Finance Council (Hansard, 21 December 1982)

§ The Chancellor of the Exchequer (Sir Geoffrey Howe)
With permission, I should like to make a statement on the outcome of the Finance Council meeting in Brussels which I attended on 17 December.
The Council discussed and adopted the annual economic report for 1983, and budgetary guidelines for member States. It briefly considered the Commission paper on budget discipline which it had first looked at in July. The Council also reviewed international monetary questions. But the main business concerned the United Kingdom's refunds in respect of the 1982 Community budget.
The House will know that on Thursday of last week, the European Parliament rejected the 1982 draft supplementary and amending budget, which made provision for our basic budget refund in respect of 1982, and for certain parallel arrangements for Germany. That decision resulted from a conflict between the Community's institutions. The Parliament believes that a lasting solution to the problem of budgetary imbalances in the Community should be found and implemented as soon as possible. So do we. But this has not so far been the Council's unanimous view. We share the Parliament's concern at the unsatisfactory nature of current ad hoc arrangements.
But the fact is that it was clear as long ago as last May that there was no realistic prospect of reaching a long-term solution which could take effect in this calendar year. Instead, the Council agreed last May and in detail on 26 October on a method of ensuring a settlement for 1982 satisfactory to the United Kingdom. The immediate result of last week's action by the Parliament was to put that settlement in jeopardy.
However, on Friday 17 December the Council was unanimous in confirming that the commitments contained in the October agreement must be fully honoured. The Council noted an undertaking from the Commission to take steps to ensure that the United Kingdom will not be put in a worse position than had been intended under that agreement. It will take early action to this end, and will also draw up a work programme for the development of the Community's policies.
It is thus now for the Commission and the Council to take the practical steps needed to give effect to the assurances which we have been given, and to prepare for new discussions with the Parliament.
I am arranging for copies of the Council's conclusions on this subject to be placed in the Library.

§ Mr. Peter Shore (Stepney and Poplar)
I have a number of questions to put to the Chancellor of the Exchequer. Is not this one more sorry chapter in the long-running and indeed scandalous story of Britain's extortionate contribution to the EC budget—a story that began with the folly of Britain's acceptance of the accession treaty 10 years ago when this budget and other arrangements were pressed upon the House by the right hon. and learned Gentleman himself and supported, I may say, by the present Prime Minister?
First, how much will we be paying in or for 1982 when and if our refund is paid? Secondly, has the Council any constitutional powers under the treaty to deliver the refunds for Britain that were promised and reaffirmed last 827 Friday? Is it not the case that under the treaty arrangements it is the Assembly not the Council that has the final decision in this matter? When is it proposed that a further concertation meeting between the two institutions will take place? Why does the Chancellor expect that the Assembly will change its mind a few days after it has already made its judgment? Why has not the Chancellor taken this occasion to spell out in the House those alternative steps to which he referred in his press conference after the Council meeting? I assume he means steps to withhold Britain's monetary contribution to the EC budget.
Is it not plain that such steps, if they are to be effective, and if we are to withhold money from the Community, which I assume is what the Chancellor is referring to, can be effective only if we are ready to denounce at least part of the treaty of accession and to make a major amendment to the European Communities Act 1972?
Finally, does the Chancellor agree that the time has come when, to use the Prime Minister's own words, we regained control over "our own money", insisted on "a broad balance" in our accounts with the EC and ceased playing the roles of Lady Bountiful and Santa Claus to the European Community?

§ Sir Geoffrey Howe
The right hon. Gentleman for Stepney and Poplar (Mr. Shore) has asked several questions. The arrangements that are likely to result from fulfilment of the Council's and the Commission's undertaking of last Friday will be the same as those originally expected to result from the agreement of 26 October. In other words, we shall be no worse off than under the original agreement. The original agreement would have provided for the receipt—by 31 December—of a net figure of almost £500 million and that is the net figure that is likely to be delivered.
At this stage in the year it is impossible to say exactly what the outturn will be, but that is the size of the refund which was agreed and which will be recoverable under the arrangements. The Council, together with the Commission, are committed to taking the necessary steps to secure implementation of the very firm declaration made last Friday. That will involve further consultation with the European Parliament. We can expect the European Parliament to arrive at the right conclusion because it has plainly affirmed its view—which is the same as that of the right hon. Member—on the need for a long-term arrangement to deal with the problem. There may be differences of view about the nature of the solution, but their objectives are the same. Therefore, there is good reason to hope that the Parliament will go through that consultation process and will arrive at the right conclusion.
The right hon. Gentleman asked about alternative steps. When news of the Parliament's decision, last Thursday, was first announced, I made it plain that if events meant that we were unlikely to obtain what was provided for us under last May's agreement, we would seriously have to consider the possibility of withholding our contribution. That remains our position. However, at this stage, and particularly in the light of the positive conclusions expressed by the Council last Friday, the House would be wise to agree that it is right to press on in search of implementation of the present agreement. It would certainly be against our interests to accept the invitation 828 offered by the right hon. Member for Stepney and Poplar, to repudiate the treaty of accession, and to leave the Community.

§ Mr. Shore
Will not the right hon. and learned Gentleman confirm that if we are obliged to take alternative steps and to take British measures to arrest the outflow of own resources to the Community, we must act against the treaty of accession and take proceedings in this House to claw back our own money?

§ Sir Geoffrey Howe
Several steps would have to be considered and taken before reaching that conclusion. However, we firmly hope that the agreement arrived at and confirmed last Friday will be implemented, as required. Only if that failed would we have to consider seriously the alternative that I have described.

§ Mr. Roy Jenkins (Glasgow, Hillhead)
rose—

§ Mr. Dennis Skinner (Bolsover)
Here is the architect.

§ Mr. Jenkins
Will the Chancellor of the Exchequer accept that I believe that he has handled this nasty hiccup very well? [Interruption.] Will he confirm something that is already clear—that the settlement reached with the Council of Ministers means that we shall not be any worse off in general or in respect of the interest payments that we would have received if the money had been paid before 31 December? Will the right hon. and learned Gentleman note that this incident underlines the need for a long-term solution that avoids a yearly subvention or one paid for a longer period? That involves leaning on agriculture and encouraging other aspects of Community activity. However, if a solution is not found, we shall constantly run into quarrels, even with those who, like the majority in the Parliament, want to help Britain to find a long-term solution.

§ Sir Geoffrey Howe
I confirm that the Council and the Commission have agreed that steps should be taken to ensure that the two countries concerned—including us—are not placed in a worse position as a result of the Parliament's decision last Thursday, and that extends to interest payments. I agree that the conflict between the two institutions plainly underlines the need for the long-term solution to the budgetary problems that the Government have been pressing for, with the support of some of their colleagues on the Council but without, as yet, unanimous supported.
Once the Parliament realises—as it may do—that the Council is seriously working on a long-term solution as a result of the conflict, it may take a different view about the refunds. Next time the Parliament considers the issue, I hope that it will understand the gravity of the way in which it uses its budgetary powers to frustrate an agreement reached after months of difficult negotiation. I stress the firmness of the Council's unanimous decision on Friday. The Council is determined that its position will be upheld.

§ Sir Anthony Meyer (Flint, West)
May I refer to a far graver issue, which was raised by the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) in a supplementary question to the Prime Minister? Does my right hon. and learned Friend recall that when, in 1947, General Marshall made his proposal, there was nothing specific about it? It became specific only because the leaders of Europe responded immediately to the suggestion and put forward plans of their own. Will my right hon. and learned Friend 829 and the Prime Minister display an imagination that is equal to their courage and take the opportunity that now presents itself?

§ Sir Geoffrey Howe
In the European context—the subject of the statement—we are taking all the necessary and possible steps to ensure that the agreement that was firmly arrived at is upheld and implemented.

§ Mr. J. Enoch Powell (Down, South)
Does the right hon. and learned Gentleman remember that those of us who advised the House against passing the European Communities Bill predicted that the Assembly would use its budgetary powers to increase its own power at the expense of a Council of Ministers and, therefore, at the expense of the House? Does not the Chancellor of the Exchequer now regret that we created this equally absurd and monstrous institution?

§ Sir Geoffrey Howe
I regret—I recollect—

§ Mr. Powell
Yes—regret.

§ Sir Geoffrey Howe
I recollect plainly the right hon. Gentleman's frequently expressed anxieties on this issue, and I respect them. However, before our accession to the EC this country took steps which have been upheld by successive Governments and endorsed by the House. Of course, as the institutions develop in their relationships with each other we must move from one agreement to the next. However, there is no reason to uphold the right hon. Gentleman's view.

§ Sir Brandon Rhys Williams (Kensington)
To put the figures in perspective, should not the House remember that the sum at issue between Britain and the Community is only a fraction of 1 per cent. of the British tax base? When trying to deal with long-term problems, such as the restructuring of steel and agriculture, it is very difficult to find solutions within the context of an annual budget. Should not a solution be sought by developing the EC's capital account through the activities of the European Investment Bank and the Ortoli facility?

§ Sir Geoffrey Howe
Those are interesting observations. The amount in question is about £500 million, which is by no means an insignificant sum. That is why it is important that the agreement was reaffirmed by the Council on Friday.

§ Mr. Teddy Taylor (Southend, East)
As we are facing one of the most serious constitutional crises since 1945, will my right hon. and learned Friend state clearly whether the Council of Ministers is entitled to arrange to make the payment without the European Assembly's permission, and whether the Government are entitled to withhold their contribution of payments to the Community? Has he decided on a time limit after which unilateral action would be justified? Is it not desperately depressing that after 10 years of membership we are no closer to a permanent budgetary arrangement? So far, it has cost this country more than £4,000 million net, which is more than £1 million per day.

§ Sir Geoffrey Howe
The Council is one of the institutions of the Community that must take action in relation to the fulfilment of that agreement. It has to do so at this stage in further consultation with the Parliament.

§ Mr. Taylor
Has it?

§ Sir Geoffrey Howe
But the Council has also asserted that it will take such steps as are open to it to give effect to the agreement. That is where we stand at the moment.
It is too early yet to say how the matter will develop if agreement cannot be reached. I remind my hon. Friend of what I have already said. The Government hope that withholding our contribution will not be necessary, the Council has made it clear that it will respect the agreement of 26 October and the Commission is committed to ensure that we are put in no worse a position as a result of what the Parliament has done. We look to it now to make its commitments good.

§ Mr. Douglas Jay (Battersea, North)
With regard to the refund, can the Chancellor assure us that the Government will not accept a settlement which involves the Assembly imposing new conditions for paying money which is already owing to us?

§ Sir Geoffrey Howe
That matter does not arise at this stage. The money owing to us is being paid in accordance with decisions that have been taken by the United Kingdom Government.

§ Mr. Russell Johnston (Inverness)
Is the Chancellor aware that he keeps talking about the Council as though it were a separate body on which he does not serve? Does he agree that it was clear in October that the Parliament would reject the budget in December? Does he therefore agree that there was a political failure in the intervening period, for which the Government bear some responsibility? Is he aware that he has not made it clear how he hopes the Parliament will be made to change its mind?
With regard to the question of the hon. Member for Southend, East (Mr. Taylor), can the Chancellor confirm that the Council cannot act on its own and without the agreement of the Parliament which voted as it did almost unanimously?

§ Sir Geoffrey Howe
The Commission can and has taken action in some cases thus far. It has demonstrated its intention to do that. The Council is firmly committed to the need to secure implementation of the decision that was arrived at politically. That is the important feature at the moment.

§ Mr. Tony Marlow (Northampton, North)
Does my right hon. and learned Friend agree with those of us who wish to remain in the Community so that we may enjoy its benefits eventually that we will be unable to remain in the Community unless and until we sort out the budget problem once and for all? Does he agree that, given the massive vested interests that exist on the other side of the Channel, the only way in which we will be able to do that is by force majeure? Does my right hon. and learned Friend further agree that we must resolve the budget problem without increasing the amount of expenditure available to the Community because the record shows that it is as prudent in its expenditure as a sex maniac would be in a brothel?

§ Sir Geoffrey Howe
I can give my hon. Friend the assurance that the Government are and have been firmly committed by the actions that we have taken so far to secure a long-term resolution of the budgetary problem that is fair to the interests of the United Kingdom. That is the effect of the agreement that was arrived at in May 1980. That is the effect of the agreement that is being upheld as a result of last Friday's Council meeting. It is 831 important that we should achieve such a long-term solution at the earliest possible opportunity. It should not depend on any enlargement of the financial resources available to the Community.

§ Mr. Nigel Spearing (Newham, South)
Will the Chancellor answer a question of which he has had prior knowledge? Will he confirm or deny propositions that were advanced yesterday in my Standing Order No. 9 application which appears at c. 693 of Hansard? Will he also answer the question asked by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore)? Is it not a fact that the final decision on these matters lies with the assembly under the treaties?

§ Sir Geoffrey Howe
The final decision will, in the last resort, depend upon whether the agreement arrived at last May and confirmed on 26 October is upheld—

§ Mr. J. Enoch Powell
By whom?

§ Sir Geoffrey Howe
—and the United Kingdom Government have a clear role to play in that final decision. With regard to questions that the hon. Gentleman asked yesterday—he asked many—the essential features are that the programmes being financed by the refund are those which are chosen by the Government. The refunds that are due to us now are still, in the Council's and the Commission's view, obligatory expenditure.

§ Mr. Kenneth Lewis (Rutland and Stamford)
Does my right hon. and learned Friend agree that as these difficulties arise from time to time, it only makes life more interesting? As long as everything comes out right in the end, what does it matter? Does he also agree that such problems give the British people the impression that there is some life in that Parliament when we thought that perhaps there was not much?

§ Sir Geoffrey Howe
I am encouraged by the fact that my hon. Friend is able to take such a cheerful view of the subject. I underline the positive point that he made. The central point upon which the European Parliament has agreed is the same as that which we are looking for—a long-term solution of the budgetary conflict.

§ Mr. David Stoddart (Swindon)
Is the right hon. and learned Gentleman aware that, judging by the interview that was given by M. Claude Cheysson on "The World at One" yesterday, as far as the French are concerned, there will be no long-term solution of the problem? Will he assure the House that he will not respond to that insolent and polyglot assembly that meets in various places in the Community, by agreeing in any sense that it should supervise any of the refunds to which it may agree? Will he also uphold the right of this Parliament, and this Parliament alone, to supervise Government expenditure?

§ Sir Geoffrey Howe
As I have already said in answer to an earlier question, the use that is made of the refunds in the supplementary letter of agreement relates to programmes advanced and chosen by the Government. With regard to the hon. Gentleman's earlier question, of course other countries in the Community assert different points of view at different times. We have asserted, and will continue to uphold, our position. It is of crucial importance to secure a long-term solution of the budgetary problem. As a result of our assertion of that principle from the outset, we have so far secured substantial and solid 832 interim agreements that are being implemented. We shall continue to pursue United Kingdom interests to the extent that it is necessary to uphold them.

Several Hon. Members
rose—

§ Mr. Speaker
Order. I propose to call those hon. Members who have already been standing in their places.

§ Mr. Anthony Beaumont-Dark (Selly Oak)
Although the problem of our debt with the Common Market is of great importance, did the Council give any thought to an even greater problem that faces the whole of the Western world—the rescheduling of Third world debts that gather apace? Was any thought given to how that might be dealt with? Does my right hon. and learned Friend agree that if it is not dealt with fairly promptly it could be a crisis that makes the budgetary problem seem comparatively small?

§ Sir Geoffrey Howe
As I said in my original statement, some consideration was given to international monetary circumstances at the Council meeting. The subject has been considered at several such meetings at which I have been present. I agree with my hon. Friend about the importance of making further progress towards strengthening the existing international financial institutions, especially the International Monetary Fund, which is playing a crucial part in co-ordinating arrangements of this type. I hope to advance that process further shortly.

§ Mr. Frank Hooley (Sheffield, Heeley)
Is not the lesson of the past three years that the Government's so-called partners in Europe have not the slightest interest in a long-term solution of the problem? Does the Chancellor agree that it gives them a lever with which to use and manipulate Britain to suit themselves? Moreover, is it not clear that as the date of Portugal's and Spain's membership approaches, the problem will become utterly insoluble?

§ Sir Geoffrey Howe
Plainly, the prospect of the Community's enlargement is likely to raise its own problems and to amplify the size of others. With regard to our own problems, the fact that the European Parliament is pressing for a long-term solution of the problem and the fact that a significant number of my colleagues in the Council of Ministers recognise the need for one show that our case is not going unheeded.

§ Mr. Ron Leighton (Newham, North-East)
Does the Chancellor recall the Green Paper entitled "The Budget Problem" that the Government published earlier this year, the last sentence of which reads as follows: A lasting solution to the budget problem must therefore be found. This is the task for the autumn of 1982."? That autumn has gone, we were told the same last year and was not that miserable failure entirely predictable? How much longer do we have to carry on with this sorry charade? When will the right hon. and learned Gentleman realise that the solution lies in his own hands and that he only has to stop writing the cheques?

§ Sir Geoffrey Howe
The hon. Gentleman takes the wrong view of the reality of this. Plainly, a long-term solution must be found. We must work towards that step by step. Last Friday's decision by the Council was a plain reaffirmation of the Council's intention, supported by the Commission, to uphold the agreements so far in place.

§ Mr. Dennis Skinner (Bolsover)
Does the Chancellor recall that those of us who voted against direct elections argued that once the Assembly was set up and the gravy 833 trains had been boarded all over the Common Market it would be very difficult to persuade the passengers to get off at the appropriate station? Does he agree that that is what has happened with the Assembly and the budget? Has not the Chancellor a duty now, as he has failed in the past, to tell us exactly what steps he will take if agreement is not reached? Is he aware that some of us believe that he is angling for an agreement of the kind that we heard about in relation to steel yesterday—a stretching-it-out-beyond-the-next-general-election kind of agreement?

§ Sir Geoffrey Howe
As the hon. Gentleman knows, Members of parliamentary assemblies—even those outside this country—have their own views on how to perform their duties. The Government are concerned, as successive Governments have been, to secure a long-term resolution compatible with our interests to the problems of budgetary imbalance, and we are addressing ourselves to that.

§ Mr. David Winnick (Walsall, North)
Will the Chancellor tell his EC counterparts that an increasing number of people in this country—certainly the majority—are tired, angry and fed up with the long-running and expensive farce of British membership of the EC?

§ Sir Geoffrey Howe
My European counterparts are aware that the view articulated by the hon. Gentleman about membership of the Community is held in some parts of the Labour Party. [HON. MEMBERS: "And by some of your hon. Friends."] That is one reason that plainly operates to emphasise the necessity for an effective longterm solution to the problem to which we are now addressing ourselves.

§ Mr. Shore
Does the Chancellor agree at least that the £500 million hiccup to which the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) referred must be the most expensive hiccup in history? Does the right hon. and learned Gentleman agree that, three years after the Dublin summit, we are now even further from a permament and equitable solution for the British budget contribution? As the Chancellor is a learned as well as a right hon. Gentleman, will he now stop fudging on this important issue and confirm that when there is disagreement between the Council and the Assembly on budgetary matters and the matter cannot be resolved by concertation, the Assembly and not the Council has the last word?

§ Sir Geoffrey Howe
The Assembly plainly has a role to play in the approval of budgets and supplementary budgets. As the right hon. Gentleman has explained, that role is exercised in a concertation process in which both parties are ready to argue their position. I believe that there is now a wider understanding of the need for a long-term fundamental solution to the Community's budgetary problems than there was three years ago.