Draft EU Budget 2011

James Clappison Excerpts

Wednesday 13th October 2010 Commons Chamber

[Justine Greening]

I have no doubt that other Members will refer to that in their contributions. As my right hon. Friend will be aware, we did not support the setting up of the European External Action Service, but as it is now in place our aim is to ensure that it does not duplicate in the way that he says, and that instead it has a role that has some value. We have been concerned about the increased budget because when the EEAS was set up, a key aspect of the conditions was that there would be fiscal neutrality and that is already being challenged. That is one reason why we have been pressing for that to be explicitly put into the terms of the EEAS remit. We have been successful in that, and we are pressing Cathy Ashton to make 10% savings immediately. Discussions on this are continuing in the EU right now. My right hon. Friend is absolutely right, therefore.

To make a broader point on the EU budget, it is vital that decisions taken on budgeting are stuck to. There is an underlying problem that I talked about in respect of implementation: in too many projects there is a gap between what has been budgeted for and what ends up being spent. It is quite a basic financial management problem, but it needs to be addressed.

Turning to the background to today’s debate and what has happened so far, in August the Council adopted its first reading position on the Commission’s draft budget. We should bear in mind that this draft budget proposed an increase of 6% in the 2011 budget. That first reading position saw the Council reduce the budget level proposed by the Commission by €788 million in commitment appropriations and by just over €3.5 billion in payment appropriations. However, although the Council reduced the payment levels in the Commission’s proposal, the reductions would still have meant an increase of almost 3% in EU budget spending from 2010 to 2011. Also, although the Council’s position was to reduce spend in the administration budget by more than €160 million and to cut the total budget for the EU’s regulatory agencies by almost €12 million, even that would have left a rise in administration of 2.5%.

I should remind the House that when we had the opportunity in the European Parliament to vote against the rise in the Parliament’s 2010 budget, we took it. Although the Council had battened down the rise proposed by the Commission, the Government could not accept the proposed level of budget increase and we therefore voted against the Council’s first reading. In fact, six other member states joined us: our Nordic partners—Finland, Sweden and Denmark; and the great brewing nations of Austria, the Netherlands and the Czech Republic. The Council’s position was, however, adopted by a qualified majority, although I just remind the House that we were very close to achieving a blocking minority on that vote; we were just three votes away from doing so—we got 29 votes when we needed 32. That is why we have been working so hard with our European partners to put our case, because we want, at the minimum, to be in a position to have a blocking minority. We really want to aim for a majority, and that is what we are working towards.

I know that, as we have just heard, the European Scrutiny Committee is considering the Council’s first reading position and the Commission’s first amending letter. However, I thought it would be helpful for Members taking part in this debate to be given an outline of that developing position. I referred to this briefly in response to my right hon. Friend the Member for Wokingham (Mr Redwood), but I can say that more than 90% of the 2011 budget for the EEAS is transferred from the existing budgets of the Commission and Council. As he points out, an additional €34.5 million is requested to fund new staff posts and other start-up costs.

Overall, the proposal includes the following: first, the establishment plan of more than 1,600 posts—this includes 100 newly created in 2010, and 18 requested for 2011, carrying a remuneration cost of just under €19 million; secondly, just over 2,000 other staff, 70 of whom are newly recruited this year, costing an extra €2.5 million in 2011; thirdly, other staff-related spending, of which less than €2 million would be additional; and, fourthly, spending on buildings and other operational spending amounting to just over €157 million, less than €4 million of which would be additional.

The amending letter stated that cost-efficiency, budget neutrality and efficient management should guide the EEAS, and, as I said, it set a target of 10% efficiency savings in headquarters. Although the Government acknowledge that some additional funding is required in the EEAS’s first full year, it is essential that the EEAS demonstrates not only value for money, but budget discipline in its funding bids and a firm commitment to substantial cost efficiencies. It is vital that the aim of budget neutrality is respected, so we are pushing for immediate cost savings and stressing the importance of achieving cost efficiencies, including in decisions over the EEAS’s premises.

We have also pushed, thus far successfully, for the Council to state on the record that the term “budget neutrality” for the EEAS applies solely to the context of the EU budget. We pressed for that so that we can counter unhelpful suggestions from the Commission in the future that additional spending at EU level could be offset by savings in member states’ diplomatic services. Such suggestions are completely unacceptable to the UK.

[Mr James Clappison (Hertsmere) (Con)]

I am extremely heartened by the proposition that my hon. Friend has put before the House this evening on this matter, but will she examine this very carefully indeed? I know that the EEAS was opposed by Conservative Members and is the legacy of those on the Labour Benches. As she would say, we are where we are, but on this point of budget neutrality will she make it her business to look carefully at any further proposals to increase expenditure on the EEAS? Budget neutrality has already been breached by the European Commission and it is likely that further attempts will be made to breach it in future.

[Justine Greening]

I assure my hon. Friend that we are looking across the piece to challenge rises in all areas of the EU budget, including the EEAS. As he points out, only months ago we were given an assurance that there would be fiscal neutrality and that has already been broken. We are challenging that and I believe we are doing so successfully. I assure him that we are making our case very strongly within the EU to challenge those sorts of spends when they are bad value for money and when the money is spent in an unplanned way that has not been agreed and was not passed in the original proposal that was signed up to. As he points out, that proposal was signed up to by the Labour party when it was in government.

So, let me wrap up. Although the annual budget negotiations are not the usual forum to achieve major budget reform, we have still set out our stance. We will be looking for a cash freeze in 2011 and, in this time of austerity, Europe needs to be looking to make the same efficiency savings that we are making in the UK.

I know that the House is interested in this topic, so I shall touch on it briefly. The European Parliament’s Budgets Committee has voted on this budget and the European Parliament in plenary will be voting next week on the European Parliament’s position on the 2011 budget. We have done our best to ensure that our Government’s position on the 2011 budget has well and truly got through to MEPs. We sent a lobbying note to the UK MEPs in September clearly setting out our position.

--- Later in debate ---

[Mr James Clappison (Hertsmere) (Con)]

I congratulate the Economic Secretary to the Treasury on an excellent and most competent speech. I listened to her and to the right hon. Member for Rotherham (Mr MacShane), so may I say to him that the last thing she needs is his protective arm around her? He could do worse than to put his arm around himself, because the end of his speech contradicted its beginning. At the end he told us that now, more than ever, our contribution to the European Union budget comes from general Government expenditure. Therefore, if our contribution increases, we have to increase taxation, cut expenditure or run up a bigger deficit, at a time when we are trying to reduce the one we have. He would do well to reflect on that.

I noted that in all the advice the right hon. Gentleman and the Opposition Front-Bench spokesperson, the hon. Member for Bristol East (Kerry McCarthy), gave us, neither of them told us—we will be watching this—how they would advise MEPs to vote when this matter comes before the European Parliament once again, under its procedures. Will MEPs vote in favour of the Council to keep the budget down or are they going to vote in favour of the Commission and for more spending on the European Union? The hon. Member for Bristol East may not want to answer the question tonight, but her MEPs will have to vote or abstain in the European Parliament. They will be watched as to how they vote and we will remind them of the effects that this measure would have in this country.

I was a member of the European Scrutiny Committee and I wholeheartedly supported recommending this document for debate, because it is precisely the sort of thing that this House ought to debate. Something caught my eye in the figures that the Economic Secretary put before the House: the European Commission was seeking in its budget this year an increase of 5.8% or £7 billion in payment appropriations—at this of all times. That comes after increases in the past three years of 3.9%, 1.6% and 2.3%. That raised a question in my mind: how on earth at a time like this, when this country and other member states are facing such stringency in their public expenditure and are seeking to reduce their deficits, could the European Commission have the instinct to seek an increase in its spending? A cynical mind might say that the European Commission made proposals to increase spending on such a scale thinking that they might be trimmed back and that it was aiming for what it would get when those were trimmed back.

Be that as it may, the Economic Secretary is doing exactly the right thing, exercising her powers and this country’s influence to the utmost. I would like those powers to be greater, but they are what they are and they are being used to restrain the European budget, to seek alliances with other member states and to seek to bring about the reductions that she has talked about. It is in this country’s interest that she should do that, and I am sure that all hon. Members on the Government Benches wish her good luck in her endeavours.

Reference has been made to the rebate, so I do not propose to dwell on that. However, because this country’s rebate has been abated in part—in 2005, somewhat inexplicably, when this country had a veto and could have prevented any such abatement—we must have to bear a higher proportion of any increase in European expenditure than would otherwise have been the case. As has been rightly said, that means that our net contribution to the European budget is set to rise progressively from £3 billion in 2008-09 up to £9.5 billion in 2014. That is a substantial increase, which is inexplicable. Historians will have an interesting time examining the motivations of those who took part in the relevant discussions in 2005, when the case for this country was put by the previous Prime Minister but one.

The thing that strikes me more than anything else as I peruse this document and the various budget headings is how little attempt seems to have been made to economise on the part of the European Union—and not only that, but how little attempt has been made to cut back on planned expenditure. It seems that the European Union is ploughing on as though nothing had changed in the world.

Talking of planned expenditure, one of the worst examples, I am afraid to say, is the European External Action Service. We were promised originally—I remember taking part in the debate with the right hon. Member for Belfast North (Mr Dodds)—that it would be budget-neutral and the rumour was that nobody in the European institutions believed that. Surprise, surprise, after we were told that it would be budget-neutral and given a solemn assurance to that effect by the European Commissioner, the European Commission started coming back for more increases in expenditure. So far, in the brief time that has elapsed since it started to put that organisation into place, it has already breached the principle of budget neutrality twice, with increasing amounts being sought—the most recent was an increase of £35 billion for an extra 190 posts.

[Mark Reckless (Rochester and Strood) (Con)]

Does my hon. Friend agree that in the current financial circumstances we should be talking not about budget increases or even budget neutrality but about reductions in the EU budget, as proposed in the excellent amendment (b)?

[Mr Clappison]

If there were a search for economies in the European budget, one of the best places to start would be the External Action Service. I have a suspicion that although some of its activities might be worth while, the prime motivating force behind the establishment of what is in effect a diplomatic service is the promotion of the European Union itself rather than the interests of member states or their citizens. I suspect that there might be scope for economies.

Let us be clear that what is being sought is planned increases in the External Action Service. Let us spell out the facts of what it will cost so far as it stands—as the Economic Secretary made clear. So far, the cost of the External Action Service, which is on the record under the so-called budget neutrality, is €400 billion. The diplomatic service has 3,700 employees and posts in about 130 nations in the world, many of which already have British diplomatic representation. Spending of that magnitude compares, I am afraid, with the search for economies that is being made in our Foreign Office, where savings of much smaller amounts of money are sought all the time in the face of the demands that have been made to try to economise. It would be sad to see the Union flag taken down in some countries in the world while the European flag was run up. I would regret that, as I think our Foreign Office does a good job in the world and represents the interests of our country. Its prime consideration is to represent this country and our citizens’ interests, rather than searching for exterior political objectives to do with the European Union.

This has been a very good debate. I commend the line that has been taken by the Economic Secretary. The facts are stark and anybody who reads these budget documents will be shocked that such increases are sought by the European Union at this of all times. It also prompts a question about the relationship between the European Union institutions, the Commission of the European Union, our constituents and the man on the street in every European state. What must be the attitude at a time when there is so much concern about the economy, when people are suffering and when cuts are being made if the European Union somehow feels that it is immune from those pressures and can go on increasing its expenditure?

[Kelvin Hopkins]

Let me reinforce that point. When referendums have been held in a number of countries, the people have voted against the European Union, in essence. That has happened in France and Holland, and in Sweden when they voted against having the euro. The hon. Gentleman is absolutely right.

[Mr Clappison]

I am grateful to the hon. Gentleman for that contribution. He has a very consistent record on this issue.

An increasing proportion of our laws, certainly as a result of the past 13 years, are being passed in the European Union, which searches constantly for new fields over which to exercise authority. It has made its way into home affairs and justice and it has huge ambitions regarding security and criminal justice. It also seeks to have an increasing influence over foreign affairs, with the establishment of a Foreign Minister and a diplomatic service. We know that it has all those great ambitions and we would do well to reflect, in the House, on what the increases in the budget say about the EU’s attitude toward individual citizens and its accountability to them.