§ The Chancellor of the Duchy of Lancaster (Mr. John Davies)
With your permission, Mr. Speaker, and that of the House, I will make a statement about the main matters considered in the Council of the European Communities since I last reported to the House on 2nd July.
May I take this opportunity to apologise to the right hon. Member for Stepney (Mr. Shore) for the late delivery to him of a copy of this statement which according to the conventions should have been in his hands? I am sorry that that was the case.
There have been three meetings of the Council—one of Foreign Ministers, one of Ministers responsible for questions of the environment and one of Agricultural Ministers.
My right hon. Friend the Minister of Agriculture, Fisheries and Food made a statement to the House on 18th July on the meeting of Agricultural Ministers, which took place on the preceding two days.
The meeting of Environment Ministers on 19th July approved a Community environment programme, in two parts. The first part deals with the control of pollution and the second with the improvement of the environment. In addition there are proposals for concerted Community positions in the work of international organisations in the field of environment. The adoption of this programme fulfils the decision of the European Summit meeting of October 1972 that an action programme for a Community environment policy should be established by 31st July this year.
The meeting of Foreign Ministers on 23rd and 24th July was concerned principally with a number of aspects of the Community's external relations.
1617 The Council reached agreement on the opening statement to be made on behalf of the Community at the Conference between the Community, the countries already associated with the Community under the Arusha and Yaounde Conventions and those developing Commonwealth countries which are eligible for association under Protocol No. 22 of the Treaty of Accession, which opens in Brussels today. My right hon. Friend the Minister for Overseas Development is attending that Conference on behalf of the United Kingdom.
The statement of the Community's views in no way prejudges the content of the new Association Convention, nor does it seek in any way to oblige the Commonwealth countries to make a choice prematurely between the different options that will be open to them. The Associated and developing Commonwealth countries are expected to make preliminary statements in reply, and the negotiations will then be resumed in September. All the developing countries will have every opportunity to make their own views and wishes known, both at this meeting and in subsequent meetings.
The Council considered further the Community's approach to the forthcoming multilateral trade negotiations under the GATT, in the light of recent developments in the international monetary situation. They agreed on the line to be taken by the Community in further preparatory work for the meeting of the participating countries of the GATT which is to take place in Tokyo in September.
The Council also discussed further an offer to be made to those countries which are claiming compensation from the Community following its enlargement, in accordance with Article XXIV: 6 of the GATT. Progress was made, and it was agreed that further consultations should take place with the aim of reaching a constructive and definitive negotiating position by early September.
The Commission yesterday presented the Council with a supplementary budget for the current year amounting to 1008.66 million units of account, and the implications of this for United Kingdom public expenditure if the total supplementary budget is finally accepted would be an extra gross cost of £33.2 million offset by certain additional receipts. Of this 1618 figure of 1008.66 million units of account, 879.29 million units of account were for the agricultural budget: 120 million units of account for the Social Fund and 9.37 million units of account for administrative purposes. The agricultural section of the supplementary budget was accepted by the Council as consequential on decisions previously taken and will now be forwarded to the European Parliament for further consideration. The Social Fund increase was not agreed and will be the subject of further consideration. As a result of pressures to achieve savings approximately 15 million units of account have already been identified and we expect more.
The Council agreed that the Community should announce its readiness to participate in the negotiation of a new textiles agreement under the GATT, in succession to the long-term agreement for cotton textiles.
A number of procedural proposals for improving the efficiency of the meetings of the Council of Ministers were adopted.
§ Mr. Shore
From the five minutes or so that I have had to look at the statement, I can strongly confirm the right hon. Gentleman's words yesterday when he said that what he had to announce about the increased size of the Community budget would be received with a pretty sickening thud in this country. This is an appalling increase and an equally appalling statement.
To many of us it is outrageous that the right hon. Gentleman should come to the House now and tell us of a decision made by the Council of Ministers only yesterday involving £30 million expenditure by this country and a supplementary increase in the whole budget of over £400 million in one year when he refused a fortnight ago to answer a PNQ which I raised on this very matter—and a number of his hon. Friends supported him in his refusal to reply to it. This is treating the House of Commons with absolute contempt and is making it impossible for us to exercise what residual powers are left to us under the terms of the Treaty and the European Communities Act relating to European matters.
To many people it is almost incomprehensible that this year this £400 million 1619 should be asked for. If, as we have been told, world food prices generally have risen above Community prices during the past year, and therefore the Community has nothing to do with the increase in British domestic food prices, why is this vast extra expenditure needed when half the Community food budget is spent on subsidising dumped Community surplus export food on the world market? If the right hon. Gentleman can explain that I shall be very surprised. Is it due to the most incompetent negotiation by the Minister of Agriculture on food prices in the Community only two months ago, or is it due to the fact that the whole system of monetary compensation amounts, which he has been so keen to press earlier, has blown back and misfired?
The right hon. Gentleman must be aware, and surely will agree, that we have reason to be greatly concerned about the preparations for the GATT talks this autumn. We have had a steady retreating, apparently under French pressure, from the original position to ever-increasing pre-conditions and restrictions which threaten the whole opening of these talks in Tokyo in September.
Having heard all these statements covering so many different matters, I must ask why the right hon. Gentleman has failed to report to the House on, and to raise with the Council of Ministers this time in either Copenhagen or Brussels during the whole course of the day of the meeting of Foreign Ministers, the question of the French nuclear testing? Why, on the day after the bomb was exploded in the South Pacific, was this matter not put on the agenda? Is it because he asked and was refused or that he did not ask at all?
Lastly, did the right hon. Gentleman take the sensible precaution of raising with the Council of Ministers the action that Britain might be forced to take to safeguard its balance of payments this year now that our balance of trade with the Nine is running at a deficit of £1,000 million?
§ Mr. Davies
When the right hon. Gentleman put his Private Notice Question recently, I told him that I did not have a proposal before me and it was therefore impossible to respond to his 1620 question in the terms that he wished. I am sorry that it should be so, but it was a fact.
On the broad question of the effect of the common agricultural policy on the budget and on the contribution that Britain makes to it, the right hon. Gentleman knows as well as I do that there are many factors in that policy that we would certainly like to have amended. He knows very well, and it has been reported regularly to the House, that at present the Commission is engaged on a review of the policy, upon which we expect to receive a report by October, which we strongly hope will give us the opportunity of raising many matters which concern us.
The right hon. Gentleman is right in saying that a considerable part of the additional budget arises from the changes in parities with the effect that they have on monetary compensatory amounts. It is a matter of fact that the common agricultural policy, as at present devised, throws up this heavy additional monetary compensation amount, and we pay our part. I think that he also knows that in this respect the Government hope that the Commission's report will enable us to see means by which these heavy charges can be reduced. As he will have heard from my statement, the next step in the operation is for the supplementary budget in question to be considered by the European Parliament— [Interruption.] It is a matter of fact. Is the right hon. Gentleman seeking to infer that this is not so? The right hon. Gentleman and his right hon. and hon. Friends voluntarily decided not to be parties to that assembly where they could effectively bring their voices to bear if they wish to do so.
I do not agree with the right lion. Gentleman about the GATT negotiations. The process of moving towards an effective discussion starting in Tokyo in September is proceeding satisfactorily. I realise that these are difficult preparatory tasks, but I do not feel disquieted by what is happening at present.
Matters relating to nuclear tests are not germane to the proposals upon which I have been reporting today. The Council of Ministers has no locus in those matters.
§ Mr. Adam Butler
Will my right hon Friend tell us something more about the 1621 textile agreement to which he referred? Will he press for some arrangement whereby our partners in the Community bear equally with us the load that we have to bear at present from ever-increasing imports from low-labour-cost countries?
§ Mr. Davies
Yes. As my hon. Friend knows, it has been a matter of concern to the Government that the extent of penetration of our market in cotton and textile terms is substantially greater than that of other member States. Certainly it is our hope that in the negotiation of a new long-term textile agreement it will be possible for that load to be shared more equitably.
§ Mr. Jay
Is it true, as reported, that the Agricultural Ministers agreed that if beef prices should fall, even by a small fraction, between now and the autumn, import duties and levies would be reimposed on beef, which would prevent a fall in prices from the present outrage-our levels? If so, why did a British Minister agree to such a proposition?
§ Mr. Davies
The position surely is that the level of prices for beef in the world market is unpredictable. That being so, the necessary provisions were made so that such levies could be reimposed.
§ Mr. Powell
If the Council of Ministers approved the supplementary budget, what can the European Parliament do about it? Alternatively, if the European Parliament can do something about it, why was it approved by the Council of Ministers? Do I deduce from my right hon. Friend's first reply to the right hon. Member for Stepney (Mr. Shore) that Her Majesty's Government themselves had less that a fortnight's previous knowledge of the proposed supplementary budget which was approved yesterday?
§ Mr. Davies
On the second part of the question, the extent of that budget was defined only yesterday. There has been protracted argument and discussion about the content of the budget for weeks because the matter was conducted within the framework of discussion in the Community. Until such time as there is a firm proposal there is no basis on which matters can be discussed in this House.
1622 On the subject of activities of the European Parliament, there is an obligation on the Council to put to the European Parliament such a supplementary budget for its consideration. It has within a certain period to make known its views on the supplementary budget—views which the Council can then take into account.
§ Mr. Heffer
Has not the right hon. Gentleman made one of the most astonishing statements ever made in the House, certainly in my recollection? First, he said that he knew of no proposals whatsoever. Then he referred to protracted discussions in which he was not involved. Now, we find out that this country did not learn of the budget until yesterday. Is it not clear that the Government must begin to stand up to the Council in these matters and that this House must have a full debate on the issue at the earliest possible moment?
§ Mr. Davies
The hon. Member for Liverpool, Walton (Mr. Heffer) did not get my answer correct. I said that the defined budget was not available until yesterday. I added that there had been discussion and argument about the budget for weeks within the framework of the Community.
§ Mr. Scott-Hopkins
Does not my right hon. Friend agree that, as the monetary compensatory amounts account for a large part of the supplementary budget, there is even more need to work as quickly as possible and with extra vigour towards a monetary union along the lines proposed by my right hon. Friend the Chancellor of the Exchequer earlier this year? Secondly, does not the remaining part of this supplementary budget underline the firm stand taken by the Minister of Agriculture in refusing to accept, intially and indeed throughout the protracted negotiations for the farm price review, the stupidly high levels of price proposed by the Commission? Will my right hon. Friend not confirm that, if the European Parliament decides not to accept the supplementary budget there are two ways in which it can give effect to that refusal —first, by refusing to pay the civil servants working in the Commission and, second, by refusing to give advice to the Council?
§ Mr. Davies
It is undeniable that the problems caused by compensatory monetary amounts are recognised as being a major problem to the Community and that progress towards monetary union would help to overcome it. The determined efforts of my right hon. Friend the Minister for Agriculture have led towards a much more realistic attitude to farm pricing in the Community, and will continue to do so.
§ Mr. Hooson
Will the Minister explain that exceptionally vague portion of his statement about pressure of savings resulting in identifying "15 million units of account"? What does that mean? If the detailed budget were put before the Community only yesterday, may we take it that the 15 million units of account were identified only yesterday?
§ Mr. Davies
No. The identification of those savings has also been under consideration and pressure for some time. As the hon. and learned Gentleman knows, any budget is composed of a series of different sections in which it may be possible to find economies. This is what has been proceeding in the Community.
§ Several Hon. Members rose—
§ Mr. Speaker
Order. I am in a certain difficulty.
The remaining time today has been allocated to private Members. This is an important statement. I will not stop the supplementaries now, but I would ask hon. Members to be as brief as possible because these other debates have been arranged for certain times.
§ Mr. Marten
In view of the fact that the supplementary budget was defined only yesterday, may we assume that this great sum which we have to pay out had the approval of the British Cabinet? Presumably it will have to come before the House under a Supplementary Estimate. What will happen if the House rejects it?
§ Mr. Davies
As was said in a debate last night, the House is in a position to reject a Supplementary Estimate should it come before the House. There is no doubt that in that event the Government would have to take the consequences of that rejection.
§ Mr. John Mendelson
Apart from the scandalous revelation that the budget was not defined until yesterday, was the Minister in a position to agree to the budget immediately on having it presented to him for the first time? Will he say more about that brief reference which he made to the fact that agreement was not reached on the proposals for expenditure on social policy? Is it correct, as reported in Paris, that a proposition to devote £50 million to certain policies which might, to some extent, benefit this country has not been agreed, in fact has been blocked, while £33 million in addition will fall on the shoulders of the people of Britain to finance the butter mountain and the sale of butter to the Soviet Union? How could the Minister agree to the additional £33 million expenditure in the absence of agreement on the £50 million on social policies?
§ Mr. Davies
As the hon. Member will have realised from my statement, the increase in the budget related to agricultural matters is consequential on decisions taken previously. Thus, the figures which arise from those decisions are a matter of fact and a matter of consequence. The position of the Social Fund is different. There is not a specific criterion which gives rise to an automatic extent in figures. Therefore, there is a decision to be taken about the extent of the Social Fund. The hon. Gentleman may take my word for it that I have struggled strongly to obtain an adequate increase for the social budget. No agreement was reached yesterday, but I am not unhopeful that an agreement will be reached in due course as a result of maintaining these pressures. The hon. Gentleman will realise that there is a distinction between the two forms of fund.
§ Sir D. Dodds-Parker
Is my right hon. Friend aware that these matters have been discussed in a committee of the European Parliament for some time in the absence of Opposition Members and that their absence has been regretted, especially the absence of so many individuals who are constructive and could help so much in these deliberations? I thank my right hon. Friend for coming so promptly to the House, which is about to adjourn for two-and-a-half months, to advise us about these matters. The same handful of hon. Members 1625 would have made a dickens of a fuss, to put it mildly, if my right hon. Friend had not made such a statement today.
§ Mr. Davies
My hon. Friend is right. Part of the undertaking that the Government have given is that I should come and report regularly to the House. I have endeavoured to do so continually and will continue to do so. Many of the questions that have been raised here could have been raised by Labour Members to good effect in the European Parliament.
§ Mr. Spriggs
Will the right hon. Gentle. man take notice of the fact that many of us regret that the agenda of the Common Market was defined only as late as yesterday? We should welcome some spirited action by the United Kingdom representatives at the EEC meetings, so that that our Ministers would reject out of hand any proposals that might lead to an increase in the cost of living. Will the right hon. Gentleman bear in mind that if he agrees to the addition of an import levy on the already high cost of food such as beef it will put that food out of the reach of ordinary people in this country?
§ Mr. Davies
I take note of what the hon. Gentleman said. I must clarify one point. It was the supplementary budget, not the agenda, which was defined only yesterday. The Government have strongly pressed for the need for a proper interval between the submission of proposals to the Council and its consideration of them. Decisions to that end were taken yesterday and I am hopeful, therefore that we shall not be faced again with a short time in which to consider proposals.
§ Mr. Biffen
Does not the rocketing increase in the size of the agricultural fund and the increases in the size of the Social Fund being sought by my right hon. Friend bring appreciably nearer the day when the Community budget will have to be financed out of a 1 per cent. rate of VAT? In these circumstances will he be a little more cautious before disavowing that the second stage of monetary union implies a harmonious VAT?
§ Mr. Davies
The second stage of monetary union has not been defined as yet. It is not therefore a matter which has so far arisen.
§ Mr. Orme
Will the right hon. Gentleman explain to me and to the British taxpayer why the Government have flatly refused to introduce subsidies for important foods in this country, yet in the same week that they made that refusal they agreed to proposals that the Government should subsidise people in the Community? What is the difference?
§ Mr. Davies
The hon. Member has failed to appreciate that the subsidies in question included a subsidy to the Community in respect, for instance, of butter consumption in this country, which will be to our benefit.
§ Mr. Shore
I hope that the Minister has taken on board the seriousness of this matter. Is it not disgraceful that a fortnight ago the right hon. Gentleman refused to answer a Private Notice Question that I put down on the pure technicality that he did not have a formal proposal, when a draft proposal for the Commission, asking substantially for what he has now announced he has granted, was with the Government and was available to me and other hon. Members? Now, a fortnight later, he has so arranged things that he has made his statement after having agreed to the proposals. It is disgraceful that what he has been asked for is a British subscription to help finance unwanted food surpluses in Europe and yet he has been unable to get some modest quid pro quo through the Social Fund. The right hon. Gentleman has behaved in a way which is quite contrary to the national interest. He has behaved cravenly. That is the only way to describe his actions. If he wishes to be taken seriously about changing the CAP, has it not occurred to him that if he wants to change the CAP this October the correct approach would have been to refuse the supplementary budget yesterday?
§ Mr. Davies
I did not have a draft proposal a fortnight ago, as the right hon. Gentleman infers, and nor did he.
§ Mr. Speaker
No, it would not be in order and I do not think that I would accept such a motion if it were.