HC Deb 18 October 2001 vol 372 cc1326-48

Order for Third Reading read.

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

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

This Bill will enable the United Kingdom to give effect to the new own resources decision which amends the arrangements for financing the Community budget. These financing decisions were agreed at the Berlin European Council in March 1999.

The decisions made at that European Council represent an important step forwards for the European Community and for the United Kingdom. The Council made several important reforms, preparing the EU for the challenges of enlargement, and it was a negotiating triumph for the UK, securing no increase in the own resources ceiling, maintaining the UK abatement and bringing EU spending under control.

The new own resources decision that we are considering is little changed from the 1994 own resources decision, and any changes made to the decision are financially neutral for the United Kingdom. Our net contribution to the EU budget will not change as a direct result of what we are considering today.

It is important that all the issues of concern to hon. Members on this short but significant Bill are properly scrutinised and the further time allowed for Third Reading will enable us to do so.

Some interesting points were raised and addressed on Second Reading and in Committee. The hon. Member for Kingston and Surbiton (Mr. Davey) asked several questions about windfall gains and requested additional information and clarification on various detailed points. I wrote to him on 16 July and have recently written to him again on the points that he raised in Committee. Copies of both letters were deposited in the Library of the House but perhaps I could reiterate some of the points that I made in my most recent letter.

First, I should like to clarify the question of whether the cumulative value of the windfall gains forgone might have been greater than the value of the abatement received. I can assure the House that the value of windfalls forgone has been only a small fraction of the value of the abatement. That will continue to be the case.

The average level of windfall gains over the period 1989 to 2001 has been £107 million per annum, whereas the average level of the abatement received over the same period has been £2.2 billion per annum. It is therefore clear that the Government were right to insist on retaining the abatement at Berlin.

It was also right for the United Kingdom to agree to the windfall adjustments, just as earlier Administrations had. We sought a fair agreement at Berlin, and that is what we achieved. I hope that my reassurances have allayed the hon. Gentleman's fears.

Mr. Edward Davey (Kingston and Surbiton)

I thank the Economic Secretary for her letter of 10 October, which clarified an issue that was of serious concern to me. I also thank her, on behalf of the House, for asking her officials to spend some of their summer recess making the necessary calculations. I assure her that the figures that she has given today and in her letter answer my question in a substantive way.

Ruth Kelly

I thank the hon. Gentleman. It was an enlightening experience for all involved.

Another point raised during our earlier debates concerned the Berlin reforms of the common agricultural policy. The Berlin summit saw the most radical reform of the CAP since its creation. There were significant cuts in the prices of cereals, beef and milk, which brought cereal prices close to world levels for the first time. As a result of those reforms, consumers in the United Kingdom will be about £70 a year better off. Although we will continue to push for further reform, the Agenda 2000 reforms constitute a significant victory for the UK. Berlin also introduced the CAP second pillar, which focuses on rural development and the environment. That was a significant step in the move from market-distorting production-based subsidies.

The Bill ratifies part of the Berlin agreement which secured no increase in UK contributions and safeguarded the abatement. That was a good outcome for the UK, and I commend the Bill.

1.52 pm
Mr. John Bercow (Buckingham)

It is a pleasure to joust for the first time—I hope that it will not be the last—with the Economic Secretary.

This is an important measure. Although, as was said on Second Reading and in Committee, the Bill is short, its implications are substantial. It is therefore necessary and desirable for us to engage in not a leisurely but a proper and comprehensive debate on Third Reading.

That is also true when we put the debate, and the proposed Act, in the context of the size of the European Union budget. When we talk about what this country contributes to the European Union, it seems extraordinarily difficult to arrive at an agreed figure. Estimates vary greatly, and it is important to distinguish between the gross contribution that the United Kingdom makes to the EU budget and the net contribution. My hon. Friend the Member for Rochford and Southend, East (Sir T. Taylor)—who, sadly, is not present, but who contributed to our proceedings with distinction earlier—has calculated that this country sends approximately £1.2 million every hour. From that, the Economic Secretary will readily deduce that the sum sent it each day is some £29 million, and that therefore more than £200 million per week goes from the United Kingdom taxpayer to the European Union.

I stress the words "from the United Kingdom taxpayer to the European Union" because Governments do not, of course, have any money. There is no question of the personal largesse of the hon. Member for Bolton, West (Ruth Kelly) going to the European Union; we are talking about hard-pressed British taxpayers, and the net contribution appears to be more than £4 billion a year.

It is worth noting how the European Union budget is spent. There has, for example, been a marked change in the last decade or so in the proportion of EU funds allocated to structural assistance. I think that the figure in 1988 was around a sixth of the EU budget, whereas it is now nearer a third.

The Economic Secretary, who is never knowingly understated in trumpeting the Government's alleged achievements, was bold on Second Reading and in Committee. Regrettably, today she has already repeated a phrase that she used at an earlier stage. She talked about how the Government accomplished a negotiating triumph. Allowing for the almost inevitable and instinctive tendency to indulge in spin over substance, that was a bit rich and I hope that she does not repeat the claim.

Quite properly for consideration of this important matter, we have a packed House and hon. Members will be aware of the four bases of own resources: agricultural and sugar levies, customs duties, VAT-based contributions and gross national product-based contributions. The Economic Secretary made an entirely factual point about the shift from traditional own resources, as greater emphasis is now placed on GNP-based contributions. That is a simple statement of fact. However, her claim that the outcome of the Berlin European Council and the decisions subsequently taken in September 2000 constitute a negotiating triumph is more controversial.

I shall argue my own case, as will my hon. Friend the Member for Arundel and South Downs (Mr. Flight) in his winding-up speech for the Opposition, but it is legitimate to pray in aid, if I can attract the Economic Secretary's attention from the alternative delights of talking to the Paymaster General, the verdict of a Foreign Affairs Committee report. The Economic Secretary will be intimately familiar with "European Union Enlargement and Nice Follow-up", which was published on 10 April. It is not the product of Opposition thinking, but at paragraph 18 it states: The reforms agreed at Berlin may have paved the way for enlargement but further progress will be required to make enlargement a success.

Ruth Kelly

indicated assent.

Mr. Bercow

I am grateful for the Economic Secretary's sedentary assent to that proposition. She thinks that it makes sense. Therefore, she will immediately share my concern that the issue has not been raised since Berlin, despite no fewer than four opportunities to do so, and that CAP reform has not featured on the agenda. Four countries have held the EU presidency in the intervening period, but none chose to highlight the subject. If she agrees with the Opposition and the Liberal Democrats that further reform is needed, it is not unreasonable to ask when she thinks that it might feature on the presidency agenda.

Mr. Edward Davey

I agree that the Bill, like the summit that debated CAP reform, does not go far enough and the hon. Gentleman is right to suggest that the Liberal Democrats want further, much greater CAP reform, but how far did the Conservative Government go on CAP reform during 18 years in office? Their many failures in negotiations with the EU have left us with today's appalling CAP inheritance.

Mr. Bercow

I am grateful to the hon. Gentleman, who can always be relied on to prove himself a steadfast supporter of the Labour Government when they are on the rack. If he continues in that vein, the entitlement to Short money that the Liberal Democrats enjoy on account of their status as part of the Opposition will quickly be called into question. However, I shall happily answer his point.

The hon. Gentleman thinks that we are playing a game of table tennis and that my natural response will be to say what a splendid job the Major Government did on the matter, but I am about to disappoint and perhaps even surprise him. We did something on CAP reform, but nothing like enough. Progress has been modest, but the difference is that I am not claiming dramatic, wholesale reform during 18 years of Conservative government. The Economic Secretary, on the basis of a fairly modest achievement, of which more anon, made a far bigger claim. Although the hon. Gentleman likes to be a helpful contributor, I hope that he will not do the Government's work for them, especially when they are doing their best to advance a rather poor case.

I try to be fair-minded about these matters, but I know that Labour Members may not necessarily take it from me that the outcome of the European Council was modest rather than distinguished. I hope, however, that the Economic Secretary is interested in and inclined to show her respect for the verdict of the hon. Member for South Derbyshire (Mr. Todd). It pains me that he is not here today. It is in order in his absence to pay sincere and fulsome tribute to him for his contribution to our earlier debates. He speaks with some authority on agriculture, and, on Second Reading, in relation to the CAP, he said: it is certainly possible to overstate what was achieved. He went on helpfully to point out: Some modest and welcome steps were taken, but modest is certainly 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 … The agreement will not be a rational basis for defending agricultural policy in the forthcoming World Trade Organisation round."—[Official Report, 3 July 2001; Vol. 371, c. 188.] I will not dilate further on the subject because I do not want unduly to embarrass the hon. Gentleman when he reads my remarks later. Suffice it to say, he said that he was shocked that there had been no progress on the liberalisation of the sugar regime or on the need to reform what he described as the "ludicrous" milk quota system.

In the circumstances, it seems that the hon. Gentleman's verdict is more closely related to the facts than the Economic Secretary's claim for the Government's achievements. Put another way, my hon. Friend the Member for Arundel and South Downs was being fair when he said that what the Government secured was not outstanding, but arguably not an unreasonable deal." —[Official Report, 3 July 2001; Vol. 371, c. 222.] Can the Economic Secretary do something about the prevailing tendency in Government for spin to triumph over substance, optimism over reality and fiction over fact? She will recall that on Second Reading, my hon. Friend the Member for Hertsmere (Mr. Clappison) reminded the House of the commitment made in the Labour manifesto, which boldly asserted: our contributions are falling to similar levels as France and Italy. Yet, the net contributions show no sign of falling. I refer the hon. Lady to the 1999 Court of Auditors annual report, which showed that France was contributing annually £766 million net to Community coffers, Italy £1.153 billion and the United Kingdom £3.482 billion. When she responded to my hon. Friend on that point she said that she stood by the claim that our contributions were falling to levels comparable with those of France and Italy on the assumption of the admission of six new members by 2006. It is a trifle cheeky for her to stand by the Labour manifesto, which made a direct and explicit claim about what is happening to UK contributions, when what the authors of the manifesto meant was that if certain events transpired and if the projected outcome of those events was as it is currently expected to be, there would be a comparable level of contribution. The expression ifs and buts, apples and nuts readily springs to mind.

The hon. Member for Kingston and Surbiton (Mr. Davey) may be satisfied with the answers that he has had on windfall gains, in which he takes a special, detailed and intelligent interest, but I am not so readily reassured. On Second Reading, the Economic Secretary, with an air of some impatience because the subject had been regularly raised, said that she wanted to set straight once and for all"— [Official Report, 3 July 2001; Vol.371, c. 229.] the position in respect of windfall gains relinquished or forgone.

In answer to my colleagues, the Economic Secretary said that the estimated loss to this country as a result of forgoing the windfall effect was approximately 220 million euros, which, if my arithmetic serves me correctly, roughly equates to £150 million. The difficulty with that answer was not that it was untrue but that, as with so much of what the Government lob in our direction, it was only half true. What she did not say, but, I believe, has recently confirmed in correspondence, was that the figure of 220 million euros was not a one-off figure, one-off loss or one-off disadvantage to the United Kingdom but a recurring sum that would arise every year. If I am mistaken and she can put another complexion on the matter, I shall be very happy to hear her do so.

I am, however, privileged to have sight of the Economic Secretary's letter, dated 10 October, to the hon. Member for Kingston and Surbiton. She talks, in that context, about how average annual windfall gains would represent less than 5 per cent. of the average abatement. Those averages can of course be ghoulish things, often disguising all sorts of variations that could redound to our disadvantage.

Nevertheless, I am grateful to the Economic Secretary for confirming in writing, although she did not repeat the point in her speech today, that on her best estimate she expects that the total level of windfalls to be forgone after enlargement is a little higher£not of the order of 5 per cent. of the average abatement, but rather nearer to 7 per cent. I do not say that that is a point of dramatic significance, but it should not be dismissed. It is important to know when we are talking about a one-off figure of 220 million euros and when we are talking about a figure that will recur for a number of years to come.

I follow with the greatest interest what the Economic Secretary says in these debates, just as I always follow what the Paymaster General says£although she is displaying a particular lack of interest in following what I am saying today. However, that does not in any way undermine or diminish the significance of the issues that we are raising.

The Paymaster General (Dawn Primarolo)

If the hon. Gentleman put his arguments more succinctly, rather than taking twice as long to say half as much, my attention would probably be sharper.

Mr. Bercow

I do not know why the Paymaster General is so churlish. When I think that I need communications advice from the hon. Lady, for whom I have a high regard, I will be happy to consult her. However, I do not think that that is necessary. There are good arguments to be made, and there are several examples that elucidate them. I have a little way to go, and many key points to emphasise. I am sorry that she is so frosty about it. I am not usually as disobliging to her as she is insisting on being to me.

I should like to draw attention to the failure of the CAP and the inadequacy of its reform. If that pains the hon. Lady, I can only say to her that she has taken the offer. She is in the Government and she has to defend the position. If she is not happy about it and finds it uncongenial, she knows the options that are open to her.

On Second Reading, the Economic Secretary said: we achieved the most radical reform of the common agricultural policy since its inception".—[Official Report, 3 July 2001; Vol. 371, c. 228.] In that respect, she was echoing what the Chief Secretary had said earlier in the debate—[Interruption.]

The Paymaster General would expect me to have done a little research into these matters. I have also had the chance to see what relevant commentators said at the time in response to the Government's achievement. It is not a question of what the Paymaster General or the Economic Secretary think, but of what other observers think. What did the Select Committee on Agriculture conclude? I can quote it with exemplary succinctness for the benefit of the Paymaster General and others. In five words, it said: This is a bad deal. The Opposition have been much more generous and nothing like so ferocious in our criticism. We thought that there was an argument to be made by the Government. However, in the view of the Agriculture Committee, it was a bad deal. In case the Paymaster General thinks that I am inventing that, she can of course refer to the relevant report, of 29 June 1999, at paragraph 6. I feel sure that when, at some point, she leaves the Chamber—I am not encouraging her to do so—it will be because she is going to hotfoot it to the Library to obtain a copy of the report and refer to paragraph 6. [Interruption.] My hon. Friend the Member for Mid-Worcestershire (Mr. Luff)—the Whip who must be obeyed—reminds me that he was the distinguished Chairman of the Agriculture Select Committee at the time of the report, so he can confirm that what I said is true.

Let us hear what the House of Lords Select Committee on the European Union said about Agenda 2000. The task was to facilitate enlargement of the Union; to develop a policy consistent with international trading agreements; better to protect the environment; and to promote rural development. The Committee's judgment was that those objectives were not achieved.

What did the National Farmers Union chairman, Ben Gill, have to say on the matter? In the foreword to the 1999 NFU publication "Farming Economy", he said that the reforms of the CAP made under the present Government had left UK agriculture in an "inherently unstable state".

The Countryside Alliance has said: the recent Agenda 2000 round of CAP reform was a failure. Agenda 2000 failed to address the new pressures of EU expansion, and the Select Committee on Agriculture foresees another round of CAP talks within two years. English Nature said that the outcome was very disappointing for the environment". The Food and Drink Federation was extremely frustrated and concerned by the conclusions of the weakened package of reforms adopted in Berlin". The Tenant Farmers Association concluded: the agreed package stems more from matters of financial and political expediency rather than a desire to place agriculture in Europe on a firm long term platform". Given the importance of reform of the CAP, which I think is agreed on both sides of the House, the fact that independent commentators are less than exultant—I put it no more harshly than that—about the outcome of the hon. Ladies' negotiating ploys should at least give the Economic Secretary and her exuberant colleague, the Paymaster General, pause for thought.

Having dealt briefly, but with relish, with the Economic Secretary's claims about reform of the common agricultural policy, I now move on, with due enthusiasm, to stealth taxes. I do not want the Paymaster General to feel left out; I shall come to her, and she will not be disappointed. I do not want her to feel that she is excluded from my remarks today, because she will feature in choice fashion. However, I hope that she will exercise the patience for which she is renowned on both sides of the House, because first I want, properly and politely, to address my remarks to the Economic Secretary.

Before I go any further I shall say something to the Economic Secretary that I probably should have said at the outset; I have certainly said it to her outside the House. I have always regarded her as possessing a rare combination of intellectual ferocity and personal charm, so I feel flattered to be opposing her across the Dispatch Box. [Interruption.] The Paymaster General, in what I take to be a slightly more jocular fashion than that in which her earlier observations were made, says, "That's the end of a good career."

On Second Reading, on 3 July, considerable attention was paid to article 9, page 14, of the Council decision on the system of the European Communities' own resources. The Economic Secretary will be well aware that that article states: The Commission shall undertake, before 1 January 2006, a general review 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, the possibility of modifying the structure of the own resources by creating new autonomous"— I emphasise that word— own resources and 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 pursuant to Article 5(1)". On that occasion my right hon. Friend the Member for Wokingham (Mr. Redwood)—sadly, he is not in his place now, although he performed earlier—argued forcefully that the article was Brussels parlance for enabling the European Union to impose its own taxes directly on the British people.

In the course of Second Reading my right hon. Friend challenged the Chief Secretary to the Treasury to strike from the document those references to the creation of autonomous resources and to seek to amend the Bill accordingly. If the Chief Secretary had been prepared to do so, or if he had even replied to my right hon. Friend's request to him to intervene, we might have had some reassurance.

As the Economic Secretary will confirm, the Chief Secretary is no more reticent than I am. He is a regular contributor in the House, and I have always thought that among Ministers he is the veritable Dr. Pangloss of new Labour. He always thinks that the best is in evidence, and that all is for the best in this best of all possible worlds. Yet when he was challenged by my right hon. Friend to respond to that question, he chose not to do so.

The Economic Secretary, who is a rather braver soul, was prepared to do so, and on Second Reading she quoted a passage from the European Communities (Finance) Act 1995, which was in fact article 10 of the Council decision of 31 October 1994 on the system of the European Communities' own resources. She used the quotation to support her alleged refutation of what my right hon. Friend the Member for Wokingham had said.

The article 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. The Economic Secretary then said: That position"— that is, the position in the Council decision of 31 October 1994— did not lead to a new EU tax then, and it will not do so now."—[Official Report, 3 July 2001; Vol. 371, c. 231.] I do not think that the argument is quite as compelling as she seems to think. She said that article 9 of the Council decision on the system of EC own resources of 29 September 2000 was broadly similar to that of October 1994, so there was no problem.

We need to play the game—an important game—of spot the difference. The notable difference between the two articles is that that of 29 September 2000, as distinct from the one put forward six years before, refers to the creation of new autonomous resources. There is clearly a difference here. We might ask whether the word "autonomous" refers to member states' ability to raise own resources through their own autonomous powers or to the power of the European Union to raise money itself through its own direct and autonomous budgetary powers over and above, and separate from, the autonomous budgetary powers of sovereign states. "Which is it?" I might ask. I am sure that the answer is on the Economic Secretary's lips even as I pose the question.

I hope that the hon. Lady will help to explain that point, because if she does not, she will be aware that we have been undertaking a little of our own private detective work to discover what we can. In that respect I am deeply indebted to one of the brightest minds helping the Opposition in this House—James Cartlidge, who has done superb work on this subject.

At my request, James Cartlidge took it upon himself to contact the European Commission to try to get clarification on the subject, which the Minister had not offered. He spoke by telephone to a Mr. Jean-Pierre Bache, who has responsibility for the Outlook for financing and budget forecasts of own resources in the Own Resources evaluation and financial programming section in Directorate B of the Budget Directorate General of the European Commission. If the Minister would find it helpful for me to supply phone numbers and website references, I should be happy to do so at a later date. I am always a helpful soul; if I can be obliging, I ant more than willing.

Mr. Bache was unhappy with the use of the word "autonomous", although that is the English translation given, because he felt that it did not adequately explain the intended meaning. He felt that the phrase "visible and accountable" would have been more appropriate. The reason, as Mr. Bache explained, is that the Commission's intention is to bring EU budgetary affairs closer to the people. Indeed, one night argue that what "autonomous" means in this case is just that—bring the EU budget closer to the people by reaching directly into their pockets. In other words, autonomous EU budgetary authority inevitably leads to Brussels levying its own taxes directly on the British people.

If the Economic Secretary does not share that analysis, she at least owes it to the House to explain what is the purport of the very particular remarks contained in the document announcing the Council decision. As Mr. Bache further explained—it is his explanation and not necessarily ours—that is not the same as the EU taking on its own tax-raising powers. Rather he argued that the new autonomous own resources measures would manifest themselves—I like this and I hope that my hon. Friends do—in more indirect forms while nevertheless achieving greater direct revenue-raising powers for Brussels.

The example that Mr. Bache used was one in which the EU might choose to specify certain percentages of excise duty or VAT as new own resources to be paid into the Brussels budget. The Economic Secretary might argue that we have nothing to fear from article 9 because similar such articles negotiated by Conservative Governments have not led to EU taxes, but we all know that this article will result in the EU having the opportunity to propose new ways in which autonomous resources can be raised.

Ruth Kelly

Of course, the hon. Gentleman has not had the benefit of the discussions at the Economic and Finance Council that I was privileged to be party to in July this year. In them, the very subject of a European tax was discussed and the Belgians, who placed it on the agenda, found no enthusiasm for it a anywhere in Europe. The Chancellor forthrightly put the UK case that there will be no European tax.

Mr. Bercow

I do not find that argument remotely persuasive, for reasons that I am happy to explain. I am afraid that all the Economic Secretary has done is—

Dawn Primarolo

Lengthened the hon. Gentleman's speech.

Mr. Bercow

Yes, she has. In view of what I said about the Economic Secretary's intellectual ferocity, I had hoped that she would come up with something better than she has just volunteered to the House.

We know that the Chancellor of Exchequer has said that he opposes tax harmonisation but we also know that, on the continent, it is commonplace, when tax harmonisation is writ large in the tabloid newspapers in this country, to employ a different lexicon. Instead, we are told that the EU would gradually like to advance the cause of tax co-ordination. We can then involve ourselves in a semantic debate on the difference between harmonisation and co-ordination.

We know that taxes come in a variety of forms and through a series of disguises. The Economic Secretary has made her point about tax intentions and she will be aware that the Belgian Prime Minister, Guy Verhofstadt, has called for a direct EU tax. He thinks that that tax should be levied on all citizens and he is backed by the Belgian Finance Minister and, importantly, by the European Union Commissioner for the Budget, Mrs. Michaele Schreyer. She suggested that the tax should be in the form of an imposition on savings, and Minister, will also be aware of the verdict of Hans Eichel, the German Finance Minister, who argued for an EU-wide tax on 14 June this year.

It is no good the Chief Secretary simply saying that any change to the tax regime in Europe is a matter for unanimity … we do not accept the need to introduce new taxes." —[Official Report, 3 July 2001; Vol. 371, c. 43.] If that is so, will the Economic Secretary explain why the Government agreed without criticism to the insertion in the decision announced in September 2000 of the words that, at the very least, open up the possibility of autonomous revenue-raising powers for the EU?

We know that a tax is not simply just something that is called a tax. If the Economic Secretary is in doubt about that, we can refer to what the EU has said about the use of alternative instruments to affect taxation measures. I refer to the Commission communication "Tax Policy in the European Union—Priorities for the Year Ahead", which said: while it remains the Commission's view that a move to qualified majority voting at least for certain tax issues is indispensable, the legal basis will, for the present, remain unanimity. I note the use of the words "for the present". The communication adds: Given the difficulties in reaching unanimous decisions on legislative proposals, which will be compounded by enlargement, the Community should also consider the use of alternative instruments. The EU is perfectly capable of producing a whole orchestra on this subject to fulfil the objective of increasing the number and scope of revenue-raising proposals.

That point is so blindingly obvious given all our experience with partners in the EU that only an extraordinarily clever person could fail to see it. I do not know whether the Paymaster General wishes to volunteer for that description, but a danger exists and—without wishing to overstate it—it would be very foolish to ignore it.

Mr. Edward Davey

Will the hon Gentleman confirm two points? The first is that he is arguing that charges could be made on the British people without the British Government having the chance to veto them at Brussels. If so, will he provide rather more substantive legal back-up than he has done hitherto? Secondly, can he confirm that his argument of the past 10 minutes has nothing to do with the Bill?

Mr. Bercow

I am very concerned to relate my remarks to the Bill. Although the hon. Gentleman is putting in a job application to replace you, Mr. Deputy Speaker, I am happy to be guided by your judgment rather than his.

The hon. Gentleman challenges me to provide a legal basis and precedent to justify my point that what is being planned is effectively a denial of the veto. He will know perfectly well that instruments of the EU can be used for a variety of purposes. I refer, for example, to the introduction of the working time directive as an EU health and safety measure, when it manifestly is not that. It was introduced on that basis, because the EU knew perfectly well that it would be not be able to get it through otherwise. Introducing it under qualified majority voting provided an alternative route.

The hon. Gentleman will be aware that all sorts of measures have been justified in the name of single market legislation and the greater approximation to a level playing field in matters of trade and commerce than has existed hitherto. If he is so naive as to suppose that to raise revenue we need to have what is formally described as a tax, he greatly underestimates the wizardry and sophistication of his masters in the EU. I strongly suggest that he do something about that.

On Second Reading, my right hon. Friend the Member for Wokingham drew attention to several measures that have come in already to the disadvantage of the UK, violating entirely the hon. Gentleman's cardinal principle—he would have us believe that it is his cardinal principle—of a right of a national veto on taxation. The art levy has already done considerable damage to the UK art market, and it will have a further detrimental effect. There also is the serious risk of an energy tax.

Dawn Primarolo

To reveal all the facts, will the hon. Gentleman explain which Government agreed to the introduction of the art levy?

Mr. Bercow

The Paymaster General is playing the party game, but I am very happy to deal with her point. I have always been opposed to droit de suite, and many Conservative Members have consistently opposed it. We regard it as detrimental, but her Government are enthusiastically pursuing it even though it was not the preference of the Conservative Government. She knows that, on that subject, she has not a leg on which to stand.

I am conscious of what Mrs. Schreyer said on behalf of the European Commission in response to a question asked by my colleague, the Conservative finance spokesman in the European Parliament, Theresa Villiers. When, on 31 July, Mrs. Schreyer was asked about the autonomous resources that might be planned, she said: An objective could be to replace the existing financing system of the European Union's budget with one or more European taxes". Although it is difficult to see how that matches up to what she previously said, she curiously adds: without imposing an additional financial burden upon European citizens. If she is saying, "We are going to find a new tax, but we are going to compensate for it by a reduction in expenditure or tax-raising measures elsewhere", the expression "pigs before eyes" comes to mind. However, I would be happy to see whether she can provide an earnest of her good intentions.

We know in any case that on taxation measures the Government's hands are not clean. My cup runneth over today, because the Paymaster General has done us the great courtesy of a visit. If the hon. Lady's record on these matters were as widely known as it should be, it would not commend itself to the electors of Bristol, South. We know, and she may be proud of the fact, that shortly after the 1997 election, a code on business taxation was established in the European Union. Shortly afterwards—I do not remember precisely when, but I feel certain that the date is imprinted on her mind—she was put in charge of an EU-wide working party on the investigation of methods to give effect to that code. Specifically, from March 1998 onwards, she was charged with the responsibility of identifying what was described as unfair tax competition.

There is a genuine debate to be had about whether genuine tax competition can be unfair. There are those of us who believe very strongly in the desirability of tax competition, although I am not sure that the hon. Lady is among us. I have been disturbed by two phenomena of late. The first was the identification by the Paymaster General of 88 examples of tax reliefs, credits or benefits that helped the United Kingdom and which she was volunteering to give up within the European Union, to the manifest disadvantage of British trade and commerce. It struck me as an extraordinary state of affairs for her to countenance.

Dawn Primarolo

rose—

Mr. Bercow

The hon. Lady is understandably sensitive on the point, so I give way.

Dawn Primarolo

I am just trying to help the hon. Gentleman to ensure that he does not inadvertently say something inaccurate to the House. There were not 88 British measures. This is not the subject of today's debate, so I will not engage him any further, but I should be happy to do so at another time.

Mr. Deputy Speaker (Sir Michael Lord)

Order. We are straying rather wide of the matter before the House, and I would be grateful if the hon. Gentleman returned to it.

Mr. Bercow

I am very happy to be guided by your strictures, Mr. Deputy Speaker, and I will focus my remarks accordingly. I will not argue the toss about whether or not there were 88 measures; we can always argue subsequently about exactly how many measures there were. That is a matter for legitimate debate.

In the interests of having a proper debate about autonomous revenue-raising powers, which is directly relevant to the Bill, I strongly advise the Economic Secretary and Paymaster General to get hold of copies of an excellent document published by the Centre for Policy Studies, the author of which is the colleague to whom I referred a few moments ago, Theresa Villiers MEP. The document is entitled, "European Tax Harmonisation: The Impending Threat". It makes absolutely fascinating reading. I read it late last night and studied it very carefully, and I can tell the Paymaster General that it certainly is not a cure for insomnia. It is a thoroughly good document and it tells us the track record of this matter.

The significance of what the Paymaster General said is that the work of the working party would "never be finalised". I presume that the hon. Lady will not deny that she said that on 10 October 2000 to the European Parliament's economic and monetary affairs committee. The Government have trumpeted as an outstanding achievement what is really a very modest deal secured as a result of the Berlin summit. It is not a great accomplishment. The hon. Member for South Derbyshire, who is a legendarily independently minded representative in the House, put his finger on it when he said that it was modest.

If the Economic Secretary would simply say that the Government think that they have reached a worthwhile, but modest, achievement, and that the Opposition should acknowledge the progress that has been made, I would take my hat off to he but I confess that I am not holding my breath in anticipation that she will suddenly abandon the term "triumph", which she has twice used to describe the measure.

The Government aid not achieve very much. There is a widespread and understandable anxiety on the part of a great many of our fellow citizens that there could be in train new revenue-raising and decision-making powers of the European Union. If those new powers flow from the decision and the passage of the Bill, it will be to the eternal discredit of the Economic Secretary. She has indicated that that will not happen. Many of us fear that it will. Those concerns are genuine; they are frequently expressed, and they should as a matter of course be listened to respectfully and heeded in practice.

What we need from the Government, throughout public policy but no mom so than in European policy, is frankness and candour. Over the past four years we have had neither. My right hon. and hon. Friends and I are determined to ensure that over the next four years we get a greater measure of both.

2.35 pm
Mr. Edward Davey (Kingston and Surbiton)

I enjoyed the speech of the hon. Member for Buckingham (Mr. Bercow), and I welcome him to his new duties. I look forward to sparring with him and with the Economic Secretary and other Treasury Ministers in due course.

Over more than half an hour, the hon. Gentleman seemed to make three substantive points. The first, which took 10 minutes, was that the word "triumph", which was used by the Economic Secretary on Second Reading to describe the Bill and the negotiations that preceded it, was wrong. The hon. Gentleman would describe the Bill as modest. I agree with him, as I said on Second Reading: It is a modest measure that arises from the modest decisions taken at the Berlin summit. Indeed, its modesty explains why it is disappointing. Secondly, the hon. Gentleman spoke about the fact that the decisions taken at the summit, which led to the Bill, were disappointing in that CAP reform was not a greater element. He is right, and I made the same point on Second Reading: We must be far bolder in reforming the CAP."— [Official Report, 3 July 2001; Vol. 371, c. 157-160.] The Economic Secretary disagreed with me in that debate and defended the decisions taken at the summit. She feels that CAP reform had gone a long way, but I do not think that there has been substantial reform. We do not have a vision of how we can fundamentally reform the CAP. So far, all reform has been incremental, and the Bill is one more small step towards a vision that is, as yet, unshared and unclear. That is one of the big failures of the summit and of the Bill.

The hon. Gentleman's third major point was about tax harmonisation. I do not share his concerns. I agree that tax harmonisation would be wrong, but I disagree that it is at all likely. Indeed, he seemed unable to substantiate his allegation that the Government would be unable to veto any such proposal. Not only he wrong, but the major point that he made does not relate to the Bill.

Mr. Bercow

The hon. Gentleman and I may just have to agree to differ. I am sorry that he thinks that I do not have a justification for my point. I maintain that I do, both on the basis of historical precedent in relation to the identification of examples of unfair tax competition and in relation to the text of the decision. Can the hon. Gentleman, who obviously disagrees with my interpretation, tell me what he understands by the term "autonomous revenue-raising power.", which are newly to be sought?

Mr. Davey

By focusing on that textual point, the hon. Gentleman misses the point, which is that a veto is retained by each member state. The Liberal Democrats support that veto, as do the Government and, I assume, Conservative Front Benchers. That means that the problems that he spent 10 minutes outlining do not exist.

I am surprised that we are here, because a Programming Committee met on 18 July. I was present and so was the hon. Member for Mid-Worcestershire (Mr. Luff), the Conservative Whip. We argued that this day's debate was not necessary, but the Government persisted in vehemently arguing that it was necessary. In the end, there was a vote in the Committee. In preparing for the debate, I thought that the Conservative spokesman would keep his or her comments short. Perhaps that was wishful thinking. [Interruption.] The Conservative Whip says that by the standards of the hon. Member for Buckingham he did deliver a short speech. Perhaps he is right. Let us warn right hon. and hon. Members who are not present of that.

The Conservatives and Liberal Democrats agreed in the Programming Committee that we did not need an extra day, primarily because all the issues had been debated on Second Reading and would be covered in Committee and on Report. We decided that we could move swiftly on. Indeed, the Conservatives did not vote against the Government. I listened to the speeches by the Conservative spokesman and thought that the Bill—as opposed to some of the points raised by the hon. Member for Buckingham, which went beyond its remit—was relatively uncontroversial. Perhaps the Conservative Front Bench has changed its position with its change of leader.

Mr. Bercow

I am taken aback by the hon. Gentleman. He is spending some minutes lamenting the length of the Third Reading debate on a critical matter that relates to a net UK contribution to the European Communities of about £4 billion a year. What is his problem? Is he so anxious to debate the ministerial salaries order that he wants to end this important debate, or is he missing a preprandial drink in Kingston and Surbiton?

Mr. Deputy Speaker

Order. Both hon. Gentlemen are making points about how we have arrived at this stage. Perhaps we can now get on with Third Reading.

Mr. Davey

I am more than delighted to do so.

The Minister set out the general background to the debate on Second Reading and earlier. The nature of the debate is that the own resources decision has been reformed, and the Bill implements that change in UK law. I welcomed many of those reforms on Second Reading, as did Conservative Front Benchers, especially the switch from the value added tax aspect of own resources to gross national product, which is a much fairer system, the ceiling of 1.27 per cent. of GNP on the EU budget and the proper discipline that has been placed on EU finance. The Government should be congratulated on gaining those substantive reforms, although they are relatively modest.

On Second Reading, I said that the Bill's major problem is its modesty. We need far more radical solutions to reform the EU budget. The Bill does not even begin to nod in the direction of those radical reforms. EU finances have rightly been criticised for many years by hon. Members on both sides of the House. Perhaps we should also take a closer look at the way in which we manage our domestic budgets, which often leaves a lot to be desired.

Recent reforms of EU finances include putting the 2001 budget under policy headings for the first time. Right hon. and hon. Members may think that that is a minor reform, but the fact that we have had to wait until 2001 to gain such a modest change goes to show what a state the EU budget is in. The Bill fails because there is so much more to do. Why are we not setting budgets based on outcomes, outputs and activity-based management at an EU level? That would be sensible. Why are we not rationalising the whole EU budget? That would result in cuts, which I am sure would delight the hon. Member for Buckingham.

There are too many budget lines scattered around the EU budget, too many small proposals for expenditure and too many small pots of money—the EU slush funds. They are unnecessary and do not amount to a row of beans in terms of what they produce. We and our European representatives should be arguing to strike out such pork-barrel politics. We need to focus the EU on its core competencies, which will make the budget more transparent. We need to examine key areas of EU spending. CAP reform has been discussed, and I agree with the hon. Gentleman on that.

We also need to consider the budget for external aid. Chris Patten brought that to light and proposed many interesting reforms of the way in which the EU should allocate substantial sums that have been earmarked for it, but that money is often wasted. It is not spent in the right way and it certainly does not meet the objectives of the initiators of the budget lines. We need to implement a major reform of the way in which we allocate such a serious amount of money.

The Bill and the discussions that preceded it did nothing to tackle major reforms. Despite the rhetoric of Eurosceptics, there are not many officials in Brussels. The Commission does not have an army of civil servants. As the EU budget is not focused on its core competencies, officials run around trying to administer small pots of money that have no effect. Their time is wasted by dealing with detailed application forms and monitoring and auditing the money. If we focused the budget, we could get better value for money from civil servants in Brussels.

Mr. Bercow

I note what the hon. Gentleman says about the small size of the centrally employed EU bureaucracy, but I am sure that he will acknowledge the large number of British civil servants and civil servants in other member states whose principal responsibility is to give effect to EU decisions, so he should not develop his point too far. Is he arguing for a reorganisation of EU finance, with fewer small pots and more money put into the larger ones, or is he making the bold and ground-breaking assertion for a Liberal Democrat that the EU budget should be cut?

Mr. Davey

I am arguing for rationalisation. If that leads to cuts and frees up resources, member states might take the political decision to remit the money to member states or use it for other purposes. I would not prejudge those decisions, but I object to money being wasted on a structure that is clearly inefficient. We should be arguing that, the Government should have argued that and we should be calling for greater reforms of the EU budget.

I have another example. Much EU spending takes place in member states, but is administered by officials in Brussels—a ludicrous process. It has to be inefficient and cannot be as transparent as a system whereby money that is spent in, for example, the UK is administered by British civil servants answerable to British Ministers. The process needs significant reform and is one reason why I agree with the hon. Gentleman that the Bill is modest.

There was not a great deal of argument about the Bill's details when we considered them in Committee and on Report. After all my research, I found only one cause for concern, to which the Minister responded in her letter to me on 10 October. The reform of own resources means that the UK Government will give up windfall gains from budget reforms due to the expansion of Europe and so on to keep the abatement originally agreed by Baroness Thatcher at Fontainebleau.

I asked the Minister whether the cumulative effect of giving up windfall gains—they are related not solely to the Bill and the decisions that preceded it, but to discussions undertaken by the previous Conservative Government—was larger than the benefit of the abatement. She was not able to answer that factual question in Committee or on Report. I pushed her on it because I wanted to persuade her to ask her officials to consider the question and do the number crunching, although she was hesitant to do that at first. I am delighted that she did so because the figure that she set out in her letter to me on 10 October, which is now in the Library, provides Members with the information necessary to allow the Bill its Third Reading.

The calculation could have shown that the cumulative effect of the windfall gain was larger than the abatement. That would have been major new piece of information on which Members could have decided whether to allow the Bill to proceed. As I and my colleagues voted to give the Bill a Second Reading, I am delighted that the calculation turned out as it did, and the abatement is indeed larger.

I want to keep my remarks brief, as we do not need to discuss the matter in my more detail. The key substantive point that emerged under previous scrutiny has been answered by the Minister. Unlike the hon. Member for Buckingham, I thought that the letter was clear and that it answered my points. I should stress that it was the Liberal Democrats who math those points at all stages and forced the Government to provide the information that was key to the Bill's scrutiny. If there is a Division, I and my colleagues will vote in favour of Third Reading. We hope that, when the Government engage in discussions on future reform of the EU budget, they will be rather more bold and seek rather more radical change.

2.51 pm
Mr. Howard Flight (Arundel and South Downs)

I would not try to copy the sophisticated rhetoric of my hon. Friend the Member for Buckingham (Mr. Bercow), but I was delighted that the Opposition were able to include in this debate the droit de suite. I can comment only that when I last spoke on the subject, I made the great mistake of saying "seigneur" instead of "suite".

This debate has been rather unsatisfactory; we know that we are going through the motions. It is about what was agreed at Berlin two years ago, and the nature of the Bill does not permit any sensible amendment. We are faced with a "take it or leave it" approval of the deal that was done.

Our basic point is that the essence of the deal on changes to VAT and gross national product funding is reasonable. The VAT-based contribution is to be amended by reducing the maximum call-up rate to 0.75 per cent. in 2002–03 and to of per cent. thereafter, and member states' GNP-based contributions are to be increased.

The hon. Member for Kingston and Surbiton (Mr. Davey) sought to claim huge credit for inducing the Minister rightly to make it clear that the cost of giving up our windfall gain would be cumulative. I think that most Members were aware of that. That of course means that we are not dealing with the one-off figure that was quoted. However, I am grateful to the Minister for clarifying that for the record. The major dishonesty of Berlin, however, was that it was supposed to be about enlargement. In a sense, it was the antithesis of that because the failure adequately to reform the common agricultural policy blocks enlargement.

I believe that anyone who is European must want enlargement of the European Union. From visiting people in Hungary, the Czech Republic and Poland, I know that they feel that they have been treated appallingly. The iron curtain has been down for 12 years and they have been told by the EU to do this, that and the other, but they are still left dangling on a string waiting for the prospect of becoming EU members. Some states have even reconsidered the desirability of becoming members. However, all those who want an open, liberal and flexible EU, rather than an inward-looking one, must want a widened membership.

Angus Robertson (Moray)

Can the hon. Gentleman reconcile those opinions—I fully endorse them; Ithink that all Members would like a rapid enlargement of the EU as soon as possible—with his party's voting record last night? The Conservatives voted against the European Communities (Amendment) Bill, which will effect EU enlargement.

Mr. Flight

I fear that the hon. Gentleman is wasting the House's time; there are different issues involved. The treaty of Nice is about going a step too far in political unification, while enlargement is the very opposite of that. A Europe of very different economies and countries cannot be a rigid and inflexible EU, hut Nice would take us down that path.

Roger Casale (Wimbledon)

Perhaps the hon. Gentleman could answer the question that I put to the shadow Foreign Secretary yesterday, to which he was unable to reply. Were ratification of the treaty of Nice to fail, when would be the earliest possible date that EU enlargement could occur?

Mr. Flight

With respect, the question is nothing to do with the matter before us. I am simply trying to make the point that something that was supposed to be about enlargement occurring as early as possible was actually about postponing enlargement for an unlimited period. Until there is adequate reform of the CAP, enlargement is not possible. That is well realised by countries in Europe that want to join the EU.

I turn to article 9, about which my hon. Friend the Member for Buckingham elucidated and—dare I say—entertained the House. It is important that the French equivalent of "autonomous" has crept in. The Minister argued on Second Reading that article 9 merely repeated what had gone before, that we should not take any notice of it, and so forth. The wording has been tightened marginally.

There is of course no point in having article 9 unless it is meant to mean something. It reserves the right to consider pan-European taxation and, indeed, to reconsider the British abatement. What is the point of Mr. Bache and his army of staff considering the subject if no one has any intent of making progress towards it? As my right hon. Friend the Member for Wokingham (Mr. Redwood) and I pointed out on Second Reading, and as my hon. Friend the Member for Buckingham pointed out today, the fact that the issue is included in what we are being asked to approve should not be overlooked. The Bill puts down a marker with which we do not agree and with which I do not think people generally agree.

There is no free lunch. The issue really was about Germany, Holland, Austria and Sweden wanting to pay less. That meant that someone must pay more or, to the extent that it might be possible to reduce the total budget, our contributions—allegedly—will not rise. However, we will not enjoy any reduction in contributions either. That fails to address the central issue that France, which has an economy roughly comparable to ours, pays £760 million net, whereas the UK pays £3.5 billion. We all know why; it is because of the CAP. We also all know why the CAP has been so difficult to reform. Yet again, failure to reform the CAP has hindered the debate on fair contributions and the problems for a more outward-looking Europe, and nothing has been done about such failure.

Mr. Wayne David (Caerphilly)

Will the hon. Gentleman acknowledge that the last time that the common agricultural policy was reformed was at the 1992 Edinburgh summit, where, under the Tory Government, agriculture spending was increased by 9 per cent?

Mr. Flight

The point that the hon. Gentleman makes has already been answered—we do not claim that we succeeded in reforming the CAP. Although spending under the CAP has fluctuated, it continues to account for nearly half of the EU's total spending, and it is projected to rise from 44 to 46 per cent. in 2006—so if what he said about the last attempt was correct, the expenditure will increase yet again.

In the debate held on 3 July, the Chief Secretary told the House that, under the current arrangements, if the EU gross national product reduced, the ceiling on EU expenditure would be automatically reduced, so EU expenditure would decrease. Although it is clear, alas, that the EU's GNP will reduce, is the Economic Secretary confident that it will be practical to reduce expenditure at the same time, as her colleague assured the House?

In essence, the deal was done at Berlin in 1999; in no way do the Government's proposals represent a negotiating triumph. Indeed, I hate to think what might have happened if the Economic Secretary ever referred to having suffered a disaster. We got the minimum deal that was acceptable. The claim that retaining the abatement was a great achievement seems wholly bogus. The abatement was negotiated by previous Conservative Administrations, and it has saved some £20 billion. Indeed, it will save about £2 billion next year.

As the House is well aware, we have a veto on that matter—unless a subtle wheeze is discovered to water it down. Our net position was not improved; nor was the unfairness in the net contributions made by different-sized economies corrected. As other hon. Members have said, no proper review of the EU budgetary process and what needs to be done to eliminate waste and excess was undertaken to ensure that money is spent as it should be. Yet the expectation is that EU administrative costs will rise from 5 to 6 per cent. in 2006, under the arrangements in hand.

Before I finish, I should like to emphasise that it is not correct to claim that there was a triumph. In particular, it is wrong not to make it clear that the Berlin arrangements failed in their intended objective, which was to accelerate movement along the road by which enlargement could occur. On that score, we are unhappy with what was achieved, but, as we made clear on 3 July, the financial deal at the centre of the issue is minimally acceptable.

Roger Casale

I am grateful to the hon. Gentleman for giving way to me a second time. It is true that previous Conservative Administrations played a part in negotiating previous British abatements, but does he really think that, given the Conservative party's present stance on Europe, it could negotiate any abatement on the scale that we have achieved?

Mr. Flight

The Government have merely continued with that which the Conservative Government negotiated, and a veto exists to retain that arrangement, so the Government have achieved nothing at all. What will happen when the Conservatives come to power at the next election will depend on what is going on in Europe, but I am confident that a general clear-sighted assessment of European affairs will enable us to negotiate whatever is right and proper.

3.4 pm

Ruth Kelly

With the leave of the House, I should first like to say that, once again, we have had a good-natured debate. It is interesting to hear the shadow Chief Secretary, the hon. Member for Buckingham (Mr. Bercow), speaking for the Opposition. I congratulate him on his appointment to the shadow Cabinet, and I thank him for his kind remarks. Having said that, I hope that my reputation will not take too long to recover with my colleagues.

Perhaps I should be surprised that the hon. Gentleman has discussed a European issue at his first appearance at the Dispatch Box since his elevation. In doing so, not only has he chosen to ignore the edicts of his party leader, who has asked his party to adopt a low profile on Europe, but he has gone even further than previous Conservative Front Benchers would have chosen to do, by gracing us with his presence here today. As has been said, he must realise that his own party previously voted against the programme motion for Third Reading to take place today.

However, perhaps I should not be too surprised, after all; the hon. Gentleman's views on Europe are well known. Indeed, if he had not been recalled to Parliament recently, he would have shared a platform at a Conservative party conference fringe meeting with Norman Lamont and the Bruges Group chairman, who stood up to applause when the panel was told that the party should campaign for Britain's withdrawal from Europe.

I certainly maintain that the Bill represents a triumph for Britain. Indeed, the outcome is far better than the two previous Conservative Governments ever achieved. In fact, when the last own-resources decision was considered in 1992, the agreement involved a 22 per cent. real increase in the financial perspective over seven years. In 1988, the increase was 17 per cent.

Mr. Bercow

The temptation is irresistible. The hon. Lady seeks to cast aspersions on the Opposition's position. First, this is Government business, and my right hon. Friend the Leader of the Opposition would expect us vigorously to oppose it, which is what we are doing. Secondly, to avoid any doubt, my position on Europe, and that of Her Majesty's Opposition, is that we are in favour of free trade, not federalism; co-operation, not coercion; and a Europe of nation states, not a single European state.

Ruth Kelly

I thank the hon. Gentleman very much for clarifying his views on Europe, although I note that he does not dispel my suggestion that he thinks we may have to withdraw from the EU. As he and the hon. Member for Arundel and South Downs (Mr. Flight) said, our proposals do not represent an unreasonable deal and, as I said on Second Reading, that is high praise indeed from Opposition Members.

The hon. Member for Buckingham has indeed done his research. He gave the various figures for the gross cost of joining the EU. The gross figure that he cited was, I think, £1.2 million an hour. However, the net cost per head is £56 a year, and I believe that that is money well spent. It gives the people of Britain a right to be part of the largest European single market, comprising 370 million people, which is estimated to increase output by 1.5 per cent., and other benefits and jobs depend on our membership of the EU and the single market.

The hon. Gentleman dwelt at length on the CAP. Of course, we recognise that further reforms need to be made to the CAP. A mid-term review of CAP financing, involving the cereals and the dairy regimes, is due in 2002. We must use that opportunity for further CAP reform. I totally agree with him that more needs to be done, but Agenda 2000 represents the most radical reform of the CAP since its inception. In fact, if we had not managed to make alliances with Sweden, Denmark and Italy, any reform of the CAP would have been extremely unlikely. We are in the vanguard of those negotiations; the Government's ability to form alliances enables us to push the agenda forward.

Mr. Bercow

The hon. Lady teased me, so she will not mind if I tease her. Does she endorse the verdict of the hon. Member for South Derbyshire (Mr. Todd) that the outcome of the Berlin Council was "modest"? Does she share his shock at the failure to achieve progress on free markets in sugar and milk quotas?

Ruth Kelly

The hon. Gentleman surely realises that I have enormous respect for my hon. Friend the Member for South Derbyshire (Mr. Todd), whose interest and knowledge of such matters is recognised by Government and Opposition Members. He must agree that my hon. Friend did not question what I have told the House today—that the United Kingdom is in the vanguard of reform and we are pushing for further reform. Of course, we recognise that more is needed and we intend to pursue such action. I merely point out to the hon. Gentleman, who described the Berlin Council as modest, that in the 1980s spending on the CAP represented more than 60 per cent. of the EC budget; this year, it will be 45 per cent. I am sure that he agrees that that is a great step forward. He questioned the nature of our contributions, which have come down in line with those of France and Italy, and asked whether it is right to incorporate six new member states in our assessment. I suggest to the House that it would have been misleading for us not to incorporate the most likely participants in an enlarged EU.

We have had an interesting debate, with both Opposition parties discussing the windfall gains that the UK has forgone inline with previous practice, which was agreed when the Conservatives were in government. As the hon. Member for Buckingham noted, I have written to the hon. Member for Kingston and Surbiton (Mr. Davey) and placed a copy of that correspondence in the Library for Members to read and study. The figure for the windfall gain that the hon. Member for Kingston and Surbiton quoted was an estimate from the European Commission itself. The amount of windfall gain to be forgone, he will realise, will vary from year to year as a result of the duties and levies collected, the effect of consumer expenditure on the VAT base, the level of the VAT base and other factors, but I will not bore the House by going through them. However, the amount is purely an estimate and not a definitive figure for the windfall gain from year to year.

We had an interesting and entertaining discussion about the own resources decision and article 9. The matter was first raised in the House by the right hon. Member for Wokingham (Mr. Redwood), and I was disappointed that he was not present to hear my response. Article 9 does not represent in any way a potting of precedent, which the Conservative Government agreed. Indeed, as the hon. Member for Buckingham well knows, and as the hon. Member for Kingston and Surbiton pointed out, that is not a critical aspect of a hidden regime in tax policy. We are absolutely determined to maintain our stance that there should be no new tax-raising powers for the EU. As the hon. Member for Buckingham will know, at ECOFIN in July we had the enthusiastic support of many other member states in that position. He will also know that there could be no new EU tax without the unanimous support of EU Finance Ministers.

Mr. Bercow

I am grateful to the hon. Lady, who is trying hard to dispel our concerns although, frankly, mine have not been assuaged. However, in the light of what she has just argued, will she tell the House the significance of the inclusion in the article of the word "autonomous"?

Ruth Kelly

I certainly listened with interest to the results of the telephone conversation hat one of the hon. Gentleman's friends had with someone in France, I believe. I do not think that he would expect me to comment on a telephone conversation to which I was not privy, but the important principle is whether we have a veto on any new EU finance tax-raising powers. I put it clearly to the House, as my right hon. Friend the Chancellor has done, and as my right hon. Friend the Chief Secretary to the Treasury did on Second Reading, that we have no intention of consenting to a new EU tax. Any such tax will depend on the unanimous consent of all EU members.

The hon. Member for Kingston and Surbiton made several well-informed and interesting comments. I certainly agree that we need to address the EU budget; rationalising it is a priority. We discussed that in Committee and, as he knows, we are giving a high priority to reform, with a focus on outputs and delivery, rather than inputs. I also thank him for his comments on windfall gains; I am sure that most people in the House will wish to do so.

The hon. Member for Arundel and South Downs made some interesting comments, some of which we have already addressed in Committee, so I shall not prolong our debate by going through all of them. However, he mentioned the financing of the UK's abatement, and I would like to reiterate that any changes to it that were agreed do not in any respect affect the position of the British taxpayer. The Berlin Council addressed the problem of other large net contributors to the community budget: Germany, Austria, Sweden and the Netherlands. In future, they will pay less towards the UK abatement, but the cost of that will be met by the other 10 member states, not the UK, so the change should have no net effect whatsoever.

In conclusion, the Bill demonstrates the huge benefits of Britain's constructive engagement with the EU. It shows that by taking a leading role in reform and by working together with other member states, we can achieve outcomes that are good for the UK and the EU. The agreement will mean stronger controls on EU spending, the beginnings of a more effective agricultural policy and no increase in the own-resources ceiling. The Bill ratifies part of the Berlin agreement that secured no increase in contributions from the UK and safeguarded the abatement. That is a good outcome for the UK and I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read the Third time, and passed.