HC Deb 25 July 1983 vol 46 cc790-7 3.47 pm
The Financial Secretary to the Treasury (Mr. Nicholas Ridley)

With permission, Mr. Speaker, I should like to report to the House on the outcome of last week's Budget Council in Brussels, at which I represented the United Kingdom. The Council had a discussion with the Parliament and finally established a draft supplementary and amending budget No. 2 for 1983 and a draft budget for 1984. These will now go forward for consideration by the European Parliament.

The draft supplementary budget No. 2 for 1983, as established by the Council, in response to a presidency compromise, makes provision for budget refunds for 1982 for the United Kingdom and Germany under the risk-sharing provisions of the 26 October agreement of 370 million ecu. The United Kingdom's share in this is around 305 million ecu-310 million ecu. In our view the total figure should have been 495 million ecu, including 408 million ecu for the United Kingdom. We are therefore left with a shortfall of about 100 million ecu gross, or 75 million ecu net. The equivalent sterling figures are £58 million gross and £43 million net. I voted against the presidency compromise, which included this provision, but all others voted for it, except the Danes, who abstained. I therefore made it clear to the Council, for formal inclusion in the minutes, that it had failed to discharge in full its obligations to the United Kingdom and that the community institutions must take the necessary action as a matter of urgency to ensure that the United Kingdom receives its full entitlement. The budgetary processes for 1983 are not yet completed, and the Government intend to ensure that this matter is resolved satisfactorily.

The presidency compromise was also unsatisfactory in that it included a cut of only 50 million ecu in the extra provision for agricultural spending proposed by the Commission. I argued strongly for a larger reduction.

The draft budget for 1984, as now established by the Council, will make provision of 1,202 million ecu for refunds to the United Kingdom and Germany, including 991 million ecu for the United Kingdom. In contrast with the 1983 supplementary, this gross provision correctly provides for a refund to the United Kingdom of 750 million ecu net, and so honours the Stuttgart undertaking fully.

The draft budget provides for agricultural guarantee expenditure of 16.5 billion ecu, as recommended by the Commission, but the Council decided to place 250 million ecu out of this total in the "reserve" chapter of the budget rather than "on the line". Together with two other delegations I argued for cuts of 1 billion ecu in the provision for agricultural guarantee spending, but this proposal was finally out-voted.

The draft budget makes provision for total non-obligatory expenditure, including the non-obligatory element in the United Kingdom and German refunds, to rise by half the maximum rate—that is, by 5.8 per cent. — but the combination of the large provision for agriculture with the necessary provision for United Kingdom and German refunds left little room inside the own resources ceiling for increases in the regional development and social funds.

Before either budget is finally adopted there will be extended negotiations between the Council and the European Parliament. During this period the Government will take all appropriate steps to ensure that the United Kingdom receives its entitlement to refunds for 1982 in full. My right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs will raise the matter at the Foreign Affairs Council at the earliest possible opportunity. I am sure that the Government can count on support for this from all sections of the House.

Mr. Jack Straw (Blackburn)

Is the Financial Secretary aware that the sad and sorry tale of the Government's performance which he has presented to the House this afternoon is a far cry from the Prime Minister's promise in her Winston Churchill memorial lecture? She said: I cannot play Sister Bountiful to the Community while my own electorate are being asked to forgo improvements in the fields of health, education, welfare and the rest. The right hon. Lady explicitly committed her Government to seeking a broad balance between Britain's contributions and receipts, and she persuaded the House on 16 July 1979 to agree, by a unanimous resolution, to fundamental reforms of the budgetary arrangements so that Britain's contribution to the budget would not be greater than its receipts.

Given that clear commitment, is not the Government's record on the European Community budget one of continuing and mounting failure, and will the right hon. Gentleman recognise that that failure arises not least because the Government have no consistent policy towards EC spending? The Treasury claims to be seeking control of the Common Market budget, but such is the power of the farming lobby within the Conservative party that the Government have shown no serious intention or commitment to secure a fundamental reform of the common agricultural policy, which lies at the heart of the Common Market budgetary problems. Instead, the Government have allowed the cost of that absurd and wasteful policy to spiral.

The Financial Secretary referred to the draft budget for agricultural guarantee expenditure of £16.5 billion ecu, or more than £10,000 million. Does he recall that the expenditure on the CAP for this year is 41 per cent. higher than it was last year? In those circumstances, what guarantee can he give to the House that the budgeted amount of 16.5 billion ecu for next year will not be exceeded?

To return to the Financial Secretary's failure at the weekend, may I ask whether the right hon. Gentleman recalls that he was quoted in The Times as saying: We have lost a battle but not the war—and it will be a war to get it back. Will the right hon. Gentleman tell the House this afternoon what weapons he intends to deploy in the war to ensure that we get our full refund? Will he explain why the Government have thrown away the key and central weapon, which is a veto on any increase in the 1 per cent. ceiling on VAT contributions? Why are the Government pussyfooting about, and why did they, at the Stuttgart summit and at the Foreign Affairs Council meeting, refuse to say categorically that Britain would veto an increase in the VAT ceiling?

When the Financial Secretary talks in his statement of the Community institutions taking the necessary action as a matter of urgency to ensure that the United Kingdom receives its full entitlement, what is that necessary action? When he says that the Government will take all appropriate steps to ensure that Britain receives its agreed entitlement, what will those appropriate steps be? Will the Government measure up to the task and block further spending on the common agriculture policy? Will they veto an increase in the VAT ceiling?

Is the right hon. Gentleman aware that the reason why he has suffered a further humiliation in a long line of humiliations, and why, for all the Government's bluster, contributions to the Common Market have been running at £100 million more in real terms under the Conservative party than they did under the Labour party, is that the other Community Governments have got the measure of the right hon. Gentleman and of the Prime Minister? They know, as we know, that the Government's sound and fury signifies nothing, and that they are willing to wound but, as ever, afraid to strike.

Mr. Ridley

That remark comes ill from a member of the Labour party. I remind the House that our Common Market partners got the measure of the Labour Government's resolve and did not give them back even one ecu, whereas this Government have obtained more than £2.5 billion in refunds. At the Budget Council last week we secured agreement to gross refunds for the United Kingdom and Germany of 1,570 million units of account. We would have liked our full entitlement, but we received a great deal through the Council.

The hon. Member for Blackburn (Mr. Straw) asked about the power of the farming lobby, and it is true that nine out of 10 Community members would wish to increase expenditure on the common agricultural policy. We are always in a weak position in trying to control that expenditure. However, although we have allowed 16.5 billion ecu in the budget for next year, that brings us to the ceiling of what can be spent. There is no question of extra spending on agriculture next year, because the ceiling has beeen reached in the budget which has been put before the Council. At last we have a real weapon to control agricultural spending, which must now rest within that ceiling.

The hon. Gentleman might not know that last week my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs proposed a strict financial guideline to control future agricultural spending. That will be negotiated by the special Council, culminating in the Council in Athens in December, and at the Athens Council we intend to achieve proper control of agricultural spending.

The hon. Gentleman asked about future action on refunds. This is the first stage of the budgetary process. The proposal must go to Parliament, return to the Council and then go back to Parliament before the matter is concluded. During those exchanges there will be ample opportunity for my right hon. Friends to press their case and to do all that is possible to make the Community live up to its undertakings and its obligations. We shall do that.

Mr. Robert Jackson (Wantage)

Can my right hon. Friend confirm that the obligation to Britain in respect of the 1982 refunds is as legally binding on the Community as the obligation to meet price guarantees to farmers? Has he conveyed to his colleagues on the Council the growing impatience, even among those most committed to the European idea, at the chicanery and prevarication that continue to surround this matter?

Mr. Ridley

I agree with everything that my hon. Friend has said. The regulations embodying the 26 October 1982 agreement create an obligation to pay sums to the United Kingdom under the risk-sharing arrangements. Last week, some other member states were arguing about the precise method of calculating these sums. However, the amount which the Council eventually included was based on an arbitrary cut and not on any principle.

Mr. J. Enoch Powell (Down, South)

Is the right hon. Gentleman aware that many hon. Members were glad to read his statement in the press that he was prepared—and therefore presumably the Government are—to go to war over this matter? Does he think that the threat was taken seriously by his colleagues in Europe? Is he satisfied with the result so far of the transfer of sovereign powers from this House to the institutions of the Community and to a directly elected Assembly?

Mr. Ridley

My right hon. Friend the Prime Minister has made it clear that we sincerely hope that we can resolve this matter during the budgetary process, which must first be allowed to complete its course. I should hate to have to have recourse to withholding—this deals with the right hon. Gentleman's question about sovereignty—our contribution until the full budgetary process had run its course. It is as if the Government have lost a point in Committee, but the Report stage remains to put the matter right.

Mr. Peter Hordern (Horsham)

Will my right hon. Friend confirm that neither he nor the Government will allow any increase in the resources available to the European Community unless the deficits incurred by the common agricultural policy are substantially reduced?

Mr. Ridley

The strict financial guideline which my right hon. and learned Friend put forward requests that the rate of increase in agricultural spending be limited to a proportion only of the rate of increase in Community own resources. If that were agreed, there would be a limit on agricultural spending.

Mr. Robert Maclennan (Caithness and Sutherland)

First, will the Minister withdraw his remark that he would hate to have to have recourse to withholding our contribution, as it is a threat to act in breach of Community law? Secondly, will he accept that the Government's insistence on maintaining a rigid ceiling on total expenditure at the level that he has mentioned will be damaging to this country and to the Community in three respects? First, putting a ceiling on agricultural guarantee expenditure of the kind that he has mentioned would result in direct harm to the British farmer. Secondly, it would leave no resources for expansion of expenditure by the Community on unemployment measures and social spending. Thirdly, it would result in continuing the reluctance of our Community partners to accept any automatic refund to this country.

Mr. Ridley

To say that one would hate to do something cannot be interpreted as a threat, and I stand by what I said. The conditions under which the Government are prepared to consider—that is not a strong word—any increase in own resources are, first, that a strict and binding financial guideline be placed upon the growth of agricultural expenditure and, secondly, that some financial mechanism be in place to ensure that no Community member state bears an unfair burden of the costs of Community policies. I should have thought that even the hon. Gentleman, and the House, would think that that was the correct way to proceed.

Sir Anthony Meyer (Clwyd, North-West)

Does my right hon. Friend agree that, infuriating as is the loss of part of the refund for last year, and satisfactory as is the settlement for this year, it is far more important to secure a long-term sensible arrangement for financing the Community? Will he concentrate on that and invite hon. Members to concentrate on it also?

Mr. Ridley

I agree with my hon. Friend. Already, two meetings of the special Council have taken place. The atmosphere was constructive and some progress was made. We hope to achieve an effective result by the time of the Athens Council meeting in December. My only sadness is that the events of last week do not give Her Majesty's Government as much confidence that those negotiations will come to a satisfactory conclusion as they would have had without any cuts in the refund.

Mr. Nigel Spearing (Newham, South)

If, to use the Financial Secretary's words, the Council has made an arbitrary cut in the 1982 repayments during the 1983 budget negotiations, what is to prevent it doing exactly the same with the 1983 repayments in respect of the 1984 budget?

Mr. Ridley

The cut in the 1983 budget was in respect of the risk-sharing for 1982, an amount calculated under a complicated mathematical formula, depending upon the outcome of our net contribution and known as the "risk-sharing element". This might have been positive or negative. In fact, it was an increased refund due to us. The rebate for 1983, included in the 1984 budget, was a fixed sum—750 million ecu net—and that amount, properly grossed up and properly calculated, has been included in the 1984 budget. Therefore, there is no doubt that the Council has passed the money required to fulfil that obligation arising out of Stuttgart.

Sir Michael Shaw (Scarborough)

Does my right hon. Friend accept that, far from being a sad and sorry performance, as described by the Opposition, his performance held high hopes for a satisfactory outcome? I hope he understands that he is to be congratulated on the difficult negotiations, in which he took part over a long period of time. I hope he will agree that a set-back is one thing but that the determination to succeed remains—quite unlike the illusory changes made by the Opposition at the time of the referendum. The genuine benefits that we should receive in the end are still attainable and must be attained.

Mr. Ridley

I am grateful to my hon. Friend. He might feel that some evidence of how hard we struggled to prevail in the Council for what was right can be derived from the fact that the Council lasted for two and a half days, including an all-night session of no fewer than 30 hours. I gather that that is a Community record, soon I hope, to find its way into the "Guinness Book of Records".

Mr. John Evans (St. Helens North)

Why is it that every time the Prime Minister returns from the Community finance bill second reading in the Council of Ministers she returns with cries of triumph and rejoicing, while every time the right hon. Gentleman and his junior colleagues return from trying to pick up the pieces in committee they return whipped and have to admit that their European colleagues have defeated them once again?

Mr. Ridley

I suggest that that is a question that the hon. Gentleman should ask the other budget Ministers of our Community partners at the Council. It is they who went back on the 26 October 1982 agreement, not I.

Mr. Nicholas Budgen (Wolverhampton, South-West)

Does my right hon. Friend agree that if the House were so unwise as to pass legislation raising the VAT ceiling the necessary pressure upon the EC to reform its budgetary arrangements and, most of all, the CAP, would be lost?

Mr. Ridley

I believe that my hon. Friend is entirely right in saying that. He will notice that no such proposal was included in Her Majesty's Gracious Speech.

Mr. Tam Dalyell (Linlithgow)

Was the Minister misquoted by the press as saying that he would "go to war" over this? If not, what is the nature of the task force that he has in mind?

Mr. Ridley

The hon. Gentleman is not living up to his usual standard. He did not mention the General Belgrano in that question. I said that we had lost a battle but had not lost the war. I repeat that.

Mr. John Townend (Bridlington)

Does my right hon. Friend agree that as the Government's policy is to reduce public spending at home it would be equally logical to reduce it at Brussels? In view of the shabby treatment that Great Britain has received this week, will the Government reconsider their position and make it clear that under no circumstances will they allow an increase in the 1 per cent. VAT ceiling?

Mr. Ridley

I agree entirely with my hon. Friend about the desirability of containing and reducing public expenditure, whether at home or in Brussels. I can give him some reassurance, because the 1983 supplementary budget is right up against the ceiling and cannot be increased. The margin in the 1984 budget is so small as virtually to amount to the same thing. At present we have an effective lid on Community spending.

Mr. Laurie Pavitt (Brent, South)

Is not this statement the latest in a long series of failures over the years by the Government on this issue, and does it not reveal that the CAP presents an insuperable difficulty which the Government cannot get over in its present form? Does it not also reveal that the change from buying food cheap from the British Commonwealth to going into the Common Market was nonsense?

Mr. Ridley

I agree that it is now essential, after the latest large percentage rises in Community agricultural spending, that either a ceiling be put on that spending or some other means is devised to control spending or, if possible, to bring it down. For the last two years Community agricultural spending fell below estimates, because of high world prices, which reduced the amounts that had to be paid. The problem has only now become acute. The Government welcome the fact that financial circumstances mean that a solution must now be found.

Mr. Albert McQuarrie (Banff and Buchan)

Can my right hon. Friend say whether, during the discussions the Greek Government refused to finalise the budget because they wanted some of the money allocated to the United Kingdom for the restructure of our fishing fleet? If that is so, will my right hon. Friend ensure that, when he returns to the Council, under no circumstances will he permit that Government to have any part of the money already allocated by the Council of Ministers for the restructure of the British fleet?

Mr. Ridley

I cannot remember such an event during the long hours of that night, but, in any case, the budget has been adopted in the form in which it now is and it is not possible for the Council to go back to it until it has been considered by the European Parliament. I do not accept my hon. Friend's allegations.

Mr. Bryan Gould (Dagenham)

Does not talking tough but acting weakly give us the worst of all worlds? Will the right hon. Gentleman, as an earnest of his intentions in the important battles to come, make it clear that we shall withhold the payments until we get a more satisfactory outcome?

Mr. Ridley

I should have thought that the maxim with which the hon. Gentleman opened his question could be turned backwards for his party. I am delighted to hear that, after all this tough talk, the two front runners for the leadership of the Labour party have changed their minds. The hon. Member for Islwyn (Mr. Kinnock) said: The Common Market position is bound to be revised. Events move around us", and they certainly do. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said today: Conversion to the acceptance of the European Community is belated but welcome. I can say that again.

Mr. Straw

Does the Financial Secretary accept that, for all the so-called repayments that the Government have received, average annual contributions in constant prices are running at £100 million a year more under this Government than they were under the previous Government? As to withholding contributions, does the Financial Secretary agree that the advice given by the hon. Member for Caithness and Sutherland (Mr. Maclennan), as the alliance representative, to grovel sycophantically before the EC is poor advice and that withholding contributions is a necessary weapon which we may have to use? The Government would have the full support of the Opposition if they were to use it.

As we are, in the right hon. Gentleman's words, up against the budget limits and the forecast is that the money for the EC will run out by October, why is the right hon. Gentleman refusing to give a commitment which many right hon. and hon. Members on both sides of the House have been demanding from him—a clear and categoric undertaking that the Government will block any increase in the VAT ceiling? Is he aware that his refusal, and that of the Prime Minister and the Foreign Secretary, to give that clear and categoric undertaking to veto any increase in the VAT contribution shows other Common Market Governments that we lack the will to fight this one through?

Mr. Ridley

The hon. Gentleman can see the figures for the contribution records of both Governments, but when making calculations he must not forget to allow for inflation. As to withholding contributions, I, and the Government as a whole, hope that it will not come to that. We shall pursue this setback by trying to put it right in the context of the budgetary procedures.

The Community may or may not run out of money in October. The supplementary budget was to provide money for the rest of the year, and that money has been made available by the Government, although the money has to go through the European Parliament. Whether or not that is sufficient money to last the CAP for this year, and whether or not the 1984 budget contains sufficient money for the agricultural policy to pay its way next year, there is no conceivable way in which those resources could be increased either during 1983 or 1984. All member states would have to ratify an increase in the 1 per cent. ceiling through their national Parliaments and, apart from the merits of the case, there is no way in which that could be done before the end of 1984.