HC Deb 16 December 1970 vol 808 cc1354-70
The Chancellor of the Duchy of Lancaster (Mr. Geoffrey Rippon)

With your permission, Mr. Speaker, and with that of the House, I wish to make a statement about certain proposals which I have today tabled in Brussels regarding United Kingdom participation in the European Economic Community's financial arrangements in the event of our accession.

In brief, Her Majesty's Government have proposed that over the first five years of our membership of the Community our contribution to the Community budget should build up by equal annual steps to a basic key which should lie in the range of 13–15 per cent. of total contributions. Thereafter, for a further three years, the year-to-year changes in our share of contributions should be subject to limitations on the lines of the correctives the Six have provided for themselves up to 1978.

We have further proposed that there should be provision to review, if necessary, the operation of the financial arrangements in an enlarged Community.

The House will expect me to explain the significance of these proposals for the United Kingdom. I must first emphasise that any estimates inevitably depend on a large number of assumptions which have to be made about the ways in which the enlarged Community would develop in the years after we and the other applicant countries had joined. To take just two of the most important factors: it is really very difficult to judge what the size of the Community's budget will be at the end of this decade, and what share of the total will be devoted on the one hand to schemes of agricultural support, from which we, with our relatively small and highly efficient agriculture, cannot expect to be major beneficiaries, and on the other to regional and industrial development and other programmes.

It is because of these uncertainties that in the past the Six themselves have in practice reviewed their own arrangements whenever unforeseen developments have upset the balance which previous agreements were expected to produce. We have, therefore, proposed to the Six that a suitable review provision should be an essential part of any agreement.

Having made clear to the House the inevitable limitations of any estimates, I can give some indication of what we expect the proposals we have put to the Community might involve. If we assume that the Community budget in 1977 was to be 4,500 million dollars as we have suggested to the Community, then under the proposals we have now made, after making an estimate for receipts, our net contribution would build up gradually from about £30 million in 1973 to about £140 million to £180 million in 1977. If, however, the Community budget remained at its current level of about 3,000 million dollars, then our net contribution would reach about £60 million to £85 million in 1977, on the same estimated basis of receipt.

We have also to take account of the fact that in the short term, membership of the Community will have certain other adverse effects on our balance of trade as a result of the increased cost of food imports and the loss of some of the trade preferences we enjoy in other markets. For this reason, it is important that we should move up gradually towards our ultimate contribution.

Neither this Government nor our predecessors have ever attempted to disguise the fact that membership of the Community will involve a substantial net contribution to the Community budget and, at least in the early stages, other balance of payments costs. But again, like our predecessors, we believe that account must also be taken of the prospect of dynamic economic advantages of membership which would be substantial. As to these, one has to make a judgment about the likely response of British industry to the opportunities and challenges that would be presented by our entry into the Community. The Government's judgment—and it is shared by the overwhelming majority of our leading industrialists—is that the response would be vigorous and determined and that we could expect to achieve a significantly higher economic growth rate if we joined the Community than if we remained outside.

The Government also consider that membership of an enlarged Community will provide considerable opportunities for British farmers. Without underestimating the problems that have to be faced in the early years of our membership, therefore, we hold firmly to the view that our entry into the Community on reasonable terms would be in the long-term economic interests of this country.

We are also convinced that enlargement of the Community would be in the interests, political perhaps even more than economic, of the whole of Western Europe. It is with these considerations in mind that the Government have formulated the proposals which I have tabled in Brussels today.

Mr. Harold Lever

In view of the complex nature of the matters which the right hon. and learned Gentleman has related to us, and since these are interconnected with other complex matters, including the levy, may I put it to him that I feel that the House would wish to have time to consider and reflect upon all these questions and take an early opportunity to debate the matter in the New Year? May I suggest that that would be a more suitable occasion to discuss these proposals

Mr. Rippon

I share the right hon. Gentleman's view about the complexities and importance of these matters. I have been in consultation with my right hon. Friend the Leader of the House, and we have in mind that it would, perhaps, be appropriate to have a debate in both Houses of Parliament before the next Ministerial meetings on 2nd February.

Mr. Sandys

While congratulating my right hon. and learned Friend on the considerable progress already made, may I ask him two questions? First, is there not a tendency, when weighing the effect of any particular proposal upon our balance of payments, to under-rate the undoubted benefits which British industry will secure—[An HON. MEMBER: "Name them."]—through access to this greatly enlarged market? Second, with reference to the discussions, of which we read in the Press this morning, among the Six in Brussels about proposals for the length of the transitional period for Britain to adjust herself to the Community arrangements, will he say whether those discussions were preceded by consultations with Her Majesty's Government?

Mr. Rippon

I think that people do tend to underestimate the benefits. As the right hon. Gentleman the Member for Birmingham, Stechford (Mr. Roy Jenkins) told the House in the debate on 25th February last year, if there were simply an additional growth rate of ½ per cent. in our gross national product over five years as a result of our joining the Community, that would give us an additional £1,100 million. It is in that context that we have to consider these figures.

In reply to my right hon. Friend's second question—No, Sir, there were no consultations. As I told the House when I made an earlier statement, it was our view that this was a crucial question in the negotiations, and we hoped that the Community would not take even a provisional point of view on these matters until we had had an opportunity of pressing our case in detail and discussing it with them.

Mr. Thorpe

The right hon. and learned Gentleman has made an important statement, since it refines the issues involved. I have two questions to put. May we assume that the 13 per cent. to 15 per cent. contribution would be to the total budget of the enlarged Community of ten? If that be so, what is the percentage of our gross national product in relation to the ten? Second, would the ½ per cent. per annum increase in our growth cover the cost to our balance of payments of the initial phases of joining?

Mr. Rippon

Several questions are raised by this matter. As regards the initial phase of our joining, the period of greatest impact, we have said that we should move up gradually towards our figure of 13 per cent. to 15 per cent. at the estimate of contributions of the ten, 13 per cent. to 15 per cent. is based on the estimate of contributions of the Ten, not on existing contributions. In arriving at that figure, we have had regard particularly to the build-up of the contribution of the Federal Republic of Germany, which, perhaps, is nearest—though there are inevitable differences—to our own position in this matter. The bracket comes because there are various ways of making that calculation.

Mr. Thorpe

May I put the question again? Could the right hon. and learned Gentleman say, if the 13 per cent. to 15 per cent. is to be our contribution, what is our percentage of gross national product in relation to the total gross national product of the Community at large?

Mr. Rippon

One of the difficulties about it is that one cannot have regard simply to gross national product, although we have had regard to it in putting forward our figure, with particular reference to the contribution of Germany. This is a gross figure of contribution to the budget. What matters, in effect, at the end of the day—and these were the figures I used—is the net contribution we have to make, having regard to receipts. It is that factor which we have to consider and, perhaps, have some discussions about in depth.

Mr. Turton

Could my right hon. and learned Friend explain the disparity between the figures which he has given today and the figures in the February White Paper? He has mentioned a subsidy to the French farmers of 15 per cent., amounting to £140 million in 1977. In the February White Paper the figure given was £270 million. Can he explain why there is such a wide disparity between the present assessments and those of his predecessors?

Mr. Rippon

I think that the basic difference between the figures which I have given and those in the White Paper is that I have referred to net contribution and the White Paper was referring to gross contribution. I think that net is right. To put the matter further into perspective, as I have explained, our net contribution under the proposals which we have made might build up approximately—the wide variation arises because the figures are rather speculative at this stage—to a figure of the order of £60 million to £180 million, depending on the size and the shape of the budget. One must then have regard also to what I described as the adverse short-term effect on trade balances, which might amount to something like £200 million to £300 million at the end of the transitional period. I think that that gives an indication of the range of figures involved.

Mr. Skinner

The Chancellor of the Duchy has made his statement today, and the Prime Minister spoke yesterday of the Government wanting to conform to the will of the majority in respect of industrial relations. Does not the right hon. and learned Gentleman understand that there is a large majority against the move which he is making, and will he consult the Leader of the House so as to ensure that, before he makes any further concessions in Brussels, he receives a licence from the House?

Mr. Rippon

As the hon. Gentleman knows, these negotiations were started by our predecessors, with the overwhelming support of the House of Commons. The negotiations are now proceeding on the basis which was laid down by our predecessors. There is really no dispute in principle about it. When the negotiations are concluded, the matter will have to be presented to Parliament, which will form a view about it on the situation as it then exists. I must add that I think it quite wrong to talk in terms of concessions in negotiations of this kind.

Mr. Fletcher-Cooke

Does my right hon. and learned Friend appreciate that what worries his well-wishers in this matter is the open-ended nature of the financial commitment? What mechanism is he proposing to ensure that that open-ended commitment is somehow closed? Is it to be by a review body, by a definite financial limit being placed, or how?

Mr. Rippon

We have to bear in mind that as well as an open-ended commitment there are open-ended advantages. [An HON. MEMBER: "Name them."] We must remember that. But, because of the speculative nature of these figures and the difficulty of foreseeing what the position will be in, say, 1980 both as to the size of the Community's budget and its shape, and a whole host of other factors, we have proposed to the Community, as I said in my statement, that there should be some provision for review if things turn out in a way which none of us expect. That would apply not just to the United Kingdom but to any other member of the Community. There are, in addition, various provisions in the Treaty of Rome itself which are in the nature of safeguards.

Mr. Jay

Will the Chancellor of the Duchy agree that, in addition to all this, according to an answer given to me yesterday by the Chancellor of the Exchequer the British Government have now accepted the E.E.C. proposals for monetary union and for more rigidly fixed exchange rates? Are these also additional parts of the price which we have to pay?

Mr. Rippon

I think that it is a long way from a matter of fact, the Community being bitterly divided on the issue at the moment, that they have accepted even the first stages of the Werner Report, and much less the third stage which lies very far in the future.

Mr. Walters

Could my right hon. and learned Friend give some indication of what he thinks will be the effects on our balance of payments?

Mr. Rippon

I thought that I had done that by indicating that the net contribution to the Community on the various assumptions which I had made might be between £60 million and £180 million. One has also to take into account the other adverse short-term effects on the balance of payments which might amount to about £200 million or £300 million at the end of the transitional period.

Mr. John Mendelson

In reference to the purposes on which these large sums of money, which the right hon. and learned Gentleman is inviting the country to contribute, are to be spent, has he studied the statement published by the Commission in October of this year that in the 12 months up to October some 300 million dollars had been spent on the destruction of perfectly good, first-class butter and that it is now proposed for the 12 months starting last October to spend another 300 million dollars on a similar purpose? Is he doing anything, as a condition of the House accepting entry, to change this crazy and wasteful policy before inviting us to take part in it?

Mr. Rippon

I am grateful to the hon. Gentleman for giving information which has been of some encouragement to some people, not least to New Zealand. These are relevant factors in the negotiations which of course we have in mind. In fixing our contribution we are concerned not only with the gross amount we pay, but what we pay it to and what we pay it for. This is what we were discussing—both the size of the Community's budget and its shape.

Mr. Ronald Bell

Would my right hon. and learned Friend agree that as, at least in the initial stages, the probable result of our accession would be a reduction of ½ per cent. in our growth rate below what it would otherwise be, the additional detriment which he has described would be the £1,100 million which he mentioned, but in the opposite direction?

Mr. Rippon

If any of the three British Governments which at various stages have pursued these negotiations had that in mind, I should be astonished.

Sir G. de Freitas

Coming back to the figures in the original statement; would it not be more significant if in future statements the right hon. and learned Gentleman gave not only figures of the estimated cost to us, but figures of the estimated gains to our economy?

Mr. Rippon

One of the difficulties is that all the figures are rather speculative. All our experience with Treasuries in all countries is that they have some difficulty in making forecasts for next year, much less for 1978, and those forecasts are on the budgetary side, which makes them rather easier. I have no doubt that the right hon. Gentleman is right. The right hon. Member for Stechford (Mr. Roy Jenkins) put it very reasonably when he suggested that the hardly measurable figure of ½ per cent. growth rate over five years, that is a cumulative build-up, would be an addition of £1,100 million. That growth rate has to be translated into an annual figure of benefit to the balance of payments, but in so far as the increase in the growth rate would largely result from access to this enormous market, we may assume that a fair balance can be struck in the proposals which are being made in Brussels.

Mr. Tugendhat

Could my right hon. and learned Friend tell us how these figures of 13 to 15 per cent. will compare on the same basis with the contributions of the Federal Republic of Germany, France and Italy as the nations most comparable with ourselves?

Mr. Rippon

We think that it will strike a fair balance. There will be some argument about it, but one has to have regard not only to the gross contribution but to the receipts, and what we are concerned with is that our contribution to the Community budget will not be unduly high in all the circumstances. The Community argues that one of the great advantages which we will get, being highly industrialised, will be access to its great and growing market.

Mr. Barnett

Because the broader vision of a united Europe is of such vital importance, is it not all the more important that the right hon. and learned Gentleman should make it clear to the Six that we should not be paying a grossly disproportionate net contribution? Would he therefore clarify what he was saying about review clauses for the period after the end of the transitional period? Does he consider it possible to put forward a proposal which would allow for something less than 90 per cent. of the import duties and levies and the 1 per cent. added value tax?

Mr. Rippon

We are not asking for an adaptation of the system itself, although it should be borne in mind that the Heads of Government at the Hague in 1969 envisaged that as a possibility. We envisage that we can conform to the system and we have put forward what has been described as a fair contribution on our part. We will discuss on that basis. I think that it is the only way in which we can usefully proceed.

Mr. Blaker

Regardless of the detailed arrangements which may be agreed, if it became clear in the light of experience that the arrangements for the financial contributions were damaging the economy of a particular country, would it not be in the interests of other member countries to remedy the situation? Is not that how the Community works?

Mr. Rippon

That is certainly how it works in practice and that is what the Community says. In one of its helpful first documents it pointed out that if an intolerable and inequitable situation arose, affecting the interests of any member, the Community institutions would deal with the situation. I have said that I accept the financial side safeguards in the Treaty, such as Article 108 and others, but one of the particular difficulties we still have is quantifying the results and likely benefits. In addition to our estimates for the period of five years and the correctives thereafter, there would have to be some understanding if a difficulty arose, now unforeseen, and there would have to be some review procedure. I am not being dogmatic about the review procedure. We must try to bring out something which may be accepted by the Community as a solution which will be in accordance with the principles of the Treaty.

Mr. Loughlin

Is the right hon. and learned Gentleman aware that there is increasing fear, both inside and outside the House, that the Government are determined to enter the Common Market at all costs? Will he make it absolutely clear to those with whom he is negotiating that the decision to go in will be taken clearly and positively by this House?

Mr. Rippon

I am grateful to the hon. Gentleman; that was a most helpful intervention. My statement has made it clear that of course we think that cost is a relevant factor and it is perfectly clear that any proposals will have to be put to the House before any agreements are reached.

Sir B. Rhys Williams

Would my right hon. and learned Friend bear in mind in relation to the Werner Committee's proposals for total monetary and economic union in Western Europe that The Times thought that this was possibly the most important development in Europe since the Roman Empire? But would he also bear in mind that Rome was not built in a day? Would he further recall that Rome was eventually built, but did not last for ever?

Mr. Rippon

I certainly hope that the Community will last even longer than the Roman Empire. There is no doubt that the proposal for increased monetary cooperation among the nations of Western Europe is something which we should welcome. What is more, it is in our long-term interests that we should be part of any discussions which take place in Western Europe about the likely nature of international monetary co-operation by which we are directly affected.

Mr. Harold Lever

When the right hon. and learned Gentleman comes to discuss monetary co-operation, will he expose to the House what his notions will be on the ancillary questions, not directly involved in the negotiations, of our own attitude to the sterling area and the subject of sterling as a reserve currency? Would he let the House know what his position will be on these matters, which will be of fundamental importance in affecting the outcome of the negotiations?

Mr. Rippon

We made it perfectly clear from the outset that these discussions were not part of the negotiations. It was agreed that there should be discussion of these matters at the appropriate time, but we have not begun such discussion yet. As it goes ahead, we will certainly keep the House informed. Meanwhile, specific questions on these matters should be addressed to my right hon. Friend the Chancellor of the Exchequer. However, I take the point and we shall have to consider it.

Mr. Crouch

Is my right hon. and learned Friend aware that when he comes to the House and reports to us on his negotiations it is with some urgency that we question him as to the progress he has made and as to the articles which might or might not be involved? I put it to him that whilst these problems are of immense importance to this country, there are other problems of the third world which grow ever larger as a direct consequence of this position. Is he proposing to have discussions with the Commission on the question of harmonisation of overseas aid in future?

Mr. Rippon

That is something we are concerned with now and with which we would be concerned within an enlarged Community. All the evidence is that the Community has adopted very forward-looking policies in its relations with the under-developed countries. This is part of the problem we have to consider, particularly in relation to underdeveloped countries of the Commonwealth and those which are members of the Commonwealth Sugar Agreement. Of course, we have all this in mind and we would expect an enlarged Community to have a forward-looking and progressive policy in these matters.

Mr. Shore

The House will want to examine closely the arithmetic of the transitional period which the right hon. and learned Gentleman has put to us. I am sure he will agree that it is the permanent post-transitional arrangements which matter most. Will he confirm that he has accepted financial regulations to give parities in the Six—that is, that Britain will be prepared to contribute the full fruit of the levy on its agricultural imports, the total yield of its own external tariffs, plus 1 per cent. of value-added tax to the Fund in the period after the transitional period, whether five or eight years are needed? Is that so?

Mr. Rippon

I appreciate what the right hon. Gentleman has to say about the complexity of these matters and the House will wish to consider in detail the mathematics involved, as far as one is capable of expressing these things mathematically. I have said that we have been negotiating on the basis that we accept the financial system which the Community has adopted. I remind the right hon. Gentleman that I added that, of course, the Heads of Government indicated that in certain circumstances there could be adaptations.

Sir Harmar Nicholls

Does not my right hon. and learned Friend think that the time has come when he should spell out in clearer terms, with all the risk of affecting his negotiations, what he considers will be "reasonable terms"? This is a phrase which he has used so often, but in making his presentations he seems to represent what to me are rather onerous terms as being reasonable. The damage is clear and can be measured to some extent, but the supposed advantages are speculative. For example, can he measure "dynamism"? From the purely domestic point of view, it is a difficult situation because when we have such statements containing very important figures they are distributed only to the Opposition Front Bench and the Leaders of the Liberal Party, who have a coalition on this issue, and it means that other right hon. and hon. Members of this House who want to probe have not got the facilities in order to follow the matter through.

Mr. Rippon

My hon. Friend will recall that earlier I said that we envisaged that there should be a debate in the House before the next Ministerial meeting on 2nd February. I hope that that will help right hon. and hon. Members to have an opportunity to consider the implications. These things cannot be measured absolutely precisely. I am sure that the terms we have put to the Community are fair and reasonable. Of course, the Community says that they are too fair and reasonable and, therefore, it has put forward its own views as to what would constitute a mutual balance of advantage as between the existing Community and the applicants. That is what the negotiations are about.

Mr. McBride

I want to refer to the problem of regional industrial development. Is it the right hon. and learned Gentleman's assumption, or is it a fact, that regional industrial policy will continue as at present? Taking Wales as an example, can he envisage any reductions in the financial incentives with which we hope to attract more and more industry to the Principality?

Mr. Rippon

What I am talking about is an increase in these facilities. This is one of the reasons that I am concerned about, not only the ultimate size of the Community's budget but its shape. At present, the greater part of the Community's budget is devoted to agricultural support, and because of the nature of our small and efficient agricultural industry our receipts are very much smaller than those of anyone else, which is a factor to be borne in mind. One of the assumptions to make is that if the shape of the budget changes in the years ahead so that a smaller proportion is devoted to agriculture and a higher proportion to regional and other investment programmes, a new situation is created which is more beneficial to us.

Mr. Longden

Will my right hon. and learned Friend make it clear that among those misguided persons and bodies which are opposed to our going into Europe on any terms there should not be included, first, the third world to which my hon. Friend the Member for Canterbury (Mr. Crouch) has referred, and, secondly, at home, our agricultural industry, since what is certain is that both will benefit?

Mr. Rippon

I am sure that my hon. Friend is perfectly right about that.

Mr. Rose

Is the right hon. and learned Gentleman satisfied that the transitional period of five years is long enough to ensure that average wages, holidays, redundancy payments, family allowances and other benefits in this country will go up to the superior levels in the Common Market countries? Is not the Government's current legislation directly blocking this parallel development towards parity with the Common Market countries in these respects?

Mr. Rippon

I cannot accept the second part of the hon. Gentleman's supplementary question. I believe that the transitional periods we are proposing are perfectly adequate and would enable us both to adjust to the difficulties and to seize the opportunities in a fair way. It is true that over a wide range of social security benefits wages and holidays the levels are rather better in the Community than they are here.

Mr. Marten

Does my right hon. and learned Friend recall saying that the application had the overwhelming support of Parliament? I remind him that it was not this Parliament which did so but the last Parliament. There is a big difference in that. [Interruption.] Hon. Members may not like it, but they are going to hear it. My right hon. and learned Friend also said that there is no doubt about the dynamic economic advantages of going into the Common Market. Does not he recall that the White Paper said that this was unquantifiable, that the National Institute said that there are no advantages in going in, and that the C.B.I, report is highly suspect by a great number of businessmen? Will he inform the country and Parliament what these so-called dynamic economic advantages are?

Mr. Rippon

I do not think that my hon. Friend should complain about the change in the composition of this House; I do not. It is the upper limit of the advantages which is unquantifiable. The report to which he refers was not a report of the National Institute. It was by three of its members and was published under the auspices of the Institute, which made it clear that the authors were answerable for their own views.

Mr. Milne

Is the right hon. and learned Gentleman aware that, apart from the problematical likelihood of an extension of the transitional period, he has told us nothing new on this matter at all? What he has done in his statement is to underline the importance to British farmers of the Common Market policy. He appears to be in the mood to sell our E.F.T.A. friends and our Commonwealth partners down the river in the interests of British farmers.

Mr. Rippon

The hon. Gentleman would be well advised to study my statement before he assumes that there is nothing new in it. I think that he will find that what I have had to say is of some significance.

I attended a meeting of the E.F.T.A. Council of Ministers in Geneva recently and we are all moving forward together in a broad front. Some of our E.F.T.A. partners are applying for membership—two of them with us. Others are applying for association. Others are seeking arrangements which will have regard to their particular circumstances of neutrality, whether forced or voluntary. The hon. Gentleman need not worry on that score.

We are in close touch with the Commonwealth, both with the developed, independent nations and the developing, independent nations; we have dealt very largely already with the dependant territories, with some reservations still about Hong Kong. The hon. Gentleman is completely misinformed about the position in E.F.T.A. and the Commonwealth. Both of them know that it is in the interests of Britain, of Europe and of the free world itself that these negotiations should succeed. If there are difficulties in bringing about a successful conclusion to these negotiations, I ask my hon. Friend to believe that the problems which would be aroused by their failure are far greater.

Mr. Mather

Is my right hon. and learned Friend aware that it is not only the financial commitment that is open-ended but also the political commitment, and that this is what causes many people a great deal of concern? Could he give the House any reassurance on this matter?

Mr. Rippon

I trust that the whole life of the nation is open-ended. Things will go on even after the end of the transitional period. One cannot precisely guess what will be the position in 1980 in regard to the pattern of world trade. Of course, a great deal will happen. We can only make reasonable assumptions as to how we see progress developing.

Mr. Sheldon

What estimates has the right hon. and learned Gentleman made of the gross contributions and receipts? Is he not aware that the higher costs he envisages would be due only if we had economic growth rates rather higher than they are at present, and that the lower estimates would be applicable if our economic growth rates were lower—in other words, that the more prosperous we become the more we will be expected to pay? What ceiling is envisaged over the period involved, is it likely to be annual and what negotiations has he had about this matter?

Mr. Rippon

What I have given is what we think would be our net contri- bution. This will depend on assumptions of the size of the budget and the gross receipts. I cannot go easily into those details now, but there is some dispute between us about the accuracy of the figures of estimates. We say that our figures are the more accurate; the Community says that its figures are the more accurate. We shall have to go into the matter in detail.

It is perhaps wrong for the hon. Gentleman to have used the word "ceiling". What I have suggested is that there is a percentage contribution which we could make which we regarded as our key and that we should build up to the figure by equal stages over five years and correctives for three years thereafter. There should be correctives—that is to say, there should be no wild increases in our percentage contribution by any factor, but it would be limited by a certain percentage per annum thereafter. One would have to see what was the budget and what was our contribution. If it were to get wildly out of line at any stage, then there must be some sort of machinery within the enlarged Community in order that we should review it. The Community says, "You can take the matter for granted—what do you want provision for?" But I think that it would be helpful that we should have this provision.

Several Hon. Members


Mr. Speaker

Order. I must protect the business of the House.