reduction—as some of my hon. Friends might prefer—has been lost. Much worse, however, is the fact that the baseline for future own resources decisions has been shifted downwards, and the cap on the cost to the UK of the surrender of the rebate comes off in 2013. The negotiating ratchet works inexorably against the interest of the United Kingdom.

As the Government contemplate the fiscal and public service delivery challenges that face the UK in 2008, they might come to rue the day that they so casually threw away £1.9 billion a year and rising. When next we hear that this or that objective cannot be achieved because of a funding problem, the British people will remember what happened here tonight.

To Parliament’s shame, we have now become complicit in this sell-out of the UK interest. The hard-fought-for rebate—our principal bargaining tool for reform of the EU budget—is being whittled away before our very eyes, and Parliament watches, apparently paralysed, as the Government betray the British people. This shameful, one single-clause Bill sums up 10 years of this new Labour Government: wasted money, broken promises and incompetent delivery. I urge my hon. Friends to vote against the Third Reading of the Bill tonight.

Given that those on the Front Benches effectively made their Third Reading speeches in the debate on clause 1 stand part, we do not need to repeat them at great length. I shall simply describe myself as a leading light in the “better off in” group. The Liberal Democrats have no embarrassment in describing ourselves as pro-European. We support British membership and constructive engagement, and we have criticised the present Prime Minister for not being constructive enough. We support enlargement and the financial adjustments necessary to make enlargement possible and to support the weaker countries in eastern Europe. We have no problem with any of that.

We also believe, however, that it is possible to hold those views while simultaneously believing that the British Government should be tough in defending British interests and British financial interests. Countries that have been in the European Union since its inception, including the Netherlands and France, have Governments who take a very tough line on budgetary matters, and there is no reason whatever why British Governments should not do the same. We also believe that the British Government have a particular mission and an obligation to pursue rapid reform of the common agricultural policy, which is damaging to British and European taxpayers and consumers and to the world trade system. They should be tough on those issues.

Our criticism of the Government is that, in these negotiations under the previous Prime Minister, they were weak and made an unacceptable deal. That is why we intend to vote tonight alongside people with whom we would otherwise not share many common views on the European question. It would have been better if the Government had accepted new clause 1, which was objectively helpful. I do not know what their motives were in rejecting it, but if they did not like it, they could have produced their own version of a scorecard to help to strengthen their negotiating position. They did not do so, however.

The outcome of all this is rather unfortunate. The Government will have made a substantial concession on the rebate. They will continue to be party to a European Union that is not reforming the common agricultural policy at anything other than glacial speed. We might well be confronted over the next few months with the collapse of international trade negotiations, caused at least in part by the intransigence of European agricultural interests. The British Government will have absolutely no leverage whatever to prevent any of those things from happening.

The certain consequence of all those things is that British cynicism about the European project will grow. We differ from the British Government in that, although we are a strongly pro-European party, we do not believe that the European project can be advanced by stealth. It has to be advanced with the support of the British public—[Hon. Members: “A referendum.”] That is why we support a referendum on British membership of the European Union—[Interruption.] Let me conclude my remarks.

The danger is that we end up with the worst of all possible worlds, in which the Government win a Pyrrhic victory; they will of course push through the legislation, but in a context that will weaken overall British public support for the European project. That is a very negative outcome, and it is the main reason why we intend to vote against the Bill.

It is a great pleasure to follow the hon. Member for Twickenham (Dr. Cable). Although we come from different sides of the argument, we have probably reached the same conclusions.

In the final stages of today’s consideration, I want to mention how unfortunate it is that so little time has been allowed to debate a Bill that will see £104 billion of taxpayers’ money spent over the next few years. It is a great shame that this evening’s debate was not allowed to continue until any hour. I have to have sympathy for the Chief Secretary, who battled hard, although I am afraid he has no support on the Government Benches. He did his best while batting on a very sticky wicket, defending the indefensible. He did not deny the fact that as from 2007, we are going to have a net contribution to the EU of £4.7 billion, which is expected to be £6.8 billion by 2011. That cannot be and is not a good deal for the British taxpayer.

My most important point relates to what the Chief Secretary said at the very beginning of the debate—that the EU would implode if we did not agree to the Bill tonight. Let me quote him what Her Majesty’s Treasury says about that:

“If any Member State fails to adopt the new Own Resources Decision by 31 December 2008 then the current Own Resources Decision (Council Decision of 29 September 2000: 2000/597/EC, Euratom) continues to operate until such time as the adoption process is completed, with the new Own Resources Decision then coming into force on the first working day of the month following the date of notification of the final adoption or ratification, retrospective to 1 January 2007.”

Her Majesty’s Treasury says that the whole EU would not collapse. The budget would remain, but on the basis of the existing formula. The Chief Secretary could therefore quite happily have agreed to the new clause tabled from the Opposition Front Bench. That is a missed opportunity, which I believe the Government will rue.

I shall be very brief, as other Members want to speak.

The Government have an obligation to ensure that every red penny of taxpayers’ money is spent efficiently. That applies to the money that will be given over by the Government to fund enlargement. Fifteen years ago, I went to Mayo to go fishing, and I had the great pleasure of flying into Knock international airport. It is in the middle of an enormous great bog; it is a very beautiful bog, but a bog nevertheless, with an international airport in it. When one gets out of the plane to get a taxi, one is swept down an amazing highway—a dual carriageway with many beautiful blue signs saying “Made possible by the European Union”. After about 7 miles, one reaches nothing more than a cattle track. It would be argued in Ireland that that is effective spending of European money. On being asked why on earth there should be an international airport at Knock, the taxi driver said, “Because somebody had a vision that it needed to be here”. We observed rather dryly that it was probably the building contractor. Anyway, that demonstrates the sort of thing we need to guard against as we pass over this money to an expanding Europe.

The Government need to reassure the House over and over again—and prove over and over again—that every penny is being spent effectively. They need to do that because at this moment they are breaking deals with public servants left, right and centre. The Chief Secretary spoke of the importance of not breaking deals, but if somebody is a prison officer their deal has been broken, and if they are a police officer their deal has been broken. It is not impossible—I cannot believe that it is impossible—for the Government to find a few extra millions, £30 million to £60 million, to ensure that at least prison officers and police officers, who do the hardest job in the country, receive the money that they deserve.

I listened to much of the opening skirmishes of the debate on clause 1 stand part, and I am afraid that I heard nothing to convince me that it is in the national interest to give the Bill a Third Reading. I put it to the Chief Secretary that he should take his arguments down to his local pub in the constituency, and tell those who are enjoying themselves there that he has personally put through a Bill that will give the European Union an extra £7.4 billion of taxpayers’ money over the planned period of the current financial perspective. I do not think he will get a very good reception.

I am afraid that it is an indictment of the House that this is almost a private occasion for the few Members who are present this evening, and the very few others whom I might be tempted to spy in the House. This is a serious matter. It is extraordinary that, at a time when the pressure is on public spending and given that the rate of growth of public services such as health and education is to be much curtailed in the years ahead, the Government have squandered such a vast sum on the notion, described to us by the Chief Secretary, that somehow we will get back the money that is to be spent in the European Union through our relationship with the European Union.

I want to explore two of those points. The idea that public spending creates prosperity was debunked in the 1970s, and has long been dismissed. There was recently a savage analysis of the efficiency of the European structural funds, showing how inefficiently and wastefully they are spent. That was just adumbrated by my hon. Friend the Member for Broxbourne (Mr. Walker), who gave the example of Knock airport. I have nothing against Knock itself—

Of course it is a religious shrine. Perhaps the matter has something to do with the Catholic plot that was referred to earlier, and the European Union, but I had better not go there. In any event, there is no evidence that European structural funds are any better spent than other parts of the European Union budget. The European Court of Auditors has failed to sign off the EU’s accounts for the last 13 years because it is so concerned about the EU’s inability to account for how its money it spent.

I had better give way to the Chief Secretary first, but I will give way to my hon. Friend afterwards.

We could have a debate about fraud related to structural and cohesion funding, but did I hear the hon. Gentleman correctly? Is he saying that there is no evidence that money from structural funds has not helped the economies of the countries that have received it? Merseyside, in my home region, has received substantial objective 1 funding over many years. Is he saying that the improvement in Merseyside’s local economy is unrelated to any impact from structural funding? I find that very hard to believe.

I know that the right hon. Gentleman finds it hard to believe, but what has transformed the Irish economy, for example, is not the structural funding, but the much lower rates of taxation. It is possible, I concede, that the substantial subsidies that the Irish received in previous years allowed them to carry a much lower burden of taxation, but what is leading to the astonishing rates of growth in the eastern European countries is the liberalisation of their economies, the cutting away of bureaucratic interference from Government, and the lower rates of taxation. The fastest growing economies in eastern Europe are those with the most dynamic, enterprise-oriented tax systems. One of the things that is eroding our competitiveness is the inexorable rise of public expenditure and taxation, which will, as the shadow Chancellor, my hon. Friend the Member for Tatton (Mr. Osborne), described, leave Britain in the position of having failed to mend the roof while the sun was shining during the past 10 years.

I have some relevant figures to hand. The Government inherited a national debt of £400 billion in 1996-97. That rose substantially in subsequent years, and by 2012-13—the year this financial perspective ends—we will have a public debt of £810 billion. That should be set alongside the situation in some European countries, which have no public debt at all because they have managed their economies very much more efficiently than we have.

On a point raised by the Chief Secretary, he might recall that three years ago his colleagues in Sheffield were crowing about the fact that Polestar publishing had got a £6 million grant to build a new printing plant in Sheffield. At the time, I raised the concern that that would have a direct consequence for the four existing plants, including the one in Scarborough. This week, Polestar has announced 190 job losses in Scarborough as a direct consequence of that European structural funding going into that objective 1 area in Sheffield. So it is not all good news on objective 1 funding.

I not only welcome what my hon. Friend has said, but I add that if public spending in Scotland and the north-east and north-west was the answer in securing the prosperity of those regions, they would be growing faster than London and the south-east, but they are not. The disparities between those regions and the south of England have widened during this period of Labour government. I think what we need to be looking at is differential rates of taxation throughout the United Kingdom, as the idea that we should have a unitary tax system is holding back the UK—but that is a matter for another debate.

When I think about the money that the House will be committing tonight, I look at my constituency. The Eastern Angles theatre company grant from the eastern Arts Council, for example, is being slashed by £100,000—50 per cent.—which will severely disable that extremely vibrant and capable arts and theatre company that operates throughout the entire region. I also look at the failure of the local health authority to open the Dedham surgery for want of £50,000 a year—not £7.4 billion—and at other surgeries that need to be upgraded. I look at the lamentable state of the A12, which grinds to a halt at least once a week because it is the most stressed piece of dual carriageway in the UK, yet the Government cannot find the money to upgrade it in the way that is necessary for the prosperity of my constituency. I look at the lack of money to spend on special educational needs in Essex schools, despite the fact that Essex is spending above the standard spending assessment on education. I look at the vast overspend on personal social services, particularly child welfare services, in Essex county council, which is not being funded by the Government because they are spending £7.4 billion on the European Union for no reason at all, instead of tackling these problems. This is not banging on about Europe; it is banging on about the needs of my constituency, which this Euro-obsessed Government think are less important than placating other countries’ interests in the EU.

I also look at the failure to honour the pay increase of the Essex police in my constituency, which is undermining the morale of the police who are fighting for law and order. I look at the Colchester garrison, which is training for operations in Iraq; 16 Air Assault Brigade is due to go to Iraq next spring. It is meant to have 110 up-armed Land Rovers for training in Iraq; it has six of them, because this Government think it is more important to appease EU interests than to fund our own armed forces. I look at the lamentable story of what happened to Corporal Wright, who was not lifted in good time from a minefield in Afghanistan because there were no helicopters with winches in Afghanistan as there should have been in order to address that matter.

I am talking about the language of priorities and public spending, Mr. Speaker. This Bill has got the priorities—

Order. The hon. Gentleman has been here long enough to know that this is the Third Reading of the Bill. He can talk about those things on other occasions, and he would be welcome to do so.

I shall sit down, but I should say that this Bill is about allocating very large sums of money to Europe instead of to those other vital national interests. It is a shame on this Government that they have such a weak European policy that they need to pay the money there instead of using it for our own people.

One of the most interesting events of today was the contribution by the interim leader, if I may call him that, of the Liberal Democrats.

I am sorry; the hon. Gentleman is the former interim leader of the Liberal Democrats. He touched on what unites many of us in this House, strange as it may seem. I profoundly believe in the comity of nations. For the four most recent centuries of this country’s history, it has been vitally engaged in what happens in Europe. Our prosperity as a mercantile nation depends on trade. All those things are true. Where we have common interests, surely we should work together for them.

At the heart of this matter is the question of who governs. I am delighted to see the Chief Secretary to the Treasury in his post, but goodness knows what has happened to the Treasury. Contrary to the environmental policies of the Government, he paraded a forest-full of notes, letters and papers. They were pushed across to him along the Benches to assist him in trying to define a very curious position.

As my hon. Friend the Member for North Essex (Mr. Jenkin) has just said, this is about who bears taxes, how we negotiate and how we achieve the objectives of those who sent us here. What the Chief Secretary has tried to do in presenting this Bill represents an extraordinary distortion of facts that are on the record. We know what Mr. Blair negotiated and what promises and undertakings were given, as do the Liberal Democrats. This is not about Europe per se, in the sense of people being anti-Europe—that will come next week if we are to engage on a great issue. This is about now, and the Chief Secretary’s characterisation of other hon. Members as having a distaff view—if I may put it like that—does no credit to the Government. Each one of us here accounts as best we can for the arguments that we support. We heard the poorest level of distillation, spin and obfuscation. He was confronted with rational arguments and, as often as not, he did not even understand them.

The proposition put during a most distinguished contribution from the Front Bench by my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), and put by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) and by the hon. Member for Twickenham (Dr. Cable) was a rational argument as to whether the proposal was negotiated worthily and in the British interest—the interest of the people whom we represent and of whom my hon. Friend the Member for North Essex was speaking—and whether we could have done better. The judgment of most independents standing to a side would be to say that this Government did not do at all well.

In the end, we have to stand before our electorate and justify what we are doing. The tranches of money involved are huge, and we are entering a period of great uncertainty in the international situation. All of us know and recognise that, and we tremble in many instances. This Government have committed the taxpayers—the people whom we represent—to laying out sums of money, and they then come to dance in front of the House hoping that their spin will get them out of the situation. That they promised something else is neither here nor there, because they try to rewrite the story of what was promised.

That is the deceit that we have had this evening. The Financial Secretary can keep waving. I take it as an indication that she and the Chief Secretary are drowning, in the terms of the poem. There is no poetry in this debate. It is a sad reflection of how destitute the Government are in the arguments that they now advance to try to show probity. We could get a better deal and the only amendment—

It being Ten o’clock, Mr. Speaker put forthwith the Question already proposed from the Chair, pursuant to Order [this day].

Question put, That the Bill be now read the Third time:—

Bill read the Third time, and passed.


Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Delegated Legislation Committees),

Road Traffic

That the draft Passenger and Goods Vehicles (Recording Equipment) (Downloading and Retention of Data) Regulations 2008, which were laid before this House on 28th November, be approved.—[Ms Diana R. Johnson.]

Question agreed to.