The House of Commons debated, yesterday,  the Commission’s proposal for the next Multiannual Financial Framework (MFF), 2014–2020. There has been widespread coverage of David Cameron’s defeat over the EU budget. The House of Commons voted to reject any deal on the MFF that does not cut spending in real terms. 53 Conservative MPs defied David Cameron and voted for a budget cut.

During the debate Bill Cash made the following speech and interventions.

Mr Speaker: I inform the House that I have selected the amendment in the name of the hon. Member for Rochester and Strood (Mark Reckless), from whom we will therefore hear in due course. 

The Financial Secretary to the Treasury (Greg Clark): I beg to move,

That this House takes note of European Union Documents No. 16844/11, No. 16845/11, No. 16846/11, No. 16847/11, No. 16848/11, No. 6708/12 and Addenda 1–3, No. 9007/12, No. 12356/12, and No. 13620/12, relating to the Commission’s proposal on the next Multiannual Financial Framework (MFF), 2014–2020; agrees with the Government that at a time of ongoing economic fragility in Europe and tight constraints on domestic public spending, the Commission’s proposal for substantial spending increases compared with current spend is unacceptable, unrealistic, too large and incompatible with the tough decisions being taken in the UK and in countries across Europe to bring deficits under control and stimulate economic growth; notes that UK contributions to the European Union budget have also risen in recent years due to the 2005 decision to give away parts of the UK rebate; agrees that the next MFF must see significant improvements in the financial management of EU resources by the Commission and by Member States and significant improvements in the value for money of spend; further agrees that the proposed changes to the UK abatement and proposals for new taxes to fund the EU budget are completely unacceptable and an unwelcome distraction from the pressing issues that the EU needs to address; and calls on the Government to seek significant savings to the Commission’s seven year framework, as set out in the Prime Minister’s joint letter with France, Germany, the Netherlands and Finland of 18 December 2010, which stated that ‘payment appropriations should increase, at most, by no more than inflation over the next financial perspectives’. (…)

When I became Financial Secretary last month, hon. Members can imagine the delight I felt to find that the EU negotiations were at the top of my in-tray. However, now that I have had a few weeks to immerse myself in the budgetary demands that have been made by not only the institutions of the EU, but several member states, I have to report that my normally cheerful mood has soured. Frankly, the sheer lack of shame displayed by those demanding more of our money is extraordinary. They want more at a time when the International Monetary Fund predicts that Government spending across the EU will fall by more than 8% between 2010 and 2017. They want more at a time when Mr Barroso, the European Commission’s President, has said:

“public finances must be consolidated”

and that

“sound public finances are needed to restore confidence that is so essential for growth”.

They are asking for more at a time when the Commission itself is forcing deep public spending cuts on member states that have the misfortune to be locked into a debt crisis. At just such a time, the European Commission has thought it reasonable to propose an increase in what the EU spends of more than €100 billion, which is 10% more than it spends already.

(…)

Mr Speaker: Order. Just before I call the hon. Member for Rochester and Strood (Mark Reckless), it might help the House if I explain that, in accordance with normal practice in these situations, he will have an opportunity formally to move his amendment at the conclusion of the debate. His opportunity now is simply to speak in it.

Mark Reckless (Rochester and Strood) (Con): We simply cannot afford to agree an inflationary increase to the EU. This country has 13% less income than it had just five years ago, and we are seeing 20% reductions to domestic spending. According to the House of Commons Library, if an inflationary increase is agreed, next year it will amount to £290 million, every penny of which we will have to borrow. Hon. Members will have spoken to constituents on different issues, and police officers have been to my surgery. They understand that their pay is frozen, although they are less happy about changes to their pay and conditions and about not getting their increments, but they do not understand why other elements of the budget, particularly the EU, should be guaranteed inflationary increases, let alone inflationary increases all the way through to 2020.

(…)

Mark Reckless: Many hon. Members will be asking themselves the same question.

We heard from the Financial Secretary what these EU officials are paid. The Prime Minister went to Brussels a week or two ago and said that one in six EU officials earned more than €100,000. He might have understated his case, because we need to compare like with like. Not only do they earn more than €100,000 but they pay a special, incredibly low tax rate that applies only to people who work for the EU. They get an enormous expatriate allowance that shoves on another €15,000 to €20,000. They get a huge housing allowance. And, while a group of people in this country are about to lose child benefit of about £85 a month, EU officials get paid, tax free, another €300 per month per chid. They contribute virtually nothing to their pension contributions. Under the arrangement we have in this country, any time a public official earns more than the Prime Minister—£142,500—that has to be signed off by the Chief Secretary to the Treasury. If we had to sign off every time an EU official was, in effect, getting the same take-home pay there as the Prime Minister’s salary here, that would apply to more than 5,000 European Union officials, or more than one in six. The Chief Secretary would be doing nothing else except signing off those requests.

Today we have an opportunity to debate and vote on the multiannual financial framework—the long-term budget. This comes round once every seven years. It requires unanimity among member states and primary legislation in this House to implement it.

(…)

Mark Reckless: No, and that is not a sensible point at all, because we have a one-off opportunity. It is this House that ultimately votes, so if any Government Members feel uncomfortable—not because of who I will be following through the Lobby, but because of who may be following me, in support of my Conservative amendment—I say to them: if we send the Prime Minister to Brussels telling him that it is acceptable to agree an inflationary increase, he may come back to this House having agreed that inflationary increase. We will then have to vote on primary legislation, in Committee and on Report, for that inflationary increase for the EU budget, all the way to 2020. If Members do not want that, they should vote today for my amendment.

The other strong argument for the amendment is this. Some people say, “We’re not going to get a real-terms cut,” but we will certainly not get one if we do not even try. If we use the veto, that is not a bad place to be; in many ways, it is better than where we would be with an agreed inflationary increase. There are two strong reasons for that. First, either we operate within a multiannual financial framework under the old, frozen ceilings carried forward, or we agree new ceilings going up by inflation, allowing higher budgets in future. Each of those budgets is always negotiated under qualified majority voting annually; the question is, where we have unanimity and where we need legislation, do we allow inflationary higher limits to 2020 or not?

(…)

Mark Reckless: (…) The second point is that if there is no agreement on a new MFF, the process of money being transferred from the budget towards the new member states will not continue. What happened, in that disgraceful decision in 2005 when Labour gave away the rebate, is that a process was put in place whereby the new member states do not pay towards our rebate in the way that the old member states do. If the Prime Minister vetoes an MFF package, that process of money shifting to new member states will be suspended; therefore, the process by which the rebate is given away will, at least for that period, be stopped, which is a significant gain for Britain. If there is an inflationary increase, as the Government propose, we will be looking at a net contribution going from £9.2 billion last year to £13.6 billion at the end of the process. We simply cannot afford that.

The European Commission put out its own press release, which asked the question: “What will happen if a new MFF is not agreed?” The press release states that failure to agree a new MFF

“would considerably complicate the adoption of new programmes. And in the absence of new legal bases, including their indicative financial envelopes, no commitments could be made…those multiannual spending programmes…the 2014 budget would probably only cover the agricultural payments and the payments on outstanding commitments,”

and that organisations

“benefiting from EU-funds…would face severe drawbacks.”

If hon. Members are prepared to vote through primary legislation—later, when we get that chance—and if they are happy with an inflationary increase in the EU budget, plus everything else that will happen because of the continued loss of the rebate if that is agreed, they should vote for the Government motion. If hon. Members think that the European Union has too much money and that its budget is too large and needs to be cut, they should support my amendment.

(…)

Mr William Cash (Stone) (Con): The Labour party—the Opposition—will of course vote with us this evening, not the other way round. As the hon. Member for Bolsover (Mr Skinner) correctly pointed out, exactly the same happened with the Maastricht treaty.

The amendment proposed so ably by my hon. Friend the Member for Rochester and Strood (Mark Reckless) is absolutely right. It deals not just with the mechanics or the technicalities, but with what is really going on under the surface. The real questions are, “Where is the money coming from?”, and “What is the object of this multiannual financial framework?”

I have been to many conferences in the past year in my capacity as Chairman of the European Scrutiny Committee—in Cyprus and Denmark, and, before that, elsewhere—and I have attended similar conferences with my right hon. Friend the Member for Aylesbury (Mr Lidington). They are living on another planet: that is the real problem. The main feature of that big landscape is where we are today. This is part of a picture that must be dealt with.

I know that my right hon. Friend the Prime Minister is conscious of that. He knows that Mr Barroso’s speech calling for a federal Europe, which was made only a short time ago, has put us at a crossroads. We cannot continue to assume that what was being considered before that date still applies. We are now on a different journey. They are on one planet, and we are on another. We have to make a stand, and that is what this is all about.

A letter dated 18 December 2011 from the Prime Minister and from the Prime Ministers of several other member states, included the following passage:

“European public spending cannot be exempt from the considerable efforts made by the Member States to bring their public spending under control.”

We are cutting here; we need growth. They are not cutting, but increasing. That is the point.

Chris Kelly (Dudley South) (Con): I know that my hon. Friend has a great deal of empathy with the private sector. The private sector is the engine of growth in our economy and it becomes more efficient every year, but does my hon. Friend agree that in Brussels the only thing that increases is the appetite for our money?

Mr Cash: Absolutely. It is impossible to make any public expenditure—including our contributions to the whole of the public sector: health, education, local government, the lot—unless the money comes from reasonably taxed small and medium-sized enterprises. Yet the whole of the Commission’s paper—which is at the heart of the 2020 strategy and at the heart of why the Commission is asking for this increased amount of money, which it calls an investment for growth—contains only one reference to small and medium-sized businesses, in one line. That is the problem we are up against. We cannot give money to the public sector unless we get it from private enterprise on a reasonably taxed basis.

The Prime Minister’s letter continues:
“The action taken in 2011 to curb”

—“curb”: that is the word he uses—

“annual growth in European payment appropriations should therefore be stepped up progressively over the remaining years of this financial perspective and payment appropriations should increase, at most, by no more than inflation over the next financial perspectives.”

The situation was wrong then, and it has got worse since. That was in December 2011. We are now in October 2012, and we know what the picture is, and it is getting progressively worse. That is why we had to call for a reduction rather than merely what the Prime Minister describes as an
“increase, at most, by no more than inflation over the next financial perspectives.”

Mr Christopher Chope (Christchurch) (Con): Will my hon. Friend take some support from the fact that on 20 June our right hon. Friend the Foreign Secretary told this House he thought reductions in the EU budget of 20% were “highly desirable”?

Mr Cash: Absolutely; that is a very good point indeed.

I would like to dig a little deeper into what this money is supposed to be used for. It is all set out in the papers laid before the House for the purposes of this debate. They talk about turning the EU into a “smart”—whatever that means—“sustainable and inclusive economy” delivering
“high levels of employment productivity and social cohesion.”

How on earth are they going to achieve that given the measures they think will produce growth? Almost every single aspect of what they want to deliver is based on increasing grants and subsidies, but not on asking where the money is coming from.

The money comes from our constituents. It comes from the taxpayer. It does not grow on trees. That is what they do not understand. Therefore, the entire strategy on which this multiannual financial framework is based is nonsense. It is an Alice in Wonderland fantasy, as I have repeatedly said when I have had the opportunity to meet the other 27 Chairmen of the national scrutiny committees. I have noticed that there is increasing awareness, too. The hon. Member for Luton North (Kelvin Hopkins) was with me only a few weeks ago, and he noticed the degree of response I was getting from the other member states’ national chairmen. They understood that they were in deep trouble.

The money does not grow on trees in Spain; that is why there are demands for independence from Catalonia. The money does not grow on trees in France or Germany either. The fact is that it has to be found.

Wayne David: The hon. Gentleman and I have significant differences about what this country’s approach to the EU should be, but does he agree that the important thing at this moment in time, with every EU member state having to make public expenditure cuts, is that the EU itself should make cuts? That message should go out from both sides of this House.

Mr Cash: The hon. Gentleman is right. I do not think this is just a cynical move, even though there is an element of that. As I find when I go to meetings with those in the presidency, there is a recognition: they know they cannot go on spending money that is not there. That is the truth. That is all this argument is really about. It is about the big landscape of whether, like
Mr Micawber, we can just hope something will turn up. It will not; it has to be built through real growth policies.

Unfortunately, the report the European Commission produced only a few months ago shows it has not got a clue how to generate that growth. I was also deeply disturbed to see that the amazing report by the European Parliament calling for all these increases was welcomed by the vice-president of the European Commission, Maroš Šefcovic. He said the MFF was “an investment budget” for delivering growth in “the entire EU.” He condemns himself outright simply by endorsing the 150 pages of unadulterated rubbish that came out of the European Parliament in its interim report.

Mark Reckless: Even for those in the House who are genuine Keynesians, if our goal is to stimulate the economy is it possible to think of a worse way to spend money than the way the MFF sets out for the EU?

Mr Cash: I absolutely agree. The real problem is that their answer is to give more money to the public sector and to ventures and projects that, as the Court of Auditors report shows, increasingly fail. The trouble is that the European project is a failing project.

They will not recognise that, so what are they doing? They are saying, “We are going to go off and have a federal Europe.” Well, let them have it. They can have their federal Europe if they want, but we, in this country, cannot possibly be part of it—that is unthinkable. The Prime Minister knows it is unthinkable, and my genuine belief is that he will come to discover that it would be better to veto this and to ensure it does not go through, because he has already been presented with the crossroads. The crossroads was presented by Mr Barroso, and the crossroads is being presented by the other member states. There is no turning back. We therefore have to say no.

We say no to this, we say no to the illegal banking regulations that we have just been looking at and we will be saying no to the proposals for any new treaty. If we are prepared to put our money where our mouth is and actually say that we will not accept this, we will be serving the national interest.
(…)

Mr Cash: Does the right hon. Gentleman know that the European Parliament describes the Commission’s proposal as representing a freeze of the multiannual financial framework between 2014 and 2020, and says that it would not be sufficient to finance the existing policies which come out of the treaty of Lisbon? Is there not something ironic in that, in relation to the Government’s motion?

Mr Dodds: Absolutely. When it comes to the European Parliament, nothing surprises me. I must speak up in defence of Members of the European Parliament, including the Member from my party, who consistently vote against these federalist ideas and against increases to the budget, and stand up for the people who contact us daily, saying enough is enough.
With reference to what the EU is doing, let us look at some of the areas of expenditure to which this year alone the UK will contribute £15.8 billion and by 2014-15 £19.2 billion, and that is before the increases going forward. A Member referred earlier to the European Parliament and the fact that it does not have a single seat. Ending that wanton inefficiency would equate to £1.26 billion over the seven years of the 2014-20 period, but there seems to be no appetite in the EU to change that.

With respect to quangos and agencies, there are 56 EU quangos, twice the number in operation in 2004. The cost to European taxpayers has increased by 33% in the past two years alone, with an estimated expenditure of €2.48 billion in 2012 alone. We were told that when it came into being, the External Action Service would not cost the British Exchequer any more money, whereas it has done precisely that. If we got rid of that unnecessary body, we would save EU taxpayers more than €480 million every year.
I think the Minister referred to the House of European History, of all things, which, I am told, is aimed at promoting an awareness of European identity since 1946. It will cost £136.5 million by 2015, with British taxpayers contributing £18.6 million. Those are simply a few examples of the absolutely scandalous waste of money towards which our taxpayers are having to contribute year on year through our contributions to the EU budget.

(…)

Greg Clark: It is true that the increase that we are talking about would involve further contributions from the House, but the negotiation that we are entering is to avoid that, to minimise the contribution that we make and to secure the best deal for the taxpayer.

The hon. Member for Bolsover (Mr Skinner), who is not in his seat, referred to the Maastricht debates and the attitude of the official Opposition at the time. If we could have drawn from the behaviour of the Opposition their intention in government, we would have reached a wholly misleading conclusion. During their time in government, from 1998 to 2010, they presided over a 47% increase in the contributions that we made to the EU budget. They surrendered our rebate in return for no reform. The reform that we were expecting was in the common agricultural policy. Our contribution to that increased over the time that they were in power from £48 billion to £56 billion.
We have secured the agreement of member states. We have led the way by managing our national finances. If our negotiating position does not succeed, we are ready, willing and able to veto. We urge the House to stand with us as the Prime Minister goes to negotiate for us.

The Speaker put the Questions necessary for the disposal of the business to be concluded at that time (Order, 29 October ) .

Amendment proposed: (a), at line 9, leave out from ‘and’ to end and add
‘; so calls on the Government to strengthen its stance so that the next MFF is reduced in real terms.’.—(Mark Reckless.)

Question put, That the amendment be made.

The House divided:

Ayes 307, Noes 294.