| Agenda 2000: Financial Aspects
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Dr. Cable: My view, which is perhaps unique among members of the Committee although some may sympathise is that the dominant source of revenue for the EU should be nationally paid contributions based on the ability to pay, which in turn is based on GDP, for which we have argued. In the long run, we should be considering the possibility of the EU having its own source of revenue: there is nothing wrong with that in principle. If an appropriate base for the taxation system exists, we should examine it sympathetically. I raised the possibility of energy taxation as an obvious subject. A new system of taxation is being introduced by national Governments in Europe, quite independently of each other, which is creating all sorts of complications simply because it is being introduced independently. Thinking 10, 15 or 20 years ahead, there is no reason why this type of tax base should not be appropriate for a top-up to contributions to European funding. But I have no difficulty with the philosophical problem that the hon. Gentleman raised. Dr. Ladyman: rose The Chairman: Order. There are still two hon. Members who wish to speak, and the Minister has a number of matters to which to respond. I should be grateful if contributions were kept rather more brief. Dr. Cable: I apologise, Mr. Gale, for being too generous to members of the Committee. On a final note, another matter that we might consider is seignorage duty. I realise that that is a technical point. However, a lot of revenue will be generated in Europe by the creation of European money, and it is not good enough for the Minister to say that we should not bother about this because we are part of European monetary union we play a part in the overall decision making as to how EMU will develop. It seems highly appropriate that a major source of revenue that generates to Governments or to the EU as a result of the creation of the euro should go to the EU. We should at least be thinking about the technical and practical issues involved. I hope that the Minister, when she replies, will move us a little beyond the defensive role that I understand she must play and deal with these admittedly politically tricky but important questions about how we raise long-term funding for our activities within the EU.
12.29 pmMr. Bill Rammell (Harlow): I welcome the opportunity to contribute to the debate and to the extent of the consensus. It is becoming almost unnerving to observe the harmony and consensus that is creeping into our discussions. I welcome the debate because it is crucial that we open to the public these budgetary discussions about how the EU of the future will be funded. Obviously, the Government have a role in this. The media also has a significant role which it does not always usefully fulfil. I came across an example of that recently in, of all places, the Financial Times, which stated that the
That is published annually by the Court of Auditors in the budget annual report; the Committee is discussing it in an informed manner. For a newspaper such as the Financial Times to be peddling such misinformation is a major cause for concern. We must do everything that we can to open up such issues. Of course it is right to criticise those aspects of European decision making and budgetary matters that deserve criticism, but we need a sense of proportion. I welcome the fact that my hon. Friend the Minister has set iut clearly the Government's intention to defend the British rebate. That is important not only in principle but politically, so that the forces that argue for a different direction on European matters cannot misrepresent what the Government are saying. When we consider the stark figures that we are the fourth or fifth largest contributor while being the ninth, 10th or 11th wealthiest nation in the European Union we cannot defend that system to our constituents. I agree with the hon. Member for Twickenham that during the past two decades we have been moving towards a system that is far more closely associated with relative wealth as expressed through GDP or GNP, and we must continue to do so. We must face up to the fact that we need fundamental reform I welcome the Government's emphasis on that. We need reforms of the structural funds that consider not only relative unemployment levels but relative levels of GDP. We also need to square the circle and face the reality of enlargement. During our question time, I made the point that if we believe in enlargement, either we must greatly expand our structural and regional funds or we must deal with the problem in a different way. We cannot say that we are in favour of enlargement, that we do not want the budget to rise and at the same time that we are not prepared to accept any redistribution of the structural funds within the EU. Politically, we must be honest and up-front about that, and face up to it in our debates. As has been said, without reform, on the current trend, the structural funds would double following the accession of new members in the enlargement process. That is clearly unsustainable. We also need firm reform of the common agricultural policy. As the Minister said, a good start has been made on that. The Commission's proposals would save the British consumer about £1 billion a year. However, the idea encapsulated in those proposals, that compensation payments to farmers who lose out through the process should continue indefinitely, cannot be defended. Across the EU, more public subsidy goes to agriculture through the CAP than to all the other industrial sectors put together. That explains the fundamental need for reform. Those reforms must take place relatively speedily. We have already heard the argument that if we allowed a country such as Poland into membership under the current CAP rules, it would take 60 per cent. of the CAP funds overnight. Clearly, that issue must be addressed in the budgetary proposals before we can proceed with enlargement. Given the time scales involved, if we do not achieve budgetary reform during the German presidency, we can forget any prospect of enlargement in 2002. Indeed, we can forget it for significantly longer than that. We would then run the risk of misleading countries that have gone through enormous structural and economic change to meet the criteria for membership. In response to the comments by my hon. Friend the Member or Gedling (Mr. Coaker), I would say that we need to restate that the reforms are necessary because we want the budget to cope with the enlargement of the Union. In some senses, it is about a moral and ethical duty to the former eastern block countries, because of the changes that they have made. It is also about our own self-interest. If we allow the huge disparity of wealth between the poorer and richer nations of the European Union to continue, the danger of illegal immigration, drug trafficking and, ultimately, the potential for war, are greatly increased. Business opportunities for Britain will also result from enlargement of the European Union, as the single market will increase Europe's population from 370 million to 460 million people. A couple of other issues have been raised. Concern was expressed about the 2.5 per cent. growth rate assumed in the documents. It is arguable that that may be too high, but as my hon. Friend the Economic Secretary said, the budget was based on a percentage of GNP, so even if the growth figure had been overestimated it would not impact on the budget. We also heard about the need to reform other ways in which Europe does its business, and the need to cut administration costs and the cost of pension arrangements. That is absolutely correct. I hope that in discussions with the Council of Ministers, my hon. Friend will speak forcefully of the need for such reform, and make a plea for the European Commission to stop scoring own goals. I refer in particular to last week's press report about the fact that European commissioners would continue to receive duty-free allowances while the European Union is pushing ahead to abolish duty-free goods. I welcome the fact that Neil Kinnock, one of our commissioners, has said that he does not intend to take those allowances. However, from the perspective of the ordinary voter, it is incomprehensible that the Commission should be so politically insensitive. I am sure that my hon. Friend will make that clear. We must also tackle fraud. I do not defend fraud in the EU in any shape or form. However, it is important to put matters in context. The detailed reports of the Court of Auditors show that the vast bulk of fraud in the EU is the result of the misapplication of funds, false form-filling and the like. It is a bureaucratic problem rather than fraud for personal gain. That point, too, needs to be firmly put. I welcome the Government's strategy in the negotiations. I hope that our firmness will be tempered with a realisation of how we can achieve what we want. The hon. Member for Maldon and East Chelmsford spoke with much relish of defending the British people with the words, "No, no, no." We should learn from the experience of other European nations that it is possible to stand up for one's national interests and to negotiate effectively without creating offence or losing the support of other member states. We need that support to win the argument. I am sure that my hon. Friend the Economic Secretary will bear that in mind.
12.39 pmMr. John Wilkinson (Ruislip-Northwood): If the Committee does not deem it inappropriate on Armistice day, I shall start with a military metaphor. I believe that the Government have opened a new front today in the battle for the hearts and minds of the British people by initiating a charm offensive on their European policy. The Economic Secretary is, in every respect, better than the bogey-persons who have previously spoken for Brussels from the Government Front Bench. She comes to these difficult issues with a clear intellect and a ready smile. But those who involve themselves at a high level with European matters always have a ready smile; they have eaten, have they not, of the lotus of privilege that is at the heart of the running of the European Union. The Economic Secretary spoke of a people's Europe, but those whom I represent and, I suspect, many of the electors represented by other members of the Committee are clearly not benefiting from the budget or from much else in the European Union. They see a vista of stretch limos, photo opportunities and l'Europe gastronomique around the Grande Place, which is far removed from the reality of their daily lives. The hon. Member for Harlow spoke with great perception about the perpetuation of duty-free allowances for European commissioners. He could have spoken of the preferential tax regimes that they personally enjoy. His electors who work at Stansted may lose their jobs because of the European Union's withdrawal of duty-free concessions on intra-EU flights, as might my electors who work at Heathrow. We should also bear in mind our huge expenditure in respect of the European Union, which was described in the Financial Times on 17 September as "The price that must be paid for friendship". True friendship has no price. We are providing £10 million for the destitute people in the four countries of central America that have suffered the effects of the hurricane, yet we provide £10 billion to the "fat cattery" of the European Union. Surely that is an iniquitous misuse of resources. There are increases in expenditure in most of the categories listed in the financial perspective, such as that for agriculture. No doubt set-aside will be well provided for; more money will go to the big landowners for growing nothing. Tell that to the banana farmers of Honduras. They have already suffered enough from the EU banana regime. The big agriculturists in east Anglia and elsewhere will do very well out of the set-aside regime. What about the internal and external policies, administration and accession financing? There will continue to be even after enlargement a need for cohesion and structural funding, but it will have its cost. That cost is in the livelihoods of our people, because it will make it easier does it not? for our competitors to gain an advantage at the expense of British industry and exporters.
The Commission is perhaps realising that its forecasts for the growth of both existing and prospective member states of the European Union are likely to be wildly wrong certainly over a quinquennial perspective. It adumbrates a series of potential additional imposts. Let us go through them: for example, a CO{**ep2 energy tax. We live in a global economic environment. If nothing else, surely the present recession has brought that home. Do we want to hobble our industry further? Because of the different patterns of production, it is appropriate for there to be different patterns of energy taxation.
We are discussing a serious matter, but disparities in the net contribution most concern members of the Committee. Increasing resentment at those disparities will grow in the European Union, and at the fact that the EU will seek over time, because its appetite for more money is insatiable, to acquire new powers of taxation. I suspect that our electors will not be prepared forever to pay the EU's price for its friendship. It will probably all end with a Boston tea party of a bust up; that is regrettable. The danger of having taxation imposed that is not approved by the electors is that it will lead to resentment and more tension, rather than more friendship in the European Union.
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| ©Parliamentary copyright 1998 | Prepared 11 November 1998 |
