HC Deb 03 July 2001 vol 371 cc143-234

Order for Second Reading read.

3.30 pm
The Chief Secretary to the Treasury (Mr. Andrew Smith)

I beg to move, That the Bill be now read a Second time.

The Bill is just the thing for a warm and soporific July afternoon. The Berlin European Council in March 1999 was an important step forward for the European Community and the United Kingdom. It initiated several important reforms to help to prepare the European Union for enlargement. It was also a negotiating success for the UK, securing no increase in the own resources ceiling, bringing EU spending under control and protecting the UK abatement. By making a shift away from the traditional own resources basis towards the gross national product basis the Council made contributions fairer and less vulnerable to fraud.

The Bill will carry into effect the financing decisions of that Council. I commend it to the House and I hope that Conservative Members as well as Labour Members will support it. It will be something of a test of Conservative Members' readiness to listen to the right hon. and learned Member for Rushcliffe (Mr. Clarke) and to engage sensibly with the serious realities of Europe. We will all be interested to see how they get on—[Interruption.] I think that the hon. Member for Hertsmere (Mr. Clappison) is giving us a taste of how they will get on. High though my regard is for him, I am disappointed that, yet again, I am denied the opportunity to debate with the hon. Member for West Dorset (Mr. Letwin)—[HON. MEMBERS: "Where is he?"] My hon. Friends might well ask that. Every time that I challenge him to a debate he seems to be gagged and to have disappeared.

Mr. John Redwood (Wokingham)


Mr. Smith

I will give way to the right hon. Gentleman on gagging the hon. Member for West Dorset.

Mr. Redwood

I did not guarantee to talk about that issue. I want to talk about the issue at the heart of this debate. Will the Government tell us which European taxes they favour under clause 16 of the document from the Commission that we are discussing today? They signed up to the introduction of European taxes by 2006 and the House has a right to know what sort of taxes they want.

Mr. Smith

As we have made clear, and as the right hon. Gentleman knows, any change to the tax regime in Europe is a matter for unanimity. We have made the UK position clear: we do not accept the need to introduce new taxes. Moreover, we strongly support imposing and maintaining firm financial discipline on the expenditure of the Community, as does the Bill.

In carrying into effect the financing decisions of the Berlin summit, the Bill is an important stage in the reform of EU finances. At Berlin, we met our key objectives of bringing EU spending under better control, retaining the own resources ceiling at its previous level and safeguarding the UK abatement.

To set those achievements in context, the earlier agreements on EU spending in 1988 and 1994 allowed for real increases of 17 per cent. and 22 per cent. respectively over the five years of those deals. By contrast, the Berlin agreement will stabilise EU spending. For the first time, spending in the EU 15 is projected to be lower in real terms at the end of the seven-year planning period than it was at the beginning.

The Berlin deal also maintained the UK's abatement in full and maintained the overall ceiling for Community own resources at a constant 1.27 per cent. of EU national income, thereby contributing to strict budget discipline and better control of EU spending.

Sir Teddy Taylor (Rochford and Southend, East)

Are things going to get better? As the right hon. Gentleman knows, they are celebrating in four countries in Europe—Germany, Austria, Sweden and the Netherlands—because they have been assured that they will pay less. If they are to pay less, does not that mean that others will pay more?

Mr. Smith

Proportionately and relatively, countries not on the hon. Gentleman's list—except the UK whose abatement is safeguarded—will contribute more to the UK abatement. As I was saying, it is an achievement of the Berlin agreement and a UK negotiating success that we fully protected the abatement. At the end of the planning period, expenditure in the EU 15—although there are costs of enlargement that I shall come to later—which was about 89.5 billion euros in 2000, will be 89.3 billion euros in 2006. Anyone with knowledge of the history of the growth of EU spending will know that to bring it under that degree of control is a considerable achievement.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

I am not terribly clever so I do not quite understand how we can, at one and the same time, cap expenditure and expand the Community yet be allowed to retain a complete abatement. Is the Chief Secretary seriously telling us that, under other provisions in the measure, there will not be a way of taking in much more taxation for the use of Community institutions, but under a different heading?

Mr. Smith

The ceiling of 1.27 per cent. to which I referred relates to gross national product. Of course, it is true that, as the EU's GNP grows, so too does the allowable expenditure. The financial perspective—the framework on spending—does indeed show lower real-terms expenditure planned in the EU 15 in 2006 than in 2000. In contrast to the history of the past growth of EU spending, that is an achievement and is to be praised.

Mr. John Bercow (Buckingham)

The hon. Member for Crewe and Nantwich (Mrs. Dunwoody) is far too wily a bird to be taken in by the right hon. Gentleman—the sooner he recognises that pertinent fact, the better. Will he return to the point that he was making a moment ago? He claimed fully to have protected the British rebate but then went on, in a stealthy, subordinate clause, to acknowledge that there are implications of EU enlargement. Why does he not spell out factually now, in plain and simple terms, what we will soon realise to be the case—that this country will have to forgo, as part of the enlargement process, windfall gains that we would otherwise have secured?

Mr. Smith

My hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) is indeed too wily either to be taken in by, or to make too much common cause with, the hon. Gentleman. The truth is that we have protected the abatement. Moreover, we will benefit from abatement on any new expenditure incurred as a consequence of both enlargement and the ceilings in the existing EU 15.

The hon. Gentleman refers to windfall gains. A precedent was given by Sir Geoffrey Howe who, I think, described a previous agreement as not a euro more, not a euro less. That precedent, which is fair, is that there should be neither a windfall gain nor a windfall loss as a consequence of these adjustments.

The abatement is protected in full. The precedent, in both 1992 and 1998, was that it would be unfair for us to benefit twice: to benefit from the substance of the changes that we had argued for and welcomed, and to benefit accidentally as a result of the way in which the abatement was applied. There would have been a double gain if those windfall gains had not been adjusted in the way that I have described, which was consistent with what was done in 1992 and 1998.

The important thing is that we said that we would protect the abatement, and we have protected the abatement. Moreover, the United Kingdom will benefit very considerably from the application of the abatement to any new expenditure on enlargement. Expenditure that was incurred before accession does not fall within the abatement, just as it does not fall within the basis of the calculation of the expenditure that I referred to previously.

Therefore, the abatement has not been an issue as far as pre-accession expenditure is concerned, and the abatement will not apply to such expenditure as it continues in future, but it will apply to all new expenditure. That was a considerable negotiating gain. Many of our partners in Europe would have said that the United Kingdom should have surrendered the abatement. We certainly did not and would not, because we want United Kingdom contributions to the EC budget to continue on a basis that is fair, and is combined with the stricter discipline on overall EU expenditure—very much stronger discipline than Conservative Members voted for when they voted through the European Communities (Finance) Act 1995.

Mr. Nicholas Winterton (Macclesfield)

The Chief Secretary gave a very full answer to the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), but will he tell the House what contingency has been made for the situation that will arise if the economic growth to which he referred does not occur, and there is a reduction in growth in the European Union?

Mr. Smith

If the GNP of the European Union were to come down, the ceiling on expenditure would come down with it. It is right for that discipline—ensuring that spending bears a relationship to what is affordable on the basis of the production and wealth of the EU—to be imposed.

I draw a very strong contrast with what happened previously. When the last two EC finance Bills were passed, under a Conservative Administration, the ceiling went up. We kept the ceiling in place at 1.27 per cent. Before Berlin, many Conservative Members claimed that we would be unable to safeguard the abatement or maintain financial discipline, but we did. It is reflected in the Bill, so Conservative Members should support it.

The UK contribution will not increase as a result of the new own resources decision, and we shall gain a fair benefit from the application of the abatement to new costs of enlargement. The UK's abatement also means that other changes agreed at Berlin have a neutral financial impact on the UK. Overall, the new own resources decision is a very good deal for the UK, leading to no increases in our contribution and keeping the abatement.

Other elements of the Berlin conclusions also benefit this country. The tight controls on common agricultural policy spending that we negotiated will mean a fall in the price of cereals, beef and milk, bringing benefits of £1 billion a year in Britain—about £70 a year for a family of four. Indeed, the summit represented the most radical reform of the common agricultural policy since its inception; spending on the CAP will decline in real terms from 2002 onwards.

Berlin also introduced the so-called second pillar of the CAP. The increased focus on rural development is a significant and welcome advance. It moves the CAP from production-based subsidies and towards incentives that are more sensitive to the environment, tackling some of the anomalies and perverse incentives of the current system.

Another welcome feature of the changes to EC financing emanating from Berlin was the reform of EU structural and cohesion funds. That streamlined the categorisation of funds, while maintaining a level of funding for UK regions amounting to £10 billion over the years 2000 to 2006. The funds are addressing structural difficulties in qualifying regions, assisting economic development and promoting skills.

The financial reforms to which the Bill commits us pave the way for the enlargement of the EU, which my right hon. Friend the Prime Minister described in Warsaw as perhaps the EU's greatest challenge, but also its greatest opportunity. As I believe is widely acknowledged in the House, enlargement will bring great economic benefits to central and eastern Europe, providing an opportunity for growth, development and prosperity. EU membership will help to raise standards of living and spread education and employment opportunities. It is important to stress that it will benefit existing EU countries as well. Expanding the single market will increase trade, stimulate competition, cut input costs, improve access to larger labour markets and encourage productive investment.

Mr. Eric Forth (Bromley and Chislehurst)

Perhaps those of us who have always thought that enlargement was a big mistake should vote against the Bill, as it may be our only opportunity to express that point of view. Beyond that, given the excellent wisdom and judgment of the Irish people, expressed recently in a referendum, about what the Chief Secretary is now claiming for enlargement—they were not conned for a moment—will he now give us a referendum on Nice before we make the final commitment?

Mr. Smith

No, and I have no intention of joining the right hon. Gentleman in ascribing motive or advice to Ireland; it is a matter for the Irish people to sort out. I said that I thought, genuinely, that there was a measure of understanding on both sides of the House that enlargement was a good thing.

Mr. Forth


Mr. Smith

That speaks volumes about the attitude of the Conservative party to this major historic opportunity to entrench greater stability, prosperity, freedom and respect for democratic rights in central and eastern Europe, of which every hon. Member should be proud.

Mr. David Drew (Stroud)

On connecting the agricultural changes to enlargement, does my right hon. Friend agree that it is essential that the changes to the CAP are in place as soon as possible? Otherwise, any talk of expansion will be completely out of the question. That is particularly true of the dairy regime, where the introduction of Poland would completely wreck any CAP funding, unless that funding was completely changed beforehand.

Mr. Smith

The Berlin conclusions represented a significant step forward in terms of the momentum behind reform of the CAP, and the fall in total expenditure between 2002 and 2006 is an achievement. No one underestimates the force of the argument that my hon. Friend advances. Further reform of the CAP must accompany enlargement. That is one way in which we can secure welfare gains for the existing populations of the EU, as well as the economic benefits that I have described for the peoples of central and eastern Europe.

The Berlin reforms are an important part of a continuing process of reform in Europe, which the UK is leading. At Lisbon, Europe's Governments signed up to economic reforms to enhance labour market flexibility and capital and product market modernisation, bringing more open markets and greater competition. At Stockholm, the EU pressed ahead with measures to meet the strategic goal of raising the EU' s productivity and employment performance beyond that of the best in the world by 2010.

Those measures will complement the Government's domestic efforts to raise productivity and we will continue to advocate this reform agenda so that we see the completion of the single market in utilities, energy, telecoms and financial and professional services. We want a reformed Europe that is outward looking, rather than inward looking, that actively pursues multilateral trade liberalisation and closer transatlantic trading links through the launch of a new world trade round and that lives up to our responsibilities to relieve the debt of poor countries and tackle global poverty.

We also support administrative reform in Europe to cut out waste, fraud and corruption. The Government fully support Neil Kinnock's reform programme to modernise the administration of the Commission, and it was, of course, my right hon. Friend the Chancellor of the Exchequer who proposed the establishment of the new European anti-fraud office, with independent powers to seek out and tackle fraud against the EC budget.

Mr. Bercow

Will the right hon. Gentleman give way?

Mr. Smith

No, I want to make progress; I have given way a lot.

On EC finances, CAP reform, enlargement and honest administration, the Government and the Bill are on the side of modernisation and progress, with constructive engagement for change. It is instructive to compare the Bill with the previous European Communities (Finance) Bill, which was introduced in the House by the right hon. and learned Member for Rushcliffe in 1994. Unlike this Bill, that measure increased the ceiling on EC spending, did nothing to cut fraud and waste or to reform the CAP. In introducing it, he argued: That increase in the contribution is … the price that we pay for the undoubted benefits of membership of the European Union. We pay for a seat at the table to enable us to influence the political and commercial character of that market."—[Official Report, 28 November 1994; Vol. 250, c. 932.] That Bill, which became the European Communities (Finance) Act 1995 and which would be repealed under this Bill, increased the United Kingdom's contributions. He said that it would do so by "about £250 million." Who voted for that Bill? The right hon. and learned Member for Rushcliffe certainly did so—he has been consistent in such matters.

Mr. Bercow

I certainly did not.

Mr. Smith

The hon. Gentleman was not even here then.

Who else appeared on that Division list? Yes, the right hon. Member for Haltemprice and Howden (David Davis) is on that list. The hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) is also there, as is the right hon. Member for Devizes (Mr. Ancram) and, yes, the right hon. Member for Kensington and Chelsea (Mr. Portillo), the then Member for Enfield, Southgate. All today's Tory leadership contenders voted for those higher contributions. That shows that the right hon. and learned Member for Rushcliffe can get most of the rest of the Tory party in the Division Lobby behind him on Europe—even though they were losing the argument then, just as they are now.

It was not just the charms of the right hon. and learned Member for Rushcliffe that got the Tory party to vote for the 1995 Act, nor even the then Prime Minister's having made it a vote of confidence; their argument then was that the House had to support the British Government in honouring their international obligations and commitments. If that were true then, it is equally true now, and Opposition Members should support the Bill. However, the more important reason why they should support it is that ours is a better Bill, based on a better agreement.

This Bill is tougher. It will stabilise contributions and it will keep the EC budget to the same ceiling. It will tackle fraud and waste. It will reform the CAP and it will enable enlargement to proceed. The Berlin conclusions represent an important step in the on-going process of reform in Europe; they show that by engaging with Europe Britain can win the arguments and secure change. The Bill, under which the Berlin agreement will be ratified, will involve stronger controls on EU spending, the beginnings of a more effective agriculture policy and no increase in the own resources ceiling. The agreement is a good deal for the United Kingdom and an important step for the EU, and I commend the Bill to the House.

3.54 pm
Mr. James Clappison (Hertsmere)

I am not sure about the billing that the right hon. Gentleman gave me, but I welcome him on his return to the Dispatch Box on what I think is the first occasion that he has spoken from it since his reappointment as Chief Secretary to the Treasury. I also intend to pay him a compliment by saying that, having now heard his arguments for several months, I know that he never betrays the merest hint of doubt or timidity in putting the Government's case; he stays resolutely on message however overwhelming the evidence to the contrary. I have listened carefully to his arguments that the agreement was a good deal for Britain, but the more he was cross-examined by my hon. Friends, the more tortuous, unconvincing and lengthy his arguments became.

The Chief Secretary asked us for our view, so I shall make it clear. We do not share the Government's evident sense of self-satisfaction or the description of the budgetary decisions that are embodied in the Bill as a negotiating success. Much needs to be done to reform the European Union budget and these decisions do not even begin to reform it. The outcome is disappointing for United Kingdom interests.

The House will be aware that there are long-standing, natural and legitimate United Kingdom concerns about the EU budget, about the unbalanced nature of the Community's expenditure policy, about the incidence of fraud and waste in the EU's spending policies and about the net cost to the United Kingdom of the EU's revenue and expenditure policy. We believe that, in the decisions that are embodied in the Bill, the Government have missed an opportunity to do something about those concerns. The cost of that missed opportunity will be borne by taxpayers and households in the United Kingdom.

I was interested to hear the Chief Secretary's history lesson. He took us back to the legislation of the 1980s and 1990s, and he went as far back as the time when Geoffrey Howe was responsible for such issues. Hon. Members will have noticed what a big point the Chief Secretary made about the abatement mechanism and how he claimed that it was an achievement of this Government to have continued it. However, I gently remind him of who exactly negotiated the rebate in the first place. It was negotiated by a Conservative Prime Minister in the face not only of the natural hostility of other European member states that were representing their interests but of the predictions from Labour Members that the then Prime Minister would go to the negotiations in Fontainebleau and return with not a penny piece. Amid all that hostility, it was a Conservative success and a real achievement to have negotiated the rebate mechanism that has saved much more than £20 billion for this country. Indeed, it will save us £2 billion this year.

The United Kingdom, however, remains a net contributor to the European Union and, in the last calendar year, made a net contribution of just over £4 billion. As the Chief Secretary said, the own resources decisions provide for the continuation of that abatement mechanism, but although he tries to trumpet that as a success, it would appear on closer examination that, while the position of the United Kingdom remains the same, that of other member countries has been improved by the decision.

Given the requirements of European treaty making and decision making, it would have been difficult for the Government to fail to bring back the abatement mechanism, because they have a veto. Although they had a veto to protect their position on that, they did not succeed in taking the United Kingdom's position any further forward by returning any more resources to this country from the net contribution that we make to European Union funds.

Joyce Quin (Gateshead, East and Washington, West)


Dr. Nick Palmer (Broxtowe)


Mr. Clappison

I shall give way to the right hon. Lady first, because she was a Minister with responsibility for Europe.

Joyce Quin

Given that, before the meeting in Berlin, Conservative Members predicted that the abatement was in danger, that we were in danger of breaching the own resources ceiling and that we would get a poor settlement on structural funds, will the hon. Gentleman now admit that they were wrong on all three points?

Mr. Clappison

Our view was based on a completely honest, accurate and objective evaluation of the negotiating skills of those who were representing us at the European summit. They came home with nothing.

Dr. Palmer

The hon. Gentleman stresses in critical tones that we are net contributors to the EU. Were we to have a Conservative Government, would it be their policy to refuse to be a net contributor in the future?

Mr. Clappison

I think that the hon. Gentleman would make common cause with me in agreeing that we should try to bring down the net contribution by as much as possible, but the Government have failed to do that. The right hon. Member for Gateshead, East and Washington, West (Joyce Quin) shakes her head, but she will know the facts because she has been an Agriculture Minister as well. The Government have failed comprehensively in their attempts to bring down agricultural spending when their record is compared with that of Conservative Governments throughout the 1980s and 1990s.

My hon. Friend the Member for Rochford and Southend, East (Sir T. Taylor) referred to the way in which other countries have benefited from the negotiations while we, at best, have stood still. Although the language in the explanatory notes is as torturous as the Minister's argument, the Government cannot avoid admitting that the financing arrangements of the correction are changed to reduce the amount borne by Germany, Austria, Sweden and the Netherlands. We are also net contributors to the European budget, but our contribution has not been reduced.

Dr. Robert Spink (Castle Point)

Will my hon. Friend clarify a detail of the negotiation? Is it not a fact that the Prime Minister yielded part of the abatement that we should have received as a windfall from enlargement, and is that not worth hundreds of millions of pounds a year?

Mr. Clappison

My hon. Friend is right. He raises the important question, which I have pondered, of when is a windfall a windfall, and when does it contribute something to someone else? A windfall is an interesting term to use.

Before I deal with that, however, I want to emphasise the fact that although other member states in a budgetary position similar to the United Kingdom's benefited from the negotiations, little progress was made on reducing our net contribution to the EU budget. After the negotiations and the legislation, with which the Government are so pleased, the UK will continue to pay to receive the benefits of EU membership, to which the Minister referred, while other members obtain those benefits and receive a payment or make a smaller payment than we do. I listened carefully to what he said about the future of the net contribution. Implicit in his comments was the idea that the UK will remain a net contributor. He did not say whether that diminished or grew as a result of the negotiations.

On the windfall, the explanatory notes say: provision is made for the United Kingdom to forgo the 'windfall' gains it would have received from the switch from VAT-based contributions to gross national product-based contributions and from the decision to allow members to retain a higher proportion of customs duties. It will be interesting to know why a change that the UK might obtain is characterised as a windfall and is thus a benefit that must be removed. Given that we have been such a large net contributor to the EU budget—the second largest after Germany—a windfall is exactly what many people see other member states getting as a result of our membership. Householders and taxpayers of this country will think that our Government should fight to preserve or obtain what is described as a windfall if it means making a cheaper contribution and lower taxes for our citizens. No doubt there will be an interesting technical explanation for that, and perhaps the Liberal Democrats will be able to give it.

Mr. Edward Davey (Kingston and Surbiton)

I am afraid that I cannot help the hon. Gentleman on that, but does he agree that the normal dictionary definition of a windfall gain is a one-off gain? Does he, like me, suspect that some of the windfall gains that are referred to in the explanatory note might be on-going gains?

Mr. Clappison

I am surprised. That is a rare example of the phenomenon of a Liberal Democrat criticising the Government. The hon. Gentleman makes a legitimate point. The windfall to which he refers will recur year after year, and I am grateful to him for drawing attention to that.

No doubt there will also be an interesting technical explanation for the claim in the Labour party manifesto that our contributions are falling to similar levels as France and Italy. That may be true of gross contributions, but it is certainly not the complete picture for net contributions, which are what matter.

The Economic Secretary pulls a face, so let me tell her what the Court of Auditors annual report for 1999 said about the net contributions. She might care to tell us later how that fits in with the Labour party's claims that our contributions are falling to levels similar to those of France and Italy. The report gives the net contributions as follows: France, £766 million; Italy, £1,153 million; the United Kingdom, £3,482 million. I should be interested to know how those could possibly be described as similar levels.

I turn now to EU expenditure on agriculture, which the Chief Secretary was brave enough to describe as the most radical reform of the common agricultural policy. He was prepared to go a little further than the Prime Minister, who in his statement following the Berlin European Council said that the Council had brought the common agricultural policy under tighter control than before. Agriculture spending by 2006 is planned to be less than 2 per cent. in real terms above its level next year, and falling."—[Official Report, 29 March 1999; Vol. 328. c. 732.] In fact, agriculture spending, as a proportion of the total EU budget, is undiminished by the decisions made at Berlin, and I understand that the proportion will rise from 44 per cent. in 2000 to 46 per cent. in 2006. The old problem of the EU budget being unbalanced by huge spending on the CAP remains; the Government have made no progress on that, compared with the substantial progress made throughout the 1980s and 1990s. The Government and the Prime Minister have simply failed to deliver.

Mr. Redwood

I wonder whether my hon. Friend is being characteristically generous to the Chief Secretary and the Government by concentrating more on the United Kingdom's net contribution. The Bill will raise taxes on British people to make gross spending commitments far in excess of the net contribution. Does my hon. Friend agree that many of the spending commitments made by the European Commission in Britain are for projects or purposes that we would never support; and that, under the rules, many of the projects are in any case too marginal to be funded directly out of British taxpayers' money?

Mr. Clappison

My right hon. Friend makes an extremely good point. Not only is there a net contribution, but some of the EU money that comes back to this country is not used for purposes that our Government and our people would regard as a priority.

Mr. Andrew Smith

Does this money form part of the £20 billion cuts? Will the hon. Gentleman start listing where they would fall?

Mr. Clappison

We always know when we are hitting a nerve because the right hon. Gentleman has to come up with a completely different subject and a bogus statistic. I have genuine statistics from the Court of Auditors, on which he relies. I have drawn attention to this country's large net contribution and to the Government's statement that it is falling to a level similar to that of other countries. Of course, the Government want to try to cover up the fact that they have failed to get good value for the British taxpayer.

Mr. Bercow

My hon. Friend is a master of understatement, and that is part of his natural charm. Will he confirm that although agriculture expenditure, as a proportion of the total EU budget, will rise by approximately 2 per cent., as he said a few moments ago, it will rise by about 7.5 per cent. in 2001, relative to 2000?

Mr. Clappison

As well as being understated, I am honest, and I have to say that I do not have that statistic at my fingertips, but knowing my hon. Friend's great interest in statistics, I would be surprised if he were not correct. Another point that might find favour with my hon. Friend—one with which more dedicated connoisseurs of European statistics than me might already be familiar—is that the financial perspective predicted by the EU often turns out to be an underestimate: spending is often far greater than originally predicted.

There are strong grounds to suspect that EU spending on agriculture does not always meet the highest standards of financial regularity. My hon. Friend might think that that, too, is an understatement, but after the Chief Secretary's opening statement, I am trying to be as objective as possible. I think that the view that I have expressed is common ground among many. The Chief Secretary should be aware of the Court of Auditors' statement on the 1999 budget and the court's identification of unauthorised payments totalling more than 1 billion euros made to farmers under the EU agriculture programme.

We are strongly interested in fraud and irregularity. We note the Chief Secretary's comment about the establishment of the anti-fraud office under Commissioner Kinnock. We wish it well, but hope that the predictions that emerge from that office will turn out to be more reliable than some of those made by the Commissioner in the past. We take fraud and irregularity seriously.

On a related subject, we note that spending on administration—a matter with which the Chief Secretary did not deal—is to rise every year between now and 2006 and is to consume an increasing proportion of the EU budget. Spending on administration already amounts to 5 per cent. of the budget; it is set to rise to 6 per cent. in 2006. In fact, it appears to be one of the fastest growing, if not the fastest growing, items of expenditure in the EU budget between now and 2006. I should have thought that he would have more to say about that, given that it, too, is a cost to the British taxpayer.

The Bill and the negotiations that underlie it represent a missed opportunity for the United Kingdom. Whatever spin they try to put on it, the Government have failed to deliver better value for money for the UK taxpayer. They argue that their approach to the EU has at least preserved the UK rebate—one that was negotiated by a Conservative Government. It is hard to envisage a Government as ineffective in negotiations as the current Government managing to secure such a rebate in the first place.

The Government have made scant progress in addressing the problems of EU finance. It is hard to avoid concluding that, once again, they have missed the opportunity to address UK concerns and bring home better value for the UK taxpayer. The negotiations will benefit taxpayers in other countries, but not in this country. Whatever spin the Government put on it, they have missed an important opportunity.

4.13 pm
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.

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 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.

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.

4.26 pm
Mr. Edward Davey (Kingston and Surbiton)

The hon. Member for Bexleyheath and Crayford (Mr. Beard) made an interesting speech, but rather oversold the Bill by suggesting that it was of such great historical importance. I am afraid that he might have been thinking of the European Communities (Amendment) Bill, which will be considered tomorrow. That Bill has a place in history, but I do not think that the Bill before us can be given the same billing. It is a modest measure that arises from the modest decisions taken at the Berlin summit. Indeed, its modesty explains why it is disappointing, as the agreement reached at Berlin was a missed opportunity for the European Union.

Mr. Beard

Does the hon. Gentleman agree that if there had been no agreement on financing the European Union after expansion, no expansion would have occurred?

Mr. Davey

To that extent, the hon. Gentleman is correct, but the idea that the budget would suddenly disappear was not on the cards at Berlin and is something of an Aunt Sally.

The modesty of the Bill was revealed by the Chief Secretary to the Treasury, who told us that the triumph in the negotiations was what was defended and did not happen. He told us that Britain did not lose its abatement and that the ceiling on spending was not raised, but he did not try to sell the Bill to the House in respect of any positive way forward for the European Union and. Britain.

Some of the missed opportunities relate to lack of reform and to the whole budget process. We need to be more ambitious in this House and in the European Union in looking for wider budgetary and common agricultural policy reform. One of the objectives of debates such as this, not only in the House but at European Union level and in the summits, should be to take the money out of the EU altogether. Tory Members should not become excited; I am not suggesting that there should be no budget at the European level and would not agree with such a suggestion. We must, however, focus the debate about money in the EU on policy and activity, not on pork-barrel politics. Much of the debate is currently about which country gains what, but we must move discussion away from that perspective and consider the purpose of the EU and the benefits of spending on particular EU policies and activities.

Mr. Redwood

How can the hon. Gentleman possibly say that this is a modest Bill? It is staggeringly expensive: there will be a cost of about £60 million a year for every word in it, and it is a huge sting on British taxpayers. We are shown how Liberals care about other people's money when we see that they do not understand how much is involved or how much will be wasted or lost through fraud.

Mr. Davey

I am disappointed by that intervention. As the Chief Secretary made clear, the right hon. Member for Wokingham (Mr. Redwood) voted for such Bills, which provided for taking similar amounts of money from the British taxpayer. The right hon. Gentleman is wrong again.

I want to develop the point about taking money out of the political debate on the European Union. As the hon. Member for Bexleyheath and Crayford said, the amounts of money are small, and if we could remove their consideration from the debate we could focus on the EU's genuine benefits. They include the single market, benefits to internal and external security, environmental protection, and the EU's greater international standing and ability to negotiate trade agreements. British taxpayers, companies and citizens gain most from such benefits. The money debate is irrelevant in many ways. We do down the European project by always allowing the debate to revert to relatively small amounts of money—I stress the word "relatively" before the right hon. Member for Wokingham leaps to his feet.

The Berlin decision and the process that underlies the Bill are regrettable. When we debate local government grant settlements, we appreciate how complicated the formulae for sharing the money between United Kingdom local authorities have become. They are even more byzantine than EU formulae. However, as we try to reform those processes for local government and national Government spending, we should share some of the lessons on budgetary reform with other EU countries, many of which are taking similar action. We are not learning the lessons of local and national budgetary reform collectively at European level.

Why do we not consider budget making that focuses on outcomes and outputs? The Chief Secretary has been proud of his public service agreements. They suffer from a few problems, but they represent a move in the right direction. The EU needs to focus similarly. Hon. Members may be surprised to learn that some improvements have been made, primarily through the initiatives of British Commissioners. The draft budget for 2001 was the first at European level to be divided into policy areas. That is an amazing change, which should have happened many years ago. It is the sort of change that we need to be able to analyse European spending sensibly and move away from pork-barrel politics, which the Conservatives go on about but which miss the point.

The previous Conservative Government should take credit for some interesting developments in ensuring that European spending has a legal basis. I should have liked the Berlin agreement and the Bill to move further on that. The previous Conservative Government took a case to the European Court. They contended that some spending by the European Commission had no legal basis. The Labour Government continued with the case and the spending was successfully challenged. That was a UK triumph. Ensuring for the first time that EU spending lines have a legal basis has meant improvements in European budget making. However, much remains to be done, and the Bill is therefore disappointing.

I should like to set out other aspects of budget reform that the Government should consider. If possible, they should use the Bill or any future European meetings to press them. I pay tribute to Nick Clegg, Liberal Democrat Member of the European Parliament for East Midlands. He wrote an interesting article entitled "Spring Cleaning the EU. Doing Less to Do More". I owe some of the ideas on budgetary reform that I am about to set out to Nick Clegg's experience at the European Commission and Parliament. For example, he argues that far too many lines in the EU budgets deal with very small amounts of money. In other words, small pots of money are put forward in a very grand way and attached to grand-sounding policy initiatives, but they mean very little and amount to no more than a row of beans. He argues in his paper that we should delete all those small lines in the budget which together amount to significant, although not huge, sums of money. In that way, the budget could be cut. We need to pursue the idea that there should be no budget allocations in the EU budget that are not related to core EU areas. The European Union, backed by the European Parliament, often puts forward small amounts of money that have nothing to do with the core competencies and functions of the European institutions. We should press for those to disappear under the philosophy of subsidiarity.

Mr. Howard Flight (Arundel and South Downs)

Does the hon. Gentleman have in mind, in that proposal, such matters as EU embassies around the world?

Mr. Davey

That may be one of the areas in question, although EU embassies around the world relate to some of the core functions of the EU, namely security and international relations. The EU clearly has more of a core role there than it has in, for example, tourism in the UK.

I should also like to see other changes. Commissioner Patten's analysis and scrutiny of the way in which the allocation of external aid from the EU has been carried out, or not carried out, in recent years would bear another look. The Government should push for Commissioner Patten's reforms in that area to be adopted.

Mr. Bercow


Dr. Palmer


Mr. Davey

I give way to the hon. Member for Broxtowe (Dr. Palmer).

Dr. Palmer

Is the hon. Gentleman seriously suggesting a total ban on EU spending outside the core areas? Is he thinking of running for the Conservative leadership?

Mr. Davey

To the hon. Gentleman's second question I can give a resounding no. On the first question, I would not want a complete and utter ban because that could become too inflexible. However, we need a massive reduction in those areas because they are straining the European Commission and the institutions of Europe unnecessarily. Much official time surrounds the spending of small amounts of money: putting forward the bids and tenders, auditing and monitoring them, and so on. We are wasting the abilities of Commission officials on paltry policy initiatives. We need to ensure that Commission officials—the bureaucracy—in Brussels focus on what they are there for, namely international co-operation between members of the European Union.

Mr. Bercow


Mr. David Heath (Somerton and Frome)


Mr. Davey

I give way to my hon. Friend.

Mr. Heath

Will my hon. Friend assure me that he will not resile too far from the position that he admirably sketched out? I entirely agree with him that it is essential that the European Union should stick to its core competencies, and that those should be far better defined than they are at present. I do not like the idea of slush funds that can be dipped into around Europe, and he is absolutely right to focus on that issue.

Mr. Davey

I give my hon. Friend the assurance that we in the Liberal Democrat Treasury team will work with our colleagues in the European Parliament to press for that reform agenda.

A further example is the myriad community initiatives that are spending money in individual member states but are administered from Brussels. That is clearly nonsense and contravenes the principle of subsidiarity. I say that because I know that the hon. Member for Buckingham (Mr. Bercow) has a wealth of ideas about subsidiarity and is dying to intervene on me. Just to help him, I shall give way.

Mr. Bercow

I was hoping to help the hon. Gentleman, because I am a naturally helpful soul, as you can readily testify, Madam Deputy Speaker. He laments the narrow focus on moneys to the exclusion or detriment of considering who should be responsible for what. Given that the Prime Minister came to the House as long ago as 18 June 1997 to trumpet the supposed merits of the subsidiarity and proportionality protocol of the treaty of Amsterdam, and was ably supported in the process by the hon. Member for Somerton and Frome (Mr. Heath), will the hon. Gentleman tell the House whether there has been one case of a directive or regulation of the European Union being repealed in accordance with the provisions of that protocol—just one?

Mr. Davey

I am afraid that I shall have to write to the hon. Gentleman, because I do not know whether there has been such a case. I do not claim to be an expert.

Mr. Redwood

There has not been one.

Mr. Davey

If that is true, I regret that. Clearly, we must ensure that the changes that enable such regulations to be repatriated are enforced. That would be welcome on both sides of the House, and the hon. Gentleman does the House no service by suggesting that only his party is interested in such matters.

Another area of budgetary reform involving big numbers is the common agricultural policy. The Chief Secretary to the Treasury told us that major reform of the CAP lay behind the Berlin summit. I wish that were so, because greater reform is needed in the new world. The CAP was born in the 1950s and 1960s, when there were worries about food supply and the economies of European Union countries were much more rural. The world is different now, and we have also learned of the CAP's negative effect on developing countries, which is another reason for reform. The enlargement of the European Union may lead to an explosion of the budget if it remains in its current state, as eastern European countries join. We must be far bolder in reforming the CAP.

We need to develop the painful issue of sustainable agriculture and sustainable management of our countryside. We should ensure that funding goes to smaller farms rather than to huge agribusinesses, and we need to reduce the bureaucracy involved in managing payments from the CAP. Huge sums are wasted on government and private sector bureaucracy. There are only four farms in Kingston and Surbiton, so I cannot claim to be an expert on agricultural issues, but farmers in other constituencies have told me that they spend an enormous amount of time applying for these funds and then showing that they have been spent in the right way. We could get rid of a significant amount of bureaucracy in the private sector if we reformed the CAP sensibly.

Mr. Drew

Does the hon. Gentleman understand the dilemma that we face? The way to open up agriculture is through increased globalisation, which comes at a cost, given the increased risk of animal diseases and the problems with the method of producing crops.

Mr. Davey

I accept the hon. Gentleman's point. It is why the reform of the CAP should be based on wider issues, such as how it could help to develop organic farming across the European Union. That would be one way to deal with the pressures implied in his remarks.

I want to refer to budget accountability. It is remarkable that in recent years the House has debated Bills relating to the European Union's budget in far greater detail than it has debated Bills on the United Kingdom Government's Budget. That goes against the whole debate on Europe. We are told that the European Union is not accountable and that this Parliament has no say, but this Parliament spends more time debating the intricacies of the European budget than it does debating the Budget of the Government who are directly accountable to it.

That is worth mentioning because the House should have a greater hold on the UK Budget, and should consider repatriating some of the good practices on budget analysis at European level. The European Parliament has a debate on the budget ex ante, before it is agreed. How many times has the House had a meaningful debate on the Budget estimates? Under the Standing Orders, we have only three days to debate the Budget estimates. That is absolute nonsense. Again, we need to strengthen the ex-ante powers of the House, and I should have liked an indication in the Bill that the Government wanted to improve accountability more widely.

Some Conservative Members have referred to the European Court of Auditors, which they are always praying in aid for their anti-Europe propaganda. That is partly because the Court of Auditors is such a strong body that it is actually able to root out some of the waste and corruption. We should argue for the strengthening of the auditors who report to the House, and suggest giving them some of the stronger powers conferred on the European Court of Auditors.

The Bill is very modest. It does not do huge amounts for either the European Union or the British taxpayer, and to that extent it represents a missed opportunity. Even so, the Liberal Democrats will not obstruct modest measures, however lacking in courage they may be. We will support the Government tonight, but we hope that, in debating these issues in both the House and the European Union, they will be far more courageous than they have been up to now.

4.46 pm
Dr. Nick Palmer (Broxtowe)

The Bill gives effect to an excellent negotiating result, as has been emphasised by a number of speakers. Such things tend to be discounted in advance and forgotten afterwards. We should pause for a moment to recognise the success of the ministerial team that negotiated, and also that of Britain's overall approach in a positive and co-operative agenda.

When I have travelled in Europe, I have always been struck by the fact that there is little schadenfreude in regard to the problems that have sometimes arisen in Britain over European policy. There is a genuine wish to co-operate and to work with us, and a substantial community of interest. When the British Government reach out to work with European partners and achieve a sensible conclusion, they have an excellent chance of success, as we have seen in this instance.

The main substantive change in the Bill is a shift away from dependence on value-added tax and Customs revenues as the primary source of Community revenue towards a greater reliance on a fair reflection of each state's gross national product. That is welcome for several reasons. First, it is fairer to countries like Britain that have less agricultural, more balanced economies with a strong industrial base. Secondly, it is fairer right down to the individual level: VAT is not predominantly known as a progressive tax, and it is reasonable for each country to contribute according to GNP.

Thirdly—this has not been mentioned so far; it was particularly striking that the hon. Member for Hertsmere (Mr. Clappison) did not mention it—the shift will reduce the opportunity for fraud. Whereas in every EU country it is not unknown for people to try to evade VAT, I know of no attempt to change the figure for GNP. There is therefore a reasonable chance of a positive side effect, namely a reduction in fraud. I hope that in the long term the Government will aim to eliminate the historical and artificial basis of funding as a side effect of VAT and the tariff budget, and substitute a straightforward levy on the basis of GNP, so that each country is fairly treated.

The commentary of the hon. Member for Hertsmere on the Bill reminded me of the old claim that Britain is a nation of shopkeepers. He focused to an extraordinary degree on very small sums of money, to the total neglect of the overall picture. I will give a couple of examples. The entire net contribution of the United Kingdom comes to less than 1 per cent. of Government expenditure.

The hon. Gentleman is particularly exercised by administration, describing it as one of the fastest growing areas of expenditure. The growth rate for administration in the proposals is 1 per cent. The total extra cost to UK taxpayers of the entire increase that he described is 1p per taxpayer per year. That is the area on which the Conservative spokesman focused.

If we are to spend our debating time challenging the figure of 1p, it is reasonable to ask whether the scrutiny that the budget is getting is appropriate—whether it is the sort of scrutiny that the Conservative party has repeatedly claimed is missing from the European scene.

I also noted the hon. Gentleman's general attack on European spending in Britain. He refused to answer the Chief Secretary's question about which European projects in Britain he would cut. He still owes us that explanation. If he does not give it, I hope that the Conservative party will give us further details, later in this debate or in the more general debate tomorrow, about where it wants the axe to fall.

We have all shared in the pleasure of Britain's successful defence of the rebates. It is also fair to note that the House of Lords Select Committee on the European Union observed that the objective of which we need to keep track is not the rebate but ensuring that Britain's share of contributions is fair. Until now, the rebate has served us well. In the long term, as the Committee argued, we should be prepared to consider any approach that secures a long-term basis for Britain's fair share—possibly one without some of the artificial side effects that result in us turning away European spending because of the impact that it would have on the rebate. For the time being, however, the outcome is entirely welcome.

Before considering the detail of the debate it is worth looking at the fundamental question of why we are members of the European Union. Is it—as the hon. Member for Hertsmere seemed to suggest from time to time—to try to make a small profit and reduce our net contribution—[Interruption.]

Madam Deputy Speaker (Sylvia Heal)

Order. Whoever owns that audible pager should silence it or remove themselves from the Chamber.

Dr. Palmer

Thank you, Madam Deputy Speaker.

Why have we decided to be members of the European Union? Is it to make a small profit, or to achieve some long-term concrete goals? If one studies the record of both Labour and Conservative Governments in the past 40 years, the goals become clear. The first is to achieve a lasting peace in Europe. The right hon. Member for Upper Bann (Mr. Trimble) recently attended the commemoration on the Somme and we all know from recent living memory how fatal it can be for our continent if we swerve away from that goal.

That means that we must retain as an overriding objective the goal of European harmony. We spend much time arguing about European federalism and European unity, but the central goal of the European Union is European harmony. We disturb that at our peril. That is why expansion of the EU is so important. It is not to enable us to gain the economic strengths of, for example, Hungary or Poland, but to bring the eastern European countries into the European family of nations so that they, too, are committed to harmony and unity. If that costs us 1p each—or even 2p—we should accept that price.

The second objective is the promotion of trade within the EU. The figures leave no room for doubt that that has been astonishingly successful over the years. It is crucial to Britain, as a central trading nation, that such trade continues to expand and develop.

Some Opposition Members are extremely sceptical about our membership of the EU, but are none the less willing to pay lip service to the idea. They say, "In 1965, Sir Edward Heath persuaded me to vote 'Yes'. I thought I was only joining a trading community, but I see to my horror that it is something quite different." I believe that the overwhelming majority of British exporters would subscribe to the view that it is only within the EU that we have a realistic prospect of maintaining the trading growth that is so crucial to our country. Is it worth 1p? Yes, it is—it is even worth 2p.

Mr. Bercow


Dr. Palmer

I give way to the hon. Gentleman as I see that he is poised to spring.

Mr. Bercow


The hon. Gentleman is becoming positively misty-eyed on the matter. I acknowledge and respect the fact that he is a committed European federast, but I presume that he does not seriously suggest that the cause of peace in Europe has been, or will be, achieved by European Communities (Finance) Bills. Why does he not simply acknowledge the central fact that the crucial and noble goal of peace in Europe has been achieved not by the European Union, but by NATO?

Dr. Palmer

The hon. Gentleman will find little international support for the belief that European harmony was achieved without the European Union. Obviously, I agree that the Bill—

Madam Deputy Speaker

Order. I remind all hon. Members that we are debating amendments to the arrangements for Community finance.

Dr. Palmer

I am grateful to you, Madam Deputy Speaker, for protecting me from the siren voices on the Opposition Benches.

The central issue is that, with the Bill, we are making a commitment that protects our current level of contribution to the EU. As I and other speakers have argued, that amount is a tiny proportion of our total spending. With that commitment, we are playing a part in achieving the goal of European harmony, European trade growth and European joint commitment to a common future.

The Opposition do themselves no credit either with Labour Members or with the wider public when they try to focus the whole debate on small items of expenditure. The focus should be on where we take the European Union and whether our current finance base is sufficient for those goals.

I commend the Bill to the House and I commend the Government for their negotiating achievement.

4.59 pm
Mr. John Redwood (Wokingham)

I have declared my interests in the Register in the normal way.

The most important power that this House of Commons won over many centuries was the sole right to impose taxation on the British people. What we are debating here today is an incredibly expensive Bill that is a very large tax demand upon the British people, running to almost £8 billion in the current year, on the figures of my hon. Friend the Member for Hertsmere (Mr. Clappison), and perhaps more in subsequent years.

One of the most unsatisfactory things about the Bill is that it puts forward a very complicated formula, derived from a correction to a European Commission document, for calculating how much the British people may have to pay, and states that we shall not know until some time in the future exactly how that calculation can be made, and how big a tax bill the Government are proposing today for the British people as a result of this measure.

Mr. Edward Davey

Can the right hon. Gentleman tell the House the last time that the House rejected a spending request from the Executive?

Mr. Redwood

It happens all too infrequently when we have such an unbalanced Parliament, with so many unthinking and uncritical supporters of the Government on the Government Benches. But I remember that sometimes, under previous Governments, proposals were rejected when independently minded Back Benchers combined with more independently minded Labour Back Benchers, in those days when they were in opposition, to inflict justice on the country and correct the Government's wrong decisions. I welcomed that. I was not always in the rebel Lobby myself but, as an independently minded Member, I always admired a system that could make the Government think again.

Mr. Davey


Mr. Redwood

I will give the hon. Gentleman a second chance.

Mr. Davey

I just wanted to help the right hon. Gentleman. The last time that the House refused a request for spending from the Executive was in 1919.

Mr. Redwood

I am not sure that I agree with that statement. I seem to remember that under Baroness Thatcher measures that had spending as well as legislative implications were rejected, so I believe that the hon. Gentleman is misinformed. That is not unusual for the Liberal Democrats, who live in a fictitious world where they cosy up to the Government at every available opportunity and then try to tell the British people the biggest mistake of them all: that they are now in some way the official and effective Opposition. Yet we see them on their knees in the Chamber day after day, grovelling to, agreeing with and supporting the Government; and then they dare to tell the public outside the House that they are in some way Opposition MPs.

Today the hon. Gentleman again showed that there was no stuffing in him. He said that he agreed with some of the things that the Government did. He said that he would support them in the Lobby tonight. However, if one listened carefully, one detected a soupcon of criticism because the Government were not giving enough of our money away—they were not going wholeheartedly enough in the European federal direction. So I will take no lectures from the Liberal Democrats on how to conduct ourselves in the Chamber and how to hold this unworthy Government to account.

The Government are after our money yet again. After the stealth taxes of the last Parliament, they have the gall to come before us today with this socking great bill, and they cannot even tell us exactly how much money is entailed. Nor, of course, can they tell us how the money will be spent. In the debate, these important points have already been dragged out of a reluctant Government. They do not know how much will be spent. They do not know entirely how it will be spent. They have very little control over how it will be spent. Even the money that we get back may be spent on causes and projects that we would not ourselves choose to finance. Under the rules of some schemes, indeed, projects must be ones that the British Government would not think worthy of financing; otherwise, they are ruled out of court.

So I say to the House, do not just look at the net cost, whatever that may be; my hon. Friend the Member for Hertsmere suggested £3 billion as a good starting price. Look at the gross cost: £7.5 billion or rather more—it has been in other years—going out from our taxpayers. All that money will be spent in ways to be determined by unelected people in Brussels, and quite a lot of it spent in places far from any of our constituencies.

Mr. Beard

I am grateful to the right hon. Gentleman, who is making a most interesting fact-free point. I have the figures. In 1995—remember who was in office then—our net contribution, with abatements, was £4 billion; in 1996, it was £2.3 billion; in 2000, it was scheduled to be £2.4 billion. Those figures should hardly turn the earth upside down and cause the revolution to which he is pointing.

Mr. Redwood

I am delighted that the hon. Gentleman thinks that I am pointing to a revolution, as I have not come to my prescription for what might be done in place of the Bill. He has missed my main point, which is that he should look at gross spending, which is what requires taxation to be levied in this country.

My worry is that the Government, who recommend the surrender of 29 or more vetoes over important policy matters in the Nice treaty, are, by stealth, giving away the power of this place—and, therefore, of the British people—to tax themselves in the way in which they and their elected representatives choose.

Two documents accompany this debate. The first is the Bill, which refers to the Commission decision of September 2000 contained in an extended paper. If it is passed, the Bill will expressly write the paper into our legislation. It is most important that we study the paper as carefully as we do this slim Bill. The Bill, as I have said, is probably the dearest Bill that has ever come before this House, costing about £60 million for every word.

The document is even more worrying than the Bill itself. Labour Members and Ministers will argue that we have had finance Bills from the EU before. That is quite true; they have always caused me some difficulty, because they represent budgets that have high proportions of waste and fraud and expenditure in far-away countries that do not give any direct or indirect benefits to my constituents. What is worrying is the wording in the attached paper concerning future intentions over our abatement and the power of the Community to tax directly.

Dr. Palmer

I do not want to be unkind—I know that the right hon. Gentleman grew up before the numeracy hour was introduced—but he says that the total cost of the Bill will be £60 million a word. As the total cost—or gross cost, as he prefers—is £7 billion, does he reckon that there are only 100 words in the Bill?

Mr. Redwood

I make it about 120 words for the points in the Bill that matter for the purposes of legislation. I have not included the short title, which is rather longer than the Bill itself. If the hon. Gentleman studies the Bill carefully and learns to count, he will come to a similar conclusion. He needs more time to practise; he looks a lot older than me, so he could not have benefited from the numeracy hour either.

The important point in the attached document is paragraph 16, which states that the Commission shall undertake before 1 January 2006 a general review of the operation of the own resources system accompanied if necessary by appropriate proposals in the light of all relevant factors including the effects of enlargement on the financing of the budget of the European Union with the possibility of modifying the own resources structure by creating new autonomous own resources. From reading the document, one can see that it is wonderful prose. It is the kind of thing that one would fall asleep over whenever one picked it up. However, it is important that we do not fall asleep over this leaden, dead and deadly prose. What it means in normal language is that they have gone away and worked out how to impose direct, new European taxes on the British people—as well as citizens in other countries in the EU—because they are after our money and they would rather do it directly.

The House and those who may hear about this outside need not believe me on this. They will say, "We all know that the right hon. Member for Wokingham is very sceptical on these matters." However, they should certainly believe the ambassador of Belgium who, on the "Today" programme only this week, affirmed that the Belgian presidency, which is about to start, has as one of its main aims the creation of those very autonomous own resources—those very European taxes—that we see written into the document and referred to in the Bill. So before the House allows the Bill to proceed, we need to ask what those new taxes might be and why the Government have signed up to the possibility of investigating such taxes, with the presumption—they always like to say that they get on with all the colleagues in the EU—that they will go along with the conclusions of the report, which will undoubtedly involve imposing direct new taxes on British and other voters in the EU.

We already know exactly what the EU has in mind. The Paymaster General chaired a most important working group to try to get rid of what the EU calls unfair tax competition practices. She did so with the express intention of making corporation taxes more penal in the United Kingdom and its offshore islands and dependencies, which have more favourable business tax regimes. I am sure that that is one of the ideas that the EU intends to press home. There is no evidence that the British Government object in principle to that proposal; there is every evidence that they are collaborating by stealth.

Mr. Andrew Smith

Why cannot the right hon. Gentleman accept the assurances, which I gave earlier in answer to his question on this very point, that the Government do not support a new EU tax? I cannot put it clearer than that. We do not support such a tax and such matters should be decided by national Parliaments, accountable to national populations for the tax decisions that they make. Let him forget the fantasy strain of his argument.

Mr. Redwood

How can it be fantasy when the words appear in the paper, which the Government have sanctioned, that we are considering—a proper, high-level study of new European taxes? Will the right hon. Gentleman now stand up and say that he will strike those proposals from the document and that he will move an amendment to the Bill tonight? Will he say that the Government have made an awful mistake and that they do not want the EU to investigate those new taxes? If he moves such an amendment, I shall rush to the Lobby to vote for it. I should be a co-signatory of such an amendment if he would like to share the Order Paper with me when we debate the Bill again.

I offer the Chief Secretary the opportunity to intervene, but we see that the Government are signed up to the new European taxes. They will not strike those proposals from the document; they will not move a suitable amendment, as we know from the Government's actions. The Paymaster General chaired the working party, and the Chief Secretary cannot stand at the Dispatch Box and renounce her works, saying that, of course, it was a huge mistake that they were dragged into discussing unfair tax competition and that there is no unfair tax competition.

I should like the British Government to say, "We want taxes to be lower here than in competitive countries." I should like them to say, "There is nothing unfair about having lower taxes than other countries." That is a sign of good sense and good management, and the main aim of public policy should be to have lower taxes so that people and businesses prosper and more investment is attracted to this country. We could then have better public services because a much more prosperous economy would be taxed at a lower rate. If only the Government would understand that and, instead of occasionally paying lip service to it when speaking to business audiences, actually do it, they might lift the growth rate and make us more prosperous.

Mr. Beard

Will the right hon. Gentleman explain why public services did not improve under the Governments of whom he was a member, who determined to have low taxes and under whom this country's public services rotted and declined to an unprecedented degree?

Mr. Redwood

I do not agree with the hon. Gentleman's analysis at all. Many improvements were made in many public services during the Conservative years, which is why the Conservatives were regularly re-elected with large majorities.

David Taylor (North-West Leicestershire)

Name the improvements.

Mr. Redwood

I should be very happy to name the improvements, but it would take a very long time; there are so many of them. A large number of improvements were made in the local police service in my area, with the recruitment of many more police and a falling crime rate in the later years. There were many new hospitals and schools, and many extra public service workers were recruited. I am sure that the hon. Gentleman was a Member in those days and that he will remember the very long list of achievements that the then Prime Ministers used to produce at Question Time in the days when Prime Ministers used to answer questions twice a week, instead of not answering them once a week.

Madam Deputy Speaker

Order. The right hon. Gentleman is straying very wide of the mark, despite having answered the intervention.

Mr. Redwood

You are quite right, Madam Deputy Speaker. I stand corrected. I was drawn on by the intervention and wanted to answer it.

We cannot trust the Government on taxation because of their past actions. I give the Chief Secretary another example. He said that they would never accept new European taxes, but they were forced to accept the art levy. It is doing grave damage to the art market in Britain, as it was designed to do, and it does damage to art markets throughout the European Union. It will send many transactions and deals outside the EU altogether. At the time, the Government claimed that they were battling against the levy, but they then discovered that they could not succeed. Therefore, they caved in and we ended up with a tax that nobody in this country wanted.

We fear that the same will happen with the energy levy, which is one of the most obvious candidates mentioned by the Belgium Government, who now hold the presidency. They want to impose a Community-wide energy tax and to produce from it direct revenues for the financing of Community expenditure.

We know that the European Union harbours ambitions to turn VAT from a European-determined tax to a European-collected tax. It wishes to go the whole hog, so that all VAT is collected centrally through Brussels. We will no longer be able to determine under such a system how much is levied here and how much is levied in Belgium or France. It will he necessary to establish a grant formula rather like our complicated local government grant formulas to decide how much will be given back.

Will the Government guarantee today that they will never accept such a proposal? Will they reassure us and say to our partners in Europe, through this debate, that there is no point in the Commission working on such proposals or in member states discussing them because the British Government will veto them? I shall be happy to give way to the Chief Secretary if he will confirm that we will never accept such a VAT system. Once again, he stays in his place, so it is clear that there is another item on the Government's secret stealth agenda to transfer VAT to Brussels as a European tax. [Interruption.] He chuckles and laughs but he will not give us the guarantee that any decent Chief Secretary would give if he had no serious intention of negotiating on such matters.

Mr. Bercow

To support my right hon. Friend's argument, will he confirm that the European Parliament, with the active support of many of its Labour Members and in a self-important gesture, regularly seeks a direct relationship between the European Union and domestic taxpayers? Is that not part and parcel of the Parliament's bid to project its status from flyweight to heavyweight?

Mr. Redwood

My hon. Friend is absolutely right. European Union institutions are pushing out many tentacles to capture the powers that they need to have the full range of government control over British citizens and those elsewhere in the Union. I am sure that he is right to say that the Parliament would like to be involved in tax raising.

The most serious threat of tax raising comes from the work of the Commission that was put to the Council of Ministers and is nodded through when the British Government think that we are not watching or when they are asleep. They sometimes seem unaware of their own proposals, and they pretended to be so earlier in the debate when I challenged them.

Another tax that we know the European Union wishes to impose and could be covered under the measures in the Bill is the withholding tax on savings. The Government made much of fighting a battle to persuade the EU to downgrade, for the time being, its request for a direct tax to be imposed on people's savings held outside their country of origin within the EU and, instead, to put in place in complicated procedures for disclosure so that national Administrations could make sure that they had collected all the due tax.

I suspect, however, that the Government will be placed under enormous pressure to impose the whole withholding savings tax. The German Administration are keen to do that, and that would be very damaging to the offshore islands related to the United Kingdom under the Crown. I fear that the Government will not prove up to defending their position in the next four years. They gave more ground than they should have done in the past four years and they have never properly made the case in principle against the tax. They never seem to understand that it is a tax on enterprise, effort and prudence and that the tax would drive business outside the EU altogether.

The tax would not succeed in capturing business for Frankfurt at the expense of London, Luxembourg, Gibraltar or the Channel Islands. It would drive much business offshore from all those places if they were all brought under its provisions. The Chief Secretary remains silent on this point, because he is clearly unable to put categorically on the record that the Government will never go along with such measures. We have to assume that by negotiating, discussing and talking endlessly about those things, the Government are prepared to compromise, which means sacrificing a vital British national interest.

Mr. James Gray (North Wiltshire)

The Government have not always been silent on the withholding tax. Does my right hon. Friend recall when no less a figure than the second person in the nation—the Deputy Prime Minister—was asked about it in the previous Parliament? Unfortunately, he did not answer yes or no because he did not know what it was.

Mr. Redwood

It was one of the few magic moments in that Parliament. The Deputy Prime Minister was, for once, at a loss for words when one of my hon. Friends asked a superb a question, which did all that it should by putting the Government on the spot and showing that they were hopeless. It resulted in a flurry of correspondence and press articles, which did much for the British people and their financial services industry by highlighting the dangers.

Dr. Palmer

The right hon. Gentleman presses Government Front Benchers for assurances. Would he press his Front Benchers for the same assurances if the right hon. and learned Member for Rushcliffe (Mr. Clarke) were to lead it?

Mr. Redwood

I can do better than that. I can assure the hon. Gentleman about all the items that I have raised with Front Benchers, who are admirably led by my right hon. Friend the Member for Richmond, Yorks (Mr. Hague).

Madam Deputy Speaker

Order. Once again, hon. Members are going wide of the mark.

Mr. Redwood

You are right, Madam Deputy Speaker. I have been too generous, which is always my weakness in such matters.

The famous paragraph 16, which the Government did not mention, says that the Commission should undertake before 1 January 2006 a general review of the correction of budgetary imbalances granted to the United Kingdom, as well as the granting to Austria, Germany, the Netherlands and Sweden of the reduction in the financing of the budgetary imbalances in favour of the United Kingdom. We have a double whammy. Not only will the study consider new European taxes—of which there is an even longer list than I have given to the House—but it will go over the ground of the British budgetary contribution in the light of possible enlargement. That is most worrying because, once again, the Government have not been entirely open with the House. Instead, they have come here to say that they came, they saw, they conquered and that all was well because the budgetary rebate was safe in their hands. Yet we discover that there is another study, the only purpose of which is to wear down the UK.

Why did the British Government go along with the study? Why did they not say that the rebate has been negotiated—incidentally, by a far greater Prime Minister than we have today—and that the Prime Minister is sticking to it? Why did they not explain that we will veto any suggestion of changing the arrangements? The so-called windfall element—our just return under the excellent formula negotiated by previous Governments—has been partly given away. We discover from the infamous paragraph 16 that there is to be another study, and more pressure will be placed on the UK to find a formula that is so complicated that it will persuade some people that nothing damaging has been given away. However, when the consequences become apparent in a few years' time, we will undoubtedly find that we have lost out.

On considering that sorry document, the conclusion must be that we are in a state of flux. The legislation is provisional and we could be a lot worse off than under the current settlement, which is vague and difficult to pin down. Article 3 of the Commission document sets out a formula, which is too long and complicated to include in Hansard, that amounts to a blank cheque. We still do not know how the formula will apply, so we have a massive bill without a clear price.

Article 8 of the document states that the Community's resources that are referred to in articles 21A and B shall be collected by the member state in accordance with national provisions imposed by law which shall, where appropriate, be adapted to meet the requirement of Community rules. The Commission shall examine at regular intervals the national provisions communicated to it by the member states, transmit to the member states the adjustments it deems necessary in order to ensure they comply with Community rules, and report to the budget authority. In other words, we have not only this colossal bill and the uncertainty about how much it will be in future, the giveaway on another study of our rebate and the huge study on European taxes, but in certain areas, particularly customs duties and levies, we are giving away wholesale this Parliament's power to decide how and when taxes should be levied, because anything that we do is subject to the approval of the Brussels governing machine.

Labour Members have tried to widen the debate.

Mr. Andrew Miller (Ellesmere Port and Neston)

You lot are doing that.

Mr. Redwood

I have not widened the debate at all. I have stuck rigidly to the Bill. I am the first person to have mentioned the crucial document that we are meant to be debating because, naturally, the Government wanted to sweep it under the carpet. In their wider remarks, they have said that peace and trade flow only from the European Union and that if we had not joined, or if a Government, not a Conservative one, pulled us out, they would in some way be dissipated or removed. That is clearly untrue. Switzerland and the United States of America trade extremely successfully with the European Union even though they are not members. Germany would want to sell her BMWs to the United Kingdom, whatever our status. I am not recommending withdrawal.

Madam Deputy Speaker

Order. I remind the right hon. Gentleman that he has said that he will not fall foul of the rule.

Mr. Redwood

Thank you, Madam Deputy Speaker.

I am not recommending withdrawal, but I think that Labour Members should correct the record when they have tried to make misleading points about our relationship with the European Community. Our position is that our relationship with the Community needs a thoroughgoing renegotiation, and the Government are unable to do that. We need to renegotiate the agriculture settlement, which is too dear and bad for customers and farmers, and mainly helps people in other countries. We need to renegotiate the regional and social funds, which are not well directed for British purposes.

I often go on holiday to Spain to enjoy the marvellous roads that my fellow taxpayers in Wokingham and I have generously paid for. Signs on all those roads, which carry the famous European logo with the 12 stars, or 12 apostles, tell me that they were lavishly paid for with European funds and that I was standing treat. It is a great sadness to me that I will not be going this year, so I will not get my money's worth. All those roads are being built with our money, and we do not get the benefit if we do not go on holiday. However, it would not be much of a holiday to have to put up with the air traffic controllers acting as they are at present.

The Government cannot to negotiate a decent deal on expenditure or on the protection of the rebate in perpetuity. There are difficulties with the detail of the rebate, as my hon. Friends have pointed out. I am sure that other colleagues will make that point if they catch your eye, Madam Deputy Speaker. The Government are selling the pass on the right of this House to have the sole charge of taxation, subject to the will of the British people in general elections. The Chief Secretary is scowling, but we have discovered in this debate that he cannot stand at the Dispatch Box and offer us the guarantees that we need.

Paragraph 16 of the Commission document is deeply worrying. We are on track for more European taxes, following the art tax that has already been imposed. We discovered last year at Budget time that the Government wanted to cut VAT on church maintenance and repairs; the Opposition wanted to support them. The Government were told by Brussels that they could not take that action, and they backed off. That was a harbinger of what will happen under this Government: more stealth taxes, more taxes from Brussels, more control of life from Brussels and the pass being well and truly sold.

I hope that my colleagues will stand up for the democratic right of this Parliament to be the only place that imposes taxation on the British people. I hope that they will stand up for the right of the British people to a tax rebate and a budget rebate from Brussels. I hope that they will stand up for the right to spend money on the things that we want, and not on what Brussels wants. I hope that they agree that this is a rotten Bill, delivered by a rotten Government who are trying to get it through the House before anyone notices it.

5.29 pm
Mr. Michael Connarty (Falkirk, East)

It is a joy to follow the right hon. Member for Wokingham (Mr. Redwood), because he is such an easy target. This is the first European debate of the Session, and it is interesting to reflect on the styles of the right hon. Gentleman and the hon. Member for Kingston and Surbiton (Mr. Davey). The hon. Gentleman said that the Bill is minor and unimportant, whereas the right hon. Gentleman described it as dangerous and "a socking great Bill". He then went straight into pork-barrel mode, moaning that he wanted money spent in his constituency and nowhere else. I assume that that means in no other constituency than his own, rather than no other country than the United Kingdom.

The right hon. Gentleman made an error when he spoke about a tax on the art world. I am a member of the European Scrutiny Committee, which has considered the directive. It allows a royalty to be paid to artists on the second sale of their works of art—it is not a tax. I did not agree with the Government's resistance to the measure, because it strikes me as entirely fair: if someone makes a record and sells a number of copies, it is fair that they receive a royalty on each; likewise, it is eminently sensible that someone who creates an original piece of artwork should, when it is sold a second time for more than a certain value, get something back. That too is fair; it is not a tax. However, the right hon. Gentleman does not appear to be able to distinguish between genuine taxes and items that he wants to throw into the mix simply to frighten the populace.

Was the right hon. Gentleman frightened by something to do with Europe when he was a young child; or was it the experience of Mrs. Thatcher, now Lady Thatcher, ramming through the Single European Act 1985, which created the single European Union that he is now fighting to get out of; or was it the experience of Mrs. Thatcher similarly ramming through—at the time with his support—the legislation on the Maastricht treaty? Some experience must have frightened him so much that he acts in an irrational and somewhat paranoid way when matters relating to Europe come up. I do not know whether he has thought about the events ofthe past two months, when his party universally adopted the same attitude as his and was rejected by the people of the United Kingdom. If the Conservatives do not find some way of tempering that attitude, we will remain on the Government Benches and they on the Opposition Benches for a long time to come.

It was rather churlish of the hon. Member for Kingston and Surbiton to mock my hon. Friend the Member for Bexleyheath and Crayford (Mr. Beard), who has some vision about Europe. The hon. Gentleman gave us a lesson on the "Nick Clegg MEP budget process", which he seemed to think a valuable contribution. That reminds me of why the Liberal Democrats have 52 Members of Parliament, compared with the Scottish Labour group's 55 Members. That is more than the whole Liberal Democrat parliamentary party. [Interruption.] Before my hon. Friend the Member for Ellesmere Port and Neston (Mr. Miller) says it, let me acknowledge that the north-west group has more members than the Scottish group.

We must look far beyond budget processes for the heart of people's interest in European debates. Today's is the first European debate of the new Parliament. My right hon. Friend the Chief Secretary to the Treasury stated what has been achieved—a stabilising of the UK contribution to the EU budget. That is especially important when seen in the light of previous agreements. The 1988 agreement, reached under a Conservative Government, allowed for a 17 per cent. increase and the 1994 agreement led to a 22 per cent. increase over five years. Those are large increases, whereas the Bill reflects negotiations that resulted in a freezing of our contribution and a securing of the abatement.

We are not talking about Nice, as the right hon. Member for Wokingham appeared to think at one point. We are talking about the Berlin European Council agreement of March 1999. That is worth focusing on, because it is significant—it is not a minor matter. Perhaps we did not achieve everything we wanted in terms of changing the European Union budgeting system and its outcomes, but a solid step forward in the right direction was taken.

After increases of 17 per cent. and 22 per cent., stabilising our budgetary relationship with the other countries represents significant progress. Despite the thrashings about of Conservative Members today, had their party remained in government, the UK contribution could have continued to rise and I suspect that it would have, so we should acknowledge that a significant gain has been made. I have seen a briefing that describes the outcome as a triumph; I am not into triumphalism, so I would describe it as a significant and positive change in the relationship between the UK and the European Community.

The fact that the abatement is kept in full is significant. Conservative Members, including the hon. Member for Hertsmere (Mr. Clappison), referred to Lady Thatcher's securing of the rebate; there is no doubt that that was commendable, and we should not take that achievement away from the lady. Now that time has passed, we have been able to retain the rebate when, as we move towards enlargement, there are clearly aspirations in the EU to try to get increased contributions from the UK. The matter is therefore important, and we should commend the negotiating team for its efforts.

We should also commend my hon. Friend the Member for Broxtowe (Dr. Palmer) for pointing out the simple and important fact that the most significant thing is the transfer of resources from the value added tax base to the gross national product base. We discussed that transfer at various times in the European Scrutiny Committee; we think that it is correct and commendable.

It is true that some windfalls will be forgone, as the hon. Member for Hertsmere said. However, it is nonsense to stir up the debate with things that have to be given up, as talked about by the Opposition. Negotiation is about reaching a balanced settlement: one which retains our abatement in full and guarantees that, when we go into the enlargement process, we can similarly secure a negotiation that will continue throughout that period. That is an extremely strong positive which is not diminished in any way by the fact that we have had to accept that we must give up some windfalls from VAT/GNP transfers.

Dr. Palmer

Does my hon. Friend agree that, if had we taken the windfall, it would, in effect, have been double counting? We already benefit from the rebate, so we would benefit doubly, which would not be fair.

Mr. Connarty

My hon. Friend made that point very well in his contribution, and I hope that it will be taken seriously. He is right; if we demand, as we say in Scotland, that our eggs be double yolked, that would not be to our benefit later, as other European Community countries would notice our double counting and eventually demand redress. We would probably see a slip in our reputation, which is now extremely high in the EU; after the fracas at the end of the previous Government, we are making progress. As my hon. Friend knows, when we go to other European countries, we are treated with respect and seen as fair negotiators who are genuinely and positively involved in the European process. Sadly, that seems to have slipped from the agenda of most of the Conservative leadership.

There has been a move to make a slight amendment to the common agricultural policy. I would not make much of that, although I know that it sounds good to say that the amendment will bring benefits, from 2002, equivalent to £70 per family or £1 billion to the country. When I look at CAP regimes, the one that always strikes me as the most bizarre is that in which 1 billion euros is contributed to the growing of tobacco in the EU. None of that tobacco is of a sufficiently high health and safety standard to be used within the EU, so we provide export subsidies to companies to sell it to the Caribbean and Africa. In the light of that billion, just getting rid of that regime would probably improve the health of people in the Caribbean and Africa and would save as much as we will in the first tranche of CAP savings up to 2002.

David Taylor

Does my hon. Friend agree that, while £70 a year is a worthwhile saving for the average family of four, nevertheless there remains the sum of about £930 a year that such a family is paying in higher food prices because of the disaster of the residual CAP? Much more needs to be done, even though that step is worth while.

Mr. Connarty

I agree; the point of discussing the Bill is to debate it as the first European Bill in the context of progress that has been made. We should not in any way see it as the only step that we can take; in fact, it is not the Government's only aspiration to make that amendment to the CAP. Many more will come during this Parliament and future terms of a Labour Government, and they will bring significant benefits. Some amendments, we know, are long overdue, but it is difficult to change an established regime which many farming communities throughout the EU, including some of our own, rely on and regard as a bankable cheque. We have to negotiate at great length before putting in a better and fairer regime and, at the same time, achieve the benefits for the consumer that my hon. Friend wants.

The negotiation was the first time that we had tried radically to reform the CAP, and we should have been given some credit for that. The churlish way in which it was dismissed by Conservative spokesmen was wrong. If the public outside see us, at the beginning of a new Parliament, getting into point scoring, that continues the devaluation of the process of government and opposition. The ranting of the right hon. Member for Wokingham will not make people think again about a Government policy. Sound advice on the budgeting process would probably carry much more weight with the public than his paranoia about the EU.

The public want us to develop a European Union that is prepared to give to people. To mock the road building in Spain, as the right hon. Gentleman did, is nonsense. When Spain joined the EU, our one great fear was that people from Spain would flood into our labour market and undermine our wage structures and much else.

David Taylor

Even the shadow Chancellor.

Mr. Connarty

I am reminded that the shadow Chancellor came to this country from Spain, but I think that that was for political reasons.

Despite our fears when Spain came into the EU, people went back there because, through the structural funds, we lifted the Spanish economy so that it became attractive for them to return and use their skills and talents back in Spain, even if that meant that roads were built in Spain that the right hon. Member for Wokingham might think should have been built in his constituency. If we compare the gross national product of the two countries, it is clear where the money should go in a fair and balanced EU.

Similarly, the idea that we might discuss the taxation systems across the EU has been mocked, even though some of them work against the UK. Tax changes will not necessarily always benefit someone else. The rationalisation and sensible application of tax rules and regulations will benefit the UK. It is not good enough to try to score points by scaring people, particularly at the beginning of a Parliament, when there is no election in sight apart from the Conservative leadership election. Perhaps that is what lies behind the mocking; it certainly has nothing to do with the benefits to the people of the United Kingdom.

The rural economy was mentioned. After the BSE and foot and mouth debacles, and the extensive changes to the rural economy, the inclusion of the rural economy in the Berlin agenda in 1999 was visionary. We now realise that it is not just about farming and the common agricultural policy, but about the structure of society in rural areas, many of which are not directly reliant on farming but depend on people using the rural economy as an asset, bringing value to it and allowing others to remain in their rural communities. The negotiation team should be commended for the prominence given to the rural economy.

The Bill is preparatory; it is not the measure that will allow enlargement to proceed. I am keen on the enlargement of the EU, having served on the European Scrutiny Committee and visited the Baltic states, the Czech Republic, Slovakia and Poland. The EU would benefit, as my hon. Friend the Member for Broxtowe described, in defence terms and in other ways not covered by the Bill; and also in terms of growing the market and the valuable common idea of a Europe of democratic nations—not one European state, but all of them giving and taking, balancing and growing the EU together—for example, by examining tax and the way in which that income is disbursed. Nations that have strengths should give to those that have weaknesses, but that should be done sensibly.

I am not a Minister, so I do not have to worry about acknowledging that I was upset by and a little ashamed of the Irish vote. I come from an Irish background and have many relatives in Ireland. It is clear that that vote was an attempt to keep the benefits of the European Union—which Ireland has received in large measure and used to grow its economy—for those already inside this "better" group of nations, and not to allow those benefits to be dissipated by being given to nations that need them much more. Most of the countries that I mentioned—Latvia, Lithuania, Estonia, the Czech Republic, Slovakia and Poland—need the benefits of EU membership more than Ireland currently does. Ireland has reaped tremendous benefits from the EU that could now be available to people in the former Soviet bloc.

Madam Deputy Speaker

Order. The terms of the debate are fairly narrow. We are discussing financial arrangements in the Community budget.

Mr. Connarty

Thank you for that direction, Madam Deputy Speaker. I thought that the document to which the right hon. Member for Wokingham referred dealt with the basis of enlargement. The negotiations have protected us from having to pay increasing amounts into the budget, as we have retained our abatement, but we must consider preparations for using that budget in different ways throughout the EU. We should see the Bill in those terms. It is not monumental, as it does not deliver what the Nice treaty will achieve when it is debated and—I hope—passed by EU nations. However, it prepares the way for those changes to be made without destroying our finances. As my hon. Friend the Member for Broxtowe said, less than 1 per cent. of taxation and expenditure will be going to the EU.

The hon. Member for Hertsmere made much of administrative spending, but it was pointed out that such spending amounts to only 1p a year for UK taxpayers. Administration expenditure is at about 5 or 6 per cent., which is low. That level does not frighten me, as long as we ensure good governance, implement Commissioner Kinnock's recommendations and run the budget efficiently. We should not be concerned only about keeping down the administration budget. If the audit function is removed in order to save money, the ability to run a fair budget is thereby destroyed. We must look underneath the expenditure level, rather than merely play around with the figures. A number of private organisations would like only 5 or 6 per cent. of their budgets to be spent on administration.

Mr. Clappison

The hon. Gentleman may be making the case that Labour Front Benchers did not make. Does he not accept that it is natural to ask questions about administration, when it seems to be the fastest rising item in the budget?

Dr. Palmer

It is not.

Mr. Connarty

My hon. Friend may want to give us the figures, which he probably has to hand. I know that he is knowledgeable about these matters.

On the fraud and financial management recommendations, everyone was worried about fraud and corruption—for instance, with regard to the tobacco regime. When the regime was investigated, it was reckoned that the same tobacco leaf was being counted almost five times in the EU. Tobacco can be moved around the EU as a wet product before it dries out. It was suggested that Mafia connections were involved, but we did not find out about them after the investigation, as the gentleman in charge of the regime jumped, fell or was thrown from his fifth-story window in Brussels and died before his knowledge of the regime could be revealed.

If administration expenditure is increased because of an anti-fraud and audit drive, the money is being well spent. I am not worried about an increase to 5 or 6 per cent. if the money is being spent correctly. I would be much more worried if the amount were low and not enough officials were available to ensure that things were done correctly. That is why the increase does not bother me.

This Government believe—as I hope the Conservative Government did—that fraud in EC budgets is unacceptable. Hon. Members may remember that the anti-fraud office was based on an initiative suggested by my right hon. Friend the Chancellor. Mr. Prodi's first act as EU President was to appoint Mr. Kinnock as the Vice-President with responsibility for reform. When Mr. Kinnock came before the Scrutiny Committee, he gave a very good account of himself and his work. We should have commended our Front-Bench Members on making sure that they were fully behind the work in the negotiating round. It is significant that we now have a code of conduct for Commissioners and Commission officials that did not previously exist. We have a whistleblower's charter. Such matters may be administratively costly, but they are also sensible.

The Bill is productive. It will not change the world, but it does not allow the past trend of massive increases in the budget to continue. It is not a trivial measure, as the Liberal Democrats would have us believe. It stops the rot and turns the EU around. It achieves much, but much remains to be done. I support the Bill and commend it to the House.

5.50 pm
Mr. Bill Wiggin (Leominster)

I hope that you will forgive me, Madam Deputy Speaker, if I comply with custom for a few moments and mention my predecessor and my constituency.

My predecessor, the noble Lord Temple-Morris, is a unique man. He spent 23 years representing the Conservatives and four years representing Labour. He also qualified as a barrister and a solicitor. He was clearly a man who liked to try everything. Hon. Members on both sides of the House—naturally—have told me that he was a diligent constituency Member, and I shall try to continue his constituency work and emulate his long and ennobling career.

His footsteps are unusually difficult to follow. However, the seat of Leominster has a history of unusual Members. Although, in 1305, the towns of Ledbury and Bromyard decided that a Member of Parliament was far too expensive, at 2 shillings a day, and chose to withdraw their privilege, Weobley and Leominster continued to pay up. John Scott, who went on to be the Earl of Eldon, was elected in Weobley in 1783. Perhaps worrying about voter apathy, he asked about the best way to win Weobley. He was told that it was to drive into the town with a dray laden with cider. I have not tried that method of canvassing. John Scott also avoided it, and instead rode into the town, knocked on the door of the prettiest girl and kissed her. Later, when asked the reason for his popularity, he fought his way into the crowd and kissed the same girl. He went on to be Lord Chancellor.

Leominster Members have had a variety of fates. One shot himself, one was hanged, another was imprisoned in the Tower during the south sea bubble crisis, and Roland Stephenson, who I am sorry to say was a London banker, was outlawed for fraud in 1829. He escaped by boat to Savannah, where he was arrested and taken to jail in New York. Happily, we also boast two Prime Ministers so far: William Bentinck, later Duke of Portland, and William Lamb, later Lord Melbourne. In Leominster, as well as in history, being christened William is an auspicious start.

Like all before him, my predecessor but one, Sir Clive Bossom, who made his maiden speech here in 1960, followed in his father's footsteps to the House. It is therefore a great responsibility and a source of enormous pride to follow in the footsteps of my father, Sir Jerry Wiggin, who represented Weston-super-Mare for more than 28 years.

The constituency of Leominster is great not only in history, but in size. It is at least 2,500 sq miles, and one of the largest constituencies in England. Its borders run from Wales into Worcestershire, and from Shropshire to the Wye valley. Julian Critchley, the late Member for Aldershot, described it as Arcadia. Indeed, it is a truly beautiful part of the country. Hon. Members who wish to holiday there instead of Tuscany will be delighted by the large number of excellent hotels, inns and pubs. That is hardly surprising, given that the fields are full of cider apple orchards, vineyards and hops.

Attractions range from Eastnor castle to Offa's dyke, as well as many beautiful houses and our unique architecture: the famous black and white trail that runs through Pembridge. The main market towns are Tenbury Wells, Bromyard, Kington, Ledbury and Leominster. All have the some of the friendliest, most charming people.

It is no surprise that the county that produces the best food is also home to the finest and fittest soldiers. We are proud to host the SAS base at Credenhill. It is the only permanent garrison in the United Kingdom.

The terrible effects of foot and mouth mean that our tourism industry could do with all the support and visitors possible. It needs, not loan guarantees at 8.75 per cent., but a positive message backed by a properly funded English tourist board.

Foot and mouth has been a monumental crisis for my constituents. There have been several outbreaks in the constituency, and we have lost not only large numbers of stock but some hope for the future of farming. There has been widespread misery, and I pay tribute to those who have soldiered on resolutely. They have put up with the culling of healthy stock without confirmation of infection, D notices and movement restrictions, the stigma of dirty farms, the uncompensated loss to the value of cattle over 30 months, the bodies of culled stock lying awaiting removal for up to nine days in Winforton, the disinfectant at the gates, and the constant washing of vehicles and reclusive living.

The sense of helplessness was worst. Sometimes it was caused by Ministry vets culling healthy dairy herds while welfare culls were left waiting. We must not forget the suffering caused to animals that tried to lamb in chest-high mud. Our farmers care for their animals. They rightly feel a sense of rage against incompetence and cruelty when they watch their sheep starving or drowning, and know that they would be prosecuted for neglect under normal circumstances.

An outbreak was announced in Brecon today. The crisis is therefore far from over. Common-sense steps, such as supporting auctioneers who collect animals in collection centres, must be hurriedly implemented. The Government have created circumstances in which farmers might hope that their animals get foot and mouth because those whose stock is culled are better off than those who battle on against the virus. That contradiction has been created by pointless rules, such as the 20-day rule, which are applied without common sense.

If we are to prevent the disease from recurring, we must first hold a full and public inquiry. We must ban imported meat from countries where foot and mouth is endemic, and we must take any opportunity to reform the common agricultural policy. We must end the mechanism that pays farmers to drive the length of the country, collecting old ewes for the benefit of the subsidy.

The Government were quick to blame farmers for the spread of the virus through the movement of sheep, but they passed up the chance in Berlin to change the rules. The Government must grasp the nettle of reforming the CAP, which made the practice widespread. We do not have much time. Farmers in countries such as Poland would also like to enjoy agricultural subsidies. When they join, where is the money to pay for them? Which of our world-class public services will be cut to top up the contribution?

We have already lost the accident and emergency department of Kidderminster hospital, and the lives of my constituents are at risk from the distances that they are required to travel. We cannot afford to miss the chance to reform the CAP again. We must remember that it costs the average family £15 extra a week, yet we agree that British farming does not have the chance to compete on a level playing field.

We must seize every opportunity to reform the CAP; we must not miss the chance. We must lead the way, and cut the Gordian knot.

5 58 pm

Mr. Wayne David (Caerphilly)

I congratulate the hon. Member for Leominster (Mr. Wiggin) on his first contribution. It was a lucid and at times humorous speech and it clearly showed that he is already well aware of the problems of his constituency. He comes across sincerely, as a man who cares. We wish him well.

One of the most important debates in the European Union in 1996, 1997 and 1998 centred on the document entitled "Agenda 2000". The debate was conducted in the EU institutions, but it also took place in the various national Parliaments. It examined enlargement and how that would improve existing member states and bring political stability and democracy to countries that aspire to EU membership. It was and is a debate about regional policy, and about how the structural funds and the cohesion funds might be developed to the betterment of the EU. It is a debate about how the common agricultural policy might be reformed, in the context of the changing world in which we live, to meet the new stresses and strains that enlargement will inevitably bring to it. It is also a debate about how the European Union could be funded in the future and how the own resources issue could satisfactorily be resolved.

Following that continuing debate and the discussions that have been held on those issues, an extremely important European Council summit took place in Berlin in March 1999. The Bill before us today follows on from the decisions taken at that meeting. I honestly believe that that European Council meeting in Berlin came to a conclusion that was good for the European Union. There were also conclusions that were good for the British Government's negotiating position and for Britain's national interest. I say that for three reasons.

The first reason is that a clear decision was taken at Berlin to bring the common agricultural policy under much tighter control. Decisions were taken to cap the CAP, so to speak. It was agreed that, by 2006, agricultural spending in the EU would be 2 per cent. less than in 2000 Many of us would like to have seen a much greater reduction in expenditure on agriculture. However, that decision was enormously significant, especially if we bear in mind the fact that it was decided at the Edinburgh European Council meeting just a few years earlier to increase agricultural expenditure by 9 per cent. Compared with just a few years ago, therefore, progress has been well and truly made.

The second notable outcome of the Berlin Council concerned regional policy, particularly with regard to the cohesion fund and the structural funds. Reference was made earlier to the importance of the MacDougall report, which was written some time ago. The Berlin Council still addressed the underlying theme of the MacDougall report, which asked how a single European market could pull together in an integrated social sense. A market, wherever it may be, cannot exist without a sense of economic and social cohesion behind it. Markets will soon fall apart unless they are underpinned by that kind of ethos. That is why I particularly welcome the clear decision that was taken, after Berlin, to establish objective 1 status in many parts of the EU that had not previously had it.

Objective 1 status is for those parts of the EU whose gross domestic product is less than 75 per cent. of the EU average. Unfortunately, many parts of the United Kingdom fall into that economic category. I say "unfortunately" because it is nothing to be proud of that parts of the United Kingdom are among the poorest parts of the European Union. Areas that have now been categorised as objective 1 areas include Cornwall, south Yorkshire and also Merseyside, which retained its objective 1 status. In this context, Northern Ireland received a special objective 1-related package. West Wales and the south Wales valleys also received objective 1 status for the first time.

As a Member who comes from south Wales, I welcome the fact that, because of the Government's negotiating success in Berlin, the economy in south and west Wales is receiving an injection of £1.2 billion over the next seven years. That money is desperately needed to rejuvenate the economy of more than two thirds of Wales. It is currently being used to develop training, to provide infrastructure and to ensure a different and much stronger base for the Welsh economy. If we had not achieved that negotiating success in Berlin, that money would not today be providing the tremendous boost that it is to the Welsh economy.

That money is being spent not according to a diktat from Brussels, as the right hon. Member for Wokingham (Mr. Redwood) alleged, but on the basis of partnership. Local authorities, the voluntary sector, the National Assembly and local businesses are coming together in Wales in a true spirit of partnership to determine their own priorities for spending the money that is coming from the European Union. That is the true principle of subsidiarity: that decisions are taken as close to the people as is practicable. That is my vision of what the European Union should be about in future.

The money coming in to areas such as south and west Wales as a consequence of the Berlin decision has meant that, for the first time, public expenditure in Wales is going beyond the Barnett formula. We are determined never to repeat what happened under previous Administrations, when money was not claimed from Brussels because there was no match funding already in Wales. Now, because extra resources are coming through beyond the Barnett formula, we are confident that that will never happen again. When there is money to be spent, it must be spent.

In addition to objective 1 status benefiting the United Kingdom, objective 2 status is doing the same. Objective 2 applies to rural areas of the Union that are suffering real difficulty and to those areas suffering industrial decline. Some 14 million people in the United Kingdom are now living in areas benefiting from objective 2 status, which I am sure that Members on both sides of the House will warmly welcome.

The third important outcome of the Berlin Council was the new formula to he introduced for the revenue side of European Union finances. A key decision, as has already been stated, was that a greater proportion of moneys raised from contributions will be linked to gross national product, while fewer contributions will come from VAT and Customs payments. That is enormously important because it is a far fairer formula than the one that we had before. It is fairer on the United Kingdom and on poorer states of the European Union. Moreover, it is a formula that will substantially reduce the likelihood of fraud. That is an important aspect of the new settlement.

Another important aspect is the fact that we have maintained the rebate that was first negotiated in Fontainebleau in 1984. It is worth underlining how significant an achievement that is. We should not forget that many member states of the European Union fought tooth and nail—that is not putting it too strongly—to try to take away the United Kingdom's abatement. It is to the Government's great credit that we have successfully maintained it. I want to emphasise that that was a huge achievement. Crucially, too, maintaining the ceiling on own resources at 1.27 per cent. of EU national income was something that I would expect Members on the other side of the House to welcome as much as we do. Taken together, the achievements negotiated in Berlin were very notable. For the first time ever, spending in the European Union will be less in real terms at the end of this financial period.

As hon. Members have noted, this is a short Bill, containing just two clauses. However, it is a Bill of enormous significance. Despite what some people have suggested today, it is not about federalism or about creating some kind of mythical European superstate. It is not about taking power away from the United Kingdom and giving it to strange bureaucracies overseas. This practical Bill is all about creating a fairer and more effective funding mechanism for the European Union in the future. I sincerely hope that it gets the full support of the House.

6.10 pm
Mr. George Osborne (Tatton)

I congratulate my hon. Friends on their maiden speeches. They have a great advantage over me: they have completed this ordeal, which is still ahead of me.

I should like to begin by paying tribute to my predecessor, Mr. Martin Bell. He was the first Independent Member elected to the House for 50 years. He tells the story of how, shortly after his election, he was invited to tea by Barbara Castle. Over tea and biscuits in the House of Lords, she summed up her advice, drawn from her 60-year career in politics. She said to him, "Young man"—which, he confesses, completely won him over—"whatever else you do, you must never be afraid to stand alone." Of all people, this former war reporter probably needed that advice the least.

Martin Bell had stood alone courageously in the Balkans when he reported the wars in that region in all their brutality. In the House, too, he stood alone. He stood alone when he forced the Government to find time to ratify the Ottawa convention on land mines. He stood alone when he controversially spoke out against the air strikes against Iraq. He also stood alone when he campaigned to overturn 50 years of Whitehall stonewalling on the question of far east prisoners of war.

Be it Serbia, NATO or the Ministry of Defence, Martin Bell took on powerful opponents and won. However, two opponents in the end defeated him. The first, I am happy to say, was my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) who defeated him in the general election. The second was the Speaker's Chair, because he campaigned long and hard for the Cross Benches below the Bar of the House to be recognised as part of the Chamber, but he failed miserably. That is a good lesson to all new Members on the power of the Speaker's Chair in such matters.

Many people come to the House as idealists and leave it as cynics. I have got to know Martin Bell quite well in the past couple of years, and it strikes me that he came to the House as a cynic and left as an idealist. The man in the white suit will be as missed in the corridors of the Palace of Westminster as he will be by people on the streets of the Tatton constituency, whose interests he represented so well. I am greatly honoured to take his place in the House.

The very name of the Cheshire constituency that I now represent is a clue to the fact that it is not a single community, but a collection of communities. Tatton is not a town or a village. In fact, no one lives in Tatton—or not any more. Tatton is a building. I believe that I am one of only two Members whose constituency is named after a building. If hon. Members are trying to remember who the other one is, I shall put them out of their misery—it is the hon. Member for Brighton, Pavilion (Mr. Lepper).

Unlike the Brighton Pavilion, Tatton Park is the rather austere, imposing ancestral home of the Lords Egerton, who are now deceased. It is now the National Trust's most visited property, and home to many popular exhibitions and concerts in my constituency. On Tatton Park's doorstep is the beautiful and historic market town of Knutsford. Once a major stop for travellers on the road to Manchester, it has long been replaced in that function by the less historic and frankly less beautiful M6 Knutsford service station. Thankfully, the coaching inns on King street remain, and more leisurely tourists still visit in large numbers.

Knutsford got its name from the place where the Danish King, King Canute, forded the River Lily—hence Canute's ford. I can report to the House that the majority of the residents in Knutsford, like me, take what could be called a Danish view of the Government's plan to join the single currency. Knutsford may be steeped in history but it has its modern problems, such as the constant pressure of development and traffic and the fear of crime. I shall seek to overturn the recent decision of Home Office Ministers—the Financial Secretary to the Treasury is a former Home Office Minister—to deny us funding for closed circuit television. There is also the noise and pollution from Manchester airport's second runway. One of my priorities will be to try to change the law to allow airports to fine planes that deviate unnecessarily from agreed flight routes and noise limits.

Around Knutsford stretches the fertile Cheshire plain, in which lie the beautiful rural villages of Mobberley, Pickmere, Plumley, Allostock, Byley, Whitley, Comberbach and Lower Peover—I have left out half of them. Lower Peover is an idyllic village with a fantastic local pub called "The Bells of Peover", in which General Eisenhower and General Patton once planned the D-day landings. These days drinkers plan who will buy the next round.

All those villages have suffered from the collapse of rural services, the deep recession in agriculture and the disaster of foot and mouth disease, to which my hon. Friend the Member for Leominster (Mr. Wiggin) eloquently referred. Farmers in Crowley, who are now struggling with a recent outbreak, or employees at the Chelford market who have seen their jobs disappear, do not agree with the Prime Minister that we are on the home stretch in tackling the consequences of this disease. I shall do everything that I can to ensure that Cheshire's rural communities get the support they need.

On the western edge of the constituency are Barnton, Rudheath and Anderton—three suburbs of the old ICI salt town of Northwich—which have often been neglected in the politics of the constituency. I am determined that that will end. At the other end of the constituency lie the former cotton towns of Wilmslow and Handforth, and the famous village of Alderley Edge, which is known to locals for its infamous traffic problems. Together they make up a wonderful residential area that is also home to many successful companies, including the research laboratories of Astra Zeneca, where world-leading research is carried out into cancer and heart disease.

Wilmslow is famous across Britain as the home of football players, "Coronation Street" stars and pop singers. However, the town's most famous celebrity is known simply as Pete. He was an unfortunate man who was found garrotted, beaten and stabbed on Lindow common. Wilmslow is not a violent place, so that discovery came as a bit of a shock. The local police launched a murder investigation. Inquiries were made and suspects were interviewed, but even the excellent detective work of the Cheshire police could not solve this murder, for it turned out that Pete had been dead for 2,000 years, preserved in the peat hog that gave him his name He now lives in the much safer surroundings of the British museum.

Another famous Wilmslow resident was the code breaker and computer pioneer, Alan Turing. It is a sad irony that the man who did more than almost anyone else to defeat the Nazi tyranny by breaking the Enigma code was persecuted in Britain for his homosexuality, and committed suicide. It is a welcome sign of a more understanding age that a statue of Turing has just been unveiled in Manchester.

Although much of the Tatton constituency is prosperous—not for nothing is it the place where Mr. Rolls met Sir Henry Royce—there are pockets of deprivation on the Longridge, Spath Lane and Colshaw Farm housing estates, and in many of the rural areas. I shall do everything that I can to help those communities.

I am delighted to have been elected to represent such a tine constituency, but it deeply concerns me that so many fewer of my constituents chose to participate in the election. Our turnout, like that of many constituencies, fell by more than 10 per cent. Some people argue that that is nothing to worry about, as it is a sign of a contented population who are happy with the present state of affairs. I believe that that is a dangerous and mistaken understanding of what is happening out there in the country.

My constituents are not content with the state of the national health service, the education system or the transport system. They are not happy to go on paying ever more taxes, or that their streets are not safe. Far from it—they are deeply angry about all those things, and they feel that we, their politicians, are not listening to them. The people of Cheshire feel remote from what is going on in Westminster. They see our debates and watch Ministers on television, but they do not hear much that relates to their daily lives. They feel even remoter from what is going on in the institutions of the European Union, whose financing we are discussing.

New directives emerge from the bureaucratic ether, and no one bothers to explain to the people and the companies affected where they came from or why they are needed. Billions of pounds of taxpayers' money is spent on hugely wasteful EU projects, such as the aid budget or the common agricultural policy. Everyone throws up their hands and says, "We know it's a waste of money, but there's nothing we can do about it."

The politicians of Europe, including our own British Government, proceed down the path of ever closer European integration, drawing up plans for European armies, European constitutions and European taxes. No one stops to ask the people of Europe whether this is actually the direction in which they want to travel. It is striking that the only two countries that have asked their peoples, in the last year, whether they are happy with the direction that Europe is taking have received a resounding no as an answer. But the reaction of European politicians to the results of the Irish and Danish referendums has been to bury their heads in the sand and pretend that they did not happen.

This Bill and the Bill that we shall debate tomorrow are supposed to pave the way for the enlargement of the European Union. No one is more passionate about enlargement than I am; no one is more anxious than I am to see the countries of central and eastern Europe brought in from the cold, and welcomed fully into the concert of democratic European nations. Let me declare an interest: I am part-Hungarian. My grandmother's family fled to Britain from Budapest just after the war because they had lived through the devastation of the Nazi tyranny, and wanted to escape the tyranny of Soviet rule. In 1956, their house in London became a home for refugees from the Hungarian uprising.

The lessons that I learn from my family's past are these: one must not impose political systems on peoples who are unwilling to accept them; one should not allow a gap to open up between the governed and the governing; and one cannot afford to stop listening. The situations are of course very different, but the lessons are ones that we in Westminster, and those who are shaping the future of the European Union, would do well to remember.

I thank the people of Tatton for sending me to this House.

6.21 pm
Mr. Mark Todd (South Derbyshire)

It is a pleasure to follow the hon. Member for Tatton (Mr. Osborne). His maiden speech was elegant, and deserves compliment. He dealt graciously with his predecessor, who, obviously, had proved a substantial embarrassment to his party in many ways, and drew out many of the strong aspects of that Member's participation in the House's affairs. He also made several points drawn from his family's experience, notably that there is something to be learned from this country's willingness to accept people from troubled states, support them and look on them with tolerance rather than suspicion. That is certainly a message that I take from his story, and I am sure that he takes it as well.

I also welcomed the speech of the hon. Member for Leominster (Mr. Wiggin), partly because, like him, I was preceded here by another member of my family. My grandfather was a Member of Parliament, and I appreciate some of the difficulties of following in political footsteps within the family. I am sure that the hon. Gentleman will face the same task.

Before turning to the debate, I should mention two items of personal history. First, shortly after I was elected, a hit list of newly elected Labour Members, along with their supposed weaknesses, appeared in The Observer. I was described as being, among other things, a maverick Euro-sceptic. I do not know with what substance the description had been given—I certainly had not communicated any of my views to anyone who might have been the author of the piece—but my speech may provide at least some basis for an understanding of why it might have appeared.

Secondly, I have some direct experience of dealing with a tiny part of the budget of the European Commission, which forms the basis of this debate. For about three and a half years, on behalf of the company for which I then worked, I ran a small business in Scotland as part of my activities. Its main marketplace was the European Commission. It sold services comparing databases for the Commission's research and development budget, and also made bids for a variety of research and development projects of its own.

That experience showed me a number of things. First, although this was the core activity of my business and I therefore pursued it with vigour, as a taxpayer I found it hard to defend the projects in which we were invited to engage. I could not see any obvious value in them; and the careful way in which they were audited by the European Union, which indicated some of the user bases, rather bore out my impression that very few people engaged with the databases that we produced or learned anything from them. That concerned me.

Secondly, there was the process by which decisions on the budget were made. The individuals involved occasionally let slip their national preferences regarding the way in which decisions ought to be made, and the partners who should be chosen in the putting together of successful projects for bids. That disappointed me. The process was not always objective; certainly, it was important to listen carefully to the language of the person with whom one was dealing, and to messages that might have been communicated about how best to seek a successful bid from the European Commission. I never encountered corruption, but I did encounter practices that I considered to stray from true objectivity, and projects that I found difficult to defend as a taxpayer, while defending them vigorously as chairman and managing director of a company that thrived on winning.

I have some direct experience, then, that confirms some of what was said by the hon. Member for Kingston and Surbiton (Mr. Davey). He made a surprisingly forceful speech, on behalf of his party, about the need for reform in the European Union and a tighter focus on its processes and objects. I share that view 100 per cent. There are some aspects of what the EU does that it will inevitably do ill—activities that, as far as I can tell from my experience, are largely carried out to foster the aspirations of individual members of the Commission and some of their supporters in individual member states. I do not believe that those activities were part of the core purposes of the European Union, to which I certainly subscribed when I voted in favour of joining the Common Market in the 1975 referendum.

I have described my experience of the research and development budget, but I am sure that there are other cases in which what appeared to me to be peripheral expenditure could have been tightened and sharpened, in a downward direction, towards clearer objectives that had more to do with the propagation of free trade and common-market principles within a single trading area.

As for the Bill and its mechanisms, the first element is that we are being invited, rightly, to applaud the Government's performance and their success in controlling the European Union's budget. It contrasts sharply with the supposed successes of the Conservatives when, in government, they had the opportunity to act rather than talk. We often observe a striking contrast between the Conservatives' rhetoric on European matters and the delivery of what they promised when they had that opportunity.

In 1988, when there was negotiation for the setting of the EU budget, a real-terms 17 per cent. increase was agreed by, presumably, the Government led by Lady Thatcher. The handbag wielded in anger apparently did not deliver a defensible outcome, given some of the Conservative speeches that we have heard this afternoon.

In 1994, under the perhaps less robust leadership of John Major, there was a 22 per cent. increase in the budget agreed in real terms. The contrast is marked, therefore. The success of the recent budget negotiation was to hold the budget in real terms over the period of he agreement, which is to be applauded.

The second element touches on the foundations of the agreement—common agricultural policy reform. There, it is possible to overstate what was achieved. Some modest and welcome steps were taken, but modest is the word. The gentle progress towards free-market prices was incomplete. Most commodities traded within the CAP area are substantially more expensive than those in world markets. One can argue whether those market prices are entirely relevant, but there is a significant imbalance. One of my hon. Friends mentioned the substantial burden that consumers in this country and the rest of the EU bear to maintain that subsidy for agriculture throughout the EU.

The agreement will not be a rational basis for defending agricultural policy in the forthcoming World Trade Organisation round. Whenever that gets going, we will find ourselves under immense pressure to make further progress towards liberalisation. Among the more shocking omissions was the failure to progress at all with liberalisation of the sugar regime, which guarantees higher prices in this country, albeit not at a direct cost to the taxpayer. Furthermore, the ludicrous milk quota system acts as a means of controlling production and impeding free markets. No progress was made with those initiatives, which could have been taken, and that is unwelcome.

Nevertheless, some progress has been made. There was a welcome delivery of some savings to consumers, some steps towards a truer free market position and greater transparency in agricultural support. Those should all be applauded, but perhaps with one hand and not as vigorously as they might have been.

The third element is the reform process, which brings me back to my original argument. From my experience—perhaps the position has profoundly changed—there needs to be a thorough reform of the way in which spending decisions are taken, of spending priorities in the EU and of the management of that process. I found it to be inefficient in many respects.

I welcome the fact that Commissioner Kinnock has been given that brief, which is demanding—I would love to have it myself. It is a challenging task and I am sure that he is relishing it. He is certainly making some progress, which is to be commended. I would be most uncomfortable about agreeing a long-term funding basis without some clear understanding that a reform agenda is being followed through by those who are sent by this country to serve on the European Commission.

The concern about reform provides a platform for certain doubts, but this is not a debate about the euro and I would not want to make it one. At issue in the decision about whether we should take that further step in European integration are the concern about EIJ institutions and the way in which they work and whether we have a sufficiently flexible and transparent arrangement for managing European policy. I hope at some other stage to expand on some of the arguments that are outside the scope of this debate. One issue that is certainly relevant, however, is whether the institutions and the reform agenda that has been agreed are sufficiently robust for us to feel comfortable about taking that further step of integration.

Dr. Julian Lewis (New Forest, East)

Without going beyond the bounds of the debate, will the hon. Gentleman give us his reaction to the recent statement of Chancellor Schröder that he would like the European Commission effectively to become the Government of Europe?

Mr. Deputy Speaker (Sir Michael Lord)

Order. I know from the hon. Gentleman's earlier remarks that he is aware of what I was about to say. Perhaps, I need not say it.

Mr. Todd

Thank you, Mr. Deputy Speaker. You need not.

First, we need a sharper definition of the purpose of the European Union. We need to decide what it is most efficient for the European Commission to deliver, and much tighter administration of the Commission's tasks for which we are deciding the funding today.

Secondly, we need far better scrutiny in this country and this House of the matters that we are voting on today and the financial implications. I read with interest—I only read it this afternoon because of this debate—some key aspects of the House of Lords Select Committee report on the funding of the European Union in which a Commissioner had been quoted as saying that the subject of today's debate was a very small matter. Indeed, one of my hon. Friends said that the budget under discussion was small in relation to the UK public spending budget and that one could exaggerate the significance that it should be given. That neglects the argument that, in total public spending terms, the UK contribution is probably worth between 2p and 4p on income tax in net terms—our net contribution to the EU. That is of some weight and significance and we should take careful measure of it. We debate some matters of much less weight at considerable length in this House, so the matter deserves tighter scrutiny.

The systems that are in place clearly do not work well enough. Many hon. Members do not engage properly in scrutinising EU legislation. Constituents tell me that such legislation is nodded through and I can hardly dissent. Many provisions that are adopted on our behalf are not properly scrutinised. We should make a better hand of that.

I welcome the opportunity to contribute to this debate. It gives us the chance to applaud what the Government have done; I genuinely do so, as we have taken important steps. I am a committed European and strongly endorse the European Union, but I want Europe to be run more sharply, with a clearer focus on objectives that we can all share, rather than on aims that seem to engage minor interests throughout the continent of Europe. This is also an opportunity to set some more challenging tasks for future negotiations, which I hope that this Government will lead.

6.38 pm
Angus Robertson (Moray)

I rise to make my maiden speech during an important debate on Europe and our political place in this great continent. Without having to resort to convention, as the new Member for Moray, it is a great honour to speak about my fellow Scottish National party parliamentarian, Margaret Ewing. Margaret still represents the constituency in the Scottish Parliament and she will be remembered across the Floor of the House, I hope, as a passionate advocate for Scottish independence and social justice and as a supremely diligent constituency Member.

Margaret's commitment to her constituents was a hallmark of her 18 years in the House, as was her work, in particular, with the fishing and whisky producing communities. The warm homes group, which she established, is one of her legacies in this House and it goes from strength to strength. I am sure that Members on both sides of the House will wish her well in her continuing work in the Scottish Parliament.

Moray has of course been inextricably linked with the independence struggle of Scotland over the centuries. Robert the Bruce was taken with the loyalty of the men of Moray who fought for liberty. The Bruce family is still linked with the area through the title of the Earl of Elgin.

More recently, the area and the independence movement have been closely associated with the Ewing family; through my predecessor Margaret, obviously, but also through Winnie Ewing. The current president of the Scottish National party represented the area as Europe's longest-serving Euro-parliamentarian and is known affectionately as Madame Ecosse. Before that, she represented the then seal of Moray and Nairn. As the first non-Ewing to represent Moray for the SNP in the fourth decade of SNP victories in the constituency, I face a daunting task but I shall pursue it with relish.

Tradition in this place dictates that a new Member should make mention of the geography and nature of his or her constituency in a maiden speech. That is not difficult for me as Moray is, without doubt, one of the most beautiful parts of the country. It stretches from the Moray firth coastline in the north, with its dolphins and porpoises, through the laich of Moray into Speyside and to the Cairngorms in the south. It takes in the fishing towns of Buckie, Lossiemouth, Hopeman and Burghead; the cathedral city of Elgin; and ever-blooming Forres, which never seems to stop justifiably winning prizes for its beautifully tended flower displays, gardens and parks.

Moray is also known internationally for its place on the religious and spiritual map. Apart from active congregations of all major Churches, the area boasts both the world's most northerly Christian monastery at Pluscarden, which is run by the Benedictines, and the Findhorn foundation which attracts visitors from around the world.

The area is also blessed with its own pleasant micro-climate, so while the roch wind might be blowing elsewhere in Scotland and the rest of the country is dreich, the chances are that it is sunny and warm in Moray.

Many Members have made great play of the fact that their constituencies or towns are sited on seven hills. However, I am blessed with a happier variation in one of the main whisky producing towns. As locals boast to visiting Italian tourists, "Rome might have been built on seven hills, but Dufftown stands round seven stills." As if seven stills were not already enough, I can make the happy claim to represent more than 50 per cent. of Scotland's distilleries, which is something that I plan to research fully.

As well as my cautious plan; for whisky tasting, I intend to be a strong advocate for that industry and for those constituents who work in it. I shall also seek an end to the discrimination sanctioned by the House against Scotland's greatest export through penal and discriminatory rates of duty.

It is a great pleasure to turn to the debate, and I do so as a proud Scot and European. I share with everybody in my country the positive benefits of immigration, which has made Scotland a diverse, multicultural and outward-looking country. Like the rest of Scotland, Moray has benefited from the welcome addition of Scots Chinese and Scots Asian communities. The many service men and women who serve at RAF Lossiemouth and RAF Kinloss—predominantly from England—have also boosted the area.

In my case, immigration to Scotland is immediately relevant as my mother and grandmother came from the continent in the wake of the second world war. Perhaps that is one reason that I feel so strongly about the development of Europe, not only as a vehicle for greater social, political and economic progress in this time of globalisation, but as the institutional guarantor of peace.

The treaty of Nice is the mechanism that will help facilitate the enlargement of the European Union and reunite our continent after the false division maintained since the middle of the previous century. My only regret about the impending, welcome accession of countries from central and eastern Europe is that Scotland still lacks that equality of status in the international community and a direct seat at the top table of the EU. Shortly, both the Czech and Hungarian Governments will join those great sea-going powers, Austria and Luxembourg, with more direct say over the Scottish fishing industry, despite not having a single centimetre of coastline.

Ironically, the treaty of Nice makes it clear for the first time that, with the planned realigned weighting of votes, the different constituent parts of the UK would have more votes jointly were we directly represented within the EU. I look forward to the day when we can support each other's needs on this island not only as good neighbours, but as equals.

As a first step, I very much welcome the recent political declaration of constitutional regions and nations involving Bavaria, Catalonia, North-Rhine Westphalia, Salzburg and Scotland. The declaration was signed in the spirit of the Nice treaty, which also seeks greater democracy, flexibility and transparency in European institutions. Among other key pledges in the declaration, the Scottish Executive approved the text which considers it "vital" that constitutional regions and nations should be able to refer directly to the European Court of Justice when their prerogatives have been harmed.

I am grateful to Members on both sides of the House, especially those Labour and Liberal Democrat Members representing English and Welsh constituencies, who have already signed my early-day motion 3 on the subject. It would be a shame if no Members from Scotland, outside the SNP, were prepared to support the Scottish Executive on the subject, but I look forward to some of them signing the early-day motion.

The Nice treaty also displayed other challenges—as was shown by the recent referendum result in Ireland. I do not mean a challenge in the conventional sense of treaty ratification, but turnout in that plebiscite was little more than 30 per cent. Turnout has been consistently down in almost all European democracies, including the UK. If European co-operation and our domestic democratic processes and political legitimacy continue to be undermined by a growing sense of cynicism and apathy, we face the dangers of extremism, as has been seen in Austria and elsewhere.

That is why I devote my concluding comments to democratic involvement. I very much welcomed the maiden speech of the hon. Member for Glasgow, Cathcart (Mr. Harris)—unfortunately he is not in the Chamber—as he addressed the challenge of encouraging more people back to the ballot booths. However, although I pose the same questions as he did, I do not share his opposition to fairer voting systems.

Speaking as the youngest Member of the House who represents a Scottish constituency, I am convinced that one change might help to engender an interest in voting among young people: lowering the voting age to 16. That has the support of Members on both sides of the House and I make the suggestion in the non-partisan hope of boosting democracy.

Does it not strike hon. Members as ludicrous that we can raise and spend tax money levied on 16 and 17-year-olds? Is it not ludicrous that we can pass legislation that affects their working lives and economic well-being? Is it not obscene that we can send young service men and women into hazardous situations where they may give their lives for their country? It is obscene that 16 and 17-year-olds are judged old enough to pay tax, get married or die for their country, but are not granted the equality that enfranchisement brings. As Ministers in this place and in the Scottish Executive consider suggestions for boosting the teaching of civic life and modern studies, would it not help to show 16 and 17-year-olds the relevance of the democratic process if we gave them the vote?

Finally, 34 years ago, SNP president Winnie Ewing made her maiden speech in this House after her victory in the Hamilton by-election. She took that opportunity to call for the voting age to be lowered from 21 to 18. It gives me great pleasure to progress that debate. It might help to restore interest in and relevance to the democratic process in this country and act as a positive development in the wider European context.

6.48 pm
Mr. Andrew Miller (Ellesmere Port and Neston)

The Berlin summit was a special day for me. It began on 23 March 1999—my 50th birthday—so it sticks with me as I grow older and, perhaps, a little wiser.

We have heard first-rate speeches from new Members: my hon. Friend the Member for Glasgow, Cathcart (Mr. Harris) and the hon. Members for Leominster (Mr. Wiggin) and for Moray (Angus Robertson). The hon. Member for Tatton (Mr. Osborne) and I might take issue with the hon. Member for Moray about places of beauty—Cheshire can match anything that Scotland has to offer—but as my hon. Friend the Member for Stirling (Mrs. McGuire) is the Whip I had better not develop that point.

I share the sentiments expressed by the hon. Member for Tatton about one of the greatest mathematicians who ever lived. Alan Turing was treated disgracefully by Britain. It is great to hear a Conservative Member express those sentiments so strongly

I have a great deal of knowledge of the centre of the hon. Gentleman's constituency, Knutsford, as my office was there for a considerable time in a previous incarnation. He is absolutely right—it was Canute's ford, Elizabeth Gaskell wrote there, and it is a very interesting place. I noticed that the hon. Gentleman airbrushed out the last-but-one representative for Tatton, but perhaps we can discuss that some time with a pint at "The Bells of Peover". It is a pity that he drifted into the Eurosceptical note at the end of his speech, but never mind; it was an excellent speech, reflecting the very interesting constituency that he now represents.

When my right hon. Friend the Chief Secretary opened the debate, he referred to points raised by my hon. Friend the Member for West Derbyshire—

Mr. Todd

South Derbyshire.

Mr. Miller

I am sorry; I meant my hon. Friend the Member for South Derbyshire (Mr. Todd). The 1988 and 1994 agreements allowed for considerable real-terms increases—17 per cent. in 1988 and 22 per cent. in 1994. The contrast with the treaty that we are debating today is that Berlin stabilises EU spending.

It would be worth while for the House to reflect on the history of such agreements over a number of years, and specifically on what happened in 1980. It is brilliantly set out in Sir Ian Gilmour's book, "Dancing with Dogma". I have heard it said that it should have been called "Dancing with Wolves", but I believe that the book came before the film. The book sets out how, at that time, the contribution for the first two years of the process for that negotiation was reduced, by skilled negotiation, by two thirds. However, when Ian Gilmour and Peter Carrington returned to Northolt, they were harangued.

To put the matter into perspective, I shall read a short paragraph: We landed at Northolt and drove straight to Chequers where Mrs. Thatcher was holding a seminar on the Middle East. She had been sent a flash telegram telling her what had been provisionally agreed … Had we been the bailiffs arriving to take possession of the furniture, or even Ted Heath paying a social call in company with Jacques Delors, we would have probably been more cordially received. The Prime Minister was like a firework whose fuse had already been lit; we could almost hear the sizzling. That was the result of a very skilled negotiation, which the then Prime Minister distanced herself from until the said two gentlemen used a brilliant wheeze by leaking the story to the press, in the context of Mrs. Thatcher's great success in getting her money back. When she saw that, suddenly she saw things from a different end of the telescope. I commend that book to hon. Members on both sides of the House. It is extremely well written and it is in the Library.

There are those in the House who believe that we can avoid our trading relationships with Europe. That is certainly not the case in the context of my constituency, where a very significant part of our manufacturing base depends totally on two-way relationships with the mainland of Europe. Although many of those companies are also global players, they all tell me in no uncertain terms that their relationship with Europe is strengthened by a stable economic framework, and a number of players have given credit to the Government for achieving the success that they have. After all, half the United Kingdom's trade—I believe that it is £132 billion—is with Europe, and at least 3 million jobs are affected by that trade.

Particularly important in the context of the financial arrangements are the parts of the agreement that impact on waste and fraud. I listened with great interest to the right hon. Member far Wokingham (Mr. Redwood). Having heard him rant about the processes that apply, I ask, why did the Conservatives, when in government for so long, do nothing about that very serious matter? In any large organisation, let alone an organisation as large as the European Union, there will inevitably be an element of waste and an element of fraud, and it is up to us, as a member state, to take a strong role in combating such activities.

In the context of the treaty, the Government have had a remarkable success. I hope that not only the Government but every person in the House believes that any level of fraud against the EU budget is unacceptable, and I hope that the root and branch reform that the Prime Minister called for will be accepted by all Members of the House. I hope that we also all support the Commission's reform proposals, which involve a radical reform of financial management. We must continue to put pressure on the Commission to ensure that they are deliverable.

The new European anti-fraud office was the initiative of our Chancellor. The Commissioners have already introduced a code of conduct for Commissioners and Commission officials, published a whistleblowers' charter, established fairer arrangements for appointments to senior posts, and started a major modernisation of financial management procedures that will establish clear lines of responsibility for preventing waste and fraud. Just compare that with the previous EC finance Bill—the European Communities (Finance) Act 1995, introduced by the Conservative party, which did nothing to tackle waste and fraud. This Bill is tougher and takes tough action to tackle fraud. It may be a simple Bill, but its implications are far reaching in that area.

Of course, the Commission's reform proposals cannot be implemented overnight, and in-depth reform will take some time, but we need to continue to put pressure on the Commission to ensure that these reforms are delivered in full. I hope that, despite the fragmentation of the Conservative party at the moment, there is general support for that principle, because it goes without saying that when our Ministers attend summits, the knowledge that it is not just their party but the whole of the British Parliament that is taking a stance strengthens their position.

The body that has been set up in this field has the almost Scandinavian-sounding name of OLAF, but of course it comes from the French: Office Lutte Anti-Fraude. Its first annual report, which has just been published, is worth reading. It describes the organisational activities and analyses the types of fraud detected during the period. It says that 241 new files were opened, as were 68 administrative investigations and 181 co-ordination files. The total value of the cases under consideration was 264 million euros. That is not to say that that degree of fraud exists, but examinations are being carried out into these matters.

There have been a number of high profile cases that hon. Members may have seen in the press. The press in different parts of Europe give a slightly different perspective, and it is worth examining the facts with some care. The body that has been set up as a result of the Chancellor's initiative is clearly having successes, ranging from the illegal importation of bananas from Ecuador, adulterated butter, a series of issues around flax production in Spain and irregular wage payments in the Commission office in Sweden. These are extremely important issues and will have an impact on the economic probity of the Council and the Commission. Together with other member states, we have made it clear that such activities must stop.

Taking one of the examples that I cited, there was a major fraud involving some 16,000 tonnes of adulterated butter that had been sold for 45 million euros, if I am allowed to use that word in the presence of some Opposition Members. The entire cycle has been traced by the public prosecutors office in Naples and the Italian revenue police, thanks to the co-operation of the European anti-fraud office and the serious financial crime office of the French judicial police. We have created a mechanism that, in co-operation with existing authorities in other nations, has produced some important gains, to the benefit of the European taxpayer. Those who argued that because of the nature and scale of the institutions and the complexity of dealing with them, one could not tackle fraud successfully have been proved wrong.

In February last year, a protocol was signed with the Italian anti-mafia directorate that establishes, in the light of article 280 of the European Union treaty, regular co-operation between the anti-mafia directorate and OLAF, aimed at more effective action against illegal activities in economic and financial areas. In the context of organised crime, whether in Italy or elsewhere, that body represents an important step forward. It is perhaps not the world's best-known body, but it has a free telephone hotline in all member states to encourage members of the public to pass on information about fraud and irregularity, and the question of whistleblowers is dealt with within the treaty. I thought that, at that point, someone might leap up and challenge me to give the telephone number. If hon. Members want to try it, it is 0800 963 595.

These are incredibly important financial reforms and the Bill helps to build on the foundations for the proposed enlargement. These measures were needed, and some have been horrendously delayed. One wonders what happened with the previous Administration in this regard. Perhaps they were so wrapped up in their anti-European rhetoric that they forgot their way.

There must be continuing reform and, like the hon. Member for Moray and others, I want expansion to become possible. I can understand his frustration about some of the issues surrounding fishing regulations, but unless we look at the bigger picture, get the structures right and reform the CAP and fisheries policy, it will be difficult to address the details to which he referred.

I want the process of expansion to continue. I have some great friends In some unlikely places; some might say that they are the only friends I have. But whether they are in Slovenia, Estonia or Malta, I want Europe to expand and the common bonds that have been created strengthened as a result of greater economic co-operation. This Bill is an essential prerequisite to that, and I commend it to the House.

I ask all hon. Members to put aside their views about Europe. Unless one is a member of one of the Tory camps that wants us to come out of the EU altogether, we should all realise that this Bill is an essential building block for the future of Europe.

7.7 pm

Dr. Robert Spink (Castle Point)

I have been reminded tonight of what a pleasure it is to follow the hon. Member for Ellesmere Port and Neston (Mr. Miller). We disagreed often in the Parliament of 1992 to 1997 and we will do so again in the future, but his warmth and courteous approach are always welcome in this House, even if he did try to butter us up tonight.

I congratulate the hon. Member for Moray (Angus Robertson) on his excellent maiden speech, and also my hon. Friends the Members for Leominster (Mr. Wiggin) and for Tinton (Mr. Osborne). They endeared themselves to the House tonight by speaking in this important debate with such eloquence and command of their subject. Their praise for their predecessors and their constituencies will reflect well upon them all. I am sure that all of them will have excellent careers in this place. It was a pleasure also to listen to my right hon. Friend the Member for Wokingham (Mr. Redwood), who showed, as always, a uniquely accurate and detailed grasp of European finances.

The Bill is yet another missed opportunity. The Government should have taken the opportunity today to get to grips with Europe and to tackle the thorny issues of European financing. Instead, they ducked that opportunity. The Government should have used this opportunity to promote wholesale reform of the financing structures and mechanisms, which are costly, wasteful and regressive. The Chief Secretary said that the effect of the Bill is neutral. I do not agree, but even if it were that would be no reason for hon Members to roll over and accept it.

I do not agree that shifting the balance from VAT to GDP will necessarily be less regressive. I see it as a stealth-based way to transfer funds from those member states that work hard and generate wealth to those that are, shall we say, less prosperous. That fact has not yet emerged in this debate. This is a socialist, redistributive measure; it will enable new taxes to be imposed on our citizens, and it deserves closer scrutiny than it seems to have had so far from those on the Government Benches.

Every hon. Member knows the emotions that flow when one rises to make a maiden speech—the intoxicating blend of honour and humility, of trepidation, yet pleasure. I have now learned that the same emotions flow for those who have been described as quasi-retreads, but perhaps with a little extra added humility, which can be no bad thing—the humility that comes from having lost and then been chosen again by those who knew one before.

I have not been idle during my enforced sabbatical There are benefits in extending one's experience outside the ivory tower of Westminster in the real world—or as my constituents often used to put it, earning an honest living. I went back to my old activities in British industry—activities similar to those of the hon. Member for Ellesmere Port and Neston. I hope that that experience will serve me well in future.

As my hon. Friend the Member for North-West Norfolk (Mr. Bellingham) said, we are an exclusive group—a group of only two quasi-retreads, who won the election to represent the constituencies that we had previously held.

It is a tradition that I should heap praise on my predecessors, and I am very happy to do so tonight. My most recent predecessor was Mrs. Butler, who cared deeply for the Labour party and for Castle Point. She fought for key issues, such as Canvey's third road and to save the local radio station. She did an excellent job locally and she was very well thought of in Castle Point.

Indeed, Mrs. Butler followed in a line of great parliamentarians—in particular Sir Bernard Braine, whom I succeeded and who later became Lord Braine. Serving as Father of the House in his later years, he brought great dignity and a real sense of caring to that office. It is with no exaggeration that I say that Bernard, after 42 years as a Member, was one of the best-loved Members of Parliament of the 20th century. He once held the record for the length of a speech in the House; I think he spoke for about three and a half hours on one occasion.

I will try to emulate Bernard's indomitable fighting spirit when it comes to the rights of my constituents, to simple justice for individuals and to defending this country, as we should be doing tonight. However, the House will be relieved to hear that I will not copy Bernard in his habit of making three and a half hour speeches—I intend to restrict myself to only two hours tonight. Bernard Braine took the seat from another well known and much loved politician—the Labour Member of Parliament, Ray Gunter, who contributed much to the trade union movement in this country. So my predecessors were indeed illustrious, and one would expect no less of Castle Point given that, in common with most Members, I believe that I represent the very best constituency in the country, and it is a great honour to do so.

Castle Point lies on the north bank of the Thames estuary, nestled between Basildon and Southend-on-Sea. It is good to see my hon. Friend the Member for Rochford and Southend, East (Sir T. Taylor) here tonight. On the mainland are Thundersley, Daws Heath, Benfleet and, of course, Hadleigh, within which lies Hadleigh castle. In the Thames, we have Canvey island, to the east of which is Canvey point. The features of Hadleigh castle and Canvey point give us our constituency name. Canvey lies within the port of London to the east of the great Coryton oil refineries.

In 1605—a date that hon. Members will remember—gunpowder was manufactured on Canvey island and taken up the Thames in boats b y Guy Fawkes and packed below the House, to blow up the historic palace. I guess that it is for that reason that the police always pay particular attention to my car when I arrive here from my constituency. However, there is no gunpowder, treason or plot to be found in Castle Point these days. We are a close-knit, sound community and loyal to Britain and our monarch.

We have other historic connections with this palace. Many of the timbers that made the hammer beam roof in Westminster Hall were cut from the great oaks of Thundersley wood. That is where I live today and have lived for many years. We have a varied and beautiful environment in Castle Point and the people are very special. Compared with the average British constituency, we have 30 per cent. more self-employed people, the highest number of owner-occupied houses, significantly more cars per household, and our population is younger than the average—and Canvey island football team had a great cup run this year, under the inspired stewardship of Jeff King. So the picture painted by the statistics and, indeed, by my experience in Castle Point is that of a young, self-reliant, enthusiastic and caring community.

Having heard how discerning my constituents are, the House will not be surprised to learn that the vast majority of them are rather sceptical about Europe. They believe that this country needs defending from the continual erosion of its sovereignty and from economic attack from Europe. I may be skating on thin ice in saying that, but this is only a semi-maiden speech, so I hope that I can semi-observe the conventions, Mr. Deputy Speaker. In any event, I must honestly represent the views of the people of Castle Point. Bernard Braine said in his maiden speech that we lived in limes of peril. We still do. That demands courage and constancy from politicians of good heart and sound judgment. Our constitution and traditions are being eroded and our economy is threatened by inappropriate European integration. Worst of all, our very sovereignty is dangerously dissolving into the European melting pot. Castle Point people are pragmatic and understand money. They have not been deceived. They know that the Prime Minister has yielded a significant part of the rebate that Maggie Thatcher negotiated for Britain. That abatement should have belonged to Britain as a result of the enlargement programme. It amounted to hundreds of millions of pounds of so-called windfall. That is enough money to pay for 3,000 new teachers, 3,000 new nurses and 3,000 new police officers a year—in all, 9,000 extra dedicated and caring professionals whom the people of Castle Point and Britain dearly need.

My constituents know that the finances of Europe are riddled with fraud and waste. They know that the common agricultural policy, which may have served a purpose in the 1960s, is now expensive nonsense and must be fundamentally reformed. We could and should have used this opportunity to start that long-overdue process, but the Government have ducked it. Will the Minister in her summing-up speech say how and when the Government will fundamentally reform CAP financing?

Castle Point people are grateful, of course, for the money that may be provided from European funds—for example, for the Thames gateway regeneration project—but they are sharp; they know that for every pound they get, they must first give £6, based on a net contribution of more than £4 billion and only £667 million in regional development fund receipts for this country. Castle Point people bought into Europe as an economically beneficial trading project, but they now see it for what it has become—a dangerous, expensive political experiment.

Those European financing issues are not the only ones that concern the people of Castle Point. Notwithstanding massive privatisation investment, the railway line still needs to be improved. Our roads need serious investment to reduce the ever-growing congestion in Hadleigh, Tarpots, Sadler's Farm, and especially on Canvey island. The number of police on our streets has been cut, just as our police stations, which I previously fought to keep open to provide 24-hour cover, have been closed or made part-time during the past four years.

We need to secure benefits from the Thames gateway regeneration and P&O port projects, but we must be aware of and defend ourselves from the potential negative impacts of those developments on our environment.

There are also real difficulties in our schools, with the lowest-ever morale now recorded in local schools. That has been exacerbated by massive teacher shortages in the south-east and by the over-burdening bureaucracy that flows from the Department for Education and Skills.

We need to create more employment—but that can, on occasions, conflict with our environmental objectives, so care is needed. The Labour Government have set a massive and, I believe, unsustainable target of building an additional 2,400 houses in Castle Point. I will fight to ensure that the estates of new houses and the necessary industrial development, which must occur, will take place only on brownfield land.

I shall address all those points with Ministers and on the Floor of the House as the weeks and months go by. The 30 or so questions that I have already tabled stand witness to that fact. A Member of Parliament cannot represent the interests of his or her constituency or country without speaking out in this place. The House needs statesmen—politicians who will hold the Executive to account in this Chamber and who can make the public aware that something needs to be done and then persuade them to do it.

I will seek all-party action where possible to resolve our problems. We need more courtesy and co-operation in politics today; but these times also call for strong opposition. Only the Conservative party truly represents the interests of the British people, and never more so than on European financing.

7.21 pm
Mr. Bill Rammell (Harlow)

I wish to make a short contribution to the debate, but before I do so I apologise for my late arrival. I was detained in my constituency.

Since I have been here, I have heard several interesting maiden speeches. My hon. Friend the Member for Caerphilly (Mr. David) made a well-informed, persuasive and detailed speech, bringing to the Chamber his enormous experience as a former Member of the European Parliament. Indeed, he was the leader of the Labour group there. I particularly welcome him as a former fellow graduate of Cardiff university; there should be a few more of us in the Chamber.

The hon. Member for Tatton (Mr. Osborne) made an eloquent speech and clearly showed that he is easily making the transition from scribe in one or other of the disreputable newspapers to politician. I welcome him to this place.

The hon. Member for Moray (Angus Robertson) gave a speech of clear conviction and demonstrated much affection for his constituency. I was interested in his remarks about introducing voting at the age of 16. I am not convinced of the need for that, but there is a case to be made and he made it well.

I welcome the hon. Member for Castle Point (Dr. Spink), as a fellow Essex Member, to the Chamber. He made an impassioned anti-European speech. Although I was not convinced by its substance, its style was excellent. He spoke eloquently and movingly about his predecessors.

A debate on Britain's relationship with the European Union and on our membership of the EU is welcome so soon after the general election in which—let us not forget it—Britain's membership of the EU featured prominently. It must be underlined that there was a strong belief in the Conservative party in the weeks and months in the run-up to the general election that opposition to the single currency and vitriolic hostility to the EU and all its works would move opinion massively and significantly towards that party.

For days and weeks, we heard that the final seven days of the campaign were going to be devoted to the single currency and that that would be the issue that would lead people to switch their votes to the Conservative party. At the very least, we should note that that simply did not happen. The more that the Conservative party focused on Europe, the EU and the single currency, the more people began to question why it was not talking about other important issues, such as schools, hospitals, railways and much else.

The campaign and the way in which the result came about convinced me more than ever that the British people are not intrinsically anti-European. I believe that they are Euro-sceptic or sceptical about Europe, but not in the way that the Conservative party has taken over the notion of scepticism. They are sceptical in the true sense of the word. They are questioning, concerned and anxious about Me future, and they desire more information, but that does not amount to hostility.

The detailed polling evidence that appeared during the election campaign showed clearly—this was borne out by my experience of talking to thousands of people on the doorstep in my constituency—that there is not a majority for British withdrawal from the EU. Depending on how the question is put and the opinion poll that one consults, there may be a majority for joining the single currency at some stage in the future if and when the criteria are met. That is very different from the prospectus on which the Conservative party campaigned.

Another factor that I found on the doorstep in the election campaign—it relates specifically to the debate—is that, whatever view people take on the EU, its budget and the single currency, they overwhelmingly wanted the issues to be debated and to receive more information They want the type of honest argument that, all too often, we do not have. Our job as politicians of all parties and of all views is to provide that information. We do not receive it from the national newspapers. On the issues of Europe and particularly the single currency and the budget, their approach is one of crude caricature and prejudice. We need information, facts and details as well as a broad philosophical debate on the kind of Europe we want and what Britain's position in it should be.

If we have such a debate, I am confident that, when the criteria for entry into the single currency are met, we will be able to take the case to the British people in a referendum and win the argument. Whatever views individuals take, we should have a referendum when the criteria are met. I never understood the Conservative party's position of opposing that, because it is the single most important economic issue in a generation. It must be decided.

In the debate, I have heard repeated references to the experience of referendums elsewhere in the EU. In particular, the referendums In Denmark and the Irish Republic have been used to provide justification for the Conservative party's view that the EU is heading for the rocks. I would not go too far down that road, because there were specific reasons that explain why those referendums were lost. Those issues do not resonate in this country.

In Denmark, the overwhelming reason why people rejected the single currency in a referendum was that they thought that joining it would lead to the Danish welfare state being undermined.

Mr. Deputy Speaker

Order. The debate on the Bill's Second Reading is tightly drawn and the hon. Gentleman is now ranging rather wide of the mark.

Mr. Rammell

I take your point, Mr. Deputy Speaker, and I take note of the time. I shall move on.

I wish to comment on the interesting remarks of my hon. Friend the Member for South Derbyshire (Mr. Todd)—and they must have been in order because he made them. He referred to the fact that some people have doubts about the single currency because of their doubts about European institutions. That argument is worth considering, and he made some positive points.

My hon. Friend also strongly made a point that relates specifically to the EU budget. He stressed the need for better scrutiny by this Chamber of the EU's budget and affairs. I strongly support him in that view. I served for four years in the previous Parliament as a member of the European Scrutiny Committee and it does very good work, but all Members have a responsibility to scrutinise the EU's work and budget. All too often, we do not take that responsibility and too few Members take a real interest in these issues.

A significant proportion of the laws that affect the lives of people in this country emanate from the EU, but they receive nothing like the scrutiny that we devote to legislation that originates from Westminister, which is a cause for concern. We have to consider providing the European Scrutiny Committee with a procedural device so that it is more able to get its concerns debated on the Floor of the House.

There is often a case for the European Scrutiny Committee to take on the role of a more traditional Select Committee. It is instructive to compare its work on budgets with the role of the European Union Committee in the other place, which carries out more detailed and wide-ranging investigations. We can learn from that.

Dr. Palmer

Is there merit in moving towards the Danish approach of having a committee that needs to give its consent before the Government decide on European Union issues?

Mr. Deputy Speaker

Order. We are not discussing other structures, as I have explained.

Mr. Rammell

I take your guidance, Mr. Deputy Speaker, especially in light of the look on the face of my hon. Friend the Economic Secretary. However, it is an interesting point.

The Bill is positive. It cements the outcome of the successful 1999 European Council negotiations in Berlin, which produced constructive proposals. The Bill is a prerequisite to enlargement. That is also true of the European Communities (Amendment) Bill to ratify the Nice treaty, which we will discuss tomorrow. That fact needs to be underlined. I am concerned when politicians say that they are in favour of enlargement progressing quickly, but when it comes to the means and decisions to achieve that there is not so much enthusiasm. That is especially the case with Conservative Members.

Without the changes, we will not have enlargement, which would be a cause for concern. Not only is it in Britain's economic self-interest to enlarge the EU from a single market of 370 million people to 500 million consumers, but we have an ethical and moral responsibility to former eastern bloc countries, which for decades we encouraged to reject totalitarianism and change their societies fundamentally. They did that and are keen to join the EU. The longer the debate about enlargement drags on without—

Mr. Deputy Speaker

Order. The debate is not about enlargement.

Mr. Rammell

It is about the financial means to achieve enlargement, and we should introduce the measures to do that as soon as possible.

I welcome the move from own resources to GNP as a result of the deal that was struck in Berlin, which will provide a fairer and more affordable mechanism to fund EU activities in the long term. Despite the claims about the outcome of European Council deliberations on EU budgets when the previous Conservative Government were in power, the two earlier negotiations resulted in significant increases in expenditure. After this round of negotiations, there will be no rise in real terms at the end of the period in question.

It is also noteworthy to explain, as others have done, that we have safeguarded the British abatement. Many other EU Governments were keen to end that, which we avoided by successful negotiation. Indeed, many Conservatives consistently claimed in the run-up to the Berlin Council that we would be forced to give way and lose the abatement, but that did riot materialise.

It is worth recognising that the UK's net contribution after enlargement will be of the same order as that paid by France or Italy. That was not the case in the 1980s and early 1990s when the Conservatives were in power and our contribution to the EU was disproportionate to our national wealth. The Bill and the deal reached in Berlin move us firmly in the right direction.

Progress on the common agricultural policy is also welcome. I agree with what my lion. Friend the Member for South Derbyshire said about the need to go much further on CAP reform. However, Berlin represented the most radical reform of the CAP since it was established. There will be significant price cuts for cereals, beef and milk, and the annual contribution will fall by about £70 a year for the average family.

Since 1988, the proportion of the EU' s budget spent on farming has fallen from 67 per cent. to 46 per cent. today. That figure is still too high, but it shows that we are making progress. However, although the achievement at Berlin was important and historic, we must consider why we did not go further. Germany is often prepared to support an unjustifiable defence of the CAP by the French Government because of the historic Franco-German alliance. The British Government and British people can learn from that. We have an opportunity to work with that arrangement and provide a tripartite leadership instead of relying on the Franco-German alliance to be the motor of the EU.

The Bill provides us with the opportunity to tackle fraud and financial mismanagement. The new European anti-fraud office was the initiative of the Chancellor and the Government and it has already conducted major investigations. The European Commission's decision to appoint Neil Kinnock with special responsibility for reform is especially significant. Achievements include the code of conduct for Commissioners, the whistleblowers' charter and, in particular, the new and fair arrangements for appointments to senior posts so that we do not continue with Buggins' turn, which happened too often in the Commission. When we talk about fraud and financial mismanagement as the responsibility of the EU, we should note that 85 per cent. of its spending is delivered by individual national Governments. The responsibility to tackle fraud lies not only at the centre, but with national Governments.

The Bill is an achievement. It takes us forward and provides for sound and well-established EU funding. If we pass the Bill and the European Communities (Amendment) Bill tomorrow, we will lead the way to EU enlargement, which will be one of the most significant and historic developments on our continent in the next decade. I hope that all hon. Members will support it.

7.38 pm
Sir Teddy Taylor (Rochford and Southend, East)

One of the joys of being a final speaker is that it is possible to hear many interesting speeches, and today I have had the pleasure of hearing four splendid maiden speeches. My hon. Friend the Member for Castle Point (Dr. Spink) made a re-maiden speech, because he made excellent contributions when he previously served in this place. There is no doubt that he will once again be a great champion of Castle Point. He showed great understanding of, and concern for, its people and all that they stand for. I am sure that we wish him well in returning to that area, which has always had splendid representatives. I was interested, as always, in his speech and look forward to hearing more from him.

The other maiden speakers set themselves serious objectives. The hon. Member for Moray (Angus Robertson), who is a Scottish nationalist, made a fascinating speech in which he said that he was going to fight for the interests of the fishing industry. The Chief Secretary will be well aware from his experience of Europe that, whereas we used to have 80 per cent. of the waters and fish of Europe, we now, sadly, have only 20 per cent. Clearly, the hon. Member for Moray will have a major job on his hands if he is to do something about that. I am not sure that Parliament has any powers at all in that respect, but I am sure that we all wish him well.

My hon. Friend the Member for Leominster (Mr. Wiggin) also made a splendid speech, in which he said that his objective was the reform of the common agricultural policy. I have had the pleasure of waiting for that reform for about 20 years. We have heard three speeches proclaiming the merits of the reform that has happened so far; we all know that it is a load of codswallop, because all that we have had is a small reduction in some prices and a transfer of subsidy to what are called "area payments", which are being paid for by member Governments. To that extent, it is possible to say that the real cost of the CAP is no greater than before.

My hon. Friend the Member for Tatton (Mr. Osborne) made an inspiring speech, in which he said that he was in favour of extending the membership of the European Economic Community. Despite all the talk, Ministers well know that that cannot and will not happen.

As someone who has had to listen, time and again, to discussion of European regulations and treaties, I know that the same thing always happens: views are expressed about the merits and joys that will ensue, but later, when one looks back, one finds that they simply never emerged.

Remarkable comments have been made today. A Member who represents a Welsh constituency said how wonderful it was that we are to have more objective 1 and objective 2 grants, which will bring pleasure to Wales. We should be well aware that if those grants are linked to EEC enlargement, that will wind up Britain's receipt of them. If, by chance, Hungary, Czechoslovakia, Poland and Romania become members of the EEC, the money available to the United Kingdom for grants will be very restricted. We should ask ourselves what the blazes the benefit of those grants is, bearing in mind the fact that if we controlled that expenditure, we could spend twice as much.

Probably because I do not like the EEC, I take pleasure in the fact that my constituency is the only place in Essex that has objective 2 grants. We applied for only three wards, and the EEC insisted on awarding grants for five. It turned down places such as Basildon and Tilbury, and said that my constituency, including the place where I live, was an area of deprivation that needed lots of money, so we got all the money for Essex. There will no doubt he big posters around the constituency saying, "Given by the kindness of the EEC", and I feel like putting a Teddy Taylor poster underneath each one, simply pointing out that every pound costs us two pounds.

The hon. Member for Broxtowe (Dr. Palmer) made the wonderful statement that the Bill will improve our trade which has been an astonishing success. If we look at the facts we see that, far from being an astonishing success, our trade has been an abysmal failure, because our trade deficit with Europe since we joined is £166 billion. That means that for every £10 of goods we have sold to Europe, it has sent us back £11 of goods. We have also been told that by changing the basis for the collection of the money from VAT to GDP, the Bill will reduce fiddling and fraud. That is typical of the comments that we always hear about the joys that will flow from the new powers that we are giving Europe. Experience shows that those benefits will not emerge.

In a splendid speech, the Chief Secretary gave us two new assurances. He said that he accepted that the Governments of Germany, Austria, Sweden and the Netherlands were thrilled and delighted that, under this proposal, they will pay less in contributions, but he explained that, far from Britain making up the difference, it will be made up by other member states. He said also that Britain's position would be stable and settled because we have the advantage of the rebate. My experience of other Bills on Europe tells me that I will have the pleasure of reminding him of what he said when we get the figures for the contributions that we have made.

The Chief Secretary did not explain what the effect on Britain's payments of the windfall payments not being taken into account will be. We know that there are windfall payments that should come to the United Kingdom. I understood the figure to be about £200 million, but one Member was talking about pennies, so I ask the Economic Secretary, in her wind-up speech, to tell us what will be the consequence of abolishing windfall payments.

What worries me most is that although we are told that the Bill will not result in more cash going to Europe, hon Members will find, if they look back at previous debates, that we have had the same assurances every time. What are the facts? In 1973, the year in which we joined, out net payment was £88 million. Ten years later, it was £796 million. In 1993, the figure was £2,154 million, and in 2000, it was £4,048 million. There has been a massive increase, and that will inevitably continue.

Those are net figures; let us talk about gross figures. I have not had the pleasure, Mr. Deputy Speaker, of visiting your constituency more than twice, but I know, as we all do, that everyone there loves having you as their representative. If I were to hand you a cheque for £5.5 million and tell you that you could do whatever you liked with it for your constituency, I am sure that being the kind, caring and conscientious MP you are, you could think of many things to spend it on. It is a lot of money I am sure that if I gave my hon. Friend the Member for Castle Point a cheque for £5.5 million and told him to spend it as he wished, he would think of many causes in his constituency that needed help. I mention that figure because it is the amount that we have sent to Brussels since we started this debate at 3.30 pm. Some £1.2 million goes to Brussels every hour. Daily, the amount is £29 million, and weekly, it is £210 million, and that rate of contribution will increase.

When the Government discussed the financing of the EEC and how the money should be spent, did they wonder what possible good was coming from it? Did they, for example, think about the fishermen to whom the hon. Member for Moray referred? Our fishermen have been ruined by our arrangement with the EEC; instead of 80 per cent. of the fish and the fishermen, we have 20 per cent., and the figure is falling. What about the businesses that we have been talking about, and the trade that we were told was so wonderful? We all know that trade with Europe has been disastrous, and that the problem will get worse. What about the CAP?

Dr. Palmer

Is the hon. Gentleman saying that trade is valuable only if it involves exports, and that he is not interested in consumers having the opportunity to import at reasonable prices?

Sir Teddy Taylor

I am saying that it is not good for a country that has a positive balance of trade with an area to make a change in its trading arrangements which results in a massive deficit. The hon. Gentleman is well aware that the deficit is due to the extra costs that, unfortunately, stem from the EEC. He will know that we used to have a positive balance of trade, but we now have a net deficit of, depending on how one looks at it, £166 billion or £300 billion.

Why do we want to spend more money on the CAP? We should look at the figures for the destruction of food. I hope that enthusiasts for the EEC will ask themselves what the point is of spending so much money on destroying food, which is essentially what CAP funds are spent on. We should consider grants, and ask ourselves what is the point of some of the crazy items that we are spending public money on. I suggest that in discussions of grants, the Government should ask themselves whether it would not be better if the EEC had no money at all, instead of simply trying to make changes to give it a little more. I suspect that if we looked at the various schemes that have been implemented, we would find that they do not help Europe or assist its people. Their only outcome is a massive waste of public money, which should worry us all. If we want to help people and countries, we can do it by dropping money from aeroplanes, or sending a cheque through the post, without becoming involved in the ludicrous schemes of the EC.

I hope that the Government will consider the consequences for this country's expenditure of items that are not direct amounts that we have to pay because of the Bill, but—disregarding the Bill—stem instead from our other arrangements with Europe. In connection with one such item, I wish that the Minister would give a straight answer to this question: how much money have Britain, its taxpayers and people lost by the sales of gold and the purchase of euros?

Roger Casale (Wimbledon)

Is the hon. Gentleman arguing that Britain should not be a net contributor to the EU budget? If so, which countries does he believe should be net contributors? Obviously, some countries must be net contributors and others net gainers from the budget.

Sir Teddy Taylor

Had I been in charge of the negotiations, I would have said that there should be no budget at all. In the context of Europe, if we ask what benefit comes from the expenditure on gold, the answer is none at all. What advantage does anyone derive from the CAP? It is the biggest protection racket ever devised by man. The farmers had a wonderful time for the first five years, but now farmers in all constituencies are suffering. How has Europe helped the fishing industry? How has it helped anyone? Instead of trying to renegotiate the amounts of money involved, we should ask whether there is any point at all. The hon. Gentleman is an enthusiast for the EEC, but does he really think that Europe would be worse off if there were no expenditure at all? I think that it would be much better for Europe, its industry and its people if there were none.

Roger Casale

In one respect, I agree with the hon. Gentleman: the EU is in need of reform. The CAP in particular is in need of drastic reforms. However, what arguments and tactics would he adopt to bring about such reforms?

Sir Teddy Taylor

To be honest, if the hon. Gentleman is talking about reforming the CAP, he should forget about it—it is not possible, it will never happen. The sort of mini-changes that are being made simply enable us to kid ourselves, because when decisions are made by majority vote, it is not possible to get the sort of structural changes that are needed—majority agreement will never be reached. Governments of both parties have tried to mislead themselves into believing that reforms can be achieved and that renegotiation is on its way, but they are kidding themselves. We have power only when money is being requested—that is the time at which we should promote change.

I ask the hon. Gentleman and the current Government, as I asked the previous Government, to think about the point of European expenditure and to consider whether Europe would be better off if we had no expenditure at all. I mentioned the regional grants that will pour into my constituency and cost this country twice as much as the grants themselves. We ask whether the money will be wisely spent, but when we look around Britain for silly things on which money has been spent, we find that grants have formed the basis for many of them. We must think about carefully about those questions.

Because of our relationship with Europe as set out in the Bill, we have to do some silly things, one of which is to promote or pump up the euro. Everyone knows that all previous single currencies have collapsed: unless we are like America, with one Government, one Treasury and a feeling of nationhood, the single currency will collapse. We all know that that will happen to the euro, but we have been propping it up in various ways, one of which—apart from direct intervention—has been to tell the Bank of England to sell its gold and put 40 per cent. of the money into euros.

The Bank has sold more than 200 tonnes of gold. All I want to know is how much money we have lost. The price of gold has, unfortunately, risen since we sold. We know that the price of the euro today is about the lowest it has ever been and that it has gone down some way since we bought euros. I simply want to know how much we have lost. I think that that is a reasonable question. When I asked Ministers that question, they told me that it would be misleading to give me that information, so I wrote to that terribly nice man, Sir Edward George, Governor of the Bank of England, asking him to tell me. He replied that he was sorry, but that he believed that any such calculation would be misleading. I do not see any reason for the Bank to undertake it. Ours is meant to be a democratic assembly and I think that the taxpayer is entitled to know how much money has been lost by selling the gold, how much has been lost by buying all those euros, how many euros we have, and what is going to happen.

If we look back into history, we will see that it always happens the same way. Say a country—for example, Ireland or Germany—is doing too well and is too prosperous—

Roger Casale

Given that the hon. Gentleman clearly believes that the EU costs too much and that reform is impossible, is it his view that Britain should withdraw altogether from the EU?

Sir Teddy Taylor

That is not possible. I know that the hon. Gentleman has not been a Member of Parliament long, but he must wake up to reality: Britain does not Lave the power to withdraw from the EU. I cannot be drawn into wider issues, because this is a Second Reading debate, but be should know that we cannot withdraw. Even if everyone wanted to leave the EC and if every Member of Parliament including the Prime Minister and the Leader of the Opposition voted for it, it would not work: we would be taken to the courts for breaching the treaties. We do not have the power to do it. That is why the hon. Gentleman should adopt an extremely cautious approach to all new developments—all the new money spent and all the new powers given away.

The sad fact is that we cannot withdraw—Britain does not have the power. If we passed a Bill stating our intention to withdraw from the EEC, it would not work. The European treaties are not like a treaty with, say, Belgium or France, which can be torn up and that is that. We have handed over the power; it has gone. I voted against every one of those treaties, as the hon. Gentleman will find if he cares to look up my record; I am sorry that we ever agreed to them. Now, because Europe is heading for the horrible problems that always accompany a single currency, we have to be extremely careful about giving away additional power. Most important of all, we must avoid being over-optimistic.

Mr. Barry Gardiner (Brent, North)

I am trying to follow the hon. Gentleman's logic—I am sure it is in there somewhere, but I am not with it at the moment. If he accepts that withdrawal is impossible and he opposes the Bill—I presume that he will vote against Second Reading—he should argue for something else in its place, but no amendment to the Second Reading motion has been tabled. What is the logic of his position? Would we simply be left—

Mr. Deputy Speaker

Order. The hon. Gentleman is embarking on a speech, not making an intervention, and I suspect that he is going to lead the hon. Member for Rochford and Southend, East (Sir T. Taylor) astray if he is not careful.

Sir Teddy Taylor

Quite right, Mr. Deputy Speaker. I do not want to be drawn into those broader issues.

I would argue for the following simple course of action. We should say that we will not agree to any new treaty until an escape clause is written in, so that countries that want to leave can legally do so if their Governments and their people want that. We do not have that power now, but it would be great if we had. However, that is a wider issue.

I have spoken for far too long, so I shall forget about the rest of my speech and conclude by making one simple and sincere point to the Government. Please stop being over-confident and thinking that everything will be better. Many people have said that they will reform the CAP, but look at the facts—it is not happened. We have only made a tiny change in prices and transferred the responsibility for paying grants called area payments to our national Governments.

The Government should stop kidding themselves—in particular, they should stop kidding themselves that the Bill will not cost more money. Provisions for European taxes have been written in. Such taxes have not been levied yet, but the fact is that everything in previous treaties has happened, because the Europeans say that we have agreed to some proposition and we have to agree to something that emerges from it. We are getting in deeper and deeper. I hope that the Government will stop being over-optimistic and that they will stop trying to pretend that things are happening that are not happening.

I regard the Bill as perhaps the best deal that the Government could negotiate in the circumstances, but it will do us no good. It will open the way to our losing additional power and I am convinced that, in two years' time, our net contribution will be far greater than the £4 billion it was this year.

7.59 pm
Mr. David Drew (Stroud)

I am delighted to speak about the Bill on Second Reading. Although I missed some of the proceedings, including most of the maiden speeches, I picked up the flavour, or tenor, of the debate from the introductory speeches.

I heard part of the very good maiden speech of my hon. Friend the Member for Caerphilly (Mr. David) and what I suppose can be described as the re-maiden speech of the hon. Member for Castle Point (Dr. Spink). I am not sure what a retread is—I thought it was something that one put on one's car when one could not afford a new wheel—but I am sure that we could use a far more complimentary word to describe his speech. I share some common ground with the hon. Gentleman, who referred to the success of his football team, Canvey Island; their success was achieved at the expense of my football team, Forest Green Rovers, who lost in the final of the Football Association trophy. Perhaps we can turn that around in future.

Before turning to the Bill, I welcome my hon. Friend the Economic Secretary to the Front Bench. I hope that she has an enjoyable time as a Treasury Minister and that I do not make her job too difficult this evening.

I wish to concentrate on reform of the common agricultural policy. Most Members will know that in the previous Parliament my interest was mainly in agriculture, which is not unimportant. If the Berlin Council and the legislation that has consequently been introduced are to succeed, it is through the reform of agriculture that moneys will be allowed to square the circle. I make no apology for concentrating on that part of the package but, in doing so, I am sure that I can comment on the wider package.

I share the view of my hon. Friend the Member for Bexleyheath and Crayford (Mr. Beard) that the Bill is rather opaque and that it is therefore difficult to know exactly how it will work in practice. In particular, I am still struggling with the mechanism by which we move from a VAT contributory regime to one based on the GNP of the nations of the EU. I am sure that that will make sense in due course but, for the moment, it leaves me mystified. I am certain that we will get further clarification as debate proceeds in this place.

In concentrating on the way in which the CAP reform is a crucial part of the whole package, I should like to highlight two possible dilemmas that have to be overcome for change to be handled properly. The first dilemma, as has already been said, is that overall reform is dependent on agricultural reform—one supposes that that involves the reduction of the support mechanism payments through the production mechanism. If the EU is to continue, that system will need radical reform; if it is not reformed, the EU will he bankrupted when the new countries join. I know that there is a strength of purpose and a desire to do good things, and although I do not go along entirely with the remarks of the hon. Member for Rochford and Southend, East (Sir T. Taylor), I feel that there have been many missed opportunities in reform of the CAP. If we are to get it right this time, reform must be radical and complete; it must recognise that the new countries coming in will want a say in the regime that will come into play even before they sign on the dotted line to join the EU.

The second dilemma relates to the first and concerns the subject that I raised when I intervened on the hon. Member for Kingston and Surbiton (Mr. Davey), the spokesperson for the Liberal Democrats. The changes are predicated on the fact that reform of the CAP regime will mean, effectively, moving towards a free market system, which will further enhance the globalisation of agriculture. I am pointing out that dilemma because the producers and consumers whom I talk to are rather sceptical about the benefits of globalisation. We have only to look at the recent protests which, in some ways, littered the streets of the major European capitals—I do not excuse the protesters' behaviour—to realise that certain aspects of globalisation are, at the very least, questionable.

We are talking not just about the necessary reform of agriculture per se, but about what will come with that. Such reform is linked to the World Trade Organisation and the gradual liberalisation of our trade. There was a dispute about the multilateral agreement on investment and, more recently, an argument about the possible globalisation of services, both of which have led to a great reaction, most of it negative. Agriculture involves a further aspect: in many ways, the markets already trade on it, but it falls between the extreme of the free market and the protected ways in which different parts of the world control the supply and purchase of agricultural products.

We are experiencing a dilemma concerning our handling of that problem. Unless we can resolve that, finance will not be avail able to allow the EU to continue, expand and take care of existing problems. I therefore urge my hon. Friend the Economic Secretary to explain how we can push forward agricultural changes and guarantee that that will take place before there is any further expansion; we must not threaten certain things, as some of us believe that they could have a deleterious effect on the future of agriculture.

I know that the easy answer is that we should look at a different way of funding agriculture and encourage different agricultural systems. I certainly welcome what will come with the change in legislation: the encouragement of more rural development and the expectation that the second pillar—which has been referred to as a stump—will grow a limb that can stand up on its own, rather than being supported by other mechanisms. If we are to change agriculture for the better, that cannot happen a day too soon. Certainly, producers, who are currently facing difficulties, want assurance that change will not be achieved at the cost of any further difficulties in their production.

Also, consumers need to be satisfied that the way that they can obtain food is by paying a fair price. I have never been one to argue, in this place or outside, that that should be the lowest price. I worry when people speak of agricultural benefits for the consumer in the form of lower prices alone. Have we not learned enough from recent crises to know that food cannot be produced at a cheaper price without impairing quality or choice? We must make sure that a balance is struck, and I am not sure that free market solutions through the globalisation of agricultural production are the best way to achieve that.

Several other speakers mentioned the fact that, as a result of the Berlin Council, the British rebate will be guaranteed and other countries will not be asked to contribute more. Wearing my agricultural hat, I must say that I have always had reservations about the true benefits of the Fontainebleau opt-out and the fact that we received a rebate of our contribution. Some of the problems visited upon the agricultural industry of late are due to the fact that when we call, as many of us do, for agrimonetary compensation, most of it comes from the British Exchequer, because we are locked into the price and currency mechanisms. It was always said that 78p in the pound would be paid back in that way.

We may find that acceptable, given the wider benefits that have accrued from Fontainebleau, but I do not believe that that is as good a deal as some people would have us believe. We are building upon it, as it is difficult to go backwards and consider a new mechanism. If the UK renegotiates its rebate, other countries will expect to be able to do the same. It is interesting to note that four countries have been able to reduce the amount that they contribute towards our rebate. I wonder how they achieved that; perhaps we can learn from them. If lower contributions are paid and higher rebates are demanded, somebody has to pay for that. Like the insurance principle, if one pays less in, there is less available when one needs to draw the money out. That has cost us dear in recent times.

Those are the two fundamental dilemmas facing us. I would be far happier if we got on with agricultural reform, so that the CAP could meet the needs of both producers and consumers. There are, of course, many other pressures on the system, not the least of which are those that will result from the expansion of the EU in due course.

I do not know whether either or both of the two main Opposition parties intend to vote against Second Reading tonight. In the main Opposition party, there seems to be a split between those who want a plague on all European houses, and who will see the Bill as a further ratcheting up of integration and will therefore vote against it on principle, and those who will take a more pragmatic stance on the Bill. Among some of those bidding for the Leadership, there seems to be the view that the party misjudged what the British people would stand for with regard to further European progression. They are therefore seeking a compromise position. When they present their tax and spend proposals, it will be interesting to see whether they aim to draw back money from Europe or take a more pragmatic line.

The Liberal Democrats remain the most enthusiastic Europeans in this place, notwithstanding the views expressed by some of my hon. Friends. The Liberal Democrat view seems to be that an opportunity was missed, and that the changes proposed in Berlin could have progressed further and faster. I am not sure whether that is realpolitik and therefore possible, or just a typically optimistic stance.

Some positive measures have come out of Berlin. If we can get the budget under control—a feature that some of u s thought was lacking from previous negotiations—that would be widely welcomed. Only time will tell whether that will be possible and whether it will yield further dividends through more reform in the future. I see the merits of the proposals, but if change is to occur, the process must be speeded up and must carry the people along with it. That will not be easy, because of the scepticism being expressed about globalisation. Perhaps other hon. Members can help me out of that dilemma. I look forward to hearing from my hon. Friend the Economic Secretary how the changes are to be made real.

8.17 pm
Roger Casale (Wimbledon)

I join my hon. Friend the Member for Stroud (Mr. Drew) in welcoming the Economic Secretary to the Front Bench. I wish her every success in her new position, and I am convinced that she will be off to a good start today and continue in that fashion.

I challenge the view advanced by Opposition Members, particularly the hon. Member for Rochford and Southend, Last (Sir T. Taylor), that although it is acceptable for Britain to be a member of the European Union, it is not acceptable for Britain to make a net financial contribution to the European Community. In other words, I challenge the view that the price of Britain's membership of the EU is not a price worth paying.

I do not argue that Britain should be a member at any price, or that we should not continue to fight for the best possible deal for Britain and for further reform of the EU. However, we should place any assessment of Britain's financial contribution to the EU in the context of the overall economic benefits that accrue to Britain from our continued membership. In debating EU finances, it is as well to remember what those economic gains to Britain and the people of Britain are. They are important to investment and jobs in the UK and provide a substantial boost to Britain's external trade.

More than 3 million jobs depend on Britain's participation in, and continued active membership of, the EU and the single market. More than 750,000 companies in the UK are involved in the single market and more than £132 billion—more than half the UK's total external trade—is linked to our membership of it. It is important to remind the Opposition Members who seem to be implacably opposed to Britain's continued membership of the EU that we must put our membership in that context. They continually speak about the price of membership without seeing its overall economic value. They do not seem to want to acknowledge the huge economic benefits of being part of the European market.

I say to Opposition Members who hold such views that their vision of Britain and its future is narrow and timid. At its heart is the fear that Britain can no longer stand up for its interests or pay its way in the world. It is not a vision of Britain that I recognise or that could inspire anyone with confidence in the future, and I believe that it leads to the conclusion that we should withdraw from the EU. If some Opposition Members are not arguing that we should consider withdrawal, they should think about whether it is right to flirt with views that lead to such a conclusion. That narrow, sceptical and even hostile view of the European Union and of Britain's relationship with it was put forward at the general election but soundly rejected by the British electorate. I ask hon. Members to imagine how it would have gone down with our European partners and other European peoples if such a vision had had the opportunity to prevail.

I want Britain, like other European nations and out partners in the EU, to be confident and engaged in European affairs. I want it not only to advance a positive vision for the future of Europe, but to make the case for changing the way in which the EU operates and build the necessary alliances to deliver that change. It should also be putting forward the case for reform. I say to Opposition Members that to accept and value Britain's membership of the European Union is not to accept the EU as it is of to deny that it is in need of reform. It is exactly those reforms that the British Government have been working to negotiate. Indeed, they negotiated them successfully in the talks and summits that led to the Berlin conclusions that we are debating.

Reform is needed first and foremost in how the common agricultural policy operates. Despite Opposition Members' sceptical comments, major reform in the operation of the CAP is occurring and was achieved at the Berlin summit. That includes substantial agreement on price cuts for cereals, beef and milk. Spending on the CAP will decline from 2002, which should bring a cost reduction of £70 a year to the average household in Britain.

Mr. Wiggin

How was the common agricultural policy reformed? I did not think that it had been reformed at all.

Roger Casale

I am tempted to give a long exposition about how the CAP has developed over the years. The hon. Gentleman must not think that if the CAP did not exist, other EU countries would not have their own mechanisms and instruments for protecting their agricultural sectors. Not only in the agricultural sector, but in other sectors, including industry, we want trade barriers to be removed through negotiation.

That is exactly what the EU and international co-operation are about. It is no good merely wishing that it was not there. We must deal with the world in which we live and face up to the reality of the historical development of the EU and the CAP, and work with other European nations for a negotiated settlement to bring those barriers down. One of the common features of the CAP is the price support mechanism. It is by reducing the level at which prices will be supported for beef, cereals and milk, bringing them closer to world prices, that we are delivering benefits to consumers in this country as a result of reform.

Mr. Mark Hendrick (Preston)

Does my hon. Friend agree that the common agricultural policy has now been cut from about two thirds of the EU budget to less than half? The dalliances of the Opposition put this country at great risk. If they had been elected, decades of treaties and agreements would have been ripped up, which would have done no good whatever for the British people. Does he agree that it is outrageous for them to threaten our relationship with the other 14 member states so irresponsibly?

Roger Casale

I listened closely to my hon. Friend's comments. It is all very well for Opposition Members to shake their heads and say that they would not have torn up the treaties or jeopardised many of Britain's important international relations, not least with our partner countries, but they put forward exactly such views and policies in the election campaign. They went down very badly and would have made a miserable impression on any partner countries that we were seeking positively to influence.

In today's world, we must recognise that many of the problems that we face as a country and many of the concerns of the people whom we represent can be resolved only by working together in the European arena or in an international context. That involves building alliances for the sort of changes that we want to deliver. We must have majority agreement to deliver many changes in the EU, because of the way in which it operates. We must de the groundwork of building alliances with our European partners and engaging positively and constructively with the EU if we are to succeed.

It is all very well for Opposition Members to shake their heads, but we have heard nothing from them about an alternative strategy that could succeed without recognising the need to build up those alliances and build confidence in Britain's contribution to the European debate, so that we can lead in Europe on the reforms that we all want, including CAP reforms. One can sit in the corner and say, "What a big, bad world we live in", or go out into the world and try to change it. The way to make those changes is to work together with other European countries to deliver them.

Reform will not be completed overnight. We are engaged in an historical process and this country has a tremendous contribution to make. We cannot make that contribution if we are always seen as negative and as carping from the sidelines. Unfortunately, for many years when the Conservative party was in government, that is how Britain was seen.

The Berlin Council did several other things apart from introducing important reforms to the CAP. It put paid to the notion that the European Union's finances were spiralling out of control. Let us consider for example the amount that the EU spends on administration. No one can say that the 5.1 per cent. of the budget that is spent on the Commission and the institutions means that the EU is a superstate spiralling out of control. A European Union that cannot raise taxes directly, except from its employees, or borrow to finance investment, is hardly a fiscal system that is out of control.

Opposition Members raise the spectre of the EU as a Frankenstein's monster that is all powerful and outside our control. That is nonsense. The EU budget has a fixed ceiling of 1.27 per cent. If we consider EU spending for the next five years—the set of consecutive financial budgets that are agreed for a five to six-year period and described as the financial perspective—total expenditure is projected to be less than our expenditure when we entered that period last year.

Our debate this evening should reassure those who support, as we do, a ceiling on EU resources. At Berlin, it was decided to bring spending within tightly defined limits. European Union spending has been stabilised for the first time in its history. That was our Government's objective when we entered the negotiations. We also managed to maintain the United Kingdom abatement in full. Those two achievements would not have been possible if we had started out from the negative, tactically and psychologically flawed, politically misguided position of many Conservative Members. That position would not have delivered any benefits for Britain, let alone reforms of the EU.

Whatever the politics of our debate on the future of Europe and the EU, the technical and financial measures agreed at the Berlin Council are significant. I hope that hon. Members from all parties can perceive some good in them for Britain. They set a good course for the future of the EU, based on sustainable financial foundations as we prepare for enlargement.

Hon. Members in all parts of the House should consider that the Berlin settlement will benefit Britain and set the EU on a sound course for the future. I urge them to support the Bill.

8.32 pm
Mr. Barry Gardiner (Brent, North)

Linoleum was invented by a Dundonian. Although I do not find inspiration in the granite architecture of Dundee, linoleum has always assumed a symbolic significance for me as a Member of Parliament. The inventor of linoleum got the idea from watching paint dry. He saw the thick skin form on the top of the paint and realised that it could be put to a useful purpose. I trust that lion. Members from all parties who are following the debate will take heart from that bijou of Scottish industrial history.

How can a measure that enables the United Kingdom to effect revised technical procedures for financial contributions to the European Community budget and leaves the contribution unchanged be greeted with the hyperbole that we have heard from Opposition Members? The Bill was everything from codswallop in the speech of the hon. Member for Rochford and Southend, East (Sir T. Taylor) to a profound disappointment in the contribution of the hon. Member for Hertsmere (Mr. Clappison).

The Bill has 12 lines. They enable us to change the notional rate of VAT that is levied on our proportionate assessment contribution to the Community budget from 1 per cent. today to 0.75 per cent. in 2002–03 and to 0.50 per cent. in the following years. That means that we will reduce our VAT-based contributions. However—I accept that no silver lining is without its cloud—there will be a corresponding rise in the contributions based on our share of gross national product. However, that rate is simply a balancing figure. The net contribution will, as we have said, be unchanged because it will have been balanced by the GNP-based contribution.

What is it in the Bill that has prompted the vitriol that we have heard from Opposition Members? Although they expressed such vitriol, they could not even be bothered to table an amendment to the blinking thing. If we are going to debate the Bill for this many hours, we should enter the realms of reality.

What did the Berlin summit achieve? Will it make a difference to this country and to the European Community? I recall sitting in the House three weeks before the summit took place, when Opposition Members jibed consistently about what was going to happen: Britain was going to be sold down the river; the abatement was going to be relinquished; and the Government were going to come back with at least croissant crumbs, if not egg, all over their chin.

The most notable thing about the week following the Berlin summit was that the Prime Minister came back and was not challenged at Prime Minister's Question Time. None of the disastrous things predicted by the Opposition happened, and they maintained a stony silence on the subject thereafter. However, that does not mean that nothing happened at the Berlin summit. What happened was that we managed to secure an agreement whereby the spending of the European Union would be brought under control.

Let me contrast that with previous agreements on EU spending negotiated by the Governments of 1988 and 1994. Those agreements allowed increases in the European Union budget of 17 per cent. and 22 per cent. respectively—yet here we are today, debating a technical measure that will put into effect the agreement reached at Berlin that European Union spending will not increase at all. Our spending in Europe is not going to increase. Why, therefore, have Opposition Members attacked this extremely small and modest Bill?

Mr. Hendrick

Does my hon. Friend believe, as I do, that the Conservatives' opposition to the Bill has nothing to do with its content, but is caused by the use of the word 'European" on the front page?

Mr. Gardiner

My hon. Friend has got it in one. The hon. Member for Rochford and Southend, East admitted in his speech, following an intervention by my hon. Friend the Member for Wimbledon (Roger Casale), that he believes that we should withdraw altogether from the European Union. Somewhat confusingly, he also said that he thought that it was impossible to do so. I am not sure how he can propose our withdrawal while thinking it impossible to achieve. There is a gut antipathy to all things European among Conservative Members, although not in any great numbers—there are two Conservative Members present, and earlier there was only a sole person on the Opposition Front Bench. I suspect that other Opposition Members do not want to devote time to this matter, because they do not see the importance of putting the Bill through Parliament.

This is an important Bill, as are all Bills in one way of another. It is a modest Bill that will enable a technical amendment relating to our financial contributions to the European Union to take effect. We should put the legislation into perspective.

The Berlin deal maintained the United Kingdom's abatement. We can be proud of that achievement, because we were told that it would not happen. The Bill looks forward to the enlargement of the European Union. We have heard eloquent speeches from my hon. Friends about the need for that. I do not want to go over the arguments that they have adduced. Enlargement is politically important, and we must be clear about that. It is politically important for a generation who saw the events of 1989. Before that, Europe was divided, and we want to move to a Europe that has an inclusivity that has eluded us for 50 years.

I vividly remember in a previous life, before entering the House, working in Germany with colleagues and clients. A German colleague spoke to me passionately about how his grandfather had lost everything in world war one, how his father had lost everything in world war two, and how he had built up his company. He did not want ever again to see Europe divided.

We should be under no illusion. Of course there is a political element to Europe and to the enlargement process—it is not just about markets and finance; it is, importantly, about unification. We should see ourselves as part of Europe, united and working with colleagues on the continent.

I welcome the provisions in the Bill and what they will do to change the way in which contributions are made. I welcome the fact that enlargement will break down the barriers to trade and business that our companies continue to face. I welcome the fact that our generation will see a transformation in the business environment across eastern Europe, and that the world's largest single market will expand to include countries that, not 20 years ago, could never have dreamed that they would be able to do business with us and be part of that single market.

I cannot claim to have an agriculturally based constituency in Brent, North. Were I to stand here this evening and talk of the reforms of the common agricultural policy that took place at Berlin, some of my constituents might wonder whether I was moonlighting in other constituencies at weekends. I assure the House that I do not intend to go into the details as did my hon. Friend the Member for Stroud (Mr. Drew), who revealed his comprehensive knowledge of the treaties and the way in which they affected agriculture in this country. What I know is that the reforms—of which the Bill is a small part—of the way in which contributions will be made will enable the average family to pay £70 a year less in food bills.

That is what affects my constituents. I cannot talk about milk quotas or set-aside schemes; what I can say is that I know that my constituents will welcome the lower food prices in our local supermarkets that will result from the process on which we are embarked. I support the Bill.

8.46 pm
John Mann (Bassetlaw)

It is with some trepidation that I, a new Member, follow such experts as my hon Friends the Members for Brent, North (Mr. Gardiner) and for Harlow (Mr. Rammell)—and, albeit from a different perspective, the hon. Member for Rochford and Southend, East (Sir T. Taylor). They have had an opportunity to discuss these issues and study them in detail for the past four years. I would like to say that the good people of Bassetlaw have also been discussing European Union finance in great detail, but if they have it has failed to catch my attention sufficiently on the doorsteps.

I feel, however, that I am able and qualified to comment on the issue of good negotiation—for this, after all, was a negotiation. In my previous incarnation, I taught industrial relations and negotiating skills—in this country and across Europe—to trade unions, but also at Cranfield school of management. The accepted wisdom of those in that rather small profession is that to negotiation one should set an objective and a bargaining range—and, within the bargaining range, a bargaining point beyond which one should not expect one's fellow negotiators to move. The skill of the negotiator, who may have been given the objective, lies in identifying accurately the bargaining range and the bargaining point.

According to my analysis of this negotiation, the bargaining range has been identified and, unusually, the bargaining point is at the extremity of the bargaining range. I note that, following the negotiation, there is no increase in United Kingdom contributions. I also note significant moves to bring European Union spending under control, and I note that issues of fraud and financial management have been properly addressed. I congratulate those involved on achieving what we in my former profession would describe as a win-win negotiation: we win, and Europe wins.

I mentioned the speeches of my hon. Friends and I also commend that of my hon. Friend the Member for Wimbledon (Roger Casale). I would juxtapose his position with that of the hon. Member for Rochford and Southend, East, who sadly is not in the Chamber at present, but who made an excellent speech. They are at opposite ends of a pole—one is at one end of the see-saw and one at the other.

In 1971, at the age of 11, I made my first political speech. In those days, I would have placed my much lesser bulk on the side of the hon. Member for Rochford and Southend, East. That speech was on reform of the common agricultural policy and what I saw as the scandal of the European Community and the way in which it was bleeding this country dry because of that policy. I note that the parliamentary choir has been active. I can assure you, Mr. Deputy Speaker, that I will not attempt a solo or a duet, but at that time there was a song called, "The Beef and Butter Mountains." Perhaps in the future, in more convivial circumstances, I will exchange the words of that song for another with the hon. Member for Rochford and Southend, East as I think that he would welcome them. However, those words and that song are dated.

I changed my views on the European Community and then the European Union. I was adamantly and vehemently opposed to having anything to do with it. I used to express the same sentiments that I heard expressed from the Conservative Benches earlier. I changed my view because of the growth of multinational companies. The question that I could never answer was how this small island alone could in arty way affect the behaviour of multinational companies that were ever greater in size and influence.

I suspect that I am now one of the strongest advocates of enlargement of the EU in the House. Over the years, I traded with Europe. Although I claim no expertise, anyone who has had to handle value added tax returns on a cross-border transaction will understand the complexities that must be involved in any financial system. A layman would say, however, that the changes that have been made are coherent.

Last year, our business sent a lorry to Hungary. One can drive there, albeit that one starts with high diesel prices here—I have mentioned those in a previous speech in the House and I shall no doubt return to that theme—and one has to pay extravagant tells to take a lorry across western Europe and, in Austria, one faces Sunday driving regulations that are different from ours. One can overcome those obstacles and cope with the costs to reach the border of Hungary, where one has to spend 24 hours on the way in and another 24 hours on the way out waiting for the bureaucracy of a non-EU country to allow us to trade with it. The case for enlargement becomes absolute in the face of those difficulties.

I was astonished by the sentiments and words of the hon. Member for Rochford and Southend, East when he said that there should be no EU budget. No budget? In my constituency! I point out to my hon. Friend the Member for Brent, North (Mr. Gardiner) that my constituency is a rural one. Farmers in my constituency are no great lovers of this or the previous Labour Government or of the Conservative Governments before them, but in their criticisms of the EU there is one thing about which they are adamant—do not get rid of all the subsidies.

As an example, I use sugar levies, which were relevant to the negotiations as part of the reform of the common agricultural policy. The sugar beet industry is, and has long been, probably the most important in the agriculture sector in my constituency. Sufficient attention has perhaps not been paid to it during the current foot and mouth problems. Restrictions on the movement of livestock have damaged the sugar beet industry.

I am pleased about CAP reform. As that reform slowly takes place, we are seeing a roll-over of the present quota systems for five years. That will allow the financial moves towards enlargement to occur so as to give greater stability for the whole sugar beet industry. It will do far better from the negotiations than it could have anticipated a year or two ago.

The European Commission study into the impact of sugar levies on the sugar beet industry is crucial—not least in preparations for enlargement. Who knows whether the applicant countries can create sufficient development in their sugar beet industries to compete with us? I suspect that they will do so. People from the UK and other advanced economies will invest in those countries to make a profit—rightly so, in their view. The study is crucial to the sugar beet industry.

As we move forward when—as I hope—we pass the Bill, it is important that we carefully monitor the role of the large sugar cane barons so that they do not get hold of the industry worldwide and destroy British sugar production. In my constituency, that would be a disaster.

Many of my constituents fled eastern Europe to escape not only Nazi but communist persecution. My hon. Friend the Member for Brent, North mentioned 1989. I was in Poland in 1980, in the month when Solidarity was formed. In 1983 I was thrown out of Czechoslovakia, which is DOW the Czech Republic and Slovakia. I was in Hungary, meeting autonomous trade union organisations and what were then described as dissident groups. They were fighting for freedom against the oppression of communism. If there were more time in this debate, I should continue to talk about that. Given the opportunity, I shall certainly come back to the subject in future debates.

After the horrors inflicted on those people, especially young people, battling for freedom from communism, for us to reject moves that would allow the finances of the EU to assist their countries—now freer, now democratic—to join us in reuniting Europe is something of an insult. It is an insult to those of my constituents who fled both Nazi and communist persecution.

I was a Yorkshire lad and spent my holidays in Filey on the Yorkshire coast. My first experience of Europe was in May 1968 when a young lad from Rhodesia, a mining village in my constituency, scored the winning goal against Ferencvaros in the European fairs cup final. That was my first experience of things European. Would that the players of Ferencvaros in Hungary were part of the European Union.

My second experience was more politically telling. That was to see tanks rolling through Prague and wonder, as a boy of eight, what kind of society we lived in. I say, let us make those preparations for enlargement. Let us negotiate our position, and the UK's position, from a position of strength. Let us he hard but fair. That is what I would expect of any of our leaders, and I commend them for what they have done. I hope, in the same spirit, that they will continue to negotiate for British and for European interests in future years.

9 pm

Mr. Colin Challen (Morley and Rothwell)

It has been a revelation for me tonight to learn that just 12 lines of a Bill could provide such riveting and thought-provoking debate. Listening to the previous two speakers in particular put me in mind of the scenes that filled the Chamber 63 years ago, when a piece of paper was passed along the Front Bench, announcing that Mr. Chamberlain would be invited to Munich to consider another form of treaty. We should compare that with the type of debate that we are having now, which some people may find boring, and which may be obscure and arcane: but the subjects that we are discussing—enlargement and the maintenance of peace in Europe after all these years—are significant and not boring in the least.

There is a danger that people will be alert to the possibility that a Member who contributes to this debate, especially a new Member, is either a Europhobe or a Europhile—because what other kind of person would possibly want to take part in a debate on such an arcane-sounding subject? But I am very pleased to speak from the centre. I want to take a balanced view about the future of the European Union.

It is from the centre that I was earlier forced to ponder on the speech from the Opposition Front Bench by the hon. Member for Hertsmere (Mr. Clappison), which seemed to suggest that there were no grounds for crediting the present Government with the successful outcome of the Agenda 2000 negotiations. The House was asked to consider who negotiated the United Kingdom's rebate in the first place, and credit was given where credit was due.

However, I also want to give credit to Opposition Members who were around at the time for their consistent support, over 18 years of Conservative government, for this country's net contributions to the European Union during that time, which I calculate, from Library figures, amounted to £30.946 billion. Each year under Conservative Governments, the net contribution increased. I find it odd that now the Opposition seem to have such great concern about the net contribution. As hon. Members have pointed out, one cannot have something for nothing; the idea that it is possible is absurd.

I welcome the changes contained in the Bill, as they are a genuine attempt to make the funding of the European Union fairer and, perhaps more important, to be seen to be fair. A move away from VAT-based contributions to a gross national product base will provide a basis for financing the European Union that more accurately reflects the relative wealth of the member states.

The proportion of income that the European Union will take from each of the own resources may become fairer, but that is not the end of the story. We must also ask, how will this money be distributed and spent? I note that the agriculture and sugar levies account for a mere 2.1 per cent. of the own resources, yet agriculture subsidies still take nearly 50 per cent. of the European Union's budget. We need to ask whether the most important financial aspect of the EU's work—efficient agriculture—is, after all these years, still subsidising inefficient agriculture.

I want to highlight regional disparities. I became aware of this problem when I lived in Hull and served on the city council's economic development committee, where I learned about the hot banana. It was a phenomenon 10 years ago in certain parts of Europe, stretching from the south-east of England down to northern Italy, where there was a disproportionate amount of economic development. We have yet to see other regions in Europe catch up with the so-called hot banana.

I have just read a report published recently by Yorkshire Forward, the regional development association, which reviewed Yorkshire and the Humber region's information technology needs. It makes salutary reading, pointing to the lower skills base, the lower take-up of IT in regional businesses and the lower usage of the internet at home and in business. We need to develop our information and communication skills and improve access to European structural funds.

We need a healthy relationship with our European partners to ensure that Yorkshire and Humber businesses in the single market—they are inextricably involved in European markets—are not disadvantaged by a little Englander attitude that opposes all things European and seems to be based on a slogan that is something like, "Part of Europe, but not in it."

Agenda 2000 means that more money will be invested in regional development and that spending on the CAP will be reduced. I believe that EU spending will be brought under control by the Bill, so far as this country is concerned.

Speaking from the centre, I want to be alert to what lies ahead. For example, if European gross national product decreases, what will be the impact on the structural spending in those regions to which I have referred that are lagging behind? Surely those areas, in those circumstances, might need more structural assistance. I was interested to hear my right hon. Friend the Chief Secretary talking about the investment of £10 billion in regional and structural funds. What guarantees come with that £10 billion?

Speaking from the centre, I would like to ask whether the Bill will lead to greater accountability. Will the money that is being spent be easier to draw down? I am familiar with the problems that businesses, voluntary organisations and a wide range of bodies have in accessing European funds. The system seems to be burdened with a great deal of bureaucracy and, very often, bodies in the regions need a great deal of bureaucracy themselves to draw down the funds that are available. Those funds are subject to the vagaries of the exchange rate of sterling and the euro; that may be borne in mind in future debates.

I welcome the Bill, and the fact that it has the vague endorsement of the hon. Member for Rochford and Southend, East (Sir T. Taylor). That is welcome, although he did not seem to put forward any alternative. Indeed, I have heard no alternative suggested by Conservative Front Benchers. Perhaps in the 50 minutes that remain, we will hear their alternative.

9.9 pm

Mr. Howard Flight (Arundel and South Downs)

May I welcome the new Economic Secretary, congratulate her on her appointment and comment with some envy on the splendid supply of talented ladies that the Labour party seems to have on the Treasury Bench?

I had to agree with the hon. Member for Bexleyheath and Crayford (Mr. Beard) on at least one thing: his criticism of the rather deliberate obscurity and lack of transparency, in language and documents, that all too often make finding out what is going on in EU matters rather difficult.

Hon. Members have asked whether we have an alternative suggestion. The job of the Opposition is to provide a critique, not necessarily to oppose when the balance of proposals may be reasonable. We welcome European enlargement, and the Berlin agreement, in itself, is arguably not an unreasonable deal. However, it is important to remember that, in an obscure way, this little Bill will effectively give our approval to all last September's Council decisions, including those important proposals contained in paragraph 16 of the EU document, which my right hon. Friend the Member for Wokingham (Mr. Redwood) mentioned. Those provisions would go much further and would empower proposals for EU taxes and further changes to the United Kingdom abatement.

The Government have said that the Berlin changes represent relatively modest, sensible and reasonably fair proposals on EU funding, sensibly reducing the VAT element and increasing the GNP-based element, but they have said absolutely nothing about what they estimate the cost of our giving up the windfalls will be, as and when enlargement occurs.

We all know that Germany, Holland, Austria and Sweden made reasonable requests to reduce their contributions, especially reflecting the fact that the German economy has been somewhat stalled in recent years. However, some people cannot pay less without others paying more, and the net financial deal is that although our abatement is set in stone—indeed, we have the power of veto over it—we are likely to pay a little more, proportionately, as things advance.

The Library notes on the matter openly pointed out—whereas the Treasury notes did not—the need to consider all the items in last September's Council decision, not just the highlights of the Berlin agreement. All those issues are relevant to the Bill.

Before turning to Members' comments, I want to ask the Economic Secretary three specific questions, the first of which is somewhat technical. There is a greater use of GNP figures, but which GNP are we talking about? Are we talking about the official figures; or, as in complying with the Maastricht treaty, are we talking about GNP figures in which an allowance is made for undisclosed economies, which differ fairly significantly among member states? The figures used will make a material difference.

Secondly, what is the position on GNP-based contributions in relation to changing exchange rates? At present, we happen to have a weak euro, but sterling is relatively strong, so will we move up and down with the exchange rate, or will a mechanism exist to provide some stability? Thirdly, will the Government comment on what they expect the windfall cost to be? The figure of £200 million has been quoted, but learned papers have suggested that the figure could be as much as £1 billion in due course.

Mr. Edward Davey

Will the hon. Gentleman give way?

Mr. Flight

If I may, I shall first make some progress.

The unfairness story has been mentioned, but I am surprised that no one has said that the real villain of the piece seems to be France. France's gross contributions have been £9.2 billion, versus our contribution of £7.3 billion, but refunds to France amount to £8.5 billion, versus £3.8 billion to us. The net effect is that France pays £750 million, compared with the United Kingdom's £3.2 billion and Germany's £7.5 billion, but the French economy is broadly comparable in size to Britain's. That seems to be where the main unfairness lies.

I was surprised by the enthusiasm for the agreement, because surely the disappointment of Berlin was the failure adequately to reform the common agricultural policy. I do not understand how central and eastern European countries can join in a hurry until there have been considerably more reforms. We have heard comments about the Polish milk situation, and we are kidding ourselves if we think that enough has yet been done. The iron curtain came down 12 years ago, and it is a disgrace that we are still fiddling away and delaying membership for those states.

I wish to make the fundamental point that the United States, which is relatively homogeneous and has a common currency, has transfer payments of 11 per cent. of GNP. Implicit in the arithmetic before us is that 1.27 per cent. is economically, sufficient for the less homogeneous economies of Europe that also now have a common currency. Detailed research does not appear to have been carried out on the fundamental issue of the amount of transfer payments that Europe is likely to need in the future.

My hon. Friend the Member for Hertsmere (Mr. Clappison) made the serious point that administrative costs are rising fast. After the major expenditure on the common agricultural policy and the structural moneys, there is £12 billion of other EU expenses in the budget of which precious little is seen. If £12 billion were spent on education or the health service in this country, it would make a colossal difference. It may be a small sum in terms of pence per citizen of the EU, but that large sum has manifestly not been well spent.

The Chief Secretary failed to refer to that fact that it was not just the Berlin agreement but, as I pointed out, the Council decisions of last September relating to contributions, and he failed to explain his understanding of what paragraph 16 is all about. It does not empower the levying of new European taxes; it invites proposals to do so and to review the British abatement yet again. Its existence, however, puts down a pretty important marker for the future.

The Chief Secretary said that he thought that Berlin had met the key objectives, but does he really think that that is true of CAP reforms? He also said that the effects on the United Kingdom were neutral, but I repeat my question on the significance of the windfall costs.

My hon. Friend the Member for Hertsmere regretted the inadequate reforms to the EU budget generally and made a convincing case that the relative position of Britain will deteriorate a little as the result of Berlin. He explained the costs of giving up the windfall and pointed out a small inaccuracy in the Labour manifesto, which had claimed that the UK contribution would fall to a level similar to Italy's. That is manifestly not the case.

Despite all the hullabaloo about the CAP and the fact that agricultural spending has stabilised at 45 per cent. and is down from the proportionately higher levels of the past, my hon. Friend pointed out that, in absolute terms, expenditure is not down much and will rise slightly over the next year or two. In essence, Conservative Members understand the fairness and approve the shift to GNP, but we believe that there has not been enough reform of the CAP and that there could have been a slightly better deal for the United Kingdom.

The hon. Member for Bexleyheath and Crayford surprisingly expressed surprise that the stealth and lack of transparency concerning many EU matters leads people to be cautious and to wonder what is going on. That is not surprising, and it would be better if communication were much more transparent. However, it is the objective of EMU to create a European state, although not in the traditional sense of the word. As all one's continental friends are clear, the objectives are not just economic, but political.

The hon. Member for Kingston and Surbiton (Mr. Davey) made a gentle, conservative speech that left me unclear about where the Liberal Democrats stand on Europe. I thought that they were much more enthusiastic than the Labour party for full European integration. He said that the Bill is modest and could be expensive for the UK. In addition, he regretted the fact that there were so few reforms to the CAP. Constructively, he wanted to repatriate to nation states expenditure that was not core expenditure. He also challenged the Chief Secretary's assertion that the CAP reform was radical and adequate. We, too, made that point.

The hon. Member for Broxtowe (Dr. Palmer) criticised us for arguing that administrative expenses were rising by too much. He made the silly point that just because it was only a penny or so per person, it did not matter. The absolute sums are substantial and hon. Members on both sides of the House are most critical of the waste in the £12 billion. That cannot be overlooked.

My right hon. Friend the Member for Wokingham plagiarised the Prime Minister. His contribution can be described as vintage Redwood. He made the robust assertion that camouflage is being used, because the Bill is supported by an underlying document which, at paragraph 16, invites the introduction of direct taxation by the EU and a further reduction in the UK's abatement. Even if the net financial deal is collectively reasonable, we should not deceive ourselves that the Berlin agreement is to our explicit financial advantage. It opens up the unknown, which could produce the fifth resource.

The hon. Member for Falkirk, East (Mr. Connarty) was keen on central and eastern European membership and enlargement, which we support. He made the fundamental point that it would strengthen a Europe of democratic nations and make them more outward looking. He also made an interesting contribution on tobacco fraud.

I congratulate my hon. Friend the Member for Leominster (Mr. Wiggin) on his excellent maiden speech. Having lived in that part of the world, I did not know that there had been two Prime Ministers from Leominster. What he said about foot and mouth and rural industries was moving and important. I hope that the Government will take note of it. He also made a significant point about how the CAP contributed towards some of the problems that spread foot and mouth, as well as commenting constructively on how it was mishandled.

The hon. Member for Caerphilly (Mr. David) argued that Berlin was good for Europe. In particular, he argued that it was sensible to have more GNP-based finance than VAT-based finance. However, question his assertion that the CAP has been brought under adequate control.

I also congratulate my hon. Friend the Member for Tatton (Mr. Osborne) on his equally good maiden speech. He made an excellent and elegant contribution, which demonstrated a gracious handling of his predecessor. [Interruption.] I mean, of course, his immediate predecessor.

The hon. Member for South Derbyshire (Mr. Todd) made an interesting contribution arising from his business dealings with the European Commission. As a taxpayer, he was critical of the waste of money on what he implied were crackpot projects, and o excessive nepotism in the awarding of contracts—I hope that his comments did not apply to him personally. He echoed the point made by my hon. Friend the Member for Hertsmere that it is bad news when administrative costs rise at a rate much higher than inflation with no justification.

I also congratulate the hon. Member for Moray (Angus Robertson) on his maiden speech. For those of us who come from south of Watford, it was an interesting education on the family background of Scottish nationalism. He made the interesting point that if Britain were broken up into separate components, we would have more votes in Europe than we do as one country. That is not a justification for Scottish independence that particularly appeals to me.

The hon. Member for Ellesmere Port and Neston (Mr. Miller) gave an interesting history of the original abatement negotiations, from Ian Gilmour's book. He also focused on the EU's ability to tackle fraud, but it seemed to me that he, too, was over-optimistic about the likely effects of the reforms to the CAP so far.

I congratulate my hon. Friend the Member for Castle Point (Dr. Spink) on his splendid retread maiden speech—I think that that is the correct phrase—and welcome him back to the House. He pointed out that the Berlin summit missed several opportunities, and he gave a vivid vignette of his constituents' sound, down-to-earth views, which rang extraordinarily true to me, being, as many will know, someone who grew up in the splendid county of Essex.

The hon. Member for Harlow (Mr. Rammell) welcomed an early debate on Europe following the general election, but he almost admitted that he knew that his views were not entirely in accordance with those of the majority of his constituents, even though he has, of course, been re-elected. He said that he understood why a majority of the British people tend to be Euro-sceptic, in the correct sense of the word.

My hon. Friend the Member for Rochford and Southend, East (Sir T. Taylor) made a splendid, bluntly persuasive speech, during which I observed Labour Members listening intently and, I think, secretly agreeing with much of what he said. He rightly pointed out that there has been no genuine reform of the CAP. He has been waiting more than 20 years for that and expects to wait at least another 30 years, if not for ever. He was healthily sceptical of all the usual optimistic arguments about the wonderful outcomes that never materialise. I remember that it was argued that the introduction of the euro would add 3 per cent. to GNP, but GNP shrank.

My hon. Friend pointed out that enlargement means that objective 1 and 2 grants to the UK are likely to come to an end. That is the Irish point—that enlargement may be morally right, but we must be clear about what effects it must have that are in our interests. He also seemed to be saying that the EU had attempted to buy his support by making not one but five grants to his constituency, but I feel that there is little prospect of that attempt being successful.

Dr. Palmer

Does the hon. Gentleman's support for the comments of the hon. Member for Rochford and Southend, East (Sir T. Taylor) imply that he agrees with him to the extent that he regrets that we joined the EU in the first place?

Mr. Flight

No. I said that he made an excellent, entertaining speech, and I think that many hon. Members saw a great deal of hard truth in it. It is good that none of us has falsely glossy views. Whether we should have joined is a different subject from what will happen in future. My hon. Friend's main point was that there is nothing that anyone can do about that at present—a powerful point that was aimed at all of us.

My hon. Friend also asked what the cost of giving up our windfall payments would be. Specifically, albeit on a matter not directly related to Berlin, he asked the Government how much the sale of our gold holdings and the conversion of the proceeds into euros has cost. Many hon. Members, including me, have asked Ministers that question and there is no justification for their not having replied. They could give a conditional reply—that the figure is such and such at such a such a rate of exchange—but it is poor not to have replied at all.

Sir Teddy Taylor

I am sorry to interrupt my hon. Friend's splendid speech, but is he aware that today I received a reply to a written question that I put to the Treasury, in which I asked how many euros we had bought and what we had paid for them? All I received was a load of codswallop that does not state how many we have bought or the price paid for them. Why will the Government not tell the people how many they bought and what they cost, so that the people can know how much money they have lost? Is Parliament not meant to be a place in which we hold the Executive to account and get information?

Dr. Spink

Hear, hear!

Mr. Flight

My hon. Friend expresses my views entirely. I hope that we have the support of the hon. Member for Bexleyheath and Crayford in fighting the European habit of being obscure rather than transparent that appears to be creeping into British Government.

The hon. Member for Wimbledon (Roger Casale) overstated the extent of reforms to the CAP, especially in relation to what is needed. We heard a lively and most enjoyable speech from the hon. Member for Brent, North (Mr. Gardiner), but I put it to him that linoleum is as out-of-date a floor covering as the CAP is a way of managing agriculture. He would be extremely lucky if the average family in his constituency were £70 a week better off as a result of the modest reforms that have so far been made.

I welcome the new hon. Member for Bassetlaw (John Mann), who came across as a decent and down-to-earth Englishman. He made some useful comments about the reality of bargaining power and he is, rightly, a keen supporter of enlargement. I also welcome the new hon. Member for Morley and Rothwell (Mr. Challen), who made a balanced contribution to the debate in which he emphasised the importance of greater accountability.

The Berlin deal was not unreasonable, although we think that it could have been better. We would have liked more reforms to the CAP and we fear that the lack thereof will further delay enlargement to eastern and central Europe. None the less, we understand that bargaining had to be done and that the deal struck was probably not a bad one. We are concerned about what else has been opened up by the agreements made at last September's Council, and I should be interested to learn about the Government's attitude to paragraph 16—an issue to which the Chief Secretary did not respond.

We shall not oppose the Bill, but we look forward to scrutinising it in a great deal more detail in Committee in about 12 days' time on the Floor of the House.

9.33 pm
The Economic Secretary to the Treasury (Ruth Kelly)

The debate has been very interesting. The hon. Member for Hertsmere (Mr. Clappison) called the Berlin summit a profound disappointment and a missed opportunity. In fact, it was not only an opportunity grasped but a negotiating triumph.

Before the Berlin summit, the Opposition set the Government three key tests: first, to limit the own resources ceiling; secondly, to secure the United Kingdom abatement; and, thirdly, to increase or improve our level of structural funds. Not only did we deliver on all three tests, but we achieved the most radical reform of the common agricultural policy since its inception and a real-terms reduction in European Union spending.

The right hon. and learned Member for Rushcliffe (Mr. Clarke) has advised his own party to listen and engage constructively with Europe. The right hon. Member for Kensington and Chelsea (Mr. Portillo advised his party to turn down the volume on Europe.

Mr. Forth

No chance.

Ruth Kelly

I can already hear that Opposition Members are unwilling to listen to that advice. In fact, the attitude of the right hon. Member for Bromley and Chislehurst (Mr. Forth) shows clearly that if, by some chance, the Opposition were in government, there would be a rerun of the situation that existed the last time that the subject was debated, in 1994. There would have to be a motion of confidence in the Government, and the Conservative party would be torn apart by factionalism and rivalry.

I exempt from my remarks, partially at least, the hon. Member for Arundel and South Downs (Mr. Flight). I was extremely pleased that he acknowledged that the outcome of the Berlin Council was not a bad deal; that is praise indeed. Respite from the comments and bickering of the Opposition came from several excellent maiden speeches. I apologise to the House for not being in the Chamber to hear all of them all the way through. I congratulate the hon. Member for Leominster (Mr. Wiggin) on his contribution and his warm tribute to his predecessor, Peter Temple-Morris, and his diligent work in his constituency. The hon. Gentleman drew attention to the damaging impact of foot and mouth disease and the need to reform the common agricultural policy; he also made a passionate defence of farming interests, a sentiment that can unite both sides of the House.

The hon. Member for Tatton (Mr. Osborne) paid fulsome tribute to his predecessor, Martin Bell—at times the scourge of both sides of the House. The hon. Gentleman referred to the beauty and historical nature of his constituency in an eloquent speech. He is clearly a representative of the new, inclusive Conservative party, but it was a shame that he was caught up in the false rhetoric and claptrap of the anti-Europeanism that dominated contributions from the Opposition.

The hon. Member for Moray (Angus Robertson) made a passionate defence of his constituents; I welcome him to the House. He too paid tribute to his predecessor, Margaret Ewing, and made a passionate defence of fishing interests, a subject on which, no doubt, he will make many further contributions in the House.

The hon. Member for Castle Point (Dr. Spink) described himself as a semi or partial retread. He clearly enjoyed making his second maiden speech to the House; I enjoyed listening to him, and I am sure that he will play a full part in the proceedings of the House in future. The hon. Member for Hertsmere, who opened for the Opposition, made several points and called the Berlin summit a missed opportunity. He pointed out that the United Kingdom's net contribution will be about £4 billion this year and that the position of other member states has improved. However, he fails to appreciate that although Germany, Austria, Sweden and Denmark pay reduced contributions, because their share of the UK rebate has decreased, in fact the money has been reallocated among the other 14 member states, and our contribution has remained unchanged.

I shall set the matter of windfall gains straight once and for all. Opposition Members asked repeatedly how much we forwent. The answer is 220 million euros. The precedent for forgoing windfall gains was set by the previous Administration—first by Margaret Thatcher, then by John Major. Before negotiations on the new own resources decision, two windfall gains associated with changes to the financing system were given up. In 1988, the Conservative Government gave up a windfall gain when the GNP resource was first introduced; then, in 1994, when the VAT contribution was reduced—which increased member states' GNP contributions—the Conservatives agreed to forgo that windfall gain as well. The effect of these has been cumulative.

The only new windfall gains given up at Berlin were an amount of expenditure equivalent to pre-accession aid upon enlargement, and the increasing collection costs against the traditional own resources. The UK gave up those windfall gains to achieve a position that can be described unequivocally as not a euro more, not a euro less.

Mr. Edward Davey

I am grateful to the Economic Secretary for giving way, and I take this opportunity to welcome her to her position. Is the windfall gain a genuine windfall—in other words, is it a one-off gain that Britain would have got, or would it have continued over the period to which she is referring?

Ruth Kelly

The main windfall gain is the windfall gain that we would incur as a result of enlargement. It our spending on pre-accession aid was subject to the rebate upon enlargement, we would have a one-off gain. That clearly would not be fair. We have therefore sacrificed a one-off gain.

The hon. Member for Hertsmere questioned whether the UK's net contribution would be equivalent to that of France and Italy. I can tell him that it certainly will be. By 2006—assuming that six new member states join the EU, as is the common assumption—that will be the case. The hon. Member for Arundel and South Downs, who called France the villain of the piece, will no doubt be pleased that, as a result of the agreement, France will be paying relatively more towards the UK rebate.

Several hon. Members spoke about fraud. My hon. Friend the Member for Ellesmere Port and Neston (Mr. Miller) spelled out some of the measures that the Government are taking. Any fraud against the European Union budget is, of course, unacceptable, and the UK has been at the forefront of measures to combat the problem. Member states must work with the Commission to ensure that the part of the budget for which they are responsible is administered in accordance with the principles of sound financial management. The UK has supported measures to make member states accept their responsibility for administering Community funds—for example, through the introduction of fines for errors in the structural funds caused by inadequate member state controls.

As my right hon. Friend the Chief Secretary said earlier, the newly established European anti-fraud office was proposed by my right hon. Friend the Chancellor of the Exchequer. It has independent powers to seek out and investigate fraud against the EC budget. It is doing a good job already and has carried out a number of major investigations.

Alongside the establishment of the anti-fraud office, the Commission is revising its internal procedures to reduce further the scope for fraud to take place. Neil Kinnock has been appointed Vice-President of the Commission with special responsibility for reform, and we fully support his programme, which will modernise the administration of the Commission.

The radical reform strategy that Neil Kinnock proposed must be delivered by the end of 2002, but already it has introduced a code of conduct for Commissioners and Commission officials. It has published a whistleblowers' charter, established new and fairer arrangements for appointments to senior posts, and begun the major process of modernising the Commission's financial management procedures to establish clear lines of responsibility for preventing fraud and waste.

The reforms proposed by Neil Kinnock are far reaching, and we cannot expect them to be implemented overnight. It is important to their success that the reforms are subject to proper consultation and that they proceed by agreement. We are confident, however, that the programme of reform will be completed on time and that it will prove a strong safeguard against fraud.

The hon. Member for Kingston and Surbiton (Mr. Davey) called for wider budgetary reform and CAP reform. He argued that the Government should focus on outcomes. He noted that the 2001 EC budget is subdivided into policy areas. I assure him that that is an element of Commission reform that the Government strongly support. We have pressed and will continue to press for clear objectives and performance indicators for all EC expenditure programmes, and timely evaluations as part of the Commission's proposed move to activity-based management.

I completely disagree with the hon. Gentleman on reform of the common agricultural policy. At Berlin, we achieved significant price cuts for cereals, beef and milk. The intervention price for cereals was reduced by 15 per cent., and for beef it was reduced by 20 per cent. over three years. Dairy support prices were reduced by 15 per cent. over the three years beginning in July 2005. Those changes do not go as far or take effect as quickly as we would have liked, but they are nevertheless a significant achievement. They ensure that European beef and cereal prices will be brought closer to world levels.

The Agenda 2000 package will mean lower prices for consumers. It will be worth about £70 a year for an average family of four. As a result of the reforms, overall spending on the CAP will decline in real terms from 2002. As well as price reductions, the discussions in Berlin of the common agricultural policy also led to the introduction of the CAP second pillar. That will ensure that the CAP moves away from production-based subsidies and towards a greater focus on rural development. We have so far introduced schemes to improve and conserve the environment, including support for countryside stewardship, woodlands and organic farming.

We are also providing support to develop diverse and sustainable rural businesses. For example, such support is provided through the rural enterprise scheme and through processing and marketing grants. The reform package includes provision for member states to target up to 20 per cent. of direct aid funds on rural development measures. The UK has already introduced that change. Agenda 2000 in Berlin delivered a significant and welcome reform in the common agricultural policy, and we are keen to build on that reform in future rounds of discussion.

When I heard the contribution of the right hon. Member for Wokingham (Mr. Redwood), I thought that he was about to launch his own leadership bid, but he seems to have missed the boat on that issue, as on so many others. Throughout his speech, he referred to paragraph 16, by which he meant article 9. If he had scrutinised his previous actions, he would have seen that he endorsed a similar decision in 1994. The European Communities (Finance) Act 1995 states: The Commission shall submit, by the end of 1999, a report on the operation of the system, including a re-examination of the correction of budgetary imbalances granted to the United Kingdom, established by this Decision. It shall also … submit a report on the findings of a study on the feasibility of creating a new own resource". That position did not lead to a new EU tax then, and it will not do so now.

The right hon. Gentleman also questioned the validity of spending structural funds. I emphasise that such funds play a key role in the development and regeneration of areas. For example, they are worth almost £300 million to Cornwall over the seven-year planning period of the EU document. Other areas—south Yorkshire, west Wales and the valleys, as well as Merseyside—will also receive substantial funds.

We heard from my hon. Friend the Member for Caerphilly (Mr. David) about his personal experience of the common agricultural policy, and also about the application to south Wales of objective 1 status and its benefits for his area. We have seen subsidiarity at its best.

Several hon. Members spoke about increases for administrative expenditure in the EU budget, but they failed to note what that expenditure is for. Part of the increase is needed to fund the necessary costs of Commission reform. I wonder whether Opposition Members would question whether that is money well spent. Of course, the United Kingdom wants the same discipline applied to the EU budget as is applied to the national Budget. We shall continue to press for budget discipline.

Mr. Flight

Is there any logic whereby reform should result in rising costs? In most organisations, reform leads to falling costs. Reform and rising costs do not go hand in hand.

Ruth Kelly

The total EU budget will decrease by the end of the planning period in 2006. That will happen precisely because we are reforming the operation of the EU and the Commission in combating fraud and cracking down on financial irregularities. Labour Members would like that to continue.

My hon. Friends the Members for Broxtowe (Dr. Palmer) and for Bexleyheath and Crayford (Mr. Beard) spelled out the benefits of EU membership. My hon. Friend the Member for Harlow (Mr. Rammell) spoke with knowledge and interest about the scrutiny of EU legislation. The contribution of the hon. Member for Rochford and Southend, East (Sir T. Taylor) was interesting. As has been said, he was at one extreme of the debate. He said that five wards in his constituency now benefit from objective 2 funding. He questioned whether the money should be spent there. Does that form part of the Opposition's spending cut agenda? Do they want to cut back on objective 1 and objective 2 spending in this country?

Reform of structural funds is clearly required for the long-term affordability of enlargement. We shall push hard for reform that is fair and in the British national interest and that will deliver value for money for UK taxpayers

My hon. Friends the Members for Stroud (Mr. Drew) and for Falkirk, East (Mr. Connarty) spoke about the move from VAT resources and Customs payments towards the GNP resource. That is an important move, which is more progressive and will help in the fight against fraud.

Dr. Palmer

Does my hon. Friend agree that further progress in that direction would be welcome in future?

Ruth Kelly

The move was an important step in reforming the EU budget. It is clearly desirable to move towards a system of GNP financing. I note my hon. Friend's comments.

My hon. Friend the Member for Bassetlaw (John Mann) yoke about his negotiating skills. His strong speech displayed evidence that he is well equipped for negotiating. I do not know how he managed to argue at the age of 11 that the CAP was bleeding the country dry. However, I am grateful that he has moderated his opinions and become an ardent supporter of the EU. He pointed out the importance of building alliances and enlarging the EU.

Mr. Heath

I welcome the Economic Secretary to her new post. I want to revert to the answer that she gave my hon. Friend the Member for Kingston and Surbiton (Mr. Davey) about forgoing the windfall gain from enlargement. Is she convinced that it is not a recurrent gain? Has the Treasury carried out any analysis of whether forgoing it is more advantageous to the UK than, for example, amending or forgoing the Fontainebleau agreement?

Ruth Kelly

The new agreement puts the matter right once and for all. Any new expenditure that is incurred in the member states will qualify for the rebate.

The Bill is short but important for Britain and the EU. It will enact the own resources decisions that were made at the Berlin Council in 1999. My right hon. Friends the Prime Minister and the Chancellor of the Exchequer won a significant victory for the UK and demonstrated how much both sides had to gain from Britain's constructive engagement with Europe. Passing the Bill will show our continued commitment to reform in Europe.

United Kingdom gains from the Berlin Council are significant. We retained our abatement in full; we maintained the overall ceiling for Community own resources at 1.27 per cent. of European Union gross national product; we secured structural and cohesion funds that will be worth £10 billion to the UK's regions between 2000 and 2006; and we negotiated reforms to the common agricultural policy that will mean lower food prices worth an estimated £1 billion a year to UK consumers. The own resources decision that we negotiated at Berlin means that the UK will continue to make a fair contribution to the European Union budget: not a euro more, not a euro less.

The Berlin Council was an important step forward for the European Union and all its member states. The EU budget was brought under control, stabilising spending following decades of expansion. The introduction of the second pillar of the common agricultural policy will move support from production subsidies to rural development and environmental stewardship.

Of course, the decisions enacted by the Bill are only part of the process of reform in Europe. We still need to push further. Economic reforms are needed to raise the productivity of the European Union as a whole, to increase the effectiveness of the single market and to extend its benefits into new areas such as energy, telecommunications and financial services. There is also an on-going process of reform to the institutions and administration of the European Union.

Roger Casale

Before my hon. Friend concludes, will she add to the long list of important gains and benefits that come from the agreement in Berlin the fact that the reforms to the common agricultural policy, the measures introduced to tackle fraud and the ceiling put in place on the EU's resources will lead to greater public confidence in European Union institutions?

Ruth Kelly

I certainly believe that that will be the case.

The Bill also paves the way for future European Union enlargement. There is an on-going process of reform to the institutions and administration of the European Union to prepare us to meet the challenges and realise the great benefits of EU enlargement.

The Bill shows how much everyone can gain from Britain's constructive engagement with the European Union. It shows that by taking a leading role in reform and working together with other member states, we can achieve outcomes that are good for the UK and that strengthen all member states. I am proud that the UK is playing a leading role in taking this process further. The single market in financial services is a good example of the benefits that constructive engagement can bring. A dynamic single market in financial services is key to achieving fundamental economic reform and prosperity across Europe.

Mr. Gardiner

I am grateful to my hon. Friend for allowing me to intervene. She has kindly accepted a number of interventions. Does she agree that one of the most important aspects of the impact that the measures will have on our constituents —and on their appreciation of the value of engagement in Europe and the achievements of the Berlin summit —is that most average families will see a reduction of £70 a year in their food bill? That is the bottom line.

Ruth Kelly

I thank my hon. Friend for drawing that to the House's attention. The Bill shows the substantial gains to be made by UK consumers and by everyone else when Britain plays a constructive role and engages with the European Union. The deal achieved in Berlin reduces EU spending by 2006, improves our position on structural funds, reforms the common agricultural policy and paves the way for enlargement. It compares with substantial increases agreed under previous Governments in 1988 and 1994. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.