European Union (Finance) Bill — House of Lords, 2015-07-08
Topic: International Affairs
Thomas Ashton (Conservative, Centre-right): My Lords, this is a short Bill but an important one. Its purpose is to enable the United Kingdom to implement the new Own Resources Decision—ORD for short—the legislation that governs the system by which the EU budget is financed. Clause 1 adds the new ORD to the list of previous Own Resources Decisions recognised under the European Communities Act 1972, thus giving it effect under the UK law. When passed, the Bill will become the European Union (Finance) Act 2015, superseding the European Communities (Finance) Act 2008, which approved the previous ORD. I am glad to see the noble Lord, Lord Davies of Oldham, in his place since it was he who, seven years and five months ago, took through the previous finance Act in 2008. Clause 2 simply cites this Act as the European Union (Finance) Act 2015 and repeals the European Communities (Finance) Act 2008 The new ORD was agreed unanimously by the Council of Ministers in May 2014. This came as a result of the historic seven-year EU budget deal secured by the Prime Minister in 2013. In 2005, the last time a seven-year EU budget was agreed, the then UK Government agreed to an 8% increase in the spending ceiling and gave away part of the UK rebate. In 2013, by contrast, the EU budget was cut in real terms for the first time, with our rebate protected On the expenditure side, we ensured that within a smaller budget, expenditure was reoriented towards areas of expenditure that can provide real growth—areas such as high-value research and development, and tertiary education. Spending on research and development and other pro-growth investment will now account for 13% of the total budget, a 4% increase on the previous budget. At the same time, overall spending on the common agricultural policy will fall by 13% compared to the 2007 to 2013 period However, the Bill relates only to the agreement reached on the revenue side of the EU budget. In 2013 there was strong pressure from some member states, the Commission and the European Parliament to reform the way the EU budget is financed, including proposals to introduce a financial transaction tax and do away with the UK rebate, or at least change the way it works. It was a specific objective for the UK that the new financing system would require no new own resources or EU-wide taxes to finance EU spending, and no change to the UK rebate This is precisely what was achieved in the political agreement reached in February 2013, and was accurately reflected in the new ORD. Under that agreement, which the Bill will implement, the Prime Minister protected what is left of the UK rebate, and this is maintained without any change throughout the life of this agreement. The agreement also ensures that there will be no new types of member state contributions and no new taxes to finance EU spending over this period The new ORD does not make any changes to the way that the EU budget is financed. There are, however, some changes in the detail of the ORD compared to the previous one. For example, it reintroduces reductions in the GNI-based contributions of the Netherlands and Sweden, while also introducing small reductions in these contributions for Denmark and Austria. The UK will contribute to these small corrections, which would mean an additional £16 million contribution from the UK per year compared to the last ORD. To put this in context, this is around 0.1% of our total gross contribution in 2014. Moreover, this will be largely offset by changes in other corrections Noble Lords will recall that the UK has always supported the principle of budgetary corrections set out at the 1984 Fontainebleau European Council, which gave us our rebate. In the absence of any meaningful reform on the expenditure side of the budget, we believe that member states who make disproportionately large net contributions to the budget in relation to their prosperity, such as the UK, should receive corrections This new ORD now requires the approval of each member state, in accordance with its own constitutional requirements, before it can come into force. The Bill before us will therefore give UK approval to that Council decision. The passing of the Bill will be the final action necessary in delivering the deal secured by the Prime Minister in 2013. As a result of that deal: EU spending was cut in real terms; UK contributions are forecast to be lower in every year compared to the final year of the Government’s seven-year deal, by on average around £1.3 billion; and our rebate, which is worth around £5 billion per year, is protected. This agreement represents a good deal for the taxpayer now and over the coming years, and I commend it to the House. I beg to move.