2002 Draft Budget

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Dr. Palmer: Among the savings that I imagine that the Conservative party would wish to make are 38 million euros for the common fisheries policy. Is it still the Conservative's policy to abolish that?

Mr. Flight: I will come to the fisheries policy. The total spend on the policy is about 1 billion euros. I hardly think that any hon. Member could approve how that is spent.

One micro aspect that needs reform and has not been addressed is the A30 system of earmarked grants. We have become used to giving fair value to the principles of competitive bidding for grants that are awarded on merit. However, there is still earmarked and gravy-train funding for many pet projects, which too often results in the impropriety of grants and inadequate monitoring. One minor reform has taken place. There was a great objection that the European women's lobby received 100 per cent. of the funding in its territory, and that there was a fair amount of incestuous circular financing. The monopoly has been broken and the lobby will receive two thirds of the funds. That represents 600,000 euros, although 300,000 euros will go elsewhere.

The A30s are the vehicle by which various bodies that campaign for greater European integration receive funds for EU houses, for example, and for many publications. There must be a push for reforms—as there has been in this country—to get rid of the corrupt approach to grant funding. The process should be out in the open to ensure that money is properly won on merit.

The budget breaks down into headings of agriculture, structure, internal policies, external policies, administration, reserves and pre-accession aid. However, I had a problem when trying to make sense of the figures because all sorts of spending pop up under another heading. Hon. Members may have noted that 3 billion euros of agricultural spending is tucked away under structural spending. Fishery spending does not appear under the agriculture heading, but in three different places. There is a deliberate opaqueness to make it difficult for citizens—let alone their Members of Parliament—to understand precisely what money is spent where, let alone how the money is doled out and to whom. That all requires considerable micro reform. In the European Union, financial regulation has not been reviewed for 20 years and there is an unhealthy bias toward letting contracts, rather than allowing contracts to be negotiated to give value for money.

I turn to agriculture. In addition to the spending of 45 billion euros, which was listed as 46.2 billion euros, I found a further 3 billion euros listed under structured funds and 0.5 billion euros listed under SAPARD. This is not the time to present major policies to reform CAP, but continuing nonsense exists in the agricultural budget. The near billion euros that are spent on tobacco has been pointed out, and I confess an interest. I would not mind if the tobacco were smoked, but most of it is burnt, which is a pure scam. There are subsidies for crops that are unsuitable for Europe, such as rice, cocoa and beans. The arable spend has risen by 4.8 billion euros to 18 billion euros. Beef subsidies have risen by 24 per cent., while olive oil subsidies are stable at 2.4 billion euros and milk subsidies are fairly stable. At a macro level, the figures show the lack of wisdom of the CAP. Why should many of the items receive a subsidy?

I turn to future accession. The estimates show that if the CAP is not reformed an extra 16.6 billion euros will be required to implement it in the 10 potential new member countries. I am pleased that Germany is keen to return agricultural support to individual members for administration by individual members.

Fisheries comes under the heading structural, internal and external, and seems to total about 1 billion euros. Much has been made of not renewing the 192 million euro renting of Morocco fishing waters, but quite a few other fishing waters are still being rented. I do not have the exact figure, but about 270 million euros are being paid to rent waters for mainly Spanish fleets to fish in. Under ``internal'' there is another 200 million euros for restructuring and decommissioning the Spanish fishing fleet. I am pleased that there is a requirement that 40 per cent. be for decommissioning; the Spanish hoped that they would get the whole lot for new vessels and restructuring.

Structural expenditure comprising about a third of the budget has been the most useful aspect of EU expenditure. Looking forward, the big issue is that if the 10 new states accede, given the purpose of structural spending, which is on areas that are relatively poor, have high unemployment and need to be brought up economically, in terms of rankings, structural spending will have virtually to disappear in most of the more advanced economies. About 50 new regions would qualify under enlargement.

Dr. Palmer: As promised, the hon. Gentleman returned to the issue of fisheries, but he did not answer my question. Is it still Conservative policy to abolish the common fisheries policy?

Mr. Flight: It is a pity that such an amiable Member of Parliament should be wasting the Committee's time. We have just had a general election, which the Conservative party lost rather substantially. Not surprisingly, all policies are up for review, grabs and homework. The view of most Conservative Members, and many Labour Members, too, is that the fisheries policy as it stands is entirely unsatisfactory and against the interests of this country. I have commented on some of the areas that are in need of major reform and the fisheries policy is one of them.

Internal spending is the great area of the A30 gravy train grants totalling some 6.5 billion euros, up 4 per cent. That covers a lot of propaganda items. Something called the Socrates programme finances schoolteachers to have holidays in various places to discuss certain subjects. It also finances the women's lobby. Some things that it does are of value, but the main criticism is that it doubles up in many areas what individual member states are doing themselves. It covers adaptation to the knowledge-based economy, the environment, food safety and research and development, which is the major item. There is waste, as each member state has Government initiatives in that area and the European Union often competes with them.

There has been comment on the 4.3 billion euros of external spend and the fact that it is expected that expansion will continue below what has been budgeted for. As everyone knows, that largely reflects the shambles of the EU aid budget; as Chris Patten's investigations revealed, the programme is four or five years behind. There are large sums of money sitting in bank accounts and half the time no one knows what is happening to it. As the Secretary of State for International Development said, the EU should do less of it and do it better.

As hon. Members have mentioned, administration is up 5 per cent., not 3.5 per cent., at just over 5 billion euros, given the additional people to whom reference has been made. That seems to include nearly 300 million euros on delegations. There are 54 embassies competing with the embassies of individual member states, and 40 additional posts have been created. I note that pension expenditure is up 11.1 per cent. Although there are legal commitments, making sure that everyone's pension is generously funded is not one of the Commission's priorities. There is an urgent need for efficient management in the Commission.

The pre-accession budget is 3.8 billion euros, which still includes SAPARD and PHARE. It is not clear whether those programmes, especially SAPARD, will be activated this year. The real issue is: what will happen to the budget and the whole process of EU collective expenditure in the light of enlargement? As I said, Gunter Verheugen apparently now envisages a big bang by 2004. It is difficult to envisage how the EU will complete its negotiations with new members, given that there is much to implement by that time, despite another billion euros for the budget for institutional building in new member states.

The EU has yet to start its negotiations about how to change agricultural support and structural support among its members. Clearly, if it does not do so, agriculture spending will increase by 17 billion euros, while structural support, which will mainly need to go to new members, is likely to be unacceptable to existing members.

One of the sadnesses is that, because the budget is only just over 1 per cent., and the net British contribution is only 3.5 billion or 4 billion euros, none of us is diligent enough in making the territory more efficient and cleaned-up. There is a tendency to say, ``There is not much we can do about it.'' Much of it is driven by legislation, as has been described, and the efforts of UK Governments, whether Conservative or Labour, have been directed at encouraging efficiency. Neil Kinnock is virtually the only person who has tried to reform the Commission. Like the Greater London council of the 1980s, it is in need of a bomb under it, in order to get rid of mismanagement, waste and potential fraud, and to deal with the macro-territory of redesigning agricultural and structural support for a new and larger Europe of the future.

We cannot oppose the motion, but merely note it. We approve of the efforts of the Government, Costa Neves and others in attempting to introduce more discipline. However, congratulations are not due yet—there is nowhere enough discipline and far too much waste.

5.19 pm

Mr. Hopkins: I welcome the statement by my hon. Friend the Minister, and the reassuring answers to our questions about the abatement. We are pleased that that seems to be continuing. There is no sign that our Government will ever cease to insist that it be paid. The preliminary draft budget has been reduced by £240 million after abatement adjustment for Britain. I am sure that I could make helpful suggestions to my hon. Friends in the Treasury about how that £240 million might be spent—perhaps on areas adjacent to Luton, North. Those are reassuring points.

However, major changes associated with enlargement are on the horizon. As the hon. Member for Arundel and South Downs (Mr. Flight) said, the budget is still dominated by the largest single item—the CAP—which even now is just under half the total budget, which has perverse effects in its fiscal transfers. It means that countries such as Britain that are relatively low down the living standard list are net contributors and that Denmark, which is at the top of the list, is a substantial net recipient. That is clearly not sensible. If the budget were at all equitable, net transfers would be made to poorer nations and net contributions by richer nations. That could be done in a progressive form, as with progressive taxation, of which I strongly approve.

There are problems, therefore, and when enlargement happens those problems may become unmanageable in political terms. Are we seriously suggesting that Poland, a poor agricultural country, should not participate in the CAP, when not far across the water, Denmark, one of the richest countries in the European Union, will continue to be net recipients from the European budget? I do not mean to be unkind to Denmark—I am simply using that country as an example. Such a situation would be nonsense, and something fundamental must take place before we go further, even if it is merely a promise about tapering change.

Radical reform is necessary. The word ``reform'' is frequently bandied about, is much abused and can cover a variety of sins—such as doing very little, for example. Sometimes it means tinkering at the edges and, sometimes, really radical change. I am wary of the word ``reform'' and want a really radical change for the CAP.

A point that arose in the debate on the World Trade Organisation negotiations recently was that France had negotiated an opt-out in the final statement about protecting agricultural arrangements in the European Union. Apparently, France was gleeful about the matter. I am not being unkind about the French, who have always acted in that way. Good luck to them if they perceive that move to be in their interests, but it is certainly not in Britain's or the European Union's interests that we continue with a wholly inappropriate and misguided form of agricultural subsidy.

We have a problem, which may become politically explosive when enlargement comes. Countries such as Poland will kick up a fuss if they cannot have a bit of the action that other countries are getting, especially given the fact that Poland is dominated by agriculture to a greater extent than other countries and is relatively poor.

A way forward would be to discuss the abolition of the common agricultural policy as it stands. Germany is apparently considering that possibility. We should think in terms of abolition rather than reform, but something must be put in its place. We cannot simply say, ``From now you are on your own, chaps and lasses,'' but countries will want to decide for themselves what elements of agriculture they should support and sustain. I have a suspicion that, if the CAP were abolished tomorrow, the effects for many countries that are most concerned would not be that great. They would continue to have to pay substantial sums towards financing agriculture, but their contributions to the European Union would not be greatly changed. Apart, perhaps, from Denmark and Ireland, no country benefits so substantially that it could not live with a tapering-out of the agricultural policy.

Repatriation of agricultural subsidies would be a way forward. Each country has a different form and style of agriculture and a different number of people employed in it. Countries produce different things in different climates: some are wine producing, some produce unsmokable tobacco and so on. Each country could decide for itself to subsidise the forms of agriculture for which it thought necessary to provide that support.

Before we joined the CAP, we had a deficit financing arrangement and an annual price review for farming, which worked well. Negotiations were on a sensible level every year, with different products subsidised to different degrees. That was sensible, and I advocate it throughout the member states of the European Union as a replacement for the CAP.

Tapering over a period of, say, five or seven years is my suggestion, but someone somewhere—perhaps Germany or Britain, or both together—must bite the bullet, abolish the CAP and put sensible proposals in its place. The deficit financing arrangement, operated at national level, would be the sensible way forward. After that, we could consider the redistributive effects of the rest of the budget. If poor countries did not get enough and rich countries got too much, we could adjust the budget so that it was fair and equitable for countries with differing standards of living.

That measure would accommodate new member states when enlargement took place. Britain might continue its contributions because, in the enlarged EU, we would be one of the richer states rather than one of the poorer ones, as all the countries joining would be poorer than us. Therefore, we will probably continue to contribute more than other countries, but we could consider abatement and come to a more sensible arrangement—one more like a redistributive taxation system within the EU.

I have grave doubts about whether such an arrangement would be politically feasible. Nevertheless, it would be a sensible and rational way forward, and would ensure that the EU was fair and seen to be fair by all its member states. It would mean that rich member states carried a big burden, and that there was a substantial fiscal transfer arrangement for the poorer states. The big question is whether the electorates of member states would wear that.

We face dramatic and fundamental changes in the EU and its budget. At the moment, we are merely talking about details of corruption and little bits of administration designed to ensure that some countries impose better discipline on their spending. That is relatively small beer compared to what will happen on enlargement. We must seriously face the abolition of the CAP and put in place sensible arrangements to subsidise agriculture for the foreseeable future.

I do not expect the Minister to give a categorical answer now, but I hope that some of the matters that I have raised on the future of the EU will be discussed and thought about seriously in that wonderful building across the road, the Treasury, where so much that influences all our lives takes place.

There should be dramatic change in fisheries policy. Norway, which is not a member of the EU, has managed to conserve its fish stocks well and so has a thriving industry. It looks after its own. I do not suggest that we should all immediately go into our bunkers and look after our own, but countries are much more likely to sustain and conserve their own fish stocks than to worry about what happens off the coast of, say, Spain or Iceland. It would be a much better arrangement for fish stocks to be husbanded by the nation states themselves rather than collectively through the EU.

I suspect that some fish in Norwegian waters swim into our waters, where we catch them. We might still have our fish and chips because Norway does such a good job of conserving its fish stocks that at least some fish are left in the North sea. We must seriously consider reforming the common fisheries policy. Again, I do not expect a definitive answer from the Minister now, but at least she has heard my views, which I hope have been helpful.

5.29 pm

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