EUROPEAN COMMUNITY (DRAFT BUDGET)

HC Deb 10 July 1978 vol 953 cc1106-70

7.0 p.m.

The Minister of State, Treasury (Mr. Denzil Davies)

I beg to move, That this House takes note of Volume 7 of Commission Document No. R/1577/78 relating to the EEC 1979 Preliminary Draft General Budget, together with Volumes 1, 2, 3, 4 and 5, and R/1104/78 and R/519/78.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

I should inform the House that Mr. Speaker has selected the amendment in the names of the hen. Members for Banbury (Mr. Marten) and other right hon. and hon. Members.

Mr. Davies

The principal document before the House relates to the 1979 preliminary draft budget. Document R/1104 contains the Commission calculation for the maximum rate of increase in non-obligatory expenditure, and this will be taken into account when the Budget Council takes its decisions on the preliminary draft budget. Document R/519/78 contains a global appraisal of the budgetary problems of the Community.

I turn to the documents relating to the preliminary draft budget, and I must at once apologise to the House and to the members of the Scrutiny Committee for the confusion relating to some of them. There were misunderstandings about the availability of certain of the budget volumes and this was compounded by a change in Brussels of the system of numbering them. For example, the volume relating to the Court of Justice was described in volume 1, which was one of the first available to us, as number 6, but turned out to be volume 5.

The House will have seen the second addendum circulated by the Treasury on 6th July to its explanatory memorandum; this clarifies the situation and I hope that it is helpful to the House. Volume 6, relating to the budget of the court of auditors, is not yet available in English translation and for that reason is not mentioned in the motion.

The background on the budgetary procedures, in particular on the relationships between the Council and the European Assembly, is contained in the Treasury's explanatory memorandum of 20th June which also contains comparative figures of the provision in the agreed 1974 budget and the Commission proposals for 1979. The report of the Scrutiny Committee draws attention to the principal Commission proposals involving increases in expenditure over that in the adopted budget for 1978, whether in relation to extension of existing policies or for new policies.

The Commission proposals for 1979 will be considered by the first Budget Council on 18th July which my right hon. Friend the Chief Secretary hopes to attend. The Council's decisions on the preliminary draft budget will be incorporated into the draft budget which will then be forwarded to the European Assembly. Tonight's debate will enable my right hon. Friend to take account of the views of the House. I should, however, remind the House that, in accordance with the terms of the Treaty, decisions of the Council are taken by qualified majority voting.

This will be the third year of operation of an experimental timetable under which the Commission tables its proposals in mid-June and they are discussed by the Council in mid-July. This has some advantages, including the fact that the House is able to discuss the budget before the recess, but it also means that the estimates of agricultural expenditure, having been made so long in advance of the year to which they relate, are even more uncertain than they would otherwise be.

These estimates are difficult to make, because they depend to a considerable extent on the volume of surplus production, which can be affected by the weather and other factors, and on the course of world market prices at which surpluses will mostly have to be disposed of. The Commission has indicated that, as in the past, it will re-examine the provision in the autumn when better information will be available, for example, on crop yields and, if it concludes that the estimates are out of date, it will send rectifying proposals to the Budget Council in time for its second meeting in November. Any such rectifying proposals will of course be deposited in the usual way.

Mr. Neil Marten (Banbury)

May we have an assurance that when the Council of Ministers and the Assembly have seen the budget proposal and made amendments to it we shall have another opportunity to debate the matter because it is only at that point that the budget becomes realistic?

Mr. Davies

The hon. Gentleman will appreciate that that is not a matter for me, but I am sure that what he has said will be noted and considered carefully.

The United Kingdom contributes to the Community budget under the own resources system and 1979 is the second of the two final transitional years before the system will be applied in full to the United Kingdom and to the other new member States. At the European Council, is was agreed that all member States would contribute to the 1978 and 1979 budgets in accordance with their own interpretation of article 131. Initially the three new member States, like other member States, would pay over full "own resources", but they would then receive quarterly refunds outside the budget from the original six member States in order to bring down their actual contributions to the level implied by the Commission's interpretation of article 131.

Following the European Council's decision, the Commission has presented the 1979 budget on a full own resources basis and if the budget were finally adopted in identical form with the Commissions' proposals, this would mean for the United Kingdom a gross contribution of 2,801 million units of account, or £1,764 million—20.4 per cent. of the total budget. We would then obtain a refund in accordance with the European Council decisions. I anticipate that the refund to the United Kingdom, if the budget were finally adopted in identical form with the Commission's proposals would amount to some £260 million. The total gross United Kingdom contribution would therefore be of the order of £1,500 million but this will be reduced by United Kingdom receipts from the budget. Receipts are difficult to estimate, but could perhaps be in the region of £400 million to £500 million. This figure does not include the monetary compensatory amounts on our agricultural imports from other member States, which the budget assumes will continue to be paid at the point of export rather than at the point of import.

In any case, we believe it is more appropriate to regard these payments as made for the benefit of the producers in the exporting member States, who are thereby enabled to export to the United Kingdom without suffering any loss of profit, than as a subsidy to United Kingdom consumers. But these figures all relate to the Commission's proposal and the actual United Kingdom contribution will be determined by the size of the budget as finally adopted in December. All I can say is that I anticipate that significant reductions will, by then, have been made on the Commission proposals. For this reason, the figure for the United Kingdom contribution included in the explanatory memorandum must be regarded as illustrative and intended only to show the financial effect of the Commission proposals as originally made and before they have been considered by the Budget Council and the European Assembly.

Because only two member States, of which we were one, had passed in time the necessary domestic legislation implementing the Community's sixth VAT directive, the 1978 Community budget had, in part, to be financed on the basis of member States' GNP shares, these representing a "topping-up" element above the proceeds of customs duties and agricultural levies collected by member States. For the 1979 budget, the Commission has assumed that all member States will have passed the necessary legislation and that contributions based on the system of VAT own resources will replace GNP-based contributions as the third element. As laid down in the own resources decision, VAT own resources are raised by the application of a rate of up to 1 per cent. of a harmonised VAT base throughout the Community. The rate will, of course, depend on the amount of budget expenditure, and the yield of duties and levies, but on the basis of the Commission's proposals in the preliminary draft budget the rate for 1979 is 0.75 per cent.

The maximum rate calculated by the Commission for the 1979 budget of 11.4 per cent, as indicated in document R/1104/78, is relevant to the degree to which the European Assembly has the ultimate power to increase the level of non-obligatory expenditure.

The Commission has explained its approach to this in pages 101 to 106 of volume 7A. The most important point is that it has entered substantive appropriation under budget headings, not only when a Commission proposal has been accepted, but when in the Commission's view a proposal, submitted to the Council by 15th June, has every likelihood of being adopted by the end of the year. Otherwise token entries are made under the appropriate budget headings and on some occasions figures entered under chapter 100. The Budget Council, however, usually takes the view that all items on which no Council agreement exists should be deleted unless agreement is likely in the near future, in which case chapter 100 may be used. In accordance with its approach, the Commission has included provision in the 1979 budget in a number of areas, in particular in relation to energy and industrial policies, where no policy agreement has yet been reached by the councils concerned. I anticipate, therefore, that the provisions will be deleted by the Budget Council.

The Commission has proposed one innovation in the 1979 budget. To the normal budget it has proposed adding a second part, the purpose of which is to cover borrowing and lending operations by the Community. Hitherto, token entries only for such loan schemes have been shown in the budget, these being included to cover any expenditure incurred by the Community in honouring guarantee obligations.

The European Assembly has consistently argued for "budgetisation" of loans, which would involve the borrowing by the Community being entered into the budget as a receipt, and the on-lending as a payment. A number of member States, including ourselves, believe that the Commission's proposal gives rise to a number of practical and legal difficulties which need to be examined in depth. We shall therefore put forward the view that the Commission's proposal for amending the financial regulation, and for having a second part of the budget, should be examined later in the year.

Mr. Tam Dalyell (West Lothian)

When we come to the Government's reply, perhaps we may be told about the Government's attitude to the so-called Ortoli loan. Do they favour such things being the subject of the criteria of the European Investment Bank or are they well disposed towards the Ortoli facility?

Mr. Davies

I shall take up my hon. Friend's generous suggestion to deal with that question in my reply.

Part of the confusion over documentation, to which I referred earlier, related to the budget of the Assembly. The Council will have before it the Assembly resolution of 15th June, a copy of which was attached to the first addendum to the Treasury's explanatory memorandum and which was not available to the Scrutiny Committee at the time that it prepared its report, and the draft budget proposed by the Assembly, which is contained in volume 2 of the preliminary draft budget and is available in the library.

The Council will have the opportunity, if it so desires, to comment on the Assembly's proposals for its own budget. The Council cannot, however, enforce any change because of the non-obligatory nature of the expenditure. However, for the 1979 budget exercise the Assembly is planning a two-stage contribution. Its first draft projects the cost of the Assembly's existing activities, and it will produce a second-stage document towards the end of the year containing proposals which would allow a new Assembly elected by direct universal suffrage to begin its work before the end of 1979.

The Government's general approach to the preliminary draft budget will, as previously, be in line with the Government's approach to domestic public expenditure, and will be to seek to restrain increases in expenditure bearing in mind the constraints of qualified majority voting by the Council, except where increases can be justified in line with our own priorities. I am, however, in considerable sympathy with the views expressed by Commissioner Tugendhat on the need to secure some movement away from the present dominance within the budget of expenditure on the CAP. That can be done only if in the main CAP expenditure can be more tightly controlled.

Agriculture dominates the budget, taking altogether 70.1 per cent. on a commitment basis and 72.7 per cent. on a payments basis. In turn, about 95 per cent. of total agricultural expenditure is accounted for by the so-called guarantee section, which finances all measures of farm price support.

The fact that the taxpayer is also called upon to make such a large contribution is, as the House knows, largely due to the need to dispose of farm surpluses, which the EEC ought never to be producing. Milk, the most surplus product, accounts for no less than 38 per cent. of the guarantee section and over 26 per cent. of the budget as a whole. It remains the Government's objective to bring supply into better balance with demand, and this essentially means bringing support price levels down in real terms. The increase in support prices for 1978–79, expressed in units of accounts, is only just 2 per cent. on average, which is the lowest increase for many years. Despite this, agricultural expenditure remains far too high. It would have been more satisfactory if there had been no increase at all in the support prices for surplus commodities.

Mrs. Gwyneth Dunwoody (Crewe)

May I, therefore, expect that Her Majesty's Government will make it plain to the Commission that far from supporting any further extension of the existing CAP—for example, a common market of sheepmeat—they will seek to lower the amount of support that is given to the CAP?

Mr. Davies

I can answer that question by saying "Yes". The British Government have no interest in extending the scope of the CAP. Indeed, it is in our interests to try to reduce expenditure on it.

Also, changes in the green currencies, agreed at the same time as the Agricultural Council decided price changes, lifted the average real increase in the EEC as a whole from the apparent figure of 2 per cent. that I mentioned in nearly 7 per cent. if we take the green currency increases into account.

That state of affairs is clearly most unsatisfactory and, as my right hon. Friend the Prime Minister informed the House this afternoon, the CAP was discussed at some length during the meeting of the European Council at Bremen last week. As he said, the Commission has been asked to make proposals. The Government will be looking for proposals which tackle the problem seriously and bring about a substantial reduction in the budgetary burden. It will be clear from what I have said that the amendment to tonight's motion, tabled in the names of hon. Members on both sides of the House, very much reflects the Government's view of the matter, and I am happy to say that the Government will be prepared to accept it.

Mr. Marten

I thank the right hon. Gentleman for indicating acceptance of the amendment. Year after year we hear that the Government of the day are dissatisfied with the expenditure on the CAP, but nothing effective is ever clone. Will the Minister of Agriculture, Fisheries and Food take with him to the Council of Agricultural Ministers the Chief Secretary to the Treasury, the experienced hatchet man, and really put it on the line that we shall not accept any more such expenditure on the CAP? Until that is done, nothing will happen.

Mr. Davies

The British Government have made it clear that we are not in favour of the way in which the CAP operates. Unfortunately, as the hon. Gentleman knows, we are one member of nine member States. It is one of the factors which, no doubt, was taken into account when the House voted for entry into the Common Market, and when the British people accepted membership in the referendum. These are the constraints within which we operate.

Mr. John Lee (Birmingham, Hands-worth)

Is there not some sticking point at which the Government propose to use the veto?

Mr. Davies

My hon. Friend knows that, although the veto seems to be a potent weapon, in view of the bargaining that has to take place in this sort of Community, it is not in practice as strong as it seems to be in theory.

Mr. John Roper (Famworth)

In view of what my right hon. Friend the Prime Minister was able to report today about all the Heads of Government, at the meeting in Bremen, being agreed that there should be a reform of the CAP, is not the position in that area somewhat brighter now than it has been in the past?

Mr. Davies

I hope that things look brighter. I think that it was agreed that there should be a review of the CAP and not a reform. It is not for me to say whether a review will lead to a reform.

It is often suggested that the Budget Council is the proper forum for deciding how much the Community should spend on the CAP and on its other policies. As my right hon. Friend the Chief Secretary told the Scrutiny Committee, this would be a new departure for the Budget Council, because it has up to now regarded its function as being confined to ensuring that the figures on the budget properly reflect the financial consequences of the policy decisions taken in the various specialist councils. Accordingly, all policy decisions on agriculture have been left to the Agricultural Council.

There is, of course, nothing to stop the Budget Council from voting to reduce the provision for agricultural expenditure. But this in itself would achieve nothing, unless the Agricultural Council were to regard itself as bound by that figure. All that would happen would be that the supplementary budget eventually required as a result of the next set of farm price decisions would need to be that much larger than it would otherwise have been. To have any practical effect, it would have to be accepted that the Budget Council's figure should be taken as a ceiling within which the Commission would operate in presenting its farm price proposals and within which the Agricultural Council would take its decisions on those proposals. From our point of view, this might be a very desirable change in the role of the Budget Council. But whether the other member States would look at it in that way is a different question.

There are various other proposals in the budget relating to the Regional Development Fund, the European Social Fund and aid to developing countries. I shall not go into them in detail now, but if hon. Members have questions on these aspects I shall be happy to deal with them.

In conclusion, I hope that taken together with the information provided in the documents before the House, including the Scrutiny Committee's report, the House will now have sufficient information to debate these proposals. My right hon. Friend the Chief Secretary will obviously take account of all comments made in the debate in deciding our attitude at the Budget Council.

7.23 p.m.

Mr. Michael Shaw (Scarborough)

I think that the whole House will wish to thank the Minister of State for opening the debate in the way that he did. I should be interested to know whether he or his right hon. Friend the Chief Secretary will be going to Brussels for the consideration and preparation of the draft budget. I suppose that the lot falls on the usual shoulders.

The preliminary draft general budget for 1979 was discussed last week in the European Parliament. I hope that my hon. Friend the Member for Banbury (Mr. Marten) will excuse me if I continue to call it "Parliament", but that was the decision of the European Parliament some years ago and it is a title which we are accustomed to use. While I know that the use of the word "Assembly" would assist him, it would disadvantage others who are listening to my speech. Therefore, I hope that, with his usual courtesy, he will go along with me in the use of the word "Parliament".

At any rate, the matter was discussed there. The views of the European Parliament will be formally presented to the Council of Ministers on Tuesday 18th July in Brussels. After that meeting, the Council will draw up the draft budget. Therefore, from all points of view, this debate is well timed. I understand that the Chief Secretary will be going to the meeting and that he will go after Parliament has had the opportunity of presenting its views to him this evening.

In describing the proposals for 1979, Commissioner Tugendhat has described his proposals as being modest. I described them last week as being disciplined increases. They are certainly in no sense outrageous. The commitment appropriations have increased by 15. per cent. and the payment appropriations have increased by 12.1 per cent. As the Commissioner explained, this position was made possible by a deliberate policy of containing agriculture. The Minister referred to this matter. It is fair to say that the containment was not as great as the Commission would have wished. Thus, we have preliminary figures for 1979 of 14.6 billion units of account for commitments and 13.8 billion units of account for payments. The Community's preliminary draft budget, therefore, represents 0.88 per cent. of its total gross domestic product, and nearly three-quarters of that is to be spent on agriculture.

Yet the discussion tonight, and, indeed, at the Council meeting next week, is not about agriculture in any detailed way, as the right hon. Gentleman explained. That debate can take place only when the letter of amendment is received in early October. That will then reflect the updated figures calculated after the harvest has been gathered in.

At this stage, we can only hope that the pattern of previous years is not repeated: a pattern in which the Council cuts back the non-agricultural sectors in July—that is, on 18th July this year—and the sums are then more than restored into the agricultural sector in October.

Mr. Lee

Perhaps the hon. Gentleman, who works for this extraordinary organisation, can give us the benefit of his assistance. He has expressed a pious hope, which I am sure is widely shared. Can he say what the pattern of events has been for the last two years? Has it gone up or down in each October review?

Mr. Shaw

The tendency has been for it to go up. So far, the Commission has said that it has got it under better control. The hon. Gentleman is assisting me in the point that I am making. I am asking the representative of the Council of Ministers to do his best to see that that containment continues when the draft budget is produced.

As a country, we must recognise that our future economic well-being and safety depend upon greater co-operation with other countries. Problems and projects which in the past were properly regarded as national more and more require Community solutions. If the Community is to be a leading economic force in the world we must not only develop together the expensive energy and industrial policies of the future but accept that the problems of regional policy, the restructuring of industry, unemployment and retraining must more and more become Community responsibilities.

Mr. Nick Budgen (Wolverhampton. South-West)

Does my hon. Friend agree that, if we are to have monetary union within the Community, that will inevitably lead to economic union and that, if we are to have both economic and monetary union, those who want it will also want the biggest possible regional policy?

Mr. Shaw

I think that the two must go hand in hand.

Mr. Budgen

The three.

Mr. Shaw

Yes, the three. We cannot have the one without the others.

Mrs. Dunwoody

Would the hon. Gentleman therefore care to comment on the fact that it looks as though the Regional Fund will be very much smaller this year?

Mr. Shaw

That remains to be seen.

Mrs. Dunwoody

Look at the figures.

Mr. Shaw

I shall deal with that matter in detail later in my remarks. The hon. Lady has looked at the figures, as have I. I shall comment later on the very point that she made.

The way ahead must lie in our drawing closer and closer together, but the benefits of so doing must be shared by all countries. It is against that background and in that belief that the Commission has made its modest proposals. Obviously, such policies will not in themselves be in any way decisive. The sums involved are far too small. However, they are a beginning. By working together through such small beginnings, co-operation in these areas must develop and expand.

For example, the budget figures for energy follow the Commission's strategy, which is based on the development of Community energy resources. That is the only way in which we can reduce our dependence on imported energy. Expenditure on uranium and hydrocarbon exploration is to be increased, as also are efforts to extend the use of coal. Equally, the Commission is right to include the costs of programmes for energy conservation. Over a four-year period the total outlay in this area will be about 150 million units of account.

In industry, the Community must plan an increasing role to assist in reconstruct- tion and conversion projects, as also in advanced technology. The European Council at Copenhagen was right to emphasise the need to overcome the serious problems arising from structural over-capacity in several industries.

Mr. Budgen

I hope that my hon. Friend will help those of us who are sceptical by defining precisely the areas in which the Community should not interfere.

Mr. Shaw

I believe that we can look at the positive matters that are identified, but I do not believe that at this stage, when dealing with economic development, we can seek to deal with those matters which are not identified because such spheres will change from year to year, as will the requirements.

When dealing with research, it is logical and right for us to develop joint programmes. We have never lacked brains and ability in Europe, but more and more, through the complexity and expense of advanced technology, as individual count-tries we cannot provide the capital and resources to exploit them. If this potential future wealth is not to be lost to Europe, we must work together by developing joint programmes of both research and production. Above all, the Commission is rightly conscious of the seriousness of the unemployment problem in the Community, with all that that means in terms of human suffering and lost production.

Commissioner Tugendhat has told us that he has put expenditure in the social sphere in a central place. That must be right with unemployment in the Community running at about 6 million. Appropriations for the Social Fund have been increased substantially this year. For example, help is being given to farm and textile workers, to people in backward and declining regions, and particularly to the young unemployed. I remind the House that the European Parliament was particularly successful in persuading the Council to increase this expenditure in the negotiations last year on the 1978 budget.

As requested by the hon. Member for Crewe (Mrs. Dunwoody), I turn to the Regional Fund. It is from that fund that help is given to the areas of the Community with special unemployment and development difficulties. The European Parliament feels strongly about this sector. Expenditure in this sphere represented the greatest difference of opinion between the Council and Parliament last year.

This year, the Commission stated in volume 7, at page 47: Continued imbalances between the regions are a major obstacle to European integration and to economic and monetary union. This has been pointed out repeatedly—most recently at the Copenhagen meeting of the European Council on 7th-8th April, which declared that internal economic stability and the reduction of regional imbalances are Community objectives of paramount importance. I agree with that. But why has the Commission so tamely accepted the figures put forward for the fund last year by the Council?

Last year, the Commission included in the 1978 budget figures which we understood had been carefully prepared. The European Parliament accepted them. The figures were 750 million units of account—that is, about £488 million—for commitments and 525 million units of account—about £342 million—for payments as a minimum requirement. When the Finance Ministers of the Council considered this item, they could not reach agreement. In the end the matter had to go to a meeting of Prime Ministers, who eventually agreed lower figures for the three years 1978, 1979 and 1980. The Finance Ministers of the Council told us that while all other figures were negotiable the commitment figure of 580 million units of account for 1978 was not, because it had been agreed over their heads by the Prime Ministers.

As rapporteur for the 1978 budget, I persuaded Parliament to accept this position. I was not very popular. I took the view that Parliament and Council had to reach agreement and that, since the Council had moved towards our view on other matters to an extent that it had never done in previous years, it was only right that we should concede this point. However, before conceding this position for 1978, the President, Mr. Eyskens, said in the debate on 13th December 1977: My view and that of the Council is that, unless we want to run the risk of a serious conflict between the Parliament and Council, we must stick to an amount of 580 million in commitment appropriations for 1978. I would add that for the two subsequent years, 1979 and 1980, despite the European Council's decision of principle, contacts, negotiations and amendments will always be possible … I have already said on another occasion that I do not consider it illogical for the 1979 and 1980 instalments of the 620 million and 650 million respectively as decided by the European Council, to be concentrated on a shorter period. That seems to be a working assumption that will require further discussion from 1978 onwards. He concluded: Let us then stick to the first instalment in 1978, otherwise we shall have great political difficulties. Clearly, the door was open for renegotiation in later years.

I generally welcome the way in which the Commission has presented the preliminary draft budget, but I have two serious complaints about the Regional Fund sector. First, having had to trim its proposals last year, it has now abandoned any thought of returning to them, although it must have known that it had the support of Parliament. Secondly, by accepting the figure that was put forward last year by the Council of 620 million for 1979 and 650 million for 1980, the Commission has closed the door to the negotiations envisaged by Mr. Eyskens last year.

If the fund is to be spent in a shorter period than was envisaged last year, it must be committed more quickly. Equally, figures entered this year by the Commission do not allow for possibly more generous amendments that were envisaged by Mr. Eyskens last year.

The problems of the regions and their development are critical to the future of the Community and to the success of plans such as those that were under discussion at Bremen last week. Can we be assured by the Minister that the Government will be receptive and flexible on the need for maximum help being provided through the Regional Fund? The European Parliament undoubtedly will make this a key point in its discussions with the Council

Mrs. Elaine Kellett-Bowman (Lancaster)

In view of the vast importance of this subject, can my hon. Friend account for the Minister's total lack of comment, except for the cursory statement that he might answer questions if they were raised?

Mr. Shaw

I do not speak for the Minister. It is curious, however, because I should have expected to hear what part our Government played in the discussions that took place between the Prime Ministers when they arrived at a final decision on the reduced figure. The meeting of Prime Ministers certainly passed down to the Finance Ministers recommendations that they felt impelled to accept.

I turn now to the ideas involved in the budget. Of these, five are listed on page 13 of volume 7, and I shall refer to the first three. The first is aimed at improving a balance between agricultural expenditure and that devoted to the development of other policies. This view has been expressed many times in this House and elsewhere and it needs no further comment from me except to say how much I agree with it.

The second idea is that of taking a selective approach leading, in a limited number of priority sectors, to a real transfer of policies from national to community level. The third is bringing under the Community budget activities which can more advantageously be dealt with both politically and economically at Community rather than national level. An expansion of Community programmes in this way is vital if the Community is to bring benefit to all its parts and to all persons living in it. Perhaps the Minister of State will comment on these ideas as expressed in the preliminary draft budget.

Mr. Denzil Davies

The hon. Member is speaking from the Opposition Front Bench on behalf of the official Opposition. Is what he is saying the Conservative Party's view on all the items he has listed?

Mr. Marten

A good question.

Mr. Shaw

This is the view of the Commissioner—

Mr. Budgen

He is just a glorified civil servant.

Mr. Shaw

Perhaps I may be allowed to complete my sentence. This is the view that the Commissioner has put forward in his preliminary draft budget. If we are to draw nearer to and entertain in any real way economic and monetary union, we must advance such joint projects as JET. It is right for us to learn to work together.

Mr. Douglas Jay (Battersea, North)

Is the hon. Member speaking this evening for the EEC Commission or for the British Conservative Party?

Mr. Shaw

I believe that if we are to make a success of the Community we must find areas in which we can learn to work together. There was no point in our joining the Community unless we were prepared to carry out this sort of joint undertaking.

Mr. John Biffen (Oswestry)

I am sure that my hon. Friend would not want inadvertently to leave the House with the impression that it was the policy that regional policy should be conducted on a Community basis and out of Cornmunity funds rather than on a national basis out of national funds. Will he make his position clear on that point?

Mr. Shaw

At the moment the programmes work through the national Governments, but they are supported by the Community. For the first time there is the possibility within the preliminary draft budget of non-quota aid being given by the Commission, and I believe that help in that way is of vital importance if we are to try to assist the more backward regions of the Community and to bring them up towards the levels of the more fortunate parts of the EEC.

Mr. David Stoddart (Swindon)

I should be grateful if the hon. Member could help me. I have been listening carefully to what he has been saying, and it seems to me that he was committing the Opposition to economic and monetary union. I found that most interesting, particularly bearing in mind the qualified statements earlier this afternoon by the Leader of the Opposition when my right hon. Friend the Prime Minister made his statement. Will the hon. Gentleman clarify the situation?

Mr. Shaw

Obviously we cannot reach any final conclusion, because, as the Prime Minister rightly said, there must be a good deal more examination of this matter. Until the terms have been produced and we are satisfied, I shall take the view that we can safely go into these matters. I do not think that what I have saicl—and, clearly, I am convinced that all those who voted to go into the Cornmon Market must have had these ideas in mind—[HON. MEMBERS "No."]—because I certainly had—contradicts anything I heard said from this Dispatch Box this afternoon.

Perhaps I may now be allowed to continue with my speech. I have already taken longer than I had intended. I hope that there will be reduction of agricultural expenditure and an expansion of expenditure elsewhere. An increase in those other sectors does not mean an automatic overall increase in expenditure. In so far as programmes are a substitution for national programmes, in so far as they are more efficient and effective and in so far as they create prosperity in place of subsidised poverty, they do not entail such increases in overall expenditure. This point has been brought out by Commissioner Tugendhat, and it was emphasised in the MacDougall report.

Now that the presentation has been made to the Council and to the European Parliament, the Commission's official task is complete. Although its important help and advice will be available throughout the remaining budgetary processes, the budgetary authority must now agree the budget, and that authority consists jointly of the Council and the Parliament. Later this month, the Council will draw up the draft budget based on the document that we are discussing now. In the past it has been the custom for the Council to cut back heavily on the non-agricultural expenditure, as shown in the preliminary draft. I shall be grateful if the Government will confirm tonight whether they continue to favour such substantial cuts this year.

The overall increases are modest, and the projects favoured by the Commission are in the sectors favoured certainly by the European Parliament and, as far as I know, by the Council as well.

After publication of the draft budget, there will follow the exhausting procedure of its consideration and amendment by the Parliament and the subsequent conciliation between Council and Parliament. In practical terms—I shall not go into the complicated and lengthy details—because the Council and the Parliament are the joint budgetary authority, because each institution has the last word on different types of expenditure and because the budget is not finally adopted until it is so declared by the President of the Parliament, it is necessary for Council and Parliament to reach agreement either at the proper time in December or, after disagreement, by a complicated procedure during the following year.

Mr. Marten

My hon. Friend began by saying that he would call the Assembly the Parliament. As I have listened to him, I have found his words somewhat confusing, if my hon. Friend will forgive my saying so, especially in the last few paragraphs, because he has referred to the "Parliament" and I have not been sure whether he was referring to the Assembly or to this Parliament here. It would therefore be better if my hon. Friend would kindly use the correct phraseology in this place, using "Assembly" for that thing over there in Europe and "Parliament" for our Parliament here. I do not mind which word my hon. Friend uses over there, but will he please use the word "Assembly" here?

Mr. Shaw

In the last few paragraphs I was referring to the European Parliament.

Last year, although the differences between us were originally substantial, I am glad to say, as rapporteur for the 1978 budget, that agreement was reached, and reached at the proper time. I hope that this year, too, Council and Parliament will be able to show that they have the same objectives in mind and can reach agreement once again.

I am convinced that the successful future of the Community depends not on the increasing of the European Parliament's power but on the better use of its existing powers and, perhaps above all, on the development of a proper and responsible relationship between Council and the European Parliament.

7.51 p.m.

Mr. Douglas Jay (Battersea, North)

I beg to move, at the end of the Question to add: 'and further notes with deep concern that the policy implied in this preliminary draft budget once again fails to make any reduction in the huge burden of agricultural expenditure under the guarantee section of the European Agriculltural Guidance and Guarantee Fund, in particular, in the cost of disposing of agriculltural surpluses outside the EEC'. The Minister has wisely accepted the amendment in advance of its being moved. The essential words of the amendment are that this House notes with deep concern that the policy implied in this preliminary draft budget once again fails to make any reduction in the huge burden of agricultural expenditure "— and so on.

It is not the fault of my right hon. Friend the Minister of State, Treasury that we are now members of the Common Market. I am not absolutely sure how the hon. Member for Scarborough (Mr. Shaw) voted on the European Communities Bill, but I suspect the worst. Certainly, a large part of his speech sounded to me as though it had been drafted by the EEC Commission.

Mr. Michael Shaw

It all depends on what is meant by the worst. I voted for it, of course.

Mr. Jay

That is what I feared.

When listening to the Minister, I was at times rather strengthened in my view that those responsible for EEC procedure and the drafting of documents deliberately make everything so complicated that no ordinary person is likely to understand what is really going on. However, one outstanding fact emerges beyond argument from this draft budget, and that is that over 70 per cent.—I think that the Minister's latest figure was 72 per cent.—of the immense sums involved is still to be spent on the common agricultural policy, which in plainer English means buying up huge surpluses of food at extortionate prices, preventing consumers inside the EEC from getting them at any reasonable price and then selling them at one-quarter or one-fifth of that price to the outside world. Compared with the agricultural budget, the sums to be spent on the Regional Development Fund and the other items are comparatively trivial.

The Treasury's explanatory memorandum which, I am sure, did its best to make matters clear, though giving the total figures did not give the percentage, but I believe that my right hon. Friend gave it as about 72 per cent. But this percentage has remained virtually the same over a number of recent years, or, if anything, it has increased from year to year. This colossal waste of public money —for that is what it is—goes on, and there has been no serious reform of the CAP in practice, despite all the promises that we have been given. Indeed, only the valiant efforts of my right hon. Friend the present Minister of Agriculture prevent the situation from getting very much worse. In fact, all that my right hon. Friend can tell us when he comes back from these adventures is that as a result of his strenuous efforts it is not quite as bad as it might have been.

I believe that the cause of this trouble and the real mistake which we have made is that the British Government have failed to take the initiative and themselves put forward major proposals for drastic reform. What happens over and over again in our relations with the EEC is that the British Government sit back and wait for other countries or the Commission to come forward with positive projects, such as the latest EEC currency stabilisation so-called plan which we heard about today, and the Government then react weakly to such initiatives coming from somebody else.

I do not believe that the situation will ever change until we take the initiative ourselves. For instance, the new currency stabilisation plan of which we heard only in the past 24 hours, which is really a plan for either fixed exchange rates or much more nearly fixed exchange rates, would in any foreseeable circumstances in this country, I believe, spell unemployment at a higher level than we have now, would weaken this country still further, and, incidentally, would strengthen the grip of the common agricultural policy on all the member countries.

The reason why the French are backing the currency stabilisation plan is that they know that it would tighten the hold of the common agricultural policy, which is what they really care about. We should keep that in mind in considering the currency plan.

Mr. Dalyell

This would be all very well if some of us did not remember those hectic nights in July 1966 and onwards when my right hon. Friend was a senior economics Minister and the rest of us were scurrying about voting for heaven knows what—with Lord George-Brown and the rest—precisely because there were unstable monetary conditions.

Mr. Jay

If I may say so, that is precisely what I am arguing—that a fixed rate of exchange takes away from the Goverment the power to carry out the economic policies which are in the country's interests. It was then done for the sake of the sterling rate of exchange. It will have exactly the same effect if it is part of so-called economic and monetary union.

I am straying rather far from the immediate subject, but I add just this. It seems to me, for the reasons I have given, that it should be the first condition of acceptance of any plan of that kind that there should be genuine reform of the common agricultural policy first. If we are to have dates fixed in the matter of the currency plan, with what will happen in October, what will happen in December and so forth, we should have similar dates fixed for the reform of the common agricultural policy and not have it perpetually postponed into the far distance.

I should like to be a little clearer than I was even after reading the Treasury's memorandum and listening to my right hon. Friend today on exactly what the United Kingdom's net contribution will be to the budget in the coming year and in later years. On the figures given up to now, I think it true that in the past year the contribution net, after allowing for all the inward payments which we are told so much about, was running at about £700 million sterling a year. After all, in this matter of the budget we were supposed to gain relief here at least from the renegotiation process, but there seems to be no sign that we have got that relief. I hope that the Minister will explain—I shall be delighted if he can do it in his winding-up speech—exactly what relief the renegotiation is providing us with at the present time.

Mr. Marten

The right hon. Gentleman mentioned the figure of £700 million net. I believe that it is estimated to be £800 million net next year, and even more the year after that. Does he agree that that makes absolute nonsense of all the propaganda put out by the Euro-movement, the Commission and so on that we are receiving grants? We are receiving nothing at all. We are paying in all the time. Had we not been members of the Common Market, we could have used all that money to make much bigger grants, if necessary, to our own country.

Mr. Jay

I entirely agree with the hon. Gentleman, but I regard the propaganda to the effect that we are being subsidised as being of so low a level that it is hardly worth referring to. It is rubbish.

I was trying to establish, with my hon. Friend's help a little later, exactly what we shall now have to pay. This is a payment across the exchanges. I think that my right hon. Friend told us that were the whole own resources system to be enforced, as the explanatory memorandum says it should be, the gross figure would be £1,760 million. I understood him then to say that there was a refund which would reduce that by, I think, £260 million. That brings the payment down to £1,500 million. My right hon. Friend then added that the payments inwards which we should receive to offset against that would be £400 million or £500 million next year. If I have that correct, the conclusion seems to be that the net burden on this country next year will be about £1,000 million, which is a huge increase on the £700 million that we are paying now.

Mr. Denzil Davies

My right hon. Friend is quite correct; but those figures are based on the preliminary draft budget and are fairly provisional.

Mr. Jay

I realise that, but even if the figures are provisional it is well to know what they are. If that is correct, it is ominous for what will happen in the next few years.

Why should even the gross United Kingdom contribution be 20 per cent.—my right hon. Friend gave us that figure again today—of the gross revenue of the EEC? The United Kingdom's gross domestic product is certainly less than 20 per cent. of the total GDP, and I thought that the renegotiation had done something to bring the two into relationship. Perhaps my right hon. Friend will explain that in his reply.

The House has a duty on these occasions. I do not say that it is voting money, because we cannot exactly describe these debates as that, but I suppose that this is as near as we shall ever get to voting our contribution to the EEC. In doing this, we should examine some of the items of expenditure and ask whether economies can be made. What are British representatives, both officials and Ministers, now doing in the EEC institutions to check the extravagance, on the one hand, and fraud, on the other, which are notorious, in particular in the common agricultural policy? As we must all be brief, I shall mention only one item tonight. I quote from the Financial Times of as recent date as 19th June, when it said: Many of the 12,000 permanent staff employed by the European Commission and other EEC institutions have for the past 18 months received higher pay than they are entitled to, because of a technical error. In some cases, the overpayments are said to be £20 per week. The error, estimated to be costing the Community several million pounds a year, became known to Commission officials and EEC governments more than a year ago, but has not been disclosed until now. Is that true? Are these figures correct? The Financial Times continued: A plan to rectify it has been drawn up, but it will probably be several months before this goes into effect. Officials in Brussels believe that it may be difficult to recoup money already paid. The EEC's permanent staff are among the best-paid civil servants in Europe … The Commission has declined so far to publish complete information on the numbers of staff and the sums involved. But officials estimate that it may amount to £5 million over the past 18 months. That does not seem to be exactly a triviality when we are dealing with public money.

Mr. Dalyell

rose—

Mr. Jay

Perhaps my hon. Friend has some information about this.

Mr. Dalyell

The matter should be put into perspective. There are fewer civil servants in Brussels than there are in the Scottish Office.

Mrs. Dunwoody

They cost rather more.

Mr. Dalyell

There are considerably fewer. As the hon. Member for Scarborough (Mr. Shaw) and I are vice-chairmen of the committee that is supposed to be looking at the subject of fraud, we frequently ask colleagues whether they have any evidence, because the matter is investigated. My right hon. Friend says that he has evidence of fraud. Naturally, it should be investigated by the Assembly, Parliament or whatever one likes to call it.

Mr. Jay

I did not say that I had evidence of fraud. I said that those positive statements were made by the Financial Times. I am asking my right hon. Friend the Minister whether they are correct. We should have the answer.

Mr. Stoddart

There seem to be double standards. We have one standard in this country and seemingly quite a different and looser standard in the EEC. A constituent of mine who was engaged at the princely salary of about £28 a week was informed by the Home Office after a month that it had overpaid him and would deduct the money, and it did so to the extent of £12. Is my right hon. Friend telling me that people in Europe who have been overpaid to the extent of many tens and perhaps hundreds of pounds will not suffer the same fate as my poor little constituent?

Mr. Jay

I am in favour of the same standard, whether in the Scottish Office or in the EEC Commission.

On the matter of correcting fraud, I remind my hon. Friend the Member for West Lothian (Mr. Dalyell) that we were told by Ministers only a week or so ago in a debate on the criminal law and proposals from the EEC Commission that changes must be made in criminal law procedure here in order to correct frauds which were going on in Brussels. If my hon. Friend cares to look up the Official Report of that debate, which occurred within the past 10 days, he will find that those statements were made by a Minister and not by a Back Bencher.

Since that debate, reports have been circulating that some of the frauds have been committed not by outside commercial agents but by employees of the Corn-mission. When we are dealing with large sums of money, we should also hear from my right hon. Friend whether that is true. It is a bit much if some officials are not merely grossly overpaid but are responsible for, or are condoning, frauds of public money and frauds on the long-suffering British taxpayer, who is making major contributions to the EEC fund. In the interests of at any rate some economy I shall be most grateful if my right hon. Friend can answer those questions.

Mr. Dalyell

Inadvertently, my right hon. Friend suggested that I had suggested that there was fraud in the Scottish Office. I meant to suggest no such thing, and I think that my right hon. Friend will accept that.

Secondly, my right hon. Friend is a former Minister of great experience, whom I genuinely and sincerely respect. With his great knowledge of Government machines, how would he suggest—I put this as an interrogative question, with no kind of slant—that the House of Commons puts its oar in on the genuine problem of alleged fraud or possible fraud within the Community? One of the questions I go on and on asking, without getting a very satisfactory answer, is what the relationship should be between the Commission and the European auditors, on the one hand, and the police forces of the various members of the Community, on the other. This is a very serious question. Perhaps my right hon. Friend has some ideas on the subject.

Mr. Jay

Surely one of the basic troubles is that the relationship of the EEC Assembly to the Commission is very different from the relationship of this House to our own Civil Service, because Ministers are responsible to this House under our system and can give instructions to our civil servants. I should have thought that the EEC, by moving a little further to that system, could make it easier to detect these frauds. All I am doing tonight is to ask the Minister to give an answer to the factual questions that have been asked.

8.10 p.m.

Mr. Russell Johnston (Inverness)

I shall be brief because many others want to speak. I intend to deal with only one item in the proposed budget, but before doing so I must say to the right hon. Member for Battersea, North (Mr. Jay) that he employed the tactic of putting a little mark on people. He started off by saying that there was a story in the Financial Times which referred to over-payments. That sort of thing happens in the best-ordered bureaucracies from time to time. He then read from the Financial Times that the money might be difficult to recover.

Then, behold, before we knew where we were, we were hearing that some officials, supposedly grossly overpaid, might be responsible for or condoning the fraud. There is no evidence of that at all. It is not good enough for the right hon. Gentleman to cover himself in making these allegations by couching them in interrogative form to the Minister. There is no evidence of any general fraud within the Commission, and it is wrong that these generalised criticisms should be made in such a way.

I wish to concentrate on the question of the Regional Fund. The hon. Member for Scarborough (Mr. Shaw) made some comments on it, but unfortunately the Minister did not so do. Amazingly, although this subject was much dwelt upon by the Labour Party at one point, the Minister spent rather more time in contrived flippancies about the common agricultural policy than in dealing with important matters such as the Regional Fund.

The report of the Select Committee is also singularly lacking in comment on the Regional Fund and that part of the draft budget. It is dealt with in one brief and extraordinary sentence which appears on page VII, which sasy: There is very little change in the Regional Development Fund, which benefited handsomely in 1978. I find that an extraordinary comment. The situation has been covered in some detail by the hon. Member for Scarborough, but I shall repeat the figures.

A total of 750 million units of account was proposed by the Commission, which at that time wanted 100 million, which would be quota-free and would amount to about 13 per cent. At the end, we got 580 million and the proposal of 620 million for 1979 and 650 million for 1980, with no non-quota element built into it. How that can be described as a handsome benefit, I do not understand. Indeed, the fund as proposed barely keeps up with the cost of living. Actually, it falls below the inflation level. I find that this is an extraordinary approach to an element of the budget which I at least consider to be of enormous importance, as many other hon. Members do.

I make five brief comments on the situation. First, the Prime Minister has frequently emphasised, as he did again today answering questions on his statement on the Bremen economic summit meeting, that there is great need for a transfer of resources from rich to poor within the Community. I agree completely. I agree that it is desirable and necessary if the Community is to continue to exist and not to be subject to the sort of political criticism which would break it up, which might please a number of hon. Members present today but would not please, in the end, the people of Europe because of its consequences.

What does the Prime Minister mean by a transfer of resources? It is a question not only of transfer of resources from Germany to the United Kingdom but of transfer of resources from the United Kingdom to Greece and Portugal in the future. Is the Minister in a position to say whether that is the direction in which the Government see the Regional Fund developing because, if there is to be enlargement of the Community, that is the way in which it will have to develop?

Secondly, there is the way in which the Regional Fund is operated is by percentage carve-ups negotiated in the Council of Ministers in advance. Consequently, one could argue that there was some kind of supervised transfer of resources as the fact that Britain gets 28 per cent. of the Regional Fund means that a certain proportion of the budget is transferred back to the United Kingdom.

I do not believe that this is at all a satisfactory system. All Governments, by virtue of the fact that the fund is known two or three years ahead, can easily plan in such a way that they will expend Regional Fund money on projects which would have gone ahead in any event and, therefore, simply use the fund for balancing their books. This is a highly unsatisfactory method of doing it and it does not amount to any real change in resources. Is that the Government's view? Or what view do they have of an expansion of the non-quota element in the Regional Fund?

Mr. J. Enoch Powell (Down, South)

I am not quite clear what the hon. Gentleman wants to do and how he wants to put this right. How is it possible to oblige Governments to lay out expenditure for projects upon which they would have laid it out if there had not been contributions from the EEC?

Mr. Johnston

My answer to that is quite direct. I was intending to mention it a little later, but I will do so now. I would like to see the Regional Fund develop so that, in the first instance, it would have a reasonable proportion as nonquota—in other words, controlled by the Commission. I know that this is anathema to the right hon. Gentleman, but it is my point of view. I would like to see that non-quota element steadily extended and expanded so that there would be an objective European assessment of what represented regional shortcomings, according to objective criteria. Therefore, there would be a more effective transfer of resources.

Mr. Powell

I can see that that would work provided that all regional aids were from the EEC, but as long as part is national and part is EEC I cannot for the life of me see how national Governments can be prevented from adjusting their decisions to what they know the EEC is going to do. Or is the hon. Gentleman suggesting that the EEC could somehow keep it secret until the national Governments had fully committed themselves, and then out it would come with unexpected presents?

Mr. Johnston

The right hon. Gentleman seems to be suggesting that the long argument, which he will know well, within the Community about additionality is bogus. That is basically what he is saying. I do not think that it is so. First, if one takes the non-quota element as at present, it could effectively be used to correct disparities which may have been caused by Community agreements which may not have had as desirable an effect in one part of the Community as in another.

Secondly, after all, we have to have a Regional Fund within the Community because of a failure of individual national countries, or a lack of capacity by individual national countries, to correct the disparities within their boundaries which currently exist. I can see that one could argue with the right hon. Gentleman for a long time about this, but I dissent from his view that the concept of additionality is bogus. I do not think that it is. What is regrettable is that there is a refusal by national Governments, including, I believe, our own, to recognise that we shall not get a genuine regional policy until we have control of it to a much larger degree by the Commission.

I return to my five points. The fourth concerns the size of the Fund. When I read out the sentence from the Select Committee at the beginning of my speech, the Minister nodded his head and made an affirmative sound—at least, I judged it to be affirmative but it may have been negative. In fact the Regional Fund, according to the latest figures that we have, created some 60,000 jobs in 1975 and 75,000 jobs in 1976. I regard that not as handsome but as being far below the level necessary.

The Liberals believe that the fund should be increased, but I repeat the point I made in responding to the right hon. Member for Down, South (Mr. Powell) that that would be a proper course only if there was an increasing involvement of the Commission.

Fifthly, a number of hon. Members have said that an increase in the Regional Fund would be indicative of a desire to move towards economic and monetary union, and surely today's statement by the Prime Minister represents, if it represents anything at all, such a move. My answer—although, looking around the Chamber, I do not think that it is a point of view that will find general acquiescence—is that this is politically important to the future of the EEC, and in this regard the allocation to the Regional Fund is disappointing.

8.22 p.m.

Mr. Bryan Gould (Southampton, Test)

Many of the points that I had intended to make have been made in the excellent speech by my right hon. Friend the Member for Battersea, North (Mr. Jay). I shall be brief, and I should like to begin by welcoming some aspects of the budget, and the way in which we are asked to deal with it, which represent an improvement over what we have been expected to do in the past.

First, I think that the different timetable gives us a proper opportunity of debating the broad principles of the budget before they are actually fixed. On the other hand, as my right hon. Friend the Minister of State, Treasury said, it involves us in the difficulty that many of the details upon which we need to form a judgment are simply not there at this stage of the exercise. I think we all recognise the difficulty under which that places us.

The second aspect which is deserving of at least a qualified welcome is that the increase in the budget this year is substantially smaller than it has been in previous years. That is very much to be welcomed. I wonder whether my right hon. Friend would elucidate one small point. The Scrutiny Committee suggests that the increase in the funds allocated to the guarantee expenditure is entirely due to inflation. I wonder whether that is really the case, since the increase seems rather larger than the average inflation rate throughout the Community.

Having made those small points by way of welcome, I think that one is bound to pass to the substantial questions which remain extremely worrying to hon. Members. The first is the point which has been made very strongly already by my right hon. Friend the Member for Battersea, North, that there remains a considerable imbalance between the expenditure on the common agricultural policy and the expenditure on all the other purposes of the Community put together.

I have said before that it is no exaggeration to described the Common Market as simply the common agricultural policy dressed up with a few trimmings, and, as long as 70 per cent. or more of the Community's Budget is devoted to the CAP, I believe that that is an accurate statement. That money finds its way into the most extraordinary forms of expenditure.

We have it in the form of Written Answers from our own Ministers that the total cost of the disposal alone of the food surpluses arising under the CAP amounts to £5 billion a year. That seems to me not only extraordinary but horrifying. It is not only the imbalance as between agricultural expenditure and other forms of expenditure; there is the imbalance, which my right hon. Friend pointed out, between the amounts allocated to the guarantee and to the guidance sectors of the CAP.

I wish to offer a word of caution to those who say that a solution lies in redressing that imbalance. I suspect that, even if we were to spend more on guidance, we should, because of the different structure of our agriculture industry from that obtaining on the Continent, derive very little benefit from that change. In other words, the CAP, however constituted, is very much to our disadvantage.

What are the real chances of reducing that amount of money spent on the CAP? I believe that the chances are virtually nil. Indeed, all the tendencies and all the pressures are in the opposite direction. We have the enormous problem facing us of Mediterranean foodstuffs. Are they to be dealt with in the same way as the temperate zone foodstuffs are dealt with at the moment? If so, there will be an enormous increase in agricultural expenditure.

Mrs. Dunwoody

Has my hon. Friend seen the speech of Mr. Jacques Chirac, who says that he would demand a guarantee price for wine, particularly for those French wine growers who would be affected by the entry of Spain to the EEC?

Mr. Gould

My hon. Friend is absolutely right. We are put on notice that that is exactly what the French have in mind—an enormous increase in that form of expenditure.

There are other examples of increased expenditure in the pipeline. The sheep-meat regime—an unnecessary regime if ever there was one—will certainly cost further money. It is not just a question of the percentage of the money. It is a question of the total amount being spent on agriculture. I make that point again as a word of warning in relation to some remarks made by the Chief Secretary when he gave evidence to the Scrutiny Committee. He suggested that one could reduce the percentage of the budget devoted to agriculture by increasing the size of the budget as a whole, but that is no solution. That offers us not the difficulty of unnecessary and extravagant agricultural expenditure but the prospect of enormously increased expenditure on a whole range of industrial, social and regional matters which ought properly to remain the preserve of national Governments.

Then there is the second problem, which I think arises from the first—that there is no proper mechanism established in the decision-making procedures of the Community for controlling these global sums. The budget that we are debating today is not, in fact, a budget at all. It is simply a total, a combination, of estimates prepared by individual Councils of Ministers, therefore the ordinary budgetary and financial constraints and disciplines which would be imposed here in respect of national expenditure simply never come into force when these decisions are being made. Indeed, if there were any attempt to enforce them it would he far too late, because the substantive decisions would already have been made.

That leads me to the third major problem with this budget—again a subject with which my right hon. Friend has already dealt admirably. That is the size of the United Kingdom contribution to this expenditure. We have understood the calculation which was made at the Dispatch Box of the contribution which would arise under these proposals if they were implemented. The figure is probably a little over £1,000 million. It may be less, but the chances are that it may be more.

I know that it is regarded as the rankest bad manners—and, indeed, as a quite unforgivable departure from our Community dogma—to inquire, however timidly, for what it is that we are spending this money. It is a trifling sum. It is only £1,000 million. It is worth a couple of pence off income tax or two percentage points off VAT. But I think that we should know what we get for this money. Even with the best will in the world, I cannot believe that we are paying this price for the sake of our trade balance with the Community, for the sake of the impact of the CAP on our balance of payments or our cost structures, for the sake of fishing, or for the sake of the control which we now exercise over our own industrial and economic policies. Those are not quite enough to justify the expenditure of this sum of money.

I turn, then, to our percentage contribution to the budget. Which is put at 20.4 per cent. under these proposals. Like my right hon. Friend the Member for Battersea, North, I am mystified by this. There seems to be some disparity between that percentage and the percentage which we contribute to the combined totals of the GNPs of Community members. I had understood that the great renegotiation mechanism for budgetary adjustments would protect us against that kind of imbalance or disparity, although I have a niggling recollection that that mechanism was hedged around with all sorts of limitations, such as that we had to have a three-year cumulative period of being in balance of payments deficit. At the time, people seemed to think that of very little importance. But with the advent of North Sea oil, we cannot take advantage of that mechanism, and it is revealed to be the fraud which we all knew that it was at the time.

I cannot leave this subject without referring to the question whether this budget, with its great emphasis on agricultural expenditure, is likely to be changed in the light of the statement that we heard today from my right hon. Friend the Prime Minister. Here I differ slightly with my right hon. Friend the Member for Battersea, North. I do not believe that it is a matter of demanding a reform of the agricultural policy as the price for agreeing to a currency stabilisation programme. The two are quite incompatible. They cannot go together. They cannot be traded off one against the other. The whole point of currency stabilisation is to entrench the CAP, to ensure its continued existence and to protect it against the irrationality which now threatens to destroy it.

The CAP can survive only on the basis of fixed exchange rates. So long as exchange rates reflect economic divergencies in the Community, the CAP is under threat. It is for those reasons that the French especially are keen on currency stabilisation. We need speculate very little about the Germans' motives for pressing this programme upon us because they have their own and obvious reasons for wishing to maintain the status quo.

I end by recalling a childhood story, which I am sure is familiar to other hon. Members, about a tar baby and the difficulties that people had in disengaging themselves from the tar baby once they came into contact with it. In many ways, the EEC is our tar baby. As soon as we have been limited by one aspect of it, however much we may struggle to disengage ourselves we find that we are stuck in other ways. That is the truth about the proposals for currency stabilisation, and I believe that there is very little in this budget to suggest that we can escape from these difficulties.

8.32 p.m.

Mr. John Biffen (Oswestry)

There is something of a contrast between the way that the House deals with a Community budget and the way that it deals with a national Budget. Apart from the fact that there are very few figures of even the most remote degree of reliability in the Community document, the essential difference is that it is perfectly natural for the hon. Member for Southampton, Test (Mr. Gould) to welcome how modest is the increase in the budget whereas the voices heard from the Opposition Benches are, if anything, bewailing the fact that the regional policy is not burgeoning forth and expanding at a sufficiently rapid rate.

That is a paradox with which we cannot live for very long, and I must say to my hon. Friend the Member for Scarborough (Mr. Shaw) that we have to resolve whether it is his belief that regional policy should be transferred from national Parliaments and become a function of Community economic policy, as agriculture is part of a common agricultural policy. In my view, the right hon. Member for Down, South (Mr. Powell) was right to say that there is not a very credible half-way house in this argument.

In common with other hon. Members, I intend to speak briefly because I realise that there are a wide number of interests who wish to be represented in what is a short debate. However, I think that it might be wise to reinforce ourselves with the knowledge of what the European Assembly has been saying about the mark I budget, which, we know, is but a very sketchy outline of what will emerge eventually.

In contrast to the robust and almost Gladstonian comments of the hon. Member for Southampton, Test, I am afraid that I read from Agence Europe, the daily bulletin for 5th July, that, in response to the presentation of the budget, On the socialists' behalf, Lord Bruce of Donington considered the preliminary draft budget unimaginative, stagnant and tiny. He was reinforced by Mr. Cointat, for the European Progressives, who thought that it was an austere and compressed budget. Monsieur Spinelli, on behalf of the Communists, thought that they showed—I quote—"A lack of imaginiation". He went on to say—and, my heavens, these are ominous words: In agricultural policy, it is necessary not to spend less, but better' Finally, there was the comment of Mr. Bangernann, speaking for the Liberals, when he said: The Budget was not important enough to exercise the 'anti-cyclical' function which it should occupy.

Mr. Dalyell

Has not the hon. Member learnt by now that the most extreme statements in favour of increasing the European budget often come from the most fervid ex-anti-Marketeers? It is a curious thing.

Mr. Biffen

It is not for me to comment on Monsieur Spinelli, who served on the Commission, which, I would have thought, meant that one could not describe him in such terms.

The advice which I think we should offer to the Treasury Bench when it goes to the next meeting of the Council of Ministers and engages in what I believe will be a fairly swingeing pruning exercise—if precedent is any guide—is as follows. I would have thought that the one clear message, which is repeated constantly, is that the common agricultural policy is an absurdity and a standing reproach to anything remotely approaching the sensible management of public finances.

It is easy enough to make those arguments, but the problem is to find the mechanism that will provide a reform in those expenditures. I suppose that I cannot do more than echo the conclusion of the hon. Member for Southampton, Test. My hon. Friend the Member for Devon, West (Mr. Mills) stated in the evidence that was taken by the Scrutiny Committee: Unless the Financial Ministers make a definite stand here you are not going to get the Agricultural Ministers to change their policy. He went on to quote from his own experience when he was at the Ministry of Agriculture. He said: there was no doubt that the Treasury had a very real effect on agricultural policy, so you must start to do this in Europe; to insist that there are changes in agricultural policy to meet the commitments to get within the estimated Budget. I think that it is a very fair question to ask the Treasury Bench what mechanism it sees as being likely to reform the common agricultural policy. If it is to be done through the Council of Ministers, can we really leave the common agricultural policy to be determined by Agriculture Ministers? This, it seems to me, goes to the very heart of the difficulties about the pattern of agricultural expenditure, with, as it were, the poachers being in charge of the hatcheries.

Mr. Peter Mills (Devon, West)

Would not my hon. Friend agree that one solution would be to have some form of Cabinet committee within Europe to deal with these things?

Mr. Biffen

I do not know about that. What I do think is needed is a much reinforced status for the Finance Ministers in the Council of Ministers. Whether this can be essayed within the present institutional arrangement I do not know. I am quite certain that the financial control will not come about as a result of the common agricultural policy being preeminently the preserve of the Ministers of Agriculture.

For those in the agricultural community who may think that these sound fairly harsh words, it is worth while observing that as recently as 3rd July, at the opening of the Royal Agricultural Show, the President of the Commission, Roy Jenkins, said in respect of the dairy industry: One-sixth of milk output is already surplus to requirements, while total consumption of milk products is declining. We shall not be able to persuade Europe's taxpayers and consumers to support that indefinitely … We must find a way of checking the surplus through prices and the market mechanisms. Otherwise we shall have to introduce direct limits on production that will be less acceptable to producers than is the present position to consumers. That move to the concept of direct quotas makes it a little easier to understand why the Commission is coming to accept the Milk Marketing Board. It would be the most natural instrument through which to operate a system of quotas in this country.

If my first piece of advice to the Treasury Bench is that it shall do its utmost to contain expenditure upon agriculture in the Community budget, the second piece of advice that I should like to offer is that it should not try to match that expenditure as a means of diluting it in the Community budget by expenditure upon some kind of industrial policy. I watch the activities of Commissioner Davignon and I think he has clearly a great desire to pursue a Community industrial policy—maybe a Community industrial strategy before we know where we are.

The experience of national Governments when dealing with the intractable problems of the textile industry, steel or shipbuilding is that they are extraordinarily expensive. The belief that somehow or other by elevating these problems into a Community dimension we can diminish the cost of the problems is an illusion. If anything, the cost will be almost certainly compounded. By all means let the Commission do what it can to regulate the use of national subsidies and non-tariff distortions so that there can be broad transparence and compatibility of practice throughout the Community on these important matters, and by all means let that be done in a way which takes account of prospective partners in the event of enlargement. But, above all, let us desist from trying to develop some Community spending programme under the title of an industrial strategy or policy.

Thirdly, I hope that in the budget discussions the Minister will be anxious to avoid those Community expenditures which are designed to trigger off national spending. It is difficult enough for any national Government to contain public spending. These external pressures upon a national Government are almost certain to invoke the argument "You are not paying for all of this expenditure because a certain amount of it comes from a Community treasure house." That was, broadly speaking, the attitude which developed among many local authorities which felt that, if the money was not rateborne but came from the Government, somehow or other it did not come out of anyone's pockets.

Public spending throughout the Community adds to the growth, weight and remoteness of Government, and many of the social problems of today derive from the inability of Government, laregly on account of their growth, to discharge many of the functions which preeminently need their attention. If only on that account, I hope that that third factor will weigh with the Treasury Bench.

Finally, will the Treasury Bench approach the whole question of the Community budget believing that it is perfectly reasonable to act in a Gladstonian sense of fiscal rectitude when it considers whatever proposals are advanced from the European Assembly, or from the Commission, because there is a partnership between the Assembly and the Commission which wants to expand the spending power and the authority of those institutions?

If we need any warning of that, it is contained, suitably enough, in the words of Commissioner Tugendhat, and again I quote from Agence Europe: Mr. Tugendhat rejected the idea that 1 per cent. of VAT is an 'absolute' rate. It will be necessary to exceed it, and the Commission will present a document to the Parliament on this subject before the end of the year. We have been warned. There are no limits to the ambition of the Commission—and possibly a directly elected Assembly —to expand its powers and its authority, to the detriment of this institution of the House of Commons.

8.46 p.m.

Mrs. Gwyneth Dunwoody (Crewe)

I find myself in great sympathy with many of the views that have been expressed in this debate, because it is clear from the budget that the basic expenditure is still on agriculture.

Some of the remarks that have been made about one of my colleagues in another place have possibly mildly misrepresented the attitude that he took. Lord Bruce, in discussing this budget in the European Assembly, made clear that he found it utterly intolerable that one could have, for example, the expenditure of a larger sum of money on the storage of surplus foods—a situation which had been created by specific agricultural policies—than on regional matters and the Social Fund.

I believe that Lord Bruce's criticism was justified, because the real problem that we are facing this evening is that we are discussing a budget that is in no way final. Not only does expenditure on agriculture account for 70 per cent. of its estimated figures, but those of us who have followed the progression of successive budgets know that that is a minimal figure, and that by the time the total payments have been made they will be greater than the amount that has been entered in the budget for that purpose.

Let us face the situation. Agriculture is the one policy inside the Community that is paramount. It is the policy that will decide the attitude of the existing member States towards enlargement. It is the policy that will determine the attiture of many of the member States towards future developments.

There is a clear indication that the Mediterranean countries, which have already been given a massive injection of capital, will nevertheless, demand that even more money be put into the sort of support systems that are being used for dairy produce. In other words, in next year's budget we shall see not a smaller sum of money for agriculture, but a massive increase, because that is the true meaning of the financial policies that are being followed by many of the member States.

We did not hear from the hon. Member for Scarborough (Mr. Shaw) his attitude about sums of money such as those that have been entered in the budget for the Regional Development Fund. We have been told by members of the Commission that the amount of money to be made available is expected to decrease, and that the Social Fund is likely to be cut in respect of those very things where one would at least assume that there was some small justification for Community support, yet I have no doubt that the amount spent on agriculture next year will be at least as much as, if not more than, it was this year.

What we are talking about is fundamental policy, because that is the attitude of most of the member States. Therefore, what we are doing tonight is going through a somewhat sterile exercise because this House will not be asked to decide when the Council of Ministers have met whether it thinks that the decisions taken there are acceptable. It will not be asked to say whether the way in which the agricultural budget is operating is acceptable. We shall simply be told that this was the agreement, that Britain is one country out of nine and that we can be outvoted, therefore we must go along with the overall decisions taken by the Council.

Therefore, to ask the Minister to comment tonight is, in a sense, just a courtesy. We are simply asking him for his opinion. In many instances his views and the views of this House will be overridden when it comes to the actual decision. Until this Parliament takes back to itself the right to decide on fundamental questions, many of the debates, such as the one we are having tonight, are frankly just a gentle exercise in the use of words. The final decision will be taken elsewhere and our involvement in it will be absolutely minimal.

I have looked at this budget with great care. Most of it is a total nonsense. Therefore, sensible discussion of it is exceedingly difficult. It is geared basically towards an agricultural policy which is not concerned in any way with defending the interests of the average consumer in the Community. It is geared towards protecting a particular level for the producers, and in many instances it does not even take account of the true effect of these injections of money in agriculture.

There is no evidence at all that the existing CAP, with the amounts of money which will be spent, will alter the siutuation of farmers in southern Italy. There is no evidence whatsoever that the amounts of money spent in the guarantee section will change the situation in many of the regions that have the lowest income. All there is evidence of—and this is shown time and time again—is that the Community is spending a vast amount of money in a totally unstructured and thoroughly incompetent fashion to the cost, in many cases, of ordinary taxpayers.

When we talk about this budget, we should ask the Ministers, whether they wish to protect those things that are important. Let them look at the Social Fund and see what amount of money can be used to create jobs for the young unemployed. Let them look at the fact that the amounts of money written in, minimal though they are, could prouce some help for the handicapped. More than that, let them look carefully at the political implications of many Community policies.

I looked at the subject of teaching of immigrant children on Friday —a scheme initiated with assistance from the EEC. The scheme is operating almost in a vacuum on the basis of a directive that has not even been fully discussed in this House. Yet money is being spent in this way in many instances without our having proper control over it, or even proper awareness of the amounts involved, or the effect on the children, which is much more important.

The real implications of the budget are political. We are talking not just about the future of the Community, but the effect that the Community has on the world as a whole. There are sums in this budget which will in due course be used to support the growth of particular commodities, such as sugar. Amounts of money will be entered and spent by the Community, and yet the effect of those policies will be felt outside the borders of the Nine. Many other countries will be directly affected by what is spent on the CAP. Yet ther is never any politcal discussion of the policy, and never any clear indication, even from our own Ministers, of the financial implications.

What we are doing tonight is discussing a budget which never at any point demonstrates a cohesive political policy. There is no evidence in the figures presented to us or in speeches made by representatives of other member States of any political will to change the CAP. It is that agricultural policy which informs the political decisions of the Common Market and which will continue to do so for many years to come.

What were we promised in the famous Bremen statement? We were told that there would be an examination of the implications. Those of us who have sat and watched the Agriculture Commissioner seeking to find any change of mind in any one of the member States know how difficult he finds that task. Even with the efforts he is making, we can see how impossible he finds it to get member States to agree to any change in a policy which has supported many of their agricultural communities very handsomely for a long time.

If that is the reality of the situation, in a year's time we shall be having a mirror image debate. We shall be saying "Why is it that our Ministers are unable to demonstrate changes in CAP? When will these pious hopes be carried into political operation?" The Government will have to reply, as undoubtedly they will tonight, "We are but one of nine—we are governed by machinery over which we have little control."

If we reach that point, the House of Commons will be failing in its duty as a monitoring body and we shall begin to pay the price in terms of public contempt. It will not be possible for us to continue as a serious Parliament if we have to go through the exercise of examining the dribs and drabs of other people's guesstimates. That is what we are doing tonight.

8.57 p.m.

Mr. Anthony Nelson (Chichester)

I do not share the implacable opposition of the hon. Member for Crewe (Mrs. Dunwoody) to all proposals and indeed this budget, which is associated with the gentle expansion at this stage of the European Community, but I pay tribute to the consistency of her opposition. I, in common with many other hon. Members, have been impressed by the sincerity with which she speaks on this subject.

My concern is somewhat different from that expressed by a number of contributors to this debate in that I am increasingly of the opinion that the budget does not go far enough. Document R/ 159/78 suggests that the budget in no way measures up to the part that it is expected to play in the move towards greater economic integration. Although we should give a cautious welcome to the budget, I should be prepared to countenance, as part of my support for the European Community, considerable expansion in the size of this budget in future, with certain conditions attached, particularly if concomitant relief were provided in term of national responsibilities.

The budget committed expenditure of 14.6 billion units of account, which amounts to only 0.8 per cent. of the member States' GDP. That figure is, in my view, too low to begin to move towards some of the basic principles and objectives of the Treaty in terms of economic integration and all the benefits of the Treaty in terms of economic integration and all the benefits which that will bring to this country among other member States.

What percentage one might contribute to the European Community, is an interesting and difficult question. Those Liberals who openly support a federal system might subscribe to a higher budget as a proportion of member States' gross domestic product. Some commentators feel that a contribution of 20 per cent. to 25 per cent. of gross domestic product is by no means unusual as a contribution towards a federal administration. The MacDougall report, which considered the matter, suggested in more moderate terms that a figure between the band of 2 per cent. to 7 per cent. of GDP would be more appropriate as a medium term objective for the European Community, but in either case this implies a substantial increase in the amount of money and of economic power and influence which the EEC will possess.

If one goes the whole federal hog and accepts a contribution of about 25 per cent., one could be talking of up to 150 billion units of account. That would be an entirely different situation from that which we have been discussing and the minor changes we have been proposing and the criticisms we have been making would be seen in retrospect to he insignificant in the new situation.

In a time scale of the next 25 years, as we look into the next century, I would place greater faith in the pluralism of Europe in making economic decisions for the benefit of this country in Europe than I would in going it alone and having a decreasing real economic influence over our own affairs.

Mr. Budgen

Is that because my hon. Friend mistrusts the people of this country in making their own decisions about economic management?

Mr. Nelson

I certainly mistrust the present Government about making such decisions, and the extent to which the IMF has efficiently taken a great deal of control over the economic management of this country in recent years indicates that we are not entirely in control of our own affairs anyway and the degree to which one is prepared to abdicate sovereignty—to put it in plain terms—to supranational bodies or within a confederation is a matter to be considered pragmatically.

The reality is that, in the world in which we have to live and trade, we are reliant on the activity and behaviour of the rest of the world. If we cannot control our own affairs the IMF will do that for us, as it has in recent years. I would rather that this country worked in Europe, and I place greater faith in a consensus economic policy based on the most prudent economic management of member States than I would on an entirely supra-national body, such as the IMF, controlling us.

The document to which I referred earlier sets out three functions of the budget. First, it should contribute directly to economic integration in Europe. Secondly, it should contribute to a redistributive function within the Community. Thirdly, it should contribute to stabilisation of cyclical trends in trade and supply.

The budget is only a partial contribution towards integration and is not enough to achieve the measure of European monetary union that I should like to see. A growth in the budget in future can be allowed only if it is associated with a relieving of national budgets and a recognition of the need to reduce regional imbalances.

This point has been raised by a number of hon. Members and arose during questions to the Prime Minister earlier today. His view, which is shared by a number of other hon. Members, is that movement towards absolute or partial monetary union can be achieved only with the precondition of increasing regional assistance within the Community. It is true that if there were a common currency within Europe and a free market prevailed within the Community, regions that were inefficient would have increasing strains placed upon them. But in such circumstances there would be vent the economic consequence of its could let the region run down and offer no regional or other assistance to prevent the economic consequence of its relative failure; it could protect the region by erecting walls within the Community, which in this instance would go against the objectives of the Treaty of Rome; or it could provide a regional fund which openly and directly assisted the inefficient industry for a variety of reasons.

I should like to see such regional funds based on encouraging a regeneration of those industries on a temporary basis. I would not countenance a Regional Fund based on a permanent application of funds to an area that was basically inefficient. On condition that it was used to make the decline of certain industries more gradual or that such aid was provided on a regional basis to assist new areas and industries to gain prosperity and to spring up, I would be prepared to countenance such a form of regional aid. I accept that that would be a necessary commitment with the sort of European monetary union that I should like to see encouraged.

Some hon. Members have said that the percentage contribution of the budget awarded to the agricultural sector is too large. In absolute terms, the amount allocated in commitment and payment for this year to the other sectors, especially the regional and social funds, is too small. Were that allocation to be increased substantially in absolute terms over a period —not necessarily this year—proportionately the contribution made to agriculture would decrease. Allocation should be increased, especially to the Regional Fund.

In the MacDougall report it is suggested that there should be a 10 per cent. allocation to the Regional Fund. That seems to be reasonable as an objective over a period. It is reasonably consistent with an earlier move towards European monetary union.

In the second part of the budget the document refers to the problems of the European unit of account and refers specifically to the 10 million units of account that will be set aside to cover disparities between the amount allocated to certain areas or recipients and the currency differences that prevail between the dates of deciding of those amounts and payment of those amounts. It relates that sum to the difficulties associated with having to translate the unit of account into a variety of different currencies within the Community.

My views in favour of European monetary union would go to assist in overcoming some of these problems and reduce the necessity for such a measure. I welcome the Prime Minister's announcement—it was a slightly reluctant commitment and cautiously worded in his statement—that he will support consideration of measures to move towards monetary stabilisation. I see that move as a step to full common currency and European monetary union.

In my view, it is untenable for any long period to have a currency stabilisation scheme. That must fail. Even if the divergent rates of economic performance within the Community are only 1 per cent. in inflation terms, over 15 years or 20 years it is obvious that that difference has to be reflected in differences of exchange rate, which are nothing more than a token or signal of what is going on within an economy. I believe in freely floating exchange rates, but possibly we shall have to go to the other extreme and have a fixed common currency.

The initial consideration of a scheme of stabilisation is only a means to the end. The end that I support is a common European currency. If a stabilisation scheme is made to last for years to see how it gets on, it must fail. It is quite impossible to have within the Community exactly parallel and concurrent economic performances of member States. If it is used as a means to move towards stabilisation and a common currency, which can be fixed at one period when Governments within the Community have the political will to fix that common currency, I welcome it.

Mr. Powell

Fixed in relation to what?

Mr. Nelson

In relation to each other. If all the common currencies are fixed at one time, as they are for the unit of account, the fixed currency is the unit of account for one's own currency.

It may be asked "What is to be the comparative value of the currency?" My answer is that it must be a freely floating currency on the world markets. Its value will be reflected by its exchange value against other currencies.

Mr. Budgen

Does my hon. Friend agree that we should then need to have detailed common economic policies so that all the currencies remain in that single relationship to each other?

Mr. Nelson

I hope that we shall have a common economic policy within Europe, yes. But I think that my hon. Friend misunderstands what I am suggesting. Individual member currencies will cease to exist. The pound will be replaced. There will be one currency for the whole of Europe. The value of that currency will be assessed in comparison with other international rates. But there will be no question of fixing the rate for the new European currency, because such fixation will not prevail for the same reasons as the stabilisation scheme within Europe will not prevail.

I believe that it is essential that we regard a stabilisation scheme as a move towards a common currency within Europe. I was interested to note from the communique that a European monetary fund should be established within two years from the start of the scheme. The commitment reached at Bremen just before the weekend goes rather beyond what the Prime Minister was prepared to admit today, for fairly obvious political reasons.

I believe that stabilisation of exchange rate schemes will be untenable in the long run. In my view, economic monetary union is a pre-condition of economic convergence within Europe. Many hon. Members—indeed, the Prime Minister and others—take refuge in saying that we must get European communities to move more together in terms of economic management and performance and that only then can we consider having a European common currency. I suggest that will never happen. We shall never reach that stage without a major political initiative and will to create a common currency. There will be no organic development of a European common currency. It will need an agreed, not a dictorial, initiative among the member States for that to happen.

I believe that a common currency would bring great advantages. We should not read into a common currency more than it indicates. I believe that it should stimulate expansion of efficient trade, industry and employment. Our original principle and objective of the Treaty of Rome was the free movement of capital and services within Europe. I believe that that can be fully achieved only if we have a common currency.

Furthermore, the vagaries and volatility of international exchange rates, which in recent years have been the subject of increasing comment and concern in industry and business internationally, inevitably create an atmosphere of uncertainty in which people are unable to invest and unwilling to trade.

I believe that a common currency based on the collective economies of the European Community—based as it would be on a community which comprises the largest trading bloc in the world—would form a more satisfactory international system and the basis of a more confident system of trade and industry within Europe. In my view, it would be a more satisfactory store of wealth.

Implicit in the concept of a European currency is control through a European central bank, which, to a large extent, implies common monetary control of the European Community. However, as a committed Conservative, I place more faith in the pluralism of Europe than in the narrow political approach being adopted by the Government in their own monetary strategy. If we could have a European currency and money supply administered by a body based on the principles and policies of the least inflationary and most prudent States in the Community, I believe that we should be a great deal better off in future, as we might have been in the past had we adopted such an approach. Therefore, I am hopeful that with such monetary control we may move not only towards a more common price movement, either inflationary or deflationary, but towards more price stability because of the prudence to which I referred.

Many hon. Members are worried about sovereignty being ceded outside this country. I am the first to admit that it implies a secession of an element of sovereignty, but I emphasise again that it is no more than has been ceded to the International Monetary Fund in recent years.

The final argument against monetary union to which I should like to put paid is the suggestion that one cannot possibly have a common currency when the economies of member States are divergent. There is no reason why that should be so. One has within confederations and federations of States one currency representing regions with different economic performances, just as we have in this country. One currency may represent a number of regions with different economic performances.

Were we to have a separate currency for Scotland, as perhaps some hon. Members would like, in a freely floating situation it might assume a value different from sterling. Yet we manage to survive with one currency throughout this country. I see no reason why we should not in the European context, with different economies and regions, be able similarly to survive with one currency.

I am in favour of an early move towards European monetary union. I recognise that this cannot be done until we have gone through the process of stabilisation. But I hope that the talks which are to take place will be followed by concrete commitments, dates and objectives for moving towards European monetary union. These are certainly proposals which I should be prepared to examine sympathetically and, I hope, give my support.

I find it difficult to support the amendment which has been accepted by the Government, because it fails to envisage the need for an expansive budget in the future. I was particularly concerned at the Minister's response. He said that when considering the future cutback in order to comply with the terms of the budget he would countenance a major cut-back in subsidies to the dairy sector.

I declare a constituency interest. A considerable number of dairy farmers in the Chichester area will not receive his response well. The Minister might consider such subsidies lavish, but there are many severe difficulties in terms of return on capital and costs which my constituents have to face. Such assistance is necessary for strategic and economic reasons. I therefore do not agree with the amendment.

I hope that my comments will be taken as being in support of our continuing membership of the Common Market and of an increased move and support for economic union. I give my cautious support to the preliminary draft budget.

9.18 p.m.

Mr. John Lee (Birmingham, Hands-worth)

If it were not for the fact that most hon. Members have a protective sense of humour, we should have the right to be rather angry at the way in which this subject has been presented to the House. What has been served up is, as usual, ludicrously complicated because the whole matter was founded in fraud. Because of the checks and balances, we are powerless to alter the budget. It would not matter if the Government had refused to accept the amendment and if the Government had been voted down. That would not have made a hoot of difference to the mandatory authority of the House.

The Minister has indicated clearly that there is no likelihood that the Government will use the veto, however indefensible are the final proposals. In addition, there is every prospect, as in past years, that, far from there being any diminution in the total budget and any diminution in the agricultural constituent of it, it is likely to be increased this autumn.

It is worth remembering that each spring there is a price review. As is clearly stated in volume 7A of document R /1577/ 78, it is likely that there will be a further increase in agricultural expenditure as a consequence of that review, apart from anything else. We can think of no organisation of any repute which would allow its financial affairs to be conducted in this slovenly and haphazard way. Even under our Companies Acts, which are deficient in terms of audit control, there would be no end of a row it matters were conducted in this fashion. I can think of no private club, and of hardly any banana republic diet, which would conduct its affairs in this way.

In so far as I understand the apologists for this organisation—there are not many of them here tonight—this is a welfare and charity organisation primarily for poor farmers in southern Europe but also to ladle out social funds for various deprived areas of Italy. One can compare it, I think, with the Commonwealth Development Corporation expenditure.

Whatever criticisms there may be of that organisation—and I have felt that it has put far too much emphasis on urban development in those parts of the developing world for which we have had a residual and historic moral responsibility since they were part of our old Empire—at least when we consider Commonwealth development expenditure, and other forms of overseas aid we know what we are voting and what we are voting it for. We get some idea afterwards, although perhaps not as much as we would like because the money is going to countries over which we no longer have any control, of how the money has been spent and how successfully it has been used on the projects to which it has been devoted. There is no comparison whatever so far with this exercise for the improvement of deprived parts of Europe.

At the moment, with the questionable exception of Italy, the Common Market does not include countries which can reasonably be classified as under developed countries. Most of the EEC countries are in any case in a much better financial position to look after them-selves. Certainly they would be if they had an effective system of domestic taxation, which the French have always lacked. They certainly should not be calling upon us, who have borne the heat and burden of the day outside this country because of our historic role and partly because sterling in the past has been so much of a reserve currency, to make a contribution of anything like that which we make. Even so, as my right hon. Friend the Member for Battersea, North (Mr. Jay) indicated, we are paying far more than is reasonable on a basis of size, and it is not desirable that we should do so.

If any or all of the quasi-developed countries of southern Europe—Greece, Spain, Portugal and, possibly, Turkey—were to be incorporated, that would add a yet more powerful lobby in favour of high-cost agriculture. The CAP would then show no sign of being removed, and there would be little chance of its being mitigated in any way.

I asked my right hon. Friend the Foreign Secretary whether we would make our acceptance of the membership of these nations dependent upon their undertaking to forgo acceptance of the CAP and perhaps, by way of an alternative, adopt a system of deficiency payments such as we operated before we joined the EEC. I got not change out of my right hon. Friend. Whatever other conditions we may impose—and I do not know of any at the moment— it seems that there is no possibility of the Government using their muscle even in that direction. We may confidently expect, therefore, that if these countries are admitted it will be in circumstances in which we can expect the present situation to get worse, not better.

Where do we go from here? Where are the benefits that we have waited patiently to discover, apart from the fact that we are net contributors by £700 million to £800 million, rising to £1,000 million, with every prospect of its growing bigger? We export far more capital to the Market than we get from it. From a position of comparative or marginal trade balance in 1970, last year we were in deficit to the extent of some £1,400 million in manufactured goods. Thus, apart from the common agricultural policy, on the other side of the coin, the industrial balance is as bad, and we are now probably running a deficit at the rate of £2,000 million, wiping out and more the benefits which we ought now to be gaining from North Sea oil.

If the Government hope to be able to present to the electorate in October, or whenever it is, the rosy prospect of dramatic economic improvement, they had better take account of the fact that for the time being, or so long as we remain in this structure, we have in all probability gratuitously thrown away the advantages which should otherwise have accrued to us, at least in terms of the balance of payments. I know that that is not the end of the North Sea saga, and in other respects, in terms of accessibility and reliability of oil supplies, some benefit is still there, and neither our membership of the Market nor anything else can gainsay that.

On top of that, we have had the fisheries policy. I see on looking through these volumes that there is to be about a 500 per cent. increase in the so-called "appropriations for commitment" on fisheries. That is an ominous note at a time when even our Minister of Agriculture, Fisheries and Food—bless his heart, who is the best Minister we have in the Government—is not prepared to stand up for a 200-mile exclusive zone in the way the Norwegians have done. His report last Friday, I am sorry to say, was quite the most waffly report—indeed, the only waffly report—that we have had from him, and the reason was that he had virtually nothing to say.

Altogether, it is a sorry state of affairs that confronts us. I do not propose to speak for more than a few minutes more in what may, for all I know, be my last contribution to debate in the House if there should be an October General Election, but I wish to address a few more words to my right hon. and hon. Friends. We have made a terrible mistake in agreeing to assent to the European elections. We shall give a spurious legitimacy to an Assembly which, if it goes on as it is at the moment, will be no more than a fatuous and futile talking shop, or, alternatively, if it develops the kind of bureaucratic megalomania which characterises the Commission, must inevitably draw power further and further away from the House of Commons.

Either way, we here shall have no possibility of controlling expenditure. If market's procedures remain as slovenly, and if its systems of scrutiny of expenditure and estimates preparation remain anything like as bad as they are, it will be no wonder that there will be fraud and no wonder that there will be waste, since it will be impossible for the House of Commons any longer to have any hope of controlling it, and it will probably be impossible for the Assembly, gathering up powers as no doubt it will, or will attempt to do, properly to gain effectively control.

What is the prospect for Britain? A small minority of Members in a House of 410, representing—if that be the right word—constituencies which no one can possibly manage and with which no one can possibly contact, will remain locked in a permanent minority situation in an organisation in which at least one, and possibly more than one, country will be in a state of chronic political instability, quite apart from the overall economic prospects which we face.

I hope that my hon. Friends will boycott the elections next year. I shall certainly campaign might and main to persuade people not to vote. I shall vote only for a candidate who pledges—and who I am convinced is genuine in his pledge—that he will in no circumstances take his seat in the Assembly and that he will not go near Brussels, Strasbourg or Luxembourg. If some people lawlessly decide to throw lighted cigarette ends, battery acid and other corrosive substances into the ballot boxes, I cannot say that I shall altogether blame them, though, of course, it is not for us to encourage illegality. I do not think I can ever forgive the fact that my party has agreed to take part in the election.

What is most extraordinary of all is that the national executive, on which there is a majority of ostensible anti-Marketeers, should have tamely assented to putting forward candidates, on the rather fatuous ground that if it did not do so all sorts of people who would be unrepresentative of the party would present themselves as being Labour candidates, I should have thought that the fact that they were unrepresentative of the party, and were seen to be, would be a good reason for letting them go forward and being seen for what they were. I shall have nothing to do with the elections.

9.31 p.m.

Mrs. Winifred Ewing (Moray and Nairn)

I wish first to address myself to the document R/519/78. We are told on page 4 of it that one of the functions of the budget is to finance policies and measures which constitute a direct contribution to economic integration. If one looks a little further around that statement, one finds numerous references in the document which seem to suggest that economic and monetary union, which is a part of economic integration, as understand it, is almost one of the vital statistics of the Community, a kind of fact of life, a fait accompli. Yet many times in the House I have had assurances from the Government that economic and monetary union is not their policy.

Only today the Prime Minister seemed to be going towards that policy. As I put to him in my question to him today, he seemed to suggest that he was now about to change the attitude he has expressed to me and other hon. Members when he has categorically said that the Government are not committed to economic and monetary union.

Quite a number of people who are proEuropeans—I am not putting myself in that category—are nevertheless opposed to that policy. It is time we pinned the Government down on this matter. I hope that the Minister will explain to me whether economic and monetary union will be a commitment in the Labour Party's manifesto on which the next election will be fought. That is a fair question, whether one is in favour of economic and monetary union or against it. I have been asking the question repeatedly. I am sure that Mr. Speaker will remember my asking it. Perhaps he is fed up with my doing so. Today we saw a total turnabout by the Prime Minister, who seemed unrepentant when his turnabout was pointed out to him by me and other hon. Members.

I feel much concern about the advisability of considering economic and monetary union at this time. It makes nonsense to consider a unified currency when we have such diverse economies. I am all for independence. Our independence of action would be further restricted if we wished to introduce economic measures that we had decided were tailor-made to our needs for various industries.

That brings me to another question. Shall we see another hurried propping up of a policy because there is a reason for speed? I am thinking of the question of enlargement and the effect it would have on economic and monetary union. Two of the countries concerned are extremely weak industrially and rather weak agriculturally. If we are to envisage a unified currency affecting those two countries, one can imagine the disparity between, for example, the German economy and their economies. In such circumstances, how could there be a unified currency? To that extent, it seems to me that, while enlargement is on the horizon, we do not know how quickly it can come about, although it might come about more quickly than we think.

Will we see another cobbled-up policy of the type we saw in the cobbling-up of the common fisheries policy, which has been such a disaster to the fishing industry of the United Kingdom, which represents 60 per cent. of the fish pond of the EEC—and of that 60 per cent. a high proportion is in Scottish waters, so that again Scotland suffered doubly? Are we to see the EMU concept repeated so often that suddenly, from having been non-Government policy—and I understand that it is also the policy of the Conservative Front Bench—

Mr. Budgen

I am not so sure about that.

Mrs. Ewing

I understood that to he so from the remarks that have been made. Are we to see the EMU concept, just because it is repeated by so many people and in so many official documents, having been a non-policy of the Government, becoming the policy of the Gov- ernment? We are entitled to press the Minister to answer that question.

Secondly, I want to address myself to the fact that the budget is one of the testing grounds of the relationship between the various institutions of the Community. It is in a sense one of the only democratic types of power, so far as it goes. Many of the deficiencies of budgetary control have been pointed out, so I will not rehearse them except to say that I agree with many of the comments.

But the actual weapon of approval of the budget, the discharge of the audit, is nevertheless a democratic weapon in the hands of the only democratic institution of the whole set of institutions. It is not as democratic as many of us would like it to be. Some say that it is a talking shop only, but at least it is composed of Members of Parliament who in various ways are responsible to an electorate. At least, to that extent, it is democratic, and this is one of its powers.

I suggest that it would be useful if the European Parliament could reject the budget piecemeal instead of having to reject the whole budget. That would be a useful power which I think must eventually come in logic and common sense. It is a bit like having a power so great that it will never the used. It is a bit like the other democratic power of the European Parliament to sack the whole Commission. It is not likely that we shall dislike the whole Commission enough to sack all its members at one time, but we might dislike one or two.

The power that we have in regard to the budget brings me to consider the relationship between the European Parliament and the Commission and between the European Parliament and the Council. I part company with many of the total opponents of contesting the elections to the European Parliament. The Parliament is there, and the Scottish National Party intends to fight for seats in it. That being so, it is desirable that the Parliament should be more democratic rather than less.

I want to quote from the speech of Commissioner Tugendhat which has already been referred to. It seems to give away the rather arrogant attitude that the Commission all too often adopts to the Parliament. The Commissioners talk a little bit like Big Brother. Mr. Tugendhat said that the Commission will have to ensure that wherever possible its own proposals are in harmony with Parliament's views. That seems to me to give the case away. He went on to say that the Commission will have to make every effort to demonstrate that it holds the Parliament in high respect. Is that so difficult? The Commission takes the existing Parliament very seriously and relations between the two bodies are, generally speaking, very satisfactory. But it would be a mistake for the Commission to assume that it can take the good will of the directly elected Parliament for granted. That is possibly very true.

Mr. Lee

Is it really likely, taking the hon. Lady's point about elections, that an elected body will necessarily, by virtue of the fact that its Members are elected, cease to display the kind of arrogance to which she rightly referred?

Mrs. Ewing

That is an interesting question. It is one that I have thought about a good deal. I am absolutely convinced that a directly elected Parliament —which by its nature is bound to be more full time—will, with its responsibility directly to the electorate, be determined to deal with the arrogance of the Commission, if I may call it that. It seems to me that there is a degree of arrogance which appears quite regularly in the relationship between the Commission and the Parliament.

Mr. Dalyell

I feel bound to say that one can disagree—possibly all of us can —from time to time with Commissioner Tugendhat, but to accuse him of arrogance is really wide of the mark. In all our dealings with him, Commissioner Tugendhat has shown no arrogance.

Mrs. Ewing

I should like to endorse what the hon. Gentleman has said. I have found Commissioner Tugendhat's behaviour anything but arrogant. However, in my experience in the Parliament over two years, I have found that quite often this has been the general attitude. It has been shown, for instance, on the question of opening up some of the Commission's deliberations and making more open the way in which it exercises its functions and arrives at its decisions.

Mr. Roper

rose—

Mrs. Ewing

I should like to get on with my speech. I have a few more points to make. At least, I should like to finish the point that I am on at the moment.

I suggest that the budget, especially in relation to its faults, is a weapon in the hands of the Parliament. If the Parliament is to achieve more powers after it is directly elected, it will probably have to be at the expense of the Commission. I give way to the hon. Gentleman.

Mr. Roper

I am grateful to the hon. Lady. She made a point about the powers of the Parliament, and earlier she referred to opening up the activities of the Commission. Is it not highly reprehensible that most of the Committees of the Parliament continue to meet in private?

Mrs. Ewing

I agree with the hon. Gentleman. That has been one of the planks that I have taken up in the Parliament, in common with other Members, to try to open up the deliberations of the Council. I have frequently suggested that the Council's deliberations should be open to Committee Members who have an interest in a particular subject. I have also recommended that Committees should open their doors. I see no harm in that. I do not think that we have anything to hide. It might overcome one of the problems about which everyone is talking—that there is not enough interest shown in this set of institutions. I am absolutely in agreement with the hon. Gentleman.

I turn now to the question of the Regional Fund, about which a lot has been said. We are all aware that it is just a small drop in the bucket. The rich get richer and the poor get poorer all the time. I think that the Fund is efficiently administered, however, and that it is operating without an excess of staff. I think that it is doing its best, as far as it goes. Nevertheless, because the Fund is so small, it represents just a drop in the bucket. Indeed, it is a tiny fraction of the United Kingdom's expenditure on regional policy. In spite of the efforts made by successive Governments, in Scotland we have an imbalance of population regionally, and in the west of Scotland we have some of the worst social deprivation. That is despite massive Government expenditure. The expenditure of the Regional Fund can only be a cosmetic propaganda exercise in its present form.

I should like by way of contrast to refer to another type of regional aid, namely, that given in Scotland by the Highlands and Islands Development Board. After the war, it decided to build up the western fleet in Scotland. It did this, and continued to do so consistently.

The regional grants of the EEC for fishing boats are made in a rather strange way. There would seem to be no rhyme or reason why one applicant with identical qualifications and experience to those of another should receive aid when that other applicant did not receive it. In a certain way, that type of aid is almost a kind of propaganda exercise, and it causes more harm than anything else because of the unfair way in which it is administered. That would be one of my criticisms of the fund.

As regards the Highland region, I should like to refer to an excellent document which has been prepared by its officials detailing their experience in making applications to the Regional Fund. If the Minister has not seen it, I shall see whether I can supply him with a copy. They make one or two basic criticisms from their point of view, and I mention them as an hon. Member whose constituency is partly in the Highland region.

It is pointed out that, although tourism is an accepted heading, it is not normal to give aid to tourist projects. Infrastructure to help create jobs is an acceptable heading. However, aid is limited to where there are more industries than one. So often in Scotland there is a great need to create jobs in order to keep remote populations in their communities, and there is a primary industry. Therefore, it seems that the very type of area which might claim to have been envisaged by the fund is not eligible when it makes application for aid under headings which are well within the spirit of the Fund but which seem to be disqualified by what I consider to be wrong technical rules.

The document also points to the lack of flexibility in the Fund, which again often prevents aid from being given for projects which I am sure are in the spirit of the Fund. Instances are given in the document, which goes into quite a lot of detail. It also makes a very simple suggestion, which I am sure would improve the Fund, that grants should be given to a project which does not need to be studied or which is not necessarily intended to proceed—in other words, a project could be subject to EEC grants. That is perfectly logical, but at the moment the rules are that a grant can be made only if the work is to proceed anyway.

The last matter to which I refer in relation to the Regional Fund concerns the vexed question of additionality. I suggest that it is not good enough for the Treasury to attempt to justify taking the money which comes from the Fund and letting it sink into the ordinary coffers of the Treasury. The original intention was that it should be additional. My information is that this is not the practice in some of the other member States, although I have found it very difficult to lay my hands on proof of this. If I succeed, I shall certainly be raising the matter. It is not so bad if we are all in the same boat. However, it is galling if only the United Kingdom Government take this money so that it is not applied in the way envisaged when the Fund was set up. I hope that the Minister will comment on the question of additionality before the conclusion of this debate.

A great deal has been said about the CAP. I begin to wonder whether there is anyone in this House who approves of the size of the CAP.

Mr. Nelson

Yes.

Mrs. Ewing

The hon. Member for Chichester (Mr. Nelson), who is enthusiastically pro-Market, is the exception. But is there anyone in the House who approves of surpluses and who can justify them in a world where a third of the people have not enough to eat? Any system which has created the absurdity of these surpluses must be found wanting. The truth is that the CAP does not work. Perhaps it cannot be worked.

The hon. Member for Crewe (Mrs. Dunwoody) said that we had to think of the consumer and that the agricultural policy was a great help to producers. It is not a help to all producers. It has not been a help to the pig farmers or to the hill farmers, especially those with small farms.

Mr. Budgen

They are not rich enough to lobby properly.

Mrs. Ewing

They are the very people who need help. They have had to see the loss of jobs. They have had to sack people. Our pig farmers are running at a loss, yet the Danish Government subsidise the advertising of bacon on our television screens to help Danish farmers to compete with our farmers to whom the CAP offers nothing.

We lose out in terms of wine and whisky, too. The French are very good at protecting the regulations for their wines and spirits—and certainly if they go against the regulations the United Kingdom Government do not take them to court quickly enough—yet, when it comes to the whisky industry, which is vital to the Exchequer and important to Scotland's economy in terms of employment, all sorts of artificial rules are made against whisky imports into some of the EEC countries. The CAP is out of control, and I agree with all those who say that the slice of the cake is far too big.

I end by asking the Minister whether his Government really will do anything about the CAP. Is there any time scale plan for reducing it and giving a bigger slice of the cake to the worthy Social Fund and Regional Fund which, although they do not go far enough, at least give help? I certainly dissociate myself from those who are anxious to advance us into further centralist policies—such as common energy policies and common industrial policies. Despite the EEC being such a great trading bloc, we do not seem to be able to protect our shipbuilding industry in European terms even against Japanese competition. The graph for Britain and other countries has gone sharply down since the war while the graph for Japan has gone in the opposite direction.

At the time of the referendum we were assured that the EEC would not affect three matters relating to energy—the rate of extraction, the price of oil, and the markets to which it could be sent. Now I see, in debates on the EEC, a considerable desire to interfere with these three areas of decision making. I see that you are looking at your watch, Mr. Speaker. I end by saying that the budget cannot be a true instrument for any social regeneration unless the CAP is drastically reduced.

9.53 p.m.

Mr. William Hamilton (Fife, Central)

The timing of this debate is singularly appropriate in the sense that just a few hours ago the Prime Minister was, in effect, saying that our national problems could not be solved solely in a national context but that they must be seen, and the solutions to them must be sought, in a European context, perhaps in a wider international context. In that sense, the proceedings at Bremen last week and the consequent developments flowing from those talks will make the proposals that we are now debating—the Commission's intentions in Europe for 1979—seem to be out of date and irrelevant long before the debates on them get under way in the European Parliament.

When the proposals were presented in the European Parliament last week by Commissioner Tugendhat, they got a frosty reception all round. Representatives from all parts of the political spectrum criticised the proposals on the ground that the non-obligatory expenditure was insufficient in every other area than the CAP. That was the gist of all the arguments. That was not surprising, because those who were making the criticisms would not have been in that Parliament if they did not accept the proposition that our problems—whether they be British problems, German problems or whatever—can better be solved by an additional element in them, a European element on top of and in addition to a national approach to them, whether we are referring to unemployment, structural weaknesses in basic industries or whatever else.

The criticisms that were laid at the feet of Commissioner Tugendhat and the Commission generally were that the overall proposals did not even begin to measure up to the problems that beset the Community as a whole. We all know what they are. They are chronic unemployment as a consequence of the world economic crisis, structural weaknesses in industries such as steel and shipbuilding and the rest, and varying exchange rates within Europe and outside. There is also Japanese competition, which is now being tackled by the Nine together rather than separately as nation States. We also have regional disparities in standards of living and quality of living. Not least there is the CAP, which is a cause of some of the disparities in Europe as between rich and poor farmers, and small and large farmers.

I hesitate to call this a budget, because it is not a budget in the sense that we know it. It is a declaration of intent. The Commission is saying "These are the things we would like to do and these are the sums of money we would like to spend in this or that direction." The global figures are trite in terms of national budgets or gross national products. They are minuscule compared with the scale of the problem. They simply cannot be expected to play more than a marginal role in tackling the problems besetting every member of the Community.

The importance of the Community lies in the recognition that we cannot solve our national problems by mouthing sentiments about having our own national sovereignty so as to solve our problems in our own way. It is no good saying that this House is, or should be, sovreign. It has never been sovereign for the past 100 years, and, in so far as it has been, that sovereignty has been steadily diminishing as we have signed and obeyed regional, national and international treaties of one kind or another.

The only common policy that we have so far devised during the 20 or more years that the Community has been in existence is the CAP. It has rightly come in for very rough words all round. I do not think that a kind word has been said for it during the debate. I will risk one. I do not speak as a Member representing an agricultural constituency. It is the case that we have had, partly as a result of the CAP, guaranteed supplies of the kind of foodstuffs that we need at a time when all signs are that there will be an overall shortage of food in the world in the course of the next century.

It would be idle, foolish and dishonest to pretend to the British people that it would be possible to obtain cheap food from other sources for a long time to come. New Zealand is often quoted in this context. Suppose that we got out of the Community and were free to negotiate with the New Zealanders. Does anyone seriously believe that they would guarantee us long-term low-priced food? It is nonsense. The New Zealanders want the same as we do, a high and rising standard of living. They seek industrialisation on an increasing scale. They are looking for markets closer to home. For all these reasons, it would be idle to pretend that in the long term we could get cheaper supplies from New Zealand.

If my hon. Friend the Member for Durham (Mr. Hughes) were present, he would have said that it is a fair point to make that a sizeable proportion of the money spent on the CAP goes into regional policies. I refer to such things as drainage schemes in Ireland. The same things are happening in southern Italy and more deprived agricultural areas within the Community. From the President of the Commission downwards, the CAP has suddenly had a diminishing number of friends, largely on account of the enormous surpluses that have been built up without any regard to the relationship between supply and demand. Indeed, farmers have been incited to produce irrespective of demand. The price has been so high that there has been a widening of the gulf between the supply of foodstuffs and the demand for them. This represents what has been repeated many times in this House—namely, the enormous political power of the farming lobby in Europe, which exerted that power long before we went into the Community.

The fault lies in our not being there at the start. It is no good—

It being Ten o'clock, the debate stood adjourned.