European Community (Mandate)

HC Deb 29 October 1981 vol 10 cc1042-80 6.33 pm

The Lord Privy Seal (Mr. Humphrey Atkins): I beg to move,

That this House takes note of the Report of the European Commission on the Mandate of 30th May 1980 (COM (81) (300)) and fully supports Her Majesty's Government in their determination to negotiate a satisfactory solution to the problems of budgetary contributions, to achieve reforms of the Common Agricultural Policy and to give an impetus to the development of Community policies.

I understand, Mr. Deputy Speaker, why you may have wished to call me on the previous order relating to Northern Ireland, but it is more than 10 years since I made a speech in the House about the European Comunity. . I do not know how many right hon and hon. Members in their places now were present on that occasion—I believe not many. In my previous job in Northern Ireland there was not much call to talk about the European Community, and in the job before that I was not allowed to make speeches at all.

It is appropriate that I should start by reaffirming in the strongest terms both my and the Government's commitment to the Community. The British people made a wise decision six years ago when they voted in the referendum by a majority of two to one to remain in the Community. Community membership offers Britain the best and, indeed, the only satisfactory basis on which to build our future prosperity and economic strength.

Our trade with the Community has reached a point where it takes 43 per cent. of our exports—60 per cent. if we include the European associates to whose markets we also enjoy tariff-free access. There has been a steady increase in industrial investment in Britain by American, Japanese and other overseas firms which, to a considerable extent, are attracted here by the fact that we are part of a free market of 270 million people. That investment, as we all know, means a great deal in terms of new jobs and new activity, most of it fortunately coming to the areas where it is most badly needed.

The Community has given us greater weight in international economic negotiations. That last point has recently been vividly illustrated by the new consensus on minimum export credit rates, which should produce significant savings for the British taxpayer and which was reached largely as a result of pressure on Japan by the European Community and the United States acting in concert.

Our belief in the Community doe not blind us to the defects that still remain in the way in which it works. On the contrary, it stengthens our determination to stick with our partners' ways of making it work better.

The report that we are debating was produced by the Commission in pursuance of the mandate given to it in the agreement of 30 May 1980. That agreement among the Heads of Government of all the member States provided for substantial refunds of the United Kingdom's net budgetary contributions over the succeeding two, or possibly three, years, and went on to state that a structural solution designed to prevent the recurrence of any unacceptable situation would be decided by the end of 1981. Since I had nothing to do with the negotiations, I cannot be accused of immodesty when I say that the agreement was a significant step forward for Britain and the Community as whole.

When we took office we inherited an intolerable situation. Unless some action had been taken, Britain, a country below the Community average level of prosperity, would have had to pay a net contribution of about £1,000 million a year into the Community. The Government changed that, thanks in no small part to the determination and negotiatiating skill of my right hon. Friend the Prime Minister.

As a result, we have already received about £675 million as refunds of our net contribution for 1980. We shall receive the balance of the refunds due in respect of 1980 when the final calculations of our net contribution for that year are made.

Mr. Tony Marlow (Northampton, North): I apologise for intervening so early in my right hon. Friend's speech, but an important calculation must be made if we pay the money one year and get it back a year or a year and a bit later. If there is money in the bank it earns interst, but if one has to borrow it one pays interest. Can my right hon. Friend at some stage calculate how much the delay in getting the money back has cost us, and therefore by how much the amount that we receive back has been reduced by the interest payments that we have had to make in the meantime?

Mr. Atkins: I could not do the mathematical calculation on my feet at the Dispatch Box, although it can be done. However, my point is that had we done nothing at all we should be paying £1,000 million a year, but as a result of the discussions in May 1980 we have got back £675 million, and we shall get more for the year 1980. If my hon. Friend will allow me, I propose to come to what we propose to do to replace that admittedly unsatisfactory arrangement, whereby we are out of the money for some time, with something better.

I have spoken about 1980. We shall shortly be getting the first refunds in respect of 1981. The May 1980 agreement made a major reduction in our net contribution over those two years. As I said earlier, there is provision for a similar arrangement to apply to 1982 if necessary.

However, it was only a temporary solution to a continuing problem. The 30 May agreement also pledged the Community to resolve the problem on a longer-term basis by means of structural changes. That was an important decision. It was agreed that the problem should be tackled through an examination of the development of all Community policies, including the common agricultural policy, with the aim of preventing the recurrence of unacceptable situations for any member State. The report before us gives the Commission's proposals on how that may be done.

The report deals with the problem in three sections—the development of policies other than agricultural, the reform of the CAP and the problem of unacceptable net budgetary contributions. In the first section the Commission sets the problem within the broad context of Community development in the medium term and the need for the Community to meet the challenge of the 1980s. It calls for progress in a number of areas, including completion of the internal market, energy policy, development of the European monetary system and research and development. It recommends that the resources of the regional and social funds should be increased and concentrated on areas of particular need, in particular, that the regional fund should concentrate on areas suffering from underdevelopment as well as the problems of industrial decline. At the same time it says that the social fund should give more emphasis to current problems, particularly in regions where traditional industries are concentrated, and to preparing young people for working life.

On the common agricultural policy, the Commission, although endorsing the basic principles of the policy, concludes that, since the Community is now more than self-sufficient for most agricultural products, sound management and the need to keep costs under control require that adjustments should be made to the way in which it operates in future. It recommends a number of guidelines, which include the following five: first, a price policy based on a narrowing of the gap between Community prices and prices applied by its main competitors; secondly, a limitation of the open-ended price guarantee, so that if Community production exceeds certain thresholds the full Community price will not be paid; thirdly, the possibility of direct income support subsidies to certain producers in specific circumstances; fourthly, an active export policy which would honour the Community's international commitments; and, fifthly, stricter discipline over national aids to agriculture.

It is the Commission's view that, if these guidelines are implemented, the Community's agricultural expenditure should grow more slowly than its financial resources, and that, of course, means that what we consider to be the excessive proportion of Community expenditure devoted to agriculture would be gradually reduced.

Finally, in the third section dealing with the budget itself the Commission recognises that the United Kingdom continues to face an inequitable budget situation, mainly because it obtains a much smaller relative return from the CAP than do the other member States. It recommends that there should be a corrective mechanism based on the difference between the United Kingdom's share of Community gross national product and the proportion it obtains of FEOGA guarantee expenditure. It suggests that the corrective should be temporary, but should last until the development of other Community policies makes itself felt.

Mr. Marlow: I am terribly sorry to intervene again. My right hon. Friend talks about radical ideas for reform of the CAP. Reforms have been required and requested and plans put forward for years, going back to the Mansholt plan, which must be about 10 years old. Can my right hon. Friend really give us hope that this time changes will take place? What is the difference now that will make changes take place? If we do not get the changes within a limited time, will the Government take action unilaterally to support the consumer in the United Kingdom, who has been milked for so long by this wretched policy?

Mr. Atkins: The difference is that the Heads of Government on 30 May recognised the existence of the problem, instructed that work should be done to see how it could be resolved and told the Commission to produce ideas, and the Commission, for the first time that I know of, has produced them. Those are the ideas that I have outlined. I was about to comment on them. I have so far briefly put what the Commission, in pursuance of the mandate, produced as ideas about what should be done. That is a new departure.

I should now like to make a number of detailed comments on the Commission's report. In general, although we believe that in some respects the report does not go far enough in the solutions that it puts forward and the approach to solving the budgetary problem is too narrowly based, we none the less regard it as a step in the right direction.

The European Council at the end of June this year agreed on the procedure for handling the report. It called for work to be done so that conclusions could be reached by the Heads of Government at the next meeting of the European Council in London on 26 and 27 November. It is a major priority of our Presidency to ensure that we make decisive progress on the subject.

Mr. Julius Silverman (Birmingham, Erdington): As many of the proposals are not comprehensible and none is specific, how can the Council of Ministers on 26 November reach a definite conclusion on the document?

Mr. Atkins: I repeat again that we are discussing tonight the Commission's ideas produced in June on how the mandate given on 30 May 1980 might be fulfilled. In June, when the Heads of Government met in the European Council again, they called on member countries to sit down, discuss, negotiate and work out how best to solve the problem, whether by adopting the proposals or in some other way, and present Heads of Government with decisions for them to endorse, or, if decisions were not possible, at least alternatives to discuss and decide on. That is what is happening. Discussions have gone on steadily and intensively over the past weeks and months.

I am glad to say that at the Foreign Affairs Council that I attended earlier in the week all member States represented recognised the need to accelerate the work, because 26 November is not far away. To facilitate decisions at the November meeting we are under instructions from our Heads of Government to do just that. It is accepted by all the countries that it is necessary to arrive in November at a position where the Council can take decisions.

As I say, the negotiations have been and still are going on. The House will agree that it would not help our case to give details of the Government's negotiating hand tonight. However, I wish to explain how the Government view the main problems and how we hope to see the discussions develop.

It has been agreed in the Community that discussions should be carried forward on a broad front, encompassing all three elements in the Commission's report. They are in fact closely connected. It is recognised that what is needed now is a general revitalisation of the Community and that our decisions should be taken in the context of an overall strategy to that end. My right hon. and noble Friend the Foreign Secretary has indeed been calling for this for some time. We wish this to apply to areas where no expenditure is required, such as the completion of the common market and the creation of common rules for the service industries, such as insurance, as well as to the Community's regional and social funds, whose expansion we have consistently supported and whose operation we feel should be focused more precisely on the main areas of need. It is welcome news that certain other countries, most recently the new French Government, have now made similar calls for the renewal of the Community through the development of its policies in these fields.

In parallel, there will have to be genuine reforms in the CAP. A great deal of nonsense is talked about the CAP in Britain, It has become one of the "Aunt Sallies" of our time. Clearly, it would be ludicrous to "jettison" the CAP, as the Opposition amendment suggests. The CAP is a working system, imperfect but capable of improvement. All the Opposition have to offer is a hope and a prayer. They say "the British consumer would be free to buy food at the lowest prices". Where would we find the quantities that we would need at these "lowest prices"? Do they think the British consumer would have welcomed the opportunity to buy sugar at "lowest 'world prices" last year, when these were about £400 per tonne, compared with a Community price of £300 per tonne? Perhaps they do and will tell us.

Mr. Denzil Davies (Llanelli): The right hon. Gentleman is misreading the amendment. The amendment does not say "lowest world prices". It specifically says "lowest prices". In any world market there is a lowest price.

Mr. Atkins: It is interesting to hear the Opposition's sudden interest in low prices. Under the Labour Administration, agricultural expenditure in the Community increased by an average of over 20 per cent. a year. Since the Conservative Party took office that figure has been 51/2 per cent.

Mrs. Elaine Kellett-Bowman (Lancaster): My right hon. Friend referred to the Community's regional and social funds. He said that they should be focused more on the areas in need. Will my right hon. Friend acknowledge that this is the first time that we have succeeded in persuading anybody to include in any Community document areas in industrial decline? They are of paramount importance to this country.

Mr. Atkins: My hon. Friend knows better than I whether it is the first time. That is a very important thing to do.

Although the CAP policy is not perfect and needs improvement, our level of agricultural self-sufficiency has increased. Food prices have risen more slowly than the general rate of inflation. The "intervention stocks" that we hear so much about are in most cases down now to a few days' supply. I cannot understand how the Opposition's policy would do the Opposition's farmers, their dependent industries or our balance of payments any good.

It is encouraging that the need for reform of the common agricultural policy is also generally recognised in the Community. That is a major step forward.

Mr. Silverman: Does not the mandate specifically exclude basic reform of the common agricultural policy?

Mr. Atkins: No, it does not. The hon. Gentleman should spend a moment or two reading the document. If he did so he would be able to make a useful contribution to the debate. Our aim is to make the most of this generally recognised need for reform and to work for serious and practical changes designed to lead to reductions in the Community's surpluses. That would therefore affect the common agricultural policy's share of expenditure.

A central element in this must be a policy for agricultural price restraint on the lines proposed by the Commission. There will also have to be limitation of guarantees once certain production thresholds are passed. Measures of this sort should, however, not discriminate between producers so as to penalise efficiency. We are against further recourse to general or linear co-responsibility levies of the sort that have been tried in recent years.

We also support the Commission's proposals for stricter control of national aids. They serve to distort the common market in agricultural produce. We are, however, cautious about the Commission's proposals for a more active export policy if these mean that the practice of exporting at heavy subsidy will be expanded. The Community must be careful of its obligations to its main trading partners, whether developed or developing. The overall objective must be to establish effective financial control over the CAP and reduce costs so that resources can be released within the 1 per cent. VAT ceiling for the other policies that the Community badly needs.

The changes that I have outlined should make some contribution in due course to reducing the extent of our problem over the Community budget. Therefore, they will take time to bring about and their effect in the short term can only be small. This is why we endorse the Commission's conclusion that, in addition, corrective measures are needed to deal with the budgetary problem.

We welcome the Commission's recognition that the United Kingdom is in an inequitable situation which must be corrected and the fact that it has proposed one way in which the correction could be made. However, we see this as a problem not just for the United Kingdom. The net contributions and receipts of all member States come about haphazardly as a result of separate decisions by different Councils on individual policies. No attempt is made at present to decide the overall pattern of the budget outcome. No member State would dream of proceeding this way at home. Any member State could in theory find itself in an unacceptable situation.

It would be nonsense to find, for example, that after its accession Portugal, with a GNP of about half the Community average, was a net contributor. In practice, not only we but the German Government are saying that our net contribution is excessive and should not be openended.

We have suggested that the right approach should be for the net contributions and receipts of all member States to be decided by the Community on the basis of objective criteria such as relative prosperity and population size. That we have to find an answer to this is clear. If the financial basis of the Community is acceptable to all, there will be much greater willingness to develop new and useful policies.

Despite some speculative claims from Labour Members, the Commission's ideas are couched in general terms and it is simply not possible to make precise estimates of what its results would be for the United Kingdom. A great deal depends on the detailed implementation of any scheme, whether the Commission's or another. That is a key part of the negotiation.

Mr. Marlow: I am sorry to interrupt again. My right hon. Friend has been more than kind so far. When we are talking about our net contribution, will my right hon. Friend, when he is looking at it and putting it to the Community, remember that not only are we making a net contribution to the budget, but that, by and large, over the years we shall be forced to buy—if the common agricultural policy stays roughly as it is or under any conceivable CAP—some of our food from Europe? We would otherwise be able to buy that food on the world market—often at lower prices. The present policy is a real additional burden on the United Kingdom housewife and community, It is just the same as a budget contribution, but additional to it. When we are looking at the amount spent on the Community they must in fairness be added together.

Mr. Atkins: When considering the balance sheet of the advantage and disadvantage to the United Kingdom of belonging to the Community, one has to take into account factors other than the budgetary outcome alone. Many factors can be brought into the balance sheet, but I was talking only about the budget, while focusing on the fact that our budgetary contribution was unacceptable and had to be put right and suggesting that, although we are glad that the Commission has made one suggestion about how that might be done, we believe that it can be done better and more fairly in a different way. We have been negotiating with our Community partners and we have every intention of carrying the negotiations through to a successful conclusion.

We achieved a firm Community pledge in the 30 May agreement to resolve the problem. We have a Commission report which provides a useful starting point. We have a shared interest with our partners in the Community in further developing a number of policies which we ourselves support, in eliminating the wastefulness of some aspects of the CAP and in preventing the recurrence of unacceptable budgetary situations. These are all major elements in our favour, and we shall build on them. The Government utterly reject the defeatism of most of those on the Labour Benches.

Even when in Government, the Labour Party's record of determination to secure improvements in the Community was less than impressive, Labour's famous "renegotiation" never yielded a single penny in refunds of our net contribution, and yet, without regard to the substantial achievements that the Government have made, the Opposition are saying that it is all too difficult and suddenly, apparently, the Community is incompatible with the pursuit of true Socialism—a view which is rejected by all their Socialist colleagues in Europe.

The national executive committee of the Labour Party and the TUC are now, I gather, embarking on an analysis of the economic and political consequences of withdrawal from the Community. Personally, I should have made the analysis before announcing the policy—but so be it. I shall be interested in the results. I hope, however, that when we emerge from the current negotiations Labour Members will look honestly at their policies on the Community. But I would much rather that they backed the true British interest, which is to secure a better Community which works more effectively to the benefit of its citizens.

Let me sum up. We are determined to achieve a satisfactory solution to the problem of budgetary contributions, a reform of the CAP and the development of other policies leading to a better balance in Community expenditure. Membership of the Community is the essential framework within which we have to increase the economic strength and prosperity of our country. I therefore hope that all hon. Members will support the Government's efforts to bring that about.

7.3 pm

Mr. Denzil Davies (Llanelli): I beg to move, to leave out from 'House' to the end of the Question and to add instead thereof:

"notes that the proposals contained in the Commission Document (COM (81) (300) of 22nd June 1981 in respect of the Mandate of 30th May 1980 are totally inadequate to remove the heavy burden imposed upon the economy of the United Kingdom by the Common Agricultural Policy and the budgetary arrangements of the Community; further notes that that burden can only be removed by jettisoning the antiquated mechanisms of the Common Agricultural Policy so that the British consumer is free to buy food at the lowest prices; and urges Her Majesty's Government to reject any new arrangements which fail to ensure that the United Kingdom's contributions to the Community Budget do not exceed its receipts."

I add my welcome to the Lord Privy Seal following his move from the rigours of Northern Ireland to the calmer waters of the Foreign Office. His Minister of State told us on Monday that Foreign Office Ministers never panic. I am sure that if the right hon. Gentleman has the good sense to throw out of the window the collected works of John Maynard Keynes, which his predecessor kept in his room, and to indent for the collected works of Milton Friedman he will have no need to panic.

As the right hon. Gentleman told the House, our debate concerns the mandate which arises from the famous temporary compromise of 30 May last year on Britain's budgetary contribution. The Government have tabled a motion in suitably vague terms and the Opposition have moved a precise amendment. The document is utterly inadequate to solve the problem and we heard nothing from the Lord Privy Seal to suggest otherwise. The best that he could muster, with all the authority of the Foreign Office, was that it was a step in the right direction.

The document shows that the Commission does not have the will to present any radical proposals for change. In the immortal phrase of Ernest Bevin, most of the document is "Clitch after clitch after clitch". The best example of its vacuuity is paragraph 4:

"In this way the Community will finally take its rightful place in the world and become a catalyst for peace and development".

Considering that most of the senior officials who worked on that document are probably earning at least £40,000 a year tax free, one could have expected them to do better than to write that sort of rubbish.

The document is supposed to set out proposals for finding a permanent solution to the absurd situation of the United Kingdom always having paid far more money to the Community than it has received in return. However, out of 28 pages of what I charitably describe as prose, a mere two pages are specifically devoted to the United Kingdom's unacceptable situation. The paper takes 12 pages to get to the CAP and when it does it produces this dazzling sentence: the result of twenty years of the application of the C.A.P. is positive. We in Britain could rewrite that statement to read "The result of eight years of the application of the CAP is a positive disaster".

The Commission makes it clear that it has no intention of putting forward radical suggestions. It states candidly in paragraph 19: It is neither possible nor desirable to jettison the mechanisms of the common agricultural policy". We must have some sympathy with the Commission, because even if it wished to put forward radical policies—though I doubt whether it would, since it has a vested interest in the bureacracy of the CAP—its hands are tied. The Lord Privy Seal glossed over the temporary compromise, but it is clear that the Commission is not allowed to produce radical policies. The damage was done in the compromise.

The House will remember what happened on that occasion. The Foreign Office and the Prime Minister accepted a compromise arrangement which we have always argued was damaging to Britain and which should never have been accepted in the form that it was. Let us consider that compromise. First, the Prime Minister accepted half a loaf, having said that she would not do that. She accepted a temporary amelioration for only two years, but in every debate in the House she and the Chancellor of the Exchequer had made it clear that the Government were looking for a permanent solution.

But perhaps even worse than those two aspects of the compromise was the acceptance that any proposal for change should not call into question the basic principles—these words are used clearly in the communiqué and the compromise—of the common agricultural policy and of the budgetary arrangements. Once that pass has been sold, once that bargaining counter has been given up, there is no way in which we can possibly get any satisfactory solution of this problem in the interests of Britain. The common agricultural policy and the budgetary arrangements of the Common Market are inimical to the best interests of this country, because they were devised without this country in mind.

Mr. Humphrey Atkins: Am I not right in thinking that this was the position following the renegotiation in which the right hon. Gentleman had a hand?

Mr. Davies: Of course the right hon. Gentleman is right in thinking that, and we have never disguised it. The point that we are making—and I hope that the right hon. Gentleman will not try to make party points—[Interruption.] We are concerned here, as the right hon. Gentleman said in his splendid peroration, with the interests of Britain, and I should have thought that he would want to raise the level of the debate and to look at the interests of Britain in this matter. It is not in the interests of Britain to be a party to these arrangements.

Sir Anthony Meyer (Flint, West): Since the right hon. Gentleman is contending that the common agricultural policy is a bad way of sustaining British agriculture, would he care to confirm that, after an examination by the Labour Party of the cost of reverting to a deficiency payment system, it was found that out of six sets of assumptions on which a deficiency payment system could be based the minimum cost was £400 million a year and the maximum cost was £1,700 million a year, and that all the other assumptions, apart from the one that I first mentioned, were substantially larger than the sum expended by Britain on the common agricultural policy?

Mr. Davies: The hon. Gentleman, as usual, misses the point. The common agricultural policy is damaging to Britain in many ways, and no doubt we can debate the question of costs on the appropriate occasion. The point that I am making now is that it is not possible, once the basic principles are not challenged, to make the common agricultural policy beneficial either to British agriculture or to the British consumer.

The Financial Secretary to the Treasury (Mr. Nicholas Ridley): Why, then, did the right hon. Gentleman remain in the Labour Government which commended to the House the common agricultural policy after their renegotiation in 1975?

Mr. Davies: That is the kind of silly remark that we expect from the Financial Secretary. This is the second debate on Foreign Office matters at which a Treasury Minister has been present to keep an eye on the Foreign Office, and we are glad to see him taking part in the debate. My answer to his question is that I was not a member of the Government when that renegotiation took place.

The paper deals and the Lord Privy Seal has dealt with the common agricultural policy. The Commission says clearly that all it is doing is to set out some adjustments to the CAP. It has given up the chance of any radical reform. It is not allowed to have it. So we are talking about adjustments, which it describes as guidelines. These are extremely vague and the Lord Privy Seal glossed over them quickly in his speech. Since they are only guidelines, I do not see how Mr. Ertl, the German Minister of Agriculture, will be able to accept them, or, indeed, that fierce lady who has just become Minister of Agriculture in France, and who sometimes sounds more Gaullist than Mr. Chirac on these matters. I cannot see her accepting them either. Perhaps we can be told by the Financial Secretary how the Government see these so-called guidelines being put into practice.

One disturbing feature of the Commission's proposals is its desire, when it looks at the surpluses and the cost of the CAP, to extend the system of what is called co-responsibility to curb the milk surplus in the Community, and presumably also raise more money for the Commission, for in paragraph 24 the Commission report states: For milk products, the Commission considers that the objective of controlling production can only be achieved if the principle of co-responsibility is extended. Stripped of the Community doublespeak, that means, in effect, a kind of tax on milk products. The Lord Privy Seal has great experience in these matters and I put this question to him: why on earth should the British dairy industry and the British consumer have to suffer this levy on milk when there is no surplus of milk products in Britain?

The Lord Privy Seal mentioned the co-responsibility levy. I hope that we shall get a reassurance from the Government tonight that they will not agree to the ridiculous suggestion of a new co-responsibility levy for the ostensible purpose, apparently, of reducing the milk surplus. As a result of the co-responsibility levy, the consumers will have to pay more for their milk than they would otherwise have had to pay. It will also damage the dairy industry. It is wholly unnecessary to have such a policy.

The suggestion of a co-responsibility levy demonstrates the absurdity of the CAP system. It is not simply a common agricultural policy; it is also a tax gathering policy. The agricultural system is one of the three heads of the own resources system and we find agriculture being used to raise revenue. That in itself is an extraordinary and retrograde system, because decisions are taken about farm policy not intrinsically on their merits—the co-responsibility levy is a classic example—but in order to raise more money for the Commission to spend on various other projects.

It is clear that one of the main preoccupations of the Commission is to raise more money in order to further its plans. Paragraph 40 of the Commission document contains the extraordinarily arrogant statement: The Commission cannot accept that an artificial ceiling be put on own resources". In other words, the Common Market should be allowed to spend what it wants and the money must then be found to pay for it. That is what the Commission is saying: the real world must not be allowed to intrude upon the Commission's grandiose designs. That is how the Common Market has operated up to now. That is what has happened. Projects have been approved and money then has to be found for those projects. That is why the Common Market is now getting into a serious financial crisis.

Now that the 1 per cent. ceiling in VAT will probably be reached in a few years, depending on world prices, the Commission is desperate to raise more money, and that is one purpose of the document. I hope, therefore, that the Financial Secretary, who is one of the disciples of Mr. Milton Friedman, will make it absolutely clear tonight in his reply that the British Government will not in any circumstances agree either to a lifting of the ceiling of 1 per cent. or, indeed, to an abolition of that ceiling, and that the ceiling of 1 per cent. VAT contribution will stay in all circumstances. We know the Financial Secretary's puritan views on these matters, and I hope that we shall get that assurance from him.

The system of collecting tax through VAT is in itself damaging to Britain. It is damaging for many reasons, but mainly because it is a poll tax. It is not a progressive form of taxation. It is based on spending in the economy, without taking into account a country's gross national product. It is therefore damaging to us as it is and would be even more damaging to us if the limit were raised.

To some extent, the Commission has done everyone a favour by showing in the Commission document what little can be achieved by tinkering with the common agricultural policy. We believe that the only course now open is to start dismantling the CAP and to replace it with national aids to agriculture. I was sorry to hear the Lord Privy Seal endorsing the statement in the document that national aids to agriculture must be discouraged, because we believe that the best way to help British agriculture and the British consumer is gradually to replace the CAP and allow each country in Europe to support its own farmers according to its own traditions and its own agricultural industry. Why should the agricultural sectors of 10 Western European nations have to be fitted into the straitjacket of the common agricultural policy?

Mr. Anthony Nelson (Chichester): Given the proportion of the Community budget that is expended on agriculture, should not the right hon. Gentleman come clean with the House? His proposals have precious little to do with aiding British farming or agriculture. They amount essentially to a wrecking policy to destroy the main mechanism of the Common Market.

Mr. Davies: It is interesting that the hon. Gentleman referred to the "main mechanism of the Common Market". The real purpose of the CAP is not to aid farming or benefit the consumer. It is there because nothing else is there. If it were removed, what would be left of the bureaucratic centralised operation? I do not believe that the Western Alliance will crumble as a result of the demise of the CAP.

Mr. Hugh Dykes (Harrow, East): The right hon. Gentleman has displayed on previous occasions his sure-footed grasp of EEC statistics. Last year he told us that 25 per cent. of the population of France was engaged in work on the land. I hope that he has now secured the right figure. Surely his argument points to the beneficial redistributive potential of EEC funds for Britain. If money is collected through agricultural levies and if we get money back for non-agricultural purposes because we have a small agricultural sector, that is redistribution that we should encourage and develop. Why is the right hon. Gentleman against that?

Mr. Davies: Because we are not getting the money back. There is nothing in the document to suggest that we shall get it. One of our objections to the CAP is that it is the main reason why we have been making such large contributions to the budget. We are not receiving any compensatory refunds from the Common Market.

Before Conservative Members say that dismantling the CAP amounts to a Marxist plot dreamt up by the Left, Transport House and Walworth Road, I remind the House that the House of Lords Select Committee on European Communities—it does excellent work under the chairmanship of Baroness White over the complete range of Common Market policy—in its 29th report on the reform of the budget states: The Committee"— that is the Select Committee of the House of Lords— has argued in this and previous reports that a solution is most likely to be found in increased national responsibility for agricultural expenditure. The Committee considered the issues objectively and came to the same conclusion as the Opposition: that the only way in which the problem can be solved—that is the budgetary problem and the problem of the CAP, because they are intertwined—is by moving away from a centralised bureaucratic CAP towards national aids for agriculture.

It is the document's objective to try not to put forward some reform of the CAP but to remove permanently the unacceptable contributions that we make to the budget. The Commision admits—the Lord Privy Seal mentioned this—that the adjustment of the CAP that is proposed will not achieve the purpose of changing the contributions that we have to make to the EEC. Paragraph 41 states: It is clear that their implementation could not have a significant impact for some time to come. The Commission then looks for an alternative scheme or policy to try to solve the problem. The problem arises in respect of the EEC budgetary year 1982 and onwards. The result of the compromise of 30 May is a mechanism for 1980 and 1981. As I understand it, there is no agreement at present on our net contribution for 1982. If there is no agreement for 1982, will the Financial Secretary indicate what our net contribution might be during that year? We have calculated that our net contribution for 1982, in the absence of an agreement, could be £1,250 million or more. That will be the starting figure. Will the hon. Gentleman tell us what our net contribution for 1982 might be if the mechanism which the Commission is suggesting in the document is applied? The mechanism compares our share of the Community's GNP with our share of receipts under the CAP.

If there are to be negotiations between now and the end of November, and if the negotiations take into account the system advocated by the Commission, surely the British Government must have the figures to enable them to determine whether the new scheme will be of benefit to Britain. The Opposition do not have the resources of the Foreign Office, the Treasury or the Commission, but we estimate that in 1982, under the Commission's so-called solution, we shall make a net contribution of about £800 million. Such a figure is unacceptable.

If we assume that the proposals are not agreed and that the proposals for 1980–81 are agreed for 1982, what will be Britain's contribution? We believe that extending the compromise of 1980–81 would mean that for the budgetary year 1982 our contribution would be about £500 million. There have been no proposals from the British Government. The Lord Privy Seal said nothing on this issue and did not indicate the proposal that he favoured. It is clear that the Government do not have the foggiest idea how to solve the problem.

As the amendment makes clear, and as the House has accepted unanimously on two occasions, the only real solution is for Britain not to contribute more to the budget than it receives. There is nothing revolutionary about that suggestion. As I have said, eight of the 10 members of the Community are already in that position. Only two member States contribute towards running the EEC—West Germany and Britain. What kind of a Community is it when only two members are paying to keep it going? Eight of the 10 members are receiving benefits from the Community in excess of the money that they put into it.

Four of the five richest countries in the Community are the three Benelux countries and Denmark. If they were in broad balance instead of receiving money from the Community, that would free £1,000 million on last year's figures alone. That sum could be spread among the other member States. We are making a modest request. We are asking for something that eight of the 10 member States already enjoy. We are asking only for a broad balance.

The French Government occasionally have to make a contribution, but in the past they have generally been in broad balance, despite the fact that they oppose in principle the notional juste retour. France has benefited from the notion of juste retour almost every year during its membership of the EEC.

Mr. Marlow: If I may put the same point to the right hon. Gentleman as I put to my right hon. Friend before, although the French Government are basically in broad balance budgetarily, they produce a mass of food which they sell to other Community countries at prices well above world prices. Although in terms of the budget they are in broad balance, they are making a massive profit out of the Community. That is one of the problems we are faced with when we try to renegotiate.

Mr. Davies: I accept that. I am not arguing that France should not be in broad balance. If it is in broad balance—it may have other benefits from the Community too difficult to quantify in this debate—we ask that Britain should be in broad balance. We are not asking for more. That is a reasonable request. We want a fair and equitable balance in relation to our contributions to the Community. If past form is anything to go by, at the end of the day the Government will suggest a satisfactory solution. They have left the motion open to obtain a satisfactory solution and the Lord Privy Seal will use all his diplomatic arts to say that it is in the interests of Britain that we accept his solution. All we will get is a cobbled-up compromise that will last a few years and do nothing to solve the basic problem. We shall have to return to the matter time and again.

If, on this occasion, the Government cannot produce a fundamental and radical change and are not able to solve this problem once and for all, the British people will not be fooled by any attempts to dress up this compromise as a permanent solution. What the Government will do is to increase the determination of the people of this country to rid themselves of the absurdity of the system and to free Britain once and for all from the shackles of the Treaty of Rome and the Treaty of Accession.

7.30 pm

Mr. George Gardiner (Reigate): It is a little late in the debate for me to join the welcome to my right hon. Friend in his new position but, at least, following the right hon. Member for Llanelli (Mr. Davies), I hope that it is not too late for me to wish him well in his task. I believe that he has already chaired a meeting of the General or Foreign Affairs Council. My right hon. Friend has therefore become blooded in his new role very quickly. Given the importance of this subject and these proposed reforms to this country, it is a matter perhaps worthy of passing remark how little interest or enthusiasm they seem to have elicited on the Opposition Benches.

For my sins, I look in each year at the Labour Party conference just to see what is happening. This year, I came away with the firm impression that these matters and the very question of our membership of the Community were burning issues. If they are of burning issues, the flame is certainly flickering very low this evening. I do not think that there have been more than five Members of the official Opposition present at one time.

In fairness, I should say that it is even more remarkable that we have had not a single representative from either the Liberal Party or the Social Democratic Party to join these discussions. It had been my impression that a commitment to the Community was, if you like, a basic test of membership of the Alliance or either of its two constituent parts. Clearly, however, that enthusiasm does not extend to any wish to join in discussion of how the Community can be improved for this country or its institutions strengthened.

Just before this report was presented by the Commission, I and one or two colleagues on the Government Benches had the opportunity to visit Brussels and to talk to Commissioners on how their ideas were taking shape. It is fair to say that we were impressed by their determination to apply some original thoughts to the problem before them and to come up with some propositions that they regarded as pretty radical.

The Commissioners must have been disappointed at the criticism that has been heaped on their report from a number of quarters, most notably from within the European Parliament. It seems to me that the central and most important weakness, almost notable weakness, in their report is its treatment of the problem of the distribution of resources within the Community as if it were purely a British problem. It is, of course, not purely a British problem. It is dangerous to treat it as if it were. It is a Community problem.

West Germany, since the settlement of May 1980, has become by far the largest net contributor. Many would argue that this is only fair, given the strength of the West German economy. What, however, are we to say about the position in which Portugal or Spain will find themselves under the present arrangements once they become Community members? Surely, we are not then to go through all this process yet again to ensure that Portugal, for example, does not become a large net contributor to the Community that it has joined.

We need a corrective mechanism for the distribution of resources within the Community that will meet not only Britain's needs but also the foreseeable future needs of an expanding Community. United Kingdom Ministers have already made a constructive response to the suggestions outlined in this document. I am glad to see that the Minister of State, Foreign and Commonwealth Office, on 14 September made strongly the point that as things stand within the Community there is very little effective central management of the demands that are presented under different budget headings. He said:

"The problem of budget imbalances has arisen because policy decisions are taken by different Councils in different contexts with little regard to cumulative effects on individual countries. If arbitrary consequences are to be avoided then the Community should, in our view, take conscious decisions on how the budget as a whole should affect individual member States."

That must be an important element in any changed mechanisms that come out of the current discussions.

Mr. Donald Anderson (Swansea, East): Given that this is a laudable aim, is there anything in this document suggesting that such a view will be taken?

Mr. Gardiner: I agree with the hon. Gentleman. That is one of the criticisms that can be levelled against the document. Indeed, it was the implicit criticism of it being levelled by the Minister of State in the remarks I have quoted. In further support of that, I make an observation that I have heard several times in Europe about the Council of Agriculture Ministers.

It is observable often that it makes little difference which country the Minister represents and, indeed, whether the Government that sends him there is of the Right, the Right-center or Left complexion. Once there, they all act as Agriculture Ministers with their own farming votes to satisfy. The outcome presents a further headache for the remainder of their colleagues in the Community. I hope that we can create a structure in which the Community dog does not appear to be wagged quite so vigorously by that tail in the future.

I have been perhaps a little critical of the Commission's report. There is one aspect that I should like to commend particularly to my right hon. Friend because, although he mentioned it in passing, he was obviously not able to dwell on it at length. That is the element concerning an expanded social fund. This is an element that could be of great beneficial value to the United Kingdom.

It is a proposal that offers more new emphasis on job creation and preparing young people for working life. One of the things that we do rather badly in this country at the moment is to prepare young people and school leavers for working life. There is a great deal that we can learn from countries such as West Germany in this respect. It is very important, outside the context of this discussion, that we should devise better means for training young people and preparing them for industry, particularly immediately after they have left school, providing more flexible training than we do now and certainly over a much broader spread.

If my right hon. Friend the Secretary of State for Employment were able, over the coming Session or beyond that, to devise a more ambitious and imaginative and, at the same time, realistic programme for preparing those leaving school for the world of business and industry, I would hope that that would be an area that would attract strong support from the European budget, and particularly through the mechanisms of the social fund. My right hon. Friend and some of his colleagues might bear that in mind in the discussions that are shaping up further on the restructuring of the budget.

Mr. Teddy Taylor (Southend, East): Does not my hon. Friend accept that if he or anyone wants to have different forms of training for school leavers or anything else, there is nothing to stop us doing that now? What difference does it make whether this receives the stamp of the Common market social fund when we are net contributors to the budget and when every pound that we have got from Common market funds up to now has cost the British taxpayer £1.71? What difference does it make, particularly when the Government maintain the principle of additionality?

Mr. Gardiner: With respect, I was not suggesting that schemes of the kind that I should like to see should be conditional upon receiving heavy support from the social fund. I entirely agree with my hon. Friend. If we want to do these things, we can go ahead and do them.

Mr. Taylor: Hear, hear.

Mr. Gardiner:

The point that I was making is that if we are seeking, as my hon. Friend is seeking, ways and means of getting more funds back into this country to balance those that go out, of which he has spoken frequently, this is a commendable way of doing it, and there is a great opportunity for us here to kill two birds with one stone.

I should like to deal with the negative attitude displayed by the official Opposition's amendment. We must look at the amendment and what the Opposition have to say in the context of their official party policy to quit the Community, come what may, without giving the citizens of this country even the courtesy of a referendum to reverse the decision that they took so overwhelmingly in the previous one. It is not for me this evening to dwell on the disruptive effect that that would have in this country on a scale that is impossible to imagine. However, I wonder how the Opposition, in putting forward such an amendment, imagine that they can help the Government to negotiate better terms for Britain while at the same time trumpeting loudly from their conferences elsewhere that they are pledged to withdraw Britain from the European Community whatever happens.

Although we always enjoy the contributions from the right hon. Member for Llanelli, particularly his shafts of unintended humour, we must regret that we do not have the pleasure this evening of the company of his right hon. Friend the Member for Stepney and Poplar (Mr. Shore), who, in the past, has treated us to some rather ambivalent thoughts on this subject. I should like to quote his remarks to us on 24 March 1980, when he seemed very confused as to whether it was a good thing for Britain to press for payments and refunds from the Community budget anyway, since he complained: By seeking to secure increased Community expenditure in Britain we are allowing the EEC increasingly to determine our own public expenditure priorities and to increase its influence and competence over Government decisions in Britain."— [Official Report, 24 March 1980; Vol. 981, c. 1087.]

The first thing that we would like to know from the Labour Party is whether it is in principle in favour of securing these refunds to us, and whether it wishes to see increasing Community expenditure in Britain on programmes of regional benefit—employment, retraining, or whatever.

Secondly, the Opposition have some things to sort out on their side in this respect. They cannot, on the one hand, say that accepting increased Community expenditure in Britain robs us of power to determine our own public expenditure priorities and, on the other hand, at the same time, allow one of their representatives in the European Parliament, Mr. Richard Balfe, to use his position on that Parliament's finance committee to seek to chop in half the refunds that were negotiated for us by the Prime Minister in the teeth of such hard negotiations. The Opposition must sort out what it is that they want. Do they want Britain to have the primary say on where these resources go, or do they accept Mr. Balfe's arguments that it is some Community institution that should have the right of decision on, this money is spent? When we hear further Opposition speakers, I hope that they will clarify that point.

Next, one cannot let this opportunity pass without drawing attention to the sheer hypocrisy underlying the amendment. Throughout Western Europe we have a problem of mounting unemployment. It has affected all members of the Community, but it is felt more acutely in Britain for reasons that were explained from the Front Bench only yesterday. In tackling this problem in this country, whether or not in conjunction with our partners, we must remember that it is access to Community markets that is essential for our industries and our jobs. My right hon. Friend the Lord Privy Seal has pointed out how 43 per cent. of our exports go to Community markets, Indeed, it has been established that 21/4 million jobs or so depend directly on such sales.

Of course, I am not pretending that if the Opposition had their way and we were to withdraw from the Community we would lose all those sales or, automatically, all those jobs. But it is a fact that if we succeeded in keeping two-thirds of that trade, the loss of the remaining third would still add 1 million to the dole queue that we have today.

There is more to it than that.

Mr. Teddy Taylor: Will my hon. Friend give way?

Mr. Gardiner: No. My hon. Friend will be able to develop his arguments later.

We have heard in this debate of the non-budgetary benefits and costs which enter into these calculations. It has been said that West Germany, particularly in the context of its large net contribution, achieves non-budgetary benefits from this in terms of access to markets. A non-budgetary benefit that we in the United Kingdom get from this, and intend to get in a much more marked fashion, is the investment that we are trying to attract, the investment that is essential if we are to reduce the total of nearly 3 million unemployed and if we are to get the jobs that we need for the future. It is crucial that we get additional benefit, both within our own shores and from overseas investment.

Recently we have had very encouraging investment decisions by a number of large overseas companies—the Burroughs Corporation, Yates Industries, Sony, Motorola, National Semi-Conductors, Minnesota Mining and Manufacturing, to name just a few. I note a sentence in a recent report from the Scottish Economic Planning Department. It said: New investment projects"— in Scotland— in recent months have often envisaged more than 80 per cent. of output being exported, most of this to Western Europe. Do we imagine that these investors will still come to this country and establish new plants here if, instead of a domestic market of 270 million people, there is a domestic market of only 56 million? We know very well that soon those investment resources would be diverted into the main market.

Many of our own firms, too, would feel the pressure, as they felt before we joined the Community, of having to try to channel investment into the Community to get a foothold there. I maintain that that alone justifies an appeal to the House to treat the Opposition amendment with the contempt that it deserves.

In so doing, I say to my right hon. Friend and his colleagues "Go on. Get the best deal you can for Britain and for a strengthened and more prosperous Community, and take no notice of the treacherous whining of the Opposition."

7.51 pm

Mr. Julius Silverman (Birmingham, Erdington): I shall not follow the hon. Member for Reigate (Mr. Gardiner), if for one reason only, and that is that I speak as the Chairman of the Select Committee on European Legislation &c. For that reason I shall not refer to the merits of the motion, nor to those of the amendment.

I want to put to the Lord Privy Seal one or two relevant questions. First, however, I should tell the House that this document has not been recommended for debate by our Committee. This is an interesting issue, and I shall go into its history in a moment.

The first question that I want to ask is: why has this document been produced at all in its present form? The second question is: why, having been produced, is the document being debated today in the House?

We should bear in mind the fact that the Commission had to fulfil its mandate by the end of June—by 26 June, I think. That means that it had to put concrete proposals before the Council before the end of June. Yet the document contains nothing like that. It is a vague document that expresses a number of sentiments, with perhaps one or two minor changes in direction.

It is true that the Commission is inhibited by the terms of the mandate, which provides that the main principles of agricultural policy shall not be questioned. The main policies relating to Common Market finances—that is, mainly the own resources policy—also shall not be questioned. Those restrictions impose considerable difficulties on the Commission in proposing a restructuring of Community policy in that connection. It does not do so.

Its policies are vague. In fact, that vagueness is commented upon in The World Today, which says: Analysis of the Commission's report is complicated by its lack of clarity and coherence, It is in places vague or ambiguous and occasionally self-contradictory. The cause seems to have been that the final draft was prepared in haste."— I stress that point— with several last-minute revisions, and translated from the original French in even greater haste. Perhaps also some differences within the Commission remained unresolved when the final text of the document was drawn up. The effect is that the reader has difficulty discerning what, if any, meaning to read into some passages and reconciling what is said in one place with what is said in another. Although negotiations may be facilitated if proposals of this sort are not set out in too much detail, they may be hampered if the imprecision is such that even the broad intent is obscured. I entirely agree with that analysis, having looked at the document.

Sir Anthony Meyer: I am sorry to interrupt the hon. Gentleman. I recognise that we have to debate the document that is before us, that being all that we have, but, as we all know, the Commission has produced much more specific proposals during the past week. Those proposals contain figures that go a long way towards meeting our requirements. It is unrealistic that we should be so bound by procedure that we cannot take account of the realities.

Mr. Silverman: The point is that we are not discussing those proposals. Our discussions are confined to the document that is before the House. That is the subject of our debate. If there are more precise proposals, clearly they should be brought before the House and discussed here. Not only should they be brought before the House, but, in accordance with the procedure of the House, in the first place they should be brought before the Scrutiny Committee and be discussed by that Committee and then reported to the House, recommending a debate on specific items.

So far no other document relating to this matter has been brought before the Committee. That is a gross breach of procedure. Having read the report, I cannot help feeling that some time before 26 June—the deadline by which the Commission had to fulfil its task; in other words, produce the documents—someone said to someone else on the Commission "Look lads, we have to produce a document by 26 June", and so they produced something that has all the marks of being cobbled together at the last moment, as was pointed out by the article that I quoted. It contains sentiments that have long been in the minds of the Commission, but there is not a single specific proposal that the House or the Committee could discuss in concrete terms. That is my chief criticism of the document.

It was for that reason that the Committee decided at the earliest possible moment that the Minister of State should give evidence to the Committee, not only to clarify the Commission's proposals, but to state the Government's attitude to them. I am bound to say that we have made little progress in that respect today. The invitation extended by the Committee to the Minister of State was to give evidence this morning, and we were astonished to learn a few days ago that the debate was to take place this afternoon. Clearly, that did not provide any time for the Committee to consider the proposals and then report to the House.

That is a matter about which the Committee and the House have a serious grievance. The invitation to the Minister had to be cancelled. No doubt the invitation will be renewed in due course. Perhaps the Minister will bear that fact in mind. He will then be able to clarify these proposals and state with much greater clarity the Government's views on them. I regard the whole situation as most unsatisfactory, and I bring this matter to the House's attention.

I ask two questions: first, can the Government say why the document in its present form was produced so late, bearing in mind that the mandate had to be fulfilled by 26 June, and why has this debate been organised for today? Secondly, why, if other documents have been brought forward, have they not been placed before the Scrutiny Committee and why are they not before the House today so that we can discuss them as an essential part of this debate? Those are questions that I am entitled to ask, not merely as a Member of the House, but as Chairman of the European Legislation Committee.

I shall not go into any of the proposals in detail, but, speaking now as a Back-Bench Member of Parliament representing a West Midlands constituency, I wish to ask the Minister one specific question. I notice that it is suggested—it is a suggestion of which I do not disapprove—that there should be an extension of the social and regional funds and that in that way the United Kingdom Government could recoup a certain amount of their contribution. However, it should be pointed out that this matter was dealt with in the sixth annual report on European regional development, in which the Committee referred to projects having been approved in Scotland, North England, North-West England, Wales and Northern Ireland.

In the West Midlands there has been a savage deterioration in the level of employment, and it has occurred rapidly and suddenly. No reference is made to that in this document, and no project has been provided for the West Midlands. Of course, that is a matter that is decided not so much by the Commission as by the Government, and that is a broad aspect of Government policy that I should like to have explained. Those who are suffering most seriously, not merely in terms of unemployment but in terms of a huge deterioration in their position, do not: understand it, and I should like to hear the Minister's views on it.

Those are the questions that I put to the Minister. I hope that before the end of the debate the House will hear the reply to them. I repeat that my Committee will renew its invitation to the Minister to give evidence, during which we look forward to hearing some clarification of the proposals.

8.2 pm

Mr. Teddy Taylor (Southend, East): I share the views of the hon. Member for Birmingham, Erdington (Mr. Silverman), but I wonder why we are debating this matter at all. The document is little more than a series of broad generalisations which give no detailed indication of how the mandate can be carried out in a way which is politically acceptable to member States. What is more, to the extent that they are no more than general indications, they are not helpful to the United Kingdom. Those who doubt whether the paper is helpful should read page 5, which contains a full list of wide and general sentiments that make no real sense and give no indication of how the mandate can be pursued.

In the mandate we are concerned largely about how we can resolve the problem of the common agricultural policy and member States' contributions to it. Having read the document and the Foreign Office paper on it, and having listened to the Minister and the Opposition Front Bench, I am depressed to discover that all the indications are that it will be extremely difficult—assuming that it is possible at all—to get any meaningful reform of the CAP which is politically acceptable to member States.

As the Minister said, the obvious problem is that of production levels, which are likely to rise. How can they be controlled? The Commission seems to believe that the answer lies basically in lower prices. Unfortunately, there is no indication that these necessarily result in a reduction in production. Indeed, in some quarters it is argued that a lowering of prices often brings about a further increase in production. But even if lower prices worked, and even if such a solution brought Community prices into line with world prices and succeeded in controlling production, does the Minister seriously believe that such a proposal would be acceptable to all member States unless they agreed at the same time to national "fiddles.' whereby the money could be made up with national cash? The idea that we could solve the CAP problem by lowering prices is not politically acceptable to all member States, and I doubt whether it would be acceptable to Britain and its agriculture.

What about the possibility of production curbs? The implication of co-responsibility payments basically is production curbs—in other words, we shall not finance open-ended production. Does the Treasury Minister believe that British agriculture—or French or German agriculture—will be prepared to accept what amounts to specific curbs on production? But even if that were the case, would it make sense in Britain's case when we are telling all our industries that they must become more efficient and productive? Our farming has a very good record in this connection. At a time when we are not self sufficient in food, how can we tell British farmers that they must produce less than at present? The Minister will be aware of the sentiments of those engaged in milk production about the existing co-responsibility levy.

There is a third way, of course. The Commission hinted at it, and I was delighted with the response to it by the Lord Privy Seal. It is not only to continue with subsidised exports but to have general agreements for continuing exports of subsidised food. The Lord Privy Seal was right to say that we must not solve the problem of overproduction by having a massive increase in the amount of subsidised food, which will not only wreck the economies of the poorer countries but create an intolerable burden for the CAP.

I am sure that Treasury Ministers were as appalled as I was that, despite all the promises, our exports of subsidised food to the Soviet Union last year broke all previous records. What is more, our exports of subsidised wine were way above all previous figures, and all the indications are that they will be up again this year.

Whatever the Government do, I hope that they will not try to solve the problem of CAP over-production by a massive increase in the dumping of food throughout the world. The example of sugar is a very good one. By the dumping of surplus sugar at a very low price, great damage has been done to some of the poorest countries.

Having listened to the Minister, I adhere to the view that I have held for a long time, that, despite all the Government's efforts, there is no realistic way in which we can look to major reforms of the CAP which are politically acceptable unless it is as the result of a "fiddle", by which I mean replacing CAP cash with national cash to supplement it, or finding ways of disposing of production other than destroying it, as we do at present, or exporting it at knock-down prices and thereby damaging the world economy.

One hon. Member who has now left the Chamber repeatedly shouted "What about the farmers?" whenever a criticism was made by an Opposition Member. I accept that British agriculture has benefited from the CAP and the EEC. The prices made by British farmers have gone up considerably, since they have risen to EEC levels and the green pound has been removed. In this way British agriculture as a whole has benefited. however, I hope that those engaged in agriculture will look to the future with a view to deciding whether the CAP will be as good for them then as it is now. If we reform the CAP in any meaningful way, it means either curbs on prices or specific curbs on production, which will apply to efficient British agriculture as well as to those on the Continent who are still inefficient. In my view, there is no way in which we can increase prices without adding to the intolerable problems of overproduction by the EEC.

In the circumstances, British agriculture should be looking to the future, realising that the only real hope of long-term prosperity will be if Britain looks after its own agriculture, bearing in mind that we are not self sufficient in food. I doubt whether anyone really believes that there is a genuine way in which the CAP can be reformed effectively to bring supply and demand into broad balance and to get rid of the cheating and fiddling which up till now have maintained the CAP. They can be contained so long as the Government adhere strictly to their commitment to a ceiling of 1 per cent.

The only feature of the document which really worries me is that the Commission has been given an impossible task and that, as has happened in the past when given an almost impossible task, it has sought the answer in a further extension of Community activities, in setting up more organisations, in planning to spend more money and in trying to solve other problems because it cannot solve the ones before it. The paper states specifically that it is believed that it will help if there is an extension of the European monetary system, if there can be a Common Market energy policy and policies on new technology, training and employment.

I hope that before the Government plunge into a further extension of our involvement with the Common Market and with the Common Market's policies they will make a genuine and serious independent study of the impact of the EEC on the British economy and British jobs. Whenever we ask specific questions on that matter, we are told that it is impossible to find out. In a question this week I asked why British unemployment has soared so substantially, more than that of almost any other country in the Western world, while the four little European countries which did not join the Common Market in 1973—Austria, Sweden, Norway and Switzerland—now have virtually full employment as in 1972.

Mr. Dykes: Really?

Mr. Taylor: My hon. Friend knows the facts. He might say that Austria, Sweden, Norway and Switzerland are different from Britain, but they were different in 1972 as well. If we regard the plight of the jobless as our main concern, as we should, we should at least be prepared to look at obvious and prima facie evidence on why, since 1972, our unemployment has soared so much, while the little countries which stayed out of the Common Market have done wonderfully well. In Sweden the percentage of unemployment has reduced.

The Minister cannot ignore this serious point. There must be an answer. I believe passionately that in our decision to join—this should colour the way in which we approach reform—we made a dreadful mistake for the British economy in that we joined when Western Europe as a whole was heading for decline. We joined at the time when the principle that "big is beautiful" was being destroyed, if one considers the economic situation in the world as a whole. We made the terrible mistake of making ourselves peripheral to what is a declining part of the world.

That is my point of view, but the facts support it. Surely before we go further, as recommended by the paper, we should have a proper, objective inquiry, a proper assessment of the effect of the EEC on the British economy. The effects have been substantial and negative. The Government must accept that our giving a net sum of over £3,000 million since 1972—over £1 million a day—must have damaged the British economy. That cannot be denied. If any country, particularly one such as ours with problems, is having to give foreign aid of £1 million a day virtually for nothing, for which we pay more and get back less, that must do damage, because it means that we lose £3,000 million of public spending that we could have used in other helpful ways, for example, for investment and reducing taxation. I hope that that point is accepted by all hon. Members.

It should be accepted generally that the CAP has damaged the British economy. It has given temporary relief to agriculture, but surely by removing the one competitive advantage that we had as a country—access to food at world prices—we have added considerably to the costs of British industry by unnecessarily forcing up the cost of living. No one knows whether we shall be able to buy the food at lower prices in the future. However, we know that there is a tax on imported butter of over 60p a pound, of 61.14p per pound on cheese, of 67p a pound on beef and of 27p a pound on lamb, which has pushed prices up considerably more than might otherwise have been the case. I obtained those figures from a parliamentary answer. Surely it must be accepted, even by the Euro-fanatics, that the CAP puts up prices in Britain and thereby adds to industrial costs.

Mr. Dykes: No.

Mr. Taylor: I hope that we shall not talk about slogans, but will look at the problem seriously and accept that if a tax is levied on food, if one's country is almost the largest importer of food in the world, and if those taxes are given to the Common Market, that must do some damage to the British economy.

Mr Dykes: My hon. Friend knows that I was saying "No" because the Ministry of Agriculture, Fisheries and Food and the Department of Industry have estimated twice that in domestic food prices in the shops in Britain the original EEC farm gate prices represent only at most 10 per cent. of the total effect of price increases. It is domestic inflation that has had the overwhelming effect.

Mr. Taylor: The Government and their Departments have made various assessments. We know that for their own good reasons the Government are trying to show the best face of the EEC. At present the Labour Party has a policy of withdrawal from the EEC. I do not believe that that will happen as the party is split too much. At the moment we are looking for propaganda.

Sir Anthony Meyer: Is my hon. Friend insinuating that Government Departments are deliberately giving wrong figures?

Mr. Taylor: Certainly not. No Government Department would tell an untruth. If, for example, there is a series of six facts, three in one direction and three in another, it is possible for a Minister and others in their speeches to put more emphasis on one side than the other.

Mr. Dykes: What about my hon. Friend?

Mr. Taylor: I am trying to be objective. If any hon. Member disagrees with anything that I am saying, I hope that he will interrupt me. A parliamentary answer stated that the net cost to the housewives is £3,000 million per year, from which the costs of deficiency payments have to be deducted. I hope that it will be accepted that the CAP has damaged the British economy. We cannot assess the extent, but it has been a negative factor.

No one can deny that if countries erect a common tariff barrier they will do more trade within that barrier. What has worried me is the way in which that trade has changed. The positive balance with Europe, which was consistent when trade was increasing before we joined the Common Market, with an average profit of £300 million a year in the eight years before we joined, has suddenly become an average annual loss of £1,300 million. While that has been happening, our trade in manufactures in the rest of the world has been improving. Everyone knows the figures, because they have been given in parliamentary answers, which are available to all.

Mr. Dykes indicated dissent.

Mr. Taylor: It is silly for my hon. Friend to disagree. Those figures were given to me by the Secretary of State for Trade in an oral answer. For example, in 1978, 1979 and 1980, Britain had a profit in manufacturing trade of about £15,000 million. On the other hand, in our manufacturing trade with the EEC, we had a massive deficit of about £5,000 million. We made a profit in manufacturing trade before, but now we make a substantial manufacturing loss. That considerably affects jobs. Germany is referred to as our best customer. We are now doing more trade with Germany, but our deficit in manufactures last year was over £2,000 million, which is about double our deficit with Japan.

What worries me even more is that we are becoming involved in more Socialist schemes through the EEC. That will do us more damage. We know the effect of the CAP. I fear that steel is moving in the same direction. Because we have problems with production, supply, prices and losses, we are moving slowly but surely towards a scheme for steel whereby there will be a substantial tariff wall, artificially high prices and controlled production. That will add considerably to the costs of British industry.

Mr. Marlow: This is alarming news. Quite reasonably, the Government are concerned about the effect of Japanese trade on the United Kingdom and about the massive deficit that we have with Japan in manufactured goods. My hon. Friend has said that we have a deficit in manufactured goods with the Federal Republic of Germany that is twice as big as our deficit with Japan. Is it any less wrong that one of my constituents should lose his job because of competition with German ball bearing factories that have been heavily invested in for some time, when compared with another hon. Member's constituent—half a person, for the sake of comparison—who has lost his job as a result of Japanese electronics and technology? Should not the Government be as vigorous in their pursuit of the problems with German trade as they have been in their pursuits of the problems with Japanese trade?

Mr. Taylor: The exact figures are set out in the parliamentary answer that I received. The deficit with Japan last year was £1,187 million, while the deficit with Germany amounted to £2,007 million. Should we become more involved, or should we stop and ask ourselves whether the EEC has been good for the British economy and whether it has damaged jobs? Is the EEC a great job destroyer? If it is, should we approach reform from a different point of view and refrain from becoming more deeply involved?

It is possible to manufacture slogans and figures. It is also possible to pick out figures. I have made a desperate effort to avoid doing that. Let us take the figure mentioned by my hon. Friend the Member for Reigate (Mr. Gardiner) as that is at the nub of the argument. I refer to the figure of 1 million jobs. At Blackpool, it was included in the Prime Minister's speech. By coincidence, Mr. Roy Jenkins used it on the same day. It is suggested that if we lose one-third of our trade with the EEC when we leave it, 1 million jobs might be lost. The assumption is that one-third of our exports will disappear, but that none of our imports will disappear. It is strange that such a precise figure can be given, because whenever the Government are asked about the EEC's effect on jobs they say that it is neither possible nor realistic to isolate from all influences that bear on employment those that are due solely to our membership of the Common Market. I am scared that we are scratching round and looking for any figure that can be interpreted to show that the idea is good.

We have had a referendum and a vote. The Labour Party is split from end to end on the issue of the EEC. I am sorry to say that, but it is true. Therefore, we must look for the right type of reform. We should try to get equal contributions. The CAP will not be effectively reformed not because of a conspiracy by nasty foreigners, but because a major reform will not be politically acceptable. Before we become further enmeshed in more Euro-steel plans, Euro-energy plans, Euro-training plans and Euro-employment plans, we should stop and objectively consider why Britain has suffered massive and soaring unemployment since 1972. We have suffered greater unemployment than that experienced in the other EEC countries and infinitely more than those countries that did not join the EEC. The time has come to look at the situation objectively so that we can see which type of reform is most suited to the special problems of our poor nation.

8.23 pm

Mr. Donald Anderson (Swansea, East): I shall try to follow the hon. Member for Southend, East (Mr. Taylor) in his objectivity and non-selectivity. I agree with the hon. Gentleman that one of the major adverse factors in our relationship with the EEC is that we joined it when the European economy was slowing down. Therefore, many of the arguments that my colleagues and I used in the 1960s were less relevant as a result of the slowdown in world and European trade that followed the OPEC price rises.

I would agree with the hon. Gentleman that the common agricultural policy has probably had a negative effect on the United Kingdom. However, it is impossible to put a value on security of supply, which has been one of the major facets of the CAP. I agree that the prospect of radical reform of the CAP is remote and will probably founder on the rock of vested interests among those of our partners who currently benefit so greatly from it and on the fact that for many in Europe the common agricultural policy is the Ark of the Covenant and the high spot of European achievement. They fear that if there were a root and branch reform of the EEC the whole structure would crumble. That is a major factor.

If the position is as negative as the hon. Member for Southend, East says, that does not quite square with the desire expressed by the Iberian countries and possibly by Greece to play a full part within the EEC. The hon. Gentleman was a little disingenuous when he asked for an objective appraisal, a cost-benefit analysis of our relationship with the EEC. He knows as well as I that much of what he has asked for cannot be obtained. For example, who can calculate with any precision the tariffs that we may face if we leave the EEC? On the assumption that Britain would leave the EEC, who can make a proper analysis of the likely trends in world food production and the availability of agricultural supplies? Who could, with any precision, say what alternative markets—if any—there might be for the percentage of the 43 per cent. of our goods that we would certainly lose if Britain were no longer a member of the EEC? I fear that the hon. Gentleman is asking the impossible. From different standpoints the hon. Gentleman and I look at factors in a fairly subjective way.

The mandate is based on the May 1980 agreement. On any criteria, the agreement represented a substantial step forward for Britain. The agreement covered only the years 1980 and 1981, with—if there were no clear agreement to the contrary—a probable follow-through to the budget year 1982. My right hon. Friend the Member for Llanelli (Mr. Davies) asked the Minister several important questions. He asked what we were likely to pay over the exchanges—according to the best available estimates—in the budget year 1982 if the 1980 agreement were extended. If, on the other hand the current Commission's proposals were accepted, bridging the gap between our proportional gross national product and receipts from the CAP, what then would be the probable figure? We should like to gain some idea of the difference—probably negative—if the proposals contained in the mandate are accepted.

A positive feature is that for the first time our partners have recognised that an "unacceptable situation" has arisen. Given the smallness of our agriculture sector and the fact that the EEC budget is predominantly oriented towards agriculture, that was probably inevitable. The Commission was given a clear task to examine current policies, to propose structural changes to the budget and, most important, to prevent a recurrence of the "unacceptable situation". It was asked, as far as was practicable, to provide a basis for a long-term solution.

The response to the mandate, on any basis, must be disappointing, particularly given the substantial intellectual resources available to the Commission. It is a typical piece of Euro-schizophrenia, in that it is mighty in word, weak in deed and gradualist in detail. The part that relates specifically to the British contribution which, after all, was the purpose of the mandate, is found only towards the end. In my first rapid reading of the mandate document I almost missed the reference to the United Kingdom. The reader is forced to fight his way through a jungle of tangled verbiage to reach the weak and inadequate conclusion.

My right hon. Friend the Member for Llanelli has already set out the grand principles in the first few pages of the report: the Community's institutions owe it to the people of Europe and to history to defend and develop this inheritance. The Community, soon to be enlarged to twelve, can set an example to the world. The Community will finally take its rightful place in the world and become a catalyst for peace", and so on. The principles are grand but the details are very inadequate.

Paragraph 21 gives guidelines on the reform of the CAP. With the possible exception of the refusal to sanction increased national aids, they are clear and sensible enough. They advise a greater adherence to the market, greater selectivity, greater quality control, and so on. But the time scale is not right. If the guidelines were implemented in detail—one knows the political problems of that—they are likely to have very little short-term impact on the excesses of the CAP.

Overall, the document is weak, partly because although the Commission was asked to provide a long-term solution to an unacceptable position, it has not done so. It has done a patching operation. The proposals that relate to the United Kingdom contribution are possibly less valuable to us than a continuation of the May 1980 agreement. The proposals are also weak because they exclude the Federal Republic of Germany, which, in terms of its contribution to the budget, is in an equally "unacceptable position". It pays over £1 billion per annum to the budget and has taken our place as the paymaster of Europe.

The proposals cannot provide a long-term solution because there is little attention to enlargement. The implications of the accession of the Iberian countries in 1983–84 are mentioned in paragraph 17 but only in passing. As the hon. Member for Reigate (Mr. Gardiner) said, at that time, on present principles, Portugal is likely to be a net contributor. If one compares Greece with Ireland, in terms of benefit per head of population, there is a factor of about 1:9 in favour of Ireland, which on any basis of integration and common purposes is wholly inequitable. Nothing is suggested to remedy that position, which will arise very soon.

Although the grand federalist principles are enunciated in the opening paragraphs of the document, nowhere is there a serious suggestion of a transfer of resources between rich and poor on a European basis, as is done on a national basis by the tax or social security mechanisms.

The essential weakness of the document is the gap between the aspirations—the grand principles—and the reality. The vision of the founding fathers, regrettably or not, is clearly not now realisable, yet lip service continues to be paid to that immediate post-war vision and a more realistic vision has not been adopted. If the new Europe is to have any meaning, it must be rooted in the possible. We shall have to jettison the expectation—grand though it was at the time—of the federalists in the immediate postwar world, when the old landmarks of Europe had been obliterated in the " European civil war".

The new Europe must be based on the reality of national States pooling their sovereignty for perceived common purposes—be they industrial, commercial or political, as in the Middle East—for their mutual benefit. Hence, there will clearly be a need for agreement in the steel sector and also, one hopes, in response to the challenge from Japan. This co-operation on a basis of perceived problems can lead to a real unity in key areas.

In my view, it should also be rooted in the concern of the people of Europe. Several hon. Members have mentioned employment, and the background faced by all our peoples within the Community is that of a worsening economic and social position.

I welcome paragraph 36 on regional policy, which mentions greater selectivity. But, of course, after enlargement, areas in the United Kingdom are likely to find that their portions will be reduced because of the demands of Greece and eventually Spain and Portugal.

So far as it goes, I also welcome paragraph 37 on the social fund, which talks about greater flexibility. Having said that, the problem of resources is touched on only gently in paragraph 45. Yet that is fundamental. Having said why I believe this document to be a wholly inadequate, short term and timid response to the mandate given at the end of May 1980, I should like to suggest the response of the Council of Ministers to it. The document's inadequacies should be recognised. It should be sent back. The Council of Ministers, as a body of responsible and accountable politicians rather than Commissioners and bureaucrats in Brussels, should realise that public opinion in Europe is increasingly bored with the enterprise—

Mrs. Kellett-Bowman: As the hon. Gentleman has said, this document is only an outline. The debate is suffering very much, as the hon. Member for Birmingham, Erdington (Mr. Silverman) said, from the fact that we do not have the other five documents. Unfortunately, we cannot refer to them because they are not before the House. However, the hon. Gentleman should remember that the Council will have those documents.

Mr. Anderson: Documents can be produced indefinitely. But the Commission, with all the resources at its disposal and all the think tanks that have agonised over the direction of Europe, has emerged, with this inadequate document even though a quite sufficient period of one year was available. That suggests something about the decision-making processes within the Commission.

The leaders of the various countries on the Council of Ministers should realise more and more that this approach is irrelevant to the problems as perceived by their own electorates. Unless more adequate propsals—perhaps the five documents; who knows what may be produced at the last minute?—are produced, it will be too late for Europe if the Community shows itself slow to respond to the real issues, worries and anxieties of our own people.

8.38 pm

Mr. Hugh Dykes (Harrow, East): Like other hon. Members, I shall refer briefly to the inadequacy of the document before us. However, my thoughts and conclusions are different from those of other hon. Members.

The hon. Member for Swansea, East (Mr. Anderson) made the mistake that is always made, namely, to blame the poor long-suffering Commission for producing inadequate proposals and timid documents. However, after years of bitter experience the Commission is fed up to the back teeth with continually being knocked on the head by the Council of Ministers, which in recent years has displayed a complete absence of any political and collective will to take the Community forward in an institutional and collective way.

The demoralisation experienced continually in the Commission, as well as at lower levels and in most of the important directorates-general, is a problem that can be overcome only if the Council of Ministers resumes sufficient political will to take the Community forward. That is the tragedy. It means also that hon. Members who are malevolent towards the EEC and all that it stands for have a wonderful opportunity to have the best of both worlds. They say "How dare the Commission produce proposals" and "We want everything done on a national basis again", yet, when the Commission produces proposals they criticise them as being intrinsically inadequate and timid.

If only we could elevate the debate about Europe and its future to a higher level of constructive proposal, it would improve the workings of the Community for all citizens and member States. We should do that instead of harking back to the fundamental argument about entry. We shall have to endure that even more in future, because the Labour Party—for internal reasons, as usual—has decided to advocate withdrawal from the Community.

We have had slightly veiled references to that stance tonight from the right hon. Member for Llanelli (Mr. Davies). I remind the House that the right hon. Gentleman's statistical, mathematical and intellectual authority collapsed last year when he declared boldly that 25 per cent. of the population of France was on the land, whereas the latest figure, issued six months ago, shows 91/2 per cent. No one can have confidence in a spokesman for the Opposition—now for foreign affairs, but previously for Treasury matters—who can make such a massive blunder. The right hon. Gentleman has still not apologised to the House; nor has he explained how he made that mistake. Everything that he says is coloured by that mistake, and not only his statistical but his intellectual authority has collapsed. Therefore, we cannot accept his arguments and we reject the amendment utterly.

I was struck by the words of my right hon. Friend the Lord Privy Seal—and I, too, congratulate him on talking from the Front Bench for the first time on the subject—when he reminded us how modest is Britain's European Community contribution—although we agree that it should be reduced as much as possible pro rata in future and although our burden of payments is unfair. I believe that the whole House acknowledges and admits that.

I am reminded of the figures in Cmnd. 8175 which show that, on an outturn basis for 1981–82, the net contribution of £531 million compares with total public spending in Britain of £104 billion. Social security alone takes nearly £28 billion, health and personal social services £121/2 billion, defence £12.3 billion, Scotland £5.7 billion and Northern Ireland—with a small population—£3.2 billion, and lending to nationalised industries was then estimated at £.1.8 billion, although it is now more.

The reality is that we make a net contribution that looks relatively heavy in comparison with those of other member States, for accidental mechanistic reasons that are not the fault of either ourselves or other member States. They reflect a pattern of trading and a historical and economic pattern that are different from those of other member States, but they are becoming less so as the years go by. The sum that we receive in total benefits for our Community membership is a tiny figure.

It remains extraordinarily incomprehensible and bizarre that the Labour Party is in favour of increasing public expenditure when it is domestic pound notes, but not when it is Community pound notes, or whatever currency we are dealing with. That is a gross inconsistency that it has never properly explained.

I wish that the document were more concrete in its proposals. I agree with the suggestion that the CAP proposals are more radical and bolder than some people would give the Commission credit for. I do not believe that the proposals are timorous in that sense. The Commission is now going along the right lines.

Mr. Marlow rose—

Mr. Dykes: My hon. Friend has intervened five times in this debate already, and those interventions have been long. I believe that in the previous EEC debate he made 10 extremely lengthy interventions. The House is sick and tired of his silly contributions. As I said earlier, we now wish to elevate the debate, and I should prefer my hon. Friend to keep quiet and listen to my remarks. Otherwise, my speech will be too long, which will be unfair to succeeding speakers. My hon. Friend has far more than his fair share of time. He is the equivalent of France in terms of Community contributions—he gets too much.

The document is more constructive than others on the agricultural proposals, particularly the idea of the production limiting mechanism. That is the point to focus on, so that we avoid the production excess problems. It is all very complicated, but that is the direction in which we should go. However, there is a dilemma for the House and for the Community, and we might as well face it. That is why I continually end up in favour of a significant expansion of the total Community budget. Some hon. Members on the Labour Benches may also be in favour of that, but they dare not admit it, because of the Labour Whips. That must be the only way to proceed.

We all know that even if we limit agricultural spending in the Community budget—which is a good thing per se—there is no way in which we can substantially reduce it. That is unrealistic. Therefore, to get more of the desirable currency in pound notes that this country desperately needs in other non-farm areas we must have a major expansion of the Community budget. That is the way to cope with the problems of maldistribution of resources in the Community.

If our pattern of trading, economic history and internal economic configuration is different from the others, because we have a small agricultural sector and import pro rata too much from the rest of the world in comparison with other member States, let us build up the social, regional and energy research and development funds—the other non-agricultural funds in the Community—to give us more money.

Why is it so immoral and wicked to suggest a significant expansion of the Community budget? I hope that the Minister will listen to this idea. Let us make it 50 per cent. more. I know that this is difficult for some to take, but I am in favour of exceeding the 1 per cent. ceiling in due course. We do not have to worry about that happening now, because the inflation receipts and the rise in world food prices has kept the figure below 1 per cent. for longer than we expected two years ago, but eventually we shall come up against it.

I am in favour of the Community raising international loans and borrowing money. A lot of that money could then come to this country and we could invest it in longterm capital projects. It is a good idea. I wish that my hon. Friend the Member for Northampton, North (Mr. Marlow) would accept those sensible ideas to build up the Community and not denigrate and knock it all the time.

That denigration and knocking are more modulated now. I have an interesting document produced by my right hon. and hon. Friends in the European Reform Group, some of whom were previously in favour of withdrawal, but who now appear to have dropped that and only want reform. I hope that I am not misrepresenting them. It is a fascinating document, called "Eurofact". It costs 20p. I see from the last page that it was printed in Southend-on-Sea. The document asks:

'don't we get advantages for our own people in freedom to work in the EEC and to obtain benefits? Yes, but this is rather one sided. In May 1979.… there were 620,000 EEC nationals over 16 … in the United Kingdom and 410, were at work."

Mr. Teddy Taylor: There is a comma after the "410" and it means 410,000.

Mr. Dykes: Perhaps the printers—Circle Services, 19 Clarence Road, Southend-on-Sea—will not make printing errors next time.

The question that is most important in the document is "Has our trade improved?" The answer is "Yes". However, I wish that my right hon. and hon. Friends in the European Reform Group would be balanced in their arguments. My hon. Friend the Member for Southend, East (Mr. Taylor)—I do not know whether he arranged the printing of the pamphlet—knows that we do not normally have a surplus with other advanced areas of the world, including other member States.

Mr. Teddy Taylor: We used to have.

Mr. Dykes: Traditionally, we normally had a surplus only with the less developed parts of the world. We never normally had a surplus with any advanced area, whether in the EEC or not. That is the point on which my right hon. and hon. Friends must focus.

Mr. Teddy Taylor: It is not true.

Mr. Dykes: I shall not give way, because time is short. I make my points and it is for hon. Members to deal with them later.

I was struck by the contrast between the Labour Party's attitude and that of the French Socialists to the Community and to this document. On 13 October the French Minister in charge of European affairs issued a memorandum on behalf of the new French Government. That document emphasises points that would fit in with not only the philosophy but some of the details of the document before us.

The French Minister proposed, inter alia, increased Community borrowing to promote investment in high technological industry. He dealt with the expansion of the European monetary system and the greater efforts needed to align the economic policies of member States.

We are confronted with high unemployment everywhere, although the figure is much worse here. That is not due to the reasons aired by some hon. Members. Unemployment is higher because our economy has been deflated more than the economies of other member States.

Interestingly enough, the document deals with a proposal for the development of what is called "A European Social Space". That is not an inspired description. It states that job creation policies would be pursued by methods such as a reduction in the working week, which is coming in this country.

It is interesting to contrast the positive ideas detailed by the French Socialists, who seem to want to have nothing to do with Labour Members here, and the negative attitude and ideas of the Labour Party in this country towards both this document and EEC membership.

In the French memorandum there was an emphasised proposal for a greater drive towards European self-sufficiency in energy. Those key proposals fit in well and closely with some proposals in the Commission document. It sounds strange for me to say that the French Socialists have good ideas, but they do. I believe that we can follow the proposals in the memorandum and observe whether the Government can take them up when the European Council meets at the end of November.

One of the most important aspects must be membership of the European monetary system. I wish that we could become a member as soon as possible.

Another important point is the need to align the economic policies of member States. There is no point suggesting that one should have greater harmonisation of the Community budget but not the concomitant harmonisation of economic policies in general. Economic policies in general include interest rate policy, monetary control policy and all other parts of the total apparatus.

We should aim for those objectives and not fear that we are losing some sort of essential totem sovereignty. That is out of date, old-fashioned and unreal. By working in close harmony in the Financial Council, the Finance Ministers could do much more. They would have greater control of the EEC budget, which is an important point, and would have greater co-ordinating ability of the different member States' economies. There would be a greater convergence of rhythm, output and expansion than we have now.

We have to support what is stated in the proposal. We await the arrival of the document referred to by my hon. Friend the Member for Lancaster (Mrs. Kellet-Bowman).

I refer finally to "European File" of October 1981. As hon. Members know, that is produced by the Commission. The Commission specifically referred to "The British problem". It said: The advantage that each member country gains from Community membership cannot be solely computed in budgetary terms: the introduction of a common industrial market"— we still do not have that— "respect for European competition laws and the international role of the Community cannot be translated into budget credits." The document continued: "The recovery envisaged by the Commission would allow a better balance in the allocation of financial resources.

I believe that we must focus on that last point. While waiting for the recovery to take hold, Community solidarity, meaning the desire to increase confidence between the member countries and thus enable new progress to be made, dictates that a solution be found to a problem that the Commission feels only really affects one country, the United Kingdom.

I know that that is not the Government's view. They have asserted that the problem is common to other member States. We know that we are suffering the worst effects of the imbalance and dislocation, but we should give the essential combined will to the Community—the Commission and the Council of Ministers acting together—to rectify that problem, while expanding the Community and building up the budget so that we can build up the British national economy again.

8.56 pm

Sir Anthony Meyer (Flint, West): By calling my hon. Friend the Member for Harrow, East (Mr. Dykes) before me, Mr. Deputy Speaker, you have saved the House some time, because he has made the most of the points that I intended to make in what I expected to be a brief intervention anyway.

The admittedly rather battered document before us is an early part of the process of trying to make the EEC a more just Community. My right hon. Friend the Lord Privy Seal called it a step in the right direction and I am certain that, under the Presidency of my noble Friend the Foreign Secretary and the other Ministers who have greatly distinguished themselves in conducting the meetings over which they have presided, the process of making the Community fairer and more just will be carried forward rapidly.

It is important that the Community should be seen to be even handed in its treatment of member States. Almost all the firms in this country are aware of the need for us to remain within the EEC and to retain guaranteed access to a market of 270 million consumers. Of course, there are worries, eagerly fanned by those who oppose our membership, that, whereas we obey the rules, no one else does. Therefore, I welcome the emphasis in the document on the importance of an effective competition policy.

A firm in my constituency that manufactures steel wire is gravely threatened by what it regards as unfair competition from Italian producers of steel wire. It has tried repeatedly to get figures to prove that the competition is unfair, but is reconciled to being unable to establish that. A properly enforced and effective competition policy would go a long way towards making that firm feel that at least it was not fighting with one hand tied behind its back.

I should like to raise a matter, which I do not expect my right hon. Friend the Lord Privy Seal to deal with, but which I hope he will pass on to the appropriate Minister. I suspect that some firms are damaged by the operation of parts of the Restrictive Trade Practices Act 1976 that may prevent sensible zoning arrangements that could enormously reduce the distribution costs of British firms.

For example, if the firm in my constituency is having to beat off competition from an East Midlands firm by seeking outlets for its produce in East Anglia, both firms are incurring transport costs that diminish their advantage over, say, Italian exporters of steel wire who have to send their goods much further.

Informal arrangements to encourage firms to seek customers in their own areas, as far as possible, would maximise the distribution costs advantage of local firms, as opposed to overseas firms, but they might fall foul of the 1976 Act. I should like Ministers to consider whether the Act is imposing unnecessary additional burdens beyond the requirements of a fair EEC competition policy.

It is now clear that the cause of British participation in the EEC has passed and recovered from its low point. Its unpopularity was very largely based on ignorance and was aggravated by the campaign that the Government necessarily had to wage in order to secure a reduction in our budget contribution.

Public opinion polls are registering a slow but steady improvement in public opinion on the EEC. This will intensify as the Labour Party, which is the only major party committed to British withdrawal, continues on a downward spiral, which is in its turn given a fresh twist by the extremism of the policies that it is advocating. The Labour Party is all alone with a policy that becomes less and less tenable the more closely the party looks at it. The figures that we have exchanged this evening on the relative cost of maintaining British agriculture by deficiency payments go a long way to demonstrate it.

It is very easy for people such as my hon. Friend the Member for Southend, East (Mr. Taylor) and Labour Members to demonstrate the admitted manifold drawbacks of membership of the European Community. It is open to them to argue that we would be better off without membership. I do not for a moment accept that argument, but it is one that they are perfectly free to put forward. What cannot possibly be maintained is that this country could derive any conceivable advantage from withdrawing from the EEC, with all the consequent rupture of existing ties and the accusations of bad faith that would necessarily follow. That being so, I do not see how for one minute that argument can be sustained.

9.2 pm

Mr. Tony Marlow (Northampton, North): I will be brief. All I wish to say to the Government on the issue of Europe is this: "You can fool some of the people some of the time but cannot fool all of the people all of the time. Please, when you are putting the case to the public, do not put things forward that are manifestly wrong".

We hear about the million jobs that we would lose if we changed our association with the EEC. I am not saying, and most people are not saying, that we should come out, but we are getting a raw deal at the moment. It can be proved that the balance of jobs goes the other way. My hon. Friend the Member of Southend, East (Mr. Taylor) made a telling speech on that subject.

When we go into the negotiations, all I ask is that the Government should remember the appalling deal that we are getting at the moment, and not just with the budget or the common agricultural policy, which is quite unsuited to a food importing country. There is the fact that we are buying European food when we could otherwise get it at world market prices. There is also the fact that we have a trading policy that does not suit us, given the difference between our industry and European industry.

I say to the Government: "Fight for Britain within Europe, and if you get it right the British people will become more enthusiastic towards Europe. If you get it wrong, you will have the right hon. Member for Bristol, South-East (Mr. Benn) putting before the public a popular platform, a popular programme, for getting out of the Community, which will destroy everything that you are trying to do."

9.4 pm

Mr. Denzil Davies: The debate has been fairly true to form in respect of the debates that we have on obscure Commission documents. They generally end in a kind of slanging match between the pro-Marketeers and the anti-Marketeers. Tonight it has been even worse because of the poor quality of the document before the House. Indeed, the slanging has come from the Conservative Party. We have had three pro-Market speeches from Tory Back Benchers and two anti-Market speeches. The debate has shown the deep split which exists in the Tory Party on this issue. Clearly, it is split as it has been in the past, and I do not see any evidence of that split resolving itself.

We were told from a sedentary position by the hon. Member for Lancaster (Mrs. Kellett-Bowman) that we should be debating five documents tonight. We have had one document, with no figures, but apparently there are five documents. I hope that the Financial Secretary will tell us why he has not seen fit to put before the House the five documents. We have read in The Guardian and the Financial Times about the figures that the Commission is producing on the CAP. I have no doubt that the Treasury and the Foreign Office have them. I am sure that they are at the fingertips of the Financial Secretary. Where are the five documents? We shall want to debate this matter again before the meeting on 25–26 November. The necessary information is not before the House. I hope that the hon. Gentleman will give the assurance that we shall have a proper debate when the Treasury has considered the documents.

Before the end of the year we shall be considering some sort of solution to the budgetary problem. The House should have all the necessary figures to enable it to make up its mind. I hope that the Financial Secretary will tell us something about the five documents and give the assurance that when we debate these matters again we shall have all the documents before us and not merely one inadequate Commission document.

I put some specific questions to the Lord Privy Seal and I put them again to the Financial Secretary as a marker. I realise that I may not get a full answer on this occasion. First, what is the Government's attitude on the co-responsibility levy? Are they against the levy? Secondly, will the hon. Gentleman give an assurance that the Government will not agree to any increase in the VAT ceiling of 1 per cent.? Thirdly, does he agree that we must have comparative figures on the effect that the various suggestions will have upon our budgetary contribution? Those figures must include the present position, the position if we agree to the Community document and the position if there is no agreement. The House should be given the figures so that it can form a judgment and decide whether there is a satisfactory solution to Britain's budgetary problem.

I am sorry that the three Conservative pro-Marketeers did not concede that it is reasonable to argue that Britain should not pay more into the Community than it receives from it. Surely there can be general agreement on that. I know that there are other factors to be taken into account. Those factors apply to all countries, including those which are net beneficiaries and those which are in deficit. However, there should and could be general agreement in the House that it is only fair and right that Britain should not pay more to the Community than it receives from it and that it should not be in a worse position than nine of the other countries of the Ten. It is disappointing that the Government are not accepting that part of the amendment. Surely they should accept that that is a sensible and equitable solution and that they should press for it.

It is clear that at the end of the day we shall not get a satisfactory solution. This running sore will continue until the British people decide to withdraw from the Common Market.

9.8 pm

The Financial Secretary to the Treasury (Mr. Nicholas Ridley): Time will not permit me to answer all the questions to which I should like to respond. I say to the hon. Member for Birmingham, Erdington (Mr. Silverman) and the right hon. Member for Llanelli (Mr. Davies) that the document before the House was produced so that the debate could take place. It was the Scrutiny Committee's desire that a debate should take place. Documents have been deposited in the past day or two, an event that took place after the Scrutiny Committee decided that it wanted the document that is now before us to be debated. In my opinion that was a correct decision because it is an important document. I see nothing improper in holding a debate—

Mr. Denzil Davies: What about the other documents?

Mr. Ridley: They are laid in the Library now. They have only just arrived. The document before us is only a basis for negotiations. It is the Commission's document and not the Government's document. The final outcome will depend on negotiations in the Council.

The agreement of 30 May 1980 was a great step forward. That was the view of the hon. Member for Swansea, East (Mr. Anderson), although it does not seem to coincide with the view of the right hon. Member for Llanelli. He asked me what would be the results for 1982 on three different possibilities. If there is no agreement about the mandate, the form of refund is clearly set out in the 30 May agreement. It is impossible to calculate, because 1982 has not even been reached let alone the finances determined. If the Commission scheme, as set out, is adopted, it is impossible to estimate the effect, because it is only an outline and not a precise scheme. We do not yet know what will be the costs of the Community budget next year. The United Kingdom will not be satisfied with the scheme put forward by the Commission. We shall seek to find a better solution than that which appears to be contained in the Commission's document.

Mr. Denzil Davies rose—

Mr. Ridley: The right hon. Gentleman has spoken twice. I have many points to answer. I shall not give way.

The Commission proposes to solve the mandate problem under three headings. One is non-agricultural expenditure. The reason why the hon. Member for Erdington has not yet received any assistance from the social or regional fund for his West Midlands constituency is that these contributions from the Community are accredited to assisted areas only. The West Midlands is not an assisted area. This does not affect the distribution of United Kingdom expenditure but in order to qualify for the refunds certain projects have to be put up. It does not affect United Kingdom expenditure. It is just a device for reclaiming our money. The heading on which the House has spent most time is that concerning agriculture. We do not question the principle of the common agricultural policy, although both the Government and the Commission admit that it is capable of reform and are in favour of reforming it.

The United Kingdom Government are not in favour of the 1 per cent. ceiling being breached. This was one of the specific questions put by the right hon. Member for Llanelli although he is not even listening. We shall do our best to make sure that this does not happen. The amendment moved by the right hon. Gentleman was to the effect that we should come out of the CAP and establish our own agricultural regime. We have had the benefit of hearing what the Labour Party intends in this respect. Its plans were leaked in an article in The Guardian on 19 October. The House should hear some of what that article stated. It should be heard by some of my hon. Friends who have alternative ideas to the CAP and the agricultural policy we should pursue. It stated:

"Farm prices would be reduced in real terms and production of some commodities—the Labour Party discussion document suggests cereals, dairy produce and sugar—emphatically discouraged. A deficiency payments system would place a heavy burden on the taxpayer but enable shop prices to be held down … The burden on the Exchequer would be far higher than 10 years ago, the Labour plan admits, because, under the EEC regime British farm output has risen."

The article goes on to say:

"The cost of a new scheme would 'range between £400 millions and £1,700 millions a year at 1979 prices'".

That is agricultural Ken Livingstone stuff. That is what the right hon. Member for Llanelli has in mind. He will spend far more on deficiency payments than we ever spent on the common agricultural policy and he will drive agriculture in this country into the grave.

I should like to quote to the right hon. Gentleman his own party policy document, as reported in The Guardian article:

"The discussion document suggests that the proposed policy would involve considerable loss of jobs in food manufacturing, as well as in the agricultural sectors earmarked for decline".

The hypocrisy of the Labour Party in debating unemployment with tears in its eyes when it has positive plans for increasing it in agriculture is breathtaking. The idea that the Labour Party can produce a better agricultural policy than the CAP, with all its defects, is exploded by this detailed exposé of its policy. From what the right hon. Member for Llanelli said, I do not think that the anodyne amendment will be pressed. I can see why. When hon. Members, including those of my hon. Friends who have doubts about the CAP, see what is the alternative—massive agricultural devastation, and massive subsidies in order to try to placate the electorate—they will understand why it is better for us to stay within the CAP and try to renegotiate our contribution so that it is in accordance with the principles that the Government have always enunciated.

Question, That the amendment be made, put and negatived.

Main Question put and agreed to.

Resolved,

That this House takes note of the Report of the European Commission on the Mandate of 30th May 1980 (COM (81) (300)) and fully supports Her Majesty's Government in their determination to negotiate a satisfactory solution to the problems of budgetary contributions, to achieve reforms of the Common Agricultural Policy and to give an impetus to the development of Community policies.