HC Deb 23 July 1997 vol 298 cc976-83 4.56 pm
The Paymaster General (Mr. Geoffrey Robinson)

I beg to move,

That this House takes note with approval of the Government's assessment as set out in the Financial Statement and Budget Report for the purposes of section 5 of the European Communities (Amendment) Act 1993. The debate arises from an amendment to the European Communities (Amendment) Act 1993 proposed by my right hon. Friend the Minister for Employment, Welfare to Work and Disability Rights. The purpose of the amendment was to signal the importance attached by the Labour party to the objectives contained in article 2 of the Maastricht treaty, which include the balanced development of economic activities, sustainable and non-inflationary growth, respecting the environment, a high level of employment, and economic and social cohesion.

The amendment to section 5 of the 1993 Act requires Parliament to approve a Government report. That report should set out how the Government's economic and budgetary position relates to public investment and to the goals of article 2. Parliament must approve that report before information may be submitted to the Commission or Council for the purposes of articles 103 and 104c of the Maastricht treaty, which relate to the broad economic guidelines and excessive deficit procedure respectively.

The "Financial Statement and Budget Report" published earlier this month provides an appropriate assessment. It clearly sets out how the Government intend to meet the social, economic and environmental objectives mentioned in article 2 of the Maastricht treaty. It also sets out the Government's position on public investment.

In the Budget, the Chancellor announced how the Government would begin equipping Britain for its long-term future. The Government's policy will promote economic stability, encourage long-term investment, modernise the welfare state to encourage work and not dependency, provide high-quality public services, move towards a fairer tax system, and protect the environment and health.

In the past, Britain has suffered repeated cycles of boom and bust, which have damaged long-term investment and growth. The Government are putting economic management on a more stable, longer-term footing. A five-year deficit reduction plan will ensure that the Government borrow only to finance investment. That should reverse the steady increase in the burden of public debt in recent years.

The Bank of England has been given responsibility for setting interest rates to meet the Government's inflation target, which should mean that interest rates will be lower in the long run.

Britain has a legacy of under-investment in new technologies, infrastructure and skills. Investment in relation to gross domestic product is low by both historical and international standards. That has contributed to capacity constraints, and has held back economic growth. The Budget encourages long-term investment by putting economic management on to a more stable footing, reforming corporation tax and reinvigorating the private finance initiative.

In Britain today, one in five working-age households have no one earning a wage. In order to replace welfare with work, the Budget introduces new deals for the young, the long-term unemployed, lone parents and schools. The Government have also launched a review of the tax and benefits system to consider how to streamline and modernise the welfare state to help employment opportunity and work incentives.

Protecting the environment is at the heart of the Government's objectives for the tax system. Economic development needs to take place in a way consistent with high standards of environmental protection. The Government are committed to broadening the scope for using the tax system to deliver environmental objectives by increasing the incentives to reduce environmental damage.

The Government are also committed to delivering high-quality public services within tight overall spending controls. Spending should be targeted in priority areas, and public resources should be spent efficiently. Within an unchanged control total, the Chancellor has announced an extra £1.2 billion for the national health service and an extra £1 billion for schools. A comprehensive spending review is also under way. It will examine every item of spending, and ensure that it contributes as effectively and efficiently as possible.

Mr. Simon Hughes (Southwark, North and Bermondsey)

The Paymaster General is probably the best person to ask for an authoritative answer. He gave the figures for extra money for health and for schools. Will he confirm that it is a straightforward cash increase, which does not take into account inflation? I am not arguing that it should, but we should understand that it is a total before inflation, not an inflation-adjusted figure.

Mr. Robinson

The hon. Gentleman will remember that that question was asked during Prime Minister's questions two weeks ago, and was adequately answered on that occasion.

The private finance initiative also has a key role to play. It has always been a good idea, but reforms are needed to make it work better. Obstacles in the way of projects coming to fruition must be removed, priority should be identified, and the process should be streamlined. The Government have already taken action to improve the PFI and to ensure that more contracts are signed more quickly across the public sector.

The House will have noted the appointment of Mr. Adrian Montague as chairman of the task force on the PFI. I am pleased to say that the appointment has received an extremely warm welcome in the private sector. I am sure that he will provide great impetus to the programme.

Sending information from the "Financial Statement and Budget Report" to the Commission and Council will enable Britain to share information with our European allies. In turn, that will enable Britain to take a lead in Europe to help to tackle the underlying weaknesses of European economies with a programme of economic reform.

British interests are best served by being strong in Europe. In order to shape an agenda that is right for Britain and Europe, we need to be in, and leading in, Europe. We want to make Europe more open, more competitive, more flexible and more adaptable. We want Europe to set goals on higher productivity, employment and growth. We need to ensure that Europe develops in ways that will promote growth and jobs in both Europe and Britain. That is why Britain must be in Europe and leading.

Participating in multilateral surveillance is a helpful step towards achieving that end. Sharing information helps to promote the adoption of sound policies, and forms the basis of a more positive and constructive approach. The Government have already adopted that approach to tackle European unemployment.

Under my right hon. Friend the Chancellor's initiative "Getting Europe to Work", member states and the ECOFIN Council will focus on cutting unemployment by identifying best practice in each member state. By playing a proactive role, Britain is leading the debate on how best to combat high and unacceptable levels of unemployment in Europe.

None of the challenges currently facing Europe will influence its development as much as the single currency. A single European currency could bring benefits, but would work only with real convergence among the economies taking part. Any decision about British membership will be made in the British interest and to meet British needs, after a cool, hard-headed assessment of the national interest. To make the right decision, we need an open and intelligent debate on a single currency.

That is why, last week, the Chancellor threw open the debate about European monetary union, and why multilateral surveillance at European level is also a good idea. Without that, we would be in no position to make the right decision, and any debate would be ill informed.

Mrs. Angela Browning (Tiverton and Honiton)

Will the Minister confirm that, in the Chancellor's consideration of what is in the British interest, he will take into account not only economic interests, but the constitutional price to pay for a single currency? How will he balance the constitutional price with the economic pluses and minuses when his work is done?

Mr. Robinson

I am sure that my right hon. Friend the Chancellor will take all relevant considerations into account, and, in his great wisdom, come to a balanced judgment about them that will indeed be in Britain's national interest.

Approving the motion allows the United Kingdom to participate in such multilateral surveillance, as provided for in articles 103 and 104c of the Maastricht treaty. Under article 103, member states submit convergence programmes that set out their economic objectives and provide information on their economic performance. Sharing such information facilitates the identification and promotion of successful economic policies. Under the article, the Council also draws up broad economic policy guidelines. Those provide an overview of economic developments in the European Union, and lead to an agreed broad set of policy guidelines.

Under article 104c, member states provide information on the state of their public finances under the excessive deficit procedure. All European countries should pursue policies for low inflation and sound public finances. Those are the essential building blocks for investment, growth and jobs. That is why the Maastricht criteria are important.

Multilateral surveillance is a sensible precursor to enable Britain to take a proper role in Europe and to make the right decisions about Europe. Approving the "Financial Statement and Budget Report" under section 5 will enable the UK to participate in such surveillance.

5.6 pm

Mr. Gary Streeter (South-West Devon)

I thank all my colleagues for coming to the Chamber to listen to me this afternoon—[Laughter.] I think that a slightly more important attraction is taking place elsewhere.

I welcome this opportunity to discuss the assessment of Britain's economic and Budget provisions. It gives the House a chance to look back with pride on the economic conditions created under the previous Conservative Government, which we can report with satisfaction to the European Commission at Brussels and to the wider world; but we must also look with growing concerning at the Budget provisions that require to be reported.

At the centre of this debate should be the vital matter of our contribution to the EU budget. We now learn that that may rise by a significant amount—possibly, according to some sources, by as much as £2 billion. I intend to deal with all three items in my brief remarks, probing the Paymaster General a little on the EU contribution.

Every day produces more evidence of the great strength of the British economy that the Labour Government have inherited. Our public finances are in first-class order. A few simple facts illustrate the point. We have had the longest period of low inflation for 50 years. Unemployment is falling steadily, while it is rising in France and Germany. In Britain, it stands at 7.4 per cent., compared with a European average of 10.8 per cent.

We have the fastest growth of any major EU economy. Tax revenues are flooding in so strongly that we are comfortably on course to meet the Maastricht criteria on debt and deficits. Britain's public sector borrowing requirement is set to be just 1.75 per cent, of gross domestic product this year, but in France the Government talk about massive tax increases in an attempt to creep below the 3 per cent. target—almost certainly in an artificial and unsustainable manner.

When the International Monetary Fund's annual report on the United Kingdom praised Britain's impressive macro-economic performance, strong growth, declining unemployment and low inflation, as the Chancellor was so keen to point out, I wonder whether he stopped for just one moment to ask himself who had been working for years to put those achievements in place. I wonder whether he stopped for a moment longer to consider who had been criticising the very policies that delivered the economic success that the IMF is so keen to praise.

Our economy is the envy of Europe. That is our Conservative legacy. All across Europe, other Governments are adopting our language of flexible labour markets and free trade, the winning of inward investment and the encouragement of enterprise. We have won the arguments, and now, throughout Europe, we must ensure that policies adopted by member states reflect that new language.

Specific policies create flexible labour markets and economic success—not just the ability to parrot the right phrases. The Paymaster General again fell into the trap of tripping out the phrases with no real sense that he understood the specific policies that are required to bring about economic success, which brings me neatly to my second point.

We have to report to Brussels our Budget proposals for the coming financial period. What a contrast with that which has gone before. I am not sure what the French is for "a botched Budget", but I suggest that the Paymaster General finds out pretty fast, because he will be hearing much about it in Europe over the next 12 months.

Labour's response to such an impressive economic legacy is to botch its first Budget. The Chancellor talked up the existence of a consumer boom, and then piled £5 billion of his £6 billion extra taxes on the corporate sector. Having identified a problem, he took no action to deal with it. Lacking the courage of our convictions, he gave a hospital pass to the Bank of England, which then had little option but to step in and raise interest rates—three times since 1 May. It is obvious to all that there are plenty more where that came from. Home owners and businesses throughout the country are already, after just a few weeks, beginning to pay for Labour's mistakes.

On top of that, the Budget trumpeted the signing of the social chapter, guaranteeing job losses here in the UK, and paved the way for a national minimum wage, guaranteeing job losses here in the UK. This Government use the language of flexible labour markets, but introduce financial policies and new burdens on businesses that will have precisely the opposite effect. For a while, the Government can live in the warm glow of their soundbite honeymoon, but in the morning, when the cold light of day exposes their decisions rather than their diction, the country's thoughts will quickly turn to divorce. That brings me, in my full flow of eloquence, to my third and final point.

How can the Paymaster General come to the House today and say nothing about the apparent increase in the UK contribution to the European Union? Not a word did he mention. Why did not the Chancellor in his Budget find the time to mention the huge increase? According to some newspaper reports, it is as high as £2 billion. The Sunday Times, which we know is always accurate, reported on 20 July: Britain's taxpayers will have to pay an extra £2 billion into the coffers of the European Union next year, as much as the additional spending Gordon Brown allocated to health and education in his July 2 budget. The surprise 27% increase, taking Britain's gross contribution from £6.3 billion to £8.3 billion, is revealed in unpublished documents sent by the Treasury to the House of Commons committee that monitors the EU. In an accompanying letter, Helen Liddell, the Treasury economic secretary, says the increase in contributions—which lifts Britain's share of the £59 billion budget of the 15-member EU from 11% to 14%—is explained by Britain's better economic performance relative to the rest of Europe, a £200m reduction in the amount of Britain's budget abatement, and an increase of nearly % in EU spending. Not a word about that did the Paymaster General mention.

I want to make one thing clear. We fully accept that we are one of the wealthiest countries in Europe, and we are prepared to pay our fair share to make the EU work. We belong to the EU, we wish to remain in it, and we wish to make it work for Britain and for all member states. We recognise that there is a price to pay for membership, but it must be a fair price, and we must be sure that our contribution represents value for money. That has been the Conservative approach to our EU contribution, and it will remain so.

For 18 years, we put value for money at the very top of our agenda. Is it not remarkable that, in their very first attempt, the Labour Government have failed to secure value for money? I pause to reflect how ironic it is that, at the same time as we are being asked to pay more, the Governments who are punishing their own people by over-tight deflationary policies simply to meet the Maastricht criteria are being rewarded by being asked to pay lower contributions.

Even more remarkable is a press statement that was issued by the Treasury on 11 July, headed "Statement on the 1997 Community Budget: European Community Finances". There is even a very helpful note to editors. Surely in such a press statement, the Government would set out the details of the huge budget increase—but not a word. The Government shout from the rooftops about transparency and open government, but when there is bad news to tell, they hide it in the basement of Millbank tower in a shabby and unacceptable way.

Why is our subscription to rise by such a huge sum? We are told that it is due, as I have said, first, to our strong economic performance, secondly, to the reduction in our rebate of £20 billion, and thirdly, to a 3 per cent, increase in EU spending. We well understand the first of those reasons. Those are the rules, and we accept in broad outline the consequence of Conservative economic success.

But what about our hard-won rebate? Surely the Labour Government have not already, after a few short weeks in the job, thrown in the towel. Why has our rebate been slashed—£200 million wiped out at a stroke? How many schools and hospitals could have been built for that sum? What action have the Government taken to prevent the rebate being slashed? Was the fact that our rebate is to go what the Chancellor meant when he said that he was against "permanent opt-outs"?

The Paymaster General must deal with such matters in winding up. The country is entitled to ask whether we can rely on Labour to maintain our rebate. Can we trust Labour with our Euro-finances? On such evidence, we clearly cannot.

Why is the Chancellor prepared—so he tells us—to be ruthless this year with public spending at home? There is to be no more money this year for teachers, schools, nurses and patients, and not a penny more for our police or firemen. He is miserly when it comes to domestic spending, but he shells out our money abroad as though sterling were going out of fashion. Perhaps it will, in Labour's hands. The Chancellor says that he is an iron Chancellor at home, but surely he is a plasticine Chancellor abroad—well and truly moulded by his European partners.

How can the Paymaster General bear to write the cheque for our extra Euro-spending when there is not a penny more for our own people? Why was not the matter raised at the Amsterdam summit? Surely, in Amsterdam, the Prime Minister already knew that our contribution was set to rise. Why did he not fight that increase? What happened to our ace negotiator? Had he slipped out to the washroom while the matter was being discussed?

We know that the Prime Minister failed utterly to get progress on enlargement, failed completely to get a binding deal on quota hopping, and—it appears—failed hopelessly to protect our financial interests. Perhaps he was out of the meeting for rather a long time. No wonder the Government have tried, in their embarrassment, to sweep the matter under the carpet; no wonder they have not made proper disclosure to the House of Commons or issued a proper press release on it.

Most serious of all, we learn that fraud is on the increase in the EU. We learn that 6 per cent, of the revenue collected from member states in 1996 was lost in fraud—a massive jump from 3.6 per cent, in 1995. In other words, moneys lost through fraud have increased by two thirds in 12 months.

Why did not the Prime Minister say at the Amsterdam summit that we would not give a single penny more to Brussels until the alarming increase in fraud had been dealt with? That would have been a perfectly sensible position to take. Is it because he is so desperate to be liked in Europe and never to be isolated in Europe?

Surely the Prime Minister could have worked out the similarity between two figures—a 2.4 per cent, increase in moneys lost in fraud and a 3 per cent, increase in the EU budget—and simply said that there will be no more money for Brussels until it puts an axe to the root of Euro-fraud. He went to Amsterdam armed with a veto, and he could have used it in a most reasonable manner by refusing a budget hike until fraud has been dealt with. The country would have supported him in that, and our European partners would have understood, but he refused. He bottled out, and he failed—but then, in his hands, our veto is a deterrent that is never to be used.

In his reply, will the Paymaster General deal with the issues that I have raised? Will he tell us why the Government have attempted to conceal the increase? Why has there not been proper debate on the Floor of the House? Where is accurate information on the matter? Why did the Prime Minister not stand up for British interests at Amsterdam? Why did he not take tougher action on fraud and use his veto in Britain's interests?

Is not the sad truth that the Government failed in their first opportunity to lead for Britain in Europe? The Government's mistakes are many, not only a few, and Labour simply cannot be trusted with the people's money.

5.20 pm
Mr. Geoffrey Robinson

The hon. Member for South-West Devon (Mr. Streeter) started his speech with some misplaced quotations on our Budget by the International Monetary Fund, and I should like to take a couple of minutes to put him right on them. The IMF mission statement said: The new Government has made an excellent start. It has set a high standard for its economic policies, aiming to maintain stability and foster long-term growth while seeking fairness in developing human potential. It has taken decisive steps towards these goals by making the Bank of England independent, introducing a Budget that makes rapid strides towards sound public finances, and initiating welfare-to-work and other programmes to enhance employability. Our policies are timely. I can well understand why he did not read on and tell us the full import of the IMF mission statement, because such a whole-hearted endorsement of our policies must cause him some embarrassment.

The hon. Member also mentioned fraud. It would have been illegal to do what was suggested, and we need no lectures—still less, help—from the Opposition on dealing with Europe. Time and again—most clearly in the BSE crisis—we have seen how all the threats, bluster and vetoes in the world culminated only in a humiliating climbdown by the then Conservative Government. Therefore, we require no lectures on those matters from them.

At Amsterdam, as the hon. Member knows, the Government accepted qualified majority voting on fraud matters, which the previous Government's Euro-scepticism and perpetual search for fights with our partners in Europe prevented them from doing, however much it might have been in the British interest to do so. We will have no truck with the previous Government's tactics, however much they are thrust upon us, because they led to disaster.

On payments—I realise that the hon. Member for South-West Devon is trying to make the story run—it is simply not the case that, in sterling, the UK gross contribution will rise by 32 per cent. Although that story was in the Sunday newspapers, no one has mentioned it since—until today, when he strode to the Dispatch Box and, with such great alarm, tried to revive it. If he had read the Treasury's explanatory memorandum, which made the matter clear, he would know that the figure was produced by comparing sums in ecu that were calculated at very different exchange rates. Moreover, if he would like to go into the details of how we can reconcile any differences, I should be happy to do so.

I shall, however, come straight to the point. As the hon. Member is interested in the underlying increase, in sterling, in gross contributions—which, because we do all our national accounts in sterling, is what should matter to us—I ask him to accept that, between calendar years 1997 and 1998, the figure will probably be about 2 per cent. I stress, however, that that figure is for gross contributions.

I should have thought that the hon. Member would be more interested in net contributions. As he knows, the figures must be projected based on certain assumptions. Next year, they could move up or down—and I stress both those words equally.

The hon. Member is interested in gross contributions, however, and the simple fact—as he will know—is that those underlying increases were introduced by the previous Government precisely to escape the types of fluctuation and misrepresentation that can occur. The percentage increase will be only 2 per cent. Therefore, the gross contribution, in sterling, will rise from £10 billion to £10.2 billion. I hope that I have satisfied his queries on those matters, and that the motion will be accepted by the House.

Question put and agreed to.

Resolved, That this House takes note with approval of the Government's assessment as set out in the Financial Statement and Budget Report for the purposes of section 5 of the European Communities (Amendment) Act 1993.