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Baroness Williams of Crosby: My Lords, I thank the noble Lord for giving way. On that point, does he accept that if the growth figures over the next two years fall short of the assumptions made by the Agenda 2000 report there might then be the necessity for a review; otherwise the limited funds that are now required for expansion would not be there?

Lord Whitty: My Lords, I was coming to the estimates for growth, and I shall deal with the point now. The report estimates growth of 2.5 per cent. It is clearly prudent for us to have some contingencies around that figure. We do not believe that the figure would fall substantially below 2 per cent., but even with a slight variation there would obviously be greater pressures on the budget ceiling than there are in the mainstream estimation within the report. That seems to increase the necessity for ensuring that reform takes place whereas a declaration now that we will review in 2002 seems to take some of the pressure off the necessity for reform.

We do not agree with the committee's recommendation for a mid-term review of the ceiling. Obviously, if circumstances change, a review may well be necessary. To declare it now would, as I said, take the pressure off the need for reform. The Government therefore insist that there can be no increase in the own resources ceiling. In that we are in good company. The great majority of member states have a similar view. It is one of the strongest levers we have to press for policy reform which, as the committee suggests, is essential for enlargement.

We agree with the committee that governments must look closely at all the figures. They must tell their own electorates the implications of the figures. We do not want to do anything that will reduce the pressure for reform.

I shall deal with one or two of the other points raised during the debate. The receipt of structural funds has clearly been of great benefit to many UK regions, as in other countries. I do not believe that the outcome of the current negotiations will be as cataclysmic as my noble friend Lord Desai suggested, but there will be changes. We do not yet know the outcome of the negotiations.

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There will clearly be pressures not just from the UK regions but from Spain, Portugal, Greece and Ireland on those fronts.

On cohesion funds, the Commission proposes no increase from 1999-2006. We agree that there is a problem in relation to the definition of what cohesion funds are for. We should not over-estimate their significance. Even by 2006 the figure will be under 7 per cent. of total structural and cohesion fund expenditure.

A number of noble Lords referred to the recommendation that more co-ordination should be adopted by western European countries on the expansion of NATO and the EU. I agree that the costs of both should be considered and that there is a vital security dimension to the expansion of EU and NATO. The costs of NATO will be much lower than the cost of EU enlargement. Those costs have been assessed recently. The Government will shortly be able to give further details of them.

I need to respond to my noble friend Lord Desai who accused some of us who advocate enlargement of being romantic and emotional. I confess to being a little romantic and emotional about these things. When I was a young man I travelled quite extensively. In the early 1960s I visited rural Ireland, autarkic and fascist Portugal, and communist Czechoslovakia. Many parts of Ireland and Portugal were virtually third world. Czechoslovakia, although apparently more advanced, was repressed, albeit with a slight air of hope which all too soon was taken away by Brezhnev's tanks.

As has been said in the debate, Ireland is now at 90 per cent. of the EU average, on a par with the UK. Portugal, like Spain, is a burgeoning society committed to democracy and with an impressive economic record, much of that due to the efforts of its own people. A large part of the economic improvement and the consolidation of democracy in Portugal, Spain and Greece has been aided immeasurably by their membership of the EU. Regrettably, Czechoslovakia, like the rest of central Europe, went backwards from the 1960s both in terms of its economy and human rights.

In the way that we helped Ireland, Spain, Portugal and Greece, we owe it to the Czechs and the other countries of eastern and central Europe which have suffered 40 years of communist repression, fascist repression and, before that, war, to help them to come into the democratic world of western Europe. In the end, it was not western pressure; the people of those countries defeated communist governments in a remarkable and almost bloodless revolution. We spent 40 years spending vast sums of money on military hardware when we thought they were pawns in Soviet expansionism. I find it difficult to reconcile that with being begrudging about the relatively small sums of money which we need to find in order to bring those countries into the European Union.

The Government wish it to be on record that they agree with the committee on the potential costs of enlargement and the uncertainties surrounding it. We do not in any way regard those uncertainties as reasons for delay. Quite the opposite. Enlargement negotiations and

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ratification will take time. Even successful outcomes will be subject to lengthy transitional periods. Internal institutional and financial reform must take place in the interim, but we must start this process now.

In a few days' time, the Prime Minister will go to the summit in Luxembourg seeking progress on at least the principles for that institutional and budgetary reform. But it will be under the British presidency that we will see the first momentous steps in the European conference and in the bilateral formal negotiations towards creating a common European home for eastern and western Europe. The Prime Minister will be launching that British presidency tomorrow and enlargement will be central to his themes. This Government stand ready to undertake their historic responsibility in that respect, but at the same time we are humble enough to continue to take advice from your Lordships' committee and from my noble friend Lord Barnett.

9.15 p.m.

Lord Barnett: My Lords, I thank my noble friend for those final remarks. I am delighted to hear that the Government will take note of all but one of our recommendations. I thank all noble Lords, particularly members of my committee, for their kind and generous remarks about my contribution. It was the committee's work, and I was delighted and honoured to have the pleasure of chairing such distinguished and able colleagues.

I thank the maiden speakers. When I listened to the noble Lord, Lord Garel-Jones, I thought that I was in the wrong debate. European monetary union was only briefly mentioned in our report, but he and my noble friend Lord Shore could not resist mentioning it. We had the single currency argument all over again. I am grateful to the noble Lord, Lord Garel-Jones, because I agree with him. However, my noble friend Lord Shore knows that I agree with him on most issues but I disagree with him entirely on anything to do with the EU. I disagreed with him again today. I thank both maiden speakers for two excellent speeches. My noble friend Lady Young of Old Scone was good on the environment. I am sure that the House was delighted to hear both maiden speeches and the non-maiden speech of the noble Baroness, Lady Ludford.

I am delighted by the way in which the House received our report because I like to think that it was an excellent report. Perhaps I may make one comment to my noble friend Lord Whitty about his disagreement with our recommendation on a possible review of the own resources issue. Although I was not happy, I was not too surprised to hear what he said. In some ways, I was pleased because it means that the Government may have read the report. I was worried that they may not have done so. It elicited from my noble friend an answer to a question asked by the noble Baroness, Lady Williams, which included the words "if circumstances change". I noted those words carefully in a speech by my right honourable friend the Chancellor of the Exchequer in another context. I hope that they will enable us to join a single currency well before a fixed time of five years. But that is another matter. I assume

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that my noble friend used the words "if circumstances change" with the authority of the Cabinet itself. I see him smiling in agreement and I hope that I am not upsetting him too much. I do not want to see him sacked because he is a good Minister.

The noble Lord, Lord Higgins, speaking from the Opposition Front Bench, reminded me of the days when we used to debate across the Floor of another place. I was not surprised to hear a highly intelligent contribution. He referred to the problems of agriculture and what they might be with the incoming countries. I did not refer to it before but it is worth quoting a reply from Mrs. Hubner. It is Question 39 on page 11 from the noble Baroness, Lady Williams. Mrs. Hubner was an excellent witness and she said that:

    "there is a myth of Polish agriculture which is based on the real agriculture of Poland that we had in the past. The last census, the 1996 census, I think shows that Polish agriculture is not as it is presented very often. First of all, it is not for example, 28 per cent. of the population, it is just 25. Out of the 25, one third, more or less, depends on the income from agriculture. Around 50 per cent. work".

That demonstrates to me that one should be extremely careful about the use of statistics. The plain fact is that when it comes to agriculture in Poland, the people are not selling what they produce. They produce for the family and one member of the family or another works elsewhere. So that destroys many of the statistics we often take too much for granted.

I learned my own lessons this evening from the noble Lords, Lord Higgins and Lord Wallace of Saltaire. They gave me an explanation of the regatta approach, to start negotiations with the 10, rather than the five plus one which we should prefer. I had not realised--and indeed the noble Lord, Lord Wallace of Saltaire, obviously did not realise--that it could be a handicap race. The noble Lord, Lord Higgins, is a former senior athlete in other fields. He knows about these matters and he said that it may be a handicap. I hope that it will not be a handicap when we come to start negotiating on a bilateral arrangement.

It has been an absolutely excellent debate and I am obliged to everyone who has taken part in it. I hope it will be helpful and I hope that it will be read widely. I hope that somebody will take note of the recommendation that copies of our report should be made available to those attending the meeting of the Council in Luxembourg on 12th December. It will be extremely good reading for them. I hope that they will take note of the majority of our recommendations. We know that at least one recommendation will not be accepted by the Government. If they take note of our report, I hope and believe that that may contribute to a successful enlargement which will be to the benefit of all concerned.

On Question, Motion agreed to.

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