European Community (Draft Budget)

HC Deb 28 November 1980 vol 994 cc693-757

[Relevant Commission documents: Nos. 9239/80 and 11422180]

9.38 am

Mr. Nigel Spearing (Newham, South)

I wish to raise a point of order, Mr. Deputy Speaker, about the notice given of the motion. Notice of business for today's sitting was given eight days ago, but it was not until late yesterday afternoon that the Prime Minister and other right hon. and hon. Members in whose names the motion stands deemed fit to place the terms of it in the Table Office. However, other hon. Members, the public and the media learnt about the terms of the motion only half an hour ago, or perhaps an hour at the most.

It may be that this is strictly in order in terms of the Standing Orders, but I put it to you, Mr. Deputy Speaker, and to Mr. Speaker, as protectors not only of the liberties of Back Benchers but also the liberties of the subjects of this realm, which the House is here to protect, that it is not in the best practice to put down motions of this type, which—and I make no complaint of this—are becoming of an increasingly complex nature and increasingly qualificatory sometimes in terms—again, I make no complaint of that whatsoever-at such short notice, so that the opportunities for amendment, be it from the Front Bench or from Back Benchers on either side of the House, are thereby reduced, to say nothing of drawing attention to these debates in wider spheres.

I hope, therefore, that note will be taken of this matter and that in due course, with proper ordering of the House, we shall get effective notice of motions of this character.

Mr. Peter Shore (Stepney and Poplar)

Further to that point of order, Mr. Deputy Speaker. I should like to reinforce the point made by my hon. Friend the Member for Newham, South (Mr. Spearing).

I am not certain what happened, but I think that this was an unusual and unfortunate affair, because I think that we were perfectly ready and were seeking ourselves to table an amendment on the Wednesday so that it would be on the Order Paper in time for Thursday. Not only does so late an appearance of, first, the Government's motion and, secondly, the Opposition's amendment make things more difficult for the House as a whole but, frankly, it is very difficult for the Opposition, because we need the opportunity to express, in time, the nature of our objections to the Government's agreement so far in the European Communities budget.

Mr. Deputy Speaker (Mr. Bernard Weatherill)

I thank the hon. Member for Newham, South (Mr. Spearing) for giving notice of his point of order. He is correct in saying that the motion is in order. As to the terms of the motion on the Order Paper and when it was put down, that, as the hon. Member correctly stated, is not really a point of order for the Chair. However, the Patronage Secretary is on the Front Bench, and I am sure that he will have taken note of what has been said.

The Parliamentary Secretary to the Treasury (Mr. Michael Jopling) indicated assent.

Mr. Deputy Speaker

In relation to what the right hon. Member for Stepney and Poplar (Mr. Shore) has said, I would point out that Mr. Speaker has selected the amendment in the name of the official Opposition.

9.42 am

The Financial Secretary to the Treasury (Mr. Nigel Lawson)

I beg to move, That this House takes note of the Draft of the General Budget of the European Communities for 1981; Document No. 10479/80, a Draft Letter of Amendment to it; the amendments and modifications adopted by the European Parliament on 6 November 1980; Document No. 11203/79, Annual Report of the Court of Auditors for the financial year 1978; and Document No. 5861/80, Council recommendation to the European Parliament on the discharge to be given to the Commission in respect of the implementation of the Budget and of the Amending and Supplementary Budgets of the European Communities for the financial year 1978. The documents covered by this relatively straightforward motion relate to the preparation of the 1981 budget of the European Communities and to the important subject of financial control in the context of the European Community budget. In my relatively brief opening remarks, I shall confine myself to the budget, but I hope that if I am fortunate enough to catch your eye, Mr. Deputy Speaker, with the leave of the House I shall be able to speak again later in this debate and answer to the best of my ability the various points that will be raised on both sides of the House.

The first stage in the Community budget process, the preliminary draft budget prepared by the Commission, document 9239/80, was considered by the Budget Council on 23 September. I gave the House information on that Council in my answer on 27 October to my hon. Friend the Member for Welwyn and Hatfield (Mr. Murphy), and the outcome of that preliminary draft budget was the establishment of the draft budget, which is the main subject of today's debate.

There was an explanatory memorandum by the Treasury dated 17 October, which was amended on 19 November, which explained the main features of the draft budget. Supplies of volume 7, the main document, have been made available in the Vote Office. A limited number of complete sets of the remaining volumes are available in the Library.

There is also reference to document 10479/80. This is a draft letter of amendment relating to the budgetary provision for pre-accession aid to Portugal, which again has been deposited, together with an explanatory memorandum by the Treasury dated 14 November.

Following the September Budget Council, the draft budget was forwarded in the normal way to the European Parliament, which voted a very large number of amendments and modifications to it. These are contained in part 2 of the minutes of the proceedings of the sitting of the European Parliament on 6 November, and, again, these have been deposited together with an explanatory memorandum by the Treasury dated 24 November. These proposals of the European Parliament are also included in today's motion.

The Budget Council met again this week on 24 November—on Monday, going right through into the early hours of Tuesday morning—to consider the Parliament's proposals, and I included a full summary of its decisions in my answer on Wednesday of this week, 26 November, to my hon. Friend the Member for Dorset, South (Viscount Cranborne).

Finally—and I hope that this brief summary of the various documents is of some help to the House-I should mention that a further short document, No. 11422/80, which is relevant to this debate, was deposited as recently as 24 November, with a subsequent explanatory memorandum dated 26 November. This document is a letter of amendment, No. 2, to the draft budget for 1981. It reduces the provision in the draft budget for refunds to this country by the amount included for advances to the United Kingdom in the draft supplementary and amending budget No. 1 for 1980, on which the Treasury has also provided an explanatory memorandum dated 24 November. I trust that that is clear.

I now turn to the content of the 1981 draft budget. In my statement of 27 October on the outcome of the 23 September Council, the first Budget Council this year, I included detailed figures on the amounts for commitments and payments included in the draft budget, including the provision for refunds due to the United Kingdom in respect of our contribution to the 1980 budget. I also explained in some detail the provision that had been made for non-obligatory expenditure, in particular for the regional development fund and the social fund.

In my written answer to my hon. Friend the Member for Dorset, South, I have also quoted the relevant figures following the Council's decision on the Parliament's proposals—that is to say, the decisions of the second Budget Council this week. I shall not, therefore, weary the House with repetition of these details, although I shall discuss the broad outline shortly. The House will be more interested in the results of the Council's discussion of the Parliament's modifications to the agricultural provision in the draft budget and on its amendments to non-obligatory expenditure.

It was quite clear to us when we met in the Council this week that the Parliament attached considerable importance to the two modifications, which, indeed, the Council accepted, in respect of agriculture. It saw the transfer of some 255 million units of account from the FEOGA guarantee section to a special reserve as a means of encouraging the Commission to seek economies to offset any additional expenditure that might arise in the guarantee section during that year. I supported the Parliament's modification for that reason. Also, I supported its modification relating to the reduction in the provision for aid for skimmed milk powder for use as animal feed. Not all member States agreed with these proposals, but I am glad to say that they were passed by qualified majority.

On non-obligatory expenditure, there was strong opposition by certain member States to exceeding the margin that the European Parliament has under the maximum rate rules and procedures. I was particularly concerned about what I saw as a very worrying gap or incompatibility in the draft budget between commitments and payments in respect of the regional and social funds—that is to say, the provision for payments appropriations contained amounts insufficient to honour obligations already arising out of the commitments that had been approved by the Council in previous years and approved by both budgetary authorities in previous years. The fact that there was incompatibility between the two figures was agreed by the Commission

I therefore urged the need for a less restrictive attitude to the Parliament's proposals, since I felt strongly that the Commission must be put in a position to be able to honour its obligations by providing sufficient payments for the regional and social funds in order to enable the fulfilment of commitments entered into. It seemed to me to be a major matter involving the integrity of the Community budget. If there were such an inadequacy, it could lead to serious problems during the coming year.

Eventually, a compromise was reached at about 4 o'clock in the morning under which the Council agreed to increase commitments and payments for the regional and social funds, particularly payments, and commitments for some other purposes. There was agreement to exceed the maximum rate for payments appropriations by 50 million units of account.

I would have wished the Council to go further on the payments side because of the incompatibility, but I have little doubt that in the later stages of the budget process there will be further exchanges between the Council and the Parliament on the matter. I hope that other member States will accept the need to ensure that the Commission can meet its obligations.

Mr. Shore

I should like to be clear that we know what we are talking about in this welter of figures. I understand that the draft budget allocated 500 million units of account for 1981. Do we understand from the hon. Gentleman that that sum has been increased to 550 million units of account?

Mr. Lawson

The increase is even greater. The allocation is now 620 million units of account. The Parliament had a margin on payments of 133 million units of account. The Council agreed to go above the maximum rate, which determines that margin, by a further 50 million units of account, making a total increase of 183 million units of account. Of that, an extra 120 million units of account has gone to the payments appropriation for the regional fund. I shall return to the regional and social funds later.

This is a crucial budget for the United Kingdom. It contains provision for the advances from the 1980 budget and for the refunds to us, under both the financial mechanism and the supplementary measure regulations that have been agreed in order to reduce the high level of our unadjusted net contribution to the 1980 budget. In other words, it is the budget which implements for the first time the important 30 May agreement to reduce the excessive net contribution that we were asked to make.

Mr. Tony Marlow (Northampton, North)

Can my hon. Friend clarify one point? Is he saying that until the budget is agreed we shall not get our refunds from the 1981 budget, and that the longer we delay the longer it will be before we get our money?

Mr. Lawson

My hon. Friend is basically right. There are provisions for advances to us. We shall get certainly £75 million, and possibly up to £100 million, before the end of the year under the rectifying letter—or whatever it is called—to the 1980 budget. The main money is contained in the 1981 budget, and it is important that that budget should be adopted by the Parliament at the end of the year. If that did not happen, the provisional twelfths regime would come into force and no significant refunds would be available to us. No doubt my hon. Friend is aware that last year the Parliament rejected the budget for the first time. However, I have no reason to suppose that it will do that again this year.

Mr. Teddy Taylor (Southend, East)

Why are we going through all this complicated business of approving budgets and getting projects approved by committees? Why did my hon. Friend and his colleagues not say that if we are to have a refund the simplest way of arranging matters would be to take the sum involved off the money that we send to the Community?

Mr. Lawson

My hon. Friend will be aware that there was a hard and tough negotiation over the refund mechanism and the amounts concerned. The final agreement, which I have outlined, was outlined in much greater detail by my right hon. Friend the Lord Privy Seal. It may be true that, as my hon. Friend suggests, a simpler method could have been devised, but no such method was agreed. What was agreed was the method that now exists. It is not fruitful to suggest that we could have negotiated something simpler. We fought hard and got a much better agreement than most people ever thought possible.

Mr. Marlow

I am reluctant to interrupt my hon. Friend again, but may I ask him to confirm that the passage of the budget—and, therefore, the receipt of money by the United Kingdom—is still dependent on eight other countries within the Community, who could delay the budget? Irrespective of whether we approve it, the other countries could delay it and could delay our repayments.

Mr. Lawson

I do not think that there is any worry about the eight other countries not approving the budget. It has already been approved by the Council in a form that contains the refunds. The remaining question is whether the European Parliament—or the Assembly, as my hon. and learned Friend the Member for Beaconsfield (Sir R. Bell) prefers to call it — is prepared to accept the budget. That is the remaining hurdle.

It remains open to us in the course of the next year to press for a further and larger amount by way of advance payments in respect of our unadjusted net contribution for 1981. The Council has agreed that there is a presumption in favour of giving us advance payments next year of at least the same amount as it is hoped to provide this year.

Therefore, while we want to see the best possible 1981 budget in the interests of the Community as a whole, we are naturally anxious that agreement should be reached between the Council and the Parliament, together constituting the two arms of the budgetary authority, so that an acceptable budget can be adopted by the Parliament before the end of this calendar year.

I should like to make clear the Government's general approach to the several stages of the 1981 budget. The line that I look at the Budget Council in September, and which was further reflected by my attitude at the second Budget Council this week, has to be seen in the context of our economic policy and, specifically, our policy on public expenditure generally. Because of those considerations, we have to subject all proposals for expenditure from the Community budget to careful scrutiny. After all, even taking into account the satisfactory budget settlement of 30 May, we are still the second largest net contributor to the EEC budget.

The attitude that coloured my approach was similar to that of most other member countries. Certainly, the desire to restrain public expenditure played a significant part in the attitudes of pretty well every other member State. We are not the only member State attaching importance to fiscal austerity and having to impose such austerity in its domestic budgetary matters. I am sure that the House will agree that it is important to be consistent in our attitudes to public spending, both at home and in the Community.

While my major objective was, naturally, to secure appropiate budgetary provision for United Kingdom refunds—that has been achieved and is now in the budget—I was also concerned about the general size and shape of the budget. We are determined, like many other member States, not to breach the 1 per cent. VAT ceiling. This itself is a major discipline encouraging the much-needed restructuring of the Community budget. Within the total available, I was anxious to secure as much as possible for the regional and social funds.

There has been some criticism of the relative provision in the 1981 draft budget for agricultural spending and for other policies. Despite the amendment on the Order Paper in the name of the Opposition, I should like to point out that the relative provision in this budget is tilted away from agriculture. An easy way of seeing this is that the provision in the budget for FEOGA guarantee expenditure is of the order of an increase over 1980 of about 12½ per cent. As a result of the increase in payments appropriations for non-obligatory expenditure agreed by the Council on Monday night and Tuesday morning, the total increase in non-obligatory expenditure payments is of the order of 20 per cent. There is a considerable tilt away from agriculture towards these other items.

Mr. Julius Silverman (Birmingham, Erdington)

As agriculture is obligatory expenditure, the provision in the budget may prove in the event to be inadequate. What is given to agriculture depends on the harvest, the price review, the general world situation and general world prices. The outturn might eventually be different from the amount allocated in the budget.

Mr. Lawson

I should like to pay tribute to the hon. Member for Birmingham, Erdington (Mr. Silverman) for his work as Chairman of the Scrutiny Committee which looks into these matters. The hon. Gentleman and his Committee perform a valuable function. He is right. The CAP is obligatory expenditure. It is also affected by the weather. None of us can predict that. It is also affected, perhaps more importantly, by the price review. The price review for 1981 has yet to come. That is not a matter for the Budget Council. We have to assess the budget as it stands at present. As it stands at present, there is a tilt away from agricultural expenditure as a proportion of the budget.

Mr. Ron Leighton (Newham, North-East)

As the Minister says, the price fixing is still to come. What is the policy of Her Majesty's Government? Is it not to increase the price of goods in structural surplus?

Mr. Lawson

This is a matter, in the first instance, for my right hon. Friend the Minister of Agriculture, Fisheries and Food. I can assure the hon. Gentleman that the attitude of the Government, in their approach to the price fixing, will be one of severe restraint.

The regional and social funds, within the total of non-obligatory expenditure, are something to which I attach particular importance, both from the point of view of the development of the Community and the point of view of the interests of this country. A similar attitude was taken by the previous Government. It will be of some interest to the Opposition, in the light of their amendment, to know that, as a result of the decisions taken in the Budget Council on Monday and Tuesday this week, the increase for the regional and social funds together, compared with last year, of commitments appropriations is 21 per cent. and of payments appropriations 60 per cent. It will be seen that I was able to achieve what I had set out to achieve—that is, within the available resources, to slant the budget as much as possible in the direction of the regional and social funds.

It was in recognition of the need for restraint in agricultural expenditure that the Council accepted the European Parliament's two proposals in this area. The total provision in the draft budget is therefore below that originally proposed by the Commission, and the creation of a 2 per cent. reserve within the total guarantee section provision is designed to facilitate a greater measure of restraint over the development of support spending.

There will now be further consideration by the European Parliament of the draft budget for 1981 and I hope very much that the Parliament will be able to adopt it next month.

Mr. Michael Brown (Brigg and Scunthorpe)

My hon. Friend says that he hopes that the European Parliament will adopt this budget. The House, I understand, is being asked today merely to take note of the budget. I should like to pose what may be a hypothetical point. What would be the effect were the House not to take note of the Community budget? What would happen? What power and influence would we have over the European Commission or the European Parliament if the House were not happy with the budget?

Mr. Lawson

We are having this debate not only because it was recommended by the Scrutiny Committee but also because we want to know the views of the House of Commons. This will colour our attitude in the further stages of the budget. The budget is not yet complete.

Mr. Shore

I cannot believe that the Financial Secretary is reflecting his own views about the role of the House of Commons. If the House of Commons declined to approve this draft budget today, surely the Financial Secretary and his colleagues would be under an obligation to use whatever voting poweer they had in Brussels to disapprove the budget. If the hon. Gentleman is arguing the contrary, he is saying something that I think would be totally unacceptable to both sides of the House.

Mr. Lawson

The motion on the Order Paper is to take note of the draft budget. Let us see what the result is. It is a hypothetical question that the right hon. Gentleman is putting to me.

Mr. Marlow

My hon. Friend has said that if the House was to reject the motion and not to take note of the documents placed before it, it would affect what he would do in Brussels later. This is important if we are to vote on the issues. How would it affect what my hon. Friend would do in Brussels later?

Mr. Lawson

That is a purely hypothetical question. I assure my hon. Friend that the Government would take very seriously the decision the House reaches today.

The European Community budget contains, as I think hon. Members know, in chapter 59 provision for aid for disaster victims within the Community. With the full support of the United Kingdom, the provision remaining available within the 1980 budget for assistance to disaster victims under this chapter of 1.5 million units of account is to be granted to Italy to assist in relief work following the recent earthquake. I have no doubt that before long the Commission will be making proposals for further assistance which it could do by transfers from other chapters into this chapter. That can be done. We shall consider the matter sympathetically.

The House will be aware that the Community provided substantial assistance following the earthquake in the Friuli region of Italy in 1976. I am sure that the action already taken through the budget in this way, small as it is, will be welcomed by both sides of the House.

Mr. Tam Dalyell (West Lothian)

I was asked by the indirectly elected Parliament to go with a noble colleague of the Minister's—Lord Bessborough—to look at the appropriation of funds in Friuli. The one thing we learnt in the damp camps was that any aid that gets there within a week, and preferably within 72 hours, is infinitely more valuable than aid that may follow a month later. Surely, the time for aid—the medicines, the vaccines, the blankets and the shoes—is now, not later.

Mr. Lawson

It is for the Commission to make proposals. I am sure that it will be well aware of the points that the hon Gentleman has made. The Government are already ferrying aid to the earthquake disaster victims.

However, this is taking us a little wider than the European Community budget as a whole. Perhaps I may reply to any further points that the hon. Gentleman wishes to make if I catch the eye of the Chair later in the debate.

Mr. Dalyell

On a point of order, Mr. Deputy Speaker. Surely chapter 59 is a matter that is legitimate for debate.

Mr. Deputy Speaker (Mr. Richard Crawshaw)

That cannot be a point of order.

10.10 am

Mr. Peter Shore (Stepney and Poplar)

I beg to move to leave out from "House" to the end of the Question and to add instead thereof: calls upon Her Majesty's Government not to approve the 1981 Community Budget which fails to achieve a broad balance between the United Kingdom's contributions and the United Kingdom's receipts; which makes totally inadequate provision for regional, industrial and social policies and which continues to commit two-thirds of its total expenditure to the support of the Common Agricultural Policy. Before I embark upon my argument in support of the amendment, I should like to make one remark about the timing of the debate. I shall not go back over the point of order raised by my hon. Friend the Member for Newham, South (Mr. Spearing), which I thought was a perfectly legitimate point.

I do not believe that it is sensible for the House to debate matters of such importance on a Friday, when it is well known that right hon. and hon. Members on both sides of the House are torn by their conflicting duties to the House and their constituencies. I address my remarks not necessarily directly to the Financial Secretary but, through him, to the managers of the House, to urge that we should use prime time. The whole range of issues affecting the Community and Britain are matters of continuing and major importance, and they are not to be dealt with late at night or on Friday mornings, when so many right hon. and hon. Members cannot be here. I give notice that there will be a major row in the future if we are to be faced with any attempts to deny the full House of Commons scrutiny of what is proposed in relation to the EEC.

The amendment reflects our continuing and deep dissatisfaction with the size of the British net contribution to the EEC budget and with the totally absurd patterns of Community expenditure that are reflected in the budget. The first of these subjects is Britain's swollen and unfair contribution, both gross and net, to the EEC. In the explanatory memorandum, the Treasury puts the figure at 20.8 per cent. of the total. That contribution to the EEC has been the subject of many statements and at least three debates within the past 12 months.

The House is all too aware of the great retreat that the Prime Minister conducted from the time of the Dublin summit in November 1979 to her acceptance of the agreements reached on 30 May this year. To us—and, I suspect, the Prime Minister—the 30 May agreements were seriously defective in the following major matters. First, the will of the House and the Government's commitment to achieve a broad balance between our payments to the EEC and our receipts from it were in the end overridden by the Council of Ministers. The Prime Minister certainly gained an improvement over the situation that would otherwise have pertained, but she was forced to eat her own words, and in a most humiliating way.

We remain the second largest net contributor to the EEC budget, whilst in terms of gross domestic product we are seventh in the league table.

Mr. Tristan Garel-Jones(Watford) rose—

Mr. Shore

I shall give way in a moment.

Further, the Government's original and powerfully stated intention that they would seek this time a permanent and not a temporary solution was again abandoned. The agreements reached are for 1980, 1981 and, subject to a further Council of Ministers procedure, for 1982 as well. But thereafter the agreements lapse and, failing a new agreement, Britain will be back in the same burdensome position as we were in previously under the original negotiation, embodied in the Treaty of Accession, which so many Conservative right hon. and hon. Members had the folly to approve seven or eight years ago.

Our third objection was the linkage of this partial and temporary easement of our budget burden to a number of concessions, notably an agreement for a substantial increase in agricultural prices, including agricultural products in continuing surplus, a commitment to reach agreement on a common fisheries policy by the end of this year, with all that goes with that, and our acquiescence in the extension of the CAP to trade in mutton and lamb.

Having completed that brief resume of objections, I am perfectly willing to give way to the lambs on the Conservative Benches.

Mr. Garel-Jones

I am grateful to the right hon. Gentleman for giving way. As a lamb, I move with some trepidation towards the tigers of the Opposition. The right hon. Gentleman said that at present this country's net contribution to the EEC was the second largest. What was Labour's position during the five years of the previous Government?

Mrs. Elaine Kellett-Bowman (Lancaster)

The right hon. Gentleman had some responsibility for it.

Mr. Shore

I do not find that question difficult to answer, and the House knows very well why. I pose a problem for Conservative right hon. and hon. Members. I am sorry for them, because they know that I opposed membership in 1972. I led one amendment after the other. I opposed it again in 1975 and I voted against it in 1975, while they all voted for it. They voted for the renegotiation. I opposed it, I continued to oppose it, and I shall go on opposing it. That is a record that the Lord Privy Seal cannot claim—

Mr. Hugh Dykes (Harrow, East) rose—

Mr. Shore

—and neither can that lamb on the Conservative Back Benches.

I think that that is a wholly satisfactory reply.

Mr. Lawson

Will the right hon. Gentleman give way?

Mr. Shore

Why on earth should I, on a mere point of history?

Mr. Lawson rose—

Mr. Deputy Speaker

Order. We can have only one hon. Member on his feet at a time.

Mr. Lawson

Will the right hon. Gentleman give way?

Mr. Shore

Not on this matter.

I have outlined our continuing objections to the agreements made on 30 May. In addition to the points that I have made, there is the question of the particular regulations through which the partial refunds to Britain are to be paid. It is apparent to anyone who has studied them that the opportunities for delay, for its Community associates to exert continuing pressure on the United Kingdom, exist all too clearly in those regulations. As the Financial Secretary confessed, the main British reason and purpose for approving an otherwise absurd 1981 Community budget is the hope that we shall get back some of the money which in the first place we wrongly paid in.

Mr. Dykes rose—

Mr. Shore

We are all too aware of the Government's continuing commitment to carry on paying money, £371 million this year and £450 million next year, and all this against a background of the latest and most unwelcome cuts in public expenditure announced only last Monday.

Mr. Dykes

I am grateful to the right hon. Gentleman for giving way. I am sure that he does not want to gloss over history in the convenient way that he has. To satisfy the House, will be spell out step by step and movement by movement the precise steps taken by the previous Labour Government to renegotiate the net budget contribution—and the result?

Mr. Shore

The House knows that there was a renegotiation in 1974–75—a renegotiation which was warmly applauded and approved, both in terms of every step that was taken and in terms of its results, by the vast majority of Conservative Members. When that renegotiation came before the House, the hon. Member for Harrow, East (Mr. Dykes) voted for it and I voted against it. Therefore, I have no need to apologise, and I will not.

Mrs. Kellett-Bowman rose—

Mr. Shore

The hon. Lady is far too involved for her own health in European affairs, and I do not think that I will give way to her.

Mrs. Kellett-Bowman

What about the health of the right hon. Gentleman's leader?

Mr. Lawson

The right hon. Gentleman has declined to admit the total failure of the previous Government, of which he was a member, to gain any success in this respect. He wishes to forget that, so let us forget it. But what is the present position of Her Majesty's Opposition? Are they now committed to leaving the European Community or are they not? Will be give a straight "Yes" or "No"?

Mr. Shore

It is a little naive to put a question like that when we are discussing the Hon. Gentleman's none-too-happy experience representing her Majesty's Government in Brussels on a matter of importance to the House. There are plenty of occasions when these matters can be raised. We had a foreign affairs debate while the hon. Gentleman was doing his duty in Brussels as recently as Monday of this week, when some similar questions were asked. I advise him to read the Official Report of that debate. That will assist him.

Mr. Spearing

Will my right hon. Friend allow me?

Mr. Shore

No, I will not allow anyone at the moment, not even my hon. Friend.

I think that we all recall how the Chancellor's defence of the 30 May arrangements proceeded. On 2 July 1980, he said: by far the most important part, in the long run, of the outcome of the Council of 30 May is the commitment to review the whole of the operation of the Community budget. The right hon. and learned Gentleman's interpretation of the Council's commitment was twofold: first, the "own resources" system is no longer immutable; second, the financial objective of the proposed review will be to prevent the recurrence of, to use the old words, "unacceptable situations".

The Chancellor later said: other menber States are now increasingly coming to recognise that expenditure on the common agricultural policy cannot be allowed to increase at a rate of over 20 per cent. a year". It is against that background of expectation that we must consider the content of the proposed 1981 Community budget.

The House will certainly recall — in his helpful opening paragraph taking us through the document, the Financial Secretary reminded us—that the preliminary draft budget for 1981, which was presented by the Commission in September, proposed expenditure of no less than 20,000 million units of account. I am rounding the totals.

Then, of course, the usual ping-pong procedure, involving the Commission, the Council of Ministers and the European Assembly, was set in train. It is now, we understand, reaching the end of the process. The Council, having received that preliminary draft, was, I believe rightly, alarmed at the size of the Commission's proposals and reduced the figure from 20,000 million to just under 19,000 million units of account.

What was remarkable, however, was the area of expenditure in which the Council chose to make its cuts. I will come back in a moment to what the Financial Secretary told us about the most recent stages, but, at the stage at which the Council itself proposed a draft budget within the preliminary proposals by the Commission, the proposed expenditure on the regional development fund was reduced from 770 mua to 500 mua at the Council meeting on 13 October. Expenditure on industrial and energy policies was cut from 63 mua to 30 mua and expenditure on the social fund from 710 mua to 560 mua.

Those are substantial cuts, certainly in percentage terms, and they are cuts in programmes which are, by any standard, puny in the first place. All three programmes represent expenditure of less than 1,500 mua on social, regional and industrial policies combined.

But what about expenditure on the CAP, notoriously the most extravagant and wasteful form of Community support?

Mrs. Kellett-Bowman rose—

Mr. Shore

I ask the hon. Lady to allow me to get on. We have had a large number of interruptions and I want to get on with my speech.

Mrs. Kellett-Bowman

This is an important point, because it could confuse the House.

Mr. Shore

Perhaps the hon. Lady will allow me to go a little further. Then, if she still feels that there is a danger of confusing the House, I will give way.

Mrs. Kellett-Bowman

Will the right hon. Gentleman give way on the subject of the regional fund?

Mr. Shore

No, I will not; I have not finished.

The Commission's proposals for no less than 12,870 mua on the CAP were trimmed—how modest a trim it was—to 12,725 mua. The guarantee section of the CAP will therefore continue to account for no less than two-thirds of the total EEC budget for 1981. I am aware that there may have been changes at the margin of the kind that the Financial Secretary described, but I am sure that he would be the first to recognise that those changes, although perhaps of some substance in terms of those tiny funds, hardly alter the total, distorted shape of the budget.

One thing is plain: the Chancellor's statement on 2 July that the rate of increase in agricultural expenditure was now the object of concern, not only in this country but elsewhere in the Community"—[Official Report, 2 July 1980; Vol. 987, c. 1555–56.] is not exactly reflected in the 1981 budget.

I should also underline the fact, as the Minister did, that agricultural expenditure represents an increase of about 12 or 12½ per cent. above the budget payments in 1980. An increase of that magnitude puts into perspective some of the misleading statements made about the effects of the last farm price review.

On 28 and 29 May, the Council of Agriculture Ministers agreed on an increase in farm prices, with an overall average of 4.8 per cent. In its explanatory document on 19 July, the European Communities Commission, in its London office briefing, said that the decisions meant that farmers in the Community will get an overall increase of 5.7 per cent. against a Community inflation rate of 12 per cent. Those who are unfamiliar with these matters may be puzzled by the discrepancy between an alleged overall increase of 5.7 per cent. and the budget increase, contained in the draft, of about 12 per cent. The explanation, of course, is that farm production is increasing, in productivity as well as in volume of output. It is this which inevitably leads—and not just this year—to increases in farm income and expenditure greatly exceeding the increases in percentage farm prices.

Over the past seven years, the cost of the CAP has leaped from 3,600 million in 1973 to the 12,725 million that we are now considering. Needless to say, that is far higher than the increase in prices generally which has afflicted Community countries over that period.

It is when we consider just how this vast guarantee section of the CAP is spent that the outrageous nature of the CAP comes home to us all. In 1979, as I noted in a recent letter in The Times, no less than £6,500 million of CAP money was absorbed in buying up and storing surplus farm produce or in subsidising it so that it could be sold in third markets at dumped prices.

What needs explanation is the acceptance by British Ministers of the changes in the Commission's preliminary draft budget which reduce the quite small sums allotted to the regional, industrial and social expenditures while accepting only minor changes to the continuing swollen payments to the CAP. That is important not only because the priorities are clearly wrong but because British connivance in this swollen agricultural expenditure must cast serious doubt on our will and intentions towards changing the CAP during the course of what the Chancellor is claiming to be the forthcoming fundamental review of the Community budget and the Community agricultural policy.

There must be serious doubts about British intentions. These doubts will have been greatly reinforced by what I thought was an extraordinary speech by the Minister of Agriculture, Fisheries and Food only a week or so ago. The right hon. Gentleman's speech amounted to a wholehearted defence of the CAP. According to the right hon. Gentleman, the CAP does not deprive other European policies of funds. He argued that the increases in its prices have been consistently modest. According to the right hon. Gentleman, the surpluses are negligible and we have the great benefit of secure food supplies. To ensure that no one could misunderstand his message, he said: Politicians in Europe"— I assume that that included many of his colleagues— were too prone to talk glibly of the form of the CAP without offering detailed explanation on what other forms are sensible or possible. The right hon Gentleman continued: changes were not possible within a week or a month or even a year … the EEC must aim over four or five years to reduce output and to promote other types of agricultural production more suited to European and world demand.

Sir Anthony Meyer (Flint, West)

Very sensible.

Mr. Shore

I do not think that Herr Ertl could have done much better in defence of the CAP. I do not know what the Foreign Secretary and the Prime Minister think about it. The House is aware that the Government have embarked upon a collective woo-in of the EEC. Ministers have been instructed to make as many agreeable noises in as many European capitals as possible. What is far more controversial is the fact that Her Majesty the Queen appears to have been conscripted for this purpose. It is an unwise practice on the Government's part to advise Her Majesty to make statements of affection about the institutions of the EEC when those institutions are seriously unpopular in Britain and the issue of the EEC is one that seriously divides opinion. I hope that there will be no argument with the long-held view and tradition that the Crown should not be involved in matters of dispute between the parties and inside the country.

Sir Anthony Meyer

Were not the negotiations for the independence of Zimbabwe highly controversial in Britain? Is it not a fact that Her Majesty lent tier full support with the overwhelming support of most of the House to the movement towards the granting of independence to Zimbabwe? Does the right hon. Gentleman maintain that the Queen should not have been involved in that issue?

Mr. Shore

I was not aware of one vote against the granting of independence to Zimbabwe when the negotiations had finished. The solution enjoyed virtually unanimous support in the House.

Mr. Dykes rose—

Mr. Shore

There is no possibility of major changes in the CAP unless and until it is clearly recognised in the Community that the major institutional arrangements that now buttress it are no longer acceptable and must be progressively dismantled.

I refer, first, to the series of guaranteed prices for open-ended quantities of food, a system which leads inevitably to intervention buying and the costly business of the storage of surpluses. I refer, secondly, to the practice of imposing variable levies on imports of competing foodstuffs so that, however cheap in comparison with EEC farm products Third country foodstuffs are, their price is brought up to and slightly above the level obtaining in the EEC. It is the most effective and complete form of protection that the world has ever seen.

Thirdly, I refer to the abominable practice—I have never understood why GATT permitted it—of export restitutions. It is the subsidising of EEC surpluses so that they undercut in world trade in third markets the exports of other producers whose basic costs are lover than those of the EEC. These are the features of the EEC that must be put under sustained attack.

The Foreign Secretary, speaking on the same day in Brussels as the Minister of Agriculture, Fisheries and Food, referred—I can only assume, with deliberate naiveté—to the principles of the CAP as outlined in article 39 of the Treaty of Rome. He said that the principles were merely the beginning of the evolution of the structure of the CAP that has developed in the past 25 years. That we understand. I should be the last to discourage the Foreign Secretary from insisting that the structure should be abolished and that we should strip the CAP down to its fundamentals—namely, to the principles set out in article 39. He will not find it easy in any event to persuade his colleagues to take that course. He will not have been assisted in his efforts by the speech of the Minister of Agriculture, Fisheries and Food.

There is a major British interest quite outside that of Britain's contribution to the EEC budget and the size of the budget itself. I think that everybody recognises that the CAP imposes on Britain major resource costs and continues to dislocate the pattern of food trading between Britain and many other Commonwealth partners. For the British consumer and housewife, the difference in the nation's food bill between buying at world prices and being forced to buy at the contrived prices of the EEC is of the order—I accept that there is a margin of difference—as the Minister of Agriculture, Fisheries and Food stated in a written answer only in July, of £3,000 million a year. Here is a chance for any Government to assist the hard-pressed families of Britain.

There is one further lesson that the experience of the 1981 budget should teach us. There are many in the Government who believe that all will come well when the Community's own resources run out—that is to say, when the yield of the three taxes ceases to equal the cost and demands of the EEC's budget. They say that when that happens we shall have a major bargaining lever with which to force the Continental members of the EEC profoundly to change the CAP itself and the methods of financing it. Those assumptions and beliefs should be considered somewhat more critically in the light of the experience of this year's budget.

The truth is that the CAP is entrenched within the EEC budget. It has priority. It is a so-called obligatory expenditure. That means that the first victims of retrenchment and squeeze in the EEC budget will be regional, social, industrial and other policies which are, to use Community jargon, non-obligatory and which have the feature of being, on the whole, not so unacceptable and unwelcome to ourselves.

We have seen the first sign of this in the rejection by the Council of Ministers of the Commission's proposals last month. I referred earlier to the ping-pong game of the budget process in Europe. We all know that the draft approved by the Council of Ministers went back to the Strasbourg Assembly. We all know—it was utterly predictable—that the Assembly substantially reinstated the proposals that the Commission first put forward. We all know that the Council of Ministers has, with the two exceptions that the Financial Secretary told us about, rejected the Assembly's proposals again. The paper tiger of European democracy, the European Assembly, will accept basically the diktat of the Council of Ministers. We shall, of course, vote against this deplorable package at the end of the debate.

I shall not go further into the major constitutional issue that the Financial Secretary brought us to confront in his inadequate reply to a question from his own Back Benches. However, if at the end of the debate the House votes for the Opposition amendment and if we refuse to accept the budget, the hon. Gentleman and his right hon. Friends cannot go back and give their approval to the budget.

Sir Ronald Bell (Beaconsfield)

Is not the right hon. Gentleman being a little unkind to my hon. Friend, who was merely jollied along by interruptions, when he should have insisted that the farcical position of this House is an integral part of the total farce?

Mr. Shore

I understand the difficulty that this House is in, but the one tenuous thread that we have in the control of our future in terms of the EEC is the responsibility of Ministers of the Crown who attend Council of Ministers meetings and who are, therefore, responsible to this House. That is why we insisted on the veto from the beginning to the end. The hon. Gentleman had better make it clear before the end of the day that he understands and fully accepts his responsibilities to this House.

10.41 am.

Mr. Michael Shaw (Scarborough)

I normally listen with great interest to the right hon. Member for Stepney and Poplar (Mr. Shore). Although I do not often agree with what he has to say, I admire what he has to say and the careful way that he agrues his case. I am sorry that he chose to bring in what is being sought to be made into a controversy, namely, the fact that Her Majesty went to the Community and said some words in support of it. As I see it, we make treaties with other countries. We send our leaders to the different centres of our friends, and naturally they support the views that have been pursued by treaties that we have entered into. It is very sad indeed to bring that matter into the political dogfight. I hope that none of us will continue along that line. It will harm this country to do so.

Mr. Spearing

Does not the hon. Gentleman agree that the words used suggest that our membership of the EEC has produced fruits that many of us believe that it is incapable of producing? Since that is a matter of controversy, would it not have been much better if those who advise Her Majesty on such pronouncements had not suggested that she use those words, because it broke at that point the long-held convention that my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) correctly pointed out?

Mr. Shaw

I am afraid that I cannot agree with the hon. Gentleman. We entered into treaty obligations. One of the main purposes of so doing is to preserve and foster relationships for the future. That is the whole point of the exercise. What was said was a perfectly natural expression of view arising out of the action that we as a country had already taken. Had some such words not been used, our sincerity as a member of the Community would have been at stake. However, I shall say no more as I do not wish to continue the fault that has been committed.

I wish to deal briefly with two main points. The right hon. Member for Stepney and Poplar spoke of the ping-pong effect of the budget. It is easy to make fun of the procedures of the Community, particularly with regard to the budget. I shall say only this. My hon. and learned Friend the Member for Beaconsfield (Sir R. Bell) has gone from the Chamber, but I shall continue to use the term "European Parliament". I hope that he will understand. His own word is "Assembly". Happily, another on these Benches who used to challenge me on that point in every speech that I made is now in a position where he is unable to take part in our debates. He has been transferred to a ministerial position.

This is a very new institution. It is a meeting together of a number of different parliamentarians, who are brought up in very different traditions and languages. It is bound to take time to work out a suitable formula—indeed, the best formula by which negotiations can take place and decisions can be made.

Mr. Dykes

Is not my hon. Friend being too self-effacing about the matter? The European budgetary procedures are in every way as rational and subject to examination as our own. Billions of pounds can be voted in this Parliament without hon. Members paying the slightest attention. The Government have total control. However, in the Community there are a general exchange of view, consultation and agreement between the various lower entities.

Mr. Shaw

That is so. There are not only mistakes in the European Parliament. There are plenty in other Parliaments as well. We must try to correct them, as we are seeking to do in this House.

The process is lengthy, starting in the early spring with the review of the conditions and background against which the budget will be created, the production of a preliminary budget in the summer and then discussions running through up to Christmas. Even during the five years that I was there, there was gaining ground a pattern that was much more professional and much more capable of reaching better decisions than in the past. After the 1975 regulations came into force, the budgetary authority, consisting as it does of the European Parliament and the Council, had to learn to work together to produce a joint decision. The success of learing to work together in the budgetary authority will play a major part in the futre success of the Community.

In the early years the Council was at fault in not taking seriously the European Parliament. Equally, the European Parliament at the conciliation meeting spent most of the time thumping the table and standing on its dignity. As a result, neither side got anywhere. I am glad to say that that state of affairs disappeared some years ago. Both sides now realise the need to get on together.

In the year of the budgetary negotiations—1977—Lord Bruce was the rapporteur. I state openly that on that occasion he was shamefully treated in the negotiations. The negotiations were finally agreed, but they were no proper example for the future. I was rapporteur in 1978, when the 1975 regulations were first used. I was determined, if possible, to see whether we could get an agreed budget. I felt that for the future the two organisations must be able to show that they could get on together. In that year we managed to get quite a number of changes both ways, and agreement was finally reached reasonably amicably. That showed that it was possible to further relationships in the future. In 1979 the Council learnt a lesson. It fell flat on its face because it had not done its homework before the negotiations. It put itself in an impossible position. I am glad that the Parliament used its increased responsibility, first, to allow the Council to fall on its face and then to allow it to pick itself up. In 1980 the budget was initially rejected, but again lessons were learnt.

I say from the bottom of my heart that it is necessary for the future of the Community that the 1981 budget is an agreed budget, and agreed at the proper time. Last week's negotiations, in which my hon. Friend the Financial Secretary played a notable part, have gone far towards securing what I hope will be a successful conclusion.

The Community is approaching a great deal of negotiation. Labour Members are not alone in wanting changes in the CAP. We all want them, and they are inevitable because there will not be enough money to carry on in the present way unless, which is most unlikely, individual States pile in more money.

The crunch is coming. It is important to show both parties to the budgetary authority that they can get on together and negotiate a satisfactory outcome to the difficult problems. That would be a good augury for the inevitable future major negotiations.

I shall not go into the details of agricultural policy and how it should be changed. The hon. Member for Birmingham, Erdington (Mr. Silverman) is right. It is no good looking too closely at the agricultural section of the budget, because it will be completely altered by the supplementary budget. I always pressed when I was in Europe that the year end of the budget should be changed to enable everyone to see a complete picture, but I doubt whether that, logical though it is, could be done.

A further point arises from the budget. The, money raised is for the expenditure of the Parliament as well as the Commission. The way that the Parliament is run, based as it is on three separate locations, is a farce. I promised to serve out there for two years and eventually stayed for five, but my experience is that the arrangement is a killer for those who are prepared to work as much as possible. It was the reason why I did not seek to stay on.

One has to live in hotel rooms without knowing which hotel it will be or even which city. One has to work on papers out of black tin trunks and one could find that they have been forgotten, perhaps left behind in Luxembourg. In my more cynical moments, I used to think that the Council deliberately arranged it that way to negative the effect of the Parliament. If the Parliament is to be taken seriously, it must be based in one place.

Mr. Richard Body (Holland with Boston)

My hon. Friend is correct. Will be explain why my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) looks so well on it?

Mr. Shaw

That is for my hon. Friend to say. I can only give my experience on the matter.

The Parliament is not responsible for its location. The decision about where it meets rests with the Council. If the Council is serious about seeking economies, it should first consider a permanent site for the Parliament.

Mr. Dykes

Which one?

Mr. Shaw

Brussels would be the best choice, but, if need be, Luxembourg would suffice. I regret that Strasbourg, delightful though it is, is out of the running because of the great expense.

I am utterly opposed to the amendment. I fully support my hon. Friend the Financial Secretary in his work, which I hope will lead to a successful conclusion at the proper time.

10.55 am

Mr. Russell Johnston (Inverness)

I am glad that my speech follows that of the hon. Member for Scarborough (Mr. Shaw), because throughout his period in the European Parliament he was constructive in everything he sought to do.

In an important sense, the budget might be described as interim in that it has evident defects. I agree with the hon. Gentleman that those of us who support the Community accept their existence as much as do those who oppose it. I agree with him also, however, about the great need for an agreed budget and at the proper time and then to proceed with the restructuring which it is generally agreed is necessary.

The Financial Secretary referred to the European Parliament's amendments and his support for them. The significance of the Parliament's pressure for restructuring the budget should not be under-estimated. British representation in the Parliament is grossly distorted, but the representation from other countries is genuinely representative, and it is interesting that the structure of the budget is criticised across the political spectrum and across all the Community countries. That must be politically significant.

I agree with the hon. Member for Scarborough about the evident shortcomings of the CAP—the proportion of the budget that it consumes, its open-ended character, the use of the surpluses and the proportion of the agriculture budget spent on storing them.

I was, however, puzzled that the right hon. Member for Stepney and Poplar (Mr. Shore) should have attacked the Minister of Agriculture, Fisheries and Food specifically on his remark that a change would be likely to take three or four years. A fundamental restructuring of the CAP must take a number of years. It is unrealistic to suggest that it will not.

While in Britain the proportion of people engaged in agriculture is small—that has all sorts of effects on our contribution — the proportions in other countries are considerable. Not only is it not politically sensible to urge rapid changes which might drive people off the land into the cities where there is currently no work; it is not socially responsible.

In all one's criticisms of the CAP—and I go along with many of them—one should not forget or overlook its constructive contribution to stabilising life on the land over a large area of Europe. I agree that it has cost a lot.

Mr. Marlow

It has cost us a lot.

Mr. Johnston

It has cost everybody a lot.

The political climate for change exists not just in the Parliament. Hon Members will have read the editorial in The Guardian this morning. It referred to the position of the Germans, to the report on what Herr Schmidt is saying and even to Herr Ertl, who operates within the Liberal family in Europe and is engaged in the movement of change.

If there is to be a balancing factor in the budget, it must be found within the regional and industrial expenditure. Here I find it difficult to understand what the Government's attitude is. The Financial Secretary said "I was anxious to secure as much as possible for the regional fund." In an interesting speech which I commend to hon. Members, and which has already been referred to by the right hon. Member for Stepney and Poplar, the Foreign Secretary said in Hamburg on 17 November: It is a fundamental objective of the treaty that member States should work to achieve a convergence of their economies. So far, the role of the Community budget in that task has been negligible. Indeed, its overall impact in some cases has actually been perverse. But if savings can be made in the CAP, then the proportion of the budget devoted to policies designed specifically to help the less prosperous member States can grow. Policies like the regional fund and the social fund are of particular concern to the United Kingdom. To the average citizen in Britain, they seem much more relevant than the CAP. I am sure that there is scope for improvement". He went on to refer to transport, urban development, energy and coal.

That seems to be a fairly clear exposition of the Government's position. How, then, do the Government respond to the speech of the retiring president, Mr. Roy Jenkins, in Luxembourg, in which he called for a considerable increase in expenditures in the regional and social areas and followed it through by arguing that that meant an increase in the size of the budget? As far as I understood it, that was something which the Financial Secretary specifically ruled out; and the right hon. Member for Stepney and Poplar is hardly likely to argue such a case.

Secondly, and related to it, the Government are, on their own repeated affirmation a non-interventionist Government. They want not to increase State intervention but rather to roll back the frontiers of the State, or whatever the expression is. Surely, that makes it extremely difficult for the Government to argue for an increase in the regional and social funds from Europe, because that means State intervention by operating through various State agencies. I have difficulty in following that argument.

A small but symbolic point in this context relates to the progress of the non-quota section of the regional fund. The hon. Member for Scarborough will recall that in the European Parliament in particular there is a long record of all the parties arguing for an increased proportion of the regional fund not to be fixed in advance but to be spent according to the normal criteria of what are felt to be appropriate regional policies. We now have a non-quota section of 13 per cent. of the regional fund, which from memory I think is about 5 per cent. of the Community budget. We are not talking about a large sum. That has still not been spent, although it has been in existence for nearly two years.

I had a rather recondite reply from the Department of Industry on 24 November, when I asked when agreement was expected on the rules governing the non-quota section. I was told: Five regulations for the use of the non-quota section … have so far been agreed".—[Official Report, 24 November 1980; Vol. 994, c. 50.] The answer also referred to steel closures, border areas in Northern Ireland and so on. Hon. Ministers will be able to read the full reply in Hansard.

What is the sense in creating a non-quota fund and delaying its use by dividing it into sectoral quotas, which in the end are not all that different from national quotas? If we are to have economic convergence and assistance on a regional Community policy basis, we must face the fact that there will be greater control of these expenditures through the Commission. If we accept that as something that we should move towards, surely it is possible to allow the Commission more discretion in the expenditure of what, after all, is a relatively small sum of money. I should like some comment on this matter, because I have asked the question several times in previous debates.

What is the position with regard to a levy on energy imports, about which one reads from time to time? I am not necessarily expressing a view on the pros and cons of the matter, but it will undoubtedly have an effect on the budget. It could be argued that it would have an advantageous effect on the British contribution as well. I should like to know about the situation in that regard.

The right hon. Member for Stepney and Poplar criticised the timing of the debate following the point of order raised by the hon. Member for Newham, South (Mr. Spearing). I associate myself with those remarks. I was surprised that the Government Front Bench spokesman did not seek to apologise for that fact. Indeed, the Minister did not even refer to it. It is bad that European matters, which are central and controversial and should be thrashed out thoroughly, should be put off to the end of the week, the end of the day or whatever. I very much hope that the Financial Secretary will use his good offices to ensure that that does not occur in the future.

Several Hon. Members rose—

Mr. Deputy Speader

Before I call the next hon. Member, I should like to say that earlier in the preceedings the hon. Member for West Lothian (Mr. Dalyell) raised a point of order relating to disasters. I misheard what the hon. Gentleman said. I thought that he was criticising the Financial Secretary for the answer which he had given. I have discovered from the Official Report that the hon. Member was asking whether it was in order to discuss the disaster fund. Apparently, that matter comes within the scope of the debate. I said that it was not a point of order for the Chair. I was completely wrong, and I apologise to the hon. Gentleman. This matter does come within the scope of the Community budget, and the hon. Gentleman is at liberty to discuss it.

Mr. Dalyell

Thank you, Mr. Deputy Speaker.

11.7 am

Mr. Jim Spicer (Dorset, West)

Unlike my hon. Friend the Member for Scarborough (Mr. Shaw), I am no expert on budget matters. Therefore, I shall confine my remarks to the broad scope of the budget, in particular one aspect of it.

Months of work go into the preparation of the budget, not only by the Council and the Commission but by the European Parliament. At this point, I should like to pay tribute to the expertise and dedication of all those, past and present, not only Conservative but Opposition Members as well, who have played their part. Mention has already been made of the work done by Lord Bruce. My hon. Friend the Member for Scarborough has also had a major role over the last four or five years in bringing sense into the way in which the budgets are presented.

The right hon. Member for Stepney and Poplar (Mr. Shore) said that this was not a balanced or sensible budget. Of course, no one can believe that it is balanced or sensible when 70 per cent. of the total is spent on agriculture. We all know that a major risk is involved. I believe that we are running to within £300 million of the top ceiling figure, which means that we could well move into bankruptcy.

We have heard about the guarantee sector with regard to agriculture. Can we really look forward to 1981 and discuss that with any degree of certainty? Rather than remaining in surplus, with an ever-increasing cost on the guarantee sector, could not the situation go the other way so that we find world shortages dramatically affecting the budget in 1981, as they did in 1973 and 1974? We all know that the current world situation is similar to 1973 and 1974. The USSR has had a disastrous harvest, and there has been a bad harvest in the Mid-West of the United States. A situation could arise where suddenly and dramatically the expense of the agriculture guarantee sector could drop enormously. We have already seen that happen to sugar. Not many months ago, the world price of sugar stood at £100 a tonne. At present, the world price of sugar stands at £366 a tonne and the European price of sugar stands at £250 per tonne. We already export sugar at a profit. If there were a world shortage of wheat, the same sort of price increases might occur suddenly and dramatically in that area.

Mr. Spearing

Does not the hon. Gentleman agree that if such an unfortunate shortage of staple foodstuffs, particularly grain, arose it could be argued that the situation had been aggravated by the CAP? It could be said that farmers who used to produce foodstuffs relatively cheaply had been driven out of business by the CAP and by the EEC's dumping of foodstuffs.

Mr. Spicer

From time to time, the hon. Gentleman gets his facts wrong. There has never been any dumping of wheat on a major scale. Although the hon. Gentleman does not know very much about agriculture, he should know that world agriculture moves from surplus and back into shortage year by year. No one can predict what will happen in a given year. It would be sad to see the soaring of price increases that we saw in 1973–74. We are debating the effect of shortages on next year's EEC budget. We are not holding a broad debate on agriculture.

My hon. Friend the Financial Secretary believes, as I do, that there is scope for major retrenchment in two areas. I refer to small cost areas within the budget. It is my hon. Friend's responsibility and that of his right hon. and hon. Friends closely to inspect the Council's budget. Under the gentleman's agreement, others do not have the right to do that. I am sure that my hon. Friend will pursue all possible economies within the Council.

The cost of the European Parliament should be a matter of grave concern to all right hon. and hon. Members. In the past three years that cost has doubled. It has increased from about £60 million to about £125 million.

Sir Ronald Bell

£125.5 million.

Mr. Spicer

Give or take £1 million, it has increased to about £125 million. There are three main reasons for that increase. First, the increase can be attributed to the change to a directly elected Parliament. As a result of that change, the size of the European Parliament has doubled. It might be said that the increase from 196 Members to 410 Members is justified. Indeed, I point out to the right hon. Member for Stepney and Poplar that it was a Labour Prime Minister who agreed to that doubling in the number of Members. It was a grave mistake. I wish that Conservative Members had taken more active steps to keep down the numbers. One can always increase the size of a Parliament, but it is difficult to cut the size once one has been saddled with it. Nothing can be done about it.

Mr. Leighton

We have about 635 hon. Members and it costs about £17 million to run our Parliament. The European Parliament has about 400 members and costs the hideous figure of £120 million. Will the hon. Gentleman comment on that?

Mr. Spicer

I should be delighted to do so. The sum of £17 million does not even begin to cover the cost of running this Parliament. We all know that. Next year, the cost of running the European Parliament will increase as a result of the accession of Greece to the European Community. No doubt many of my hon. friends will make much of the increase in staff. No one would wish to go back on our commitment as regards the membership of Greece to the European Community. We promised that once Greece returned to democracy it could join the European Community and would be made welcome. It would be politically disastrous if we were to go back on the promise made to Spain, Portugal and Greece.

Mr. Marlow rose—

Sir Ronald Bell rose—

Mr. Spicer

My hon. and learned Friend the Member for Beaconsfield (Sir R. Bell) is well known as a man who wishes to keep promises that have been made. We all agreed that Greece should accede. We now face the cost of the increased staff of translators, interpreters and other ancillary persons. That represents a major increase in the cost of the European Parliament.

Mr. Dykes rose—

Mr. Spicer

I turn to the horrifying subject of the seat of the European Parliament. I should like to echo the words of my hon. Friend the Member for Scarborough. It is disgraceful that we should be in such a situation. It adds millions of pounds to the cost of running the European Parliament. Staff leave Luxembourg and trundle down to Strasbourg. Everybody arrives in Strasbourg. The following month, everybody goes to Luxembourg. Then they go off to Brussels for committee meetings. It is an intolerable situation. Some people enjoy the present situation, because as long as staff and Members of the European Parliament are trundling about they are not doing any real work. I suspect that many Governments would secretly like it to continue. However until the European Parliament sits in one place it will never be able to work effectively.

It is not for the European Parliament to decide about the change. First and foremost, that decision rests with the Council of Ministers. Given the need to economise not only at home but also in Europe, I should have thought that this matter would have been uppermost in the mind of my hon. Friend the Financial Secretary. In the meetings of the Heads of Government, I hope that progress will be made on this point, because it is the Heads of Government who must take the final decision.

If a decision is not reached, the European Parliament will refuse next year to sit in more than one place—rightly so.

Mr. Russell Johnston

The hon. Member for Scarborough (Mr. Shaw) dismissed Strasbourg as a possibility because it was inconvenient. When Spain, Portugal and Greece accede to the EEC, Strasbourg will be more central. In addition, a building already exists. If we go to Brussels, we shall have to spend a considerable amount on creating new facilities.

Mr. Spicer

The hon. Gentleman could easily lead me into a discussion on which is the right seat. However, this is neither the time nor the place for such a debate. There are three lobbies in operation: one for Brussels, one for Strasbourg and one for Luxembourg.

Given that we shall move towards a decision on the seat of the European Parliament, I should welcome an end to the gentlemen's agreement. It makes it impossible for the European Parliament to consider the Council's expenditure and impossible for the Council to look at the European Parliament's expenditure. Let us decide on the seat and then settle down to a close scrutiny of the expenditure of both the Council and the European Parliament. There is scope for considerable economy in both those areas, and both should show the desire to economise.

Mr. Dalyell

In The Guardian of 7 November, there is a report on the willingness of Members of the European Parliament to cut spending. It states: Their willingness to cut wasteful spending did not extend to their own pockets. A move to reduce their own secretarial and administrative expenses if they failed to attend at least half of their meetings was rejected. I ask this question in an interrogatory rather than a rhetorical spirit. Is there any comment that the hon. Gentleman, who is a Member of the European Parliament, would care to make about that?

Mr. Spicer

This is an area that should be looked at. The hon. Member will know, from his service in the European Parliament, that some people work very hard and that others do no work at all. It would be right for us to move towards a position in which, if people are Members of a Parliament — particularly the European Parliament—they should have to justify themselves. We might well wish to extend that sort of scrutiny to this House. There might be many people who would find it a little embarrassing if they had to give some account of how much work they put in here. I resent the fact that the European Parliament is always the target. There are occasions when people in glass houses should not throw stones. I say that in a spirit of great friendship, particularly to the many people in this House who work extremely hard.

Mention has already been made of the appalling situation in Italy following the earthquake. I agree wholeheartedly that help given now will be of much more value than help offered later. One recalls the experience in 1976, when the help was dribbled out over a period of months and years, so that it was lost sight of and was not effective. I hope that the disaster fund set up at that time is now being raided to a massive extent, because every single penny within it should be on its way to give practical help to the unhappy people in a region of Italy that is extremely poor even in normal times and where the suffering is therefore so much greater.

I strongly support the motion and hope that the House will support it.

11.22 am

Mr. Julius Silverman (Birmingham, Erdington)

I intend to confine my remarks almost entirely to documents 11203/79 and 5861/80, which relate to financial control in the Community, the report of the Court of Auditors for 1978 and the discharge in respect of the 1978 budget.

When our Scrutiny Committee examined the report, we had the utmost concern at the disclosures made in it as to the methods of accountancy, as to the control which was not always exercised, and as to the laxity in regard to revenue and expenditure shown in the report—so much so that the Committee decided to make a short visit to Brussels and Luxembourg. There we had a long meeting with the financial director of the Commission. We also spent half a day with the controller of budgets. We had a working lunch with Commissioner Tugendhat. We also spent a day with the Court of Auditors. I cannot say that our apprehensions were seriously allayed by what we saw and heard in Brussels and Luxembourg.

We also, as part of our investigation, had an interview with the intervention section of our own Ministry of Agriculture, Fisheries and Food. The gentlemen in that section described their methods of procedure concerning intervention in this country. The members of the Committee were impressed with the meticulous way in which they appeared to be conducting their control over agricultural and financial expenditure. Whether the same control applies in other countries is another matter.

Mr. Dykes

Does the hon. Gentleman agree that to leave that last sentence with an unfinished sentiment, so to speak, gives a totally misleading impression? Many of the other member States have very rigorous and strict procedures. Some may be less rigorous than others. But to give the impression that we are always stricter than other countries is totally wrong.

Mr. Silverman

I am not suggesting that all the other members of the Community are more lax and less meticulous than we are. I shall come to that point later and elaborate upon it.

The report to which I have referred mentions one point which has already been discussed by many hon. Members this morning—the obligatory nature of the agricultural fund, especially the guarantee fund. It has hitherto accounted for about 70 per cent. of the total expenditure, as hon. Members have already mentioned today. The agricultural fund is rather like an elephant in bed. While it is there, there is not much room for anybody else or anything else.

The Court of Auditors concentrates on the point that, because of the obilgatory nature of the expenditure, financial control is impossible. One cannot control finance when one has to meet the expenditure come what may.

Sir Ronald Bell

The hon. Gentleman will remember that when we saw members of the Court of Auditors and I asked them how much their operations cost, they were quite unable to tell me. That did not look like very good financial control.

Mr. Silverman

They are, of course, working in the tradition of the other sections of the Community.

Mrs. Kellett-Bowman

Did the hon. Gentleman have any dealings with the control committee which has now been established and which is going into every aspect of Community expenditure in considerable detail? It is an innovation and owes a great deal to my hon Friend the Member for Scarborough (Mr. Shaw), but it did not come into operation until the directly elected Parliament met. It is only now beginning to go through the Community institutions and their expenditure item by item, and no discharge can be given to any item of expenditure until it has been passed by the control committee.

If the hon. Gentleman has an opportunity to take his Committee to Brussels in the near future, I suggest that he should contact in particular the control committee, which is doing exactly the sort of thing that the Public Accounts Committee does in this House and of which more and more notice is being taken by all those who are dealing with Community expenditure at the present time.

Mr. Silverman

The hon. Lady is probably referring to the control committee of the European Parliament. Our contact was with the Commission and the Court of Auditors. It may well be that we shall seek to do what we failed to do last time and pay another visit to Brussels and Luxembourg so that we may see some of these other gentlemen as well.

The Court of Auditors is a body of quite distinguished people with a great deal of accountancy experience. It was decided upon in 1975 and the appointments were made in 1977. The first report was in relation to the 1980 budget. I repeat that as a matter of general principle the Court of Auditors takes the view that one cannot control obligatory expenditure. This is part of the difficulty. Obligatory expenditure embraces at least 70 per cent. of the funds of the Community. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) has said that the regional and social funds are non-obligatory, but otherwise there has never been any definition of what is non-obligatory, so that it has sometimes been rather difficult to find out which is the one and which is the other. One thing is definite. Agricultural expenditure is obligatory, and it cannot be controlled — at least, not in the sense of control in this House — because the outcome is not known. What is said in the budget is one thing, but the turnout is unknown. However, come what may, the Community must pay that.

Another point that concerned the Scrutiny Committee was the question of frauds and irregularities, especially in the agricultural sector. The figures given in the report show that in 1976 the extent of frauds and irregularities reported totalled 6,135,000 European units of account and that 2,427,000 units were recovered. What happened to the remaining 3 million units is not known. In 1977, the extent of frauds and irregularities reported amounted to 9,534,000 European units of account, and 2,197,000 units were recovered. In 1978, the extent of frauds and irregularities totalled 3 million units of account, and the amount recovered was 1,040,000 units. In relation to the total budget, that does not appear to be a very great item, and if the amount remained at that level it would perhaps be acceptable. But one minor problem is that there has never been any agreement between the member States on what constitutes a fraud or an irregularity.

However, it is interesting that, in terms of value, 88 per cent. of the cases reported are from two member States only. One is this country and the other is West Germany, and this country is not a great recipient in agriculture. What is the significance of that? Is it, perhaps, that other countries are better at discovering or discouraging frauds—Italy or France, for instance? The Committee was not convinced of that.

The point that worries us is whether this is a realistic account of the amount of fraud and irregularity that is taking place or whether it is the tip of the iceberg and there is a greater amount of undisclosed fraud which has never been discovered or detected. I do not know the answer, but it is a question that should be investigated and a reply should be given.

There are other disparities in the Community. For instance, different systems of accountancy are always an obstacle. There has never been any attempt to establish a generally accepted method of accountancy. No doubt when the Financial Secretary replies he will say what the Government think and what proposals they will put forward.

It is said that Customs examinations are part of "own resources". I do not think it is generally realised that when people pass through Customs and are charged duty on goods, the revenue therefrom does not come to this country; it goes to the Community.

Mr. Douglas Jay (Battersea, North)

And the levy.

Mr. Silverman

Yes, and the levy. It goes to the Community, except, of course, for the 10 per cent. cost of collection. The practices vary in each member country, as does the amount that is examined. According to the report, sometimes it is 100 per cent. and sometimes it is nil. We must bear in mind that some countries—perhaps those which are a little less conscious of their national obligations—may not bother to collect duties from their citizens, knowing that the revenue goes to the Community.

Mr. Dykes

Which countries?

Mr. Silverman

I do not know. The difficulty is that the court does not specify countries. It did not specify this country and Germany. We learnt that. The court simply points out the disparities between different countries. It does so for the good reason that it does not want to appear to attack any country. I simply point out its observations.

There is a good deal of laxity in accountancy generally, for instance, with regard to development. Most hon. Members will agree with the principle of assistance for the Third world and developing countries. The court comments on five factors which seem to it to be determining the success or failure of a project:

1. "(i) bad preliminary studies, which may cause projects to stagnate for years;
2. (ii) provision of over-sophisticated equipment and luxury expenditure resulting in inefficiency and heavy maintenance costs;
3. (iii) failure of the local authorities to observe the obligations of the agreement they sign, leading to absence or inadequacy of maintenance of projects and delay in making services (water, electricity, etc.) available;
4. (iv) the imposition on farmers of low prices to the benefit of the towns, thus discouraging them from diversifying their production;
5. (v) the lack of knowledge on the part of some staff delegated to give technical assistance, of what had happened on previous projects".

It gives a few examples: Lack of success of a tea-growing project was due to climatic conditions, poor quality soil and failure properly to train the local population. Serious problems in a tea factory were due to incomplete specifications, poor planning in choice of machinery and an incomplete preliminary study. In one country a 75 km section of road was financed from the 1st EDF for an amount of EUA 1,397,000 and was finally accepted in 1966. Owing to lack of maintenance the road had to be completely rebuilt in 1978 from credits from the International Bank for Reconstruction and Development". Eight examples are quoted in the report, all of which show lack of preparation, lack of financial control and lack of adequate supervision. Those matters must be attended to.

The report is substantial and detailed, and I shall not weary the House with all the matters with which it deals. Therefore, I ask the Financial Secretary whether the Government have any proposals to put forward to alter the basis of the financial control of the Community, the method of accountancy and the method of financial supervision.

11.39 am

Mr. Tony Marlow (Northampton, North)

I should like to widen the scope of our discussions beyond solely the budget to the total cost of our membership of the Community. After all, the budget is a symptom, a small part of the problem. Our total costs of membership of the Community are much greater, as the right hon. Member for Stepney and Poplar (Mr. Shore) has already said. To deal alone with the budget would be rather like a quack doctor who, when confronted with smallpox, would cover it with calomine lotion rather than get at the real guts of the problem.

Earlier this week my right hon. and learned Friend the Chancellor of the Exchequer was seeking to raise the rather large sum of £2,000 million. We all daydream from time to time. I am sure that my right hon. and learned Friend has often mused in the privacy of his bathtub on how pleasant it would be if somehow he could miraculously reach out with his right honourable arm and pluck £2,000 million from the ether. I have wonderful news for him. It can be done. It can be done without pain and without difficulty. It does not require even sleight of hand, let alone a miracle. All that is needed—he hardly even has to reach out of his bathtub—is to put into effect three simple and easy decisions.

The first decision is a unilateral withdrawal from the common agricultural policy. The second is to restore to the United Kingdom control over certain aspects of our trading policies. The third, on the budget itself, is to reduce our net payment to our share of the administrative arrangements within the Community. After all, this is the average of what every other country is paying into the budget.

I dare say that punk Europeans such as my hon. Friend the Member for Harrow, East (Mr. Dykes) would say that what I am suggesting is that we should leave the EEC. Nothing could be further from the truth. My hon. Friend no doubt has dark visions of the United Kingdom being dragged away and dumped, friendless and without markets, in mid-Atlantic. Anyone who would subscribe to that point of view from what I am saying is subscribing to the simplistic notion that we are either fully in the Common Market or fully outside it and that there is no arrangement between the two whereby we can enjoy the benefits of membership of a European Community, sharing interests in common with our friends across the Channel, while at the same time they would gain great benefits from association with the United Kingdom, also recognising the very great differences that we have here, in terms of our system of agriculture, our means of feeding ourselves, our industry, our commerce, the strength of the pound and our great commercial differences with the rest of Continental Europe.

In seeking to raise £2,000 million, how can we help? Here goes. First, as regards the CAP, according to an answer to my hon. Friend the Member for Aldridge Brownhills (Mr. Shepherd) referred to previously by the right hon. Member for Stepney and Poplar, the cost to the British housewife of being forced to buy European food at European prices, above world market prices but including the cost of our agricultural support, is about £3,000 million a year. That figure has been taken into calculation by the Institute of Fiscal Studies, which has worked out that the cost to us of buying food and feedstuffs from Continental Europe over and above the world market price if we bought them from outside Europe—and this is allowing for the payment—

Mr. Garel-Jones

Will my hon. Friend give way?

Mr. Marlow

No, I shall not give way. Many hon. Members wish to speak.

This is allowing for the payment of our own agricultural support. In other words, the additional cost of Community membership, even supporting our own farmers and our own farm policy, is £1,500 million.

Of course, people would say that if we left the CAP supplies would not be available at the same world market prices. But why not? Why should that change? Should we eat any more? Would the Community produce any less? Is not the price of an agricultural commodity, or any commodity, determined by supplies and demand at the margin? Why should that change? The only two changes that would come about are that the British housewife would be able to get her foodstuffs at a much lower price and that the social support required for European agriculture would be paid for by the countries in which that social support was needed rather than by the British housewife and the British taxpayer.

We might even do better than that, because we would be able to go back to our friends in the rest of the world, in the Commonwealth, in New Zealand and in the Commonwealth sugar agreement. We would be able to offer them long-term agreements at indexed prices. We would be able to have the same security of supply. We could have better security of supply than we have now, at prices even lower than current world market prices. But I shall be modest. I shall claim £1,500 million only.

Secondly, let us look at changes in trade policy. I think that virtually everyone in this Chamber is basically in favour of free trade, because one gets cheaper goods, one gets choice of goods and one gets the ability to re-equip one's industry with the best machinery available on the world market at the cheapest prices. But the point must come when we have such a massive deficit in trade in manufactures with a particular group of countries, as we have now with the EEC—where our trade deficit in manufactures has soared from £1,000 million to £3,000 million in a mere two years—that we must look at our trading relationship with that group of countries.

Mr. Dykes

Is not my hon. Friend aware that the average Commonwealth tariff is higher than the average Community tariff for other goods coming in?

Mr. Marlow

That is one of the points that obviously we have to look at. The Commonwealth tariffs were not there before. We should look at the whole of our trading relationship with the Community and the rest of the world. It is £2,000 million. If only half of those goods was produced within the United Kingdom — import substitution — and if 40 per cent. of the cost of that production were labour, and if one calculates labour rates as being one and a half times the cost of unemployment benefit, not only would we save or produce some more jobs, which we sadly need now, but we would save another £250 million.

On the budget itself, I feel generous. We should pay our share of the administration and our share of the essential costs, such as the connoisseur's ransom paid monthly to the illustrious Commissioner Jenkins. Let us say that this will cost us £150 million a year. The present budget contribution, the average this year and next year—that is, if we actually get the rebates that we have been promised—is £400 million a year. But, of course, we have to add to that the fact that by September we had already paid £700 million, and by the end of this year we shall have paid more, and we have to wait to get the money back. If we put on the interest charges that could be earned on that money were it put away or invested or not borrowed from the public, that is probably another £200 million a year: £400 million for the budget, and £200 million for interest, less £100 million for administrative costs, coming to £500 million a year. So let us have a look at the matter: £1,500 million, £250 million and, hey presto, £500 million — £2,250 million, more than the Chancellor was trying to raise.

There are those who say that such reforms would destroy the Community and, anyhow, they would not be granted—"Forget it. You haven't got a cat in hell's chance." With respect, that is the argument of a busy man with a full "in" tray. He has too much to do and does not want to think of anything radical that might rock the boat. It is the top of the head, status quo argument. But if we think it through—

Mr. Dykes

My hon. Friend really wants to leave the EEC.

Mr. Marlow

Not at all. I think that if we think it through the answer would be quite different.

All right, if the Community is damaging to our interests, does the risk of its destruction, as it is at present, really matter so much? Perhaps that is a bit of a flippant point, but if all the items that I have required—

Sir Anthony Meyer

Will my hon. Friend give way?

Mr. Marlow

No, I shall not be giving way. I must get on. I shall not give way any more.

Sir Anthony Meyer rose—

Mr. Marlow

I am not giving way.

Sir Anthony Meyer rose—

Mr. Deputy Speaker

Order.

Mr. Marlow

I am not giving way.

If, having gained the requirements that I have set out, we are still of benefit to the Community by remaining a member, why should there be any risk that the Community would want to change? Why would it want to break up? There would still be mutual benefit. We would still remain, even though to a lesser extent, a dumping ground for a certain amount of high-priced European agricultural supplies. We would still remain a preferential market for the EEC's industries. We would still contribute to the administrative budget. And when crisis next stalks the Middle East we shall still have oil in the North Sea, and the Europeans would covet our association with them so that they could have security of supply. What politically aware European leader could afford to turn his back on that?

When we contemplate changes in policy of this magnitude — and the country and the Government are aware that we are contemplating possible changes in policy — the first requirement is for an adequacy of information. I must say that I have noticed a strange reluctance on the part of the Government to set out a proper balance sheet of our membership of the Community. It seems instead that we have embarked on a voyage through fairyland with the Brothers Grimm of the Government propaganda machine — my right hon., dignified and delightful Friend the Lord Privy Seal and my right hon. Friend the punk CAP fan, the Minister of Agriculture, Fisheries and Food—who have launched a campaign which, although it would be well merited were its intention to sell packaged soap, is hardly appropriate when trying to drum up support for a tired and increasingly threadbare European Economic Community.

It would be hateful to think that the ghost of Dr. Goebbels is alive and well and stalking to and fro in the darkness of night between the cellars of the Foreign Office and the Ministry of Agriculture. Let us have some facts. How much does the CAP cost the British housewife over and above our budget contribution? Is it £3,000 million a year? Is it £1,500 million a year? How much does it cost? Is it the £2.10 a week for the average family that can be calculated from the report of the Institute of Fiscal Studies? How much is it costing? Why do we have such maidenly reluctance and virginal timidity on the part of my right hon. Friend the Minister of Agriculture to let us know? I can hardly believe that he does not know the facts of CAP life after his eloquent seminar on the subject only last week.

What of the other main boast that Europe is our most important trading partner? Important in what way? Is it because, as I have said before, our deficit in trade was £1,000 million three years ago, £2,000 million two years ago and £3,000 million last year, increasing in the first three months of this year at an annual rate of £500 million and having declined since only as a result of the recession?

Is our trade with Europe so important because it is so disastrous? The figures are inevitably draped in a magnificent disguise, hidden beneath a veil of oil exports. What right, basis or significance is there for the inclusion of oil? Like gold, it is almost a currency. It is what we use to pay for our imports of manufactures and food. It is a commodity which is saleable almost anywhere at any time, according to the market price. I plead with the Government not to try in future to fox and fudge—one might even say con—the public on this issue. Let us have the figures and let us have them straight.

Uniquely, we are a country with a vital industry and a strong currency. The strength of the currency is based not on the strength of our industry but on the mineral wealth oozing from the North Sea. No other country is in this position. No other country has been in this position. No other country, given such a position, would have surrendered its trading policy lock, stock and barrel to an external institution, the majority of members of which have completely different loyalties and objectives.

I wonder what we would do under the existing regime if there were a sudden surge of oil prices. How could we offer temporary protection to any of our strategic industries which would be likely to be devastated in such circumstances? There is nothing that we could do about it. We do not have the powers.

I have asked for facts. I have asked for responsible discussion with regard to changes. I hope, and I am sure, that we will eventually get them. We have different problems. We have different agriculture. We have different systems of feeding ourselves. We have a strong currency. We have different commercial and industrial problems, which will not go away and will not change. These demands will be with us until we get a change in our relationship and an improvement in our relationship, not just for us but for the rest of Europe.

11.56 am

Mr. Nigel Spearing (Newham, South)

The remarks of the hon. Member for Northampton, North (Mr. Marlow) increasingly reflect a great deal of thinking in the Conservative Party, both inside the House and outside it. Unless the Government take note of that, they will be in considerable trouble.

At the start of the debate I drew attention to the complex nature of the motion. After some remarks about the budget, I shall follow my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman) on the question of the annual report of the Court of Auditors and document 5861, which recommends a discharge for the Commission in respect of the financial year 1978.

The hon. Member for Dorset, West (Mr. Spicer), who kindly gave way to me, said that there was not large-scale dumping by the EEC on the world market. I had said that if the world faced some food shortages in future—and that is not out of the question, particularly in respect of United States agriculture—the inability of the world to respond to the need would be the responsibility, in part, of the EEC, which has driven out of production farmers in other parts of the world.

The hon. Member for Dorset, West accused me of not knowing much about agriculture or, by implication, about the CAP and its dumping activities. The budget for 1980 showed, according to a reply in Hansard on 9 November last year, that the export restitutions for grain amounted to £924 million and those for milk products totalled £1,300 million.

If the hon. Member for Dorset, West goes to Australia and New Zealand, the dairy farmers of both nations, who could produce much more valuable protein, will assure him that they are up against dumping of EEC products in this country. We must not forget that those dairy products include ingested grain and dairy powder which has been included by law in their food. I hope that the hon. Gentleman will either modify his remarks or cap mine if he can.

Mr. Jim Spicer

I was trying to say, probably not as well I should have done, that if there is a world surplus, world prices inevitably go down. There is no question of dumping grain on the world market if it is being sold at the prevailing world price. The world price for grain has been low. That has nothing to do with the EEC; there have been over-production in the world and surpluses for the past five years. What worries me is that we are to go back the other way, but there is no reason why the Community should be ashamed of putting its surplus on the world market.

Mr. Spearing

The hon. Gentleman condemns himself out of his own mouth. The same answer on 9 November 1979 made clear that 10 million tonnes of EEC wheat were dumped on the world market at the expense I have mentioned. If the hon. Gentleman claims that this does not depress the world price beyond what it would otherwise be, particularly for nations that depend on marginal price, he can do so. I defy him to make that assertion.

Mr. Body

The hon. Gentleman is seriously understating the position. The Community is currently proposing to increase export subsidies on cereals by no less than 43 per cent. over last year. That is the measure of the increased dumping on the world market. It will depress the world market seriously and put even more Australian and other farmers out of business.

Mr. Spearing

I am grateful to the hon. Gentleman. I do not think that the hon. Member for Dorset, West would claim that his hon. Friend knew nothing of agriculture. The exchanges have shown absolutely not only that the EEC dumps food and drives farmers out of business in the rest of the world but that the position is getting worse. The figures provided by the hon. Member for Holland with Boston (Mr. Body) illustrate that.

That brings me to the basic problem of the budget. It is an agricultural spiral that no one can stop. It will hit the VAT ceiling. The income for the Community, as we know, comes from a percentage of VAT levies and from the common external tariff. No one has referred to what will happen when the expenditure hits that ceiling. There has been talk informally that, even if the Heads of Government stick to the 1 per cent. limit, other means of revenue will be found. I hope that the Financial Secretary, in his reply, will assure us that there will be no question of finding additional revenue from, say, a tax on oil. That might be attractive to some of our colleagues in the EEC. It might appear superficially attractive to the United Kingdom for the next 10 or 15 years. If the price of fuel in the EEC went up unilaterally, we could be said to be gaining. No doubt the headlines in the press, aided and abetted by the Foreign Office press department, would say what a good thing it was for Britain if this was so.

I hope that it will be not just a question of our keeping the 1 per cent. limit but that it is also the policy of the Government not to increase significantly revenues to the EEC from any source at all.

Mr. Matthew Parris (Derbyshire, West)

Does the hon. Gentleman agree that if agricultural spending hits the 1 per cent. ceiling, and as agricultural spending redistributes resources away from countries like Britain which are in agricultural deficit, there will be a good argument for trying to claw back some of that deficit through non-obligatory spending of a kind that would raise the ceiling above 1 per cent.? It would unfortunately provide a good argument within this country for going past the 1 per cent.

Mr. Spearing

The hon. Gentleman brings me to my next point — the clawback of the payments that we might, and I stress "might", be getting. One does not necessarily encourage a thoroughly bad and evil system because one may gain, or may be supposed to gain, some marginal benefit if it is enlarged. I do not go along with the hon. Gentleman's logic. The sitting of the Select Committee on European Legislation &c. at which the Financial Secretary appeared was held on 4 November. Its proceedings were ordered to be printed by the House on 5 November. They are not yet properly published. There are copies of the document in the Vote Office. There has been no reference to it in the debate. It is, however, an important House of Commons document. In the exchanges, the Financial Secretary was asked whether the projects to be paid for by the EEC as part of the repayment arrangements were known. He replied: The details shall be known fairly soon. In fact, I do not think I have a great deal to add to what the Lord Privy Seal said to the House on the 27th October, but what I can say is that we shall be hoping to be submitting our programmes formally to the Commission during the course of this week. I must emphasise that these projects will be the lion's share of the repayment that we hope to receive from the EEC. The nature of these projects will not be in the control of this House. It is clear from article 1 of regulation No. 7943/80, already discussed by the House, that The measures shall be implemented by means of special financial assistance to the realisation of pluriannual programmes submitted for approval by the United Kingdom to the Commission. The Financial Secretary said that they would be submitted fairly soon. He would not give any assurance in the Committee that he would publish the list of applications. He said, in a rather vague way, that we would know the result of those applications. What happens, however, if the Commission turns down some of the applications? Does that mean that the House will not know what is being asked for and will not know the decision of the Commission? According to the regulation, which I do not think has been amended, it is not even a decision of the Council. It is a decision of the Commission.

This House is jealous of its Supply procedures. It is jealous of the expenditure of public money. The Government are making a great issue of the spending of public money. They say that too much is being spent. Here we have a situation where projects involving our money, if I may use the Prime Minister's phrase, are to be sanctioned in this country, not only projects over which the House has no control but, apparently, projects whose nature the House is not yet aware of. That is the position into which we have got ourselves in the Prime Minister's so-called triumph in getting certain repayments. The matter goes further than that. Of these projects, the Government have to pay 30 per cent.

Another article says that infrastructure costs can be asked for in addition to the actual projects. It is not just the cost of the projects themselves. When will we know the results of the application? I should also like to know whether there has been any application for projects outside the development areas. The regulation makes clear that there can be projects outside the development areas. Paragraph 2 of article 3 says: However in exceptional cases or where there is a special Community interest, special infrastructure programmes may be submitted for areas outside regions referred to in paragraph 1. One of the interesting infrastructure projects in the United Kingdom that we have heard of recently is a railway tunnel under London to link Euston with the Southern Region. This might be a useful project with considerable merit. It would certainly link parts of the United Kingdom with the other parts of the Community. It would be rather like Napoleon's roads or Hitler's autobahns—part of the communication infrastructure of a new State, which the EEC wishes to become.

The British Rail booklet on the subject shows an advanced passenger train standing in East Croydon station. I have no doubt that the project would be of great benefit to people in and around East Croydon and those who travel by rail through the rest of Britain. But we read in our newspapers that through lack of public expenditure trains on Southern Region are to be cut and that even Blackfriars and stations on the line to the Sevenoaks area will close after 7.30 pm.

We do not know whether this sort of project is included in the applications. If it is likely to go ahead, with public money received from levies coming into this country and spent by virtue of what the Commission says, are we in a position to carry out worthy capital projects of British Rail in this country when at the same time the Government are reducing public expenditure for commuter and other existing services? That would appear to be at least a possibility. I hope that the Financial Secretary will clear up these matters.

My last point on the repayments concerns the budget communiqué on 30 May this year. After going through the ways in which we can get these moneys back, paragraph 9 says: With this objective in mind all member states undertake to do their best to ensure that Community decisions are taken expeditiously and in particular that decisions on agricultural price fixing are taken in time for the next marketing seaon. In other words, that is giving away any veto on increased prices of agricultural products, which are not in this budget. It is extraordinary that two-thirds of the budget is to do with agricultural prices. The Financial Secretary told us in the Select Committee on 4 November, in answer to question 4, that no account is taken of current prices.

However, the matter amounts to more than that. The question of fisheries is under discussion. The Minister of State, Ministry of Agriculture, Fisheries and Food told us firmly in a debate this week that he would defend to the end the proper claims of British fisheries. Does that mean that if we stand out on that matter the programmes will be delayed? It looks very much as though that may be so. Nevertheless, I hope that the Government will stick out for the fishermen.

I turn to the question of the audit report, which my hon. Friend the Member for Erdington has already mentioned. I mentioned it on 29 March 1979 and in previous debates. I want to read part of the report of 1977 from the Court of Auditors. Paragraph 2.2 in respect of the guarantee section of the agricultural fund said: It is even more important to note, however, that while it is recognised that the rules applying to the Guarantee Section differ from the general rules laid down in the Financial Regulation for the execution of the budget, the control of the final expenditure has been carried out so late that, because of the delays in clearing the accounts, it has tended to lose reality or become arbitrary. The worst effect of this persistent delay is to remove from the discharge decision taken by the political authority most of its significance. Nobody seemed to pick that up at the time, although we are now being asked to discharge the 1978 Court of Auditors' report.

In its conclusion, at paragraph 11.21, the Court says:

1. "(a) the general accounts of the institutions, as operated at present, notably those of the Commission, do not permit the ascertainment of the institution's situation in respect of assets and liabilities, as provided for in Article 76 of the implementing measures of the Financial Regulation;
2. (b) the balance sheet of assets and liabilities of the Communities, as required by Article-76 of the Financial Regulation, has been drawn up in an incomplete manner and still falls short of meeting the requirements of proper consolidation;
3. (c) the accounting for exchange differences shows serious shortcomings which lead to distortions in financial reporting and have led in 1978 to a material mis-statement in calculating the result of the conversion from u.a. to EUA at 1 January 1978;
4. (d) the overall effectiveness of internal controls is a matter of concern.

Furthermore, the Court considers that the published financial statements of the Communities do not enable the reader to gain a clear insight into the Communities' financial affairs since they lack an explanation of the accounting principles applied and other explanatory notes needed for a full understanding of the figures presented. If only a quarter of those remarks were included on any audit certificate of any company in this country, there would be a great deal of activity. If it were a large company, there would be questions in the House. Action would have to be taken by the officer responsible in the Department of Trade. But all that is in respect of the Community's accounts, and in particular those relating to the guarantee funds to which my hon. Friend the Member for Erdington has already referred.

What do we do about the matter? The Community's mechanism is that there is a certificate of discharge, which we are now ostensibly debating. In the motion—this phrase was not presaged in the remarks of the Leader of the House eight days ago—we are asked to approve Document No. 5861/80, Council recommendation to the European Parliament in respect of the budget for 1978.

If the Financial Secretary approves that document at the next Council meeting, what will be do about all those comments? What action is the Council taking to ensure that such reports do not appear year after year? I have read the 1977 comments and the 1978 comments. What is to prevent the 1980, 1981 and 1982 audit reports saying the same thing?

There are comments in the discharge certificate. All that it says in chapter 11, headed "The General Accounts", is: The Council notes that the Commission and the Court of Auditors do not agree on the scope of the balance sheet of assets and liabilities of the Communities as provided for in Article 76. It requests the Commission to study this problem and to make proposals in the context of the imminent review of the Financial Regulation, so as to preclude any difference of interpretation. All it says about the effectiveness of the Commission's internal controls is: The Council notes that, in the Court of Auditors' view, the overall effectiveness of the Commission's internal audit is a matter of concern. It asks the Commission to review its system of internal audits thoroughly in order to improve this worrying situation. But it is the Commission that has been responsible for this. That quotation is rather like this House or the inspector of companies asking a company accountant to be more careful in future. That is all that the Council is doing.

On behalf of this country and almost everybody in the EEC, the Financial Secretary has no right to approve this so-called discharge certificate, which is worded so sloppily. Can it not be amended to make absolute requirements or to say that it gives only preliminary discharge and not a final discharge? After this document is approved in the Council of Ministers—if it is—the Council has no power at all. The matter is finished with. The Assembly, of course, may have some comments to make, but the executive approval of the 1978 accounts has been given. In its present form, this discharge certificate is phoney and the Minister has no right to approve it.

Last night, in a witty and amusing speech, the Leader of the House tried to rescue the Government from the ashes of their policies. He managed to dive into the heap of ashes and bring forth a nice little bone. He said that the Government were introducing control over Supply and would appoint a Select Committee. The House may have ultimate control over the Supply of the United Kingdom, but it has completely lost control, under the Treaty of Rome, of taxation relating to the EEC. It has even lost control, I suggest, over the projects of the EEC which will be carried out in this country. We do not even know what those projects will be or what the Government are asking.

But, worse than that, the House has lost control even of the auditing procedures which should ensure that those moneys are properly spent. I am glad to support the amendment, because it gives the Minister no authority to approve this phoney discharge certificate. I hope that he does not do so in Brussels either.

12.21 pm

Mrs. Elaine Kellett-Bowman (Lancaster)

I should like to comment on the final remarks of the hon. Member for Newham, South (Mr. Spearing) before coming to the subject closest to my heart, that of the regional fund.

As my hon. Friend the Member for Scarborough (Mr. Shaw) said, parliamentary traditions differ vastly among the nine countries of the Community. When the British delegation joined the European Community — at that time, alas, without the reinforcement of Labour Members—we were able, with an important contribution by my hon. Friend the Member for Scarborough, to bring about substantial changes, first in the system of auditing and more recently in the system of financial control.

Hon. Members should bring themselves more up to date with these matters. For the first time, we are taking control of spending in Europe and backing up what we believe to be the intentions and practices of this House. The other members of the Community are now beginning to appreciate our work in this respect.

Given the inevitable restrictions within which it had to operate last year—namely, the fast-approaching ceiling on its financial resources—the Commission's preliminary draft budget for 1981—

Mr. Marlow

On a point of order, Mr Deputy Speaker. I do not know whether it is a traditional rule of the House, but I had understood that if an hon. Member had an interest in something under discussion, that interest had to be declared to the House. I do not mean this in a personal sense, because I am sure that everything that my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) will have to say will be appropriate, but I understand that she is a Member of the European Assembly and in receipt of salaries, allowances and other things from that Assembly.

At the moment, there is a great deal of controversy in the House about how we should continue our association with the Community. If we were to change it to any great extent, there would be some risk that the advantage in remuneration that my hon. Friend receives would be changed. In those circumstances, before she addresses the House, would it not be better for her to declare what interest she has and, secondly, to make it clear that she has no intention of voting on the motion, since she stands to gain from any such decision?

Mr. Deputy Speaker (Mr. Bernard Weatherill)

I think that that is a debating point. It is well known to the House that the hon. Lady is a Member of the European Parliament. I do not think that she needs to declare that fact in a debate of this kind. If the hon. Gentleman wishes to make that point, it would have been more appropriately made in a speech than on a point of order.

Mrs. Kellett-Bowman

Thank you, Mr. Deputy Speaker. I was under the impression that even the most ignorant of hon. Members were aware of my membership of the European Parliament. I apologise if I was mistaken.

When the Commission's preliminary draft budget appeared before the European Parliament, it was a reasonable enough affair when account was taken of the fact that we were approaching the ceiling of own resources. However, in the mutilated form in which it was returned to the Council it was a scandal. All European groups in the Parliament agreed on that. All the measures that should have helped to bind together more closely the citizens of the Community and reduce disparities between the standards of living of the different regions had been slashed to a degree that we found hard to believe when first we saw the figures.

The regional and social funds, which are strongly supported by all parties in the United Kingdom delegation, had been reduced not merely in money terms but in real terms when account was taken of Greek entry and inflation. The United Kingdom delegation was placed in an extremely difficult position. In the budget that was before the Parliament was enshrined part, though not all, of the budget refund for which we had fought so hard. If we had helped to throw out the budget, we would have been throwing our own money out of the window. But at the same time the United Kingdom receives roughly 27 per cent. of the regional fund. Apart from our Community interest in levelling out disparities, we had a national interest in wanting the regional fund budget to be as large as possible. It was partly because we were dissatisfied by the size of the regional fund last year that we threw out that budget. This year we wanted the budget to pass through the Parliament but did not want it to go through at an unacceptable price.

As the House will know, there is certain room for manoeuvre whereby the European Parliament may increase the allocations for commitments and appropriations in its budget. There is disagreement—I feel that it would be helpful if this disagreement were to be resolved before the next budget—over both the precise amounts that are involved and precisely when they operate from. For example, does the margin of manoeuvre operate from the First Reading or the Second Reading?

The tendency among most groups, but not that of the European Democratic Group to which I belong, is to treat the first reading of the budget somewhat lightly and to restore in committee after committee virtually all the cuts that the Council has made. The European Democratic Group regards that as a fruitless exercise. If the European Parliament does not clearly express its priorities at the First Reading, it gives the Council carte blanche to decide where the priorities shall be when it discusses the budget after First Reading.

The European Democratic Group tried hard to keep its amendments within at least striking distance of the margin of manoeuvre, even though that meant not restoring items that it was eager to restore but which it knew the Council would merely strike out again.

One of the items that worried my group the most was the amount allocated by the Council to the regional fund for commitments and payments. When we studied the preliminary draft budget, it seemed that 1,600 million units of account was quite a substantial increase. However, it was inexcusable for the Council to slash it to 1,400 units of account, especially when Greek entry will entitle Greece to a quota of roughly 15 per cent., thus reducing everybody else's share.

It was for that reason that the European Parliament voted back the original figures for both commitments and payments. I am very glad indeed that my hon. Friend the Financial Secretary fought so hard in the Council for the original figure to be almost restored, at least in regard to commitments. There is still a substantial shortfall in the payment appropriations, but I do not entirely share my hon. Friend's apprehension in that regard, although I appreciate the fact that he again fought hard to try to get the payments restored almost to the original position.

The vital figure for regional policy is, and has always been, the figure for commitments. That is the basis on which the regional policy of' the Community is founded. It is on the basis of agreed commitments that the most disadvantaged regions can plan ahead. If there is a low figure for commitments, a bottleneck occurs which no payment commitment, however large, can remedy. A payment commitment that could not be spent because of lack of commitments would simply be carried forward to the following year. No further projects could be started and no further good could be done by the fund, because if commitments are short no progress can be made.

This week I had the opportunity of discussing with the local authorities of the sadly striken parts of southern Italy the work that the regional fund has done in their areas. Much of that work has been destroyed this very week, but much remains. Similarly, in the part of this country that I have the honour to represent, Cumbria, much help has been received, especially for the servicing of industrial estates, tourist projects, infrastructure and advance factories.

If the Socialist amendment were carried, not only would we lose the increase which the Council has conceded in the regional fund and which may be increased still further in the negotiations that are continuing with the European Parliament. If the budget is not passed, we shall also lose the United Kingdom refund, which can be paid relatively quickly because of the difference in the dates of the financial years of the European Parliament and of this country. Those refunds are by no means marginal, as the hon. Member for Newham, South (Mr. Spearing) implied. I therefore beg this Parliament to reject the Socialist amendment and to vote for the Government motion.

12.32 pm

Mr. Douglas Jay (Battersea, North)

The hon. Member for Lancaster (Mrs. Kellet-Bowman) talked of the regional projects that she hopes the EEC will finance. I am sure that she realises that we have been assured by the Government that those projects would have gone ahead anyway. They are not additional projects. Cumbria and other areas of this country are not getting any additional projects, development or help from the EEC budget.

The hon. Member for Dorset, West (Mr. Spicer) talked about some minor matters concerning whether the European Parliament—and it is neither European nor a Parliament—should take up its operations in Strasbourg, Luxembourg or Brussels. Quite frankly, I do not care where it meets, and nor does the majority of the British public. Its operations have no effect on the life of ordinary people in this country. They would probably prefer to see the whole thing shut down so that money could be saved.

I listened with interest to my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman), who gave a great deal of information about what he called the irregularities and frauds in the administration of finance under the common agricultural policy. He said that he did not know where some of the money was going. I cannot say where it is all going, but some has gone to a remarkable character, a French Communist millionaire, who has made a fortune out of these funds. This interesting gentleman buys subsidised exports of food from the EEC at a low price and sells them to the Soviet Union for much more. They are then, of course, sold on by the Soviet Government to their public at a higher price still. That is undoubtedly where some of the money is going.

As well as debating the expenditure of the EEC, upon which most of our discussion has turned, we are also talking about revenue. I notice that the explanatory memorandum of document 5861/80 states: In the process the Council and the Parliament are each required in turn to examine the revenue and expenditure accounts We know that the revenue comes largely from the 1 per cent. of VAT, the import duties and the levies. It is worth considering the effects on us of both the levies and the expenditure. They have a considerable effect on the life of the British public. They have had a notable effect this week on a major company in my constituency. Among these levies, the EEC has been imposing in the past two to three years an import levy on wheat, barley and maize, which Britain still imports mainly from the Community. The levy on these commodities has been varying between 50 and 100 per cent. It is running at about 80 European units of account per tonne on maize, which is about £35 or £45 a tonne. That represents a tax of between 50 and 100 per cent. on a major raw material of British industry and agriculture.

Up to now, the one industrial factory in my constituency that has been able to carry on in spite of the Government's deflationary policies is Messrs. Garton, manufacturers of starch and glucose from maize. It employs 500 people and is part of the Tate and Lyle combine. However, the levy on maize has put the factory in great difficulties over the past three years. Only the day before yesterday I was informed that Tate and Lyle had decided that the factory must close because it could not carry on in the current deflationary climate with such a heavy tax on its main raw material.

It is an extraordinary comment on the EEC policies that we have to follow that, whereas for 100 years the policy has rightly been not to apply an import tax on industrial raw materials, we are now forced to impose the levy, with the result in this case that the factory will close and 500 people will lose their jobs. The custom will largely be transferred to a factory in France which, because of the operations of the French Government, in spite of the EEC rules, is able to obtain its raw materal at a lower cost. That is just one example of the effect of EEC policies on the life and employment of our people.

I come next to an example of the workings of the CAP. Up to now, we have been told by the Conservative Euroenthusiasts—to give them a polite name—that the case for remaining in the EEC is that it gives us the chance drastically to reform the CAP, the costs and absurdities of which are universally admitted. We have been told again and again that that is what is to be done and that that is why we should remain in the Community instead of withdrawing.

Suddenly, however, the Minister of Agriculture goes to Brussels and makes an extraordinary speech in which he says that the common agricultural policy is almost perfect, that it is neither possible nor desirable to reform it and that we ought to leave it alone and admire it. That is an incredible statement. Incidentally, it is quite different from what he has been saying for the last two years. But is he right? If that is now the policy of the Government, they have destroyed the whole case for remaining in the EEC.

Will the Financial Secretary therefore tell us, if he can spare time from all the Euro-jargon and the intricacies and irregularities of the EEC budget, whether it is really the Government's view that the CAP is in no need of reform and that the Government have no intention whatever of trying to reform it? I can hardly imagine a more effective way of destroying our entire bargaining position in future arguments with French negotiators than for them to be able to quote that speech by the Minister of Agriculture saying that the CAP is not seriously in need of reform. How are we to press our case if that is to be thrown at us across the council chamber in every future debate?

It has been pointed out in the debate today that the EEC budget is soon to run up against the ceiling of the 1 per cent. VAT and that we shall therefore have a chance to argue that that should not be done until there has been drastic reform of the CAP and the budget. I hope that that is the view of the Government. However, at a semi-public discussion within the last month I listened to one of the EEC Commissioners saying that we should not worry too much about the 1 per cent. but should look for new sources of revenue, and that one tempting source of revenue from the Commission's point of view would be an import tax on oil imported into the Community. That would be very convenient for the Commission. It would bring in a great deal of extra revenue without the trouble of any drastic reforms. It would also destroy the last serious hope of any of the reforms on which the interests of the United Kingdom depend. From what I heard, it seems that in its private deliberations the EEC Commission is seriously meditating upon the idea of putting forward a proposal of that kind.

I hope that we shall be told today that it is the policy of the British Government not to accept any excess over the 1 per cent. VAT or any new form of revenue, such as an oil import tax, before really drastic reforms have been made in the common agricultural policy at the very least.

12.44 pm

Mr. Teddy Taylor (Southend, East)

I certainly share the view of hon. Members who have said that it is unfortunate that we are debating this matter today. We all have problems with constituency and other engagements on a Friday. Those who believe passionately in Europe as a principle must feel as aggrieved as the majority of Members that a matter of this significance should be debated on a Friday when there is a small attendance and when so many hon. Members have engagements in their constituencies.

Those of us who took the trouble to attend the debate today perhaps wondered whether it had been worth our while when we heard the delightful opening speech of my hon. Friend the Financial Secretary. When asked about the consequences of our voting on the motion, he said in his usual delightful way that the Government would certainly take account of the views expressed here, but it seems that what we decide today has little more effect on the matter than that.

I was glad that the right hon. Member for Battersea, North (Mr. Jay) emphasised one case in respect of which jobs had been threatened and could be destroyed as a result of our present relationship with the EEC. What he said reflects the views of a growing number of people who are worried about the effect on jobs in Britain.

The fact that our balance of trade in manufactures with the EEC has been seriously and sharply deteriorating during the past three years—so that last year we had a £3 billion deficit with the Common Market compared with a profit of about £4½ billion with the rest of the world—means that it has a serious consequence for jobs. Clearly, if we are importing vast amounts of goods which could be produced in this country and not exporting anything like that amount to the EEC, it has serious and, in some cases, devastating consequences on employment.

At a time when the whole of Britain is concerned about the level of unemployment, this is surely a matter about which we should think carefully. We should particularly bear it in mind in relation to the fact that, before our membership of the EEC, neither Labour nor Conservative Governments appeared to have enormous difficulty in maintaining relatively full employment. However, since our membership both Governments have faced enormous unemployment problems.

It would be foolish to suggest that this was simple cause and effect. I would not suggest for a minute that, because unemployment has become more of a problem since we joined the Common Market, it has been solely the result of our membership. Many factors are involved, but I think that even the Euro-fanatics would accept that a £3 billion deficit with the EEC affects many jobs and makes it more difficult to maintain employment.

It seems that every hon. Member has expressed dissatisfaction over the fact that this budget, like so many others in the past, has 70 per cent. of its cash taken up in agricultural support of one form or another, a major slice of which goes to the guarantee fund. Everyone is increasingly concerned and worried about so much cash being devoted to an absurd policy when so much of it can be attributed to price fixing at an artificially high level, to the destruction of food, as happens in this country — there there were details in Hansard the other day with regard to the quantity of cauliflowers and apples that were destroyed—and to ridiculous exports of cheap, subsidised food to the Soviet Union and elsewhere.

I find it offensive that since the Soviet invasion of Afghanistan the Common Market has exported about 80,000 tonnes of butter to Russia at prices between 30p and 50p per lb, which the Russian Government resell at £1.20 per lb. Even if they were appallingly inefficient distributors of food, we know that the Russians have made a profit of at least £100 million in cash from the sale of this cheap, subsidised butter since the invasion of Afghanistan. That money can buy napalm and tanks which can then be used against the people of Afghanistan. It seems strange that at a time when we have discouraged our athletes from going to Moscow we should sell such subsidised food which can provide vast profits for the Russians in order to subsidise the Soviet system and buy weapons that can be used in Afghanistan.

The British Government said "We are opposed to this. We must stop all this nonsense." I am told that even the European Assembly has said "We do not like it either." However, it goes on because somehow the Commission must despose of the surpluses. Eveyone says that it is rubbish, yet it carries on.

As always, the only voice of hope was that of my hon. Friend the Member for Dorset, West (Mr. Spicer), who said that this year our estimates for agriculture could be overstated as there could be a shortage of grain in the world because of the problems in Russia. It is interesting that there can be these periodic signs of hope. As my hon. Friend rightly said, there could be a plague of frogs next year or a seven-year drought. Such things can postpone the evil hour, but, on the other hand, we all know that this nonsense of a policy is particularly damaging for Britain. At a time when we are concerned about rising prices, it obliges the British consumers to pay much more for their food than they otherwise would.

My hon. Friend the Minister gave a reply to my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd), in which he calculated that the extra cost for the consumer was about £3,000 million. We become blasé when we talk about thousands and millions of pounds. However, it means £5 per week to the average family. That is a great deal of money, particularly when we are battling against inflation.

It is easy to knock the CAP. Everyone does it. We are entitled to ask the Government how the blazes they are going to get out of it. How can we change the situation? The Euro-fanatics say that they want major structural changes. A splendid chap called David Curry, a Member of the European Parliament, compiled an enormous document on the changes that he wished to see in the CAP. As so often happens, there are generalisations such as that something must be done, urgent action must he taken and change must come. The tragedy is that there is no semblance of an indication, let alone an agreement, about the basis of any change.

Will the basis of any change be a restriction on production? For a while, that was tried with sugar beet. We know what the farmers said about that. There is no political possibility of getting the countries and farmers of Europe to agree on production restrictions. I wonder how many of my hon. Friends who represent country areas—supposedly entwined with the National Farmers' Union—would like to tell their farmers to produce only 80 per cent. of the amount that they produced last year. It is unthinkable.

Alternatively, we could freeze prices. There is no indication that a price freeze would prevent an increase in production. There is some indication that the holding of prices can result in an increase in production. Hon. Members, call for structural changes. My right hon. Friend the Minister of Agriculture, Fisheries and Food indicated that he thought that the CAP was the greatest thing since sliced bread and that change should take place over a lengthy period. We must face the fact that, unless we wish to wipe out the CAP and accept that each member State should carry responsibility, there is not a ghost of a chance of a reaching any politically acceptable reform.

There are those who say that we are being faint-hearted and that we must trust our European friends. They say that we should look forward confidently to the future, in a competitive spirit. They say that somehow a change will come about. Major structural changes aimed at reducing the problems of finance and production cannot be a made to the satisfaction of all member States. We have all got different interests. We should look to the future and admit that none of us likes this policy. Euro-fanatics find this subject embarrassing. Those who have set their sails for the Common Market are embarrassed to talk about the CAP. They know that it is nonsense.

Those of us who have been hostile to the Common Market for a long time regard the CAP as nonsense. Is there the slightest chance of doing anything major about it? I doubt it. Even those who want change cannot agree or even indicate the broad principles upon which any change should take place. Plenty of people say that the surpluses should go. Plenty of people make broad generalisations, but there is no agreement about how any aim is to be achieved.

We should have the specific aim, in agreement with our European partners, of eliminating the CAP. Each member State should be allowed to look after its own agriculture. It is not a question of asking Europe to destroy itself. It is not a question of doing away with the Common Market. It is more than likely that member States would co-operate more readily if they did not have annual rows about the settlement.

Sir Anthony Meyer

When my hon. Friend has eliminated the CAP, does he think that he will have resolved the problems of Britain's industrial trade with the EEC? He told us at great length that we are unable to hold our own in our industrial trade. If we are unable to hold our own in the EEC—our home market—where can we hold our own?

Mr. Taylor

I can give my hon. Friend some hope. We would have a better chance of improving our trade with Europe if we did not have the CAP. That would lead to a reduction in our costs. Britain maintained its 52 million people only because it engaged in international trade at a profit, on the basis of low cost. That was our one great advantage, and it enabled us to sell goods all over the world. We threw that advantage away when we became partners in the CAP.

Where does inflation start? It starts, understandably, with the housewife who pays more for her food and asks her husband for more money. He then asks his employer for more money. That is the basis of inflation. If we did not have the CAP and the unnecessarily high basic costs, of course we could engage in better competition with Europe and the rest of the world.

Mr. Jim Spicer

My hon. Friend mentioned low cost. Presumably, he is talking about low-cost food in that context. That may be all right in Southend, but what does he expect to happen in terms of deficiency payments which would have to be paid by our Government to our own farmers if we were buying low-cost food throughout the world?

Mr. Taylor

We had the deficiency payments system until we changed to levies in anticipation of joining the Common Market. Certainly it would cost money. The alternatives are either to keep prices at the present absurdly high level, charge levies and keep the money in our own Treasury instead of sending it to Europe, or to let food find its natural price, which I should like to do, and make up the difference with deficiency payments.

We know that the only people who are opposed to this are some of the agricultural community, not because they think that a British Government would cut their throats—they never do—but because for the first time in many years we would identify the actual support going to British agriculture. At the present time, there is no such support. All we do is to insist on high prices. The farmers get the money, we pay levies, and there is no way of identifying the support.

It would be quite healthy for our agriculture industry if we were able to identify the support we were giving it against foreign competition. I honestly think that farmers are splendid people, and it is great to say that our farming is the most efficient in Europe. I could grow bananas on Clydeside in greenhouses and be the most efficient grower in the world, but it would not necessarily make economic sense. It would be good and healthy for the country if we could identify the support going to agriculture. I accept, of course, that it is one of our most important industries and we want to maintain and support it, but there is no reason in the world why our industrial base should be destroyed, and continue to be destroyed, because we are forced to pay these absurdly high prices.

If we were to do away with this system and do away with the 70 per cent., how would we redress the balance on a percentage basis? My hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman), who is a Member of the European Assembly, stated her point of view about having more money in the regional fund. This is what I do not like about the attitude of the Opposition Front Bench. They say "Let us have more in the regional fund." But why should Conservative Members want to have more and more money put into the social and regional funds of the Common Market? Surely, we do not want to have ever-increasing sums going to a bureaucratic organisation which will splash money around on regional and social funds. Surely, we in Britain can best decide for ourselves what money should go in which direction.

I am surprised at the number of Conservatives who support our present relationship with Europe when we know that basically Socialist policies are being put forward in the EEC. We hear a great deal about the various plans and the propping up of lame ducks with Government money and bureaucracy. What on earth are Conservatives doing in supporting such ideas? Let us get rid of the CAP, but let us not saddle ourselves instead with a regional or industrial policy which will mean having mountains of ships and aircraft instead of mountains of butter. I want to oppose Socialism and bureaucracy, and the answer is not to replace the CAP with some kind of industrial agricultural policy.

I hope that the Government will be able to comment on the question of our contributions. In the budget that is before us, we have the first indications of the rebates. We know that the previous Labour Government failed abysmally to get a major repayment of the vast amounts that we pay to the Common Market and that our Prime Minister managed to get a very substantial repayment agreement. We were all very proud of what she achieved. But there were indications in the press that the Prime Minister was not very happy about it. There was to be a total repayment of £1,500 million over two years, but there were press reports that although those in the Foreign Office—the so-called heroes of Zimbabwe—were delighted at what had happened, there were some people who were not happy, and we wondered why. We are now beginning to see why, now that we have had the report of the Foreign Office's famous renegotiation of the details of the agreement. Instead of getting £700 million for 1980 in 1980, we shall get only about £75 million for 1980 in 1980, and the rest will come after 1 January — some some time in 1981, or perhaps even in 1982. Two-thirds of that is subject to the approval of Common Market committees, in which we have one voice and one vote only. Also, it will be paid on the basis of projects. So we shall put forward projects, and the Foreign Office has been given an assurance that the Common Market will try hard to pay us 80 per cent. of the money before the end of the financial year—5 April. But we all know that on 1 January we are supposed to have an agreement on fishing, and although those matters are not directly connected they were discussed at the same meeting and are in the same package.

I am anxious that the Government should fight hard on fishing, but it represents an intolerable and unfair burden on our Treasury Ministers, who are desperate for cash. For the first time, our Common Market refunds were included in the Chancellor's statement on Monday as a cut. It places an unfair burden on the Government. If we do not reach an agreement on fishing, there could be administrative delays in the EEC that will prevent us from getting the rebate.

There is a simple answer to that. The Government could resolve the issue by making clear to the EEC that if they do not get the money within the planned timetable, they will deduct it at source from the sums that we pay every month. This year we have been paying about £100 million a month, and we cannot afford it. We are having to borrow money from small savers, granny bonds and so on in order to pay our bills. Like any company, we need the money, and if there is a hold-up there is a problem. We would take the pressure off our Ministers who are negotiating on fishing if we were to make a solemn declaration that, if we do not get our 80 per cent. by 5 April 1981, we shall deduct it from the sums that we pay to the EEC. What could be simpler or fairer than that? Does any hon. Member disagree with that? What is wrong with that suggestion? I should like there to be unanimity, at least among hon. Members who are present today. It is not a threat; it is simply taking Europe on trust.

Mr. Jay

Is there not an obvious precedent in that the French imposed an illegal levy on sheepmeat imports and kept that in force, disregarding entirely the rules of the Community?

Mr. Taylor

I do not like people breaking laws. The French acted deplorably on that issue, and I should not like this country to go as far. I should simply like us to say that we were promised the cash and that if we do not get it we shall deduct it at source. We would not be breaking EEC rules or laws.

We are entitled to some guidance on those issues. It is obvious that there will have to be changes in nine months or in a year, when Europe runs out of money. Either we shall have to agree to increase resources by the front door, by increasing VAT, or by the back door, by imposing an energy law or whatever.

The Government and the House will be aware that there is a change of heart here. I was away from the House of Commons for a year — I enjoyed myself immensely while I was away—but since my return I have noticed changes. Apart from the fact that we have some delightful, hardworking new Members, there has been a change of attitude on the Common Market. When I left here a year ago, the extreme Euro-critics were the odd men out. Now, it is the "Euro-nuts" who stand out like a sore thumb and who are out of touch with the general feeling of Parliament and the people.

Sir Anthony Meyer

Has my hon. Friend actually read the Queen's Speech?

Mr. Deputy Speaker

Order. Before the hon. Member for Southend, East (Mr. Taylor) gets tempted to answer lots of questions, perhaps I may say that it has been indicated to me that the winding-up speeches will begin at 2 o'clock and that there are eight hon. Members who wish to take part in this important debate.

Mr. Taylor

I am sorry, Mr. Deputy Speaker. I shall come to a conclusion very quickly indeed.

All I say is that there has been a change. What we must do is remember that the situation now is rather like it was on the devolution issue, which the hon. Member for West Lothian (Mr. Dalyell) will remember so well. There was a time when we were all fanatically committed to devolution root and branch. It was almost heresy to say anything against it. Gradually, one or two people started to say "It is a load of rubbish. It is a lot of nonsense. Let us try to do something about it." Happily for us, the miracle came. We had a Labour Bill, which enabled our party to oppose without changing our views — no sackcloth and ashes, no public declarations; it all happened nice and quietly and smoothly.

The approaching insolvency of the EEC gives a chance for this big change. That change should be not to have more budgets such as this but to have a situation which is the right one, in which we co-operate with the Common Market on things on which our interests are the same but get rid of all the nonsense and rubbish such as the CAP, which does damage to us and undermines the unity of Europe.

Several Hon. Members rose—

Mr. Deputy Speaker

I call the hon. Member for Newham, North-East (Mr. Leighton).

Mr. Body

On a point of order, Mr. Deputy Speaker. You indicated a few moments ago that the winding-up speakers would seek to catch your eye at 2 o'clock. Am I not right in saying that this is exempted business and that it would be possible for the debate to continue afterwards for another one and a half hours? If that be so, might it then not be possible for those of the eight hon. Members who have been unsuccessful in catching your eye to be called afterwards?

Mr. Deputy Speaker

I thank the hon. Gentleman for raising that point with me. In fact, this is not exempted business under the Standing Order. The definition of European Community documents in the Standing Order does not cover the draft general budget for 1981 because it is not a document published for submission to the Council of Ministers or to the European Council. It originates from the Council itself, so it is not exempted business today.

1.6 pm

Mr. Ron Leighton (Newham, North-East)

The whole House has listened with the greatest interest and attention to the significant speech of the hon Member for Southend, East (Mr. Taylor). He expressed his dissatisfaction with this budget and the situation surrounding it. In so doing, he is representative of widespread opinion on both sides of the House and certainly of opinion outside the House.

One is impressed by the absence in these debates of the right hon. Member for Sidcup (Mr. Heath) and the right hon. and learned Member for Hexham (Mr. Rippon). They never seem to come along and invite us to join in rejoicings over the results of the policies that they carried out a decade ago. I wish that they would come, because I have enjoyed their recent speeches. Perhaps they have other things on their minds at present which prevent them from making other criticisms which they may wish to make. However, all that we hear is dissatisfaction.

When I look at what the Financial Secretary called the size and the shape of the budget, I find that I can look at it only with distaste. I find it offensive. With the best will in the world, I cannot find a single redeeming feature about the budget.

Of course, it is not a budget as we have and understand Budgets traditionally in Britain. There is no social purpose to the EEC budget. Quite often, our Budgets redistribute income from the well-off to the less-well-off. They have purposes of that description. But they also pay some attention in their revenue raising to ability to pay. The sole purpose of the EEC budget, basically, is to pay for the monstrosity of the common agricultural policy.

The EEC budget's revenue is the most bizarre and grotesque set of taxes that I have ever seen. The first is the percentage of VAT and the other two taxes are fines on any member State that does not believe in a parochial, autarchic little bit of Western Europe but is internationalist enough to want to trade with countries outside the EEC. Any member State that wants to trade with the rest of the world is fined. Any member State that imports food or manufactures from outside the Community is fined, and the fines are paid into the budget.

The explanatory document issued by the Treasury on 17 October shows the shape of the budget. The first item in the document is administration, which costs 635 mua. The figure for industrial and energy policy is only 30 mua. The social fund allocation is 560 mua. We spend more on administration—paying the salaries of the bureaucrats—than on the whole social fund. Only 500 mua is devoted to the regional fund. The guarantee section of the agricultural fund, which pays for the food mountains, shows a colossal 12,725 mua. That is where the money goes.

That was borne out in the remarkable speech of the Minister of Agriculture, Fisheries and Food on 17 November. The right hon. Gentleman seems to be a born-again pro-Marketeer. He appears to think that the CAP is wonderful. In seeking to defend it, he said: If we are to improve the system we must understand it and we must not base our actions on popular myths. The first myth is that it has deprived other European policies of funds. It is a myth, because there are no other policies organised on a European basis. In other words, the Common Market has nothing apart from the CAP and common external tariff. There is an obligation to have protection on food, which is bad for us, and an obligation to allow the free import of manufactured goods from the EEC, which is damaging to us.

The Minister threw out a challenge in his speech. He said: There is this happy phrase on the lips of politicians throughout the Community, the phrase that 'We must reform the CAP'. The right hon. Gentleman obviously does not believe in that any more. He continued: The phrase, alas, is not frequently followed by a detailed explanation as to what reforms are sensible or possible. How can we reform the CAP? I believe that it is impossible to do so. The Minister said that it would take five years to do it, but we have already had 12 years in which there has been no reform.

The only way of reforming the CAP would be to have much lower prices and for us to say to the countries where lower prices did not give a sufficiently high standard of living to peasant farmers that they should pay subsidies out of their national budgets instead of out of the EEC budget. We should also open our ports to free imports from the rest of the world. All that would mean abolishing the CAP. I agree with the hon. Member for Southend, East that the only sensible policy for this country is to come out of the CAP.

I am worried about what the Minister of Agriculture is doing on the green pound, which is about 11 per cent. or 12 per cent. above the rate for the actual pound. The only reform that the Government have suggested to the CAP is that there should be no price increases for goods in structural surplus. He has reneged twice on that promise. I suspect that next time he will do the same again and then devalue the green pound, saying "Aren't I clever? I have given a huge increase in food prices, but have stopped it coming to the British housewife."

I wish to say a few words about the document to which my hon Friend the Member for Birmingham, Erdington (Mr. Silverman) referred relating to financial control in the Community I accompanied him on the visit. This is one of the most startling documents I have read during my short period as a Member or the House. It shows that there is absolutely no financial control. On page 4, it is stated that the Court of Auditors considers that the general accounts of the Institutions do not permit the ascertainment of their overall situation in respect of assets and liabilities; that the balance sheet had been drawn up in an incomplete manner and fell short of meeting the requirements of proper consideration; and that the published financial statement did not enable the reader to gain a clear insight into the Communities' financial affairs". On the next page, it talks of the underspending in some sectors exceeding 50 per cent. of available appropriations: This, the Court considers, calls in question the basis on which the budgetary estimates were drawn up and the soundness of the financial management. On agriculture, the document points out that there can be no control over agriculture and draws the conclusion: It would appear, in fact, that to speak of budgetary control over agricultural guarantee expenditure, and indeed over compulsory' expenditure generally, is largely meaningless. There is no control over the spending on agriculture.

On the giving of certificates of clearance, many years are elapsing between the accounts and discharge. The clearance of the accounts in 1970 took place in October 1978. The accounts were audited and cleared only eight years afterwards. The reason is that the work is not done by the Commission. It relies on the authorities in the different countries. The document states: The failure to close the accounts promptly must detract considerably from the significance of the annual discharge given to the Commission in respect of the implementation of the budget and thus compromise the European Parliament's budgetary control powers. On frauds and irregularities, I shall not repeat what my hon. Friend has said about only two countries reporting frauds.

Mr. Silverman

They account in value for 88 per cent. of the total.

Mr. Leighton

The document states that not all Member States are equally assiduous in making reports". We can draw our own conclusions from that.

It is remarkable to read in a passage relating to revenue: The Court noted during visits to Member States that there has been a certain lack of consistency and harmony between them in procedures for establishing the amounts of the Communities' own resources'. For example, the degree of physical examination of goods declared for customs duties varied from extremes of virtually 100 per cent. to none at all. The only conclusion I can draw is that in certain countries — I suspect those that play cricket — the Customs officials, when goods come in, charge the tariffs and excise duties and religiously pay them over to Brussels but that there are some other countries and ports which do not charge anything. This is one of the swindles and frauds. To me, the whole of the common agricultural policy and the whole budget — indeed, the whole Common Market—are a fraud and a swindle against us. The sooner we withdraw, the better.

1.20 pm

Mr. Tom Normanton (Cheadle)

I am grateful to you, Mr. Deputy Speaker, for allowing me the opportunity to make a number of points about the 1981 budget and the discharge for the 1978 budget. It is not necessary for me to rise to the bait offered by my hon. Friend the Member for Northampton, North (Mr. Marlow) and declare an interest, but I happen to have been in the European Parliament as a nominated and elected Member for nearly eight years. I have seen eight Community budgets go through the whole Community processing before they have been put into operation. I have also had the experience of being involved in, and strongly supporting, the rejection of the budget for 1980.

I am, therefore, delighted to see so many of my colleagues in the European Parliament, and those who served in it in years gone by, taking part in this debate or trying to catch the eye of the Chair.

The Community budget for 1981 gives me no satisfaction. There are only two significant redeeming features. One has come from this debate, in which my hon. Friend the Financial Secretary made a number of extremely informative observations and commitments to rethink certain procedures within the European Parliament's budgetary operations in the year ahead. I welcome those commitments. In a few minutes I shall refer to areas that I hope my hon. Friend will concentrate his mind on, in addition to those that he included in his opening speech.

Secondly, it is a unique budget in one respect only, in that it gives effect to the first major and significant adjustment to the budgetary imbalance which has universally been felt on both sides of the House, and certainly by the British representatives in the European Parliament. The achievement should not be allowed to pass without at least one observation.

I was deeply concerned and somewhat distressed by the opening barrage of fire. I felt that bitterness, distress, anger and retaliation would almost certainly result, but that has not happened. The way in which the negotiations were carried out and the success with which they were crowned was seen as an example of British governmental tenacity, because it was coupled with a commitment that Britain would remain a full, constructive, energetic and dynamic member of the European Community. That is the basis on which we must record the outcome of the budget imbalance negotiations.

The Community budget is not to be compared with that of a member State. At best, I should call it a partial budget.

But it is a developing budget. The first budget to which I contributed some thoughts was that for 1974, the size of which was 10,000 million or barely 11,000 million units of account. We are now dealing with a budget for 1981 that will without question top 20,000 million units of account.

Besides expanding in size, the budget is expanding in coverage. But it has a long way to go before it will reach anything remotely resembling the kind of budget that most of my friends in the European Parliament, and many of my right hon. and hon. Friends here, would like to see it develop into.

The inclusion of the regional fund and the social fund is but the beginning of the road that I believe the budget must take. I hope that all who serve here and in the European Parliament will make constructive and positive contributions to the shape and format of this development.

During 1981, the House should keep a keen eye on the budgetary ceiling—the VAT ceiling of 1 per cent. I have no doubt that, before the end of the calendar year 1981, the current budget will be bumping up against that ceiling, if not trying to break through. When does my hon. Friend the Minister expect that bumping point to be reached, and how does he see the development from then on in renegotiating a new formula, a new ceiling or a new content of the budget? What will be do about a supplementary budget?

I have been increasingly concerned about budgetary procedure. We in the House repeatedly fail to understand how the Community works and how we can influence the pattern of its development. It is not a remote institution unconnected with us. It is connected with us, and we are part of the machinery and must use it to optimise our effectiveness in future developments.

The operation of the budget, for example, consumes an enonnous amount of the time of individual Members of the European Parliament, of the committees and of the staff of the Parliament as such. I wish that we had a similar procedure here, contributing critically and constructively to dealing with our own national budgetary matters. We fall lamentably short here, and I do not want us to fall short in European budgetary development.

As for the process of the budget, it does not suddenly appear as a subject for a three- or four-day debate with a final vote, only to be heard of no more except in post mortems. It involves elected Members of the European Parliament throughout its whole course in their work and participation in the Parliament's committees. Individuals, lobbies and groups of interested Members can influence the pattern of development and can do so through a virtually open-ended debate. That is something else that we fail lamentably to appreciate. We therefore fail to see how we can influence that process.

As for the investigatory powers of the institutions, my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) rightly stressed the new and, I believe, most important development — the establishment of the budgetary control committee. This is a genuine and effective method of monitoring public expenditure, which the House has not the slightest ability to do in its own national affairs. I earnestly ask both sides of the House to study what is being done in that context. We may have a lesson or two to learn from it.

The spending of and accounting for the Community budget funds cover a wide range of what some would describe as sins and omissions but I would call efficiencies and inefficiencies. I hope that the Minister will say that he will look carefully at the ways in which Community legislation in budgetary and fiscal matters is being implemented by all member States. Without naming names, I would say that certain States fall lamentably and irresponsibly short in this context. I hope that my hon. Friend will press hard to deal with these anomalies.

The House has always laid great stress—I feel great anguish when I hear it said—on control of the public purse. However, the mechanisms that are developing within the Community — Parliament, the Court of Auditors, the Commission and other institutions — provide for us in this place many lessons on how we can improve our own affairs at home. I deeply regret the way in which the House tries and fails completely permanently to get control of its own legislative and financial affairs and the way in which we aspire to do the same in Community affairs. I can describe that approach to Community affairs on behalf of many right hon. and hon. Members only as frivolous, fatuous and foolish. It is based on an unawareness of the facts of life and the way in which the Community is working.

I plead for much closer co-operation between hon. Members on both sides of the House who owe allegiance to their respective parties and the directly elected Members of the European Parliament who belong to the same political parties. If we can only get hon. Members in this place—the representatives of the people in Britain—and those elected by the same electorate to the European Parliament to work more closely together, we shall have a far more effective scrutiny mechanism than all the institutions that we are spawning here in the Palace of Westminster.

The budget fails lamentably to take account of the vast and almost open-ended borrowings of the Community and many institutions. Budgetisation of loans is still only a hope. I hope that that will be taken up and actively pursued in the year ahead in defiance of the great opposition of many of the member States.

Finally, I urge my hon. Friend the Minister to press for still more improvements above and beyond those to which he has committed himself. I ask him to examine the procedure for establishing the legal basis. The Minister knows the jargon and he knows what I mean. That being so, I shall not take up the time of the House to elaborate on it.

There are constant examples of underspending in areas of crucial importance. Far be it from me as a parliamentarian and a Conservative to bewail Government underspending. However, it is bad budgeting when commitments have failed to be implemented. The CAP overspending is inevitable because of the nature of the products. I hope in the year ahead that the restructuring of the CAP will be set well in hand and may well pre-empt the need for a supplementary budget.

I turn, lastly, to the declarations of the European Council. It is not a Community institution but it is rapidly becoming one. I personally regret that. Its declarations need to be considered carefully. Over and over again, declarations from the Heads of Government of the member States are made—presumably in good faith—but their connection with the decision-taking of the Council of Ministers and, more importantly, the decisions taken and the part played by the Financial Secretary in his membership of the European Community leave very much to be desired.

I hope that the House will support the motion and reject the Opposition's amendment.

Mr. Deputy Speaker

I remind the House that the Front Bench replies will start at 2 o'clock. Six hon. Members have been waiting in the Chamber since 9.30 am. I should like to be able to call them.

1.34 pm

Mr. Tam Dalyell (West Lothian)

I believe that hon. Members from each side of the House who have sat through a Friday are entitled to have the opportunity to contribute to the debate. I shall resume my place at 1.38 pm.

I make it clear, as one who is favourably disposed towards the Common Market, that if the House were to pass the amendment there would be an obligation—I agree with my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) — to vote accordingly in Brussels. I was shocked by the attitude of the Financial Secretary to the Treasury. I was also uncomfortable about the Queen's Speech as reported from Brussels. It seems that the Palace was badly advised.

Along with Lord Bessborough, during my time as a member of the sub-committee on budgets of the European Parliament I was asked to go to Friuli to examine the allegation of the misuse of funds.

Having had that experience, I plead with the Government that, if help is to be given under chapter 59 for earthquake disasters, the maximum help is given in the first 72 hours or first week after the earthquake. I talked to people in camps in damp conditions at Friuli. They need medicines, vaccines, clothes and tents as soon as possible. What action group has the Community set up, as it did under Mr. Ruggiero and Mr. Lananduyyi last time? What is the policy over pefabricated housing?

In order to save time, I refer to page 79 in the report of the European Parliament of the sitting of Wednesday 27 October 1976, when I detailed the position in Germona and villages like Magnana in Rovera. The sooner that aid is given, the more effective it is. I am therefore concerned about the answer that was given to Mr. Poniatowski in the "Official Journal of the European Communities", when Mr. Cheysson said: The procedure suggested initially would have been contrary to Article 205, which stipulates that the Commission shall implement the budget on its own responsibility. Furthermore, since, unlike action policies, emergency operations are specific measures restricted to the people in disaster areas and covering only a limited period of time, it is enough for the appropriations to be entered in the budget for the Commission to be able to use them. I should like to be clear that the Commission has full powers right away or that the Government are pressing for a supplementary budget as soon as possible.

With regard to energy and the 50 mua, I agree with my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) about now being the time for a Channel tunnel. However, some of us strongly support what the Community is doing at ISPRA, particularly in relation to solar energy and gas liquefaction.

We had an Adjournment debate recently, initiated by the hon. Member for Flint, West (Sir A. Meyer), as a result of which it is clear that our coal from oil will go ahead at the Point of Ayr. I want to know whether there is co-ordination with what the Community is doing and why there is the extra 100 mua referred to in committee paper No. 4348.

I also ask, as a former member of the sub-committee, why Heinrich Aigner, the chairman of the Parliament's budgetary control committee, called for the amount paid back to member States to cover the cost of collecting the European Community's "own resources" to be cut in half. What is the Government's response to Mr. Aigner's view, outlined on 4 November in the report of the European Assembly at columns 127 and 128?

1.38 pm

Sir Ronald Bell (Beaconsfield)

To have to make speeches lasting only a few minutes on the European budget is almost farcical. We should have proper time to consider a subject of this magnitude. I do not know how one can present a worthwhile case in three or four minutes.

I find it impossible to vote either for the Government's motion, which is objectionably harmless, or for the Opposition's amendment, which suggests lines of activity by the Community that I cannot support. I have never supported anything in respect of the Common Market except its demise, and I do not want to change that now.

The reason is simple. We are talking about the budget. I suppose that our deficit on the budget, after the excellent renegotiation of my right hon. Friend the Prime Minister, leaves a burden on each individual in the country of about £10 a year. The £3,000 million extra expenditure on food — one does not subtract the deficiency payments, because they are internal payments—puts a burden on each individual of £60 a year. The average family of four is therefore out of pocket by about £280 a year because of our adherence to the Treaty of Rome. But for the renegotiations by my right hon. Friend the Prime Minister, the figure would be £300 a year, which is a lot of money considering that we get nothing for it.

It is suggested that we should remedy this defect by a fundamental recasting of the Common Market budget. By that is meant always the common agricultural policy. My continuing opinion about that is that that course of action is not open to us. The right hon. Member for Huyton (Sir H. Wilson), when Prime Minister, said that the CAP was not negotiable. When we joined, it was explicitly so made. President Pompidou, in his broadcast to the French people after meeting my right hon. Friend the Member for Sidcup (Mr. Heath) at the Elysée, said When I arrived in office, Europe was in fact in deadlock. Our partners in the Europe of the Six could no longer accept that Britain be left out … I found that the chances of our obtaining the renewal, and…the definite establishment of the agricultural Common Market were very slight. That was why, at the conference at the Hague, I very clearly put the bargain to them. And I obtained, on the one hand, that the agriculture Market should become permanent in exchange, on the other, for the opening of negotiations with Britain. Then there followed that famous exchange of letters between the British ambassador and the French correspondent, who wrote: What of our suspicions? They are true. You are sincere but governments change. How could you assure that your future governments will not support those of our partners who put up impatiently with this common burden? o that the British ambassador replied, writing: We have solemnly and explicitly undertaken to adopt the Community system of agricultural support, Community price levels, the mechanism of Community preference, Community levies, the Community system of resources propres … the Community fiscal system, Community rules on capital transfers, the Community blueprint for economic and monetary union: in short, the Community itself. All of these we are explicitly and solemnly committed to adopt. In case anyone says that we have adopted them and that now we can change them, it should be borne in mind that this was the answer of Her Majesty's ambassador to the question How could you assure that your future governments will not support those of our partners who put up impatiently with this common burden? Those were the assurances, explicit and solemn, of Her Majesty's ambassador given on the instructions of a Conservative Government about the conduct of our future Governments. How can anyone say that we are at liberty radically to reform the budget arrangements and the Common Market?

In case there was any doubt, President Pompidou at the end, before lifting the veto, asked my right hon. Friend the Member for Sidcup whether he accepted that principle. The President said in his broadcast that my right hon. Friend assured him that his concept of the Common Market accorded with that of France. We are therefore not honourably at liberty to do that. Of course, we could cheat, but the five at The Hague agreed not to gang up with us and we agreed not to gang up with them to break the CAP. It is all very well to say that that is past and that we must now do it, but every stage of our entry into and continuance in the Common Market has been marked by disingenuousness amounting at times to duplicity. If that is the case, as it is, there is only one possible conclusion.

As the situation is intolerable and disastrous, and as my right hon. Friend the Member for Sidcup landed us in the mud up to our necks—I say that in no critical spirit, because my right hon. Friend's misjudgment is usefully predictable and admirably consistent—the only decent course for us is to give proper notice of denunciation of a treaty that has turned out to be a total disaster.

1.45 pm

Mr. Tristan Garel-Jones (Watford)

I shall try to follow the example of the hon. Member for West Lothian (Mr. Dalyell) and be as brief as I can. The only part of the speech of my hon. and learned Friend the Member for Beaconsfield (Sir R. Bell) with which I agreed is that in the short time available it is difficult to make a serious speech on such an important matter.

If the remarks of the hon. Member for West Lothian were more typical of the way in which we approach these matters, they would be a great service to the country as well as our approach to the EEC. The hon. Gentleman stands four square in his commitment to the Community, but he is perhaps one of the most pungent and detailed critics of its operation.

All that I have time to do today is to point out to the country at large that it should not be misled into believing that my hon. Friend the Member for Northampton, North (Mr. Marlow) and many of those who speak with him are supporters of the EEC. During the course of his remarks, my hon. Friend referred to my hon. Friend the Member for Harrow, East (Mr. Dykes) as a "punk European". The implication is that my hon. Friend the Member for Northampton, North subscribes to some other kind of European loyalty which is rather better than that of my hon. Friend—perhaps a sort of "rocker" Europeanism.

My hon. Friend the Member for Northampton, North is not convincing in this House, and I hope that he is not convincing in the rest of the country, when he claims to be a good rocker European. Let us examine his Europeanism.

In Western Europe, France, Germany, Italy, Belgium and Luxembourg — in fact, all the members of the Community —wish wish to remain within the Community. Spain, Portugal and Greece are about to join. There is virtual unanimity in those countries that the future for Western Europe lies within the Community. Therefore, the only part of Europe which I can believe that my hon. Friend is referring to is Eastern Europe, behind the Iron Curtain, which together with the Soviet Union, its sponsor State, has been traditionally opposed throughout to the EEC.

Mr. Marlow rose—

Mr. Garel-Jones

I shall not give way. I hope that my hon. Friend will understand, but another hon. Member wishes to take part in the debate and he has been in the Chamber all day.

My hon. Friend is revealed when he plaintively asks "Why cannot we withhold this? The answer is that we depend on other countries. "That is what he does not really like. One of the things that my hon. Friend must learn is that in an ever intercommunicating world everything that this country does depends on other countries. Our ability to control inflation depends on other countries, and we must learn to live with that fact.

The punk and rocker Europeans are only one group. There are also what I would describe as the "ballroom dancer" Europeans such as my hon. and learned Friend the Member for Beaconsfield, who is at least open about the fact that he regards the EEC as a total disaster and wishes to withdraw from it. I applaud his honesty and consistency in holding that view. The ballroom dancers of Europeanism are led by the right hon. Member for Stepney and Poplar (Mr. Shore). He is the Victor Silvester of the entourage. The right hon. Gentleman spoke on the Gracious Speech and correctly referred to the serious difficulties that face the Third world and the need for us to take a lead. He said: About 14 per cent. of United Kingdom exports and 12 per cent. of United Kingdom imports go to and come from Third world non-oil countries. It is a substantial part of our trade, and if those countries can no longer finance imports from us … we shall not be able to export to them."—[Official Report, 24 November 1980; Vol. 994, c.363.] I agree with every word of that. It is a good way of illustrating the enlightened self-interest that should lie behind our approach to the Third world. The 12 per cent. or 14 per cent. of our exports to the Third world is serious. However, it seems that our exports of 42 per cent. to the European Community are so unimportant—although one in six jobs in Britain is totally dependent on them—that they can be brushed aside.

My hon. Friend the Member for Northampton, North completed a list of ways in which Britain could finance itself if it were outside the European Community. He ended the list with the words "Hey presto". He was rather like a conjuror who pulls a rabbit out of a hat. Unfortunately, when my hon. Friend the Member for Harrow, East pointed out that the tariffs on the old Commonwealth were higher than those that now exist in the European Community, his jacket came open and all his false pockets were revealed. My hon. Friend the Member for Northampton, North seemed completely unaware of that fact.

In 18 months, the Government have achieved a substantial renegotiation of our payment terms. The right hon. Member for Stepney and Poplar made no attempt to reply to my question about our position in the league table during the five years when the Labour Party was in office. The Labour Government made no effort or progress. In 18 months, the Government have established a bridgehead as regards our contributions. They have opened the way to serious and constructive discussion on other important matters, such as the CAP. I congratulate the Government. I certainly intend to support them in the Division.

1.52 pm

Mr. Richard Body (Holland with Boston)

All is not total blackness as regards the Common Market. I am a beneficiary of the budget. I have a financial interest, namely, a small pack of hounds, It is rather expensive to keep a pack of hounds. I am grateful to the EEC, because it gives me a subsidy of about £800 a year. Although I oppose our membership, and although I look forward to getting out of the EEC, I should be churlish if I did not express my gratitude for that financial assistance.

We have been assured by the Government Front Bench that if the budget does not go through we shall have difficulty clawing back the refund negotiated earlier this year. I do not find that argument persuasive. If one examines the proposals, one finds major increases in items of agricultural produce in which we have no interest. As far as I know, no British farmer grows rice. Nevertheless, these proposals allow for an increase of 28 per cent. in the subsidies given to those growing rice. Olive oil, too, does not concern us, yet the increase in expenditure in subsidising olive oil will be 24.8 per cent. The total amount going to subsidising olive oil is £400 million. It seems so crazy that one can hardly believe it.

Two other items that ought to be mentioned are wine and tobacco. There are hundreds of thousands of people in this country who cannot afford wine. There are many others who do not like the taste of it. There are many hundreds of thousands who disapprove of the drinking of wine.

Mr. Teddy Taylor

Hear, hear.

Mr. Body

Yet my hon. Friend the Member for Southend, East (Mr. Taylor) will bear in mind that we are increasing the subsidies on wine by 33 per cent. and that this will run to £200 million this year. Every penny of that is coming from our taxpayers, or our taxpayers, by a process of coercion, are having to make their contribution towards it.

Then there is the increase in tobacco subsidies of a little of over 20 per cent. My hon. Friend the Member for Southend, East will perhaps be more kindly disposed towards that. But it is astonishing that our Government are spending taxpayers' money in warning people of the dangers of tobacco when in the forthcoming year it is proposed to spend £200 million in subsidising those who grow tobacco. That surely must have the effect of inducing an increased demand for tobacco and nullifying what our own Government are doing within our own Budget.

The cost of the CAP is bearing very heavily now upon millions of households in this country. My hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) has elicited from our Minister of Agriculture, Fisheries and Food the fact that it is effectively causing every household to pay another £5 a week for food. If people are paying another £5 a week for food, it means that they have £5 less to spend on other items.

When we are anxious about the rising level of unemployment, we must have regard to the fact that every family in this country has £5 a week less on average to spend on items other than food and that in that way they must be reducing their demands for other goods. My hon. and learned Friend the Member for Beaconsfield (Sir R. Bell) tells me that it is £5 per individual. If that is the case, it magnifies my argument.

But in our anxiety about the things that are causing unemployment in our own country let us not overlook what is being done in other countries where there are many thousands of low-cost producers of food who are being driven out of business. When I look at the budget, I am appalled that £4,000 million is going towards undercutting the efficient low-cost producers of the world. That is an enormous sum of money, and it is being used to undercut many of our friends and allies in other parts of the world, who are shamefully being driven out of business, although they can grow food efficiently at low cost. It is grossly immoral. I cannot see any defence of a budget which is to spend £4,000 million on doing that. That is why I, for one, will oppose it, much as I shall regret voting against the Government this afternoon.

1.58 pm

Sir Anthony Meyer (Flint, West)

: I shall not exceed my two minutes, Mr. Deputy Speaker, but I cannot let the occasion pass without dealing with the astonishing assertion of my hon. Friend the Member for Southend, East (Mr. Taylor) that those who support the Government's policy over the EEC in some way represent some kind of a fringe within the party. I have the greatest admiration and affection for my hon. Friend and I was delighted to see him back in this Chamber. But the fact remains that he and those who think like him, who are nearly all on the extreme Right of our party, those who are loudest in their protestations of undying loyalty to the party and to the party's leader, have been consistently attacking and undermining a central issue of the Government's policy. They know that the Government's policies can succeed only on the basis of our membership of the Community, and their attacks have done infinitely more damage than any of the criticisms levelled by my right hon. Friend the Member for Sidcup (Mr. Heath). The Government understand that whatever action we may take within this country to correct our difficulties must take second place to effective action on the international stage. It is only as a member of the European Economic Community, the largest trading bloc in the world, that we can contribute to the flow of world trade, which offers the best prospect for this country in its present position.

2 pm

Mrs. Gwyneth Dunwoody (Crewe)

It is not an accident that Parliaments concern themselves so often with taxation—with the raising and paying of taxes. It is fundamental to the political system and to the decisions that are taken that effect populations. Therefore, the fact that we are debating on a Friday morning what we are told is the budget of the Community, which must inevitably be of great importance to this country, is nothing less than a disgrace. If the Government were serious about giving the House of Commons the proper control and the right to examine the perpetual flow of legislation from the Community, they would not be discussing the budget on a Friday morning, when they know that most Members of Parliament have strong commitments in their constituencies. They would not endeavour—as they frequently do — to push through directives and regulations late at night, presumably because they think that they will slip through unnoticed on to the statute book.

The introductory speech of the Financial Secretary to the Treasury was enormously familiar. He made great play of the fact that of course there have been some changes and that the Government have begun the first of the great series of revisions following their victory in getting some money back from the Community. Let me remind him of what happened.

The Prime Minister told the Community, in, shall I say, strident terms, that we were determined to get our money back. She made it plain that she regarded the payments to which we are at present subjected as totally inequitable and that she was determined to go on until she got a just solution. But when it came to the point, and she did not get her broad balance or her juste retour, not only did she accept that there would be time limits but she apparently accepted that the Community would have the final veto on the sort of projects that would be paid for with the refund from the Community. When we talk today about the new budget, we are seeing a plain example of the ineffectiveness of the Government's attempt to change the Community's policies.

Mr. Lawson

What did Labour achieve?

Mrs. Dunwoody

From a sedentary position, the Financial Secretary asks what we achieved. I shall tell him. Because we had a Minister of Agriculture, Fisheries and Food who was determined to protect the interests of the British housewife, we got better terms than the present Minister, who is free with his plain statements that he thinks agricultural policy should be left as it is. Our Financial Secretary made it plain to the Community that he was not prepared to accept the unfair burden that was placed upon us. At that time we had no support from the Conservative Opposition. At meetings of the European Assembly I heard Conservative Members saying time and again that Socialists were non-communautaire because they even dared to question the amount of money that Britain was paying into the kitty. I am now told "Only the Conservative Government can achieve what none of you managed to do."

The reality is that the right hon. Lady the Prime Minister made a great fuss and is now turning tail because she is terrified that she has made manifest to the people of this country the real cost of our membership of the Common Market. As soon as it became clear to her how much deep unease there was in the population of these islands about what was happening under the existing Community, she turned tail and said "Now we must have a big propaganda display to convince people that really the Community is in their best interests and it is their best friend."

Mrs. Kellet-Bowman

Will the hon. Lady give way?

Mrs. Dunwoody

No. I must not take any more time than I am allowed.

The clear thing about this particular budget, like every other Community budget since we entered, is that the one cornerstone, the only important policy, is the agricultural policy. It is the policy that takes up at least 80 per cent. of the payment. Although the Financial Secretary said that we would now be changing FEOGA so that we have a special reserve, and although he said that we have reduced the subsidies on skimmed milk for animal feed, what he did not say is that there is absolutely no logic in this agricultural policy. It is the logic of bedlam that says that one does not produce agricultural goods and products that one's people need and that one's climate dictates but that one produces agricultural products only on the basis that they will get open-ended subsidies from the Community. In the detail of the existing budget, that has been continued even in 1981.

We have heard from my good friend the Member for Birmingham, Erdington (Mr. Silverman) that there are very grave problems in the financial controls of the Community and that most of the agricultural expenditure cannot be touched because it is obligatory expenditure, and, therefore, there is no hope of our doing anything about it. I understand that there is a very great deal to worry about in the financial controls.

I ask this question of the Financial Secretary. Let us suppose that in the new price review the present Minister of Agriculture, far from arguing for lower prices, goes along with increased farm prices, prices that will pay more back to the agricultural community than it is getting even from the the present artificial green pound. Will be then make clear that he is not prepared to ask for a supplementary budget for more agricultural payments at the end of the Community's agricultural year? Or will be say "Because this is compulsory expenditure, and because the price review was not catered for in the budget, we shall be prepared to accept increased expenditure"? If that is the reality, it makes nonsense of all the pious hopes that the Government have expressed about wanting to change either expenditure on agricultural affairs or commitments from this country.

I have been deeply distressed by the attitude of Her Majesty's Government overall to the cutback in aid to the Third world, but they have persistently said "As members of the Community, we actually give a great deal of money through Lomé and we give considerable amounts of support from the EDF."

The Committee that sits under the superb chairmanship of my hon. Friend the Member for Erdington has made it plain that the EDF, far from being efficiently administered, is quite positively misusing funds. The Committee lists specific instances. It points out how desperately unfair it is in countries which are already suffering from every known problem of poverty that the aid that is going from the Community should be in some cases misused and in other cases misdirected. I should like the Financial Secretary to tell us how he envisages setting up proper controls over that sort of fraud and misuse, some of which is inadvertent but some of which is deliberate. If the Community is looking at its expenditure, it should be considering the administration of those funds.

We can see no sign that the Government intend to do anything to change the financial controls within the EEC. If the great misuse of expenditure by institutions is to continue, why is there no clear indication that there will be changes in the institutions? Why has the Spierenburg report not been acted upon? Why is there continuing expenditure on moving the Assembly from place to place? The Commission has had some of its demands cut back, but it still appears to be able to ask for increased staff way above the numbers that can be justified by the inclusion of a new member State. The regional fund, small and badly administered though it is, is tremendously important to countries such as Britain which are eligible for help. Why is the fund not to be put on a more efficient basis?

One criticism made by our Scrutiny Committee is that the budget has a great deal of inequity between its commitment and appropriation headings and that in many instances unrealistic amounts were entered in last year's budget, in which the appropriations bore little resemblance to the amounts spent.

We are told that the reason is that member States often do not submit projects in time, do not administer them in the right way and do not get from the Community all that they could if they operated efficiently. That is a fallacious argument. The Government cannot make up their minds on their attitude towards the regional and social funds. The Government have contributed more than any other to youth unemployment, and they should be looking for ways of getting assistance for the young and the unemployed and for youth retraining schemes. Instead, they are cutting social fund expenditure and they have cut the regional fund in real terms.

The Government have said that they are prepared to go along with the inclusion in chapter 100 of various extra headings, but they will not contribute to our economy. There has been no indication that the Government are prepared to look at positive means of supporting the regions that are worst hit by current economic policies.

If there is to be equity of treatment throughout the Community, why are not the Government actively searching for means of getting support for Scotland and the areas of Wales where forms of primary employment have been closed and where new jobs are not being created? Even by their own standards, the Government are not seeking to use the Community budget in the way that they suggest is possible.

We had from the Financial Secretary at the start of the debate a superficiality of approach which was almost insulting. He has not once put forward the political reasons for the lack of change in the budget. He said, in effect, that over a period of time we shall be able to bring about changes, that agriculture will take less and that regional and social projects will take more, but he has not demonstrated that today, in his membership of the Council or in the decisions taken in Brussels. He has not given the European Parliament any indication that he is not prepared to go along with the present level of spending on agriculture. Some of his right hon. and hon. Friends have asked why, if he is so worried, he cannot withhold our payments from the Community. I should hardly think that he is prepared to go along with that. He has not, however, made plain and has not stated to Parliament that we cannot continue to fund a policy that is manifestly absurd and that is costing every man, woman and child in this country £60 a year as a minimum assessment.

If we are to be members of the European Community and if our future is to lie within that marketing organisation, certain things are essential. We must return to the House of Commons the power of decision-making so that we decide how we are going to spend our money. We must cease to go along with the Alice-in-Wonderland nonsense of the present agricultural policies. We must begin to ensure that the future of Britain in the Community is based on sense and common sense and not on a totally erroneous idea of a fairy tale future that will never come.

2.16 pm

Mr. Lawson

We have had a wide-ranging debate, as is normal on these occasions. I have been asked a number of questions by my hon. Friends who are present, most of whom have spoken, and also by Opposition Members, most of whom, again, have spoken. Although I shall report to the Leader of the House the feeling about holding the debate on a Friday, I think that this has been as lively and as full a debate as we would have had on any day of the week.

I may not have time to reply to all the points that have been made. I hope that if I leave out any hon. Member's remarks from my reply, he or she, if they feel strongly, will write to me. I shall do my best' to remedy the omission.

I should like to deal first with the matter raised by the hon. Member for West Lothian (Mr. Dalyell), who, I understand, has to leave in a few minutes. The hon. Gentleman asked about Community aid for victims of the Italian earthquake disaster under chapter 59. I understand that while we have been debating the matter, so has the Commission. It has decided to adopt proposals for further measures to help the victims of the earthquake and will shortly be presenting a supplementary budget to deal with the matter.

There was a certain amount of discussion of the question of financial control and the activities of the Court of Auditors in the Community. I did not touch on the matter in my opening remarks, even though it is important. I concentrated on the budget for obvious reasons. I should, however, like to say something in reply to the points made by the hon. Members for Birmingham, Erdington (Mr. Silverman) and for Newham, South (Mr. Spearing), who devoted most time to this aspect of the documents before the House.

The hon. Member for Newham, South asked me not to approve, or to ensure that the Council does not approve, the discharge certificate in respect of the 1978 Community budget. I am afraid that he is a little behind the times. If he looks at the Treasury explanatory memorandum 5861/80, issued in connection with the document before the House, he will see that the Council recommended that the discharge be approved on 26 March and that Parliament duly granted the discharge on 22 May this year. Nevertheless, I share the disquiet of a number of hon. Members who have spoken about some of the irregularities and other matters that the Court of Auditors turned up.

The Court of Auditors is proving an increasingly useful institution within the Community. I am glad to see that the hon. Member for Erdington assents. One point to which the hon. Gentleman referred was the fact that, apparently, two member States — Germany and ourselves — accounted for 88 per cent. of the irregularities in the guarantee section recorded in 1978. I entirely agree with the hon. Gentleman and with the Committee of which he is Chairman that this seems to suggest that the reported figures for frauds and irregularities are not wholly reliable, that not all member States are equally assiduous in making their reports. There is some disagreement among member States as to what constitutes an irregularity. This accounts to some extent for the difference in the number of cases reported.

The matter must be kept in proportion. As I think the hon. Gentleman conceded, over the period 1976–78 the total reported amounted to only about 0.1 per cent. of the expenditure on the CAP, and a significant proportion of that was subsequently recovered. It is worth bearing in mind also that most of the irregularities are not frauds but simply mistakes made by traders in applying the complex regulations. As I have said, there is also the absence of a generally accepted definition of an irregularity.

Nevertheless, the position is not satisfactory. I am not Pretending that it is. We have been, and still are, pressing the Commission to ensure uniformity of treatment throughout the Community, and the Commission has now produced a working document which sorts out the guidelines on the type of irregularities that should be reported.

We have in various other ways, which I do not have time to go into now, been pressing the Commission to act on what the Court of Auditors has recommended. I hope that the European Parliament will continue to give full support to the court's work.

However, I think that the hon. Member for Erdington was slightly mistaken when he suggested that because FEOGA expenditure was obligatory financial control was impossible. That has nothing to do with its being obligatory. It is not the catching of irregularities but the assessment of what must be spent that is difficult, when it depends so much on the weather, the state of the harvest and so on. It is difficult to know in advance. It has nothing to do with the expenditure being obligatory or with irregularities.

I was asked by a number of right hon. and hon. Members — including the right hon. Member for Battersea, North (Mr. Jay), who is not present, and my hon. Friend the Member for Southend, East (Mr. Taylor), who I am glad to see is — about the Government's attitude to the CAP. We are far from satisfied with how it works out in practice. In particular, it was never envisaged that the CAP should create the substantial surpluses that are at the core of the present problems. The bulk of budgetary expenditure is in order to deal with those surpluses. Therefore, the problem must be tackled at source by introducing policies to reduce them.

Mr. Spearing

When?

Mr. Lawson

Clearly, it cannot be done overnight; it must be a long-term process, but it must be started now. A key requirement is a restrictive price policy to limit incentives to produce, but that alone is not enough. We shall have to pay attention to particular problems, such as the milk problem. Action is particularly urgent in the milk sector.

We must see the outcome of the remit to restructure the Community budget which came from the 30 May agreement. It was not simply an agreement about refunds for Britain; it was also a charge to the Commission to produce proposals, which it will produce in due course, in a matter of months, for restructuring the budget.

Mr. Shore

Can the hon. Gentleman say anything further about the timetable, first, for the Commission's initial proposals and, secondly, when it is hoped that some general discussion will have taken place within the Community?

Mr. Lawson

We hope that the Commission will have produced its proposals by May next year.

The budgetary restructuring exercise also will obviously be considerably strengthened by the way in which the Community is getting nearer and nearer to the exhaustion of its own resources at the 1 per cent. VAT ceiling. I was asked whether the oil levy would be an easy let-out in those circumstances. That levy is only one of a number of ideas produced by the Commission which are being studied. It is far too soon to comment on its merits, and in any case it would not fall within the time scale which would be necessary, even if it were approved, to deal with the exhaustion of the "own resources" provision now and the discipline that that imposes on restructuring.

My hon. Friends the Members for Dorset, West (Mr. Spicer) and Scarborough (Mr. Shaw) discussed the expenditure of the European Parliament itself and the gentleman's agreement under which the Parliament and the Council have the final say on their own expenditure. This agreement has lasted for many years. It is a matter not of Community law but of practice and was accepted by the previous Government when they represented the United Kingdom on the Council.

However, I am concerned about the growth of the Parliament's budget. I have expressed this view in the Council and I know that many Members of the European Parliament themselves, particularly within the European Democratic Group, are also concerned. It is a little worrying that, although the Council significantly cut its own budget, by about 8½ million units of account, from the draft produced this year by the Commission, the Parliament did not see fit to cut its budget at all. I hope that the feeling among the European Democratic Group in the Parliament will spread to other groups, or I foresee a day when the gentleman's agreement may have to come to an end.

Part of the reason for the high expenditure is the existence of three seats for the Parliament, which adds about 18 mua to expenditure. That can only be changed unanimously. It is not something to which the British Government have any objection.

The hon. Member for Newham, South asked a number of questions about the refunds for Britain, which I know are of concern to many hon. Members and are important in the light of the vote that we shall shortly have. The projects under the supplementary measures will be subject to exactly the same parliamentary control as all other expenditure projects in this country.

I was asked what would happen if the Commission turned down applications by us. There is no reason to believe that the Commission will do so. This is a political commitment by the Community as a whole which the Commission will take into account. It is time that it is possible for the Council to reject by a qualified majority—approval as such is not required—measures proposed by the Commission, but I do not expect that to happen. This procedure is the result of a unanimous agreement by the Council of Ministers.

The investment programmes concerned were notified to the Commission on 6 November and the House will be kept fully informed of future developments. We expect to know pretty soon the outcome of the Community discussions on these measures. The ad hoc committee will be meeting early next month. That means that there can be no connection of the kind suggested by my hon. Friend the Member for Southend, East with the fishery negotiations. We shall know the result of the Commission's decisions on these matters well before the fishery negotiations are completed. They do not have to be completed until the end of the year and the price fixing does not have to happen until the following year. There is, therefore, no linkage with any of these matters.

We have a firm commitment that we will get those refunds. My hon. Friend said that we should take Europe on trust. I believe that we should, and I am confident that we will get the refunds that we have been offered.

I have replied to most of the questions asked by the right hon. Member for Stepney and Poplar (Mr. Shore), but he did not reply to the crucial question that I put to him—whether it is the position of Her Majesty's Opposition that Britain should withdraw from the European Community. That is the question that I asked him and I ask him again. If he cannot say "Yes" and he cannot say "No", he cannot be taken seriously.

Question put, That the amendment be made:—

The House divided: Ayes 31, Noes 91.

Division No.4]	[2.29 pm
AYES
Body, Richard	Maynard, Miss Joan
Booth, Rt Hon Albert	Pavitt, Laurie
Bottomley, Rt Hon A.	Powell, Raymond (Ogmore)
Campbell-Saviours, Dale	Prescott, John
Cocks, Rt Hon M. (Bristol S)	Proctor, K. Harvey
Cryer, Bob	Shore, Rt Hon P. (Stepney)
Deakins, Eric	Silkin, Rt Hon J. (Deptford)
Dormand, Jack	Silverman, Julius
Dunwoody, Hon Mrs. G.	Spearing, Nigel
English, Michael	Thomas, Dafydd (Merioneth)
Haynes, Frank	Walker, Rt Hon H.(D'caster)
Healey, Rt Hon Denis	Welsh, Michael
Hughes, Mark (Durham)	Willey, Rt Hon Frederick
Jay, Rt Hon Douglas	Winnick, David
Leighton, Ronald	Tellers for the Ayes:
Lyon, Alexander (York)	Mr. Walter Harrison and
McKay, Allen (Penistone)	Mr. Terry Davis.

NOES
Alexander, Richard	Hawkins, Paul
Aspinwall, Jack	Hawksley, Warren
Baker, N. (N Dorset)	Heddle, John
Beith, A. J.	Hogg, Hon D.(Grantham)
Benyon T. (Abingdon)	Hooson, Tom
Berry, Hon Anthony	Hordern, Peter
Best Keith	Hunt, David (Wirral)
Bevan, David Gilroy	Hunt, John (Ravensbourne)
Biggs-Davison, John	Hurd, Hon Douglas
Blackburn, John	Johnston, Russell (Inverness)
Bright, Graham	Jopling, Rt Hon Michael
Brinton, Tim	Kellett-Bowman, Mrs Elaine
Brown, Michael	Lawrence, Ivan
Bruce-Gardyne, John	Lawson, Nigel
Cadbury, Jocelyn	Lester Jim (Beeston)
Carlisle, J. (Luton W)	Lyell, Nicholas
Chapman, Sydney	Macfarlane, Neil
Clark, Hon A. (Plymouth S'n)	MacGregor, John
Clarke, Kenneth (Rushcliffe)	Major, John
Colvin, Michael	Maude, Rt Hon Angus
Cope, John	Mellor, David
Cranborne, Viscount	Meyer, Sir Anthony
Dover, Denshore	Mills, Iain (Meriden)
Dunn Robert(Dartford)	Murphy, Christopher
Dykes, Hugh	Neale, Gerrard
Fenner, Mrs. Peggy	Nelson, Anthony
Fowler, Rt Hon Norman	Neubert, Michael
Gardiner, George (Reigate)	Normanton, Tom
Garel-Jones, Tristan	Onslow, Cranley
Goodhew, Victor	Page, Rt Hon Sir G. (Crosby)
Goodlad, Alastair	Page, Richard (SW Herts)
Grieve, Percy	Parris, Matthew
Griffiths, P. Portsm'th N)	Patten, Christopher (Bath)
Grimond, Rt Hon J.	Rhodes James, Robert

Rhys Williams, Sir Brandon	Thomas, Rt Hon P. (Hendon)
Ridsdale, Julian	Thorne, Neil (Ilford South)
Sainsbury, Hon Timothy	Walker, Rt Hon P.(W'cester)
Shaw, Michael (Scarborough)	Ward, John
Shepherd, Colin (Hereford)	Warren, Kenneth
Sims, Roger	Wells, B.(Hertford)
Speed, Keith	Wickenden, Keith
Speller, Tony	Wiggin, Jerry
Spicer, Jim (West Dorset)	Worfson, Mark
Stanbrook, Ivor
Stevens, Martin	Tellers for the Noes:
Stewart, Ian (Hitchin)	Mr. Peter Brooke and
Stradling Thomas, J.	Mr. Robert Boscawen.
Tebbit, Norman

Question accordingly negatived.

Main Question put and agreed to.

Resolved, That this House takes note of the Draft of the General Budget of the European Communities for 1981; Document No. 10479/80, a Draft Letter of Amendment to it; the amendments and modifications adopted by the European Parliament on 6th November 1980; Document No. 11203/79, Annual Report of the Court of Auditors for the financial year 1978; and Document No. 5861/80, Council recommendation to the European Parliament on the discharge to be given to the Commission in respect of the implementation of the Budget and of the Amending and Supplementary Budgets of the European Communities for the financial year 1978.