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EU: Budget

Volume 727: debated on Monday 16 May 2011


Asked by

To ask Her Majesty’s Government, in the light of their programme of public sector savings, whether they will approve proposals to increase over the next three years the United Kingdom’s current net contribution of £8 billion to the European Union budget.

My Lords, the UK cannot act unilaterally and is required to make its contributions to the EU budget under obligations imposed by the treaties. However, the Government are very concerned about the UK’s growing net contributions and are working hard to reduce them within the constraints of the 2007-13 financial perspective agreed in December 2005. According to the latest forecast, the UK’s net contributions will rise from £4.7 billion in 2009-10 to £8.9 billion in 2014-15.

I thank my noble friend for his carefully considered reply which is, I appreciate, configured by the limitations to his powers. However, does it really make sense to continue to pour billions of pounds into the economies of other EU countries, to bring fantastic infrastructure improvements to Greece, Spain, Portugal and Ireland, while here at home our infrastructure is in decay? Could we at least contemplate at some stage diverting those funds into our economy, which at this stage would be a classical contracyclical investment, not only bringing great strength to our economy and improving our infrastructure but creating, allowing for the multiplier effect, at least 250,000 new jobs just when they are needed? Surely we should put the interests of our unemployed first.

My Lords, I completely agree with the need to invest in infrastructure in this country, which is why we launched the first ever national infrastructure plan last autumn, at the beginning of our suite of pro-growth policies. Approximately £40 billion to £50 billion will be invested in the UK's infrastructure each year over the next five years. As to the European budget, it is quite right that we should make our contribution; but it is completely wrong that the previous Government gave away a significant part of the UK's rebate. The European Commission's figures show that in this year alone, the amount of rebate given away by the previous Government in 2005 will cost us £1.98 billion. As the result of the action that my right honourable friends the Prime Minister and the Chancellor took in reducing by half the increase this year, we clawed back £350 million at the December decision. That is the scale of the challenge we face.

My Lords, would the Minister care to remind us of the size of the EU budget as a percentage of the gross product of the whole of the EU? Will he confirm that the percentage is roughly the same as it has been for some years?

My Lords, there are various ways of peeling that onion, but there is indeed a maximum limit of 1.3 per cent, or thereabouts, of European GNI, and a sub-limit in the current financial perspective of about 1 per cent of European GNI. However, those numbers leave considerable latitude for headroom, and the regrettable fact is that that permits the annual budget to go up, if we do not restrain it, by more than inflation year-on-year. Regrettably, there is not enough constraint on total expenditure and it can rise if we are not vigilantly on the case, as this Government are.

My Lords, does the Minister agree that in promoting growth across the EU, even more important than the EU budget is the completion of the single market? What are the Government doing to promote the completion of the single market, particularly in services?

I am very grateful to my noble friend. Of course, we discussed some of the structural reform issues in a debate in the Chamber last Thursday. I can reiterate and confirm that the Government are working very hard indeed to be an active supporter of the whole 2020 structural reform programme. Completing the single market is perhaps the most critical component of that, and the Government are pushing very hard for that to happen.

My Lords, in the light of the huge increases in our net contribution, which will continue, is it not time that we had a cost-benefit analysis of our membership of the EU; or, perhaps better still, a referendum on whether we should remain in it?

My Lords, the analysis is carried out periodically by the Treasury. Reviews of the independent analysis of the benefits of our membership are available on the Treasury website. Europe accounts for 40 to 50 per cent of our exports. It is critical that we play a constructive part in Europe and that we work on factors such as those referred to by my noble friend Lord Newby to make sure that the market works better and that the UK takes full advantage of it.

My Lords, this is inevitably an extremely difficult issue at a time of stringency, but does the Minister agree that the rise in our contribution agreed in the 2005 budget deal was intended principally to meet this country’s commitment to enlargement and the increase in the structural funds that went with it? Does he also agree that, if we had not made that agreement, Poland and other new member states with living standards of a third or 40 per cent of ours would have ended up contributing to the British rebate? As for the unfairness in our contributions, does he accept that at the end of this financial period the UK net contribution will be on a par with that of France and Italy—member states of similar size and wealth?

My Lords, I do not begin to accept any of that analysis. In 2005, the Prime Minister, evidently without consulting his Chancellor, gave away in the rebate a total of €10.5 billion over the current financial perspective period. What the UK got in return is a complete mystery to me. We were promised some leverage in fundamental reform of the common agricultural policy and we got nothing. This Government will not see a repeat of that.