Commons Sitting of 23 July 1982

Preamble
The House met at half-past Nine o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PETITION

  Airedale General Hospital, Keighley
  9.35 am
  Mr. Bob Cryer: I have pleasure in presenting to the House a petition on behalf of the health workers at Airedale general hospital in my constituency. It contains 1,000 signatures. The petitioners are not asking for an 18 per cent. pay increase similar to that which judges and senior civil servants recently received when they already had salaries of £25,000 a year or more. They are asking for a modest 12 per cent.
  Representatives of Airedale general hospital visited the House on Wednesday and asked me to point out that the offer made by the Government is inadequate and that it would give people with several years service a net increase of only £2 a week. I was provided with a wage slip which shows basic gross pay of £71·09 and net take-home pay of £50·75. That is hardly a living wage.
  I have therefore been asked to present this petition in an attempt to persuade the Government to make a reasonable offer to the workers whose services are widely appreciated. Airedale general hospital is a facility that is much appreciated by the people in my constituency and in the surrounding area.
  The petition reads:
  To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled.
  The humble Petition of the people of Keighley in West Yorkshire and elsewhere
  Sheweth
  That the claim for a 12 per cent. increase in wages and salaries by National Health Service workers who provide a highly important and widely appreciated service is an extremely reasonable one and that the arbitrary imposition of a wage limit is unfair and unacceptable.
  Wherefore your petitioners pray that your Honourable House will urge the Government to meet the pay claim by the National Health Service workers in full.
  And your Petitioners, as in duty bound, will ever pray, etc.

BUSINESS OF THE HOUSE
Ordered,
That, notwithstanding the provisions of paragraph 1 of Standing Order No. 18 (Business of Supply), the second part of the 22nd allotted day may be proceeded with this day and, notwithstanding the provisions of Standing Order No. 3 (Exempted business) and Standing Order No. 18 (Business of Supply), if proceedings on the Motion relating to European Communities Budget have not been disposed of by half-past Two o'clock, Mr. Speaker shall put forthwith any Questions necessary to dispose of them.—[Mr. Cope.]

Orders of the Day
  SUPPLY
  [22ND ALLOTTED DAY] SECOND PART]—considered
  SUPPLY

    European Communities Budget
    9.37 am
    The Financial Secretary to the Treasury (Mr. Nicholas Ridley): I beg to move,
    That this House takes note of the preliminary Draft Supplementary and Amending Budget No. 1 for 1982 and the preliminary Draft General Budget of the European Communities for 1983.
    This is the ninth debate on the European budgetary proposals in a series that goes back to 1975. It is an annual event when the House gives its views on the draft budget documents before the Government go to the Council to negotiate the final budget for the following year, in this case 1983. The Commission has put forward proposals for the draft budget next year and for the amending budget for this year. I have a certain amount to say about the latter as well as the former.
    We have explained some of the details of these documents to the House in a memorandum that the Treasury deposited on 2 July. I hope that hon. Members have had a copy. I realise that this is a fairly narrow subject—
    Mr. Nigel Spearing: Oh!
    Mr. Ridley—in that the budget deals only with corrections to the present year's budget and the plans for next year's budget whereas many hon. Members will want to debate the wider issues, particularly our budgetary contribution and matters that were covered at some length in last Wednesday's debate. I shall be happy to respond to hon. Members' remarks about those wider matters. I must at this stage confine myself to the details of the two documents.
    Mr. Peter Shore: Does the Minister accept that the budget is supposed to represent the results of the famous May 1980 mandate and that therefore the debate should cover the whole area of our interests with the EEC? I hope that, where relevant, the Minister will range widely over the issues.
    Mr. Ridley: I am not a bit surprised that the right hon. Gentleman should say that. I merely said that I would concentrate in my opening speech on the documents before us and, with the leave of the House, respond to right hon. and hon. Members later.
    We are discussing the Commission's initial proposals. They represent the first step in the process that leads to the budget. Next week the Council meets the Parliament and the First Reading of the budget takes place on 27 and 28 July under the Danish Presidency. I shall be the United Kingdom member of the Council. We shall take into account what is said about the documents today to bring the proposals as near as possible to what the House wants.
    Last year I acted as President of the budget council. We ended with a disputed budget. It involved a most unseemly dispute between lie Parliament and the Council. The agreement broke down on a number of issues, the principal

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    one of which was whether budget items should be classified as obligatory or non-obligatory. The treatment of items varies according to their classification, so the amount of the budget was affected by the Parliament taking a different view from the Council on classification.
    Statements were made to the House on 27 January and on 3 February. The matter was followed up in a debate on the Supply Estimate on 16 March when the hon. Member for Colne Valley (Mr. Wainwright) questioned the increased contribution which we put before the House in the form of a Supplementary Estimate. Those matters should be resolved.
    On 16 March I said that I hoped that the issue would be resolved in the discussions put forward by the United Kingdom Presidency, which the Belgian Presidency carried out in the first half of this year. I said:
    "It is our earnest hope that we can avoid these budget debates"—
    between the Council, Parliament and the Commission—
    "in the future and can work out a sensible formula for carrying out these tasks."—[Official Report, 16 March 1982, Vol. 19, c. 259.]
    Because the budget was not agreed we had to pay a little more than is allowable under the European Communities Act. I said that we would pay the extra amount into the EEC No.1 account so that it remained in our control. I said that we would keep the discussions going and in the meantime go the European Court for a resolution of the dispute, if it could not be sorted out by negotiation. I said that if there was no agreement we would seek the court's ruling. I am glad to tell the House that an agreement was reached. The text of the agreement is in the Library. The court action is be withdrawn. The agreement was signed by the President of the Council, the Commission and the Parliament on 30 June this year and was ratified by the European Parliament on 8 July.
    Sir Michael Shaw: I have heard rumours that, although the documents have been approved, a difference of interpretation has come to light about some of the important words in the documents. Are the language differences now resolved?
    Mr. Ridley: I doubt whether they will ever be resolved completely. European documents are not legally precise, like our legislation. Indeed, they are sometimes designed to mean all things to all men because otherwise they may not come into existence. There is some dubiety about the meanings of some phrases but a major degree of agreement is progress.
    The first two sections of the new agreement define the classifications of the various budget lines. The annex to the first two sections specifically reclassifies the 1982 budget as part of the agreement. Agreement on procedure for deciding the classification of new budget lines in future is included.
    The third section deals with interinstitutional collaboration on the budgetary procedure. There is an important agreement that Parliament will not adopt a budget until disagreement with the Council has been resolved by further discussion. That puts right one of the things that went wrong last year.
    The fourth section covers three aspects of the Council's continuing right to control and limit expenditure. It covers, first, the maximum rate by which non-obligatory
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    expenditure can be increased by the Parliament and the definition of that; secondly the setting of ceilings by the Council in regulations on particular lines of expenditure and, thirdly, the requirement that each item of expenditure shall have a legal base.
    I shall be happy to answer questions about the agreement. I hope that it will make an effective improvement to the budgetary process and will last for a considerable time. I am glad that during our Presidency we gave the initiative the push that resulted in agreement. It is an example of limited but important progress in Community institutions.
    There are two consequences of the agreement for us. The first is that the 1982 budget will now be implemented as published in the official journal of the Community. The second consequence is more complicated. It involves a notional assiette. I know that I am not allowed to use French words, Mr. Deputy Speaker, but I think that it means "plate". "Assiette froid" means "cold buffet". The meaning in this case is that the base from which the classification of the different items is to be calculated will be in accordance with the new agreement rather than on the basis of the 1982 budget. That means that, when considering the 1983 budget, we shall operate as though the classification agreement was in existence last year. The matter is complicated and I hope that I have made it clear.
    Mr. Peter Shore: Retrospection.
    Mr. Ridley: There may be said to be an element of deemed retrospection
    The preliminary drafts from the Commission do not reflect the two consequences because they were drawn up before the agreement. In the budget council we shall ensure that they conform to the two conditions that I have just described.
    On 16 March the House voted additional sums of £7 million for 1981–82 and £21 million for 1982–83. As I said in that debate, we were the stakeholders for the extra moneys. We paid them into the EEC No. 1 account which is held by the Paymaster General and under Treasury control.
    The agreement does not yet alter the status of the payments, but it paves the way, through the reclassification that I have mentioned, for the 1982 budget to be established on a new basis. That might be done through a rectifying budget now, or later in the year when other charges can also be taken into account.
    To pick up a point that I made in that debate, I can confirm that the balance of £131·2 million in the EEC No. 1 account at the end of 1981–82 was far in excess of the £7 million paid from the Supplementary Estimate. The same applied at the end of the first quarter of 1982–83, when £7·012 million was paid from the vote and a balance of £112·3 million was in the EEC No. 1 account.
    When a new level of budget is established through an amending budget, either the one that we are discussing or a subsequent one—there might be other changes since the beginning of the year as well as the effects of the classification agreement—payments into the EEC No. 1 account will be adjusted accordingly. That will discharge the Government's obligation fully to account for those payments to the House.
    The 1983 budget is only for one year and the Government note with regret the absence of a triennial financial forecast for the following two years. We would

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    much prefer to have a longer profile of planned spending so that the House could have some idea of the shape of things to come. We shall raise that matter in the Council.
    We must encourage the Commission, the Council and the Parliament to look at the allocation of resources in the longer term within a confined total and to start to talk the language of priorities in budget-making. That is absent from Community budget-making and it is a point that I have made many times in budget councils. We should be making value judgments about what should be increased and what should be decreased, just as we have to do at home.
    Finally, I should like to make a few points about the shape and content of the draft budget for 1983. The payments included in the 1983 preliminary draft budget show refreshingly smaller increases than in the past. Compared with proposals for 1982 presented by the Commission this time last year, the overall increase, excluding our refunds which are a separate financial transaction from this part of the budgetary process, is only 7·7 per cent.
    Some subsidiary figures show how, by more realistic estimating, the Commission has produced relatively modest changes. As between the preliminary draft budget last year and this year, administrative and related expenditure is only 4·9 per cent. up and the expenditure on agriculture is only 2 per cent. up, whereas the regional fund is 26 per cent. up, the social fund 32 per cent. up, and industry, energy and research are 53·5 per cent. up. Within that total increase of 7·7 per cent., there is a much more encouraging re-allocation in the Commission's proposals for the money.
    It might help the House if I gave some historical background to the figures. Apart from the cost of administration, which since 1975 has varied between 5 per cent. and 5·8 per cent. of the total budget, the weight of the main constituents has changed considerably over the years.
    In 1973, expenditure on the guarantee section of the European agricultural guarantee and guidance fund, represented nearly 80 per cent. of the European budget. Up to 1980 it varied between 70 and 75 per cent. From 1981, following high world food prices, it dropped to less than 62 per cent. It is estimated that it will not rise beyond 65 per cent. in the 1983 draft budget that is before the House. I stress that the estimates are highly vulnerable to factors outside our control.
    Since 1973 the social fund has grown from 1·2 per cent. of the budget to 5·8 per cent. in the 1983 draft budget. The regional development fund, which started in 1975 by taking 1·4 per cent. of the budget, now represents 6·4 per cent. of the 1983 draft budget.
    Research, investment and energy expenditure took up 1·8 per cent. of the budget in 1973, 2·3 per cent. in 1981 and 3·1 per cent. in the preliminary draft budget. Taken together, expenditure on investment, industry and employment will have risen from about 3 per cent. in 1973 to 12 per cent. in 1982. The proposals in the 1983 draft budget would bring the figure up to 15·3 per cent.
    Mr. Jack Straw: I am grateful to the hon. Gentleman for those figures, but will he acknowledge and accept that payments to the United Kingdom out of the regional and social fund do not result in any additional public spending over and above that laid down in the public expenditure White Paper?
    Mr. Ridley: The hon. Gentleman knows full well that if the United Kingdom did not receive those sums and, indeed, if we did not receive our refunds, the Government would not be able to maintain the level of public spending that they do. Therefore, I confirm what he says.
    I ask the House to approve the draft budget and to give the Government a mandate to negotiate the budget's approval and to give its views on how it would like it improved so that when I go to Brussels next week I shall have not only the confidence but the views of the House during those discussions.
    9.56 am
    Mr. Peter Shore: This is the second debate this week on European matters. On Wednesday we debated and voted upon an Opposition motion that stated the belief
    "that events have show that Common Market arrangements for the Budget, Agriculture, Fisheries and Food are contrary to the interests of the United Kingdom and that the Treaty of Rome cannot provide a sound and secure basis for long term fruitful cooperation with the United Kingdom's European friends and allies".
    Very properly, that debate covered a wide canvas—the totality of our relationships with the EEC, including, as the words that I have read out make plain, a specific mention of the present, to us intolerable, arrangements for the EEC budget as a whole and, in particular, the United Kingdom's contribution to it.
    But for that all-embracing motion and the vote upon it on Wednesday, we would today have tabled a specific motion reaffirming broadly the motion on the budget that we put down and voted upon almost exactly a year ago.
    I say that to make it plain to the Financial Secretary before he departs early next week for Brussels that he has no more support in his endeavours on the broad shape of the 1983 preliminary draft budget than he had for the preliminary draft budget for 1982, 12 months ago.
    I listened with great interest to the hon. Gentleman's speech. I note what he said about the late achievement of the British Presidency with regard to the classification agreement. We now know far more clearly than we did before what is to be classified as obligatory and non-obligatory expenditure. No doubt there will be dancing in the streets of Brussels and wild celebratory parties in Luxembourg and Strasbourg as a result of such an achievement.
    Mr. Spearing: At public expense.
    Mr. Shore: As my hon. Friend has said, it will probably be done at Euro-public and particularly British expense. However, it is a very modest achievement.
    The tedium of the budget procedures in the European Assembly, and of the procedures between it, the Commission and the European Council and the grotesqueness of the structures and arrangements of the budget will continue to command far more attention. I certainly share the Financial Secretary's concern that there is no triennial forecast this year. Some sense of perspective is required, particularly when, as we are well aware, the 1 per cent. VAT yield is moving towards the ceiling laid down in the February 1970 agreement, which authorises that part of own resources.
    The absence of a triennial forecast is linked to what the Financial Secretary said about the relatively low growth in the overall size of the payments budget this year. I do not necessarily say that that is deliberate, but it is a rather

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    surprising consequence both of the Treasury's explanatory memorandum of 2 July and of the words used in the introductory part of volume 7 of the major clutch of Commission documents before us. It is a consequence of the way in which the somewhat inadequate and incomplete accounts for the 1983 draft preliminary budget have been presented that the overall increase is understated, possibly to a significant extent.
    The Financial Secretary properly and frankly acknowledged that no sum was included for the refund to the United Kingdom. We do not yet know with absolute certainty what the sum is, but when it is included it will change the picture from the rather modest—as the hon. Gentleman said—increase of 7·7 per cent. to a higher figure. That must be pointed out.
    The preliminary draft budget for 1983—the principal subject for our debate—marks, most importantly, the continued and almost total failure of the Government to achieve the reform objectives that they set for themselves with such clamour and apparent fervour nearly three years ago.
    I shall recall the events. Having been defeated at the Dublin summit in December 1979, and having been driven to accept the temporary and inadequate compromise of 30 May 1980 in Luxembourg, the Government pinned their hopes of far-reaching and permanent change on the searching reappraisal of Community practices—the now famous mandate that was given to the Commission on that date. The Commission reported back to the Council of Ministers 13 months later, to be precise on 22 June 1981. It is remarkable that the House, which has had several opportunities to discuss European matters during the past 12 months, has not seriously debated the content of the Commission's report as a result of that mandate of 30 May. When we faced the Community budget debate this time last year it was at least plausible for the Government to argue and for the Commission to assert that the results of the mandate could not, in so short a period, be properly reflected in the Commission's preliminary draft budget for 1982, or in any decisions taken on the mandate report by the Council of Ministers. However, no such excuse is available today. The Commission has had a full year in which to reflect upon its report and to feed it into the budget structure. As for the Council of Ministers, we have had six months of creative British Presidency, ending on 31 December 1981, and two further summit meetings in which the conclusions on the mandate were a central part of the agenda.
    Therefore, this is the first post-mandate budget. It is the first budget of the new era and of the new Community dawn that the Government's alleged determination had forced and persuaded their fellow members in the EEC to enter. It was to be the start of a new pattern of expenditure and as a central part of it the CAP was to play a markedly different and less dominant role. This was also the age when changes were to be made in the absurd way in which member States finance the EEC budget. Above all, it was to be the beginning of a new period in which the United Kingdom, after the surrender of its interests by the right hon. Member for Sidcup (Mr. Heath) and his Government in 1971—when they agreed to pay an open-ended ransom to the EEC budget for the privilege of British membership—and after the failure of the Government of my right hon. Friend the Member for Huyton (Sir H.
    664
    Wilson) in the renegotiation of 1974–75 to retrieve that initial and major error, was to see a permanent, fair and equal financial relationship between the United Kingdom and the EEC.
    That was certainly what was hoped for. Alas, that was not to be. In the draft budget for 1983 we have before us a testament to the failure of the Government's attempts to renegotiate their unequal burdens with the EEC and a monument to the continued failure to reshape, in any significant degree, the totality of the EEC budget and the methods of financing it. I shall spell out why the 1983 draft justifies the title of a budget of failure.
    Mr. Hugh Dykes: Does the right hon. Gentleman's last remark mean that he would seriously welcome much more being spent on the social and regional funds in future?
    Mr. Shore: Given the choice between expenditure on the common agricultural policy and expenditure on other matters, there is no doubt, as common sense indicates, that that would be a better form of expenditure. However, as the hon. Gentleman might, in a sense, expect, I shall develop my remarks on that point.
    I turn to the subject of the continued dominance of the CAP. Next year, as the Treasury's explanatory memorandum makes plain, the EEC budget provides for expenditure of over £12,000 million. Of that sum, no less than £8,000 million is to be devoted to price support of European farm products. As we all know, the benefit of those vast subsidies does not accrue to consumers either in the United Kingdom or elsewhere in the EEC. Some part of it goes to European farmers, but a very substantial part is simply wasted. It goes in storage costs for the large surpluses, cut price sales, when those surpluses become unmanageable, to whatever countries will purchase them, after the Soviet Union, and, further, through the deliberate subsidising in the world market of Community farm products that would otherwise be uncompetitive.
    The preliminary draft budget for 1983 anticipates an increase in farm guarantee expenditure of about £500 million. According to the Commission, it will then account for 64 per cent. of the 1983 budget. It is true, as the Commission claims, that that is less than the 1980 percentage share, when the figure was just over 71 per cent., but the Commission fails to say—the House must recognise this—that the reduction, such as it has been, owes more to the hardening of world farm prices, and therefore the reduction of certain expenditure, than to any change in decisions about the CAP. One may doubt whether world food prices will continue this year and next to be as favourable from the point of view of the cost of subsidising CAP exports as in the two previous years. However, we are still accepting that broadly two-thirds of the total Community budget will be absorbed in agricultural expenditure.
    That is all the more amazing and all the more disproportionate at a time when recession in the industrial sectors of the Community, most grievously in the United Kingdom, has so noticeably deepened. That is reflected in the unemployment figures in the Community as a whole, which are disturbing and depressing. The last set of figures was published along with the papers that accompanied the most recent summit meeting. The figures should be familiar to hon. Members on both sides of the House. There has been an increase of two to three times over the past four to five years.

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    The Brussels Commission and all the institutions within the Treaty of Rome are patently ill-equipped to deal with the fundamental problems of slump and unemployment. Last year, in presenting the 1982 preliminary draft budget, the Commission wrote:
    "in drawing up the 1982 budget the Commission has sought particularly to enable the community to respond as effectively as possible to the demands placed upon it by the continuing economic recession."
    The same theme is pursued in this year's submission. Referring to what it called the
    "major reorientation of the community policies"
    which were supposed to be initiated through the 30 May 1980 mandate, the Commission states in the introduction to volume 7:
    "This year, however, the Commission is able to present a budget which represents a first step towards fulfilling the objectives of the mandate even though some important elements of that debate are still under discussion."
    I am afraid that the evidence for that progress towards major reorientation is thin and unconvincing. The Commission has proposed a substantial increase in the social and regional funds, which has been mentioned by the hon. Member for Harrow, East (Mr. Dykes) and the Financial Secretary.
    Even if approved by the Council of Ministers and the Assembly, the Commission's proposals for increased expenditure via the social and regional funds will, in 1983, be barely more in real terms per capita for the anticipated 10·5 million unemployed in the EEC than when unemployment was 6·8 million in 1980. Thus, in spite of the cosmetics and the commitment to a
    "major reorientation of the community policies"
    in 1983 the EEC will remain basically what it has been almost since its inception—a common agricultural community with a common external tariff surrounding a customs union.
    The 1983 preliminary draft budget takes no forward step towards changing the bizarre arrangements for financing the EEC, for the reason that no commitment to such a change has been made, and, like major CAP reform, it was virtually excluded from the terms of reference given to the Commission in the 30 May mandate.
    Of the three main taxes that make up "own resources", as hon. Members will discover when they look through either volume 1 or volume 7 of the documents, in 1983 Britain will pay nearly one-third of the total contributed through levies and premiums on imported food. Only one other country, Italy, pays half as much in levies on imported food as Britain.
    Of the second main tax, customs duties, Britain will pay, it is assumed, slightly less in 1983 than in 1982. However, we shall contribute more than 25 per cent. of the total revenue from customs duties. Only Germany will contribute more. As for VAT, the third of the own resource taxes, Britain will contribute just over 20 per cent. As the Treasury memorandum acknowledges, in total in our gross contributions we shall contribute no less than 22·4 per cent. of the total, about £2,700 million. As our GNP, as a percentage of the total EEC GNP, amounts to only 17·1 per cent. and that percentage reflects an overvalued exchange rate of the pound sterling, we are contributing more to the EEC budget than any reasonable calculation based on our capacity to pay would justify.
    So much for the gross contribution. What about our receipts and our resulting net payment? Here once again
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    we confront the failure of the Government to rectify the imbalance between the United Kingdom's contribution and the United Kingdom's receipts from the EEC budget. We are now heading towards the third anniversary of the Prime Minister's insistence that that problem must be solved speedily and on a permanent basis. It is three years since she told the rest of the EEC that she was not prepared to go on playing Lady Bountiful to the Community. It is three years since she insisted that the present inequitable arrangements had to be replaced by those that would have left us in broad balance with the EEC budget. It is three years since she insisted so vehemently that after all it was our money. The House knows that in the end she was fobbed off with a two-year temporary arrangement and the Commission mandate to which I have referred. That mandate yielded virtually nothing. An additional year has now been added to the two year temporary period. In her efforts to solve the problem earlier this year the Prime Minister succeeded only in entangling herself more deeply in the procedures and rules of the Community.
    In the absence of an agreement, the Prime Minister was obliged on 25 May this year to accept a further ad hoc one-year agreement for Britain's budget payment. In the debate on 26 May the Foreign Secretary told us that the Commission estimated that the United Kingdom's net contribution in 1982 would be £880 million. He said:
    "We have accepted a basic refund of £490 million, which, on the basis of the Commission's estimate, will make the United Kingdom's contribution, after refunds, one of £390 million."—[Official Report, 26 May 1982; Vol. 24, c. 942.]
    The Foreign Secretary went on to explain the formula agreed for that year should the £880 million net contribution be exceeded. This arrangement which was imposed on the United Kingdom came too late for the arithmetic to be recorded in the draft preliminary budget for 1983. As the House will have noted, in the relevant tables there is simply a gap for 1983 under the heading
    "Supplementary measures in favour of the United Kingdom",
    and it is partly that which gives that misleading impression of the relatively small rate of growth of the overall Community budget for 1983.
    What I find surprising is the lack of any serious discussion of the 25 May agreement in the Treasury's explanatory memorandum which, after all, was produced only on 2 July. We must know the precise figures now for the payment to the United Kingdom that has beets agreed for 1982, including by now the details. I had hoped that the Financial Secretary would tell the House more about this and also whether any new conditions had been imposed or were likely to be imposed in the new regulation that under these arrangements will have to be issued by the Brussels Commission.
    I should also like to hear the Government's explanation why the financial mechanism which, with the benefit of hindsight and experience, they renegotiated in 1980 has failed yet again and apparently will continue to fail to yield any return to the United Kingdom. I have no doubt that the Financial Secretary will assist us with an explanation.
    Mr. Ridley: The right hon. Gentleman will know that it was his own Government who negotiated the financial device to which lie has referred. On no occasion has it yielded one new penny of refund.
    Mr. Shore: The Financial Secretary has missed the point entirely. I agree with him that the financial mechanism which was negotiated as an attempt to undo the

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    damage done by the previous Government in 1971 failed to do that. Unlike a number of other people, I thought at the time that it would fail to do it, and I said so. But the hon. Gentleman has missed the point, because what is remarkable is that when, in the negotiations which led up to the 1980 agreement conducted by his own Government, measures were sought to assist the United Kingdom at least in the preliminary period before a permanent settlement could be found, the financial mechanism was renegotiated. A mark II financial mechanism, with all the authority, experience and expertise of the present Government, was devised. But mark II is no more successful than mark I was. Not a single refund has come through the triggering of that mechanism. Therefore, all has to be loaded on the fall-back fail-safe mechanism—the supplementary measures. But I am still waiting for the hon. Gentleman's explanation. Obviously he is not aware of what happened, and we look forward to hearing from him when he has had time to reflect on it.
    The details of the settlement for 1982 and the sums of money to be allocated for it in the 1983 budget are entirely secondary to the massive defeat that the Government sustained in their effort to obtain a lasting and sensible solution to the scandal of our unjust and disproportionate contributions this year.
    As long ago as 31 March 1982, the Prime Minister, reporting on the European Council Meeting, told the House that decisions on all aspects of the mandate must be taken together; that is to say, decisions on the budget, the common agricultural policy and industrial and social affairs of the Community. Because no satisfactory arrangements had been reached at the end of March on either the CAP, the industrial and social affairs of the Community or the total shape and finance of the Community budget, the Prime Minister made it plain to the House and to our fellow members of the EEC that there would be no British agreement to the agricultural price settlement for this year unless and until Britain's budget problem was settled. In short, Britain would use the veto on the agricultural price settlement until the 30 May mandate was agreed and a just and lasting settlement to Britain's budget problem was achieved.
    As the House knows, the British position was destroyed at the meeting of the Council of Agricultural Ministers in Brussels on 17 and 18 May when, consciously and deliberately, the Council overrode the British veto and simply declared that the veto itself, which had been in place ever since the famous Luxembourg compromise of 1966, simply did not apply. Thus the Government's bargaining power on Britain's budgetary contribution was destroyed at a stroke.
    Not only was our bargaining position destroyed. The central convention that had dominated the conduct of the EEC for the past 16 years—the central constitutional convention which was prominently displayed during the referendum campaign in Britain in 1975 and in the 1971 White Paper prior to the right hon. Member for Sidcup signing the Treaty of Accession—was destroyed with it.
    The following day, the Prime Minister herself said that the decision was "without precedent" and had serious implications. The Minister of Agriculture, Fisheries and Food told the House on 19 May:
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    "the Council had violated an accepted convention under which all previous price fixings had been adopted."—[Official Report, 19 May 1982; Vol. 24, c. 352.]
    The gravity of the decision and the implications for the United Kingdom have not yet been understood fully either in the House or in the country. Of course, the Foreign Secretary raised the matter, as he had to, at the Luxembourg meeting of the Council of Ministers on 20 and 21 June. There was little to comfort us when he reported back to the House on 22 June. He could not get that decision negatived, cancelled or reversed. Nor could he get any guarantee that the veto would not be overridden again whenever other member countries thought it right to do so. The best that he could tell the House was that
    "where … very important interests are at sake"—
    this is the old doctrine—
    "discussions must be continued until unanimous agreement is reached, and that Community business should continue to be governed by this principle. This position was supported unreservedly by two member States and by two others with minor qualifications."—[Official Report, 22 June 1982; Vol. 26, c. 155.]
    The Foreign Secretary refrained from saying which member States unreservedly accepted the British view. However, we know from the statement made by the Minister of Agriculture, Fisheries and Food the previous month which States they were.
    On the occasion when the offence was committed, we had the support of the Danes and Greeks. But that should give us little satisfaction, because the combined voting strength of the United Kingdom, Denmark and Greece is insufficient to prevent the other Community States from obtaining the qualified majority that the voting rules require. If they had had that voting power, the original offence could never have been committed. But it was, and it is plain that there is nothing, now that the 1966 convention has been broken, to prevent it from being broken again. All that we have is the report by the Foreign Secretary that there were two other member States which, with minor qualifications, broadly supported the principle of the national veto and the Luxembourg compromise.
    But this, too, is totally unsatisfactory. By definition, those two other unnamed States which supported our position in June with minor qualifications were among those States that voted in the first place to violate the Luxembourg compromise on 19 March. As the Foreign Secretary was candid enough to confess to the House, there cannot be any certainty about future conduct. He went on to say that he would have preferred a clear-cut result. So would we all. It is not clear to any of us what a clear-cut result or commitment can now involve. There is no possible way in which a clear-cut commitment to the doctrine of the national veto can be obtained without a change in the Treaty of Rome. There is a great irony in all that. It is now just over 10 years since, as Opposition spokesman on European affairs, I tabled an amendment to the European Communities Bill which would have enshrined in the European Communities Act 1972 the veto principle that we were all then assured was universally accepted and inviolate. We forced a vote. The amendment was defeated by only 13 votes on 13 June 1972. It is rather interesting to note who voted against it. The Financial Secretary voted against it. He is to preside over the budget council this coming week. He was not alone because his colleague the Economic Secretary voted in the same Lobby, the Chancellor of the Exchequer voted in the same

    669
    way, and so did the Prime Minister who has complained so bitterly about the lamentable results. I urge them to reflect.
    I should have thought that the remedy to the budgetary problems is clear. We have urged it upon the Government again and again over the past two and a half years. The only leverage that we have on the EEC countries is to amend the European Communities Act 1972 so that we can halt at will the outflow of British money, the Community's so-called own resource. We should then insist upon a proper net contribution to the EEC, one that is approved by the House. We have offered immediate assistance to the Government in both the framing and passage of such amending legislation. That is only the first part of a larger process of disengagement from the Treaty of Rome to which we are committed. For all the Prime Minister's bombast, the Government will not tread that obvious road to a solution. I invite the House to consider carefully where the present course is leading.
    The Prime Minister has come a long way since she insisted that it was our money. She has found that no mixture of threats or blandishments has yielded any lasting solution to the outrage of our budget contribution. She has only managed to obtain a temporary reduction and study. The mandate does not offer any solution. It devotes only two of its more than 30 pages to discussing the British budgetary problem. The rest of the document is given to the ambitions and fantasies of the Commission, seeking as always to enlarge its activities, to promote European union and to widen its competence into still larger areas of the affairs of member States.
    The solution that the Commission has in mind is not one that would give a permanent balance to Great Britain's payments and receipts to the budget, nor one that would demand any drastic curtailment of expenditure on the common agricultural policy, but a solution that would involve, in some unquantified and undemonstrated way, a new possible balance that could be struck if there were to be a vast increase in social, regional and industrial policies, and expenditure upon them, under which Great Britain might conceivably receive more than it now pays.
    There is the great paradox and disadvantage. Such a solution would involve a substantial increase in the Community's own resources. I warn the Government that that road is not one that they should even contemplate pursuing. The Opposition have had enough of these annual occasions when we can do nothing but express our opinion. We cannot make any decisions about the European Community's budget or our contributions to it. We have to continue these exercises, and we hope that the Financial Secretary, out of some primitive instinct for self-protection, will seek to advance the British cause at the forthcoming meeting of the budget council. We have little confidence in his capacities, although in the national interest we wish him such success as may be possible.
    10.35 am
    Sir Michael Shaw: I have listened, as always, with considerable interest and admiration to the speech of the right hon. Member for Stepney and Poplar (Mr. Shore). His most notable contribution was that of gloom. I assume that that was intended. There was a complete lack of hope that we could achieve what we are seeking in the Community. From that I am convinced that the Labour Party is bent on getting this country out of the Community as soon as it can. That being so, we are put
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    at a great disadvantage in our negotiations. When discussing the problems and how best they can be overcome to better not just our position but that of other countries of the Community, our influence must be restricted by the obvious divisions within the House.
    As my hon. Friend the Financial Secretary said, this is the ninth in the series of debates we have had on the preliminary draft budget of the European Community. It seems less than a year since we last discussed the topic. That is not surprising, because the last budget has been with us for a long time and is still not entirely resolved. We have been told that it is to be resolved in its original form. I am not clear whether any formal declaration has been or will be made or whether—as on one occasion—it will be accepted with no further comment by the Council. I should be interested to know whether that is so.
    We also have a first supplementary draft budget. In all probability, we shall have a second in the autumn. The 1982 budget has been a protracted affair. There was a time when such affairs took up a great deal of my political life, but nothing can be more boring than the endless recollections of someone who has been a professional in a certain area, so I shall try to keep my contribution brief.
    I congratulate my hon. Friend the Financial Secretary and the Government on their work during our Presidency. Although the debates in December on the 1982 budget ended unhappily, as my hon. Friend said, a certain positive good resulted. In substantial measure that was due to my hon. Friend's work.
    Under the 1975 amended treaty, which was ratified in 1977, the joint budgetary authority was set up consisting of the Council and the Parliament. Sooner or later they had to learn to work together. In the main, the years since then have shown the difficulties in achieving that desirable objective. In only one year was the budget agreed on time by the Parliament and the Council. I hesitate to say this, but it was the year in which I was the rapporteur for the Parliament. In every year since there has been disagreement and falling out. That cannot be good for the Community's future.
    My hon. Friend, when he was president of the budget council, saw the need for an agreed interpretation of treaty provisions. Every time that we came to an argument about what various sections meant, a clear decision on an agreed interpretation was fudged. I did not mind too much, as I reckoned that I could fudge as well as anybody, and more often than not the advantage lay with ourselves in Parliament, but things could not go on in that way indefinitely.
    In addition, there was not a proper conciliation procedure between the Council and the Parliament. Although I was hesitant in my view, my hon. Friend was right to persuade his colleagues in the Council to go to the Court to seek an official interpretation. That brought matters to a head, and agreement has now been reached between the Parliament and the Council. It was preferable to reach agreement than to go to the Court. The understanding must be honoured. It is much easier to take a flexible approach provided that it is agreed by both parties. In a sense, it is the old argument of a written constitution or one such as we enjoy.
    A joint declaration was made by the parties on 30 June. It may prove to be an historic declaration. It was made by the European Parliament, the Council and the Commission on measures to improve the budgetary procedure.

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    My hon. Friend raised the question of classification, which has been an annual problem. If paragraph I of the declaration can make it absolutely clear to all into which classification—non-obligatory or obligatory—items fall, it will take out a tremendous amount of annual argument.
    The arrangements under paragraph II are wise. They seek to sort out how new items of expenditure can be classified as quickly as possible so that the general movement of the budget procedure is not held up and serious differences do not remain between the parties.
    Paragraph III refers to "interinstitutional collaboration" in the context of the budgetary procedure. In the past, inadequate provision was made for the way in which the Parliament and the Council got together to thrash out differences of opinion. As far as it can, it makes sure that proper time is given not only for discussion between the two parties but for deliberation afterwards, so that their views can be taken into account before the final draft budget is put forward by the Council.
    Again, for example, in regard to the new rate of increase in non-compulsory expenditure, systems are laid down whereby meetings of the heads of institutions can be arranged to sort out differences as and when they arise, rather that to leave then to the end. On three or four occasions other matters are taken up in the document.
    I wish specifically to refer to fixing the limits of expenditure, the existences of lines in a budget and whether they provide a legal basis for expenditure. These matters are fundamental to the Parliament. I often disagreed with many of my hon. Friends in the European Parliament. Many felt that because there was a line in the budget, it was automatically an authority for the Commission to spend the money. That must be wrong. If money can be spent only by the creation of a regulation, whatever budgetary powers the Parliament may be given and may rightly exercise in accordance with the treaty can be nullified if the Council refuses to adopt a regulation.
    A compromise is built into the declaration—an acceptance of the Parliament's rights to a certain extent by the Council and an acceptance of the Council's point of view by the Parliament. The compromise shows that it is possible for true conciliation to take place between the two parties and it augurs well for the future.
    The last paragraph of the declaration deals with the financial regulation and the need for its early revision. How long it will be before that revision takes place? In December 1977, when I finally got through the revised financial regulation, I built into it a specific provision that the financial regulation should be reviewed every three years. I did that deliberately as I knew that with direct elections and, frankly, the fact that, thorough though my own review had been, it was impossible to pick up everything in one review, it would be necessary for the document to be changed from time to time. Therefore, I wished to force those concerned to reconsider it every three years. Five years have now passed and the document is still floating around the corridors of power waiting for people to make up their minds. When are they likely to do that and when is this likely to be adopted?
    On the European budget itself, convention has it—
    Mr. Spearing: Ah!
    Sir Michael Shaw: I know that the hon. Gentleman does not agree with convention, but convention has it that
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    the Council and the Parliament do not interfere in each other's budget. If such a convention is to last, each institution must appreciate the absolute necessity of showing that it is conducting its affairs with the utmost responsibility and internal discipline.
    It seems clear that mistakes have occurred, particularly in relation to the Parliament. The expansion through direct elections and the heavy additional costs involved have not been reflected in an appropriate updating of its financial system and the staff who run it. The inadequacies disclosed by the Court of Auditors show how right the Parliament itself and many others, particularly the British members, were to insist that the Court of Auditors be set up.
    Mr. Douglas Jay: As the hon. Gentleman is such an expert on the subject, can he tell us how soon that report will be published so that we can read it?
    Sir Michael Shaw: I cannot tell the right hon. Gentleman that, although rumours reach one as to what is in it. On the evidence so far published—the reaction of the Parliament—it is clear that there has been fairly far-reaching criticism. The most important aspect of that reaction has been that the President, Mr. Dankert, has taken this problem upon himself, and I praise him for that. That is vital, because the future respectability and influence of the European Parliament depend on its getting this right. Therefore, it is absolutely right that Mr. Dankert and whatever committee he cares to set up should take that responsibility. Having done that, he should then implement any recommendations made by whatever consultants he calls in to advise him on these matters. Above all, he must put at the head of the financial department of the Parliament a higher grade of official than it has had so far, because things have not improved since the old days.
    The amount of money passing through the hands of Parliament has increased enormously with all the expense of moving to different places and the greatly increased number of people involved. Unless credibility is built into the whole parliamentary system and the public are assured that matters have been put right and will be kept right, no one will take the European Parliament seriously. Having said that, I believe that Mr. Dankert has done the right thing, and I wish him good luck in what he has undertaken.
    Finally, too often there has been disagreement between the Parliament and the Council on the budget. Changes have been made this year which I believe will help to bring agreement at the end of the discussions. The declaration is an important move in that direction. As a result of those changes and agreements, and perhaps because a British member of the European Parliament is rapporteur for the 1983 European budget, I hope that once again we shall be able to reach agreement at the proper time—in December this year.
    10.59 am
    Mr. Ron Leighton: The Community budget is an extraordinary arrangement. Its effects are wholly perverse and it is completely unsuitable for Great Britain. Its grotesque system of revenue and bizarre use of expenditure are consistently and inevitably anti-British in effect. It is like no other budget I have ever heard of. Indeed, I find it difficult to regard it as a budget

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    at all. I believe that these matters were originally described as the financial regulations, which is a far better description.
    Other international bodies, such as the United Nations, are financed on the basis of ability to pay. Countries contribute according to their size and wealth so that there is some equity in the arrangements. In the financial arrangements of the EEC, however, there seems to be no equity or fairness and no reason or logic at all. It is a club of 10, but only two members pay any contributions and the others are beneficiaries. That seems a very strange way to run a club. Some of the richest nations in the world are net beneficiaries under this arrangement. How on earth can that be justified?
    When we use the word "budget", we think of our national budgets, which tend to be redistributive. We have progressive taxation. The rich are supposed to contribute according to their ability to pay and expenditure is based on some criteria of need. For example, some areas of the United Kingdom are richer than others and I am sure that a study of these matters would show that there are transfer payments between classes and between areas whereby the rich pay in more and the least well-off get more out.
    In the EEC, Britain is seventh in the prosperity league. We are told that we are one of the poorer Common Market countries. So surely, in any sensible, fair, logical or reasonable budget, the United Kingdom would be a substantial net beneficiary. Why should Britain pay any net contributions at all? What is the justification? Where is the logic or reasoning? So crazy and lunatic is the system that we became the largest net contributor. In my opinion, that was quite monstrous. Now, I believe that we are the second largest contributor.
    The Prime Minister said in her speech to the European Assembly on 16 December 1981:
    "The problem arose when one of the Member States, my own country, found itself bearing an unacceptable and increasing budgetary burden as a result of the combined effect of Community policies."
    The words she used were
    "the combined effect of Community policies".
    She was saying that Community policies together had had this effect on Britain.
    How did this situation arise? Basically, there are two reasons. There is the bizarre set of taxes to finance the budget. There are levies on food imports. There are duties on manufactured imports. Then there is a percentage of value added tax. Why was that mix of taxes dreamed up? Presumably, it was to influence the development of the European Community. Presumably, it was to encourage a diversion of trade. Presumably, it was to encourage self-sufficiency in agriculture—to have autarchy in agriculture; to have a siege economy in agriculture within the Community. Presumably, it was to encourage trade between member States and to penalise trade with the outside world. It is somehow thought to be reprehensible and non-communautaire to buy food from outside the Common Market or to import goods from the rest of the world. That seems to be the reasoning behind those taxes.
    If countries have the temerity, or are so delinquent or remiss, as to import food from outside, they will be fined—penalised. They will have to pay a levy or a tax for the sin of importing food from outside the Community, and of course, that money does not go to our Exchequer, but straight to Brussels.
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    Who does the policy hit? It hits us. As my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) said, we are the largest food importer in the world. So the policy directly harms this country. I assume that that was the purpose of the taxes.
    Britain, being a mercantile, maritime world trading nation, has found that this EEC straitjacket does not fit us. We still do most of our trade outside the Common Market. It is quite remarkable how the pattern of trade has not changed.
    Mr. John H. Osborn: Forty-three per cent. of our exports go to the Common Market, so what the hon. Gentleman is saying does not make sense.
    Mr. Leighton: What the hon. Gentleman says underlines what I am saying. If 43 per cent. of our trade—that is, under 50 per cent., if my mathematics are correct—goes to the EEC, it means that 60 per cent. goes to the outside world. I thought that that was what I was saying. Even after a decade in the Common Market, most of our trade is with the rest of the world. We are an internationalist country; we trade on a world-wide basis.
    I understand the hon. Member for Sheffield, Hallam (Mr. Osborn) getting a little confused, because sometimes the propagandists juggle with the figures. There is much statistical trickery. Often these professional propagandists do not compare like with like. They compare the EEC Six with the EEC Ten, and then they lump in Lomé, aggregate that, and then come up with a curious figure. So it is remarkable that the pattern of our trade has hardly changed since we joined the Common Market. Most of our trade, as we have all agreed this morning, is outside the Common Market. We are therefore fined and taxed because we trade in that way. That is why we pay more. It is completely inequitable and unfair, and, moreover, it is anti-British.
    Mr. Hugh Dykes rose—
    Mr. Leighton: No, I shall not give way. The hon. Member for Harrow, East (Mr. Dykes) always refuses to give way, so I hope that he will excuse me if, on this occasion, I continue.
    In my view, the mischief is compounded when we turn the penny over and look at what the budget is spent on. It is spent overwhelmingly on the common agriculture policy, financing food surpluses. It so happens that we do not have any—or rarely have any—food surpluses. So although we pay more, when we look at the purpose of the expenditure—financing food surpluses—we do not benefit. We pay more than anyone else and we draw out the least.
    We are told by "Europeans" that that is our fault. In other words, we should change and adapt ourselves, stop being internationalists, and stop importing food and goods from the rest of the world. We should seek to break off our relations with the rest of the world and deal only with the Continent. They are saying that if only we would be good Europeans, we would not have to pay as much. They are asking us to change our nature and history, and basically stop being British—to become, perhaps, an imitation of France.
    There is an irony here. If the policy were to succeed, and if infra-Community trade were increased, Community revenue would diminish to the extent that it increased, because if we no longer traded internationally there would

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    be no levies or taxes. If we traded only with one another, the revenue would diminish, and the process would be self-defeating.
    I quote an article entitled:
    "French doubts about Britain's ability to adjust to Community"
    It appeared in The Times, dated 22 January 1980 and said that
    "When Sir Ian Gilmour, the Lord Privy Seal, meets French Ministers in Paris tomorrow to sound out France's views on what Britain is seeking to obtain from the EEC at the European summit"—
    he would find—
    "continuing doubt, which the Dublin summit"—
    this was after the Dublin summit—
    "has done nothing to dispel, as to whether, in the words of a senior official, the EEC corset is not a little too tight for the British Prime Minister and whether a somewhat looser garment would not be more suitable … The fundamental issue is whether British consumer habits, British trade and British industry, based on continued dependence on third countries, which in turn accounts for the huge size of the British contribution, are not incompatible with an economic community as it is organised at present."
    Those were the worries of the senior officials of the Community and that is what the then Lord Privy Seal was told at that time.
    The Continentals want us to change and to become like them. The British want the Community to change. We continually talk of reform. Everyone said that we must get inside the Community and reform it. We have tried to do that for 10 years, but without success. Indeed, I do not see why the Continentals should change. It is their Community and it was established by them without us. Why should we be so arrogant as to think that we ought to change what they are doing, so that it suits us? Despite all the endless talk of reform, restructuring the budget and so on, we must face the fact that the Community has not changed and will not change. It does not suit us.
    Our budget problem has not been solved. There is a temporary, patched-up, bodged-up, ad hoc arrangement and the mandate of 30 May 1980 has come to nothing. The Prime Minister said in her speech to the European Assembly:
    "The Community agreed, on 30 May 1980, that the problem should be resolved … 'By means of structural changes'"—
    but here comes the interesting bit—
    "without infringing basic Community principles.'"
    How can that be done without infringing basic Community principles?
    We constantly hear that the CAP is to be reformed. The Foreign Secretary told the European Assembly last year, that the CAP was
    "an expensive and wasteful anomaly that must be corrected"—
    but, again, there was the qualification—
    "but not so as to undermine the principles of the CAP".
    How can we reform something without changing it? How much longer must we endure a budget that is dominated by one sector—agriculture—and is clearly detrimental to one nation—Britain?
    Is there a solution? We could scrap the taxes that form the budget and go over to a system of paying a percentage of GDP. Another approach that would find favour in some quarters would be to extend the budget and to make it up to 400 per cent. bigger. We would spend as much as we do now on agriculture and hand over even more so that our
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    industrial and social policies are also run from Brussels. I do not believe that that is on. Only a few slightly fanatical Tory Members—a tiny minority—would wish to follow that course.
    Mr. Spearing: While only a tiny minority in the Conservative Party wish to follow that course, it is the expressed policy of the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) and, presumably, of Alliance Members. That is their complete policy, but they try to hide it from the British public.
    Mr. Leighton: My hon. Friend is correct. It was only in the interests of brevity that I cited the Prime Minister rather than the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) who has not graced our debate. The right hon. Gentleman made a valedictory speech in which he set out the alternatives and explained clearly that the course that I have outlined was favoured by him and presumably, the SDP. That is one of the more persuasive reasons why no one should support the SDP.
    The most sensible solution would be to end the common financing of agriculture and the indefensible CAP and to return responsibility for agriculture to the member States. If the French or anyone else want to subsidise their less efficient farmers and to give them a good standard of living by charging high prices to the consumer, let them do so—but not at the expense of the British taxpayer.
    We should abolish the CAP. Why is it so important? I have never understood how the security and prosperity of Western Europe can depend on something as lunatic as the CAP.
    I have no confidence in attempts to reform the CAP. The Conservative manifesto for the last general election made the clear commitment that prices of goods in structural surplus would not be increased. In real terms, as inflation marched on, as it has under this Government, prices would come down, the laws of supply and demand would work and we would eliminate the structural surpluses That promise has been cynically broken under threats from the Common Market and we have just had another huge increase in CAP prices, which entrenches the policy.
    The only way out for us is to pull out of the CAP, to say that it does not suit us and will only cause endless arguments between us and the EEC, and to refuse to pay more than our receipts. It was the announced policy of the Prime Minister that we should break even. If we cannot get international agreement we shall have to take unilateral action.
    We should stop writing the cheques. We should intercept "our money"—it is not legally our money—en route to Brussels as a means of putting pressure on the EEC institutions. We were told that the way to exert pressure was to refuse to agree to the farm price settlement, but our veto was overridden. We have another card that could be played; we could refuse to pay the money.
    For the long term, I support the Labour Party policy, which had a five-sixths majority at our annual conference. A central point of our next election manifesto should be that we should agree, without recriminations and in an atmosphere of friendship and amity, to Britain's withdrawal from the EEC, which does not suit us and only causes trouble between us and our Continental friends.

  Royal Assent
  Mr. Deputy Speaker (Mr. Ernest Armstrong): I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts and measures:

  1. Aviation Security Act 1982

  2. Merchant Shipping (Liner Conferences) Act 1982

  3. Northern Ireland Act 1982

  4. Tees and Hartlepool Port Authority Act 1982

  5. Lloyd's Act 1982

  6. Cumbria Act 1982

  1. Pastoral (Amendment) Measure 1982

  2. Clergy Pensions (Amendment) Measure 1982

  European Communities Budget
  Question again proposed.
  11.20 am
  Mrs. Sheila Faith: I should like to apologise for the fact that I may have to leave before the end of the debate, which means I shall be unable to hear the reply of my hon. Friend.
  On all sides, there is some disappointment with the budget. We shall still be contributing £400 million. A long-term solution remains to be reached. I cannot, however, agree with the hon. Member for Newham, North-East (Mr. Leighton) that the budget is anti-British. It has to be remembered that we were late entrants to the Community. We knew that the farm price arrangements would not be to our advantage and that, as food importers, we would pay a disproportionate amount into Community funds.
  The Labour Party is committed to withdraw from the Community. This is because the Opposition have shown no ability to improve our situation. During the period of office of the Labour Government, in spite of renegotiation, our contribution to the Community increased every year from £31 million in 1973 to £947 million in 1979.
  The right hon. Member for Stepney and Poplar (Mr. Shore) talks of our failure to renegotiate. The Opposition's failure was monumental. On the other hand, almost immediately after taking office, the Prime Minister, showing her usual tenacity and skill, achieved beneficial short-term changes. It is, perhaps, understandable that the Labour Party should be so lacking in confidence in its own ability to negotiate that it has decided to withdraw from the Community in the improbable event that it wins the next general election. It is even more astonishing that elements in the Conservative Party should be so bogged down with food surpluses that they are unable to see the opportunities that would be lost and the dangers that we would face if we did not participate.
  The Labour Party looks to the Community as a scapegoat for our lack of competitiveness and productivity. It has not the will to tackle the basic problems of our economy and would be happy to see us deteriorate to the standards of eastern European countries. These countries are the natural allies of those who are far to the left of other members of the EEC. Rather than listen to the Labour Party, I shall listen to the industrialists in my constituency.
  I am privileged to represent a constituency where there is diversification. Most industrial sectors are represented, either in my own area or in the neighbouring towns of Burton and Derby. On my visits to factories, I hear different opinions on various matters. Those firms that are importers of commodities say that they would like to see a high pound. Those firms that are exporters say that would like to see a lowering of exchange rates. Without exception, all have stressed to me the importance of Britain staying within the EEC and taking advantage of a market of a quarter of a billion people.
  Our exports to Europe have increased much faster than our exports to the rest of the world. They have grown by 28 per cent. as against 19 per cent. to other countries. These figures cannot be disputed even by the hon. Member for Newham, North-East. If we left the EEC, 2·5 million jobs would be lost.
  Mr. Straw: Will the hon. Lady say on what basis she calculates that 2·5 million jobs will be lost? How does this

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  square with the assertion of the Minister of State, Foreign and Commonwealth Office, on Wednesday that only some thousands of jobs would be at risk?
  Mrs. Faith: I believe that 2·5 million is a conservative estimate. It is an opinion held by many industrialists.
  In the northern part of my constituency there is a strong textile tradition. This industry benefits from the multifibre arrangement, which gives better protection than any agreement that we could negotiate separately, and with less retaliation. United Kingdom employment training schemes benefit from the European social fund, which the Commission proposes to expand. This money has helped to retrain unemployed textile workers in new skills. It is gratifying that some transfer of resources from agriculture to the regional development and social funds has occurred. It will be most beneficial to this country. While agricultural spending is to increase by 2 per cent. the social fund will increase by 26 per cent. and the regional development fund by 22 per cent. Agricultural spending has fallen from 80 per cent. of the budget in 1978 to 64 per cent. in 1981.
  Agriculture is also a large industry, as large as any other, in my constituency. Dairy farming is predominant. My farmers complain that their incomes have fallen by 50 per cent. over the past five years. They have expressed satisfaction over a rise in farm prices of over 10 per cent. with no accompanying revaluation of the green pound. The effect on the retail price of food will not be great. It will amount to perhaps 1¼ per cent. to 1½ per cent. The effect on the overall retail price index will be of the order of a quarter of 1 per cent. My farmers are also pleased that the co-responsibility levy has been reduced, and that the proposed change to a higher levy on farmers with large herds has been dropped. This would have discriminated between farmers in this country. They welcome the fact that school milk subsidies have been increased to 112 per cent., so that local authorities will be encouraged to take advantage of cheaper school milk.
  Mr. Leighton: Will the hon. Lady explain why the farmers in her constituency are happy to pay a co-responsibility levy on milk, which, I understand, is intended to deal with a milk surplus, when we produce no surplus in this country? Why are farmers being taxed?
  Mrs. Faith: I think that they are happy that the co-responsibility levy has not been increased but has been reduced. They appreciate that this levy helps to promote plans for the sale of milk and milk products.
  No one can ignore the fact that food shortages will become a major problem as the population in the developing world increases. There can be no doubt that, at a time of grave world shortages, it is imperative that we should be self-sufficient in food. Since joining the EEC, Britain has become more self-sufficient in food and has saved imports of £850 million. Although the CAP may not be the best way of supporting agriculture, it must be borne in mind that there is no longer any easy method of securing cheap and plentiful supplies of food. It is estimated that national Government support to replace the CAP would cost £2 billion.
  It was unfortunate that a decision on food prices should have been forced through by the over-ruling of the Luxembourg convention. The link between farm prices
  680
  and budget contributions is surely realistic, because of the direct effect of one upon the other. Although it may not be possible for us to use the convention again in quite the same way, we must continue to support its use. The right of this veto was an important point that was put to the British people during the referendum campaign in 1975. I am optimistic that we shall have the support of Greece and Denmark on the matter. The veto was also an important condition of their entry to the Market.
  While some would say that the progress of the Community over important budgetary matters has been painfully slow, frustrating and difficult, it is a measure of the basic strength of the EEC that present day disputes are over such matters as fish, lamb, turkeys and farm prices. It is unthinkable today that any European country would consider taking up arms one against another. This would have seemed impossible 40 years ago. For this situation, we must thank the EEC.
  As the western States of America become more powerful, our interests do not always coincide with those of the United States. As America's most loyal ally, our voice is especially important in Europe. Because of our geographical position, it is ridiculous to think that we could manage without European co-operation. These particular budget negotiations have been difficult and frustrating but we must continue our attempt to obtain the best possible arrangements in the future. We cannot dispute the value of our membership.
  11.30 am
  Mr. Nigel Spearing: I am pleased to follow the speech by the hon. Member for Belper (Miss Faith) because it typified the illogicalities of those who propound our continued membership of the EEC. I shall attempt to describe some of the illogicalities.
  The hon. Lady said that we knew when we joined the EEC about the disadvantages that we would experience in respect of food. She might have heard about them, but I had not. The illogicality is clear. Those who claim that they knew of the disadvantages said that we could change the EEC when we joined. At the same time, they said that we would protect our own interests by the use of the veto. That same veto also protects other countries and prevents the changes that we have discussed in the past five years. The hon. Lady and her friends cannot have it both ways. A great publicity con took place at the time of our entry and some people—including the hon. Lady—continue to believe it.
  The hon. Lady also discussed employment and trade. She talked of a secure market of millions of people, but it does not exist. All that we have is a tariff-free potential in that market—and the manufacturers there have that potential in our market. Figures were published in written answers to the hon. Member for Southend, East (Mr. Taylor) last week. We are running a deficit in manufactured goods with the rest of the EEC of £3 billion a year. Before our entry we were in balance. How many jobs does that involve? We may begin to export oil, but producing oil does not usually create many jobs, while producing manufactured goods does.
  The hon. Lady said that 2·5 million jobs would be lost if this country were to leave the EEC, but she refused to provide a back-up calculation. She did what most hon. Members have learnt not to do—make a statement without any back-up knowledge or reason.
  Mr. Dykes: On a point of order, Mr. Deputy Speaker. Is not this debate about the preliminary draft budget?
  Mr. Deputy Speaker (Mr. Ernest Armstrong): The Chair decides when an hon. Member is out of order.
  Mr. Spearing: I am coming to the budget, but if the hon. Member for Belper was in order—and she must have been—surely it is in order for me to reply to her arguments.
  I challenge the hon. Member for Belper and the whole of the European movement. She must tell us how 2·5 million jobs are involved. The benefit to Britain in terms of increased manufactures here would at least be on the cards if we withdrew. The Minister of State said last week that hundreds of thousands of jobs would be at risk, but I contest that.
  Mr. Straw: The statement that we extracted from the Minister of State, Foreign and Commonwealth Office, last week was important. I thought that he said that hundreds of thousands of jobs would be lost if we were to leave the Common Market. He corrected me and said:
  "I did not say that jobs would be lost. I said that they would be put at risk … Moreover, I referred to thousands of jobs, not to hundreds of thousands."—[Official Report, 21 July 1982; Vol. 28, c. 423.]
  That is in contrast with the wild claims of people such as the hon. Member for Belper, the CBI and the Secretary of State for Industry. The Minister of State has reduced the adverse consequences of withdrawal to thousands of jobs possibly being at risk. It is important to have on the record that statement from an ardent pro-Marketeer.
  Mr. Spearing: I am grateful to my hon. Friend. I suggest that the hon. Member for Belper and others turn their attention to other policies that put jobs at risk. We heard the other day that building the replacement for a ship that went down in the Falklands, even if men worked free of charge, would cost more here than elsewhere. If the Prime Minister insists on competition, our industry will disappear altogether. We should consider that rather than the risks of withdrawal from the EEC.
  I am surprised at the absence of Members from the Liberal/SDP alliance. We are discussing paying no less than £2,700 million in public expenditure to a body which members of the alliance believe we should belong to and who believes that its remit and power should expand, and yet they have not put in an appearance this morning.
  Mr. Jay: Would it not be rather unreasonable to expect the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) to be here as early as 11.30 am?
  Mr. Spearing: Hon. Members will have their own views about the right hon. Member for Glasgow, Hillhead (Mr. Jenkins). If he arrives, two empty Benches are ready for him to occupy.
  The Financial Secretary to the Treasury has views about public expenditure. He is usually against it on principle. He goes about his Department seeing what money is being spent and stopping it. We are here to scrutinise enormous sums. The Minister could cast a beady eye on many areas of expenditure.
  Contrary to public belief, the Opposition do not believe in public expenditure for the sake of it, or in increased public expenditure as a principle. We support public expenditure that is beneficial. It is possible for public expenditure to be not only beneficial but downright harmful. Most EEC expenditure in Britain is directly
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  harmful, not only to our people, but to the interests of the United Kingdom.. I hope that the Financial Secretary will agree that EEC expenditure is against Britain's interests.
  As my hon. Friend the Member for Newham, North-East (Mr. Leighton) said, the budget is not a budget in the normal sense of the word. Unlike the Estimates that we shall discuss next week, is almost impossible to know what the changes will be upon the budget for 1983 for the simple reason that the majority of the charges will be for agricultural support.
  The crops to be supported in 1983 are not yet sown. The crops being planted elsewhere in the world are not there yet. The price of the crops in 1983 is not yet known. Because the bulk of the EEC budget involves the differential between the cost of growing crops in the EEC and the cost of growing crops in many other places, it is impossible to decide what amounts will have to be drawn upon for supporting the prices. The budget is not in any sense a projection of expenditure, although we may have a broad picture of the expected income.
  A mechanism enables the EEC to top up its income in any way that it likes, within limits. The percentage of VAT take can be increased so that it can top up its income from levies and customs duties to the amount required to be paid out for any one year.
  I hope that when the Financial Secretary replies he will tell us what the percentage of 1 per cent. will be for 1983. It is an important figure and it is not given in the memorandum. In its twenty-sixth report, the Select Committee on European Legislation, &c. said that that
  "would leave some 2,944 million ecus (about £1,643 million) within the one per cent. VAT ceiling for later adjustments to the Budget."
  We all know that at some stage that ceiling must be broken. I return to what was said in that respect in the debate on Wednesday. I hope that the Treasury Minister will be able to give some guidance on Government policy on this matter. In the debate on Wednesday 21 July, the hon. Member for Faversham (Mr. Moate) pressed the Minister of State, Foreign and Commonwealth Office about further plans for raising revenue. The Minister said:
  "we do not believe that at present any such proposals would be justified."
  The Minister cannot say that such proposals would be justified at present because we are still within the 1 per cent. limit. However, if world prices remain down, we shall soon be pressing on that limit. It is an open secret that one of the proposals made by the Commissioner to member States is that we should raise more revenue. If we cannot do that by increasing the 1 per cent. VAT, we should do it by putting some form of import tax on oil.
  I raised that point with the Minister for Trade during the debate on 21 July. He would not allow me to intervene when he ostensibly replied to a question that I did not ask. He said:
  "The hon. Member for Newham, South asked whether the Community could impose any fresh taxes that would be binding on Britain without the authority of the House. The answer is clearly 'No'. That would have to be by the unanimous decision of the Council of Ministers, ratified by the House. I hope that will reassure the hon. Gentleman."—[Official Report, 21 July 1982; Vol. 28, c. 421–80]
  That does not reassure me one little bit. The Commission and the Council have the power to raise increased taxes without coming to the House at all. There is nothing in the treaty that says that such a proposal must be ratified by the House. All that it requires is unanimity in the Council or even only a qualified majority. If it

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  required unanimity, it would mean that our Minister would have to give his assent. Could he use the veto? It is questionable. First, we know that the veto is not there any more. At least, it is not there if certain people so choose. Even if it is said that it is in Britain's national interest that we should not have the tax, no doubt somebody would say that it was in our interests. It could be said that, if oil coming into the EEC is taxed, our oil in the North Sea would be of greater value. It could be asked how that could be against our interests. If the Genscher-Colombo plan, requiring written reasons for using the veto, goes through, we shall be caught.
  I gave the Minister notice that I intended to raise this matter today. I hope that he will tell me in his reply that the Minister for Trade was wrong, that the House has no power to ratify the agreement for such a tax and, under the Treaty of Rome, never has done. Of course, there is an informal arrangement for the House to debate it, but that is quite different.
  My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) referred to the repayment that we now have for one year. May I draw the attention of the House to the nature of that repayment? Information was given to the House by the Treasury memorandum dated 25 March which kindly set out in a table the amounts for 1981–82. I notice that they are all going to public works—roads £242 million, water and sewerage £123 million, and telecommunications £290 million, a total of £903 million.
  As is made clear in the text, those projects are not chosen entirely by the Government. We are told that they are put forward by the United Kingdom for Community support. Many more projects were put forward than were passed. We see that they include the construction of a nuclear power station at Hartlepool, the A66 east-west link road and the A1 north of Newcastle in the Northern region.
  If we do not get money next year or the year after, what happenss to the atomic power station and those roads? Irrespective of their merits, do we stop building them, or will the Exchequer take responsibility for their completion? Does the Financial Secretary agree that the choice of these projects was not made by Her Majesty's Government or the House? The choice of where the money should go to is in the hands of Brussels. If the right hon. Member for Hillhead gets his way, he will pass even more money to Brussels and give it even more choice to decide how that money should be spent in Britain.
  Surprisingly, I want to disagree with my hon. Friend' the Member for Newham, North-East. Some hon. Members who come to these debates accuse other hon. Members of making the same sort of speech. They may come to the same conclusions, but I hope that they adduce different evidence. I want to introduce some new evidence today which may startle hon. Members. I hope that it will startle the hon. Member for Belper and her constituents.
  A large amount of money received by Britain from the EEC is disbursed by the Intervention Board for Agricultural Produce which produces excellent annual reports. The most recent report, Cmnd. 8589, tells us a great deal about what is going on. In 1979, it disbursed £353 million, but in 1981, the last financial year, it disbursed £630 million, all of which was paid by the EEC. Therefore, when my hon. Friend said that we did not have agricultural surpluses, and that therefore the EEC was not
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  paying us a great deal in that respect, he was a litle out of date. British agriculture is changing and is being disorted by the market prices imposed on us by the EEC.
  The figures in the report are startling. Last year, the United Kingdom Intervention Board for Agricultural Produce paid out no less than £155 million in support of cereals. There was an export surplus of 3 million tonnes from the United Kingdom. On 19 July I received a written answer which showed where those surplus tonnes went. East Germany and Poland received £1·5 million tonnes at a cost of £40 million. The right hon. Member for Brighton, Pavilion (Mr. Amery) would hop around at that news, as would the hon. Member for Southend, East. Indeed, I think that all Conservative Members would. I am sure that when the Financial Secretary looks at the grain growing areas of the Cotswolds and the areas that are being ploughed up which perhaps should not be, he would be astonished to know that there is a good chance of that grain ending up in East Germany at the taxpayers' expense.
  As my right hon. Friend the Member for Battersea, North (Mr. Jay) says, who knows but that it might be passed on elsewhere, perhaps to the Soviet Union. Therefore, Britain which is popularly supposed to be in grain deficit is now a big grain exporter. It may not be a great grain exporter in net terms because it has to import hard wheat from Canada for its bread, on which h pays levies. That was the situation in 1981. I wonder what will happen to the harvest of 1982.
  Mr. Jay: In addition, were not several hundred thousand tonnes of grain exported direct from Britain to the Soviet Union so that the total export of United Kingdom-produced grain to the Soviet and satellite countries was nearly 2 million tonnes?
  Mr. Spearing: I dare say that my right hon. Friend is correct. Certainly the total exported was 3 million tonnes and the cost of export subsidies to the intervention board was £90 million for cereals alone. However, there are other curious entries for cereals. There is production support for cereals that are manufactured into starch. It amounts to £9 million. Last Thursday, when talking about public expenditure, the Prime Minister had the effrontery to suggest that fewer teachers would mean more people being employed elsewhere. When she was challenged about efficiency, she said that they would just have to teach more effectively, or words to that effect. How many teachers would £9 million buy?
  If the Prime Minister and the Treasury want to reduce public expenditure, should they not consider some of these figures, instead of closing the Museum of Childhood in east London and doing nasty stupid things, paring and cutting out here, there and everywhere? The Government should have a look at these figures.
  It has been said that we do not have a surplus of milk. I am not so sure. Last year the intervention board spent £192 million on supporting milk in Britain, yet we still face the possibility of losing doorstep deliveries. There is something called the co-responsibility levy. I agree with the cut, but what a phrase that is. There is not much co-responsibility about it. It is one of those EEC newspeak words that mean the opposite of what they say.
  We support oilseeds to the extent of £57 million. There may be some justification for that, and I shall try to find out whether there is. However, that £57 million may well be spent to the detriment of others. For the first time we

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  have an extraordinary item before us. I refer to the perhaps modest sum of £108,000 which is to be spent on aid for grape must. Presumably that refers to the nascent British wine industry. Having got its cereal and butter mountains, Britain is now presumably having its own wine puddle, to which we are to contribute £108,000. The Treasury should have a look at that.
  Brussels repays the sums and people may say that as the aid goes to Britain it must be good. They say that it must be a good thing for the money to be spent on British agriculture. However, we all know that British agriculture is not in a healthy condition, despite the enormously increased income that it receives. Conservative Members should talk to their farmers about land and input costs that they are having to bear. The hon. Member for Belper should talk to them. They will claim that, although they are receiving enormous sums—for which we pay the cost by buying food—they are also having to pay out a great deal. Farm income is the difference between input costs and receipts. Farmers may complain most about the cost of rent and of interest. I have looked at the figures, but I shall not bore the House with the details. Broadly, in the 10 years since we joined the Common Market, land values have increased at least six times and perhaps more
  Mr. Jay: They have increased tenfold in some cases.
  Mr. Spearing: I shall be conservative and call it sixfold. I am also told that interest rates have greatly increased. I believe that they are roughly double what they were 10 years ago. My figures may not be exactly right, but they are not far wrong. If the cost of land has increased roughly sixfold and if interest rates have doubled, the cost of land as a factor in the production of agriculture may have increased twelvefold. I stand corrected; let the National Farmers Union give me the correct figure.
  Mr. Dykes: Get on with it.
  Mr. Spearing: The hon. Gentleman will have an opportunity to speak, but some of the factors that I have mentioned are not understood. The money that we receive from the EEC at our expense is going into the cost of land. People in the City buy land. As every farmer knows, they speculate on the value of land. The pattern of agriculture in Britain is being distorted, not only in terms of its husbandry and croppage, but in its pattern of ownership. The EEC adds to the imbalance of ownership.
  Mr. Dykes: That is not true.
  Mr. Spearing: If the hon. Gentleman wants to say that he should get up to intervene. I should be glad to give way to him on that point. I shall not cut short my remarks because of him. If he wants to challenge what I am saying about City capitalists, he should get up and do so. Every farmer in the country knows what is happening. The mechanism of the EEC has accelerated the pace. I do not say that it might not have happened anyway, but the EEC mechanisms acted as an accelerator.
  Due to certain allegations, the European Assembly has recently received some publicity. I shall not repeat those allegations because they are well known and involve travel costs and the use of balances held by officials. The money was possibly misused when it should have been left in the bank. I understand that there has been a leak from the audit board, which will produce a report in due course. The document is available only to Members of the Assembly. If I say anything inaccurate or unfair about the Assembly,
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  I shall happily give way to the hon. Member for Kensington (Sir B. Rhys Williams) if he wishes to intervene.
  Volume 2 deals with the European Assembly's expenditure. It contains some interesting information. I could not get a copy from the Vote Office and managed to get one only on loan—it seems that Sir Derek Rayner has also been in the Vote Office in the past few weeks. Chapter 37 covers grants to expenditure of political groups in the EEC. We call that short money. Under heading 3707 the sum is £2 million. Under heading 3706 about £1 million goes to other political activities, although we do not know what those activities are. Perhaps we shall discover in due course.
  Heading 3708 covers a contribution to the cost of preparations for the next European elections. About £3 million is involved. I am rounding up the figures and perhaps slightly underestimating them. Chapter 29 covers subsidies and financial contributions towards the cost of group visits, and there is about £1 million for that. Heading 2991 involves—I like these words—subsidies towards the costs of visits by "opinion multipliers" for the member States, and the cost is £200,000. However, those sums are modest compared with the sums involved in the main schedule at the front of the volume, which breaks down the broad costs. The hon. Member for Scarborough (Sir M. Shaw) was right: they are considerable.
  I shall summarise. In 1983, salaries and expenses of members will amount to about £20 million, of which travel and subsistence expenses account for about £7 million. The cost of staff will be £50 million and the cost of missions abroad £4 million. On the staff subheading, that adds up to about £75 million. Then there is the item relating to buildings and equipment, £25 million, and grants to certain institutions amounting to £7 million. Broadly, that is £130 million a year. Therefore, it would seem that for about 400 Members it works out, with backup cost and staff cost for Members, at a little over £250,000 per Member per year—an extraordinary figure.
  We know that the audit board is looking at some of the uses of the money, but the hon. Member for Scarborough mentioned that there is a convention that the Assembly does not question the expenditure of the Council and the Council does not question the expenditure of the Assembly. The House is obliged to him for drawing our attention to it. If it persists, how can anybody look properly at the Assembly audit figures, which he rightly says must be done?
  There is a limit to what we can do here. Perhaps the Scrutiny Committee or the Public Accounts Committee will be able to do something; I suggest that they should. But the Council of Ministers has a specific responsibility, because every year the Council has to agree a discharge certificate to the Court of Auditors. The only other body which can do that is the Assembly itself, so it will not be too worried. When the audit discharge certificate next comes before the Council of Ministers for consideration, will the Minister take particular care to see that it is not given the nod by the British Minister present unless and until we are satisfied concerning the audit of the EEC Assembly?
  Sir Michael Shaw: I do not want there to be any misunderstanding. There is, of course, full scrutiny by the Court of Auditors. That was not quite clear from the hon. Gentleman's remarks, although I think he understands it.

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  I wanted that to be absolutely clear on the record. A full audit takes place. That will be part of the report which, presumably, is made public, and it will be part of the general discussion.
  Mr. Spearing: I agree with the hon. Gentleman. The auditors' report comes out annually, but what happens then? Unfortunately, year after year in the past the auditors' report has been heavily qualified. An auditors' report of that sort in the City of London would cause a Department of Trade inquiry to be made. All that has happened so far is that the Treasury Minister or the Foreign Office Minister who sits in the Council does not do anything about it except to grant the discharge certificate, and once the discharge certificate has been granted that is it.
  The whole policy of the Government is based on controlling public expenditure, so I ask them to look at the matter and at all the other points I have mentioned. When it comes to looking at candle ends and doing very small nasty things, the present Administration are very good—or very bad from our point of view—but they take very little notice of what is happening to expenditure in the EEC. I suggest that the Government, in looking at public expenditure, should consider the profligate, counterproductive expenditure of the EEC, which is wide open to abuse. It is an expenditure which has been growing, is still growing, and has to be reduced and stopped. The only way we can do that is to cease to be a member of the EEC.
  12.4 pm
  Mr. Hugh Dykes: The hon. Member for Newham, South (Mr. Spearing) always tends to repeat the same points on these occasions. Today he strayed away from the immediate subject of the budget, although he made some interesting points in the second half of his rather lengthy speech. I hope that he will forgive me if I do not deal with some of those detailed points, because it would take too long and I know that several other hon. Members wish to speak in the debate.
  It was interesting that the Financial Secretary, at the end of his remarks, made a verbal exhortation to the House to approve the 1983 draft general budget and the supplementary budget, although the word "approve" is not in the motion, which is a "take note" motion. I welcome that verbal reinforcement, because I feel that in a fairly fundamental way the budget is making progress in the direction that we have wanted to see in recent years—towards a diminution in the agricultural spending ratio. Partly as a matter of reciprocity but also in its own right, it is beginning to produce for the first time considerable sums of money to be spent in desirable areas of industrial and economic regeneration in the weaker regions of the Community. It is doing so, alas, in part because of the weakness of our own economic system in the United Kingdom.
  Although funds such as the social fund, with its different purposes, and the regional fund are very small mechanisms, they are now beginning to be interesting and serious in terms of the deployment of money in future years. I hope that that process will continue.
  I am also glad that in relation to the United Kingdom the budget position is becoming reasonably satisfactory. I should like to enthuse once again on what the
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  Government have been able to achieve in that area. There is no long-term agreement yet, but, bearing in mind the complexities of the matters involved, it is remarkable that a very satisfactory refund configuration has been achieved as a result of very civilised, although tough negotiations in the past two years. The refunds for the current financial period will be extremely satisfactory.
  Like the hon. Member for Newham, South, I deplore the absence of Members of the Liberal/SDP alliance today. It is extraordinary that people who are supposed to take a close interest in the EEC are absent. I hope that we shall have a proper written explanation as soon as possible from the parties concerned for the convenience of the House so that we may know why the Members were not here. But the hon. Member should not feel too smug, because only four Labour Members have been present.
  It is interesting from a psychological point of view that we continually hear Labour Members talking about small amounts of money in some areas of the Community Buget, yet blandly, year in and year out, when the Labour Party was in office, Labour Members were quite calm about millions of pounds of deficits in the nationalised industries. Frequently they expressed the wish that those deficits should remain rather than be tackled by the Conservative Government who took over in 1975.
  It is striking to note the total amount of money spent by two successive Labour Governments from 1964 onwards on the wasteful and useless nationalisation of industries. It did immense damage to certain sectors, particularly to steel, involving billions of pounds at current prices, because prices more than doubled since those outlays. The Opposition thought that it was marvellous and wonderful and in the national interest to do those things, yet we are dealing here with a modest total Community budget, amounting to £12 billion between all the member States, including the very wealthy Federal German Republic, and the Opposition are deploring that expenditure as being evil and wicked.
  Perhaps we have common ground in the House in welcoming the fact that the agricultural ratio is falling, as my hon. Friend the Member for Be1per (Mrs. Faith) said, to about 65 per cent. this year. That is a notable achievement resulting from a common will in the Community to reduce the ratio from the traditional figure of about 80 per cent. I think that that process will continue, partly with the build-up of the rest of the Community budget and partly by exercising continued discipline in regard to expenditure. As the Financial Secretary rightly said, with great emphasis, the farm spending increases on this occasion were less than the rise in own resources.
  The hon. Member for Newham, South waxed lyrical about the apparent menace of British grain exports going to the German Democratic Republic and other Communist countries. I deplore that, but United States and Canadian grain is also going to the Eastern bloc and we have to ask the same question in that respect. When I was in Moscow in April, I noticed to my astonishment not that the bulk of the butter in the shops was Soviet butter—the Soviet Union cannot produce enough—or that it was EEC butter, which we all complain about when it is sent there as an unusable surplus; most of it was New Zealand butter. Yet the response of Labour Members was:
  "Poor New Zealand must sell some butter."

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  Why do Labour Members try to have it both ways? Why not condemn that if they condemn the sending of apparently unusable surpluses from the EEC to the Soviet Union?
  Mr. Spearing: I shall answer that point immediately. I have no objection to this country or any country sending grain to Russia, East Germany or Poland for a fair price related to the production costs and as long as it does not distort the agriculture of the country concerned. That is so with regard to Canada and New Zealand. However, in Great Britain there is a distortion of our agriculture and that is being done at enormous public expense and with subsidies. That is the difference.
  Mr. Dykes: I knew that it was a mistake to give way. The hon. Gentleman's contribution was as predictable as everything we have heard before.
  On the parameters of the Community budget, we can all agree that, unlike national budgets, it has the virtue of not having a built-in deficit. The receipts and payments should equal each other. That is so with the exception of the Ortoli facility and any outlays through the European Investment Bank, which are not part of the central budget. Therefore, there is no built-in deficit. I suppose that most hon. Members wish that to continue in future.
  Nevertheless, European enthusiasts such as I would say that since the European budget is a vital component of the cohesion, solidarity and future development of the European Community, surrounding the nation States, and, alas, the reality of the modern world is that national budgets seem to have deficits, even if we try to keep them under control, it might not be so shocking in future if the deficitary system in the European budget were to develop under proper discipline and control. However, the difficulty is that it is much harder to achieve discipline and control and correct auditing, as my hon. Friend the Member for Scarborough (Sir M. Shaw) said, in a communitarian system than in a national system. One has to bring together the habits and propensities of experts and accountants from different member States. We joined the Community later than its foundation. Therefore, we tend to have to accept the majority habits of auditors from other countries.
  However, that system might develop in future. I should be interested if the Financial Secretary would refer to this briefly. I refer to other sources of revenue. That area needs to be explored energetically by those with good will who, unlike the hon. Member for Newham, South, like the Community and being members of it, despite its faults, which are inevitable, as in any nation State.
  The alternative sources of revenue, which have been referred to in the debate, are the areas that appear to be, prima facie, the most interesting, partly because of the absence of any other brilliant ideas. The energy or oil import product based levy idea should be explored because, axiomatically and automatically, it would he of overnight benefit to this country, although it would be an extra charge on all the other member States and, I hope, eventual conclusion and recommendation of that area of study and research in the Commission and the financial section thereof is not imminent or looming because there is no sign that the 1 per cent. VAT ceiling will be attained in the near future. It is interesting how the ratio below 1 per cent. of about 0·85 per cent. appears to be steady at
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  the moment. I imagine that that is connected with the inflation of monetary receipts into the EEC budget more than any other factor.
  As a good European—I hope that that does not mean that I am not also a good patriot, as the two can go together—I would not be shocked or upset by the penetration of the 1 per cent. VAT ceiling as soon as may be. That would enlarge the aggregate source of revenue by definition. That would give us a chance, if we can hold down farm spending or allow it to increase less than the rise of own resources in future, as occured this year and last year, to develop a realistic and meaningful Community budget with desirable public spending.
  It is funny how the Labour Party hates Community public spending but loves national public spending. "Let us squeeze the taxpayer for national public spending but not for Community public spending": that is a strange dichotomy in the minds of members of the Labour Party.
  The country would benefit tremendously from the revival of the Northern region and the other outlying less developed regions and in Scotland where there is serious erosion of the economic base, alas, because of the severity of the recession.
  It is no good depending in future on national funds alone for those purposes as we shall have to have a much larger Community budget in future in order, in all practical terms, to get real convergence of economic and financial policy making, which has eluded us so far. It is not enough for us to rely on the will and determination of, unfortunately, a weak financial Council of Ministers. We must have the raw material, which is the money available, to build into a larger Community budget.
  The EEC budget is minuscule. It is a tiny proportion—1 per cent. or less—of the total gross domestic product, of the Community. Until that budget is significantly larger in future, allowing for the conventional year-on-year restraints on public spending and national budgetary objectives— I know that this is a difficult period when there are restraints and there is the need to reduce the rate of inflation—we shall not reach a realistic position. That might be anathema to the hon. Member for Newham, South because of his ideological obsession with the horrors of working with foreigners in the Community—
  Mr. Spearing: No.
  Mr. Dykes: —but it would be of great benefit to the hon. Gentleman's constituents, even in prosperous South-East London, to find that significant Community funds were beginning to flow towards us which would not go simply to the north of England and elsewhere. That would be the meaning and reality of a modern Community, of which we need not be ashamed or fearful and which can be built up and developed in future.
  I welcome this budget. It is a modest instrument in all comparative terms. I thank the Financial Secretary for what he has said and I look forward to his remarks when he replies. I hope that the Government will develop with confidence the need for a long-term refund arrangement, which will mean that we face an agreeable and satisfactory future of paying, on current figures, only £400 million to £500 million into the Community, which is a tiny price for desirable membership.
  12.18 pm
  Mr. John H. Osborn: Dealing with revenue, whether on the national, European or

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  regional scale, is almost as difficult as the problem facing a group of people who are running a company and who are trying to assess what is coming in by way of sales and the costs that have to be matched against those sales and whether they are running a deficit or surplus, a profit or a loss.
  I have attended a number of meetings at which works directors and others have been present. At those meetings there were charts, block diagrams, and the schematic and visual aids which can do much to convey the trends to those who are not in daily touch with the figures.
  I welcome the debate. Admittedly there are no charts, but I have heard hon. Members' points of view. Two Members of the European Parliament, my hon. Friends the Members for Cheadle (Mr. Normanton) and Kensington (Sir B. Rhys Williams) are present. My hon. Friends the Members for Harrow, East (Mr. Dykes) and for Scarborough (Sir M. Shaw) have also made contributions. I know from my period in the European Parliament—and we were all Members together—how much my hon. Friend the Member for Scarborough did as rapporteur to contribute towards framing the budget and what a tremendous responsibility that is on the rapporteur of the European Parliament.
  Three years after leaving the European Parliament, I must relate this debate to the pressures in my own region, and I wish to put forward that point of view. I also relate it to the fact that in the Assembly of the Council of Europe I shall be discussing not only the budget and costs of the Council of Europe but the problems of people living in Europe, relating their problems to those that are experienced in Britain.
  Obviously, the Prime Minister, the Foreign Secretary and the Financial Secretary have to face the blatant implications of the British opposition, wanting to withdraw as expressed by the right hon. Member for Stepney and Poplar (Mr. Shore) the terms put forward in today's debate or the one that we had last Wednesday. This is essentially a debate on the supplementary budget and the draft budget for 1983.
  To have had a presentation from the Commissioner responsible for this would have been of even more value, although I much value the presentation by the Financial Secretary because I know how much he has kept in touch with these matters. But Community expenditure is all-important. Mr. Tugendhat has been round the country to explain this to interested persons—sometimes the European Movement, perhaps sponsored by the local press, including the Sheffield Morning Telegraph—and meeting business men and others. Business men in areas such as my own perhaps have mixed feelings which are understandable, and I shall try to elaborate on them in the course of my speech.
  One of the difficulties in our society is perhaps the force of regionalism. Local loyalties are growing. This is true of Scotland, Wales and to an extent Northern Ireland. But it is also true in my area, Yorkshire, where regional pride is perhaps stronger than it was 10 or 20 years ago. There is also a degree of regional self-pity at a time of great difficulty in that area.
  The Community is made up of people with different languages, different cultures and different traditions. Therefore, the differences between regions are that much greater. But this also gives rise to rivalries and jealousies
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  if one group of people is doing better than another group within a country and across national boundaries. It must be accepted that social readjustment has to go on in Britain, which is dependent on between 33 and 36 per cent. of its gross national product being exported and with such a high percentage dependent on trade whether with the Community or elsewhere in the world.
  One factor which has been lost sight of, although my hon. Friend the Member for Harrow, East touched on it, is that the Community budget is less than 1 per cent. of the total EEC GDP and probably about 1·7 per cent. of the expenditure by all the member Governments. To listen to the hon. Member for Newham, South (Mr. Spearing), one might be forgiven for thinking that the Community budget by far dominated the funds involved in our own Budget. However, it is minuscule. Therefore, it must be kept in perspective, and I hope that that factor will be brought out in the debate.
  What has come out in this debate and the one last Wednesday is the Luxembourg compromise and the fact that Conservative Minsters in Luxembourg on three fronts—agricultural prices, the budget and, perhaps because we were preoccupied with them, the Falkland Islands—had to go through a very difficult period. I may say that in the Council of Europe I was one of the first to stress that.
  What is important is that, although Britain has had the remission—so that the total contribution is of the order of £400 million after the remission—our GDP per capita is the lowest in the Community other than that of Greece, Italy and Ireland. I have the latest statistics from the Library to demonstrate that. Therefore, when there is talk about Britain's contribution, it should be borne in mind that social changes have hit this country very much harder than any of us anticipated 10, let alone 20, years ago.
  I welcome the fact that the agricultural contributions of 10 years ago, which were about 70 to 75 per cent., are 62 per cent. at present and, according to the proposed figure, will be 64 per cent. and not more than 65 per cent. But I have to agree that for an industrial country to find that the Community spends so much on agriculture is a state of affairs that must be changed. All Governments have tried to change it in the past 10 years. I wish the Financial Secretary well, and I hope that the Commission will respond, let alone the Community, by taking the burden off Britain, bearing in mind especially that industrial pressures are very high at present.
  Within the House of Commons, let alone within the Conservative Party, with respect to those of my hon. Friends who are here at the moment, there is the attitude of those who come from the shires. My hon. Friend the Member for Belper (Mrs. Faith) represents a farming community. I cite an example which I have quoted before in the House. When I used to go to the races at Market Rasen in Lincolnshire, all the Rolls-Royces came from Sheffield, Nottingham, Derby and Leeds. Now they are the property of Lincolnshire farmers—and why not? Prosperity in the United Kingdom has moved from some of our industrial cities to agricultural areas because of self-sufficiency, and the production of food in a world with a rising propulation is such an important pressure on Britain and the Community.
  I want, therefore, to relate this debate, and my own contribution, to the problems of the industrial areas. In South Yorkshire, there is concern about the assisted status and about the fact that funds might not be going to

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  Sheffield and South Yorkshire, where I would wish to see them go. I raised this matter in the debate on industry last week. But I received an assurance from my hon. Friend the Minister of State for Industry, and I should like my hon. Friend the Financial Secretary to comment on it:
  "It is true that in general assisted area status gives easier access to European funds but we believe that European regional policy should work with the grain of national regional policy, not against it."
  We knew this five years ago in the European Parliament.
  "It would be counter-productive if our decision to concentrate regional aid in the areas of greatest need were undermined by the spreading of the funds we receive from Europe across the country. Nevertheless, in principle, there are possibilities, for instance in the non-quota section of the European Regional Development Fund, for aid to be given for specified sectors outside the Assisted Areas."
  In addition, my hon. Friend made reference to the fact that there are special arrangements for the social fund and EIB money.
  The European Coal and Steel Community's role was to help Belgium and France with the running down primarily of coal and then steel. There has been a tremendous impact on the British steel industry. This involves Commissioner Davignon. The industrial pressures on the city of Sheffield, with 12·5 per cent. unemployment when the national average is 12·4 per cent. and perhaps a bleak winter ahead, demand a greater expenditure from the regional and social funds. This involves unemployment payments from EEC funds and retraining. Perhaps in Brussels the Financial Secretary can look into whether that money is coming through quickly enough.
  I have already written to my right hon. Friends the Secretaries of State for Employment and for Industry expressing not so much complaints as concern from people who are dependent on these funds. This will be a serious problem for the Community. With 10·5 million people unemployed in the Community, more than 3·2 million in this country against 16 million in Western Europe, and perhaps 30 million in the OECD countries, there is need to make a close study of future trends.
  If I may digress for a moment, I listened to some hon. Members who had been on a recent IPU trip to Romania. They commented on the scarcity of petrol and the fact that farmers, mainly in State farms, could not afford to run harvesters, distribute grain and run tractors. One of the priorities that must be looked at over the next five years is the need to ensure that there is energy available for European industries and that the momentum of British and European agriculture continues. I hope very much that this will be borne in mind.
  When I was in the European Parliament I found—and those of my hon. Friends who are there now will no doubt support me in this—that the rural background to industry is so strong that perhaps the industrial pressures that Britain experiences are much greater than those in either France or Germany. I have tried to put that point across at the Council of Europe, and I hope that those of my hon. Friends who are MEPs will do the same with their German and French colleagues in the European Parliament.
  The Council of Europe is concerned about the level of unemployment and what action to take. It will relate the problems of the Community and Western Europe to those of the OECD countries. I hope that more thought will be given to the possibility of reducing the working week,
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  encouraging people to acquire skills, increasing opportunities for leisure by extra funding, and encouraging tertiary industries. I hope that the Community budget will reflect those aims.
  I was impressed by press articles relating to the compromise that was reached in May. In The Times of 26 May there is a passage to which I should like to draw the attention of the Financial Secretary. It says:
  "The right way for the Community to deal with this would be to come up with a system of financing which is fair to all the member countries. Its failure to do this has meant that the United Kingdom has been repeatedly cast in the role of complainant, demanding that the Community pay it a refund of a large pal of its budgetary contribution."
  On 1 July I learnt that there had been new ground rules to stop the annual squabble over who controls what in the European budget. That was mentioned in the previous debate. There are plans to diversify the sources of the budget, and that must be welcomed.
  I have read with interest Mr. Jackson's report to the committee on budgets of the European Parliament. I have received this report from Sir Henry Plumb. I hope that my hon. Friends will note some of the recommendations. Recommendation 3 states:
  "Reiterates its view that the central theme of the 1983 budget should be the fight against unemployment, making full use of all the appropriate instruments, in particular by means of a considerable increase in appropriations for the Social Fund and a significant increase in appropriations for the Regional Fund".
  That is what I was saying about Sheffield and other British industrial areas. I hope that my hon. Friends will concentrate on that recommendation. It is vital.
  The report also notes the evolution of proposals for research and development. There should be perhaps a higher level of Community expenditure rather than national expenditure on science and technology. That would make better use of our resources. I am sure that my hon. Friends will realise that that is as important now as it was five or 10 years ago. Perhaps the Financial Secretary would consider whether joint ventures on various projects would reduce overall expenditure and duplication of effort. I stress that point when dealing with research, development and industrial policy. Recommendation 20 of that report regrets
  "the proposed reduction in commitment appropriations for industrial policy".
  Will the Financial Secretary find out what the rapporteur meant by that?
  I return to two points that are close to my heart. The hon. Member for Newham, South spoke about levies on oil imported by the EEC. It was a point I made 10 years ago and to which I returned just after the Conservative Party was returned to power in 1979. A common energy policy is comparable to the common agricultural policy with implications in its financial sense as well as structure. I hope that Treasury Ministers and Ministers responsible for energy in the Community will look at that because it might balance some of President Reagan's anxiety about the trans-Siberian pipeline which has occupied Western minds for the past two or three weeks.
  I share the view of the House of Lords Select Committee that the full variety of energy sources should be harmonised. I do not know whether Britain can persuade the Community to use more of our North Sea oil and gas. I regret that the Labour Government were so possessive five or 10 years ago. My hon. Friend the Member for Cheadle knows how much our previous insularity is a cause for regret and the opposition that that

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  brought from German MEPs because this country would not work towards a proper commercial and trading relationship with gas and oil. I hope that the Community will work towards a European pipeline so that we might better share our resources. I hope that my hon. Friends on the Front Bench will press for that. I believe that that would be a proper expenditure of Community money, and that if the budget were increased to meet that type of problem—and included private finance—the Community could better work together to achieve its common interests. I should like my hon. Friends who are MEPs to know that I and my hon. Friends value their work in resolving European problems within the Community.
  12.37 pm
  Sir Brandon Rhys-Williams: When we hear speeches such as those of the right hon. Member for Stepney and Poplar (Mr. Shore), the hon. Member for Newham, South (Mr. Spearing) and other Labour Members on European matters, we must ask ourselves why they are persistently hostile to everything that flows from our membership of the European Community.
  The Treaty of Rome is a free enterprise manifesto. It is Western Europe's answer to the Communist world. Many Labour Members find it an uneasy treaty. They might prefer us to leave the treaty and might feel more at home in Comecon. But in the Western European democracies on the Continent many people of committed Communist persuasion and Socialists and Social Democrats see the overwhelming advantages of adherence to the Treaty of Rome. I hope that in due course the Labour Party will also come to terms with it. Almost all thoughtful people are convinced that if we withdrew from the treaty it would be disastrous for the country.
  In discussing the European budget, I should like to bring into perspective the figures in comparison with the British budget. In 1983 Great Britain is likely to be required to contribute £2,700 million gross to the European budget, but we must compare that with a tax base in the country of about £180,000 million. Our gross contribution equals about 1½ per cent. of the British tax base. I emphasise "gross", because a large proportion of the contribution comes back to us. In the coming year it seems likely that as a result of the special arrangements that our Community partners are agreeable to, the net British contribution will come down to about one-quarter of 1 per cent. of the British tax base. We do not want to pretend that that is not still a large figure, but it is important that the House should keep all the figures in perspective.
  If only hon. Members who devote so much ingenuity and intelligence to pursuing the details of the European Community budget would put the same amount of energy into pursuing the details of the British budget, which contains so many opportunities for saving public expenditure, they would do their constituents much more good. But they continue to hunt the European budget for tiny items where there has apparently been mismanagement or waste.
  As I said, we must not underestimate the importance of the figure if Britain is to make a net contribution to the European budget in 1983. However, what we should ask is not how large but how effective the contribution is. If Britain's money is put to effective use for the sake of the
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  Community as a whole, I do not believe that the British taxpayer would grudge it. But where my right hon. Friend the Prime Minister and the other Ministers who have taken up the cudgels are so right is that we cannot be satisfied that our net contribution is being put to effective use.
  That leads one immediately to a discussion of the CAP, which has been discussed by a number of hon. Members. It is an important preoccupation of the House. If we are to understand the attitude of our Community partners, we must appreciate that the CAP is not primarily an economic policy. It produces results contrary to strict agricultural economy, in particular the embarrassing surpluses, especially in dairy products. It is not defended by its enthusiasts mainly on the ground that it is a food supply policy to ensure that at any rate the population of Western Europe as the years go by will not be short of temperate-climate foodstuffs. But with the world population expanding at the rate of about 200,000 a day, it seems prudent in the long run to install a policy in the Western European democracies that is likely to continue to ensure that there are ample supplies of the temperate foodstuffs for our populations.
  The CAP is primarily a social policy that has been installed because of the drift off the land, particularly since the end of the war. Still today it is causing serious social problems in France, Italy, Germany and elswhere. We in Britain ruined our agriculture by free trade in the latter half of the nineteenth century. We caused appalling suffering on British farms. Large numbers of people were driven off the land. They mostly went abroad to America, Canada, New Zealand, Australia and so on.
  One hundred or more years later the painful readjustments that had to be made on the land have been forgotten, but on the Continent they have been happening in the past 20 years, although, happily, not on the same scale. People have not been going from France, Italy and Germany to other continents; they have drifted off the land into the towns. One has only to see the enormous social effort that has been put into building blocks of flats to house people who have come into the towns off the land to realise the strain that has been put on national finances by the dramatic change in the past 20 years in the structure of European agriculture.
  The future of agricultural prices and the population on the land matter to our partners in Europe in a way that members from this country can hardly understand because the agricultural element in our electorate tends to be very small and the adjustment still taking place on the Continent took place in this country long ago.
  One may therefore sympathise with the concern of our partners about the agricultural population. Some of them may occasionally be too keen in seeking advantage for their own electors to be entirely sincere—that is a feature of any democratic society—but I assure the House that for the most part their determination to defend the CAP is based on their insights into the situation of their own electors and they are not prepared to budge on this because they are convinced that support for agriculture on the scale provided by the Community must continue for reasons of humanity and social policy.
  Nevertheless, if we are to spend that amount of money on support for Community agriculture in transition, we must ask whether it is being spent effectively. I believe that it is not. The annual distribution of subsidies, which is all that is possible within the structure of the Community budget, does not tackle the fundamental problem, which

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  is the capital shortage on the poorer land with the marginal farms that are shedding population and causing the problems.
  The result is that because people do not have the resources to adapt the way in which they farm, they are forced to depend on the type of crop that gives the quickest return without the use of huge amounts of family capital. In other words, they go in for dairy products, which provide two crops per day, and they do not turn their land over to forestry, to take the other extreme, which provides only one crop in a lifetime and perhaps not even that.
  As a result, the Community economy produces embarrassing surpluses of dairy produce that we do not know how to prevent, while importing huge quantities of timber. Although at present this is outside the scope of the CAP, I suggest to the Government that it is one way in which we could successfully contribute to reform of the CAP and also recycle much of the money that we contribute to the budget and hope to get back from it to areas of Britain in need of support. Therefore, I hope that the CAP can be extended to forestry and that far more will be done to remedy the capital shortage on the land in the poorer areas of the Community, including those in this country.
  On the structure of the budget, we must ask how effective it is as an instrument of the collective will of the member States. In my opinion, there are two glaring deficiencies which reflect shortcomings in the Community itself. On current account, it is extremely tentative as well as being very small—less than 1 per cent. of the gross product of the Community. Worse than that, however, on capital account, the budget is barely in evidence at all. If it is impossible to make long-term plans, much of the money is bound to be wasted because it is long-term changes that are really needed in the structure of the European economy.
  Looking ahead to what can be discerned about the world economy in the late 1980s and 1990s, I must say in all seriousness that Western Europe is wrongly structured to face the competition from Asia, Latin America and elsewhere. We are not doing enough about this while we still can so that Western Europe may remain one of the richest areas of the world, depending on world trade in exporting manufactures, profits from services, and so on.
  Many people now express confidence that the next few months and years will bring a recovery of the economies of the Western countries with a new surge of investment in modern industries and so forth. There is a likelihood of that recovery', but will it be on the scale that is needed and will it achieve the changes that are required if Western Europe is to remain in front in the world's economic stakes?
  We are still following our own national economic policies, and our own prestige industries are being supported by national subsidies. We see subsidy policies for the public sector—and also the private sector industries—which should be reorganised, but which are not being reorganised on a Community basis, not just in this country but in virtually all member States. We see ourselves holding on to our frontiers. We still have customs delays and the form-filling which obstructs trade and prevents people taking advantage of the treaty that we have signed.
  What about the successes and failures of our attempts to adopt a Community posture on general economic management? Interest rates are still completely out of
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  kilter. There is no serious convergence on tax policy. Each member State has its own budgetary policy. Finance Ministers and central bankers all produce their own post-Keynesian brainwaves without any coherent policy between them. Tariffs are reintroduced and other obstacles to trade are discussed in an effort to protect the status quo. That is not the way to ensure that the economy that we pass on to our children will maintain the standard of living to which we are trying to accustom them.
  I come back to the budget. How will this little budget tackle the enormous problem? Is it large enough to be useful at all? I am rather doubtful about the "1 per cent. Europe". If we are to make a success of the Community and overcome the evident problems, "1 per cent. Europe" is unlikely to make rapid progress. I should not mind using the slogan "5 per cent. Europe". I do not mind being quoted on that, provided the quotation includes what I shall say next. Five per cent. Europe yes, but only when we have cleared away the nationalistic obstacles to the completion of the liberation of the internal market, and the creation of a united Community market for capital. On current and capital account, we have much further to go before we can begin to realise what was in the minds of the founding fathers when they drew up the treaty all those years ago. This budget, in my opinion, cannot give the lead to the restructuring of European industry, either by direct intervention or by the promotion of conditions in which free enterprise will make the most of the opportunities of the free, united, internal West European market.
  There is almost no reference anywhere in the Commission documents to the European currency system, the European monetary system, call it what we will. We must ensure that the European monetary system becomes a success and that it is changed in the ways that are necessary so that this country can join it. It is likely that some expense will fall on the budget if we tackle the reform of the European monetary system, as is urgently required. At the moment, it cannot cope with capital flows—certainly not on the scale of the London market—and it does not pro vide for orderly adjustment of parities.
  We read all too often of weekend conferences, with banner headlines heralding imminent changes. All too often those banner headlines in the newspapers are proved right. It is disturbing for trade when it cannot rely on the so-called fixed parities that are established in the European monetary system. Although I want Britain to join, I do not want us to join while the system is operating as unsatisfactorily as it is now. As London is the principal financial centre in the Community, we have a duty to propose ways and recommendations to our colleagues in the Community for organising the paper currencies so as to give the maximum confidence to trade and investment. We must admit that the post-Smithsonian experiment with national paper currencies has failed, and I personally hope that something will emerge to supersede the present chaos, in which Community member States—indeed, virtually all the member States of the International Monetary Fund—are trying to run their own paper currency systems.
  I do not want to go back to the gold standard, but to go forward to a benign measure of value and store of value, perhaps the energy standard or something of that sort. It will be some time before we get to that and in the meantime we must put some sort of shape on the currency chaos.

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  The budget is expressed in an artificial unit, which cannot be spent or stored, because it has to recognise the artificial character of the currency system. How can we make a success of our membership while this little budget is expressed in artificial terms and is so ineffectual in achieving what is urgently necessary?
  I should like to see the Community as a single purchasing power area, with, if necessary, national currencies that are maintained at true purchasing parity, so that traders can rely on price levels, profit margins and business trends in every part of the Community running in parallel, instead of being afflicted by currency changes that, in spite of the aspirations of the European monetary system, are not uniting the Community, but Balkanising it. No one can have faith in the reality of the paper currency structure that we have set up and with which we are trying to live.
  Even more important than using the budget to stabilise the paper currencies is the need to look ahead to the creation of a genuine Community market for capital. The achievement of the European Investment Bank is truly remarkable but the Commission papers before us contain only a trace element of the gradual emergence of a capital budget for the Community.
  In other words, the Community is still living in the Stone Age. All that we can do is to look ahead to the next crop and decide from one year to the next whether to plant it or eat it. I am sure that our forefathers used to worry over that problem. We are still worrying about it in relation to the Community budget. We cannot look ahead.
  The wonders of the European economy in the nineteenth century were achieved on the basis of ultra-long term plans. Disraeli borrowed the money to build the Suez canal on a 99-year loan. Where in the world could one borrow money today on that basis? Capitalism is dying out because people cannot see far enough into the future. We have joined a Community and signed a treaty that will enable us to put that right, but all that we are doing is quarrelling among ourselves.
  There may not be a change in the 1 per cent. ceiling on current account expenditure in the foreseeable future. I am prepared to be reconciled to that, partly because of the fact of German opposition, but also because of the opposition of the British Government, which is not misplaced. We are not sufficiently confident in the way that money is spent to be sure that if we went for 1½ or 2 per cent. Europe the money would be spent effectively.
  While we are thinking about the expansion of the current account in due course, let us instal a capital account that could enable the Community to get on with the jobs that must be done in the public and private sectors. Let us give all the encouragement that we can to the European Investment Bank, but let us also find ways of including in the budget systems that would allow the bank to enlarge its operations.
  I do not want to detain the House by going into that matter in more detail, but I hope that there will be occasions when we can consider ways in which the European Investment Bank could help to tackle the unemployment problem in Western Europe by expanding the scope of its activities.
  We all have a duty to press for the ending of the barriers against the movement of capital within the Community, which is damaging London, because we would gain so
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  much if we were members of a truly united European market for capital, and holds us all back and keeps us atrophied in a Stone Age budget that is able to look only a few months ahead.
  The solutions to the economic and social problems of western Europe are in our own hands. We must stop quarrelling among ourselves. We must learn from history. If we refuse to profit from the failures of western Europe in the 1930s, we shall be condemned to repeat those mistakes, and, ultimately, even to suffer the same sort of destiny experienced by Europe at the end of that disastrous decade. We cannot allow the Treaty of Rome to founder. Niggling complaints about the characteristics of the budget are not the right spirit in which Britain should approach its membership of the Community.
  1 pm
  Mr. Ian Lloyd: As always, my hon. Friend the Member for Kensington (Sir B. Rhys Williams) has made an interesting and perceptive speech. I am tempted to follow him down a number of roads. However, he has covered them so well that there is little need for me to do so. I agree profoundly with his analysis of the manner in which the attempt is made to re-erect and to re-create the barriers and the protective devices within our complex human system that we have tried to bring down, by one form of institution or another, and so prejudice much that is important in trade and economic affairs.
  There has been reference in this debate to the domination of agriculture in the budget. There is no doubt that agriculture still retains, through everything associated with the common agricultural policy, an extraordinarily dominating position in European affairs. Looking at community expenditure by sectors, one compares the 13,000 million units of account under the EACGF guarantee and the mere 596 million units of account, amounting to only 4 per cent. of the total or £300 million, spent on the sector that I wish to discuss.
  The budget concentrates on industries that might survive or continue in a different shape or form. The centre of the budget—the regional policy and the social policy—is concerned at the moment with the consequences of the structural readjustment of those industries or those economic sectors that are struggling to survive. They will become dramatically larger and more significant if the sectors that are yet to arrive covered by energy policy, research and investment, information and innovation, fail to arrive.
  There are some important lessons to be learnt and some questions that I should like to ask. The first arises out of energy research and development. A significant statement on page A/41 says that appropriations for commitment totalling 167 million units of account have been requested and that these are designed to
  "extend the energy budget into a substantial package offering a clear sign of the Commission's determination to seize its new energy options, as called for by Parliament."
  I follow energy matters closely. I have a good idea of what energy options are. I have been unable to discover anywhere in the document any statement of what Europe regards as its new energy options or to what energy options this sum of money will be directed. My eye was caught by the section on page A/43 dealing with demonstration projects. This states:

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  "Current programmes moreover should be extended to cover other areas, like wind energy, exploiting small heads of water and new original alternatives for oil"
  Does the Department of Energy know about and approve this programme? This is a matter that hon. Members should know more about. Appropriations for energy research show a large increase. It is interesting that the large increase is in direct contrast to the reduction in the comparable federal United States budget. It reflects an interesting contrast in philosophy on which the Secretary of State for Energy may wish to comment one day.
  On page A/44 of the document under the heading "Miscellaneous", it is stated that a large sum of 270,000 European units of account—about £135,000—is to be allocated to the Oxford Institute for Energy Studies
  "to open in Oxford in 1983 to promote research and studies into international energy problems."
  It is to be financed by OPEC, the Governments of western Europe with a contribution from the Commission. Its purpose is to
  "promote better understanding between oil-producing and oil-importing countries."
  The House will share the view that a better understanding between such important economic groups is desirable, but I wonder whether the creation of another international institute for energy is necessary. Dozens already exist all over the world. I think of the Ford and Miller institutes in America, and there must be many others in western Europe. What new contribution to thinking and analysis will be made by the new institute? I learn nothing about it from the document. It is the first time that I have heard of it and we should know more about it.
  Under the heading "Research, Science and Development", we are told that to carry out its task the Community must
  "contribute to the solution of major socio-economic problems such as"—
  and this caught my eye—
  "…achievement of increased agricultural capacity."
  That is an astonishing objective of science research and development at this time in the Community. Page A/50 of the same document states:
  "For agriculture, research projects specifically designed to reduce surpluses are planned."
  What is the Community doing? Is it indulging in research to increase agricultural capacity or to reduce surpluses? The House needs to know more about that.
  I endorse the general objectives under that heading because, as the document states:
  "The solution to these problems … relies on a high-level capacity for innovation. No single European country, however, has the human and financial resources to develop basic research and technology on a broad front covering all disciplines and all techniques."
  I endorse that conclusion. The document continues:
  "The absence of collective action at European level would curtail Europe's capacity in certain high-technology sectors."
  I endorse that. I compare it with two other issues that show the importance of an appropriate scale as well as relevance in research and development in the Community.
  In Committee the other day we heard that the Japanese are leading the world in the application of coal-fired electricity generation and that one of the reasons why the United States and western Europe is falling behind is that we are not capable or willing to innovate in the detail and on the scale of the Japanese. That is a mundane and conventional technology that we all understand.
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  Less mundane and more important is that last week there was a conference in London on the fifth generation computer. We were told that the Japanese Government are devoting resources on a prodigious scale to what they believe to be the most important technological innovation this century—the development of a computer that: will handle symbolic inference in the same way as they handle numerical data. If the Japanese get that right, they will lead the world in technology and its application. They will probably lead the United States and certainly western Europe. It is of the utmost importance that R and D resources are devoted to that.
  The next point that caught my attention was 'that biomolecular engineering is to be stepped up in 1983. That is probably the second most important of the new technologies that challenges the developed world. It is of the utmost importance that Western Europe should be a significant leader in that field.
  However, under that heading, we are told that there is to be a
  "rearrangement of the division of know-how and scientific potential between North and South."
  I do not know what that means or implies. I do not know how such a rearrangement could be carried out. We learn very little about it from the document and we should know more.
  I turn next to an item on page A/48 where it is said that
  "The aim of the new programme 'Basic technological research' is to give the European industry a technological base on which to become or remain competitive on the world market in the main sectors of industry".
  That is a vague and generalised statement. What is involved? How will the United Kingdom participate? How is it proposed that the United Kingdom should benefit?
  It concludes that
  "other measures to help in the industrial application of results must be envisaged".
  One immediately asks: What other measures? How are they to be applied in the United Kingdom?
  On page A/49 we again see a discussion on some important new concepts in the field of fundamental energy research. They are referred to, in the modern habit of acronyms, as "Super-Sara", "Lobi" and "PARR". That is the first time that have heard of those. We are told little about them. I should like to know whether the work of the Atomic Energy Authority will be duplicated. Will the judgment on Sizewell be affected? What are the implications of this for the whole energy scene in the United Kingdom? We have no answers.
  It is a significant decision that several projects
  "relating more specifically to fast reactors will have to be drastically reduced, if not abandoned."
  What lies behind the decision to abandon or reduce work on fast breeder reactors, especially in a context of continued French support for that work? Why has that been done and what is the thinking behind the Community's decision?
  I move forward to information and innovation policy on page A/50. Here we are told that there is to be
  "the development of advanced technologies and methodologies based on the new information technologies and the increased harmonization of European techniques and standards."
  As I implied earlier, that is crucial and I heartily support it.
  However, again I wish that we had been told a little more about what is implied by EUROTRA—yet another acronym for the new-generation European machine translation system—and by the extension of

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  "machine translation systems to other scientific and technical fields and to other language pairs".
  That is all very technical but it is of the utmost importance.
  Within the same sector of research and development we come, on the same page, to industrial and internal market policy. Here I noted a statement that I believe to be of great significance, especially in the light of what my hon. Friend the Member for Kensington said earlier. It says that:
  "To ensure the success of these measures the Commission must maintain and develop the internal market so that it can become a genuine European preference area for our industries."
  Does that mean that we in the United Kingdom have now, through the Commission and Parliament, committed ourselves to all that is involved in the European preference area? If that is so, it is the first time—I may be in some ignorance of these matters—that I have heard about it. There are considerable implications for our economy and I should like to know a little more about the Government's reaction.
  On page A/53 of the document we are told that the total Community expenditure on industrial development—which includes several regional and social components—is about 1,000 million units of account. Is that figure to be applied to the whole of Europe? I endorse what my hon. Friend the Member for Kensington has said. On a proper scale, it is about 10 per cent. of what the Federal Government of the United States of America are now spending on research and development of defence alone. Compared with what the Japanese spend the contribution to this immensely significant subject is minuscule.
  I looked for a general analysis from the Government on the European budget's significance. I looked at the three documents that were circulated. There was an interesting letter that told us very little. It commented on steel production monitoring, staff numbers, Community actions in the area of integrated operations and the social fund, but drew few conclusions. It even stated that the Commission had proposed the correction of various typographical errors. That is the absolute nadir of significance.
  On analysis, the document from the Treasury is nothing but a catalogue of what is already in the budget. There is no analysis, there are no conclusions and it tells us nothing. There is an even more bulky document from the Treasury, which is a comment on the European Council. It is described as the preliminary draft supplementary and amending budget. Again, it is virtually an abstract without comment. It is in no sense an analysis and it does not help the House to decide whether several thousand million units of account in general, and 500 million units of account on research and development are being spent in a way that is of national or European significance.
  A Committee in the other place argued that we needed to look at research and development differently. If ever the case has been made, it was made today by the way in which the document reached the House and by the way in which significant expenditure on science has been accepted virtually without comment. One important factor distinguishes us from France, Germany, Japan, the United States of America and Canada. Recently, France brought the Ministries of Trade and Industry under the umbrella of research. In both France and Germany there are Secretaries of State for Research, Industry and Training. Research is the first part of the title and the most
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  significant part of the Ministers' responsibilities is research and development. Apart from the Prime Minister, no one carries such responsibility in Britain.
  I have argued before, and argue again that it would not be right to ask the Prime Minister to attend the House today to comment, but some Minister should be here. However, there is no such person in the Government. Such responsibility is diffused throughout the governmental organisation and goes largely by default. It has been argued that a super tanker cannot change direction quickly and that someone standing in front of one will be run down because it takes the tanker five miles to change course. The largest supertanker is that of policy. In Europe, it is a disarticulated super tanker. It takes a long time to change course. The wheel is locked, the key is strongly guarded and the course is apparently decided by a committee. Even when the wheel is unlocked and someone is responsible for putting the wheel over, it takes about 10 years for the policy tanker to change course. The point that I came here to argue today, with specific reference to the European budget but with general reference to the handling of science, research and development in the United Kingdom, is that it is time that wheel was unlocked and that policy was put hard over. If we do not do so, not only the United Kingdom but Western Europe as a whole will fail signally to meet the challenges which have been described by my hon. Friend the Member for Kensington.
  1.20 pm
  Mr. Tom Normanton: I am particularly grateful to you, Mr. Deputy Speaker, for the fact that I have caught your eye at this stage in the debate, if for no better reason than that I follow contributions from hon. Friends who, in their own particular way, have adduced powerful arguments in support of their beliefs.
  I shall concentrate on a part of the Community budget which, as my hon. Friend the Member for Havant and Waterloo (Mr. Lloyd) has already said, represents a very small proportion of the whole, but is one which I believe to be vital to the future of Europe and to Britain's place in Europe. I am referring, of course, to that part of the budget which is concerned with research and development, with science and with technology. I shall not repeat the points that I would have made had they not been made already by my hon. Friend the Member for Havant and Waterloo and other hon. Members.
  In the 1982 budget, such expenditure represented a mere 1·8 per cent. of the whole. It is not surprising that, when faced with the problem of the common agricultural policy or with the politically extremely important point of the net return to the United Kingdom from that budget, expenditure on research seems relatively insignificant, yet for us in the United Kingdom it is of crucial importance.
  In the 1983 budget, the proposals for research would result in an increase in expenditure and would bring the total expenditure on research to about 2·3 per cent. of the whole. It is in the interests of the United Kingdom that that increase should be made and that our representatives in the negotiations in Brussels, the Financial Secretary in particular, should support the proposals contained in the draft budget.
  I had intended to make a particular contribution on the 1 per cent. issue, but my hon. Friend the Member for Kensington (Sir B. Rhys Williams) spelt out the argument in such crystal clear terms that I need only say that I endorse what he said, and the way in which he said it, 100

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  per cent. It is fundamentally wrong that such a high proportion of the Community budget should be devoted to agriculture and that expenditure on research and technological activities, which could be of far greater economic and social benefit to the Community as a whole, and to the United Kingdom within it, is kept at such a tiny proportion. It is in our interests that expenditure on research and development in the Community budget should be increased in absolute terms and also as a proportion of the total budget.
  It is interesting to see where the extra money that the Commission is proposing to spend in 1983 is intended to go in relation to research and development. The information is contained in the plans and proposals of the Commission which were presented to the Council of Ministers at the beginning of June, and which the Ministers broadly endorsed at the Council meeting of 30 June.
  The proposals relate to seven sectors of Community activity: first, promoting agricultural competitiveness; secondly, promoting industrial competitiveness; thirdly, improving the management of raw materials; fourthly, the management of energy resources; fifthly, aid to the developing countries; sixthly, improving living and working conditions as that is, in the context of social policy; and, lastly, stimulating the efficacy and cost effectiveness of the Community's research and development potential. It is on that point that I want to make my contribution to the debate.
  The Commission's proposals for the budget show how those goals are reflected in terms of where the Commission wants to spend extra money. As we should all know, for some time the Commission has had substantial programmes of research in areas such as raw materials, energy, environment, health and safety. However, the Community has not done enough to promote industrial effectiveness or research in the member States on help to the developing countries. Both those areas should obtain a supportive response from right hon. and hon. Members on both sides of the House.
  I shall concentrate on items concerned with the improvement of European industrial competitiveness. It is upon that that our existence as a nation depends. There is no soft option to which we can escape. In this country we have always taken great pride in our industrial research, and rightly so, yet despite that investment we have not been able to translate that research into industrial productivity and competitiveness. That is conspicuously so when set alongside the successes in that context of Japan and the United States.
  However, that is not particularly a British phenomenon. I do not think that it should be described as such. Regrettably, it is to be found almost everywhere in Europe to a lesser of greater extent. Even in Germany, where industry's performance has probably been—I think that it would be true to say almost certainly—the best in the Community, it is abundantly clear that the efforts in research are too dispersed and small.
  Where do we in Europe fall behind our major competitors? We are not nearly as good as our competitors in the transfer to industry of basic research that is done in universities. There is a whole area of research into which both the Japanese and the Americans put substantial effort, with Government and industry working in the closest cooperation. We have neglected to do that in Europe. That
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  is why we are paying the price in falling behind, amongst other things, in our lack of competitive capability in world trade.
  That is the area where universities are deemed by industry to be too theoretical and academic and industry is seen by the universities to be too practical and remote. That is an area in which the Community proposes to make a contribution in the budget year 1983. That area cries out for action at Community level because we need high quality work, such as that at the University of Manchester, in which I have a long-standing interest, combined with equally high quality work done in many other highly reputable universities throughout Europe, in close cooperation with industrial firms. We have a long way to go to catch up. It may take us 10 years to do so. If we do not start on the course that is proposed by the Commission, we shall fall further behind.
  I draw to the attention of, and ask the support of my hon. Friend the Minister for, in his discussions in Brussels, the items on budget lines 7730 and 7731. They deal with the esprit programme for which the Commission takes 11·5 million units of account for 1983 to launch a major programme of Community information technology research. My hon. Friend the Member for Havant and Waterloo touched on that aspect of technological development where if we fall further behind it will be a disaster for Western Europe and an enormous bonus to the Japanese penetration of our markets. I know that that must be to the liking of my hon. Friend the Minister for Industry and Information Technology, and I hope that he will give that proposal his fullest support during the Brussels discussions. Information technology is one of today's glamour industries. It is very much in the public eye.
  I turn to something that is more mundane and less glamorous and yet, to mere mortals connected with industry, of greater importance and relevance. I refer to budget line 7378—the proposal for expenditure on basic technological research. The Commission is working on a new programme, and it is asking for money to start such a programme in 1983.
  The aim of that research is to help existing European industry by stepping up precisely that area of basic technological research that lies between the university and industry. Much of that research has a wide application to several sectors of industry. The proposal is to work through contracts to be placed in member States within institutions such as universities and industrial organisations. United Kingdom interests in both those areas would and should be able to secure a high proportion of the contracts available. We have an undoubted expertise that needs to be developed and reinforced in the industrial applications of lasers, computer-aided design, computer-aided manufacture, the technology of fine particles and the depositions of thin films, and the technology of services. That is the point and purpose of the Commission's proposals.
  From those somewhat advanced and sophisticated sectors I turn to the more mundane sectors, one of which is the clothing industry, which I know well. The clothing industry is one of a number Of industries which, under the Commission's proposals, will benefit significantly from the implementation of the programmes referred to and listed in the 1983 budget. Without that approach, European basic industries and many others will succumb to the competition of low-cost producing countries. Developing collaboration with industry in the sectors

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  concerned will help them become more efficient and more aware of modern techniques and methods of manufacture, and our economy will be better able to resist the desperately dangerous persuasive arguments of those who seek protectionist measures. Who can know whether that research will be successful? However, I am certain that a start has to be made in that direction. By the end of next year, I am sure that we shall be able to judge better whether this sector of research and development and its application to industry should be reinforced.
  I add a few words in support of a few other items in the budget. There is article 720, for preparatory actions of particular interest to small and medium size enterprises. We in this country have expended a considerable amount of energy and national resources in this direction. But many of the problems facing the medium and small companies in Britain are reflected across Europe, and therefore there is every good reason for drawing on that experience and the problems and difficulties. This is one of the purposes of that budget line.
  Budget line 7377 for new work in the most important new industrial sectors of development—biotechnology—is surely an area in which Britain has a contribution to make. But Britain also has a considerable amount to learn.
  Then there is line 7379, for a new programme for those aspects of steel research, including the translation of research into practical applications, which so far have been covered within the steel research programmes under the coal and steel treaty but have proved inadequate. Here is an area in which we can as a Community make a positive contribution to this troubled industry.
  All these represent areas of new departure for the Commission and the Community, and I believe that they should be encouraged wholeheartedly.
  I refer briefly to the joint research centres of the Community, of which there are four. One of them, since it was formed nearly 30 years ago, has gone through somewhat traumatic political and research experiences. Not long ago, it was regarded as the great scientific white elephant of Europe. In the past three or four years enormous efforts have been made to bring this Community institution up to date and enable it to meet the challenges which it has to face in order to survive. In terms of technology, Europe must also accept that it will survive.
  As a member of the energy and research committee of the Parliament, I have been associated with this move for more than nine years. I can say that without question the centre is now one of the finest research organisations in Europe in certain specialist fields. Undoubtedly it is expensive, because it has to embrace 10 member States, to deal in seven different languages and to suffer the imposition of the difficulties of finding agreement on its programmes at Community level. But in those areas on which agreement has been found—and my hon. Friend the member for Havant and Waterloo referred to the Super-Sara—there is no doubt in my mind and in the minds of other hon. Members who are serving and have served in the European Parliament that a major step has been taken by the joint research centre with the sole purpose of making it better able to contribute to the advancement of technology. That area deserves our support.
  I repeat that I do not argue for a major expansion of the Community budget. We must ensure that it is more
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  effectively balanced and cost-effectively implemented. The research and development and the science and technology elements are a minuscule part of the whole. What is being done is good and should be expanded. I commend to the House support for what is happening in that sector and the related items in the 1983 budget.
  1.40 pm
  Mr. Jack Straw: This has been a useful debate on an important subject, but the difficulty that hon. Members have had in attending the debate proves that it was unfortunate that the Government chose to organise it on a Friday late in July.
  My hon. Friend the Member for Newham, South (Mr. Spearing) mentioned the total absence of the two most unanimously pro-market parties—the SDP and the Liberals. In a debate on the central issue of our membership of the Community their absence is extraordinary.
  The hon. Member for Belper (Mrs. Faith) mentioned potential job losses if the country elected a Labour Government, as I am sure that it will, and we withdrew from the EEC. She followed the path of Sir Roy Denman and others last year, plucking out of the air ludicrous and totally unsubstantiated claims about the likely consequences of withdrawal. Last July Sir Roy Denman claimed that unemployment would rise to at least 5 million or 6 million. The CBI claimed that businesses and jobs would be put in jeopardy. The Government have started to consider more carefully the possible consequences, as I pointed out to the hon. Lady.
  No one in the Government is more passionately in favour of membership than the Minister of State, Foreign Office, but the most that even he would claim is that thousands of jobs may be put at risk, and not that millions would be lost or hundreds of thousands put at risk. If that is the most that he can claim, we can rest assured that the reality is that no jobs would be at risk.
  If the Government wish to challenge that claim they must produce a basis for calculation. I have repeatedly asked the Government and the CBI to produce a systematic study of the effects of withdrawal. As long as they remain silent we must assume that there is no basis for those calculations.
  It has been said that the European budget is minuscule. Those who claim that 25 billion ECUs or £15 billion or £16 billion is minuscule should have produced the same argument a week ago when we were discussing the genuinely minuscule amount in terms of our national Budget of £60 million that should have been given back to the unemployed. On any basis, the EEC budget is substantial, as is our contribution. If the Government wish to put that contribution into commission for the Opposition to discuss how it could be allocated for the benefit of our constituents, we shall be happy to do that.
  Earlier this month, the Treasury and Civil Service Select Committee produced a valuable report on budgetary reform recommending major procedural changes in the means by which the House considers the Government's revenue-raising and public expenditure proposals, to ensure that they are more fully debated before final decisions are reached and firm positions taken up. The report proposed a much greater and genuine integration between revenue and spending decisions. The House will no doubt have the opportunity to debate that report later this year, but it is widely recognised that the present

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  procedures for parliamentary and Cabinet scrutiny of the United Kingdom domestic Budget and the PESC White Paper are inadequate and require urgent reform.
  The procedures for scrutiny of our domestic Budget, however, could be described as perfection itself when compared with those operating in relation to Common Market expenditure. The document before us is described as a "Preliminary Draft Budget", but to call it a budget at all is to do violence to the English language. It is in fact a preliminary draft bill in the sense of an invoice or account rendered and shortly falling due for expenditure decisions made elsewhere within the labyrinthine machinery of the EEC.
  The Treasury's own explanatory memorandum is remarkably candid on this point when it says that
  "the Community budget reflects the financial consequences of Community policies agreed or to be agreed, and discussion of the PDB in the Council of Ministers is not usually the occasion for detailed discussion of, or decisions on, new policies."
  In other words, we are presented today with a bill for decisions made elsewhere and above all for decisions made in the Council of Agriculture Ministers with the Finance Ministers merely being there to pick up the tab.
  While this debate gives the British Parliament no effective opportunity to control the Common Market budget—that was lost in 1972 when the Conservative Party surrendered the sovereignty of Parliament over that expenditure—it gives us the chance to assess the progress made by the Government to meet their own objectives in relation to both the size and the structure of the overall EEC budget and the extent of our contribution.
  It has been made clear already today that, on any assessment, the Government's conduct of negotiations on the EEC budget has been a failure. There has been one false storm after another, one outburst after another of empty sabre-rattling rhetoric from the Prime Minister about standing firm, followed by one capitulation after another, culminating in the abject humiliation of this country on 25 May. On that occasion, not only was the national interest veto overridden but this country actually acquiesced to that in the destruction of the Luxembourg compromise, thus accepting the destruction and abnegation of the central condition upon which we entered the EEC in 1973—a condition that both pro-Marketeers recognised as central to our entry.
  The charge of failure is a serious one, but it has clear substance when the actions of the Government are set against, not the targets and intentions of the Opposition, but the goals that the Government themselves have set. In the first debate in the House on the European budget on 16 July 1979, the Government actually accepted an amendment moved by my right hon. Friend the Member for Llanelli (Mr. Davies). The House resolved that:
  "This House urges Her Majesty's Government, in view of the United Kingdom's massive and ever increasing net contribution to the Community Budget, to press for a fundamental reform of the budgetary arrangements so that Britain's contribution to the Budget is at least not greater than the receipts".— [Official Report, 16 July 1979; Vol. 970, c. 1096.]
  That was the mandate given by the House to the British Government three years ago, a mandate that they have lamentably failed to achieve.
  It was not only the House that set a target; it was also the Prime Minister. We all remember her Winston Churchill memorial lecture, given on 18 October 1979, when she said:
  "We seek a remedy which will restore a broad balance, and which will last as long as, but no longer than, the problem".
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  She also said:
  "I cannot play Sister Bountiful to the Community while my own electorate are being asked to forgo improvements in the fields of health, education, welfare and the rest. The imbalance is not compatible with the spirit of the Community".
  We can say that again. We can also say again that it is indefensible for the electorate to forgo improvements in health, education, welfare and the rest, while the British taxpayer has to finance the extravagance of the continental agricultural policy.
  The Dublin summit followed that lecture, and as we all know, that was a failure. In 1980, there was the agreement of 30 May of the Commission mandate. That led to a reduction in the contribution that would otherwise have been made. However, it is important to note that it was a reduction in the contribution that would otherwise have been imposed on us, following the terms agreed, not in 1975 by my right hon. Friend the Member for Huyton (Sir H. Wilson), but in 1971 by the then Conservative Government—terms which the present Chancellor of the Exchequer played such a prominent part in obtaining.
  When the Government seek to congratulate themselves on the partial and very temporary solution to the budget problem that they achieved in 1980, they forget that they were the authors of the problem in the first place. The Labour Opposition in the early 1970s, and in particular my right hon. Friend the Member for Stepney and Popular (Mr. Shore), spelt out exactly what the size of the burden would be 10 years later.
  In any event, despite the rebates, the contributions that the country has had to make over the past two years have been large by any standards. In 1980, we had to shell out £706 million, and last year, as the assiduous questioning of the hon. Member for Northampton, North (Mr. Marlow)—to his great credit—winkled out of the Government, the contribution was £397 million, not the £6 million which the Minister of State tried to claim. The Foreign Office practised the subterfuge of recording only contributions to the allocated budget, whereas if we take the gross payments to the Community budget, the allocated and the non-allocated budget, we discover that our net contribution last year was only £3 million short of £400 million. This year, assuming that the EEC estimates of our net deficit are correct, we shall pay £390 million. It is no wonder, therefore, that The Standard, which is a loyal supporter of the Government, headlined the decisions of 25 May as
  "Maggie's big climbdown on EEC bill".
  How different is the reality of what this Government have achieved from their rhetoric.
  Even worse is the fact that there is no firm deal for next year. There is only an agreement to seek a deal in November of this year. Moreover, the agreement for next year can take into account the actual size of the contribution, not only this year but over the previous two years. There are already strong signs that the fact that there was some shortfall in our net contributions in 1981 and 1982 will be taken into account by the Commission and the Council of Ministers in the decisions for 1983 The gobbledegook used to report the outcome of the informal meeting of Foreign Ministers on 25 May included:
  "Corrections to be made for 1980 and 1981 in the light of the actual figures will be taken into account when negotiating the subsequent solution."
  That is the solution for 1982–83.
  I ask the Financial Secretary to spell out how the rebate will work if, as is possible, the unadjusted net contribution

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  does not come out at the Commission's assumed level of £880 million or 1,530 million ECUs. I understand that a sliding scale will operate if our unadjusted net contribution is greater than that and that the same scale, of 50 per cent. on the first slice and 75 per cent. on the subsequent slice, will operate in reverse if our net unadjusted contribution is less than 1,530 million ECUs. We could end up with a substantially lower rebate than appears to be likely.
  The Government's failure to secure a lasting solution on the question of our contribution to the EEC budget is the result of two much more fundamental failures. The first is the failure to secure reform of the EEC budget as a whole, following the collapse of the 30 May mandate.
  When that agreement was reached Ministers used extraordinary and extravagant language to announce it as heralding a new beginning. The then Lord Privy Seal, the right hon. Member for Chesham and Amersham (Sir I. Gilmour) said:
  "In the long term, the most important part of the package is the commitment of the Council to review the development of Community policies and the operation of the budget … we have an unrivalled opportunity to bring about sensible adjustments to the operation of the CAP and to put the Community's finances on a sounder basis than ever before."—[Official Report, 2 June 1980; Vol. 985, c. 1045.]
  The Chancellor of the Exchequer was even more extravagant in a debate on the EEC budget. He said:
  "it is the view of the Government that that arrangement will turn out to have been one of the most significant and fruitful developments since we became members of the Community in 1973."—[Official Report, 2 July 1980; Vol. 987, c. 1543.]
  I wonder whether the Chancellor or the former Lord Privy Seal would repeat those claims today.
  As many of my right hon. and hon. Friends and I pointed out at the time, the mandate never made the promise that Ministers claimed had been made. It was fatally flawed from the start and the small print made it clear that it would never be possible to secure a fundamental reform of the budget or the CAP. The mandate said that the examination should proceed.
  "without calling into question the common financial responsibity for these policies … or the basic principles of the common agricultural policy."
  Unless the House can call those matters into question it will never be possible to secure fundamental reforms in the disgraceful and wasteful way in which the CAP and the EEC operate.
  Despite the report of Gaston Thorn in June 1981, there have been no serious or significant changes in the balance of the budget and there is no prospect of that. The Financial Secretary referred to some changes that had been made in the amount allocated to the regional and social fund. As far as they go—and as long as we are locked into this ludicrous system—they are welcome. However, not too much weight should be placed on that. Even the European Assembly has criticised the balance saying that the draft budget does not constitute a budget of progress. In the "Euro-speak" now being developed, it
  "regrets that the Commission's proposals for an increase in appropriations for the Social Fund do not differ in a truly significant way from proposals for increases in this sector in previous years' Preliminary Draft Budgets."
  and
  "reiterates its view that the central theme of the 1983 budget should be the fight against unemployment."
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  Of course, that has not happened. On present estimates, the amount going to agriculture next year will rise from 62 per cent. to 65 per cent. This underlines the fundamental failure of the 30 May mandate.
  Given the total failure of the 30 May mandate and the promise held out by the Government, and particularly by the Chancellor of the Exchequer, for major reforms in the overall EEC budget and also promises on the common agricultural policy that were a central part of the Conservative manifesto, will the Financial Secretary say what proposals the Government now have for securing further change? Are they to wash their hands of any possible reform of the common agricultural policy or of the EEC budget? If they intend to seek reform, as they are pledged to do, how do they intend to secure it?
  The second reason for the Government failing to secure any lasting solution on our budget contribution arises from the breaking of the Luxembourg agreement and the right of countries to exercise a veto where vital national interests, as they define them, are at risk. It is not only a case of the breaking of the Luxembourg agreement but the extraordinary acquiescence in its breaking by her Her Majesty's Government. Before the decision was made on 25 May this year, No. 10 Downing Street was briefing any journalist willing to listen that the Government would stand firm in the face of any attempt by the Nine to try to bounce a farm price review decision through the Council of Ministers without there being agreement on our budget contribution. The Sunday Times had a headline
  "Thatcher set for EEC row".
  The article stated:
  "Mrs. Thatcher is preparing for a new showdown with the Common Market over Britain's payments. She is determined to take the EEC to the brink of collapse once more if it does not settle her demands for a guaranteed extension of the special 'money-back' deal she won two years ago. Conservatives were alerted to the impending storm yesterday by Humphrey Atkins, the deputy foreign secretary".
  We know what happened to him.
  Another headline in January in The Times stated
  "Britain isolated after EEC talks collapse"
  followed by a report which stated
  "Britain prepared to freeze EEC business last night as talks among the foreign ministers of the 10 member countries, aimed at restructuring the community finances, collapsed".
  Two months later, the Prime Minister was still rattling her sabre. Not only were journalists briefed at No. 10. The right hon. Lady also spoke at a press conference after a full day of talks at Chequers on 19 March. One report stated:
  "The British Government will continue to block this year's EEC farm price review until a satisfactory solution is found to the long running dispute over Britain's contribution to the Community budget, Mrs. Thatcher said last night."
  Hon. Members know what happened. The Government went like lambs to the slaughter while the rest of the EEC rode roughshod over them. M. Cheysson was reported in The Standard on 25 May as saying that Britain had been forced to accept a far lower refund because it had no "weapons" left. That was why the French and remaining countries of the Nine tried it on. They tried to over-ride the Luxembourg compromise. Having got away with it, they stripped away and destroyed the one weapon that we possessed and the one weapon that we could have used.
  Not only did France, the constructor of the Luxembourg compromise, seek to force a change in the agreement, but the Foreign and Commonwealth Office was willing to accept that defeat. That is appalling. Many of us suspect that it was willing to accept the defeat because, as

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  federalists, Foreign Office Ministers have never liked the Luxembourg compromise and wish at the most for voting on a qualified majority.
  The gulf between the Treasury and the Foreign Office on European Commission matters is wider than it is on other issues. The Treasury is packed with closet anti-Marketeers. If the Financial Secretary does not know that he should look in the closets.
  I was surprised to hear nothing from the Financial Secretary about the Government's attitude to the Luxembourg compromise. He said nothing about whether we would seek to ensure that it was properly enforced, particularly by warning the EEC that we shall do what de Gaulle did in 1966 and adopt an empty chair policy until we have compliance from the other States.
  I am surprised that there was no reference to whether the British Government will accept an increase in the 1 per cent. VAT ceiling or any other increases in the so-called own resources available to the EEC. That is of fundamental importance to our negotiations and our future position in the EEC. None of us were reassured by the statement by the Minister of State, Foreign and Commonwealth Office on Wednesday. He was questioned repeatedly by the hon. Member for Faversham (Mr. Moate) about whether the Government still stick by what the Prime Minister told the House—that no revenue resources would be made available to the EEC. The Minister would not repeat what the Prime Minister told the House last year. All he said was:
  "At present there are no proposals for an increase in own resources, and we do not believe that at present any such proposals would be justified."—[Official Report, 21 July 1981; Vol. 28, c. 421.]
  He did not say that future proposals would be blocked. I want to hear the Financial Secretary say that they will be blocked.
  The Commission wants to increase the amounts of own resources. In a recent document it stated:
  "The Commission cannot accept that an artificial ceilng be put on own resources, and will propose that they be increased when this becomes necessary to achieve agreed objectives."
  That is the mandate given on 30 May 1980. What is the British Government's approach to an increase in own resources?
  The Daily Telegraph supports the present Government. On 27 May, two days after the fateful humiliation of Britain, an article on the leader page posed the following questions:
  "What is the Community now to become? What is to be Britain's role in it? Does Britain indeed have a role? An uneasy peace prevails but there is little faith it will endure. More so than at any time since its founding, the purpose, procedures and even membership"
  of the EEC are in question.
  "The bitter row over Britain's budget payments has vital significance for our own EEC membership but in the past few days it has also served to strip the Community of much of its belief in the way it operates and conducts itself."
  I could not have put the matter better.
  Let us concede that there was once some vision and hope in the Common Market. Although many Labour Members profoundly disagreed with it, that was why the House decided to go ahead with our entry into the EEC about 10 years ago. However, nobody can now say that there is any hope or vision left within the Common Market. What hope and vision was once there has now been replaced by demoralisation and despair.
  714
  The more that events unfold, the more it becomes clear that the Common Market is an ossified structure, incapable of change. It is a late twentieth century dinosaur. The more that becomes clear the more the British public will appreciate the harm that the EEC is doing to the United Kingdom and the more they will appreciate the Labour Party's approach, first, of an amendment to the European Community Act and secondly, for a disengagement from this extravagant, inefficient and wasteful madness. That is the only sensible basis for our relationship with Continental Europe.
  2.10 pm
  Mr. Ridley: Having listened to the concluding tirade of the hon. Member for Blackburn (Mr. Straw), I must report that there is only one topic on which the House has been unanimous in the debate, and that is our tearfulness at the absence of the right hon. Member for Glasgow, Hillhead (Mr. Jenkins).
  The point that has bothered me all morning was raised by my hon. Friend the Member for Kensington (Sir B. Rhys Williams). He asked what was the reason for the Labour Party's continuing hostility towards and vendetta against the Common Market. He said that it was because it was a free market organisation. I do not know. Perhaps one day Labour Members will take time off from the tedious repetition that we have heard today to give us the answer. We have heard nothing new at all—only ample additional evidence of their hostility.
  We have had a grudging acceptance by the Opposition of that which is good. We have had nothing but condemnation and criticism of the agreement of 30 May 1980, but at least it was a damned sight better than anything that they ever did.
  The Opposition showed a grudging attitude to the mere £490 million, or whatever was agreed on 25 May this year—peanuts. They showed a grudging dismissal of the agreement of 30 June. It was described by the right hon. Member for Stepney and Poplar (Mr. Shore) as if it was of no importance whatever. Everything was dismissed.
  It is like driving a car in rather tricky country when the back-seat drivers—there are plenty of them—want to go home. The Opposition are not helping Britain's interest in Europe. They are being a dead weight upon those who are trying to solve the difficult problems.
  The Labour Party paid lip service to the fact that this was a debate on the 1983 budget and the rectifying 1982 budget. However, after a brief reference, it was off into the good hunting country of the mandate and the CAP and people's dislike of them.
  Every one of my hon. Friends who contributed to the debate made constructive and helpful speeches, designed to assist the Common Market and the Government to solve the problems to which we are assembled here to address ourselves. Indeed, my hon. Friend the Member for Kensington raised a fundamental point, as did my hon. Friend the Member for Sheffield, Hallam (Mr. Osborn).
  We are talking of between 1 per cent. and 2 per cent. of the European Community's gross domestic product and a similar proportion of the domestic product that we put into Europe. It was suggested that it should be at least 5 per cent. and that barriers should go. That may be the way that we shall go in future. However, the figure must be even higher than 5 per cent. if it is to be seen as a means of redressing our budgetary imbalance. Unless we spend an enormous sum on social and regional policy, we cannot

  715
  redress that imbalance. However, if Europe could take over growing areas of national expenditure and do it much better than the individual nations, that might be a way of furthering the cause of Europe, and I would agree with that.
  The debate has highlighted the fact that it is not only we who decide. It takes Ten to agree. That is why progress tends to be slow. This may be a disappointing year for my hon. Friend the Member for Kensington, because there has been an increase of only 7·7 per cent. in the draft budget compared with last year. I take issue with the right hon. Member for Stepney and Poplar on a mathematical point because he said that that was distorted by excluding the refunds for 1983. However, last year's figures contained the refunds for 1982. If one takes the 1982 and 1983 draft budget figures and includes the refunds in both, the increase is less; only 6¾ per cent. to 6½ per cent.
  Mr. Shore: A moment ago the hon. Gentleman complained that our questions were irrelevant to the budget. However, my question was entirely relevant. I did not quite understand the hon. Gentleman's reply. He gave the figure for the budget increase between 1982 and 1983 as 7·7 per cent. I pointed out that there was no entry for the British refund in the 1983 draft budget, and I asked him about that. He cannot say that once the figure is taken into account—at the minimum, it must be £300 million or £400 million—the increase in 1983, once adjusted, can be less than 7£7 per cent. However, that is apparently what the hon. Gentleman is saying.
  Mr. Ridley: The right hon. Gentleman must compare like with like. Excluding refunds, the increase, is 7·7 per cent. Including refunds, the increase is 6¼ per cent. to 6½ per cent. The right hon. Gentleman also complained about unemployment and asked what the budget was doing to assist. No one would pretend that the sums involved will make much of an impact on European unemployment. However, he pointed out that in the past four or five years unemployment in Europe has doubled or trebled and has now reached 10·5 million. I hope that he will bear that in mind when we hold our debates on the economy. It is a clear sign that unemployment is a European problem.
  An argument developed about unemployment in Europe, particularly between my hon. Friend the Member for Belper (Mrs Faith) and Opposition Members. The argument showed that figures can be bandied about. My hon. Friend said that unemployment would increase by 2·5 million if Britain left the Community.
  The hon. Member for Blackburn was keen to quote, partially, my hon. Friend the Minister of State, Foreign and Commonwealth Office about his figures. I wish that he had completed the quotation, but he was merely being careful. It might help to complete it. My hon. Friend said:
  "Even more certainly, quotations from industrialists investing in Wales and Scotland especially make it clear that they have brought those jobs to this country because of our membership of the Community."—[Official Report, 21 July 1982; Vol 28, c. 423.]
  There is not one hon. Member who argues that employment would increase if we left the Community. We have debate after debate on unemployment and then on the European Community. Nevertheless, Opposition Members fail to link the fact that the policy that they
  716
  advocate one day about leaving the Common Market is bound to make the problem of unemployment infinitely worse the next day. The Opposition are inconsistent.
  Mr. Straw rose—
  Mr. Jay rose—
  Mr. Ridley: I shall not give way, because there is little time left and there are many questions to answer.
  My hon. Friend the Member for Scarborough (Sir M. Shaw) made an excellent speech. I thank him for the sensible comments that he made. I should have liked to be able to answer all his points, but in the time available I shall try to deal with what he said about the financial regulation. He told us that he managed to get it introduced when he was the rapporteur. He asked why it had not been reviewed. The answer is that the Commission presented its proposals for the amendment of the financial regulation early in 1981, but the European Parliament has to be consulted about it. The Parliament began its consideration of the proposal in 1981, but it has not yet finished its consideration and given its opinion. As the Parliament has not delivered an opinion to the Council, the Council cannot comment on and implement it. That is a pity, because it clearly should be done.
  The hon. Member for Newham, South (Mr. Spearing) asked me about the other possible resources which would be available if and when the VAT ceiling was reached. The percentage represented in the draft budget by the 1 per cent. VAT ceiling is 0·7945, so there is still 0·2 per cent. to go. In money terms, that is more than £;1 billion, which is a considerable amount of leeway, even at this time.
  I confirm that the Government do not see any need at present to consider alternative forms of revenue for the Commission. Nobody will say that at no time in future will it be necessary to look at the problem again.
  The hon. Gentleman asked me about a fuel import levy. I shall be dealing with that very shortly. Clearly, such a revenue to the Community would be of very great assistance to the United Kingdom in dealing with our net contribution. It would be foolish of me to turn it down flat for ever and a day. My point is that, as there is no need for additional revenue, we do not need to address our minds to it, and we shall certainly not agree to such a levy at this time.
  The hon. Gentleman asked whether the Commission could introduce a levy on imported fuel on its own responsibility. He knows, of course, that the Commission—
  Mr. Spearing: The Council.
  Mr. Ridley: I think that the hon. Gentleman asked about the Commission, but perhaps not; it is not an important distinction. If the Commission proposed such a levy, it could get it accepted only with the unanimous agreement of the Council. I believe that the Luxembourg compromise would hold and that it would not be possible—[Interruption] I do believe that. It is not simply a question of a member State saying that it is in its national interests to object; it actually has to be in its interests to do so. I do not think that anyone could claim that imposing a fuel levy was not in a nation State's national interests.
  This House ultimately has control. If it mandates the Government, by a motion which it has passed, to object to a new levy, whether of that sort or not, the Government are bound to act in that way. They may not win the vote.

  717
  The trouble is that Labour Members do not win votes, and probably never will again, as their numbers dwindle and diminish. That is what they are complaining about. If the House were to press the Government and carry a vote against them, the Government would not ignore the House, which is the source of all their authority.
  The hon. Gentleman also asked about the Court of Auditors report. Several of my hon. Friends asked about the possibility of failing to give it a discharge until it had investigated the European Parliament's affairs and they had been acceptably put right. The convention that has been mentioned by my hon. Friend the Member for Scarborough and others operates in that case. The European Parliament does not look into the Council's expenses and the Council does not look into the Parliament's expenses. It must be a feature of a responsible, though not a sovereign, Parliament that it should be responsible for its own cleanliness in its financial dealings. To have the Council try to look into the Parliament, breathe down its neck and crawl over it, would be as humiliating as if the Government constantly spent their time trying to investigate how the House of Commons Commission spends its money. As parliamentarians we must be responsible for our own housekeeping. The same goes for Europe.
  With regard to the discharge of the auditors' certificate, it is not only the Council, but the Parliament, that has to put its name to it. I think that the hon. Gentleman will agree with this. My hon. Friends the Members for Cheadle (Mr. Normanton) and Kensington, who are Members of the European Parliament, will take back the message from the House that we would like to see the Parliament's financial propriety in its own dealings put beyond any doubt, with more power put in the hands of the Court of Auditors to achieve that.
  My hon. Friend the Member for Sheffield, Hallam and others of my hon. Friends, particularly my hon. Friends the Members for Havant and Waterloo (Mr. Lloyd) and Cheadle, spoke meaningfully and forcefully about the need for more money to be spent on joint ventures in research and development, industrial innovation and the improvement of competitiveness. I gave the figures showing what is in the draft budget. Money for joint ventures on research and development has risen from 2·3 per cent. to 3·1 per cent. of the total budget. Funds for research in this draft budget have risen by more than 50 per cent. compared with last year. Those are valiant efforts by the Commission to meet the points made by my hon. Friends. I have taken a detailed record of the budget lines that my hon. Friends have advocated. That is the sort of
  718
  helpful advice that we like to get out of these debates. When I go to Brussels I shall do what I can to reflect those views and priorities.
  In the detailed assessment of different programmes, be they agricultural or industrial, my right hon. Friends the Secretary of State for Industry and the Minister of Agriculture, Fisheries and Food will decide the British Government's priorities, but I shall make sure that their attention is drawn to what my hon. Friends have said.
  The hon. Member for Blackburn asked me a specific question about the refunds for 1982. There is a risk-sharing agreement. If we go over 1,530 million ECUs as our net contribution, defined by the Commission, there is no additional refund until we reach 1,580 million ECUs. From 1,580 million ECUs to 1,730 million ECUs, the refund is 50 per cent. of the excess. Above 1,730 million it is 75 per cent. of the excess. On the downward risk-sharing path, the arrangements will be broadly similar. They have not yet been fully agreed. They are still under discussion, as are the means by which the refund will be paid by our nine partners, who have not yet come to a final agreement.
  I am grateful to all right hon. and hon. Members who have contributed to the debate—those behind me who have tried to improve the European budget, and those in front of me who have tried not to have a budget at all.
  Question put and agreed to.
  Resolved,
  That this House takes note of the preliminary Draft Supplementary and Amending Budget No. 1 for 1982 and the preliminary Draft General Budget of the European Communities for 1983.

  Motion made, and Question put forthwith pursuant to Standing No. 73A (Standing Committee on Statutory Instruments, &c.)
  STATUTORY INSTRUMENTS, &c.

    COMPANIES
    That the draft Companies (Accounts and Audit) Regulations 1982, which were laid before this House on 6th July, be approved.— [Mr. Berry.]
    Question agreed to.
    Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments, &c.)

    HOUSING
    That the Housing (Payments for Well Maintained Houses) Order 1982, a copy of which was laid before this House on 6th July, be approved.—[Mr. Berry.]
    Question agreed to.

  Raoul Wallenberg
  Motion made, Question proposed, That this House do now adjourn.— [Mr. Berry.]
  2.30 pm
  Lord James Douglas-Hamilton: If he is alive today, Raoul Wallenberg will be celebrating, if that is the right word, his seventieth birthday in 12 days' time. That makes him approximately the same age as the Leader of the Opposition and, as we know, that is an age which does not preclude all types of activity.
  Without making odious comparisons, it can be said of Raoul Wallenberg that humanity owes him an enormous debt, and that can be said of hardly any other living person this century—if, indeed, he is alive.
  In 1944 and 1945, whilst acting as a Swedish diplomat in Hungary, he repeatedly confronted the SS commanders taking persons of Jewish origin away to be murdered, and he claimed that they were Swedish citizens. As a result, when Soviet forces took Budapest, about 120,000 persons of Jewish origin were alive, this being far and away the largest Jewish community remaining in East Europe at the end of the Second World War. I doubt whether it can be said about any other man this century that he played a key role in saving the lives of somewhere in the region of 100,000 people.
  The facts are plain and unmistakable. Raoul Wallenberg showed qualities of enormous courage and relentless persistence. He is, with justice, regarded as one of the great heroes of the twentieth century. A recognition of this fact is that only two men this century have received honorary American citizenship. One was Sir Winston Churchill, for the role that he played in destroying the Third Reich. The other, on 6 October 1981, was Raoul Wallenberg, for his part in saving the lives of some 100,000 people.
  It was on 17 January 1945 that Raoul Wallenberg was taken into custody by the Soviet authorities in Budapest who, ever since, have refused to release him.
  I raise the question of his fate today for a number of reasons. First, to this day the Swedish Government do not regard Raoul Wallenberg as being dead. The ambassador in London, Mr. Per Lind, has confirmed that the Swedish Government would welcome support in connection with Swedish intervention in an international forum.
  On 15 April 1981 the then Minister of State, Foreign and Commonwealth Office, my hon. Friend the Member for Blackpool, South (Mr. Blaker), answered questions from my hon. Friend the Member for Ilford, North (Mr. Bendall), my hon. Friend the Member for Essex, South-East (Sir B. Braine) and the hon. and learned Member for Leicester, West (Mr. Janner) with these words:
  "we shall do everything that we can to back up the Swedish authorities by supporting their representations. Also, we have told the Swedish authorities that we shall put them in touch with British subjects who may be able to help by giving evidence in support of the search"—[Official Report, 15 April 1981; Vol. 3, c. 310.]
  Secondly, I have received a letter from Raoul Wallenberg's sister, Mrs. Nina Lagergren, written on behalf of the Raoul Wallenberg Association, welcoming the inititative to raise inquiries about her brother in the House of Commons with deep gratitude. In this connection it is relevant that one of Raoul Wallenberg's cousins, Annis Bonsor is a British citizen, and my hon. Friend the Member for Nantwich (Sir N. Bonsor) will be able to
  720
  represent her views. As it is, quite a number of those whose lives were saved by Raoul Wallenberg came to Britain after the Second World War, and many of them went on to settle in North America and in Commonwealth countries.
  Thirdly, the Church of Scotland, of which I am a member, greatly admires and respects the work carried out by Raoul Wallenberg. On a much more limited scale, Miss Jean Haining also tried to save people from being murdered in Hungary during the war. She was sent to Auschwitz, where she was murdered, and this year the Moderator of the Church of Scotland, the Very Reverend Dr. Andrew Doig, took part in the service unveiling a memorial to her in Budapest.
  It is relevant that, when Raoul Wallenberg went to Budapest, his mission was known to the British Government who even supplied him with names of British citizens and contacts so that he could protect them.
  I turn to Raoul Wallenberg's fate. On 16 January 1945 the Soviet Deputy Foreign Minister informed the Swedish ambassador in Moscow that the Russian military authorities had taken measures—as he described it—to protect Raoul Wallenberg and his belongings. On 8 March 1945 the Russian-controlled Kossuth radio broadcast that Wallenberg had been murdered. On 18 August 1947, the Deputy Foreign Minister, Andrei Vyshinski, said that Raoul Wallenberg was not in the Soviet Union and was unknown to the authorities. Vyshinski suggested that he had probably died in Budapest in 1945. That was untrue, as Soviet authorities later admitted.
  Wallenberg was seen by a large number of witnesses, and in 1957 the Soviet Deputy Foreign Minister Andrei Gromyko wrote that a search of prison archives had revealed a hand-written report dated 17 July 1947 from the medical head of Lubyanka prison to the Minister for security services, Abakumov. The note said:
  "I report that the prisoner Wallenberg who is known to you, died suddenly in his cell last night."
  Gromyko said that later Abakumov was sentenced to death and shot.
  Gromyko's reply to the Swedish Foreign Minister contradicted Vyshinski's earlier reply. Gromyko made it all too clear that Wallenberg was well known to the Soviet authorities, and alleged that he had been killed in 1947. since then Raoul Wallenberg has been seen by many witnesses. I have 90 pages of evidence prepared in Sweden which reveals that witnesses had seen him in Russia. Many returning prisoners of war confirmed that they had seen him. During the 1950s many more witnesses spoke of seeing Wallenberg in prison, and said that he had been interned because the Russians regarded him as a spy.
  So much evidence was accumulated that in 1960 two Swedish supreme court judges assessed it and came to the same conclusion about the sightings. They said:
  "The statements contain a large amount of information, the correctness of which it has been possible to check and they support each other. In our opinion, according to Swedish law, the present Report must be considered to make it probable—though it does not contain full evidence in this respect—that Wallenberg was alive at least in the beginning of the 1950s and at that time in prison in Vladimir."
  The judges' considered assessment carries infinitely more weight than the unconfirmed reply of Gromyko.
  In 1961 there was further evidence of Raoul Wallenberg's detention in the Soviet Union. Professor Svartz was told by the Russian professor Myasnikov that he knew of Raoul Wallenberg, who was in a mental

  721
  hospital. The Swedish Prime Minister wrote to President Krushchev, who became angry with Professor Myasnikov. The next time that Professor Svartz saw Professor Myasnikov the latter withdrew his statement and said that he did not wish to discuss the matter.
  In 1978 news reached Sweden that a Russian Jew called Jan Kaplan had met a Swede in the Butyrka prison in 1975 who had been in prison for 30 years. Jan Kaplan passed that message out through several different sources, and the Swedish Government took up the matter. They were referred to Gromyko's reply, but no serious attempt was made by the Soviet Government to investigate the detailed evidence of sightings of Wallenberg.
  It is significant that when the Swedish Prime Minister asked Soviet Prime Minister Kosygin to investigate all information and requested that a Swedish representative be allowed to speak to Jan Kaplan, that request was turned down. The Russian leadership gave the impression of being anxious that the facts of the case should remain hidden.
  I am glad that the hon. and learned Member for Leicester, West (Mr. Janner) is with us. He led a deputation to the Soviet embassy some time ago and I understand that he received a very unsatisfactory reply. I hope that he will catch your eye, Mr. Deputy Speaker.
  In those circumstances it is understandable that many of the witnesses did not wish their names to be published on the grounds that if they were there might have been serious recriminations against their families in the Soviet Union. Indeed, 1,200 pages of Wallenberg documents remain secret so that there should be no persecution of relatives in Russia.
  In 1979 the American Government, with the approval of the Swedish Government, raised the matter directly with the Soviet Union. 1 hope that today the Minister will make it clear to the Swedish Government that he, too, will join the American Government in giving whatever help he can to discover the whereabouts of Raoul Wallenberg and to obtain his release if he is alive. Already at the Madrid conference Britain has raised the matter in an international forum and no satisfactory reply was received. Can the Minister assure the House that the matter will not be allowed to rest? As the Swedish Foreign Minister said on 13 May 1979:
  "We always assume that missing citizens are alive, until we consider that convincing proof of their death is found. We must not give up."
  Raoul Wallenburg was a person of the deepest humanity and a great man in his own right. If the Russians should ask why we are so anxious about the fate of that one man, the reply must be that even if he had not been a person of great consequence he would still be entitled to justice and to freedom if he was alive.
  I do not know for certain that he is alive. I do not even know with certainty how long he might have survived in Russian hands, although I am very much aware of the detailed evidence from witnesses to the effect that they saw him for many years after Gromyko said that he was dead. But whether he is alive or not, the struggle to draw his case to the attention of the world is of major importance to remind us, first, of the vital truth that a genuinely good man can achieve immense victories even in the most adverse circumstances, and secondly, that whatever their claims to Socialism and to justice, the Soviet Union is a country in which individuals can disappear without a trace and the full facts be systematically withheld for ever more.
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  One might argue that, by acting as a symbol of prisoners of conscience, Raoul Wallenberg continues to serve humanity as he did all his active life. Nevertheless, I very much hope that he is still alive and that our efforts might do something to secure his release. In any case, the forces of totalitarian injustice must be reminded that, try as they may, the individuals who suffer at their hands will not be forgotten.
  2.42 pm
  Mr. Greville Janner: The House owes a considerable debt of gratitude to the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) for raising yet again the case of Raoul Wallenberg, that extraordinary hero of humanity.
  In a recent visit to Hungary I met some of the 100,000 people whose lives he saved by his extraordinary bravery. Travelling almost anywhere in the world where there are survivors of Hitler's catastrophe one finds among Jewish communities people who say that it is due to Raoul Wallenberg that they now live.
  It was another tragedy that he should disappear into the Soviet Union. His life and death, if there be one hereafter, are one of the great mysteries of the postwar world. We have only statements from the Soviet authorities that have been proved to be untrue, combined with a series of sightings and statements, each one of which on its own is almost unreal and unreliable, but when woven together form the cloth of reality that shows that this man is probably alive. Those who value his work and appreciate his heroism will not be prepared to accept the fact of his death unless it is proved in a way that has not so far been done.
  I am sure that the House would wish the Government to do everything possible to convince the Soviet authorities that the case will never be forgotten until it is solved, to ask them for the good name of the Soviet Union to produce evidence that the family of Raoul Wallenberg can accept about what has happened to him, to release him if he is alive and to prove his death properly if he is dead.
  In the recent Wallenberg hearing in Stockholm, we heard the evidence of people who loved and knew him and whose lives he saved. His case will not be forgotten in the House and I thank the hon. Member for Edinburgh, West once again for taking the opportunity to raise the matter today.
  2.45 pm
  Sir Nicholas Bonsor: I extend the personal thanks of the English branch of the Wallenberg family to my hon. Friend the Member for Edinburgh, West (Lord James Douglas-Hamilton) and indeed the hon. and learned Member for Leicester, West (Mr. Janner) for their kind words in support of his case and for raising the matter in the House today. I have little to add to what has already been said.
  With the assistance of the Swedish Government, my cousin's family has striven for more than a quarter of a century by every means available to it to discover the fate of Raoul Wallenberg and, if he still lives, to secure his release. As the House will know, all those efforts have been to no avail. If indeed he lives, I trust that even now in the few closing years that may remain to him, the Russian leaders will relent, give him back his freedom and send him home.

  723
  If Raoul Wallenberg is dead, as many of us fear, and if no further word is heard as to his fate, let the Soviet leaders be warned of the consequences. Their system of government is founded on violence, nurtured and fed by human sacrifices such as his, and sustained only by fear. Until that system has been utterly destroyed and its leaders with it, the name of Raoul Wallenburg will live on in the West as a beacon and a shining example to those who follow in his footsteps and who will continue his fight for freedom and justice until they are restored in all the countries of Eastern Europe, including Russia itself, which now suffer the tyranny of Soviet rule. The Soviet leaders will rue the day they deprived Raoul Wallenberg of his liberty and trampled on the principles and standards that he represented.
  2.47 pm
  The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Malcolm Rifkind): I congratulate my hon. Friend the Member for Edinburgh, West (Lord James Douglas-Hamilton) on raising this subject today. It is particularly appropriate that we have had the benefit of the contributions not only of my hon. Friend the Member for Nantwich (Sir N. Bonsor), who is related to the Wallenberg family, but of the hon. and learned Member for Leicester, West (Mr. Janner), who participated in the hearings in Stockholm in 1981 which brought to light further information regarding the fate of Raoul Wallenberg.
  It is particularly appropriate that the House of Commons, which has centuries of experience in supporting the cause of liberty and freedom, should on this occassion salute not only the memory but the achievements of Raoul Wallenberg. As my hon. Friend the Member for Edinburgh, West made clear in his eloquent speech, Raoul Wallenberg directly and indirectly helped to save the lives of up to 100,000 men, women and children. Anyone who has read the information available about his activities in Budapest in the closing days of the war cannot be other than intensely moved by the personal risks that he ran and the enormous and successful efforts that he made, the dramatic consequences of which allowed such a large number of his fellow human beings to survive at a time of great danger.
  It is all the more tragic that such a man, who deserved the grateful thanks of the whole world, should have simply disappeared into the inner recesses of the Soviet prison system from which he has never emerged. His history is tragic but it is also noble in that the spirits of many thousands of people have been uplifted not only by his achievements in the closing weeks and months of the war but by the symbol that he has been for them in the years since his disappearance in 1945.
  Reference has been made to the accumulating evidence and alleged sightings over the years suggesting the Raoul Wallenberg certainly survived for a considerable time after the end of the war and may even be alive today.
  It is important to emphasise that two clear facts are now established beyond doubt and accepted by all who take an interest in this matter, including the Soviet Union. One is that Raoul Wallenberg, despite claims by the Soviet Union in the immediate years after the war, did survive the war.
  724
  He was not killed during the last stages of that conflict, but survived for at least two years, until 1947. That is not disputed by anyone, including the Soviet Union.
  Equally, it has not been disputed since at least 1957 that during at least those two years Wallenberg was a prisoner of the Soviet Union, held in Soviet prisons. It is important to emphasise that those two factors are not in doubt or in question, even by Moscow. They are important because it shifts the whole onus to the Soviet Union to satisfy the family of Raoul Wallenberg and the whole international community as to exactly what happened to the man who was in their control for that time, and who may still be in their control.
  It is clear from the evidence that has accumulated over the period that the Soviet Union has failed to discharge that heavy onus on it, and has failed in a number of ways. It has yet to povide a satisfactory explanation of why Wallenberg was arrested in the first place. His contribution in defeating the objectives of the Nazis in Hungary was so outstanding and obvious to all who lived in Hungary at that time that for such a man to be arrested is something that requires an explanation which we have not yet properly received. The fact that it is accepted that, at the very least, until 1947 he was kept a prisoner of the Soviet Union has not been fully explained.
  The assertion in 1957 by Mr. Gromyko, the Soviet Foreign Minister, that Wallenberg died in 1947 is based on an alleged piece of paper that suddenly emerged in the inner recesses of the Soviet prison bureaucracy and which, as far as I am aware, has never been authenticated, and the reliability of which we are of course not in a position to test.
  The saddest aspect is that if the Soviet Union could deny any knowledge of Wallenberg's whereabouts and existence right up to 1957, what credence can we give to the assertion, in and since 1957, that he died some 10 years before that? Clearly the onus is on the Soviet Union to provide the international community and the family of Raoul Wallenberg with conclusive evidence, and it has failed to do that.
  Her Majesty's Government do not know whether Wallenberg is alive. We have no firm evidence to suggest conclusively that he is alive, but equally, we have no evidence that would lead us to assume that he has died. The evidence that has emerged on frequent occasions over the years consistently points to at least the possibility that he has survived those many years of incarceration. That is important in considering this question.
  My hon. Friend asked what assistance the United Kingdom Government could give. From a technical point of view, we have no strict locus, in that Raoul Wallenberg is a Swedish citizen who had no direct relationship with this country. However, we never for a moment thought that that was sufficient reason for not interesting ourselves in the case. It is a case which has shocked the conscience of the world and in which every freedom-loving Government must involve themselves and do what they can to help the Swedish Government in their efforts to secure knowledge of Raoul Wallenberg's fate and his release, if he is still alive.
  We shall continue to look closely at any new evidence that may emerge and that may point to his whereabouts and fate. We have assisted the Swedish Government over the years in contacting people in this country—British citizens and others—who may have been former inmates of Soviet prison camps and who may be in a position to help the

  725
  Swedish Government in their efforts. In addition, as my hon. Friend said, at the Helsinki review conference in Madrid November 1980 the British delegate spoke in favour of the Swedish attempts to open the issue and bring pressure on the Soviet Union to clarify the circumstances and give a proper answer to the questions that have been constantly raised.
  I give the unqualified assurance that we shall respond as helpfully and constructively as possible to any initiative taken by the Swedish Government in which they feel that we could perform a useful role with others in the international community in seeking a resolution of this great tragedy.
  Although the background to the Wallenberg case is unique, his fate is not. Over the years, tens of thousands have disappeared in the Soviet Union. Few have had the international reputation of Raoul Wallenberg, which has maintained the interest of the world in his case, but we should not forget that the nature of the Soviet system has had consequences of the sort graphically described by my hon. Friend the Member for Nantwich.
  Throughout the realm of human rights, the concepts of personal liberty and freedom which all hon. Members, whatever their political views, take for granted have been neglected in the Soviet Union. Some of the cruder brutalities of the Stalinist system have disappeared, but major erosions of the quality of life and personal liberty remain.
  Perhaps the Soviet Union believed that the Western world would gradually lose interest in the fate of an individual who disappeared as long ago as 1945. Public interest in issues often fades after weeks or months and especially after years. It is remarkable that, far from interest in Raoul Wallenberg having declined over the years, the reverse is true. Interest in the man and his fate is probably greater today than at any time since the war.
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  The decision of the United States Congress to award Raoul Wallenberg honorary citizenship, the Stockholm conference attended by the hon. and learned Member for Leicester, West, this debate and others in many parts of the world are proof that the cause of Raoul Wallenberg, what he stands for and his achievements during his short active career as a diplomat have had a major impact.
  Mr. Greville Janner: Is the hon. Gentleman aware that it is proposed to hold a major Wallenberg exhibition in London in the autumn? Will he assure the House that if the exhibition takes place, as is hoped, under the auspices of an all-party and interdenominational group the Government will do what they can to help that exhibition and to bring forward even more evidence to commemorate the life and, if necessary, the name of a great man?
  Mr. Rifkind: The Government will respond as sympathetically as they can to any new initiative, in this country or elsewhere, in which it is thought that British involvement and encouragement might assist. It is right to continue to recognise that this is primarily a matter for the Swedish Government, but we shall not hesitate to do anything that is thought to be useful or appropriate.
  I thank my hon. Friend the Member for Edinburgh, West for doing the House and the issue a great service by renewing our interest. The Government believe that the fate of Raoul Wallenberg is not only a demonstration of the basic inadequacies of the Soviet system, but that, irrespective of the wider issues involved, Wallenberg as an individual made such a major contribution to a humanitarian cause and achieved so much in saving the lives of so many of his fellow human beings that we should be doing less than our duty if we did not do all in our power to discover his fate and, if he is still alive, to ensure his release, for his sake and for that of his family.
  Question put and agreed to.
  Adjourned accordingly at one minute to Three o'clock.