Budget (Hansard, 20 July 1983)

§ 66. Mr. Arnold
asked the Secretary of State for Foreign and Commonwealth Affairs what progress he has made towards finding a solution to the European Community budget problem.

§ 69. Mr. Willie W. Hamilton
asked the Secretary of State for Foreign and Commonwealth Affairs what steps he intends to take to prevent any increase in the size of the European Community budget until satisfactory reforni of the common agricultural policy is agreed.

§ 70. Mr. Knox
asked the Secretary of State for Foreign and Commonwealth Affairs what progress has been made towards reaching a long-term solution to the European Community budget problem.

§ 71. Mr. Dykes
asked the Secretary of State for Foreign and Commonwealth Affairs what progress towards a resolution of budgetary problems was made at the Foreign Affairs Council on 8 July.

§ Sir Geoffrey Howe
As the Prime Minister told the House on 23 June, the European Council at Stuttgart on 17 to 19 of June agreed that urgent negotiations would be started on the future financing of the Community and that the result of the negotiations would be submitted to the next European Council in Athens on 6 December. The first meeting of the special Council, which is to prepare the ground for decisions at Athens, took place in Brussels on 8 July. Agreement was reached at this meeting on the timetable for future meetings of the special Council and on procedural questions.
I attended the second of these Councils yesterday and will be saying a word about its outcome during the statement that I shall be making to the House on the Foreign Affairs Council on 18 July, immediately following this Question Time.

§ Mr. Arnold
Will my right hon. and learned Friend give the House an assurance that there will be no further increase in Britain's contribution to the EC budget until such time as our EC partners are prepared to accept the admirable principles that he outlined in his statement yesterday?

§ Sir Geoffrey Howe
I am grateful to my hon. Friend for his remarks about my statement. The purpose of making it was to impress the Government's propositions upon our colleagues.

§ Mr. Hamilton
Does the right hon. and learned Gentleman recall that when the Prime Minister returned from Stuttgart she boasted that she was getting a rebate of £450 million? When will that sum be repaid and will it be conditional?

§ Sir Geoffrey Howe
The effect of the agreement that was arrived at in Stuttgart was that provisons for the rebate would be written into the budget that is now under preparation. The money will be repayable—

§ Mr. Hamilton
When?

§ Sir Geoffrey Howe
—to this country on the same timetable as in previous years, but in Britain's financial year. There are no conditions attached to that. It has emerged clearly from what my right hon. Friend has said about Stuttgart that agreement on the refund to the United Kingdom was not conditional or dependent upon other agreements that were arrived at in Stuttgart.

§ Mr. Knox
Does my right hon. and learned Friend agree that the extension of regional development and energy policies in the Community, from which Britain would benefit disproportionately, could play a part in the long-term solution of the budget problem?

§ Sir Geoffrey Howe
I am not sure that I would agree with my hon. Friend in following that approach. If we were to try to solve our budgetary problem by an expansion of the regional fund in order to secure the equivalent of the 750 million ecu that we are getting under 374 the Stuttgart agreement, we should have to enlarge the size of the regional fund until it was twice as large as the entire Community budget. That would not seem to be the most fruitful way of doing it. One of the objects of the arrangement that I was urging yesterday was to put the financing of the budget on a more rational basis, so that member States need not be so preoccupied with whether we do or do not get something out of a particular policy. We can address ourselves to the financing of the budget and then consider the policies on their merits.

§ Mr. Dykes
As there is an urgent need to create enthusiasm for the EC in this country, and as the budget rebate has been a spectacular success for Her Majesty's Government, is it not now possible to indulge in the best principles of compromise and give and take with the European Parliament and create a truly constructive dialogue for the non-inflationary expansion and modernisation of the budget?

§ Sir Geoffrey Howe
I hesitate in my present capacity to try to analyse all the implications of a non-inflationary expansionary modernisation of the budget, but I certainly agree that it would be useful to endeavour to secure the most fruitful partnership that we can between the Commission, the Council, member states and the Parliament.

§ Mr. Rogers
Is the Secretary of State aware that an increase in taxation from 1 per cent. to 1.5 per cent. is likely to cost the British taxpayer about £3 million? What steps will he now take to ensure that we get a reasonable return, in view of the fact that the other countries are not likely to change their views on the common agricultural policy? How much is the right hon. and learned Gentleman going to sell us down the river for?

§ Sir Geoffrey Howe
I am not sure that I accept the arithmetic underlying the hon. Gentleman's question, but he is right to draw attention to the fact that an enlargement of own resources would involve an additional burden to the budgetary burden on the people of this country.

§ Mr. Skinner
Will the right hon. and learned Gentleman increase VAT?

§ Sir Geoffrey Howe
The reason why I believe that it is right to say that the argument against accepting the case for enlarging own resources is likely to be considered seriously is that an agreement to enlarge own resources involves the concurrence of the Council and of each Parliament of the member states. In place of that balance of relationships, the proposition that one cannot automatically accept the case for enlarging own resources must be taken seriously.

§ Mr. Body
Will my right hon. and learned Friend undertake to make it plain to his colleagues on the continent that VAT places a heavy burden on the consumer, the poor as well as the rich? Will it be his intention to oppose any increase in VAT?

§ Sir Geoffrey Howe
One can certainly understand the case that if VAT or any other tax increases beyond a certain point, it becomes more of a burden. The argument that we are considering in the European Community is not, in fact, whether that tax should be increased, but whether the tax revenue to be handed over as own resources should be calculated by reference to a notional increase in the tax.

§ Mr. Skinner
It is going up.

§ Sir Geoffrey Howe
The real question is whether we allow an increase in own resources. We have placed the burden of proof firmly on those who seek to make that case.

§ Mr. Ioan Evans
Will the Foreign Secretary confirm that the resources of the Community are drying up and that by October there will be a financial crisis if own resources are not increased? As the British net contribution this year is £1,140 million, which is about equal to the entire British aid programme to the Commonwealth and the countries of the underdeveloped world, when will the right hon. and learned Gentleman come to the House to say what action he will take to ensure that Britain gets a fair deal in the Market?

§ Sir Geoffrey Howe
The position is straightforward. The present arrangement for financing; the Community is leading to the position that the hon. Gentleman described. The resources available to the Community are running out. Any increase in those so-called own resources has to be made by shifting resources from somewhere else—from the taxpayer or the consumer. We are saying that that case must be proved. We also say that whatever arrangements are made for financing the Community in future, Britain should not bear an unduly large share of the cost. In pursuit of that case we have been successful, over the past four years, in securing a refund of two thirds of our potential maximum contribution. Over the past four years we have been successful in securing refunds of £2,500 million. That is an indication of the energy with which we conduct the case.