HC Deb 20 July 1981 vol 9 cc29-79

[Relevant Commission documents:

Preliminary draft supplementary budget No. 2, 1980

(Document No.

12085/80). Draft supplementary budget No. 2, 1980

(unnumbered).

Modifications and amendments by the European

Parliament to the draft supplementary budget No. 2

1980 (Documents Nos. 12547/80 and 12489/80).

Decisions taken by the Council on the European

Parliament's amendments and modification to draft

general budget, 1981 (unnumbered

explanatory memorandum of 11th December 1980).]

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

I beg to move, That this House takes note of the Preliminary Draft Amending Budget No. 1 to the General Budget of the European Communities for 1981 and the Preliminary Draft General Budget of the European Communities for 1982.

Mr. Speaker

I have selected the amendment in the name of the Leader of the official Opposition.

Mr. Lawson

On Thursday of this week, 23 July, in Brussels, the Council of Ministers will be meeting for the first time to consider the European Commission's preliminary draft amending budget No. 1 to the general budget of the European Communities for 1981, and the preliminary draft general budget for 1982.

The purpose of the debate is to give the House an opportunity to comment on the Commission's proposals before they are discussed at the Budget Council on Thursday, at which I will preside and my hon. and learned Friend the Minister of State will represent the United Kingdom. The House may be assured that he will take fully into account the comments made during the course of this debate.

Unlike other manifestations of the Council of Ministers, the Budget Council is unique in having to maintain the closest possible mutual understanding with the European Parliament, which has the power to amend within limits and, indeed, to reject the Council's budgetary proposals.

The Budget Council will accordingly be meeting representatives of the European Parliament on Wednesday, the day before the Council meeting, for an initial discussion of these matters, which will, I hope, get things off to a constructive and reasonably harmonious start. My hon. and learned Friend, who is an expert in these matters, will know that this initiative of meeting the representatives of the Parliament the day before the Budget Council is entirely new and I hope that it will prove helpful. Of course, all this is merely the beginning of a lengthy procedure which will, I trust, lead to the establishment of a satisfactory budget for 1982 by Christmas, or even a few days before.

As the motion indicates, various other documents are relevant to the debate, but I hope that it will be for the convenience of the House if I concentrate on the Commission's proposals for an amending budget for 1981 and for the main budget in 1982, and then perhaps to say a word on the report that was recently published by the Commission on the crucially important matter of restructuring the Community budget. Finally, I propose to deal briefly with the amendment in the name of the Leader of the Opposition.

The main purpose of the 1981 amending budget is to provide a political solution to the continuing dispute over the legality of the 1981 budget, pending the resolution of which three member States—Belgium, France and Germany—have been withholding a part of their budgetary contributions.

The main feature of the proposed amending budget is a reduction of over £300 million in provision for the CAP, largely as a result of the higher than expected level of world food prices, offset by a slightly smaller increase in spending on other items, in particular the regional fund. I have no doubt that the Council will seek to modify these proposals, looking in particular for a rather larger net reduction in expenditure than the Commission has proposed. I very much hope that on this sensible basis it will be possible, with the agreement of the European Parliament, to bring to an early end the outstanding dispute over the 1981 budget, whose legality would then be accepted by all member States. It is clearly in the interest of the United Kingdom and the Community alike that that should be so.

I come now to the 1982 budget. The full details of the Commission's proposals are set out in the documents that are available to the House and are summarised at length in the Treasury's explanatory memorandum of 26 June. The net effect would be an increase in payments over 1981—after taking into account the proposed amending budget for that year—of about £1½ million, or about 16 per cent. Within that figure, expenditure on the CAP is assumed to rise on the same basis by 8.3 per cent., and expenditure on the non-agricultural parts of the budget—of which the regional and social funds are, of course, the most important—by about 37.6 per cent. I want to make it absolutely clear that these are proposals made by the Commission. When the Council considers them, I have no doubt that it will inevitably have in the forefront of its mind the domestic budgetary preoccupations of the various member States of the Community. Most of them are engaged at present in a protracted and painful process of belt-tightening at home, and would expect there to be a widespread awareness of the fact that one cannot justify austerity at home and expansiveness abroad.

That is not the only constraint on Community expenditure. Happily, the Community budget is obliged to be in balance and, thus, expenditure is rigidly tied to revenue. Both the Council and the Parliament will be keenly conscious of the inexorable approach towards the ceiling on the Community's resources imposed by the 1 per cent. limit on the VAT contributions to Community revenues. The 1982 draft budget comes closer than ever to this limit, with an implied VAT rate of 0.95 per cent. Some may consider that to be a trifle too close for comfort, but in any event it is already clear that the discipline of the 1 per cent. ceiling is having a salutary effect.

Mr. Tony Marlow (Northampton, North)

What would happen to the 0–95 per cent. of VAT if there were a massive lowering of world food prices? Would it become higher? Would there be a problem? How would the Community budget then cope?

Mr. Lawson

My hon. Friend may benefit from listening to all my remarks. I was about to say that there can be no increase in the 1 per cent. VAT limit except on a unanimous basis. All member States must agree. As I was about to say, Her Majesty's Government have made clear their determination to keep the ceiling in place, as have the German Government.

Mrs Elaine Kellett-Bowman (Lancaster)

Will my right hon. Friend also seek to keep in perspective the proportions that the Commission has suggested? Would he not be in favour of retaining the proportion of plus 8.3 per cent. to agriculture and plus 36.7 per cent. to regional and social spending, because the regional and social funds are immensely advantageous to this country?

Mr. Lawson

My hon. Friend is a Member of the European Parliament and a great expert on these matters. I assure her that I shall be dealing with the question of the balance between the various parts of the Budget; indeed, I am asked to do so by the Opposition amendment.

As I was saying, the own resources ceiling imposed on the Community's budget is the sort of financial discipline that is imposed at home by the limits to which member Governments can tax their people or borrow. To raise the ceiling as soon as it was reached would not be consistent with the present need for economy and restraint. The Community budget can no more do without financial discipline than can our domestic budget. Any increase in Community public expenditure has precisely the same economic consequences as does any increase in national public expenditure. What is just as important is that one major incentive to improve the working of the CAP would be removed if the ceiling were increased, since the way would then be open for a further uncontrolled increase in agricultural expenditure by the Community.

There are no automatic stabilisers under the CAP—nothing to shield the net contributor countries in particular from the consequences of any collective extravagance. On the contrary, the more that expenditure rises on that, the greater the budgetary imbalances become, with the position of the net contributor countries correspondingly worsened.

Therefore, within the resources available, it is my hope that member Governments will accept the need to restrain the provision for CAP expenditure. Otherwise, there can be no hope of, and no scope for, developing new areas of expenditure—for example, on industry and employment measures. We have to shift the balance of the budget since there is no possibility of finding large amounts of new money to spend in those other areas, however worthy they may be.

Within the overall proposals contained in the 1982 draft budget, provision for the European agricultural guidance and guarantee fund, as it is called, accounts for over 60 per cent. of total expenditure, as the Opposition's amendment points out. That is certainly less than in previous years, but still the lion's share.

Since the Community is so close to the limit of its revenue, it is all the more important that we should ensure that estimates in all areas, not excluding the CAP, are tightly drawn. During the Budget Council discussions we shall, therefore, be looking very carefully at the Commission's estimates included in the 1982 preliminary draft budget to see whether savings can be made in those proposals.

Within the possibilities for increased expenditure, as compared with last year, the United Kingdom intends to urge that priority be given to the regional and social funds. We have been a significant net recipient from those funds in the past, and that has enabled us to finance a higher level of expenditure in the United Kingdom in those areas that would otherwise have been the case. In any event, those are the most important areas of so-called non-obligatory expenditure since they are directly concerned with improving employment prospects and alleviating regional imbalances.

I now turn to the United Kingdom's net contribution to the Community budget and to the whole question of restructuring the budget, of which this is a vital part. As the Treasury's explanatory memorandum makes clear, the preliminary draft budget for 1982 included £867 million by way of provision for refunds to this country to implement the end-May 1980 agreement relating to this country's net contributions to the Community budget.

The Conservative Administration can take considerable satisfaction from the fact that the Budget now includes specific provision for refunds to this country. Successive British Governments have argued continually about our budget contribution, but this is the first time that we have seen money in the bank. We owe that achievement to a great deal of persistent negotiation, notably by my right hon. Friend the Prime Minister, leading up to the agreement concluded on 30 May last year. We have so far received about £645 million and expect more later this year.

I concede that this is only the beginning of the road. The next step must be to build on the 30 May agreement to achieve an improved and lasting solution to the budget problem. The agreement guarantees us a second year of refunds, which will come mostly in 1982. Thereafter, it commits the Community to a radical reform of the budget—to "restructure" it, in the jargon. If this cannot be achieved in time to affect the 1982 budget, the United Kingdom special refund will be extended.

Mr. Denzil Davies (Llanelli)

The Minister has explained that some money will be coming as a result of the 30 May 1980 agreement, which relates only to the 1981 budget. Will he tell the House, as his explanatory memorandum does not, what will be Britain's net contribution in respect of—I choose my words carefully—the 1982 budget? He tells us that the gross contribution will be £2,700 million.

Mr. Lawson

The net contribution this calendar year will be a little more than £500 million. With regard to next year, with the leave of the House, I hope to be able to reply to the debate and I shall certainly give the hon. and learned Gentleman the best estimate, but it will be roughly of the same order.

The Community is now committed to a radical reform of the budget. My right hon. and learned Friend the Chancellor referred to this in his speech at The Hague on 3 June, when he set out the Government's general approach to the whole issue. He argued that the Community must in future take conscious decisions on the overall effect of the budget on individual member States and that those decisions should be based upon objective criteria, such as relative prosperity and population size.

Since then, as hon. Members will be aware, the Commission has produced its initial proposals in pursuance of the mandate entrusted to it. Its report clearly recognises the need both to improve the operation of the CAP and to correct the United Kingdom's inequitable budgetary situation. It makes some interesting suggestions as to how to achieve those aims. In particular, it suggests that some continuing correction should be made for the United Kingdom's low receipts from the CAP.

I am sure that hon. Members on both sides will understand that it is far too early to say what the precise effect on the United Kingdom would be. There are no figures in the Commission's report. The effect of its proposals would clearly depend upon all kinds of details which have yet to be discussed within the Community. None the less, it is helpful to have proposals on the table and we look forward to examining them sympathetically with our partners.

Mr. Marlow

My question is purely for clarification. The Minister said that in 1981 the net budget contribution would be about £500 million. We pay some money this year and we get some back next year. Is he saying that at the end of the calculation it will be £500 million, or that the cash flow effect of our membership of the Community in terms of budget contribution this year will be £500 million? If it is more than that, will he tell the House?

Mr. Lawson

With the exception of a small amount in advances, we get the flows in arrears. That is to say, the refunds in respect of 1980 are received in 1981 and those in respect of 1981 will be received in 1982. Indeed, the mechanism is such that our precise entitlement can be calculated fully only at the end of the year in question. It is therefore inevitable that the refunds should be paid afterwards. There is no lengthening lag, as it were. It is simply that, with the exception of the advances, payment is in arrears.

Mr. Donald Anderson (Swansea, East)

Will the Minister give an assurance that any formula accepted by the Government will be no less favourable than the current formula negotiated in May last year?

Mr. Lawson

We shall certainly negotiate hard for the most favourable formula that we can secure. These are negotiations, however, and I am sure that the House will not wish—as on some occasions, although certainly not all the time, as was apparent in the earlier negotiations—to put the Government at any disadvantage in the conduct of the negotiations.

The Commission's approach, of course, is not the only possible one. It could have cast its net a little wider in its search for solutions. It could have followed the lines suggested by my right hon. and learned Friend the Chancellor in his speech at The Hague. The problem of budgetary imbalances is not merely a British problem. The 30 May agreement makes it clear that the aim is to avoid an unacceptable situation for any member State. It is also clear that the Community needs a durable solution. The Commission's proposals are rather more limited. The scheme that it suggests would be temporary and confined to the United Kingdom.

One of the main questions that we and other member States will have to ask is whether the Commission's proposals might be adapted to provide a broader and permanent Community solution. The European Council has agreed that the issues must be examined intensively in the second half of this year. We, as the Presidency during that period, shall do our best to make progress. Needless to say, it will not be easy. Nevertheless, we may take heart from the fact that very considerable progress has been made in the past two years. The nature of the problem is now well understood, as it was certainly not when we took office, and it was officially recognised when the 30 May 1980 agreement was concluded. We must now build on that.

I turn finally to the Opposition amendment. I must say that this is one of the most brazen pieces of impudence to have sullied the Order Paper. They complain that the budgets before us today make no basic reform in the EEC Budget arrangements or in the Common Agricultural Policy". Even the Opposition must surely be aware, as I have already pointed out, that this is precisely what the restructuring exercise is about. That is made absolutely clear in the Commission's recent report. It also makes clear that this will now be carried forwards by the Foreign Affairs Council, under the chairmanship of my right hon. and noble Friend the Foreign Secretary and by the European Council under the chairmanship of my right hon. Friend the Prime Minister. I shall seek to ensure that the 1982 budget is consistent with that objective. That is a great deal more than could be said for any of the EEC budgets regularly commended to the House by Labour Ministers when they were in Government.

Secondly, the Opposition complain that the budgets before us fail to achieve a broad balance between the United Kingdom's contributions and receipts". That complaint comes from a party which, when in office, huffed and puffed a great deal but at the end of the day achieved precisely nothing in mitigation of the imbalance. In 1978, the Labour Government's final year of office, the United Kingdom's net contribution to the EEC budget was £804 million—or about £1,100 million at today's prices—and was on a sharply rising trend. This year, as a result of the tough and successful negotiations that we concluded on 30 May last year, our net contribution is expected to work out at £574 million—half what it was during the Labour Government's last year in office.

Thirdly, the Opposition complain that the 1982 budget makes: inadequate provisions for regional, industrial and social policies". The House will be interested to know that the total provision for such policies in the 1982 budget is £1,129 million, which is a record figure.

The Opposition further complain that the 1982 budget commits: over 60 per cent. of the Community's total expenditure to the support of the Common Agricultural Policy". I assure the right hon. Member for Battersea, North (Mr. Jay) that that is perfectly true, but in 1978—Labour's last year of office—it was 80 per cent.

There is only one word for the Opposition's amendment—humbug. To say the least, it is also a disingenuous amendment, because the whole House knows what really lies behind it. It is not a desire to reform the Community budget at all, nor to secure justice for the United Kingdom within that budget, both of which are at the very heart of the restructuring exercise on which we and the rest of the Community have already embarked. What lies behind it, although they seem curiously reluctant to come clean about it, is the fact that the Labour Party is now firmly committed to total United Kingdom withdrawal from the European Community, regardless of the consequences for United Kingdom industry and British agriculture. [Interruption]. I note that Labour Members cheer at the consequences of withdrawal.

Mr. Teddy Taylor (Southend, East)

If, as my right hon. Friend says, the Labour Party is now advocating withdrawal and he is saying that this would have serious consequences, is it not about time, as I and other hon. Members have urged, that we had an authoritative independent study of the economic consequences of the United Kingdom's membership of the EEC? Why will not the Treasury or anyone else get down to it?

Mr. Lawson

Many figures are published, probably too many, but this is not merely a question of figures. In any event, if my hon. Friend were to ask British agriculture and British industry where they thought their advantage lay, he would get a clear answer, and they should know what they are talking about.

When in office, Labour gave the British people the choice in a referendum — a choice that the people exercised in no uncertain manner. No doubt the people were influenced by the eloquence and the experience—[HON. MEMBERS: "Of Mr. Roy Jenkins."] No, it was not just Mr. Roy Jenkins. I think that they were influenced rather more by the then Labour Prime Minister, the right hon. Member for Huyton (Sir H. Wilson); the then Foreign Secretary, the right hon. Member for Cardiff, South-East (Mr. Callaghan); and the then Chancellor of the Exchequer, the right hon. Member for Leeds, East (Mr. Healey). All of them agreed most vigorously and argued that it was vital that we remained within the EEC. Where do they now stand in relation to the Labour Party's new policy?

The Labour Party is for total withdrawal without even so much as a referendum. Why does it want to get out? I assure my hon. Friend the Member for Southend, East (Mr. Taylor) that it is not for the reasons that he would like to get out. The Labour Party wants to get out because it believes that the Socialist policies of a future Labour Government would not be possible within the framework of the European Communities.

Mr. Anderson

What about President Mitterrand?

Mr. Lawson

As the hon. Gentleman has just pointed out, we have a Socialist President and Socialist Government in France who are committed to the most far-reaching Socialist measures, including nationalisation on a massive scale. Yet President Mitterrand is confident that what he seeks to do is compatible with the framework of the EEC, and there is no talk of France wishing to withdraw.

It is clear that the Socialism of President Mitterrand—this is the only conclusion that one can reach—must be a very mild brew indeed compared with the extreme policies to which the Labour Party is now committed, although it says little about them. The mind boggles, but the nation is warned.

On many occasions the House has debated the Community's financial problems. Legitimate concern has been expressed about the balance of expenditure in the Community budget between agriculture and non-agriculture programmes, about financial control in the Community and about the effect of the budget arrangements on the United Kingdom. None of those problems can be easily solved, but I believe that we are beginning to see distinct progress.

As to financial control, there is now distinct evidence that the approach of the 1 per cent. ceiling is creating a new mood in the Community. The Commission, the Council of Ministers and the European Parliament are all being forced to take hard decisions about priorities and value for money. The old attitude of settling the policy regardless of its cost is fast disappearing.

There is the special United Kingdom problem which is of great concern to all hon. Members. During 1981 we have received substantial refunds. Provision for further refunds is included in the draft budget for 1982. Following the 30 May agreement, the Commission has made a proposal in its report for solving the problem in the longer term.

I concede that none of these are revolutionary developments. None of them fully dispose of the anxieties expressed in the House on many occasions, although they dispose of the Opposition amendment. I have no doubt whatever that we are slowly progressing towards a saner Community budgetary policy, and on that basis I commend the motion to the House.

4.26 pm
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 Preliminary Draft Amending Budget No. 1 to the General Budget of the European Communities for 1981, nor the Preliminary Draft General Budget of the European Communities for 1982, as they make no basic reform in the EEC Budget arrangements or in the Common Agricultural Policy, fail to achieve a broad balance between the United Kingdom's contributions and receipts, make inadequate provisions for regional, industrial and social policies and continue to commit over 60 per cent. of the Community's total expenditure to the support of the Common Agricultural Policy. Having read the motion, I can well understand the Financial Secretary's sensitivity. I can well understand why he should worry about returning to the whole question of the proper contribution which the United Kingdom makes to the EEC. Like the right hon. Gentleman, I shall work my way through these volumes of documents and shall attempt to deal with most of these questions in a reasonable order.

This is the first debate on Community affairs since the United Kingdom took over the Presidency of the Council of Ministers at the beginning of July. I can only hope that the Government will use whatever facilities that office provides to reinforce the British case and will not use it to arbitrate between British and Community interests. Frankly, I am not terribly impressed and encouraged by the thought that the right hon. Gentleman will preside over the budgetary Council and that the Minister of State will advocate British interests under his guidance and chairmanship.

I expected the Financial Secretary to make some play of the proposed increases in the 1982 preliminary draft budget on non-agricultural expenditure, and he did not disappoint me. However, he was absolutely right to point out that there is a world of difference between what the Commission proposes and what the Council of Ministers disposes. Indeed, it is optional expenditure as distinct from non-optional expenditure and, as we know, optional expenditure can easily be the first casualty in any major tussle between the Assembly and the Council of Ministers or when economies must be made.

As the right hon. Gentleman and the House well know, agriculture remains at the heart of the EEC budget. The guarantee section of the CAP will take just over 61 per cent. of the budget total in 1982, compared with about 63 per cent. in the amended budget for the previous year, which is also before us. The guidance section of the CAP will take a further 3½ per cent.

The fall in the percentage that has gone to the CAP in the last two years does not reflect positive decisions by the EEC to cut down on its allocations for the common agricultural policy. Indeed, the decisions of the Council last April on agricultural prices resulted in an increase of nearly 500 mua in support of agricultural prices and other related programmes. The decrease in total expenditure, as the Financial Secretary indicated, came about largely from a rise in world prices. If world prices were to fall substantially, there would be a total budgetary catastrophe and financial ruin would befall the EEC as it approaches the margin of the own resources.

There are, I understand, two savings. The first is that when world prices rise, the cost of the enormous expenditures that the EEC undertakes in the form of export restitutions, the subsidising of otherwise high-cost surplus EEC agricultural production and the subsidising of those surplus exports on world markets inevitably falls. The other factor, I am told, that contributes to the saving is the high rate of positive monetary contributions—compensation amounts—that are charged in the accounts of the budget as negative expenditure. We in Britain are now making a substantial contribution in that form since we have very large positive MCA payments.

Nevertheless, these developments have made possible some savings in the amending budget of 1981 and also some additional proposed expenditure under the regional, social and industrial chapters for the draft budget of 1982. While the specific policies are to be increased under the Commissions proposals by, I think the Financial Secretary said, 38 per cent.—although some of the figures may represent a difference between commitment and appropriation of 50 per cent.—it should be remembered, as the Commission's document observes, that in absolute terms the total funds involved"— regional, social and industrial— are small compared with the importance of these projects for the future of the Community. Indeed, they are.

The argument and underlying purpose are stated in the first sentence in volume 7A—the dominating volume of the whole batch of documents of the Commission's preliminary draft budget. It says that in drawing up the 1982 budget the Commission has sought particularly to enable the Community to respond as effectively as possible to the demands placed upon it by the continuing economic recession". The economic recession has indeed deepened, as hon. Members will recall from the document that was submitted to the recent European Council meeting in Luxembourg as a background paper. In the Community as a whole, GDP in 1981 is expected to be minus 0.4 per cent. Unemployment, which was 6.1 per cent. last year, is running at 7.7 per cent. in 1981. This means that more than 8 million men and women are unemployed in the EEC as a whole. The position in Britain, of course, is far worse than the Community average. It is not 7.7 per cent.

unemployment for us; it is 10.5 per cent. While the Community average shows a decline of 0.4 per cent. in GDP, our decline is no less than 2.2 per cent. Yet again, while the EEC as a whole expects to raise its GDP by around 2 per cent. next year, our own GDP, if the forecasts are correct, will at best rise by about one half of 1 per cent.

Mr. Arthur Lewis (Newham, North-West)

My right hon. Friend says that unemployment in this country is 3 million while in the EEC as a whole it is 8 million. That is a difference of 5 million. We are told every day, from the Prime Minister downwards, that our unemployment is due to wicked workers receiving too-large wage increases, that they will not work, and so on and so forth. If the figure for the rest of the EEC is 5 million, is it the case that its workers are also getting too much money and will not work?

Mr. Shore

Of course not. My hon. Friend knows the answer to his own question. There are two separate factors. There is indeed a world recession. Other countries in Europe are experiencing its effects in terms of unemployment. One can only hope that those who manage the affairs of the larger industrial nations meeting in Ottawa at this time will show greater wisdom in tackling this problem than they have shown in the past. Quite separate from that is what I would describe as the Thatcher factor in British unemployment. There is no doubt that the peculiar and special policies pursued by this Government and by Treasury Ministers have done extra damage to the economy of our own country.

The main point is, unhappily, that unemployment has risen and is likely to rise further not only in Britain but in the EEC as a whole. Against this background we have to assess the increase in expenditure or proposed expenditure on social policy, regional policy and industrial policy. It is here that matters must be seen in proportion. Regional policy in the 1982 preliminary draft budget is increased for the whole of the Common Market by £250 million, if that is approved. The social fund is raised by approximately £170 million and the whole range of industry, energy, transport and research policy by some £75 million. The sum of all these increases is rather less than £2 per head per annum for the 250 million people in the EEC—a programme equivalent of an increase in expenditure of £100 million in the United Kingdom.

Mr. David Myles (Banff)

Will the right hon. Gentleman accept that an element of the common agricultural policy budget is directed towards social policy in the countryside, and especially the less favoured areas?

Mr. Shore

There are some such expenditures. I can only say to the hon. Gentleman that we certainly pay for them.

Mr. Anderson

Will my right hon. Friend speculate on the amount that we shall get from the pot when the much poorer Iberian countries, with their high populations, enter the EEC in 1984, demanding their own portion from a relatively small source due to the constraints of the VAT own resources ceiling?

Mr. Shore

If regional policy, which is pretty inexact, reflects differences in GDP in various parts of the EEC, it is bound to be the case that funds will be allocated to those countries with the lowest GDP. Portugal, Spain and Greece must therefore be among the main claiming areas of the European Community.

It is difficult to believe that the amounts that I have listed will make any noticeable difference to the economic performance or employment prospects of the EEC and the countries and regions within it. With the guarantee expenditure due to rise by a further 12 per cent. on the CAP and with the guidance section continuing, and totalling together some 64 per cent. of total Community expenditure, the EEC remains what it has always been—a customs union with a common agricultural policy. As the House knows and as the Financial Secretary properly put it to us, the EEC is approaching the ceiling of its so called own resources. Agricultural levies and customs duties go automatically to the Commission, but VAT, under the 1970 agreement, is limited to 1 per cent. of the total yield. In the budget now being discussed for 1982 the call-up of VAT will reach 0.95 per cent. of the authorised 1 per cent. Even this year supplementary expenditure could take the EEC to the limit of its own resources and beyond.

Next year for certain the EEC budget will rise well beyond the 1 per cent. ceiling. The much-heralded crisis of Community finance will break. Given the closeness of the budget appropriation to the ceilings of revenue, it is extraordinary that in its general comment on the 1982 draft preliminary budget the Commission makes no reference to this matter. Nor does it confront the problem of what it will be obliged to do if, through supplementary provisions, perhaps caused by a fall in world food prices, the ceiling is reached and breached this year.

The next major matter raised in our amendment is the continued and unacceptable net contributions that this country pays to the EEC. The 1982 draft preliminary budget and the 1981 amending budget both record and reflect the agreement reached by the Prime Minister in May 1980. It was and remains our contention that it is ludicrous and unacceptable that the United Kingdom should be the second largest net contributor to the EEC budget. During 1979 this House, without a Division, twice supported an Opposition motion calling for an agreement which would ensure that the United Kingdom's receipts were at least not less than the United Kingdom's contributions. It was the Prime Minister herself who, during that period, took the lead in demanding a broad balance. The Chancellor of the Exchequer "marvelled" at his own modesty in making such a demand. It is a very different tune that we have been hearing since then from the Government Front Bench.

In the event, we have had to settle for payments in 1980–81 and 1981–82 which are little less than half the peak figure which was paid in 1979–80. We have had to accept, in short, somewhere near that half a loaf that the Prime Minister rejected before the deal was concluded. Although we shall still be paying, in current terms, over £l billion in net contributions for 1980–81, the budget documents reveal just how insane were the original agreements that were made in relation to the United Kingdom's contributions when the right hon. Member for Sidcup (Mr. Heath) signed the Treaty of Accession.

As the table on page 96 of the 1982 budget so clearly shows, the own resource system bears extremely harshly on the United Kingdom. We pay substantially more than any other EEC country, through levies on imported agricultural products. We again pay more in customs duties than any other EEC country, with the exception of Germany, whose payments are only just above ours. In payment of VAT we are the third largest contributor, with Germany first and France second. The total United Kingdom payment of our own resources is higher than that of any other country except Germany.

I confess that while I judged from the start that the agricultural levies and customs duties would have this massively adverse effect upon our position as a contributor, I am surprised that the 1 per cent. VAT payment does not reflect more closely the relative gross domestic products of the United Kingdom, France and Germany. If German's GDP is twice that of the United Kingdom, and if France's GDP is now 50 per cent. higher than ours, it is, on the face of it, surprising that Germany's VAT contribution should be only 23 per cent. larger than ours, and that of France only 9 per cent. larger than ours. If the Financial Secretary has any explanations to offer on that matter, I shall be interested to hear them.

Nevertheless, whatever the explanation may be, under the own resource system, Britain, with some 16 per cent. of the total Community GDP, makes a gross payment, of about 21 per cent. of the total, and although our gross contribution is about 21 per cent., our share of gross receipts is only about 9 per cent., reflecting above all the relatively small expenditures of agricultural support in the United Kingdom.

We are all conscious of the fact that the May 1980 agreement was not the permanent settlement upon which the Prime Minister had originally insisted but a temporary device to last for two or, at the most, three years. The difficulty and dangers of this kind of arrangement are well illustrated in the 1982 preliminary draft budget.

As the House will recall, the arrangements that followed the agreement of May 1980 led to two regulations providing for a reduction in the United Kingdom net budget contribution. The first was to provide for a partial refund under an amended version of the original financial mechanism negotiated in 1975. The second regulation provided for Community contributions in respect of certain United Kingdom public investment programmes under a scheme of so-called supplementary measures for the United Kingdom.

The original financial mechanism was seriously defective—as some of us, as the Financial Secretary might note, said at the time. We made that one of the principal reasons why we rejected it and took the position that we did in the referendum, when the Financial Secretary and all those others who are now, as it were, teasing us, were only too happy to lend their voices to those who proclaimed that we had the most satisfactory result, that all was well and that Britain was, happily, now a member of the EEC. That was not the view that we took, as the Financial Secretary knows perfectly well, and we argued against it.

Mr. Lawson

As the right hon. Gentleman has repeated what he said at the time, perhaps he will say what his right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said at the time, when he was Foreign Secretary and was in charge of those matters for the then Government, and subsequently became Prime Minister.

Mr. Shore

The then Foreign Secretary said at the time exactly what the present Financial Secretary said at the time—that he was in favour of it. What we are now arguing about is between those who were in favour of the 1971 and 1975 settlement and those who denied it and argued against it from the start. I have never accepted it.

I come to the financial mechanism. I said that it was seriously defective. But it is remarkable that, with the experience of the inadequacies of the 1975 mechanism, the revised financial mechanism, which was negotiated by the present Treasury team, has shown itself to be equally defective. As the preliminary draft budget for 1982 reveals—and it really is a joke— the financial mechanism will not be triggered in 1982: calculations from the latest figures suggest the United Kingdom's contribution to the 1981 Budget will not be more than 10 per cent. higher than it would have been if the member State budget contribution were a function of their share in Community GDP.

That all sounds rather like gibberish, but this is one of the trigger mechanisms of the financial mechanism as revised, with all the skill and knowledge of the Financial Secretary and his colleagues.

The trigger will not work. That is mainly because the rise in the value of sterling relative to the ECU has increased the United Kingdom's share in Community GDP. So, as we have become poorer, in statistical terms we have become richer, we have a larger share of the GDP, and the financial mechanism so carefully examined, re-examined and redesigned, with all the skill which the Financial Secretary could bring to this task, has been shown to be totally inadequate and incapable of being used.

In order, therefore, to meet the obligation under the 30 May agreement, the Commission has placed the total refund under the heading of "Supplementary Measures", which is the alternative route to repayment. That is not a simple matter. The refund to the United Kingdom through the supplementary measures is itself governed by the conditions laid clown in the relevant regulations. The £800 million involved can be spent only on capital projects undertaken by public authorities that fulfil the following criteria, laid down in Commission regulation No. 2744/80.

The first criterion is that they must contribute to the economic and social development of the United Kingdom. The second is that they must contribute to Community integration. The third is that they must ensure, in a diversified manner, the development of economic and social infrastructures. The fourth is that they must not be incompatible with a Community policy. The fifth is that they must not give rise to distortions of competition. The Commission has the right to invigilate the programmes and must not contribute more than 70 per cent. of the annual expenditure cost of each sub-programme.

The amounts paid to the United Kingdom, are, as we know, to be paid in the following year. But if the United Kingdom wants advance payments it will require a qualified majority in a vote on the proposal from the Commission in order to obtain it.

The next point is a good one. The United Kingdom, in agreement with the Commission, is to take the necessary steps to ensure that "suitable publicity" is given to the assistance granted under this regulation. I emphasise the phrase "suitable publicity". No doubt that is why, all over the country, particular projects are publicly identified as reflecting the benefit that the United Kingdom obtains from membership of the EEC and the generosity of its partners. The truth is that our money is simply coming back to us. Even then, only a part of the amount that we are forced to pay comes back.

Mr. Tim Renton (Mid-Sussex)

Given the right hon. Gentleman's vehemence, are we to assume that he is coming to the heart of the matter? Is it now the right hon.

Gentleman's view that come what may—budget restructuring or no—the United Kingdom should get out of the EEC? Is that also the view of his leader and deputy leader?

Mr. Shore

I shall come to that point later, because I am now discussing the budget—[HON. MEMBERS: "Answer the question."] I shall answer the question.

When the House discussed the agreement of 30 May 1980 the Chancellor of the Exchequer made his main claim not the reduction in the extortionate sums that we would otherwise have been paying but the agreement that had been reached to make a fundamental review of Community policies, so that "unacceptable situations" would not arise in the future and particularly in the period in which these temporary arrangements came to an end. As the House will recall, the Commission was required urgently to study the problem and to report not later than 30 June 1981. It was our strongly expressed view at the time that the Commission's terms of reference were seriously if not fatally limited by the instruction to examine the development of Community policies without calling into question the common financial responsibility for these policies which are financed from the Community's own resources or the basic principle of the Common Agricultural Policy. Since the principal problem of the budget is the extraordinary mix of taxes that form "own resources", and since the principal imbalance in the budget expenditure is the structure and basic principles of the CAP, it seemed to us then that the possibilities of major reform were remote.

We now have the Commission's report on its mandate. Indeed, the Financial Secretary referred to some of its features. In the preliminary draft budget for 1982 the Commission acknowledges that it was unable to incorporate the conclusions of the study, which was published on 22 June. However, it obviously believes that the balance in the 1982 budget—particularly the reduced share going to the CAP guarantee section—is "a step in the right direction". It rather optimistically offers to amend its proposals for the 1982 preliminary draft budget if recommendations on its mandate are given immediate effect by the Council. I must say that I find the Commission's report on its mandate extraordinary and unsatisfactory.

I do not know whether hon. Members have had an opportunity to read the document. If they have not, I hope that they will make an early appointment with themselves to do so. Out of 28 pages of prose, the Commission devotes itself to only two pages on the United Kingdom's unacceptable situation. It is not surprising—knowing the Commission—that it has taken an opportunity to read a moral lesson to the nation States of the EEC. It has taken an opportunity to restate its old belief in the further integration of member States and, in particular, in the great goals of economic and monetary union that it has proclaimed since and even before 1972.

When at last the Commission reaches the CAP—I believe on page 12—it endorses its three main principles of market unity, Community preference and financial solidarity, and makes proposals for reform which have an all too familiar ring to most of us. Of course, it draws attention to the necessity of narrowing the gap between Community prices and the prices of its main competitors in the outside world. It believes in the modulation of guarantees in line with Community production targets and in an active structures policy. It calls for tighter financial control by the Community in the management of its CAP expenditures, and for stricter discipline in relation to national aids to avoid undermining Community policies.

As all of us who have studied these things—going back to the days of Mansholt—will recall, this is familiar stuff. What the Commission proposes to remedy the "unacceptable situation" of the United Kingdom is, against this background, no more than an extension, with a new formula, of the existing special arrangements. Since, according to the Commission, the main reason for our vast net contribution to the Community is that we do not obtain a proper proportion of the guarantee section expenditure of the CAP, and since it clearly believes—contrary to what it says elsewhere—that the guarantee section expenditure will continue to form the bulk of the budget, it proposes that the United Kingdom's future refunds should be based on a new mechanism, which compares the United Kingdom's share of Community gross domestic product with its share of receipts for CAP expenditure.

As the Financial Secretary rightly pointed out, no exemplifications are provided, so we have no idea what the result of such a formula might be. However, the passages that I read did not contain a very positive or sympathetic note in relation to improving, or even sustaining, the level of refund that the United Kingdom has recently obtained. It was particularly interesting to note how it was proposed to finance the continuing cost of partial restitution of excess contributions by the United Kingdom. The Commission's first and most hopeful proposal for financing it is to breach the 1 per cent. VAT and to increase the totality of own resources. That is its preferred and clear solution and much pressure will be applied towards that end. Otherwise, it is said that it could be financed by other member States making an abatement on a percentage formula of their receipts from the CAP guarantee section.

The prospect of major changes in the nature, structure and workings of the CAP, as well as changes in terms of refunds from other member States is—based on all experience—remote. Far from being a permanent solution, the Commission proposed that the new measures should apply for a limited period, but long enough for the effects of the new guidelines it proposes to be felt. The position would be reviewed before the compensation system expires, notably when a decision is taken on creating the additional own resources needed to implement common policies. Once again, there is a suggestion of tutelage. The Commission states: The funds made available to the United Kingdom should be used to finance activities in that country which accord with community policies and are designed to increase convergence of the economies. I am sure that no hon. Gentleman would claim that we have a solution for the unacceptable situation that the Treaty of Accession and the structure of own resources and Community expenditures have imposed on the United Kingdom.

Mr. Russell Johnston (Inverness)

rose—

Mr. Shore

I cannot give way.

Indeed, the Chancellor of the Exchequer's speech of 2 June made it plain that he would not accept an increase in "own resources" as a prior condition for working out a solution. That is something. It should be clear to everyone that the concessions won by the Government on 30 May 1980 were very limited, both in amount and in time. What is now proposed is a modification of that limited settlement. it is a modification that will carry forward all the opportunities for exerting further pressure on the United Kingdom to fit in with Community policies. There is a clear implication that we should join the EMS and support the enlargement of own resources when the ceiling has finally been reached.

In addition, there is the obvious and unacceptable continued invigilation of United Kingdom's affairs in order to justify the paying back of our own money in the years ahead. The adjustments that have been recommended to the CAP are modest. In any event, they are unlikely to be accepted by those who benefit from its existing provisions. There is no mention anywhere of the whole unacceptable doctrine and mix of taxes that comprise own resources.

Mr. Lawson

Will the right hon. Gentleman give way?

Mr. Shore

The right hon. Gentleman has had plenty of opportunity.

Mr. Lawson

Will the right hon. Gentleman give way?

Mr. Shore

The right hon. Gentleman's interventions have not been especially constructive, and he should allow me to complete my speech.

Mr. Lawson

rose—

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. The Minister should know that the right hon. Gentleman does not intend to give way and that he must resume his seat.

Mr. Shore

I have given way to the right hon. Gentleman already. He opened the debate and has the pleasure of winding up. I am not afraid of the Financial Secretary. I put it as directly and simply as that.

Mr. Lawson

Will the right hon. Gentleman give way?

Mr. Shore

The report of the mandate of the Commission of 22 June is to be discussed substantially at the November meeting of the European Council in London. It is crucial that the House has a full statement of the Government's approach to the proposals—I do not consider that what the Financial Secretary has said forms a clear statement—and a debate before the summit in late November. I give notice that we shall demand just such a debate when the recess is over. Beyond that, we look forward to the day when there will be no British contribution to the EEC Budget; to the day when, in a different and new relationship with our Continental neighbours, we in Britain are outside the whole crazy system of the EEC budget and own resources.

Today we are discussing the 1981 and 1982 draft budgets. For the reasons stated in my amendment and my remarks the Opposition will vote to reject them.

5.3 pm

Mr. Tim Renton (Mid-Sussex)

I have sympathy for and am in agreement with the right hon. Member for Stepney and Poplar (Mr. Shore) on one point—the sheer weight and volume of the documents that we were meant to read prior to the debate. I obtained them, as doubtless many other hon. Members did, from the Vote Office this morning. I weighed them. They weighed 1,620 grammes, or approximately 3½ old British pounds. While I have sympathy for what the European Commission is trying to do in its proposals, on the 1982 draft budget and its modest steps towards restructuring, I agree with the right hon. Gentleman that, by and large, much of what is contained in the papers is difficult to comprehend—to put it mildly. One has to dig deeply to find comprehension.

I declare an interest, in that I am strongly pro-European, both emotionally and intellectually. I have heard far too much from small firms in my constituency who are thriving on their export orders for engineering and electrical components from other Common Market countries. I have heard far too much from the leaders of major British companies such as Shell and ICI, who tell me that they would not be building new plants in Britain if we were not members of the European Community. I hear too much ever to believe that withdrawal from the Community is a reasonable option open to us. Ford would not have built its new plant at Bridgend, in South Wales, if we were not members of the Community.

However, I must make it plain that I am not one of those who are so blind in their love that they cannot see the warts or the delinquent tendencies of those of whom they are fond. That caution applies to the direction that the European Community is taking at present.

I was struck by a recent publication that I received, entitled "Facts", and published bi-monthly by the European Movement. The most recent edition, which I suspect all hon. Members received, has—[Interruption.] —I should be delighted to lend my copy to any hon. Member who did not receive one. The front page is headed Britain in Europe—a success story, and immediately underneath, in the second paragraph, there is the sentence: Our problem in Britain is widespread ignorance about the Community. That strikes me as analagous to those who have put on a performance of "Macbeth". As the curtain comes down the actors playing Macbeth and Lady Macbeth tell each other that they were brilliant and that they had never played better, and that even Malcolm made the best out of a very boring part. Meanwhile, the audience is hissing and booing and throwing things at the curtain.

Mr. Arthur Lewis

No one is there.

Mr. Renton

In fact, everyone is there and watching. Who is right, the actors or the audience? At the end of the day the audience is right, because its members are the market. They are the people who pay. Unless they like a play they will not turn up and there will be no play in the future. It is against that background that I make my remarks.

Many of the documents are difficult to comprehend. The procedures of the Community must be simplified, and that goes for much of the paper work that is produced. I find it difficult to understand why the common agricultural policy, which in the past has taken as much as 80 per cent. or more of the European budget—even in 1982 under the revised procedures it will take 61 per cent.—is blamed by the dairy and pig farmers in my constituency in Mid-Sussex as one of the factors for their present distress, yet it is that policy that consumes so much of the Community's resources.

Farmers in my constituency, like those elsewhere in Britain, find that much of what goes on under the label "CAP" is incomprehensible in its documentation and the terms used. We are all deeply worried about such absurdities as the same consignment of butter passing backwards and forwards between Northern Ireland and the Republic of Ireland, drawing a subsidy each time until it goes rancid.

Such problems must be sorted out. The general aim of the Commission, supported by all the Ministers who wish to see it succeed, should be to ensure that over five years the expenditure of a far more comprehensive CAP is reduced to not more than 50 per cent. of the total European budget. There should be no commitment to increase "own resources" above 1 per cent. of VAT until that target and the means of achieving it have been agreed by all the Ministers concerned.

In the budget papers it is intended that 36 per cent. more should be spent on the regional and social funds in 1982. I welcome that development. It is clear that much more than is commonly recognised has been done by those funds in this country. For example, much money has been spent by the funds specifically on helping to create new jobs in new industries in the depressed steel towns of the United Kingdom. Unlike other hon. Members—who made noises against that earlier—I believe that when such money is spent there should be a clear requirement that the local community should know that some of the money has come from the European regional or social funds. Signboards should be put up.

Mr. Teddy Taylor

Will my hon. Friend give way?

Mr. Renton

No. My hon. Friend will have an opportunity to speak. I do not wish to take up much time.

Signboards should be erected explaining how much money has come from European funds to help build a new factory or motorway and to create more jobs on a local industrial estate.

Mr. Marlow

Will my hon. Friend give way?

Mr. Teddy Taylor

Give way.

Mr. Renton

No. My hon. Friends must not remain sedentary and interrupt me. l shall not give way.

When hon. Members protest about such signboards, I cannot help but believe that they are frightened and do not want people in our depressed towns and cities to know how much the EEC is doing for them. Let us clear that up. Let us have the signboards. I have seen such boards in Kenya and other parts of Africa, and they are a great help in making it known what the Community does.

Mr. Marlow

Where does the money come from originally?

Mr. Renton

I shall not give way to my hon. Friend.

Ministers could be more aggressive about letting the facts be known. I tabled a recent question to the Secretary of State for Industry. I asked him to comment on the statement in the Official Journal of the Council of European Communities that the Community regional policy in particular, which relies on aid from the ERDF, has helped create or maintain during the period in which the latter was in operation (1975–1979), 339,317 jobs in the Community as a whole, including 99,767 jobs in the United Kingdom.

Perhaps the Financial Secretary will pass on my comment to the Under-Secretary of State, because the reply, after two bites at the cherry, was so drawn by a civil servant that I was not certain whether the answer was "Yes" or "No". It would be better if the Government were a little more firm in giving credit and ensuring that the European—

Mr. Marlow

Will my hon. Friend give way?

Mr. Renton

I am attempting to talk to the Chair over the blond head in front of me. I hope that Ministers will be more firm in ensuring that the European regional development fund gets the credit for its help in job creation.

Mr. Marlow

Will my hon. Friend give way?

Mr. Renton

No. I turn now to the question of the European monetary system. It is covered in the budget documents by reference to interest payment made to the EMS. I confess that although I was enthusiastic about the EMS when it was first announced in 1978, I have, in the last two years, been a sceptic. However, I am now coming round to the view that, bearing in mind the desperate need in British industry for greater currency stability, we should positively consider in the next six months the question of joining the EMS.

Lord Lever's two articles in the Financial Times last week pointed out how much damage can be done to British industry by the speed with which hot money moves round the financial markets of the world and the speed with which currencies go up and down. If the EMS has made one positive achievement in the last two years it is that it has achieved relatively much greater stability for the currencies within it than sterling has experienced.

It is possible to think of the EMS not as the currency snake or super-snake that my right hon. and hon. Friends regarded it as two and a half years ago but more as a European snail that slowly and steadily takes movements in one direction—that of stability. Clearly, our currency has particularly suffered over the last two years because it was suddenly recognised as a petro-currency. Consequently, it went up by 30 per cent. against the dollar and came down by 30 per cent.

My right hon. Friend the Financial Secretary feels understandable caution and scepticism about the matter. I submit to him that we have got over our initial shock of having a petro-currency and that we are more settled back in our normal role of having a relatively poor industrial base and relatively high inflation but a good trade balance because of our oil. We might expect to remain in that position.

Mr. Hugh Dykes (Harrow, East)

Will my hon. Friend give way?

Mr. Renton

In all fairness, I shall not give way. I am impartial in my obduracy.

As sterling has fallen by about 7 or 8 per cent. in recent months against the main European currencies and against the European unit of account, this is the moment to take seriously the words of the Governor of the Bank of England. He said that we should participate fully in the EMS at the proper time. My right hon. and hon. Friends should think joining the EMS not just as a token of our commitment to Europe at the important time when we are holding the Presidency but because it would be of great practical value to British industry. After all, British industrialists are in business to export their modern products at competitive prices all round the world. They are not in business to have to be currency speculators.

I have asked for much more simplicity and a much better presentation of the European Community's documents, including the budget. It is important that in the difficult years ahead the British public should have a much better and clearer perception of what the European Community is doing for them.

With that said, there must also be a European ideal. Our Ministers, examining the budget in the six months ahead, must go to the relevant meetings not just thinking "What can I get out of this for my country?", but also "What can I put in for Europe's sake?"

It is significant that the one major initiative on which Community Ministers have managed to agree in the last few months is Afghanistan. That is a long way away and does not affect any of our internal interests. Ministers should address their minds to what they would do and how they would react if Russian tanks went into Poland and if West Germany then felt threatened with the Russian tanks so close to it. The Ministers should consider what would happen if the German mark then came under threat and developed great weaknesses. European Finance Ministers should consider the possibility of such pressures. That is what the European Community should be about.

If the discussion about budget reform is merely a squabbling ground for national interests it does not deserve to succeed. It it is a breeding ground for European interests and overall West European growth. It can, should and will succeed.

5.18 pm
Mr. Douglas Jay (Battersea, North)

I agree with the hon. Member for Mid-Sussex (Mr. Renton) that there should be more publicity about the EEC because the more that the British public know about the EEC the more they are against it.

The Financial Secretary today and the Treasury's explanatory memorandum on the 1982 EEC budget show that there is little change in the budget or the CAP mechanism, except that the total expenditure is becoming larger and larger. Total EEC spending on the commitments basis rises again in 1982 by over 10 per cent., to about £12 billion. The total cost of the agricultural guarantee fund—that is the CAP cost of storing surplus food and subsidising food exports to the Soviet Union and elsewhere—is to rise by another 12 per cent. from 1981 to 1982. That is presumably partly because of the surrender of our Minister of Agriculture, Fisheries and Food on food prices this spring, when he agreed to further rises. I understand that the CAP will continue to swallow between 60 and 70 per cent. of EEC expenditure in 1982. Perhaps the Financial Secretary will tell us precisely what the percentage will be in the Commission's present plans.

It also emerges from the Treasury paper that the gross contribution of the United Kingdom for 1982 will total 23 per cent. of the entire EEC budget at £2,700 million. There is not yet any information available about what refunds the United Kingdom will receive in 1982. We know that the gross payment will be approximately £2,700 million. The Financial Secretary has told us that there will be some belated refunds accruing to us in 1982 but we do not know so far what they are or what our net payment will be in that year. Perhaps we can at least be enlightened about that tonight.

The reliefs negotiated in May 1980 come to an end before the end of 1982. Though the Financial Secretary did not mention it, the Government completely failed to put forward any proposal of their own for basic reform either of the budget or the CAP thereafter. All we have as a result of the lack of proposals from the United Kingdom Government is the document from the Commission, dated 24 June this year, entitled "Commission Report on the Mandate of 30 May 1980".

Commission reports always read as if they were first drafted in Paris. This one is no exception. It is a most disappointing document—so disappointing that the Financial Secretary said little about it. It has no precision and no figures. but many Brussels clichés and dogma. Like the hon. Member for Mid-Sussex it would like to force everybody into the straitjacket of the European monetary system—that is one of the few things which are clear—which it calls "monetary stability".

The Commission is also anxious that the 1 per cent. VAT ceiling should be removed, to give it more revenue for more expenditure. The Financial Secretary did not mention that. Here the Commissioner's main thesis is wholly contrary to everything else that he said this afternoon.

The report then says about the CAP: the result of 20 years of the application of CAP is positive". That is a remarkable judgment; but what does it mean? It reveals a remarkable state of mind on the part of the Commission. The report goes on to say that it is neither possible nor desirable to jettison the mechanism of the CAP It makes a few timid suggestions on adjustments for this year and continues: these guidelines for the reform of the CAP leave the principles on which it is based intact. Indeed they do.

The future of the British budget contributions is mentioned only in a short passage near the end of the report, as my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) pointed out. Again, the proposals are vague and timid, with no figures, and they virtually depend on the 1 per cent VAT ceiling being removed. That is something which the Commission constantly assumes.

We are also told—believe it or not—that, in the words of the report, the new budget relief measures for the United Kingdom after 1982: shall apply for a limited period. In other words, even if all this were adopted the British economy would be threatened with yet another guillotine when the later deadline was reached.

If proposals for reform start like that—before the French Government have spent their usual nine or 12 months obstructing, delaying, vetoing and mutilating them—we all know how they will end up when that process is over: with no material reform of the CAP or any lasting relief in the budget burden on the United Kingdom. The Financial Secretary's speech certainly did not encourage me to believe that he would negotiate with sufficient vigour to prevent that conclusion.

Therefore, those who continue the pretence that such fiddling reforms can remove the economic burdens of EEC membership on the United Kingdom are misleading the public and, incidentally, delaying still further the recovery of the United Kingdom economy.

The chief burden on the United Kingdom is not the budget but, first, the extremely high agricultural protectionism of the CAP, which must force up food prices against a food-importing nation such as the United Kingdom: and secondly the removal of all restraints on United Kingdom imports of manufactured goods. Both those basic policies are precisely the opposite of what our fundamental economic interest requires.

If the CAP raised food prices by only 5 or 10 per cent. above world prices that might be tolerable, though foolish. But EEC food prices have for years been, on the Commission's own figures, between 60 per cent. and 100 per cent. higher for grain, 100 per cent. higher for beef and lamb and 300 per cent. to 400 per cent. higher for dairy produce. On the most optimistic calculation, that means that the general level of retail food prices is at least 20 per cent. to 25 per cent. higher in the United Kingdom than would otherwise be the case.

Those excessive food prices work right through our economy and have been a major cause of rising pay claims ever since we adopted the CAP in 1973.

Mr. Arthur Lewis

And unemployment.

Mr. Jay

I shall come to unemployment in a moment. Ministers, particularly the Secretary of State for Employment, are fond of claiming in economic debates that retail prices and pay claims rose faster in this country from 1974 to 1979 than they did in the case of our Continental competitors. So they did; and the main cause was the imposition of the CAP on the United Kingdom economy between 1973 and 1978–79, as a result of the Treaty of Accession, which the Financial Secretary and most of his colleagues supported.

Ministers also claim from time to time that we lost export competitiveness in those years. That is true, arid one major cause is again what I have described. Those of us who opposed accession from the start always argued that it would have such effects on food prices, the cost of living and United Kingdom trade competitiveness.

There is no remedy now for this burden on prices and costs except to sweep away from the British economy the whole CAP mechanism of restriction and dear food and to restore the principle of free imports of food. Countries such as Australia and New Zealand would be more than ever glad to send us that food.

The second great folly of the 1972 treaty was the removal of all tariff restraint on manufactured imports from the Continent into the United Kingdom economy—incidentally, just at the moment when the CAP was forcing up our labour costs. For instance, it was the removal of moderate tariffs, which we had had for many years, on steel and cars in particular, which have devastated the British steel and engineering industries since 1974 and have probably added several hundreds of thousands, if not half a million, to our present unemployment figures.

It is no good people saying as they sometimes do, that those industries should have been able to stand that competition. If they could not stand it, it was folly to expose them to it. Some of us knew in advance that it should not have been forced on them until it was clear that those industries were able to meet it.

I think that Conservative Members have now at least grasped the fact that our present large oil exports to the Continental EEC, which have risen from about £100 million in 1970 to £4,000 million in 1980, have nothing to do with EEC membership, would have been much the same if we had not joined, and will remain much the same if we withdraw. Our EEC membership has affected, first, food prices and, secondly, trade in manufactured goods, on which tariffs were removed on both sides.

Mr. Arthur Lewis

If my right hon. Friend is right, as I believe he is, will the effect not be accentuated when the Greeks, the Spanish and the Portuguese come in?

Mr. Jay

It will be accentuated to some extent, certainly with imports of manufactures. Let me give the story up to date. The result of the mutual removal of tariffs has been a change from a United Kingdom export surplus to the EEC Six in manufactured goods of £100 million in 1970 to a deficit of £2,900 million in 1980—a colossal swing against us of £3,000 million in the balance. That has been a major cause of increased unemployment during that time. Interestingly enough, it has taken place in a period when our trade balance in the same goods with the non-EEC world swing in our favour by more than £3½ billion. Those two figures prove beyond serious dispute that the tariff changes with the EEC Six after 1971 were the main cause of that swing into deficit.

Even more pertinent, those figures make clear that if the process were reversed—if the distortion of our trade by EEC membership were removed and a moderate industrial tariff were restored both ways—in all probability the proportion would swing back. One remarkable lesson of the eight years of EEC membership has been the smallness of our total trade distortion, in spite of the loss of Commonwealth preferences and the reversal of previous tariff policies. The change in policy and the 10 years' experience has affected only between 10 per cent. and 15 per cent. of total United Kingdom trade. Even now, only about 25 per cent. of our food imports appear to come from the rest of the EEC.

In 1970, 70 per cent. of our total trade was with the non-EEC world and 30 per cent. with the EEC. Now, after all these distortions and 10 years, we still do about 60 per cent. of our trade with the non-EEC world and about 40 per cent. with the EEC. Even if withdrawal from the EEC meant the reimposition of a moderate tariff on manufactured goods both ways, we should not cease trading with the Continental EEC altogether, as is sometimes said, and as was implied by the hon. Member for Mid-Sussex. We should in fact return to nearer the 30 per cent. of our total trade which prevailed before, and the balance would swing back in our favour. That is the overwhelming probability on the evidence before us. Far from unemployment increasing, the swing in the balance would mean a large net gain for United Kingdom employment.

Mr. Anderson

Would my right hon. Friend care to detail the third markets where our manufactured goods are likely to beat the Japanese and other manufacturers?

Mr. Jay

If we abandoned the CAP we should lower our labour costs, and our retail prices would be lower. That would give us a distinct advantage throughout the whole world during a period which I think would be much shorter than the eight or 10 years that we have already experienced.

Withdrawal, accompanied by some moderate industrial tariffs on the levels now permitted by GATT which, after all, we apply to our imports from the rest of the world, would bring three immediate and decisive economic gains to the United Kingdom. First, free entry of food from the world's most efficient producers would hold down the RPI, restrain cost inflation, and improve our competitiveness, both at home and abroad. Secondly, a moderate tariff, at least for the time being—one would hope that it would not need to last indefinitely—on manufactured imports would save British industries from the near extinction that is threatening them today. Thirdly, a 200-mile exclusive fishing zone would be available to us instead of the almost total loss of any exclusive zone which is currently threatened. That is a vital matter, which we have not even discussed today.

Without at least the first two of those rescue measures, I do not believe that there is any possibility of a full economic recovery or a return to full employment for the United Kingdom economy.

5.38 pm
Sir Brandon Rhys Williams (Kensington)

I am sure that no one, however convinced a European, would seek to defend absolutely the present shape of the European Community budget. I shall certainly not seek to do so. In my opinion it is much too small an annual sum for the objectives that it sets itself—or rather, that are set for it. Moreover, it is obvious that it has suffered a great deal of distortion due to political pressure. However, it could have been a great deal worse if it had not been for the exertions of the European Parliament since the direct elections. I have played a small part in that, and I am proud to declare my interest in that respect.

An annual budget of this size is not competent adequately to tackle provision for capital projects such as the restructuring of agriculture and the long-term social and industrial reorganisation that we are seeking in the Community. That is one reason for the many valid grumbles that we hear about the money not achieving what we want it to do. Could a sum of less than 1 per cent. of the Community's total production really tackle all that we are asking of it on the capital side?

In my view, the European Community is still living in the Stone Age. We try to achieve our long-term objectives with annual budgets, and we cannot carry over our long-term projects from one year to the next except in very limited ways. We are like the people in the Stone Age, who could look ahead only to the size of the subsequent year's crop. They could not make plans such as a group of industrialised, capitalist democracies ought to do.

I do not join in the present clamour to increase the 1 per cent. ceiling to perhaps 1½ per cent. or 2 per cent., because that, in itself, would not be enough. We have to look for more important departures in the way that we attempt to finance the Community than simply edging forward through the 1 per cent., although I imagine that that will happen in due course.

I understand what my right hon. and hon. Friends are seeking to do in insisting on keeping to the 1 per cent. ceiling, so as to force fresh thinking, especially about the way that we support the agricultural policy, but I should like to see the opening up of facilities for investment as part of the Community's plan, and it should be done on an ambitious scale.

Mr. Nick Budgen (Wolverhampton, South-West)

Is my hon. Friend advocating an additional tax—an additional form of revenue to be raised by the EEC?

Sir Brandon Rhys Williams

I am glad that my hon. Friend has given me an opportunity to clarify my position. For the time being, I do not think that we should seek to break through the 1 per cent. ceiling. We should support the Germans in the view that they take, that the 1 per cent. ceiling should be the limit, at any rate for the time being. But I should like us to attempt to develop a capital account in the same way as each of the member States within the Community has a capital account for its national projects. It is futile to expect the Community to succeed without having a proper capital account.

I do not want to expand the current account. I want to see the development of a thoroughgoing capital account for the Community, and I think that this would be a proper project for us to suggest while Britain is in charge of the Community during the current six months.

I recognise that the European Investment Bank does very good work and that it has expanded beyond all the ambitions of its founders. Good use has been made of the Ortoli facility, which might be regarded as a kind of pilot scheme to establish a capital account by the Commission, but only on a very limited scale.

We need, not only in the Economic Community but in all the Western industrialised democracies, the recycling of funds from the OPEC countries on a much larger scale than we are seeing at present; and the recycling that is taking effect should be carried out much better. Central bankers and the institutions pride themselves on the way in which they have carried out recycling since 1974, but it seems to me that too much of this money has been brought back into short-term assets, or for the purchase of existing assets which forces up prices in an inflationary way but does not contribute to the creation of wealth.

I should welcome a deliberate attempt at Community level to bring back our own savings from the OPEC countries so that they could be put into projects which would add to our own wealth as a Community.

We ought to use the capital account to redress the balance of contributions and real needs over the long term. I accept that the annual budget is bound to contain anomalies. However, especially through regional policy, many of the anomalies in the annual budget to which right hon. and hon. Members rightly object could be put right over the course of time.

We should use recycling consciously to provide finance for regional policy and also to back specific projects which at present are hanging fire. I have in mind, for example, the Channel link and energy substitution projects. I should like to mention, in particular, the Severn barrage, because I also have interests in South Wales. The economy of South Wales and the West of England would be transformed if the Severn barrage scheme were taken up and financed as a Community project.

There are many other industrial projects that need support, including the total reconstruction of our car industry, which the Japanese have shown is long overdue. That is another of the projects that I should like to see taken on by the Community.

Mr. Teddy Taylor

rose—

Mr. Dykes

rose—

Sir Brandon Rhys Williams

It was not my intention to speak for very long. I am delighted to have attracted so much attention, but I hope that my hon. Friends will forgive me if I do not give way to them. They will undoubtedly have an opportunity to catch the eye of the occupant of the Chair.

There are two questions that we need to ask about a large expansion of the Ortoli facility or of the activities of the European Investment Bank. The first is how to service the debt. We have to recognise that the OPEC countries are wise to the fact that the paper currencies of the West are depreciating so fast that they actually are losing money by participating in investments in the West and do not preserve its real value.

I have not much use for its contraptions—the paper currencies—twisted toogether into new-fangled units such as the SDR or the ECU. They do not seem to add very much to the strength of the individual paper currencies that are twisted into them. I doubt whether large financial operations could be carried out now or at any time in the future on the basis of the SDR or the ECU; but we need to explore with the OPEC countries the type of long-term guarantee that they would recognise as being suitable to preserve their assets.

The Severn barrage, for instance, might be financed by giving guarantees expressed in terms of kilowatt-hours. The Channel link might be guaranteed on the basis of the cost of a container-mile. Individual industrial projects could be financed on the basis of value added, rather than by making commitments in paper currencies in which, increasingly, international investors have no trust.

The second question is how to keep the capital and current accounts separate. We have to learn to do that if we are to make a success of Community finance and not allow it to deteriorate into the kind of muddle that I am sorry to say the British Government's finances are in at present. Whitehall might learn a lesson by listening to the way in which, for instance, German officials seek to separate the current account and the capital account. We are trying to put capital projects on to our small annual budget, and that is a mistake. But we should not fall into the other mistake of using the capital account to subsidise current spending.

Those are the thoughts that I wanted to put to the House, and I am glad to have had the opportunity to do so. We must recognise that the creation of the European Community is a long-term project, which can succeed only on the basis of adequate long-term finance.

5.47 pm
Mr. Donald Anderson (Swansea, East)

We were to face a restructuring of the Community budget in any event because of the ever-nearing approach to the VAT ceiling. But it is clear that the end of May agreement reached between the Government and our partners has only accelerated that necessary restructuring. We had been saying for some time that an "unacceptable position" had arisen, and that was recognised at least in part by our partners in May 1980. Now it is clear that the Germans also are using the same argument, that an "unacceptable position" has arisen for them as well in the proportion of the EEC resources that they are contributing.

The question must arise whether, and to what extent, we and the Federal Germans now have a common interest in exercising a much greater discipline over the budget, and the response will depend in part on coalition politics in Germany and a series of other factors that we shall face.

Following the agreement of May last year, it was clear that there was a need to control the proportion of the total budget going on the CAP and, if possible, to reduce it; ideally to find new areas of expenditure and to consider possible increases in resources. The permanent mechanism for solving the United Kingdom budgetary problem is necessary in any event, because of the pattern of our trade and because of the weight of agriculture in our economy.

The Commission was charged with the task of finding such a permanent solution. However, it is recognised on both sides of the House that the attempt thus far by the Commission has been too timid. It does not fill in the details. Even what the Commission proposes is only temporary. It is angled largely at the United Kingdom, when it is clear that the problem is more extensive than that of the United Kingdom and will extend to Germany and possibly to other countries.

The Government must make clear to the Commission the total inadequacy of the Commission's attempt to answer the mandate that it was given following the temporary budgetary arrangement for the United Kingdom.

To what extent has the Commission risen generally to the problem of restructuring the budget? We know that although there is an increase in total there will be less of an increase for agriculture and more for regional and social funds, which may marginally help us. Of course the base lines are so much greater for agriculture in any event. There has not been a radical restructuring, but perhaps that is impossible given the present configuration of political forces within the EEC.

What has happened is that there has been a turn of the wheel in the right direction—insufficient in itself either to justify the doubters, who say that the EEC is incapable of reformation, being the cornerstone of the EEC achievement, or to cheer the optimists, who say that because of the possible new London-Bonn axis the way is clear for a change in the EEC budget more on the model of what would accord with our own United Kingdom interests.

As the Opposition amendment underlines, the CAP remains in excess of 60 per cent. of the total budget. The 1 per cent. straightjacket remains on "own resources" so that, because of the compulsory expenditure of the CAP, and with the addition of largely agricultural economies such as those of Spain, Portugal and Greece, a lower proportion of the total EEC budget will be available for the sort of provision that Britain needs, especially for regional and social funds.

The CAP itself may not be profoundly changed during the next few years. Nevertheless, it is probable that by 1983–84 the EEC will be substantially different from what it is today. That will be, in part, because of enlargement and the shock to the system, including the budgetary structure, that will result from that enlargement. There may be new political forces at work. That can be exaggerated. While it is not clear yet what difference, if any, there will be in the French attitude to the Common Market in general, no one can doubt that President Mitterrand will fight in his corner for his farmers as vigorously as did his predecessor.

During the next two years it will be vital to watch how the EEC as a whole responds to the common crisis faced by all its members, especially in the area of unemployment. Figures have already been given for the projected increase in unemployment in all European countries. As the hon. Member for Mid-Sussex (Mr. Renton) said, the play may be good and the actors may be ready to congratulate themselves, but the audience may be profoundly dissatisfied with the performance. That is the most worrying feature about the future of the EEC.

Increasingly, the concerns of the peoples of the Community are about jobs and the living conditions around them, whereas the concern of the EEC itself appears basically orientated towards agriculture—something that is not at the centre of the concerns of the people. We have just seen the recent survey on responses to the EEC, which has shown that the poorest areas in the United Kingdom are those least in favour of our continued accession. That is hardly surprising.

Mr. Myles

Will the hon. Gentleman concede that a stable supply of food is the main aim of any Government and any society, especially for the poorer areas?

Mr. Anderson

Of course that is a major concern of any Government. If it were clear that the sources of supply of food in the world were decreasing, the stability and security offered by the EEC would become that much more important. I hope that the hon. Gentleman will agree that more and more at the centre of the political stage will be a concern about unemployment and regional development, although there are links with what he said. If the EEC does not address itself to those problems, and with the current constraint in the budget it can hardly do so, it will be seen by more and more people as irrelevant to their needs. That is the real challenge facing the EEC, and the question is whether it can face it.

Apart from the question of popular acceptance, whatever sums come to Britain and whatever notices are put up saying "Gift of the EEC", the current position of the Government is not to make the expenditure additional but, rather, to make it part of the Government's general assault on public expenditure. Britain was on its own at the Luxembourg summit a month or two ago when considering how to respond to the employment crisis and the job creation proposals. All the commentators suggested that in response to monetarist policy there was a congruence of interest and approach by Chancellor Schmidt and the Prime Minister. However, on general job creation measures Britain was on its own. That hardly bodes well for our response to the challenge. If the EEC turns its back on the major concern of our people, it will deserve to fail.

What should be the British response to the present EEC position? I know that at its last conference the Labour Party pledged to withdraw from the EEC. In my view, it would be wholly premature to suggest that. Many of the arguments are made on assumptions that may or may not be valid by 1983–84. We cannot, as my right hon. Friend the Member for Battersea, North (Mr. Jay) regularly seeks to do, put back the clock to 1970 and put Humpty Dumpty together again. The world has changed substantially during the past decade.

The questions remain: can we hope to retain our share of exports to the EEC—43 per cent. or 45 per cent., including the oil element—if we withdraw? Can we be confident that in the tight competitive position that we have in the world we can find alternative markets elsewhere for any markets that we may lose within the EEC? Because of possible protectionism within the EEC, Japan and other new suppliers would fight us hard for any markets outside the EEC. Are we really confident that we can have a "quickie" divorce, or will it be a more messy affair, with retaliation from our erstwhile partners? Can we be sure that we will retain our attractiveness for inward investment? We would not have a chance of the Nissan investment were we not a member of the EEC. I come from South Wales—a part of the world that has attracted one-third of the total of Japanese investment in the United Kingdom. Those investments would not be there were it not for the wider market offered by the EEC.

Before we reach a final conclusion about membership, I should like an area-by-area and industry-by-industry survey of the job impact of any such withdrawal. Can we hold our own with the weight of a single economy with a population slightly over 50 million in international trade negotiations? What would be our voice at Ottawa today if we were a single market with fewer than 60 million people?

I hope that we shall make our judgments on facts and not on emotion. I fear that by the time we come to the next election the EEC may have changed, and yet we shall have drifted into an anti-EEC stance, which will be shown by a commitment to withdraw on the part of the Labour Party. The possible continued dislike of the EEC within Britain may, by the time of the next election, force the Conservative Party to adopt a "me, too" attitude.

In my view the prudent course is to wait and see. Will the EEC succeed or will it have a sort of middle-age burn-out? It will have such a burn-out if it does not address itself to the concerns of our people. Given the new political and economic configuration, there is no better opportunity to seek reform and to work for change. We must work for a change that will link our contribution more closely to our proportionate GDP within the EEC. If there is no will to succeed on the part of our partners, and if the proper interests of Britain are ignored by our partners, we cannot remain a member of the club. It would be premature to reach such a conclusion now, and the prudent course remains to work for change.

6.3 pm

Mr. Maurice Macmillan (Farnham)

I have no doubt that the budget and the common agricultural policy should be considerably reformed, as my hon. Friend the Member for Kensington (Sir B. Rhys Williams) explained so well. In the reforms that it proposes the Opposition amendment seeks to throw out the baby with the bath water. Indeed, the official Opposition and some Opposition Members want to kill the baby. They made a fine effort to abort it and they are now making a strong effort to destroy it. In common with other Opposition Members, I think that they are wrong to take that course.

Important though the budget operations are, they are small when set against the totality of what membership of the Community means and can mean in future for the benefit of Britain and its people. By 1980 the general budget was about 0.8 per cent. of the Community's GDP and about 1.7 per cent. of the combined member Government's expenditure. In 1980 agricultural spending represented 0.47 per cent. of the Community's GDP and between 1.1 per cent. and 1.4 per cent. of total agricultural spending by member Governments within the Community. I agree with the hon. Member for Swansea, East (Mr. Anderson) that we must shift the balance from agriculture to manufacturing industry. However, I remind the House that the proportion of the Community's spending on agriculture, when expressed as a percentage of its GDP, is roughly the same as in Japan and the United States of America. Possibly, therefore, the proportion is not as distorted as we have all been led to believe. The Japanese and the Americans spend about 1.5 per cent of their GDP on agriculture.

In public expenditure terms the United Kingdom's net contribution will be £530 million for 1981–82. That is in contradistinction to about £5,300 million that we are spending on industry, energy and trade and about £1,000 million on aid.

The right hon. Member for Battersea, North (Mr. Jay) has a gloomy view of our economy if he thinks that this contribution will remain an insuperable burden. He seems to take the view that Britain will be permanently the sick man of Europe and that we must ensure that we receive better treatment than any other European country because we are less well able to look after ourselves. Part of the right hon. Gentleman's cure was rather odd. It would expose the United Kingdom, for the sake of reducing unit labour costs by bringing down the retail price index, to unrestricted imports from more efficient manufacturing countries. I imagine that the right hon. Gentleman had in mind countries such as Japan.

The Community's gross domestic product is larger even than that of the United States. It has been suggested on occasions during these debates that we should benefit, like the Japanese, outside the Community. Alas, our GDP is not like that of the Japanese—$1.46 billion. If it were more like that we might be in an economic position to be independent like Japan. The GDP of the United States is about $2½ billion, but that of the EEC is $2.790 billion.

The EEC gives us a great opportunity. We have a surplus on visible trade with the Community of about £709 million. Our trade with the Community is growing faster than our trade with any other market. Even our miserable rate of economic growth has been marginally better since we joined. It is true that our competitiveness is terrible. Our competitors' wages costs increased by about 12 per cent. over the past two years while ours increased by about 40 per cent. It takes the Germans about twice as long as the Japanese to make a motor car. It takes the Americans about twice as long as the Germans and we take about twice as long as the Americans. Those are not the precise figures but they indicate that our productivity is appalling. However, we have done better in the Community than outside.

The much-vaunted idea of standing on our own feet outside the Community is not very impressive if we test it against one measure of performance—the percentage of imports covered by exports. In 1974 it was 47 per cent. for Japan; by 1980 it had sunk by nearly half, to 28 per cent. In 1974 it was 82 per cent. for North America; by 1980 it has sunk by about one-quarter, to 66 per cent. But for the EEC it was 84 per cent. in 1979 and in 1980, 86 per cent. On balance, the Community has been of great benefit to manufacturing industry. The figures that I have quoted relate solely to manufacturing industry.

We have shown our incompetence in the face of the Japanese and the Americans, and even, alas, the Spanish, the Portuguese and the Greeks. The proportion of the imports from those countries that we have covered in exports has decreased by about one-third in the past six years. Our incompentence in the face of other competing countries has been mitigated by the advantages of being a member of the Community. I have a nasty feeling that part of that mitigation is due to the fact that we provide a fairly cheap place in which to invest for the Americans and the Japanese, and to use as a base for their penetration of Community markets. That investment would not be so enthusiastic if we did not provide such a base. If that were so, I fear that they would change from manufacturing to finishing off semi-manufactures in Britain as a means of increasing their output in the United Kingdom market.

We shall do better by addressing ourselves to how we can overcome not only the immediate problems of the budget but some of its longer-term workings. We must move towards an energy policy. We must have some method of helping developing countries with their energy requirements, including developments based on the French nuclear initiative.

We must do something with the rest of Europe and get the European Community to act as such in trying to get some of the Arab money into the developing world. It is essential to world recovery. What is wrong is that the massive savings represented by Arab wealth are not being invested in productive industry. The EEC could do much better by moving in that direction than any country could by itself—co-operating, of course, with Japan, Canada and the United States.

We need new methods of developing investment from the rich countries, both into Europe and into the developing world, including the Arab States themselves.

My hon. Friend the Member for Mid-Sussex (Mr. Renton) suggested that it would help if we joined the EMS, thereby getting a degree of economic stability. I am a little sceptical whether the EMS goes far enough. I do not believe that it is possible for world trade and world economic policies to develop successfully for very much longer when we have no measure of changing currencies in the world, apart from what my hon. Friend the Member for Kensington called matching paper with paper.

There are attractions in the EMS, but, as a distinguished French economist remarked, if we have a lot of apples, some of them good and some of them bad, and put them in the same basket, we tend to end with a basket of rotten apples. There are limitations that we should seek to overcome.

I should like to see the European Community making a great deal more effort to try to get a degree of standardisation in matters such as defence equipment. It is ludicrous that we cannot shoot each other's bullets out of each other's guns, and achieve a good deal more co-operation in the more expensive forms of defence research and development.

I have tried briefly to make a few suggestions about what the British Government could do to improve the Community in the longer term, as well as to alter the short-term budgets and common agricultural policy. Of course we must fight our corner as hard as we can, but there is a little more to it than that. I beg the Financial Secretary and the Government, when they are fighting our corner, to remember to fight also for more effort by the Community as a whole in the longer-term development and to look to the future for the peace as well as the prosperity of this country.

6.12 pm
Mr. Russell Johnston (Inverness)

I should like to start by referring briefly to the official Opposition's amendment, which refers to the failure of the proposed budget to achieve a broad balance between the United Kingdom's contributions and receipts".

The expression "broad balance", as the right hon. Member for Stepney and Poplar (Mr. Shore) reminded us, was coined by the Prime Minister in an uncharacteristically non-astringent moment. It turned out essentially to be a euphemism for the juste retour. It is, in my judgment, a definition of the Community budget that I find unacceptable. It runs completely contrary to the ideals of convergence of economic opportunity and social conditions which go to the very heart of what the founding fathers of the Community wished to work towards.

However imperfect the practice—and I am the first to admit that it has been imperfect—if we turn our back on the redistribution of wealth within the Community we turn our back on its fundamental ideal.

Mr. Marlow

Will the hon. Gentleman give way?

Mr. Johnston

I do not want to give way at this stage, because many hon. Members wish to speak. I prefer not to give way, although I should like to do so in order to bat down the hon. Gentleman.

If we turn our back on the principle of the distribution of wealth we turn our back on a fundamental ideal. If we say that every country must be in broad balance—which is what we are saying if we say that Britain should be in broad balance—that means that we can throw out of the window any attempt at common industrial, regional or social policies. We go back to the simple principle "We are out for ourselves and what we can get, and forget everybody else." If Britain is to be in broad balance for ever, so must Germany, France and all the existing members. So, indeed, must Greece—and soon Spain and Portugal. That means that all the proud words about supporting democracy through enlargement would be quickly seen as empty and windy verbiage, and no more than that.

Mr. Marlow

Will the hon. Gentleman give way?

Mr. Johnston

If the hon. Gentleman will be brief.

Mr. Marlow

I am grateful to the hon. Gentleman. He mentioned the redistribution of wealth. Will he agree with me that the great problem at the moment is that wealth is redistributed in the Community, but from the poor to the rich?

Mr. Johnston

To some extent I would agree with that, but the hon. Gentleman's solution, and the solution proposed by the Opposition amendment, is not really a solution; it is a suggestion that would only make things worse.

The Opposition amendment goes on to speak of inadequate provisions for regional, industrial and social policies and criticises the commitment of over 60 per cent. of the Community's total expenditure to the support of the Common Agricultural Policy".

That is contradictory on two grounds. First, even if the balance is changed, very little money is released—certainly not enough to do very much—and it increases the number of people unemployed in agriculture. The hon. Member for Northampton, North (Mr. Marlow) may say that the CAP in one sense is Europe's job creation scheme. Perhaps we need job creation schemes at this moment. Does it make sense to release a great many people from agriculture to join the dole queues of the cities? I do not think that it does.

Secondly, without a real increase in the budget—which under present methods would mean increasing the VAT ceiling, as Roy Jenkins suggested when he gave up the Presidency of the Commission—I do not think that anything significant can be done in this area. The Opposition's amendment represents a negative and aimless approach.

In the Opposition amendment I am surprised to see no mention whatever of the EMS, to which various Conservative Members have referred. I should have thought that the Opposition would want to make some reference to it, either negative or positive. The Liberal position—and, indeed, the Social Democratic position—is that we should like to see Britain joining the European monetary system. It was one of the main achievements of Roy Jenkins, whose performance in the Warrington by-election at least demonstrates that close association with the European Community is no disadvantage electorally, for no one has been more clearly and definitely linked with the European Community than Roy Jenkins.

I admit that these are not encouraging times for those of us who remain deeply committed to the European Community. None the less, the Commission's draft proposals represent a realistic first step in the necessary reshaping of the budget. As has been said by a number of speakers, even from within the straitjacket of an unwillingness of the majority member States to exceed the 1 per cent. VAT ceiling, it sketches some road ahead for the Community. My Liberal colleague, Gaston Thorn, has done his utmost.

There was reference to the United Kingdom financial mechanism. It is temporary, but it is something. A rejection of broad balance, by the way, does not in any way mean an acceptance of an unfair contribution arrangement. We see a CAP adjustment. We see proposals to concentrate the regional fund effectively.

In this regard I should like to ask two questions of the Financial Secretary. I should be obliged to him for his attention, because the tradition on these occasions is that very few answers are received to questions asked. The non-quota section is referred to on page 54 of the preliminary draft general budget, where it says that The reason there have been no commitments from the non-quota section of the Fund … is that the Council did not approve the measures until 7 October 1980. That was a two-year delay. Why was the implementation delayed, and what position did Her Majesty's Government take? Secondly, now that it is implemented, what is the arrangement? It is only 5 per cent. of the regional fund. It is a pittance. [Interruption.] It is far too small, as the hon. Member for Lancaster (Mrs. Kellett-Bowman) interjects. But how is it approved? It has to go through the Council of Permanent Representatives. Is that by unanimity or by majority? It is not entirely at the hand of the Commission.

It is bogus for the right hon. Member for Stepney and Poplar to complain about the small amounts of money available for regional and social development and be unprepared to pay a penny towards it. That makes no sense whatever. There is reference in the budget to the elimination of existing non-tariff trade barriers, which should be welcomed. Finally, there is emphasis on research programmes for energy, environmental protection, nuclear safety, and so on. As I said, the Commission has done its best, but it is insufficient.

It was surprising that in a few desultory remarks the right hon. Member for Stepney and Poplar referred to the need to link VAT payments to GNP. That is an important suggestion, which is equally attractive for those who believe that there should be a link between payment and the ability to pay. However, essentially, the right hon. Gentleman does not believe in that. He would not give more to the central pool to help Greece, although I suspect that he would take anything that Germany would give him. That is the fundamental contradiction in the Opposition's position.

We must look carefully at the new criteria for paying, but we should do so on the basis of an acceptance of some increase in the Budget. I once thought that the Labour Party believed in redistribution and not in national advantage. I once thought that it also believed in trying to develop with other democratic countries co-operation in tackling common problems. However, if the speech of its spokesman, the right hon. Member for Stepney and Poplar, is the basis of its approach, it no longer believes in those things. He made an arid, negative and spiritless speech, without a positive word in it.

The arguments for entry into the Common Market that were advanced in 1973 and adduced again in 1975 are as strong now as they ever were. Alone we shall not overcome our economic problems or unemployment problems—to say nothing of the political potential of membership. The right hon. Member for Stepney and Poplar rather uncharacteristically, because he is a polite man, refused to give way to me at one point. I was going to ask him about the word "tutelage", which he quoted in a resentful way from the Commission document. That is the sad thing about his approach and, to an extent, that of the Financial Secretary—he does not accept that anyone can teach him anything. I think that the economic and social performance of this country since the war shows that we have a lot to learn.

6.23 pm
Mr. Teddy Taylor (Southend, East)

The hon. Member for Inverness (Mr. Johnston) has at least been consistent, but those of us who have listened to his speeches on the Common Market over the years have probably gained the impression that if Britain had 99.9 per cent. unemployement and mass starvation the hon. Gentleman would say that it would have been worse without the benefit of EEC membership.

I am sorry that the Financial Secretary is to reply to the debate. Those of us who are critical of the Common Market and want structural change regard him and his team as allies. If the Government had the same determination on EEC spending as they have on national spending—if the Financial Secretary approached the EEC budget as he approaches spending in the United Kingdom—we might have a healthier Community and certainly the money would be better spent.

Before making some general comments, I put three specific points to my right hon. Friend in view of his invitation for suggestions for the meeting later this week. First, is there any way in which the United Kingdom Chairman of the Council of Ministers can sort out some of the appalling waste that does more damage to the EEC's image than anything else. I believe that he knows what I mean. The Government and the Council of Ministers have no control over the spending of the so-called European fund. There is a gentlemen's agreement whereby the Parliament does not ask about the Council of Ministers' spending, and vice versa. I am sure that if my right hon. Friend, with his long experience of Treasury matters, had the opportunity of getting stuck into the expenditure of this so-called Parliament there would be major changes.

Secondly, I should like to ask him about the information machine of the EEC and its various outfits. It was interesting to hear my hon. Friend the Member for Mid-Sussex (Mr. Renton) say that we should perhaps spend more time and money telling people what a grand institution the EEC is. Far too much money is spent in that way. It is designed not to promote information but simply to put across rather bogus propaganda.

How much money in the budget will go, for example, to that spendthrift propaganda organisation known as the European Movement? In its publications it says that it does not receive any public funds, but it was disclosed in a recent answer to Mr. Ken Lomas that the organisation and its associated bodies received in 1977, 1978 and 1979 a total of £25,659, £68,616 and £33,315 respectively from EEC sources. I was astonished to discover from the paper published just the other day, called "Supply Estimates"—which is the Financial Secretary's own document—that this year we are to give £30,000 of British money to the European Movement without any check on how it is spent. There is a little mark against the money to show that, unlike other grants, even the Treasury and the Comptroller and Auditor General will not check on how it is spent, and, if it is not spent, the organisation can keep it anyway.

In Southend on Saturday I visited Viking House. About £100,000 has been raised by voluntary donations to make it a day centre for the mentally handicapped. The building is complete, but it is standing empty because the county cannot find the necessary funds to staff it. It makes me sick to think that the Government can spend money on a scandalous propaganda machine, which is churning out an immense amount of literature, inviting all and sundry for free and expense-paid trips and spending on a shameful, lavish and extraordinary scale.

My third point concerns a matter raised by my hon. Friend the Member for Mid-Sussex, who asked why we did not spend more money telling people about the grand money that we are getting from the EEC for bridges and other extra things to help people. I tried to interrupt him. If there is to be propaganda it should be fair. It is a simple point, but every pound of money that we get to spend on such things as bridges and roads costs the British taxpayer £1.95. That fact was stated in a written answer that I had from the Financial Secretary a few weeks ago, when he told me that since we joined the EEC we have put into it £6,720 million and received in grants and subsidies £3,651 million. Those figures are up to 31 December 1980.

Mr. Lawson

If I remember rightly, my right hon. Friend asked me for figures from the very moment that we joined the Community, and that is what he is quoting. However, he will be aware that there was a substantial improvement in the ratio as a result of the 30 May agreement.

Mr. Taylor

I accept that the situation has undoubtedly improved because of the renegotiation and the 30 May 1980 agreement. The gap is not so broad. However, I believe that the Minister will accept that, since we joined, for every pound that we have received we have paid £1.95. Even this year, our net contribution will be £500 million.

My hon. Friend the Member for Kensington (Sir B. Rhys Williams) wants new bridges and tunnels, but we could have more in Wales, Scotland and England if we paid for them ourselves. It is rather like putting British pound notes in a washing machine. They shrink in the wash.

We should approach this budget in the same way as we would approach a British Budget. The important thing is to ask how will it affect jobs. Jobs are our biggest problem. In considering this budget and the associated documents, we should ask ourselves how the budget and all that goes with it will affect jobs in Britain. This is the kind of aspect that the Treasury should consider. All the peripheral evidence is there. There is the situation in countries which did not join the EEC. Small countries such as Austria and Norway, which had about 1 per cent. unemployment in 1973, now have 1½ per cent. or 2 per cent. unemployment. Supporters of the EEC will immediately say that that is different because they are small and we are big, but in 1973, too, they were small and we were big. The countries which did not take on the burdens and restrictions of EEC membership have performed remarkably well.

What about Britain? How will the budget affect jobs here? First, we shall have to pay a substantial net sum to the EEC. That money would otherwise be available to the Treasury to cut taxes or to provide jobs. The sum this year is about £500 million. I hope that the Financial Secretary will at least give a clear commitment that in the current renegotiations he will not accept any arrangement that is worse than the 30 May agreement. It is frightening to think of the effect on jobs in Britain of the £3,000 million that we have been paying into the EEC since we joined. Certainly, that must account for a large number of jobs.

The second damaging effect is the CAP. The Secretary of State for Industry said today that unemployment was terrible, and would continue to be so until Britain became more competitive and could produce cheaper goods, which people wanted in the world market. I suggest that a crucial factor in our total production costs is the cost of food. It is basic, for example, in the context of wage bargaining. It is a major factor in determining total costs. What is the difference here? Some would suggest, based on the written answer by the Minister of Agriculture to my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) some time ago, that the net difference is about £3,000 million per year. That is £5 per week per British family. Others say that that does not tell the whole story. We know, however, the taxes that we have to charge on food as a direct result of this budget and the CAP. In a written answer on Tuesday 14 April, the Minister of Agriculture himself informed me that we must charge import levy of 60p per pound on butter, 61.14p on cheese, 67p on beef and 27p on lamb. These extra taxes add to the cost of food for the British housewife and the British worker, thus contributing to higher costs. Surely the Financial Secretary accepts that the existence of the CAP adds to industrial costs in every way and thus helps to destroy jobs in Britain.

The third factor to be borne in mind is the effect of trade upon jobs. We all know—there is no hiding it—exactly what has happened. The Secretary of State for Trade stated in an answer on 29 June that in the eight years before we joined the EEC we had a profit in trade and manufactures with the Common Market of £300 million per year. In the eight years since then there has been an average annual deficit of £1.3 billion. That is a massive change. I ask the Financial Secretary again what is the effect of that upon jobs. How many jobs have been lost in Britain as a direct consequence of that massive shift in manufacturing trade from a regular profit to a regular massive loss?

Mr. Dykes

Not true.

Mr. Taylor

My hon. Friend says that that is not true. That was the answer given by my right hon. Friend the Secretary of State for Trade on 29 June.

Mr. Dykes

My hon. Friend's argument today would be more appropriate coming from the Opposition. He is putting the classic arguments of the Labour Party approaching the proposal to withdraw from the EEC. Does my hon. Friend also wish to withdraw from the Community? Apart from changes in the CAP, the ending of the Community budget system as we know it could not be achieved without such withdrawal.

Mr. Taylor

My hon. Friend is trying to divert me. As I have said to him publicly and privately, I am a member of an organisation called the Conservative European Reform Movement, which has put forward four specific suggestions for trade change. If those four suggestions were fully accepted we should be very happy to remain in the EEC. One of our proposals is the abolition of the present CAP. As my hon. Friend knows, that is possible and, indeed, practicable within the Treaty of Rome, which merely calls for a common agriculture policy, not the one that we have. It is a habit of my hon. Friend, when we reach a sticky point which perhaps upsets him and some of his silly friends in the various organisations which lash out money on pamphlets, to attempt to divert the debate.

We should be talking about jobs. I have mentioned the effect of the CAP and of trade. Some may say that these effects result not from the Common Market but from the fact that British workers are no good and British industry is uncompetitive. If that is so, why has our trade with the rest of the world improved dramatically while our trade with Europe has gone wrong?

A fourth factor which affects jobs can be discovered in the budget. I refer to the money spent on the anti-dumping procedures. We are well aware that jobs are being destroyed daily because goods are being dumped in this country from Eastern Europe, the Far East and, indeed, all other parts of the world. In the past when this problem arose and textile and footwear firms were being forced to close we could take prompt action. Unfortunately, since the changeover to the EEC we can no longer do that. We can only refer the matter to Brussels, where it is dealt with by a slow, cumbersome and ineffective procedure. Those are not just my views; they are the views of the CBI and the European employers' organisations which have made representations about this.

The fifth factor affecting jobs is the freedom of movement of people. In considering the amount spent on administration, one relevant factor is the number of people from the EEC who work in this country and the number of British workers in the EEC. The last figure that I was given in an answer by the Secretary of State for Employment was that there were 410,000 EEC employees in Britain and 80,000 British employees in other parts of the EEC.

We must also consider the effect of Britain's attitude to these and other rules. The Italians have brought in import deposits. That is totally against EEC rules, but the system continues to exist and to disrupt trade. The whole picture shows that, by and large, we play by the rules while others do not.

I therefore hope that in replying to the debate the Financial Secretary will at least concede that there is a prima facie case for saying that the effect on jobs has been devastatingly bad. That is why we must go not just for tinkering reform but for the kind of reform that I suspect many people in the Treasury would like. That means doing away with the present CAP, which is covered in the budget to the extent of 60 per cent. That is perfectly possible within the Treaty of Rome, which calls only for a CAP, that is fair to consumer and user alike, with each country doing its own thing, supervised by the Commission. We must have equality of contributions and national control of anti-dumping procedures.

It is impossible to identify all the factors which have led to the tragic level of unemployment in the United Kingdom, but few who examine the evidence rationally would deny that entry into the EEC on the terms on which we joined has had a devastating effect on employment in this country. We must put that right. We shall achieve that not by the simple procedure of breaking off or getting out but by approaching reform in such a way that we demand major changes and not just cosmetic ones.

6.40 pm
Mr. Denzil Davies (Llanelli)

The hon. Member. for Southend, East (Mr. Taylor) was quite right to point out that membership of the EEC has cost thousands of jobs in Britain. Our massive deficit in manufacturing trade has closed factory after factory, not only in the development areas but throughout the country. I hope that in the autumn we shall be able to debate this issue so that we car, extract from the Government the number of the jobs that have been lost as a result of EEC membership.

Today's debate is a narrower one and covers the documents that are now before us—in the main, the draft Community budget for the calendar year 1982. When one reads these documents and the explanatory memorandum one is forced to the conclusion that they make a depressing start to the United Kingdom's Presidency of the Common Market over the next six months.

The documents show—and the explanatory memorandum sets it out—that the United Kingdom will be contributing almost one-quarter of the total gross revenues of the Common Market budget—a total payment of £2,700 million. In other words, 23 per cent. of gross payments will go from the United Kingdom to the EEC, and that despite the fact that our GNP per head of population is the fourth lowest in the Community. That is the clear point revealed by these documents.

The Financial Secretary will correctly point out that what matters at the end of the day is the net contribution when the gross payments have been balanced against the receipts. However, nowhere in the explanatory memorandum does it state what the net contribution will be. When pressed, the right hon. Gentleman muttered something about £500 million, but he does not know; neither does the Treasury. If the Treasury knew what the net contribution would be it would have said so in the explanatory memorandum. However, nothing is said because the Government have no idea what the net contribution will be to the 1982 budget.

Indeed, based on these documents, I suggest that our net contribution could be about £1½ billion. The Minister shakes his head. In that case, he can say why he has not included a figure in the explanatory memorandum. I believe that it could even be higher than £1½ billion.

The Government cannot pray in aid the payments that have arisen as a result of the 30 May 1980 compromise agreement, because those payments relate to 1980 and 1981. They do not relate to 1982. There was no specific agreement about that year. All that we have is a vague statement by the Council of Foreign Ministers that if a permanent solution was not drawn up before 1 January 1982 the same kind of mechanism would apply.

Will the payments next year be £500 million or £1½ billion? In its latest document, which is not on the Table, the Commission sets forward certain mechanisms for changing the United Kingdom's budgetary position. But that document contains no figures. However, on the basis of the proposals it is possible to work out the United Kingdom's contribution in 1982 if all the countries agree to the proposals. That total would be about £850 million net, or £300 million more than the Financial Secretary hopes that we will have to pay in 1982.

This demonstrates that the Financial Secretary and the Government have no right to seek the House's endorsement of documents when they do not know how much British taxpayers' money will be paid across the exchanges into the EEC budget in the next calendar year. The right hon. Gentleman should take these documents away, and we should debate them again when he is able to give exact figures.

This shows how imprudent the Government were to accept the compromise of May 1980. Not only did they give away any chance of obtaining a fundamental reform of the CAP, not only did they betray the interests of British fishermen, not only did they give away the veto in the last agricultural price fixing; they lost for ever any chance of making a fundamental and radical reform in the Common Market budget.

Just as we were two years ago, we are again at the mercy of the other EEC countries. We are forced to go to them before the end of the year and beg them to give back some of our own money. The Government and the Financial Secretary have no idea how much money we will get back, nor have they any idea how much we will have to contribute. Will it be £500 million, £850 million or £1½ billion?

The preliminary draft budget for 1982 estimates that spending on the CAP may be about 60 per cent. of the total spending. I concede that that is a lower percentage than it has been for some time. However, the improvement is a superficial one because it is purely fortuitous and is not caused by any changes in the structure of the system. It is caused by factors which in the main are completely outsie the control of the Commission, the Council of Ministers and the whole Common Market mechanism.

As the Commission points out, the main reason for the reduction is the belief—it is only a belief, because this is an estimate—that the gap between world prices and EEC prices for the next 12 months or so will not be as large as it has been, therefore making it less expensive to dispose of food surpluses on world markets. In addition, there appear to have been favourable currency fluctuations and green currency changes. But, as the Financial Secretary knows, these can go either way, and next year or the year after there could again be a vast increase in CAP expenditure.

On page 25 of volume 7/A, the Commission clearly states: there is no way of predicting accurately the funds needed to meet the obligatons arising under the CAP". Therein lies the fault of the system. There is no control over CAP expenditure. It is a totally open-ended commitment, and that is one of our basic objections to it.

Even if the Council of Agriculture Ministers were to freeze prices for a few years, there would still be no guarantee that expenditure would drop, because other factors could and would push up CAP expenditure. For example, world food prices could drop rapidly. To compensate for the lower prices, farmers would increase their productivity just as they have done in the past. A depression or a recession could reduce consumption. Even with a price freeze, there would be no guarantee at all because all those other factors might come together and prevent any lessening in CAP expenditure. Unless there is a fundamental change in the CAP—and that has been ruled out by the 30 May compromise—the CAP will always take an exorbitant amount of money from the budget and we in Britain will constantly be at a disadvantage.

I have referred briefly to the Commission's document. Because of the time, and as it is not on the Table, I shall not go into detail. That document makes some tentative suggestions about the CAP and the budget, and tentative and vague they are. I believe that there is general agreement in the House that they are quite unsatisfactory and that they do nothing to meet the problem.

There are rather woolly guidelines about the CAP, which the Commission calls "adjustments". Indeed, the Commission admits that the adjustments would have little effect on Britain's contribution. Therefore, the Commission's own proposals on the CAP, tepid as they are, would have no effect at all on Britain's budgetary contribution. The Commission goes on to suggest various ways in which our contribution could be reduced. But even on the best estimate those proposals would produce a net British contribution to the 1982 budget of £850 million—£300 million more than what the Financial Secretary hopes we will be able to get from the Council of Ministers.

I hope that the right hon. Gentleman will say again—he was fairly forthright in opening—that he condemns utterly the Commission's paper as totally inadequate to solve the problem. At least, however, the Commission has put forward some suggestions. We have heard nothing from the British Government. We heard nothing today from the Financial Secretary. We have heard nothing from the Foreign Office, which will apparently be negotiating these matters. The Foreign Secretary tours the world in search of a role. He travels to Moscow one day and to Riyadh the next. Yet nothing is heard about a fundamental problem relating to the British economy and the British taxpayer. There is complete and utter silence. It is clear that the Government do not have either the imagination or the courage to face the problem and are hoping that somehow, by 1 January 1982, the problem will go away.

The Chancellor of the Exchequer made a speech in Holland recently—this was mentioned by the Financial Secretary—but it contained no radical initiatives. It was very lukewarm and negative in tone in relation to the CAP and the Budget. There will be no permanent and fair solution to the problem of the budget unless it is based on a number of basic and fundamental changes.

The Opposition believe that it is no solution to agree to an increase in the VAT ceiling of 1 per cent. and then to use some of the extra money to construct another grandiose common policy under the control of the Commission. Common policies that have to be applied to the different conditions and economies of 10 European countries are bound to be inefficient and wasteful, and to lead to the same kind of absurdities as those seen in the common agricultural policy. If, as is obviously the case, there is need to spend more money to reduce unemployment, to help the inner cities and to promote regional development, what on earth is the sense of doing it by transferring more British taxpayers' money to the Commission in Brussels for the Commission to hand some of it back and tell us where and how to spend it? It is a fairly fundamental proposition that British taxpayers' money should be spent in Britain at the behest of the elected Government of this country.

Secondly, as the amendment makes clear, the United Kingdom's contribution to the budget should not exceed our receipts. There should be a broad balance. That seems to me a perfectly reasonable proposition. The French have been in this position almost every year since they have been a member of the Common Market. Our national income is well below the average for the Community as a whole. Why should we have to make any contribution, let alone a major contribution, to the budget? Why cannot contributions be based on countries' different gross domestic product? The Benelux countries and Denmark are substantially wealthier than Britain. They are net beneficiaries from the budget. If they merely balanced their contributions and receipts—we are not asking for more—those four countries, probably the richest in Europe, would release £1 billion to the budget. Why should that not happen? Why should those countries and others have substantial receipts from the budget?

We also believe that the CAP should be gradually dismantled and replaced with national assistance to agriculture that can cater for the different needs and farming structures of member States. I do not believe that the future of Western Europe will be put in jeopardy by the demise of the common agricultural policy. In the meantime, while the Financial Secretary is dismantling the CAP, I suggest that he should at least try to ensure, and try to get other members to agree, that expenditure on the common agricultural policy should be subject to the same budgetary rules and constraints on expenditure as expenditure on the regional fund, the social fund and other expenditure.

It makes no sense at all. This so-called budget deals with only 30 per cent. of expenditure. The Financial Secretary, poor fellow, will be attending long meetings in Brussels almost up to Christmas but will nevertheless be dealing with only 30 per cent. of expenditure. The rest is completely out of control. One of the most fundamental reforms that should be made is that all expenditure in the budget should be controlled in the same way as the expenditure contained in that 30 per cent.

The Opposition are not hopeful that the Government, despite holding the Presidency, and with all the ballyhoo that follows, will be able to obtain even one of these fundamental changes. If the Government fail I believe: that Britain and the British economy will continue to suffer from a system that is totally unfair and unjust to us. By passing the Opposition amendment tonight this House of Commons will at least make clear not only to the Government but to other member States that we reject the enormous contribution demanded by the draft 1982 budget and that, even if the Government lack the courage and imagination to act, the House of Commons is at least prepared to say "Enough is enough."

Mr. Lawson

The House has just listened to another tirade from the right hon. Member for Llanelli (Mr. Davies), who had the impertinence to try to instruct the Government on how they should negotiate a reduction in the net contribution. The right hon. Gentleman asked why the Government had not made a statement. He is in no position to tell us how to negotiate the matter. The Labour Government had the opportunity to negotiate, and achieved absolutely nothing. They achieved no reduction in the net contribution to the Community budget. I shall take no notice of the right hon. Gentleman's advice, helpful though it may have been intended to be, on how to set about achieving an improvement on the 30 May agreement and its extension into a permanent solution.

The right hon. Gentleman got rather muddled about the net contribution in 1982. The net contribution that Britain has to pay in 1982 is related to the events of 1981. The matter is one year in arrears, yet the right hon. Gentleman was not at all clear on whether he was talking about that or about 1983 and the payments of 1982.

Mr. Denzil Davies

I wish to make it clear, as I did in my initial question, that I was referring to net payments in respect of the 1982 Community budget. The right hon. Gentleman mentioned £2,700 million as the gross payment. What is the net payment in respect of that gross payment?

Mr. Lawson

The right hon. Gentleman is now talking about the net contribution in 1983 in respect of the 1982 budget. It is impossible to say at this stage. It depends on the restructuring negotiations that have just begun. This has been made clear. The undertaking that we got in the 30 May agreement was that the refunds on the existing system would run for two years—in 1981 in respect of 1980, and in 1982 in respect of 1981. I thought that it was that that the right hon. Gentleman was discussing earlier.

As for 1983, in respect of 1982, that should be superseded by the agreement on restructuring the budget, which is in the process that we are now going through. If it is not, there will be a further extension of the 30 May agreement. That is clear. It is impossible to say what will be the precise sum. Nor is it a factor in the Government's accounts in 1982. The right. hon. Gentleman is talking about the Government's accounts in 1983. There are many aspects of the Government's accounts in 1983 that cannot be stated with precision at present.

Mr. Jay

In that case, will the Financial Secretary now tell us precisely what will be the net contribution in 1982?

Mr. Lawson

It is possible to get closer to that, but not to be precise. We expect the refunds that we get in 1982 to be about the same as the refunds that we get this year.

The net contribution is likely to be slightly in excess of the net contribution this year. It is impossible to say what will turn out to be the final figure. That depends on the 1982 Community budget, which has not yet been agreed. Indeed, the budget will not be agreed until the end of the year. The first round of discussions on the 1982 budget begin this week. That is why we are having this debate.

I should like to ask the right hon. Gentleman a question. He talked about a great saving and argued that agriculture should be supported nationally. How much would a Labour Government be prepared to pay on agricultural support nationally? That is an important question. The only way that Labour Members could get savings of the sort that they have spoken about would be by ceasing to assist the United Kingdom farmer.

Mr. Marlow

rose—

Mr. Lawson

I do not have time to give way.

It is clear that until the right hon. Member for Llanelli and his party are prepared to say what form and what scale of national support they are prepared to give the farmer—perhaps nothing at all—

Mr. Ron Leighton (Newham, North-East)

rose—

Mr. Lawson

I shall not give way. I do not have very much time.

Unless Labour Members are prepared to say what form and what scale of national support they would give the farmer, it is impossible to believe their sincerity. It is equally impossible to believe their arithmetic. The offset against any saving that they are suggesting can be made would have to be made good by national aids to the farmer.

I have become tired of the right hon. Gentleman's gloom-mongering predictions, which are regularly falsified. We had a debate in the House on this subject a year ago. On 2 July 1980 the right hon. Gentleman said: I submit that if there is no fisheries policy by the end of the year"— he was refering to the end of 1980— there will be no payment under the budget."—[Official Report, 2 July 1980; Vol. 987, c. 1678.] The right hon. Gentleman assured the House that not a penny would be paid under the budget unless a fisheries agreement was concluded by the end of the year. We do not have a fisheries agreement. We are still fighting for British fishermen. Yet we have received every penny of the refunds that were due to us under the 30 May agreement. So the right hon. Gentleman has been proved to be wrong in that prediction, as he has been proved to be wrong in almost every prediction that he has made on economic or Community budget matters.

I shall try to deal briefly with some of the points that have been raised. I am sure that right hon. and hon. Members will forgive me if, in the little time remaining to me, I cannot deal with all of them.

My hon. Friend the Member for Southend, East (Mr. Taylor) raised a number of matters. I do not accept his statement that there has been a loss of jobs in the United Kingdom as a result of membership of the Community.

My hon. Friend also asked a question about the moneys paid for the European Parliament. Last year I expressed concern in the Council of Ministers at the amount that the European Parliament was, through, as it were, the gentlemen's agreement, voting itself. However, I am glad to be able to tell my hon. Friend that in this year's budget the increase for the European Parliament is only 5 per cent. in money terms, which is a reduction in real terms. That may well suggest that my concern last year that the sum was a bit too high was well founded. Nevertheless, my hon. Friend will at least be reassured to know that.

My hon. Friend the Member for Mid-Sussex (Mr. Renton) raised a number of matters, including that of the European monetary system. This is constantly under review. While it is true that currency stability is something that many business men would like, the great instability that we have seen, as my hon. Friend said, is between the European currencies and the United States dollar. It is not between sterling and the European currencies. Even if we were to be a full member of the European monetary system and part of the exchange rate mechanism we could not do anything about that major instability between the dollar and other currencies.

My right hon. Friend the Member for Farnham (Mr. Macmillan) rightly pointed out that our problems are not wholly due to the EEC. He was right to remind the House that it is always easy to use the Community as a scapegoat. We have problems, but that is not where the difficulties lie. My right hon. Friend suggested that we should take a wider look, rather than just look at narrow budgetary issues. We take a wider look, and we look at the wider issues and the longer issues—peace as well as prosperity. But we must still concern ourselves with the budget. It is important that we do that. It is my humble task to play a part in that, and it is a part that I intend to carry out.

This matter links up very much with what my hon. Friend the Member for Mid-Sussex said. He was right to say that British public opinion is not altogether happy about membership of the Community. [Interruption.] Opposition Members may laugh, but when this matter was put to the people of Britain in a referendum in 1975 there was a very clear answer, and I suspect that the answer would be the same today. I am sure that the more progress that we can make on the European budget question the less discontented that British public will be with the effects of membership of the Common Market. It is very difficult to justify the fact that we, with a standard of living below the Community average, are the second biggest contributor to the budget.

Finally, the hon. Member for Swansea, East (Mr. Anderson) made a very sensible and balanced speech, as he always does. He said that he was worried that the Labour Party was drifting into a committed anti-EEC stance. I regret to have to inform him— I know that other Opposition Members feel the same way—that it is too late. That drift has already reached the point at which, if one were to read between the lines of fine print in what the right hon. Member for Stepney and Poplar (Mr. Shore) said, it is apparent that the Labour Party is firmly committed to withdrawal from the Community. However, for some reason or other the Labour Party does not have the guts to come out into the open about it.

Does the right hon. Member for Stepney and Poplar deny that there is within the Labour Party an EEC study group—of which I believe the right hon. Member for Llanelli is a member—which is on the point of finalising—if it has not done so already—a lengthy document of 20 or more pages, which I trust will be published very soon, committing the Opposition to withdrawal from the European Community? When will it be published? Perhaps the House can be told. We shall be interested to know. Instead of the shadow boxing that we have had across the Dispatch Box tonight about how to reform this and that, and how to negotiate this and that, and the ridiculous amendment to the motion, why do not Labour Members come out in their true colours? I think that the House would then be able to reach a clear decision on this matter. The country will reach a clear decision on it when the time comes.

In the meantime, I invite the House to throw out the Opposition amendment.

7.7 pm

Mr. Tony Marlow (Northampton, North)

We are debating the budget for the European Community. Two years' budget could be as much as £2,000 million. This is a very important matter. It is the bill that we pay for our membership of the Community.

No doubt my right hon. Friend the Leader of the House will one day set aside time for a debate on the benefits of our membership of the Community. He need not worry about setting aside too much time. For 1981 the die is cast. For 1982 the budget is still a matter for negotiation and discussion. I am sure that my right hon. Friend the Prime Minister will be as adamant in British interests as she always is. She has said already that she will be requiring fundamental reform in the budget and the common agricultural policy.

We must look at the cost that we are paying now, despite my right hon. Friend's magnificent efforts last year. This year membership of the Community will cost us, across the exchanges, £530 million. My hon. Friend the Member for Mid-Sussex (Mr. Renton) suggested that we should let people know the facts about the Community, and that wherever the Community puts money into this country for investment we should, at the site of the factory, put up a notice saying that we have had so much money from the Community.

This £530 million costs the average wage earner 80p every week. I should like to make a simple suggestion, namely, that every week every wage packet should have a little item on it saying that the Community has cost the person involved 80p. We should let people know the facts.

We know that the European Assembly will cost us £120 million. That amounts to £½ million for each of its members. We also know that £7,500 million has been set aside in the form of guarantees for farmers. Labour Members are not keen on Trident, but in one year that is one and half times Trident's eventual all-time cost. We do not know that agricultural guarantees will cost 60 per cent. It is said that the figure will be 60 per cent., but if world agricultural prices drop, the figure will climb way above that.

I said that the budget was the bill that we paid for our membership of the Community. However, it is only part of that bill. Indeed, it is the smalles part of it. My hon. Friend the Member for Southend, East (Mr. Taylor) said that he had received an answer from my right hon. Friend the Minister of Agriculture, Fisheries and Food. The cost of the CAP to the British consumer is £3,000 million in any year. My right hon. Friend the Financial Secretary said that we would be bound to pay our own agricultural support. We know that we would be bound to do so and calculations have been done. That would cost us £1,500 million. Therefore every family in that land faces an additional bill of £2.50 per week over and above the cost of agricultural support, which, naturally, we all feel that we should sustain.

If my right hon. Friend the Financial Secretary should feel that the figure that I have cited is inaccurate I should be happy for him to intervene. Those are the calculations that have been produced. The Government have been asked for other calculations, but they have not been produced. It is important to bear in mind that there is a major disadvantage in belonging to the EEC. We are the only major food-importing country in the EEC. We import one-third of our foodstuffs from temperate climes. If we have a high-price regime and pay high prices to our farmers in need of agricultural support, that is fine. However, we are paying high prices to Danish, Dutch, German and French farmers. That is every bit as much a burden to our consumers as the budget is a burden to our taxpayers. I hope that my right hon. Friend is listening. When he goes into the budget negotiations, will he calculate the cost of the CAP to the consumer over and above the budget cost? That is a real cost and it is greater than that of the budget. That must go into the calculations.

I have already spoken about the cost of the CAP and that of the budget. Sadly, there is an even more savage cost, namely, the cost to jobs. Right hon. and learned Members have pointed out the savage effect that: our present situation in the Community has on jobs. In the three years leading up to the recession our balance of trade deficit in manufactures increased to such an extent that it was equivalent to 250,000 jobs.

Those hon. Members who have engineering companies in their constituencies will know of the way in which they have been undercut and put out of business. Jobs have been lost and people have been thrown on the dole queues because of our membership of the Community and the terms of our membership. We complain about the unfair practices of the Japanese and the way in which they are smashing our industry. Does not the House realise that our balance of payments deficit in manufactures with the Federal Republic of Germany is three times that of our deficit with Japan?

In this recession, one of the most important things that can help towards overcoming the problem of unemployment is our trade policy. However, one of the penalties of membership of the Community is that we have surrendered our trade policy, lock stock and barrel to Brussels. My hon. Friend the Minister for Trade is sitting on the Front Bench. He does a magnificent job, but there is little that he can do, because all his powers have been transferred and taken away from him.

There is a world recession and everyone is suffering from unemployment. However, we have a petro-currency that makes us less competitive than other countries. Our problems in the recession are worse than the problems of others. They are not of the same nature as those of other European countries. We have problems outside, which they cannot comprehend. We also have problems inside, because European countries have free access to our markets at a time when our currency is uncompetitive.

Still, we have surrendered our trading policy to the well-manicured hands of the Brussels bureaucrats. What have they done? What about Japan and the laser beam that has fastened on to some of our industries? The Federal Republic of Germany is in favour of free trade. It is not concerned about Japan. France has ways of overcoming such things. The Italians overcame the problem before it started. What about us? Who is interested in little Britain or in the United Kingdom? Those countries are supposed to be fighting for us, but they are not concerned about us. We are only part of their problem.

Hon. Members should bear in mind that 50 per cent. of one type of electrical appliance—food mixers—have been imported from Eastern Europe at one-third of the United Kingdom price. They are being dumped. What happens when we fight dumping in Eastern Europe? We have to take the problem to the Community. All the other countries get together, including West Germany. The West Germans and the East Germans are the same people. The West Germans do not want to stop the East Germans. They are not concerned if East German manufactures come into the United Kingdom and destroy our industries. Therefore, they delay and delay. Other electrical appliances come into Britain. For more than a year complaints have been made on dumping but there has been no resolution of the problem. Industries are being destroyed. Brussels fiddles while Britain burns.

Norman Sommerfeld, president of the British Footwear Manufacturers Federation states: I recognise that the Government is itself subject to all sorts of practical and institutional restraints—not least our membership of the Community . . We were sold membership of the Community partly because of the great negotiating weight that it would bring to bear on our behalf. But instead, too often, it has appeared divided, irresolute and slow to take necessary action in its members' interests. The Community has been particularly slow to take action in our interests. It does not seem to care.

Man cannot live by bread alone. We all need a sense of direction and a certain spiritual uplift. The great European adventure—the idea of European co-operation and of Europe being stronger as a whole than its individual parts—has much to commend it. We should all like to go along with that. But how can we, when the Community's very instruments are so unfair?

Would the French put up—as we have done—with robbery from the Community budget? Would they allow their industry to be devastated by inadequate trading policies that do not suit their national needs? Would the French have allowed such a massive extension to their dole queues while other European countries railroad in goods at prices with which they could not compete?

How much longer must the United Kingdom be the paymaster of Brussels, the whipping boy of the Community and a lamp-post for every French poodle and German dachshund? We have all the cards in our hands. We have the market for their agricultural surpluses. We have the market for their manufacturing surpluses. We have got the North Sea oil that they all need. We have the status in the world to work together politically with other European countries. We must demand reforms and equity, and in pursuing this budget we have the instrument with which to do so.

Question put, That the amendment be made:

The House divided: Ayes 219, Noes 301.

Division No. 281] [10.00 pm
AYES
Adley, Robert Cadbury, Jocelyn
Aitken, Jonathan Carlisle, John (Luton West)
Amery, Rt Hon Julian Carlisle, Kenneth (Lincoln)
Ancram, Michael Carlisle, Rt Hon M. (R'c'n )
Arnold, Tom Chalker, Mrs. Lynda
Aspinwall, Jack Chapman, Sydney
Atkins, Robert(Preston N) Churchill, W. S.
Atkinson, David (B'm'th,E) Clark, Hon A. (Plym'th, S'n)
Baker, Kenneth(St.M'bone) Clark, Sir W. (Croydon S)
Baker, Nicholas (N Dorset) Clarke, Kenneth (Rushcliffe)
Banks, Robert Clegg, Sir Walter
Beaumont-Dark, Anthony Cockeram, Eric
Bendall, Vivian Colvin, Michael
Bennett, Sir Frederic (T'bay) Cope, John
Benyon, Thomas (A'don) Corrie, John
Benyon, W. (Buckingham) Costain, Sir Albert
Best, Keith Cranborne, Viscount
Bevan, David Gilroy Critchley, Julian
Biffen, Rt Hon John Crouch, David
Biggs-Davison, John Dean, Paul (North Somerset)
Blackburn, John Dickens, Geoffrey
Blaker, Peter Douglas-Hamilton, Lord J.
Body, Richard du Cann, Rt Hon Edward
Bonsor, Sir Nicholas Dunn, Robert (Dartford)
Boscawen, Hon Robert Durant, Tony
Bottomley, Peter (W'wich W) Eden, Rt Hon Sir John
Boyson, Dr Rhodes Eggar, Tim
Braine, Sir Bernard Eyre, Reginald
Bright, Graham Fairgrieve, Russell
Brinton, Tim Faith, Mrs Sheila
Brittan, Leon Farr, John
Brooke, Hon Peter Fell, Anthony
Brotherton, Michael Fenner, Mrs Peggy
Brown, Michael(Brigg & Sc'n) Finsberg, Geoffrey
Browne, John (Winchester) Fisher, Sir Nigel
Bruce-Gardyne, John Fletcher, A. (Ed'nb'gh N)
Bryan, Sir Paul Fletcher-Cooke, Sir Charles
Buck, Antony Forman, Nigel
Budgen, Nick Fowler, Rt Hon Norman
Bulmer, Esmond Fox, Marcus
Burden, Sir Frederick Fraser, Rt Hon Sir Hugh
Butcher, John Fraser, Peter (South Angus)
Galbraith, Hon T. G. D. Mates, Michael
Gardiner, George (Reigate) Mather, Carol
Gardner, Edward (S Fylde) Maude, Rt Hon Sir Angus
Garel-Jones, Tristan Mawby, Ray
Gilmour, Rt Hon Sir Ian Mawhinney, Dr Brian
Glyn, Dr Alan Maxwell-Hyslop, Robin
Goodhart, Philip Mayhew, Patrick
Goodhew, Victor Mellor, David
Goodlad, Alastair Meyer, Sir Anthony
Gorst, John Miller, Hal (B'grove)
Gow, Ian Mills, Iain (Meriden)
Gower, Sir Raymond Mills, Peter (West Devon)
Grant, Anthony (Harrow C) Moate, Roger
Gray, Hamish Monro, Hector
Griffiths, E.(B'y St. Edm'ds) Montgomery, Fergus
Griffiths, Peter (Portsm'th N) Moore, John
Grist, Ian Morris, M. (N'hampton S)
Grylls, Michael Morrison, Hon C. (Devizes)
Gummer, John Selwyn Morrison, Hon P. (Chester)
Hamilton, Hon A. Mudd, David
Hamilton, Michael (Salisbury) Murphy, Christopher
Hampson, Dr Keith Myles, David
Hannam, John Neale, Gerrard
Haselhurst, Alan Needham, Richard
Havers, Rt Hon Sir Michael Neubert, Michael
Hawkins, Paul Newton, Tony
Hawksley, Warren Nott, Rt Hon John
Hayhoe, Barney Onslow, Cranley
Heath, Rt Hon Edward Oppenheim, Rt Hon Mrs S.
Heddle, John Page, Rt Hon Sir G. (Crosby)
Henderson, Barry Page, Richard (SW Herts)
Hicks, Robert Parkinson, Cecil
Higgins, Rt Hon Terence L. Parris, Matthew
Holland, Philip (Carlton) Patten, Christopher (Bath)
Hordern, Peter Patten, John (Oxford)
Howell, Rt Hon D. (G'ldf'd) Pawsey, James
Howell, Ralph (N Norfolk) Percival, Sir Ian
Hunt, David (Wirral) Pink, R. Bonner
Hunt, John (Ravensbourne) Pollock, Alexander
Hurd, Hon Douglas Prentice, Rt Hon Reg
Jenkin, Rt Hon Patrick Price, Sir David (Eastleigh)
Jessel, Toby Prior, Rt Hon James
Johnson Smith, Geoffrey Proctor, K. Harvey
Jopling, Rt Hon Michael Pym, Rt Hon Francis
Joseph, Rt Hon Sir Keith Rathbone, Tim
Kaberry, Sir Donald Rees, Peter (Dover and Deal)
Kellett-Bowman, Mrs Elaine Rees-Davies, W. R.
Kershaw, Anthony Renton, Tim
Kimball, Marcus Rhodes James, Robert
King, Rt Hon Tom Rhys Williams, Sir Brandon
Knight, Mrs Jill Ridley, Hon Nicholas
Knox, David Ridsdale, Sir Julian
Lamont, Norman Rifkind, Malcolm
Lang, Ian Roberts, M. (Cardiff NW)
Langford-Holt, Sir John Roberts, Wyn (Conway)
Latham, Michael Rossi, Hugh
Lawrence, Ivan Rost, Peter
Lawson, Rt Hon Nigel Royle, Sir Anthony
Lee, John Scott, Nicholas
Lennox-Boyd, Hon Mark Shaw, Giles (Pudsey)
Lester, Jim (Beeston) Shelton, William (Streatham)
Lewis, Kenneth (Rutland) Shepherd, Cohn (Hereford)
Lloyd, Peter (Fareham) Shepherd, Richard
Loveridge, John Shersby, Michael
Luce, Richard Silvester, Fred
Lyell, Nicholas Skeet, T. H. H.
McCrindle, Robert Speed, Keith
Macfarlane, Neil Speller, Tony
MacGregor, John Spence, John
MacKay, John (Argyll) Spicer, Jim (West Dorset)
Macmillan, Rt Hon M. Spicer, Michael (S Worcs)
McNair-Wilson, M. (N'bury) Sproat, Iain
McNair-Wilson, P. (New F'st) Squire, Robin
McQuarrie, Albert Stainton, Keith
Madel, David Stanbrook, Ivor
Major, John Stanley, John
Marland, Paul Steen, Anthony
Marlow, Tony Stevens, Martin
Marshall, Michael (Arundel) Stewart, Ian (Hitchin)
Marten, Neil (Banbury) Stewart, A.(E Renfrewshire)
Stokes, John Walker, B. (Perth)
Stradling Thomas, J. Wall, Patrick
Tapsell, Peter Walters, Dennis
Taylor, Teddy (S'end E) Ward, John
Tebbit, Norman Warren, Kenneth
Temple-Morris, Peter Watson, John
Thomas, Rt Hon Peter Wells, John (Maidstone)
Thompson, Donald Wells, Bowen
Thorne, Neil (Ilford South) Wheeler, John
Thornton, Malcolm Whitelaw, Rt Hon William
Townend, John (Bridlington) Whitney, Raymond
Townsend, Cyr I D, (B'heath) Wiggin, Jerry
Trippier, David Williams, D.(Montgomery)
Trotter, Neville Wolfson, Mark
van Straubenzee, W. R. Young, Sir George (Acton)
Vaughan, Dr Gerard Younger, Rt Hon George
Viggers, Peter
Waddington, David Tellers for the Ayes:
Wakeham, John Mr. Spencer Le Marchant and
Waldegrave, Hon William Mr. Anthony Berry.
NOES
Abse, Leo Dixon, Donald
Adams, Allen Dobson, Frank
Allaun, Frank Dormand, Jack
Alton, David Douglas-Mann, Bruce
Anderson, Donald Dubs, Alfred
Archer, Rt Hon Peter Duffy, A. E. P.
Ashton, Joe Dunn, James A.
Atkinson, N.(H'gey,) Dunnett, Jack
Barnett, Guy (Greenwich) Dunwoody, Hon Mrs G.
Barnett, Rt Hon Joel (H'wd) Eadie, Alex
Beith, A. J. Eastham, Ken
Bennett, Andrew(St'kp't N) Ellis, R. (NE D'bysh're)
Bidwell, Sydney Ellis, Tom (Wrexham)
Booth, Rt Hon Albert English, Michael
Boothroyd, Miss Betty Ennals, Rt Hon David
Bray, Dr Jeremy Evans, Ioan (Aberdare)
Brocklebank-Fowler, C. Evans, John (Newton)
Brown, Hugh D. (Provan) Ewing, Harry
Brown, R. C. (N'castle W) Faulds, Andrew
Brown, Ronald W. (H'ckn'y S) Field, Frank
Buchan, Norman Flannery, Martin
Callaghan, Rt Hon J. Fletcher, Raymond (Ilkeston)
Callaghan, Jim (Midd't'n & P) Fletcher, Ted (Darlington)
Campbell-Savours, Dale Foot, Rt Hon Michael
Canavan, Dennis Ford, Ben
Cant, R. B. Forrester, John
Carter-Jones, Lewis Foster, Derek
Cartwright, John Fraser, J. (Lamb'th, N'w'd)
Clark, Dr David (S Shields) Freeson, Rt Hon Reginald
Cocks, Rt Hon M. (B'stol S) Freud, Clement
Cohen, Stanley Garrett, John (Norwich S)
Coleman, Donald Garrett, W. E. (Wallsend)
Concannon, Rt Hon J. D. George, Bruce
Cook, Robin F. Gilbert, Rt Hon Dr John
Cowans, Harry Ginsburg, David
Craigen, J. M. Graham, Ted
Crowther, J. S. Grimond, Rt Hon J.
Cryer, Bob Hamilton, James (Bothwell)
Cunliffe, Lawrence Hamilton, W. W. (C'tral Fife)
Cunningham, G. (Islington S) Hardy, Peter
Cunningham, Dr J. (W'h'n) Harrison, Rt Hon Walter
Dalyell, Tam Hart, Rt Hon Dame Judith
Davidson, Arthur Hattersley, Rt Hon Roy
Davies, Rt Hon Denzil (L'lli) Healey, Rt Hon Denis
Davies, Ifor (Gower) Heffer, Eric S.
Davis, Clinton (Hackney C) Hogg, N. (E Dunb't'nshire)
Davis, T. (B'ham, Stechf'd) Holland, S. (L'b'th, Vauxh'll)
Deakins, Eric Home Robertson, John
Dean, Joseph (Leeds West) Homewood, William
Dempsey, James Hooley, Frank
Dewar, Donald Horam, John
Howell, Rt Hon D. Roberts, Ernest (Hackney N)
Howells, Geraint Roberts, Gwilym (Cannock)
Huckfield, Les Robertson, George
Hughes, Robert (Aberdeen N) Robinson, G. (Coventry NW)
Hughes, Roy (Newport) Rodgers, Rt Hon William
Janner, Hon Greville Rooker, J. W.
Jay, Rt Hon Douglas Roper, John
John, Brynmor Ross, Ernest (Dundee West)
Johnston, Russell (Inverness) Ross, Stephen (Isle of Wight)
Jones, Barry (East Flint) Rowlands, Ted
Jones, Dan (Burnley) Ryman, John
Kaufman, Rt Hon Gerald Sandelson, Neville
Kerr, Russell Sever, John
Kilroy-Silk, Robert Sheerman, Barry
Lambie, David Sheldon, Rt Hon R.
Leadbitter, Ted Shore, Rt Hon Peter
Leighton, Ronald Short, Mrs Renée
Lewis, Arthur (N'ham NW) Silkin, Rt Hon J. (Deptford)
Lewis, Ron (Carlisle) Silkin, Rt Hon S. C. (Dulwich)
Litherland, Robert Silverman, Julius
Lofthouse, Geoffrey Skinner, Dennis
Lyon, Alexander (York) Smith, Rt Hon J. (N Lanark)
Lyons, Edward (Bradf'd W) Snape, Peter
Mabon, Rt Hon Dr J. Dickson Soley, Clive
McDonald, Dr Oonagh Spearing, Nigel
McElhone, Frank Spriggs, Leslie
McKay, Allen (Penistone) Stallard, A. W.
McKelvey, William Steel, Rt Hon David
MacKenzie, Rt Hon Gregor Stewart, Rt Hon D. (W Isles)
Maclennan, Robert Stoddart, David
McMahon, Andrew Stott, Roger
McNally, Thomas Strang, Gavin
McNamara, Kevin Summerskill, Hon Dr Shirley
McTaggart, Robert Taylor, Mrs Ann (Bolton W)
McWilliam, John Thomas, Jeffrey (Abertillery)
Magee, Bryan Thomas, Mike (Newcastle E)
Marshall, D(G'gow S'ton) Thomas, Dr R.(Carmarthen)
Marshall, Dr Edmund (Goole) Thorne, Stan (Preston South)
Marshall, Jim (Leicester S) Tilley, John
Mason, Rt Hon Roy Tinn, James
Maxton, John Torney, Tom
Mikardo, Ian Urwin, Rt Hon Tom
Millen, Rt Hon Bruce Varley, Rt Hon Eric G.
Miller, Dr M. S. (E Kilbride) Wainwright, E.(Dearne V)
Mitchell, Austin (Grimsby) Wainwright, R.(Colne V)
Mitchell, R. C. (Soton Itchen) Walker, Rt Hon H.(D'caster)
Morris, Rt Hon A. (W'shawe) Watkins, David
Morris, Rt Hon C. (O'shaw) Weetch, Ken
Morris, Rt Hon J. (Aberavon) Wellbeloved, James
Morton, George Welsh, Michael
Moyle, Rt Hon Roland White, Frank R.
Mulley, Rt Hon Frederick White, J. (G'gow Pollok)
Newens, Stanley Whitehead, Phillip
Oakes, Rt Hon Gordon Wigley, Dafydd
Ogden, Eric Willey, Rt Hon Frederick
O'Halloran, Michael Williams, Rt Hon A.(S'sea W)
Orme, Rt Hon Stanley Wilson, Gordon (Dundee E)
Owen, Rt Hon Dr David Wilson, Rt Hon Sir H.(H'ton)
Palmer, Arthur Wilson, William (C'try SE)
Park, George Winnick, David
Parker, John Woodall, Alec
Pendry, Tom Woolmer, Kenneth
Penhaligon, David Wrigglesworth, Ian
Powell, Raymond (Ogmore) Wright, Sheila
Prescott, John Young, David (Bolton E)
Radice, Giles
Rees, Rt Hon M (Leeds S) Tellers for the Noes:
Richardson, Jo Mr. Hugh McCartney and
Roberts, Allan (Bootle) Mr. Frank Haynes.

Question accordingly negatived.

Main Question put and agreed to.

Resolved, That this House takes note of the Preliminary Draft Amending Budget No. 1 to the General Budget of the European Communities for 1981, and the Preliminary Draft General Budget of the European Commission for 1982.