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European Council, 16–17 June

My Lords, with the leave of the House, I should like to repeat a Statement made in another place by my right honourable friend the Prime Minister. The Statement is as follows: ““With permission, Mr Speaker, I shall make a statement about the European Council held in Brussels on 16 and 17 June. ““This European Council was essentially about two subjects: the consequences of the ‘No’ votes in the referendums in France and the Netherlands; and the financial perspectives, the budget ceilings for the EU for the period 2007–13. ““In respect of the constitutional treaty, the 10   member states that had ratified were anxious that ratification continue. But realistically, given the   ‘No’ votes in France and the Netherlands, the ratification cannot succeed unless and until those votes change. Moreover, the Dutch Prime Minister, rightly and inevitably, said frankly that there was no prospect of his bringing back the treaty for any sort   of new decision in this Dutch Parliament. As a result, whatever words are used in Council conclusions, standing the results of the French and Dutch referendums, the treaty cannot proceed. It is therefore sensible, instead, to have a period of reflection, in which the critical questions as to Europe’s future direction are debated. ““On the future financing package, the UK approached the negotiations with three objectives. First, we wanted an overall budget which demonstrated a responsible and prudent approach to spending, at a time when national budgets across Europe are under strain. Secondly, we wanted a commitment to a comprehensive reassessment of the structure of the EU budget. ““Europe faces an immense global competitive challenge. Quite apart from the established economies of America and Japan, the rise of China, India and the other Asian economies is creating a wholly new economic environment. ““It simply does not make sense in this new world for Europe to spend over 40 per cent of its budget on the common agricultural policy, representing 5 per cent of the EU population producing less than 2 per cent of Europe’s output. We are spending seven times as much on agriculture as on R&D, science, technology, education and support for innovation combined. This is not a budget fit for purpose in the 21st century. Even at the end of the next financial period—that is, by the beginning of the year 2014—we would be spending 40 per cent of the budget on the CAP. Europe just cannot wait 10 years or more for the change necessary. ““It is in this context that the issue of the British rebate must be examined. The rebate arises because of the distortion of the budget. Over the past 10   years to 2003, France’s net contribution to the European Union was 18.8 billion euros. In the next financial period—that is, 2007–13—even with the rebate, Britain would be paying around 13 billion euros more. Without it, Britain would pay nearly two and a half times as much as France, and slightly more even in money terms than Germany. ““However, it is also true that the rebate is merely a correction mechanism, designed to address an underlying imbalance in the budget. As the European Union has expanded and Britain has become more wealthy than countries like France, it is right that it changes. ““Our position, therefore, was not to refuse any change to the rebate, to rule out a discussion, or to disown our responsibility to pay for the enlargement of Europe we passionately support. ““On the contrary, I made it clear that we should deal with both anomalies—the rebate and the CAP. I proposed that we have a fundamental review of the EU budget, reporting in time for us to be able—midway through the next financial period—to alter fundamentally the structure of the budget, dealing with both the rebate and the CAP. In the meantime, of course, we would ensure we paid our fair share of enlargement. ““The presidency proposal from Luxembourg fell   way short of such a solution. The terms of the review were expressed in language so vague as to be   meaningless. In addition, the words meant, effectively, endorsing the 2002 CAP package up to 2013. It has been frequently said in the past week that this 2002 agreement ruled out further CAP changes, and therefore it was unfair of the United Kingdom to try to reopen it. But in October 2002, it was expressly stated that this agreement was without prejudice to the future financing arrangements and at that time the UK made it clear that on the basis of such a package there could be no change to the rebate. ““So the review offered was inadequate. What is more, the cost to the UK of the Luxembourg proposal would be over 25 billion euros, meaning that over the next financial period instead of parity with similar-sized countries, we would have been back to, for example, a 23 billion euro deficit with France. This money, incidentally, would not have gone to the poorest countries, but been redistributed among the wealthy ones. ““This is a deal that I simply could not have recommended to this House. It was not the right deal for Britain. It was not the right deal for Europe. Four other countries rejected it and several more made clear their dissatisfaction. ““I fully understand the concerns of the new European countries. They want an agreement. We will do our best to secure such an agreement and to make sure that it is one that meets their needs. Britain championed enlargement. Britain will continue to do so. But let us not forget that, on any basis, around 80 per cent of CAP funds and almost 50 per cent of structural and cohesion funds will continue to go, not to the new accession countries, but to the original 15. ““It is said that the failure to reach a deal has deepened Europe’s crisis; that Europe’s credibility demanded a deal. No, Europe’s credibility demands the right deal—not the usual cobbled together compromise in the early hours of the morning, but a deal which recognises the nature of the crisis. This crisis is not about the failure of Europe’s leaders to reach agreement with each other. The crisis is about the failure of Europe’s leaders to reach agreement with the people of Europe about the issues that concern them. ““People in Europe see the world changing around them, economically and socially, and want answers to the challenges that they face. They worry about   globalisation and organised crime—not the re-weighting of votes in the European Council. If we answer these concerns, Europe will strengthen. And we need a strong Europe to bolster the strength of individual nations. The European budget should not be separate from that debate, but part of it. It is that debate that we will look forward to in our presidency””. My Lords, that concludes the Statement.