HC Deb 16 March 1982 vol 20 cc248-59 7.36 pm
Mr. Richard Wainwright (Colne Valley)

I raise the matter of wholly unprecedented expenditure that should not have been made without the express approval of the House. It is covered by Class II, Vote 12.

Parliament seems virtually poised to recover after more than 50 years its key role of fully debating Estimates for future Government spending, which, after scrutiny by hon. Members, appear to be questionable. That new vitality in the House springs from all parts and has already given rise to big changes in parliamentary procedure.

It has been inappropriate and insensitive for the Government to use the back door method of the Contingencies Fund in the last two months to pay to the European Communities about £7 million, the legality of which is being contested at the European Court of Justice.

The Select Committee on the Treasury and Civil Service reported unanimously to the House this week that the right course for the Government then to have taken would have been to present an immediate supplementary estimate on which the House could have taken a decision. This would have been preferable to making use of the Contingencies Fund. That is the first point that I wish to put to the Minister. I am sure that he will bear in mind that the Treasury evidence ably given to the Select Committee revealed clearly that there was considerable and understandable uncertainty in the Treasury and the Foreign Office about the proper procedure.

The second and perhaps substantive point on which I question the Government's wisdom is the paying of that large sum before the European Court has heard the case, which is that the whole amount has been levied by the EEC illegally. The House has not yet had any satisfactory explanation for the highly unusual procedure of making payments that the payer regards as illegally levied and which are being contested in a court of justice. Those payments have not been made to an independent stakeholder nor, so to speak, are they payments "into court", but they are payments made to the European Communities, which, it is claimed, have levied them illegally.

That is a matter on which such actions undoubtedly set precedents. For example, in the examination of witnesses from the Treasury by the Select Committee on the Treasury, and Civil Service, a member asked: You say that we are in an unprecedented situation, so what is done in this case is not without importance as far as the future is concerned? The Treasury official replied: That is correct. The House should have had an opportunity to debate a matter that would set a precedent in a novel and untilled field.

Our Government, through the rest of the Council of Ministers, are asking the European Court to find that last December the EC Assembly adopted a 1982 budget, the total of which was over the maximum increase allowed under Article 203.9 of the Treaty of Rome, and also that within the disputed total, the food aid item had been illegally increased by the Assembly.

The combined amount in dispute—subject to exchange values—is approximately £27 million, of which over £7 million is being paid in the current fiscal year. The balance will be payable under this decision in 1982–83 unless the court puts on a great turn of speed and gives its decision before the monthly instalments have amounted to the whole sum of approximately £27 million.

The Select Committee on the Treasury and Civil Service has been told by Government witnesses that this large payment in advance of the court hearing was considered necessary if a unanimous Council of Ministers were to launch the case, as distinct from the British Government and perhaps other sympathetic EC member States though not all of them. The grounds on which the Government came to the conclusion that it was worth this substantial payment to have the case launched by the Council of Ministers rather than by the British and perhaps some other Governments have never been explained to the House.

There appears to have been a suggestion that the European Court of Justice would in some way be influenced by the nature of the body bringing the case, and there has been talk of the court having a more sympathetic reaction because of that. There may be justification for that view, but to the layman, who has not been allowed access to the facts so far, it seems odd that a great court of justice should be capable of having sympathetic reactions according to the status of those asking for justice. This raises the question of how the court proceeds and what its standards are. Such matters should be considered carefully by the House and decisions should not be taken by the Government alone.

In its report published this week, the Select Committee records its regret that it has not been possible for the Government to provide a copy of the case as presented in writing to the court by the Council. We understand that this is not the British Government's fault. It is a position taken by the Council of Ministers. Nor was the Select Committee given access to the legal advice on which the Government decided to take what is, on the face of it, a remarkable decision.

Equally important, the Select Committee could not be given any assurance that if the European Court finds in favour of the United Kingdom and declares that the Budget is illegal under the Treaty of Rome, the disputed money which the Government have been in such haste to pay over will be repaid to us with interest. Perhaps the Minister will be good enough to comment on that as well.

All Members who are concerned to recover parliamentary control of Government expenditure will regret that we have been able to debate this unprecedented matter only after payments have been made. However, it is better late than never. I hope that the Minister will comment in detail on the points I have made and, indeed, on the report of the Select Committee on the Treasury and Civil Service.

7.44 pm
Mr. Michael English (Nottingham, West)

By raising this matter the hon. Member for Colne Valley (Mr. Wainwright) has been kind to the Committee on which he serves. He was fortunate in the Ballot and he could have chosen any subject he wished, but he has rightly chosen this subject.

This must be one of the first occasions when the Consolidated Fund Bill has been used for its proper purpose. Today, we are debating, amongst other things, something that is being technically appropriated and approved by the Consolidated Fund Bill.

Usually these sums of money are used as pegs on which to hang discussions. In this instance the Select Committee on the Treasury and Civil Service has reported upon two unusual Supplementary Estimates. In respect of the EEC Estimate—the report also covers a rather unusual item relating to national savings as well—it is extremely odd that we should be subjected to this procedure. I say that in no criticism of the civil servants who came before us. They obviously acted perfectly properly both in the Treasury and in the Foreign and Commonwealth Office. They had consulted their lawyers and they told us so. Those lawyers had consulted the Law Officers and the Crown; and the civil servants told us that as well. [Interruption.]

In my view—I hope that my Front-Bench colleague will keep quiet—perhaps I should wait a moment. In my view, it is perfectly proper, perfectly accurate and perfectly well advised on the part of the Treasury and the Foreign and Commonwealth Office that they should not have paid this money directly out of the Consolidated Fund as the Act permits them to do if the expenditure is legal or lawful. It is extraordinary that it was paid out of the Contingencies Fund. The Financial Secretary to the Treasury, who is to reply to the debate, was a member of the General Sub-Committee of the Expenditure Committee in the previous Parliament. Almost the last act that that organisation ever did was to commission from a variety of lawyers throughout the United Kingdom their opinion of the validity of Contingencies Fund expenditure for a variety of purposes such as the one before us.

We were given—I regret to say that this is sometimes the way with lawyers—two different and diverse sets of advice. Half of the United Kingdom's most eminent constitutional lawyers think that the Contingencies Fund can be used for a variety of purposes and the other half think that it can not. There is clearly doubt about it and that has been admitted in evidence to the Select Committee on the Treasury and Civil Service by the Treasury itself. That is known to us and that is admitted.

The worrying feature is that the Government never brought this issue before the House of Commons. They merely assumed that the money could be paid out of the Contingencies Fund. They obtained correct legal advice that it could not be paid out of the Consolidated Fund and that it could not be paid under the European Communities Act, 1972. However, the assumption was made that it could be paid somehow.

The Lord Chancellor's robes have been paid for from the Contingencies Fund, and the atomic bomb has been paid for from the Contingencies Fund. As far as I am aware, Parliament was not informed in either instance. In this instance the money was paid from the Contingencies Fund on the assumption that eventually—perhaps in a week or two or a month or two or at some time when it was convenient—Parliament would just have it mentioned to it as a minor Supplementary Estimate. In years gone by that is all that would have happened. That is because there was no Select Committee on the Treasury and Civil Service.

The Select Committee on the Treasury and Civil Service has reported on this use of the Contingencies Fund. It has had to do so in photocopied form. It seems that these days the Stationery Office is not capable of printing anything for the House of Commons the day after it has been given it. It does so for the Government but not for the House of Commons. The report was issued yesterday in photocopied form in the Vote Office to the press and to the public. I do not see how the public can get it if it is only in photocopied form.

This procedure is not good enough. When there is an argument—I shall not repeat the arguments of the hon. Member for Colne Valley because he has advanced them must properly and adequately—about whether money should be legally paid by Her Majesty's Government, and when we are talking of millions of pounds, I suggest that it might just be advisable perhaps to consult the House of Commons to ascertain whether it wishes to pay over the money in advance of the court's decision on whether it is lawful.

It may be lawful, although there is doubt about that, but it is certainly improper for the Government simply to pay money out of the Contingencies Fund, which was originally created literally for disasters—storms, tempests, destruction and Acts of God. Whatever else the EEC may be it cannot be described as an Act of God unless one has an awful and forbidding view of the Almighty. Money can be paid in to the Contingencies Fund by statute and there is no statutory authority for that. Money is paid out of the Contingencies Fund without a word to us. We were not asked to approve this money to be paid to the EEC. We are asked to approve the money being paid back to the Contingencies Fund. What an extraordinary world it is.

Strictly speaking, the House is not allowed to discuss whether we ought to pay the money in advance of the court's decision, although we have been able to do so with the aid of the hon. Member for Colne Valley (Mr. Wainwright). Strictly speaking, we are discussing the paying back to the Contingencies Fund of money that has already been spent without the approval of the House. That cannot be an appropriate procedure.

I am glad that we have the Procedure (Finance) Committee considering the control of public expenditure. Consideration and action are necessary. We are discussing a clear example in which money can be paid without the authority of Parliament from a fund from which no statute has ever authorised expenditure—the Contingencies Fund—for a purpose the legitimacy of which no one yet knows, although the Law Officers of the Crown have advised that it is not lawful. The House is asked not merely to authorise that but to pay back money to the Contingencies Fund on the grounds that that is a perfectly proper procedure. Such financial control if applied in the average company would be criticised by its auditors. At the moment, we are in the position of auditors of the United Kingdom in a non-professional sense. As auditors, we are criticising such financial procedures.

7.52 pm
Mr. Hugh Dykes (Harrow, East)

It may be appropriate that an hon. Member who was not a member of the Select Committee should contribute to the debate. I hope that it does not embarrass the hon. Member for Colne Valley (Mr. Wainwright) too much if I congratulate him on raising this issue which is not only interesting but raises disturbing questions.

I was not surprised that the hon. Member for Nottingham, West (Mr. English) was able to argue that the grandest lawyers of the land are split down the middle and express diametrically opposed opinions. That is what we sceptical laymen expect from our grand lawyers when they are interpreting complicated constitutional and financial matters. This is an important example of a case in which the House of Commons, alas, to many hon. Members, seems intrinsically weak vis-à-vis the Executive. Its powers of surveillance and scrutiny not only of expenditure—whether it be the matter immediately to hand, which may be an esoteric piece of expenditure or more general, legitimate and conventional expenditure—but of general Government policy, are limited. It has been a matter of some pain to many hon. Members that Parliament, which has a long history of priding itself on being a robust institution, is weak vis-à-vis the executive branch, to use the American phrase, in its ability to supervise these matters.

The development of the Select Committees offers some encouraging glimmers of light—I say no more as they are at an early stage—but this is an excellent example of an hon. Member with a distinguished reputation being able to raise an important matter. I am sure that I am equally right to say that the Minister will come up with some acceptable explanations of the Government's position on the matter. It raises two general points about the way that the House handles the scrutiny of EC matters.

I know that how we hold those debates and whether we should have them in Committee as well, as we now do again, is a separate issue, but the conceptual control side of the EC budget, not its strategy or its politics—how large it should be and whether the VAT ceiling will be reached in due course—is a complex matter. It is important for those such as myself who are enthusiastic about the EC to be reassured as the years unfold about a complex mechanism which is difficult to handle in an international environment, with the countervailing powers of the institutions impinging on it. The Commission is in a difficult situation. It is trapped between the Council of Ministers and the European Parliament which naturally wants, in a secular way, to increase its supervision of these matters.

It is important that that financial and control process is seen to be done properly both in the international context and in such a way that individual national Governments relate to the collective EC budget. That would involve improving the work of the Court of Auditors. I would love to hear the private opinion of officials in the Court of Auditors about this matter. Perhaps we shall have an opportunity on another occasion.

I end as I began. As a non-member of the Committee I find it useful I pursue this matter closely and I await the Minister's reply with interest.

7.56 pm
Mr. Guy Barnett (Greenwich)

The House must be grateful to the hon. Member for Colne Valley (Mr. Wainwright) for raising this matter. I congratulate him on his good fortune. I use those words advisedly; nobody knows who will successfully raise a matter on the Consolidated Fund Bill. There is no doubt that this is an important matter which should have been debated in the House.

The Lord Privy Seal, when making a statement on 3 February, said: Of course it will be possible to debate the matter when the Supplementary Estimate is laid before the House."—[Official Report, 3 February 1982; Vol. 17, c. 306.] We have been granted that possibility thanks to the efforts of the hon. Member for Colne Valley and his good fortune. Surely that serves only to underline and illustrate the points that have been made—that the House ought to exercise some control over expenditures of this type but does not at present have the procedures to do so.

It is very important that we should establish such procedures, not least because of the case that has has been brought before the House today. I spent only a matter of months as a member of the European Assembly. Never during that time did it strike me as a body which even expected the responsibility to control expenditure. That is a responsibility which we grant ourselves but do not always satisfactorily fulfil. Hence, it seems all the more important that, whereas the European Assembly, if I may describe it in the technical sense as an "irresponsible" body, has voted to increase the budget in certain respects which, according to the constitution, may or may not be lawful, it nevertheless appears not to have the job of control which is the responsibility that historically and traditionally is ours. The debate has illustrated that point and several others with which I shall deal.

Mr. Christopher Price (Lewisham, West)

My hon. Friend says that he spent only a few months at the European Assembly. I spent a whole 12 months there. Is he aware that I never felt so ankle-deep in uncontrolled money in my whole life?

Mr. Barnett

Many hon. Members who have spent time in that body will share my hon. Friend's opinion.

I also congratulate the Select Committee on its work. I have read both its report and the oral evidence that it took. I also congratulate it on the speed with which the report was provided for the House. Admittedly, it was published only yesterday and it may not have been possible for many hon. Members to study it. Nevertheless, the Committee took evidence on 1 March and the report was ordered to be printed on 8 March—I take the point made by my hon. Friend the Member for Nottingham, West (Mr. English)—and it has still proved possible through sheer luck for the House to consider the matter today. Although the Lord Privy Seal was questioned on this at some length on 3 February, I am sure that everyone agrees that it ought to be properly debated.

The hon. Member for Colne Valley (Mr. Wainwight) raised two main points. I shall deal first with the question of the lawfulness of the European Assembly's action. I, too, was greatly disturbed by certain remarks which were made by officials in good conscience. I in no way criticise what they said, because in many respects they repeated what was said by the Lord Privy Seal in his statement on 3 February, when he said: We believe that a joint approach by the Council would be more powerful than an individual approach by Britain. What kind of approach is that to the European Court? Indeed, what kind of body is the European Court? I am no lawyer and I have had no legal training, but I have always understood that the quality of the case and not the quality of the appellant was the deciding factor in determining whether a case was right or wrong.

Mr. English

Although my hon. Friend describes himself as a layman in terms of the law, he is trapped in Anglo-Saxon common law attitudes. That is indeed the attitude of most people in this country in relation to the law. We are here dealing with the Roman law system, which was developed in a very authoritarian empire in which the emperor's decision was law and which was revised in another authoritarian empire by Napoleon, for example. My hon. Friend must appreciate that in the Roman law system the attitude of the authorities, of the executive or the legislature—in this case, the Council of Ministers is the legislature—is far more important than it is in the Anglo-Saxon system here, in America, or in the Commonwealth.

Mr. Barnett

I am grateful to my hon. Friend. I cannot personally judge whether he is right or wrong as I know little or nothing about Roman law. He will recall, however, that when evidence was taken by the Select Committee some very surprising statements were made by officials, of which I shall quote two to illustrate the reasons for my anxiety. Paragraph 31 of the oral evidence contains the suggestion that the decision one gets out of the Court is affected in some way by whether the reference to it is made by the Council of Ministers as a whole or just the United Kingdom". When that was questioned, there was the following very interesting reply, which highlights the position and the point that I wish to make: It is a court, after all, which is judging a dispute which has occurred within the terms of this Treaty, which is a Treaty which is political as well as everything else. That may be the clue to the problem.

One thing that I know about European law or about the way in which the court at Luxembourg works is that in making its judgments it is bound to take into consideration the preambles to the articles of accession and the rest, which is not the case under our system of law, and this is capable of leading the court to make decisions which would not be made in this country.

In the Select Committee's report, the point is again underlined. The report states that the Government's view was that proceedings launched by a unanimous Council were more likely to produce a sympathetic reaction from the Court. That is a most interesting and perceptive phrase.

The hon. Member for Colne Valley also raised the interesting point, as did others, that the payment is being made although it has not received the approval of the House. I shall not go into technicalities about the Contingencies Fund and the way in which it is administered or the purposes for which it is administered. I am prepared to admit that in the very exceptional circumstances that was the right step to take. Indeed, that was the opinion of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), who questioned the Lord Privy Seal on 3 February. Nevertheless, it strikes many of us as a remarkable procedure that although the legal opinion which apparently weighed heavily with the Lord Privy Seal was such as to suggest that the European Assembly's decision was not lawful, it was nevertheless decided to make the payment. Perhaps this was because it was recognised that the way in which the European Community and the Council of Ministers operate is such that one must give a bit and take a bit—that is, one gives a bit by making the payment on condition that the Council of Ministers will take up one's case with the European Court. That, again; highlights the unsatisfactory situation in which we find ourselves.

Finally, I refer to a point which, although it has been answered, has not been mentioned so far and should not be omitted from the debate. When I asked the Lord Privy Seal—I know that it is a somewhat theoretical question—what would happen if the House refused to sanction the payment, he replied: Then we shall have to reduce our payments".—[Official Report, 3 February 1982; Vol. 16, c. 306–9.] I am not sure exactly what those words mean, but if the House obtains the proper sanctions and scrutiny of payments of this kind that most of us would wish, we could run into a very serious situation in relation to European law. I am looking towards the horizon and assuming, although I hope that it will not be the case, that we shall remain in the EC. In those circumstances, we should run into a serious situation if the House really began to exercise the control over payments of this kind that many of us believe it should exercise. That is why I ask what on earth the Government would do, having made a commitment to the Council of Ministers, if the House of Commons subsequently refused to sanction it. That is the kind of problem that is likely to arise from the doubt about the relative power of institutions under the EC.

I have spoken to some whose opinion is that the European Court is likely to rule against the submission from the Council of Ministers on the grounds, first, that in making its judgments it takes into account the preambles to the treaties, and, secondly, that it regards as sacrosanct within the EC that which is communautaire.

I should be grateful for the Financial Secretary's response to some of the issues that have been raised by my hon. Friends, the hon. Member for Harrow, East (Mr. Dykes) and me in this debate. These are very important issues, and I am grateful for having had the opportunity to debate them.

8.9 pm

The Financial Secretary to the Treasury (Mr. Nicholas Ridley)

I, too, am grateful to the hon. Member for Colne Valley (Mr. Wainwright) for raising this matter. It is important and deserves the attention of the House.

I hope that the House will bear with me while I try to cover all the points that have been raised, but perhaps I might be allowed to do that in my own order. There is a logical sequence to the argument as well as to the debate.

It was a great sadness to me personally that, having been president of the budget council last winter, I was unable to secure an agreement with the Parliament on the budget. We very nearly made it, but at the last minute, by a small margin, the Parliament voted sums which were in excess of what the council had agreed to. My hon. Friend the Member for Harrow, East (Mr. Dykes) said that the United Kingdom Parliament was very weak and that it should strengthen its power to control expenditure. In my experience, the United Kingdom Parliament is much better at controlling expenditure than the European Parliament. Indeed, the European Parliament's main power is to increase expenditure. It is in that difference between the two Parliaments that one has first, the difficulty that we experienced last autumn and, secondly, the divergence between the two Parliaments in their functions.

I took the issue back to the Council on 21 December 1981. As a result of that meeting, we sought discussions with the Parliament to see whether we could negotiate a settlement of the dispute. However, after the Council meeting, the President of the Parliament adopted the budget without further ado and the situation that we are now discussing arose.

It so happened that the next Council meeting was on foreign affairs on 26 January 1982 when my right hon. Friend the Lord Privy Seal represented the United Kingdom. The Council decided what it should do in response to the Parliament's decision to adopt the budget. My right hon. Friend found that unanimity could be achieved only if all members of the Council paid the disputed extra in full, and, at the same time, as a sort of quid pro quo, if the issue were taken to the court. Meanwhile, I must make it clear that negotiations with the Parliament continued and taking the issue to the court was a long-stop procedure.

In the Council there were a large number of different views. Italy, Ireland and Greece wanted to make the payments. They did not want to dispute the Budget, or to take the Parliament to court. On the other hand, the United Kingdom and certain like-minded countries wanted to do what the House has suggested. It was possible to find consensus—a word that I should have thought would have been appealing at any rate to one hon. Member in the Chamber with liberal attitudes to these matters—only in the course which the Council finally adopted.

Mr. English

I am grateful but puzzled. The Financial Secretary seems to have said that what was basically a budgetary issue, to be settled in a Council of Finance Ministers of one rank or another, was decided in a different way because by sheer accident the next meeting was a meeting of Foreign Ministers of one rank or another. How does an issue of budgetary importance become an issue of foreign policy?

Mr. Ridley

I had hoped that my trailer would cover the full story and would save the hon. Gentleman the trouble of intervening. However, the answer is that in community affairs it is quite usual for urgent business to be taken by the next council on the agenda. As the next council was a foreign affairs council, the matter happened to be handled by it, rather than by the budget council. There is nothing unusual about that.

Negotiations are continuing with the European Parliament on both the wider and narrower levels. However, if there is no agreement, we shall seek the court's ruling. The report of the Treasury and Civil Service Committee stresses three concerns about the Government's decision. First, it was asked why we should pay in full and, if we had to do so, why we could not pay it into court or reserve the money to a stakeholder. However, the money has been paid into the EC No. 1 account, held by the Paymaster General and under the control of the Treasury accountant.

Therefore, the money is with stakeholders—ourselves. As the money is still within the Treasury, no interest is payable and interest will not become payable until such time as the issue is determined by the court or by negotiation. If at any time after the money became due—technically on 1 February—we had not taken such action, interest would have become payable to the Commission. Therefore, the interest was working in support of what the Government did. By taking such action we shall not incur interest and if we had done the opposite we would have incurred interest if the court found against the Council. We paid in full because we thought it important to achieve a consensus and that it was right to go with the majority to achieve a balance between court action and paying in full.

Mr. Richard Wainwright

Does the hon. Gentleman agree that the money is wholly available for spending by the Community and, as a Treasury witness told the Select Committee it is being spent en principe and is not being held in any neutral state?

Mr. Ridley

The answer is "en principe". The money is available only en principe and is not being used. Many of the disputed programmes are tacitly not to be implemented by the Commission until the dispute has been resolved. Therefore, the money is in suspense pending the settlement of the dispute.

I turn to the major worry of why we paid and whether we should have paid the extra. The quotations that has been read out are fair and reasonable descriptions of the situation. The Treasury officials who gave evidence have described the court's position accurately. Of course, the court is not British. In this case, it is acting as a constitutional interpreter of the Treaty of Rome and is adjudicating not on a body of law or on statute but on a treaty that is far from being a finite statute. Perhaps it is necessary to take the House back to the issue as to why the budget was disputed and why the Parliament and the Council are in disagreement. The dispute is about what items within the budget are obligatory or non-obligatory. On obligatory items, as the House will know, the Council has the last word about the amount of money. On non-obligatory items, it is the Parliament which has the last word. What the Parliament sought to do last November was to make non-obligatory certain items of expenditure which the Council thought should be obligatory.

The definition of obligatory stems from the Treaty. It is simply that items of expenditure which follow automatically from the Treaty of Rome are obligatory. That is not finite or precise. It is not a matter which can be the subject of a legal judgment of the sort that we are accustomed to. It is a question of interpreting the Treaty. If the word was used, I do not deny it; it must have a certain political element about what is the right way to develop the institutions of the Community.

The concept of lawfulness which the hon. Member for Greenwich (Mr. Barnett) put forward is hard to interpret in the light of the issue which is before the European Court.

The Treasury and Civil Service Committee and the hon. Member for Colne Valley (Mr. Wainwright) raised the question whether we were right to treat the extra payment as we did for this Parliament. I am glad that the Committee thought that we were right not to pay the extra money out of the Consolidated Fund. We considered on legal advice what was the right way to treat the House of Commons in relation to our decision. Our legal advice was unanimously to the effect that we should make a statement to the House which was the opportunity for the House to be informed of what had happened, to lay a Supplementary Estimate, and to make it clear that a debate could be held on that Supplementary Estimate and that it would be welcomed by the Government.

The report of the committee says that an immediate supplementary estimate on which the House could have taken a decision should have been laid. It has been said in the debate that we employed a back-door method by making the payment out of the Contingencies Fund. This is perhaps the case I have to answer to the hon. Member for Nottingham, West (Mr. English).

Payments were due to the Community on 1 February. The Government came to their decision only a very few hours before that. Interest would have run from 1 February if we had refused to pay. If the Government had presented a Supplementary Estimate on 3 February, the day my right hon. Friend made his statement, then under the House of Commons Standing Order No. 18 it would have been 10 February before a Supply resolution could have been taken and at least a further day or two before a special Consolidated Fund Bill, which would have been required, could have been passed through the House. In any case, it would have been unhelpful for the conduct of the business of the House for the Government to have presented a special Supplementary Estimate early in February when the spring Supplementaries were to be presented on 18 February. In either way of handling it, it would have been too late to have validated the payment through the House, so to speak, before the payment had to be made.

The Contingencies Fund is for cases which arise frequently where an urgent payment of money has to be made by the Government and there is not time to validate it by a special procedure, nor are the Estimates before the House at that moment. As the House will know, this is something which has been done for many years and which has been common. Whether it be a hurricane or a flood or whether it be an urgent need to honour our word given in Brussels on a matter like this, it does not destroy the point that it was urgent and had to be done.

I must point out to the hon. Member for Nottingham, West that there is no doubt about the rightness of this procedure. I refer him to the Third Report of the Public Accounts Committee for 1978–79 where the Committee said: The Treasury told us that they had no residual doubts about the propriety of the Contingencies Fund transactions. So where these lawyers who are split down the middle can be, I do not know. We certainly have no doubt. Indeed, the Committee itself endorsed the procedure. I quote again from paragraph 31: In our view it provides the flexibility necessary in order to finance urgent Government expenditure in advance of parliamentary authority. Parliament has always been aware of the Fund and its uses. Its existence has been recognised in many statutes. We are satisfied that the legal advice obtained by the Treasury has resolved any doubts about the status and use of the Fund. We also welcome the assurances given by the Treasury and the Comptroller and Auditor General that use of the Fund is closely controlled and monitored, in accordance with the operating rules which have been reported to Parliament.

Mr. Michael English (Nottingham, West)

I am grateful to the hon. Gentleman. I cannot obviously reveal the evidence that was originally requested by the old Expenditure Committee and received by the present Treasury Committee. But, as a footnote in this report states, we are going to append and publish it in one of our next two reports. I can only assure the hon. Gentleman that some of the most eminent constitutional lawyers in the land have taken the view that he has just adumbrated and about half of them have taken exactly the opposite view.

The reason for this is perfectly simple. Whilst there is statutory authority for payments into the Contingent Fund there is no statutory authority for payments out of it. It therefore becomes a question whether the Government have authority for payments out of it not based on statute but at common law. That is something that goes back long before the modern principles about the payment of money. Tonight we are indeed engaged in passing a Bill that authorises the expenditure of money. That is what we are actually doing. The question is whether the Crown can spend money without being authorised by Parliament to do it. That is where the doubt as to the legality lies. I do not want to go into it now, but I assure the hon. Gentleman that when the evidence is published he will realise that the matter is not quite as certain as he may have been advised.

Mr. Ridley

It is not uncommon for the hon. Gentleman and me to find ourselves at opposite ends of an argument. I never realised before that either of us was of the calibre of legal expertise to be in the category in which the hon. Gentleman put us. We await with interest the next report from the Committee to which he referred, but at present I must be firm in stating that the position is as reported by the PAC. The Government themselves have a strong view about the matter—that that is what the legal position is and that is how they will operate.

The classification talks between the Parliament, the Council and the Commission about what sort of expenditure should be classified as obligatory and what as non-obligatory are taking place. The whole question of the Parliament's margins—what items it can increase and what it cannot—and other issues are being discussed in that series of talks.

It is our earnest hope that we can avoid these budget debates in the future and can work out a sensible formula for carrying out these tasks. I hope that the talks will also result in an agreement between the Council and the Parliament about the 1982 budget, which is the subject of our difficulty. If not, we shall certainly pursue our case in the courts and we shall report to the House whether the money comes back, because we have won our case, or whether it is validated by the court as an expenditure, in which case it will be validated under the European Communities Act as properly expended out of the Consolidated Fund.

I hope that the House will feel that we have not treated it in a cavalier manner in this unusual and difficult situation. I hope that what I have said tonight will show that we have tried to keep the House informed and to give it every opportunity to control the Government in the matter of this expenditure.