European Community Budget

HC Deb 21 February 1983 vol 37 cc665-750

Mr. Speaker

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

3.33 pm

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

I beg to move, That this House takes note of European Community Documents Nos. 4348/83 (Amended proposal for contracting loans under the New Community Instrument for the purpose of promoting investment within the Community), 10960/81 (Mandate of 30th May 1980—Report on the application of the Financial Mechanism), 5980/82 and 8874/82 (Commission's second and third reports on the implementation of supplementary measures in favour of the UK), COM(83)23 (Preliminary draft supplementary and amending budget No. 1 for 1983), the subsequent draft supplementary and amending budget No. 1 for 1983, 4417/83 (Proposal for a Council regulation amending Regulation No. 2744/80 establishing supplementary measures in favour of the UK, 4418/83 (Proposal for a Council regulation establishing specific measures of Community interest relating to energy strategy) 11125/82 (Communication from the Commission on the compensation for the UK: the subsequent solution), 4826/83 (Commission communication on the future financing of the Community); and supports Her Majesty's Government's efforts to negotiate arrangements for the Community budget which will ensure that the sharing of burdens between member states is equitable. The motion lists 10 documents relating to the Community budget which the Scrutiny Committee has recommended for debate. I should like to thank the Scrutiny Committee, under the chairmanship of the hon. Member for Birmingham, Erdington (Mr. Silverman), for all its work and for recommending the documents for debate. The debate is about the European budget and our contribution to it. It falls to me to report to the House, because I am the Minister who represents the Government on the Budget Council. The Scrutiny Committee has not recommended for debate the Labour party document recently published by the hon. Members for Liverpool, Walton (Mr. Heffer) and Aberdare (Mr. Evans). No doubt, however, they and others will talk about it. They will try to turn this debate, as they do all European Community debates, into a debate about whether we should be in or out—a kind of rehash of the debates that took place leading up to the referendum organised by the Labour Government in 1975. The Government believe that the issue was settled by the people, who voted 67 per cent. in favour.

Nevertheless, I cannot resist sharing a few gems from the document with the House before I come to the Community budget. The most important reason for the growth in our trade with Europe, which grew from 20 per cent. in 1958 to 43 per cent. in 1982, is given by the hon. Gentlemen on page 5 of their document. It states: It has come about through the growth of foreign travel and the use of international languages. Tell me another! On page 32 the document states: On women's rights decisions of the European Court have conferred some benefits but they fall short of the Labour party's intentions in this area. Watch out, chaps!

Mr. Peter Shore (Stepney and Poplar)

The Financial Secretary is in a somewhat bantering mood. May I turn him to a rather more serious course? He has referred to the increase in the percentage of Great Britain's exports to the EC. Will he tell us what percentage of our increased exports are oil exports and what has happened to manufacturing exports over the past 10 years?

Mr. Ridley

I shall be delighted to give the right hon. Gentleman that information if he will specify over which period of years. Perhaps he will put down a question and I shall give him full and accurate information.

As the House knows, in December the European Parliament rejected a supplementary budget which made provision for our budget refunds for 1982. We were naturally disappointed by that vote, but we saw it as a stage only in the process and the Finance Council agreed the following day that it would respect the agreement of 26 October on our refunds for 1982. If would then do all that it could to have it implemented. The Commission undertook to ensure that the United Kingdom and Germany would not be put in a worse position than was intended under that agreement. The Commission has honoured that undertaking.

In response to the rejection of the 1982 supplementary budget, the Commission prepared a revised supplementary budget, this time for 1983, which the Council broadly endorsed and sent to the Parliament. As hon. Members will know, in its plenary session in February Parliament voted to adopt the new budget. It also gave opinions on the two draft recommendations which provide the legal basis for our refunds. Therefore, the way is now open for the Council to adopt regulations and for the Commission to grant us our basic refund for 1982 of £630 million gross or £500 million net as agreed last October.

Mr. Tony Marlow (Northampton, North)

Although these refunds will be coming in, they will be late, and late money deserves interest payments. Will we, in effect, be in the same position as we would have been had we had the money at the right time? Are there any strings attached in terms of people going through our books and deciding what we can spend money on?

Mr. Ridley

I shall be coming to the second point raised by my hon. Friend, but on the first point I assure him that the Commission deposited the money in an account in London so that we did not pay interest on it and we had full use of the money. It did not cost us anything.

With the exception of some hon. Members on the Opposition Benches, the House will welcome the outcome. Now that it is virtually all over, I should like to share three thoughts with the House about these events. First, on the problem of budgetary imbalances, I believe that there is a new sense of urgency in the Community—a new mood of realism, a feeling that there must be a lasting solution and that things will not be quite the same again. Indeed, the rejection of the budget may prove to be a blessing in disguise, although I agree that the disguise seemed extremely good last December.

Between the rejection of the 1982 supplementary and the adoption of the 1983 supplementary there was urgent and highly constructive debate among Council, Commission and Parliament. I took part in it. I spent a great deal of time in Brussels and Strasbourg. I believe that the Parliament has come a long way towards persuading the Council of the urgency of finding a lasting solution to the problem of unfair budgetary burdens. We have been arguing since we came to power for such a solution. The Parliament, by using its powers over the budget, has insisted that progress must be rapid. I also think that the Parliament appreciates that, with the best will in the world, putting a lasting solution in place is bound to take time and that interim arrangements will be needed to pave the way for that lasting solution.

This new sense of purpose is heightened by the Commission's announced estimates of the next budgetary positions of individual member states for the calendar year 1982. They show that before refunds our net contribution for 1982 was about 2 billion ecu, or £1.2 billion. That has made it clear to everyone that the problem has not gone away.

My second thought on looking back is how right we were not to over-react in December, as the right hon. Member for Stepney and Poplar (Mr. Shore) typically did. We judged at the time that the best course would be to see whether we could turn the events of December to good account. I believe that we have done that. I pay tribute to the good counsel and good sense of British Members of the European Parliament at Strasbourg. We worked closely with them, particularly our friends and colleagues in the European democratic group.

Thirdly, the Council reached the agreement with the Parliament without making unacceptable concessions. In its rejection of the 1982 supplementary last December, the Parliament drew attention to a number of specific issues in addition to the urgent need for a lasting solution to the budget problem instead of ad hoc arrangements—the staging of payments of grants to the United Kingdom and Germany; the need to integrate the payments with Community policies, not least energy; and the classification of expenditure as obligatory or non-obligatory. The agreement finally reached covered all those points in a manner satisfactory to us. I shall explain how.

On the staging of payments, the Council agreed that grants should be paid as to 90 per cent. immediately, with the remaining 10 per cent. following certification of expenditure on programmes attracting grants. That repeats the arrangements made for our 1980 and 1981 refunds.

The Council agreed to the Commission's proposal for dividing our refunds between supplementary measures of the type that we received for 1980 and 1981 and special energy measures under a new regulation. About £230 million of our total gross basic refund of £630 million is to be granted under the new energy regulations. Grants under that regulation will be classified as non-obligatory in accordance with existing practice for other Community expenditure on energy. The agreements reached among the institutions on these matters are reflected in documents Nos. 5 to 8.

I should now like to take the House through the budget refunds that have been won over the past three years by the Government.

Mr. Teddy Taylor (Southend, East)

Would the Minister be kind enough to tell the House what happens if the budget committee of the European Assembly is not happy with the way in which we have spent the money on special energy measures? What happens if it feels that our allocation is not in accordance with its view of what are special energy measures?

Mr. Ridley

The list of qualifying projects is nearly completed and will soon be agreed. I assure my hon. Friend that there is no likely difficulty about finding adequate candidates to absorb all the money provided and, indeed, much more.

Mr. Marlow

Could my right hon. Friend tell the House—this is the important part—where the power resides? Who can finally decide whether we get that money?

Mr. Ridley

The processes are now complete except for the final approval by the Council. That money will now be paid. We are discussing the end of this particular saga. But I must tell my hon. Friend—although I am sure that he knows—that there are two budgetary authorities, the Council and the Parliament. The budgets must be agreed by both before they can become legal.

I would now like to take the House through the budget refunds that we have won over the past three years. The refunds already received for 1980 and 1981 amounted to over £1.4 billion net of our gross contributions. We expect to be granted next month a further £500 million of basic refund for 1982. If the Commission's latest estimates for our net contribution for 1982 are confirmed, we should be entitled to further repayments under the risk-sharing arrangements. That brings our total net refunds over the three years to about £2 billion. That shows what can be done by patient negotiation and perseverance.

I hope that it will not be thought immodest if I point out how our record compares with that of the Labour party. The Labour Government, in their infamous renegotiation of the terms of entry, secured agreement to a financial mechanism regulation designed to reimburse some of our gross contribution in certain circumstances. How much money have we had from that regulation? Not one single ecu. The right hon. Member for Stepney and Poplar did not read the small print which prevented us from qualifying. The second document listed in the motion gives that very small print.

Mr. Shore

Did the right hon. Gentleman agree the original mechanism, not merely in principle? Did he vote for the package of renegotiation when it came before the House in 1975? Did he not have the opportunity with his colleagues to renegotiate the financial mechanism? Since the renegotiation of the financial mechanism in 1980, has the situation improved? Have we received a single penny under the renogiated financial mechanism?

Mr. Ridley

I voted to support the Labour Government"s attempts to improve our refunds from Europe. I imagine that the right hon. Gentleman will vote in favour of our very much more successful attempts to do the same.

On the second point, yes, we did renegotiate the financial mechanism and, no, we got nothing out of it, and the right hon. Gentleman knows that perfectly well. It was overridden by the agreement of May 1980 under which we got the full refund. That is much more successful than anything the right hon. Gentleman did.

Mr. Julius Silverman (Birmingham, Erdington)

When the May agreement was brought before the House, did not the Government make a strong point that there were two elements in it—the financial mechanism and the supplementary measures? At that time the Government attached great importance to the financial mechanism, even though we have not had a penny from it since.

Mr. Ridley

Yes, and that shows how wise it is to provide two triggers. If the first trigger does not succeed, at least the second does.

The Labour party has made much of the cost of our membership being £1 million a day on average since we joined the Community. In the Labour Government's last three years of office, the United Kingdom's contribution was £1 million a day in 1977 and £2.25 million a day in 1978, rising to more than £2.5 million a day in 1979.

The Opposition amendment relates to our estimated net contribution of £616 million for the financial—not calendar—year 1982–83. That figure is taken from the recent public expenditure White Paper. However, special factors have inflated the figure for the current year. We had an unusually high VAT rate in 1982 and our basic refund for 1982 assumed that our net contribution would be much lower than it turned out to be. We are therefore due to receive extra refunds later this year through the risk-sharing arrangements. When one adds to that the fact that nearly £2 billion has been returned through our efforts, the House can judge whose stewardship of our European budgetary affairs has been more successful.

The greater part of our refunds for 1982 will again take the form of supplementary measures, but 400 million ecus, or £230 million, will be for special energy measures. The draft regulation makes it clear that the new special energy measure will be confined to the United Kingdom and Germany. They do not amount to a new Community energy policy.

The document referring to the new Community instrument has a separate subject from the other documents for debate. It demonstrates a positive and helpful aspect of the Community endeavour, which will be unwelcome to Opposition Members. The facility is designed to cover borrowing in the Community's name to help to finance projects in member states in energy, industry and infrastructure. The aim is to back up member countries' efforts to stimulate investment and to try to control unemployment. The further 3 billion ecus now being approved will cover an additional category of "other productive sectors" and, as before, the Council will continue to authorise each tranche of borrowing and to lay down guidelines on lending. I commend that constructive development.

The vital question, however, is that of finding a long-term solution to the financing, including our own budget problem. The most positive result of recent events has been the growing consensus in the Community about the urgent need for a lasting solution. Discussions between member states are now beginning. They will not be easy, but there is no need for pessimism. The hon. Member for Walton wrote in his infamous document: Any agreed restructuring of the EEC budget is most unlikely given the balance among the Member States". In the same paragraph he alleged that West Germany's budget receipts and contributions have tended to be broadly in balance". Such ignorance is worrying. Germany's net contribution has not been £1 million a day; it has been more like £3 million a day. It is necessary to approach these discussions constructively and optimistically with a firm determination to find a lasting solution which, as the motion states will ensure that the sharing of burdens between member states is equitable. The second to last of the documents listed in the motion contains ideas for interim arrangements which the Commission put forward last autumn. The last of the documents, the Commission communication about the future financing of the Community, is relevant to the long-term solution. The Commission's paper on future financing contains a number of far-reaching ideas which if implemented, would have major implications for the scale of the Community's expenditure and revenues. The paper is clearly a discussion document. The Commission has imported our term "Green Paper". It is not a firm set of proposals; firm proposals are promised for this spring. The green paper begins by calling on the Community to develop and extend non-agricultural policies and produce a better balance in the budget between agricultural and other spending. That general objective is one that we endorse.

The Community's expenditure on agriculture has fallen from over three quarters of the budget when we took office to about two thirds now. As to the development of Community policy, we recently published a booklet called "Positive Approach" which sets out some of our own ideas.

The green paper then suggests that the extra financing needed for the development of Community policies should be found partly by containing the growth of agricultural expenditure—an objective that we share—and partly by increasing the Community 's revenues or own resources. We do not share the Commission's views on the need for extra own resources. No one has yet demonstrated that an increase in own resources is necessary. If agricultural expenditure is properly controlled, the Community's existing revenues should provide the necessary financial resources for the development of Community policies and, indeed, for enlargement.

It would be wrong to rule out the idea of changes in the structure of own resources as opposed to the total of their yield. Our budget problem arises because we pay into the Community budget much more than the Community pays out to us. That is primarily because we are not a surplus agricultural producer. One obvious contribution towards solving the problem would be to restructure own resources so that we pay less. The Commission's paper discusses the possibility of a new resource, based on the value or value-added of agricultural production in each member state. Our share of that would be considerably smaller than our share of VAT own resources.

If VAT own resources were to be partly replaced by an own resource based on agricultural production, it could make a useful contribution towards reducing the United Kingdom's budgetary burden. It would be even better if it were based on the production of agricultural surpluses. The green paper states, rightly, that one objective of any reform of the Community's financing system should be to contribute to the correction of budgetary imbalances between member states, but it does not contain specific proposals. There are some hints in the sections dealing with the proposed new agricultural own resources and financial equalisation systems. We shall make it clear to the Commission that it should give special attention to this crucial problem in its further work between now and the spring.

Our views on the nature of a lasting solution were summarised in Brussels earlier this month by my right hon. and learned Friend the Chancellor of the Exchequer. Copies of his statement are in the Library. We want an arrangement that will solve the problem of unfair budgetary imbalances once and for all and which, once implemented, will remove the need for budget refunds and take the entire subject off the Community's regular agenda.

Mr. Eric S. Heifer (Liverpool, Walton)

The right hon. Gentleman says that the views of the Government were outlined by the Chancellor of the Exchequer in his speech on 8 February, but the Chancellor said nothing—nor has the right hon. Gentleman today—about the other proposals in the document, one of which is: Any new development of the Community's financing system should, in the Commission's view, reflect and enhance the role of the directly elected European Parliament. An important part of the document is the suggestion to strengthen the Parliament and the Commission, the introduction of majority voting, the introduction of all-round harmonisation and reducing the House of Commons to a regional body. Is that the Government's view? Are they prepared to give us a categorical assurance that they will not accept that proposal, as the Minister was prepared to give about not increasing the one per cent. VAT?

Mr. Ridley

My right hon. and learned Friend's statement was made on the same day as the publication of the Commission's green paper, so of course he did not refer to it. They were coincidental. On budgetary contributions, the Parliament seems to be on the same side as the vast majority of hon. Members. We must see how the matter evolves. The powers of the Parliament are laid down in the treaty and it would require major upheavals to change them. We should not consider the matter deeply on a day that has been set aside for discussing the budgetary imbalance.

The solution should include the development of Community policies as one component, but there is no way in which that could solve the problem completely. A lasting solution is likely to require changes in the financing of the Community as well. My right hon. and learned Friend the Chancellor of the Exchequer mentioned two practical ideas in this connection. They are ideas—not proposals—which would solve the problem with minimum disturbance to the Community's existing arrangements. One is that the VAT liabilities of member states now bearing excessive budgetary burdens might be reduced by placing an upper limit on them. Such limits should be calculated by reference to relative prosperity and GDP. The other is that the VAT liabilities of net contributor countries might be reduced to take account of the difference between their shares of CAP receipts and their contributions to CAP expenditure, this relief being progressively phased out for more prosperous net contributor countries.

The Government are being constructive and optimistic. I do not disguise the fact that hard negotiation lies ahead. The Government will continue to negotiate with determination in the interests of this country. I commend this approach to the House.

Opposition Members are totally preoccupied with the idea of withdrawing from the Community and retreating into isolation and protectionism cloaked in international rhetoric.

The document of the hon. Members for Walton and for Aberdare contains one gem, with which I would like to close: The Labour party is an internationalist party. We believe in a wider European unity. We hope that eventually the whole of Europe will be under a democratic Socialist system. It is curious that those countries which find it necessary to include the word "democratic" in their titles are always countries which do not practise democracy. An example is the German Democratic Republic. Why does Europe have to be under a socialist system? There has been no shortage of socialist governments in the European Community, including the last United Kingdom Government. Why are United Kingdom Socialists so different from French or German Socialists? Do the Opposition want Europe to be like the east European satellites? Would it not be better if those countries were free members of the European Community? One of the important points about the European Community is that it helps to avoid—and this is what the Opposition say they want—the whole of Europe falling under a democratic Socialist system.

Mr. Heffer

rose—

Mr. Ridley

That is the kind of European Community from which I for one would certainly wish to withdraw.

I ask the House to support the motion and to reject the amendment, if the Opposition have the temerity to move it.

4.4 pm

Mr. Peter Shore (Stepney and Poplar)

I beg to move to leave out from semi-colon to end and add 'deplores the continuing failure of Her Majesty's Government to end the scandal of Britain's inequitable contributions to the EEC; recalls the unanimous Resolutions of the House of Commons on 16th July and 22nd November 1979 urging a fundamental reform of the Budgetary arrangements so that Britain's contribution to the Budget is at least not greater than its receipts; declines to approve the Preliminary Draft Supplementary Budget under which the Government has agreed that Britain is to make a further £616 million payment to the EEC in 1982–83; and demands that the Government resist any new EEC proposals that would increase the tax burden on the British people.' The House has listened to a speech that I can best describe as something of a sandwich. There was frivolity at the beginning and at the end. In the middle there was a large slab of platitudes and wishful thinking. Frankly, the Financial Secretary's capacity to mislead the House is far below his ability to deceive himself. That is a judgment that I have formed, having listened to his attempts to explain and to see a way out of the present impasse, in which we have been for so long, in our budgetary arrangements with the EC.

The Financial Secretary opened his remarks with some reference to trade. As it is the totality of our relationships that gives so sharp and cutting an edge to the budget imbalance, it is right for me to inform the House and the Financial Secretary, as he does not seem to know anything about it at all, what has happened to our balance of trade since we joined the EC.

I shall quote the incontestable figures in terms of our manufacturing and semi-manufacturing trades. In 1972, which was the year before we joined, the United Kingdom had a balance of £82 million in its manufacturing trade. In the first half of 1982—this is appalling—our deficit was about £4,800 million. The reason why this has not yet turned into an unmanageable balance of payments crisis is that in 1972 we had a virtually nil balance of trade in oil products with the members of the EC, but in the first half of 1982 we were exporting an annual £4,000 million of North sea oil which helped, but did not overcome, the defict that had accumulated in our manufacturing trade.

It is against that background—and it is only one of the major issues that we seek to raise on the totality of issues involved in our membership of the EC—that we turn to the special levy, the special tax and the special exaction that is imposed upon the British people through the budgetary arrangements.

This is the sixth debate in this Parliament on Britain's inequitable contribution to the European Community budget. In the first of these debates, on 16 July 1979, the House unanimously approved the motion, substantially reiterated in the Opposition amendment today, that in view of the United Kingdom's massive and ever increasing net contribution to the Community Budget"— the Goverment should— 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. That same resolution was reiterated in the second debate on 22 November 1979 when the Chancellor of the Exchequer outlined the Government's two main policy objectives: first, that there should be a broad balance in the United Kingdom's accounts with the Community", and, secondly, that arrangements embodying a broad balance must operate in respect of 1980 and subsequent years. As the Chancellor then put it: This time the agreed solution must be one which, so far as can possibly be foreseen, will last as long as the problem … Neither I nor any succeeding Chancellor will wish to make speeches in the House in a year or two about yet another debate within Europe on this same subject."—[Official Report, 22 November 1979; Vol. 974, c. 593–97.] That was the Government's position, and hon. Members know that at the Dublin summit, which followed in late 1979, in spite of the vehement statements by the Prime Minister that she would no longer play Sister Bountiful to the Community—it was, after all, our own money—the Government were driven to a shoddy, shameful and continuing unsatisfactory compromise.

Since the stamp of the Chancellor of the Exchequer was put upon the two major objectives of the Government's policy in relation to the Economic Community in those debates in 1979, and again in his attempts to explain why he did not get it in 1980, I greatly regret that the right hon. and learned Gentleman is not defending this further failure from the Government Front Bench today. I have been in touch with him, and he knows very well that I expected a senior member of the Government to be speaking from the Dispatch Box today. I hoped that we would at least have had an opportunity of substantial answers not only to the questions that I shall put—I shall put quite a few—but to the pertinent quesion of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) about the Government's attitude towards the latest proposals to remove from the House further powers on financial and taxation arrangements, as is suggested in the documents before us.

As a junior Minister, the Financial Secretary is not entitled, and has no right, to speak for the Government on this matter. That is all the more reason why the Chancellor, who is not exactly on the eve of his own Budget, should have been present today. He is not attending any international conference; he is sitting in Great George street thinking of how he can dress up his package on 15 March in a way that is most acceptable to the electorate.

I have outlined the Government's position in 1979 before the Dublin conference. By the time we reached our third debate on 2 July 1980, the Government had settled for an arrangement under which we had to be content with a substantial refund. That arrangement fell far short of broad balance. Moreover, it would last initially for two years and, at most, for three. Meanwhile, the Community agreed to make what the Chancellor described as a fundamental review of the scope, balance and operation of the Community budget, the stated purpose of which would be 'to prevent the re-occurrence of unacceptable situations' for any of the member states."—[Official Report, 2 July 1980; Vol. 987, c. 1556.] At the centre of today's debate, amid all the documents before us, is the outcome of the third and final year of the 30 May 1980 agreement. Amid those papers is the crucial one containing the Government's weak-kneed agreement to pay no less than £616 million to the Brussels authorities for the fiscal year 1982–83. However £616 million may be described, it is clearly not a broad balance. It is better described as a good example of the so-called resolute approach.

The fundamental review of the Community budget—the so-called mandate of 30 May 1980—has run predictably into the sands. As I warned at the time, the so-called mandate gave the Commission and the Council anything but a free hand. They were hedged in from the start by their terms of reference. Those included the Council's specific agreement not to call into question the common financial responsibility for Community policies that are financed from the Community's own resources; nor to call into question the basic principles of the CAP.

Mr. Marlow

Will the right hon. Gentleman explain why he is so scathing about the Government when in 1978 the deficit was more than £800 million and in 1979 it was £900 million? That was a time when the Labour Government had responsibility. Instead of raking over the ashes and coals of the past, would it not be a favour to the House if the right hon. Gentleman said how we could get out of the mess that we are in at present?

Mr. Shore

I am sure that I shall assist the hon. Gentleman in his great distress before I finish my speech. I was among those who rejected not only the arrangements in 1975, which led to the payments that we are now financing, but the original agreement that set the whole arrangement in concrete, not in 1975, but in 1971 and 1972 when every member of the then Opposition voted enthusiastically for the arrangements from which we are now seeking to disengage. The hon. Gentleman will forgive me if I do not feel the slightest sense of self-reproach when I discuss this subject.

After 13 months of deliberation, the Commission submitted its report of 22 June 1981. It is a long, turgid essay on relaunching the Community, on strengthening the powers of the Commission, on increasing the Community's resources, and it is a plea for economic and monetary union. The United Kingdom's disproportionate budget contribution—the unacceptable situation, which was the whole purpose of the study—was dealt with in precisely six paragraphs in the 50-paragraph text. For the Commission, the main thing was not to meet the British need but to increase its own revenues to finance new policies. It summed it up as follows: the Commission cannot accept that an artificial ceiling be put on own resources and propose that they be increased when this becomes necessary to achieve agreed objectives. The report on the mandate was not accepted by the Council of Ministers, and last year, in a desperate attempt to force agreement on a permanent solution to the United Kingdom's budget problem, the Government sought to withhold their approval from the annual farm price review. In short, they sought to exercise their veto on the financing of the CAP under the Luxembourg compromise. That occurred in May last year, but that effort led to the other members of the Community jettisoning the Luxembourg compromise and reverting to the qualified majority voting provisions as laid down in the Rome treaty. Thus, the central constitutional convention of the EC—the right to veto, which was presented as the principal safeguard to the British people in the 1975 referendum—was at a stroke overturned.

The Minister of Agriculture, Fisheries and Food bitterly complained in the House that the Council had violated an accepted convention under which all previous price fixings had been adopted. The following day the Prime Minister said that the decision was "without precedent". The Foreign Secretary was then dispatched to the subsequent Council of Ministers, but came back to the House with the unsurprising news that he could neither reverse the decision on agriculture prices nor attain any binding promise from his EC colleagues that they would not in future, when they thought fit, override the British veto.

That was in June 1982. Since then we have not had a word from the Prime Minister, the Chancellor of the Exchequer or the Foreign Secretary. I suppose that this is another example of the resolute approach. So, for the third year running, we have no broad balance, which the Chancellor set out to achieve three and a half years ago, nor do we have a permanent solution. Instead, we have the payment by Britain of £616 million, a continuation of our position as the second largest net contributor to EC funds, and no agreement is even in sight on the long-term solution of the budget problem.

Indeed, following their abortive attempt to play the veto card last May, the Government found it extremely difficult to get any agreement at all, and only then after quite exceptional delays and with increasingly humiliating conditions.

One cause of last year's problem was the failure of the revised financial mechanism to operate. That was the subject of an earlier exchange between the Financial Secretary and myself. As document 10960/81 makes plain, one of the main qualifying conditions for the operation of the financial mechanism—that the claimant country has a per capita GNP of less than 85 per cent. of the average per capita GNP of the Community—was not met. It was not met, not because the per capita GNP of the United Kingdom increased in relation to the Community's average—on the contrary, it actually fell—but because the pound sterling, owing to the Government's insane monetarist policies, rose against the ecu. As the document puts it: The main factor that underlies the failure of the mechanism to operate as intended is the increase during the period 1979 to 1981 of the United Kingdom's GPD share expressed in ECU. Over this period the rate of real growth in the United Kingdom remained on average significantly below the Community average. At the same the time, the value of the pound increased relative to ECU while the United Kingdom had an above average rate of inflation. That is what the document says. I do not know how the Financial Secretary reconciles that with what he said about it to the House half an hour ago.

The overvaluation of sterling that followed the money supply and high interest rate policies of the Government led not only to the decimation of British industry but to the wiping out of our claim for monetary refunds under the financial mechanism. The whole of this year's repayment had to be financed under the guise of supplementary measures. As we all know, that is the device under which refunds of the United Kingdom's money are allocated to regional projects, to infrastructure projects and, increasingly now, to energy projects in the United Kingdom.

Having at last reached agreement on this in October 1982, the European Assembly then decided to intervene. It rejected the proposed supplementary budget and forced the Commission and the Council of Ministers to come up with a new package, designed, as the explanatory memorandum to document 4417/83 puts it, to bring out in a more positive manner the Community character of the measures proposed. Earlier, I used the word "humiliating" advisedly when I described the conditions under which we receive our money back. These refunds of our money that the Commission, the Council of Ministers and now the European Assembly have so kindly permitted us to receive, are subject not only to their allocation to different projects in the United Kingdom but to inspection and invigilation by the Commission staff. I know that the hon. Member for Southend, East (Mr. Taylor) will listen to what I say now with particular interest. As the explanatory memorandum to document 8874/82 describes it, the Commission staff carried out a control check on the Yorkshire and Humberside railways sub-programme in March, and in May, further checks were made of the land reclamation and housing sub-programmes in Northern Ireland. The purpose of these checks was to verify the use of the Community funds granted and to check that the sub-programmes were being implemented as planned. The House will be glad to know that apart from a minor problem on housing, these visits were completed to the Commission's satisfaction, and the remaining balances were then paid to the United Kingdom.

I have said that we have now reached the end of the third year of the interim arrangements that were agreed on 30 May 1980. What now lies ahead? One thing is clear. The Government have not the slightest idea. In the most recent public expenditure White Paper published in February, the Government make forecasts for the three years 1983–84, 1984–85 and 1985–86. The entries for our net contribution to the EC budget during those three years total £1,400 million. Of course, those figures are covered by a note in the text which reads: the level of our net payments will depend on the outcome of further negotiations in the Community on budget refunds. The House will wish to know that, in the absence of agreement for the years ahead, Britian's net contribution in 1983–84 is estimated at £1,504 million, in 1984–85 at £1,588 million and in 1985–86 at £1,700 million. This is the true measure and extent of the folly that was committed as long ago as 1971 when, in their anxiety to join the EC, the Government of the right hon. Member for Sidcup (Mr. Heath) agreed to accept the financial arrangements of the European Communities. This agreement was embodied in the treaty of accession in 1972 and began to take effect from the moment of our entry in the following year, but built up slowly in the seven-year transitional period that the treaty of accession permitted.

There is not a member of the present Government who did not enthusiastically agree to the terms of entry to the EC that the then Prime Minister so weakly and foolishly accepted. There was one exception, so far as I can recall. Certainly the present Prime Minister cannot object. The right hon. Lady voted for the terms of entry, and she voted specifically against the amendments which we tabled to the European Communities Bill during its course through the House in 1972. The Chancellor of the Exchequer, so prominently absent today, shared the burdens of driving the Bill through the House of Commons with his right hon. and learned Friend the Member for Hexham (Mr. Rippon).

Mr. David Stoddart (Swindon)

He sold us out.

Mr. Shore

We warned, again and again and at the time, of the appalling burdens and exactions that the Community's financial arrangements—its "own resources" system—would impose on the United Kingdom. But our warnings were ignored and overridden.

Mr. Ridley

Although the right hon. Gentleman is going back over this ground, it carries no shame for me personally. When the Labour Government renegotiated the terms of entry and presented them to the country in the referendum which approved them, was the right hon. Gentleman content to remain a member of that Government? Was he happy, if he now has these views, to remain a member of a Government with which he now says he did not agree?

Mr. Shore

The right hon. Gentleman will recall that we had an exceptional arrangement within the Labour Government—[Interruption.] There is nothing to laugh at. We had the phenomenon—the House has had no other experience in this century of so-called dissenting Ministers—by which we were free to campaign against what we disagreed with. I campaigned as vigorously as I knew how. I was right, and those who support these arrangements were wrong. If, in the immediate aftermath of having lost that referendum, I had said that I was no longer going to abide by the rules of the game, the House would not have thought that particularly honourable behaviour on my part. I shall leave it at that. I have not at any stage concealed my strong objections and dissatisfaction and, what is far deeper, my determination to put it right.

The consequences of these arrangements are clear to anyone who bothers to look. Unless new arrangements are made, we shall revert in the coining year to the original arrangements entered into under the treaty of accession with those appalling sums, which I mentioned earlier, being due under Community law for Britain to pay to the Brussels Commission. So it is with particular interest tht we must now all turn to the document "The Future Financing of the Community" which was released by the Commission on 4 February 1983.

What do we find? Basically, the same tired old remedies. First, expand Community policies other than agricultural support policies, which are, of course, virtually sacrosanct, in the hope that this will somehow rectify the imbalance in the United Kingdom's budget payments—the difference between contributions and receipts. Secondly, as a consequence of new policy developments, the enlargement of the Community's "own resources"—in short, the increased taxation of member states by the EC.

In raising more money, there is no doubt which is the Commission's favoured remedy. As the Commission puts it: of all the possible sources of additional general revenue for the Community budget, value added tax has obvious attractions. The VAT contribution is limited by the 1 per cent. ceiling, and the Commission seeks the removal of that ceiling.

Secondly, there is the proposal for what the Commission describes as "progressivity". The basic proposal is that VAT contributions should be made at different rates, reflecting the GDP per capita of the member states. The third proposal is for a special agricultural output-related tax—to which the Financial Secretary referred—which the Commission concedes would be only a temporary measure.

Fourthly, the Commission examines the prospects for financial equalisation—the raising of new funds to finance expenditure in the least prosperous member states. It states: the resources so transferred need to be subject to the necessary consistency with community policies and subject to proper community control". Finally, the Commission document argues for an extension of the powers of the European Assembly. It brings forward once again the proposal first made in 1973 to amend article 201 of the EC treaty so that the institutions of the community can create additional sources of revenue without having to obtain ratification by national parliaments. There will not be many supporters for any of those proposals in the House.

The suggestion that the European assembly should be given the power to raise additional taxes, without the consent of the House, can be rejected out of hand Nor do I believe that, apart from a few Euro fanatics—I recognise one or two in the Chamber—there is any opinion in the House in favour of increasing the own resources of the EC. In any event, no variation in the tax-levying aspect of the EC's budget would meet the massive discrepancies between the United Kingdom's payment and its receipts. Indeed, the Chancellor of the Exchequer, in his statement in Brussels, made that point. There is no means of closing the gap without dealing with the specific question of Britain's unequal contribution. That change in receipts can be brought about only by the substantial demolition of the CAP—which the remainder of the Community would not allow—or by a massive increase in other Community programmes, which would involve a substantial increase in the tax revenues of the Community. So there is no way out there.

The Opposition warn the Government not to proceed down those paths. The remedy that we have consistently urged upon the Government, since they first resolved to obtain a broad balance in their budget accounts with the EC, is to amend the European Communities Act 1972 to enable the House to intercept the outflow of British money to Brussels and, thus, to reduce our contribution to the level of our receipts. After three and a half years of first threatening and then dithering, it is time for decisive action. It is time for a resolute approach.

A resolute approach on this will be among the first measures that the next Labour Government will take when they begin the process of withdrawal from the Rome treaty.

4.34 pm

Mr. J. Enoch Powell (Down, South)

It is almost exactly five years since this House decided to create in its own image—or in a caricature of its own image—a body in the European Community that was destined to exercise within the Community, over this country, the powers that the House had gained and exercised throughout the centuries. I need hardly add that the House was operating under a guillotine when it reached that decision. In recent years it has been our custom, when there was to be any great change in our constitutional arrangements—any marked sacrifice of our rights and liberties—that the House should deny itself the opportunity of debating them in full. Perhaps that was in part due to a nice sense of reluctance to hear too much and to perceive too clearly what we were doing.

It was however clearly perceived and stated in the House in 1977–78 what would be the consequences of the establishment of a directly elected European Assembly. I shall trouble the House with only one half paragraph that sets the point out concisely: The moment that the right to reject the budget or to dismiss the Commission is in the hands of those who sit in the Assembly by the same right as we sit here, it will be found that those are very far-reaching powers indeed. The reference is to the treaty powers of the Assembly. It will be found that the Assembly has become a body which the Commission will have to obey—whatever the forms"— we have been discussing some of the forms in the debate today— under which it obeys—and it will be a body which the Council of Ministers will be unable to defy."—[Official Report, 24 November 1977; Vol. 939, c. 1790.] Those who divest themselves of their rights and privileges and hand them over to be used against them by others seldom have to wait very long for the opportunity to perceive what they have done and to regret the consequences. For us it has begun with the transactions that we are investigating this afternoon.

The elected European assembly has made the first move towards exploiting its inherent powers—the power over the budget and the power over the Commission. Its resolution, which opened the door to the refund of 1982—for which the Financial Secretary appears to take so much credit—stated: It considers this supplementary budget, to which it raises no objection"— the reason it raises no objection is that since the first objection was taken a treaty has been made between the Commission and the assembly— a first step towards more ambitious objectives for the Community. The terms of that treaty are discreetly expressed in Europese, a tongue which owes something, no doubt, to the diplomatic language which the Foreign Office has taught the world. However, they can be read and translated. Before Britain was to receive the refund, before there was to be a budget, undertakings had to be given to the assembly by the Commission, in consideration of which it would take no objection to the supplementary budget. The Commission undertook namely: to bring forward proposals as soon as possible to expand existing policies and diversify the own resources system. Again, the assembly noted that the Commission had undertaken to present at the earliest opportunity proposals aimed at furthering and developing such policies and introducing a more diversified system of own resources. Hon. Members who have looked no further than that sentence might be misled by the word "diversify". It is a delightful euphemism. It does not refer to resources of the same total quantity raised in different ways. It is clear that "diversify" is a euphemism for "increase". The Commission's document, the essay which the Commission showed up to its masters in the assembly during the period between the refusal and the agreement, between the objection and the non-objection, makes that clear enough.

I quote now from paragraph 13 of Commission document No. 11125/82—I am sorry about the barbarous figures—which says: the Commission starts from the assumption that the existing range of own resources will remain intact; and that any new forms of revenue would constitute an addition to this range. That is what is meant by "diversification". It then says, on the subject of those further policies which are mentioned in capitulation by the Commission to the assembly: The Commission regrets that, as a result of the current stagnation of Community decisions in many areas, the relationship between the development of national and Community policies is not moving as expected in favour of Community programmes. Did the House hear that? The Commission regrets that we are doing so much ourselves upon our own decisions with our own revenues, instead of more being done by the Community—and not just more being done by the Community, but less, in consequence, being done by us. It is also stated that the increase is not desirable "simply"—a lovely word—"for its own sake". The increase is desirable for its own sake, but not "simply" so. The Commission continues: All expenditure at Community level should be rigorously scrutinised with a view to showing that it represents a cost-effective alternative to national programmes … the corollary of increased Community expenditure should be a reduction in expenditure at the national level. One could not have a more open or a more insolent assertion by the Commission to the Community's face that it intends to take more from us in order not that we shall pay more in total but that we shall control less.

It would be a mistake to suppose that the capitulation is painful to the Commission. On the contrary, it is wholly delightful to the Commission; for the power which the assembly gains will be power gained at the expense of the Council of Ministers—that is, at the expense of the component nations. Who will be the gainer by that? It will be the would-be bureaucratic dominator of Europe. It will be the would-be bureaucratic empire of western Europe, which will arrogate to itself the powers which the leverage of the assembly has removed from the local democratic—I do not know whether I dare use the word after what the Financial Secretary said—control of national assemblies.

At a critical stage in our own constitutional development, the power of this House, which depended upon its control of the budget, was consciously used by the Crown as a means of exalting the power of the Executive. When the Reformation statutes were being passed, Henry VIII said, "We are nowhere so high in our estate Royal as in this our High Court of Parliament." The Commission will be nowhere so high in its imperial, bureaucratic power than when it is exercising what has been extorted by the assembly's budgetary powers enshrined in the treaty—the budgetary veto of the assembly.

In case that assertion were to be misconstrued as mere deduction, mere statement of arguable consequences, we have it set out—it has been mentioned by the hon. Member for Liverpool, Walton (Mr. Heffer) and the right hon. Member for Stepney and Poplar (Mr. Shore)—in the overt assertion by the Commission that in any future rearrangement of the finances of the Community, the assembly's role must be increased. I quote: In the Commission's view, it is essential that in any further renewal of the system proper provision should be made for the exercise by the directly elected European Parliament of budgetary powers and responsibilities which adequately reflect its status. Let there be no misunderstanding, then, about the nature of the initial victory: the first step has been taken at the expense of this House and this country by the elected European assembly which we ourselves brought into existence.

Give me the budget and I will control the Government. Archimedes' principle might be restated in that form. We gave the assembly control of the budget by treaty. We gave it the right to direct election. Now we are beginning to reap the consequences, but not only in matters financial. It may have been in financial matters that our predecessors, centuries ago in the embryo of this place, first exercised their power. But that was not for long. They soon turned to the matters upon which the moneys which they granted would be expended. They soon turned to control the domestic policy, they soon turned to control the foreign policy, of the Crown.

We have been injudiciously anxious—the Government, or, for kindness and accuracy, I should say a part of the Government, have been only too anxious—to cast over the European Community the mantle of a sovereign state in respect of the conduct of international affairs. Now the assembly is moving up to exploit that field too. We learn that it intends as an assembly—as the directly elected body, with its thumb on the jugular vein of the Government—to investigate and conduct hearings on the internal affairs of this country and its relations with the Irish Republic, that it will proceed to hold hearings in London, Belfast and Dublin and sit in judgment on the policies of Her Majesty's Government and the internal affairs of the United Kingdom.

That has to stop somewhere. Somewhere, even the Government, who could swallow the treaty of 1972 and who can take pride in the humiliation of the supplementary budget of 1982, must put some limits to their surrender and cession of the rights of us here and of the powers that ought to belong to the House. Before the debate is concluded we ought at any rate to have a plain assurance that Her Majesty's Government will make it perfectly clear—they have the means to do so—to the European Community that it has no business, and that the assembly has no business, to concern itself with internal matters of the United Kingdom, over which the House and Parliament alone are sovereign.

I shall give just one little reminder and just one little warning to the Financial Secretary. He was talking about the refunds that would be obtained in the future. He was saying—I heard him say it, although he is only the Financial Secretary—that we would not be agreeing to an extension of Community revenues from this country. I thought that the right hon. Member for Stepney and Poplar over-indulged his natural generosity in saying that only a tiny minority in the House would ever be found agreeable to an increase of the types of revenue that we pay to the Community. I do not agree with the right hon. Gentleman there: I think that he was too generous. He has taken too little account of the power of the lever which we ourselves, only a few years ago, put in the hands of the European Assembly.

It will be no use, when the Commission comes forward with proposals for increasing the sources of the Community's revenue, for Her Majesty's Government or this House to say, "But we shall not agree to an increase in our VAT contribution," or, "We shall not agree to the derogations in the incidence of VAT being removed," or, "We shall not agree to any additional form of taxation going hence to the EC." We cannot say that. Why not? Because the assembly will answer again, as it did in 1982–83, "In that case, you get no refund, no supplementary budget." The Government have lost the power, this nation has lost the power, so long as we are parties to the Treaty of Rome, to say what we will or will not do, what we will or will not pay. Such is the depth to which we have fallen. It is a depth from which we can still recover ourselves; and we shall.

4.50 pm

Sir Russell Fairgrieve (Aberdeenshire, West)

I listened with interest to the right hon. Members for Stepney and Poplar (Mr. Shore) and Down, South (Mr. Powell). It worries me that when we debate European matters, mainly Opposition Members, but also some Conservative Members, come back to the basic idea of withdrawal, no matter what the subject. I say to the right hon. Member for Stepney and Poplar that, as 40 per cent. of our exports go to the European Community, if we withdraw from the Community we shall probably put at risk the jobs of as many people as are currently unemployed in this country. If the right hon. Gentleman wishes his party to go into the election with mandates calling for increased unemployment—and relaxation of immigration rules at the same time—it will not be very popular with the electorate.

Mr. Jack Straw (Blackburn)

From where does the hon. Gentleman get his figures for potential job losses? Is he aware that the Minister of State, Foreign and Commonwealth Office—a Euro-fanatic, if ever there was one—put in his own claim in a debate last year of only tens of thousands? Is he further aware that no one in the Government has made any study of the employment consequences of leaving the EC, presumably because it is realised that there would be a benefit for employment?

Sir Russell Fairgrieve

I was very careful about the figures that I gave. The figures have been worked out at 2.5 million jobs being at risk in industries that export to Europe. One reason why we have been in trouble with Europe from the beginning is that we did not join each of the European institutions at the very beginning. One of the things that I learnt in my business career was that, if a new product came into the field, one tried to market it first. One did not wait until everyone else was doing so. That has been our trouble in Europe. It happened in the case of the European defence community from which we pulled out, thus causing France to pull out. It happened in the case of the steel and coal community—Schuman' s brilliant idea to prevent ever again war between France and Germany. We did not enter, but we had to do so in the end. It has been the same sorry picture throughout.

Then there were the Messina talks, at which we were improperly represented, and the final signing of the treaty of Rome. When did we enter? We entered just at the moment when oil prices were hijacked in the western world, which then went into slump.

We know the problem of the budget. It is the common agricultural policy. We know that agriculture claims far too high a proportion of the Community budget. I know that this Government will do all they can to redress the balance. That is what would have happened had we been in at the beginning. I remember the words well, when we first considered the CAP—that it would pay to grow wheat on the top of Ben Nevis. It is still not right. Although I accept that French, German and Italian agriculture have reduced considerably the number of people employed, their efficiency is miles away from that of our agriculture. It is still wrong that a man in Europe can come back from his normal job and it pays him to keep a couple of cows in his back shed. Those are anomalies that we must straighten out, and I am sure that the Government will do that.

I believe that this Government have done a fine job in budgetary repayments. They did a fine job recently over the fishing agreement. Again, had we joined at the beginning, we should not have had an agonising 10 years in getting a fishing agreement, because there would have been a different agreement from the start.

I end with a word about the future. Again, we have made a mistake in not joining the EMS at the beginning, because we shall have to join it some day. There is never a right time, if one does not join at the beginning.

I leave the House with this thought, which I know will be anathema to some Opposition Members. Although I may never live to see it, I hope that we are approaching a generation that can travel from London to Rome via Bonn and Paris without having to produce passports or change currency.

4.55 pm

Mr. Tony Benn (Bristol, South-East)

I shall not pursue the argument of the hon. Member for Aberdeenshire, West (Sir R. Fairgrieve), because what has emerged from this debate is what has been the key question from the beginning. In having this debate we find that relationships in this House have completely changed. We have not heard a responsible Minister telling us what he has decided. We have had a petitioning Minister reporting on how much he was allowed to have back of the money that our electors have paid in taxation. This is not about money or energy conservation.

We are studying the effect of transferring real power from the people of this country, who only lend it to us Parliament by Parliament, to others who will have a growing role in the control of our society. When we are told that Community inspectors will come to see how far we have obeyed the instructions under which we have to operate in order to receive our own money back, the extent of the power shift becomes apparent. This derives from the treaty of Rome which we did not draft and cannot amend, and to which we were joined by a treaty of accession which was not even published before it was signed by the Prime Minister of the day, using the Royal Prerogative for that purpose.

It is not irrelevant to go back into the history of this matter. We have now had over a decade of membership. There have been many conflicts over the common agricultural policy, steel policy, fisheries, trade, taxation, and now over the budget. The issue has always been the same: whether we were right to hand over the powers of self-government to the Community, and what were the consequences of that transfer.

The hon. Member for Aberdeenshire, West said that he would like to see more travel in Europe. So would I. He said that he would like to see people moving more easily from one country to another without a passport. So would I. After all, passports were introduced only quite recently, in 1914 I think, for travel in other parts of the world. What the hon. Gentleman will not see is that the treaty of Rome is a permanent barrier to co-operation between this country and other countries in Europe, because it asks us to sacrifice our rights of democratic self-government in order to co-operate with those who live across the channel. We are a provincial assembly, and we will not have it. However long it takes—and it may take some time—the British people will break with the treaty of Rome.

I want briefly to divide my comments into three parts. First, why will the British people never accept these arrangements? Secondly, how do we get out? Thirdly, what sort of Europe do we want to see? Let me say—for we are moving into a period when we shall have much public debate about our relationship with Europe—why it is that we shall not accept the treaty. It is not a nationalist response. Indeed, the treaty of Rome is as hostile to the interests of working people in Germany, Italy and France as it is to those of our own working people. [Interruption.] Hon. Members should reflect on why, after the horrors of Nazism, the Common Market looks better to those countries than it does to us and it will be realised that after such an experience the Community looks better than what went before. [Interruption.] That is true. Apart from Ireland, we are the only country in the Community that has not lived under Fascism or Nazism or been occupied by Fascists or Nazis. That explains the different attitude which I experienced as president of the Council of Ministers, and when I sat on that council for many years as Secretary of State for Energy. It was the history of those countries that made them see the Community as acceptable, and it is not acceptable to us. It is certainly not insularity, because we have always been a worldwide trading nation.

Sir Anthony Meyer (Flint, West)

rose—

Mr. Benn

I shall give way in a moment.

We shall not accept the treaty, but not because anyone in Britain thinks that our problems have been caused by Common Market membership. To the best of my knowledge that has never been said. It is not because we think that withdrawal would automatically solve our problems, because nobody has said that either. The reason is that, like every other colony in the British Empire, we want self-government. We need to break with the treaty of Rome to solve our problems because—this is an issue that the House has not yet faced—if a Government were elected on a programme involving, as it must if our economy is to recover, exchange control, trade planning and public investment, those policies would not only be contrary to the views of the European court in interpreting the treaty but to the British judges in whom we have invested the power to apply European legislation against an elected Government. What Lord Denning did to Mr. Livingstone over cheap fares in London it would be the duty of British courts to do to an elected Government committed to trying to solve the problems by applying our policies.

Sir Anthony Meyer

Is it not possible that to countries such as Spain, Greece and Portugal, which knew at first hand and have recently emerged from the horrors of totalitarianism, the idea of pooling a measure of their sovereignty in order the better to defend their freedoms is an attractive one?

Mr. Benn

The hon. Gentleman had better be careful. If he says that countries that have apparently willingly accepted a loss of democracy do not find much difference in the Community, let him be careful that he does not say that a country that has struggled over many centuries to achieve democracy should not now mind giving up the rights of its people. Again—I repeat the point—the House has never been sovereign. It is the electorate which is sovereign, whose interests and opinions we seek to represent, and it was not and is not for us to yield its power to others.

How shall we get out of the EC? In his final words, my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) alluded to withdrawal. People in election year want to know how that will be done. They know that there are many criticisms of the Community, many of which have been made in the House. I want to turn my mind for one moment to how that withdrawal will be carried out.

First, we must make it crystal clear that, although we may have to negotiate about the details of our withdrawal, there will be no negotiation about the decision to withdraw. There will not be another renegotiation. Many Labour Members felt cheated when the last Labour Government came to a conclusion that did not meet the objectives that we set. We are saying, for the reasons that I have tried to set out, that Britain will withdraw from the Common Market.

We have also said that, in order to do that, we must repeal the European Communities Act 1972, not just section 2, to restore the power of the House of Commons and thus remove the potential capacity of some new Lord Denning to tell an elected Government that the policies to which they are committed are illegal.

We must then abrogate the treaty of accession. I do not know whether the House noticed, but I alluded earlier to the fact that the treaty of accession was signed under the Crown Prerogative. Therefore, it cannot be wrong for an incoming Government to use the Crown Prerogative to abrogate it. Those who think that this House or the other place would have any control over that act of abrogation have misread our constitution. I happen to think tht it is entirely wrong that Parliament, unlike the American Senate, has no power to ratify treaties. As a general proposition, I am in favour of the House ratifiying treaties, but under our constitution it does not and does not have to ratify the abrogation of treaties. Therefore, the abrogation of the treaty of Rome will be an executive act that can be undertaken on the advice of a Labour Prime Minister using the Crown Prerogative.

Let me deal with the way in which that transfer can be made with the minimum of disturbance. I should be perfectly happy, once the Act was repealed and the treaty abrogated, that we should have a status quo agreement about many of the arrangements that have been reached with the Community. Indeed, we would have no alternative because many industries would be dependent on those agreements. But a status quo agreement where we, as a Parliament, have the power to change the status quo is completely different from a status quo enforced upon us by a Commission that we have not elected. I go further. I would be perfectly happy to see British Ministers as observers at the Council of Ministers, trying to participate in the development of sensible acts of harmonisation. But the fact that we must withdraw, abrogate and restore to the House the power to govern itself, cannot be denied.

What sort of Europe do we want? The Financial Secretary to the Treasury made some fun, he thought, of what the Labour party was saying. However, he is wholly wrong to suppose that the argument that we put forward is insular in character. We have repeated time and again that we want a united Europe but not a Europe in which we are tied to a commission with powers under a treaty that we cannot alter.

For the sake of greater clarity, I have marked the passages in "Labour's Programme 1982" which spell out our policy with great simplicity. It says: The Labour Party and the labour movement in general, is now firmly committed to Britain's withdrawal from the European Economic Community. On foreign policy it says: we should like ultimately to bring about the simultaneous dissolution of both NATO and the Warsaw Pact. That relates to a European security arrangement. It goes on to say: We welcome the contribution made by the Euro-Communists in this respect"— that is European unity— and consider that this is an important factor which helps the labour movement in Europe as a whole to work for a European socialist alternative … We need to encourage and develop economic links with Eastern Europe, as this constitutes one of the main elements of our policy of detente. We believe that such co-operation is of mutual benefit, and that a rupture of an East-West dialogue would be detrimental to world peace and security. It goes on to say: We live in a divided Europe, yet we must work to open the frontiers of peace, working towards a genuinely socialist Europe. Our objective is to work towards the creation of a wider but much looser grouping of European states—one in which each country is able to realise its own economic and social objectives, under the sovereignty of its own parliament and people. I shall finish with one further quotation. I shall not inform the House until afterwards whose remarks I am quoting.

Can anyone doubt that, if we had had, in 1939, the unity between Russia, this country and the United States that we cemented at Yalta, there would not have been the present war? I go further. Can anyone doubt that, so long as we hold that unity, there will not be another war?"—[Official Report, 28 February 1945; Vol. 408, c. 1514.] That was Anthony Eden speaking in the House of Commons on 28 February 1945. The perspective of a united Europe in which people are able to live and work together without either the curse of the arms race or the divisions imposed by the Common Market on the one hand and Comecon on the other would be greatly in the interests of our people—[interruption.] The hon. Member for Wrexham (Mr. Ellis) does not speak for anyone in this House. He should resign and seek a mandate, like the former hon. Member for Mitcham and Morden, Mr. Bruce Douglas-Mann.

Mr. Tom Ellis (Wrexham)

On a point of order, Mr. Deputy Speaker. I wonder what protection I can have. I represent the electors of Wrexham who voted me into the House. What protection exists for me when the right hon. Member for Bristol, South-East (Mr. Benn) says that I do not represent anyone in the Chamber?

Mr. Deputy Speaker (Mr. Paul Dean)

I cannot help the hon. Gentleman. It is not a point of order for me. It is a point of debate.

Mr. Benn

It is a point for the hon. Gentleman's constituents. He will not give them the chance to decide whether they want him under his new label.

Fifty years ago, Hitler came to power. We live with the legacy that he left. The legacy was, first, a divided Europe that has caused great anxiety and uncertainty to people on that continent, secondly an anti-Russian crusade that the Prime Minister has taken up, and thirdly, ideas that are being reintroduced into society by the Government over whom the right hon. Lady presides. I believe that the electors should reject all of them and that, in moving forward, we should progress towards a vision of a different sort of Europe—a Europe of unity, not of disunity, a Europe of self-government in the East as well as the West and a Europe that allows the people of that continent to have a larger say in their future than is permitted under the treaty of Rome.

5.13 pm

Mr. Teddy Taylor (Southend, East)

The right hon. Member for Bristol, South-East (Mr. Benn) has added greatly to our knowledge of the kind of Europe that he wants and of the steps that the Labour party would take to get us out of the Common Market. It is, however, accepted by the Opposition Front Bench that a minimum of 18 months would be required for this to happen and that the achievement of a united Europe would probably take considerably longer. Irrespective of whether a Labour Government are elected or the Conservative Government are returned to power, there will be a period of at least two years during which a serious budget problem will have to be resolved. Although my right hon. Friend the Financial Secretary to the Treasury spoke with great sincerity, it is not clear how that problem will be resolved. It is clearly more serious and urgent than ever.

My right hon. Friend the Financial Secretary has stated that if nothing is done our net contribution this year and next year will probably be more than £1,000 million. Over the past three years, we have had the advantage of substantial rebates negotiated by the Prime Minister through her determination and courage. However, this avenue now appears to be blocked. The signs are that there will be no rebate in 1983 and 1984 unless the British Government are prepared to make substantial concessions either by accepting a new system of budgeting or by giving more powers to the European assembly.

Hon. Members—those for and those against Europe—should be concentrating on how we can get out of the mess. It is not a question of whether the blame lies with the Government who signed the treaty or with the Labour Government who did not renegotiate very well. The fact is that Britain has an urgent and serious problem. Sadly, there has been no proposal from anyone, apart from the right hon. Member for Down, South (Mr. Powell), for dealing with it. It is implied that our weapons are not strong. What weapons do we possess to resist the Commission and the Parliament combined if they come to us and say that they will give us another rebate, or a rebate for five years, if we agree to increase the resources of the Community? This is a matter that hon. Members should be examining. The Government should state their views and the Opposition, despite their clear objection to membership, must say precisely what they consider should be done.

There is not a great deal to be gained by arguing the membership case yet again. We have some strong weapons in the back of the armoury. It should not be forgotten that we have contributed an enormous amount to the Common Market. I have received a recent answer from the Treasury showing our net payment to date at £3,911 million—well over £1 million a day since we joined. That is a substantial sum. We also make an important contribution to European employment. My hon. Friend the Member for Aberdeenshire, West (Sir R. Fairgrieve) said that 2.5 million jobs are at risk in our trade with the Common Market. If so—the figure has been given by the CBI—there must be at least three million jobs on the continent equally at risk.

One thing that has emerged since we joined the Community is a horrendous trade deficit with Europe. The deficit now stands at about £5 billion a year. That compares with a situation before membership when we always had a profit. There is no weakness. Certainly, many jobs in Britain depend on Common Market trade. However, far more jobs in the Common Market depend on exports to Britain.

If trade with Europe stopped tomorrow, according to the logic used by the CBI, 700,000 more jobs would be created the same day. That would not, of course, happen. Things do not work like that. Trade does not stop. It was expanding with Europe before we joined the Common Market. If there is a disruption of trade, everyone suffers. If, however, the argument is conducted on the basis of figures and this kind of loose logic, there would be a net gain of jobs. Europe would suffer more severely than Britain in respect of manufacturing jobs. To that extent, we have a lever.

We also have the lever of the common agricultural policy. I can never understand why Labour Members object to the CAP. It seems to be the ideal kind of Socialist arrangement that many of them suggest for British industry. They want to protect jobs in our traditional industries. If there were a planned policy for steel, for cars, for ships and for coal, like the common agricultural policy, this would surely be the answer to all Socialist dreams. One can imagine the Government saying to car workers, coal miners and shipbuilders that they intend to introduce an EC scheme under which they can produce as many ships and cars and as much coal as they want, that there will be a guaranteed price at least twice that of the world price and that there need be no worries about selling whatever they produce because sales can always be made to the Russians for one third of the price. That would guarantee full employment for shipbuilders, for miners and for car workers. We could all live happily ever after. The cost would be extraordinary. The developing countries would be damaged. However, this is what the CAP is all about. I cannot therefore understand the root and branch opposition of the Labour party when it has a golden opportunity during the budget negotiations to achieve exactly what it wants.

Our only hope of getting more cash is by agreeing to give the Common Market more cash. That money is wanted by the Common Market to develop more nutty, Socialist, nonsensical schemes, such as the common agricultural policy that damages us, benefits the Russians and cripples developing areas such as the West Indies and Pakistan. Many hon. Members feel deep down that the parties, by some gigantic mistake, have ended up on the wrong side. Some of the sentiments expressed by the right hon. Member for Bristol, South-East could be used by Conservative Members on other issues. At the same time, Conservative Members are supporting Socialist nonsense, such as the CAP, either for farming or for other reasons. We hear Conservative Members talking about the undermining of parliamentary sovereignty, which they never used to do, and we hear the opposite from Labour Members.

Whether my arguments are right or wrong, the British Government and Parliament face an appalling problem over budget payments. It is an urgent problem which will not go away.

What worries me most is that, while everyone agrees on sentiments, no one gives us any clear ideas. The Chancellor of the Exchequer, in his excellent speech on Europe, said that, as part of the deal that the Government had negotiated, there would have to be a reduction in the cost of the CAP through the elimination of structural surpluses and that agriculture spending would have to be subjected to the same financial disciplines as other national spending programmes. Those were splendid sentiments with which hon. Members on both sides of the House would agree, but no one will tell me how those aims are to be achieved.

Should we say that we will freeze prices? There is not the slightest evidence that a freeze would reduce structural surpluses. There is ample evidence that farmers would increase their production to maintain their incomes. We will not solve the problem that way. The CAP is not in the business of reducing or freezing prices.

Mr. Geraint Howells (Cardigan)

If the hon. Gentleman had his way, which policies would he introduce to safeguard the interests of British agriculture?

Mr. Taylor

The only way that can be done is to give responsibility to the British Parliament and Government to do what they think is right. If we decide that it is in our national interest to pay our farmers twice or three times the world price for their products, that is up to us. Parliament and the Government would also have to decide whether they wanted to do the same for the car industry, coal mining and everyone else.

As we are not net exporters of food, we could afford to do that for our agriculture, but we cannot afford to do it for ourselves and for Europe.

I urge the Government to give us some guidance about what they intend to do. If we have a clear policy on what we should strive for, it might be possible to get all-party unity until the membership issue was decided at the next election or thereafter. It is optimistic to talk in terms of withdrawing from the Community within 18 months. Greenland had a referendum a long time ago and decided that it wanted to leave the Common Market, but it is still a member. Negotiations are continuing, and some of us doubt whether Greenland will ever leave.

Some say that one answer to the problem would be to increase Community spending and to set up CAP equivalents for cars, textiles, coal and any area where we could get more out of such an arrangement than could other members of the EC. It is suggested that we ought to look for any industry or area where we waste more public spending than does the rest of the Common Market and get that industry or area included in an EC scheme.

I know that the Prime Minister and the Cabinet are willing to go along with the nonsensical aspects of the Common Market, because they think that it might be possible to improve them, but I do not believe that they would agree to set up CAP equivalents for coal, cars, steel and so on. That is not on. We will not be able to solve the problem by increased Community spending.

Another suggested solution is that we should change the basis of contributions. Our main problem is that contributions are calculated on the basis of VAT and customs duties. Because we import more from the rest of the world, we pay more in customs duties. The French have said that we will not solve the problem by changing the basis of contributions.

Could we change the CAP? Although my right hon. Friend the Minister of Agriculture, Fisheries and Food complained bitterly about the overturning of the veto, there did not appear to be much complaint about the speedy implementation of the price increases. I doubt whether we shall ever see the day when a British Government will ask for the sort of fundamental changes that will reduce the amount, spent on the CAP.

There is increasing urgency. Partly because of the weather, partly because we are stuffing our cows with more imported tapioca from south-east Asia to increase their yields, and partly because our farmers are producing more through efficiency, the CAP problem will be a lot worse this year. Last year we spent £7 million a day on subsidies to export cheap food to the rest of the world, including Russia. Such exports to Russia totalled 3 million tonnes last year, 2 million tonnes in the previous year and 1 million tonnes in the year before that. That problem is getting worse.

I can see no long-term progress being made unless Britain is prepared to be very tough and to use the weapons at its disposal, which are the payment of cash, trade coming into this country and our contribution to the CAP. The only answer that would make sense to a Conservative is the running down and eventual abolition of the CAP. That is the only way to get a permanent and sensible answer to the budget problem—unless we go the other way and create CAP equivalents for other industries.

It may be asked how we could achieve that when we cannot even achieve a reform of the CAP. I believe that it would be easier to abolish the CAP than to change it. Much would be gained and nothing would be lost if we made it clear that it was the responsibility of each member state to look after its own farmers and agriculture and to decide how money was to be allocated for food exports.

Hon. Members on both sides of the House have talked about the importance of getting agreement and co-operation between European countries. The CAP is a divisive factor which does enormous damage to friendship and co-operation within Europe.

Some may say that the abolition of the CAP is not the right answer and that there are better ways, but such people always talk in generalities. They say only that there could be adjustments here and greater emphasis there.

It may have been hoped that we could stagger from year to year by having more rebates. Until recently I thought that that was the answer, but the European assembly has made it clear that we will not have any more rebates. Something must give.

The Government's battle will be made more difficult if we continue to swap slogans on whether it is a good thing or a bad thing to be in the Common Market. I accept that many things are wrong. Our trade performance has been horrendous, we have been mugs in many areas, and I find it impossible to justify the fact that we have reduced the number of jobs in our steel industry by more than the rest of the EC members put together, under an agreement that was meant to be "European".

The Government will have to explain how we can sort out the budget problem permanently. They will need the co-operation of both sides of the House and will have to act with great determination. Unless we are willing to accept a solution that would be unacceptable to Conservative principles and to common sense, we must go for the abolition of the CAP and leave each member state to make its own decisions on agriculture. If we did that, there would be less disagreement within Europe and a better deal for Britain. We could then move forward to achieve more co-operation and harmony within Europe.

5.28 pm

Mr. John Roper (Farnworth)

The hon. Member for Southend, East (Mr. Taylor) is one of the more seductive critics of the European Community and his arguments have to be listened to and, on occasions, responded to. I agree with much of his basic analysis of the budget problems and he helpfully brought the debate back to the subject under discussion.

No one can doubt that a long-term solution to the imbalances in the Community budget is considerably overdue. There is a tendency in the House to consider that this is purely a problem for this House and this country, whereas the problem of the Community budget, as the recent document from the Community and the recent debates in the European Parliament have shown, is much wider than the particular problem, serious though it is, of the British contribution and the British payments. As the hon. Member for Southend, East said, the problem goes much wider, and if the solution that he suggested—that of abolishing the CAP—were to be accepted, it would have a substantial impact throughout the Community.

It may not be entirely the fault of the present Government that a solution has not been found, but it certainly seems that the annual bickering over our refunds and the way that they have been conducted have not necessarily brought the long-term solution any closer. The Government's give-us-our-money-or-else attitude has distracted attention from attempts at long-term solutions of the budgetary problems and given many among our Community partners who are sceptical about our commitment to Europe more grounds for suspicion.

The emphasis of our effort must shift from trying to get as much back in any one year as possible to trying to find a satisfactory solution on a longer-term basis. This can serve not merely our national interest but the interest of the Community as a whole. Such a solution, as has been made clear in what has been said so far, must consider both sides of the budget, income as well as expenditure.

I do not accept the view of the Financial Secretary that there is no need for further own resources. It is fortuitous that the tendencies in world food prices over the past two years have saved the Community within those two years from hitting the limits of own resources. The problem of the admission of Spain and Portugal to the European Community means that it is necessary to look carefully at the phrase about the diversification of own resources, and I note what the right hon. Member for Down, South (Mr. Powell) said about that. He quoted from the Community's document, which says: It should be possible to show the people of Europe that any increase in the Community's resources should not automatically involve an additional burden on the European taxpayer; on the contrary, in many cases the corollary of increased Community expenditure should be a reduction in expenditure at the national level. The solution of the problem of the community budget will lie not in the way suggested by the hon. Member for Southend, East, of reducing the Community's activities, but by diversifying sources of revenue and of expenditure. That solution will take some time to be reached, and there will obviously be a fairly long period for these negotiations. I doubt whether in this year we shall get, for the budget of this year, that solution. It will be necessary also to find a short-term solution for 1983.

Signs of frustration and impatience halfway through the negotiations, or the unilateral measure suggested by the right hon. Member for Stepney and Poplar (Mr. Shore)—the threats of not making payment—are not liable to lead to the right long-term solutions being made in the Council of Ministers.

Mr. Nigel Spearing (Newham, South)

Can the hon. Member be a little more explicit about something? He said that he did not favour greater Community taxation, but went on to say that perhaps we should get our revenue from diverse sources, and that that will take a little time. Surely that is taxation, whatever the source. The hon. Gentleman is saying that he favours additional taxation, but he is not saying how he thinks it should be raised.

Mr. Roper

I shall be returning later to the subject of the diversification of resources. I said that I did not accept what the Financial Secretary said about there being no need for any further own resources. I then went on to refer to what the Community document said, which is that it is not necessarily the case that if there is increase of expenditure by the Community on the Community's budget and projects there needs to be an increase in public expenditure in Europe as a whole, and therefore by the European taxpayer as a whole. It may be there that the hon. Gentleman misunderstood me, and I am glad that I have been able to put him right.

Mr. Heffer

I am sure that the hon. Gentleman must have read the speech by Mr. Gaston Thorn in which he said: Even if we can achieve savings thanks to tighter management of budgetary funds, and funds allocated to the common agricultural policy in particular, new own resources will be needed to bring Community intervention to the critical level at which it will have a real impact and provide the stimulus and guidance we expect of it.

Mr. Roper

Obviously I did not make myself clear. I was trying to say that there is a need for increases in the Community expenditure and for diversification of own resources. What is not necessarily the case is that that increase in Community spending need lead overall to an increase in public expenditure throughout the Community, if what is happening is a transfer to the Community budget of matters that have previously been the responsibility of the national budget. I hope that I have made that point clear.

Mr. Douglas Jay (Battersea, North)

In that case, the hon. Gentleman is saying that some expenditure that was previously decided by the British Government and the British Parliament will, in future, be decided by the authorities in Brussels.

Mr. Roper

With parts of Community policy, such as energy policy or transport policy, it makes a great deal of sense for us to develop policies together. For example, on research and development on such projects as the joint European Torus, it makes much more sense to carry out these projects on a European basis so that we can match the research and development of Japan and the United States, rather than doing it by penny packets by individual European states. If there is to be a regeneration of industry in Europe, it will be by developing such policies on a Community basis. There is an opportunity for the use and development of European policies to bring people throughout the Community back to work.

It is clear that equitable reform of the budget will not be achieved solely by increasing expenditure on programmes that would benefit Britain. This point was made by the Financial Secretary. The scale of the problem caused by the CAP, which devours between 60 and 70 per cent. of the Community budget, is too great. The Chancellor, in his remarks in Brussels, pointed out, for example, that the regional development fund would, on the present quota basis, need to be increased by 50 billion ecu, twice the totality of the whole Community budget, to give Britain net receipts equivalent to the 1982 refund of 850 million ecu.

To think that one can get the problems of the imbalance and the unfairness of the budget and of getting the United Kingdom net contribution right by increasing programmes such as the regional fund without looking at the contributions is nonsense. The problem will become greater and probably insuperable after Spain and Portugal have joined the Community in the near future.

Expansion of some of the programmes, to some of which I have already referred, and the introduction of new ones will help to ease the budget problem and will have a valuable effect of their own. The Community needs to develop programmes to bring economic activity in Europe back to the level that is required. Here, some expansion of the regional and social funds would be of advantage. Transport and energy policies could be further developed, and we have seen in the refunds for 1982 a great deal of that. As the Financial Secretary said, about a third has been devoted to energy projects in this country, that is, about £230 million out of the £600 million that is coming. Indeed, the solution for 1983 will require far more specific contributions to energy and transport schemes in Britain. But further resources should also be devoted to joint industrial research and development projects.

I have already referred to the example of the joint European Torus, and I believe that there would be opportunities in, for example, the financing of Airbus Industrie, which could be used as a way of developing Community initiatives.

The Financial Secretary referred briefly to the projects that have been agreed for 1982, and it is interesting that those projects outside the CAP that are arranged in order to give us our refund are classified as non-obligatory expenditure. It is worth noting that the European Parliament's discretion to increase the budget is related to the share of non-obligatory expenditure within the total budget. Non-obligatory expenditure has gone up last year as a result of the refunds to the United Kingdom, and it will presumably go up this year. If, as has been hinted by the chairman of the budget committee in his speeches, that expenditure increases, so will the Parliament's control over the budget.

Mr. Ridley

I might be able to help the hon. Gentleman with the facts on what is an important point. The supplementary measures before the supplementary budget for 1983 have always been classified as obligatory. In the supplementary for 1982, paid in 1983, about two thirds remain in supplementary measures—the £400 million, which is still obligatory. The other third, about £230 million, relates to energy measures and is classified as non-obligatory, but the Parliament has given its undertaking that it will not take that into account as part of the base, thereby being unable to increase its total expenditure for next year.

Mr. Roper

I am grateful to the Minister, but I understood that, although the Parliament has given that assurance for 1984, it has not given such an assurance for 1985. Indeed, Mr. Lange, the chairman of the budgets committee, has suggested that whatever is agreed in terms of specific projects this year would affect the 1985 budget. Therefore, the growth of the non-obligatory section of the Community's budget has some effect upon the leverage, referred to already, that the Parliament has on the totality of the Community's budget. I am not opposed to it, but it is a matter of which the House should be aware in its discussions.

I believe that the Parliament is aware of the need for long-term reform of the budget. Indeed, its activities in the last few months have helped in the direction of finding sensible long-term solutions for the problems of the Community as a whole, as the Financial Secretary said in his opening remarks.

It will be virtually impossible to expand any of the financial non-agricultural policies unless fundamental changes are made in the ways in which the Community collects it resources. We shall be hitting the 1 per cent. limit VAT ceiling in the very near future—if not in the course of this year, it will almost certainly be in the course of 1984.

Reform is made all the more necessary because of the particular problem that the desirable accession of Spain and Portugal to the Community will bring. The paper outlining the Commission's initial ideas—the so-called green paper—has in a sense provided us with a helpful basis for considering ways of diversifying revenue and, indeed, perhaps increasing it. I accept what was said by the right hon. Member for Down, South, that diversification might be seen by some to be a euphemism. It is, I believe, intended, as he said, to refer to an expansion as well as to a variation in the resources to which we are referring.

While raising or removing the 1 per cent. VAT ceiling would probably be the simplest solution and has always had some advocates, I should not wish to see it introduced if there are other possibilities, as I believe there are. It would have particular disadvantages for the two countries which are at the greatest disadvantage in terms of the Community's present budget—the Federal Republic of Germany and the United Kingdom. By itself, it does nothing to reduce the burden of the net contributions on those members of the Community.

The Financial Secretary, in his note on the Community's proposals, is a little sceptical about the proposal that to link the VAT contributions to national GDP would help solve the problem and would also help to remove the present imbalance in the budget by introducing an element of progressivity. If it could be notionally linked with the regional variations in income throughout the Community, it could be seen to be in line with the treaty of Rome, the aim of which includes bringing together the levels of wealth in different regions of the Community. That progressivity—although I believe that it would be most rational to link it to the percentage of VAT that was contributed—could, as was said by the Financial Secretary, be in the form of a tax on national GDP. There are certainly substantial advantages in providing the Community with other resources based on taxes other than value added tax.

The Community has suffered in the past from its narrow and inflexible tax base. The proposal for an agricultural tax that is made in the Commission's document, although I do not think it would be welcomed very quickly by some Community members, would have the greatest effect in redressing the imbalance between net contributors and net recipients, as it would fall most heavily on those countries which at the moment are the largest recipients of funds from the CAP. Certainly that aspect should continue to be explored.

I am sorry that the Commission, in its final document, did not put forward its earlier proposal that there should have been some form of energy import levy. That idea has much to commend it. I believe that it would be fairly acceptable to a number of countries in the Community, if not to all. I think that it would be acceptable, for example, to France, which is concerned about its investment in nuclear and other power stations. It would probably be acceptable also to the Federal Republic of Germany. I hope that the Financial Secretary and the Government will, in the discussions on the document, ensure that the idea of an energy import levy is kept in play as one of the effective ways of increasing the revenues of the Community and, by diversifying them, of helping very considerably the problems of the United Kingdom. As a net exporter of energy, we would not, of course, be a contributor to that particular Community levy.

It is likely that a final solution of the Community's budget problem will require a combination of several of the proposals that the Commission has made for the diversification of own resources. I hope that the Government, in the discussions, will take a rather more positive attitude towards the proposals than seemed likely from some of the things that the Financial Secretary has said today.

Rather than pointing out the disadvantages—obviously almost any tax has certain disadvantages—the Government should try to ensure a development of new sources of revenue for the Community, in the interests of trying to get a solution to the fundamental problem of the budget.

The demonstration of our commitment to the Community and of our political will to achieve the necessary reforms in regard to expenditure and revenue raising is essential. If we are obstructive this year, we shall find ourselves bickering over refunds next year, the year after and the year after that. The potential benefits to Great Britain of Community membership will once again fail to be realised. They are available now, and I hope that the Government will take advantage of these proposals to ensure that they are realised.

5.49 pm

Sir Michael Shaw (Scarborough)

I follow the hon. Member for Farnworth (Mr. Roper) by saying that I believe that it is important that we look at the problems to see how we can develop our future role within the Community. I feel that there has been a danger in some of the earlier speeches—I fully understand it—of rehearsing diametrically opposing views. We have heard from those hon. Members who felt genuinely that it was a mistake ever to have joined the Common Market and who equally genuinely still believe that it is a mistake to remain in it.

I voted in favour of joining, and I have always been in favour of staying in. I believe that we can play a valuable part for the people of this country and for Europe by staying in and seeking to make it the maximum possible success in the future. In furthering those ends I believe that we have an important duty today to look at the way in which the budget debate in Europe has been going because it involves refunds due to the United Kingdom and, this year, to Germany also; to their implementation and to the ways in which the need for such refunds can be avoided in the future.

The first proposals put forward by the Commission in the 1982 supplementary budget for reimbursement last year were discussed in great detail and, finally, for reasons that I shall deal with later, were not adopted. Revised proposals were put forward in the first 1983 supplementary budget and have been happily agreed. After the production of the draft 1982 supplementary budget, the Council took the proposition put forward by the Commission and, after considerable discussion, hammered out an agreement on 25 October last year. However, the European Parliament had not been consulted and there were several matters upon which it felt strongly. As was right, it expressed its views equally strongly.

First, the Parliament felt that there should be greater control over how the rebates were spent. In other words, if money was being paid back it should be paid back for energy projects, and so on, that could be checked and controlled properly by the Community. That is one of the reasons why I believe we should get away from this concept of rebate as soon as possible. We want to contribute the correct amount to start with rather than contribute too much and then have the money handed back later.

The second point about which Parliament felt strongly was that there should be a limit to annual ad hoc arrangements of refunds. The European Parliament claimed that it should be the last occasion upon which these ad hoc arrangements should be made. Frankly, I do not believe that that is a realistic concept. I understand it for the purpose of argument and bringing pressure. If one reads the debates that took place in the European Parliament on 10 February this year—although not couched within the official resolutions—one sees that members had doubts about that proposal.

The third point was that the European Parliament felt that in reaching agreements such as the supplementary budget there should be proper consultation between the Council and Parliament. The stumbling block in 1982 was the European Parliament's insistence that this would be the last occasion upon which such ad hoc arrangements would be made. The Council offered to make a general declaration recognising the importance and urgency of finding, in the context of the development of common policies, a lasting solution to the Community's internal imbalances so as to avoid future ad hoc adjustments. In support, the Council noted publicly that the Commission was submitting proposals to it on the Community's future financing. Parliament's view at that stage can be summed up fairly as, "We have heard all this before. We have heard these policies and nothing seems to have happened." As a result, the supplementary budget was not accepted.

I have a good deal of sympathy with the European Parliament's view. For several years I was involved in the conciliation process between the Council of Ministers and the European Parliament. However, the faults were not one-sided. In the early days the Council may have been reluctant to take the European Parliament seriously but, for its part, the parliamentary delegation was far too prone to stand on its dignity and insist on its rights. That is no posture in which to seek genuine negotiations. A genuine role for the conciliation machinery had not been worked out at that time. It was only after the 1975 treaty, which was ratified in 1977, that the need for conciliation became clear.

The Community's budgetary authority became a joint budgetary authority consisting of the Council of Ministers and the European Parliament. From then on, Council and Parliament had to learn to get on with each other. I am glad to see that the 1983 budget was agreed and adopted at the proper time in December. It was to the credit, not just of the Council and Parliament, but particularly of the Parliament's budget rapporteur, the MEP for Upper Thames, Mr. Robert Jackson.

In every debate on this subject in which I have taken part, I have stressed the fundamental need for Council and Parliament to learn to work together as the budgetary authority. I stress that once again. Whatever difficulties may have to be overcome in the successful development of the Community, such agreement is fundamental to future progress.

The first supplementary budget of 1983 was a re-hash by the Commission of the first attempt in 1982. The negotiations that have taken place this year, prior to the final agreement reflect considerable credit on all involved—on the Commission for the way in which it prepared the document, taking account of all the criticisms and comments beforehand, and particularly on the Council and the Parliament for the way in which they genuinely sought an agreed solution, and in doing so showed themselves willing to move significantly towards each other's point of view. The obstacles that made agreement impossible in late 1982 were finally overcome in early 1983. Where there's a will, there's a way.

I believe that there is now a willingness on the part of the Council, even if not on the part of all members of it, to acknowledge the partnership involved in developing the role of the joint budgetary authority. I suspect that in that process my right hon. Friend the Financial Secretary to the Treasury has played a constructive and helpful part. I congratulate him.

The Council has agreed to much greater control over the refunds than was originally contemplated. For its part, the Parliament has accepted the fact that genuine efforts are being made to reform and develop the Community's future financial framework. Agreement has been reached by genuine conciliation.

We must consider whether the ad hoc payments to the United Kingdom and West Germany will be necessary in future. The simple answer is yes, probably, until the entry of Spain to the Community. At present there is an imbalance in the budgetary contributions of individual member countries. The reasons are well known.

By definition, it means that if the United Kingdom pays too much, as it does, other countries do not pay enough. To put it bluntly, I do not foresee the latter agreeing to a permanent change from a system that is advantageous to them unless there is also advantage to them in a change. But changes will be necessary when Spain joins. Nowhere will they be more necessary than in the CAP. The countries now advantaged by the CAP will then insist on changes. It is in just such negotiations that our justified demand for a fairer long-term solution to the present imbalance in budgetary contributions can best be made.

Until that time I suspect that short-term arrangements for ad hoc rebates will have to continue. In the meantime, it is vital that we should prepare plans and discuss ways in which those changes can be brought about, so that if and when Spain accedes we are ready to put into the changes that will then become necessary methods whereby the character of the budgetary contributions will be fair to all.

6.4 pm

Mr. Julius Silverman (Birmingham, Erdington)

I follow the hon. Member for Scarborough (Sir M. Shaw) in agreeing that a long-term solution to the budgetry problem will not be found quickly. I wonder whether it will be found at all.

It is now about 18 months since the Commission failed to fulfil its promise to bring proposals before the Community and the Council on structural changes in the finance of the Community. Eighteen months later we get a green paper. Apart from discussing options and possibilities and showing the Commission's desire to increase expenditure and taxation, it takes the matter no further. There are no concrete proposals. I shall be surprised if proposals come forward in the spring, as the Minister said. If they come forward in a form acceptable to members of the Council I shall be absolutely astonished.

The fault of this budget is the fault of all EC budgets that have come before the House. They all suffer from the CAP. That is the problem. It bestrides the whole of the Community's finance. Even today, when the proportion has been somewhat reduced, it is still the dominant feature in Community finance and all revolves around that huge concentration of finance. It is because of the CAP that we have the problem of compensation for the United Kingdom and that the Commission feels that it has no room for manoeuvre.

In its green paper the Commission talks about raising finance here or there, but it does not question the existence of the CAP. There is no suggestion of taking even the most modest steps to reduce the expenditure. That is astonishing. When we talk about finance we are talking about expenditure as well as raising revenue. The green paper is one-sided and I do not believe that it will take us very far.

When the May agreement was entered into we were told that there were what the Minister called two triggers. One, the financial mechanism, soon went. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) told us why. We did not possess the qualifications, due to a large extent to the Government's economic policy. That trigger has gone. We are left with the supplementary measures, of which we are getting only £400 million, and we are told that we shall get £230 million on unspecified energy programmes. No one has been told anything about them. We do not know what sort of programmes they will be or where they will be sited. We are merely told that a programme will be coming forward. I look forward to that with interest.

I wish now to deal with the matter from a constituency angle. I represent a west midlands constituency in Birmingham. So far not a single penny has gone to the west midlands from the supplementary measures. The money is devoted entirely to certain designated areas which the British Government and not the Commission are responsible for choosing. The west midlands does not get a single penny.

The west midlands is today one of the most depressed areas in the country. Its decline from past prosperity has been rapid, dramatic and disastrous. It is now almost at the top of the list of regions with high unemployment. Every week there are fresh closures and fresh redundancies. There have been several thousand redundancies in the city of Birmingham during the past few weeks, and 20,000 jobs have disappeared in my constituency during the past three or four years.

There is no daylight to be seen. In the past, Governments might have said that the depression in Birmingham was temporary. They might have said that the west midlands was a resilient area and that it would recover. Today, the position is desperate. Industries are disappearing and there is no sign of recovery. One might have expected that, where there were some programmes to distribute, something would have gone to the west midlands, but not a single penny of this money is going to the west midlands. I do not know whether any of the energy programmes will go there. Perhaps the Minister could tell us in due course. I am interested not only in the supplementary measures but in the regional fund. As for the regional fund, I have here a table entitled: "Fund assistance 1975–1981 and main social and economic indicators". I shall give the figures for assistance in the various areas in those years. For the north of England, the figure is 80.51 million ecu; for the north-west, 27.72 million ecu; for Yorkshire and Humberside, 73.63 million ecu; for the east midlands 13.24 million ecu; for the south-west, 31.85 million ecu; for Scotland, 331.36 million ecu; for Wales 196.70 million ecu and for Northern Ireland 182.75 million ecu. For the west midlands, the figure is 0.10 ecu per capita.

I want the Minister to explain why this state of affairs continues when conditions are so desperate. One or two hon. Members have asked whether the west midlands will now have access to Community funds and the Minister has replied that, for the time being at any rate, there will be no such access. In view of the desperate position of the west midlands, what are the Government going to do about this aspect of their policies? What assistance will they give? What proportion of these funds will go to the west midlands, and what change of policy will the Government make with regard to that very distressed area?

6.13 pm

Mr. Alan Haselhurst (Saffron Walden)

My approach to the budget problem depends on three factors: first, the assessment of the benefits of membership to Britain; secondly, the certainty or otherwise of Britain's membership of the Community; and, thirdly, what I wish the Community to be and what I wish it to do.

I apologise to the hon. Member for Birmingham, Erdington (Mr. Silverman), with whom I have the honour to sit on the Select Committee on European Legislation &c, for not taking up what he said, especially from his regional point of view. However, I doubt whether industrialists and business people in the west midlands would necessarily draw, as he does, a gloomy conclusion about membership of the Community.

It is impossible to assess Britain's benefits from membership of the Community simply by considering our performance today and deducing that, because we have been members of the Community, we have done less well than we would, had we been outside the Community. We must try to assess what would have happened to Britain had we not joined the Community and then compare our position today. That exercise was carried out by the group economic adviser to Lloyds Bank and published in its January economic bulletin. The conclusion of Mr. Christopher Johnson was: The cumulative effect of our EEC membership on the UK's GNP is estimated at a £19 billion gain on industrial exports, and a £7 billion loss on agricultural Budget transfers, leaving a net gain of £12 billion, or 5 per cent. of this year's GDP. That shows that there is an economic gain to Britain, although the gain may not be as great as many of us would wish.

Nor has Britain lost from the common agricultural policy. There have been benefits to both British agriculture and the consumer from our membership of the CAP because we have security of food supplies. We may not have been better off by buying on the great world market where prices have fluctuated considerably for some time and that will offer no certainty of cheapness in the long term.

Mr. Arthur Lewis (Newham, North-West)

Will the hon. Gentleman give way?

Mr. Haselhurst

No. The hon. Gentleman has only just arrived in the Chamber and has not been listening to the debate. Other hon. Members wish to speak—

Mr. Lewis

I have heard the hon. Gentleman's comments.

Mr. Haselhurst

—and I shall not give way to the hon. Gentleman.

The reason why Britain has not done better in the EC may lie in the fact that we have not put our industrial house in order in other ways. We have suffered from overmanning, poor management and obstructive trade union practices, all of which have held up Britain's performance compared with our continental partners. Those matters cannot be dismissed and ignored when we consider what Britain has done in the Community. We could have done better, and we shall do better only if we sort out our industrial difficulties.

We should not ignore the political importance of our membership. It is impossible to put a price on that, and one of the most fundamental reasons for our membership is the great advantage of our growing closer to our European partners, which is a force for peace and good in the world. That stands above all other benefits of membership.

If we are to take a sensible approach to the budget problem, we must know how we have done realistically within the Community, and how well we might do if we sorted out our industrial difficulties, and we must get rid of the continuing doubt about whether we are serious about our membership. Our industry is damaged by the uncertainty, and especially by the fact that a major party in Britain will campaign in the next election for this country to leave the Community. Very few people in industry and commerce believe that it is a sane and credible policy for Britain to pull out. When they know that the Labour party is advocating that policy, it must act as some form of restraint on their commercial and business decisions. That uncertainty is damaging to the further development of the British economy.

While this uncertainty exists, how do we look to our partners in the Community? How can they be expected to debate and negotiate seriously on what should be a fair deal for Britain and for all the Community members if our partners are not sure that Britain will remain for much longer a Community member? That cause for doubt is understandable. If they appreciate the downright hostility that was shown this afternoon by the right hon. Member for Stepney and Poplar (Mr. Shore) they may imagine that we are at war with them, rather than in partnership as members of a community dedicated to common objectives.

The so-called internationalism of the Labour party, as demonstrated by the right hon. Member for Bristol, South-East (Mr. Benn), is of the vague and waffly variety. The Labour party is very good at talking about the brotherhood of man in broad international terms, but when it is asked to get down to the nitty-gritty details of co-operating with its next-door neighbours in Europe it falls well short. That uncertainty must be removed. The Labour party should realise the damage it is doing to Britain and to the British people by continuing to keep the issue open.

Mr. Heffer

Is the hon. Gentleman aware that at the end of the second world war the Labour party resuscitated the Socialist International, whereas the Conservative party resuscitated nothing about internationalism? Is he also aware that it was the Labour party which, consistently over the years, stood foursquare with those who were seeking their national independence? When the Labour party came to power in 1945, it was responsible for ensuring that India and other nations gained independence. That is true internationalism.

Mr. Haselhurst

The hon. Gentleman demonstrates that he is living in 1945 and not in the present. The British Labour party has the opportunity of standing foursquare with the Labour and Social Democratic parties of the continent of Europe, and to their despair it is failing to do so. That is the test of internationalism and the brotherhood of Socialism. We must get rid of this uncertainty as an important part of ensuring that Britain gets the best budget deal in the future.

The final consideration is what kind of Community should exist in the future—[Interruption.] I have already given way to the hon. Member for Liverpool, Walton (Mr. Heffer). I am not prepared to give way to him if he continues a sedentary commentary. He might do the House the courtesy of remaining silent or seeking to interrupt if he wishes.

The Community should be an expanding and dynamic body. I do not have any hang-ups on sovereignty. Today, it is absurd to rely upon narrow national sovereignty. I am not happy with the idea of clinging to the nation state. While I am proud of my country's history, I look back on the history of the world to see that the nation state has created a lot of distress in the conduct of its policies. If a way can be found of getting away from the nation state and embracing the idea of a wider community, that is far better for the development of mankind than relying on narrow nationalism or an overt jealous guardianship of sovereignty.

The Community's role must be expanded. In this modern world, many things can be done only on a Community basis. If this country is to retain a worthwhile industrial presence in the world, we must work in alliance with our partners in Europe. That will enable the financing of some of the projects that will form the core of tomorrow's industrial world. Unless countries are prepared to act together, nation states will be unable to find the resources individually to fund the industries that will create work for the future. We should be thinking about new research projects as well as regional development when we look at what the scale of the Community's budget should be. More money will have to be found in the future.

I hope that my right hon. Friends will not take too rigid a view of not expanding the contribution to own resources. If there are worthwhile reasons for putting money into the Community's budget, I hope that those will be paramount.

The solution to Britain's problems can come about only as part of an expansion of the Community budget towards defined purposes. My hon. Friend the Member for Southend, East (Mr. Taylor) suggested that these principles were Socialist. They are the pragmatic approach of a Government and country seeking to find realistic answers to the industrial problems of tomorrow. Those answers cannot be found solely within these shores. That is not a Socialist conclusion. It is in an expansion of the Community budget that one will be able to solve the contribution that Britain should make towards that budget.

I commend Ministers on the imaginative and resourceful speeches that they have recently been making on the continent of Europe. I hope that they will keep those qualities of imagination and resourcefulness to the fore when they are engaged in the detailed negotiations on Britain's future contributions. It is only by the enlargement process that we shall achieve a fair answer for all the individual countries as well as a contribution that is fair and reasonable.

6.28 pm

Mr. Nigel Spearing (Newham, South)

I am grateful, to you, Mr. Deputy Speaker, for calling me immediately after the hon. Member for Saffron Walden (Mr. Haselhurst) with whom I frequently agree on matters in the House. We are both members of the Select Committee on European Legislation. First, I pay him a compliment. He has expressed in colourful language a common view held by members of his party, and some members of the British public, about the Common Market. That view is erroneous.

I wish to remark on one of the points the hon. Member made earlier about how Britain can benefit from the European Community. I have every reason to suppose that the hon. Member's constituency is benefiting from the Community's agricultural policy. The United Kingdom cereals harvest for 1982 showed a surplus of about 6 million tonnes. Not all of it will be exported. Some of it may be sent to the EC, Russia, East Germany or Poland. If it is exported it will require a subsidy of between £400 million and £500 million. If that surplus was not available to export, Britain would not get the money from the European Community and we would be contributing another £500 million net.

Many of the so-called "benefits" in the budget calculations go to particular sectors of society. The common agricultural policy is distorting the agriculture of the United Kingdom in a way which may be of short-term benefit to some of the hon. Gentleman's constituents. In the long term it will not benefit agriculture in the United Kingdom.

The hon. Gentleman said that the treaty of Rome encouraged co-operation and partnership and that it is an international treaty. That is not true. The treaty of Rome is a commercial, economic and political treaty. I can find nothing in that treaty relating to world co-operation and partnership. Those are qualitative matters in relationships between states. I shall be interested to see whether any hon. Member can point to any provision in the treaty of Rome that encourages those necessary qualities. I suggest that the treaty prevents the development of the qualities that we all wish to see.

The common language is an example. We talk about partners. The essence of partnership is that each person contributes to the common weal without an account book calculation of how much he is putting in. In fact, that is never the case in the EC. The other member states are our competitors rather than our partners. They are competitors forced on us by the articles of the treaty, which require competition as the sine qua non of the economic organisation of the Community.

The hon. Member for Saffron Walden said that he wants to see an expanding and dynamic Community. Perhaps he does not realise that he is encouraging a hierarchical organisation that takes power from the nation state. I agree that in the modern world the nation state cannot solve problems on its own. That is why the United Nations and hundreds of international agencies look at matters issue by issue to see whether some sort of arrangement can be made. Of course, the nation state cannot do it on its own, but, unless there are nation states, they cannot co-operate with one another.

Those who support the EC in terms of the hon. Gentleman's logic want to do away with Britain as a nation state, as with France and Germany—[Interruption.] The hon. Member for Harrow, East (Mr. Dykes) waves his hand. He should wait until the end of my remarks to see whether he feels so confident, because that is the aim of those who wrote the treaty of Rome. They have put inside it an automatic screw which, wherever it moves—and it moves annually—inexorably and automatically moves in that direction. It is built into the mechanism, and was seen to be so by hon. Members long before we signed the treaty. Conservative Members, Ministers, and perhaps even the Foreign Office, have just woken up to that fact of life.

I wish to make three relatively brief points on the procedure that we have adopted in these matters, on the mandate of 30 May and on the power of the assembly, which is growing and ought to be diminished. We have before us in this long and complex motion no fewer than 11 documents. Attached to each is a Government explanatory memorandum, some of which are also accompanied by reports from the Scrutiny Committee. In other words, between 20 and 30 documents ought to be perused by hon. Members taking part in the debate.

Notice was given of the debate in principle last Thursday week, but it was not until last Friday that the general public and most hon. Members could possibly know what documents would be contained in the motion. The motion was not tabled until then, and it was not until then that the Hansard containing the list of documents was printed. If we are to do justice to our procedures or, indeed, to the Community, that is not the proper means of proceeding. I hope that the Leader of the House and others concerned with these matters will look at this point.

My second point on procedure is perhaps more important. We have been discussing the powers of the assembly. It has been assumed by some, including the right hon. Member for Down, South (Mr. Powell), that the powers of the assembly, which it is now wielding so effectively, were in the treaty of accession. They were not. The treaty has been printed as Cmnd. 6252, dated 1975. The assembly's enhanced powers over the budget were given by this House on the evening of 8–9 December 1975. However, that effective amendment to the treaty of Rome was not understood by the House, which considered two definition of treaties orders that were passed without any change whatever.

Mr. Roper

The hon. Gentleman will remember the date as well as I do, because he took part in the debate, as I did. If he rereads the speeches, he will find that there were a number of references to the importance of those treaties.

Mr. Spearing

I do not deny that. On that occasion, my speech was nothing like as strong as it should have been.

The question on the Order Paper at that time was that the House should approve two statutory instruments. I shall now proceed to explain how they amended the treaty of Rome. The schedule to each of those domestic statutory instruments referred to a number of treaties—about 12 in all—of which Cmnd. 6252 gave greater power to the assembly in respect of the budget. That was how we amended the treaty of Rome and handed over the power.

Some of us may have had a clue about what was going on, but I doubt whether any hon. Member believes that that was the way to give the assembly greater powers over the budget. Therefore, procedural matters in respect of the Community and this House require considerable scrutiny.

My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) has already referred to the mandate of 30 May 1980, which was hailed by Conservative Members, particularly by the right hon. Member for Chesham and Amersham (Sir I. Gilmour), then the Lord Privy Seal, as a great breakthrough. The Cabinet was sold it the day after it had been agreed, and everyone thought that they were on the way. However, that communiqué—because that was all it was—contained the phrase without calling into question the principles of the CAP". The problem is that the principles and practices of the CAP are the keystone to virtually everything that goes on in the Community, pre-eminently the budget.

Mr. David Myles (Banff)

Which principles in the CAP does the hon. Gentleman wish to do away with?

Mr. Spearing

The problem is that the CAP objectives are laid down in the treaty, but it is the means whereby those objectives are achieved that have become custom and practice. One of the objectives, I think in article 64, is the "stabilisation of markets". It is on those three words that the whole system of intervention depends, as well as the ways in which it has grown and in which the previous agreement affects future expenditure.

One of the features of Common Market operations is that immediate difficulties are usually solved at the cost of putting greater difficulties and expenditure into the future. That has happened time and again. When it was agreed that there should be a modest withdrawal of crops, modest intervention and the setting up of an agricultural fund, I doubt whether anyone realised the extent to which the CAP had grown. Once started, it could not be stopped. It cannot be stopped because of the dependence on electoral votes in each country concerned. Politicians on both sides of the Channel have got on to a rising spiral that they cannot get off. That is one of the principal characteristics of the Community.

Mr. Myles

I wish to pursue this point further. The hon. Gentleman has not said which of the principles of the CAP he would wish to jettison either in or out of Europe. Is it the stabilisation of markets, which was mentioned, or one of the others?

Mr. Spearing

I am grateful to the hon. Gentleman because, perhaps inadvertently, he has hit upon the great problem that faces the CAP.

One can agree with objectives, but one can disagree with the means adopted for achieving them. If I were a Frenchman, I would perhaps uphold the policy of taxing food from outside because I would believe that, internally, French rural society should be sustained by such a policy. I believe that our policy of deficiency payments was much better suited both to British agriculture and to the British people. Therefore, the answer is that one has two means of achieving the same objective. I do not believe that they can be harmonised because of history and the differences between our two peoples. That was one of the good reasons why many people were against going into Europe. They foresaw the problems that we now face.

My third point relates to the role of the assembly in our current problems. The British rebates have come across continual problems. They were negotiated for a two-year period, with a one-year extension. Now, in this final year, after an enormous amount of discussion, the assembly, as described by the hon. Member for Scarborough (Sir M. Shaw) with great accuracy and detail, has said no. It did so for obvious reasons. I shall quote from Europe dated Friday 17 December 1982 under a heading "Strasbourg Thursday 16 December 1982". It states: By a very wide majority—258 votes in favour and 79 against—the Parliament has adopted the report and the resolution by the Italian communist Carla Barbarella which amounts to a rejection of the amending budget for 1982". It goes on to explain the reasons. Carla Barbarella was not present in a party capacity. She was chairman of the committee which reported. Neither Conservative Members nor the Foreign Secretary, who was Chief Whip of the Government which pushed through the measures, would have believed that in 1982 an Italian Communist deputy, being chairman o f a committee, could move a motion in the assembly which would wipe away £500 million or £600 million of public money from Britain. That is what is happening.

We all know why it has been done. The right hon. Member for Down, South used the word "lever". It is not only that the Parliament was against this payment because it did not have the necessary strings attached to it, but because it wanted to enlarge the powers of the assembly as against those of the Council and the Commission. The Parliament was using this as a convenient lever in its hands to do so.

The hon. Member for Scarborough outlined the need for consultation. He emphasised time and again the need for agreement. Of course 'that is so, but it takes two to make an agreement. The more consultation there is, the more power the assembly will have over and above the Council. It may be that the effective power is even greater than that given by the treaty. We all know that the real power in politics is based not only on the written law or on written rules, but on the leverage which might be brought to bear. It is clear that the European assembly, in going about its work, has enlarged its powers and brought publicity on itself that it would not otherwise have received and is spoiling for the next round.

We have only to read the communiqués which appeared in Europe on 11 February. Referring to the long resolution which came about at the end of the deliberations, it said that the Parliament considers this supplementary budget, to which it raises no objection, a 'first step towards more ambitious objectives for the Community."' What can the "more ambitious objectives" be? The hon. Members for Saffron Walden and Harrow, East might like to fill those in. The hon. Member for Farnworth (Mr. Roper) has already filled in what the SDP thinks. The SDP agrees with the Community on this matter. The SDP wants to enlarge the budget and increase its scope. It wants the EC to spend more and national Governments to spend less. That was the burden of the speech of the hon. Member for Farnworth.

It is no good the Government saying that they do not think there should be an increase in the 1 per cent. limit. The report of the Select Committee on European Legislation summarises it as follows: The Commission contends that for these aims to be realised an extension of the Community's own resources is unavoidable, and does not accept that the 1 per cent. ceiling on VAT own resources should be a permanent constraint. Later, summarising the Commission's views, it states: The Commission concludes its paper with a discussion of the role of the European Parliament as one branch of the budgetary authority, noting that while sensitive issues were raised in 1973 by its own proposal that the Community institutions should be empowered to create new budgetary revenue sources without the need for ratification by national legislatures, a greater degree of independence in this respect was nevertheless desirable. In other words, the Commission is leaning in the direction of the assembly when the assembly wants to increase its powers.

I close my remarks on the connection between money and policy, on a point made by the right hon. Member for Down, South. We all know that control over money equals control over policy. In political terms, policy is often money—not always, but often. The assembly clearly wishes to extend its competence, and competence over the budget is but the first step. Other people also wish to extend the competence of the Community.

In a press release, dated 26 November 1982, Herr Kohl, Chancellor of the Bundestag as he then was—this was kindly sent to us by the West German embassy—referring to the period when Germany will have the Presidency of the Council—a period now with us, but of course preceding the German elections—said: Above all, this applies to the German-Italian initiative on a European Act, which we hope will provide new impulses for European unification. When my country assumes the presidency of the European Community, we shall therefore make vigorous efforts to promote this initiative. That document is not before us today, but the power of money which would push that document is not in this House alone—it is with the assembly. When Conservative Members read the document, they may not say "Hear, hear". The mechanisms of the Community, which I mentioned in reply to the hon. Member for Saffron Walden, have within them an automatic screw towards European unification—unification of its political authority; unification of its public expenditure; unification of its laws; and unification of its foreign policy.

I do not believe that that is the right step. I do not believe that the fruits of co-operation, fellowship and friendship can come from the tree of the treaty of Rome. They must be achieved in some other way. The Government must realise that once a year the screw will be turned on an automatic ratchet, and that ratchet is the annual budget. They must make a resolute approach and realise that the friendship and partnership that we want with our friends across the Channel cannot be achieved by the treaty of Rome.

6.50 pm

Mr. Peter Lloyd (Fareham)

I am pleased to follow the hon. Member for Newham, South (Mr. Spearing) because I agree with the main part of his argument. My only disagreement is with his comment that it takes two to make an agreement. That is not true in the Community, where it takes at least 10.

Everyone agrees that Britain pays too much, or that it receives too little, but I suspect that some Community enthusiasts regard our contribution as a not unbearable surcharge for the privilege and benefit of belonging to the EC, and as an inevitable penalty for not joining earlier and being present for the formulation of the original rules. That view was taken by my hon. Friend the Member for Aberdeenshire, West (Sir R. Fairgrieve).

Most people in Britain, and certainly in the House, believe that the Prime Minister was wholly right to insist on the temporary adjustment that she achieved in 1980. Contrary to what the hon. Member for Farnworth (Mr. Roper) said, I believe that in so doing she focused, not distracted, attention on the basic long-term problem. Since then we have been waiting for the promised new permanent arrangement to ensure that the problem does not arise again for Britain, or for any other member state. So far, we have waited in vain.

The obvious injustice to Britain, tardily recognised as such by our friends in the Community, is that we are in an unacceptable position which, on entry to the EC, we were promised would be put right. The fact that that remains unresolved strikes most people as, at best, sloth and inertia and, at worst, a deliberate and mean desire to keep arrangements that might profit them at our expense. But neither view really explains why the matter remains unsettled, despite the sustained pressure of Foreign Office and Treasury Ministers during the past three years. Those suspicions do an injustice to, and underestimate, our friends in the Community.

Of course, our fellow members would be unusual if they were enthusiastic to find ways of paying more so that we could pay less. But the underlying reason why nothing is done is surely that the budget question inevitably touches upon the fundamental character of the EC. The way that it is eventually settled will determine the way in which the Community will evolve. Therefore, every solution canvassed has a more significant implication than its effect on the United Kingdom's net contribution and the extra that our fellow members will have to pay. The documents underlying the debate show that.

But if the Community is to continue to be welded into a federal European state or, to use a less provocative description, some sort of supranational unity—which is undoubtedly the ideal of most of those with the responsibility for running it and the path down which, in the fulness of time, they mean to go—witness the statement of Herr Kohl referred to by the hon. Member for Newham, South. There are others we could pray in aid on that point.

If the Community is to advance in that direction, it must ensure that it continues to be financed from its own resources, to do with as it determines. It must also view with great suspicion any idea of a juste retour arrangement, as it would destroy the Community's potential as an organic unity if each country was guaranteed that it would get out whatever it put in, less a percentage for expenses. The Government undoubtedly understand that, because it is implied, if not quite stated, in the green document which has been in the Vote Office for some considerable time, unlike some other documents being debated today. It is dated September of last year and is entitled "The Budget Problem". On page 7, the Government argue strongly that they are not asking for a juste retour but that they want a formula to ensure that the transfer should be from the richer to the poorer. That sounds to me, and no doubt to our colleagues in the Community, to be a refined version of the species—a somewhat juster juste retour than simply getting back what we put in. My hon. Friend the Under-Secretary, who knows that passage, will say that Britain is prepared to be a modest net contributor, but we are being disingenuous to say that the principle is not really being breached by what we ask.

The most communautaire way to deal with the United Kingdom budget problem is to develop other Community policies that would provide the desired offsetting net benefit. But there is surely something grotesque in the idea of developing policies not for their intrinsic merit, but to make the statistics look better. That would be a gigantic misappropriation of public funds. Yet the Government, in the document, insist that they have long wanted a more rapid development of EC policies, especially regional and social. I hope that they will explain why.

Are the Government really saying that Brussels can spend our money more effectively in those and other areas, and do so better than we can ourselves? If so, they must tell us how that can be. I suspect that efficiency and value for money have little to do with it, and that the answer is that the Community idealists and managers in Strasbourg and Brussels regard those as the necessary steps in what they call "building Europe". We will be moved to accept that as the most promising way of achieving the appearance of getting our money back. For, in truth, development of those policies will mean that the Community, including the United Kingdom, will have to find additional resources to finance them. That, thanks to the additionality rule, will exert an upward pressure on public spending at home, which the Government have taken nearly four determined years to bring under control. That would not be a satisfactory outcome, although it may have some attraction for Opposition Members.

As my hon. Friend the Member for Southend, East (Mr. Taylor) said, the budget problem would almost entirely evaporate if there was a genuine common market in agriculture, in which prices were determined by supply and demand rather than expensively engineered by politicians. Yet the Government, in the document, protest that they are not trying to undermine the CAP and that over-production and the consequent dumping on the unfortunate Third world can be dealt with without altering the principles of the treaty of Rome, or even the fundamentals of the CAP constructed upon it. It is high time that the Government told us how the trick might be done, because I do not believe that it can. I shall resist the temptation of explaining why, because it is not strictly relevant to the debate. But I recommend any hon. Members who wonder why to read the brilliant book on the subject recently published by my hon. Friend the Member for Holland with Boston (Mr. Body).

Despite my critical stance, I support the Government—at least in their efforts to obtain a permanent rebate. But they are facing a far harder and more dangerous task than they have ever admitted. The way that the issue is resolved will have a major influence on the direction in which the Community will develop. Those who make the decisions on the other side of the Channel will insist that any change conceded must extend the authority and the influence of the Community. Thus I fear that the only solution—

Mr. Myles

Does my hon. Friend want us to come out of the Community?

Mr. Lloyd

No. I would much prefer that the Community should be changed. If it cannot be changed, I am afraid that that will be the only option open to us.

I fear that the only solution—I hope that it will not be—that the Government will eventually find that it can secure will involve a further increase in EC own resources and a larger area of United Kingdom decisions and spending controlled or supervised from Brussels, which will be less cost-effective and responsive in practice than Whitehall would have been and deeply unwelcome in principle to the British people and the House.

7.1 pm

Mr. Ron Leighton (Newham, North-East)

I am pleased to follow the extremely thoughtful speech of the hon. Member for Fareham (Mr. Lloyd).

I fear that the House must approach this debate with a sense of déjà vu. Once again, we are obliged to turn to the sad and sorry saga of Britain's still unsolved budget problem. Here we are yet again tiresomely haggling over the grossly inequitable exactions that are demanded from us by the EC budget and the still unreformed lunacies of the common agricultural policy. It is no wonder that there is a sense of exasperation and weary disillusion in the country over the whole wretched business.

Last week I asked the Foreign Secretary whether he was aware that the British people were sick and tired of the annual haggling and wrangling over the British budget contribution. He said that he understood that well and asked me how I thought he felt. Presumably he feels exactly the same.

The EC budget is a Heath Robinson contraption, which it is misleading to dignify with the description of budget. The Common Market has nothing like a Chancellor of the Exchequer who sits down and takes a series of conscious decisions. All the main decisions are taken separately in meetings of the Council of Ministers. The decisions on policies are laid end to end. The expenses are estimated, added together and presented as a bill to be paid. That is what is called a budget.

Conscious decisions can be made only in the small sector known as non-obligatory expenditure. Much the greater part is obligatory or compulsory expenditure, mainly on agriculture, where there is no discretion. The task is merely to estimate the cost of running the CAP, the cost of financing the huge, surpluses exceeding demand and the enormous costs of subsidising their dumping and export on world markets. Then the bill is presented. Therefore, the Council of Agriculture Ministers is in many ways more influential on the outcome than the Council of Finance Ministers. The latter just picks up the tab.

Our Minister of Agriculture, Fisheries and Food could have helped if he had carried out the promise in the Conservative election manifesto to freeze the prices of goods in structural surplus. However, he has not. He has done the opposite. Last year the price increase was over 11 per cent. That served only to worsen, entrench and fortify the CAP, not to reform it. The farm whey is becoming more lunatic than ever. It gives open-handed guarantees for everything produced. That is why it produces the food mountains. It has unduly benefited the larger, richer producers and has widened rather than reduced the gap between the richer and poorer regions.

It puzzles me why, in equity, the United Kingdom should pay anything at all to the EC budget. Even the Chancellor once said that in the EC resources should flow from richer to poorer countries and regions, as they do within national economies, and that the balance of contributions should flow from conscious overall decisions, not simply from putting individual policies end to end.

I do not know what the budget will be like this year, but in our domestic budget normally some heed is paid to the ability to pay and to the need for expenditure. The more deprived regions in the United Kingdom receive more than they pay. There is a redistributive effect. The preamble to the treaty of Rome talks of reducing the differences existing between various regions. If the policy is really one of encouraging convergence of economic performance and wealth, why should there not be large subventions to the United Kingdom? Why are we not a net beneficiary? After all, most of the other member states are. They receive subsidies and net payments, yet they are some of the richest countries in the world, certainly in Europe and in the Common Market. Surely that is entirely perverse. There is no relationship between contributions and receipts on the one hand and each country's wealth on the other. The budget, and the mix of policies that it finances, does not promote a fair distribution of resources within the EEC or the convergence of economic growth. It does the complete opposite.

Document 6329 is an explanatory memorandum from the Treasury. It is stated in paragraph 8: in real terms, economic growth in the UK has remained on average significantly below the Community average. That takes me back to the discussions, which my right hon. Friend the Member for Bristol, South-East (Mr. Benn) will remember, when we had the referendum. When our growth rate was contrasted with that of the Community, we were told that if only we would join, by some unexplained process or infection, the United Kingdom would have the same growth rate as in the Common Market. However, in the decade before we joined the Common Market our growth rate was higher than it has been since we joined. I must not be diverted down that path.

I return to the budget. It was eminently predictable and was predicted—our words are on record—that the financial regulations devised by the original Six to suit themselves would not suit our different circumstances, economy and trading patterns and would lead to a haemorrhage of British resources to the continent, and that effectively we would be grossly exploited by our richer neighbours. In the 10 years that we have been members of the Community we have handed over about £4 billion. At 1983 prices, it would be much more than that. That growing disaster was concealed by the transitional arrangements. Their ending coincided with the election of the Conservative Government. The Prime Minister was confronted with the full horror of a bill for £1 billion for policies that damaged us. The right hon. Lady averred that she would have none of it. She went to Dublin to demand our money back. She wanted the whole loaf, and she had the full support of the House. I shall quote what was reported in Hansard on 16 July 1979—just a couple of months after she was elected. The House passed a motion urging Her Majesty's Government 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 policy of this House in July 1979.

At that time I was a member of the Select Committee on European Legislation, &c., the Scrutiny Committee, and I well remember on 16 April 1980 the Financial Secretary coming along to tell us what that meant. I quote: As you know, the Prime Minister has said on a number of occasions that we have very little room for manoeuvre and that she would consider it appropriate, if we were to make a net contribution, for that contribution to be less than that of France, I do not think it would be sensible to go further than that". The Select Committee Chairman said: Just for the record, what is the contribution of France?", to which the Financial Secretary replied: It is slightly complicated, because if you look at the table you will find that it is roughly a break even".—[Official Report, 3 July 1980; Vol. 987, c. 1667–8]. That was the position of France, and the Financial Secretary said that he wanted our contribution to be less than that of France. Presumably he wanted either a break even or for this country to become a slight net beneficiary. I should have thought from that statement that nothing could be clearer about the Government's policy.

The Prime Minister insisted on what she called a permanent solution based on a broad balance. We all know that we do not have that. Can anyone say that we have anything like that? Of course not. It is as far away as ever. All we have is a temporary ad hoc arrangement, giving us half a loaf, with promises. The promise was the famous mandate to the Commission in May 1980—I remind the House that that was three years ago—for an examination of Community policies following the temporary settlement with Britain to prevent a recurrence of unacceptable budget situations for any member state. That mandate was fatally flawed. It was confined and circumscribed because, in May 1980, the Council re-affirmed that the commission must not call into question common financial responsibility for EEC policies or the basic principles of the CAP. How does one reform anything without changing it? Is that possible? Of course not.

However, there was a pathetic and naive optimism. The right hon. Member for Chesham and Amersham (Sir I. Gilmour), then the Lord Privy Seal, said in June 1980: With the review commissioned for 1981 and the proximity of the 1 per cent. VAT ceiling, 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.1046.] That was three years ago. We have had it again today. We have heard it for years. We have always been going to do these things.

Sadly the right hon. Gentleman is no longer with us in that capacity to muse upon what went wrong. His successor, the right hon. Member for Spelthorne (Mr. Atkins), coming perhaps with some relief from Northern Ireland, was even more sanguine. By then, the Commission, under the mandate, had reported, and he told us on 29 October 1981—it is embarrassing to hear his naive optimism: The European Council at the end of June this year agreed on the procedure for handling the report. It called for work to be done so that conclusions could be reached by the Heads of Government at the next meeting of the European Council in London on 26 and 27 November. It is a major priority of our Presidency to ensure that we make decisive progress on the subject". Does the House remember the great hopes that were held out by the British Presidency? The former British President, the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), is not present. My hon. Friend the Member for Birmingham, Erdington (Mr. Silverman), the Chairman of the Scrutiny Committee, was taken aback by that, and intervened to ask whether that was realistic. The then Lord Privy Seal went on, very optimistically: In June, when the Heads of Government met in the European Council, again, they called on member countries to sit down, discuss, negotiate and work out how best to solve the problem, whether by adopting the proposals or in some other way, and present Heads of Government with decisions for them to endorse, or, if decisions were not possible, at least alternatives to discuss and decide on. That is what is happening. Discussions have gone on steadily and intensively over the past weeks and months. I am glad to say that at the Foreign Affairs Council that I attended earlier in the week all member States represented recognised the need to accelerate the work, because 26 November is not far away. To facilitate decisions at the November meeting we are under instructions from our Heads of Government to do just that. It is accepted by all the countries that it is necessary to arrive in November at a position where the Council can take decisions."—Official Report, 29 October 1981: Vol. 10, c. 1047.] That was in 1981.

Mr. J. Enoch Powell

Just think what he was like in Northern Ireland.

Mr. Leighton

That was pie in the sky. I do not know what the right hon. Gentleman was like in Northern Ireland, but here, I believe that he had been a Whip before that. What he said was a fantasy, a dream world, complete nonsense. He, too, is no longer with us in that capacity—nor are his illusions. We have no permanent solution. We have still only a patched-up, botched-up, unsatisfactory temporary arrangement. All these years later we are still engaged in ad hoc-ery, in bitter demeaning annual wrangling and haggling, and it will get worse. Quite soon, we shall start on another round. I pity the Minister on the Treasury Bench if he has anything to do with it. There will be more bitterness and more bad blood.

The financial arrangements do not suit the United Kingdom, but to change them we should have to undo and unravel the whole package that the original Six contrived for themselves. Why should they undo it? They are enshrined in the treaty of accession that we so foolishly signed—but, presumably, with our eyes open. The measures for Britain are seen by the theologians and purists of the EC as exceptional and purely temporary concessions.

It is we and we alone who want to reform the CAP, but if that is to be done it is the other countries which will have to change their agriculture systems. Why should they change their agriculture systems to suit us? Are they likely to do so? I do not think so. It has been said that Germany is now the largest net contributor and therefore might be an ally. But Germany's agriculture voters get great benefits from the CAP. I notice that Herr Helmut Schmidt from time to time gave lip service to criticisms of the CAP, but Herr Ertl went merrily ahead looking after his Bavarian farming vote. I see no help there.

What leverage do we have? We cannot veto the farm price review, can we? Our veto was steamrollered out of existence. We have a Minister who is in favour of higher prices for the farmer and who is not worried about consumers. He just wants to please the farming community, so there is no hope there.

There are all sorts of other difficulties in the Minister's way. He will have observed the recent shenanigans in the EC assembly. I do not know whether that is a futile body. It seems to be, but it does have powers under the treaty. Something which has not yet been mentioned is the prospect of new elections. The people who sit in that rather curious body will want to flex their muscles to justify their existence to their sceptical voters. Is there not a great temptation for them in the run-up to the Euro-elections next year, when we return as a supplicant, to make all sorts of conditions? There are rumours that they may sack or put pressure on the Commission; they will certainly seek to strengthen their position before the next elections.

The right hon. Member for Down, South alluded to the fact that the House obtained its powers historically by its control of Supply and the assembly will do the same. That is the only way that it can obtain extra powers and establish its position.

Some people think that the solution is to throw money at the problem—as the Prime Minister would say —to have a larger budget and to set up new funds. I am afraid that that is no solution. Even if we did that, all that we should be doing is throwing more money after bad because, although we now have a small net gain from the minuscule regional and social funds, even that will disappear from enlargement, and after enlargement the United Kingdom will be in deficit, even on the regional and social funds. Therefore, to increase the size of the budget and to breach the 1 per cent. ceiling on VAT will not help us.

The only moral to draw, the only sensible conclusion, is to recognise the stark and simple truth that these arrangements do not suit the United Kingdom. They were not negotiated by us, and they were not meant to suit us and they do not. If they continue, they will be a constant source of acrimony, discord and conflict between us and our neighbours. It is ludicrous and demeaning to go on year after year with these wearisome disputes. Let the continentals run their agriculture as they wish, but let us take back the powers that we ceded to run our agriculture as we wish. Instead of these destructive disputes, let us arrange our relations with our neighbours on a basis other than membership of the Common Market.

7.25 pm

Mr. Hugh Dykes (Harrow, East)

Instead of continuing with wearisome disputes as described by the hon. Member for Newham, North-East (Mr. Leighton), we should divest ourselves of his wearisome speeches which, if he does not mind me saying so, are always similar. It is a rather shaming reality that instead of dealing in detail with the specifics of the subject in hand, such as the budget, EC debates, particularly the speeches of Labour Members, hysterical and monotonously repetitive tirades against working with wicked foreigners who have horns and a tail, who are not to be trusted at all, and who are seeking to do us down at every opportunity, seem to set out to show how ghastly the whole thing is.

The British public do not fall for that nonsense. That is part of the internal cathedral of the Labour party's domestic agonies and problems. Whenever it is in opposition, it must be fiercely anti-EC. If by some mischance it were to win a general election in future, which seems increasingly unlikely, it would presumably find convenient reasons for being able to declare that withdrawal from the EC is no longer a good idea for Britain, or, indeed, an essential prerequisite—to use some of the phrases that we have heard today.

Without wishing to sound pompous in any way, as an hon. Member who is part of the post-war generation, how saddening and shaming—for that is the right word—it is that this is the only Parliament in the EC where such absurd quasi-fundamentalist debates take place with monotonous repetition, with the hysterical outbursts and silly speeches such as that made by the right hon. Member for Bristol, South-East (Mr. Benn) and the equally absurd tirades and hysteria of the right hon. Member for Down, South (Mr. Powell), who is not here at the moment. Presumably we shall have an even more hysterical outburst later from the hon. Member for Liverpool, Walton (Mr. Heffer).

That does not serve the nation or the British public well. They want to hear serious and detailed arguments about the inevitable problems that arise in the normative and conventional context of our EC membership, not the hysterical, chauvinistic, xenophobic rubbish that we hear repeatedly from the Labour party for its own internal reasons. It is a little presumptuous of it to inflict the domestic intra-party wranglings and struggles that it has, one comrade against another, on the long-suffering British public when its stance is not genuine but is born out of the traditional agonies and pains of its disunity in opposition. Although I want the disunity to remain so that it remains perpetually in opposition, it should bring forward much more constructive views about the budget and what should be done in future.

We all know the problems of the EC budget without the hon. Member for Newham, North-East telling us. They are perfectly understandable and natural problems which need not cause the hysteria within the Labour party to which I have referred. They are that Britain's traditional trading patterns still reflect the past, although we are gradually achieving better harmony with our colleagues and friends within the Community. We still import far more from non-EC countries and because our agriculture is based on a higher level of activity pro rata, with a much smaller base of operatives and output, we contribute more to the CAP than we get out. Those are the main reasons. There are some detailed exceptions such as the differential size of our GDP which is also added to the budget problem.

The awful Catch 22 illogicality of the Labour party is that it grumbles about such things but does not wish to see the permanent solutions to the problems that are even now being proposed in this series of documents. The Commission is constantly beset, as are the hapless members of the European Parliament—I pay tribute to them, particularly the British Members, and even the Labour ones who realise that they have a worthwhile job to perform—by the dilemma of being deprived by the Council of Ministers of the essential power and authority to propose solutions on issues such as the budget that would overcome the objections mentioned by the hon. Member for Newham, North-East. There are some hon. Members mainly on the Opposition Benches but even one or two sadly on the Conservative Benches—

Mr. Teddy Taylor

A growing number.

Mr. Dykes

—who are not prepared—my hon. Friend the Member for Southend, East (Mr. Taylor) made a much more thoughtful speech today—to wish the powers on the Commission to propose solutions.

The documents before the House contain sensible proposals, some aired for the sake of debate while others are more concrete. The Government are responding in a series of complicated but nevertheless essential meetings to those suggestions. I share the view expressed by my hon. Friend the Member for Saffron Walden (Mr. Haselhurst), in an excellent speech, and by my hon. Friend the Member for Aberdeenshire, West (Sir R. Fairgrieve), that the 1 per cent. ceiling is out of date and that it should be breached as a matter of deliberate policy to provide more resources for the Community budget. At a stroke, that would allow the hon. Member for Newham, North-East to be satisfied that, at long last, the agricultural ratio was coming down and that more funds would be available for spending on desirable areas in this country and others.

The Commission is proposing all the things that Labour Members want—more money on industrial and commercial activities, more money for the less developed regions of Britain and less on agriculture. Yet, when these proposals are put forward, there is the traditionally hysterical reaction from the Labour party. We need to support the ideas that the Commission produces. We need to reinforce the authority of the Commission. We should welcome the increased budgetary powers of the European Parliament with the additional insurance policy and protection provided by the fact that it is a joint budgetary authority with the Council of Ministers.

I wish that the Council of Ministers, not only in financial and budgetary matters, but in other matters, had had the courage and wisdom to cease adopting a nationalistic position. It is worse here than in any other state, including France. However, it exists everywhere, as a result partly of the economic recession. If the Council of Ministers had had the courage to withstand those pressures and had acted together positively to build up the Community and the budget in recent years, we would have fewer problems. The United Kingdom's less developed areas are crying out for more Community money.

This would not be a total substitute for national money. The purposes can be different. No one can provide the planning—a word congenial to Labour Members—on a scale and with the cohesion and harmonisation in deciding priorities better than the people in Brussels who can assess the needs of the entire Community. Of course, nation states remain strong entities that are more powerful than the Community. I accept that with enthusiasm. I am a patriot and a nationalist in that moderate sense. Why should that contradict the development of the Community taking common actions that benefit member states—tasks that cannot be done so efficiently by the nation states?

Mr. Leighton

Will the hon. Gentleman explain why he wants to send even larger sums of money to Brussels to finance an even more swollen and bloated budget in the hope of getting back a little more for our deprived regions when we could keep the money here and allow the House to decide what should be done with it?

Mr. Dykes

The hon. Gentleman misunderstands. The answer is lengthy. I shall deliberately avoid giving it, because you, Mr. Deputy Speaker, would rightly become impatient. I should like, however, to give two examples to show how the hon. Gentleman continually takes the wrong path. When a nation state alone decides which regions should receive additional aid, the west midlands, which needs it, does not get it. If the Community had the power, over and above national money, to decide upon areas of the Community that needed additional assistance, that problem would be overcome.

The hon. Gentleman continually undermines the confidence of his constituents about Britain's membership of the European Community and its long-term future in respect of expenditure that amounts to 2.5 per cent. of the total public spending of all member states. It amounts to less than 1 per cent., even following the latest increase, of the total amount of GDP of the entire Community. It is illogical and irrational that the hon. Gentleman should fuss and fret ten times as much over these issues when billions of pounds can be voted late at night without hon. Members paying proper attention. This shows the obsession of the Labour party.

Mr. Richard Body (Holland with Boston)

rose—

Mr. Dykes

I hope that my hon. Friend will forgive me if I do not give way. He has not been present for much of the debate. It will take time if I give way.

I implore Opposition Members and some of my hon. Friends, although there are not, thank goodness, many of them—this is the wise party in all respects—to drop these incredibly biased obsessions and irrational judgments about the European Community. They have ceased to be amusing. They have become positively alarming and worrying. This is the only Parliament within the Community where one hears such self-doubting, hysterical and paranoid debates about membership of the Community. Even in France, which cannot be accused of being other than an extermely robust and proud nation state, such debates do not take place in the National Assembly. That is not because the National Assembly is weak. It has powerful debates on many subjects. There is no debate even among Socialists in France about the essentials of Community membership even though there are problems within the Community which has not arranged everything marvellously for France.

Mr. Teddy Taylor

If there are any hysterical and alarming arguments, they surely come from my hon. Friend. It was true Conservatives like myself who fought the last election saying that we wanted to control unnecessary public spending. Now that this has been achieved, my hon. Friend wishes to increase public spending by the back door through the Common Market.

Mr. Dykes

That is one way of describing the situation. It is, however, my hon. Friend who gets carried away and becomes over-excited. The Community budget is not only small; it is also virtuous. In this country we have become accustomed to continued chronic deficits. Now, following four years of painful policy making by my right hon. and learned Friend the Chancellor of the Exchequer, they are much smaller. The Community budget is self-contained. There is no deficit. No debt is created. The receipts and the payments are supposed to balance. This will presumably continue to be its structure.

There are enthusiastic Europeans like myself who say that the budget, logically, like national budgets, should develop some kind of debt ratio. However, that does not happen at the moment. My hon. Friend does not need to get too worried. It is essential to determine the areas of genuine spending need in the Community budget and to fit tight financial control and surveillance of those figures into the budgetary procedure by increasing the powers at the margin of the European Parliament and by encouraging the Council of Ministers to operate more in the spirit of a community. They should operate on the basis that member states and those running the Governments in them actually like each other—not on the basis of hostility and dislike portrayed by the Opposition.

My hon. Friend the Member for Southend, East argued again about the wickedness of sending butter to the Soviet Union. On a visit I made to Moscow last April, I found that most of the butter in the shops came from New Zealand. My hon. Friend the Member for Southend, East will presumably argue that it is heroic and brave of New Zealand to send butter to the Soviet Union as a means of getting rid of a surplus. Yet he describes it as wicked and monstrous if the Common Market does the same thing. That is nonsense. I hope that the European Parliament will develop greater self-confidence. In its December debate and vote it held out the hand of assistance to this country over the dilemma of the budgetary problem. The European Parliament was saying, with total justification and accuracy, that the system of rough and ready rebates, which are not fair either to the majority of member states or to Britain, was silly and illogical and that a permanent solution had to be found.

I do not believe that we can achieve a permanent solution without being much more open-minded and flexible, not only on going through the 1 per cent. ceiling on VAT-equivalent payments, but on considering other sources of revenue for the budget.

Why is the 1 per cent. ceiling regarded as so sacrosanct? I agree with my hon. Friend the Member for Southend, East about the need to exercise ruthless control over public spending, but there is no magic about the 1 per cent. figure. It is only because there has been an anomalous effect on the differentials in world food prices and export subsidies and because VAT receipts, before the rate of inflation slowed down in Europe a year or two ago, were higher than expected, that the 1 per cent. ceiling had not been breached. It might have been breached if circumstances had been different and then a solution would have had to be found, because the pressure on spending in farming and other areas would have demanded it.

There is nothing fixed about the 1 per cent. limit. Of course it is a psychological jump to move to 1½ per cent., but it should be easier for people at least to think constructively about alternative sources of revenue.

One hon. Member suggested that an energy levy should be considered. I regret that such a levy is not an intrinsic part of the Commission's proposals. It makes much sense in many ways to develop a number of alternative, individualised sources of specific revenue for the EC budget. Overnight, this country would be an automatic beneficiary. The amount that we would receive would be very large and we would pay little into an energy levy budget because we are an oil-producing country.

I hope that the House still prides itself on its flexibility, though I sometimes doubt it when listening to debates such as this. The House should consider alternative possibilities, and I am sure that my hon. Friend the Under-Secretary of State for Foreign and Commonwealth Affairs, who is to reply to the debate, will refer to a number of options that could be developed in future.

There is no substitute for developing the Community budget constructively and in a non-inflationary way to spend money in the right areas in all the member states. There is also no substitute for much more co-operation, which is the essence of a convergence of action and decision making by Finance Ministers to help to get a Community-based, Community-wide recovery.

The slump in Europe is getting worse and the EC is the only body which can take a lead in bringing the whole of Europe out of the economic and industrial degradation and developing squalor into which it has sunk.

Mr. Leighton

Why has the Community not done so?

Mr. Dykes

Because the Council of Ministers never has the political will to get everyone round the table to decide to do things, which means spending Community money.

Surely the Mother of Parliaments should have more self-confidence in its constitutional abilities and capacities to stand up to the relatively weak European Parliament and other European institutions, which are still a modest collection of bodies. If that is not possible, there must be something wrong with this House and, to a lesser extent, with another place, which is also proud of its constitutionality and is not panic-stricken about the Community. Debates in another place reveal a continuing enthusiasm for our membership of the EC, even among Labour peers, who reflect a more sensible period of the Labour party's history of about 10 years ago.

It is not right for the right hon. Member for Down, South to compare exactly the constitutional procedures and long-term historical reality of our control over taxation proposed by the Executive and approved by the Parliament with the developing and modern procedures of the European Community. The essential difference is that there is a separation of powers in the Community which does not exist in this Parliament. The absence of a Government in the European Parliament changes the situation completely. Even though the Council of Ministers and the Parliament revolve round each other more constructively, the Council still calls the tune. None of the budget proposals can be approved unless the British representative on the Council of Ministers agrees that they meet the wishes of the British Government.

In the light of that incontrovertible fact, I suggest that everyone can be much calmer and less hysterical and silly about the future of our membership of the Community.

The comforting irony for Conservative Members is that, although detailed aspects of the Community are, inevitably, unpopular—it is a pity that we do not do more to present the facts to the public—there seems to be no inclination among the British people to leave the Community. That is yet another fatal flaw in the Labour party's negative and miserable manifesto.

7.47 pm

Mr. Bob Cryer (Keighley)

We have come to expect those measured tones of smooth support from the hon. Member for Harrow, East (Mr. Dykes). He is a Eurofanatic who sees nothing wrong with the EC and continues to trot out a sort of PR panegyric on the virtues of the Community.

The hon. Gentleman acknowledged that the EC, too, is in recession. I remind him that at the time of the referendum on our membership, the employers' organisations ran a campaign entitled "Jobs for the Boys" in which they claimed that the budgetary and economic arrangements of the Community would provide a solution to all our economic ills.

It is apparent that those claims were palpably false. The EC does not provide any solution to our economic ills, but the employers' organisations now claim that pulling out of the Community would be even more devastating than the devastation that membership has wreaked on our economy, particularly over the past three years.

The Community is in crisis. The argument about the budget is an annual event and no long-term arrangements can be made, because of the make-up and constitution of the EC. Therefore, as long as we remain members we shall have this annual wrangle.

This year we have managed to get a refund of our own money, but it is likely that next year we shall make a net contribution of about £700 million. When the Labour Government were in office, the then Leader of the Opposition, the present Prime Minister, used to claim that we were too abrasive with the Common Market and that a more co-operative and helpful approach was necessary. The right hon. Lady adopted the supine attitude towards the Community that the hon. Member for Harrow, East always displays.

However, since taking office, the Prime Minister has had to argue fiercely with the Common Market to obtain relatively minor results. There have certainly been no major results in the form of a reorganised Common Market.

Reorganisation of the Common Market is impossible because it depends on unity, and there are vested interests in the Common Market that benefit directly to a far greater extent than we do from the CAP. Those countries are not likely to give their consent to any changes that will deprive them of their farming benefits.

We are in an unfavourable position. Britain is the fourth poorest nation in the Common Market. Yet only Britain and West Germany are net contributors. Even in those circumstances, there is pressure from the EC to increase the own resources contribution by upping the 1 per cent. levy from VAT.

The translation of the letter from the Commission of the European Community signed by Mr. R. Burke, member, in paragraph 4, says: The Commission has on a number of occasions explained why it believes an extension of the Community's own resources to be necessary and why it cannot accept that the present ceiling should constitute a permanent constraint upon the growth of the Community's budget. In his programme speech of February 1981 to the European Parliament the President of the Community emphasised that the Community could not remain simply a Community of one per cent. In the first place, this is because of the need to safeguard the maintenance of the full range of the Community's existing policies. The Community is already living in the shadow of the exhaustion of its current financial resources". There is pressure for an increase in the levy that finances the Common Market. We need an assurance that the Government will resist any pressure to increase the levy on VAT that goes to the Common Market. Conservative Members, such as the hon. Member for Harrow, East, specifically say that the Common Market has to extend beyond the 1 per cent. limit. That is a significant part of our money over which this Parliament does not have control.

The hon. Member for Harrow, East said that we should be able to stand up to the Common Market and not worry about things too much. However, Parliament has been nurtured and developed as a democratic institution over many years. The vote has been fought for by people over many years. People see Parliament as an institution of democratic endeavour. When we see that institution eroded and the power of controlling financial expenditure shifted away to a Council of Ministers with non-accountable Commissioners in the EC, we worry.

The touching faith of the hon. Member for Harrow, East in the Council of Ministers is remarkable. The Council is undemocratic, it meets in secret, it has considerable powers and it can effectively legislate without any opportunity for lobbying, except indirectly to a Government before a Minister sets off for the Council of Ministers. There is no spotlight of publicity through open doors covering the proceedings of the Council of Ministers. It is a secretive body. If such a body had those powers in this country, I hope that Conservative Members would ask for it to be subject to more democratic proceedings. We do not want any more resources from the United Kingdom going to an essentially undemocratic body that is unaccountable for its decision-making. The pressure for the increase in own resources must be fiercely resisted.

Another aspect of the danger of the increase in own resources and of the Community's budget is the decision over the farm price review. The Government have said that they regret and are opposed to the decision but it took place, and the Luxembourg compromise was effectively seen to suffer a major alteration. There is no guarantee that in future there will be pressure for majority decision-making to be acceptable as the norm in the EC — I suspect that a few Euro-fanatics on the Conservative Benches are prepared to accept that—rather than some aberration that they are powerless to stop.

Mr. Allan Roberts (Bootle)

And the SDP.

Mr. Cryer

As my hon. Friend has reminded me, the SDP has specifically said that it is hook, line and sinker for—if it is for anything at all—majority voting in the EC. I imagine that its watchword at the next election will be, "Vote for us. We want majority voting in the EC." This would be a major breach of faith with the British people, because the Government's pamphlet "Britain's New Deal in Europe", which was distributed to every household in the United Kingdom, unequivocally stated: No important new policy can be decided in Brussels or anywhere else without the consent of a British Minister, answerable to a British Government and British Parliament … The Minister representing Britain can veto any proposals for a new law or a new tax if he considers it to be against British interests. That patently was not the case over the farm price review, which set an important precedent. I know that the Government expressed some opposition at the time, but they cannot give an unqualified guarantee that the same pressures will not arise again for majority decisions to be taken over important issues.

When we discuss the budget we recognise that, because of the nature and organisation of the Common Market, the vast proportion of the budget goes to support the CAP. There have not been any changes in the CAP over the past three years, or even since the formation of the EC. It is an intrinsic pillar of the Common Market. Countries with vested interests, particularly France, which benefit from the CAP, will see no virtue in agreeing to any changes. As long as there is a right of veto in the Common Market there will be no change in that system.

The CAP is an obscene system, and everybody pays lip service to its obscenity. Even the Euro-fanatics say that the CAP gives rise to obscenities in a world in which many people are deprived of food. For example, in 1981 over one million tonnes of fruit and vegetables were taken off the market by the EC, and 300,000 tonnes were destroyed.

Mr. Dykes

The hon. Gentleman has just been saying how wrong it is to have a majority voting system. Now he says that the trouble with the CAP is that there is a veto. Why does he not solve the muddle in his own mind?

Mr. Cryer

That is one of the difficulties of the Common Market. The veto was guaranteed by the United Kingdom Government, but they cannot guarantee that the right of veto will be maintained in future. On the farm price review, the veto was useless.

France will attempt to maintain the veto, as will West Germany, because it is in their interests, as it is in the interests of other beneficiaries of the CAP. The hon. Member for Harrow, East is making the point that if the veto system disappeared, the CAP might be changed because a majority system would be brought into operation. That lies in the distant future. In the meantime, our experience is that the majority system has been used only rarely, and against the interests of the United Kingdom.

In 1980–81, 78,000 tonnes of tomatoes were taken into intervention, of which 67,000 tonnes were destroyed; 517,000 tonnes of apples were taken into intervention, of which 114,000 tonnes were destroyed, and 8,000 tonnes of cauliflowers were destroyed, but I do not have the figures for the number of tonnes taken into intervention. To allow that quantity of food to be destroyed, without any likelihood of a fundamental change in the system, is appalling when we bear in mind that two thirds of the world's nations are short of food.

Mr. Myles

Does the hon. Gentleman agree that fresh food deteriorates rapidly? If it were not taken off the market, it would be destroyed, in effect, on the trees.

Mr. Cryer

It would not be destroyed if it were eaten. The hon. Gentleman is an enthusiast for sophisi.cated weapons systems. I suggest that it is not beyond the wit of mankind to take that surplus food and distribute it to hungry people. That could easily be done before the food became rotten. It is done every day throughout the world. But, because the CAP operates an obscene system, it does not allow that sort of thing to happen. As we know, it is a system for propping up the inefficient, uneconomic farmers of the Common Market.

The Government have recently demonstrated yet again their devotion to the farmers' cause. The hon. Member for Holland with Boston (Mr. Body) has written a very useful book showing the amount of support that has gone into farming in the European Community compared with manufacturing industry.

The Government, who are supporters of free enterprise—the Prime Minister says that British goods must compete on fair terms with the rest of the world—have done a complete U-turn over UHT milk imported from France. They say that the milk is horrible, tastes nasty and should not be imported. Yet they are denying the very principle that they purport to support—that the consumer should be allowed to make the judgment. The Government, in their effort to plan trade—that is what they are doing—say that the importing of that milk would disrupt British farming. For whatever reason they can find, they are determined to control the importing of French milk into Britain. All I ask is that they take the same robust attitude to manufacturing imports.

One of the objections to UHT milk relates to hygiene. Have the Government considered the safety aspect of manufactured goods? The Government do not employ safety officers at ports in Britain to examine imported manufactured goods arriving here. If any manufacturer in any other Common Market country wishes to exhibit machinery in Britain, he is free to do so, and it can then be sold. At that stage, it may be discovered to be faulty.

When a British manufacturer takes his machinery to West Germany, for example, and puts it on a stand at an exhibition, it is inspected to determine whether it is safe. If it does not conform with safety standards, it has to be withdrawn from the exhibition, and it is not allowed to be sold. The Government should institute reasonable safety standards for goods coming into Britain, rather than reacting, as always, after an accident has occurred or after some product has been found to be defective. The Common Market budget is geared very much towards the common agricultural policy and very little towards manufacturing industry.

The European Community is very good at public relations. It widely advertises the fact that it contributes to factory nursery units, to new factories and to regional development programmes. It claims to represent a great stride forward in international relations. Yet even the hon. Member for Harrow, East accepted that expenditure on the regional fund needs to be increased. He wants to reduce the disparity between the money spent on manufacturing industry and the money spent on the common agricultural policy. He wants to do that not by a switch of existing resources, but by increasing the expenditure on manufacturing industry through increasing the contributions from the various member states, particularly the United Kingdom. It simply will not work.

We have to emphasise continually that every penny that is spent by the Common Market inside the United Kingdom is our own money, but with the important difference that it is not under the control, generally speaking, of the United Kingdom Government and is not subject to scrutiny by our elected Parliament. By increasing the EC's own resources, we shall be pushing more and more power across to the Common Market.

The hon. Member for Harrow, East said that some people take a nationalistic view of the Common Market. That criticism does not apply to Labour Members. We do not take a narrow nationalistic view of the Common Market. We do not accept that a minority of western European nations represents the world. The EC is a tariff club. It is a Common Market with a tariff, a barrier. Those who look inwards are the EC supporters.

We want to have trading, cultural and international relations with the whole of the nations of the world. [Interruption.] With the Communist bloc as well, of course. As my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) has said, if we do not live with the Russians, we shall die with the Russians, so of course we want international relations with the Communist bloc, and also with the capitalist countries, but not just those within the EC.

Our withdrawal from the EC would not be accompanied by the dire results predicted by those who in the past have said that our membership would bring us great benefits and been proved to be so wrong. The United Kingdom is a massive, rich market for the EC countries. Since our entry in 1973, in motor vehicle production alone we have lost about 1 million cars and 150,000 commercial vehicles. That is one of the reasons why our manufacturing industry is in such dire straits. When the manufacture of vehicles is reduced to that extent, the ripples spread throughout the whole of the United Kingdom. For example, there is no longer any demand for the textiles used in tyres. The effects are also felt by the manufacturers of components and of car batteries. Head-lining and upholstery from the textile industry are also affected. All those items have a cumulative effect.

We have seen what has happened as a result of our membership of what was to be a buoyant Community. Our industry was supposed to grow. Much of the loss of British manufacturing has been taken up not by Japanese imports, but by imports from the Common Market, as the new car registrations will show.

We are in a very powerful position to organise quota arrangements to ensure that British manufacturing industry survives and is not swamped by Common Market products. The western European countries want to enter our market and we want to plan trade, so on that basis we can arrive at a suitable quota arrangement. After all, the Government have done it in arriving at the multi-fibre arrangement. There is not a Conservative Member of Parliament representing a textile constituency who objects to the multi-fibre arrangement. Some of them may object to some of the details, but they do not object to the MFA in principle. The only Conservative Members who object to the MFA are those who are comfortably away from the textile belt, but they should remember that the textile and clothing industries employ over 600,000 people directly and represent a very important section of our manufacturing industry.

The multi-fibre arrangement is a precise quota arrangement operated and negotiated by the EC with Third-world countries. The problem is that we cannot negotiate quota arrangements with other EC members because the majority of textiles that affect the United Kingdom come not from Third-world countries but from within the EC. There is a massive case for having trading and international relations with a much broader spectrum of countries than those within the narrow confines of the EC.

As the EC's budget resources increase and pressure grows, the power of an institution such as Parliament, which has been built by blood, sweat and tears over many years, is being gradually eroded. We can see that in the regulations and directives that are spewed out from the EC one after the other week by week.

We know that there has been erosion. Yet too many people shrug their shoulders and accept it as part of the status quo. The EC is not simply a trading arrangement; it is a political arrangement, a federal system, to convert a number of nations working together into a gigantic amorphous mass in which the major political and economic decisions are taken behind closed doors by the Council of Ministers.

There is no reason why nation states cannot come together and work in amity, extend relationships, and enter into quota arrangements. Indeed, people get on far better if they do, because the span of human understanding is limited. People have an appreciation, an understanding and acceptance of their position within a nation. If nations are combined into a great sprawling mass, such as the EC, people's sense of belonging disappears. They become more, not less, alienated.

The notion that people coming together in the EC has been some kind of bridge in international relations is not true. People feel isolated. The arguments over the budget demonstrate people not coming together but engaging in an unseemly scramble over the allocation of resources. It is far better to engage in international trade as a group of equal nations on a basis of trust and equality. It means that we must leave the Common Market and all this budgetary nonsense can be left behind.

8.12 pm

Mr. David Myles (Banff)

I am glad, Mr. Deputy Speaker, to have the opportunity of catching your eye. I had thought that I might do so earlier but the hon. Member for Keighley (Mr. Cryer) was drafted in rather hurriedly by the Opposition to prop up some of their weak arguments and perhaps carry the batting on a little longer. That was demonstrated by the way he put his case. His arguments were unusually ill-rehearsed. He had to scribble down one or two things during the speech of my hon. Friend the Member for Harrow, East (Mr. Dykes). It is rather unfortunate that the Opposition are so short of speakers who want to oppose this motion that they had to resort to that subterfuge.

I have been in the Chamber for almost the whole of the debate. The only time that I had to leave was when my hon. Friend the Member for Southend, East (Mr. Taylor) was speaking. I should have liked to hear what he said, but I have heard him speak on this subject on many occasions so I may, perhaps, be allowed to guess at a little of what he said today.

I have been trying to find my place in this argument, because we have heard both extremes. Unfortunately, we have mainly heard from the Opposition that the only answer to our relationship with Europe is to leave. It is remarkable that the right hon. Member for Bristol, South-East (Mr. Benn) did not seem to go to that extreme. He seemed to be saying that although we should leave the present European Community, we should form another. I was listening with a certain fascination. That is not the right word, because a rabbit is fascinated by a ferret, and I did not feel fascinated like that, although there must be many people who are influenced in that way by the right hon. Member. I was interested in his argument because he seemed to say that he wanted a union of European Socialist republics. He said clearly that Europe would not be united unless it was Socialist. He did not mind giving up our sovereignty for a union of European Socialist republics but he did not want to give it up for a confederation of European democratic republics. It is amazing that the right hon. Member for Bristol, South-East should go on so much about democracy.

Opposition Members who go on about sovereignty—with the exception of the right hon. Member for Down, South (Mr. Powell) whose long-held views on this matter I respect—and who are terrified of giving it up still say, "Let us lay down our arms. Let us throw away sophisticated weapons." That is what the hon. Member for Keighley said. Surely that is a bigger surrender of sovereignty than any co-operation or confederation in Europe.

I ask the House to consider carefully the far greater dangers that there could be in giving away sovereignty in that way than there is in the European Community. We have not given away sovereignty. I do not want to give it away. I believe that the House and the country should have control of our legislation. We must recognise that if we live in a world where travel difficulties are always decreasing, we must expect certain disciplines. That is the right word to describe the things that we must pay attention to within the Community. They are a great discipline.

The other factor that has been ignored by the Labour party in the debate is that the disciplines apply not only to us but to the other side. In the common fisheries agreement, for instance, we were able to get a discipline imposed on the Danes so that they would not continue to rape the seas and destroy fish stocks. We could have had the control in no other way than by agreement. We achieved it within the EC. I congratulate my right hon. Friends on their tremendous hard work in achieving the agreement, which is one of the true common policies that we have had in Europe.

International agreements such as on the financing of the EC budget are not easily achieved and are even more difficult to alter if only one state in 10 wants such a change. The situation is not helped if, in the interim, there has been renegotiation and an agreement again reached, backed up by a referendum of the whole country. It is therefore pleasantly surprising that so much recognition of our budget contribution problem has been given by our Community partners.

Mr. Marlow

In Paris?

Mr. Myles

Most certainly. Otherwise, we would not have obtained the refund. Our Community partners would not have been willing to give the refund. Under the strict terms of the agreement, we were not entitled to the refund, but, because of an understanding of our problem, we obtained a substantial refund.

There is, however, a great need to find a longer-term acceptable solution, as my right hon. Friend the Minister suggested. I am sure that our Community partners are amenable and are anxious to find such a solution, unlike the Labour party. The only solution that it and, I am sorry to say, my hon. Friend the Member for Southend, East have is to abolish the EC—get rid of it, come out, give up, contract into our shell and not compete. That is what is argued so often from the Opposition Benches.

Mr. Arthur Lewis

I have not heard one hon. Member on the Labour Benches say what the hon. Gentleman alleges. I would like to have one person named.

Mr. Myles

I am interested to hear the hon. Gentleman complaining. I have heard people say continually in the debate that they wanted to come out of Europe or abolish the CAP.

Mr. Lewis

But who said that we should wrap ourselves up in a cocoon?

Mr. Myles

Ah, no. No one said that. As usual., the hon. Gentleman has scored a hit. I beg his pardon. But it is the logical implication that I draw from what is said.

Mr. Lewis

Sweden is not in the Common Market and it is not in a cocoon.

Mr. Myles

I am sure that the House would be surprised if I did not come quickly to speak of the CAP. It has been a remarkable Community achievement. Along with the CFP—we hope to see the benefits of that, too—it is one of the agreements that has worked. Not only has agricultural production increased—the hon. Member for Keighley was complaining about manufacturing production not increasing—but the percentage of the budget that the CAP has required has been steadily reduced, especially since this Government came to power.

The surpluses are constantly complained about. It is strange to complain about plenty. We are the only area that complains because we have enough food. The complaint would be far more valid if it were about shortages or the failure of the Community to provide food for the poor people of our countries as well as for the rich.

Mr. Marlow

My hon. Friend is a farmer and knows a great deal about agriculture. Could he tell the House about the long periods during which the British people suffered from deprivation of food, outside periods of war, when this country was not a member of the European Community or involved in the CAP?

Mr. Myles

Outside periods of war? I do not dwell on history. I want to move forward. I want to consider future supplies for the increasing population in this country and in the world. If my hon. Friend wants to study history, he should consider what Thomas Malthus said. I do not doubt that the surplus in western Europe would have existed even if we had never fashioned the CAP. The carrot of stable, guaranteed Community prices for some agricultural products—only a few—has done far less to increase production than the new agricultural technologies. There have been genetic improvements in seeds and livestock, an increased understanding of the benefits of fertiliser usage and increased use of herbicides. Many of those new techniques have been stimulated because the guaranteed prices have been set at levels lower than those to which input costs have escalated.

The hon. Member for Keighley spoke about motor cars and how we have lost ground in our markets for motor cars. I can demonstrate graphically how this may have happened under the 1974–79 Labour Government, when the economic management of his country was so disastrous that inflation, wages and everything else was allowed to roar on. In 1973 it took 22 5 cwt. hill calves to buy a British-made Ford 4000 tractor. In 1979 the same Ford 4000 tractor would have cost 39 of the same 5 cwt. hill calves. In 1973 it took one calf to buy 1,000 gallons of diesel; in 1979, three calves. That is how farmers in the Community and everywhere else have to pay their bills.

That is the reason for the surpluses. As input costs rose, the farmer had to increase his production to meet them, or go out of business. It may be that many Labour Members want farmers to go out of business. If that is what they want, let them say so clearly and not say, like the hon. Member for Newham, South (Mr. Spearing) who has now left the Chamber, that we could rely on the old-established deficiency payment system. A deficiency payment system that would maintain agricultural prices in this country at present levels would cost far more than our net contribution to the European budget.

Mr. Marlow

Not true.

Mr. Myles

That is a recognised fact. There are two deficiency payment systems within the CAP—one is the beef premium scheme and the other is the sheepmeat regime that we enjoy. I say "enjoy" because farmers get a reasonable return for their labours and the housewife can buy lamb at market price with no added value. It is commonly said that the sheepmeat regime has dragged down the price of other products such as pigmeat. There is no guaranteed price for pigmeat or many other agricultural products in the Community.

The problems in the CAP are with grain, milk and milk products. Many other areas should follow the example of the Aberdeen milk marketing board, which has increased its sales of liquid milk during the past year. Then we could get out of our surplus milk difficulties. When did a milkman ever come to the door and ask, "Can I give you better service? You are not taking so much milk this week." We need a little more marketing, which will be stimulated by the "Food from Britain" campaign that was launched successfully last week and that will help our surplus problems much more than rhetoric from Opposition Members.

It would be foolish to suggest that an easy solution could be found to the volume of expenditure on the CAP while at the same time adhering to the aims of the treaty of Rome. The hon. Member for Newham, South said that it would be difficult, and it is. Nor is it sensible to increase spending in other areas to try to balance our contribution. In that, I agree with some of my hon. Friends. Care should always be taken in spending public money. However, there is a danger that we shall procrastinate on this matter until a crisis occurs, believing that a solution can be found because of the motivation caused by that crisis. I urge my right hon. and hon. Friends to find a solution before the crisis develops, so that we are not forced into a funding position that we do not relish.

8.32 pm

Mr. Doug Hoyle (Warrington)

The speech of the hon. Member for Banff (Mr. Myles) was one of the most unusual that I have heard in the House. I did not believe that I would ever hear, from either side of the House, such a defence of the common agricultural policy, because it is almost indefensible. The hon. Gentleman's acceptance of a common fisheries policy that has given away Britain's rights was almost unbelievable. His speech moved well away from other speeches and from the subject of tonight's debate, which is the budget and how much longer we shall put up with paying an unfair amount.

As always, we have heard the same excuses about why we cannot get our just deserts from the Common Market. We are always promised another reform, but from what the Minister said it appears that budget reform will be even more difficult in future. Now the Minister says that we shall not be given a rebate as such but that the money returned will have to be earmarked for specific purposes. It will be impossible for us to cope with that because the majority of hon. Members wish to change the nature of the budget. Despite what the hon. Member for Banff said, we all wish to change the 65 per cent. spent on agriculture.

Following the advent of Spain and Portugal, we shall get a demand from those countries for more support for Mediterranean products. More money will be spent on agriculture rather than less. As long as we are faced with this dilemma, Ministers will always say, "We are fighting for British interests. We have not got them yet. Just leave it with us. Sooner or later we shall persuade these benevolent people in the other countries in the European Community, although they have a vested interest in retaining the CAP."

One can understand why France has a vested interest in agriculture, and why there is a demand to prop up the inefficient farmers in France and Germany. One can understand why they will in no way agree to any changes.

My hon. Friend the Member for Keighley (Mr. Cryer) said that this has been a bad deal for Britain. The whole of the EC has been a bad deal for Britain. Many hon. Members remember that we went in with a blowing of trumpets. It was said that membership could lead to a bonanza for this country and solve all our problems. Membership was not relevant to the problems we were facing at that time. When we examine the position we can see that we were bound to be put in a more unfavourable position than we were before.

Before we joined the Common Market, Britain had the problem of trying to carry one of the major currencies of the world. That was not relevant to the problems faced by the other countries that had joined the Common Market. Our problems were not those faced by France, which was an agricultural country with some industry, nor were they the problems faced by that most efficient industrial machine, Germany, which was looking for new markets. Of course those countries welcomed us into the Community. They have exploited the situation.

Many people are not surprised at what has occurred. Many hon. Members argued against going into the European Community. In 1975, hon. Members on both sides of the House argued that Britain should come out when we were given the opportunity to do so in the referendum. We have been proved right in what we said on both occasions. The tragedy was that the British people did not listen to us when they had the choice.

There is no doubt at all about the unpopularity of the Common Market now. It would be wrong to lay all of our problems at the door of the Common Market. However, the Common Market has made our position far worse, especially as a manufacturing nation. It is in our interests to buy our food and raw materials in the cheapest world market. It is in our interests as a manufacturing nation to look to the world as a whole to get a market for our manufactures.

What has happened now that we are in the Common Market? Our trade deficit in manufacturing goods has been £15 billion in the past 10 years. That must be compared with our surplus with the rest of the world of £40 billion. How can joining the Common Market have been a good thing for us? The Minister tried to grapple with the cost of our being in the EC. It has been costing Britain £1 million a day.

My hon. Friend the hon. Member for Keighley was right to talk about the cost in relation to motor vehicles. I agree with him. There is no point coming to the House and talking about a plan for the import of motor vehicles and telling the Japanese to cut back on their imports when the real problem is imports from the EC, which far outnumber imports from anywhere else in the world. About 40 per cent. of our imports come from the EC. If we wish to protect our automobile industry so that it can have a chance to recover and make itself competitive with the rest of the world, we should be talking about global quotas and of restricting imports from all parts of the world, and that includes the EC. That will be impossible so long as we remain in the EC. The cost to us has been tremendous.

Mr Cryer

The proponents of free trade have long held that trade should not be planned or interfered with. That applies to the Common Market. In 1982, we achieved the lowest output of British motor vehicles since 1957. If we do not plan our trade we shall be virtually wiped out within the next 10 years.

Mr. Hoyle

I agree with my hon. Friend. The motor vehicle industry is reaching crisis point, just as the textile industry did, yet we are unable to deal with the crisis because we are members of the Common Market and, therefore, cannot deal with the biggest threat to our motor industry.

When we talk of the automobile industry, we are not merely talking of the automobile factories, but of the components industry that supplies them. In other words, we are speaking of some of our most basic industries. For example, many jobs in steel have been lost because of the import of motor vehicles. The textile industry has suffered just as much, as has the rubber industry, which is part of the components industry. We are, in effect, talking about a large part of our manufacturing industry.

Since 1979, our steel industry has lost 100,000 tonnes, because of steel imports or the import of products made of steel, such as motor cars. That is something that we cannot continue to accept, not if we are to remain a manufacturing nation.

The deficit between the export of goods to the EC and the import of goods from the EC is now about 30 per cent., or £900 million. In other words, about 750,000 jobs have been lost solely through our membership of the EC. Some people argue that jobs would be at risk if we pulled out of the EC, but they do not give the other side of the equation and say how many jobs have been lost because of our membership. We certainly know that our manufacturing industry has been unable to stand up to the competition that has resulted from the Common Market.

The hon. Member for Banff waxed eloquent about the CAP. He did not seem to think that there was anything immoral about the surpluses that have occurred, but rather that there was something good in creating them. It would be good if those surpluses benefited the world as a whole, but instead they often distort world trade. What has happened with sugar is nothing short of criminal. Such surpluses often help the Soviet Union. We certainly do not get the benefit. Last year, the EC spent £2.8 billion disposing of agricultural surpluses.

The hon. Member for Banff said that he spoke for the farming community, but he did not represent the farmers who took part in the Farmers Weekly poll, which showed that 78 per cent. of our farmers were worried by these wasteful surpluses. Such surpluses are a vast handicap to our people, who must put up with the high prices that result from both the CAP and the surpluses.

There has been a net export of investment away from Britain. We were promised that, if we joined the Common Market, investment would flow into Britain, but investment has left this country and has gone to the Common Market. We are far from being a beneficiary. That investment should have been taking place in Britain, because it was badly needed in manufacturing industry.

We are led to only one conclusion—that Labour has the right policy in relation to the EC. We have to decide that enough is enough and that we must come out of the Common Market. We have put it plainly at the forefront and I am hopeful that it will be stated in our campaign document and in Labour's manifesto that we shall withdraw. We shall try to do so in an orderly fashion. We shall try to do it with the least disruption to trade within the EC. Of course, it would be quite wrong if we did not say here and now that we shall be discussing withdrawal with our EC partners. We could talk for ever but talking cannot be allowed to go on for ever.

The first thing that we would try to do on coming to office would be to amend the European Communities Act 1972. We would ensure that the Act did not apply in this country. We would return to Britain the sovereignty that was taken away by our entry into the EC. The next step after the negotiations had taken place would be a complete repeal of the European Communities Act. Conservative Members have fairly asked what would be the result of withdrawal. I believe that we should not rejoin EFTA—although some Opposition Members would accept that policy—but should have the same type of relationship with the EC as America and Canada, which would mean applying a common tariff policy to the EC which, equally, would apply a common tariff policy to us. We would be the beneficiaries of such a policy.

If we withdrew and applied such a policy, it would not mean, as some critics of our policy have said, that we would stop trading with Common Market countries. Of course we would not. There is a self-interest involved. Can one imagine the French giving up a market for their agricultural produce? Can one believe that Germany would want to give up the market that it has developed for its manufactures? The difference would be, of course, that outside the EC we would be trading on more favourable terms with those countries. It would also give us the opportunity to develop our markets in the rest of the world.

I for one, wish to retain our close associations with the French Socialists and with the West German, Dutch and Danish Socialists. We wish to have a close liaison with them. We could gain many advantages from close association. We could discuss with the French some of the Socialist policies that they are trying to incorporate, albeit with difficulty in some cases, because of the membership of the EC. The French are having problems with their balance of payments because they are trying to apply Socialist policies while remaining in the EC. That is a lesson from which we should be able to benefit.

The Labour party policy would be popular with the British people. The British people as a whole believe that they were sold a false prospectus over the Common Market. They have seen jobs disappear and our steel industry decimated. They have seen our automobile industry going the same way as a result of imports. They have seen us pay far more for our food than we need to—all by reason of our membership of the Common Market. They will welcome a party that will give a lead not from a narrow, nationalistic angle, but from an internationalist angle. Britain can then trade freely with all the nations of the world. It could help the developing countries, which would benefit if we imported more food and raw materials from them. I want Britain to enter into a long-term arrangement with them that will benefit their economies.

While Britain remains a member of the EC, there will be no recovery of manufacturing industry. Instead, we shall see the death of one industry after another. It is not the time to argue about the budget—we must argue about the whole philosophy of remaining in the EC. Conservative Members who are highly critical of the Common Market are not prepared to support that argument. They believe that the EC can be reformed while Britain remains a member. I do not believe that.

It would be far more sensible and honest to tell our partners that we must leave the EC. It does not mean that we shall leave them altogether. We shall still co-operate with them, but on equal terms. The only way to do that is to withdraw from the EC after negotiation with our partners. We must do so in an orderly manner that does not destabilise our economy or have a bad effect on the economies of our partners. If we follow that course, not only shall we remain on friendly terms with them, but we shall continue our trade with them while we re-open our discussions and trade with the remaining nations of the world.

8.52 pm

Sir Brandon Rhys Williams (Kensington)

The Financial Secretary said that the vital issue was to find a lasting solution to the budgetary problems. I am sure that all hon. Members in this House agree with him, as do the elected representatives in Strasbourg.

The difficulty of Britain's budgetary position has been exaggerated by our uneasy relationship with the EC, which has been caused by reasons other than the imbalance of the budget. In recent years, the rates of exchange between Britain and the main manufacturing member states have been favourable to imports and unfavurable to our exports, with the result that we have not enjoyed the extension of our trade for which we hoped when we joined a large, expanding, free trade area.

Another reason for our uneasy relationship is the demands of the CAP. A number of hon. Members also find the constitutional issues extremely difficult, even after 10 years of membership. However, we signed a treaty that set up a common fund and also an elected body to supervise the way in which the bureaucracy which determines the spending of the common fund manages its affairs. Those who opposed the signing of the treaty are entitled to their view, which is that the solution to the budgetary problem is to withdraw from the Community. The Government take a different view, and I am glad that they do.

The Community is still holding to a target of 1 per cent. a year for its current account, which puts into perspective the real size of the budgetary problem. We are debating a sum of money in dispute in our current account which is only a fraction of 1 per cent. of the British tax base. Although that is a substantial sum, we must realise that the current account is not the only consideration.

The Government are right to look at ways of changing the nature of the sources of revenue from which the 1 per cent. is raised. However, I make no secret of the fact that I am convinced that it would be better for this country if we joined the member states that are seeking to enlarge the fund. The case rests on the basis of "the bigger the fund, the bigger the refund". Although it will be difficult to reform the common agricultural policy, if the fund were somewhat larger, there would be a more than proportionate expansion in the amount of money for the social and regional funds, from which this country stands to benefit so much.

I therefore welcome the Commission's initiative in its so-called green paper on exploring ways in which the budget might be expanded in the course of time. We shall not see a runaway expansion that will jeopardise the financial independence of Britain, France, Germany or other member states, but within the current account there is room for certain expansion. This country would stand to gain very much if that expansion were allowed. Therefore, I hope that the Government will keep in mind the possibility that that is the solution to our budgetary problem, which we shall find in the end.

I should like to say something about the reform of the CAP. The difficulty arises from historical conditions that go back to our decision to repeal the Corn Laws in 1846. The member states on the continent took a different view on the protection of their agriculture. There are, however, some suggestions one could make. We should press for forestry to be included in the scope of the CAP to a far greater extent than now. Of course I realise that forestry is not a current account but a capital account matter. We could place also more emphasis on the avoidance of waste, recognising that the CAP is primarily intended to provide a social fund to assist an industry which is grossly overmanned. We, too, have such industries and we need help with them. It is not a food policy or an economic policy, but a social policy. If the money that is spent in support of agriculture went directly to the people instead of towards sustaining a uniform price as the main aim of policy, it would achieve its objective in a better way. With the accession of new member states, that is the way in which the CAP will have to be reformed.

I would like to draw the attention of the House to the Commission's intentions in regard to the capital account, which stands in the long run to be far more significant for this country than anything in 1 per cent. or 1½ per cent. Europe, or whatever ends up on the current account. The Ortoli facility will be expanded by the Commission's current proposals. Is the Commission simply duplicating the work of the European Investment Bank? I do not think that it is, because the EIB is not short of funds for the sort of lending that it does, which is a scrupulous operation. The EIB has never had a bad debt. That implies that it takes on only a certain limited category of capital investment. The Commission is now proposing something different, but has not fully worked out its intentions.

In article 2 proposed in document 4348 on 13 January this year, it is stated that the council is to lay down the guidelines for eligibility for these loans. I have pressed Mr. Ortoli and have not had a satisfactory answer as to precisely what the Commission has in mind. The House should give its mind to it.

The real difficulty of industrial lending in Britain and other member states is not the shortage of funds but the anorexia which is afflicting our industries. They will not take advantage of the funds which are available for all sorts of reasons. How will the new fund overcome those problems? It has scope first where Government support is necessary or consequential expenditure is needed, for projects such as the Severn barrage. Presumably there will be planning and other considerations besides the generation of power on which the British Government should collaborate with the Commission. Secondly, it has scope where the project requires the co-operation of more than one Government. The channel link is an obvious example. There is also scope for the Ortoli facility where the timespan of risk is beyond the cover obtainable through normal market mechanisms. I am sorry to say that that applies now to most industrial restructuring plans, in both the private and the public sectors. Finally, there is scope for the Ortoli facility where there needs to be a stimulus or a subsidy element which has deliberately to be included in the loan as a matter of policy.

If we, as a Community, plan to spend more money, the Commission has to show that exenditure jointly incurred is likely to bear more fruit than expenditure of the same order undertaken by member states without the co-operation that is envisaged under the treaty. If nothing is to be gained by co-operation between the European democracies, the treaty has only a limited value. But I believe that the people who hold that Britain can solve all its economic problems entirely on its own are in a minority in this country, and will be shown to be in a minority when the election comes.

9 pm

Mr. Eric S. Heffer (Liverpool, Walton)

Despite the fact that we are supposed to be discussing only the supplementary and amending budget No. 1 and the green paper, we have strayed well beyond those subjects, which is perfectly understandable when we realise that the budget is at the heart of the whole issue of the Common Market.

Before I come to the issues that are connected with the budget, I want to make one or two comments on what the Financial Secretary said. I thank him for giving publicity to the document that I and my hon. Friend the Member for Aberdare (Mr. Evans) issued last week. I hope that those right hon. and hon. Members who have not seen the full document will get hold of Labour Weekly of last week, which gives at least part of the document. Of course, the document is much more lengthy and contains many interesting details. The hon. Member for Harrow, East (Mr. Dykes) said that we should have serious and detailed arguments, and I quite agree. Any serious and honest person, after reading the paper, will agree that the case against being in the Common Market is proved, I would say almost beyond doubt.

I want to say a word about democratic Socialism. It is often implied by Conservative Members that we want to bring in some form of east European state, and I want to answer that charge briefly. Such charges, bandied about in the Mother of Parliaments, undermine democracy and democratic argument, democratic discussion and democratic institutions.

For the benefit of those Conservative Members who do not know what democratic Socialism is, I shall explain it briefly. It is the opposite of democratic centralism; that is the point. It is Socialism by the consent of the people through an elected Government, who can of course be thrown out at the next election if the people so desire. We are passionately concerned to uphold the basic democratic parliamentary system that we have in this country, and in which democratic Socialists believe in every other country. For the benefit of those who do not understand it, the first people who were imprisoned in the Soviet Union during the Bolshevik revolution were democratic Socialists. The first people who were put in prison in Hitler's Germany were democratic Socialists. We believe in a pluralistic democratic system. I want to put that on the record, because hon. Members and others often make slanderous statements which, in my view, do great harm to democracy in this country.

In passing, I suggest that the Financial Secretary to the Treasury and the hon. Member for Southend, East (Mr. Taylor) seem to get their ideas of Socialism more from the "The Servile State" by Hilaire Belloc and the books of Edward Bellamy than from genuine Socialists such as William Morris and Keir Hardie. I suggest that they read the last two authors and, if they do so, it will be with great effect.

There are two aspects of the supplementary budget. First, that Britain is to receive compensation is hailed by the Government as a great victory, as we have heard so often this afternoon. It is a tune which we have heard before. We heard it about the fisheries agreement. What has happened is that Britain has lost far more overall than it has gained because, first, there is no guarantee whatever for the future. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) spelt out in detail exactly what can happen if there is no agreement in future. It is interesting to consider that we start from a completely false premise on the fisheries agreement. We make a little gain by a concession but have done so after having given everything away, and that is hailed as a great Government victory.

Secondly, the Government have said nothing about the cocky attitude of the European assembly which has flexed its muscles and used what powers it has to strengthen its position and is now demanding greater powers. The Commission is proposing that the assembly should have a bigger role in future. What is slowly but surely happening is that, by stealth, the assembly is being transformed into a real Parliament with real powers at the expense of the House and, therefore, of the British people.

In a statement made on 7 February at Brussels, the Chancellor of the Exchequer said: To begin with the 1982 supplementary budget, I naturally regretted the Parliament's decision last December. That an agreement reached after so many months of painful negotiation in the Council should be thrown out at the final stage came as a considerable shock. It certainly did not come as a considerable shock to many hon. Members, but it shows that the Government were shocked. He went on to say: The Council has responded positively and constructively on all these points in the recent dialogue and the new draft budget. It has travelled a remarkable distance in a short time. I hope very much that Parliament will now respond in a similar spirit of flexibility and co-operation". We heard from the hon. Member for Scarborough (Sir M. Shaw), who knows a great deal about this matter, that there was conciliation by consent. I would say that the Parliament, or so-called Parliament—the assembly—used what powers it had, flexed its muscles, in order to ensure that it developed further powers in future. It will use those powers each time as effectively as it can at the British people's expense. If that process is not reversed, sooner or later we shall find that increasingly important decisions affecting our people will be taken at Brussels or Strasbourg and, as we were warned by some when we entered the EC, we shall become a sort of regional authority which inevitably must look to Brussels for guidance. Some may argue that that is an exaggeration. I shall be examining it when I come to discuss the green paper. It proves beyond doubt the sort of future that some within the Community envisage for us. They want to see a federal Common Market—an EC with an enhanced Parliament that has the powers, and what they will be spent on.

I come back to the supplementary budget. Following the hours devoted to it and the compromise reached on 25 and 26 October by the Foreign Ministers, the Commission proposed in a document that the United Kingdom should receive the whole of the 1982 budget refund entitlement. Despite all the work of the Foreign Ministers, this was rejected by the European Parliament which later agreed new proposals by 183 votes to 33 with five abstentions. Those proposals gave Britain the compensation we had originally proposed but with strings attached, which mean that the Parliament decides how the rebate or part of it will be spent. I believe that I heard an hon. Member say "democracy".

Mr. Cryer

It was the SDP—the hon. Member for Farnworth (Mr. Roper).

Mr. Heffer

It seems funny that, when the Council of Ministers has agreed on an amount, it is overthown by the Parliament which is to decide how the British Government will use the money. It is not simply a matter of telling the Government how the money will be spent. It is telling the British people. Barbara Castle, the leader of Labour's delegation in the European assembly, was right when she said: The compensation to the United Kingdom is inadequate and the insertion of a part of the common energy scheduled measures is not necessarily in line with United Kingdom priorities." Barbara Castle, speaking on behalf of the Labour party, put the case absolutely correctly. We are now paying into the EC budget the second highest amount of any EC country. The Government's White Paper on public expenditure still envisages a net payment of £680 million. It could be more. On 2 February, The Times stated: That rough assumption of a two thirds refund may prove over-optimistic in the face of the hard negotiating to come with Britain's EEC partners, and on the big agriculture element in the EEC budget the White Paper concedes that Community spending on agriculture, and Britain's corresponding contributions, will continue to rise.

Sir Michael Shaw

The hon. Gentleman argues that it is presumptuous of the European Parliament to seek to deny the passage of the 1982 supplementary budget because it has been fully thrashed out by the Commission and the Council. I fail, therefore, to understand why the Labour Government in 1975 agreed a new amendment to the treaty whereby the budgetary authority of Europe was to consist in the future of both the Council and the Parliament acting together. In 1977, all members of the Community agreed to that change in the treaty. What is the purpose of having a joint budgetary authority if the two members of it are not both consulted and do not get together in a genuine discussion about what should be done?

Mr. Heffer

When we discussed direct elections and the establishment of a European assembly, many Labour Members and, I am sure, some Conservative Members believed that sooner or later that assembly would be given increased powers and we would become a sort of local Parliament without power to control our future. We made our position clear at the time. The Labour party opposed the whole basis of the assembly, and we wanted Britain to come out of the Community.

My right hon. Friend the Member for Stepney and Poplar made his position clear earlier, and I make my position clear now.

Mr. Ridley

That is not quite good enough. The hon. Gentleman was a member of the Administration who allowed this to go through and he remained a member of that Administration—not for ever, I know, but he did not resign on this issue. Why is he raking over this ground as though he had not approved of it when he was in office?

Mr. Heffer

The Financial Secretary to the Treasury ought to know what goes on in the House. I left the Labour Government on the question of the Common Market. If the right hon. Gentleman has not caught up with that yet, he is a few years out of date. He clearly does not know what went on at that time.

Our contribution to the budget is second only to that of West Germany. We have heard much about the money that we get back through grants. One of my hon. Friends listed a number of regions that have received grants. Merseyside receives grants and loans from time to time, but we are merely getting back the money that we have paid in. The figures show that we get back far less than we put in and in some places we may be getting money that we do not want and which could be better used in other places if we had control over that money.

Mr. Teddy Taylor

Did the hon. Gentleman see the recent helpful reply from the Treasury that explained that every pound of aid that the EC gives to Merseyside and other areas costs the British taxpayer £1.71?

Mr. Heffer

I am grateful for that helpful intervention. If any other hon. Member wishes to intervene with similar statistics I shall be happy to allow him to do so.

The decision of the European Parliament can be summed up as meaning that there will be a rebate for Britain this time, but never again. That needs to be examined with some care. We know that the Government want to find a solution to the budget problem. They want to find it within the EC and we want to find it outside the EC.

The European assembly's resolution on the supplementary budget was described as a first step towards more ambitious objectives for the Community". On 8 February this year, Mr. Gaston Thorn, the President of the Commission, spoke to the European Parliament. Every hon. Member ought to study that revealing speech carefully. Mr. Thorn spoke about the need to fight unemployment and admitted that the Community had totally failed in that respect. At the end of his speech he turned to the future of the EC's finances, argued that the Community required more finances and said: The limit on our own resources has almost been reached … Why does the Community need new own resources? The answer is simple. Even if we can achieve savings thanks to tighter management of Budgetary Funds, and funds allocated to the Common Agricultural Policy in particular, new own resources will be needed to bring Community intervention to the critical level at which it will have a real impact and provide the stimulus and guidance we expect of it. I am sorry to quote at such length, but this is an interesting and important speech. He continued: In addition to this institutional constraint, there is the Council's insistence on unamity on every question, even where the basic legislation does not require it. It is high time we turned our backs on quarrels about the Luxembourg compromise which has been increasingly detrimental to the Community of Nine and the Community of Ten and which, if the practice it instituted were to persist, would completely paralyse a Community of Twelve. It is no longer acceptable that Community decisions, when they finally emerge, can only be described as 'too little too late'. That is clearly a call to get rid of unanimity and have majority decisions. He continued: I do not propose to go through the details here. Suffice it to say that the Council, which is to begin considering our proposals, shortly, is asked to delegate more executive tasks to the Commission and to accept that there should be more majority decisions. These decisions would require the formal assent of this House, which would thus be more closely involved in the Community legislative process. That is what Mr. Thorn said, and there is the great Social Democrat, the hon. Member for Farnworth (Mr. Roper), who is so democratic that he changed his party without a vote, nodding his head in agreement. He does so because he, like all the other Euro-fanatics, in the House and outside, wants a federal Europe and wants to get rid of the conception—

Mr. Ridley

It is a free country.

Mr. Heffer

Of course it is a free country, but in the process of the so-called freedom the powers and rights of the House of Commons will be destroyed. That is what the hon. Member for Farnworth wants.

There are four financial proposals in the green paper. There is a suggestion of an increase of the 1 per cent. in the VAT payment. The hon. Member for Harrow, East asked what was wrong with that, and other hon. Members have said much the same. What is wrong with it is that VAT is a regressive kind of tax that hits ordinary working people harder than anyone else. We opposed it for those reasons and we would oppose it again.

Let us take the so-called progressivity. This would relate each state's contribution to the EC budget more directly to its prosperity as measured by GDP, and could be done by VAT adjustments or taxation. There are three other proposals, all of which were outlined earlier. All these proposals in the green paper in the long run could and, I agree with the right hon. Member for Down, South (Mr. Powell), would, mean an increase in the taxation of our people.

The Commission is suggesting a long-term solution but at further cost to the British people. The fishing agreement is part of that. We have been discussing the CAP and much has been said about it. However, as far as Gaston Thorn and the majority of the countries in the EC are concerned, the CAP is sacrosanct. As Gaston Thorn said in his speech: There can of course be no compromise on the fundamental principles of the Common Agricultural Policy. If that is so, I would assume that the CAP financing would, despite the proposals, continue largely as before. That would mean high prices for the housewife for her foodstuffs.

The proposals for the rote of the European Parliament are included in the green paper: Any new development of the Community's financing system should, in the Commission's view, reflect and enhance the role of the directly elected European Parliament as one branch of the budgetary authority. I could go on giving quote after quote. They all add up to enhanced powers for the European Parliament, and I regard them as being very serious.

The debate has been wide ranging and I want to end by looking very briefly at what 10 years' membership of the Common Market has meant for us. I want to consider the so-called gains that we have achieved as a result of our membership.

Unemployment in Britain has increased by 2.5 million since we entered the Common Market. In manufacturing industry alone, unemployment has more than trebled. In the steel industry it has increased fivefold. Industrial output has fallen by 16 per cent. The annual output of motor vehicles has fallen by almost 1 million. Our accumulated trade deficit in manufactured goods with the EEC over the 10 years amounts to over £15 billion, whereas our trade surplus with the rest of the world exceeds £40 billion.

Since we joined the Common Market, we have paid not £1 million a day but—according to figures that the hon. Member for Southend, East received yesterday—more than £1 million a day into the EC budget. Our consumers have suffered a decade of high food prices under the CAP policy.

In view of the statement made by my right hon. Friend the Member for Bristol, South-East (Mr. Benn), it is necessary, in order to clarify the position, to see where the Labour party stands on the question of withdrawal from the EC. The Labour party conference on three occasions has made it absolutely clear that it will take this country out of the Common Market. In addition, the TUC Economic Review 1983, published a week ago, says: A further set of constraints is imposed by our membership of the EEC … It is for that reason that the TUC is campaigning for the UK to withdraw from the EEC. So it is not only the Labour party that wishes Britain to come out of the European Community. The TUC is also against our continued membership and is arguing that we should withdraw.

How should we seek to achieve our objective? As my hon. Friend the Member for Warrington (Mr. Hoyle) said, we shall do it in an orderly way, by proper negotiations, and not by threats or high-handed action. When we have a Labour Government, we shall immediately begin negotiations—[Interruption.] The British people, at the next election, will give Conservative Members a real political bloody nose, and there is no doubt about that. We shall have a Labour Government after the next general election. When we get it, we shall begin negotiations with the EC countries. We shall agree on a timetable and we shall issue a White Paper.

We shall immediately repeal vital parts of the European Communities Act 1972, which would mean that EC law would no longer be applicable to this country. We should then carry out the main negotiations which would culminate in the repeal of the 1972 Act and the formal abrogation of the treaty of accession. That is the way in which we intend to leave the European Community. That is the Labour party's clear position. There is no dubiety about it. I want to make that absolutely clear to the House and the country. The Labour party believes that in the long run we cannot solve the problems relating to the CAP, the budget or other matters without making a clear statement of that kind and without leaving the European Community.

9.30 pm

The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Malcolm Rifkind)

This debate has, perhaps not surprisingly, ranged over a number of issues not directly related to the budget. It might, therefore, be appropriate to respond to certain of those points first.

The right hon. Member for Down, South (Mr. Powell) raised the fact that some members of the European Parliament are seeking to have discussed within it matters involving Northern Ireland. He asked the Government to respond by making it clear that we could not support any such proposal and that we should not consider it to be within the European Parliament's competence. I am happy to give him that assurance, which, I believe, will be welcome also to hon. Members on both sides of the House. I understand that no firm decision has yet been made on that request, but that a committee of the European Parliament will discuss it later this week. We have no doubt that a domestic matter such as that does not fall within the European Parliament's competence, and that it would be inappropriate for it to be discussed. Of course, we have no formal means of preventing the Parliament discussing whatever it wishes. However, the practical consequences of any such discussion will be completely negative, and it is desirable that the matter be considered in that light.

The hon. Member for Liverpool, Walton (Mr. Heffer) and other hon. Members asked whether the proposal in the green paper that has been issued by the Commission which calls for an increase in the European Parliament's powers commands the Government's support. My hon. Friends the Members for Saffron Walden (Mr. Haselhurst), Aberdeenshire, West (Sir R. Fairgrieve) and Harrow, East (Mr. Dykes) said that they would have some sympathy with the proposal. As has been said on a previous occasion, the Government do not see any reason to increase the European Parliament's powers. That proposal does not find favour with the Government.

Perhaps one of the most curious contributions to the debate was the speech by the right hon. Member for Bristol, South-East (Mr. Benn). He was asked why Socialist and working-class people in this country had to treat the Community as an enemy whereas Socialists in West Germany, France and other countries of the Community could treat it as a friend and something with which they could work and accept as being within their interest. His response was that, because they had lived under Nazism and Fascism, their attitude towards the Community was different from ours. The right hon. Gentleman nods his head. That is an extraordinary condemnation of the contemporary Labour party. It believes that only Socialists who have experienced Nazism and Fascism can work together within the European Community rather than try to disrupt it.

Another even more remarkable observation by the right hon. Member for Bristol, South-East was that if a Labour Government were returned to office after the next election, they would have the power—presumably he would wish it to be used—to use the Royal Prerogative to abrogate the treaty of Rome. He put that as one of the first actions of such a Labour Government. We are aware that the Labour party and the right hon. Gentleman, having once burnt their fingers with a referendum, no longer wish to consult the British people. We now find that they do not even wish to consult Parliament. This great tribune of the people wishes to use the Royal Prerogative for that purpose.

Mr. Benn

The hon. Gentleman should consult the record of his own party. The Prime Minister who took us into the Common Market stood on a manifesto that he was committed to negotiate—nothing less, nothing more. He then signed the treaty of accession, without publishing it, using prerogative powers. It was my hon. Friends and I, and the Labour party of which I am a member, who provided the referendum, having said throughout that this matter must be decided by an election or a referendum. The Labour party will be committed by its manifesto to withdraw and the British people will vote on withdrawal in the election which brings back a Labour Government later this year.

Mr. Rifkind

The right hon. Gentleman doth protest too much. Great democratic Socialist that he is, he has shown himself today to be a great admirer of the Royal Prerogative. That is contrary to the Socialist pretensions he has applied on other occasions.

I have studied the motion and the Opposition amendment. I have also listened with care to the speeches of the right hon. Member for Stepney and Poplar (Mr. Shore) and of the hon. Member for Walton. I did not expect to hear congratulations to the Government on what they have so far achieved in reducing the burden of the European budget. I am well aware that comparisons between what we have achieved and what the Labour Government managed to produce will not find favour with Labour Members, but they cannot avoid the fact that during the five years of the Labour Government not one single penny was refunded to the British taxpayer—not one solitary ecu was repaid to the British Treasury. That was the achievement of the Labour Government of which those right hon. and hon. Gentlemen were members.

In 1975, the attempt to renegotiate the terms of our membership of the Community did not in any way remedy the problem. When this Government came to office in 1979 there was not even an attempt being made at that time formally to renegotiate the burden of the European budget. Yet right hon. and hon. Gentlemen have the sheer effrontery to attack this Government. During the last two years of the Labour Government, Britain's contribution to the European budget was no less than £1,580 million, and not a single penny had been refunded. That can be compared with the first three years of this Conservative Administration, when we have had no less than £2,000 million refunded. One can sum it up by saying that the Labour party talks about budget reform, but the Conservative Government practise it and will continue to do so.

I said that the right hon. Member for Stepney and Poplar was vague in his comments about the budget and how he would wish to see it altered. He has been vague about a number of other matters, too—in particular, the relationship that he would like to see between Britain and the Community in the event of Britain's withdrawal. He does not want to see a free trade relationship continuing between Britain and other members of the Community, but he has equally professed himself to be no full-blooded protectionist. We are entitled to wonder where he exists in the spectrum.

I am reminded of a doggerel written 70 years ago about a politician in a similar situation: I'm not for free trade and I'm not for protection, I approve of them both and to both have objection. In going through life I continually find It's a terrible business to make up one's mind, So in spite of all comments, reproach and predictions I firmly adhere to unsettled convictions. That would be a suitable epitaph for the right hon. Member for Stepney and Poplar, after the view that he has taken.

Several hon. Members referred to the recent decision by the European Parliament not to approve the original draft supplementary and amending budget. Like other hon. Members, the Government regretted that decision by the European Parliament. Indeed, it was an ironic decision for it to take. We understand that its main motivation was to draw to the attention, in particular, of the Council of Ministers, its disapproval of one interim solution after another and the imperative need for a long-term resolution of the problem.

When we consider that the Government hold this objective more than any other, it would have been somewhat ironic if the United Kingdom had suffered most as a consequence of that decision by the European Parliament. In the event, both the Council of Ministers and the Commission insisted that the United Kingdom would not suffer as a consequence of that decision, and the European Parliament approved the subsequent budget that was put before it.

In one important way, that incident may have been beneficial. It focused the attention of the Council of Ministers on the importance attached to a long-term reform of the budget. It emphasised the fact not only that the United Kingdom believes that existing arrangements are unsatisfactory, but that there is broad support within the European Parliament from parliamentarians of other countries who realise that some resolution of this difficulty by long-term restructuring is essential. That can only be beneficial to this country.

A number of hon. Members referred to the so-called green paper tabled by the Commission, perhaps partly in response to the growing feeling on this subject. That document is very important. For the first time we have a review of the revenue as well as the expenditure aspect of the European budget. As the Government have emphasised for some time, we must balance those considerations if we hope to resolve this difficulty.

It is too early to form any definite views on the details of the green paper, which has not long been published and which is composed largely of ideas rather than firm proposals. The Commission has said that it wants to await the response of the Council of Ministers, the European Parliament and other interested bodies before making any firm proposals either to the Council of Ministers or to the European Parliament.

Mr. Heffer

Will the hon. Gentleman give us a firm assurance that if the European Parliament makes it clear that it will not agree in future to Britain having some temporary ad hoc arrangement, unless it gets the powers suggested in the green paper and also outlined by Gaston Thorn in the same process, the Government will not agree to those powers? If it insists and we are faced with a huge bill, will the Government then refuse to pay it and perhaps do the sort of thing that was suggested by the hon. Member for Southend, East (Mr. Taylor)?

Mr. Rifkind

The hon. Gentleman does the Commission a disservice. Nowhere in the document to which he referred does the Commission suggest that an increase in the powers of the European Parliament should be a necessary and inescapable part of any package that might be agreed.

Mr. Heffer

Yes, it does.

Mr. Rifkind

If the hon. Gentleman reads the document, he will see that the Commission indicates its preference that consideration should be given to increasing the powers of the Parliament. I have said that the Government do not share that preference, and the Commission does not suggest that that should be a necessary precondition of any resolution of the budgetary problem.

The European Parliament has not ruled out the idea of giving support to further interim solutions if there is a clear sign that the Council of Ministers and the Community are moving in a realistic way towards a resolution of the long term budgetary problem.

It is clear that any satisfactory attempt to deal with this problem must approach the expenditure as well as the revenue side of the European budget.

Some points have been made about expenditure. My hon. Friend the Member for Fareham (Mr. Lloyd) asked about the expansion of the regional and social funds and other non-agricultural parts of the Community budget. He asked whether it was sensible or wise, or the Government's policy, significantly to seek to increase the Community's overall expenditure as a means of helping to rectify the budget problem. While we certainly see a role for expanding the non-agricultural element of the Community's expenditure to get a more sensible balance within the budget, we would not suggest that that should be brought about by a significant or dramatic increase in the total expenditure of the Community. We are talking about a balance within the Budget and not the total resources available to the Community.

The development of non-agricultural expenditure can play an important part in achieving a balance, although I put it no higher than that. At present, Britain receives about 29 per cent. of expenditure on the social fund, which is desirable. We have said that we shall support proposals for selective assistance to high technology industries, information technology and the development of energy policies. The United Kindgom has also taken a lead in the promotion of a Community strategy on the coal industry. Progress can be achieved in several important areas. I assure my hon. Friend the Member for Southend, East, (Mr. Taylor) and other hon. Members who have commented on this matter, that it is neither realistic nor desirable to propose that the non-agricultural expenditure of the Community can be so expanded as to resolve the major imbalance that now exists. We must consider these measures as only a contribution towards that problem.

Mr. Marlow

Will my hon. Friend agree with me that there is no justification whatever for any increase in Community expenditure at a time when the Government are trying to reduce their own expenditure?

Mr. Rifkind

I shall deal with own resources later, but my hon. Friend will appreciate the fact that, even without any change in the formal structure of the Budget arrangements and finances, the 1 per cent. ceiling on VAT has not yet been reached, and there is still buoyancy in the existing arrangements without formal new decisions being taken.

There is broad agreement in the House that reform of the CAP is necessary, but not because we do not recognise that the policy has provided some advantages. It is worth noting that the increase in agricultural prices during the past 10 years has been lower than the rate of inflation, and the proportion of agriculture as compared with the overall size of the Community budget has reduced during that period from about 80 per cent. to about 65 or 66 per cent. Clearly, the uneconomic and expensive surpluses that have been generated are not in the interests either of this country or of the Community. They must be a major objective of reform.

The green paper produced by the Commission refers, significantly for the first time, to the need for changes in the revenue structure of the Budget. The document puts forward some ideas about which the Commission is thinking. My right hon. Friend the Minister of State is attending a meeting of the Council of Ministers in Brussels today, where preliminary discussion is taking place on such matters. He intended to try to establish with greater clarity the ideas that the Commission is considering. However, I emphasise the fact that the Government's approach is very much that outlined by my right hon. and learned Friend the Chancellor of the Exchequer in his speech at The Hague in June 1981. He said that if we are to move on this matter, we must find a proper balance between the net receipts and the net contributions in the Budget to ensure that, if progress is to be made, we must acknowledge the relative prosperity of member states and their populations.

We do not suggest that there must be a mechanical formula to guarantee that each member state receives back exactly the sum that it contributes. I doubt whether that is possible, even if it were desirable. However, as my right hon. and learned Friend said, if there is to be an element of redistribution in Community expenditure, any net transfers should be on the basis of movement from the more prosperous to the less prosperous members of the Community. It is essential that the criteria applied should be defensible and logical. I hope that that will command support on both sides of the House.

Mr. Shore

The hon. Gentleman is speaking with great authority on behalf of the Chancellor of the Exchequer, whom we are now pleased to see in his place. Is it still the policy of his right hon. and learned Friend and that of the Government to achieve a broad balance in Britain's budget contribution with the EC? If so, over what time scale does he intend to achieve it?

Mr. Rifkind

It is desirable to achieve a broad balance. The right hon. Gentleman will be well aware that the Chancellor of the Exchequer and the Prime Minister have stated that the Government would not object if the result of these procedures and negotiations was a modest net contribution by the United Kingdom. We maintain that the existing arrangements are unacceptable. Any long-term solution should be based, if there is to be a net transfer, on account being taken of the relative prosperity of the individual member states of the Community.

My hon. Friend the Member for Northampton, North (Mr. Marlow) asked about own resources and whether the Government could support any increase in the own resources available to the Community. Within the existing 1 per cent. ceiling on VAT there is an element of buoyancy which enables some growth in expenditure to take place and some flexibility to be applied without any formal change in the revenue-raising powers that the Community has at its disposal.

The Government have not changed their view. No argument can be put forward with any conviction that it is necessary or desirable to increase the own resources of the Community.

I say to my hon. Friend the Member for Scarborough (Sir M. Shaw) that the Government do not believe that the likely accession of Spain and Portugal to the Community, which we hope will happen in the relatively near future, will materially change own resources. The Government do not approach this question in a dogmatic or ideological way. We maintain that at present, for pragmatic reasons and for reasons relating to the natural buoyancy of existing arrangements, it is not necessary to contemplate a change of that kind.

The hon. Member for Walton mentioned his great pride in the new document on the Labour party's policy on the Common Market. This is a document to which I and my hon. Friends have been giving some attention. The front page is quite interesting. It is called "Labour's Socialist Approach". It says that it is issued on behalf of the hon. Member for Walton and the hon. Member for Aberdare (Mr. Evans). I was puzzled and curious about the reference to the document being issued on their behalf. I presume this was as a result of the determination of their research officer to show that he had written it and not the hon. Gentlemen. The document is not on behalf of the Labour party, the Opposition Front Bench nor the Shadow Cabinet, but only on behalf of those two hon. Members. Perhaps this is another example of the precedent that the right hon. Member for Stepney and Poplar referred to, of a potential agreement to differ in that the remainder of the Opposition Front Bench wish to reserve the right to agree or disagree with such aspects of this document as take their fancy.

Mr. Heffer

The hon. Gentleman is making a lot out of nothing. My hon. Friend the Member for Aberdare (Mr. Evans) and myself are Front Bench spokesmen. The statement is similar to the one issued by my hon. Friend and his team. It is the views of the Front Bench spokesmen of the Labour party, and is totally in line with Labour party policy.

Mr. Rifkind

The hon. Gentleman is correct in saying that the hon. Members are Front Bench spokesmen. This document is not issued on behalf of the Shadow Foreign Secretary. He is a Front Bench spokesman with some interest in the European policy of the Labour party. He has not even graced us with his presence this evening. Perhaps he is in Bermondsey. I would not advise my hon. Friends to read this document. I would not advise Opposition Members to read it. It is one of the most turbid documents one could hope to find. It is one of those documents that, once it is put down, is difficult to pick up again.

In its conclusion is a reference to the Labour party being an internationalist party. You could have fooled me, Mr. Speaker. Its belief in internationalism leads it to wish to break up the best example of international co-operation in western Europe. They go on to say: We hope that eventually the whole of Europe will be under a democratic socialist system. It seems that President Mitterrand of France, Mr. Papandreou of Greece and Senor Felipe Gonzales of Spain have not been persuaded that the break-up of Western Europe is necessary to achieve that objective.

The most interesting statement of all is contained in the conclusions, which state: We believe in a wider European unity. I am happy to accept that the hon. Member for Walton is a model European—after all, what is a model but a small imitation of the real thing! This extraordinary document also states that, after the next Labour Government have withdrawn Britain from the Community, they do not wish to indulge in a siege economy. We are told that the policy of the next Labour Government would be to impose a common external tariff on imports from the Community. It is suggested that this should be a tariff of about 9 per cent., but the hon. Gentleman and his hon. Friend have the nerve to go on to say that they do not expect retaliation, despite the fact that 43 per cent. of our exports go to the Community, whereas only 7 per cent. of Community exports come to the United Kingdom. In those circumstances, retaliation is not only likely but almost inevitable and would be greatly to the disservice of this country.

The hon. Gentleman also said that after withdrawal from the Community the options available to the United Kingdom would be severely limited. He does not anticipate that we should contemplate any agreements with the Community that would inhibit the freedom of a Socialist Government to impose Socialist policies on the United Kingdom. He goes on to state that the power to impose Socialist solutions amost certainly excludes rejoining EFTA and excludes negotiating a bilateral preferential trading agreement with the EEC". Even Communist Romania and Yugoslavia have bilateral preferential trading agreements with the Community. It seems that the hon. Gentleman's objective is a relationship between Britain and the Community, of which it is now a member, of even less significance than that shared by the Communist states of eastern Europe.

The truth is that the Labour party's whole policy on the Community has become a complete shambles. Its one fixation is Britain's withdrawal from the Community. It has not the faintest idea of what that will lead to or what relationship Britain would then have with the rest of the Community. Indeed, I am reminded of the scathing remarks that Voltaire made about the Opposition of his day 200 years ago, when he said that the Opposition was like a eunuch—it knows what it wants, but it does not know how to get it.

That summarises a Labour party that has rejected the results of the referendum and the trading benefits for our exports to the Community that have developed over the past 10 years. It represents a Labour party that has produced proposals that bear little relationship to the true needs of the United Kingdom and that ignores the fact that the investment that we have achieved over the past 10 years, particularly investment from the United States and Japan, would in all certainty not have come here—

Mr. Heffer

rose—

Mr. Rifkind

I shall not give way. It ignores the fact that much of the investment that has come to the United Kindgom over the past few years would not have come but for our membership of the Community.

I understand that a survey this month has shown that the United Kingdom was the first choice for investment by United States electronics companies, half of which said that they would reconsider if Britain were outside the European Community. One quarter of those companies flatly said that they would not have set up in the United Kingdom but for our membership of the Community.

I have no hesitation in rejecting this foolish and absurd amendment, and I invite the House to vote for the Government's motion.

Question put, That the amendment be made:—

The House divided: Ayes 220, Noes 314.

Division No. 73]	[10 pm
AYES
Adams, Allen	Buchan, Norman
Allaun, Frank	Callaghan, Rt Hon J.
Anderson, Donald	Callaghan, Jim (Midd't'n & P)
Archer, Rt Hon Peter	Campbell, Ian
Ashley, Rt Hon Jack	Campbell-Savours, Dale
Ashton, Joe	Cant, R. B.
Atkinson, N. (H'gey.)	Carmichael, Neil
Barnett, Guy (Greenwich)	Carter-Jones, Lewis
Barnett, Rt Hon Joel (H'wd)	Clark, Dr David (S Shields)
Benn, Rt Hon Tony	Clarke, Thomas (C'b'dge, A'rie)
Bennett, Andrew (St'Kp't N)	Cocks, Rt Hon M. (B'stol S)
Bidwell, Sydney	Cohen, Stanley
Booth, Rt Hon Albert	Coleman, Donald
Boothroyd, Miss Betty	Concannon, Rt Hon J. D.
Bottomley, Rt Hon A. (M'b'ro)	Cook, Robin F.
Bray, Dr Jeremy	Cox, T. (W'dsw'th, Toot'g)
Brown, Hugh D. (Provan)	Craigen, J. M. (G'gow, M'hill)
Brown, R. C. (N'castle W)	Crowther, Stan

Cryer, Bob	McCartney, Hugh
Cunliffe, Lawrence	McCusker, H.
Cunningham, Dr J. (W'h'n)	McDonald, Dr Oonagh
Dalyell, Tam	McElhone, Mrs Helen
Davidson, Arthur	McGuire, Michael (Ince)
Davies, Rt Hon Denzil (L'lli)	McKay, Allen (Penistone)
Davis, Clinton (Hackney C)	McKelvey, William
Davis, Terry (B'ham, Stechf'd)	McMahon, Andrew
Deakins, Eric	McNamara, Kevin
Dean, Joseph (Leeds West)	McTaggart, Robert
Dewar, Donald	McWilliam, John
Dixon, Donald	Marks, Kenneth
Dormand, Jack	Marshall, D (G'gow S'ton)
Douglas, Dick	Marshall, Dr Edmund (Goole)
Dubs, Alfred	Marshall, Jim (Leicester S)
Duffy, A. E. P.	Martin, M (G'gow S'burn)
Dunnett, Jack	Mason, Rt Hon Roy
Dunwoody, Hon Mrs G.	Maxton, John
Eadie, Alex	Maynard, Miss Joan
Eastham, Ken	Meacher, Michael
Edwards, R. (W'hampt'n S E)	Mikardo, Ian
Ellis, R. (NE D'bysh're)	Millan, Rt Hon Bruce
English, Michael	Miller, Dr M. S. (E Kilbride)
Ennals, Rt Hon David	Mitchell, Austin (Grimsby)
Evans, Ioan (Aberdare)	Molyneaux, James
Evans, John (Newton)	Morris, Rt Hon A. (W'shawe)
Ewing, Harry	Morris, Rt Hon C. (O'shaw)
Faulds, Andrew	Morris, Rt Hon J. (Aberavon)
Field, Frank	Moyle, Rt Hon Roland
Foot, Rt Hon Michael	Mulley, Rt Hon Frederick
Ford, Ben	Newens, Stanley
Forrester, John	O'Halloran, Michael
Foster, Derek	O'Neill, Martin
Foulkes, George	Orme, Rt Hon Stanley
Fraser, J. (Lamb'th, N'w'd)	Palmer, Arthur
Freeson, Rt Hon Reginald	Park, George
Garrett, John (Norwich S)	Parker, John
Garrett, W. E. (Wallsend)	Parry, Robert
George, Bruce	Pavitt, Laurie
Gilbert, Rt Hon Dr John	Pendry, Tom
Golding, John	Powell, Rt Hon J.E. (S Down)
Gourlay, Harry	Powell, Raymond (Ogmore)
Graham, Ted	Prescott, John
Hamilton, James (Bothwell)	Price, C. (Lewisham W)
Hamilton, W. W. (C'tral Fife)	Race, Reg
Hardy, Peter	Radice, Giles
Harrison, Rt Hon Walter	Rees, Rt Hon M (Leeds S)
Hart, Rt Hon Dame Judith	Richardson, Jo
Hattersley, Rt Hon Roy	Roberts, Albert (Normanton)
Haynes, Frank	Roberts, Allan (Bootle)
Healey, Rt Hon Denis	Roberts, Ernest (Hackney N)
Heffer, Eric S.	Roberts, Gwilym (Cannock)
Hogg, N. (E Dunb't'nshire)	Robertson, George
Holland, S. (L'b'th, Vauxh'Il)	Robinson, G. (Coventry NW)
Home Robertson, John	Rooker, J. W.
Homewood, William	Ross, Ernest (Dundee West)
Hooley, Frank	Ross, Wm. (Londonderry)
Howell, Rt Hon D.	Rowlands, Ted
Hoyle, Douglas	Sever, John
Hughes, Mark (Durham)	Sheerman, Barry
Hughes, Robert (Aberdeen N)	Sheldon, Rt Hon R.
Hughes, Roy (Newport)	Shore, Rt Hon Peter
Janner, Hon Greville	Short, Mrs Reneée
Jay, Rt Hon Douglas	Silkin, Rt Hon J. (Deptford)
John, Brynmor	Silkin, Rt Hon S. C. (Dulwich)
Johnson, James (Hull West)	Silverman, Julius
Jones, Rt Hon Alec (Rh'dda)	Skinner, Dennis
Jones, Barry (East Flint)	Smith, Rt Hon J. (N Lanark)
Kaufman, Rt Hon Gerald	Smyth, Rev. W. M. (Belfast S)
Kerr, Russell	Snape, Peter
Kilroy-Silk, Robert	Soley, Clive
Lambie, David	Spearing, Nigel
Leadbitter, Ted	Spellar, John Francis (B'ham)
Leighton, Ronald	Spriggs, Leslie
Lestor, Miss Joan	Stallard, A. W.
Lewis, Arthur (N'ham NW)	Stoddart, David
Lewis, Ron (Carlisle)	Stott, Roger
Litherland, Robert	Straw, Jack
Lofthouse, Geoffrey	Summerskill, Hon Dr Shirley
Lyon, Alexander (York)	Taylor, Mrs Ann (Bolton W)

Thomas, Dr R. (Carmarthen)	Whitlock, William
Thorne, Stan (Preston South)	Wigley, Dafydd
Tinn, James	Willey, Rt Hon Frederick
Torney, Tom	Williams, Rt Hon A. (S'sea W)
Varley, Rt Hon Eric G.	Wilson, Rt Hon Sir H. (H'ton)
Wainwright, E. (Dearne V)	Wilson, William (C'try SE)
Walker, Rt Hon H. (D'caster)	Winnick, David
Warden, Gareth	Woodall, Alec
Watkins, David	Woolmer, Kenneth
Weetch, Ken	Wright, Sheila
Welsh, Michael
White, Frank R.	Tellers for the Ayes:
White, J. (G'gow Pollok)	Mr. George Morton and
Whitehead, Phillip	Mr. Harry Cowans.
NOES
Adley, Robert	Costain, Sir Albert
Aitken, Jonathan	Cranborne, Viscount
Alexander, Richard	Critchley, Julian
Alison, Rt Hon Michael	Crouch, David
Alton, David	Dorrell, Stephen
Ancram, Michael	Douglas-Hamilton, Lord J.
Arnold, Tom	Dover, Denshore
Aspinwall, Jack	du Cann, Rt Hon Edward
Atkins, Rt Hon H. (S'thorne)	Dunn, Robert (Dartford)
Atkins, Robert (Preston N)	Dykes, Hugh
Atkinson, David (B'm'th,E)	Eden, Rt Hon Sir John
Baker, Kenneth (St.M'bone)	Edwards, Rt Hon N. (P'broke)
Baker, Nicholas (N Dorset)	Eggar, Tim
Banks, Robert	Elliott, Sir William
Beaumont-Dark, Anthony	Ellis, Tom (Wrexham)
Beith, A. J.	Emery, Sir Peter
Bendall, Vivian	Eyre, Reginald
Bennett, Sir Frederic (T'bay)	Fairbairn, Nicholas
Benyon, Thomas (A'don)	Fairgrieve, Sir Russell
Benyon, W. (Buckingham)	Faith, Mrs Sheila
Berry, Hon Anthony	Farr, John
Best, Keith	Fell, Sir Anthony
Bevan, David Gilroy	Fenner, Mrs Peggy
Biffen, Rt Hon John	Finsberg, Geoffrey
Biggs-Davison, Sir John	Fisher, Sir Nigel
Blackburn, John	Fletcher, A. (Ed'nb'gh N)
Blaker, Peter	Fletcher-Cooke, Sir Charles
Bonsor, Sir Nicholas	Fookes, Miss Janet
Bottomley, Peter (W'wich W)	Forman, Nigel
Bowden, Andrew	Fowler, Rt Hon Norman
Boyson, Dr Rhodes	Fox, Marcus
Bradley, Tom	Fraser, Rt Hon Sir Hugh
Braine, Sir Bernard	Fraser, Peter (South Angus)
Bright, Graham	Fry, Peter
Brinton, Tim	Gardiner, George (Reigate)
Brittan, Rt. Hon. Leon	Gardner, Sir Edward
Brooke, Hon Peter	Garel-Jones, Tristan
Brotherton, Michael	Gilmour, Rt Hon Sir Ian
Brown, Michael (Brigg & Sc'n)	Ginsburg, David
Brown, Ronald W. (H'ckn'y S)	Goodhart, Sir Philip
Browne, John (Winchester)	Goodhew, Sir Victor
Bruce-Gardyne, John	Good lad, Alastair
Bryan, Sir Paul	Gorst, John
Buchanan-Smith, Rt. Hon. A.	Gow, Ian
Buck, Antony	Gower, Sir Raymond
Budgen, Nick	Grant, Sir Anthony
Burden, Sir Frederick	Gray, Rt Hon Hamish
Butcher, John	Greenway, Harry
Butler, Hon Adam	Grieve, Percy
Carlisle, John (Luton West)	Griffiths, E. (B'y St. Edm'ds)
Carlisle, Kenneth (Lincoln)	Griffiths, Peter (Portsm'th N)
Carlisle, Rt Hon M. (R'c'n)	Grist, Ian
Cartwright, John	Grylls, Michael
Chalker, Mrs. Lynda	Gummer, John Selwyn
Channon, Rt. Hon. Paul	Hamilton, Hon A.
Chapman, Sydney	Hamilton, Michael (Salisbury)
Churchill, W. S.	Hampson, Dr Keith
Clark, Hon A. (Plym'th, S'n)	Hannam, John
Clark, Sir W. (Croydon S)	Haselhurst, Alan
Clarke, Kenneth (Rushcliffe)	Hastings, Stephen
Cockeram, Eric	Hawkins, Sir Paul
Colvin, Michael	Hayhoe, Barney
Cope, John	Heath, Rt Hon Edward
Corrie, John	Heddle, John

Henderson, Barry	Mayhew, Patrick
Heseltine, Rt Hon Michael	Mellor, David
Hicks, Robert	Meyer, Sir Anthony
Higgins, Rt Hon Terence L.	Miller, Hal (B'grove)
Hill, James	Mills, Sir Peter (West Devon)
Hogg, Hon Douglas (Gr'th'm)	Moate, Roger
Holland, Philip (Carlton)	Monro, Sir Hector
Hooson, Tom	Montgomery, Fergus
Horam, John	Moore, John
Hordern, Peter	Morgan, Geraint
Howe, Rt Hon Sir Geoffrey	Morris, M. (N'hampton S)
Howell, Rt Hon D. (G'Idf'd)	Morrison, Hon C. (Devizes)
Howell, Ralph (N Norfolk)	Mudd, David
Howells, Geraint	Murphy, Christopher
Hunt, David (Wirral)	Myles, David
Hunt, John (Ravensbourne)	Neale, Gerrard
Irvine, Rt Hon Bryant Godman	Needham, Richard
Irving, Charles (Cheltenham)	Nelson, Anthony
Jenkin, Rt Hon Patrick	Neubert, Michael
Jessel, Toby	Newton, Tony
Jopling, Rt Hon Michael	Nott, Rt Hon Sir John
Joseph, Rt Hon Sir Keith	Onslow, Cranley
Kaberry, Sir Donald	Oppenheim, Rt Hon Mrs S.
Kershaw, Sir Anthony	Osborn, John
Kimball, Sir Marcus	Page, John (Harrow, West)
King, Rt Hon Tom	Page, Richard (SW Herts)
Kitson, Sir Timothy	Parkinson, Rt Hon Cecil
Knight, Mrs Jill	Parris, Matthew
Knox, David	Patten, Christopher (Bath)
Lamont, Norman	Patten, John (Oxford)
Lang, Ian	Pattie, Geoffrey
Langford-Holt, Sir John	Pawsey, James
Latham, Michael	Penhaligon, David
Lawrence, Ivan	Percival, Sir Ian
Lawson, Rt Hon Nigel	Pink, R. Bonner
Lee, John	Pollock, Alexander
Le Merchant, Spencer	Porter, Barry
Lennox-Boyd, Hon Mark	Prentice, Rt Hon Reg
Lester, Jim (Beeston)	Price, Sir David (Eastleigh)
Lewis, Sir Kenneth (Rutland)	Proctor, K. Harvey
Lloyd, Ian (Havant & W'Ioo)	Rathbone, Tim
Lloyd, Peter (Fareham)	Rees, Peter (Dover and Deal)
Loveridge, John	Renton, Tim
Lyell, Nicholas	Rhodes James, Robert
Lyons, Edward (Bradf'd W)	Rhys Williams, Sir Brandon
McCrindle, Robert	Ridley, Hon Nicholas
Macfarlane, Neil	Ridsdale, Sir Julian
MacGregor, John	Rifkind, Malcolm
Maclennan, Robert	Rippon, Rt Hon Geoffrey
Macmillan, Rt Hon M.	Roberts, Wyn (Conway)
McNair-Wilson, M. (N'bury)	Rodgers, Rt Hon William
McNair-Wilson, P. (New F'st)	Roper, John
McNally, Thomas	Rossi, Hugh
Madel, David	Rost, Peter
Major, John	Royle, Sir Anthony
Marland, Paul	Rumbold, Mrs A. C. R.
Marlow, Antony	Sainsbury, Hon Timothy
Marshall, Michael (Arundel)	St. John-Stevas, Rt Hon N.
Marten, Rt Hon Neil	Sandelson, Neville
Mates, Michael	Scott, Nicholas
Maude, Rt Hon Sir Angus	Shaw, Sir Michael (Scarb')
Mawby, Ray	Shelton, William (Streatham)
Mawhinney, Dr Brian	Shepherd, Colin (Hereford)
Maxwell-Hyslop, Robin	Silvester, Fred

Sims, Roger	Vaughan, Dr Gerard
Skeet, T. H. H.	Viggers, Peter
Smith, Sir Dudley	Waddington, David
Smith, Tim (Beaconsfield)	Wakeham, John
Speed, Keith	Waldegrave, Hon William
Spence, John	Walker, Rt Hon P. (W'cester)
Spicer, Jim (West Dorset)	Walker, B. (Perth)
Spicer, Michael (S Worcs)	Walker-Smith, Rt Hon Sir D.
Sproat, Iain	Wall, Sir Patrick
Squire, Robin	Waller, Gary
Stainton, Keith	Walters, Dennis
Stanbrook, Ivor	Ward, John
Stanley, John	Warren, Kenneth
Steel, Rt Hon David	Watson, John
Steen, Anthony	Wells, Bowen
Stevens, Martin	Wells, John (Maidstone)
Stewart, A. (E Renfrewshire)	Wheeler, John
Stewart, Ian (Hitchin)	Whitelaw, Rt Hon William
Stokes, John	Whitney, Raymond
Stradling Thomas, J.	Wickenden, Keith
Tapsell, Peter	Wiggin, Jerry
Taylor, Teddy (S'end E)	Wilkinson, John
Temple-Morris, Peter	Williams, D. (Montgomery)
Thomas, Rt Hon Peter	Williams, Rt Hon Mrs (Crosby)
Thompson, Donald	Winterton, Nicholas
Thorne, Neil (Ilford South)	Young, Sir George (Acton)
Thornton, Malcolm	Younger, Rt Hon George
Townend, John (Bridlington)
Townsend, Cyril D, (B'heath)	Tellers for the Noes:
Trippier, David	Mr. Carol Mather and
van Straubenzee, Sir W.	Mr. Robert Boscawen.

Question accordingly negatived

Main Question put and agreed to

Resolved, That this House takes note of European Community Documents Nos. 4348/83 (Amended proposal for contracting loans under the New Community Instrument for the purpose of promoting investment within the Council), 10960/81 (Mandate of 30th May 1980—Report on the application of the Financial Mechanism), 5980/82 and 8874/82 (Commission's second and third reports on the implementation of supplementary measures in favour of the UK), COM(83)23 (Preliminary draft supplementary and amending budget No. 1 for 1983), the subsequent draft supplementary and amending budget No. 1 for 1983, 4417/83 (Proposal for a Council regulation amending Regulation No. 2744/80 establishing supplementary measures in favour of the UK), 4418/83 (Proposal for a Council regulation establishing specific measures of Community interest relating to energy strategy), 11125/82 (Communication from the Commission on the compensation for the UK: the subsequent solution), 4826/83 (Commission communication on the future financing of the Community); and supports Her Majesty's Government's efforts to negotiate arrangements for the Community budget which will ensure that the sharing of burdens between member states is equitable.

c750
1. BUSINESS OF THE HOUSE 23 words