HC Deb 02 June 1980 vol 985 cc1043-58

The Lord Privy Seal (Sir Ian Gilmour) rose——

Mr. Skinner

On a point of order, Mr. Speaker. I wonder whether you have had any representations from the Prime Minister in regard to this statement, in view of the fact that she was closely involved in this matter both at Dublin and at the following summit, when she made claims to get rid of the whole of the burden with which we are now saddled in payment to the Common Market, and as she said that that package would not in any way be involved with any other commitment. It now appears that we are to be subjected to an increase of 5 per cent. on farm prices and that she has sent this lackey along to do her job.

Mr. Speaker

Order. The answer is that I have not received any representations, except that the Lord Privy Seal is to make a statement.

Sir I. Gilmour

With permission, I will make a statement on the meeting of the Foreign Affairs Council that my noble Friend the Foreign and Commonwealth Secretary and I attended in Brussels on 29 and 30 May. My right hon. Friend the Minister for Agriculture, Fisheries and Food, will make a statement on the Agriculture Council, which took place at the same time, both councils were the culmination of a long and complex negotiation which the Government began shortly after taking office last year, on the size of the United Kingdom contribution to the European Community Budget.

The Foreign Affairs Council, in which work continued throughout the night of 29–30 May, reached provisional agreement on a number of issues, as did the Agriculture Council, which was meeting in parallel. After a meeting of the Cabinet today, the Government have informed the Italian Presidency that we accept the proposals that emerged from both councils.

I should like at the outset to offer unstinted praise to Signor Colombo, the Italian President of the Council, for his outstanding chairmanship. His skill played a vital part in the work that was done.

At the Foreign Affairs Council on 29 May, the following arrangements were proposed to alleviate the United Kingdom's budget problem. The first element in the solution is the following formula for 1980, provided our net contribution, before the risk-sharing formula is applied, does not exceed £1,080 million, there will be a ceiling on our net contribution after adjustment of £370 million; for 1981, provided our net contribution, before the formula is applied, does not exceed £1,300, the ceiling will be £440 million. All these sterling figures are converted at a rate of 1.65 units of account to the pound. This would result in a total rebate to Britain over the two-year period of £1,570 million.

A further element of the solution is a risk-sharing formula. Should the amounts of the United Kingdom's uncorrected net contributions in 1980 and 1981, as estimated by the Commission, in fact be exceeded, the arrangement is that in 1980 we will bear only one-quarter of the cost of this excess. For 1981, a more complex formula exists, under which we would meet the first £12 million of any excess, the next £60 million would be shared between us and our partners equally, and thereafter we would meet only a quarter of the excess cost, as in 1980.

For 1982, it was envisaged that by this time the Council would have completed a radical review of the pattern of Community expenditure and the operation of the budget. However, if that had not by 1982 produced arrangements resolving the United Kingdom's budget problem, the Commission would put forward proposals along the lines of the 1980 and 1981 solutions and the Council would act accordingly. We can therefore be sure that for 1982 as well there will be similar restrictions on the level of the United Kingdom's net contribution.

The payment of these amounts to Britain will be brought about by improvements in the operation of the 1975 financial mechanism, bringing our gross contribution more or less into line with our share of Community GNP and, for the rest, through Community expenditure in the United Kingdom. There will be a new regulation under article 235 of the Treaty to provide for this expenditure.

Following the precedent of the financial mechanism, the credits under the new regulation will appear in the Community budget for the following year, but with the possibility of advance payments in the current year. For 1980, we would expect to be paid before the end of our financial year 1980–81.

In the long term, the most important part of the package is the commitment of the Council to review the development of Community policies and the operation of the budget. This, together with the restraints imposed by the 1 per cent. ceiling, will enable us to press for lasting reforms, which will, among other things, resolve the British budgetary problem. This review offers an opportunity that has never been available before, since we joined the Community, to work together with our partners for financial arrangements and Community policies that are to the advantage and interest of all the member States, as befits a Community of equals.

We agreed to a statement of general principles on fisheries, which leaves the substantive issues open for consideration on their merits in the Fisheries Council, which will next meet on 16 June. A deadline of 31 December 1980 has been fixed for agreement on a revised CFP. This is in the United Kingdom's interest. Her Majesty's Government have repeatedly urged rapid progress towards a satisfactory common fisheries policy settlement. I welcome the fact that the fisheries text recognises the need for this and for a settlement of all the outstanding elements of the CFP together. It in no way prejudices the vital interests of our fishermen, which we are determined to safeguard.

When my right hon. Friend the Prime Minister refused the offer that our partners made at Luxembourg, she made it clear that this was because the combination of amount and duration was not right. We have now negotiated better arrangements for the two years 1980 and 1981, taken together, than were on offer then, and we have also secured an arrangement for the third year, 1982, which was refused to us then. Furthermore, the Community has recognised that there will have to be a major review of the operation of the budget and the balance of Community expenditure and that the United Kingdom's budget problem must be resolved finally.

As my right hon. Friend the Prime Minister made clear after Luxembourg, we also refused what was on offer then because we were being asked to accept agreements outside the field of the budget which were damaging to us. Since then, as my right hon. Friend the Minister of Agriculture, Fisheries and Food will make clear in his report on sheepmeat and CAP prices and related measures, we have secured changes in what was being suggested that give us substantial advantages. Taking the balance of these proposals together, the Government believe that they add up to a fair and advantageous outcome.

In a negotiation as complex as this, no one party can expect to get everything that he wants and to concede nothing. There should be no belittling of the concessions that our partners are making at a time when, whatever the impact on them of the Community budget, the general economic background is unfavourable. With this arrangement Britain can play her part in developing further the internal and external policies of the Community.

The negotiation has, morever, focused the minds of all member States on the unsatisfactory way in which the Community budget operates and, more clearly than ever, on the undesirable imbalance in the pattern of Community expenditure. With the review commissioned for 1981 and the proximity of the 1 per cent VAT ceiling, we have an unrivalled opportunity to bring about sensible adjustments to the operation of the CAP and to put the Community's finances on a sounder basis than ever before.

This Government came to office determined to make a success of our membership of the Community. The first task was to deal with the inequitable budget contribution. That we have now done. But Europe is about more than that. The challenges that face the Community both internally and externally are as daunting as any in its relatively brief history. None of us can find adequate solutions to them on our own. This agreement gives us the chance to solve them together.

Mr. Alexander W. Lyon

On a point of order, Mr. Speaker. The Lord Privy Seal acknowledged that to judge his statement we must balance it with the statement of the Minister for Agriculture, Fisheries and Food. In order to know the price of the concessions that he has announced, we must know the prices that we shall have to pay on the food bill. Would it not be possible for the Minister for Agriculture, Fisheries and Food to make his statement now, so that we can question both Ministers together?

Mr. Speaker

That would be against our custom. When a statement has been made, the Minister usually submits himself for questions.

Mr. Shore

The Lord Privy Seal made much of the fact that for 1980 and 1981—and perhaps for 1982—we will be permitted to keep back more of our own money—two-thirds of our own loaf—and thus become only the second largest net contributor to the EEC. Is he so insensitive that he cannot understand that a settlement that will further increase the price of butter, milk, sugar, meat and cereals for every family in the land; that will limit the export of New Zealand lamb to Britain and face that country with competition in third markets from subsidised French lamb exports; that will increase still more the huge financial cost and swelling food surplus of the CAP—which offers only a partial and temporary relief to the totally unjust budgetary contribution of the United Kingdom—will not be acceptable to the nation and will only intensify its already deep dissatisfaction with the EEC?

How can the Lord Privy Seal justify his retreat from the position of broad balance to an agreement to pay out no less than £1,500 million over the next three years to countries that are more prosperous than Britain, and for the sole purpose of increasing the already unmanageable food surplus? When will the Prime Minister cease playing Lady Bountiful to the Community—[Interruption.] Those were her words. How can the Government justify the abandonment of their demands for a solution that would last as long as the problem, and substitute what amounts to a further three-year transitional period, at the end of which we shall still be left with a Treaty commitment to pay at least £1,500 million a year, or to endure the same haggle and confrontation that we have had over the past 12 months?

Above all, how can the Prime Minister agree to so wet a formula for the future—I quote from the official communiqué—to resolve the problem by means of structural changes when the next sentence in the communiqué explicitly re-endorses the basic principles of the CAP and the continuation of the bizarre tax system of Community own resources.

Is the Minister aware that with a little more nerve and persistence, by continuing our veto on price increases of foodstuffs already in surplus—which the Prime Minister assured the House as recently as 20 March, without qualification, that she would insist on, not to mention the statement in the Conservative Party's election manifesto to the same effect—and by backing the negotiating stance with legislation to halt the outflow of British money, the Prime Minister could have achieved what the whole House has twice resolved to achieve, namely, the elimination of our excess contribution and a fundamental and lasting change in the CAP?

We shall certainly wish to pursue the matter further. I hope that there will be an early debate.

Sir I. Gilmour

The right hon. Gentleman's remarks this afternoon illustrate the disadvantages of instant comment. He loosed off on Friday before he knew what he was saying, and before he knew the full terms of the agreement. He is now compelled to make the same silly remarks this afternoon.

Mr. English

Why did the Lord Privy Seal keep the details to himself? Why did he not circulate them earlier?

Mr. Speaker

Order. The hon. Gentleman must restrain himself. It is not fair to shout from a sedentary position.

Mr. English

On a point of order, Mr. Speaker. I apologise to you, but my emotions overcome me when I hear Ministers of the Crown complain, although they have not circulated certain statements earlier.

Sir I. Gilmour

The right hon. Member for Stepney and Poplar (Mr. Shore) was, if I may use his words, insensitive to talk about food prices. Perhaps he would be interested to hear that over the coming year the total effect on food prices of the present settlement will be the same as the increase that took place in food prices every fortnight under the Labour Government.

The right hon. Gentleman mentioned certain commodities. Under the Labour Government, milk prices rose, on average, by 7.3 per cent. a year. Under our two years, net of co-responsibility levy, they have risen by 1.25 per cent. Under Labour, sugar prices rose by 8.5 per cent.; under the Conservatives, by 3 per cent. Under Labour, wine rose by 7.3 per cent.; and under the Conservatives, by 3.5 per cent. In those circumstances, the right hon. Gentleman would have been well advised to emulate the generosity shown in the remarks of the Leader of the Opposition when my right hon. Friend the Prime Minister returned from Luxembourg. He spoke in a different tone from that of the right hon. Gentleman this afternoon.

If the right hon. Gentleman complains in such terms about our achievements, we must reflect a little on what happened under the previous Labour Government. The Opposition party achieved absolutely nothing in seeking to reduce our budget contribution during the five years that it was in power. Its renegotiations were a complete waste of time. It wasted the opportunity that we gave it by our transitional arrangements. Yet the right hon. Gentleman has the effrontery to tell us to turn down a refund of £710 million this year and £860 million next year.

Mr. Shore

We have had a fine display of bogus indignation but not a single reply to any of the questions that I put to the right hon. Gentleman. I shall not repeat them all—[Interruption.] I think that the House and the country would like to know why and, in particular, how, the right hon. Gentleman and his Government justify the total abandonment within weeks of the specific pledge to insist upon a price freeze on foodstuffs that were in surplus. That is the first thing that we want to know.

The second thing that we want to know is what is the right hon. Gentleman's justification, against the background of the words that have been spoken from the Government Front Bench about a totally unjustified system under which this country is being milked for the benefit of the EEC, for the continued net payment by Britain, as the second largest contributor, of no less than £1,500 million over the next three years.

Sir I. Gilmour

I have already answered the second part of the right hon. Gentleman's question. As for the first part, perhaps I may quote his own leader to him.

Mr. William Hamilton

Quote your own leader.

Sir I. Gilmour

This is what the Leader of the Opposition said: I repeat very strongly that we shall support her in not giving way on the agricultural price freeze until the budgetary issue is settled."—[Official Report, 29 April 1980; Vol. 983, c. 1154.]

Mr. James Callaghan

Will the right hon. Gentleman accept from me that he has totally misconstrued the meaning of those words?

Sir I. Gilmour

With great respect to the right hon. Gentleman, I find that sentence virtually impossible to construe in any other way, and I shall be interested to hear an alternative construction of what he said.

Mr. Rippon

May I first congratulate Her Majesty's Government on the successful outcome of these negotiations, which have been conducted with skill and patience? Reverting to the observations of the right hon. Member for Stepney and Poplar (Mr. Shore), may I suggest—I ask my right hon. Friend to confirm this—that the truly wet formula was the formula negotiated by the Labour Government in Dublin in 1975, which is at the root of the present difficulties and has done so much to undermine the transitional arrangements?

I also express appreciation of the fact that now that the question of the budget has been settled and the farm price review has been agreed, British farmers will welcome the payment to them of a proper price for what they produce.

Sir I. Gilmour

I am most grateful to my right hon. and learned Friend for what he said at the beginning of his question. Of course he is right to remind the House that we have farmers, too, and that they need proper returns. He is entirely right in what he says, in that the formula evolved in 1975 has proved to be virtually useless.

Mr. J. Enoch Powell

Is the right hon. Gentleman aware that however many pledges and prepared positions the Government abandon, there is in this country a deep and rising determination that we must be free, sooner or later, from the intolerable limitations placed upon our freedom of action by our membership of the EEC—[Interruption.]—and that the statement that he has just made will prove to have been a step towards that end?

Sir I. Gilmour

I think that that is extremely unlikely. Bearing in mind the right hon. Gentleman's previous views on the Common Market, I always live in hopes that he will return to them.

Mr. Edward Gardner

Is my right hon. Friend aware that the country generally will be delighted by the success of the Prime Minister and my noble Friend the Foreign Secretary in persuading the European Community to pay to this country during the next three years a sum in excess of £2,000 million? Is he aware that this agreement will be seen as yet another demonstration of the Prime Minister's extraordinary ability to make possible the seemingly impossible?

Sir I. Gilmour

I entirely agree. This agreement is the culmination of negotiations carried out over a long period by my right hon. Friend the Prime Minister and my noble Friend. They have now been successful. It is unfortunate that so many Labour Members should appear to regret the successful outcome.

Mr. Russell Johnston

Does the right hon. Gentleman accept and agree that much credit for this settlement goes to our Community partners, not least the German Liberals—[Interruption.]—in the very difficult political situation that they face? Does he agree that while confrontation may take us so far—I agree that it has done so—ultimately the success of the Community will depend on developing a spirit of co-operation? Will he assure the House that that will now be the priority of the British Government?

Sir I. Gilmour

Of course, there can be no successful negotiations unless everyone taking part has played a useful part. As I tried to say earlier, no one party to the negotiations can claim everything for himself. As has already been said by our partners, the success of these negotiations has been a success for the Community as a whole. With respect to the hon. Gentleman, I do not accept the implication that we have been proceeding by confrontation. This was a very genuine difficulty and a grievance that needed to be settled, but we have not been proceeding by confrontation. I assure the hon. Gentleman, as I indicated in my statement, that our ambition and that of the rest of our Community partners is that the Community should prosper by the co-operation of all those concerned.

Mr. Wall

I congratulate my right hon. Friend on the budget package. Will he be a little more specific about certain issues concerning the fishing industry? For example, will British rights be preserved in the 50-mile zone, will the dumping of foreign fish below the cost of catching be ended, and will the British conservation values be maintained? Is he aware that these are very important matters to be resolved before a common fisheries policy is agreed?

Sir I. Gilmour

I entirely agree that these are all extremely important matters to the fishing industry and to the country. However, my hon. Friend will be aware that they were not affected by the declaration agreed at Brussels, and they will be discussed in the Fisheries Council later this month.

Mr. Spearing

Does the Lord Privy Seal agree that the agreement has not brought a broad balance; secondly, that in two years' time there will have to be another major renegotiation; and, thirdly, that in the meantime the CAP has been entrenched and not diminished?

Sir I. Gilmour

The hon. Gentleman will have heard what I said about the future in 1981 and 1982. For the first time it has been agreed that there should be a fundamental restructuring of the Community budget. This will be enforced by the 1 per cent. ceiling, which will be hit somewhere around then. The new Commission has been enjoined to bring forward proposals to benefit the entire Community by restructuring the budget, which has been the fundamental aim of this country for some time before then.

Mr. Maxwell-Hyslop

What proportion of the estimated cost of £1,000 million a year that the accession of Portugal, Spain and Greece will bring to the Community does my right hon. Friend expect to fall upon the United Kingdom in addition to its present financial commitments under this agreement?

Sir. I. Gilmour

The figures for Greece are included in the figures that I have already given to the House. Spain and Portugal cannot accede to the Community before 1983, and therefore the consideration of their position will be included in the fundamental review to which I have referred.

Mr. Anderson

Have not the German Government, particularly because of their domestic circumstances, made some remarkable concessions? Do Her Majesty's Government accept that there is a serious danger that the food price increases will fuel expectations in the current wage round, and that there will be a historic error, just as there was last June when the Government raised VAT?

Sir I. Gilmour

I agree that the German Government have made concessions, as have all other Governments, including the British Government. The hon. Gentleman must get it right about food prices. The effect of the agreement on food prices will be small. It will increase the RPI by 0.15 per cent.

Mr. Farr

I congratulate my right hon. Friend on what has been achieved, but would it not have been better to stand out for a more permanent agreement, covering the difficult years from 1982 onwards? Will he say something about New Zealand, which is of great concern to many hon. Members on both sides of the House?

Sir I. Gilmour

From one point of view it would be good to have a permanent agreement under which we paid nothing and everybody else paid us a great deal. I agree with my hon. Friend that it is possible to imagine a better agreement. I can assure him that in the present circumstances a better agreement was not open to us. As I said, I believe that the agreement that we have obtained is fair to all concerned. I have no doubt that my right hon. Friend the Minister of Agriculture, Fisheries and Food will be going into greater detail on New Zealand, but my hon. Friend will have noticed that the agreement fully safeguards New Zealand's interests.

Mr. Heffer

Irrespective of the exchange of niceties across the Chamber on previous statements, does the right hon. Gentleman agree that the agreement is a retreat from the statements made by his right hon. Friend the Prime Minister that there would be no trade-off? There has been a trade-off. That is bound to have an effect on ordinary British people. They will have to pay higher prices for a range of products. Is it not clear that basically there has been a sell-out in reaching the agreement?

Sir I. Gilmour

I have already told the House what the increase in prices will be. It will be an extremely small increase, namely, 0.15 per cent. on the RPI. The hon. Gentleman should remember that the agreement on sheepmeat is extremely advantageous to Britain. The external issues will help Britain.

Several Hon. Members rose——

Mr. Speaker

Order. The House knows that there is another statement to follow. I shall call three more bon. Members from each side of the House to ask questions on the statement that is now before us. When questions are asked on the following statement I shall bear in mind those who failed to catch my eye during questions on the present statement.

Mr. Eldon Griffiths

At a time of serious international tension, is not the most welcome feature of the agreement that it has put Europe back on the road to unity? As my right hon. Friend has achieved something far better than Dublin, far better than Luxembourg and far better than anything that the previous Labour Government were able to get near, is it not the sheerest gall and effrontery on the part of the Opposition to complain?

Sir I. Gilmour

I agree with my hon. Friend. I indicated to the right hon. Member for Stepney and Poplar that he was on rather weak ground in complaining, bearing in mind the total lack of achievement of his party when in office. I agree most strongly with the first part of my hon. Friend's question. In an ever more dangerous world the unity of Europe is vital to us all.

Mr. Donald Stewart

In view of the breaking of the promise made by the Minister of Agriculture, Fisheries and Food on 24 April that there would be a veto on any increase in farm prices on items in structural surplus, what prospect is there now that the fishermen will not be betrayed in the forthcoming talks? Is he aware that if that occurs there will be the most serious developments?

Sir I. Gilmour

That is hardly worthy of the right hon. Gentleman. He knows full well that the Government have the interests of our fishermen fully in mind. We have safeguarded those interests until now and we shall continue to do so.

Mr. Moate

Does my right hon. Friend agree that by the standards set by the renegotiations entered into by the Labour Government and by the standards set in the original negotiations, the Government, and especially my right hon. Friend the Prime, Minister, have produced a remarkable achievement? However, judged by British interests, do not the very nature of the concessions that have been made—the move away from broad balance and the concessions on food prices—mean that Britain is still getting a very bad bargain? Will my right hon. Friend answer the question of my hon. Friend the Member for Harborough (Mr. Farr) on New Zealand? The agreement is vague about New Zealand. Will be give an absolute assurance that there will be no diminution of New Zealand lamb imports into Britain?

Sir. I. Gilmour

I cannot agree with my hon. Friend. I do not think that the agreement on New Zealand lamb is at all vague. It seems to be strikingly specific. My right hon. Friend the Minister of Agriculture, Fisheries and Food will be going into greater detail about that later. I cannot agree that we have achieved a bad bargain. If we had been starting from scratch, no doubt different results would have been obtained but, we were not. We have achieved a considerable amount. Of course, we have made concessions, In any negotiations that is bound to happen. However, as has been said from both sides of the House, our partners have made considerable concessions.

Mr. Jay

Has the right hon. Gentleman yet read the sentence in the communiqué that indicates that the proposed fundamental review must not call in question the principles of the common agricultural policy?

Sir I. Gilmour

I have. If the right hon. Gentleman will remind himself of what those principles are, in the Treaty, I think that he will be greatly reassured.

Mr. Myles

Does my right hon. Friend agree that there is no automatic mechanical link between the prices that were negotiated for agricultural produce in Europe and the prices in the shops in Britain?

Sir I. Gilmour

My hon. Friend is entirely right. It may be helpful if I say again that the average 5 per cent. increase in prices will add only 0.7 per cent. to the food price index—in other words, a very small amount.

Mr. Dalyell

Will the right hon. Gentleman clarify two matters in his original statement? First, in relation to the financial mechanism, he said that there was the possibility of advance payments taking into account that we would not be paid before the end of the financial year 1980–81 for the 1980 payments. Unless that is in black and white, what real possibility is there of advance payments?

Secondly, will the right hon. Gentleman accept from one who was a member of the Budget Committee of the indirectly elected European Assembly that on endless occasions we have heard about a major review of the budget? What will that major review achieve? There is no way of having a non-cosmetic major review without hurting various countries, which may refuse to be hurt.

Sir I. Gilmour

I agree that there is no way of ensuring that we get early repayment. However, we are bound to get repayment in our own financial year as opposed to the calendar year. This will help some of our partners. The Council has for the first time committed itself to a fundamental review and reiterated that no unacceptable situation should arise. The hon. Gentleman has forgotten that we have the prospect of the 1 per cent. ceiling, which is crucial in these matters.