Rt Hon Lord Lilley

    Parliament should tell ministers to renegotiate the EU budget to keep Britain’s rebate, according to Peter Lilley, MP for Hitchin and Harpenden.As things stand, Britain receives less money back from the EU per head of population than any other member state.

    Mr Lilley said “Britain suffers an unfair burden. We pay in 20 per cent more per head than France, yet receive only a half of the spending allocated to France. We should not make matters worse by giving up the rebate negotiated by Mrs Thatcher without getting something in return.

    He said Tony Blair had made concessions on the budget because he did not want to end his premiership with a big row with Europe. His personal interests were not the same as Britain’s.

    Mr Lilley told the House of Commons: “The case for retaining our rebate persists.” He supported the proposal Gordon Brown made when he was Chancellor that control of regional funds should be returned to Britain, so the money was used for British priorities. It made no sense to send the money to Brussels and then have it sent back earmarked for uses which might not be the choice of the British people or British government.


    Note to editors:

    Extract from Hansard Attached:

    Andy Burnham: I seem to remember that the former Prime Minister came back to the House on more than occasion-after the Council in June and again in December, once the decision was made. I accept that the latter occasion was after the event, but the debate on these matters after the June Council was very live and the House had an opportunity to influence events. I repeat that there was a vote on Second Reading, and hon. Members will have other chances in the votes to be held this evening to express their views as to whether they believe the agreement represents a good deal for Britain. I am not going to assert that it is, as all hon. Members must arrive at their own judgment. If they decide to reject a deal that was negotiated in good faith, however, they must bear in mind the damage that might be done to Britain’s interests in Europe.

    Mr. Peter Lilley (Hitchin and Harpenden) (Con): I do not think that the Minister realises that the opposition expressed this evening by members of various parties would strengthen the Government’s hand. The rebate at the centre of the argument was won by Mrs. Thatcher because she was strong, and it was conceded by the former Prime Minister in the weak days of his dying regime. If the Minister were forced to go back to Brussels because this House did not accept the dilution of the rebate, his position in negotiations for a better deal would be very strong. Mrs. Thatcher was able to get what she wanted because she had the House behind her.

    Andy Burnham: I do not believe that that is how the previous Conservative Government conducted their European negotiations. The right hon. Gentleman will find that there was no showdown and that no macho statements were made. Much of what that Government did was very pragmatic, and that is the same for all Governments. Their approach was based on

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    compromise, with a view to achieving the best available solution. His memory of the period may be rather selective, as I do not believe that it is based on fact.
    The deal under discussion preserves the basis of the Fontainebleau Council, at which it was decided that the UK would receive a rebate on all spending in the 15 countries that then made up the EU. The current deal retains that approach, with the difference that it takes account of enlargement and proposes a different financing mechanism for the enlarged EU.

    The Conservative party says that it supports EU enlargement-

    Mr. Lilley indicated assent.


    Andy Burnham:
    …The percentage increase in our contributions from 1994 to 1999 was an increase in gross costs to the UK of-wait for it-73.4 per cent. There is a bit of a difference, really. Okay, they were different times, and it was a smaller European Union and a smaller budget, but let us get some facts on the record. Let us have some long memories in this debate, rather than a few short ones.

    Mr. Lilley: On the question of putting facts on the record, the right hon. Gentleman’s Government have already put it on record that the net contribution of the UK as a percentage of its own total managed expenditure is set to rise from 0.64 per cent. to 0.96 per cent. by 2010. That is a 50 per cent. increase in the share of our expenditure that is going to Europe. If he has got a grip on these matters, why is he not keeping that amount down, rather than putting it up?

    Andy Burnham: I have referred to these figures before in the debate. The net contribution is published in the pre-Budget report and again in the Budget, and that is a forecast of payments that the country will make. The figures have been set out quite clearly. I do not have the pre-Budget report to hand, but from memory I think that the net contributions over the course of the spending review that we are about to enter are about £5.5 billion, and will stay at roughly that level over the spending period.


    Dr. Cable: I am rather tempted by the new clause. As I said in the clause stand part debate, there was a major failure in the negotiations to establish a link between the rebate and agricultural policy. It seems in principle, unless the Minister can persuade us to the contrary, that the new clause provides a mechanism for retrieving the situation.

    Let us look carefully at what the Prime Minister said about the review in his statement to the House in December last year, when he brought back the agreement. He clearly thought that he had extracted a major concession in return for the negotiations on the rebate. He said:

    “Alongside this agreement on… the modernisation of eastern Europe, we also agreed on a fundamental review of all aspects of the EU budget, including the common agricultural policy… with the recommendation that it begin in 2008.”

    The two subsequent sentences are crucial. The Prime Minister said:

    “As the language in the European Council conclusions makes… clear, it is then possible for changes to be made to this budget structure in the course of this financing period.”

    Of course it is possible, but why should the Governments who resist reform of the common agricultural policy agree? What possible incentive is there for them to do so? The French Government will almost certainly refuse to renegotiate. What possible leverage do the British Government have in carrying through the Barroso recommendations?

    The following sentence is even more substantial. The Prime Minister continued:

    “This will also allow us to take account of any changes agreed in the World Trade Organisation round”.-[ Official Report, 19 December 2005; Vol. 440, c. 1564.]

    That is terribly important, because we keep being reminded-rightly-that if the negotiations fail, there will be disastrous consequences for the world economy, for Europe and for the United Kingdom.

    During the last few weeks, Mr. Mandelson has been ominously quiet. There is a real and growing worry that the negotiations may fail, primarily because of difficulties in the American Congress but also because of the intransigence of agricultural interests in Europe. In the next few months, we may well be faced with disastrous circumstances in which our negotiations fail for the first time since the second world war, opening a Pandora’s box of protectionism. The British Government should be, and according to much of its rhetoric will be-and we hope it will be-in the vanguard of efforts to prevent that from happening. However, what negotiating clout do they have in making other EU members come to an agreement with the Americans at the World Trade Organisation? There is no leverage; there is no negotiating position if it has already been conceded.

    Mr. Lilley: The hon. Gentleman makes an important point. He mentioned that Peter Mandelson has been ominously quiet, but I do not know whether he is aware that today Commissioner Danuta Hñ/4bner has not been quiet, and that she has made a speech: “Reform of the EU budget: Time for a debate without taboos”. She says that, as well as considering the agricultural policy,

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    a central part of the review should concern the corrective mechanisms-the British abatement that remains. Therefore, what we have started could eliminate what we retain, rather than secure any benefits for what we have already given away.

    Dr. Cable: That is a helpful intervention. I do not know how significant those commissioner’s comments are, but they seem to be genuinely worrying.


    Mr. Lilley: I am grateful for the opportunity to contribute to the debate, and I return to the subject of the own resources of the European community with some nostalgia, as it was the subject on which I made by maiden speech some years ago, on which I had my maiden rebellion against my Government, and on

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    which I made my maiden criticism of the then Prime Minister, Mrs. Thatcher, nearly bringing my career to a premature end. She was seduced-or so it seemed to me-by the argument that in return for a promise from the European Union to be more moderate in its future spending, she should concede an increase in the own resources of the European Community. I asked her at Prime Minister’s questions whether she would follow that logic and reward a drunkard who had signed the pledge by giving him a bottle of whisky. She was not best amused, and I was told my career would not proceed any further. I was wrong, of course, as Mrs. Thatcher was in the process of securing for Britain the rebate that has enabled us to save billions of pounds of contribution to the EU, whereas the present Government are doing the reverse.

    I mention this because I think it shows that, having been critical of my own Government, I have a reasonable licence to be critical of this Government on this issue. My position in both cases is as someone who does not want to see a waste of public expenditure through an increase in spending that will not be properly monitored or controlled, and will not be in the interests of the taxpayer. I fear that what we are being asked to do today will result in that. That is why I welcome the new clause tabled by my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), because it says that we should not go ahead with this increase in the own resources-the new structure reducing Britain’s abatement by up to £10.5 billion-unless we get something in return.

    Unfortunately, as far as one can see, the Government’s negotiating process so far has not got anything in return. Indeed, the negotiating position of the former Prime Minister, Tony Blair, has been rather like that scandalously sexist aphorism, “When a lady says never she means maybe, when she says maybe she means yes, and when she says yes she is not a lady.”

    The former Prime Minister started off saying never:

    “The UK rebate will remain and we will not negotiate it away. Period.”-[ Official Report, 8 June 2005; Vol. 434, c. 1234.]

    He then went on to say maybe:

    “Of course, if we get rid of the common agricultural policy and we change the reason why the rebate is there, the case for the rebate changes.”-[ Official Report, 29 June 2005; Vol. 435, c. 1293.]

    Finally, he conceded a reduction in the rebate completely, but he said that he was getting something in return-a reform of the agricultural policy, or at least a promise of a review of it.

    Accepting new clause 1 would enable us to see whether we have anything in return for the concessions made, and I cannot see how the Minister can possibly object to it. It proposes that the Treasury shall go ahead with implementing the new structure of own resources only if it can certify that we have secured a concession. It would be left to the Treasury’s judgment whether it could honestly say that we had secured the concession-the review-that we were promised, and which Tony Blair told this Parliament he had been offered. The Treasury would be able to say whether it had been substantively achieved, so I invite the Minister to say that he will accept the new clause. If he cannot, will he say frankly and openly that he rejects it because he cannot envisage circumstances in which the

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    Treasury will be able to say that the promises given to this House will be delivered? That would be an appalling position.

    The case for retaining our rebate persists. It was based on the fact that the structure of the British economy is such that when the same rules are applied to us as are applied to other member states they result in an unfair burden on us relative to the advantages that we get. Even after the changes that have occurred, and those planned in this settlement, are taken into account, this country will receive the lowest amount of European spending per head of any of the 27 countries in Europe. We will receive a quarter of that received by Ireland, whose gross domestic product per head, we are now told, is above ours, and we will receive half that received by France, whose figure was only marginally below ours before the recent exchange rate changes.

    Despite that, the contribution that we make is significantly greater than that of many other countries. The Government have been prepared to give us the figures only in respect of France, but the contribution per head that British people will make to the European budget is 20 per cent. greater than that of France. Our net contribution is set to rise significantly under this settlement, as I mentioned in an intervention that the Minister was kind enough to take. The net contribution is rising faster than the generality of public expenditure is planned to do in this country-so much so that our net contribution to the European budget as a share of total public expenditure will rise by half over the time span of the current spending process.

    This is a very inequitable arrangement as far as British people are concerned. It was right to secure an abatement to try to offset some two thirds of the differential between the money that we put in and the money that we get out. Mrs. Thatcher was able to secure it because she had a very good case, she argued forcefully and she persuaded her partners to give it to her. According to the Government, we now have to reduce that abatement and to accentuate again the inequities that the correction mechanism was designed to redress. “Correction” is the word used in the European documents. The correction is to an inequity that Britain otherwise faced.

    We will get nothing in return, because the CAP budget will continue to rise. According to House of Commons figures, the CAP budget remains 48 per cent. of the total expenditure of the EU. Others claim that it has risen from 40 per cent. a few years ago to 44 per cent. Lord Patten said a year or so ago:

    “We are talking about a budget for research and development that’s been severely squeezed already in order to accommodate a continuing rise in agricultural spending that will actually go up from 40 to 44 per cent. of the overall community budget.”

    So, far from our having secured some degree of reform already that is resulting in a reduction, it remains overwhelmingly a budget that goes on the CAP.

    The other part is spent on structural funds, and I want to ask the Chief Secretary whether the Government have made any progress in securing the reform that the present Prime Minister sought when he was still Chancellor. In 2003, he wrote in The Times that

    “When the economic and social, as well as democratic, arguments on structural funds now and for the future so clearly favour subsidiarity in action, there is no better place to start than by bringing regional policy back to Britain.”

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    In a Government document entitled “A modern regional policy for the UK”, the UK Government argued that member states with GDP per capita above 90 per cent. of the EU average should no longer receive structural funds money. Instead the money should be retained by them and spent by them, because, the Prime Minister has argued,

    “There are many things that we want to do to encourage local skills and research and development, and local businesses, but we’re not able to do because of the existing rules.”

    So when, under the new clause, the Government report back to the House on whether they have secured concessions, they can tell us whether they have secured the concession, at least for countries such as ours, on regional funds, so that we control that money and use it for British priorities, rather than sending it to Brussels and having it sent back by them, having incurred administrative costs and being earmarked for uses that would not necessarily be the priority of the British people and the British Government.

    The former Prime Minister made the concessions that are incorporated in the Bill. At the time, the then Chancellor was leaking to the press that he did not really support that. He thought that Tony Blair was being unduly weak and giving away too much. Now is his chance. He is now Prime Minister and this is the great vision that he has been seeking to put before the British people. He can do what he indicated in leaks that he wanted to do and give his Back Benchers a free vote on this Bill. They will then put him in a strong position to renegotiate and get the sort of deal that he wanted.

    I fear that we did not get that deal because the outgoing Prime Minister had other priorities. He was looking to his own future. He did not want to end with a big row in Europe. That might have been in Britain’s interests, but it would not have been in his. He made a concession, which was a big contribution to his own future campaign to be President of Europe-an undeclared contribution, which dwarfs those of any member of the present Cabinet. I hope that that mistake, that unfortunate policy and that unfortunate weakness of the previous Prime Minister can be put right.

    The new clause would strengthen the position of the Government and the House, and I hope that it will be accepted