The Prime Minister made a statement, yesterday, at the House of Commons, on last week’s European Council. Bill Cash made the following intervention.

The Prime Minister (Mr David Cameron): (…) Last week’s European Council agreed the overall limit on EU spending for the next seven years, starting in 2014. When these multi-year deals have been agreed in the past, spending has gone up, but last week we agreed that spending should come down.

By working with like-minded allies, we delivered a real-terms cut in what Brussels can spend for the first time in history. As the House knows, the EU budget is negotiated annually, so what we were negotiating—initially at the Council last November and again last week—was not the individual annual budgets, but rather the overall framework for the next seven years. This includes the overall ceilings on what can be spent—effectively, the limit on the European Union’s credit card for the next seven years.

During the last negotiation, which covered the period 2007 to 2013, the last Government agreed to an 8% increase in the payments ceiling, to €943 billion. Put simply, this gave the EU a credit card with a higher limit, and today we are still living with the results of allowing the EU’s big spenders to push for more and more spending each year.

In fact, only last year, while member states were having to make tough decisions to tighten their belts at home, the big spenders succeeded in increasing the 2012 European budget by another 5% compared with the previous year. If no deal had been reached, the existing ceilings would have been rolled over and annual budgets could have continued to soar for the next seven years. Because annual budgets are negotiated by qualified majority voting, it can be difficult to constrain spending in these annual negotiations. By contrast, the seven-year limits are agreed by unanimity, so this was our chance to get the ceilings down in line with what could be afforded.
The European Commission produced an initial proposal for increasing the payments ceiling still further to €988 billion. This was strongly supported by a number of member states. The first negotiation took place at the Council in November, and although the President did then reduce this during the Council itself, it was still some way short of the real-terms cut we were looking for. So together with like-minded allies from a number of countries, including Germany, Sweden, the Netherlands and Denmark, we rejected the deal on the table and told them to think again.

At this Council, we made further progress. Together with allies, many of whom like Britain write the cheques, we achieved a proper look across all the areas where spending in the Commission proposal could be cut. While there are areas where we could and should go further, not least on reforming the common agricultural policy and reducing the bureaucratic costs of the European Commission, we agreed a real-terms cut in the payment limit to €908 billion. That is €80 billion lower than the original proposal; €35 billion lower than the deal agreed by the last Government, which is still in operation today; and €60 billion lower than the emergency arrangements that would have come into place if there were no seven-year deal. My aim was not simply to cut the credit-card limit; I wanted to set the limit at a level that would deliver at worst a freeze and at best a cut in actual spending over the next seven years. That is what this deal delivers—a real-terms cut.

If we take the latest complete budget—the one for 2012—and freeze spending at that level for the next seven years, we would have spending limits of €932 billion. Our new payments limit means spending cannot rise above €908 billion, so we have slashed €24 billion off a real freeze on the last completed budget. Of course, the budget set in 2012, which Britain voted against, was unacceptably large, but even against the average of the last two completed years—2011 and 2012—this deal still delivers a real-terms cut.

This deal must now, of course, be voted on by the European Parliament, and the European Council has said it is prepared to accept some flexibilities about how spending is divided between different budget years and different areas of spending, but we are absolutely clear that this must be within the framework that the member states have now agreed. The EU’s seven-year budget will now cost less than 1% of Europe’s gross national income for the first time in its history.

Let me say a word about how this deal is likely to affect the UK’s contribution; a word about how it is likely to affect what the UK receives from the EU for research, for our regions and for our farmers; and a word about what this means for growth and competitiveness across the European Union as a whole.

On the UK’s contribution, the House will remember how the last Government gave away almost half of our rebate. This has had a long-term and continuing effect on the UK’s net contributions. It is worth remembering why. It is because when the European Union spends money on structural funds and cohesion payments in eastern European countries, for example, the UK no longer gets a rebate on this money. As a result, almost whatever budget deal was done, our net contributions were always likely to go up. As a result of this deal, however, they will be going up by less. The only two sensible things we could do to protect the British taxpayer in these negotiations were to get the overall budget down and to protect what is left of our rebate.

Ed Balls (Morley and Outwood) (Lab/Co-op): Hear, hear.

The Prime Minister: The right hon. Gentleman keeps on saying “Hear, hear”, but he was the one who gave away our rebate in the first place. Even he is welcome on a happy day like today. That is exactly what we have done.
While the actual amount that the UK contributes will depend on technical factors, such as the size of the annual budgets, economic performance and exchange rates, as a result of this deal we now expect the UK’s contribution to the EU to fall as a share of our gross national income. As for the rebate that this Government inherited, it is now completely untouched. As ever, throughout the negotiations the rebate was attacked repeatedly, but I successfully rejected all the calls for change, and under this Government the British rebate is safe.

In terms of what the UK receives, I wanted to make sure that our universities were well placed to receive research work, that our less well-off regions were treated fairly compared with others, and that our farmers continued to receive support for the environment schemes that they put in place. Let me deal with each of those points.

The section of the budget that includes spending on research, innovation and university funding is up by over a third. The money is handed out on the basis of quality, so Britain’s universities are particularly well placed to benefit. We have ensured that structural funds will continue to flow to our less well-off regions, and Britain’s share will remain broadly the same, at around €11 billion. While we have cut spending on the common agricultural policy overall, we have protected the flexibility that will allow us to direct funds to support both the environment and the livelihoods of
our farming communities.

Overall, this is a better-framed budget in terms of growth, jobs and competitiveness. It is disappointing that administrative costs are still around 6% of the total, but overall spending on the CAP will fall by 13% compared with the last seven-year budget. Research and development, and other pro-growth investment, will now account for 13% rather than 9% of the total budget.

Reform of EU spending is a long-term project, but this deal delivers important progress. Working with allies, we took real steps towards reform in the European Union. This is a good deal for Britain, a good deal for Europe, and above all a good deal for all our taxpayers. That is what we have delivered, and I commend my statement to the House.

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Mr William Cash (Stone) (Con): May I congratulate my right hon. Friend on this significant success? He carried it through in line with the most important of his five Bloomberg principles, namely that the root of our democracy and accountability lies in this Parliament, which recently voted for such a reduction. Does that not prove that the UK national interest is best served when the Government and Parliament are at one?

The Prime Minister: I absolutely agree with my hon. Friend. A number of leaders of different European countries kept referring to what they thought the European Parliament would do if we agreed this figure or that figure, so the point had to be made fairly frequently in the Council that we should also, and more importantly, be listening to the individual national Parliaments, because of course it is our Parliaments that have to vote the money. The European Parliament does not have any responsibility for voting the money, and it is to our Parliaments that we should account.

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