Martin Callanan MEP: LibDem and Labour MEPs vote for more EU taxes

Martin Callanan is Leader of the Conservative MEPs

After 12 years in the European Parliament I thought I'd seen it all: the vitriol spouted at anyone opposed to an ever-expanding EU, the attempts to smear anyone who thinks the EU should not interfere in every area of our lives, and the sneering at nations such as the UK whose governments and parliaments want to remain the primary decision-making arenas. But, this week, even I was astonished by the invective directed at "Her Majesty's Government" by the leader of the Liberal Group in the European Parliament, Guy Verhofstadt. Mr Verhofstadt is a well-known EU federalist and a former Prime Minister of Belgium . And clearly, he is no fan of "Her Majesty's Government".

Let me give you some context first. The EU budget operates within a seven-year framework known as the Multiannual Financial Framework (MFF) and the current MFF expires in 2013. As you may recall from the time we negotiated the current MFF - at the end of 2005 - the discussions usually descend into an almighty row between national governments with different priorities. In order to reach a deal last time, our Labour Government gave away £7 billion of the UK rebate with absolutely nothing in return. It's this disgrace that has contributed towards the UK 's rapid increase in contribution to the EU in recent times.

The debate over the next MFF looks set to be even fiercer. Austerity in many countries, a Euro in crisis, the emergence of new economies and our own shaky competiveness will incite many different visions of how the EU budget should look. And to add another spanner into the works, this time round the European Parliament will undoubtedly demand more of a say, too.  To prepare the ground, over the past 12 months, a temporary committee has met with a view to setting out the parliament's priorities for the next MFF. The so-called SURE committee was meant to look at the "policy challenges" and suggest areas where the EU's spending should focus its fire.

This was an opportunity for the parliament to identify areas where EU spending may add value, and to propose areas where spending could be reduced or refocused. If they did their job properly then this would surely see the EU budget reduced or at least frozen. From what I've heard, there was talk about carrying out the kind of prioritisation exercise that national governments, local councils and households across the EU also have to do. But it came to nothing, and the final report produced by the committee was a federalist wish list: a 5 percent increase in the EU budget, an end to the UK rebate, new EU taxes such as a Financial Transaction Tax (which would be a tax on the city of London), and the end of the practice where unspent monies are returned to national governments.

Last week, the full parliament was asked to debate the report and vote on it. Shortly before the debate the UK government sent MEPs a note outlining its position on the report. It was rightly critical. Yet in his speech - see the video below - Mr Verhofstadt attacked the note, arguing that the UK Government's "disappointment" in the report shows just how good it must be. He called the position a "provocation", attacked the rebate and argued that only by increasing the role of the EU can the UK make savings in its own budget. The UK should succumb to an EU diplomatic service, it should succumb to the EU managing its monetary policy, and it should enter the Euro!

Verhofstadt is well known as being a windbag but it was quite extraordinary to see the leader of a group whose joint largest party (our very own Lib Dems) is a partner in the UK coalition make such an outspoken attack on the UK Government's position. Incidentally the other largest party in his group is the German FDP, which is also in a government that has called for EU budgetary restraint.

The Liberal Democrats should publicly distance themselves from Verhofstadt and ask him to apologise for such a disgraceful attack on their own government. Thankfully, my south east colleague Richard Ashworth spoke immediately after in the debate and addressed Verhofstadt's points. Anyone who knows Richard will know that he is a gentleman, and I don't think I have ever seen him lose his temper but this time he'd clearly had enough. His response can be seen in the video below.

Throughout, as our representative on the SURE committee, Richard has worked tirelessly to achieve a more satisfactory outcome from this temporary committee, but in the end he was swimming against an impossible tide. None the less, it was very important that the orthodoxy of "more Europe is good, therefore it needs more money", was challenged and Richard did a sterling job at that.  You can also see my speech on the subject below, and you'll notice my good friend the excellent Peter van Dalen from our Dutch delegation nodding along!

Unfortunately, some LibDem MEPs voted with Mr Verhofstadt on a number of items. In particular, Duff (Eastern), Hall (NE), Ludford (London), Lynne (WMids), Lyon (Scotland), McMillan-Scott (Yorkshire and Humber), Newton Dunn (EMids), Wallis (Yorkshire and Humber) and Watson (SW), all voted to scrap the UK rebate and to introduce new EU "own resources' AKA taxes.

So there we have it; our own coalition partners, who are supposedly joining with us to bring the deficit under control in the national interest, think the best way to do that is to scrap the UK rebate and add a new layer of taxation onto businesses. By the way, they also voted in clear contradiction to their election manifesto commitment given in 2009. Labour MEPs also voted for new EU taxes, which they have previously called for on the city of London in the form of a Financial Transaction Tax. Without a G20 agreement on such a tax, it would be economic suicide for the UK.

The parliament's debate and vote was a prelude to the kind of arguments we will see over the next few months. The commission will publish proposals at the end of this month. If they look anything like the proposals supported by Labour or LibDem MEPs this week then the coalition government should not be afraid of threatening the veto. The next long-term budget of the EU will define the future direction of the EU and this is a fight that we literally cannot afford to lose.

Unfortunately, we are going to have to go through a similar exercise next month when we vote on the report of another temporary committee. This one was set up to look at the financial crisis and to suggest ways of preventing a future one. This committee has met for about 18 months and its recommendations are nauseatingly predictable: EU taxes, a common consolidated tax base (a preamble to a common tax rate which would destroy the UK and Irish financial districts), national contributions to the EU to increase by between five and 10 percent, and for the EU to take control of more spending programmes currently carried out in the member states. It seems that, in the European Parliament, no matter what the question, "more Europe" is always the answer.

Thankfully we are not alone in finding these approaches from the European Parliament to be wholly out of touch. There is a growing body of thought amongst other national governments in the Council of Ministers that the EU needs to get real and reflect the austerity that is sweeping the continent. In the parliament, we continue to have many individual successes but it is clear that we are always going to be swimming upstream when it comes to fighting federalism.

But the picture is not completely gloomy, and I am proud to report that the ECR group is continuing to gain strength. With the addition of David Campbell Bannerman to our ranks, the ECR has now formally overtaken the Greens and passed a very important milestone, making us now the fourth largest group in the parliament. David has already settled in to the delegation and to the group and is already working well with our teams both on his committees and in the Eastern region. Our case for urgent reform of the EU is striking a chord in some quarters of the chamber and we hope to continue to grow the group and provide some common sense and Euro realism in a parliament that is all-too-often filled with federalist ambition. There was plenty more excitement in our plenary session last week, including the commission finally accepting, as we had warned eight years ago, that the European Arrest Warrant can be abused to extradite people for petty crimes rather than the major terrorism and organised crime for which it was intended.

The parliament also voted to allow Romania and Bulgaria into the border-free Schengen zone. Thankfully this has rightly been blocked by the national governments as it seems to me that we need to seriously look at the failings of the Schengen agreement - an agreement made for a different age - before bringing yet more people into it. Labour and the Liberal Democrats voted for it which strikes me as odd when we consider the hard time they recently gave the government for not opting in to the EU's trafficking directive. Surely the best way to prevent human trafficking is to not open up the border to Romania which is widely reported as being a transit country.  There's plenty of other updates and information on the website of the ECR - www.ecrgroup.eu, on our twitter feed @ecrgroup or at the delegation website: www.conservativeeurope.com.