HC Deb 10 July 1978 vol 953 cc1170-201

Question again proposed, That the amendment be made.

Mr. Hamilton

I give way to the hon. Member for Banbury (Mr. Marten).

Mr. Marten

The hon. Gentleman has slightly overrun the point on which I wanted to intervene. The New Zealanders would like to give us long-term contracts, and I suspect that their prices would remain lower than Common Market prices. Also, if we were outside the Common Market—I am not arguing that—we could buy the subsidised exports from the Common Market. Is the hon. Gentleman aware that in Hansard the other day it was calculated that the cost of the disposal of surpluses, calculated in sterling, was £5,284 million? The hon. Gentleman said that there was no insubstantial sum, but it is a large sum indeed.

Mr. Hamilton

I shall not go into the details of that argument, except to say that there is no assurance that we should get long-term cheap supplies from anywhere. The tendencies are all in the opposite direction. The producers of foodstuffs are determined—as we are, and as is the rest of Europe—to get far higher standards of living than they have had hitherto, and that must be reflected in the prices that they charge us and others for their products.

Several hon. Members who have criticised the CAP have asked the Government why they have not yet produced their alternative proposals. I was trying to ask the Prime Minister that very question this afternoon: whether the Government could produce a White Paper showing those policies of convergence before the December meeting of the Nine. It is significant that the Minister of Agriculture, who has a reputation for being extremely negative in his criticism of the CAP, has been extremely loth to produce his own alternative proposals.

Twelve months ago the Socialist group in Europe produced its own document on this subject. I have referred to this before in debates in the House. We obtained the agreement of all nine Socialist parties in Europe to that document. I put more than 100 copies of the document in our Whips' Office, but they were deliberately kept from our Members. It was an embarrassment to circulate those things because it was the only attempt by this party to produce an alternative policy to the CAP. It behoves our Government to enunciate these policies in accordance with what the Prime Minister said this afternoon about the need to get convergent economic policies.

What makes me particularly angry in the context of this budget is not so much the size of the sums—because they really are chicken feed within a national and international context—as the discrepancy between the sums allocated to the CAP and to the Regional Fund. I shall not labour the point, except to say that this afternoon the Prime Minister emphasised the need to pursue more vigorously European policies designed to remove or reduce disparities of wealth within the European regions. The regional policies of national States and, on top of that, the regional policy of the EEC have an important part to play in that context.

In the draft budget, the Regional Fund is in a worse state in real terms than it was when it was introduced in 1975, as the hon. Member for Inverness (Mr. Johnston) said. The Commission itself, although it has frequently paid lip service to the principles and purposes of regional policies within the Community and to regional funds, has now proceeded to propose sums which are lower than they were three years ago when the policy was introduced. That is not the fault of Mr. Tugendhat or of the Commission. It is the Council's fault. The Commission is in touch with the Council, which has to make the final decision, and the commission knows that the Council simply would not accept over-ambitious figures for regional policy or anything else.

The Commissioners seem to be—I am an inexpert layman looking at this—a disorganised collection of men with no agreed common purpose. They carry varying degrees of political weight, and in that respect they are not unlike our own Cabinet. We look at various British Cabinets and we all know who are the heavy guys and who are the lightweights. This is often reflected in the legislation that is brought to this House. Similarly, in the Common Market we have Commissioners of great variety in ability, stature and weight, and those variations are reflected in the budget.

The budget is replete in trivia. There is little in it of any grand design for Europe as a whole. In yesterday's edition of The Guardian there was a letter from the right hon. Member for Sidcup (Mr. Heath), who came to the aid of the Leader of the Opposition at Penistone recently. That great European, who has refused the leadership of the Conservative Group in the elected Parliament, was talking about the sum of money that had been allocated to the European choir. For a start, he did not know what he was talking about. All of us who sit in the European Parliament have had letters about the cuts in the sum available for that choir. Choirs are important, but unemployment, the problems of the steel industry and the difficulties facing our youth are infinitely more important.

This is the great criticism that I have of the budget overall. Fortunately it will be largely overtaken by more important events at Bremen and at Bonn next weekend. The Government were right, in their response to the German and French initiative, to feel sore about being left out in the cold. They were equally right to reserve the right to stand back and study carefully all the implications of the Franco-German proposals without rejecting them out of hand.

I do not often agree with the sentiments expressed by the hon. Member for Chichester (Mr. Nelson). It may be a long time before I agree with him again, but I went along with what he said this afternoon about this House consisting of Conservatives all over the place and right across the board. I would spell "Conservative" with capital letters and apply the term to hon. Members on this side just as much as to hon. Members opposite. The debate today has emphasised this fact.

We look at Europe as if we wish it had never happened, as if we could stop the clock or even turn it back. But we cannot do it. We are in there to stay, and it would be foolish and irresponsible to pretend that we have anywhere else to go if we get out. That would be nonsense. If we go on pretending that we can solve our currency, economic and defence problems by any other step than joining and co-operating with larger organisations, we are deceiving ourselves and those whom we represent. In that sense, sovereignty here is dead and is diminishing all the time.

When we talk about our problems, we are concerned not only with the strength of sterling but with the strength of the dollar, the yen, the deutschemark and the franc. That is what it is all about. The right hon. Member for Down, South (Mr. Powell), who was at the Treasury, knows that this is the case, and it is now more true than ever. Nevertheless, we have a right to look with a jaundiced eye at any proposition, particularly that which has emanated from the French and the Germans in the last week or so which might result in the imposition on the United Kingdom of further deflationary policies which could lead to a further increase in unemployment and still greater regional imbalances within the EEC. But we should not pretend that the other States would not go along without us. Certainly they would go on without us. Therefore. we must resign ourselves to making the best of a bad job.

We are not powerless in this respect. We have on our side some negotiating power. I believe that the Prime Minister and the Government are facing a momentous challenge. I do not believe that we should be intimidated by those challenges by refusing to meet them because of the raucous clamour of little Englanders and by the disciples of a siege economy.

10.12 p.m.

Mrs. Elaine Kellett-Bowman (Lancaster)

I was astonished that in his long opening statement the Minister deigned to make no comment, except in a throwaway offer to answer questions, on the vital subject of the Regional Fund, which is so important to the ordinary citizens of our country, particularly to the region from which I come, the north-west. Since the Minister so signally failed to comment on that important subject, I wish to take this brief opportunity to draw the attention of the House to certain anomalies in the Commission's estimates for 1979 which concern me very much indeed.

On 14th February this year the European Parliament listened with the greatest attention as President Jenkins presented the eleventh general report and outlined the annual work programme of the Commission for 1978. He correctly pointed to unemployment as the major problem facing the Community: He said Policy should begin at home. He remarked: In the longer term we are concerned to promote the economic growth which will enable us to provide employment and prosperity for our citizens. What he asked, can the Community do? His answer was clear: First, our sectoral and regional policies must be put together in a coherent way, and we must build on last year's limited but successful steps. This idea Mr. Jenkins repeated in the speech concluding the debate, when he said: We must use the Social and Regional Funds in every possible way to counteract and mitigate the effects of unemployment. His words have since that date been enshrined in the words of the new draft Council regulation on the Regional Fund which reads in Article 1: The European Regional Development Fund is intended to correct principal regional imbalances within the Community resulting in particular from agricultural preponderance industrial change and structural unemployment. These words were echoed last Monday in Luxembourg by our excellent Commissioner, Mr. Tugendhat. I thought that the hon. Member for Moray and Nairn (Mrs. Ewing)—I am sorry to say this in her absence—did less than justice to Mr. Tugendhat's speech because I thought it was a masterly exposition. He said: We need industrial measures to enable the structural reform required. By laying such emphasis on the priority which the Regional Fund would enjoy as an instrument of Community policy, President Jenkins without doubt gave new hope and confidence to all of us who for some time have been deeply concerned about the future of the Community's regional policy, and of the Regional Fund in particular. This hope, based on President Jenkins' words and the fine words of the draft Council regulation, have been cruelly disappointed in the draft budget. It appears, alas, that our confidence was misplaced, though that does not appear to have concerned the Minister unduly.

Since uttering those fine words, President Jenkins has failed to stand by the Commission's original figure of 1,000 million European units of account as the resources needed by the Fund to carry out its task in 1979. We have before us instead the miserable figure of 620 mua as laid down by the European Council in December last year.

This year's figure of 580 mua indexed to take account of inflation, is actually a reduction of 64 mua on the amount for 1977. What is even more astounding is that the Commission had proposed no less than 846 mua for 1976 which, if indexed to today's prices, would give a figure of 1,280 mua, so that the Commission is proposing an allocation of less than half its proposal for three years ago, despite the incontrovertible fact that the gap between richer and poorer regions has now reached the staggering ratio of six to one.

I am particularly puzzled by the fact that last year, as my hon. Friend the Member for Scarborough (Mr. Shaw) said, the Commission worked out carefully the cost of an effective Regional Fund and stuck to its guns until the very last minute when the European Council bludgeoned it into accepting a substantial cut in commitment appropriations. Since the Commission suggested in last year's budget a figure of 1,000 mua for 1979 to help cope with inflation and the worsening national and regional situation, it would have been reasonable to expect it to increase the amount this year to try to make up the ground that was lost last year. But instead of taking Eyskyns' hint of last year and far from asking for an increase, the Commission has meekly, and without justification, submitted a request for merely 620 mua—less than half, in real terms, what it originally proposed for the fund in 1976 under the old regulations. Those of us who are interested in regional policy feel that the Commission has well and truly sold the pass and its conduct is beyond the bounds of reason.

Mr Jay

Will the hon. Lady give way?

Mrs. Kellett-Bowman

No. The right hon. Gentleman has had quite enough time already. The Copenhagen summit declared that the Community's three priorities—

Mr. Budgen

Will my hon. Friend give way?

Mrs. Kellett-Bowman

No. My hon. Friend has also had too much time. The Copenhagen summit declared that the Community's three priorities would be social affairs, regional affairs and energy.

Mr. Budgen

Will my hon. Friend give way? I wish to help her.

Mrs. Kellett-Bowman

No. My hon. Friend can best help me and the House best by sitting down and shutting up.

It is inexplicable that the Social Fund has risen by 48.84 per cent., the energy sector by 81 per cent., but the Regional Fund by a beggarly 6.7 per cent.

I do not complain that the social and energy sectors have risen. Indeed, I rejoice that this is so, because there can be no industry without energy and no jobs without adequate training.

The House will know of my life-long interest in social problems, which brought me into the House—no doubt to the consternation of my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen). However, I complain bitterly that the Regional Fund, which is so vital to the rejuvenation of our regions and the restructuring of our industry, has been so scandalously neglected. There is not much hope for the expansion of the Social Fund, with its emphasis on retraining, if the Community is failing to promote through the Regional Fund employment opportunities where they are most needed for people when they have trained. That is especially true of the north-west and my own constituency of Lancaster, where unemployment is well above both the national average and the regional average. Sadly, it rose again last month, and no doubt it will do so again this month.

On a slightly happier note, I welcome the non-quota sector, for which the Conservative group in the European Parliament has fought for so long. I trust that it will be in addition to the eventual figure agreed for the Regional Fund. Small though it is, it is at least a start.

I am aware that my party stands, quite rightly for a reduction in overall public expenditure, so that men and women may keep more of the money that they earn to spend as they think fit on their personal and family priorities. However, all hon. Members who have read the carefully prepared MacDougall report. to which my hon. Friend the Member for Scarborough referred, will know that the higher Community allocation to the Regional Fund could well be bread cast upon the waters and could reduce the burden on national budgets. That is partly because money can be more effectively spent on co-operation and partly because of the increased prosperity and greater employment that it can generate.

It is for that reason that I urge the Minister of State, if he will pay attention, to urge the Chancellor of the Exchequer to refuse his consent to this meagre allocation and insist that a meaningful amount be allocated to the Regional Fund in 1979. I hope that many hon. Members in the Chamber will join me in that plea.

Several Hon. Members

rose—

Mr. Speaker

Order. I inform the House that it is hoped that the winding-up speeches will begin at 11 o'clock, which leaves 39 minutes for the four hon. Members who I know are trying to catch my eye.

10.23 p.m.

Mr. David Stoddart (Swindon)

I have found the debate fascinating. Amazing changes of heart seem to have occurred in various parts of the House. There are some on the Opposition Benches who are virtually welcoming additional public expenditure whereas we usually hear cries from the Opposition for less public expenditure.

When we consider a Budget we are entitled to know what benefits we shall get from it. That is one of the questions that we are bound to ask. What is more, we are entitled to ask what return we shall get for taxation paid, and we are entitled to receive an answer. That is what it is all about.

The British people are paying taxation to the EEC. Therefore, we are entitled to know what return we shall get for the taxation. Furthermore, we are entitled to know what achievements there will be from the very preparation of the budget. It is only right that we should know what the organisation is out to achieve that seeks to tax.

These questions are being asked increasingly by the public, but they are not being asked sufficiently in the House. Many hon. Members are not doing their duty and querying our involvement in Europe and the price that we pay for it. Increasingly the British people are asking "What are the benefits? Where are the benefits? Show us the benefits of our membership of the EEC."

It was clear from the opening remarks of my right hon. Friend the Minister of State—it was confirmed in a later intervention—that we know roughly what our contribution or tax will be in 1979. Our contribution will be about £1,000 million to £1,100 million. Whichever way we look at it, that is public expenditure. There is no other way of looking at it. What is more, it is an increase over the current year of £250 million. I understand that our net contribution for the current financial year will be £750 million. In 1979, there will be an increase of £250 million—33 per cent. in one year.

It is strange—in my book anyway—that our contribution this year should be received with such enthusiasm by the Conservative Opposition who, generally speaking, are opposed to any increase in public expenditure when it applies in the United Kingdom. But this is public expenditure in the same way as public expenditure on pensions, assistance to industry, or what-have-you. But, instead of being criticised, it is welcomed. Indeed, some Opposition Members would have it larger.

Furthermore, it is public expenditure, as has already been mentioned, which will be used to subsidise some of the richest countries in the world. Undoubtedly a percentage of our gross national product will assist Germany, which is one of the richest countries in the world. There can be no doubt but that it will be used to subsidise the rich nations of Europe. We can imagine the squeals of anguish from the Opposition Front Bench if we decided to increase the overseas aid budget to the under-developed countries by £250 million in one fell swoop. Yet we have not heard a squeak from the Opposition Front Bench tonight. Indeed, they would have us pay more to subsidise the rich countries.

Do we get any tangible return from the net expenditure of £1,000 million per annum? We were assured before we entered the Community that there would be substantial benefits through increased trade and the dynamising of our economy. We remember the propaganda that was put across in this country to persuade people that, having gone into the Community, we should remain within it. We were to enjoy the great benefits of trade. The cold wind of competition would hit the British industrial scene and we should immediately become dynamic. Our exports would increase; our standard of living would rise; everyone would be £7 a week better of. Those were some of the promised benefits.

Have they come about? Certainly our trading position has not improved. Far from it. On manufactured goods our balance of payments deficit with the original Six worsened from about minus £90 million in 1972 to £2,000 million in 1977. There is no benefit there, and this budget will give us no benefit in that respect in 1979.

Will the budget help to keep down food costs? After all, most of the budget will be used for subsidising agricultural products. Will it keep down food costs in this country? Of course not. Everybody knows—indeed, even the Government agree—that food costs are higher because we are members of the Community.

Furthermore, part of our contribution is being used to undermine the trading position of Commonwealth countries through the dumping of surplus food on world markets. My hon. Friend the Member for Fife, Central (Mr. Hamilton) said that the CAP had brought some benefit in that it guaranteed us food supplies at reasonable cost, and he doubted whether New Zealand or Australia would be able to guarantee us the same security of supplies at reasonable prices. My hon. Friend the Member for Fife, Central said that they would never conclude a long-term agreement with us. But I remind him that New Zealand, Australia and Canada did conclude such long-term agreements in 1945. They saw us through the worst difficulties that this country has known in food supply and costs. What was done then could certainly be done now. My contacts with people in New Zealand lead me to believe that they would welcome such long-term agreements, which would be for the benefit of this country and New Zealand.

The contribution that we shall be making in 1979 and the contributions that we have made so far have done considerable damage to many parts of the Commonwealth. Many beef farmers in Australia have gone out of business. Tens of thousands of head of cattle have been destroyed because the farmers can no longer sell their produce to the United Kingdom. We have been helping this trend by our contribution to the EEC budget.

No tangible benefits can be shown. We are being bled white by the Europeans. That view is gathering strength among the people, in spite of the insidious attempts by the BBC and other organs of the media to convince them otherwise by announcing with a great flourish every little loan or grant that comes from the EEC but never informing the people of the total net contribution that we make to the budget.

Mr. Marten

The hon. Member for Swindon (Mr. Stoddart) has overlooked one matter. We must not forget that our net contribution is a transfer across the exchanges and that therefore reduces our invisible surplus to a negative surplus or a deficit.

Mr. Stoddart

I understand that. I am obliged to the hon. Member for Banbury (Mr. Marten) for mentioning it. It has a considerably greater effect on our total economic activity than is obvious from a first glance. There is no doubt that, because this is a net contribution across the exchanges, it limits to the extent of about three to one the increased economic activity that could occur here were we not making that contribution across the exchanges.

I was most disturbed by the attitude of the hon. Member for Scarborough (Mr Shaw). He appeared to be advocating full blown economic and monetary union. Let us make no mistake: economic and monetary union would merely compound the disaster of British membership of the EEC and lead to a further decline in our economic and industrial base.

The hon. Member for Chichester (Mr. Nelson) waxed eloquent about economic and monetary union. He said that he was happy that public expenditure should be used for regional aid, provided that it was only temporary. History shows that if we become a member of a economic and monetary union, economic activity and finance will flow to the centre. The hon. Member should realise that it is inevitable that, far from keeping regional aid on a temporary basis, it will be made even more permanent than such aid is already. It has happened in this county as a result of economic activity of money and people flowing from Scotland, Wales and Northern Ireland into the south-east. If we get further tied up with Europe through economic and monetary union the same will begin to happen, with the flow-out across the Channel because inevitably economic activity and finance will move to the centre.

This has been a fascinating debate. A lot of economic arguments have been turned on their heads and many hon. Members have thrown aside, it seems, many of their political beliefs simply because they are so besotted with the EEC that anything goes. Things that they condemn out of hand in this country they will accept for the EEC. That is not good enough.

I am glad that this debate has filled its full time. We should have longer debates on the EEC budget, and this House should examine far more closely not only the budget but everything that happens in the EEC. The more we examine it, the more we shall understand exactly what sort of noose this country has put its head into. Perhaps with a bit more examination we can slip the noose off.

10.37 p.m.

Mr. Peter Mills (Devon, West)

The hon. Member for Swindon (Mr. Stoddart) said that absolutely nothing comes out of the EEC. If it is any comfort to him, I have information which shows that in his own area there is help from the EEC for bottling equipment at a dairy near him. Not far from him the construction of a potato and carrot store is being undertaken. That will certainly help the consumer in his area. He is quite wrong to say that even such a small area as around Swindon receives no help from the EEC.

Mr. Daniel Awdry (Chippenham)

Will my hon. Friend say exactly where these projects are?

Mr. Mills

Certainly. One is at Castle Combe, which, I imagine, is not far from Swindon. The other is further down the road at Ilminster. These will certainly help the consumers in Swindon.

Mr. Stoddart

Those areas are not remotely concerned with my constituency. My point was not that we did not receive grants or loans from the EEC, but that we pay the EEC first to pay us back the loans and grants, and that in the end the EEC makes a damned great profit out of the arrangement.

Mr. Mills

I apologise for delaying the House. I should not have gone down that road. I thought that since I had the information it might help and encourage the hon. Member for Swindon.

I do not take such a negative view as we have witnessed this evening. No one seems to be very satisfied with the enormous amount of paper that accompanies the budget, but at least the printers and paper producers must be pleased with the amount of material that is used. If one reads this documentation, however, one can find much in it that is of extreme value and help to this country. I am a fairly severe critic of certain sections of the Community, but I believe that it is totally wrong to dismiss the whole preliminary draft budget as being of no use. That is totally unfair.

As I look at the budget, paying particular attention to the things that concern me in agriculture and food production, it seems to me that Ministers have still not learn the lessons that they ought to have learnt over the years. This dis- tresses me. I believe in the CAP—fullstop. I believe that it can be made to work: it should be made to work, and it must be made to work, though I hope that it will be changed to a common food policy rather than a common agricultural policy.

I do not dismiss the common agricultural policy. I just want to see it improved. There are ways of improving it, though I cannot go into that tonight. I have done so at other times. If the hon. Member for Swindon laughs at that, I shall send him my two papers on the subject, where he can read about what can be done to change the CAP.

What disturbs me is the same old problem of the sums of money being in the guarantee fund rather than in the guidance fund. I do not want to spend any more money. What I want to see is money directed within the budget into different sections, and particularly into the guidance fund.

There is no doubt that the CAP is not at present in the interests of British agriculture. That is a fact. Very few farmers whom I know and to whom I speak would say otherwise. I am still up to the neck in agriculture. None of us wants it. We do not want policies of the sort that are produced in Brussels, and it is sad that Ministers have not learnt the lessons that they should have learnt. The present policy is certainly not in the interests of consumers.

We ought, therefore, to have had a much stronger representation from the Government in making those views known in Brussels and in seeing that changes were made. I am amazed when the Chief Secretary to the Treasury tells us in our Select Committees that he will try, that it is difficult, and that we have to change the policy. I remember the time when I was a junior Minister at the Ministry of Agriculture. The Treasury certainly had its sticky fingers on our policy. It saw to it that we did not spend too much money. I should like to see far more determination on the part of Ministers, including the Treasury Ministers, in going to Brussels to change the emphasis from a guarantee fund to a guidance fund.

In the long term, it can do no good to continue with things as they are, and in the short term it will do no good, either. There has been inadequate recognition that structural problems such as chronic surpluses or social difficulties in particular localities demand specific action. In my view, because most of these problems are the concern of individual members of the Community, they should be tackled by national Governments rather than by the Community as a whole. To continue to bolster up the guarantee side of the budget only stokes the fires of surpluses the whole time. In this sense, the budget is plain stupid and irresponsible, and before the next preliminary draft budget comes before the House we must have far more determination from the Government in dealing with these matters.

Hon. Members always talk about the end price. Although we certainly do not want to see any big increase in the end price, that alone will not solve the problem. We must tackle the problems of the small farmers in Community countries who produce agricultural products just for intervention. Until we find alternative work and until we see that far more money is paid to get some of the small farmers out—not in this country but elsewhere in the Community—we shall never overcome the problem.

The cheapest way to destroy a cow is to kill it, to take it out of circulation. That is the cheapest way of dealing with the surpluses. The amount of money being spent in that direction is pitiful. Something must be done.

I say to the Minister "You must do something about it. You must influence the Minister of Agriculture in Europe." I do not believe that it is too late this year. I believe that something can be done in these matters and that a tough line can be taken.

Mr. Marten

How?

Mr. Mills

My hon. Friend is always interrupting.

Mr. Marten

Tell us how.

Mr. Mills

If nothing is done, it is totally unfair to British agriculture to go on as things are going. In this country we have efficient farmers who are being blamed for the surpluses in the Community. This is totally wrong.

Mr. Roger Moate (Faversham)

What is to be done?

Mr. Mills

I can soon tell my hon. Friend. I can give him my two papers, which will tell him exactly how to right the position.

It is wrong that British farmers should go on being blamed for the surpluses when we are the most efficient in the Community. As a strong supporter of the Community and the CAP over the years, I feel great sadness that the lessons have not been learnt. Much of the blame must rest on this Government for not taking a tougher line in these matters.

10.46 p.m.

Mr. Tam Dalyell (West Lothian)

All of us who have remained until this hour of night deserve to go on the mailing list of the hon. Member for Devon, West (Mr. Mills) for his two papers.

Mr. Mills

Here they are.

Mr. Dalyell

My hon. Friend the Member for Swindon (Mr. Stoddart) said that it was possible to become besotted with the EEC. Indeed, the late Jack Mendelson had a colourful expression for it, when he accused some of us of being unreconstructed Stalinist pro-Marketeers. I suppose that in one sense I fall into that category, because I am unrepentant. But, because time is short, and because one hopes not to be too besotted, I should like to make some remarks that may be interpreted as critical.

I have become more and more anxious as a member of the Budget Committee of the European Parliament, when time after time either Commissioners or Commission officials have come before us with yet another new scheme. It starts off with the steel industry. They seem to take responsibility for that. Then we go on to a proposal to reform aerospace, and then we go on to shipbuilding and youth unemployment.

If the Community is to take responsibility for every problem area, for every lame duck, we get into great difficulty, because one of the things that are most damaging—and I do not think that the budget has solved it—is to give the impression that the Community can solve problems that really it cannot solve and does not have the money to solve. The pretence of being able to do so is very damaging to the idea for which many of us, rightly or wrongly, voted when we joined the Market. Therefore, I hope that the Government and the Council of Ministers, which apparently in this debate is asking for advice, will speak very bluntly to the Commission.

The hon. Member for Oswestry (Mr. Biffen) and my hon. Friend the Member for Southampton, Test (Mr. Gould) were right in making the crucial point that the Commission is no kind of Cabinet. I believe that Roy Jenkins—I do not call him President Jenkins with quite the deferential air of the hon. Member for Lancaster (Mrs. Kellett-Bowman)—has probably tumbled to the fact that the Commission is no kind of Cabinet but a series of satraps who go off on their own sweet way.

That is a very worrying development, because it seems that no kind of coherence is imposed on the Government of any of our nation States by a powerful Finance Minister or powerful Chancellor of the Exchequer. Therefore, I hope that when our Ministers discuss these matters they will tell the Commission that it is high time it produced some kind of coherent strategy and a list of financial priorities and did not come forward with quite so many weird and wonderful schemes. This comes from a pro-Market-eer, and I hope that it is taken on board.

I have two questions. The first concerns the matter of the Ortoli loan, whether there should be a new device through the Commission for making loans for various projects, or whether it should be done, as hitherto, through the European Investment Bank. Many of my Socialist colleagues disagreed, but I want to know what kind of loans should be made, given the state of the capital market, by the Commission through the Ortoli facility that would not be acceptable to the European Investment Bank. After all, the Chancellor of the Exchequer and other Finance Ministers are governors of the bank, but I just wonder why, for this kind of operation, the mechanism of the bank should be passed over in favour of some kind of new device.

One of the difficulties in all this is that, if one presses the Commission as to what it is actually going to do with the Ortoli facility, one gets the answer from Mr. Ortoli himself, "Perhaps the Channel Tunnel could be financed through this mechanism", or, as the hon. Member for Scarborough (Mr. Shaw) will remember. when we asked certain officials to do with the Social Fund and the ECSC they said that it would help to finance the fusion project.

I think that there is a great deal 01 confusion as to precisely what the Ortoli loan is for, and I hope that, when they go to the meeting of Ministers, my right hon. Friends will find out, one way or another, precisely what they want to do with the Ortoli loan and state the attitude of Her Majesty's Government towards it.

My second question I put in my capacity as rapporteur—Heaven help me—ot the Energy Committee of the European Parliament in relation to the budget we are discussing. What bothers some of us —and I speak for an increasing number of members of the Committee—is again the watering-can effect of trying to do all sorts of things that are probably better done by nation States. I take for example the very grave concern whether it is really the business of the Commission to get involved in the subject of intra-Community trade in coal.

But, having said all this, there are some of us who believe that there are some matters that are better done by the Community than by nation States. Among these I would pinpoint the alternative methods of producing energy. I happen to be very pro-nuclear. I do not think that we can produce a panacea to suggest that somehow wave power, or wind power, or solar power, or even fusion, will be an easy way out of the difficult problems of nuclear waste that we have to face.

Having expressed a certain scepticism, nevertheless there are those of us who also think that people have to be serious about the so-called alternative uses of energy, and if that is so it is better done on a Community basis than on a nation state basis. This brings me to a precise question that I want to put to the Treasury.

The Community has done a great deal of work, very properly, in this matter at Ispra and elsewhere. These are things that it can do well, and those who have been to see know that it has done its work well. Why was it that suddenly, out of the blue, some three weeks ago the British Government produced a £16 million scheme for British research on the alternative uses of energy, without having so much as informed the European Commission that they were doing so? The Prime Minister this afternoon talked of common objectives in energy by 1985. These are fine sounding words, but I have to tell the Government that they sound a little hollow to those who know that this kind of idea is somewhat marred by current practice.

Why was it, I repeat, that the Department of Energy in this country did not so much as inform the European Commission, or our partners in Europe, that we were to put forward a relatively large scheme for the alternative uses of energy? At the very least, it would have been courteous to do so. It would have been sensible and constructive to do it with our partners in Europe rather than suddenly deciding to go off on our tod and to tell them not a thing about it. It seems to me a very unfortunate way of proceeding.

There may well be an explanation. If the British Government did tell the Commission, and if Commissioner Brunner is wrong in saying to the European Parliament that the Commission had not been informed, let us be told so before the end of the Session, otherwise some will go on and on with our efforts to winkle out an explanation from our Government for what seems to be an embarrassingly unfortunate sequence of events.

Mr. Frank Hooley (Sheffield, Heeley)

My hon. Friend must know that France has had a very advanced and high-powered solar energy programme for years. To the best of my knowledge, France has made no particular effort to consult Britain or the European Commission about it. The Germans have just announced a $1,000 billion conservation programme which they are doing on their own. What is peculiar about Britain pursuing these matters?

Mr. Dalyell

Full information was given to the Commission about the German conservation programme. I would be less certain about the French. It does seem that if we are partners and want to make Europe work—I speak as a reconstructed pro-Marketeer—at least I am entitled to ask this very precise question. In the next three weeks some of us want it be answered.

10.57 p.m.

Mr. Peter Tapsell (Horncastle)

We have in this debate demonstrated that we have now reached the stage where we can discuss the institutions and documents of the Community with the same detached and critical scrutiny that we apply to their British equivalents without calling in question our commitment to British membership of the EEC, in most cases. Indeed, it is only by such a critical approach that constructive progress can be made in improving the many present defects in the functioning of both the British and the European bureaucracies and ensuring their proper subordination to the political will of the democratically elected national Governments and Parliaments.

Those hon. Members who have looked at or even lifted, some of the seven volumes of the EEC 1979 preliminary draft general budget, of which we are asked to take note this evening, can, whatever their past attitudes to British membership of the Community, at least agree that they are of the most enormous bulk, weight, length and obscurity. They tell us everything we could possibly want to know except exactly how much the Commission and the other institutions of the Community are to spend in 1979, and exactly how that expenditure is to be itemised.

Opening the debate, the Minister delicately described this mass of figures as "illustrative" and spoke of "token entries". The truth is that Gibbon illuminated 1,300 years of Roman history in fewer pages than the European Commission has devoted to the obfuscation of its spending plans for 1979. Volumes 7/A and 7/B are two massive tomes which alone run to 1,270 pages, yet they are merely an explanatory memorandum on the preceding six volumes. My right hon. and learned Friend the Member for Hexham (Mr. Rippon), in an understandable moment of exasperation, once threw an Order Paper across the Dispatch Boxes. If I were to throw these two volumes, complete with their deadly metal clips, at the Minister of State, the number of pending by-elections would increase immediately.

However, the Commission does not rely merely on weight. The "playing hard to get" ploy is also used. Volumes 1, 2, 3, 4 and 5, to which the Notice of Motion refers, reached the Library of the House of Commons only on the afternoon of last Thursday, 6th July, just as we were all leaving for our constituencies. Volume 6 has not arrived at all, presumably because the pantechnicon which was seeking to transport them here collapsed under the weight. Incidentally, the Library has only one copy of each of the other five volumes, and they may not be removed from the Library even to bring into the Chamber. Consequently, there can be few hon. Members who have had a proper opportunity to study the volumes in their original form, the massive contents of which we are invited in an exceptionally inapposite phrase "to take note". Winston Churchill once spoke of "some chicken, some neck". To that, we might now add "some note".

Although there is a comic aspect to all this, it raises a very serious parliamentary point. The relevant documents covering the proposed expenditure of the order of £9 billion, including nearly £1,800 million gross of British taxpayers' money or some £800 million net after the various cross-payments have been made, are not and have not been in any meaningful sense made available to this House before it is invited to approve them.

It is most unsatisfactory that this House of Commons should be expected to proceed in this way, and for all those like me who are supporters of membership of the European Community it has to be borne in mind that this is a major cause of feelings of ill will in this House towards a Commission which so often does not produce documents at the proper time and in a proper form for our consideration. A proper presentation of documents in adequate time for their detailed study is an essential prerequisite for the effective functioning of the democratic process as we have understood it for centuries in this House. That is simply not happening on these European matters, despite the efforts of the Scrutiny Committees in this House and in another place. It is a problem to which the Government and the Leader of the House especially must give much greater attention than they have shown so far.

It is high time also that the nine national Parliaments made it clear that they are not prepared to be treated in this cavalier fashion by national Governments and by the Commission. I hope and believe that the British Conservative Members of a directly-elected European Parliament or Assembly will wish to give urgent attention to remedying this situation. Otherwise the Community will not have a proper and effective democratic base.

Mr. Jay

Is the hon. Gentleman saying that he dislikes everything that the EEC does but that he wants us to go on being a member of it?

Mr. Tapsell

I have not so far reached any aspect of what the EEC does, beyond its failure to produce the necessary documents. I hope that that point has now registered.

The second point which needs to be made, and which has been made by a number of hon. Members, is that this is not a budget at all in the sense in which that term is commonly understood in Britain. We are in reality discussing the Commission's opinion of what the 1979 budget might be. It can, of course, still be substantially modified, both by the Council of Ministers and by the European Parliament. This so-called budget is what in British parliamentary parlance would more appropriately be called preliminary draft estimates of the cost of policies, many of which have not yet been approved and some of which appear to be only partially formulated.

Despite, or because of, the enormous length of the documentation before us, there is a marked lack of precision about the content of the budget. For example, volume 2, containing the European parliamentary budget, makes no attempt to estimate the increased cost of the directly elected Assembly or Parliament which will come into being in 1979. As my hon. Friend the Member for Harrow, East (Mr. Dykes) said in the debate last year: However, the discrepancies in assessments, and the fact that the final budget is different from the preliminary draft produce enormous obfuscation and an opportunity for deliberate obfuscation by the Council of Ministers. I hope that parliamentarians, national and European—and perhaps, to a lesser extent, even the Commission—will work hard together to overcome this central problem."—[Official Report, 18th July 1977; Vol. 935, c. 1255.] We can all warmly endorse those sentiments of my hon. Friend, whose devoted loyalty to the concept of European unity is not in doubt. But we must add that the little headway which has been made in this regard since he addressed the House in those terms 12 months ago is a continuing cause of anxiety.

In 1978 the general budget of current expenditure of the Communities will total about 12.4 thousand million Eua in appropriations for payment. This corresponds to 0.8 per cent. of the gross domestic products of the nine nation States and about 2.5 per cent. of their national budgets. The present conversion rate of the Eua into £ sterling is about 0.65—it fluctuates daily—so that the pound is worth roughly two-thirds of a Eua based on the basket of currencies used.

For the purposes of the budget of 1979 a fixed conversion figure was taken on 1st February 1978 at the lower figure of 0.629926. It is on this fixed figure that conversions have to be made when we seek to undertake the somewhat daunting task of translating all these figures in all these volumes into meaningful amounts of money. On this basis the Commission estimates that the British contribution to the Community budget in 1979 will be £1,764 million or 20.4 per cent. of the total Community budget. I note, however, that the Chief Secretary, when questioned on this point by the Select Committee on 28th June, was unable to confirm this figure, for understandable reasons. It remains in doubt, as the Minister of State made clear by his qualifying remarks in opening the debate.

For 1979 the total budget expenditure proposed by the Commission is 13.8 thousand million Eua in appropriations for payment and 14.7 thousand million Eua for commitment. Translated into English that means £8.7 billion for current expenditure and £9.2 billion for future commitments. This constitutes an increase of 12.1 per cent. over the estimate of current expenditure, and an increase of 15.5 per cent. on the 1978 estimate of future expenditure. We are told that this is the smallest year-on-year increase of expenditure to be proposed for a long time, largely because agriculture's expenditure is not likely to rise by more than 7 per cent. this year, taking the green currencies into account.

No doubt Commissioner Tugendhat deserves considerable credit for limiting this overall increase, but it is still too much, and that is my answer to the hon. Member for Swindon (Mr. Stoddart), because percentage increases of public expenditure in the range of 12 per cent. to 15 per cent. are very substantial, even when set against the growth rates of the most dynamic economies in the Community, partticularly in the light of the Prime Minister's report to us earlier this afternoon that growth rates within the whole Community are likely to be lower than expected. I agree with the hon. Member for Swindon that public expenditure, like bureaucracy and corporatism, demands at least as much supervision and vigilance in the European as in the national context.

The Conservative group in the European Parliament has played a leading and notable part in the creation of the court of auditors, as has my hon. Friend the Member for Scarborough (Mr. Shaw), who opened this debate for the Opposition in such an able fashion and who, as a rapporteur of the 1978 budget, and in many other ways, has played a major role in the European Parliament. Clearly, what is needed is a Chief Secretary for Europe, of a Gladstonian disposition. Let us hope that Commissioner Tugendhat will adopt that role.

Of course, it will be argued, and is argued, that the proportion of national budgets—2½ per cent.—committed to the European institutions is still relatively tiny and that increases in Community spending should lead to compensating reductions in national expenditures on the same services, but those who take that point of view are, I think, subscribing to the triumph of hope over experience, because we all know that expenditure programmes develop a dynamism of their own and once started not only tend to grow faster than anticipated but become difficult to rein back. That has been the undoing of the present British Labour Government. Secondly, while the replacement of national expenditures by Community expenditures sounds fine in theory, may it not in practice lead to a great deal of duplication of effort and expenditure unless the European bureaucracy turns out to be very different from all other bureaucracies the world has seen so far?

Indeed, speaking at Luxembourg on this very matter on 3rd July, Commissioner Tugendhat, who is, after all, the EEC Commissioner for budget and financial control, told the European Parliament that later this year he would be presenting proposals for enlarging the Community's own resources. He went on to say, as my hon. Friend the Member for Oswestry (Mr. Biffen) pointed out, that Community expenditure was rising at such a rate that it would reach the present limit on revenue of a 1 per cent. rate of VAT within three years, and Mr. Tugendhat added: We are examining various possibilities for financing the budget when that ceiling is reached.

Mr. Biffen

That is hardly the voice of Gladstone.

Mr. Tapsell

No. indeed. It was the voice of a very young Gladstone. But it was a significant statement, and I hope that the Minister of State will give us some indication of the Government's thinking on this matter of expanding the Community's finances from our own resources. When, for instance, will the EEC be able to start operating the present own resources system by starting to collect up to 1 per cent. of VAT receipts?

Will the Minister confirm that the share of the Community budget falling upon the United Kingdom, which is now 20.4 per cent., is likely to rise by 1982 to about 23 per cent?

The Foreign Secretary recently referred to the need to raise yet again the question of the share of the United Kingdom contribution. What are the Government's proposals on this important subject? What was the basis for the Minister of State's prediction that the 1979 budget will turn out to be smaller than the estimates at present before us? All the evidence of past experience seems to suggest the opposite.

A debate such as this should provide an opportunity to review the whole strategy of the Community's future spending plans. But is there such a strategy'? Despite the unanimous criticism from all sides of the House about the unbalanced nature of the Community's expenditure programme, more than 70 per cent. of the budget will be spent on agriculture again in 1979, and of this nearly 40 per cent goes on one single commodity—milk and milk products. Indeed, 26 per cent. of the whole budget goes on milk.

We all agreed—with the solitary exception of my hon. Friend the Member for Chichester (Mr. Nelson)—that this is a nonsense. The Prime Minister indicated earlier today that there is growing support throughout the Community for a revision of these arrangements.

Commissioner Tugendhat made the point to the European Parliament on 3rd July that development of the Community's social and regional policies depended on greater restraint in agricultural spending. But when the Chief Secretary gave evidence to the Select Committee on European Legislation on 28th June, he said that there were two ways of reducing the agricultural percentage of the budget —by cutting agricultural expenditure or increasing expenditure in all other fields. I very much fear that the latter course will prevail.

I had a number of other points that I wanted to make, but we are nearing the end of the time for the debate. I finish by asking the Minister whether he will explain how the Government will implement the statement made to the House earlier this afternoon by the Prime Minister on his return from the Bremen summit. He said that a more sensible distribution of the Community's resources among its members was needed. This British Labour Government have conspicuously failed to achieve that so far.

11.17 p.m.

Mr. Denzil Davies

The hon. Member for Horncastle (Mr. Tapsell) has declared himself, as have others, a whole-hearted supporter of the European Community. They prefaced their remarks by making it clear that they were not seeking to go back on that commitment. Then the hon. Member for Horncastle tells us that our Government are not being firm enough on expenditure on the CAP. I remind hon. Members who supported the European Community that when they voted for it, they voted for the CAP, the way it is financed and the transfer of sovereignty from this House, which makes it very difficult for any British Minister, with a Gladstonian axe or not, to do anything about the CAP.

The hon. Member for Horncastle asked me about the "own resources" system. I confirm that the Commission believes that by 1981 it will have reached the 1 per cent. ceiling on VAT. I understand that it is now working on proposals to meet that problem when it gets to 1981. The proposals have not been put to member Governments yet, but when they are we shall look at them very seriously.

My hon. Friend the Member for West Lothian (Mr. Dalyell) asked two questions, which I shall deal with at the outset He asked me about the Ortoli loan facility. This facility of 1 billion Eua is available for investment in the industrial, energy and infrastructure sectors. I cannot give any more details. The fear he had was that the money would be channelled perhaps through the Commission and not through the European Investment Bank. The British Government—and this also applies to other Governments—think that this money should be lent through the European Bank, which has definite criteria for lending the money, rather than through the Commission. But I understand that there is pressure from the Assembly for the money to be lent through the Commission and not through the Investment Bank. But it is our firm view that the Investment Bank is the right vehicle because it has had established criteria.

Mr. Biffen

Would a decision to channel the Ortoli funds through the Commission require the consent of the Council of Ministers?

Mr. Davies

I am not certain of the answer to that question. I am not sure of the legality of the position. I can only emphasise that the British Government and other Governments are pressing through the Council of Ministers for this money to go through the Investment Bank.

My hon. Friend also asked me about energy policy. He made his point strongly, but he will appreciate that this is a matter for the Department of Energy and not for a Treasury Minister discussing the Common Market budget.

Mr. Dalyell

Will my right hon. Friend ask the Department to write to me about the matter?

Mr. Davies

Yes, I shall see that the Department writes to my hon. Friend.

My right hon. Friend the Member for Battersea, North (Mr. Jay) asked me a number of questions. He asked me why we cannot get some money back as a result of renegotiation. The mechanisms for repayment are complicated. They depend partly on per capita GNP, partly on balance of payments and partly on various other factors. In respect of the 1978 budget we did not qualify because I am told that in real terms our share of the budget was 15.3 per cent. and our share of Community GNP was 15.5 per cent. Therefore, in the 1978 budget we did not qualify under the mechanism.

For the 1979 budget the figures are provisional, but on the basis of those figures it looks as though we might get some benefit—it might not be very large —as a result of the renegotiation mechanism, which is related to GNP and contributions to the budget. It is difficult at the moment to put a figure on it, but it certainly will not be a large one.

My right hon. Friend also asked me about the report in the Press about errors in payments to staff. I can confirm that in substance that report is correct. A working party has been set up on which the British Government are represented and we are pressing and doing our best to obtain corrective action. There are legal problems into which I cannot go now, but we are pressing very hard for corrective action on that overpayment.

My right hon. Friend asked about fraud. That is similar to asking "When did you stop beating your wife?" If my right hon. Friend has any evidence, no doubt he will supply it to the authorities. But I have no evidence of any fraud, and I am told that the question of payment or overpayment to staff had nothing to do with fraud.

I was also taken to task for not mentioning the Regional Development Fund. I suppose I could have mentioned it in my opening remarks, but it is not as important in this year's budget as it was last year. That does not mean that we do not attach a high priority to the fund. But hon. Members will appreciate that it was the 1977 European Council, after much wrangling and final agreement, that laid down for three years the figures for expenditure on the fund—620 million Eua. It is a little unfair—and here I come to the Commission's defence—to criticise the Commission for not exceeding that agreement reached by Heads of Government. As for the 5 per cent. non-quota section, we feel that we should meet that within the figure of 620 million Eua.

Mr. Michael Shaw

The Minister of State might like to know that several of us voted against Parliament's wishes on loans, and some of us were for the Investment Ban. On the other point may I say that Mr. Eyskens, as President of the Budgetary Council last year, said that there was room for negotiation this year. What interpretation do the Government place on that—because I do not know?

Mr. Davies

We attach, generally, a priority to the Regional Fund, but we must recognise the reality of the decisions taken at the summit and we cannot go into the Council with plans for substantial increases in expenditure in view of the size of this year's budget.

My hon. Friend the Member for Southampton, Test (Mr. Gould) made the good point that we are not discussing a budget. We are discussing estimates, and the Budget Council is not the equivalent of the British Cabinet. The hon. Member for Devon, West (Mr. Mills) asked why Treasury Ministers did not instil some Treasury control into these matters. He recalled that when he was at the Ministry of Agriculture, the Treasury controlled expenditure within that Department. But we are not talking about that sort of situation. There is no salvation in asking why the Budget Council does not sit on the Agriculture Council. If other European Governments operate as our Government operate, their agriculture Ministers take to the Agriculture Council a collective negotiating stance decided upon within government. I imagine that the West German and French Governments operate in this way. To expect an agriculture Minister to argue one way in his Council and the budgetary Minister to argue against him in the Budget Council shows a lack of realism of the way government works. There is no answer in saying that a finance Minister should put a different case from an agriculture Minister of the same country. The Council of Ministers does not sit as a Cabinet. It is a question of deciding priorities. There is no simple solution.

The hon. Member for Devon, West also suggested that we should spend more on the guidance sector of agriculture and less on the guarantee sector. I am not an expert on agriculture, but I understand that we would not benefit all that much by increased expenditure on the guidance sector because our agriculture is efficient and the areas of Europe where the industry is not so efficient would get the greater benefit from the guidance sector. If they became more efficient, we would still have the problems of surplus production and price. There is no salvation that way either.

Mrs. Winifred Ewing

Does the Minister intend to answer my questions about EMU and additionality?

Mr. Davies

The answer on additionality was given by the right hon. Member for Down. South (Mr. Powell) in an intervention. There is no problem here because a Government will always, when deciding expenditure on regional policy or anything else, look at the amount of money likely to be coming from another source and will decide its expenditure in that light. I am sure that every Government in Europe operates in that way. There is no other way.

I shall not ask the hon. Lady what she means by economic and monetary union.

Mrs. Ewing

What do the Government mean by it?

Mr. Davies

I am not sure what is meant by the term. All I say is that one cannot have economic and monetary union without a federal Government. It must develop in an organic way. It cannot develop in any other way. It is not the policy of this Government to agree to a federal Government in Europe leading to economic and monetary union. I hope that that answers her question.

Mrs. Ewing

If the term economic and monetary union, which is used daily in the European Parliament, offends the Minister, will he tell us whether it is the new policy of the Government to favour economic integration, to us the phrase which appears in the document?

Mr. Davies

There is no new policy. The hon. Lady is chasing hares. I made it clear that all these matters can never come about except by organic development. When we consider the problems of inflation, exchange rates and different rates of growth in different countries, I do not see how we can move towards the economic and monetary union that apparently the hon. Lady favours.

Mr. Nelson

Does the right hon. Gentleman—

It being half-past Eleven o'clock, Mr. DEPUTY SPEAKER put the Questions necessary for the disposal of the proceedings, pursuant to Standing Order No. 3 (Exempted Business).

Question, That the amendment be made, put accordingly and agreed to.

Main Question, as amended, put and agreed to.

Resolved, 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/5I9/78 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 Agricultural Guidance and Guarantee Fund, in particular, in the cost of disposing of agricultural surpluses outside the EEC.