European Community

HC Deb 03 April 1984 vol 57 cc869-934

Motion made, and Question proposed, That this House do now adjourn.—[Mr. David Hunt.]

7.18 pm

The Secretary of State for Foreign and Commonwealth Affairs (Sir Geoffrey Howe)

There is no doubt that this is the right moment for this debate. We are at an important stage in the history of the Community. The negotiations that have been under way since the Stuttgart Council last June are rightly seen as having a far wider significance than the sum of the individual issues, because there can be no doubt that the outcome will have a decisive influence on the shape of the Community for many years to come.

The House will wish to consider the individual issues in the negotiations in some detail. Before I turn to those issues, let me underline the strength of this Government's commitment to the European Community. It is our conviction that membership is an essential element in our national life and that the Community's well-being is vital for Britain's prosperity.

Last June, the people of this country made it very clear that they took the same view of that central question. Despite the economic problems that have beset us since accession, despite the difficulties of adaptation, despite the often hard struggle to ensure that the Community reflects the interests of nine and then ten member states, and not just the balance struck between the original six, there is no doubt that the British people recognise that Britain's future lies within the Community.

In face of that clear verdict, it is all the more remarkable that the Opposition apparently still intend to take the line in this summer's European elections that withdrawal remains one of the options available to Britain". I do not think that the House can be in any doubt why the Labour party is forming up behind that inglorious phraseology. It is presumably the only basis on which all the party's spokesmen can be persuaded to unite. I suppose that that is achievement of some kind. But I must tell them that it will not, when the time comes, enable them to avoid answering some difficult, but necessary, questions. Are we better in or out? Are we likely to have better prospects for investment in or out? Do the Opposition complain about the farm settlement because it is too expensive or because it gives too much or too little to the farmers?

I hope that the House will hear answers to some of those questions tonight. It is not open to the Opposition simply to rest on a crude political calculation, designed to camouflage the contradictions in Labour policy. They cannot for ever take refuge behind the Kinnock word mountain. So long as they go on trying to do so, they will have nothing to offer that is remotely relevant to the needs of the Community today.

The real task that has faced this country during the past decade has been how best to develop the advantages of Community membership to the full. We have seen a position develop in which the United Kingdom has been required to shoulder a manifestly unfair share of the budgetary burden. The Community has not developed policies in areas away from agriculture in the way that we had been led to expect. For a number of years now we have faced the need to secure a fairer deal on the budget in a series of annual negotiations.

Ever since this Government came to office in 1979, that has been one of our major concerns. We have been determined, and rightly so, to find a lasting way of avoiding that annual return of the Community to the financial barricades. We have been determined as well —in the longer term this is of even greater importance —to find ways of developing the Community's potential to the full.

We have been seeking to fashion a fresh approach for the Community. More and more, our partners have been seeking to do the same. Many of them have come to share our concern. Our French partners have increasingly stressed their view of the need for what they call a relaunch of Community policies. We entirely agree with that approach. We have been, and are, doing all that we can to ensure that that comes about.

That is why the Stuttgart declaration of June last year was such an important landmark. The agenda it established for the negotiations was a measure of how far the Community had already come. Stuttgart called for new policies, control on spending, an examination of revenue needs and, above all, a fair budget system. It was an ambitious agenda, which has led to many hard days and hard nights of negotiation in Foreign Affairs and Agriculture Councils and at two European Councils.

Europe has not yet completed that work. Despite the headlines proclaiming failure, the House will, I think, have detected a strong feeling, growing throughout Europe, that the Brussels European Council marked real, and I hope decisive, progress down that road. I should like to remind the House of the notable part played at that Council by the French presidency in promoting that progress.

The Brussels summit has brought the Community within measurable distance of what may come to be seen as a historic agreement. Agreement on substantial and, as the House knows, inevitably painful progress has been made towards reform of the common agricultural policy, to make it more responsive to market forces.

We have come close to agreement on effective control of Community spending, both agricultural and other expenditure. We have reached agreement on a number of new policies, and on the development of existing policies that are the key to the prosperous and dynamic Community of the future. Many of those new policies—this is of fundamental importance — do not call for any fresh Community finance.

Finally, we have made substantial progress towards agreement on a revised method of financing the Community that will ensure that future development is not held up by annual arguments about the sharing of the budgetary burden.

Mr. Tony Marlow (Northampton, North)

I do not know how much detail my right hon. and learned Friend intends to give about the new means of finance in the Community, but we should be grateful if he could go into a great deal of detail because many people have been perplexed and, to some extent, confused by what has been coming out of Brussels. Could my right hon. and learned Friend go into every detail so that we can understand?

Sir Geoffrey Howe

I shall not have the opportunity to embark upon sufficient detail to fill my hon. Friend's mind as much as he would like to have it filled. I shall be coming to each of the issues in due course, in the light of what took place at the Foreign Affairs Council last week and at the Agriculture Council meeting last weekend.

I begin with budgetary discipline, because nothing better illustrates the extent of the progress that has been made than the way in which the question of budgetary discipline is now likely to be treated within the Community.

We have not been alone on this issue. Several others, in particular the Dutch and the Germans, have long shared our anxiety on this score. Before the Athens European Council, the French added their powerful support to the view that budgetary discipline was an essential part of the Stuttgart package.

The Brussels European Council confirmed two vital points. First, it is accepted that the rigorous rules that govern budgetary policy in member states should apply also to the Community budget. Secondly, the important point has been accepted that revenue should govern expenditure—and not the other way round. Not all the details have yet been translated into the rules and practices that will be necessary, but two important principles are no longer in dispute.

First, at the beginning of each year's budgetary procedure, the maximum level of overall expenditure for the following financial year will be fixed. Secondly—this is an important feature for many hon. Members—the rate for the growth of agricultural expenditure should be held below the rate of growth of Community revenue.

Mr. Nicholas Budgen (Wolverhampton, South-West)

rose——

Sir Geoffrey Howe

If I am to satisfy the demand of my hon. Friend the Member for Northampton, North (Mr. Marlow) for detail, I must make my speech without interruption.

In the weeks ahead, it will be the task of the Council of Ministers to translate those principles into measures that will guarantee their effective application, so that budgetary discipline becomes a full part of the Community's budgetary procedures.

The rules that follow from those principles must ensure that any possible increase in own resources does not once again lead to an uncontrolled growth in agricultural spending because of lax, undisciplined budgetary procedures.

Mr. Robin Cook (Livingston)

Would the Foreign Secretary share with the House his view on whether this week's agricultural settlement represents an example of that budgetary discipline? If so, will he explain to the House how that settlement results in another £500 million of expenditure on agriculture over and above the estimate provided for by the Commission and budgeted for by the Council of Ministers, and where that money will come from?

Mr. Howe

I am grateful to the hon. Gentleman for interrupting, because that makes the score one each on both sides of the House. I was just going to come, to the excitement of the hon. Gentleman, to the very question which he has raised. It was dealt with, of course, by my right hon. Friend the Minister of Agriculture, Fisheries and Food when he spoke to the House yesterday on the results of the Agriculture Council.

Neither my right hon. Friend nor any other hon. Member had any doubt about the difficulty of those conclusions. But nor should anyone doubt that the outcome was a major step towards reform of the CAP. The hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) is frequently disposed to make this point — indeed, it is a point frequently made from the Opposition Front Bench; how, they say, can this be claimed to be a sufficiently effective conclusion of the agriculture debate when it still costs too much money? Yet, at the same time, they reserve the right to complain of the consequences for the agricultural community. They really have got to make up their minds.

Mr. Cook

rose——

Sir Geoffrey Howe

I am sorry. The hon. Gentleman will have his chance to explain his policy on these matters in his own speech.

Mr. Teddy Taylor (Southend, East)

rose——

Sir Geoffrey Howe

I will give way in a moment, when I have taken this argument a little further.

I have said that this represents a major step towards reform and I have mentioned that the removal of open-ended guarantees on products in surplus is a major step. The agreement on a price freeze or price reductions for most commodities is a considerable achievement.

Implementing those decisions is not going to be easy for any member state. This has been made very clear by the chorus of complaint that has arisen not just within our own farming community but among farmers throughout the EC. But I suggest that if one takes into account the relative importance of agriculture in our country, the historic levels of production and other economic circumstances, the pain has not been too unfairly distributed.

Mr. Taylor

If the calculations prove to be wrong on the agricultural percentage increase, through no fault of the Government or of any member of the EEC, what, under the existing procedures, is to stop either the Council of Finance Ministers or the Council of Agriculture Ministers deciding by a majority to impose a supplementary expenditure, which would of course push us through the ceiling? Does the Secretary of State agree that we would need either to change the treaty or to introduce regulations to stop a majority decision of the Council breaking through the percentage increase?

Sir Geoffrey Howe

One of the features of the provisions under discussion and on the way to agreement in the European Council is a stipulation that not only shall the sum be paid every year be fixed, but, if there is for any reason any kind of overrun, that has to be collected or clawed back in following years. It has to be handled on the basis of a three-year moving average, because it may fall either short of or above the initial figure, for one reason or another.

Mr. Taylor

rose——

Sir Geoffrey Howe

No. I cannot give way too often.

Mr. Taylor

Just very briefly.

Sir Geoffrey Howe

I am sorry. I sympathise, as everyone must, with the dairy farmers who are worded about the effects of the milk super-levy. But very few of them, I hope and believe, can possibly contest the fact that the Community cannot go on producing 20 per cent. more milk than it can consume. Indeed, they have recognised that fact for some time.

Again, hon. Gentlemen are dissatisfied with the manifest hardships that are going to follow from this step and the direction of reform. If they wish the step to be more dramatic, more sustained, more swift, more urgent, they must stand up and be counted and say that the difficulties facing the farming community are not enough to satisfy them; that they wish to see far greater difficulties introduced at far greater speed. They cannot go on having it both ways.

As my right hon. Friend the Minister of Agriculture told the House yesterday, bringing milk production down from last year's level of 105 million tonnes to 99.5 million tonnes this year is expected to save the Community £1,000 million a year. Yet this still leaves 10 million tonnes of surplus production which the common agricultural policy will have to finance. So, of course, the process has to go on, but there must be some recognition of the significance of having taken this decisive step in the right direction.

Mr. Budgen

Will my right hon. and learned Friend give way?

Sir Geoffrey Howe

I cannot go on giving way.

I know that some people argue—as the Opposition seek to do—that we should have gone further in cutting milk output, but others say that the cut represents an intolerable burden for our farmers. A balance had to be struck, and that is what my right hon. Friend was striving to achieve. While doing that, he obtained agreement on many features of importance to our farmers. For example, a one-year transitional arrangement will ease the adjustment to the new quotas; the intensive levy originally proposed has been turned down, as has the notion—which I can understand appeals to some people, but which is much more helpful to countries other than our own—of exclusions for small producers. There is scope in what has been agreed for special treatment of difficult cases —for example, where substantial investments have been made recently or production has been distorted by disease.

In other sectors, much has been achieved that is of importance to British farmers and consumers alike. The butter subsidy has been kept in place. The beef variable premium scheme has been continued, albeit at a slightly reduced rate. Arrangements on sheepmeat which are of particular advantage to our hill farmers have been established, and we have successfully resisted—this, I believe, is important—the Commission's proposed tax on oils and fats.

Much has been said — this point has been raised already — about the excess cost of the agricultural package. Of course, some parts of the agreements will be expensive and further progress in the same direction is necessary.

Mr. Budgen

rose——

Sir Geoffrey Howe

This is particularly true of the agreement to dismantle monetary compensatory amounts. Other measures which I have already described will make substantial savings. There is a long way to go before agricultural spending is brought fully under control, but I make the point — this has been recognised — that a significant and courageous start has been made.

Mr. Budgen

On that point, is it enough? My right hon. and learned Friend was saying at one stage that it was necessary to have a fundamental reform of the CAP before we were prepared in this country to authorise an increase in own resources. There was also another condition in relation to the budget. But, under the heading of the CAP, is the deal as it stands enough to constitute a fundamental reform?

Sir Geoffrey Howe

My hon. Friend should be invited to take note of this point. The deal reached in the Agriculture Council on Friday and Saturday is a formidable step in the right direction——

Mr. Budgen

But is it enough?

Sir Geoffrey Howe

—and it is acknowledged to be a formidable step in the right direction.

Mr. Budgen

Is it enough?

Mr. Howe

I heard my hon. Friend's question the first time he put it; he need not go on putting it time and time again. He asks whether it is enough. Of course in itself it is not enough, but this progress under this deal has been made even before the regulations that are going to become operative have started to operate. For that reason it represents, as I say, a significant and courageous start.

I must say that here again there is a curious lack of precision about the policies of the Labour party. [Laughter.] I can imagine laughter being prompted by the accuracy of that observation. How do hon. Gentlemen reconcile their call for radical reform with the criticism which they reserve the right to make that the reforms achieved are too vast? How can they say, as they do, that the agreement costs too much, while adding that it should be put into place more slowly? They really must tell the House, and above all they must tell the farmers, exactly how they would cut agricultural costs. [Interruption.] Of course one has to have a balance between farmers and consumers. The Labour party seeks to go on pretending that one can get everything always. What it must consider —this must be of concern even to the Labour party—is how much British agriculture would have to contract if its policies were ever implemented.

Mr. Robin Cook

I am most grateful to the right hon. and learned Gentleman for putting up the score to 3:2. He has asked for a precise statement from the Opposition, and I shall give him one. In the view of the Opposition Front Bench, the control of agriculture expenditure which he has outlined does not constitute a case for increasing own resources. If the Community, when bumping against the ceiling of expenditure, can still find another £500 million to spend on agriculture, there is no reason to imagine that the formula which the right hon. and learned Gentleman has outlined will work after he has increased the resources that are available. Does the first step of the deal which he has outlined add up to a case for increasing own resources?

Mr. Budgen

That is a perfectly fair question.

Sir Geoffrey Howe

The step which I have been outlining, which has been achieved in agriculture, is one component that must be judged before we consider the issue of own resources. The Opposition must make up their mind which way they want to play this issue, and it seems that they cannot do it. The nearest that the Labour party has come to explaining its policy is to be found in a rather engaging statement of the hon. Member for Aberdeen, North (Mr. Hughes) on 22 March. During a 20-minute speech on this subject, he said: If I had more time, I would go into the ways in which we could reform the policy."—[Official Report, 22 March 1984; Vol. 56, c. 1280.] The failure of the Opposition to make specific and constructive criticisms and proposals is a measure of the gap between their general denunciation and anything that is practically significant.

The most difficult issue in the negotiations is the fairness of the Community budget. The present own resources system was set up in 1970 for a Community of six. It has become increasingly clear that it does not operate fairly in a Community of ten. This is being recognised more and more by our partners in the Community. They realise that the Community cannot live from hand to mouth, from year to year—all the more so as they are arguing that the Community now needs new own resources. So this is precisely the moment to ensure that in future the Community is financed on a fair basis.

In that respect, we have made a good deal of headway since Stuttgart. The arrangements under discussion at the previous European Council and in the past week cover all the key points. If they are adopted in their present form, they will ensure that any member state which carries an excessive budgetary burden in terms of its relative prosperity will have its contribution to the budget corrected and brought into line. They will ensure that the correction will no longer be applied through a system of refunds based on notional payments on the spending side but through a reduction in the VAT contribution in the following year. They will ensure that the duration of the correcting mechanism will be linked to any decision on new own resources. In other words, contributions will be related to ability to pay and there will be no more ad hoc arrangements from year to year. This is plainly a much more sensible way in which to finance the Community.

The issue which still separates us in the negotiations is the figure on which the system should be based. The gap between what we have been offered and what we can accept may seem small, but there are two points to be noted. The first point is that every step that we take to meet the other nine has to be paid for exclusively by the United Kingdom, whereas every step the others take to meet us is shared among nine.

Mr. Stuart Bell (Middlesbrough)

What a specious argument.

Sir Geoffrey Howe

I cannot begin to understand how the hon. Gentleman sees fit to make that comment. If the burden that has to be borne is shouldered by one country, it is much heavier than if it is shared among nine others. If the burden is shared, it is a much smaller one for individual member states to accept. The second essential issue——

Mr. Bell

rose——

Sir Geoffrey Howe

No, I must get on. The second essential issue is that the base figure, the figure which has to be determined, will govern what will happen in the years ahead. The system will be dynamic and will thus determine the sharing of the Community budget in future. That is why we must get the base figure right from the outset. What counts is the cumulative effect over a long period.

Some have accused us of not being sufficiently flexible, and it is not surprising that we have been accused by others of just the opposite. The truth is that our aims have remained constant and firm but that we have adapted our tactics as the situation has developed.

It is easier for those member states which benefit from the present arrangements to combine to resist change. We have not argued for a zero contribution, for we expect to remain net contributors to the Community budget, even under a new system. We want to ensure that that net contribution does not increase unreasonably. The question for us is not so much the size of our rebate in the opening year, though that is important, as the way in which the system will develop over a number of years.

The Prime Minister said at Stuttgart that we would consider an increase in own resources provided that we achieved control of agricultural and other Community spending, and provided that we achieved a fair share of the financial burdens. Those two conditions remain absolute. In the absence of agreement on those conditions, there is no question of an increase in own resources.

Our partners argue that, because we are now up against the 1 per cent. ceiling and because it is impossible to negotiate immediate real cuts in agricultural costs, an increase in own resources will be necessary to allow the continuation of existing non-agricultural policies, the adoption of important new policies, and enlargement.

The Commission proposed that to avoid the issue arising again in the near future there should be an increase of the VAT ceiling to 2 per cent. Some member states supported that proposal, while others argued that an increase to 1.6 per cent. was desirable. If there is to be an increase as part of a package, we take the view that it should be restricted to 1.4 per cent. in 1986 and that it should be subject to ratification by national Parliaments. If there is to be a proposal of a further increase of 1.6 per cent., that, too, could take place only with the unanimous agreement of member states. That, too, would have to be subject to ratification by national Parliaments. That view was accepted eventually at Brussels by every other member state.

Mr. Marlow

Does my right hon. and learned Friend mean that there would be two separate ratifications, two separate measures, two separate debates and two separate discussions?

Sir Geoffrey Howe

Precisely. That is the point that I was emphasising, which was eventually accepted at Brussels by every other member state. So we accepted that there was a case for a limited increase in the VAT ceiling, but we made it clear that that depended on long-term effective control of Community spending and on the establishment of a fair and lasting budget system. I cannot emphasise too strongly that a necessary consequence of such a system—that is, a fair and lasting budget system —is a significant reduction in the effective burden on the United Kingdom.

I hope that the House will allow me to anticipate one more argument that no doubt will be advanced. I have made it perfectly clear that the Community's failure to agree to pay our 1983 refunds now is unjustified and misconceived. Whether or not they are paid in the next few weeks, there is no question but that the Community is committed to making the payments, and we shall insist that it does so. Nevertheless, we have taken the view that we should take no action which might damage the prospects of decisive progress in the present negotiations.

I must make it clear to the House, as I have done to our partners in the Community, that that commitment must be honoured. We shall not agree to any increase in own resources which does not have as its counterpart a satisfactory budgetary settlement. That must, of course, include the 1983 refunds.

I have left until the end the new policies section of the negotiations because the new policies represent, certainly for us, the future of the Community and the way in which we want to see it emerging when we have solved the outstanding issues in the Stuttgart package.

The European Council was successful in reaching a large measure of agreement on policies and on developing existing policies. These include, for example, the development of Europe's scientific and technological potential, which is one of the keys to the future prosperity of the Community. We shall adopt a framework programme by the end of June for telecommunications and biotechnology and there will be an increased programme for Community research and development.

Secondly, we wish to free the internal market so that European companies may derive more benefit from the common market within the Community. We want to introduce measures to reduce frontier controls to simplify trade procedures, to establish common standards and to open up public sector contracting. Thirdly, we are intent on liberalising trade in services, especially by the removal of restrictions on lorry traffic, and the opening up of the insurance market. As London emerges increasingly as the financial centre of Europe, that will be of particular significance to the United Kingdom.

The specialist Councils will be required to get on with these priority tasks as rapidly as possible. We shall be pressing for practical action and we shall do our utmost to keep the momentum going. It has been the task of Conservative Governments since 1979 to repair the damage done to the Community and to Britain's role within it by the half-hearted and obstructive activities of the previous Labour Government.

The Opposition may not like to be reminded, but when they were last in office they had the opportunity to show what they could do. They failed abysmally. The hon. Member for Edinburgh, East (Mr. Strang), a member of that Administration, told the House the truth on 22 March, when he said: The last Labour Government failed to secure radical reform of the CAP. Invariably, we allowed ourselves to be bought off'.—[Official Report, 22 March; Vol 56, c. 1286.] He was quite right.

The last Labour Government in this context failed to achieve reform of anything, radical or otherwise. The last Labour Government left this country instead with an agricultural policy that was running out of control, and a rapidly rising budgetary burden. This Government have had to grapple with the consequences of that failure, and we have been doing so with increasing success ever since.

The resolute and consistent approach of this Government to Community issues has produced results—and will go on achieving results. We have achieved a common fisheries policy which provides a good deal for British fishermen. We have made a courageous start on reforming the common agricultural policy. We have secured budget rebates worth £2,500 million over four years. We are now moving towards a long-term agreement for a fairer budget. The Labour party negotiated a financial mechanism which secured not a single penny for Britain.

Slowly but surely, we are seeing the Community put its house in order and equip itself to deal with the challenges of the modern world—above all, perhaps, the challenge of securing the European recovery which will be the best long-term basis for fuller employment for our citizens.

In all of this, Britain under this Government has been giving a lead. We have been a catalyst for change within the Community. Change is often uncomfortable, but it is necessary. The prizes to be won for Europe are great. A successful European Community is a major British national interest. That is why the Government will persevere with their efforts to set the Community on a basis which will enable all its members to contribute fully and fairly to its success.

8.12 pm

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

The Opposition welcome this debate and I personally welcome the opportunity to lead for the Opposition. I have no doubt that the Foreign Secretary was overwhelmed when 481 hon. Members went into the Lobby to decide on the closure of the previous debate so that they could hear us. Not all of them have been able to turn up, however.

We regret that there is no opportunity tonight for the House to express its wishes on two key issues—first, on withholding our contributions to an amount equal to the rebate due and, secondly, on whether Britain should agree to increase own resources. We look forward to the eventual debate and vote on that issue.

This debate is about the current negotiations within the European Community. The negotiations stretch over the whole period of this Government. We shall show that, in relation to the targets and objectives that the Government set for themselves, their record is one of repeated failure.

Mr. Nicholas Soames (Crawley)

Nonsense.

Mr. Foulkes

I shall prove that it is not nonsense. No rebate has yet been paid. The common agricultural policy is still uncontrolled. My hon. Friend the Member for Livingston (Mr. Cook) will trace the tactical withdrawal —or, more precisely, the retreat—on the question of increasing own resources. The Government's attitude has changed from, "We might consider that after we achieve our demands" to the current position of an agreement being made before we have achieved what we asked for.

The record is a catalogue of failure dressed up as successes or triumphs by carefully controlled, clever media manipulation. In reality the Prime Minister is like the grand old Duke of York, who has led her men up to the top of the hill—summit after summit—to conquer CAP expenditure, to achieve lasting solutions to the budget imbalance, and most recently to secure that elusive 1983 rebate. Each time she has marched them down again.

The Minister of State, Foreign and Commonwealth Office (Mr. Malcolm Rifkind)

The hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) has chosen to attack my right hon. Friend the Prime Minister. Has he read the latest issue of the New Statesman, in particular an article by Mr. John Palmer, a senior member of the Socialist Society, who is in control of the European Socialist strategy? He says: It is a useful rule of thumb that when the Labour Party reaches for the Union Jack to attack Tory Prime Ministers, it is to cover up its own ideological nakedness. Europe, and all matters EEC, have long been a major blind spot for the British Left, but the EEC budget crisis has underlined the bankruptcy of official Labour policy towards Europe.

Mr. Foulkes

I am grateful to the Minister of State for that intervention. As he knows, we do not all share the blind spot that he described. I am reliably informed that, like the Minister, Mr.- Palmer is not a member of the Labour party, so I cannot take any responsibility for his remarks. The New Statesman is not an official Labour party paper.

I remind the Foreign Secretary of the first alleged triumph of the Prime Minister. It was not at Stuttgart, but at Brussels in 1980 when we heard about the long-term solution. The right hon. Member for Chesham and Amersham (Sir I. Gilmour) reported to the House, and there was no doubt in his mind four years ago, about the unrivalled opportunity for a solution to the Community's problems.

The right hon. Gentleman said: With the review commissioned for 1981 and the proximity of the I 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. This Government came to office determined to make a success of our membership of the Community. The first task was to deal with the inequitable budget contribution. That we have now done."—[Official Report, 2 June 1980; Vol. 985, c. 1046.] The Government claimed in 1980 that they had solved the problem. As my right hon. Friend the Member for Blaenau Gwent (Mr. Foot) said at the time, that was certainly not so.

Mr. Eric Forth (Mid-Worcestershire)

Will the hon. Gentleman set that argument in the context of the series of triumphs that he will no doubt claim for the last Labour Administration over the way in which they set about tackling our problems in the Community? That juxtaposition would be useful to the House.

Mr. Foulkes

Some hon. Members who are present were connected with the last Labour Administration and perhaps they might contribute to the debate.

We read in June 1980 that the problem was solved, and the euphoria and ecstasy in the House was unbelievable. The right hon. and learned Member for Hexham (Mr. Rippon), who is not known as a supporter of the present Government and their Prime Minister, said: I also express appreciation of the fact that the question of the budget has now been settled".—[Official Report, 2 June 1980, Vol. 985, c. 1050.] Even more ecstasy was expressed by the hon. and learned Member for Fylde (Sir E. Gardner), who asked of the Lord Privy Seal: Is he aware that this agreement will be seen as yet another demonstration of the Prime Minister's extraordinary ability to make possible the seemingly impossible?"—[Official Report, 2 June 1980; Vol. 985, c. 1051.] That did not do him much good.

Mr. Budgen

Will the hon. Gentleman consider leaving that line of argument? Does he agree that it has become a convention of the House that every Minister coming back from the EEC always claims a great triumph? If the hon. Gentleman disagrees, can he cite any instance throughout the period of our negotiations for membership, and during our membership of the Community, when any Minister of any Government came back and said that the meeting had been disastrous and that the whole thing was a failure?

Mr. Foulkes

I agree that that is not normally the inclination of any returning Minister, but from time to time they admit to having problems, as hon. Members on both sides know. Nevertheless, I will accept the hon. Gentleman's strictures and move on to the more recent history of negotiations since the last general election.

As the Foreign Secretary said, the key meeting was at Stuttgart on 23 June 1983. To judge from accounts of previous summits, any participant who attended all of them must have had a feeling of déOà vu at Stuttgart as it involved the same issues, the same agreements, the same unrivalled opportunities and the same inexorable pressures as three years before. The main questions discussed were exactly the same. The Prime Minister came back and told the House that the objectives set were clear directions, a tight timetable and effective procedures and said that the conclusions reached at Stuttgart met those objectives. She said that urgent procedures would be set in train, that there would be special meetings in the run-up to the Athens summit and that special responsibility for dealing with those meetings would be placed on the Foreign Secretary, the "master of detail". He would be in charge, and at Athens in December 1983 everything would be all right. Greater budgetary discipline, effective control of agriculture and other expenditure and equitable sharing of the burdens would be achieved.

Mr. Marlow

There are serious issues at stake. Will the hon. Gentleman stop trying to score party political points and address himself to them?

Mr. Foulkes

They are indeed serious issues. I shall come to the previous pronouncements of the hon. Member for Northampton, North (Mr. Marlow) in a moment.

My understanding was that the British rebate was agreed and accepted at the Stuttgart summit, albeit falling short of the Government's previous target. As my right hon. Friend the Member for Blaenau Gwent said earlier, it also fell short of the unanimous resolution of the House of 22 November 1979. Nevertheless, the British rebate was agreed at that meeting of Heads of Government and no conditions were placed upon it. It did not depend on any agreement on any other subject. The hon. Member for Northampton, North—an unbiased observer, as it were — helped in this context when he asked the Prime Minister the following question: Will my right hon. Friend confirm that the excellent rebate that she negotiated on behalf of the United Kingdom will be available whether or not there is an agreement over the long-term finances of the Community later this year? The Prime Minister replied: The arrangement that we reached on this year's refund is separate from the long-term arrangement."—[Official Report, 23 June 1983; Vol. 44, c. 149.]

Mrs. Elaine Kellett-Bowman (Lancaster)

This is becoming an anthology.

Mr. Foulkes

The hon. Lady does not like too many quotations from the Prime Minister because they reveal too many twists and turns in the past few years, but she is going to hear them.

The Athens summit was billed as the final solution. There seem to have been a great many finals in this. The Times described it as the longest summit ever and as a total failure bringing the EEC to the brink of financial and political collapse. The Prime Minister's next statement to the House was another example of back-tracking. She said that all the matters should be considered as a whole, casting aside the assurance given to the hon. Member for Northampton, North that the rebate would be taken separately. The Prime Minister blamed the failure of the Athens summit on everyone else but said that things would be better at Brussels — it moves around from capital to capital. When my right hon. Friend the Leader of the Opposition asked what was likely to change between Athens and Brussels, the hon. Member for Macclesfield (Mr. Winterton) said, "The weather"—and that was all that did change.

Between Athens and Brussels another opportunity was lost. The French President appointed a Minister for Europe, Mr. Dumas, who went from capital to capital ensuring that the French view was co-ordinated for the next meeting. The British Foreign Secretary, however, seemed transfixed. No action was taken and the United Kingdom became even more isolated than it had been previously. Potential allies who could have been brought together were alienated and no urgency was apparent.

At home, however, the Prime Minister made brave noises and ringing declarations for United Kingdom consumption, especially in the patriotic tabloids, in which she was constantly quoted as saying, "It's our money!" The distinguished political correspondent of The Times, Mr. Anthony Bevins, reported on 21 October 1983 that a Bill to block EEC cash was ready if the talks broke down. I suspect that that piece of tough talk was a leak from someone other than Sarah Tisdall and that no inquiries or prosecutions followed. The report stated: The Government is understood to have drafted a contingency Bill and a supporting White Paper which could be used to block British contributions to the European Community budget in the event of a breakdown of talks on the future of Community development. It said that civil servants were instructed to draw up contingency plans before the Stuttgart summit, making the necessary amemdments to the European Communities Act that would enable Britain to take unilateral cash action. It continued: One Whitehall source confirmed last night that the Government did have contingency plans. Will the Foreign Secretary or the Minister of State confirm that? Where is the Bill? Where is the White Paper? It would be interesting to know. The Government talk tough but act weak.

More recent history shows even more abject failure by the Government.

Sir Anthony Meyer (Clwyd, North-West)

When the hon. Gentleman was younger and wiser, he was a great believer in Britain playing an active part in the Community. We therefore listen with rather more interest to the hon. Gentleman than to some of his hon. Friends to hear how he thinks that further progress can be made. Is there any chance of anything constructive from him today?

Mr. Foulkes

The hon. Gentleman clearly finds it difficult to accept that the Conservative Government have failed for the past four years. The Brussels summit was a total collapse although, yet again, before the meeting took place the Foreign Secretary predicted success. If that prediction is anything to go by, I doubt whether he was betting on Hallo Dandy in the Grand National. The Prime Minister told the House: The Government are considering what action we should now take to safeguard our position. We would like to know what action will be taken to safeguard our position. There was a policy shift. The Prime Minister was so concerned about the total collapse at Brussels that the Cabinet were to be consulted about what to do. But there were already hints from the Prime Minister of a climb-down. She said that the rebate was not a legal necessity but habit and custom. The right hon. Lady's natural instincts then prevailed, and she said that the action of the Community was reprehensible and almost intolerable.

Mr. Budgen

Many hon. Members will accept that the Government have wriggled all over the place in the negotiations. Will the hon. Gentleman please set out the Labour party's position on the deal and say whether the Labour party believes that the deal justifies the increase in own resources?

Mr. Foulkes

That is a valid question, and I shall deal with it.

In her statement on the Brussels summit, the Prime Minister cited precedents for withholding. She said: in 1979, France, Denmark and the United Kingdom refused to pay full VAT contributions… In 1981 the French, Germans and Belgians… refused to pay… in respect of the 1980 supplementary budget". — [Official Report, 21 March 1984; Vol. 56, c. 1049–1053.] The House understands that the Prime Minister's instinct must be to withhold — to take some decisive action. Clearly she has been counselled and cautioned about the legality of that step, but my understanding is that the United Kingdom would be acting illegally only if the European court ruled as such, and we would still have several months before that might happen in which to decide. That would be decisive action by the Government and the Foreign Secretary. So far, we do not know what decisive action is being suggested.

Mr. Robert Jackson (Wantage)

The historical rigmarole that the hon. Gentleman is offering to the House is simply an account of a long and difficult negotiation made more difficult by the irresponsible and unconstructive attitude of the Opposition.

Mr. Foulkes

Not at all. We are talking about what the Government have done and what success, if any, they have achieved. The negotiations have been a failure for the Government on every count. We are debating the Government's negotiations. After the next election, when we are back in power, things will be different.

After the abject failure of Brussels, which put the Government and the Cabinet into grave difficulty, the day was saved by a most unlikely saviour — President Mitterrand—and the Foreign Secretary had yet another opportunity to save the honour of the country and of the Prime Minister.

Mr. Russell Johnston (Inverness, Nairn and Lochaber)

Why does the hon. Gentleman describe his Socialist colleague the President of France as an unlikely saviour?

Mr. Foulkes

He is certainly an unlikely saviour of the Conservative Government in their difficulties. There was a peculiar contradition in the Prime Minister's statement. France and Germany vetoed our deal, but the President of France was said to have been very helpful about our rebate. That is difficult to understand.

At the eleventh hour and 59th minute the Prime Minister was still making reassuring noises to the Leader of the Opposition. On 22 March, she was saying that our refund was not due until 31 March, as if that was something to be pleased about. There were still nine days left in which the Community might undergo a last-minute conversion and pay the money.

I come to the final chapter in the sorry saga that has unfolded in the past fortnight. Predictably, the Foreign Affairs Council—at which the Foreign Secretary had a last chance to save the field — ended in failure. Yesterday we heard that the Minister of Agriculture, Fisheries and Food has agreed to a deal that will cost us more, not less. My hon. Friend the Member for Livingston estimated the figure at about £500 million. He was gently contradicted by some Conservative Members. They may have been right to contradict him, because the figure may be closer to £800 million or £1,000 million. That cannot be called keeping the CAP under control.

There is still a surplus of 10 million tonnes of milk agreed for the next five years. It is an institutionalised part of the operation of the Community. However, the consumer is no better off. Milk prices do not fall, although that would be a sensible way to deal with the surplus, and beef prices will rise. Yesterday the Minister was challenged about how this situation measured up to the fundamental reform required as a prerequisite of the increase in own resources. He could only say that it was a vital first step. If it is, it must be a step in a very long staircase. To our mind, this does not satisfy the prerequisite for an increase in own resources.

Mr. Michael Lord (Suffolk, Central)

Would the hon. Gentleman explain to the House how beef prices will rise?

Mr. Foulkes

The farmers themselves have predicted that beef prices could rise by between 18p and 25p in the pound. That is the prediction that I have read in the papers, and I have no reason to disbelieve it.

Already, the Minister of Agriculture, Fisheries and Food seems to have swallowed up the projected VAT increase to 1.4 per cent., before it has even been agreed. [Interruption.] My hon. Friend the Member for Aberdeen, North (Mr. Hughes) has give a clear outline of the Labour party's alternative agriculture policy and he will be glad to do so again at any time, for the hon. Member for Edinburgh, Pentlands (Mr. Rifkind) or anyone else.

In spite of all the statements from the Foreign Secretary and the Prime Minister, all the debates and all the Question Times, questions still remain unanswered. Britain's rebate is now overdue. We have passed 31 March without any payments being made. I hope that the Minister of State will be able to answer my questions. What advice was the Cabinet given about the legality of withholding the money due to us? The House should be told what the advice was. As the hon. Member for Macclesfield said last week, according to justice and the rules of the Community the refund should have been paid to us by 31 March. If agreements reached at summits do not mean anything, why do we bother to have them?

What are the Government doing to safeguard Britain's position? We have been told that they are worried, but what are they doing? That is the least of the promises that they have made to us. Where is the rumoured Bill on withholding, and the White Paper? When will the House have an opportunity to express its views on the matter?

The Foreign Secretary has spoken about own resources. Will he explain why, although his belief was that the increase to 1.6 per cent. would have to be approved by the Parliaments of the member states, Mr. Mitterrand said at a press conference on 21 March: The maximum rate of VAT mobility was set at 1.4 per cent. as from 1 January 1986 concomitant with the Community's enlargement, and would rise to 1.6 per cent. after two years, on a unanimous vote of the Council of Ministers. There is no suggestion there that the national Parliaments will have to approve the change. I hope that the Foreign Secretary can explain why his understanding differs from that of Mr. Mitterrand.

Will the Foreign Secretary also explain a fundamental contradiction in the Government's tradition? The Foreign Secretary, the Prime Minister and others have said that the necessary precondition of increasing own resources is real and effective control of the CAP. However, the Foreign Secretary must agree that if we achieve such real and effective control, an increase in own resources will not be necessary. Is that not the case? The hon. and learned Member for Mid-Bedfordshire (Mr. Lyell) said last week that our ability to prevent an increase in own resources is our trump card. It would seem more truly to be our only card in this game. From what we heard previously—I am not reassured by what we heard earlier today — it would seem that the Government are in danger of discarding that trump card before we have achieved the objectives which they set.

The Foreign Affairs Council will meet again on 9 April —yet another last chance for the Foreign Secretary to achieve some success. What can we expect then? What will be done between now and then to get support from our partners and to end our isolation in the Community? Will the stumbling from meeting to meeting and from crisis to crisis continue, or will the Government achieve their objectives?

The Government have failed, first, because they have no overall co-ordinated strategy for the Community, unlike the French, who have appointed a Minister for Europe to co-ordinate their strategy. Secondly, they have failed because they made no attempt to persuade the European Parliament at crucial times about the necessity of our rebate or, indeed, to win allies among our partners. Our abrasive style of negotiating, especially that of the Prime Minister, has lost us allies instead of winning them. Now we have even conceded the Irish milk demand for one year with bad grace and bad diplomacy, without getting their support in return, and we have agreed a deal which the Prime Minister said would be devastating to Northern Ireland, Scotland and Wales.

The objectives were set out by the Government in 1979. They have failed to control agricultural spending. They have failed to get long-term changes in the budget and they have even failed to obtain the one-year rebate that was agreed at the Stuttgart summit. The farmers are unhappy; the consumers will see prices increasing; the other nine member states have been alienated by the Government; and we have obtained none of what the Government set out to achieve. Meanwhile, the Community has failed to tackle the major problems of 14 million people unemployed, of increasing poverty in the Community and of starvation in the Third world. In voting for the Adjournment tonight, we shall register our view that the Government's policy in the community represents total and abject failure.

8.42 pm

Mr. Eric Forth (Mid-Worcestershire)

I begin by setting this matter in context in two ways. First, I remind the House that the size of the Community budget is about £15 billion, which is roughly equivalent to either our defence or health budgets. Therefore, it is as important to review and control the Community budget as it would be to review and control one of our domestic budgets. The second context is the attitude of our continental colleagues to our approach to negotiations with them. Our approach is seen differently on the continent from how it is in Britain. That is understandable, but it is worth remembering and repeating.

Our continental colleagues say, "You negotiated your entry to the Community under one Government in the early 1970s, you pronounced yourselves satisfied with it and you came in. Your Government then changed complexion in the mid-1970s, renegotiated the terms and even went so far as to have a referendum on the matter. They obtained the support of the overwhelming majority of the British people for membership of the Community and pronounced themselves satisfied. We were astonished when, in the late 1970s, when your Government changed hands again, you were still unhappy with your terms of membership and came back to us wanting further negotiations."

It is little wonder that we have problems in persuading our Community colleagues that we are in genuine difficulty on this matter. They are fully entitled to say, "What is wrong with you British? Do you not understand what the Community is about? Do you not understand what negotiations are about? How many times must you come back to us under different Governments and pronounce yourselves in turn satisfied and dissatisfied?" It is important to remember that that is the context in which we have had to approach the negotiations yet again and have had to try to persuade our continental partners of the justice of our case.

Having said that, the Government's position has been made clear, and it is one on which we can all stand four square. It is that finance should determine expenditure, not vice versa. That commends itself to me as a sound Conservative principle and a sound commonsense principle.

On 28 March my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs said that the Government would entertain a proposal for an increase in the Community's resources only if there is effective control of Community spending and a fair sharing of the budgetary burden."—[Official Report, 28 March 1984; Vol. 57, c. 295.] Every hon. Member would agree with that proposition. However, my problem is this: how far have we moved towards that position and how far are we persuaded that we have arrived there sufficiently to proceed to the next vital step in the development of the Community? How far have we gone towards the proposition that finance will determine expenditure, and how effective are our Finance Ministers in curbing the enthusiasm of their agricultural colleagues?

In considering this matter we should examine agriculture, which represents about two thirds of the Community's budget and which is still the most important aspect of the Community's activities that must be controlled. Therefore, we must consider the extent to which we are moving towards or have achieved effective control of agricultural spending. Yesterday my right hon. Friend the Minister for Agriculture, Fisheries and Food said: The trend makes it doubtful whether, in 1984… agricultural expenditure can be easily met within the budgetary provision. In 1984 agriculture is budgeted at about 16.5 billion ecus. My information, which I regard as extremely reliable, is that that sum is almost bound to be exceeded by a minimum of 2 billion ecus. That will occur for several reasons: first, because of the cost of the recent mca changes; secondly, because of the carry-over of the 1983 deferred expenditure; thirdly, because of the price increases that have been conceded on some products; and, fourthly, because of likely changes in world markets, especially in cereal harvests.

Mr. Jackson

My hon. Friend drew an analogy between the EC budget and Britain's health budget. Does he accept that the analogy goes further and that both budgets are open-ended because they are both entitlement-led budgets? Does he agree that we must limit that open-endedness and that this is what has been achieved in the dairy settlement?

Mr. Forth

I am persuaded in one respect by my hon. Friend's point, and that is that we all agree about the objectives. However, I remain to be convinced that what was brought back to the House by my right hon. Friend the Minister yesterday was a significant step towards ending the open-ended arrangement. There are two elements in the problem of the agriculture policy: one is the volume and the other is the price level. Although we have gone some way towards tackling prices, I am not convinced that we have dealt with the volume.

My right hon. Friend the Minister also said yesterday: The Community will need to take the necessary steps to limit expenditure."— [Official Report, 2 April 1984; Vol. 57, c. 661.] We have not yet heard from anyone what that would involve. If we must face a minimum increase of 2 billion ecus in the Community's agricultural expenditure in 1984, where will that money come from?

It can come only from a very limited number of measures, and we have yet to hear which are to be invoked. One would be a reduction in another head of Community expenditure, perhaps the regional fund or the social fund. Both of these are beloved by many hon. Members, and the United Kingdom benefits considerably from both. None of us would like to see either of them cut. What shall we have then—a supplementary budget, or a further passing round of the hat? If we have either of these measures, how can that be accepted in the context of a claim for a need for a reduction in or limitation on agricultural spending? How far can we be persuaded that we have made any significant progress along the path of a reduction in or control of agricultural spending if in the very year that we have embarked on this project we find that already we are being invited to cover further expenditure on agriculture? This is the problem that I have with these negotiations and proposals.

We heard from my right hon. and learned Friend the Foreign Secretary that the agricultural package is not in itself enough to meet the criteria laid down by the Government for an increase in own resources. I found that statement at least reassuring—[Interruption]. He said that. We shall see it in Hansard tomorrow. I made a note of it. I heard him say that the agricultural package was not in itself sufficient justification for the Government to proceed to agree to a further increase in own resources. That is what I heard him say. Hon. Members will be able to check the record tomorrow.

Mr. Robin Cook

May I help the hon. Gentleman? As I understood it, the Foreign Secretary referred to the budget imbalance. I share the hon. Gentleman's apprehension if that is what the Foreign Secretary meant, but if I understood him correctly he was saying that the agricultural settlement was not in itself sufficient because it was yet to be accompanied by action on the budget imbalance. There was no suggestion in what the Foreign Secretary said that he was not prepared to recommend the agricultural settlement as meeting the conditions on agricultural expenditure that he has attached to an increase in own resources.

Mrs. Kellett-Bowman

The note that I have is that the Foreign Secretary would not agree to an increase in own resources unless he was satisfied on the budget and the refund payment was made.

Mr. Forth

We all know that the record of my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) is always as reliable as Hansard, and I am prepared to accept what she says.

I wish to move to the second point about the rationale behind an increase in Community own resources in itself. One thing that we have not heard too much of as yet is the argument for an increase in Community resources per se. We have heard the context in which it is said. Those of us who have experience of our continental friends know of their various enthusiasms for spending on various projects. We know that the Community has become a very effective mechanism for devising ever more methods of spending money, preferably other people's money, and often ours. What we have not yet heard is an argument in detail as to why the Community justifies having more resources of its own at this point in its development.

If an institution is proving ineffective in dispensing and using resources in its current circumstances, how can it justify to any reasonable person a further increase in those resources? That is the nub of the argument. The argument has become obfuscated by the negotiations which have gone on whereby we have tried rightly to limit our input to the Community budget and in return have been prepared to concede the principle and ultimately, I suspect, the fact of an increase in Community resources without going through the vital stage of asking why the resources should be increased and what we would do with them if they were.

Again, we were given a hint of this by my right hon. and learned Friend the Foreign Secretary when he suggested some headings under which this could be justified. The most important of these need not necessarily incur any additional expenditure, because if we are to make the Community work better we certainly need free movement of goods within the Community, the dismantling of the non-tariff barriers to trade and all such related matters. We need progress in the free movement of goods and services and so on. None of these need have any budgetary significance.

Although the argument is still to be made, we may need a new level of expenditure on research and development which some would argue could be more effectively carried out by the Community than by individual nations. I should like to hear that argument articulated in much more detail.

The final justification for the increase in own resources is enlargement. Again, that is a subject that has been woefully neglected as an argument in itself. It is often introduced as a kind of digression or sideline to other vital arguments. Various Ministers from the Foreign Office have stressed often what they regard as the great importance to the Western democracies of bringing Spain and Portugal into the Community. I find this argument singularly unconvincing. For example, if one considers the membership of NATO, it is not in any way conterminous with the membership of the Community. Some members of the Community are not in NATO. Spain has already agreed to support, if not to join, NATO without being a member of the Community. I do not think that the two should necessarily be tied together.

More worrying is the fact that we are being told that to have the privilege of an enlarged Community we may have to provide more resources to the Community and through it to the new members. I invite my hon. Friends and the House to speculate on the result on the political balance and on policy-making within the Community of an enlargment of the membership to 12. What will happen when there is a possible alignment of the members of the south—Greece, Italy, Spain, Portugal and France when it suits it—to reorientate the policies of the Community towards what are loosely known as the Mediterranean products, although Portugal is far from the Mediterranean? That is one of the policy issues that faces a potentially enlarged Community. We are rarely invited to think about it and the House has not been given sufficient time to consider it in the past.

I am watching most carefully the progress of the negotiations on all these interrelated matters, but I do not as yet believe that we have reached a point where we have been given sufficient justification to go to the vital stage of giving the European Economic Community more resources. We must satisfy ourselves about our own position, about the agricultural policies and about enlargement and its implications. Until I hear very much more about these matters, I shall reserve my judgment.

9 pm

Mr. J. Enoch Powell (Down, South)

Not the least valuable part of the valuable speech of the hon. Member for Mid-Worcestershire (Mr. Forth) was the invitation to the House to look at these negotiations as they appear to the rest of the European Economic Community.

It would be easy superficially for a person listening to the report of the Prime Minister a fortnight ago, after the European Council, and of the Foreign Secretary last week, after the meeting of the Council of Foreign Ministers, to conclude that, apart from the rhetoric, this was really only another of those habitual paroxysms of the Community where a gap is left which is presently filled by one more heave, large or small, by one more compromise or by one more rearrangement of the figures.

This time it was different, and was perceived to be different. Often, a fundamental difference—one which forces itself on people's attention — presents itself as though it were a quarrel about details, about figures and relatively small amounts. The new feature—or, at any rate, the feature new in its intensity—which followed the events of the last two weeks was the much more realistic reaction of the other members of the European Community. They seemed at last to realise what had lain behind the train of events of which the hon. Member for Mid-Worcestershire reminded the House and which, no doubt, is fresh in the minds of our EEC partners. They realised, for example, how strongly feeling in this country remains set against membership itself.

I notice that the French Liberation wrote: Madame Thatcher has every reason to stand firm on her cheque. She has behind her 55 per cent. of the British people ready to leave Europe at a day's notice, but also 20,000 miners on the eve of losing their jobs who would not be at all understanding if the so-called Iron Lady paid handouts to French and Italian farmers. They have also recognised that there is a fundamental difference of intention on the part of this country from at least some of the other members of the Community. In an important speech, the German Chancellor brought that out plainly when he said: The question is, who is ready to follow us"— presumably Germany— along the road to political union with the declared goal of a United States of Europe? By implication, the suspicion had dawned on Herr Kohl's mind—I shall return to this shortly—that whoever else said aye to that, the British people did not. But perhaps most perceptive of all, as one would expect, was the French Foreign Minister, M. Cheysson, who told the European Assembly that he was concerned that there was an incompatibility between the original six EEC countries and those who joined later with different interests and characters. That was well perceived. There is a radical incompatibility. There is the incompatibility of Britain's perception of itself in relation to the European continent; there is the incompatibility of the economies of a country such as ours and the much more profoundly agricultural countries of the European continent; above all, there is a constitutional and political incompatibility.

I hold in my hand — I have treasured it — the document which was issued in 1975 to all citizens when they were invited to give their advice — it was only advice, it will be recalled — on the question of our continued membership of the EEC. On the page entitled "Will Parliament lose its power?" was a reference to the then recent Government White Paper in which, so it said, the Prime Minister declares that, through membership of the Market, we are better able to advance and protect our national interests. This is the essence of sovereignty. There followed the all-important sentence—the answer which, no doubt vainly, the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) sought from the Foreign Secretary—about the legality of any action by this country to protect itself and its rights: The British Parliament in Westminster"— it is said in what was not a partisan document; but the factual basis on which all citizens were invited to reach their conclusion— retains the final right to repeal the Act which took us into the Market on January 1st 1973. Thus, our continued membership will depend on the continuing assent of Parliament. That, I suppose, every Englishman would take for granted. He would say, "That is a fair description. That is what it is all about. That is what we understand to be our political rights and liberties." But that is not what has hitherto been understood by the remainder of the members as the nature of our adherence to the Community.

Sir Anthony Meyer

The right hon. Gentleman has made it plain, as he has on repeated occasions, that he would reject any compromise that would enable the Community to function effectively. He has also made it plain on repeated occasions that he rejects any compromise that would enable the Commonwealth to be any kind of effective force. Is he, therefore, saying now, and has he said on other occasions, that he welomes the total isolation of this country?

Mr. Powell

I fear that I may, perhaps for the first time, disappoint the hon. Gentleman, not so much—it would be out of the line of this debate—by any remarks on the Commonwealth but by what I have to say about our relationship with the EEC.

This is a formidable trinity of incompatibilities which lies behind the differences of approach that have been signalised and forced into recognition by the Prime Minister's determination. That is something that we have to face; and, unless we are to go round the dreary and self-destructive cycle many times yet, the rest of the Community will have to face it too. Yet, incompatability or not, we cannot contract out of Europe.

We are attached to Europe by the fundamental necessity of a relationship of exchange that is much more than an exchange of trade — it is an exchange at all human levels between ourselves and the peoples of the adjacent continent. With that crucible of humanity that is Europe, with its political strivings, its cultural attainments and even its religious movements, this country is inextricably bound up. What happens politically on the continent of Europe is bound profoundly to affect this country. We cannot set aside those facts because we discover that the framework in which we have hitherto endeavoured to perceive and manage our relationship with the European nations is defective and incompatible with all that we hold most closely dear.

This is an age of institutionalisation, or, to put it more elegantly, an age of institutions. We seem to need to create for every problem or perception a corresponding institution to fit it. Certainly, we need an institution to fit our true relationship with the nations of the European continent without any prejudice to what we intend for ourselves, what we mean for ourselves, and what we understand about ourselves.

I believe that to be the truth lying behind what the Prime Minister has said repeatedly. A fortnight ago, she said: I want to see a more effective Community, developing its full potential. That is the Community in which I believe."—[Official Report, 21 March 1984; Vol. 56, c. 1050.] Only a few days ago she said: many of us had far greater ideals for the European Community than have yet been achieved. We shall continue to work for them but we believe that the financial and agricultural matters must be settled first."—[Official Report, 29 March 1984; Vol. 57, c. 446.] I do not believe it was mere words for the sake of words when the Prime Minister said that. I do not think that—as I admit I was base enough to suspect when the Foreign Secretary opened his speech this evening—this was a sort of shield behind which she could advance unobserved to the attainment of her immediate objectives. I think she was expressing the sense, which almost all of us have, that we must find a different—a better and more successful — institutionalisation of our relationship with the European nations than the framework of the original Six with which M. Cheysson observes that we are incompatible. We have to devise that. Along with the rest of the European Community, we are engaged this time upon a profoundly important venture, and it is essential that neither on this side of the Channel nor on the other should its magnitude be misunderstood. We are looking for a new relationship, a new conception which will work; one in which we can give without taking, in which we can contribute without meanness or grudging. That is the task which the nation wants this Government to perform. I believe this Government can perform it.

9.9 pm

Mr. David Heathcoat-Amory (Wells)

I pay tribute to my right hon. and learned Friend the Foreign Secretary for his patience and stamina in the past few months. The same applies to my right hon. Friend the Minister of Agriculture, Fisheries and Food, whose sleepless nights are now over, I hope. Within the terms allowed, they have both negotiated skilfully. However, my criticism is that the European negotiations are not ordinary negotiations where there can be a free exchange of bargaining counters. Over the past few months we have had a unique opportunity to create a different Europe. That Europe cannot be created by negotiating along previously established lines. If we let that opportunity slip away, it may never return. We must not let it slip away by treating the whole exercise as simply another horse deal.

Own resources are central to that difference. Speaking as a European, I oppose any increase in own resources. I resent any implication that, because I resist an increase in own resources, I am thereby anti-European. I supported Britain's entry to the Common Market. I voted in that referendum following the farcical renegotiations— and how they got it wrong—to stay in. I want a drawing together of European foreign and defence policies. I want a removal of barriers to trade and a genuine free exchange of services and goods. I am pleased that my right hon. and learned Friend the Foreign Secretary alluded to the new policies being worked out in Brussels. I hope that we can give them a fair wind. In short, I believe in a Europe that achieves its full potential for peace and prosperity.

However, all that is being distorted and obscured by the present structure of the Common Market. It is no good saying, "Let us go for the political objectives and not argue about a few hundred million pounds." For a start, it is not a few hundred million pounds. We are committing ourselves now to a stream of contributions that will be difficult for any future Parliament ever to influence again. Secondly, and more important, a budgetary system that is fundamentally flawed—and flawed it certainly is—will for ever create bewilderment and resentment among the people of Europe. We can all understand and even support a system whereby the richer countries contribute to poorer countries; but that is not what we have or are being offered. The negotiations in Europe sanctify a system whereby Britain, a poorer country, pays an annual tribute to her richer neighbours. Great damage is being done to the European ideal by that permament and enduring imbalance.

We are also entitled to ask about the competence of the European institutions that control and administer the budget. The Common Market has run out of money because of agricultural overspending. Who is responsible for that spending? It is certainly not the farmers. All that they have done is to react to a favourable price regime in the most logical way—by increasing output. They have been encouraged to do so by a succession of Ministers and a collection of grants, many of them European, designed to increase European agricultural production and productivity. Of course, farmers and the National Farmers Union press for higher prices. That is their job. The surpluses are not their fault. They are evidence of a European failure, a refusal to face reality. It is a European failure of political nerve, an attitude of spending now and asking questions later.

Mr. Barry Porter (Wirral, South)

Does my hon. Friend not recognise that, for the first time and fundamentally, the French and German Governments have accepted that reality? That is what the right hon. Member for Down, South (Mr. Powell) was saying, as I understood it.

Mr. Heathcoat-Amory

No, the point I am making is that the spending dynamic in Europe is still there. France and Germany may have marginally changed tack, but the same European structure, the same coalition of interests that created the problem, remains unreformed.

Mr. Jackson

Will my hon. Friend recognise that these problems are inherent in any system of managed agricultural markets? After all, the American dairy surplus is larger than the European surplus. So this has nothing to do with European institutional structures: it is an inherent problem.

Mr. Heathcoat-Amory

It is an inherent problem, given the present structure of European institutions. We have an unholy alliance between national interests bargaining for a slightly larger slice of the cake and European interests arguing for a larger cake in the first place. My point is that those same institutions remain intact and that we are being asked to give them a higher VAT contribution.

It is indeed a much higher contribution, because an increase to 1.4 per cent., which, I gather, is the minimum being contemplated, would add about £3,500 million to the Community's own resources. That is an increase of about 25 per cent. I see very little justification for reinforcing failure in that way. I see a need to cap the CAP. I see a need to control spending rather than increase it. The whole principle and rationale of the 1 per cent. VAT contribution, which has existed for some time now , is that it is automatically buoyant. Not only does it rise in line with prices—that is to say, it is inflation-proofed—but it rises in line with increased output. It is, as it were, super-buoyant. An increased level of consumer expenditure feeds directly and automatically into higher VAT contributions. As we are moving out of a recession, and as consumer expenditure picks up, so VAT revenue should increase throughout the Community.

It may be happening already. Last year we were told that the Common Market would run out of money by this spring. Doomsday has now been postponed. We are told that the Common Market may run out of money by the autumn. What is happening on the revenue side? May we be told? I understand that the Commission has no estimate of the likely VAT yield in the coming year—my right hon. Friend the Prime Minister gave that answer to a written question last month. All that the Commission would say is that it needs the money. We all need the money, but that need must be justified in arithmetical terms, because increasing our VAT contribution to the Common Market is not like any other increase in taxation.

In Westminster Budgets, taxes are often increased and, in subsequent years, reduced. What we are being asked to do here, however, is to transfer permanently an additional part of our revenue to an extra-parliamentary, extra-national body. That is the constitutional question that affects the historic duties and powers of the Parliament to which I have been elected.

I am not an absolutist on this issue. Absolutes are dangerous in politics. Nevertheless, to export our powers of taxation in this way requires rather more reason and justification than we have been given to date. I also have difficulty in reconciling such a step with the policies on which we on the Government Benches were elected last year. We stand for lower taxation and reduced public expenditure, yet here we are, being invited to move in the other direction. I see nothing especially virtuous in European public expenditure.

In the regional and social funds, in crude terms, money flows from London to Brussels; it is translated into eight languages, is subjected to a political bargaining process and then comes back to London. It is then spent on projects that might or might not have been worth while. That is not my idea of the European vision. It is not the cornerstone of my political faith and it is not why I supported entry into the Common Market in 1973.

I might be able to swallow some of my objections if I were more enthusiastic about the package of agricultural reforms presented to the House. I represent a large milk-producing constituency, which is tied to milk production every bit as much as any part of Ireland. We are being asked to cut back while Ireland is being permitted to expand. No doubt, these milk surpluses have to be controlled, although, if the fault lies anywhere, it lies with the European Commission, the European Assembly, and the Council of Ministers, and not with British farmers.

Mr. David Harris (St. Ives)

Will my hon. Friend acknowledge that the Commission has led the way in trying to bring things under control, and that the real responsibility lies with the Council of Ministers? For the past three years, we have seen this bidding-up process, which has led to even bigger surpluses. The Commission at least tried to make a start in this as far back as 1981.

Mr. Heathcoat-Amory

I do not absolve any part of the European institution, and it would not be my intention even if I knew the answers to allocate blame precisely. The point is that exactly the same structure and institutions remain intact. If I were convinced that there had been profound reforms and that there was a new institution arising that might take a more realistic look at the future of agricultural spending, I might be more sympathetic to the idea of transferring more resources to those institutions.

I accept that there have to be cuts. I do not fall into the trap that Labour Members fall into of opposing an increase in own resources while also opposing the necessary cuts in spending. I can see that there have to be cuts, but how is the axe to fall? Which sectors of agriculture are to be cut? Ministers said that one aim was to correct the imbalance between corn and horn, but this has not happened. A bigger cut in cereal prices, if it had come about, would have been attractive. It would have helped livestock producers and would have been good for the countryside and for the European taxpayer. As it is, dairy farmers have suffered a 45 per cent. reduction in real income since 1977 whilst cereal farmers have enjoyed a rise of 60 per cent. Nor do we know how the quotas will operate.

I have misgivings about the use of quotas in principle and would have preferred a straight price cut. It will have been a mistake if one of the things that comes out of this series of negotiations is a permanent milk quota system in Britain.

The price mechanism should take over from quotas to limit production in the longer term. Such price cuts are painful—I do not disguise that—but they are preferable to the inequitable and unfair system of quotas that will be imposed on national and individual milk producers.

The crisis caused by a shortage of cash should be an opportunity for a profound change, not an opportunity for postponement. The economies imposed on the milk sector are unfair and discriminatory, and I have not found that the case for the increase in own resources has been adequately made out.

9.24 pm

Mr. Gerald Bermingham (St. Helens, South)

We have been in Europe for the last 10 years, in which time it has cost us roughly £1.5 million a day. One must therefore ask what, after spending £1.5 million a day, have we got out of it? Has it been of any benefit to our society?

In my short contribution to the debate, I wish to concentrate on my constituency, which gives an accurate reflection of what has happened to the country. The constituency has two halves to it, one physically very large and the other very small. In the very small physical area, glass is the predominant industry, and in the very large part of it farming is the predominant industry. Much of the land area of the constituency is farmland, some of it owner-occupied and some of it tenanted. I asked myself one simple question during the recent negotiations in Europe concerning the farming sector and in the other negotiations that have taken place in the last few years: how has my constituency benefited? The answer is that it has not.

There is an old saying that, if one is going to play the game, one should play by the rules. If one is to play by the rules, one should find out what the rules are. I regret that in this land we have never bothered to find out what the rules are. The rules by which we are supposed to play the game are not the rules by which the rest of Europe plays the game, and I make no bones about saying that. In the glass industry, as in the case of energy, and energy support, what does one find? The Belgians, the French and the Germans have hidden subsidies to their industries, by means of energy prices which are low and subsidised. We play by the rules. As a result, our glass is more expensive to produce. Therefore, we produce less of it, and we suffer import penetration. In this free market of ours, in which everything is supposed to be fair and above board, our industry suffers, and the industries of the rest of Europe profit.

One finds that the same situation arises with the Government. The Government seem not to understand the rules when it comes to glass. I give a simple example from the recent Budget. The Goverment imposed VAT on double glazing, forgetting that the French and Germans have a support system for people who wish to buy double glazing. I mention that because, in this free market of ours, apparently we do not play by the same rules that apply to everyone else. The list is endless, and includes farm support systems and the transfer of animals, carcases and various other food products across Europe. What happens? Everyone else has one set of rules, and we have another. We do not play the game by the same set of rules, yet we pay £1.5 million a day for the privilege of belonging to this rather expensive little club.

I do not pretend to be an expert on Europe, but I am an observer of what happens in my constituency. The fanning aspects of my constituency encompass dairy herds and cereal crops. Much of what has been said earlier in the debate is very true. It is ludicrous that we have a milk industry that supplies roughly 80 per cent. of our needs, yet we are told that we must have a reduction in our productive capacity of approximately 7.5 per cent. Quotas must also be considered. As a result, we will supply less to meet our needs. In supplying less to meet our needs, we shall have to import more. From where will these imports come? Of course, they will come from Europe. Treated milk will be flowing quietly in from the east coast ports to meet the needs of our society while our own diary farmers will be slaughtering their cattle, and our herds will start to decrease. I cannot see the logic of this. To belong to this club costs us £1.5 million a day, and so it will continue.

In the debate, the lovely little phrase "own resources" has been used by the Chancellor. It seems that own resources will be increased because of an increase in the percentage of VAT. We are not told when this will occur or how much more it will cost us to belong to this little club which signals the beginning of the slaughter of our dairy herds. Once that happens, we shall produce less milk and, in effect, will be asking for inefficiency.

The one advantage of belonging to the famous club is that our agriculture — which has served us so well, meets our needs and wishes to expand and become more efficient and, therefore, more productive, which is what we expect of any industry — is once again to be penalised by a series of quotas, premiums and goodness knows what else. That is the price of membership of that cosy little club, which costs us £1.5 million a day.

The problems are endless. As I was told earlier today, there is only one possible solution. The time has come to stop messing about. It is no good saying, "Look what the Labour Government did between 1974 and 1979", because that leads to the retort, "Look what the Conservative Government did between 1979 and 1984." The answer to both remarks is, "Precious little." Neither took the matter by the throat.

We must say either that we have a European concept that is a free trade area where the farce of propping up inefficiency is eliminated and where we do not pay ridiculous subsidies here, there and everywhere, or that it must be a really free trade and take out the barriers, let the goods flow and let the efficiency of our partners benefit both them and us.

I am talking about a different form of European market — one that recognises the concept that trade flows without customs barriers, petty restrictions, bureaucracy and the other things for which we currently pay £l.5 million a day. The only benefit that we have achieved during the past 10 years of membership is, regrettably, that Britain now has the lowest level of supplementary benefit as a percentage of former earnings than anywhere in Europe.

The price of 10 years membership at £1.5 million a day is that our unemployed are worse off than anywhere in Europe. Much of that unemployment has been caused by the stupid bureaucracy of what is happening within the EEC. All that the recent negotiations will produce in the farming sector is further unemployment. Unless we actually grasp the problem by the throat and say that it must stop, that there must be free trade across Europe that will allow us to compete on the same terms and by the same rules as the remainder of Europe, the only alternative is to rewrite the rules of the treaty of Rome—in other words, to tear it up.

9.33 pm

Mr. Robert Jackson (Wantage)

The House has been treated to a remarkable and—dare I say it—unusually positive speech about Europe from the right hon. Member for Down, South (Mr. Powell). His theme was the need to institutionalise our relations with the continent—with a continent that is determined to organise itself, which fact in itself imposes certain conditions upon our association with it.

The right hon. Gentleman argued that we need to change the existing institutions of the EC, which are the expression of that necessary European interrelationship, so as to make them more suitable for the United Kingdom. I hope that he will recognise, in this more positive vein, that this is precisely what the Government are trying to do in these negotiations by seeking to change two key institutions of the EC—the CAP and the budget.

Anyone who has been following the saga of the budget negotiations and the question of Community budget reform—and I have followed them closely during the past five years in the European Parliament—knows that it is remarkable how far the British Government have succeeded in shifting the focus of discussion on to the ground that we staked out in 1979. This is true not only on the broad questions of principle but also of the questions of detail.

Hon. Members may think that some of these points are obvious, but seen from the other side of the Channel—and an interesing feature of the debate is that we have had some unusual glimpses of how things look from the other side of the Channel—they have not been at all obvious.

Let me go through some of these points. The Government has succeeded in getting across the idea that basic changes in CAP regimes are necessary to cut costs. We have now had agreement not only on the broad principle of such reform, notably in the dairy regime, which has just been changed, but also in the details of those changes: we have got across the idea that exemptions should be kept to a minimum; the intensiveness levy has been dropped; the oils and fats tax has been dropped; and so also has been the idea of restrictions on cereal imports.

Secondly, we have got across the need for a system of financial discipline to govern not only the so-called "non-obligatory" part of the European budget but also the "obligatory" agricultural expenditure. We have also got across the controversial principle that expenditure should be dictated by revenue, rather than the reverse. If I point out that there is a rubric in the printed text of the European budget which affirms precisely the opposite principle, it will be readily understood how right the Secretary of State is to emphasise the novelty of this new position.

Thirdly, we have got across some recognition that the problem of the British net contribution is a genuine one, that there can be no dismissal of the sums involved and that the old French theme of the juste retour and its unacceptability cannot be a reasonable way of proceeding with the budget.

Fourthly, we have won some recognition that this British problem cannot be solved merely by the development of Community policies and by expenditure on policies other than those of agriculture—what might be called the Italian thesis. We have won recognition that a budget mechanism is necessary: it has been a major achievement to get that principle accepted within the Community.

I believe that all of this represents striking progress in fulfilling the vision of the right hon. Member for Down, South of changes in the Community so as to make it a more comfortable institution for us to belong to.

The Community has now reached what could be the final stages of this negotiation. We had a breakthrough at the Agriculture Council last weekend and we have a meeting of Foreign Ministers on Monday and Tuesday of next week. This debate in the House is our chance to let Her Majesty's Government know how we view the choices and the compromises that are facing them at this crucial time.

Of course, it is very difficult to comment on this because so much of the substance of the negotiations, as well as the atmosphere, is an unknown quantity to all of us on the Back Benches. But, subject to that consideration, my feeling is that the Government face some very difficult choices and that they will have to make those choices in a spirit of sober realism, in which I think this House should attempt to participate.

Thus, for example, although I argued against it when we had a debate on this subject on 20 February, I accept the Government's move to base the calculation of our net contribution not on the concept that all the own resources should be included but that it should be done on the basis of the VAT share only in own resources. The 250 million ecu difference between these bases is an earnest of our desire for a settlement, and on that basis I can support it.

I believe that the central difficulty that the Government face in this negotiation is that of how to find a mechanism that respects the fact that it is not possible for the net contribution of any member state, including Britain, to be limited to a fixed ceiling but which does not at the same time produce inequities and unacceptable situations as the budget expands in the future. That is the nub of the problem that the Government face in this negotiation.

The system that is being discussed, based on the conclusions of the French presidency, is a very complex one, with its arrangements for thresholds and for what is coming to be called the ticket moderateur. Its very complexity must provoke doubts about its effectiveness. I remember very well the Dublin mechanism negotiated in 1975 by Harold Wilson, as he then was. I recall vividly the enthusiasm with which it was greeted, because there was, I think, a genuine belief in all quarters that it was actually going to do the trick. It was an exceedingly complicated mechanism and the fact was that it failed to produce a penny piece for the United Kingdom.

This one will certainly do much better—but I say to the House and to Ministers that we should not focus on the percentage of our net contribution that will be abated, however impressive that may be. We must focus on the absolute amounts that we shall have to pay, especially in future years.

Here I have something of a nightmare about the situation in which we might find ourselves in, for example, 1990 — when we may have a growing deficit in our balance of payments and a progressively diminishing contribution from oil, with a question mark over the volume of manufacturing exports. The nightmare is that we may then find that on the Government's side of the balance of payments account there are not only hefty costs in the stationing of British forces on the continent under the NATO arrangements, not only transfers in the form of foreign aid which we must continue, but a net contribution to the European Community rising from perhaps £450 million which is acceptable in 1984 to a sum which might be double that, or even greater, in 1990. Such a sum would then be unacceptably high in absolute terms even though in relative terms in a Community of 12 Britain could no longer be classed among the less prosperous member states because the average will fall as the Community expands among the Mediterranean countries.

Mr. Norman Buchan (Paisley, South)

I am always puzzled by the concentration of the hon. Gentleman and others on the figures of £450 million and £1.5 million a day. With respect, those figures are fleabites when set against the real cost to the United Kingdom. The common agricultural policy costs us between £5,000 million and £6,000 million a year. That is the cost to the taxpayer and the consumer. That increases the £1.5 million per day to about £14 million or £15 million a day. We should include also the disaster that has befallen our manufacturing trade, which has gone from surplus into deficit by about £5,000 million annually. If the figures are added together, they produce a sum of about £28 million a day and not £1.5 million.

Mr. Jackson

I remind the hon. Gentleman of the statement of a former leader of his party and Prime Minister that "one cannot quantify an élan". It is exceedingly difficult to establish what the net economic effects have been outside the budget of our membership of the European Community. There have undoubtedly been costs on the agriculture side and there is a dispute about the extent to which our membership has assisted growth in the industrial economy and the degree to which that has counterbalanced the increased agricultural costs. The hon. Gentleman is on exceedingly difficult terrain when he raises these issues. The costs that he is describing are by no means as indisputable as he thinks. When we talk about the European Community budget, at least the sums involved are clear and it is possible to make a reasonable judgment. So I suggest that we should concentrate on the budget, which is the subject before us.

Mr. Robin Cook

If my hon. Friend the Member for Paisley, South (Mr. Buchan) is so mistaken, why is the hon. Gentleman so dismal about the 1990s? Why is he so lacking in confidence about the future that we shall have after another 10 years?

Mr. Jackson

I described a nightmare, and it is one that I hope will not come to pass. It is part of the nightmare that in 1990 we have a problem with oil and with our manufacturing trade. I hope and believe that we shall be able to avoid the latter problem. In that context, a net contribution of the sort that I have been describing would not be regarded as excessive. However, if the problems envisaged in my nightmare were to come to pass it would be regarded as excessive—which is why we need to find a mechanism to guard against that prospect.

I shall return to the main line of my speech. Many hon. Members will feel that the logic of my position is that the Government should not seek to reach a conclusion next week on this mechanism outlined in the European Council presidency's paper. It is a mechanism which undoubtedly carries with it the risks that I have described. So we must recognise that the choice is an extremely difficult one.

Let us ask ourselves what will happen if there is no agreement next week on the basis of the presidency paper. At the very least, there will be a possible loss of the undoubted positive features of the presidency paper, of which there are many. We would see a loss of the momentum that has now been created in the negotiations by the breakthrough on the agricultural front. We would see a hardening of positions in other Community countries as well as in Britain as we go through the European election campaign. That could be serious.

As the Government face these decisions, the House and the Government must be realistic about the strengths and the weaknesses of our bargaining position.

Too often in these debates it has been said that we have "only to wait for the money to run out". Let us not underestimate the problems involved in the money running out. For instance, we must consider the consequences for the agriculture industry. Many hon. Members will be more aware this week than they have been for some time of how important British agriculture interests are at stake in the negotiations. Moreover, let us not underestimate the ingenuity that our partners may use in stretching Community finances. The 1 per cent. VAT ceiling is pretty elastic: the buffers may turn out to be made of rubber. For instance, the non-agricultural parts of the budget could he raided if the European Parliament and a majority in the Council agreed. Or, more likely, there could be an agreement among the other nine countries to finance the CAP by national payments outside the budget — payments which would not be returnable to the Community budget—[AN HON. MEMBER: "What a good idea."] I do not agree that this is a good idea, because we would have to pay to finance the policy in Britain, but we would not be able to recoup that expenditure, and that could go on for a long time.

We must face other consequences of a failure to reach an agreement. The payment for 1983, the refund of £450 million, would not be made. We would not have cover for 1984, which could involve a sum in excess of £450 million. And there would be no prospect of a refund next year or the year after. That would point inexorably to the United Kingdom withholding payments.

When hon. Members looked over the brink of this abyss two weeks ago, the general feeling was that we should pull back because of the dangers. Opposition Members are, of course, light with the law: we see that not only in Europe but in other areas of national life. Irrespective of any high legal and constitutional principle, on which there are a variety of views, there can be no doubt that from a political point of view that course is fraught with heavy risks both in domestic and in international terms.

So the decisions that the Government will have to take before next Monday and during the negotiations are difficult and the arguments about which course to take are finely balanced. My conclusion, for what it is worth, is that the Government should now try hard to close the deal. At the same time, I hope that they will seek to obtain some recognition of the fact that the complex mechanism which is envisaged may not work out satisfactorily in the end.

Although last month I argued against it, in the light of this argument I might now perhaps be forgiven for believing that there may be some advantage for us in the presidency paper's insistence that the mechanism will operate only until the exhaustion of the new own resources. Of course there is a risk that if the mechanism operates only until the exhaustion of the new own resources, the whole matter might be reopened to our disadvantage and I thought that this would be to our disadvantage last month. But as the details of the mechanism begin to take shape I must say that I see a more than compensating advantage in the matter being kept open in this way, because if the mechanism does not work out satisfactorily we shall then be able to reopen the question.

For, in the nature of things, the question of financing the Community will not go away. I have never been one to argue that the sums involved in the British net contribution are de minimis. They are important sums for Britain, and they will probably become even more important. This is not just a British question. It is a question that will not go away, because, using the words of the right hon. Member for Down, South, it is of fundamental importance for the "institutionalisation" of Europe. The history of all federations is clear— and I have no doubt that the Community is a federation[HON. MEMBERS: "Oh!"] — in the making —[HON MEMBERS: "Ah!"]. Hon. Members may disagree with that judgment, but history will show in due course whether it is correct. History tells us that in the organisation of such entities — or institutions, to use the right hon. Gentleman's word — the financial aspects are fundamental. They are a rock on which either a whole complex splits asunder or on which, alternatively, a stable structure is built. Although Britain's efforts have been much misunderstood in the Community, we are trying to build —or rebuild—the Community's finances on a rock of stability—and we must never abandon that object.

9.50 pm

Mr. Russell Johnston (Inverness, Nairn and Lochaber)

Mr. Deputy Speaker——

Mr. Andrew F. Bennett (Denton and Reddish)

On a point of order, Mr. Deputy Speaker. Will you confirm that it is a principle in the House that one's vote is supposed to follow one's voice? That being so, is it not also logical that one's voice should follow one's vote? As the Liberal party earlier made great play about not wanting this debate, is it not illogical for a Liberal Member to seek to speak in it, especially as about 15 minutes of the time available was denied to other hon. Members by that party's behaviour?

Mr. Deputy Speaker (Mr. Harold Walker)

Every hon. Member is entitled to seek to speak. Neither I nor the hon. Member for Denton and Reddish (Mr. Bennett) can anticipate what the hon. Member for Inverness, Nairn and Lochaber (Mr. Johnston) intends to say.

Mr. Johnston

I shall not spend time referring to the earlier argument, which was perfectly clear and simple. The Liberal party believes that it should have more time to raise Supply matters. I do not think that that was an unfair argument.

It is always difficult to comment on other people's negotiations which fail. There is a natural human tendency to believe that one could have done everything so much better oneself. Inevitably, too, one is ignorant of exactly what happened, what was on offer, how things were played, what relationships were like and why.

Mr. Allan Rogers (Rhondda)

Will the hon. Gentleman give way?

Mr. Johnston

With respect, I have hardly started.

Mr. Rogers

How long do we have to wait?

Mr. Johnston

The hon. Gentleman will not have to wait too long if I am not subjected to continued interruptions.

One reads with incredulity in the "Insight" column of The Sunday Times, or perhaps it is The Observer, that the summit collapsed because Chancellor Kohl was not getting the regular supply of nutrients that his considerable frame requires. On the other hand, one knows that people's attitudes are often conditioned by how they feel.

I do not think that my Social Democrat friends will mind my remarking——

Mr. Dennis Skinner (Bolsover)

Where are they?

Mr. Johnston

The hon. Member for Bolsover (Mr. Skinner) always responds on cue. I am sure that they will not mind my saying, as we did a considerable amount of negotiating over three years——

Mr. Roland Boyes (Houghton and Washington)

Will the hon. Gentleman give way?

Mr. Johnston

—that I emerged from some particularly gruelling sessions wondering how on earth people managed when they did not start from a common political basis and spoke different languages—however good the interpreters, nuances and shades of emphasis may be changed—and when their historical perspectives and domestic pressures were quite different. I certainly do not belittle the immense difficulty of such negotiations for any Government, but one thing is clear. Our Government, our representatives and, indeed, our Prime Minister showed neither negotiating skill nor political leadership in a situation fraught with enormous long-term dangers for everyone.

The position of Ireland on milk, which was mentioned by the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes), is a good example. Given the dependence on milk of the Irish economy, it was clear that a special deal should and would be struck. I was recently looking at the Government's Green Paper on the budget problem which set out the percentage deviations from the norm of GDP per head in 1980–81. We were running at about minus seven, and the Irish were running at minus 50. It was evident that some arrangement would be made for them.

Hon. Members on both sides will agree that there was a political need to build on the improved relations which stemmed from the replacement of Mr. Haughey by Dr. FitzGerald. The proper course would have been for the United Kingdom to play a sympathetic role. Instead, the Prime Minister moved in with sure flat-footedness. She treated Dr. FitzGerald with inexcusable arrogance —there was no room for problems of interpretation there —and in the end the Irish got their settlement and we ended up with no diplomatic advantage at all. That was not an example of good negotiating.

The House, the farmers and the country deserve an explanation of how the milk agreement is to be operated. I am in a strong position to be critical because I have often stood here and defended the CAP, even while recognising the evident need to restrain open-ended production.

Mr. Buchan

Even when it was wrong?

Mr. Johnson

I have not defended anything when it was wrong. Since the basis of the agreement has been known, my hon. Friend the Member for Truro (Mr. Penhaligon) has raised questions on these matters on several occasions. I refer hon. Members to the Official Report for 22 March and to an application under Standing Order No. 10 on 2 April. None of the questions that my hon. Friend asked have been answered.

I accept that the whole basis of the CAP was to provide a stable basis for agriculture, for supply and for the farmers. There is, however, a real danger that the effect of the milk agreement will be an abrupt change in direction, with all the problems that that would occasion, not least in areas of the country which the Government and the Community agree deserve regional assistance. That does not make much sense.

My hon. Friend the Member for Truro has already drawn attention to the grave problems facing Cornwall, where 80 per cent. of agriculture is in the dairy sector. At the other end of the country, in the constituency of my hon. Friend the Member for Orkney and Shetland (Mr. Wallace), the agreement is likely to threaten the Kirkwall cheese factory, which is a vital part of that tiny economy.

It makes no sense to apply cuts in areas which are already recognised as having special problems. At the beginning of the debate, the Foreign Secretary said categorically that dairy farmers have long realised that over-production cannot go on. How, then, does he explain the advice given by the Ministry of Agriculture a year ago to farmers in Cornwall, quoted by my hon. Friend the Member for Truro on 22 March? My hon. Friend said that in January 1983 the Minister of Agriculture, Fisheries and Food was present at an NFU meeting. There were questions: One particular gentleman received an answer, the words of which, I suspect, will ring in his ears for a long time. He said to the Minister, 'The surplus is as it is and is increasing. What do you want us to do? What do you advise the agriculturalists in this room do do?' I nearly fell off my chair in sheer disbelief at the reply. It was, 'Produce, produce, produce.' That was the reply given at a select agricultural meeting in an area like mine where farming is so important to the ecomony."—[Official Report, 22 March 1984; Vol. 56, c. 1296.] That is the experience of my hon. Friend the Member for Truro, and it is not a good sign that the Government have been pursuing a sensible approach to this matter.

The Liberal party accepts the need to cut, but it must be phased in sensibly. Most hon. Members will have read the article by Hugh Noyes in The Times today. The Labour party seems to be saying that the cuts are not enough, that they are not sufficiently draconian and that they are not quick enough. The Labour party is becoming the anti-agricultual party—[HON. MEMBERS: "No."] What is the meaning of that?

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Ordered, That, at this day's sitting, the Motion in the name of the Prime Minister for the Adjournment of the House may be proceeded with, though opposed, until Twelve o'clock.—[Mr. Major.]

Motion made, and Question proposed, That this House do now adjourn.— [Mr. Major.]

Mr. Johnston

If the Labour party's view is that the cuts must be made more rapidly, that would have an even more devastating effect than the existing proposals are likely to have on the dairy industry. Everyone is waiting for the Government to tell us how the quota system will work and whether it is to be applied to dairies or to farms. The sooner we hear something about that, the better.

Mr. Teddy Taylor

The hon. Gentleman has made it abundantly clear that the Liberal party believes that the cuts in milk production are too large. What is the Liberal policy on how the Common Market should dispose of the 11 million-tonne surplus of milk that will be produced this year as a result of the agreement?

Mr. Johnston

I did not say that the cuts were too large. What I said—I thought that the hon. Gentleman was listening with his usual politeness—was that the phasing of those cuts must be more sensible. There cannot be sudden changes in agricultural policy without their causing considerable hardship to many people.

I wish now to concentrate on the political and industrial problems that face the Community and, therefore, Britain. The Liberal party has never disputed the necessity to have a budgetary basis which related our contribution to our gross national product. On the contrary, the Liberal and Social Democratic concept of the Community has always underlined the pre-eminent need to work for economic convergence and the development of the equivalency of opportunity in the Community. However, that requires an approach very different from that adopted by the Government. Mr. Genscher, the German Foreign Minister, remarked perceptively after the failure of the summit that it had floundered not on figures but on attitudes to Europe". There were proposals on the table from Denmark for a convergence fund and from West Germany for an evening-out based on gross national product. The basis was there, but what was lacking was good will or any vision——

Mr. Skinner

To give in.

Mr. Johnston

The crucial statistics behind the debate——

Mr. Skinner

That is what it really means: to give in.

Mr. Johnston

Since I have been subjected almost non-stop to interruptions by the hon. Member for Bolsover, may I say that good will is not an attribute of his.

The crucial statistics behind the debate are that during the past 10 years the United States has created 19 million new jobs, Japan has created 5 million and the European Community has created only 2 million. However, in the elections to the European Parliament in June this year, the Community will have an electoral roll of 40 million people more than the electoral roll for the American presidential elections. During the 1970s, industrial production in the Community increased by 7 per cent.; in America it increased by 12 per cent. and in Japan by 28 per cent. That is the challenge on the economic side.

Mr. Harris

On the European elections, can the hon. Gentleman confirm that a major plank in the SDP-Liberal case will be a complete abandonment of the right of veto, as their European colleagues have advocated in the European Parliament?

Mr. Johnston

No, we have not said any such thing. What we have said is that there should certainly be a steady movement towards more majority voting.

On the political side, no one has spoken about security, disarmament, the precarious world balance or the capacity to exert influence in areas such as the middle east, where the balance could tilt disastrously, where neither the United States nor the Soviet Union is trusted and where no single European country can be effective. Therefore, there is an opportunity for the Community and for us through the Community to be more effective in these matters. These are the things at the heart of the future of all of us.

There is certainly a need for an expansion in own resources. The late agreement on the ESPRIT programme is of enormous potential importance, but with a budget of $700 million over five years I do not think that it can properly begin to compete with the United States and Japan. In 1982 the United States spent £22 billion on research and the Community only £15 billion. As a percentage of gross national product, we spent under 2 per cent. and Japan spent 3 per cent. These are the important statistics.

The extraordinary thing about the debate has been the refusal of either Government or Opposition to stress both the opportunity presented by the Community and the threat that the failure of the Community could bring in its train. Time has been spent bickering about who did best. Records have been compared——

Mr. Skinner

The Liberal party and the SDP make a big thing about stopping the bickering and being the people in the middle like general arbiters solving everything. If that is the case, why is it that in the Common Market elections we have the spectacle only a few miles from this building of a Liberal and a Social Democrat sparring with each other for the same London seat? If they cannot stop the bickering in the alliance between the SDP and the Liberals, how can they stop it in Europe?

Mr. Johnston

I think that a success rate of 80 out of 81 is not bad.

Mr. Skinner

They are falling out.

Mr. Johnston

Only in one out of 81 seats has there been a falling-out. That is not a significant statistic even for the hon. Gentleman to quote.

The Foreign Secretary described the Labour party as "half-hearted and obstructive". That does not seem to be an unfair description of the Conservative Government. Not one word of the speech of the hon. Member for Carrick, Cumnock and Doon Valley was constructive. He did not say one single thing about what the Labour party would do or hoped to see done. He had the gall to criticise the Government for being abrasive, as if to suggest that the Labour party by contrast was silky and co-operative. If one believes that, one believes that there are fairies at the bottom of the garden. I give the hon. Gentleman the opportunity to deny that that is what he said. The fact is that the vaunted increase in VAT to 1.4per cent. will not be adequate. The Community is already spending on existing programmes at the rate of 1.3 per cent., leaving out of account any cheque for us, which, as the Government have said, is rightly due.

Therefore, the proposed increase allows no margin for unfavourable movements in agricultural prices, let alone for any significant changes in the budget, such as boosting expenditure on research, to which I have referred, increasing the regional fund and increasing the social fund to smooth the inevitable transition from the old industries in which we were dominant to the new ones in which we must find a way to compete.

Mr. Buchan

The hon. Gentleman says that it is insufficient. Does that mean that he is calling for a higher value added tax remuneration to the Community?

Mr. Johnston

Yes, and I think that something over 2 per cent.;—

Mr. Skinner

Does the right hon. Member for Plymouth, Devonport (Dr. Owen) know that?

Mr. Johnston

The hon. Member for Paisley, South (Mr. Buchan) will recall that when the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) made his final speech as president of the Commission, he called for an increase of own resources to 2.5 per cent.

Mr. Buchan

Will the hon. Gentleman spell it out? The Liberal party wants over 2 per cent. of our value added tax paid to Europe. Is he now saying, with the authority of the former leader of the SDP and one of its principal spokesmen on these matters, that the SDP wants 2.5 per cent.? Will he also explain what that means in hundreds of millions of pounds?

Mr. Johnston

I am saying that 1.4 per cent., which has been spoken of, will not meet existing commitments and at the same time allow for the development of the programme about which I have been talking, including research, the regional fund and the social fund.

Mr. Buchan

How many hundreds of millions of pounds would that involve?

Mr. Johnston

I do not wish to prolong my remarks. They have already been long, although I have been interrupted considerably, and I have always thought it a good thing to give way. I cannot see this country prospering other than through a more effective European Community, and I cannot see us achieving economic recovery or political stability unless that takes place.

Several hon. Members

rose——

Mr. Deputy Speaker

Order. Speeches are becoming expansionary. I remind the House that long speeches are made only at the expense of other hon. Members' time.

10.14 pm

Mr. Tony Marlow (Northampton, North)

The hon. Member for Inverness, Nairn and Lochaber (Mr. Johnston) took pride in having given way. The whole of his speech was about giving away everything that Britain has to the European Community. He has some endearing characteristics. He finds something wrong in everything that British statesmen say about the Community and something right in everything that European statesmen say about it. Another of his endearing characteristics is that anything that a Community country wants, or anything that the Community itself wants, is right, and they must have it, whereas any demand that the United Kingdom makes on the Community is wrong and curmudgeonly.

I take as my text motion No. 628 standing in the name of my hon. Friend the Member for Crawley (Mr. Soames), and I thank him for the signal service that he has done in putting forward the definitive reformists' motion. I hope that I do not offend him when I say that I have striven for a long time to achieve such a succinct motion. In it, my hon. Friend says that he is gravely concerned for the political future and international credibility of the European Economic Community", a point that was well made by the right hon. Member for Down, South (Mr. Powell), and I shall return to that issue. My hon. Friend goes on to say that the greater interests of Europe—not, note, the EEC— lie not solely in mountains, lakes and money. I caution my hon. Friend. Perhaps he has not travelled sufficiently to know how important those mountains and lakes—and, I must add, forests—are to history and to the cultural identity of Europe. "Powerful forces rise with the mists from our wooded hills and lakes. Do not tamper with them!"

As for money, what has that to do with the political future and international credibility of Europe? It is money that divides and is causing problems and distortions at the moment. It would be naive to believe that the statesmanlike oratory of the participants in each Euro wrangle is not prompted by a finely tuned calculation of the outcome of each policy in terms of national cash flow. It is money that gives ambition to the bureaucrats and hypocrisy to the discussions of Europe's future. Concentration on money prevents the development of policies. It is money that has been the enemy of progress towards our common destiny.

I agreed with every word of my right hon. Friend the Prime Minister when she looked forward to a Europe that would take the initiative on world problems, build a more helpful relationship between East and West and work in partnership with the United States — to defend and promote the values and beliefs of Western civilisation. That is the way to strengthen the political future and international credibility of Europe. It needs no money.

The other European nations may see things differently. Perhaps they want or would accept a greater pile of European money—their vested interests obscuring the underlying realities. The smaller nations, wishing to reassert their nationality at the higher European level, are eager to dispense with their sovereignty and fall over themselves to surrender policies and funds for the Community. Ireland and Italy are already swimming in Community money. They are hooked on the drug and crave more. The benefits to France's swollen agriculture will always exceed any likely membership fee. Germany, guilt-ridden from the second world war and revelling in the rich opportunities provided for her factories, has always been ready to concede in the past.

We joined the Community on the basis of levies plus the 1 per cent. calculation of VAT. There is no moral reason for us to concede an increase, nor is there any sense in it. The Prime Minister has said that we would be prepared to consider an increase in own resources if agricultural spending were brought under control, but after the latest agreement that is hardly the case, with reports predicting a surge of £2,000 million in extra expenditure on the common agricultural policy this year — an increase of more than 20 per cent. In a situation where those responsible for negotiating and discussing the deal are unable to put a figure on it, they are therefore by definition unable to claim that it is under control.

The Prime Minister has also said that we shall consider an increase if there is a fair deal on the budget. When that was first discussed, we talked about making a contribution towards the running costs—the administration—of the EEC. Those costs are 750 million ecu each year. The figure being bandied about in the press as the minimum rebated net contribution that we could get away with is 750 million ecu each year—the whole of the Community's running costs. It is hardly likely that we could accept that as the basis for considering an increase in own resources, especially when that figure can only increase as our GDP and Community expenditure rise; or perhaps as we are booby-trapped in further negotiations.

We have said, too, that we would support new policies within the Community, such as the entry of Spain and Portugal. We are told, however, that because Spain and Portugal are not the wealthiest members of the Community they would be net recipients. Britain is not one of the wealthiest members of the Community. There is no logic in saying that we should pay if Spain and Portugal are expected to receive. We do not receive rebates. Even if we were so generous, and were to have satisfactory answers to the poignant questions put earlier in the debate by my hon. Friend the Member for Mid-Worcestershire (Mr. Forth), Spain and Portugal will not commence Community membership until 1986. There will be a five-year transition period. The cost, at its most generous, will be 5 per cent. of existing own resources. We do not need to consider an increase in own resources at this stage on behalf of the membership of Spain and Portugal.

What about ESPRIT? We have received answers to parliamentary questions about it. It is paid for out of the Community budget at the moment. We do not need more money for that. We want to remove non-tariff barriers to trade. That is cost-free. We want a Community market in insurance and financial services. That is cost-free. We want further industrial co-operation between various firms in the Community. That can be done at a multilateral level by Governments and companies. It has nothing to do with the Commission. We do not want it to get its sticky fingers into that. It is cost-free for the Community, too. There are no policies that we should support that will cost the Community a single extra ecu.

Let us consider what would happen if there were an increase in Community own resources. Where would the money go? There are three possibilities. First, much of it could be wasted. Much money is at the moment. One should consider the report of the Court of Auditors. One should consider the 100 million ecu loss each year on olive oil and the leakage that is seeping into the snakeskin wallets of the Mafia. There could be more waste. Let us not forget that.

Second, there is a suggestion that such an increase could be spent on new policies. What new policies would be better funded by Brussels than by national Governments? I know that my friends on the other side of the Chamber want regional and social policies to deal with unemployment. They are entitled to want that. Would they not rather work out those policies here than have the money and policies laundered and decided in the Berlaymont building in Brussels? Would it not be better if they did that themselves?

The third possibility is the answer to the question: What will the money be spent on? It will be spent on one thing — agriculture. That will happen, whatever we say. It will scoop the pool and take the money. Agriculture Ministers, whatever disciplines appear to be devised by Finance Ministers, will continue to solve their problems at the expense of other people and other programmes. There is no mechanism yet devised, as my hon. Friend the Member for Mid-Worcestershire so brilliantly said, that would overcome that problem.

Of course, we must take account of the needs and wishes of our own farmers. The recent agricultural cuts will doubtless cause hardship. Those hardships will produce political imperatives requiring expenditure. There will be a slump in the price of cull cows, and the beef price will go down. There will be squalls and cries of anguish, and national Governments will be required to provide funds, and why not? There will be different hardships in different parts of the Community. It is better to devise national measures to finance the marginal difference in our agricultural economies than to resort to the hyperactive cash tills and blanket programmes of the Community.

Another reason has been advanced for an increase in own resources. It is the means of negotiating our current and future rebates. Why must we justify it in this way? When we joined the Community we were promised that agriculture, which was then running at 60 per cent. of expenditure, would fall to 40 per cent. of expenditure. It has not. When we joined the Community, we were told that if unacceptable situations arose, solutions would be found. They have arisen, and the solutions should be found. We have a moral right to cut our contribution, particularly because we have reached our present state through the vested interests of the majority of our partners voting for policies that will perpetuate and continue to perpetuate our disadvantage. They vote; we pay. We have a legal right. The House of Commons makes the decisions on how we spend our money. If we have an unsatisfactory situation within the treaty and the Community, we here have the legal right to change that situation. Our case for rebate is just. It is strange that some people consider that justice demands that concessions come from the innocent.

I do not underestimate the difficulty of the task confronting the Government in these negotiations. Everybody has had our money before; everybody is ranged against us—nine against one. I have no doubt that the Prime Minister has fought our battle as nobody else could have fought it. If there is a suggestion that there should he an increase in own resources, it is not the Government or the Council of Ministers that will decide, it is the House and the Parliaments of the several Community countries that will decide. If we are asked for an increase in own resources, it is a constitutional issue of the first magnitude.

Any increase in own resources to the European Community comes from a finite source of money. If the Community has more, we have less. If the Community has more, it will make the decision on more policies and we will decide on fewer. If the Community has more, the European institutions will have more power and we here will have less.

If we agree to an increase in own resources, it will be somewhat akin to loss of virginity. The indulgence could be habit-forming. The House — the mother of Parliaments — could be reduced to a discarded and barren whore.

I am against an increase in own resources. I stand on a platform which is against the increase. I put my standard on that platform. I hope that other Members will do likewise.

Mr. John Home Robertson (East Lothian)

Follow that if you can.

10.26 pm

Mr. Allan Rogers (Rhondda)

It would be very difficult to do that. I am not sure what the hon. Member for Northampton, North (Mr. Marlow) was trying to tell the House, but he was using the most peculiar expressions.

I listened with both pleasure and astonishment to the Foreign Secretary, when he opened the debate. The Foreign Secretary of course, is disguised—I am sorry, described—as a master of detail and negotiation. My Freudian slip is probably more appropriate. I listened with pleasure because, frankly, I like a good laugh and I found the beginning of his contribution very humorous. I listened with astonishment because I came to realise that he actually believed what he was saying.

I in no way doubt his integrity, but one thing that I begin to doubt seriously is his ability and competence to do the job that has been entrusted to him. The record of the Foreign Secretary in this Parliament is absolutely appalling. For him to come back from Brussels with yet another failure does not surprise me at all. If we go over the sorry saga of the last few months—Grenada, where, for some days, he lost the Governor-General, GCHQ and the irreparable damage that he has done to us and to our image in Europe—we see that the Foreign Secretary is not competent to carry out the business of this country in negotiation with our European partners.

This is one of a series of sad failures on his part. His allusion to the petty cash that he lost on the way back from Brussels, as compared with the total success claimed by the Minister of Agriculture, Fisheries and Food, simply illustrates what I am saying. Even our traditional friends and allies in Europe are turning away from us. Many people in Belgium, Holland and Denmark are asking what the matter is with Great Britain when it negotiates on such issues. The Foreign Secretary should resign. It is his function to prepare the details for the Prime Minister to go along to summits and make the deals. When the Prime Minister has gone along to summits, she has come back with failure after failure. The Foreign Secretary needs a rest, and the sooner the Prime Minister gives him a long rest on the Woolsack, the better for the country. We invite the Prime Minister to think of a better colleague to prepare the business of the country. I should not suggest the hon. Member for Crawley (Mr. Soames), who is lounging on his seat. Before he starts shouting across the Chamber, he should do a little homework.

When I was asked to speak, I did a little homework by looking up the statements made after all the summit meetings to which the Prime Minister has been going. I will not bore the House with long extracts, but the meetings start from Strasbourg in June 1979, Dublin, Luxembourg, Maastricht, Luxembourg, Venice — one can go through them and find names that we had forgotten, such as the Lancaster House summit, when we had the presidency. In all these negotiations, in all these sad, sorry stories, every one of the statements is the same, along the lines of, "We fight for Britain, we are batting for Britain." On all these occasions, as on this one, the Prime Minister and the Foreign Secretary have scored "ducks" again.

Mr. Forth

I invite the hon. Gentleman, as I invited the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes), to give us a catalogue of the successes of the Labour Government in their negotiations with the EEC, and then to compare that with the record of this Government, who have obtained magnificent rebates and who have taken us so far in reform of the European Community.

Mr. Rogers

I congratulate the hon. Gentleman on his speech, to which I listened with attention. I admired it. It was superb. The hon. Gentleman and I are old friends, so I was thrilled at what he said. He is right that this is part of a long battle, but when the Labour party was in power we were in the period of adjustment that followed our accession to the Community. After that there was a continual process of adjustment on many points.

Some Conservative Members criticised my right hon. Friend the Member for Lewisham, Deptford (Mr. Silkin), who conducted our negotiations, for being intractable and difficult in his negotiations. He was batting for Britain then, and was castigated by the Conservative party. Now the Conservatives come back, supposedly batting for Britain, but are bringing back no runs for Britain. What do they expect us to do now?

One should put the matter into the context of the first meeting attended by the Prime Minister. I thank the hon. Member for Mid-Worcestershire (Mr. Forth) for reminding me that the Prime Minister, when she reported back from Strasbourg, said: At last, therefore, we have an agreement to tackle the inequitably high contribution that Britain at present makes to the European budget. The time for decisions will be at the next Council. My right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan), the then leader of the Labour party, in reply to the Prime Minister's statement said: The right hon. Lady will have the support of the whole House in continuing the work that we began." —[Official Report, 26 June 1979; Vol 969, c. 288–9.] The last Labour Government, therefore, began the work during the adjustment period.

Mr. Michael Colvin (Romsey and Waterside)

rose——

Mr. Rogers

I will not give way. The reality of this sad and sorry situation, to which we have been led by an incompetent Foreign Secretary, is that we have been sold down the river again. Last year we were sold down the river on the fishing and budget negotiations. We were sold down the river on steel quotas. I point out to the right hon. and learned Gentleman, who may be elevated if my wishes come true, that he ought to judge the proposed quota system very carefully.

When quotas were imposed on the British steel industry, we kept to them, but the Italians and the Germans did not keep to theirs. The Italians are the only nation to have increased their steel production since the Davignon plan came into operation. The Germans, who were fined for over-production under the old system, have not yet paid their fines, although there has been a renewal of the quota system in the last year.

I do not know what quota system will operate in the milk industry, because I am not an expert in farming. However, I advise farmers to be very wary of any system that is imposed from Brussels because, if it operates like the steel quota system——

Mr. Nicholas Fairbairn (Perth and Kinross)

rose——

Mr. Rogers

I will give way to any hon. Gentleman who has been present during the debate, but I will not give way to any Johnnie-come-lately to the debate.

The reality of the deal that has been brought back is that we have been asked to buy our own rebates. We have agreed in principle to increasing VAT contributions to 1.4 per cent. in 1986 and 1.6 per cent. 1988. Who will pay? It will be the taxpayer and the consumer who are now paying food prices far above world prices. The farmers, too, will pay in this deal that is supposedly the first step towards the new European dimension. Who will pay? Saddest of all, the people on fixed incomes will pay, as will the 4 million unemployed and the pensioners, those who cannot adjust their incomes to keep pace with inflation. Who will gain? That was let out of the bag by the Foreign Secretary in his statement. The only positive thing he had to say, on the balance of the new equation, was that London had become the financial centre of Europe. Our manufacturing industry and our farming industry can be destroyed, as long as the friends of the Conservative party in the City of London can be looked after. As long as the Government can manipulate the place where the money can make money, but not jobs and happiness, they will keep us in Europe. This is a sad day because of the last summit. At the end of the day, many of our people on low incomes and our many unemployed will be the ones to pay.

10.40 pm

Mr. Phillip Oppenheim (Amber Valley)

We must not under-estimate the difficulties faced by the Minister of Agriculture, the Foreign Secretary and other Ministers in the farm negotiations. There have been some small successes, for which we must be grateful. The retention of the beef premium and the increase in the wool price are welcome, especially as some dairy farmers will have to turn to those enterprises.

However, we are deeply disappointed not only for the dairy farmers who will suffer but for the taxpayers who will have to pay the extra price for the jobs that will be lost on farms and in the ancillary industries. Asking our farmers to cut milk production by 150 million tonnes—milk that could be consumed in Britain—will mean that less feed will be sold in Britain, fewer tractors, less agricultural machinery, fewer foragers and fewer mowers, and the effect will be felt throughout the economy.

Many people find it incredible that France, which produces 170 per cent. of its dairy needs, has been asked to cut back by less than 3 per cent., compared with a 7 per cent. cut for our farmers who barely produce enough milk for our national needs. The stock answer to that point is that we are in something called the Common Market and, therefore, we must accept common responsibility for common surpluses. But are we really in a common market? Is there a common market in insurance and financial services? Are there really no trade barriers? Can a British microcomputer manufacturer go to France and sell his products to the French Government or to French local authorities?

If we really could do all those things, I would be happier with the agricultural package. As it is, the CAP is the only really common Common Market policy. Now British farmers are being asked to produce less milk than they can efficiently produce — less milk than this country can consume—because the French, the Dutch and the Danes produce more than they can consume.

An argument used by the Minister of Agriculture yesterday to justify the agricultural package was that dairy farmers were warned in 1980 and 1981 that they would be expected to cut back. I wish to remind the House of what has been said during the past two or three years. In June 1980, the then Secretary of State said that he would support proposals for greater responsibility for disposal of surpluses to be placed on those countries that produced the surpluses. As Britain contributed nothing to the surpluses, he said that he would oppose measures that would affect us.

In November 1980, the issue was debated again. During that debate on EEC milk production, both sides of the House agreed that it would be ridiculous to reduce British milk production, as we were not self-sufficient. Even my hon. Friend the Member for Southend, East (Mr. Taylor) asked how, at a time when we were not self-sufficient in food, we could tell British farmers that they should produce less. Now, however, we are being asked to do just that, without even properly examining the alternatives such as price reduction or a system of taking land out of commission— a system that operates very well in the United States. It would probably cost the taxpayer considerably less than the current proposals. That has hardly been touched on in the EEC negotiations.

I am not against the EEC. We as a nation have derived some huge benefits from the Common Market, along with the disadvantages. Our contributions, vast as they are, represent barely 0.5 per cent. of our gross national product, but it has to be recognised that our agricultural interests are totally incompatible with those of the other members, to which it would appear that our farmers have now been sacrificed.

The answer to the problem which has led to this situation certainly does not lie in the muddled policies of the Opposition, whose efforts to get a better deal out of the EEC make this Government's appear vastly successful by comparison. Nor does the answer lie in the increase in own resources to which we have so promptly agreed. The answer, I believe, lies in more national responsibility for surpluses by the nations that produce them, and more use of those surpluses within the Community to benefit Community consumers.

We currently export food at great cost to Russia and import billions of dollars' worth of animal feed from America. Instead, we should denature our surplus grain and sell it to our livestock farmers at export prices to help them and benefit the consumer. Surplus grain should feed British pigs, not Soviet citizens.

Overall, while I wish the Prime Minister and the Foreign Secretary success in pressing our case for a lower net contribution, the agricultural package can only be a source of great concern to our dairy farmers. Dairy farmers in my constituency are left not knowing whether to pour milk down the drain, whether to kill cows or feed them less, and not knowing what to do with the tonnes of cake they have on order. These are hard-working, efficient farmers who have taken the Government's advice and invested and grafted. Now they are to suffer, not because they produce more milk than we want but because continental farmers not only want our taxpayers to finance their over-production, and to have our markets to sell their surpluses to; they now also want our farmers to cut production so that they can sell us more.

They are like a huge, unhealthy, malignant cuckoo that has alighted in our nest and is determined to sit tight and feed off our taxpayers, our consumers and our farmers, and our Government are guilty of allowing them to get away with it. But the real tragedy is that the EEC, which was designed and set up to unite us and to heal old wounds, now itself threatens to divide us further.

10.47 pm

Mr. Dafydd Wigley (Caernarfon)

I listened with interest to the hon. Member for Amber Valley (Mr. Oppenheim) and he, like many hon. Gentlemen, appeared to be putting a stronger and stronger case for taking the United Kingdom out of the EEC. That is the message that seems to be coming across and I am sure that it has been heard on the other side of the Channel as well. I think that all hon. Members recognise that changes in the EEC are inevitable and that pretty large changes will have to come very soon.

I certainly accept that there needs to be change in the CAP. The fact that the common agricultural policy is taking 70 per cent. of the budget is clearly ridiculous. Considering the peanuts that are going to regional policy, clearly what is happening now is not what was promised at the time of the referendum in 1975. The money going into the CAP is not being used in a sensitive and effective manner and I believe that there needs to be a total policy re-think, aiming at a greater equalisation of wealth throughout the Community. The CAP must change, as part of a total policy re-think taking in all aspects of policy, and the changes must be made in a phased manner that does not cause unnecessary chaos and hardship, which is the danger that we are facing now.

Earlier today some figures were published in Cardiff relating to the contributions from Wales to the EEC over the last 10 years, from 1973 to 1982. The total contribution amounted to £736 million, according to this assessment. The receipts by Wales from the EEC in the same period amounted to £576 million, including all the various funds, leaving a shortfall of £160 million. That shortfall would he even larger if things like the regional contributions—which are not additional but are substitutes for money that should have come under other Acts of Parliament—were allowed for. The total shortfall taking that into account amounts to £539 million over this period, or £54 million per annum, and that is £1 per week for every family in Wales.

The point I underline is that Wales, on the recently published league table, is forty-sixth out of 54 regions in the EC in terms of wealth. We are at the poverty end of this league table, yet we have to make that sort of contribution. That underlines the stupidity of the present situation. We want to see strategic budget changes and more money going to regional policy. The money that goes to finance regional policy should be additional to that which is spent under existing Acts and should not be a substitute form of finance. The framework of the Industry Act 1972 is inadequate for ensuring that money for regional policy is provided in sufficient measure.

In the past two years the area which I represent in part, the county of Gwynedd, has received ½ per cent. and 1 per cent. of the money directed to Wales for industrial development. It is amongst the highest levels of unemployment and net outward migration and the lowest per capita personal income in Britain. If the EC funds are to be increased in the way that has been discussed, they must be used much more effectively than at present. We have had harmonisation of the shape of eggs and the insides of chickens, for example, but we need a harmonisation that will bring a better distribution of the wealth within the EC and an equalisation of per capita personal income.

Milk production is of great concern to Wales, as is the impact that the changes to which the Minister of Agriculture, Fisheries and Food agreed will have on the dairy sector in Wales. In 1980, Welsh dairy farmers produced 1,575 million litres of milk. By 1983, production had increased to 1,772 million litres. The increase was more than 10 per cent. over those three years and it was deliberately encouraged.

Some parts of Wales will be hit particularly hard by the changes which were announced over the past weekend. For example, the county of Dyfed produces half of the total production of milk in Wales. Of the 5,291 specialist dairy holdings in Wales, 3,269 of them are in Dyfed. There are twice as many milking cows in Wales in relation to the population as there are in England. The absolute level of milk production is greater in Wales than in Scotland or Northern Ireland. Milk as a component of GNP in Wales is over twice as important as in Britain as a whole. I contrast the settlement for the milk sector with that for the cereal sector. The 1 per cent. cut in price will do nothing to deal with the EC's chronic wheat surpluses.

In the statement made yesterday the dairy settlement was described by Conservatives in various unfavourable terms. The hon. Member for Norfolk, North (Mr. Howell) described it as a "feeble settlement". The hon. Member for Torridge and Devon (Sir P. Mills) said that the effect on the very small dairy producer in the wet areas will sometimes be disastrous". That is exactly what it will be in parts of Wales. The hon. Member for Horsham (Mr. Hordern) commented that the result of the settlement will be larger and more expensive surpluses, the impoverishment of the dairy farmer and the continued enrichment of the cereal farmer." — [Official Report, 2 April 1984; Vol 57, c. 665–666.] That is what we are fearful of in Wales. We are very dependent on dairy fanning, and cereal production plays a much smaller part of our farming. The settlement is directly contrary to the interests of Wales.

There has been the lack of strategy for milk over recent years. A few years ago farmers were being encouraged to leave milk; they were being bought out. They were then allowed to drift back into dairy production. At that stage Ministry experts were encouraging them to produce more milk and the result was a 10 per cent. increase from 1980 to 1983. The dairy farmers are now facing a bleak future.

Farmers in Wales invested from 1980 to 1983 so that they could contribute effectively to the increased production. They borrowed to do so — that was the advice that they received — and now they are facing disaster because of the changes that the Government have conceded. It has been assessed that between a fifth and a sixth of Welsh dairy farmers could be forced out of business as a result of the changes. Over 1,000 dairy farmers in Wales are going on to the rocks.

Sir Anthony Meyer

The plight of the Welsh dairy farmers is one that must give us all great concern. As the hon. Gentleman and others have said, the dairy farmers have been encouraged over the past few years to produce more and more milk. If they have increased their production, they did so against a background which should have led them to be perfectly well aware that the day of reckoning was bound to come. The warnings were written up plainly that the lunacy could not continue. To speak as if they were being led down the road to the day of reckoning is rather to mislead opinion on this issue.

Mr. Wigley

The Minister conceded yesterday that circumstances had encouraged farmers to develop dairy production. It is not good enough to blame the farmers for responding to pressures from all directions. There is now talk in Wales of blockades of tractors to express dissatisfaction with what is happening. That is a direct result of the corner into which farmers have been driven by the Government's settlement. The ridiculous thing is that we have not yet reached self-sufficiency in milk products in these islands. If there is a milk lake, why not make the cuts in areas that produce too much instead of hitting Wales at a time and in a way that will be so devastatingly hard to bear?

The contrast with Ireland is stark. Ireland succeeded in achieving a special package. A good friend of the hon. Member for Clwyd, North-West (Sir A. Meyer), the MEP for North Wales, Miss Beata Brookes, is reported in the Western Mail as saying that she had sent telegrams of protest to the Secretary of State for Wales, the Minister of Agriculture and the EEC agricultural Commissioner over milk. The report said that she was upset that concessions had been made to Irish dairy producers without equal consideration for those in Wales. Concessions were made because the Irish had a voice in the negotiations. Where was the voice of Wales in those negotiations. Where was the voice of Wales in the Council of Ministers to defend the interests of dairy farming in Wales, which is as vital to Wales as it is to Ireland? The Irish had a voice; we did not. They have 15 MEPs; we have four, although the size of our populations is identical. When the chips are down and negotiations take place, because we do not have a voice, our farmers suffer. They will go out of business as a result. The lesson is clear for the people of Wales.

An editorial in The Irish Times states: The eleventh-hour agreement in Brussels, and the concession to Ireland, were a recognition of the Republic's national interest. There was an appreciation that the farming economy here differed widely from the rest of Europe, and that any serious alteration would be harmful to the whole economic fabric of the nation. The Irish nation has been considered. The Welsh nation has not. Absentee representatives do not put our interests high enough when the stakes are discussed.

The loss of income to the rural areas not only involves the 10 per cent. loss to farmers. It has a spin-off effect through the countryside. In many rural areas of western Wales subsistance farming is the pattern. We are not talking about the fat pigs and cows of eastern England. We are talking about the economy of areas where shops and schools will close and buses will stop as a result of the cuts. The domino effect will travel throughout the Welsh countryside as a result of deliberate Government policy.

We seek assurances. In the long term we need a change in EC economic policy and in the CAP structure, but immediately we need assurances that a longer transitional period will be allowed to permit dairy farmers to adjust. Quotas should not be set in a uniform manner. We must have flexibility so that quotas are applied on a farm-by-farm basis. We need a low-interest loan fund to help farmers in difficulty over this period.

We also want an assurance that the Welsh Office, members of which have again been absent from the Chamber for this debate, will take a part in defending the interests of Welsh farmers. We want an assurance that the National Farmers Union of Wales has been, and will be, involved in negotiations.

As the hon. Member for Rhondda (Mr. Rogers) said, the Minister let the cat out of the bag when he said that one compensation arising from recent negotiations, was the benefit that would go to the London financial centre. That is the lesson that comes home to Wales. Our national interest has been sold down the river for the benefit of the City of London.

10.59 pm

Mr. William Powell (Corby)

Those of us who have sat through the past four hours of debate recognise that it has been of very high quality and that most of the important points have been discussed. I wish to concentrate on two matters, both of which go to the heart of our present relationship with Europe.

The first concerns surpluses within the Community. With all the romantic connotations of his constituency, one might expect the hon. Member for Inverness, Nairn and Lochaber (Mr. Johnston) to take a rather romantic attitude to things. Alas, however, when my hon. Friend the Member for Southend, East (Mr. Taylor) put the crucial question to him about how to dispose of surpluses, he was unable to answer. The hon. Gentleman asked for more time to adjust which inevitably means greater surpluses.

Surpluses have to be disposed of and the cost of their disposal has become the cancer within the Community. There can be no ducking that. Impressive though their analysis was, my hon. Friend the Member for Amber Valley (Mr. Oppenheim) and the hon. Member for Caernarfon (Mr. Wigley) made one factual error. In fact, we are in surplus in dairy products.

Mr. Oppenheim

Will my hon. Friend give way?

Mr. Powell

Moreover, the surplus is increasing.

Mr. Oppenheim

rose——

Mr. Powell

It is not so great as in some European countries, but we are in surplus.

Mr. Oppenheim

Will my hon. Friend give way?

Mr. Powell

No, I will not give way. We are in surplus in liquid milk.

Mr. Oppenheim

rose——

Hon. Members

Give way!

Mr. Deputy Speaker (Mr. Harold Walker)

Order. The hon. Member for Corby (Mr. Powell) is clearly not giving way. The hon. Member for Amber Valley (Mr. Oppenheim) must not persist.

Mr. Powell

Taking into account the butter that we have specially decided to import from New Zealand, we are also in surplus in butter fats. That surplus, too, is increasing. I give way to my hon. Friend.

Mr. Oppenheim

I am grateful to my hon. Friend. Overall, taking all dairy products into account, we are not in surplus. Although we are in surplus in some types of dairy product such as butter fat, in others we are in deficit. Overall, we are not in surplus in dairy products. That is a fact.

Mr. Powell

The Minister has said that our dairy produce is 108 per cent. of our requirements and rising. That suggests to me that we are in surplus, even including the New Zealand element which is also important. In any event, we are part of one common market. We cannot belong to a common market and then ignore its existence. That must be taken into account, as well as our domestic situation.

The real tragedy of farming policy in the Community is that it does not provide the one thing that it was supposed to provide for farmers—an income comparable with that which can be earned in urban surroundings—because 60 per cent. of the cost of the CAP is spent on the storage and disposal of surpluses. Therefore, there can be no solution to our problems in the Community until we can solve the problem of surpluses. Those who fail to answer the question that my hon. Friend the Member for Southend, East put to the hon. Member for Inverness, Nairn and Lochaber about how to dispose of the surpluses must therefore concede that that question cannot be avoided.

Unfortunately, I detect that there are still those who seek to pile surplus upon surplus. It is to the credit of my right hon. Friend the Minister of Agriculture, and of the Minister of State, that they have tried mightily to come to terms with the question of surpluses. They have not totally succeeded. We still have a large surplus. We may manage to dispose of some of it on world markets this year, but we may be left with quantities of dairy produce which we are unable to dispose of. We must devise policies which will permanently dispose of the problem. It is the cancer which is eating away at the budget side and the agricultural sector, and there is no avoiding it.

To those who contemplate an increase in own resources, I have to say that if the purpose of increasing own resources is merely to allow greater flexibility on the agriculture budget, that will not solve the essential structural difficulty.

The other main theme of the debate was introduced by the right hon. Member for Down, South (Mr. Powell). He referred to the paradox which is central to our relationship with Europe. He talked of the incompatibility of our perceptions, our economies and our political and constitutional arrangements. In contrast, he talked of Europe as a crucible of humanity to which we are inextricably bound. How right he is. That paradox is central to our whole unhappy relationship with Europe.

Over the years, we have pretended to a special relationship with the United States. We have an utterly necessary alliance with the United States, and relations between the leaders of both countries, of both parties, have been excellent. But our true special relationship is with Europe, although we have been unable to work it out satisfactorily. One of the tasks that my generation will face in the coming years and decades will be to try to establish a satisfactory relationship with the countries of mainland Europe — a relationship not bedevilled by the cancer growing in our midst.

My right hon. and hon. Friends on the Treasury Bench will have the support of us all as they try to come to terms with those problems. It may take them longer than we would wish. There may be further depressing debates in this House as the date of the solution to the problems is postponed again, but the problems must be solved. We must all show patience if we are to achieve a solution which will enable us to develop the satisfactory relationship to which the right hon. Member for Down, South so tantalisingly alluded.

11.7 pm

Mr. Robin Cook (Livingston)

The hon. Member for Wolverhampton, South-West (Mr. Budgen), in an intervention in the speech of my hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes), said that it had become a convention in the House that anyone returning from Europe claimed to have achieved triumph and success. Any hon. Member who cares to look back over the many speeches that I made in the previous Parliament replying to debates on the Finance Bill will find that I could be thought to have adopted a convention of saying that the House had had an excellent debate. However, I am not merely making a conventional statement when I say that tonight's debate has been outstanding. There have been a number of first-class Back-Bench speeches which have contributed to the development of our thinking about Europe. It is a tribute to the quality of those speeches that for long periods there were very few interruptions from the Government Benches.

However, I must make one partisan point. It is because we have had such a successful debate of a high standard that one must place on record at the outset regret that the debate was shortened by half an hour by the frivolous and vexatious use of Divisions of the House by minority parties. The hon. Member for Inverness, Nairn and Lochaber (Mr. Johnston) said that we should try to pursue the negotiations in a spirit of good will. I understand what the hon. Gentleman meant. It is true that the other Prime Ministers who emerged from the closet in which they were held with our Prime Minister did not appear to have been impressed by the rationality and powerful logic of the British case, nor convinced by the sweet reasonableness with which it was put forward.

I understand the hon. Gentleman's criticism of the way in which the negotiations were pursued, but if he and his colleagues from the alliance parties wish to pursue what I understand to be their grievance about the allocation of time, it would be much better done in ways that did not detract from our opportunity to debate the future of Europe and to hear serious speeches such as those that we have heard since we completed that series of Divisions.

I must also tell the hon. Member for Inverness, Nairn and Lochaber that it would be of interest to Labour Members if he were to inquire of his colleagues in the SDP where they have been this evening. This is the third debate on European affairs in the House since the turn of the year, and SDP Members have completed a hat trick of not contributing to any debate, nor even of being present for most of them. It calls in question the rhetoric of those SDP Members who are fond of saying that they, and they alone, hold the key to the vision and the ideal of the future of Europe.

One striking feature of the debate has been the lack of support from either side of the House for the package that looks like emerging from the negotiations in which Ministers have been engaged. [Interruption.] The hon. Member for Wirral, South (Mr. Porter), from the sedentary position which he has maintained all evening, says that that is not true—[Interruption.] I am sorry; I understand that it was not the hon. Member for Wirral, South who said that. However, of those Conservative Members who managed to raise themselves into a standing position, only the hon. Member for Wantage (Mr. Jackson) could be described as supporting the package. From all other quarters there has been criticism.

I say that not in a partisan sense. Two of the outstanding speeches of the debate came from Conservative Members —the hon. Member for Mid-Worcestershire (Mr. Forth) and the hon. Member for Wells (Mr. Heathcoat-Amory) —both of whom deployed devastating arguments against any increase in own resources. I hope that I will not cast a permanent shadow on the prospects of the hon. Member for Mid-Worcestershire if I say that he made an excellent and refreshing speech. My only criticism of his speech is that at the end he made a completely convincing case against an increase in own resources and then said that he had an open mind on the matter. I recommend the hon. Gentleman to read his speech in Hansard tomorrow and then to recognise that, in the light of his speech, he cannot escape the logic of his position. He is obliged not to have an open mind but to oppose an increase in own resources.

The hon. Member for Wells deployed the case for Britain with great reasonableness and lucidity. I am tempted to speculate—this will probably cast not just a shadow but a positive pall over the hon. Gentleman's prospects—to what extent the British case might have been advanced in negotiations had it been maintained with the clarity and rationality which the hon. Gentleman showed in his speech.

There is a clear gulf between the approach of those hon. Members and that of Ministers. Both hon. Members and several others who have spoken in the debate have considered the case for an increase in own resources on its merits; having done so, they were driven to the inevitable conclusion that there is no case for increasing EC own resources. However, Ministers have now trapped themselves in the position that they no longer regard the increase in own resources as a matter to be judged on its merits, but as a bargaining chip to be surrendered in exchange for concessions. We heard of a further concession which is now being entered against that bargaining chip which makes it more difficult for the right hon. Gentleman to withhold the bargaining chip, namely, the British refund for 1983.

This is a new development. Hitherto we have been assured that if the rebate was not paid by the deadline of 31 March — a deadline chosen by the Government themselves—then action would be taken to safeguard the British position. Those were the words that were used several times in the period up to 31 March. It is barely a month since the Foreign Secretary chided me for suggesting that there was no realistic possibility of the rebate being paid by the deadline. I take it that the Foreign Secretary will not dispute the issue with me now. The deadline is past and the rebate has not been paid. We can all agree on that and that is common ground between the Front Benches.

There is not even a promissory note that the rebate will be paid. There is no guarantee that even at Fontainebleau they will obtain the rebate. Yet a curious change has occurred in the rhetoric. During the period in which the Foreign Secretary was assuring us that there was a realistic possibility that the deadline would be met, the air was heavy with threats of swift and sever vengence if the deadline was not met. Now the deadline has passed and these threats of vengeance have evaporated.

I remember distinctly the appearance of the Prime Minister when she returned from Brussels. She came to the House and gave us one of those magnificent impersonations of Boadicea rampant. She assured us not just once but three times that action would be taken to safeguard the British position if the deadline was not met. In case anybody was in any doubt about what she meant, she spelt out previous occasions on which member states had withheld contributions to the EC.

The next day there was a sudden pax in that position. The right hon. Member for Old Bexley and Sidcup (Mr. Heath) and a few confreres appeared to have succeeded in unhitching the chariot of Boadicea. Unforeseen, unanticipated treaty obligations were discovered. There were legal and diplomatic complexities which no one had thought of explaining to the Prime Minister and the Foreign Secretary when they were threatening to safeguard the British position. All of a sudden the deadline has passed and we find that no action is to be taken on the failure of the EC to pay our rebate by the deadline.

The House will be aware that the view of the Opposition is that we should withhold contributions up to the amount represented by the rebate which has not been paid to us and to which we are entitled. Let me say in a spirit of conciliation and in the non-partisan mood that has marked much of the debate that I recognise that there is an alternative case, argued eloquently by the right hon. Member for Old Bexley and Sidcup, that such an action would merely raise temperatures and exacerbate the situation.

I must point out that the Government have chosen the worst of all possible worlds by threatening to withhold if the deadline was not met and then backing off from the threat. They have put themselves in the position which is the classic failure of any negotiator: they have bluffed, and their bluff has been called and it has been seen to be empty. For that reason when they return to the negotiations they will find their position weakened.

Now we are told that they will not withhold contributions but that they will not agree to an increase in own resources until the rebate is paid. The bargaining chip of increasing own resources becomes weakened by having yet another concession attached to it.

I listened with great care to the Foreign Secretary's speech. I noticed that at no time during the half hour for which he addressed the House did he attempt to make the case for an increase in own resources on its merits. The hon. Member for Edinburgh, Pentlands (Mr. Rifkind) is to reply to the debate. It was he who in the House in February 1983 said that no such case could be advanced with conviction. When he replies, I ask him to address his mind to the merits of an increase in own resources, irrespective of its utility as a bargaining chip.

The sums involved are large. For 1986, the Government have accepted, subject to agreement and budgetary balance, an increase to 1.4 per cent., an increase of 40 per cent. at the present VAT level. That represents an increase of £675 million per annum. They have accepted in principle after that a target increase to 1.6 per cent., a 60 per cent. increase. That represents an increase per annum of £1 billion. President Gaston Thorn has described those increases as unacceptable, and many hon. Members will agree with that description, except that President Gaston Thorn regards them as unacceptable because they are not big enough. He wants to see an immediate increase to 2 per cent.

He has shown great moderation because I understand that the extreme position of the Liberal party is to increase own resources not just to 2 per cent. but—if the detail of the speech of the hon. Member for Inverness, Nairn and Lochaber has been correctly reported to me — to something over 2 per cent. , which would represent over one fifth of the total tax take from VAT in the British isles.

I strongly urge the hon. Member to make sure when he stands in the European elections that he figures prominently in his election address that commitment to double the VAT paid by his electors to Brussels. If he does not, we have ways to ensure that his electorate gets to hear about it.

Mr. Johnston

I am sure that the hon. Gentleman wishes to be fair. He will perhaps concede that when I said that an increase of that order was desirable, it was to make possible an increased research programme, an increased regional programme directed at jobs and an increased social programme directed at helping ageing industries.

Mr. Cook

The hon. Gentleman is calling on us to double our VAT payments. The question that will be asked by his electors in the Highlands and Islands is what evidence there is from the experience of the EEC that if we doubled our payments, that would result in a doubling of the regional and social funds rather than a doubling of expenditure on agriculture.

Sir Anthony Meyer

rose——

Mr. Cook

I will not give way. I agreed to curtail my remarks to allow another hon. Member to speak in the debate.

The size of the figures are such that they exceed the sums being debated as the refund for the British budget contribution; £675 million in 1986, which is more than the £600 million offered by Chancellor Kohl at the summit, and £1 billion thereafter, more than the £737 million, which represents the top demand by the British Government. In other words, we are being asked to strike a very odd bargain indeed. To get our refund, we shall agree to increase payments by more than the refund that we were to get when we agreed to increase own resources.

From where will that money come? The hon. Member for Wells made the pertinent point that we live under a Government—of which we on these Benches are well aware — who are committed to cutting public expenditure and taxation. There is no provision in the public expenditure White Paper for this increase, so what further cuts in domestic public expenditure or what widening of the tax base do the Government propose to raise this money, now that they have brought within the VAT net the fish and chips and do-it-yourself joinery shops of the nation?

If we are to be confronted with such a widening of the tax base or a further cut in domestic expenditure to make room for this additional payment to Brussels, we shall have to look very hard indeed at the bargain that we obtained with this bargaining chip.

That brings us to the heart of many speeches made tonight — the agricultural settlement reached over the weekend. We have been assured by the Government that effective control of Community expenditure, particularly agricultural expenditure, is one of the conditions that they will extract for this precious bargaining chip.

We have before us the agricultural settlement of last weekend. There is one outstanding feature of the settlement. It is that it will not result in a reduction in expenditure. It will not even stabilise expenditure. It will result in an additional increase in expenditure. I asked the Foreign Secretary how much it would be. He replied by saying that the Minister of Agriculture, Fisheries and Food had told us yesterday. I am sorry to say that he was mistaken about that. The Minister said yesterday: With regard to the cost of the package, the same position arises every year. One can never tell what it will be, because one does not know what will be the amount of money needed to implement the intervention prices. The hon. Gentleman should know that that can never be quantified."[Official Report, 2 April 1984; Vol. 57, c. 672.] That statement does not smack of firm budget discipline. There is no effective control of expenditure embodied in that statement by the Minister only yesterday.

However, the House is fortunate in that there are other commentators who will put a price on the package. For instance, there is the Commissioner for agriculture, Mr. Poul Dalsager. He has stated that the additional cost of the settlement at the weekend will be £500 million per annum over and above the estimate provided for agriculture expenditure. Mr. Dalsager is the man who complained a couple of months ago that some Governments seem to think that reforming the CAP is a matter of ordering smaller oysters and a cheaper brand of champagne, and the Agriculture Council responded, to his irritation, by ordering larger oysters and a more expensive brand of champagne.

Moreover, that increase of £500 million comes on top of an agriculture budget that is already overspent. President Gaston Thorn said a fortnight before the weekend settlement that even without an additional increase in expenditure, the agriculture budget would be overspent by £900 million to £1,200 million. Let us add to that the £500 million cast away last Saturday and Sunday. We are left with an overspend of £1,500 million to £2,000 million, on a budget that started with a base of less than £10,000 million. If such an increase represents the Foreign Secretary's understanding of the effective control of expenditure, I can well understand why, having achieved that effective control of expenditure, it is necessary for him to agree to an increase in own resources to pay for it.

The remarkable feature about the increase is that the Agriculture Council arrived at the settlement when, by common consent, the EEC is going bankrupt. What firmer budget discipline could we hope to impose upon the Agriculture Ministers than the fact that if they do not agree to contain prices, the cheques will bounce at the bank some time in the summer or autumn? Yet they still come up with a 15 per cent. to 20 per cent. increase.

The Foreign Secretary said that that increase represented a start in controlling expenditure on the CAP; that it was a first step towards effective control. However, he also said that we have a long way to go. I am sure that every hon. Member will agree with him on this point, if on nothing else—we have a long way to go from the package to effective control.

That being so, it is surely logical for the House to wait until we arrive at the point to which there is a long way to go before we agree to any increase in own resources that will relax the discipline imposed on Agriculture Ministers last week.

Mr. Jackson

I know that the hon. Member likes to rise above vulgar detail, but perhaps he might like to recognise that a large part of these additional costs comes from changes in the MCA system of the kind for which he has been pressing, revaluations of the green currencies.

Mr. Cook

Unfortunately, that is precisely not the change for which I have been pressing. Everybody else is going to change their MCA but in Great Britain there will not be a revaluation of the kind that we have requested. The 5 per cent. tax on food prices will remain in Britain but nowhere else.

I conclude this passage on agriculture by quoting the words of the Minister of Agriculture Fisheries and Food. I am sure that those on the Government Benches will not accuse me of partiality if I quote what their own Minister has said. As the negotiations were proceeding, the Minister made a statement that is worth repeating and putting in the record. He said, We must continue to live within our means. He added—and hon. Members will recall that this came before the summit in Brussels— But if the Summit were to tell us that more money was available, that would be different. In those two short sentences the Minister of Agriculture summed up with a brilliant succinctness the case against agreeing to an increase in own resources. If it is the case that the situation will be different if we gave them more money, surely that points more compellingly than any other argument against increasing own resources until we have demonstrated that we have arrived at the effective control of expenditure that, the Foreign Secretary agrees, we have still a long way to go to reach.

We are at the moment debating the outcome of the third summit in just under a year. The first summit managed to agree an agenda for the next two summits. The last two summits have been unable to agree even on an agenda for the subsequent summit. There is a record of failure over the past nine months.

What is particularly disappointing about that failure is that the crisis in the Community is also an opportunity, an opportunity to secure the fundamental reform that, all too plainly, the Community needs, an opportunity to find the new sense of direction that, all too plainly, the Community has lost. That opportunity is now being frittered away. It is quite clear that, whatever fudge emerges at Fontainebleau, or between now and Fontainebleau, it will not include any fundamental reform of the common agricultural policy. It will not include any increased expenditure on the regional and social funds; indeed, we may well find over the next few months those funds curtailed in order to provide additional expenditure on the rollercoaster of agriculture. That new direction will not include any new initiative to tackle the problem of mass unemployment throughout Europe because three times——

Mr. Porter

Will the hon. Member give way?

Mr. Cook

No, I will not give way. I am concluding my remarks in order to let the Minister reply.

Three times the Prime Ministers of Europe have met and on none of those occasions have they produced a single constructive, positive idea to reduce unemployment in their countries.

One thing is quite clear. When that fudge emerges, although none of these fundamental changes will be included in it, it will include a requirement on Britain to pay even more to the EEC, in order that it may go on as before, spending that money on an agricultural policy that has never suited the British consumer and which, we learn from Members on the Government Benches, now does not suit the British farmer either.

The Government Front Bench have failed. They know that they have failed. We can tell that they know that they have failed by the timid refuge that they have sought tonight behind the motion on the Adjournment of the House. Those on the Government Benches know that we pressed them to put down a substantive motion to which we could propose an amendment that would argue our case, in order that the House might come to a considered and reasoned view. They have avoided the pressure. They have offered us only a motion——

Mr. Porter

Rubbish.

Mr. Cook

The hon. Gentleman says, "Rubbish". I would invite him to look at the Order Paper. If he does so, he will find that the House is debating tonight merely a motion to adjourn the House.

If we are to be faced only with the miserable device of an Adjournment motion, and that is to be the only way that we can express our view, we shall divide the House. We do so not so that the House may adjourn, but so that we can record our dissatisfaction at the Government's failure to reach an agreement that safeguards British interests, our condemnation of their retreat from withholding, and our determination that out of this failure there shall not arise any projects by which the Government may come to the House and suggest that there should be an increase of own resources to Brussels, to be paid by the British people.

11.35 pm

The Minister of State, Foreign and Commonwealth Office (Mr. Malcolm Rifkind)

The hon. Member for Livingston (Mr. Cook) concluded his speech with a rousing condemnation of the Government for not allowing an Opposition amendment to be put down on which they could have expressed their views and divided the House. He has a nerve to suggest that the Government could be condemned on that basis. In the past two debates that the House has had on the European Community, the Opposition have put down amendments in both cases. On the first occasion, the amendment called on the House to reject any suggestion of an increase in own resources. When the House came to vote, the amendment was defeated by over 300 votes to approximately 60. Where all the Labour Members were, and why they had failed to come to express their view, the House has never had the benefit of knowing. On the last occasion that the House debated the Community, the hon. Gentleman again put down an amendment, calling on the Government to withhold our contributions to the European Community if the refunds were not paid, and that was in advance of there being a threat that that would happen. When that debate ended, the hon. Gentleman did not even divide the House.

I agree with the hon. Gentleman's opening remarks. The quality of the contributions from the Back Benches has been very high. I also agree with his rebuke to the SDP. Its members have failed to be present during the debate. It is a party that, although small, contains not only a former Foreign Secretary but a former President of the Commission, but in the past three debates neither of them made any attempt to contribute their views, and those of their party, on one of the most crucial issues before the United Kingdom. That shows an extraordinary negation of duty and of their responsibilities. Even the hon. Member for Inverness, Nairn and Lochaber (Mr. Johnston) does not jump to the defence of the party.

There has been a wide spectrum of contributions to the debate. The House listened carefully, as it always does, to the right hon. Member for Down, South (Mr. Powell). He expressed the view, which the House received in a thoughtful fashion, that, while there was no basic incompatibility between Britain and Europe in the geographical and historical context, there was, nevertheless, a fundamental incompatibility between Britain and the EC. I listened with care to the right hon. Gentleman, although this is a view that he has expressed often before. However, his proposal that there is something that cannot be remedied in the relationship between Britain and the Community and that that shows a basic incompatibility, cannot be sustained.

Perhaps the most important explanation of why in the 10 years since our membership there have been successive negotiations, and attempts to change the way that the Community operates from the point of view of the United Kingdom, is not because of a basic incompatibility in the concept of the Community, but arises out of the fact that we were not a member of the Community when it first began, and were not present when the present system of own resources was negotiated.

One of our fundamental problems has been that of trying to change the rules and regulations of a Community of which we could have been a founder member—an opportunity of which, for various reasons, we chose not to take advantage. One cannot help but recollect the remark made by Alfonso, a medieval king of Spain: "If I had been present at the creation, I would have had some useful hints for the better organisation of the universe." That is a view which could equally be expressed by those countries that have joined the Community since its inception.

The hon. Member for Livingston and his hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes)—

Mr. Porter

It is not for me to explain the views of the right hon. Member for Down, South (Mr. Powell). As I understood it. he was trying to be helpful to the Government by indicating that, in his view, the arrangement reached between the agriculture Ministers was a fundamental shift which had occurred as a result of the persistence of the Prime Minister, and he was offering a new view from his new position in Northern Ireland. Perhaps my right hon. Friend is misunderstanding what the right hon. Gentleman said.

Mr. Rifkind

No, I freely acknowledge that with much of what the right hon. Member for Down, South said I happily agreed, and I shared his interpretation. The remarks I was making related to the suggested incompatibility of Britain with the European Community; that is a point that the right hon. Gentleman has held all along with complete consistency from the beginning of the debate.

The hon. Member for Livingston, on several occasions, I am bound to say, has sought to misinform and mislead the House. Only last week he waxed indignant when my right hon. and learned Friend the Foreign Secretary announced that the United Kingdom was going to refuse to pay an advance of £100 million demanded by the Commission. The hon. Gentleman, with great indignation, said that that was a worthless gesture, because the sum that the United Kingdom was declining to pay would in any event, according to him, fall due a few days later, last Sunday, on 1 April. I can only advise him that, in future, when that date, of all dates, is recommended to him, he should treat it with special caution; because he was wrong on that occasion, and in a substantial way.

Not only would the sum have fallen due in some three weeks' time, but the action of my right and learned Friend and of the Government was fully vindicated two days later when the Commission withdrew the application for an advance, not only from the United Kingdom, but from other member states of the Community. Having sought to mislead the House only last week, the hon. Gentleman might have done the House the service to which it is entitled, and apologised for the misinformation that he gave on that occasion.

Mr. Robin Cook

The Minister has made a point which is perfectly correct, in that I understood that it was an advance payment of VAT, paid not on 1 April, which I did not say, but on 2 April. It was intended to be an advance payment of a customs levy due on 20 April. fully concede that the Foreign Secretary was standing up firmly, resolutely and determinedly for a full fortnight, which I had not allowed for in my calculation. If the Minister seeks to suggest that that was a worthwhile, and not a worthless, gesture, he will surely recognise that on Friday last week the Commission announced that it did not need our money anyway, so who was impressed by our withholding it?

Mr. Rifkind

The hon. Gentleman has spent some time admitting that he was wrong last week. It is a pity that he could not have admitted that he misled the House in his own speech, rather than having to have it drawn out of him like a tooth that needs to be extracted.

His hon. Friend the Member for Thurrock (Dr. McDonald), who wound up in the last debate on the European Community, also sought on that occasion to create an atmosphere of doom and despondency within the House. She made a prediction then that the Government were going to make some sort of soggy compromise at the Brussels summit. When the Government showed that they were standing absolutely firm by the national interest, she and her hon. Friends turned to accusing the Government of intransigence and rigidity. I am bound to say that to expect objectivity from the Labour party on our European Community negotiations would be like expecting a cannibal to be objective in a lecture on vegetarianism.

Mr. Bermingham

Will the Minister assist the House and the country by answering two questions? First, when will we obtain our rebate; and, secondly, what compensation, if any, will be paid to farmers in my constituency who will have to slaughter their cows?

Mr. Rifkind

Those are somewhat different questions, and I shall come to them later if I can. I assure the hon. Gentleman that there is no dispute about our entitlement to a refund—it is the date of payment that is in dispute.

The Leader of the Opposition, who I am glad to see in his place, when he spoke after the Brussels summit and sought to interrogate my right hon. Friend the Prime Minister, made the most astonishing suggestion. He said: Is it not the case that, nearly nine months after the Stuttgart summit, the Prime Minister is now even further away from securing agreements to end the injustice of the British budget deficit". — [Official Report, 21 March 1984; Vol. 56, c. 1050.] I do not know whether that question was drafted for him by the hon. Member for Livingston or whether it was the product of the right hon. Gentleman's fevered imagination. All that I can say is that he was gloriously and outrageously wrong. If he does not believe me, he need only ask the Prime Minister or Head of Government of any other member state. If the right hon. Gentleman needs to be educated, I am happy to respond to that request. I shall tell the right hon. Gentleman and his hon. Friends exactly what the Government have achieved in the nine months since Stuttgart.

As an aperitif, I shall comment on the achievements of the Labour Government. [HON. MEMBERS: "No."] We must have a proper basis of comparison. During five years of Labour Government, there was much sound and fury, that produced nothing. Not only did the Labour Government alienate every one of our Community partners; they did not return with a single, solitary ecu of refund for the United Kingdom; nor did they achieve a single, solitary reform of the budgetary system.

Let us compare that with what the Government have already achieved on the budget deficit since the Stuttgart summit. First, the Community has now agreed quite unanimously that it is necessary for the future that the burden of supporting the Community's expenditure should take into account the relative prosperity of member states. That principle was not accepted until after the Stuttgart summit. It was the first achievement that the Government can claim. The second achievement that we can legitimately claim is that there is now unanimous acceptance that solution to the budgetary problem must not rely on annual haggles and crises, but that there should be a lasting system that, in a proper and acceptable way, will meet the United Kingdom's requirements.

The third achievement is the unanimous acceptance by all the member states that in future the proper way to deal with the British budget problem is not by finding new artificial forms of expenditure, but by reducing the contributions of the United Kingdom to the Community's finances. That is the third achievement that this Government have to their credit.

The fourth achievement is agreement by our colleagues in the Community that, in devising a system for the future, a Community not of 10 but of 12 should be taken into account, in order to anticipate the consequences of the enlargement of the Community. The fifth achievement is an agreement on the sum that is to be paid to the United Kingdom, which has now been narrowed to a gap of only 250 million ecu.

If the Leader of the Opposition does not believe that all that adds up to the most dramatic progress that has been achieved in many years in the resolution of the United Kingdom budgetary problem, I can only say that his understanding of logic explains why he considers that his total climb-down and abject surrender on the Elgin marbles should be considered a triumph of negotiating skill.

Mr. Ron Leighton (Newham, North-East)

Would the hon. Gentleman tell the House how many ecus net were paid into the budget in the last five years of the Labour Government and how many ecus have been paid into the budget in the five years of his Government?

Mr. Rifkind

The hon. Gentleman is well aware that Britain's net unadjusted contribution has continued to increase since our membership began. What the Labour Government tried to do was to negotiate a formula that would rectify that situation. They in fact negotiated a formula that had not the slightest effect on our budgetary burden.

Mr. Marlow

Now that we have finished with the history, could my hon. Friend concentrate on answering the very important question asked by the hon. Member for Livingston (Mr. Cook) and several other hon. Members during this debate? What justification, if any, can there be for an increase in own resources, and what will the money be spent on? Every hon. Member who has spoken this evening thinks that the only thing the money can be spent on is agriculture.

Mr. Rifkind

My hon. Friend will be well aware that the question of an increase in own resources need be addressed if, and only if, there is agreement on the two fundamental questions that the Community is addressing at the present time. One is the control of agricultural expenditure and the other is an acceptable solution to the British budgetary problem. The arguments that have been used in support of an increase in own resources, as I am sure my hon. Friend must know, include the enlargement of the Community; any increase in the regional and social funds—the Government have said that they are prepared to support some increase in the regional and social funds — and new policies of a kind similar to ESPRIT, although ESPRIT itself has already been covered.

Mr. Budgen

Would my hon. Friend please explain exactly what is required to improve the agricultural side of the deal so as to make acceptable conditions that would give rise to an application to this House for an increase in own resources?

Mr. Rifkind

My hon. Friend will be aware that so far the Community has agreed, first, on the principle that finance should determine expenditure—a principle first enunciated by my right hon. and learned Friend the Secretary of State in his speech in The Hague some years ago. That is now unanimously agreed. Secondly, it has been accepted that guidelines must be laid down both for agricultural expenditure and for total expenditure, and it is agreed that the Community and the Commission should bring forward specific proposals to turn these principles into firm budgetary procedures that will control the expenditure of the Community. That is the essential requirement as the Government see it.

The hon. Member for Livingston and his right hon. and hon. Friends have been asked on a number of occasions to indicate what their policy is on the development of the Community. They have been reluctant to do so, but we have had a document produced by the right hon. Gentleman the Leader of the Opposition and published in New Socialist in which he outlines his vision of the future of Europe. I may say that it conflicts on a number of material points with a speech made by the deputy Leader of the Opposition, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) at the Dorchester Hotel on 28 February. It may be significant that the Leader of the Opposition expresses his views in New Socialist while the deputy Leader of the Opposition expresses his views in a speech at the Financial Times conference. There are interesting contrasts between the two.

The Leader of the Opposition says that we must preserve our right to withdraw from the Community. The deputy Leader of the Opposition says that it would be deeply against our interests to withdraw. Which is correct? The Leader of the Opposition states that the CAP "is intolerable" and has to be replaced. The deputy Leader of the Opposition states: I am not suggesting that the CAP can be abandoned.…Nor can we guarantee and support farm incomes by the subsidy system that proved so expensive in pre-EEC Britain. Who speaks for the Labour party, and what is the policy that that party is putting to the British people?

In his interesting article the Leader of the Opposition states that, from within the Community, if the Socialist countries co-ordinate their economic reflation, We have to acknowledge the right of a country which pursues policies for full employment to protect itself against the effects of policies in other countries which do not. In other words, the right hon. Gentleman wishes to recreate the industrial tariff barriers, the pulling down of which was one of the Community's finest achievements.

The most dramatic and absurd proposal that appears in the right hon. Gentleman's document concerns the future of the Community. The right hon. Gentleman has entitled his appeal to the nation as a call for a "new Messina". We all recall that the original Messina conference laid down the essential foundations of the European Community. The right hon. Gentleman's document calls for the destruction of the European Parliament, a destruction of the common agricultural policy and a destruction of a free market in industrial goods. If the right hon. Gentleman is addicted to Italian symbolism, the "new Vesuvius" would be a better description of his vision.

The right hon. Gentleman, in the context of reform of the EC, calls for the House and the country to take account of countries in western Europe that are not within the Community and for the Community to take into account its relationship with the countries of eastern Europe, including those of the Warsaw Pact. He ends by calling for the abolition of the Council of Europe, the European Parliament and the European Council of Community Heads of Government and the replacement of those institutions by full European councils, all-European assemblies and all-European gatherings.

Mr. Neil Kinnock (Islwyn)

Nonsense.

Mr. Rifkind

The right hon. Gentleman says that that is nonsense. It is his document and if he wishes to describe it so, I shall not disagree with him.

Mr. Kinnock

Read it properly.

Mr. Rifkind

I have read it properly. The right hon. Gentleman will be aware that he makes no distinction at all in the document between the various parts of Europe. He refers to the need for all European parties — he includes eastern Europe as well as western Europe—to send delegates to institutions he wishes to create. This is an intolerable policy.

Mr. Robin Cook

The Minister will be aware that the House is debating the summit in Brussels. He appears to be labouring under the illusion that the Labour party was a party to that summit. He has now but two and a half minutes left in which to reply to the debate. Will he now address his mind to what case there may be on its merits for increasing own resources, whether a settlement that increases agricultural spending represents effective control of expenditure and where the extra £2,000 million will be found to pay for the outcome of the settlement?

Mr. Rifkind

The hon. Gentleman is well aware that I spent the first half of my speech setting out the Government's unprecedented achievements in obtaining a fair budget solution to Britain's budgetary problems. The Government have already shown their determination to ensure that there will be no increase in own resources unless there is a satisfactory solution to the other matters to which I have referred. If the negotiating strength of Labour Members is to say to our Community partners, "We wish everything from you and we are not prepared to consider giving anything in return," that explains why the previous Labour Government's economic policy was a complete failure and why that Administration would have continued to fail.

I have no doubt that the negotiations that are now being conducted by my right hon. Friend the Prime Minister and my right hon. and learned Friend the Foreign Secretary will lead to a fair settlement for the United Kingdom, which will enable the Community to develop on a sound and prosperous basis. It is on that assumption and in that belief that, if the Opposition wish to divide the House, I shall advise my right hon. and hon. Friends to show their support for Her Majesty's Government.

Question put, That this House do now adjourn:

The House divided: Ayes 178, Noes 253.

Division No. 224]	[11.59 pm
AYES
Adams, Allen (Paisley N)	Foster, Derek
Alton, David	Foulkes, George
Anderson, Donald	Fraser, J. (Norwood)
Ashton, Joe	Freeson, Rt Hon Reginald
Atkinson, N. (Tottenham)	Freud, Clement
Bagier, Gordon A. T.	Garrett, W. E,
Barnett, Guy	George, Bruce
Barron, Kevin	Gilbert, Rt Hon Dr John
Beckett, Mrs Margaret	Godman, Dr Norman
Beith, A. J.	Hamilton, James (M'well N)
Bell, Stuart	Hardy, Peter
Benn, Tony	Harman, Ms Harriet
Bennett, A. (Dent'n & Red'sh)	Harrison, Rt Hon Walter
Bermingham, Gerald	Hart, Rt Hon Dame Judith
Blair, Anthony	Hattersley, Rt Hon Roy
Boothroyd, Miss Betty	Healey, Rt Hon Denis
Boyes, Roland	Heffer, Eric S.
Bray, Dr Jeremy	Hogg, N. (C'nauld & Kilsyth)
Brown, Gordon (D'f'mline E)	Holland, Stuart (Vauxhall)
Brown, Hugh D. (Provan)	Howell, Rt Hon D, (S'heath)
Brown, N. (N'c'tle-u-Tyne E)	Howells, Geraint
Brown, R. (N'c'tle-u-Tyne N)	Hoyle, Douglas
Brown, Ron (E'burgh, Leith)	Hughes, Robert (Aberdeen N)
Caborn, Richard	Hughes, Roy (Newport East)
Callaghan, Jim (Heyw'd & M)	Hughes, Sean (Knowsley S)
Campbell, Ian	Hughes, Simon (Southwark)
Campbell-Savours, Dale	John, Brynmor
Canavan, Dennis	Johnston, Russell
Carter-Jones, Lewis	Jones, Barry (Alyn & Deeside)
Clark, Dr David (S Shields)	Kaufman, Rt Hon Gerald
Clarke, Thomas	Kinnock, Rt Hon Neil
Clay, Robert	Lambie, David
Cocks, Rt Hon M. (Bristol S.)	Lamond, James
Cohen, Harry	Lead bitter, Ted
Coleman, Donald	Leighton, Ronald
Concannon, Rt Hon J. D.	Lewis, Ron (Carlisle)
Conlan, Bernard	Lewis, Terence (Worsley)
Cook, Frank (Stockton North)	Litherland, Robert
Cook, Robin F. (Livingston)	Lloyd, Tony (Stretford)
Corbett, Robin	Lofthouse, Geoffrey
Corbyn, Jeremy	Loyden, Edward
Cowans, Harry	McCartney, Hugh
Craigen, J. M.	McDonald, Dr Oonagh
Crowther, Stan	McKay, Allen (Penistone)
Cunningham, Dr John	McKelvey, William
Davies, Rt Hon Denzil (L'lli)	McNamara, Kevin
Davies, Ronald (Caerphilly)	McTaggart, Robert
Davis, Terry (B'ham, H'ge H'l)	McWilliam, John
Deakins, Eric	Madden, Max
Dewar, Donald	Marek, Dr John
Dobson, Frank	Marshall, David (Shettleston)
Dormand, Jack	Martin, Michael
Douglas, Dick	Maxton, John
Dubs, Alfred	Maynard, Miss Joan
Duffy, A. E. P.	Meacher, Michael
Eadie, Alex	Meadowcroft, Michael
Eastham, Ken	Michie, William
Ellis, Raymond	Mikardo, Ian
Evans, John (St. Helens N)	Millan, Rt Hon Bruce
Ewing, Harry	Morris, Rt Hon A. (W'shawe)
Fatchett, Derek	Morris, Rt Hon J. (Aberavon)
Faulds, Andrew	Nellist, David
Field, Frank (Birkenhead)	Oakes, Rt Hon Gordon
Fields, T. (L'pool Broad Gn)	O'Brien, William
Fisher, Mark	O'Neill, Martin
Flannery, Martin	Parry, Robert
Foot, Rt Hon Michael	Patchett, Terry
Forrester, John	Pavitt, Laurie

Penhaligon, David	Steel, Rt Hon David
Pike, Peter	Strang, Gavin
Powell, Raymond (Ogmore)	Straw, Jack
Prescott, John	Thomas, Dafydd (Merioneth)
Randall, Stuart	Thomas, Dr R. (Carmarthen)
Redmond, M.	Thompson, J. (Wansbeck)
Rees, Rt Hon M. (Leeds S)	Tinn, James
Richardson, Ms Jo	Torney, Tom
Roberts, Ernest (Hackney N)	Wallace, James
Robertson, George	Wardell, Gareth (Gower)
Rogers, Allan	Wareing, Robert
Ross, Ernest (Dundee W)	Welsh, Michael
Ryman, John	White, James
Sheerman, Barry	Wigley, Dafydd
Sheldon, Rt Hon R.	Williams, Rt Hon A.
Shore, Rt Hon Peter	Wilson, Gordon
Short, Ms Clare (Ladywood)	Winnick, David
Short, Mrs R.(W'hampt'n NE)	Woodall, Alec
Silkin, Rt Hon J.	Young, David (Bolton SE)
Skinner, Dennis
Smith, C.(Isl'ton S & F'bury)	Tellers for the Ayes:
Smith, Rt Hon J. (M'kl'ds E)	Mr. Frank Haynes and
Snape, Peter	Mr. John Home Robertson.
Spearing, Nigel

NOES
Adley, Robert	Coombs, Simon
Alexander, Richard	Cope, John
Amery, Rt Hon Julian	Corrie, John
Amess, David	Couchman, James
Ancram, Michael	Cranborne, Viscount
Arnold, Tom	Critchley, Julian
Ashby, David	Crouch, David
Aspinwall, Jack	Dorrell, Stephen
Atkins, Rt Hon Sir H.	Douglas-Hamilton, Lord J.
Atkins, Robert (South Ribble)	Dover, Den
Atkinson, David (B'm'th E)	Dunn, Robert
Baker, Nicholas (N Dorset)	Durant, Tony
Baldry, Anthony	Dykes, Hugh
Batiste, Spencer	Edwards, Rt Hon N. (P'broke)
Beaumont-Dark, Anthony	Eggar, Tim
Bellingham, Henry	Emery, Sir Peter
Bendall, Vivian	Eyre, Sir Reginald
Berry, Sir Anthony	Fairbairn, Nicholas
Bevan, David Gilroy	Fallon, Michael
Biffen, Rt Hon John	Farr, John
Biggs-Davison, Sir John	Fenner, Mrs Peggy
Blaker, Rt Hon Sir Peter	Fletcher, Alexander
Bonsor, Sir Nicholas	Fookes, Miss Janet
Bottomley, Peter	Forman, Nigel
Bowden, Gerald (Dulwich)	Forth, Eric
Boyson, Dr Rhodes	Fox, Marcus
Braine, Sir Bernard	Gale, Roger
Brandon-Bravo, Martin	Galley, Roy
Bright, Graham	Garel-Jones, Tristan
Brinton, Tim	Gilmour, Rt Hon Sir Ian
Brittan, Rt Hon Leon	Glyn, Dr Alan
Brooke, Hon Peter	Goodhart, Sir Philip
Brown, M. (Brigg & Cl'thpes)	Goodlad, Alastair
Bruinvels, Peter	Gorst, John
Bryan, Sir Paul	Grant, Sir Anthony
Buchanan-Smith, Rt Hon A.	Greenway, Harry
Budgen, Nick	Griffiths, E. (B'y St Edm'ds)
Burt, Alistair	Grist, Ian
Butcher, John	Hamilton, Hon A. (Epsom)
Butterfill, John	Hamilton, Neil (Tatton)
Carlisle, John (N Luton)	Hampson, Dr Keith
Carlisle, Kenneth (Lincoln)	Harris, David
Carttiss, Michael	Hawkins, C. (High Peak)
Chalker, Mrs Lynda	Heathcoat-Amory, David
Chapman, Sydney	Heddle, John
Chope, Christopher	Higgins, Rt Hon Terence L.
Churchill, W. S.	Hirst, Michael
Clark, Dr Michael (Rochford)	Hogg, Hon Douglas (Gr'th'm)
Clark, Sir W. (Croydon S)	Hordern, Peter
Clarke, Rt Hon K. (Rushcliffe)	Howe, Rt Hon Sir Geoffrey
Cockeram, Eric	Howell, Rt Hon D. (G'ldford)
Colvin, Michael	Hunt, David (Wirral)
Conway, Derek	Jackson, Robert

Jones, Gwilym (Cardiff N)	Robinson, Mark (N'port W)
Knowles, Michael	Roe, Mrs Marion
Lamont, Norman	Rossi, Sir Hugh
Lang, Ian	Rowe, Andrew
Lawrence, Ivan	Rumbold, Mrs Angela
Lester, Jim	Ryder, Richard
Lightbown, David	Sackville, Hon Thomas
Lilley, Peter	Sainsbury, Hon Timothy
Lloyd, Peter, (Fareham)	St. John-Stevas, Rt Hon N.
Lord, Michael	Sayeed, Jonathan
Lyell, Nicholas	Shaw, Giles (Pudsey)
McCrindle, Robert	Shaw, Sir Michael (Scarb')
McCurley, Mrs Anna	Shelton, William (Streatham)
Macfarlane, Neil	Shepherd, Colin (Hereford)
MacKay, Andrew (Berkshire)	Shepherd, Richard (Aldridge)
MacKay, John (Argyll & Bute)	Sims, Roger
Maclean, David John	Skeet, T. H. H.
McNair-Wilson, P. (New F'st)	Smith, Tim (Beaconsfield)
Madel, David	Soames, Hon Nicholas
Major, John	Speed, Keith
Malins, Humfrey	Spencer, Derek
Malone, Gerald	Spicer, Jim (W Dorset)
Maples, John	Spicer, Michael (S Worcs)
Marlow, Antony	Squire, Robin
Mather, Carol	Stanbrook, Ivor
Maude, Hon Francis	Steen, Anthony
Mayhew, Sir Patrick	Stern, Michael
Mellor, David	Stevens, Lewis (Nuneaton)
Merchant, Piers	Stevens, Martin (Fulham)
Meyer, Sir Anthony	Stewart, Allan (Eastwood)
Miller, Hal (B'grove)	Stewart, Andrew (Sherwood)
Mills, Iain (Meriden)	Stewart, Ian (N Hertf'dshire)
Mitchell, David (NW Hants)	Stokes, John
Moate, Roger	Stradling Thomas, J.
Monro, Sir Hector	Sumberg, David
Montgomery, Fergus	Taylor, John (Solihull)
Moore, John	Taylor, Teddy (S'end E)
Morris, M. (N'hampton, S)	Terlezki, Stefan
Morrison, Hon C. (Devizes)	Thomas, Rt Hon Peter
Morrison, Hon P. (Chester)	Thompson, Donald (Calder V)
Moynihan, Hon C.	Thorne, Neil (Ilford S)
Mudd, David	Townend, John (Bridlington)
Murphy, Christopher	Twinn, Dr Ian
Neale, Gerrard	van Straubenzee, Sir W.
Needham, Richard	Vaughan, Sir Gerard
Nelson, Anthony	Viggers, Peter
Newton, Tony	Waddington, David
Nicholls, Patrick	Wakeham, Rt Hon John
Normanton, Tom	Waldegrave, Hon William
Norris, Steven	Walden, George
Onslow, Cranley	Walker, Bill (T'side N)
Oppenheim, Philip	Wall, Sir Patrick
Oppenheim, Rt Hon Mrs S.	Waller, Gary
Ottaway, Richard	Ward, John
Page, Richard (Herts SW)	Wardle, C. (Bexhill)
Parris, Matthew	Warren, Kenneth
Patten, Christopher (Bath)	Watson, John
Patten, John (Oxford)	Watts, John
Pawsey, James	Wells, Bowen (Hertford)
Percival, Rt Hon Sir Ian	Wells, John (Maidstone)
Pink, R. Bonner	Wheeler, John
Pollock, Alexander	Whitfield, John
Porter, Barry	Whitney, Raymond
Powell, William (Corby)	Wiggin, Jerry
Powley, John	Wilkinson, John
Proctor, K. Harvey	Wolfson, Mark
Raffan, Keith	Wood, Timothy
Raison, Rt Hon Timothy	Woodcock, Michael
Rathbone, Tim	Yeo, Tim
Rees, Rt Hon Peter (Dover)	Young, Sir George (Acton)
Ronton, Tim	Younger, Rt Hon George
Rhodes James, Robert
Rhys Williams, Sir Brandon	Tellers for the Noes:
Ridley, Rt Hon Nicholas	Mr. Robert Boscawen and
Rifkind, Malcolm	Mr. Michael Neubert.
Roberts, Wyn (Conwy)

Question accordingly negatived.