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Mr. Nigel Beard (Bexleyheath and Crayford): The Bill makes possible the expansion of the European Union. Great difficulties in arriving at a suitable financial arrangement were expected, but they were overcome magnificently by the Berlin European Council of March 1999, which lies behind the Bill. What a pity the EU does not manage to trumpet its triumphs more loudly. Instead, a major achievement went almost unnoticed as just another EU meeting.

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We would do well to remember the significance of making EU enlargement possible. It will entrench democracy and the principles of a modern economy in countries whose attachment to both has been fitful throughout the 20th century.

Mr. Redwood: I quite agree that we should entrench democracy, but is not one of the main provisions the idea that, if there is a referendum in which people vote no, the answer is no, it means no, and the treaty falls?

Mr. Beard: I gather that that is a reference to Ireland. We accept the sovereignty of individual member states: the matter is one for Ireland to sort out, not for this Parliament.

As I said, the Bill will entrench democracy and the principles of a modern economy in countries whose attachment to both concepts was fitful throughout the 20th century. In doing so, it will underpin political and economic stability on the borders of western Europe; such stability has not been known for several hundred years, if ever. Not only does it provide for western European security, it enhances the life chances and the standard of living of people in those countries in ways that could only have been dreamt of before.

Some people fear that enlargement will mean unwanted migration across Europe from the poorer to the more affluent countries, with tensions arising as a result. The best insurance against that is not police controls, but giving the people of the poorer countries of central and eastern Europe the hope of a better life in the culture and countryside that they know best. That now becomes possible as a result of the financing arrangements in the Bill.

The advantages are not all one way. British firms will benefit from increased trade and investment, supplying goods and services to 500 million customers in the largest single market in the world, and the advantages that that will bring to British businesses will strengthen their competitiveness worldwide.

The average intelligent inquirer would never guess that such prospects lie behind the Bill, with its obscure cross-references; nor do its explanatory notes expand understanding significantly. I urge the Government to explore ways in which we can deal with European policy more transparently and less obscurely. It is darkness that fertilises such an abundant crop of myths about Europe, the greatest of which is regularly propounded with froth and fantasy by the Opposition and concerns the evolution of the European Union into a European superstate that usurps the power of member nations. It is a demon, created to frighten the gullible, the innocent and those who do not observe facts too carefully.

The European budgets that the Bill makes possible over the next five years range from a total of 1 per cent. to 1.2 per cent. of the EU's gross national product—hardly a dominant aspect of European spending. The total European Union budget for 2001 will be £65.5 billion, compared with £400 billion for the United Kingdom Government's budget alone. The sum spent by the UK Government on welfare benefits in one year is 50 per cent. more than the total EU budget. To put it another way, for

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every £1 spent by the Government of a member state in one year, the EU spends 2½p. It is on that flimsy foundation that Opposition Members have built the absurd spectre of a federal European superstate. Moreover, the chief question in selecting their leader in the coming weeks will be: who can best slay that dragon? Someone should turn the lights right up to show that the beast that the Opposition are stalking with such assiduity is, in fact, the shadow of a pussycat on the wall.

Another myth that prevails among Opposition Members is that the Germans, French and Italians are always bossing us around and telling us to do things that are not in our interest. However, we have the same voting strength as the Germans and the French. The Germans pay 28 per cent. of the EU budget; the French, 17 per cent; and the Italians, 12 per cent, compared with the UK's 13 per cent. I wonder how we were bullied into letting the Germans and the French pay so much more than we do.

The fatuous suspicion of everything emanating from the EU became self-fulfilling for the previous Conservative Government, which went to every negotiation seeking to domineer and ended up provoking the hostility of the majority. They isolated themselves, then sought to blame their isolation on scheming foreigners who were up to no good. Needless to say, they did not win friends or influence people.

The Berlin Council negotiations, which are the foundation of the Bill, were a triumph for a wholly different approach by the Labour Government. Berlin was a triumph for the co-operative approach that seeks allies and presents a reasoned case, rather than table thumping to emphasise uncompromising demands.

European Union spending, as has been said, is brought under control by being capped at 1.27 per cent. of total Union gross domestic product. Previous such budgets provided far greater increases. Moreover, there had been an expectation, promoted by the Opposition, that the rebate would have to be reduced to get agreement on expansion, but we have come away with the UK abatement maintained in full.

Spending on the common agricultural policy was considered a tricky problem, given that nations entering the EU—Poland, Hungary and the Czech Republic—are overwhelmingly agricultural, but as we have heard, common agricultural spending is budgeted to decline to less in 2006 than in 2001—a gain of about £70 a year for the average family in the UK. Although agricultural spending will be 45.5 per cent. of the total budget, that is well down from the dominance that agriculture once had in the EU's affairs.

That reduction has contributed to the decline in the overall budget for the next five years, ranging from 1.2 per cent. of gross national product in the Union in 2001 to 1 per cent. or just under in 2006—well within the cap of 1.27 per cent. of GDP that has been set. There can be no better demonstration that spending has indeed been brought under control.

The fruits of successful negotiations are not seen solely in the big picture. The European Union has set aside £600 million a year to deal with foot and mouth disease and mad cow disease. Much of that will come to Britain in the next few years—from an organisation which, Tory Ministers used to say, stole their sweeties every time they negotiated with them.

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One of the inflexible aspects of the European Union was the way in which its revenue was raised from member states. Some came from the customs duties of individual states; some came from a levy related to a country's VAT receipts. Where those sources of funds did not meet the budget, money was provided in proportion to the country's gross national product. The customs duties and VAT resources often introduced anomalies in the amounts paid by each country and were a source of fraud. This negotiation has revised the arrangements so that there is far less dependence on VAT, and revenue contributions depend much more on GNP. The arrangements are therefore fairer and less likely to lead to anomalies.

Mr. Bercow: I am enjoying the hon. Gentleman's speech, but it is clear that he is a member of the Dr. Pangloss school of optimism. Can he tell the House what assessment he has made of the prognosis of the MacDougall report for the level of fiscal disbursements as a proportion of gross domestic product, in the event that we join the eurozone, as he wishes?

Mr. Beard: I have made no further examination of Mr. MacDougall's report, which is many years old and irrelevant to the present circumstances, as is any concept of our being in the euro for this budget.

The Berlin Council negotiations, which we are ratifying today, are a clear demonstration that constructive engagement pays off. Britain's negotiating objectives were achieved, and we confirmed and won friends among our allies. Contrast that with the Conservative Opposition, who have just fought a general election with demands fundamentally to renegotiate our position in Europe, knowing that, with no other European nation supporting them, the end would be humiliation or the need to pull out of the EU altogether.

Despite total rejection of that policy at the general election, four out of five of the candidates for the Opposition leadership election would continue it. They must acknowledge that half the United Kingdom's total trade of £132 billion is with the European Union, and 17 per cent. with the United States. If we were to pull out of the European Union and join the North American Free Trade Agreement, as some Tory leadership contenders would prefer to do, there would be an immense upheaval for the whole of economic life in this country for many years—and for what? Furthermore, most inward investment into the United Kingdom would evaporate if we ceased to be a member of the European Union, with repercussions for our balance of payments and our national economic management in general. We cannot play games with those vital interests or secure them in isolation from our natural allies.

I believe that the budget that we are ratifying demonstrates three major points. First, the cost of our membership of the European Union is trivial by comparison with the interests that it safeguards and secures. Secondly, the institutions of the European Union have proved that they can adapt to changing circumstances. Thirdly, this Government's approach to the EU, which is based on a spirit of co-operation with allies, secured more for British interests in four years than was gained throughout 18 years of Tory hectoring, denunciation and isolation.

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4.26 pm

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