20 June 2005
Tony Blair spoke to MPs after attending the EU meeting in Brussels.
Parts of this transcript may have been edited
Read the transcript of the PM’s statement
With permission, Mr Speaker, I shall make a statement about the European Council held in Brussels on 16-17 June.
This European Council was essentially about two subjects: the consequences of the no votes in the referenda in France and The Netherlands; and the financial perspectives, the budget ceilings for the EU for the period 2007-2013.
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. Second, 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 CAP, representing 5 per cent of the EU population producing less than 2 per cent of the EU’s output. We are spending seven times as much on agriculture as on R&D, science, technology, education and support for innovation combined. This isn’t a budget fit for purpose in the 21st Century. Even at the end of the next financial period i.e. by the beginning of the year 2014 we would be spending 40 per cent on the CAP. Europe just cannot wait 10 years or more for change.
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 EU was €18.8 billion; Britain’s €42.4 billion. Without the rebate it would have been €78.7 billion. In the next financial period, i.e. 2007-2013, even with the rebate, Britain would be paying around€13 billion 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.
But it is also true that the rebate is merely a correction mechanism, designed to address an underlying imbalance in the budget. As the EU 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 support passionately.
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 both with the rebate and the CAP. In the meantime, of course, we would ensure we paid our fair share of enlargement.
The Presidency proposal 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 this 2002 agreement ruled out further CAP changes, and therefore it was unfair of the UK 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 the same 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’s more, the cost to the UK of the Luxembourg proposal would be over €25 billion, meaning over the next financial period instead of parity with similar sized countries, we would have been back to, for example, a €23 billion deficit with France. This money incidentally would not have gone to poorer countries but been redistributed amongst the wealthy ones.
This is a deal 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 understand fully 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 it is one that meets their needs. Britain championed enlargement. We will continue to do so. But let us not forget that on any basis around 80% of CAP funds and almost 50% 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 recognizes the nature of the crisis. The 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 they face. They worry about globalisation and organised crime and they do not, at present, see Europe giving a credible response. If we answer these concerns, Europe will strengthen. And we need a strong Europe to bolster the strength of individual nations. It is those who believe in Europe most who should be the most ardent advocates of changing it. The European Budget shouldn’t be separate from that debate but part of it. It is that debate which we will look forward to, in our Presidency.
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