Commons Sitting of 11 December 1984

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS

  STANDING ORDERS (PRIVATE BUSINESS)
  Ordered,
  That the Amendments set out in the list of Amendments to the Standing Orders relating to Private Business proposed to the House by the Chairman of Ways and Means, laid upon the Table by Mr. Speaker on 4 December, be made.—[The Chairman of Ways and Means.]

  BRITISH RAILWAYS ORDER CONFIRMATION BILL
  Order for consideration read.
  To be considered tomorrow.

Oral Answers to Questions
  DEFENCE

    Defence Programme (Annual Review)
    Mr. Cartwrightasked the Secretary of State of Defence when he expects to announce the results of the annual review of the defence programme.
    The Secretary of State for Defence (Mr. Michael Heseltine): Information about the future defence programme will be given in the 1985 "Statement on the Defence Estimates" in the normal way.
    Mr. Cartwright: As the existing commitments in the 10-year defence programme are reported to exceed available resources by as much as £10 billion, will the Secretary of State ensure that his next review makes it clear what non-nuclear commitments are being cut out to make room for the Trident programme?
    Mr. Heseltine: The hon. Gentleman must learn to distinguish between a planning process and a commitment. There are no excess commitments in the Ministry's long-term policies, because such commitments have not been authorised by Ministers.
    Mr. Robert Atkins: In the course of the review, will my right hon. Friend give urgent consideration to the future of the European fighter aircraft, bearing in mind that discussions are being protracted, largely by the French? Will he make provision, if necessary, for funds to go national?
    Mr. Heseltine: I appreciate my hon. Friend's real interest in this matter from his constituency point of view, with which I sympathise. However, there are great prizes to be achieved if Europe can co-ordinate more closely its
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    military procurement. Ministers of various Alliance countries are trying to achieve that, if possible. We cannot say that it is possible to achieve greater co-ordination, but we are trying to achieve it within the framework of the EFA discussions.
    Mr. Boyes: Has the Secretary of State had time to study an answer that I was given about using animals, without anaesthetics, to test the effects of cyanide poisoning? Is the right hon. Gentleman aware that a number of Conservative voters have told me that they will vote Labour at the next general election because of the Government's outrageous attitude to animal welfare? Does he believe that it is in the national interest to propose in the defence review the closure of Porton Down as a chemical research establishment or to consider it as a suitable and useful area for peaceful purposes?
    Mr. Heseltine: I think we all realise the immensely difficult issues that are raised in the context of the research to which the hon. Gentleman draws the attention of the House. We must also realise that we have a responsibility to our troops, especially those in Germany who face the possibility of a chemical attack by the Soviet Union. It would be unthinkably irresponsible for a Ministry of Defence Minister not to do everything possible to provide them with the best preventive kit.
    Mr. Stern: In the course of the defence review., will my right hon. Friend consider the role of export sales in making our defence programme possible? Will he encourage his Department of Trade and Industry colleagues to take a realistic attitude to potential export sales, particularly to countries, such as Turkey, which have never defaulted on such contracts?
    Mr. Heseltine: I am grateful to my hon. Friend for his support and interest. I have the closest and most harmonious relationships with all my Government colleagues, who meet to discuss these difficult issues of priorities.
    Mr. Denzil Davies: When the Secretary of State comes to publish the fruits of the defence review, will he be as candid as was the Minister of State for the Armed forces in the Royal Navy debate two weeks ago and admit that the cost of Trident is bound to come out of conventional defence programmes? If that is so, does he agree that, by cutting our conventional defence, he is weakening Britain's real defences and its contribution to NATO at a time when it is important to build up conventional defences and not to rely on the first use of nuclear weapons?
    Mr. Heseltine: It is fascinating to note that the right hon. Gentleman, whose party campaigned during the election for a reduction of 30 per cent. in the conventional defence budget, should now tell us that the Labour party wants to improve our conventional defences.

    Cruise Missiles
    Mr. Wigleyasked the Secretary of State for Defence if he has any plans to alter security precautions for exercises involving cruise missile convoys.
    Mr. Home Robertsonasked the Secretary of State for Defence if he has any proposals to change the security precautions for exercises involving cruise convoys.
    The Minister of State for the Armed Forces (Mr. John Stanley): Security precautions always remain under review.
    Mr. Wigley: Is the Minister aware that, in the early hours of 15 November, when a convoy of cruise missiles was entering Longmoor camp in Hampshire, two local inhabitants who were disturbed by the convoy were kidnapped by the police, deposited in a 5 ft deep pit, fenced by barbed wire, and guarded by two armed soldiers? Does the right hon. Gentleman accept that the deployment of cruise missiles will inevitably lead to this sort of erosion of civil rights and put us on the road to totalitarianism?
    Mr. Stanley: The hon. Gentleman has an extraordinary recollection of that event. Those individuals were trespassing in a military training area during a military exercise. To protect them, they were put in the one place where there was some shelter and cover from the elements—a rifle range, which was not, of course, being used at that time.
    Mr. Home Robertson: Does the Minister accept that interference with telephone lines in the neighbourhood of cruise missile convoy exercises, as happened last night, is neither tolerable nor legitimate as a security precaution? Does the right hon. Gentleman now accept that his strategy of trying to hide American weapons in the British countryside is doomed to failure, because many thousands of people will not turn a blind eye to what is going on?
    Mr. Stanley: The hon. Gentleman is mistaken. The off-base deployment programme of ground-launched cruise missiles for training purposes has been extremely successful.
    Sir Antony Buck: Does my right hon. Friend agree that it is most important that there should be off-base deployment to maintain the credibility and deterrence effect of the second strike power of all this weaponry? It seems to me that that approach is broadly accepted not only by those who live in the area but by those who are concerned about defence matters.
    Mr. Stanley: I am grateful to my hon. and learned Friend for making that point. He is entirely correct.
    Mr. John Browne: Does my right hon. Friend accept that the activity of people such as those who participate in Cruise Watch—whether or not they are aware of it—in monitoring the movement of these missiles off-base only aids and abets this country's enemies?
    Mr. Stanley: I agree with my hon. Friend that the amount of time and effort devoted by certain small minorities to watching cruise missiles is strange. Some Conservative Members wish that those people would devote the same amount of energy to watching the progress on SS20s on the other side of the wall.
    Mr. Denzil Davies: Are not all these problems an indication of how ridiculous it is to base cruise missiles not only in Britain but in the most populous areas of southern England? Is it not a fact that the cardinal principle of ground-launched missiles is that they should be mobile and not be detected? These missiles are not mobile. It seems that everyone from here to the Kremlin knows where they are.
    Mr. Stanley: That is not the case, as the right hon. Gentleman knows. The Government and NATO were right
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    to serve notice on the Soviet Union that the massive increase in its capacity to blackmail western Europe through the SS20s would not go unanswered by the West.
    Mr. Viggers: Will my right hon. Friend confirm that such are the safeguards built into the cruise missile system that the only risk of deployment is a traffic accident and, therefore, the right action for right minded people is to ensure that deployment can occur without obstruction?
    Mr. Stanley: I am grateful to my hon. Friend for raising that point. I am sure that all responsible people believe that deployment for training purposes is a necessary part of deterrence. Responsible people will enable those deployments to take place.

    RAF Molesworth and Alconbury
    Mr. Skinnerasked the Secretary of Defence if he will make a statement on the development of RAF Molesworth and RAF Alconbury.
    Mr. Stanley: On RAF Molesworth I cannot at present add to my answer to the hon. Member for Liverpool, West Derby (Mr. Wareing) on 29 October .
    RAF Alconbury is scheduled to be developed in support of the deployment of TR1 tactical reconnaissance aircraft, with construction planned to begin next year.
    Mr. Skinner: Is the Minister proud of the fact that he is a member of a Government who have turned Britain into a police state against the miners? Not content with that, they are now crawling on their hands and knees to Reagan and the Americans and are prepared to bring conspiracy charges against the Alconbury seven to help site American missiles there? Why do the Government not send them back where they belong and drop the charges against those people? They are British people.
    Mr. Stanley: I am proud to be a member of a Government, as are all my right hon. and hon. Friends, who have cemented the Anglo-American alliance which formed the linchpin of our security during the second world war.
    Dr. Mawhinney: Does my right hon. Friend accept that the people of Cambridgeshire will not react kindly to any authority which allows to be established at Molesworth and Alconbury the type of peace-camp nonsense that was established at Greenham common? The people of Cambridgeshire do not expect to have to pay increased police bills as a consequence of any unlawful activity at Molesworth and Alconbury.
    Mr. Stanley: I note what my hon. Friend says. Police bills are a matter for my right hon. and learned Friend the Secretary of State for the Home Department. I am sure my hon. Friend accepts that the important deployment that will be taking place at Molesworth should be subject to the necessary security measures to protect the ground-launched cruise missiles as and when they are established there.
    Mr. Marlow: If Britain were to be the only significant territory within a nuclear alliance—NATO—on which no nuclear weapons were based, and if hostilities broke out with the Warsaw pact, would not the most likely area of NATO to be subject to nuclear attack be the United Kingdom, because the likelihood of retaliation would be

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    rather less? If the United Kingdom were not to have atomic weapons on its soil, would we not be in more rather than less danger?
    Mr. Stanley: I entirely agree with my hon. Friend. If the Opposition believe that it somehow serves our defence interests to ask our most important ally to go back across the Atlantic, their logic escapes me.
    Mr. Barron: Will the Minister tell us when we shall reach a stage, such as we have at Greenham common at present, when what was originally a Royal Air Force camp turns into a United States air force base where we have little or no control over whether weapons are used in this country.
    Mr. Stanley: The hon. Gentleman does not seem to be aware that the agreement establishing ground-launched cruise missiles in this country was between the United States Government and the Government of this country.

    Helicopters (Northern Ireland)
    Mr. Dubsasked the Secretary of State for Defence if he has received any complaints about helicopters operating in Northern Ireland, especially in the Crossmaglen and Forkhill areas.
    The Parliamentary Under-Secretary of State for Defence Procurement (Mr. John Lee): There have been a few complaints, including some from the Crossmaglen and Forkhill areas. We are considering whether the levels of noise referred to in these complaints are sufficient to justify the payment of compensation by the Ministry of Defence. A decision on this complicated matter will be taken next year.
    Mr. Dubs: May I urge the Minister to go to Forkhill and Crossmaglen and listen to local people? Is he aware that there is enormous feeling about the frequent helicopter flights? They sometimes fly as often as one every 30 seconds out of the military base at Crossmaglen. People who are by no means opposed to the security forces in general feel angry about helicopters flying at night 30 ft above their bedroom windows.
    Mr. Lee: I take the hon. Gentleman's point. This is an operationally dangerous area. Many members of the security forces have been killed. There is a substantial threat from culvert bombs. Therefore, substantial helicopter activity is essential.
    Mr. Key: Will my hon. Friend accept from those on both sides of the House who have been to Forkhill that people have a genuine complaint, particularly on Sundays when church services are upset by the noise of helicopters? Despite the security implications, will he do all that he can to ensure that only necessary flights take place on Sundays?
    Mr. Lee: The security considerations must be paramount, but we shall take into account the points made, particularly about the sabbath.
    Mr. John David Taylor: As I live in the same county as Crossmaglen and Forkhill and within 100 yards of the helicopter station, may I put it to the Minister that the vast majority of people in County Armagh welcome the presence of the helicopters and their constructive contribution towards the pursuit of terrorists? Is he aware that people have been killed even during church hours?
    Mr. Lee: I am grateful for the hon. Gentleman's sentiments. I am sure that the security forces will also be grateful.
    Mr. Duffy: Is the Minister aware that when more force than is reasonably necessary is used in sensitive areas, such as Crossmaglen, Forkhill and Derry, simply to appease Unionist politicians, not only is the infamy of the Black and Tans recalled, but the most notable and enduring casualty is the honour and reputation of the British Army?
    Sir Humphrey Atkins: Sit down, you silly man.
    Mr. Duffy: Say that outside.
    Mr. Speaker: Order.
    Mr. Lee: With respect, I think that the hon. Gentleman is overreacting. I am sure that the security forces do not use more force than is necessary in the circumstances.
    Sir John Biggs-Davison: In view of the difficulty of operating helicopters in that region without infringing the border, is it not time that there was direct co-operation between the British and Irish Armies against those whom Dr. FitzGerald has described as the common enemy?
    Mr. Lee: Relationships between the two forces are extremely good, but I take the specific point that my hon. Friend makes.
    Mr. McNamara: Can the Minister say whether helicopters were used at the time of the Gransha hospital incident last week? Can he also say whether the British Army has now abandoned its stop-and-search policy in favour of a shoot-and-kill policy? Is he aware that the yellow card procedures seem to have been completely abandoned? Can he also tell us whether the two people killed by the British Army last week were first given the opportunity to surrender, whether there were any warrants out for their arrest, and, if so, why they were not dealt with by the RUC?
    Mr. Lee: The services are, as always, answerable to the law.

    Nuclear Missiles
    Mr. Chapmanasked the Secretary of State for Defence what are the equivalent numbers of nuclear missiles targeted by the Union of Soviet Socialist Republics and Warsaw pact countries on western Europe and vice-versa.
    Mr. Stanley: As detailed on page 43 of the "Statement on the Defence Estimates 1984", the Soviet Union has deployed about 1,800 intermediate and short-range land-based nuclear missiles facing western Europe. The equivalent figure for NATO systems based in Europe facing the Soviet Union is some 300. Strategic nuclear missile systems would be additional on both sides.
    Mr. Chapman: As there is clearly an imbalance in nuclear missiles in favour of the Eastern bloc, would not any simple nuclear freeze result in a greater threat to western Europe unless it were the first stage of an agreed, verifiable multilateral disarmament programme?
    Mr. Stanley: My hon. Friend is entirely right. The fallacy of a nuclear freeze is that in the present circumstances it would merely freeze the very substantial superiority of the Soviet Union in this area and remove any incentive for the Soviet Union to reduce that superiority.
    Mr. Robert C. Brown: Is not the question of balance in terms of the number of warheads completely academic? Does the Minister appreciate that if nuclear war broke out in Europe many fewer missiles than those now sited would create a very cindery situation in this country and mainland Europe?
    Mr. Stanley: I remind the hon. Gentleman that the policy of successive Governments has been that multilateral disarmament should be on a balanced and verifiable basis.
    Mr. D. E. Thomas: Does the Minister accept that whether he is counting missiles or warheads, which he is not counting today, the deployment of sea-launched cruise missiles, not only in the waters surrounding Europe but in the Atlantic and other areas totally annihilates the potential for verifiable arms control?
    Mr. Stanley: The deployment to which the hon. Gentleman refers is carried out by both the United States and the Soviet Union. In the short term, the Soviet Union is likely to have an operational capability for strategic ground-launched cruise missiles, strategic air-launched cruise missiles and strategic sea-launched cruise missiles.
    Mr. Terlezki: As Mr. Chernenko is to visit this country soon, will my right hon. Friend give him a message to take back to the Soviet Union—that we want peace, but not at any price; that if the Soviets dismantle their nuclear missiles we will dismantle ours; and that the British people are not naive?
    Mr. Stanley: My hon. Friend summarises the message very well. The British Government want a more peaceful world, and a world that is also more secure. That means multilateral balanced disarmament by both sides.
    Mr. Denzil Davies: When we consider nuclear missiles, must we not also consider strategic as well as Euro and intermediate missiles? On the question of a freeze, is it not true that there is a balance now, generally speaking, between the Soviet Union and the West?
    The right hon. Gentleman mentioned multilateral talks. Can he tell us whether the British Government favour talks to cover both strategic and intermediate range weapons? As he is so keen on multilateral disarmament, will he also tell us whether the British Government will be present at those talks?
    Mr. Stanley: Like the American Government. the British Government favour participation in both the strategic and intermediate areas. We have been taking part in the negotiations. We have been directly involved, for example in the talks on chemical weapons. Traditionally, strategic negotiations have been matters for the United States and the Soviet Union.

    Defence Expenditure
    Mr. Frank Cookasked the Secretary of State for Defence if he will make a statement on the level of conventional defence spending.
    Mr. Heseltine: The defence budget for the current financial year amounts to £17·25 billion. Of this, some 97 per cent. will be spent on our conventional forces.
    Mr. Cook: When will the Secretary of State realise that the electorate will not tolerate the kind of fob-off offered to my right hon. Friend the Member for Llanelli (Mr.
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    Davies) in answers to supplementary questions on question No. 1? Does not persistent dependence on a reduction in conventional spending inevitably mean that we rely more on the threat of nuclear arms and the sophisticated weapons that are being developed? Does the right hon. Gentleman accept that persistent reliance on that strategy means that we will inevitably contribute to the destruction of the globe?
    Mr. Heseltine: I take a somewhat different view. All Labour Governments since the war have followed the policies that I follow. I believe that we should continue to follow those policies, because they have worked.
    Mr. Cyril D. Townsend: Will my right hon. Friend spell out the implications of a decision by this country to scale down our spending on conventional forces to the levels currently maintained by our NATO colleagues? Would not such a decision mean the decimation of our conventional forces and place greater reliance upon nuclear weapons?
    Mr. Heseltine: I believe that all those consequences would indeed flow from such a decision, together with another which my hon. Friend did not mention, but which I am sure he will accept, namely, the incalculable effect upon the credibility of the NATO Alliance of Britain's taking a decision dramatically to reduce our commitment to defence.
    Mr. O'Neill: Will not the assurances given by the Secretary of State today have a somewhat hollow ring for the 1,000 people who are to lose their jobs in the Royal Electrical and Mechanical Engineers workshops? Will they not directly relate any savings of that nature to a campaign to make money available for Trident in the future?
    Mr. Heseltine: I do not think that anyone would seriously believe that that is the purpose of trying to get more value for money out of the defence budget, which, on all counts, we have a responsibility to do.

    Light Aircraft Industry
    Mr. Lyellasked the Secretary of State for Defence what representations he has received from representatives of British industry about the opportunity to re-establish a British light aircraft industry during his evaluation of the tenders for the new basic trainer for the Royal Air Force.
    The Minister of State for Defence Procurement (Mr. Adam Butler): My right hon. Friend and I have received numerous representations from industrialists in support of the companies tendering for the new basic trainer aircraft including some reference to the wider aspects of re-establishing a civil light aircraft industry.
    Mr. Lyell: Will my right hon. and hon. Friends remember that Hunting Engineering Ltd.'s Firecracker is a beautiful aircraft, which well meets the RAF's needs, is wholly the product of private enterprise, is wholly privately financed, and would provide Hunting Engineering Ltd. with a real opportunity to re-establish the British light aircraft industry?
    Mr. Butler: I appreciate my hon. Friend taking this opportunity to press the case of one aircraft. Of course, what he mentioned is one of a wide range of considerations that we have to take into account.
    Mr. Stephen Ross: Is the Minister aware that what remains of the British light aircraft industry is to be found in my constituency? Is he aware that no fewer than three of the contenders have connections with the Isle of Wight, where unemployment is now approaching 17 per cent. and where many of those who work in the aircraft industry are working a three-day week? Will he assure the House that he will take those facts fully into account when making a decision about a replacement for the Jet Provost?
    Mr. Butler: We shall take those facts fully into account. Perhaps I might say something about the light aircraft industry. We have short-listed two aeroplanes, which will be made by companies which are not manufacturing fixed-wing aircraft at the moment. That means that we are prepared to accept that possibility. However, there are many other considerations that will carry greater weight.
    Sir Patrick Wall: When considering these tenders, will my right hon. Friend bear in mind that only the PC9, linked with the Hawk advanced trainer, will form a package that could provide major export orders?
    Mr. Butler: There is no reason in theory why there should not be a package that involves the Hawk with another aeroplane.
    Rev. Martin Smyth: Is the Minister aware that there is already a company in the light aircraft industry that has a worldwide reputation? Will he assure us that Shorts Tucano will also be considered?
    Mr. Butler: Yes, Sir.
    Mr. Gerald Howarth: Will my right hon. Friend bear in mind that we really need an aeroplane that meets the requirements of the RAF? The RAF has undertaken an extensive review of the technical merits of all of the aeroplanes at Boscombe Down. Does he agree that what is wrong in this procedure is the fact that the air staff target has set a speed that is far too low for the RAF's requirements?
    Mr. Butler: I agree that the operational requirements of the RAF must have priority, but, as I have made clear today and previously, there are many other considerations. I hope that we shall be able to make a decision reasonably soon, and preferably before the next round of Defence questions.
    Mr. McNamara: The whole House agrees that we require an aircraft that most meets the RAF's requirements. I understand that the overwhelming support for that comes from the PC9. Will the Minister confirm that, among the weighty considerations to be taken into account, there is not the fact that if Shorts get the order it will be made more attractive for privatisation? Secondly, will he confirm that if, for some strange reason, we have the RAF flying a Brazilian aircraft, thus becoming the laughing stock of NATO, that will not be done to enable us to have facilities to get down to the Falklands because of the Fortress Falklands policy?
    Mr. Butler: I hope that the RAF will not be the laughing stock of anybody, whether it has an aeroplane that is designed in Brazil, Switzerland, Australia or the United Kingdom. There are many considerations to take
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    into account. Relations with Brazil are important to Britain, as are relations with Switzerland, Australia and many other countries.

    Trident Missile
    Mr. Campbell-Savoursasked the Secretary of State for Defence what is the current cost in pounds sterling of Trident.
    Mr. Heseltine: As I indicated in the answer that I gave to my hon. Friends the Members for Gainsborough and Horncastle (Mr. Leigh) and for Wells (Mr. Heathcoat-Amory) on 13 November, the Trident estimate is currently being reviewed as part of the annual recosting of the defence programme. I hope to be able to announce a revised estimate to the House early in the new year.
    Mr. Campbell-Savours: Have not the Government been patently negligent in failing to negotiate with America an offset agreement guaranteeing work to British defence contractors? Is it true that, apart from the submarine and the warheads, British contractors have won only £12 million-worth of contracts out of a multi-million pound contract and that Britain is retaining less than half of the total capital cost? What will the Government now do to defend the interests of British defence contractors?
    Mr. Heseltine: The hon. Gentleman touches on an important issue which is of concern to me. When we decided to purchase the Trident D5 system, it was an existing system with existing contractors in the United States. That makes it especially hard for British industrialists to break into the bidding process. However, substantial opportunities are available and I hope that British industry will take advantage of them. I shall be looking to ensure that, wherever reasonable, without raising undue hopes, we are pursuing such opportunities as exist.
    Mr. Leigh: Does my right hon. Friend see any significance in the announcement by Sir Charles Pringle, director of the Society of British Aerospace Companies, that the Ministry should look at the possibility of a home-grown Polaris system to replace the existing system?
    Mr. Heseltine: It would be quite wrong to leave any doubt. There is no question of the Government's reviewing the Trident programme.
    Mr. Strang: Does not the right hon. Gentleman's answer to my hon. Friend the Member for Workington (Mr. Campbell-Savours) contrast sharply with the assurances that he and his predecessor gave to British contractors? Is it not now clear that about half the colossal expenditure on Trident will go on American technology and jobs? How many hundreds of thousands of jobs might be created in this country if that £5,000 million or thereabouts were spent in Britain?
    Mr. Heseltine: The hon. Gentleman will appreciate that this decision was taken for defence reasons. The technology that we are purchasing is available in the United States, and it was considered that that technology gave Britain the best possible independent nuclear capability. That was the object of the decision. I shall do what I can to secure proper job opportunities in this country, but there is a limitation, for the reasons that I have given. The House will realise that virtually half of the

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    Trident programme will be spent in Britain, and consequently very large numbers of jobs will be associated with it.
    Mr. Bill Walker: Does my right hon. Friend agree that deterrence vitally depends on our ability to inflict an unacceptable level of damage on a would-be aggressor, and that the important aspect of Trident D5 is that, for the next 30 years, it will possess just that capability, while many of the alternatives on offer do not?
    Mr. Heseltine: I am grateful to my hon. Friend. The alternatives were set out and discussed in the open government document. As my hon. Friend rightly said, the Government took the view that this is the system most likely to create the deterrence upon which our ultimate peace depends. We believe that we took the right decision, and there is no prospect of changing it.
    Mr. Ron Davies: Does the right hon. Gentleman expect the total cost of Trident to be in excess of £10 billion? Will he confirm that that is double the original estimate? Will not the most likely consequence be that this will put increased pressure on the level of our conventional defence expenditure? Does the right hon. Gentleman not accept that the result of that will be to heighten the nuclear threshold, thereby making nuclear war more, rather than less, likely?
    Mr. Heseltine: The hon. Gentleman will remember the open government document, which I have with me, which refers to the cost as £7·5 billion. Therefore, his arithmetic does not stand up even if his figures are correct. The House will appreciate that most of the change about which we are talking is based on changes in the exchange rates at today's money values carried forward over the next 10 to 15 years, when the House is not capable of reaching an informed judgment about exactly what the exchange rates will be.
    Mr. Franks: In considering the Trident programme, will my hon. Friend take account of the necessity of ensuring that when the Vickers shipyards are privatised, control of those shipyards remains firmly in British hands?
    Mr. Heseltine: I am sure that my hon. Friend's question will be drawn to the attention of my right hon. Friend the Secretary of State for Trade and Industry, who has responsibility for that matter.
    Mr. Denzil Davies: If, as the Secretary of State rightly said, no one knows what the exchange rate will be in the next 10 years, how on earth can he trot out these spurious estimates of the cost of Trident? Given the present state of the British economy, the likelihood is that exchange rates will go down rather than up. Even more important, will he confirm what he said earlier— that he has no intention of looking at the suggestion of a Polaris Mk II to try to get him off the hook of paying for Trident?
    Mr. Heseltine: I can confirm that we are not reviewing any other alternatives. We did so at the time of the review of the options and arrived at our decision. The right hon. Gentleman asks how I can trot out spurious calculations to give costings to the defence Estimates. The answer is simple. I inherited much precedent from the previous Government, to which I have slavishly stuck.

    Nuclear Weapons (Transportation)
    Mr. Jannerasked the Secretary of State for Defence to which chief constables and to which fire
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    officers general guidance has been given concerning safety aspects of movements of nuclear weapons: and when such guidance was last issued.
    Mr. Stanley: Guidance is issued to those chief constables and fire officers who have a need to know, and is kept up to date. For security reasons I cannot give details.
    Mr. Janner: Is the Minister aware that this morning I received a letter on this matter from the Prime Minister, who says that guidance is given to chief constables and fire officers about the transport of nuclear weapons through their areas, "where necessary"? For the benefit of those who live in Leicester and other cities through which Chevaline and other missiles are transported, will he say whether the words "where necessary" mean that chief constables and fire officers are or are not told when such weapons pass through their areas?
    Mr. Stanley: We are not willing to disclose which chief officers are notified, as that would involve disclosing routes and methods of transport.
    Mr. Peter Bruinvels: Does my right hon. Friend accept that the people of Leicester will welcome the news that such information is to remain confidential? Does he further accept that they are grateful for what has been done by the chief constable, the police and the fire services, and that any attack on them is completely unwarranted and undeserved? It ill-becomes the hon. and learned Member for Leicester, West (Mr. Janner) to behave like that and scare the people of Leicester in such a way.
    Mr. Stanley: I am grateful to my hon. Friend for his responsible attitude.

    Animals (Experiments)
    Mr. Tom Coxasked the Secretary of State for Defence if he will list the types of animal experiments carried out by his Department.
    Mr. Lee: Experiments involving the use of animals conducted by the Ministry of Defence are mainly directed at developing defensive measures against chemical attack. The Soviet Union maintains substantial stocks of chemical weapons and it is essential that our forces are protected. It is also necessary to ensure protection against biological warfare. Other work includes medical studies, including the study of wounding, and the diagnosis of disease.
    The use of live animals for experiments is governed by the Cruelty to Animals Act 1876. It has been the consistent policy of the Ministry of Defence to comply fully with the Act.
    Mr. Cox: Is the Minister aware of the ever-increasing anxiety of the general public about the barbaric experiments on animals that the Department allows to be conducted? Is he further aware that it seems that it is only by persistent questioning in the House that he will begin to outline the experiments that are allowed? What efforts is his Department making to find alternative methods of experimentation, if he claims that it is so necessary, rather than using defenceless animals?
    Mr. Lee: Porton Down takes the lead in considering alternatives. The vast majority of the population, and of hon. Members, and all our service men and women recognise the necessary work that is done at Porton Down.
    Mr. Key: Does my hon. Friend agree that, despite the comments of Opposition Members, there is no equivocation on this subject, and that the growth of non-animal-based toxicity tests has been rapid in recent years and months? Does he further agree that the tragic incident in India has highlighted the need for toxicity tests on cyanide, which are paralleled by the work at Porton Down?
    Mr. Lee: I entirely agree with my hon. Friend and am grateful for his support. We resent some of the innuendo, abuse and exaggeration about the work of Porton Down.

    Exercise Autumn Train
    Mr. Duffyasked the Secretary of State for Defence if he is satisfied with the official reports on Exercise Autumn Train which took place in the Atlantic in November; and if he will make a statement.
    Mr. Stanley: Exercise Autumn Train 84 was this year's Fleet weapons training exercise. Some 20 Royal Navy and other NATO ships and submarines took part, as well as RAF Buccaneers, Nimrods and Phantoms. All participating units achieved considerable training value from the exercise.
    Mr. Duffy: Will the Minister assure the House that the operational effectiveness of the Fleet and its aircraft was not seriously affected by a shortage of spare parts, notably for the Sea King helicopters which embarked with 814 squadron on the carrier Illustrious?
    Mr. Stanley: There has been some difficulty in the supply of engine components for Sea King helicopters. That is partly a manufacturing problem. The overall stock of the Royal Navy is in pretty good shape.
    Mr. Porter: Does my hon. Friend believe that the operational effectiveness of the Fleet was affected by the delay in ordering the type 22 destroyers? Does he accept that it is about time that the order went to Cammell Laird at Birkenhead?
    Mr. Stanley: My hon. Friend has introduced a difficult issue. As was made clear in the debate on the Navy, we shall try to resolve this matter quickly.

    Defence Procurement (Memorandum of Understanding)
    Mr. McWilliamasked the Secretary of State for Defence if he is satisfied with the balance of advantage to the United Kingdom of the effects of the memorandum of understanding between the United Kingdom and the Federal Republic of Germany and Italy on defence procurement.
    Mr. Butler: I assume that the hon. Gentleman has in mind the memorandum of understanding relating to the FH 70 and Tornado programmes. The answer is yes.
    Mr. McWilliam: I am grateful to the Minister for that answer, but how can he be so complacent as to be satisfied with collaboration with companies such as Rheinmetall, when that company is now in court for supplying arms to Argentina via Spain—arms that were used against our men — and when that company is putting people in Britain out of work?
    Mr. Butler: The memoranda of understanding and present circumstances show that for different reasons the
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    balance of advantage lies with the United Kingdom in respect of both the FH 70 and Tornado programmes at the moment.

  PRIME MINISTER

    Engagements
    Mr. Fisherasked the Prime Minister if she will list her official engagements for Tuesday 11 December.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House I shall be having further meetings later today. This evening I hope to have an audience of Her Majesty the Queen.
    Mr. Fisher: When considering whether a pit should close for economic reasons, does the Prime Minister think it sensible or reasonable that costs such as surface damage, which may continue for many years, whether that pit closes or not, should be included? Given the interest in, not to say controversy about, the National Coal Board's accountancy system that has been stirred up, would it not be helpful and constructive if the Prime Minister were to set up a full review now to look into the accounting basis for pit closures?
    The Prime Minister: No, the board fully accepts that management decisions on pit closures should not be based on a single accounting document, and that has never been its practice.
    Mr. Haselhurst: Could my right hon. Friend find time today to consider how far my right hon. Friend the Secretary of State for Transport has infringed his quasi-judicial capacity on airport policies by proceeding with the Civil Aviation Bill? Does she understand that there is grave concern among many hon. Members on both sides of the House that a fair decision on this matter is being prejudiced by the way in which matters are being handled?
    The Prime Minister: I could not possibly accept my hon. Friend's strictures on my right hon. Friend the Secretary of State for Transport. I am aware of what happened this morning, but the future meetings of that Committee is a matter for the Chairman of that Committee.
    Mr. Cunliffeasked the Prime Minister if she will list her official engagements for 11 December.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Cunliffe: Will the right hon. Lady reconsider her Government's mean and niggardly decision to cut old people's heating allowances for those on supplementary benefit by £1? Does she understand that this has caused considerable anxiety and concern in all parts of the House — a concern equal to that about student grants? Furthermore, will she resist any attempts by her Chancellor of the Exchequer to put 15 per cent. VAT on fuel prices, which will again cause severe hardship for pensioners and others?
    The Prime Minister: The hon. Gentleman does less than justice to the Government's excellent record on fuel allowances. The Government are spending £400 million this year on help with fuel bills, and £200 million of this goes to pensioners. The level of the heating allowances has risen by 40 per cent. more than the increase in fuel prices.
    Mr. McCrindle: Is my right hon. Friend as concernd as I am about the activities of the drug companies, which are suggesting that the very limited movement into generic prescribing is calculated to create two levels of health service? Will she place on record the fact that there is no reason why any patient should be disturbed, because the efficacy of those drugs being recommended is at least as good as those with brand names? Will she also express surprise that general practitioners and the British Medical Association are prepared to lend their names to this campaign?
    The Prime Minister: Yes, I fully endorse what my hon. Friend has said. The House would have cause to criticise the Government if we did not get the best value for money spent on drugs in the NHS.
    Mr. Kinnock: Is the Prime Minister aware that the youth training board of the Manpower Services Commission is recommending to the MSC that the pay of young people on youth training schemes should be increased to £34 next year? Is the Prime Minister willing to endorse that recommendation and so give assistance to young people on training schemes and their families, much as she did last week to deserving young people and their families involved in higher education?
    The Prime Minister: No. I think that it is more important to get the maximum number of young people on the youth training scheme—[Interruption.] No. I think that it is much more preferable to get the maximum number of young people on the training scheme, to enable them to get jobs for which higher skills are necessary; jobs which would not be available to them but for that training.
    Mr. Kinnock: There seems to be confusion in the Prime Minister's mind. There is no conflict between the quality of training, the numbers involved and the payment of at least acceptable rates of pay to young people. If the Prime Minister is interested in these matters, will she acknowledge that the youth training board is also interested in involving the maximum number of youngsters, but that it still recommends £34 a week? Will the right hon. Lady also accept that, because of the anticipated underspend in the next year, the MSC could pay £40 a week and still not exceed its budget?
    The Prime Minister: If increases were to be made, resources would have to be found. The right hon. Gentleman talked about anticipated underspend. Precisely because of that anticipated underspend we increased other training services. The money has already been spent on other training projects.
    Mr. Kinnock: Is the Prime Minister saying that after offering a guarantee to all young people—of which she boasts—that they will have education or training, she has been expanding other schemes by filching money from the funds that she was offering under that solemn guarantee to those young people? Will the right hon. Lady now answer the question? Does she think that young people should be properly paid, by the amount recommended by the youth training board—£34 a week —or does she think that they should continue to be underpaid?
    The Prime Minister: The right hon. Gentleman's last question was inconsistent with his previous question. In his previous question he said that an increase was justified because of an anticipated underspend. In his last question
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    he said that we had spent the anticipated underspend that he proposed to spend on increasing the payment — [Interruption.] The right hon. Gentleman said that we should increase the amount because of the anticipated underspend. I was telling him that because of the anticipated underspend we had already increased the spending. I am concerned about increasing the numbers of young people who are trained. The right hon. Gentleman's proposal is impossible without imposing extra tax.
    Mrs. Jill Knightasked the Prime Minister if she will list her official engagements for Tuesday 11 December.
    The Prime Minister: I refer my hon. Friend to the reply I gave some moments ago.
    Mrs. Knight: Is the Prime Minister aware that claims made last week by an Opposition Member based on an article published in Accountancy that NCB accounts were a flawed instrument have been totally invalidated by the article being withdrawn— [Interruption]. The article's authors have admitted that they did not properly understand the accounting or decision-making procedures employed by the NCB and that they included factual inaccuracies in their article.
    The Prime Minister: I understand from a press statement issued by the National Coal Board on 7 December that the NCB's members and its director general of finance yesterday met the authors of an article in Accountancy. The statement said:
    "The board … explained how the authors had misunderstood the board's accounting and decision making procedures and drew attention to factual inaccuracies. The authors, who regretted that the orginal article had been circulated by the magazine before the board had an opportunity to discuss it with them, readily agreed to review the contents of their article.
    The board … expressed their willingness to discuss with the authors their revised article."
    Mr. Steel: Can the Prime Minister confirm that the £10 Christmas bonus for pensioners introduced by a previous Conservative Government in 1972 is now worth only £2.80 in real terms? Is the right hon. Lady continuing to refuse to uprate the bonus? Does she realise that comparisons between her and Mr. Scrooge are wholly unfair, because he was prepared to see the error of his ways?
    The Prime Minister: The right hon. Gentleman is aware that this Government have paid the Christmas bonus every year—unlike the last Labour Government, whom the right hon. Gentleman helped to keep in power. This Government will continue to pay the Christmas bonus. If the right hon. Gentleman wants more, will he tell the House where the resources should come from?
    Mrs. Rumboldasked the Prime Minister if she will list her official engagements for Tuesday 11 December.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mrs. Rumbold: Although many people agree that the laws on Sunday trading need to be reviewed, does my right hon. Friend agree that the traders who opened last Sunday should be roundly condemned for opening illegally? Would it not have been preferable for those traders not to have opened illegally on Sunday but to have left the matter for Parliament to consider and reach a decision?
    The Prime Minister: I agree with my hon. Friend that the law must be obeyed until it is changed by Parliament.
    Mr. Barronasked the Prime Minister if she will list her official engagements for Tuesday 11 December.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Barron: The Prime Minister said earlier that the National Coal Board does not use any one set of accounting figures in relation to colliery closures. Will the right hon. Lady tell the House why she stood at the Dispatch Box last Thursday and tried to defend the NCB's practice of using a single set of figures? What was said in the article about those figures has not yet been withdrawn. Have not those figures been described as a mine of misinformation?
    The Prime Minister: I have made the position perfectly clear. The NCB fully accepts that management decisions on pit closures should not be based on a single accounting document. That has never been its practice. What I said last week still obtains—that, whatever the accounting procedures, the taxpayer has paid £1·3 billion subsidy to the NCB. That is a matter, not of accounting procedure, but of fact.
    Mr. Sternasked the Prime Minister if she will list her official engagements for Tuesday 11 December.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Stern: Will my right hon. Friend take time during her busy day to study the recent conclusion of Professor Patrick Minford that the best possible way to reduce unemployment is to raise tax thresholds?
    The Prime Minister: I accept the implication behind my hon. Friend's question that there is an unemployment trap because there is virtually no gap between the level of what a person can receive on supplementary benefit and some of the levels of pay, and because of the difficulties that occur when withdrawing certain means-tested benefits. It is vital to raise the thresholds. Under Conservative Government, thresholds have been raised by 16 per cent. in real terms, compared with a fall under the last Labour Government.
    Mr. John David Taylor: Does the Prime Minister recall her assurance to the House last month that the United Kingdom would not pass on to the European Community super levy payments unless other countries were seen to be complying with the milk quota scheme? What is her reaction to the strange decision of the Commission last night to withhold from the United Kingdom's regular
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    agriculture payments an amount equivalent to what it assumes to be the super levy due by the United Kingdom to the EEC?
    The Prime Minister: This matter will be dealt with in the normal way, by representations to the Commission. What I said will hold.
    Mr. Michael Forsythasked the Prime Minister if she will list her official engagements for Tuesday 11 December.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Forsyth: Is my right hon. Friend aware of the Wang factory which will be opened next week in my constituency by His Royal Highness the Prince of Wales and of the news today that Hughes Microelectronics has announced a £25 million expansion scheme in Glenrothes, creating some 500 jobs? Is it not a tragedy that the Labour-controlled local authorities which represent those areas are adding to the costs of these new businesses by squandering more than £1 million of ratepayers' money in support of striking miners?
    The Prime Minister: Yes. I was very glad to hear the news about Hughes Microelectronics setting up in Glenrothes, which means some 500 new jobs. I agree with my hon. Friend that when local councils put heavy rates on business, ultimately it will drive away business from that area. Also, I agree with the implication of my hon. Friend's question that the strike is doing untold damage to the repuation of this country for value for money and speedy delivery.
    Mr. Ewing: On a point of order—
    Mr. Speaker: I will take points of order afterwards, unless they are directly related to questions.
    Mr. Ewing: Yes. It is directly related to questions.
    Mr. Speaker: Very well.
    Mr. Ewing: I apologise for raising a point of order, Mr. Speaker, but I noticed that during defence questions when my hon. and learned Friend the Member for Leicester, West (Mr. Janner) raised a question you called the hon. Member for Leicester, East (Mr. Bruinvels) to give, quite rightly, a contrary point of view. I do not complain about that, but the hon. Member for Stirling (Mr. Forsyth) has just made a scurrilous and untrue allegation against—[Interruption.]
    Mr. Speaker: Order. If the hon. Gentleman had been watching the clock, he would have seen the reason why it was not possible to call another hon. Member.

M25 Motorway (Accident)
3.32 pm
Mr. Robert Adleyasked the Secretary of State for Transport if he will make a statement on the serious motorway accident this morning which resulted in death and injury.
The Minister of State, Department of Transport (Mrs. Lynda Chalker): A multiple accident occurred in thick fog over a length of some 40 yd on the westbound carriageway of the M25 at 6.15 am today near the Kent boundary with Surrey. I understand that 22 vehicles were involved. Wreckage has not yet been cleared and it is feared that at least nine deaths have occurred, but this figure may not be the final total. The total number of injured is not yet known.
The westbound carriageway is completely blocked and is not expected to be opened until tomorrow, Wednesday, at the earliest. The eastbound carriageway has been closed except for use by the emergency services. The police have set up an emergency telephone service for news of casualties. I thank all the emergency services involved in dealing with this motorway tragedy.
I am sure that the House will wish to join me in expressing condolences to the relatives and friends of those so tragically killed and in sending the injured our best wishes for a speedy recovery.
Mr. Adley: I thank my hon. Friend for her statement. I join in her thanks to the emergency services for yet again turning out at short notice in awful conditions and in expressing condolences to the relatives of those who were killed and to those who were injured, so near to Christmas, but may I ask her a number of questions? First, will there be a specific—
Mr. Speaker: Order. One question.
Mr. Adley: May I ask my hon. Friend whether a specific inquiry will be set up into this accident, as is done with other modes of transport, and whether the police have powers to close motorways in certain weather conditions to prevent similar accidents from occurring in the future? Will my hon. Friend now examine the attitude of her Department, which seeks to increase rather than to reduce the speed of heavy lorries?
Mrs. Chalker: In the event of a road accident, it is up to the police to decide whether to prosecute as a result of their inquiries, but I assure my hon. Friend that my Department will examine all the data, using all the relevant resources, to see what we can learn from this terrible tragedy. I can tell my hon. Friend that a 30 mph limit had been in operation for all vehicles throughout the night, in an effort by the police to prevent such an accident.
Mr. George Gardiner: How regularly is this section of the M25 vulnerable to fog, and has it any previous record of accidents as a result of fog? Is my hon. Friend satisfied with the lighting arrangements along substantial sections of this motorway?
Mrs. Chalker: I cannot tell my hon. Friend how regularly fog will fall on any section of the motorway. To my knowledge, there have been no major accidents on this stretch of motorway, but I shall check and write to him about that. Motorway lighting, which may be helpful in some cases, is not necessarily helpful in fog; it depends
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on the height of the fog. I cannot say that the lack of lighting at the point of the accident was necessarily unhelpful until we know the prime cause of the original and subsequent crashes.
Mr. Sydney Bidwell: Will the hon. Lady undertake to look into speed restrictions and their observance on motorways? Does not this accident show the Department of Transport's wisdom in resisting the pressure to increase the speed limit from 70 to 80 mph? The public do not generally understand that an amber flashing light warning of the necessity for a reduction in speed is only a recommended limit. Will the hon. Lady try to ensure that the law is changed to make that limit enforceable?
Mrs. Chalker: I agree with much of what the hon. Gentleman has just said. I thank him for his comment on the Government's common sense in retaining the 70 mph speed limit in good weather conditions. I am aware that the amber flashing lights are switched on by the police only when they believe that speed should be reduced to the level shown on the matrix signals. All drivers should heed that warning. In this case it was 30 mph, but it may be even less. Drivers should seek, not only to slow down, but to keep a sensible distance from and as far behind the vehicle in front as possible, so that they have room to pull up in bad weather conditions. I assure the hon. Gentleman that we shall look fully at all the evidence in the case.
Mr. Mark Wolfson: I thank my hon. Friend for making a statement on this tragic accident. It gives the House the opportunity to express our condolences to all the victims. I support what she has said, but will she re-emphasise that on the motorways each driver depends for his life and that of others on the responsible driving of other people? It is only by keeping a safe distance and driving at speeds which suit the weather conditions at the time that safety can be increased and ensured. Too fast and too close is all too often the cause of this kind of tragedy.
Mrs. Chalker: I thank my hon. Friend for what he has said. He is right in the guidance that he gives. I would add that every driver should consider whether it is necessary to go onto the road in bad conditions, and, if so, to ensure that all his lights are in safe and working order and well cleaned so that he may be seen as well as see others. I recommend all motorists to look at paragraph 50 of the "Highway Code" entitled "The Fog Code", which contains sensible advice.
Dr. John Marek: I do not wish to prejudge the cause of the accident, but will the Minister accept that many such accidents are caused by motorists going too fast? Will she urge the police to crack down on these law-breakers, especially those who travel at more than 70 mph?
Mrs. Chalker: I understand what the hon. Gentleman says. I do not yet know the cause of the accident, but there is no doubt that to drive faster than is safe in bad weather conditions, or in any other conditions, is motorway madness, as it has been dubbed. I very much hope that motorists will learn from this terrible tragedy that, whatever the weather conditions, they should obey the law, which lays down a maximum of 70 mph in good weather conditions.
Mr. Kenneth Warren: Will my hon. Friend consider the design of this motorway, about which she will remember I have had extensive correspondence with her? The problem is as much that of a traffic jam building up eastwards for many miles as anything else, as it is impossible to leave the motorway for a distance of about 20 miles. If there were only an interchange capability where the motorway meets the A21, many hundreds of drivers could have been eased out of the traffic jam which caused so much chaos for so many hours.
Mrs. Chalker: I do not think that any change in the distance between junctions would have made any difference to this tragic accident. I shall consider what my hon. Friend has said, but if drivers would obey the "Highway Code" and take notice of police advice we would not be dealing with a private notice question about a tragedy of the sort that took place this morning.
Mr. Nicholas Soames: In view of what my hon. Friend has said, will she seek the consent of the House to give the amber lights the full force of law?
Mrs. Chalker: As I said to the hon. Member for Ealing, Southall (Mr. Bidwell), I shall be examining the matter.
Mrs. Gwyneth Dunwoody: The whole House will join the Minister in sending condolences to the unfortunate relatives of those who have been killed and injured. Will she consider closely the history of the lighting along this stretch of motorway, where several accidents have occurred, as there may be some connection between accidents and the lack of lighting? Will she bear in mind that there is no point in giving advice to motorists if it is constantly ignored? Will she satisfy herself that the police can impose restrictions where motorists consistently break the speed limit that is imposed in bad conditions?
Finally, will she tell the Secretaries of State for Social Services and the Home Department that it is not only on occasions such as this that we should remember the worth of the emergency services? The ambulance, fire and police services are increasingly under attack while doing their jobs. They need the support of a proper budget and the ability to provide proper cover at all times.
Mrs. Chalker: On the information so far given to me, I am content that the police will impose all necessary restrictions on a motorway when this is necessary. I am considering lighting on motorways. I cannot say that the absence of lighting was necessarily a good or bad thing in this instance.
I am sure that my right hon. Friend the Secretary of State for Social Services and my right hon. and learned Friend the Home Secretary will note what the hon. Lady said about the emergency services. I know of no circumstances where our emergency services have been anything but first class. They have been on the spot immediately. That should be said, whatever the political background to the hon. Lady's question.

Rate Support Grant (England)
3.43 pm
The Secretary of State for the Environment (Mr. Patrick Jenkin): With permission, Mr. Speaker, I wish to make a statement on the rate support grant settlement in England for 1985–86.
In my statement to the House on 24 July I set out my proposals for the main elements of the rate support grant settlement for next year and listed the 18 authorities which I was designating for rate limitation. I have today laid before the House the main Rate Support Grant report for 1985–86 and I am sending rate-capped authorities notices advising them of the rate or precept limit proposed for them. Copies of all the material being sent to local authorities today are available in the Library and the Vote Office.
I have also laid today two Rate Support Grant supplementary reports. The third supplementary report for 1983–84 adjusts authorities' grant entitlements in the light of the latest information on outturn expenditure for the year. The second supplementary report for 1984–85 implements grant abatement for Liverpool city council, whose budget was received too late to be taken into account when I implemented grant abatement for all other authorities in July. Both reports also contain other technical adjustments to grant.
I now turn to the main report for next year. For 1985–86, for the first time, the Rates Act 1984 enables me to influence directly the spending levels of the worst overspenders by imposing limits on their rates. As we promised throughout the passage of the Rates Bill in Parliament, this means that rate limitation will benefit not only the ratepayers of the selected authorities but low-spending authorities, since I am no longer obliged to ask them to make cuts because of the excesses of the high-spending minority.
I have decided to confirm the targets that I proposed in July with two important changes. The first allows most low-spending authorities an increase over this year's budgets of 4·5 per cent. instead of the 4·25 per cent. I previously announced. This reflects the slight increase in the forecast inflation rate over the period. For the first time, targets for the lowest spenders imply spending increases in line with inflation, or, in other words, no further cuts in real terms, the second change relates to a particular group among those low spenders — namely, authorities such as Berkshire budgeting this year to spend not only below grant-related expenditure but at or very close to target. They will be allowed a further relaxation of targets so that they may increase spending by up to 4·625 per cent. —a little more than inflation—without incurring penalties. With these changes, the targets for low-spending authorities fulfil to the letter the undertakings that I gave to the House last January.
I have decided to confirm the stringent holdback tariff which I announced in July at the rate of 7p in the pound for the first percentage point of overspend, 8p for the second, and 9p for each point thereafter. I believe that it is only fair to match realistic targets with a strong incentive that they should be met. I propose, however, to continue to exempt from penalty increases in certain urban programme and civil defence expenditure and increases in expenditure on schemes jointly financed with health

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authorities. Aggregate Exchequer grant will be £11·764 billion. That is slightly higher than the figure which I proposed in July. The grant percentage is 48·7 per cent.
Following consultation with local government, I have decided on some limited but important changes to GRE assessments, affecting primarily the GREs for passenger transport support, highway maintenance, rate fund contributions to council housing and recreation. I have also increased the slope of the block grant poundage schedule. This increases the importance of spending in relation to GRE as a factor in grant entitlements and increases the marginal cost of spending about GRE for all authorities. Again, this helps low-spending authorities, since it gives more of the available grant to authorities spending at or below GRE.
Mr. Patrick Cormack: May we have a translation?
Mr. Jenkin: My hon. Friend may take it that it is good news because it gives more of the available grant to authorities spending at or below GRE.
In the light of this RSG settlement, I am issuing maximum rate or precept limits for the 18 selected authorities. Since July, when I announced expenditure levels for these authorities, it has been open to each of them to apply for a redetermination of its expenditure level at a higher level, but none has done so.
Rate or precept limits for 1985–86 are therefore based on the July expenditure levels. I am today sending out statutory notices informing each authority of the limit that is proposed for them. A list of these limits has been placed in the Library and is available in the Vote Office. In calculating the rate or precept limits, I have taken account of the expenditure levels set and the authorities' block grant entitlements next year. I have had regard also to the level of financial reserves available to each authority, making assumptions as necessary.
Authorities now have until 15 January to comment on the rate or precept limits proposed and to draw my attention to any relevant information of which I may not be currently aware. Unless I have comments by 15 January, it will, in the absence of agreement, be necessary to move on to the next stage of asking the House to confirm the rate limits by affirmative order.
The proposed rate and precept limits that I am announcing today will be warmly welcomed by ratepayers in the areas concerned.
Mr. Tony Banks: Tell us what they are.
Mr. Jenkin: For 13 of the 18 authorities I have set rate or precept limits which are lower than the rates or precepts being charged this year. In the five remaining cases, however, the rate or precept will be lower than it would have been without rate-capping.
This year's average rate increase was the lowest for 10 years. If authorities budget to meet their targets next year, the average rate increase next year should be even lower. the first stage of rate limitation will at long last bring relief to ratepayers in the rate-capped areas. Moreover, rate-capping has allowed me to set much fairer targets for low-spending authorities. This settlement has meant increasing the provision for local authority current spending next year
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by £820 million above the provision in last February's public expenditure White Paper. In present economic circumstances, this is a reasonable and fair settlement, and I commend it to the House.
Dr. John Cunningham: The House will be aware that if the Secretary of State had been bringing good news today, he would have announced it in language that we could all understand. Is not the irony of it the fact that he makes a statement in which he continues the trend which has currently, under this Administration, removed £9,000 million from rate support grant and placed increasing burdens on the ratepayer, when his colleagues in the Treasury are publishing a report which shows that, because of almost six years of Government inefficiency, almost £1 billion is being wasted through Government purchasing policy? That is far in excess of any alleged overspending by local authorities.
Is it not also significant that in the five pages of his statement, the Secretary of State never once mentioned the quality of services or the impact of the settlement on employment? The reality is that the provision for expenditure, despite the right hon. Gentleman's protestations, is 5 per cent. below what is required just to maintain existing services across the country. Have not the local authorities made that clear to the right hon. Gentleman in their discussions with him? Are not local authorities being aided for spending below the assessment of what is required of them for the proper provision of services?
How can the right hon. Gentleman believe that an increase of one eighth of 1 per cent. in targets—that is only for some authorities— will make up for the fact that the aggregate Exchequer grant next year is to be £110 million less in cash terms, which equates to £600 million in real terms? That is the measure of the reduction.
Will the Secretary of State say how many councils spending at target will receive less grant in real terms next year than they received in the present year, after taking into account his changes in transport supplementary grant? Will not most major spending councils receive less in real terms as a result of this settlement? When does the right hon. Gentleman expect to make his announcement about housing investment programmes and other capital allocations?
Is it not a fact that for 1 per cent. expenditure over target, authorities will be fined treble the amount taken away from them in the current year? That is, for every £1 in excess, they will have to pay £10 to the Treasury. Paradoxically, the Treasury has gained from authorities spending above target in the current financial year to the tune of over £500 million. That is how perverse the Government's financial arrangements are.
May I also ask the Secretary of State — [HON. MEMBERS: "No."] If the Secretary of State insists on making two statements, one on rate support grant and one on the Rates Act, he can expect two lots of questions. He will recall saying on 24 July:
"Rate-capping does not therefore mean that services must be slashed. The spending limits that I am setting are reasonable and should be perfectly attainable".
Is he aware that one of the most impoverished boroughs in England is being asked for a cut of 28 per cent., the city of Leicester for a cut of between 15 and 16 per cent., the London borough of Brent more than 13 per cent., Merseyside almost 18 per cent., the London borough of

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Haringey almost 14 per cent. and the city of Sheffield 12·5 per cent. Does he accept that that is the reality of the cuts in local authority budgets that he seeks?
It is idle to claim, as the Secretary of State does, that the derogation process somehow offers a way out. Is the Secretary of State aware that on derogation the Conservative leader of Portsmouth city council said:
"The thing about the redetermination is that it could come with strings attached that my council could not possibly accept".
That is the view of Conservatives in local government. [HON. MEMBERS: "One."]
Is the Secretary of State aware that in engineering rate decreases at the expense of the shire counties through lower grants being made available to them and at the expense of the Exchequer he has at last admitted what many Members and people outside have put to him—that because of the increase of more than £800 million in public expenditure that he has just announced under the rates Act he is spending £800 million to save £100 million?
May I say, finally—
Hon. Members: No.
Hon. Members: Yes.
Dr. Cunningham: Is not the Government's message to ratepayers the same old recipe—pay more and get less? Is the right hon. Gentleman aware that people are increasingly realising that the Government are determined to prevent local democracy from working and to prevent elected councils from meeting their statutory obligations?
Mr. Jenkin: I am afraid that the hon. Gentleman spoke a great deal of nonsense, but I will try to answer his specific questions.
Of course there is a reduction in the percentage of expenditure met by the aggregate Exchequer grant — [HON. MEMBERS: "Why?"] That continues the trend of many years, including the period of the Labour Government of which the hon. Gentleman was a member. In 1976 the percentage was 66 per cent.—
Mr. Robin Corbett: Here we go.
Mr. Jenkin: The hon. Gentleman may not like it, but he is going to hear the truth. The percentage fell to 61 per cent. under the Labour Government and it has continued to fall. Many people in local government, and the Association of County Councils in particular, support that development because they recognise that a higher proportion of expenditure being paid by ratepayers enhances local accountability.
The hon. Member for Copeland (Dr. Cunningham) went on to ask how many councils spending at target would receive less grant. I can only advise him to look at the totals. There are a number of changes in grant-related expenditure assessment. A number of councils will receive more grant, but most, of course, will receive less because of the reduction in the percentage. That is perfectly clear. The hon. Gentleman persists in confusing the real savings that will be made with the necessary adjustment in the public expenditure White Paper figures to achieve realistic targets.
The figure that we expect to save this year through the operation of rate-capping, based on what the rate-capped authorities have shown that they would otherwise have spent, is about £400 million. Because of that £400 million,
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I have now been able to offer much fairer targets to the shire counties and to fulfil our undertakings of last January.
Finally, the hon. Gentleman asked when we expect to make a statement on capital spending. I know that authorities are anxious to know where they stand on capital, so that they can make their plans. I am sorry that we have not managed to make the announcements coincide, as they usually do, with the rate support grant settlement. I cannot yet give a firm date—we are still sorting out some of the details—but I hope to make an announcement quite shortly.
Mr. Mark Carlisle: If I understood my right hon. Friend's answer correctly as meaning that the Exchequer proportion of local authority expenditure is further to be reduced, how does that equate with the intention to reduce the rates burden? In particular, how does it equate with the effect on small businesses, on which the employment prospects of many people depend?
Mr. Jenkin: I can assure my right hon. and learned Friend that in each of the past four years the proportion of expenditure met by the rate support grant has fallen and that in each of those four years the percentage increase in rates has fallen as well. There is no necessary connection between the level of rates that a local authority levies and the proportion of its expenditure met by grant. What matters is the level of an authority's spending. By increasing their accountability, we are bringing greater pressure on local authorities to keep their spending firmly under control and to keep their rates down with a lower increase each year. I confidently expect that to happen next year.
Mr. Peter Hardy: On the point referred to by the right hon. and learned Member for Warrington, South (Mr. Carlisle), will the Secretary of State confirm that—leaving aside the cruel effect on many households —the extra burden on commerce and industry is £4,000 million? Does the right hon. Gentleman consider that the Prime Minister was entitled to make the remarks that she made at Question Time today? Does he accept that the arrangements that he has proposed this afternoon will further increase unemployment, and that many areas cannot stand any further increase?
Mr. Jenkin: On the contrary, the hon. Gentleman is absolutely wrong. High rates cost jobs. In many of the areas of highest unemployment, the rate reductions made possible by rate-capping will help to reduce unemployment.
Mr. Robin Maxwell-Hyslop: What persuades my right hon. Friend that the present system of rates is a more just form of taxation than central Government taxation? If, like me, he is not satisfied that the rating system is a just form of taxation, why does he increase the percentage of local government expenditure borne by that unjust system?
Mr. Jenkin: I am well aware of my hon. Friend's views on the rating system. I am sure that he will have taken comfort from my announcement in October that I have asked my right hon. Friend the Minister for Local Government to undertake a series of thorough studies into the whole system of local government finance. I hope that that process will produce a fairer and more robust system

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of financing local authorities and will enhance local authority accountability. I am sure that we would all welcome such an enhancement.
Mr. Simon Hughes: Does the Secretary of State believe that, by those figures, he can justify taking away over £2,000 million of grant from London in the past four years, because that has been the result? My borough has lost over £70 million in grant. Can the right hon. Gentleman justify the fact that, on the figures now announced, if Southwark spends the maximum that it is allowed to spend under the rate-capping legislation, it will none the less be over £1·5 million over the target above which it will be penalised? Is that logical? If it is logical, where does that logic lead us?
Mr. Jenkin: The ratepayers of Southwark expect to benefit from a reduction of about 25 per cent. in their rates.
Mr. Hughes: Thirty-three per cent.
Mr. Jenkin: The figure on which the rate limit is based is 25·74 per cent. Had Southwark been free to spend in accordance with the intentions that it had disclosed, the domestic and business ratepayers of Southwark would have faced an increase of 30 per cent. rather than a cut of 25 per cent. The hon. Gentleman would do well to keep quiet about the matter for a time.
Mr. John Maples: My constituents will welcome the fact that the three authorities to which they pay rates have all been rate-capped. However, will my right hon. Friend explain the justification for continuing the target and penalty system for rate-capped authorities, and for continuing the grant calculation system under which the GLC and the Inner London education authority will continue to receive no rate support grant? Is that not extremely unfair on Londoners? Could not my right hon. Friend arrange matters so that rate-capped authorities receive their fair share of the rate support grant?
Mr. Jenkin: My hon. Friend must recognise that it would be wildly unfair as between rate-capped authorities and those which fell just below the criteria for rate-capping, to impose penalties on the latter for exceeding their targets but not on the former. That distinction would be completely indefensible.
On this basis, the GLC will recover a marginal entitlement to rate support grant. However, both the GLC and ILEA spend so much more than their grant-related expenditure assessment that they remove themselves almost completely from entitlement to rate support grant. Were that not so, there would be less grant for everyone else.
Mr. Robert N. Wareing: How can the Secretary of State argue that local accountability is improved by reducing the rate support grant to 80 per cent. of expenditure when that reduction is accompanied by fictitious penalties, targets, GREs and rate-capping? Is the right hon. Gentleman aware that his diktat to Merseyside county council will mean the loss of 3,000 local government jobs and the abandonment of statutory obligations? Can the right hon. Gentleman tell Merseyside county council which laws it should break and which statutory obligations it should renege upon?
Mr. Jenkin: There is no question whatever that any local authority faced with a rate limit is likely even to approach the level at which it would be obliged to break its statutory obligations. The authorities concerned are all high-spending authorities, which spend at least 20 per cent.—
Mr. Greville Janner: On what?
Mr. Jenkin: —more than their GREA and at least 4 per cent. more than their target. The hon. Member for Liverpool, West Derby (Mr. Wareing) is quite wrong. I suggest that the hon. Gentleman should study the precept limit that I have set for Merseyside. As the legislation requires, I have had to take account of the use of balances in the authority's accounts. Merseyside will still face a substantial precept increase next year, but it will be very much lower than it might have been. If the authority had continued to spend at the level at which it made clear earlier this year it intended to spend, the increase might have been as much as 100 per cent. Merseysiders must be grateful for small mercies.
Mr. Charles Morrison: I welcome my right hon. Friend's proposals for target increases in those shire counties which have been most hard hit by targets after reacting responsibly and diligently to the Government's requests that they should reduce or contain expenditure. However, is my right hon. Friend aware that low rate increases in the shire counties are not the sole objective of a large proportion of the electorate and the ratepayers? People are equally concerned about the provision of adequate services. Is my right hon. Friend aware that the worst of all worlds is a high rate increase couplied with a cut in services?
Looking even further ahead than 1985–86, will my right hon. Friend give a commitment now to relax or preferably to abolish targets for shire counties in 1986–87?
Mr. Jenkin: I am glad to confirm to my hon. Friend that the increase in target for Wiltshire, at 4·625 per cent., is the highest for any authority. I am grateful for his welcome recognition of the steps that we have taken to acknowledge the efforts made by low-spending authorities. I entirely agree that ratepayers are concerned about standards of services. One of the advantages of the present rate support grant settlement, compared with all those that have preceded it, is that any economies that an authority is able to make and any extra efficiencies that it is able to achieve, instead of being clawed back under the penalty system, may be spent on improving and enhancing the quality of services given to the ratepayers. That is a perfectly fair outcome of the consideration that we have given to the matter in the past two months.
Mr. Janner: Does the Secretary of State not understand that it is undemocratic, unreasonable and unfair to penalise a well-run city, such as Leicester, for building up reserves under Conservative and Labour Administrations, precisely as a good businesslike operation would do? How can he expect a reduction of 56·61 per cent. in rates to be absorbed without destroying and causing chaos in services which all citizens need?
Mr. Jenkin: The hon. and learned Gentleman has obviously not studied the figure of Leicester city council's reserves, which, on the information available to us, were astronomically high. It is unreasonable that ratepayers should be expected to add to such reserves. On the

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contrary, any sensible council with such massive reserves can reasonably be expected to charge ratepayers a lower rate. That is the basis on which we have approached the setting of a rate limit for Leicester. If Leicester believes that we have got it wrong, it has until 15 January to come and give us the true figures.
Mr. Janner: I shall tell the right hon. Gentleman.
Mr. Jenkin: It is for the council to come in. I believe that the ratepayers of Leicester will cheer mightily at the prospect of a 56 per cent. reduction in rates.
Mr. Tim Smith: Is my right hon. Friend aware that his statement will be welcomed in areas which have suffered because of high-spending authorities elsewhere? Will Buckinghamshire be among the low spenders that will benefit from a permitted increase in target spending of 4·625 per cent.? Has my right hon. Friend been able to make any progress on the problem relating to Buckinghamshire's population?
Mr. Jenkin: The target increase for Buckinghamshire is not 4·625 per cent., but a full 4·5 per cent. because it has been budgeting this year marginally over the target. The highest increase in the target goes to authorities which have budgeted below GRE and target. I am well aware of the case of Buckinghamshire and several other authorities which have expanding populations. I am not convinced that the system works as unfairly in their case as they claim, but I am always prepared to listen to arguments about whether further adjustments and refinements of GREs are necessary to reflect that phenomenon.
Mr. John Cartwright: Is the right hon. Gentleman aware that many rate-capped authorities are planning to spend more rather than less next year? Does he agree that a sudden slamming on of severe cuts will produce chaos, confusion and real hardship for people who depend on local authority services and for local authority employees? Whatever the Secretary of State's argument with councillors might be, will he take steps to limit the impact of rate-capping on innocent bystanders who are not involved in this battle?
Mr. Jenkin: The local authority is responsible for the level of its expenditure. I believe that many ratepayers in Greenwich will welcome an 18 per cent. cut in the rates. Greenwich is that London borough the expenditure and rates of which have increased among the fastest in the country. It has become a byword for extravagance. It is for the council to decide how to live within the level that we have set. I am sure that Greenwich ratepayers will welcome an 18·9 per cent. reduction in rates.
Mr. Gerald Bowden: By how much would the ILEA precept have increased next year without rate-capping? Will my right hon. Friend confirm that further reductions could be made to bring the ILEA target nearer to its GRE?
Mr. Jenkin: The proposals for the ILEA precept will result in a reduction of 7·25 per cent. ILEA has published for next year a bogus budget of what it would have liked to spend. If it spent that amount, there would be a 12 per cent. increase in the ILEA precept. My hon. Friend is right. ILEA is notoriously extravagant and can make savings which would enable it to come closer to the GRE and so begin to be entitled to rate support grant. Several proposals have been made by the Conservative minority on ILEA.
Mr. Guy Barnett: The Secretary of State referred several times in his statement to low-spending authorities. Is he aware that the average rate level in the London borough of Greenwich is the fourth lowest in inner London—way below that for Chelsea and Kensington and for Westminster? Is he aware that that is the case in spite of the fact that Greenwich has lost or had stolen by by the Government a larger—[Interruption.] Will the Secretary of State listen?—a larger proportion of its rate support grant than any other authority in Britain? Is he aware that his proposals will lead to the imminent loss of no fewer than 1,000 council jobs and a slashing of services to the elderly, the disabled and the poor? The Secretary of State's Audit Commission described those services as efficient and well run. Is the Secretary of State surprised that my constituents regard his attitude, and that of the Government, towards Greenwich as nothing short of unjust and vindictive?
Mr. Jenkin: The hon. Gentleman is quite wrong. Greenwich's rates have increased by 112 per cent. since 1981–82. It has a high GRE because it scores high on several of the inner-city deprivation indicators, and therefore its base entitlement to grant is fairly high. That is as it should be, but it does not absolve Greenwich from running services effectively and economically. I shall believe the hon. Gentleman's cries of woe when see Greenwich cutting out a lot of its nonsensical spending on advertising, police committees and the rest, rather than on services. By their works we shall know them. We shall watch carefully where Greenwich makes its savings.
Several Hon. Members rose—
Mr. Speaker: Order. I have to take into account the fact that there is another statement and then an important debate. I shall take questions until 4.30 pm. I hope that, if hon. Members ask their questions briefly, I might be able to call them all.
Sir Dudley Smith: Is my right hon. Friend aware that, as a ratepayer in the Lambeth area, I am delighted at his tough approach towards high-spending authorities and at his decision to abolish the GLC? Is he further aware that, as a ratepayer in Warwickshire, I am rather less enchanted with the news that he has given us, although it is a move in the right direction? Will he give a pledge that well-run low-spending authorities will continue to be looked on with the greatest favour in view of sacrifices that they have made in the past?
Mr. Jenkin: I thorougly endorse what my hon. Friend said about Lambeth. I wonder whether he has noticed that Lambeth has decided that, for local authority tenants who owe more than £1,000 in rent arrears, for every £1 that the tenant pays off, he will be let off £4? I should have thought that the ratepayers of Lambeth would have something to say about that.
Mr. Jack Straw: Housing benefits.
Mr. Jenkin: The hon. Member for Blackburn (Mr. Straw) is quite right to mention housing benefits. These tenants are able to pay their rents but are simply allowed to go month after month without paying them. That is a scandal, and Lambeth ought to be thoroughly ashamed of itself.
Warwickshire gets the full 4·5 per cent. increase in target this year. It budgeted marginally above target for the

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current year and therefore qualifies for a 4·5 per cent. increase of next year's target over this year's budget. With regard to grant entitlement, Warwicksire loses probably less grant in percentage terms than many other counties. [HON. MEMBERS: "Ah—less."] Of course, it will lose some because we are clearly reducing the percentage of the aggregate Exchequer grant. That is in accordance with decisions taken by the Government and our predecessors.
Mr. A. E. P. Duffy: Is the Secretary of State aware that people came from all over the world to observe Sheffield's post-war housing take shape? Now in my constituency there is dilapidated and decayed housing, lengthy waiting lists and appalling repair problems. In view of his confirmed stringency and vindictiveness towards Sheffield, will he tell the House how far and on what timescale he expects to correct that regression?
Mr. Jenkin: I think that Sheffield should follow the example of some of its Labour-controlled neighbours and make arrangements for some housing to be modernised with the help and support of the private sector. The hon. Gentleman should look across the Pennines and see what has been going on in Salford, Oldham and other authorities there. They have achieved a substantial upgrading of the quality of life for the people who live there, and it is being done substantially at the cost of the private sector.
The ratepayers of Sheffield, who have been paying through the nose for years because of the extravagance of the council, will welcome the virtual rate standstill next year. It certainly would not have been so if Sheffield had been free to continue spending as it has been doing in recent years.
Mr. Cormack: Does my right hon. Friend agree that Governments tend to lose the confidence of people when they speak in a language which people cannot readily understand? Does he know of any system of local government finance in the Western world which is more confusing and confused than this one?
Mr. Jenkin: I shall send my hon. Friend, together with a number of hon. Members, what I hope will not unkindly be called "A child's guide to the rate support grant system".
Mr. Cormack indicated assent.
Mr. Jenkin: I share his concern about its complexity.
Mr. Jeff Rooker: Has it been helpful to the right hon. Gentleman?
Mr. Jenkin: Yes, it has been very helpful to me. It has helped me to understand the system, and I am not ashamed to admit it. I think that I now understand most of it. I hope that my hon. Friend the Member for Staffordshire, South (Mr. Cormack) will feel that it is a helpful step. It is important that people should understand the system, which is not as illogical as it is sometimes made out to be. Obviously it is complex, but my right hon. Friend the Minister for Local Government is studying its complexity.
Mr. Corbett: Is the Secretary of State aware that in the city of Birmingham we are presently discussing rate increases of up to 100 per cent. merely to stand still, not to carry out any of the policies on which we won control
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of the council? In the light of his statement how does he propose that the first city outside the capital should deal with urban decay and a genuine crisis in housing?
Mr. Jenkin: Luckily for the present Labour-controlled authority of Birmingham, the previous administration budgeted economically. Birmingham is not spending in excess of its target and it is spending below its GRE. Birmingham will qualify for the 4·625 per cent. —the maximum increase in target. I recognise that Birmingham, as a major city, has financial problems, but they are not as serious as the hon. Gentleman tries to pretend.
Mr. Robin Squire: I welcome any increase in grant support for responsible authorities, such as Havering, but is my right hon. Friend aware that until we have a reformed system of local government finance —he has only recently announced the inquiry—many of us will be concerned about the ever-increasing reduction in the amounts met by the Government and the consequent increases now carried by an inadequate local rating system?
Mr. Jenkin: I certainly understand my hon. Friend's concern. When I spoke about the studies that are being undertaken, I made it clear that a central problem that we need to examine is the balance between central and local government of bearing the cost of local government services. Clearly one wishes to achieve maximum accountability of local authorities to those who enjoy their services for the discretionary spending which rests with them. That is one of the points at the heart of my right hon. Friend's study. We want to ensure that we achieve a better, more robust and defensible system.
Mr. Tony Lloyd: Has not the Secretary of State shown that he has no understanding of local government in metropolitan areas, such as Greater Manchester? Will he explain to my constituents who poorer and fewer services, higher rates and increasing unemployment are in their interests?
Mr. Jenkin: Greater Manchester and Manchester city have both been fairly high-spending councils. They have not yet gone above the level that we designated this year for rate-capping. I have no doubt that both authorities can make significant savings without seriously impinging on the level of services, if they are prepared to budget hard and economically. The ratepayers of Manchester would welcome the level of reduction that such action would bring.
Mr. Robert Banks: Will my right hon. Friend accept my warm support for his statement that civil defence will not count in grant-related expenditure? Does he agree that the financing of old capital expenditure by local authorities should not prejudice the rate support grant, especially where it has led to greater prosperity? Is he aware that Harroate borough council will be affected considerably to its detriment by his statement?
Mr. Jenkin: I am grateful to my hon. Friend. As he said, civil defence expenditure will be disregarded in line with what has happened in earlier years. Where authorities have in the past incurred large capital spending, run up large debts and therefore have interest charges, it would be extremely difficult to disregard those interest charges for the purpose of targets and block grants because they form part of each authority's expenditure. However, each

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authority must manage its capital expenditure so that the revenue costs can be borne within the guidelines laid down by Parliament.
Mr. Kevin Barron: Does the Secretary of State recall, when he made his statement in the House on 24 July, that in my question about the alleged high spending of South Yorkshire county council I said that I had not received any letter of complaint about the rates levied by the council? In answer, he said that he had received many letters from ratepayers in South Yorkshire complaining about rates. I then wrote to his Department asking how many letters had been received from people in Rother Valley, and he wrote back that he had received none in the past nine months. Has he received any since 24 July?
Mr. Jenkin: I can tell the hon. Gentleman that if South Yorkshire had spent at the level of the proposals which have been discussed within the council, the precept increase next year would have been more than 50 per cent. In those circumstances, we would have received a flood of complaints. As it is, South Yorkshire's precept will show a 2 per cent. reduction, which will be welcomed.
Mrs. Edwina Currie: Has my right hon. Friend taken a look at rate-capping authorities, such as Derbyshire, which think that shoving up rates as fast as possible is part of their duty to their ratepayers and whose services in essenial work, such as education, are worse than those of neighbouring local authorities, such as Nottinghamshire and Birmingham? Incidentally, in Birmingham the Tory council cut the rates twice, yet managed, to find £1 million this year to promote its services in advance of a local election. When can we expect my right hon. Friend's strong right arm to be fully recovered to put a stop to such practices?
Mr. Jenkin: Next May the ratepayers of Derbyshire will have their opportunity to pass judgment on the extravagance of Derbyshire county council. No doubt my hon. Friend will lend her considerable talents to the same end. We are giving urgent attention to the question of spending on advertising. It will also come within the purview of the abuses inquiry, on which I hope to make a statement to the House fairly soon. The huge sums of ratepayers' money which local authorities are spending on what is nothing more or less than blatant political propoganda are an almighty scandal and cause great outrage among many ratepayers who, for the information of the hon. Member for Rother Valley (Mr. Barron), write to me about it frequently.
Mr. Derek Foster: Will the Secretary of State now admit that by continuing to reduce the grant he will either force up rates or slash services? Is he aware that in my area, which is one of the most deprived in the country, there is male unemployment of 26 per cent., and that we can afford neither? He is heaping burdens on the backs of those who are least able to bear them.
Mr. Jenkin: The hon. Gentleman is quite wrong. Obviously he did not hear what I said earlier. In each of the past four years when the grant has been reduced, the average increase in rates charged by local authorities has also decreased. This year, the increase in rates and precepts will be the lowest on average for the past 10 years.
Several Hon. Members rose—
Mr. Speaker: Order. I realise the importance of the statement. Therefore, exceptionally, I shall allow another five minutes for questions, although I remind hon. Members that long questions lead to long answers.
Mr. Derek Spencer: Does my right hon. Friend accept that Leicester city council is well able to comply with the limits that he has set, because it has so much money in the kitty that it has been able to indulge in a massive anti-rate-capping campaign?
Mr. Janner: So it should.
Mr. Jenkin: My hon. and learned Friend is right. He will welcome the 56 per cent. rate-cap that this limit implies.
Mr. Tony Banks: Surely the Secretary of State is aware that he is forcing Labour-controlled local authorities into illegality if they are to defend services—
Mr. Robert Adley: Question.
Mr. Banks: I said, "Surely the Secretary of State is aware" that he is forcing such authorities into illegality. Does the right hon. Gentleman relish the confrontation that he will undoubtedly have with Labour-controlled authorities in London? If the GLC does not raise a precept, which I would recommend it so to do, does the Secretary of State plan to introduce a Bill to allow the boroughs to raise a precept next year?
Mr. Jenkin: I am glad to read in the press that several of the hon. Gentleman's colleagues on the GLC have made it abundantly clear that they will have nothing to do with illegal action and that they will urge the GLC to precept lawfully, as it must, do, by 10 March. If the GLC does not raise a lawful precept in line with the limit that I have announced today, or as may be approved by the House. it will be open to any London borough, which will incur extra costs because of the GLC's action, to take the necessary proceedings in the courts. I have no doubt that one or more will do so.
Dr. Ian Twinn: Is my right hon. Friend aware that the residential and commercial ratepayers of London, especially those of the London borough of Enfield, will welcome his statement warmly? Were it not for rate-capping, what would the GLC precept have been?
Mr. Jenkin: Had the GLC been free to precept in line with what it was saying, it would have increased rates by at least 20 per cent., or from 36·5p in the pound to 43·8p in the pound. There is no reason why there should be a large increase in Enfield's rates next year, and Enfield ratepayers will benefit from the GLC rate standstill.
Mr. Derek Fatchett: Does the right hon. Gentleman agree that his statement is wholly consistant with the Government's policy of reducing the standard of living of those least able to look after themselves and of reducing jobs? Would it not have been more honest for him to have told us haw many jobs he expects will be lost and about the deterioration in local government services?
Mr. Jenkin: I expect the significant rate reductions in many of the highest-rated areas to be a considerable encouragement to the private sector to expand its

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businesses and increase employment. The reverse has happened as rates have increased. There is no reason why jobs should not increase as rates decreased.
Mr. Harry Greenway: Bearing in mind the complexity of the child's guide which my right hon. Friend will circulate, may I ask him to produce a simpler child's guide? What are the implications of his statement for salary increases for local government workers, teachers and others?
Mr. Jenkin: We have made no assumption about that. The Treasury has estimated the GDP deflator for next year to be 4·5 per cent. That is why we have allowed an increase of at least 4·5 per cent. in the targets of low-spending authorities. I shall do my best to provide what my hon. Friend wishes. Perhaps a pre-natal guide would be the answer. It is a complex system, and if one is to do it justice and my hon. Friends are to understand it, the explanation must be reasonably full and, therefore, complex. My hon. Friend will probably find the paper that I have circulated to be interesting.
Mr. Eddie Loyden: Is not the Secretary of State disregarding absolutely areas with high unemployment, aging populations and the need for more, not fewer, local government services? When my hon. Friend the Member for Greenwich (Mr. Barnett) said that the statement would mean the loss of 1,000 jobs, the "Hear, hears" that we heard from Conservative Members were the real voice of the Tory party.
Mr. Jenkin: The points made by the hon. Gentleman about the unemployed, the elderly and other deprived groups are taken into account, through the GREs, in assessing the grant to which an authority is entitled.
Mr. Loyden indicated dissent.
Mr. Jenkin: The hon. Gentleman shakes his head, but I am telling him nothing less than the truth. If Liverpool city council is prepared to spend irrespective of its financial resources, it is bound to get into serious difficulties. I hope that even now the city council will see sense and not drag the city of Liverpool, as it seems bent on doing, closer to the brink of chaos.
Mr. Richard Holt: Does my right hon. Friend accept that, until the Conservative party takes control of Cleveland next May, there will be considerable rejoicing among Cleveland ratepayers about the action that he has taken? Not least among those rejoicing will be the members of Teesside chamber of commerce, which announced recently that if Cleveland county council continued to spend money as it has at least 3,000 jobs in the private sector would be lost during the next 12 months. He has saved those 3,000 jobs, and probably many more.
Mr. Jenkin: I understand that, but Cleveland is a high-spending shire county, and its target for next year will be lower than its budget this year. Cleveland must bring its expenditure firmly under control, or it will impose severe burdens on its ratepayers. However, the ratepayers will wreak their revenge next May.
Several Hon. Members rose—
Mr. Speaker: Order. I shall bear in mind those hon. Members whom I have not been able to call today, and will give them preference in the debate on the rate support grant settlement.
Mr. Straw: I am grateful to you, Mr. Speaker—I am sure that I express the view of the House — for extending the time for questions on the statement.
Is it not disgraceful that the central message of the settlement—that grants to local authorities will be cut—had to be wrung from the Secretary of State in questions rather than being made clear by him in his statement? As he has now admitted that most authorities will receive less grant, does that not mean that rates in many Conservative-controlled areas will increase as a direct result of his cuts in rate support grant? Does that not mean in turn that the Secretary of State has failed completely to fulfil the solemn undertakings that he gave to the House on 23 January?
Is it not a fact that rates have increased twice as fast as the rate of inflation since 1979, and that the Conservative-controlled Association of County Councils said that excessive increase in rates was entirely attributable to the Government's action?
When the Secretary of State publishes his child's guide, will he ensure that it explains that if Labour overspenders reduce their spending to the level dictated by grant-related expenditure assessments, it will lead to less for the Treasury and for Tory authorities? To give one example, if this year all authorities had spent at their GRE limit, Tory Norfolk would get not £90 million in grant but only £56 million, and its rates would be 20 per cent. higher.
The Secretary of State said that he would sort out some of the details on capital. Is it not true that he is having a major row with the Treasury about the use of capital receipts? When will that row end? Given the screams of private companies about the potential loss of building orders from the public sector, will not the cuts over which the Secretary of State is presiding lead to a loss of jobs not only in the public sector but in the private sector?
Mr. Jenkin: I cannot add to what I said earlier, in reply to the hon. Member for Copeland, about the capital statement. The hon. Member for Blackburn (Mr. Straw) is wrong. I gave the percentage of AEG in my statement. The hon. Gentleman knows that the grant this year was 51·9 per cent., so when I announced that it would be 48·7 per cent. for next year I obviously meant that there would be a reduction. To say that this was wrung from me is absurd.
The hon. Gentleman also has it wrong about the holdback, which is the penalty suffered by those authorities which exceed the targets that have been laid down. The money goes to the Treasury, but the Treasury has made it abundantly clear, both in public and in private, that it would far rather forfeit that holdback and have authorities spending in line with the Government's guidelines, which are approved by the House, than have the penalty money going into its coffers.
I do not accept the figures about which the hon. Gentleman talks. What would be set would depend entirely upon the circumstances. I do not expect a large number of authorities spending well above GREA to come down to GREA overnight. Of course they could not do that.

National Union of Mineworkers (Sequestrators)
4.40 pm
The Attorney-General (Sir Michael Havers): With permission, Mr. Speaker, I shall make a statement concerning the indemnity that I gave, on behalf of the Government, to the sequestrators of the assets of the National Union of Mineworkers.
Mr. Kevin Barron: Why?
The Attorney-General: As the House will know, on 28 September this year, Mr. Justice Nicholls gave judgment on an application that had been made in an action by two working miners, Mr. Taylor and Mr. Foulstone, against the NUM. In his judgment, Mr. Justice Nicholls restrained the NUM from, among other things, describing the strike in the Yorkshire area as official, as it had not been called in accordance with the rules of the NUM.
Mr. Dennis Skinner: Yes it was—under rule 41.
The Attorney-General: Despite that order, and in full knowledge of it—
Mr. Barron: This is sub judice.
The Attorney-General: It cannot be sub judice — [Interruption.]
Mr. Speaker: Order. The Attorney-General is only just beginning to make his statement. If hon. Members are patient, they may be called to question him.
The Attorney-General: Despite that order, and in full knowledge of it, the national executive committee of the NUM and its senior officials made statements that affirmed the strike as official. This was a deliberate contempt by the union and on 10 October, Mr. Justice Nicholls fined the union £200,000 and ordered the fine to be paid within 14 days.
Mr. Martin Redmond: On a point of order, Mr. Speaker. I understand that, if a matter is before the courts, it is sub judice. Is the Attorney-General correct to speak on this matter?
Mr. Speaker: Order. I hope that this matter is not before the courts.
Mr. Barron: It is before the courts.
The Attorney-General rose—
Mr. Speaker: Order. The Attorney-General is not talking about the judgment. I ask hon. Members to bear in mind that he is the Law Officer.
The Attorney-General: I am citing a matter of record of the court.
This was a deliberate contempt of court by the union and, on 10 October, Mr. Justice Nicholls fined the union £200,000 and ordered the fine to be paid within 14 days. He made it clear that if the fine were not paid, the union risked having its assets sequestrated. In imposing the fine, the judge said:
"A great and powerful trade union, with a large membership affected by the court orders in question, has decided to regard itself as above the law, and to make this plain repeatedly, emphatically and publicly on a nationwide basis."
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The fine was not paid within 14 days and Mr. Justice Nicholls therefore appointed sequestrators, as he had warned the union that he would, on 26 October. The sequestrators accordingly set about taking possession of the assets of the union. However, by about 11 November, they had been able to seize assets only to the value of some £8,500. The vast majority of the remaining assets of the union, amounting to many millions of pounds, had apparently been transferred by the union to banks in various countries abroad, apparently in a deliberate attempt to put them out of reach of the court.
Mr. Skinner: Why not? Your lot do it all the time. There are gangs of them on the Tory Benches sending money abroad.
Mr. Speaker: Order.
The Attorney-General: The sequestrators, as was their duty—
Mr. Skinner: Have you got any?
The Attorney-General: The sequestrators, as was their duty, took steps in the countries in question to obtain possession of the funds that had been spirited away, and in particular instituted proceedings in the High Court in Dublin where they had traced a substantial deposit of funds. For the purposes of these proceedings, it seemed likely that the sequestrators might be required to incur considerable financial liability themselves, including having to give a financial—[Interruption.] Oh, do shut up.
Hon. Members: Order!
Mr. Speaker: Order. I do not think that the Attorney-General was referring to me. It would be helpful to the House if the Attorney-General could complete his statement, as hon. Gentlemen would then have an opportunity to question him. Interruptions from a sedentary position delay the proceedings.
Mr. Martin Flannery: He is barracking the audience from the rostrum.
The Attorney-General: You are quite right, Mr. Speaker. I was not intending to refer to you, and I regret what I said. Sometimes, the temptation is difficult to resist.
In those circumstances, I understand that the sequestrators inquired — [Interruption.] This is really quite important. I have been asked particularly to come to the House and make a statement, and I hope the House will let me finish it.
In these circumstances, I understand that the sequestrators inquired from the High Court in this country whether this potential liability could be covered by funds at the disposal of the court. They were told that there were no funds available to the court for that purpose. There was no communication at any time between Mr. Justice Nicholls and my Department.
When I learned of this situation, it seemed to me to be contrary to the public interest to allow the risk of the sequestration being frustrated in this way. On the one hand, it was not right to expect sequestrators to incur this increasing substantial financial liability themselves, even though, at the end of the day, they could look for reimbursement out of the union funds. On the other hand. it was totally unacceptable that the order of the court, made following the non-payment of a fine imposed for

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deliberate contempt of court, should be defeated by the union's tactics of transferring its assets abroad and keeping them abroad. I therefore sought and obtained authority to give the sequestrators, on behalf of the Government, an undertaking to indemnify them against the costs and expenses that were reasonably and properly incurred by them in carrying out their duties in pursuance of their appointment by the court. In the knowledge that that undertaking is available, they are now pursuing actions in various jurisdictions abroad to recover the assets which were surreptitiously removed from this country. The contempt of court committed by the NUM will therefore be punished and the law will be properly upheld.
Mr. John Morris: I thank the Attorney-General for responding to the Opposition's request for a statement. However, would it not have been better for him to volunteer the information himself, rather than entrusting the matter to the press spokesman at No. 10, presumably after he had been briefed on the law by the Attorney-General's Office? Given the Attorney-General's frequent incantations about his independence, does not this politically incestuous handling of the issue dent his claim more than a little, as his high office is not seen to be independent?
What is the Attorney-General's power under common law to give this indemnity? As the common law is developed through precedents, what precedents are there for this indemnity? As a matter of policy, have the Government decided to reinforce the law of contempt? What evidence was there of the risk of the public interest being frustrated, as the senior partner of Price Waterhouse and Co. is quoted on the tape as saying that the firm did not ask for this help, and it was unsolicited? As Price Waterhouse did not ask for the indemnity, does intend to use it, does not the Attorney-General feel that a hypothetical, or even real, need to protect the courts is outweighed by the disadvantages of his being seen to be intervening in civil litigation? Whatever his motives, is not the cherished impression of the independence of his high office tarnished?
The Attorney-General: I find it absolutely astonishing that the right hon. and learned Gentleman, who is one of Her Majesty's counsel and sits from time to time as a recorder, does not seek from the Dispatch Box to support the enforcement of a High Court order.
If the right hon. and learned Gentleman had read the statement that I made to the House with the care that I should expect of him, he would have appreciated that the purpose is to ensure that the law is upheld and for the High Court's orders to be successfully carried out. By that I mean that the orders of the court should not be frustrated. We heard not a single word about that from the right hon. and learned Gentleman.
Several Hon. Members rose—
Mr. John Morris rose—
Mr. Speaker: Order. I shall call the right hon. and learned Member for Aberavon (Mr. Morris) again at the end.
Mr. Derek Spencer: Is it not a principle of the common law that where there is a grievance there should be an effective remedy? Would it
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not be a blot on the fair face of British justice if a plaintiff were debarred through lack of means from effectively obtaining this remedy?
The Attorney-General: I would always agree with that proposition, but the sequestration was not ordered to enforce the judgment in favour of one of the parties to the action. It was ordered following the non-payment of a fine imposed for deliberate contempt of court by the National Union of Mineworkers. Not only did the NUM make it clear that it would not obey the court's order, but it tried to defeat the order by transferring assets abroad.
Mr. Merlyn Rees: Has this ever been done before? Is this an innovation which seems to many to have occurred, not because of the honour of the Attorney-General, which I respect, but because the Government are involved in the dispute? That is the impression in the country. I repeat the question: Is this the first time that this has been done? Is it not being done because the Government are heavily involved in the mining dispute?
The Attorney-General: This is the first time that it has been done. My researches show that this is the first time that when an order for sequestration has been made—[Interruption.] Such an order is made only when the court is satisfied that the person against whom the order is made has the funds to satisfy it. It is known that as long ago as last March the NUM had taken the money out of the country.
Mr. Tony Baldry: Do not the Law Officers of the Crown have a duty to the Crown to ensure that orders made by Her Majesty's judges on behalf of the Crown are not frustrated because those who are instructed by the court to carry out those orders do not have the means to do so? Is not the precedent the fact that never before has any body such as the NUM sought so perniciously to frustrate the workings of the common law of England?
The Attorney-General: With respect, I agree. It is important to remember that the sequestrators went back to Mr. Justice Nicholls and spoke of the difficulties they were having in being required either to find a bond or to give a personal undertaking about any damages that might be awarded against them in the action in Dublin if that action failed. They were not doing this for fun. They had been asked by the court to carry out this onerous duty. One can understand why they went to the court to seek assistance and to find out whether any funds could indemnify or guarantee them against the ever-increasing costs. The judge said that no funds were available which he could direct to be awarded to them.
Mr. Barron: They said that they did not want the money.
The Attorney-General: I am speaking of how the indemnity came about. After that, there was a real risk that the sequestrators, Price Waterhouse, might withdraw—[Interruption.] They have said only that they did not seek funds from me. They sought assistance from the court and the court was unable to give it. I, as the guardian of the public interest, have no alternative but to give it.
Mr. Roy Mason: But is the Attorney-General not aware that, by paying the hounds after the NUM's money, the Government are directly participating in the strike because they are trying to cripple

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the union financially? Does he agree that this is an act without parallel and that it should now be stopped? Is the right hon. and learned Gentleman further aware that in the end the Government and those hounds whom he is paying will not pay the cost because the Government will force it from the miners who will pay in the end?
The Attorney-General: I regret very much that the right hon. Gentleman, for whom I have great regard and respect, should fail to make the distinction between the Government and the courts.
Mr. Mason: The Government are directly involved.
The Attorney-General: Everything that has happened, from the first action—brought by two working miners, not by the Government—to the injunction to the union and the executive that they should not call the strike official, to the imposing of the fine of £200,000 and to the entry of the sequestrators, has nothing to do with the Government. They have been carried out by an independent High Court judge. — [Interruption]. The only thing that I have done—it is so simple—[HON. MEMBERS: "It is simple all right."]—and so self-evident — is that I have said that if the sequestrators were unable to go on because they were not in funds, the Government would indemnify them. That was done so that the court's orders would not be frustrated.
Mr. Spencer Batiste: Does my right hon. and learned Friend accept that the contempt by the NUM leadership strikes at the very root of the rule of law? Does he agree that, if such contempt is allowed to continue, it will undermine the basis on which our society exists and that his action in providing an indemnity will be widely welcomed throughout the country, since he has correctly identified a matter of great national interest?
The Attorney-General: I am very grateful to my hon. Friend.
Mr. James Wallace: Does the Attorney-General accept that there is a fine dividing line between the province of the judiciary and the province of the Executive? Is he aware that it appears to many people that such a blatant act by the Attorney-General oversteps that line? The right hon. and learned Gentleman said that he sought authority to give the indemnity. From who did he seek that authority? Were the Prime Minister and other Cabinet members involved in giving that authority?
The Attorney-General: I consulted relevant Ministers. That is all that I shall say about that. It is important to remember—[Interruption]—that there are two alternatives. One was that the sequestrators did not manage to obtain any money and had to give a financial undertaking to the court in Dublin—[Interruption.] I am trying to make a sensible and important point to the House.
Mr. Flannery: You are not doing it very well.
The Attorney-General: I shall start again. There were two alternatives. One was that the sequestrators would be advised by their lawyers that they could not accept an open-ended financial commitment in the case in Dublin and would therefore withdraw. The other alternative was for them to be supported, if possible by the court. They went to the court and were told that the court did not have the funds to do that. It seems so simple that an order of the High Court should be enforced. As guardian of the public interest, I was the only person who could do that.
Mr. Ivan Lawrence: Is my right hon. and learned Friend aware that the argument presented against his action is absolutely bogus, that the country will learn the attitude of Opposition Members, which is to uphold contempt for the rule of law, that the law would be an ass if the orders of the court could not be enforced and that the country is wholeheartedly behind my right hon. and learned Friend in taking seriously his position as the protector of the public interest in this matter?
The Attorney-General: That is put as well as, if not better than, I put it myself.
Mr. Michael Welsh: Some individuals—wrongly, in my opinion—have taken civil action against the NUM in the courts. What does that have to do with the Attorney-General?
The Attorney-General: Again, the hon. Gentleman is completely missing the point. I am not concerned in the matter and never have been. It has always been a case of two working miners against senior officials. The Government are neither concerned nor involved. There is no Government counsel or advice.
At the end of the day, the court made an order which was deliberately and flagrantly ignored. The court then imposed a fine of £200,000, which was ignored. The court then put in the sequestrators, who are liable to run out of money—
Mr. Flannery: What—Price Waterhouse?
The Attorney-General: There is no reason why Price Waterhouse should involve its partners in ever-increasing financial risk. That cannot be the responsibility of any ordinary commercial firm.
Mr. Tim Smith: Is it not a sad day for the Labour party when there is a deliberate contempt of court by a major union that regards itself as above the law and says so, but no Opposition Member is prepared to uphold or support the enforcement of the law?
The Attorney-General: After the intervention by the right hon. and learned Member for Aberavon (Mr. Morris), I sought to say that we would have liked to hear an Opposition Member say that he wanted the order of the court to be enforced. We have not heard that from one Opposition Member.
Mr. Gerald Bermingham: Does not the Attorney-General agree that, as this precedent has been created, any future plaintiff who finds—as many have over the years—that the defendant has moved his assets can now receive an indemnity from the Government while tracing takes place? Does not the right hon and learned Gentleman agree that this unique precedent has been created for purely political purposes?
The Attorney-General: I can just envisage the hon. Gentleman, who is a solicitor, seriously advising his clients in that way.
Hon. Members: You have done it.
Mr. Tony Blair: Assuming that the Attorney-General has much unprecedented power, is it not the case that he has had that power for centuries? Have there not been cases of contempt involving sequestration over the centuries? Why has he chosen to use this power now, in this particular case and at this particular lime? Should not the right hon. and learned Gentleman answer

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that question to avoid the charge that he has acted not as an officer of the Crown but as a servant of the Government?
The Attorney-General: Sequestration can apply in a number of cases. It can be applied for on behalf of one party to an action who has succeeded against the other party. But this is sequestration not on behalf of either of the two plaintiffs, but because it is a contempt of court and a fine was imposed by the court. It would not go to the benefit of either of the plaintiffs. It is an attempt by the sequestrators to enforce the order of the court. There was a real likelihood that that order would be frustrated—
Mr. Tony Banks: That is the court's province, not yours.
The Attorney-General: In answer to that I must tell the House that the court was powerless because it had no funds.
Mr. Alexander Eadie: Does the right hon. and learned Gentleman accept that his explanation is anything but satisfactory? Indeed, he shot himself in the foot two or three times. A serious aspect of the matter is that his legal impartiality is now under question. How can he tell the House that, since the order was imposed by the courts, Price Waterhouse could not fund the carrying out of the duty placed on it by the courts? Indeed, suggesting that is, to some extent, a slander on Price Waterhouse, which can easily afford the funds. The right hon. and learned Gentleman knows that the money will be obtained and the miners will have to pay for all the legal proceedings. Therefore, his statement is most unsatisfactory.
The Attorney-General: The problem is that, if someone is determined to approach the matter with such prejudice — in the way that the hon. Gentleman has demonstrated—there is no point in my seeking to make him see the ordinary, straightforward, honest approach that needs to be taken. I, as guardian of the public interest, have a duty to ensure that the orders of the courts are enforced.
Sir Ian Percival: Is my right hon. and learned Friend aware that the vast majority of people in this country will fully understand the very clear explanation that he has given for his actions—
Mr. Flannery: Speak for yourself.
Sir Ian Percival: The people will have great respect for my right hon. and learned Friend's courage in taking his action and will share the view that it is a sad day when not a single voice is heard from the Opposition Benches upholding the rule of law. Will they not see it for what it is — an attempt by the Opposition to make cheap political capital out of my right hon. and learned Friend's determination to ensure that the rule of law prevails?
The Attorney-General: I am grateful to my right hon. and learned Friend. That was the reason—and the only reason—that I granted the indemnity.
Mr. Robert Hughes: As the Attorney-General is the protector of the public interest, where in law does he have the right to involve political Ministers in advice on and discussions about such an extremely sensitive matter?
The Attorney-General: It is not a matter of whether someone is to be prosecuted, where the law imposes a single duty upon me, but with a right — as Lord Shawcross said clearly in 1946 —to consult, although not to be bound by advice. This is an entirely different position. There was a risk that the law would be frustrated. I therefore consulted certain Ministers and drew to their attention what had happened, especially in Dublin, and gave advice on what I thought was the proper course to adopt, and in the end was authorised to grant indemnity.
Mr. Donald Coleman: The right hon. and learned Gentleman will be aware that this House has the responsibility of Supply. Will he tell us under which Vote he has made these moneys available?
The Attorney-General: That is entirely a matter for the Treasury. The necessary documents were laid before the House yesterday by the Financial Secretary to the Treasury.
Mr. Douglas Hogg: Does my right hon. and learned Friend agree that it is clearly contrary to the public interest that the NUM should defeat the court's orders by salting away money outside the jurisdiction? Does he further agree that he is doing no more than his public duty in granting the indemnity? Is it not almost certainly in the interests of the ordinary miners within the NUM that the money is brought back into this country with all possible speed?
The Attorney-General: That appears to be the view of the judge who ordered the appointment of a receiver. The House must realise—however unpalatable it may be to Opposition Members, especially the hon. Member for Bolsover (Mr. Skinner), who never stops intervening from a sedentary position — that the courts are the Crown courts and that the pubic interest requires that their orders should not be defied.
Mr. Ian Wrigglesworth: Is the Attorney-General aware that it is absolutely right that the sequestrators should be enabled to carry out their job, but as the High Court has made this judgment, is it not right that it should will the means to carry out that judgment? If it cannot do so, will the Attorney-General make a statement about the situation and look into the possibility of finding the means for its judgment to be carried out? If there was no consultation between the judge and the Attorney-General, could the Attorney-General tell the House from whom he understood that Price Waterhouse had approached the court?
The Attorney-General: As for willing the means—that is the reason why the sequestrators went back to Mr. Justice Nicholls—it was hoped that he would have the means. But he does not. The High Court has the means to pay witnesses, and small items like that, but not to provide the sort of funds that might be necessary in this case. As for the information which was obtained, it was obtained partly from the registrar as a result of inquiry and partly from the newspapers, because the Dublin case was quite widely reported. I am not sure whether Clifford Turner, the solicitors, provided information.
Mr. Barron: May I thank the Attorney-General for at least being honest enough to admit to the House that the action which he has supposedly taken was not asked for by the sequestrators? Would it not be more truthful if he went on to say that the person who brought the action to

935
bear was the very person from whose office Mr. Bernard Ingham yesterday gave a press conference before this House knew anything about it—namely, the right hon. Lady the Prime Minister? That is where the political involvement relating to this court action came from. It would be more honest for the Attorney-General to stand up and admit that to this House than to try to hide behind this obnoxious way of saying in effect that he knew that he had to pay it but that nobody had asked for it to be paid.
The Attorney-General: The entire initiative came when the matters were put before me.
Mr. Tony Banks: By whom?
The Attorney-General: Nothing came from No. 10. [Interruption.] I am speaking of the time when I first looked into the matter and the matters were put before me. As a result, I consulted certain colleagues, informed them of the position and obtained the authority to give the indemnity about which I have told the House.
Mr. Redmond: Will you confirm that by your actions you are seeking to—
Mr. Speaker: Order. It is not me.
Mr. Redmond: Will the Attorney-General confirm that, by the actions which have been taken, he is seeking to influence matters which are now before the courts? Will the Attorney-General be honest enough to tell the House when this idea first entered his head and who put it there?
The Attorney-General: The matter was put before me within 48 hours, if not a day, of the failure of the sequestrators to persuade the judge to will the means, to use the words of the hon. Member for Stockton, South (Mr. Wrigglesworth), because he did not have any means that he could will. It was thereafter, as a result of further inquiries, that I realised that there was an appreciable risk that the sequestrators might say that they could not go on.
Mr. Stanley Orme: How did you know?
The Attorney-General: I spoke to them.
Mr. Orme: They did not answer.
The Attorney-General: After I had obtained the authority, I spoke to the sequestrators and was told that in their own minds they had set a limit beyond which they would not go. They had not reached the limit, but they were not far from it.
Mr. Dennis Skinner: If the matter was as simple as the Attorney-General keeps saying, why is it that nobody else who has held his office from either party, for very many years, has discovered this simple way of dealing with matters? My impression is that the Attorney-General has been incapable of explaining the matter simply to the House. In fact, he has had a tottering time. The Attorney-General ought to know that the sequestrators could get hold of £200,000 quite easily, because £200,000 is to be found in those areas where miners are working. That money has not gone to the national office. If the sequestrators wanted to get their hands on £200,000 they would only have to go to Nottingham, Leicester, South Derby. All the money is there. Is not the truth of the matter that what the Attorney-General and in particular the Prime Minister are up to is using the judges, the police and all the echelons of the establishment in order to smash the
936
NUM? They hope that if they get away with that, the result. Will be that the rest of the trade union movement will fall like a pack of dominoes. It is a political decision from beginning to end and the country, thank God, is beginning to see just how much this lousy, rotten Government are involved.
The Attorney-General: I think that the country has now heard that broken record so much that they are fed up to the back teeth with it.
Mr. Geoffrey Lofthouse: Will the Attorney-General tell the House whether or not Price Waterhouse would have pulled out of their duties if he had not given this guarantee to them?
The Attorney-General: I cannot say that. All I can say is that there must be a limit to how much an ordinary firm is prepared, at the request of the court, to take on in a duty of this kind without being able in the end to be absolutely satisfied that it will recover its money. It is the partners' money and other people's money. It is not just the firm's money.
Mr. John Home Robertson: Is the Attorney-General aware that there is as much sorrow as there is anger on this side of the House that the Government, having brought the police into disrepute, during the course of this dispute, now appear to be bringing the courts and the law into disrepute? Will the Attorney-General reflect on the political nature of the decision and now answer the specific question which was put to him by my hon. Friend the Member for St. Helens, South (Mr. Bermingham) on whether or not an important precedent is being set?
The Attorney-General: No precedent is being set, because I do not think there has ever been a case in which an order for sequestration has been made in which it was discovered, when the sequestrators went about their duties, that £8,250,000 had been squirreled out of the country and had to be obtained from places as far apart as Dublin, Luxembourg and Switzerland.
Mr. John Gorst: Is my right hon. and learned Friend aware that there are some rebellious and politically unmanageable elements to be found on his back Benches but that, when he upholds the due processes of law and facilitates their implementation, there is unequivocal support for what he does?
The Attorney-General: I shall not comment on the first part of my hon. Friend's question, but I am very grateful to him for what he said subsequently.
Mr. David Winnick: We know of the attitude of the hon. Member for Hendon, North (Mr. Gorst) towards what happened at Grunwick, but is the right hon. and learned Gentleman aware that today he has lost a great deal of credibility? The reason is that he has acted as a pawn of the Government in trying to undermine the strike of the National Union of Mineworkers.
The Attorney-General: I could not have believed that not a single Member of the Opposition would be prepared to speak in support of the law.
Mr. Flannery: Is it not a fact that on the issue the Government, and in particular the Attorney-General, who has fought with his back to the wall, who has not properly answered a single question today and who has repeatedly

937
lost his temper, are impailed upon the horns of a dilemma because they have been asked questions this afternoon to which they have no answer? Will the Attorney-General tell us which law of this country allows the Attorney-General and the Government to come forward with moneys which could not be obtained by the two scabs who were getting money from business men all over the country, and which sets a precedent that he has been unable to explain to the House in any acceptable way? Is it not a fact that during the last half hour his personal credibility has been totally destroyed?
The Attorney-General: Every Minister has a power to give an indemnity in the right circumstances. I gave an indemnity for one reason only; that is, that I believe that the rule of law—
Mr. Flannery: Which law?
The Attorney-General: —and the orders of our courts should be enforced.
Mr. Flannery: The right hon. and learned Gentleman still has not answered.
Mr. Max Madden: Does not the Attorney-General now appreciate that for him to have acted in an unprecedented and highly politically partisan manner has compounded the grave dismay which he caused earlier this year when he seemed to be offering advice to judges in advance of court proceedings concerning the miners' dispute? Will he now confirm to the House that the Prime Minister was consulted and agreed before he gave the indemnity that he has given? Will he also confirm that the expenses of court receivers who have been appointed, including active members of the Conservative party, are also covered by the indemnity?
The Attorney-General: The hon. Gentleman knows that that last comment is ridiculous. I confirm that I consulted the appropriate Ministers; that includes a Treasury Minister because Treasury approval for the payment, if it were ever called up to be made, would have to be given. That is as far as I am prepared to go.
Mr. D. N. Campbell-Savours: Does the Attorney-General accept that Price Waterhouse received special treatment? Is that treatment now to be the normal course of events in similar cases?
The Attorney-General: I have said many times to the House that, despite constant references to similar cases, this is a unique case so far as the NUM is concerned. It is a unique case, in which the NUM has deliberately sought to put beyond the reach of the courts over £8 million. That is unique.
Mr. Peter Hardy: The Attorney-General and several of his hon. Friends seem to be suggesting that somehow the NUM has acted illegally in moving money abroad. Does the right hon. and learned Gentleman not accept that that money was moved abroad lawfully largely because the Government removed exchange controls? If those exchange controls had not been removed, the money could not have been shifted. As that was the Government's action, would it not be more appropriate for the Conservative party, rather than the present Administration, to pay the sequestrators' expenses?
The Attorney-General: One of the problems is that the sequestrators' expenses have been grossly inflated by the money having been moved abroad because action has had to be taken in the Isle of Man, Dublin, Switzerland and Luxembourg in addition to the ordinary costs here. Therefore, that has amounted to a great deal of money. That is one of the reasons why it is a much higher figure than it otherwise would be.
Mr. Mark Carlisle: After the exchanges over the past 40 minutes, would my right hon. and learned Friend agree that the one fact which the Opposition appear to be determined to ignore is that the sequestrators were appointed by the court for the purpose of enforcing the order of the court? Is it not right that, if my right hon. and learned Friend did not support the court in that action, that would be an attack on the rule of law in Britain which hon. Members opposite might well come to regret?
The Attorney-General: I am very grateful to my right hon. and learned Friend. I have sought to say that in a variety of words. I am grateful to him for the clear way in which he has expressed it.
Mr. John Morris: Does the right hon. and learned Gentleman realise that he has failed to answer a single one of my questions, but instead sought to question my integrity? He may not be aware that on the Floor of the House in a debate in May, and on radio and television, I have repeatedly said that the law must be upheld and that whoever is in breach of it must be punished. The right hon. and learned Gentleman may wish to reflect on that and reconsider his comment.
Why does the right hon. and learned Gentleman say that the court is powerless? Mr. Justice Nicholls did not ask for his help and Price Waterhouse did not solicit his help. When he tells the House that there must be a limit for ordinary firms, what evidence is there for that and for the decision that he has taken? Will he be good enough to place that evidence in the Library?
Lastly, why does the right hon. and learned Gentleman arrogate to himself the decision on the gravity of the offence? Is that his role? Is that not for the courts themselves? Given that he has revealed that there is no precedent at all for this, now that he says that he is the guardian of the public interest, what precisely is his authority at common law for his decision?
The Attorney-General: The right hon. and learned Gentleman asks why I say that the court is powerless. The judge made it clear that there was no way in which he could assist when Price Waterhouse sought assistance for its case in Dublin. I should have thought that a fine of £200,000 for a deliberate contempt of court was in anybody's eyes a serious offence. Nothing more needs to be said about that. [Interruption.] It is a matter of opinion. Hon. Members do not have to agree with me. I happen to think that it a serious offence.
I have said many times that there is no precedent of which I know in which, when an order for sequestration has been made, it has been found that a large sum of money, in excess of £8 million, has been put, so far as possible, beyond the reach of the courts. The authority for the indemnity is the authority under which any Minister has the right to grant one as long as it is put before the House at the necessary time, as this one was.

Statements by Ministers
5.27 pm
Mr. James Wallace: On a point of order, Mr. Speaker. You will recall that last week at Scottish Question Time there was considerable debate on teachers' pay. That matter has been raised on a number of occasions since and there is to be an Adjournment debate tonight. I am advised that at approximately 4.10 pm the Secretary of State for Scotland put in the Library the answer to a written question from the Member for Stirling (Mr. Forsyth). I am equally advised that he held a briefing beforehand with the Lobby to advise it of his written answer. I know, Mr. Speaker, that you do not have the power to make a Minister make a statement, but is it courteous to the House and within the procedures of the House for a Secretary of State to discuss that matter with the press before his written answer is available to hon. Members in the Library?
Mr. Harry Ewing: Further to that point of order, Mr. Speaker. The reply that the Secretary of State gave and placed in the Library is not worth wasting the time of the House on. The whole thing is a lot of rubbish. It is not worth wasting the time of the House by making a statement.
Mr. Gordon Wilson: Further to that point of order, Mr. Speaker. May I first dissent from the view taken by the hon. Member for Falkirk, East (Mr. Ewing)? The answer given by the Secretary of State for Scotland was full of ambiguities and could be considered by many to be a bit of a con trick. Nevertheless, it would have been advantageous for Scotland if that answer had been given in the House so that we could have put many important questions to him. Last week, Scots Members were placed in a difficult situation, as indeed you were, Mr. Speaker, by the lack of a statement. Something must be done in future to make the Secretary of State for Scotland answer for his important decisions to Members representing Scottish constituencies.
Mr. Archy Kirkwood: Further to that point of order, Mr. Speaker. When Ministers of the Crown are constantly and continuously making fairly important decisions that will involve widespread disruption in classrooms in Scotland in the form of written answers rather than statements on which they can be cross-examined, it must surely be within the power of the Chair to protect the rights of Back Benchers and somehow to bring influence to bear to stop that practice in future.
Mr. Speaker: The House well knows my view. I stated it yesterday and I state it again today. The House of Commons should always be told before the press. If there is an embargo on those matters they should be held up until the statement has been made, if a statement is to be made.
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Whether written answers are given is not a matter for me. There is an Adjournment debate tonight and no doubt those matters will be aired then.
Mr. Malcolm Bruce: On a point of order, Mr. Speaker.
Mr. Dennis Skinner: On a point of order. Mr. Speaker.
Mr. Speaker: I shall take the point of order of the hon Member for Bolsover (Mr. Skinner).
Mr. Skinner: This is a different point of order, Mr. Speaker. It has been drawn to my attention that there is more than a little controversy over Stansted airport. I am not involved in any way, but I listen to what is going on and I know that representations have been made for statements to be made by the Government and for leave to table private notice questions, for example. However we shall not go into that because—[AN HON. MEMBER: "What is the point of order?"] Mr. Speaker decides whether there will be private notice questions.
We understand, Mr. Speaker, that you are placed in a difficult and sensitive position. However, the Secretary of State for the Environment is involved in the Stansted issue. Apparently he has said that he is not having anything to do with the decision-making and that has been given to his No. 2, "Supergrass" — the Minister for Housing and Construction. It is reported that Mrs. Jenkin has said on behalf of her husband and for herself, "We do not want the airport here." I should like to know who will make the decision. I think that you should call the Secretary of State to account, Mr. Speaker.
Mr. Speaker: That is a matter on which I cannot, and perhaps should not, rule.
Mr. Malcolm Bruce: Further to your previous reply, Mr. Speaker. On previous occasions when I have raised with you the issue of the Secretary of State for Scotland making statements to the press before he has issued them to the House, you have said that you disapprove of the practice and that it should not happen. May I seek your guidance, Mr. Speaker? What sanction does the House have when the Secretary of State, in spite of your ruling, continues to flout the advice and continues to treat hon. Members with contempt?
Mr. Max Madden rose—
Mr. Speaker: Order. An important debate is to follow points of order and in fairness to those who wish to take part in it, I shall deal only with this issue. I shall take that course unless the hon. Member for Bradford, West (Mr. Madden) has something vital to raise with me. It is not a matter for me whether written answers are given or are not. If a written question is tabled, it will receive an answer. That cannot be a matter for me, and I cannot offer any advice on it.

Entry Certificates
Mr. Max Madden: I apologise for delaying the House, Mr. Speaker. My point of order relates to a point of order that I raised yesterday. I have made further inquiries since asking you yesterday about the procedures that the Government intended to pursue to implement a decision announced on 22 November to impose a charge for entry certificates. I have discovered that the imposition of the charge was implemented by statutory instrument on 22 November by the Foreign Office. As there is widespread concern about the legality of this procedure, it seems that the Government are guilty of sharp practice. I should like your advice, Mr. Speaker, on the remedies that are available to hon. Members and others who question the legality of the Government's decision, bearing in mind that the statutory instrument was introduced on the day that it was said by the Minister responsible that the charge was to be imposed.
Mr. Speaker: I shall look into that matter and communicate with the hon. Gentleman.
Mr. Sydney Bidwell: Further to that point of order, Mr. Speaker. As you know, Sir, I have a profound interest in these matters. The issue raised by my hon. Friend the Member for Bradford, West (Mr. Madden) involves many of my constituents and possibly dependent relatives overseas. For the first time in our history, we are charging Commonwealth citizens a certain sum for entry certificates—in other words, visas—when they have a lawful right to come here. This will be a controversial matter. I wish to tell the Leader of the House to think about the matter because I shall be raising it on Thursday during business questions and drawing attention to early-day motion No. 200.
[That this House requests a reconsideration of a proposal made on 22 November to introduce, for the first time, a charge for entry certificates for Commonwealth citizens; and points out that refusal of an entrance certificate, simply because the fee cannot be paid, would not be lawful under the Immigration Act 1971.]
I hope that the right hon. Gentleman will take note because—
Mr. Speaker: Order. It is only Tuesday. The hon. Gentleman should not raise with me today what he wishes to talk about on Thursday.
Mr. Teddy Taylor rose—
Mr. Speaker: Order. Before I take another point of order, I shall deal with the statutory instrument.

Entry Certificates

  STATUTORY INSTRUMENTS, &c.
  Ordered,
  That the Statutory Sick Pay Up-rating Order 1984 be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Sainsbury.]

European Community Budgets
[Relevant Document: "Developments in the European Community, January—June 1984", Cmnd. 9348.]
5.35 pm
Mr. Teddy Taylor: On a point of order, Mr. Speaker. Before we proceed with the main debate I seek your guidance on the main document that we shall be considering, which is Cmnd. 9348. I am sure that hon. Members who have studied the document will have found what appears to be a serious arithmetical error on the final page, which will place the House in total confusion in its approach to the debate.
One of the fundamental issues which I am sure will be debated is the trading balance. The figures set out in the final column tell us that exports of £3·6 billion and imports of £12·6 billion produce a balance of minus £3·9 billion. Obviously, that cannot be correct. I do not know the precise figures, but the trade balance and the consequent loss of jobs will be a fundamental issue in the debate. I appreciate that those in the Foreign Office are not always as good at sums as those in the Treasury, but I ask my hon. Friend the Minister to state the real figures. Alternatively, could we adjourn the debate until we know the real position?
Mr. Speaker: The hon. Gentleman has drawn attention to what appears to be a slight error. However, I am not very good at arithmetic either. Perhaps the best thing would be for the Government Front Bench to investigate the matter. I am sure that it will be dealt with during the debate. Perhaps we should now get on with the debate.
5.37 pm
The Minister of State, Foreign and Commonwealth Office (Mr. Malcolm Rifkind): I beg to move,
That this House takes note of European Community Documents Nos. 8322/84, Preliminary draft supplementary and amending budget No. 1 for 1984; 8879/84, Letter of amendment to preliminary draft supplementary and amending budget No. 1 for 1984; the unnumbered document, Draft supplementary and amending budget No. 1 for 1984; Document No. 10222/84, European Parliament's proposed amendments and modifications to the draft supplementary and amending budget No. 1 of the European Communities for 1984; the unnumbered document, Draft general budget of the European Communities for the financial year 1985; Documents Nos. 9482/84, Letter of amendment to preliminary draft budget of the European Communities for 1985; 10690/84, European Parliament's amendments and modifications to the Draft budget of the European Communities for 1985; 8454/84, Amended proposal for a Council decision on the Communities' system of Own Resources; 8445/84, Commission proposal for a Council regulation introducing reserve measures to cover requirements in 1985; 8514/84, Commission's communication on the budgetary requirements of the Community in 1984 and 1985; 5899/84, Amended proposal for a Council regulation amending the Financial Regulation of 21st December 1977 applicable to the general budget of the European Communities; and the unnumbered document, Budgetary discipline: common position of the Council of Ministers; and welcomes the agreement on budgetary discipline providing for the firm control of agricultural and other expenditure.
Mr. Speaker: I have selected the amendment in the names of the hon. Member for Southend, East (Mr. Taylor) and some of his hon. Friends.
Mr. Rifkind: The debate takes place in the aftermath of the Dublin summit, where a number of important matters were considered by the Heads of Government. The Heads of Government discussed and endorsed the annual

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economic report prepared by the Commission on economic development in the Community. I am sure that both sides of the House will be delighted that the Heads of Government endorsed the report, which showed that the growth expected in the United Kingdom was likely to be greater than that in any other European Community country in the forthcoming year.
It is of interest that the economic policy that was proposed and endorsed by the Heads of Government was one that emphasised the importance of keeping inflation low, controlling public expenditure and pursuing an economic policy very close to that of Her Majesty's Government.
Mr. Nicholas Budgen rose—
Mr. Rifkind: I shall give way later to my hon. Friend. I ask him to be patient. I am dealing with matters that are of importance to the House. It was of significance that a summit which dealt with a wide range of issues was able positively to endorse an economic strategy which was identical in all important essentials to that of Her Majesty's Government.
Mr. Robin Cook: I am happy to agree with the Minister that an important document was placed before the Council. I draw his attention to the section on page 31 which observes that programmes of public investment should be strengthened, especially in countries where the construction industry is under-utilised. As one worker in four in Britain's construction industry is idle, how does he square that observation in the report, which he so warmly endorsed, with the simultaneous decision of the Government to lop £500 million off the construction investment?
Mr. Rifkind: That is because the main conclusion of the report to which the hon. Gentleman refers observes that the overriding consideration must be to keep the maximum constraint on expenditure, to reduce it where possible and to concentrate available resources on the reduction of taxation.
I shall concentrate on budgetary discipline, but before doing so I shall make further comments on some of the important issues that were discussed at the Dublin summit. Increasing emphasis is being placed on the completion of the internal market. That is something to which the Government have given enormous importance in recent years. We were delighted when Lord Cockfield was given responsibility in the recent announcement by the President Elect of the Commission to take responsibility for that matter.
In the early 1950s the European Community decided to complete within 10 years the elimination of all tariff barriers within the Community. It succeeded in fulfilling that target. We hope that it will now be possible to achieve by 1990 the completion of the elimination of non-tariff barriers within the Community. That is a short, although not unreasonable, period, especially when we consider . that we are seeking to implement the commitments entered into by the Community when the original treaty was signed.
The proposed enlargement of the Community is important to the House and relevant to budgetary discipline. Enlargement is at a crucial stage and the United Kingdom has some strong views on the matter. The
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Government have stated their great belief that it would be in the Community's interests to come to an early and successful conclusion on the current negotiations on enlargement, enabling Spain and Portugal to join the Community. A wide range of issues are involved, some of which are of less importance to the United Kingdom than to other countries. The negotiations on fruit and vegetables, olive oil and wine are more significant to existing Community members from the Mediterranean area, for whom the accession of Spain and Portugal will mean important competition, than they are to the United Kingdom.
The United Kingdom considers other parts of the negotiations to be equally crucial; for example, the fisheries' negotiations, which are of particular interest to hon. Members on both sides of the House. We have emphasised that the common fisheries policy, which was agreed only after many years of anxious negotiation, should not be jeopardised by the accession of a country with the largest fishing fleet in Europe. The Community has adopted a negotiating mandate with Spain, and we should insist on the Community protecting the interests of British fishermen and fishermen from other members of the existing Community. That aspect is crucial in the negotiations.
Dr. Norman A. Godman: Bearing in mind that there are about 17,000 Spanish fishing vessels — more fishing vessels than Britain has fishermen—is it likely that the negotiations will result in a diminution of that Spanish fishing fleet in the years immediately following accession?
Mr. Rifkind: As I understand it, the bulk of the Spanish fishermen fish in various parts of the world in waters far from Europe. That results from bilateral arrangements between Spain and various other countries, primarily in the Third world. It is primarily for Spain to decide the future size of her fleet. We are determined to ensure that that fishing fleet does not pose a threat to the already precarious livelihood enjoyed by many fishermen in the United Kingdom and other existing member states.
Industrial tariffs are also important to the United Kingdom. We are all conscious of the fact that in recent years there has been a substantial disproportion between the tariff that must be met by British manufacturers on exports to Spain and the tariff enjoyed by Spain when exporting to the United Kingdom.
Mr. Budgen: For how long has this problem existed? How long will it be before the problem is resolved?
Mr. Rifkind: The problem has existed since the conclusion of the agreement in 1970 between Spain and the European Community, at a time when Spain's industrial structure, especially its vehicle industry, was much weaker and smaller than now. It is important and, indeed, essential, when considering the transitional arrangements on industrial tariffs which Spain will properly enjoy, that special attention is given to a form of accelerated reduction of the high tariffs on industry, of which the motor vehicle industry is perhaps the most important category for the United Kingdom. I assure the House that that aspect will pre-occupy the United Kingdom and other Community countries.
I have said that competition from Spanish and Portuguese fruit and vegetables, olive oil and wine is of

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less direct significance to the United Kingdom, but we are concerned about the financial implications of accession. When the Community is beginning to control the agricultural expenditure of its northern members, it is essential that we should not agree to the accession of new Community members if that will create comparable problems for southern members of the Community. Recent agreements on olive oil and wine will help to safeguard the position.
Much of the discussion has concentrated on economic questions, but I emphasise that the United Kingdom remains convinced that the political dimension of assisting Spain and Portugal, which not long ago emerged from a dictatorial form of government, to entrench their new democratic institutions is important to Spain and Portugal and to western Europe as a whole.
Mr. Eric Forth: I understand, although I do not agree with, the Government's obsession with bringing Spain and Portugal into the Community. Will my hon. Friend assure the House that if we do not obtain satisfactory arrangements on fishing, trade and all the other matters which bear directly on United Kingdom interests we shall not agree to Spain coming into the EEC?
Mr. Rifkind: The Community has taken a long time to come to a decision about Spain, because the United Kingdom and certain other countries with a particular interest in fisheries and the other matters to which my hon. Friend referred have attached great importance to those issues. Having spent so many months reaching a satisfactory Community position, we have no intention of abandoning that stand in the subsequent discussions with Spain. The conclusions must be satisfactory to the interests of those affected by the common fisheries policy.
Mr. Tony Marlow: I assume that my hon. Friend the Minister is saying to my hon. Friend the Member for Mid-Worcestershire (Mr. Forth) that the Government are satisfied with the conditions and that the conditions have now been met. Will my hon. Friend assure the House that, if Spain and Portugal come into the Community, there will be no average increase in the cost of the common agricultural policy; in other words, that by bringing Spain and Portugal into the Community, their share of the cost of the agriculture policy will not lead to the cost of that policy overall becoming pro rata greater than it is at the moment?
I believe that the Government's policy was that they would not agree to an increase in Community own resources except in respect of policies which the United Kingdom wished to support. One of those policies concerned the accession of Spain and Portugal. The Government have justified no other policies in terms of an increase in own resources. May we take it as read that, if it is not agreed that Spain and Portugal should join the Community, there will be no requirement to increase own resources?
Mr. Rifkind: My hon. Friend will be aware that I did not intend addressing the matter of own resources during this debate, because it goes beyond the pure question of enlargement. Enlargement is undoubtedly an important component in these discussions. We maintain that, because of the various reforms introduced at the present
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time, the cost of the CAP will lead to agriculture representing a smaller share of Community expenditure, notwithstanding the enlargement of the Community.
Mr. Budgen: My hon. Friend has made a profound philosophical point. He has said that by entering the Community the nature of the people in both Spain and Portugal will change and that they will have a continued interest in a particular form of internal government. My hon. Friend stated that as though it were a self-evident truth which any sensible person should understand immediately. Will he explain it a little further?
Mr. Rifkind: I did not put it in quite the way so helpfully suggested by my hon. Friend. Having assumed democratic institutions, the Spanish and Portuguese Governments — as did the Greek Government before them—believe it is important for the development of their democratic identity that they acquire membership of a community that is entirely democratic, in the sense hon. Members understand democracy, and consists entirely of parliamentary democracies.
We believe that the full integration of Spain and Portugal within the family of the democratic countries of western Europe will be assisted by their membership of the European Community. That is not just the British view. It is the view held by every Government within the Community as well as the Governments of the applicant countries. I accept the suggestion of my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) that that does not necessarily make it the correct view, but it is the view that we hold, and as yet we have heard no convincing reasons to suggest otherwise.
I mentioned the political considerations a few moments ago. It is interesting to note that the country which recently suggested that it would deliberately delay the accession of Spain and Portugal if certain other conditions were not fulfilled was Greece, the most recent member of the Community. Its position has been influenced by its determination to obtain substantial extra resources through the system of what is referred to as the "integrated Mediterranean programmes".
The British Government's view on that is clear. With the other member states of the Community we have endorsed a policy which accepts that those countries which will be most directly affected by enlargement are entitled to some assistance through integrated Mediterranean programmes, but we have insisted that those programmes must be integrated into the structural funds which currently exist.
Mr. Budgen: What does that mean?
Mr. Rifkind: I mean the regional, social and other such funds. It is not acceptable to create a separate new fund for that purpose. We have also said that the sums that can be made available in the foreseeable future can only be modest, taking into account the financial pressures that exist on the Community as a whole.
Mr. Russell Johnston: Is the Minister saying that in the view of Her Majesty's Government regional and social funds, for as far ahead as we can see, will be entirely cosmetic?
Mr. Rifkind: No, on the contrary. The regional and social funds already represent substantial sums, and all the Heads of Government have agreed that there should be a significant increase in the size of those funds.
Mr. Budgen: Why? We are reducing them.
Mr. Rifkind: I assure my hon. Friend that I have not suddenly announced a new statement of policy. My hon. Friends have been aware for some months that that is the position which has been agreed by the Community. If my hon. Friends are anxious to see agriculture represent a smaller and smaller share of Community expenditure, it is not unreasonable that other forms of expenditure should increase.
Mr. Marlow rose—
Mr. Rifkind: I must be allowed to continue. I am sure that my hon. Friend will have an opportunity to intervene in the debate.
Mr. Marlow rose—
Mr. Deputy Speaker (Mr. Harold Walker): Order. The Minister is clearly not giving way.
Mr. Marlow: Will my hon. Friend give way?
Mr. Rifkind: I should prefer not to at this stage.
I come to another matter which relates to budgetary discipline. It is the supplementary finance that has been requested for the current year. The House will recall that on 10 July, when asked about the matter in the House, I said that the Government's view would be that only when we were satisfied that the likely overspend during the course of the current year had been reduced to the current minimum would we be prepared to consider whether, and if so to what extent, it was appropriate to produce supplementary finance to assist the Community.
That examination has not been cursory; it has been extremely rigorous. My hon. Friend the Economic Secretary has been fully involved with other Finance Ministers in the Community to ensure that those sums are reduced to the absolute minimum. As a result of their efforts the original sums proposed by the Commission have been reduced by more than half. We believe that they have now reached a level which is the irreducible minimum, given the obligations which the Community has under its existing rules.
We also said earlier this year that our attitude towards supplementary finance would depend upon two further conditions being satisfied. One was the payment of the refund to which the United Kingdom was entitled during the current year, and the House will be aware that that sum has now been released and been paid to the United Kingdom.
Mr. Budgen: We have paid for it.
Mr. Rifkind: We have not paid to receive the refund. My hon. Friend is wrong about that. The refund was provided for in the original budget, and through payments out of the original budget. The supplementary finance about which we are talking is not connected to the refund which the United Kingdom has already received. I can give my hon. Friend a complete assurance on that.
The second matter to which hon. Members will be aware the Government attached considerable importance was satisfactory conclusions on budgetary discipline. I should like to deal with the conclusions on budgetary discipline which were endorsed by the Heads of Government at the Dublin summit.
Mr. Nigel Spearing: Before the Minister moves on to the disciplinary mechanism, can he
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reassure us about the repayments of the 1984 reimbursable loan, which is the subject of Cmnd. 9395 and another procedure? Is there provision in the 1985 budget for the repayment of that loan? He may not be able to answer now, but perhaps he could arrange for an answer to be included in the reply to the debate. There is some disagreement about the liability for the loan and the authority under which any such loan is repayable.
Mr. Rifkind: I am sure that my hon. Friend the Economic Secretary has heard the question and will seek to respond to it in due course.
Mr. Robin Cook: I wish to ask a question about procedure, and it may give advance notice to the Economic Secretary. I understand that the final appeal in the case ex parte Smedley will not be heard until tomorrow and that there will be no judgment until Thursday. 'That will make it difficult for the Government to table an order for debate next week. In the event that the House cannot debate and therefore condescend on the order next week, may we have an assurance that no moneys will be paid to the EEC in advance of the House returning from the recess? Where does that leave the EEC budget, which runs out on 31 December?
Mr. Rifkind: The hon. Gentleman is as aware as I am that we do not know when the judgment in the case to which he has referred will be announced. I cannot anticipate the business for next week which my right hon. Friend the Leader of the House may wish to consider. It goes without saying that if we are required to receive the authority of the House before supplementary finance can be provided, until that authority has been obtained we cannot provide it. I hope that the hon. Gentleman can accept that that is the position.
I shall return to the main subject which I wish to raise, which is budgetary discipline and the conclusions which were endorsed by the Heads of Government at the Dublin summit. We must study the background to the subject and realise that for most of the life of the Community there has been nothing that could properly be referred to as budgetary discipline. Over the years that the Community has operated, decisions have been taken on expenditure, and only once they have been reached has it been thought necessary to ensure that the revenue is available to provide for the resulting costs.
It was that provision which the United Kingdom Government first identified as being unacceptable and which we have striven over the past few years — successfully I believe — to persuade our fellow Community Governments to agree was unacceptable as a way in which the Community deals with its economic affairs.
The first important milestone was reached when the Community Heads of Government some months ago endorsed the principle that in future revenue should determine expenditure, and not the other way around. It was crucial that that principle be endorsed, because it was a denial of the Community's recent history. It was appropriate that that should be made clear.
The conclusions that were endorsed by the Heads of Government last week provide for a reference framework that will identify the Community's total expenditure in a given year, and, within that reference framework, provide that there should be a financial guideline which will control agricultural expenditure. It also provides that,

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should there be growth in agricultural expenditure, that growth must be less than the growth in the own resources base of the Community as a whole. The effect of that when implemented will be that agriculture will increasingly represent a smaller and smaller share of total Community expenditure.
Mr. Forth: Does my hon. Friend share my anxiety that among the budget discipline documents we see such phrases as "exceptional circumstances in article 2"; in article 5 "barring aberrant circumstances"; and in article 6 "amend the reference framework", and that those words can mean—as they usually do in European Community jargon—that while the Community starts out with good intentions, they are infinitely variable afterwards, depending upon those rather ill-defined circumstances?
Mr. Rifkind: My hon. Friend asks a perfectly reasonable question. I shall be coming to the points that he has raised. I have explained the general way in which it is proposed that budgetary discipline should apply.
Essentially, three criticisms have been levelled at the proposals. First, it has been suggested that as the proposals are not in the form of a regulation they are not legally enforceable and are thus of limited value. Secondly, it is argued that because decisions will be taken by a qualified majority United Kingdom interests may not be properly protected. Thirdly, there has been criticism of the provision for exceptional circumstances to alter decisions already reached. Those are reasonable concerns, and I intend to deal with each of them in turn. Before doing so, however, I wish to make two general points.
First, the United Kingdom objective has always been to ensure that Community expenditure is dealt with on more or less the same basis as national expenditure. In other words, we have never sought to suggest that there must be an absolute straitjacket on expenditure, but simply that Community expenditure should not be handled according to rules which no national Government would consider appropriate for their own national circumstances.
Secondly, we have been the initiators, as it were, of most of the concern about this in the Community and I freely accept that the position that we have reached is not perfect in every respect. If it had been left entirely to us, further improvements could have been made, and still could be made, to certain proposals to make budgetary discipline more effective. We see this as a dynamic process. [Interruption.] I wish to be completely honest with the House. We have never suggested that the solution was perfect. As the motion states, it provides
"for the firm control of agricultural and other expenditure."
That is the position to which we adhere. There may well be ways of making that control even more effective in years to come.
Mr. Teddy Taylor: Does my hon. Friend agree that under article 1 of this so-called strict budgetary discipline the Council of Ministers could agree by a majority to spend any amount that it wishes, without any limit at all? In other words, even if we think that the Council of Ministers is crazy and spending money like water, there is nothing to stop it deciding by a majority to spend double the amount that we consider necessary.
Mr. Rifkind: I said that I would deal with the specific criticisms, of which that is one. If my hon. Friend will also allow me to continue, he will have the answer to his question.
First, there was the criticism that the absence of a regulation meant that the proposals were not legally enforceable. If there were a regulation or a treaty amendment there could be no question but that the rules for budgetary discipline would be completely enforceable, but the opposite does not necessarily apply. The mere fact that there is not a regulation does not mean that the European Court would not find the rules to be enforceable.
Mr. Marlow: What is the disadvantage of a regulation? Why not make it a regulation, to be on the safe side?
Mr. Rifkind: For the United Kingdom there would be no disadvantage in a regulation. As I have said, there were proposals which we regarded as preferable. It is no secret that we should have preferred a regulation.
Sir Anthony Meyer (Clywd, North-West): Is it not a trifle ironic that those now pressing most strongly for enforceable regulations are always the first to demand that we retain a national veto to be used whenever we feel that we are being inconvenienced?
Mr. Rifkind: My hon. Friend is right to emphasise the paradox and inconsistency of some of the interventions.
Mr. Allan Rogers: Will the Minister give way?
Mr. Rifkind: No. I have been very generous about interventions. Many hon. Members wish to participate in the debate, so perhaps they will keep their comments for their own contributions.
The Council of Ministers itself has identified these conclusions as binding upon it. Whether they are legally enforceable can be determined in the last resort by the European Court. We believe that they are binding, and all the Heads of Government have endorsed them as such. The European Commission, too, has accepted that it will be bound by them in its proposals to the Council.
Mr. Budgen: If all the other countries have the political will to curb excess agricultural expenditure, why did they not agree to a regulation?
Mr. Rifkind: The attractions of budgetary discipline were received by the various states with varying enthusiasm. Some Governments are less enthusiastic than others. Nevertheless, to the best of my recollection, when the Council of Ministers endorsed the proposals only two of the 10 states entered any reservation to the effect that they did not regard the conclusions as binding on the Council as a whole.
The second criticism, that the requirement for a qualified majority constitutes a major flaw in the proposals, does not hold water. First, it ignores the important fact that the Commission has said that it will regard itself as bound to put forward proposals consistent with the rules of budgetary discipline. Under article 149 of the treaty, when the Commission puts forward proposals a decision not to comply with them requires unanimity on the part of the Council. Secondly, even in a situation in which a qualified majority would be relevant, even in the enlarged Community any combination of two large states and one small state could prevent the qualified majority being obtained in the Council.
Mr. Marlow:What security is that?
Mr. Rifkind: My hon. Friend's question implies that only the United Kingdom has any interest in budgetary discipline, but that is not remotely the case. In considering any increases in Community expenditure which may be proposed in years to come we must consider also where the burden of financing them will fall in the light of the Fontainebleau conclusions, which provide for a two thirds refund to the United Kingdom of any new expenditure. That means that the maximum proportion of funding for new expenditure that will fall on this country is not the original 21 per cent., but 7 per cent. For France it will remain 27 per cent., and for Germany 32 per cent.
That being so, the suggestion that Britain will invariably be more concerned about budgetary discipline while France and Germany have no interest in the matter flies in the face of common sense. Indeed, a number of smaller countries have an equal and increasing interest in budgetary discipline and can be expected to support us in rejecting any unreasonable proposals. Therefore, notwithstanding article 149 and the need for unanimity when the Commission puts forward proposals with which certain people disagree, even when a qualified majority is appropriate there is reason to assume that in the vast majority of cases any unreasonable proposal will rightly be dismissed.
The third criticism was about the reference to exceptional circumstances, and related matters. Not just in the Community, but in any national Government, a budget that has been fixed may have to be altered during the year because of exceptional circumstances. That in itself is not an unreasonable proposition. The main safeguard, however, has not been mentioned. Within the conclusions that have been adopted, although exceptional circumstances may result in increased expenditure, the provisions also require that that additional expenditure should be clawed back in the following years. Therefore, the overall requirement to control expenditure is safeguarded.
Mr. Budgen: "May be" clawed back.
Mr. Rifkind: Not "may be". Under the conclusions adopted, additional expenditure is required to be clawed back.
Mr. Forth: Following that line of logic, what would happen if there were three consecutive years of fine harvest?
Mr. Rifkind: The Community cannot in future assume that the interests of the farming community are the only considerations to be borne in mind. In the circumstances envisaged by my hon. Friend, we would have to consider the overall interests of the Community and the expenditure that would have to be incurred to meet that situation.
Given that the overwhelming part — some 93 per cent. — of any new expenditure will not fall on the United Kingdom, it is reasonable to assume that other member Governments would be as concerned as Her Majesty's Government about the implications of such expenditure.
Mr. Teddy Taylor: May I refer my hon. Friend to article 5? He says that the money would be clawed back. Will he tell us what is meant by the reference to "barring aberrant developments"? That phrase seems to me to
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imply that the money will be clawed back unless the Council considers that there have been what it would call aberrant developments.
Mr. Rifkind: We are seeking to ensure that any proposal to provide for unreasonable increases in expenditure can be blocked in the various ways to which I have referred. We have never sought to impose a rigid straitjacket on Community expenditure. What we have sought to ensure, and what I believe the conclusions adequately represent, is effective control of expenditure.
Mr. Teddy Taylor: What about article 5?
Mr. Rifkind: I refer those who doubt what I have said to various reactions to the proposals and the conclusions on budgetary discipline. Dr. Stoltenberg, the Federal German Finance Minister, stated in a debate on these matters in the Bundestag:
"I believe that we now have, for the first time, an effective instrument to bring about a sensible control of expenditure".
The French Permanent Association of Chambers of Agriculture — a body with a great interest in these matters—said:
"Heads of State and Government have just decided a real financial straitjacket for the CAP".
The president of the Italian farmers association said that the proposals that had been agreed represented a "complete change in direction of the CAP."
Hon. Members: What about Mr. Rocard?
Mr. Rifkind: The French Minister of Agriculture was at one stage quoted as being hostile to the proposals, precisely because he was concerned about how effective they would be. The French Government and Mr. Mitterrand have emphasised that their primary objective is to ensure proper budgetary discipline. We welcome the fact that the French Government share with us the belief that that must be the supreme consideration. That is why, despite the no doubt understandable reservations of Mr. Rocard, the French Government remain absolutely committed to the proposals.
Mr. Budgen: Will my hon. Friend give way on one final point? I give an undertaking, binding in Community law, that barring either exceptional circumstances or aberrant developments, this will be my final intervention. Does my hon. Friend agree that the imposition of the milk quota was the first tentative attempt to control agricultural expenditure? Will he tell us how those milk quotas have been applied in each state?
Mr. Rifkind: On the basis that this is to be my hon. Friend's final intervention, I shall be delighted to corriply with his request. As a result of the quotas, the United Kingdom has experienced a significant reduction in milk production. Belgium was required to cut production by 2·7 per cent., but the latest information suggests a cut of 3·7 per cent. Denmark was required to reduce production by 5·6 per cent. but so far has reduced production by 6·3 per cent. Neither Greece nor Ireland, which under the original proposal were permitted an increase, has increased production by anything like the amount proposed.
Mr. Rocard has recently made it clear that French milk production this year is expected to be significantly below the quota.
Mr. Budgen: What about Italy?
Mr. Rifkind: I have given my hon. Friend a certain amount of detailed information. He may be disappointed

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to hear that most member states are carrying out their obligations. I suspect that that was not the answer that he expected to get and that it was not his intention to assist the Government in their hour of need.
My hon. Friend rightly mentions Italy. Italy is the one country which has not so far made any serious attempt to carry out its obligations under the agreement. In consequence, the European Commission has begun infraction proceedings against Italy in the European Court. The United Kingdom and many other countries have made it clear that it is essential that if any country is expected to carry out its obligations, all countries must do so. That is the only way in which the system can operate effectively.
Mr. John David Taylor: I entirely accept all that the Minister has said about milk quotas. However, he has told us only how the national quota has operated in each nation. Who decided that there should be regional quotas within nations? Was that a national responsibility, or a Community decision? In either case, what is the legal basis for it?
Mr. Rifkind: I cannot answer that specific point in detail. However, our main concern must be to achieve a substantial reduction in overall milk production. We would also expect that the detailed provisions agreed upon by the Heads of Government have to be accepted and implemented according to the details agreed. There would be no basis for a system of implementation different from that orginally endorsed by the Council of Ministers. Nearly all member states have substantially reduced production. Italy is the one main exception to that general principle, and we are pleased that the Commission has begun infraction proceedings.
Mr. John David Taylor: Most nations, including the United Kingdom, are now below their national quotas. However, for some reason, we still have to pay super levies to the EEC. Indeed, our British super levy was seized last night.
Mr. Rifkind: No, that is not quite correct. I understand that as a precautionary measure the Commission has taken a decision which applies to all Community countries, in part because we have made it clear that our attitude towards the payment of the super levy will be influenced by whether other countries also carry out their obligations. However, no specific action such as the right hon. Gentleman has referred to is being taken.
We believe that the proposals on budgetary discipline should commend themselves to the House. As I have sought to explain, they provide effective—
Mr. Marlow: Will my hon. Friend give way?
Mr. Rifkind: I am sorry, I shall not give way. The proposals provide effective and appropriate ways of controlling expenditure within the Community.
Mr. Marlow: Will my hon. Friend give way? I will give the same undertaking as that given by my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen).
Mr. Rifkind: If my hon. Friend will give that undertaking, I shall be happy to give way.
Mr. Marlow: We are all most grateful to my hon. Friend for his courtesy in answering all our interventions. However, as he has explained the budgetary discipline, it will, in legal terms, hold as much water as a leaky sieve. We are concerned, therefore, about people's intentions.
We understand that next year the Community will spend £1,000 million more than it is entitled to raise. How can we at this stage have any reassurance about the intentions of the nations that make up the Community and that they will behave in this way?
Mr. Rifkind: Precisely because one of the reasons why the Council of Ministers is in conflict with the European Parliament is that the Council of Ministers has insisted on putting a draft budget to the Parliament which is within the 1 per cent. ceiling. If the Council of Ministers had not been determined to insist on that, no doubt my hon. Friend would have complained that that showed a lack of willingness to observe the rules of budgetary discipline.
Way back in 1979, curiously enough also at a Dublin summit, the Government initiated what we believe to be necessary reforms in the EEC. Since then there has been a major transformation in the rules which are applied and in the thinking of all Governments in the Community on this matter. The issue was perhaps best summed up in an article which appeared in the French newspaper Le Figaro on 1 December 1984. It said:
"It is true that she"—
meaning the Prime Minister—
"has every reason to be pleased with the outstanding diplomatic victory she won this year, after five years of hard struggle. For it was in November, 1979, at the Dublin European Council, that she entered on the battle to obtain a reduction in the British contribution to the EEC budget, a drop in the EEC budgetary expenditure and, in particular, in the Common Agricultural Policy. She has won on all fronts, and it is understandable that yesterday she should have termed 1984 'A very important year' for the Community."
I endorse those comments and, on that basis, invite the House to accept the motion.
6.21 pm
Mr. Robin Cook: I wondered for a moment whether I had entered into an agreement with the Minister that, if he gave way to me twice, I should not attempt to speak in the debate. I am relieved that I still reserve the right to speak.
The Minister, in conclusion, painted a glowing picture of the past 18 months as a progress of triumph, suggesting that the EEC has retired to a succession of summits for meditation and negotiation and has emerged from that process strenghtened, purified and with a new commitment to relaunch the Community and its objectives. I find it extremely difficult to recognise that picture in the documents that litter the Table from which I am speaking. Those documents paint a picture of an institution that is in financial shambles. It is stumbling towards the end of 1984 grasping for temporary expedients to keep the cash flow. The expedient on which it has hit to get to the end of this year is a whip-round of member states. It is not clear whether that whip-round is a loan or a grant. When he spoke to the Treasury and Civil Service Select Committee, the Economic Secretary to the Treasury described it as a reimbursable advance. As the Committee elicited from the Economic Secretary, it is an advance, but it is by no means clear whether it is reimbursable. However it is described, it is clear that there is a large gap in the budget for 1984

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which has been plugged only by payments from sources outwith the resources of the treaty and by a special arrangement.
It is difficult not to agree with the Court of Auditors' statement that the Commission's estimate of a shortfall of more than £1.6 billion in its original calculations is evidence of
"the need for greater accuracy in the preparation of original budget estimates".
We do not find such "greater accuracy" in the 1985 budget. The draft budget provides sufficient revenue to meet expenditure for the first 10 months of the financial year. A letter, attached to the draft budget, expresses the hope that, on arrival at the last two months of the year, some way will have been found of meeting expenditure. It is extraordinary that a responsible public institution should enter the financial year on such a basis. If Hackney or Islington borough council introduced such a budget for the forthcoming year, Treasury Ministers would be the first to denounce them as introducing an illegal and irresponsible deficit budget.
In these documents we see an institution that is wallowing in a financial crisis that is deeper than anything that it has experienced since the relaunch of the Community in Stuttgart 18 months ago. Against that background we must judge the wider issues, to some of which the Minister addressed himself. The Minister did not address himself to one document. That perplexed me, as the document was before the Government at the summit only last week and it received the attention of the Council when it met in Dublin. As the Minister failed to refer to it, perhaps I can help to redress the balance. I refer, of course, to the document prepared by the Dooge committee. It prepares the way for European unity. It is impossible to take exception to elements of that report. Section 2, for example, has a chapter headed,
"The Promotion of the Common Values of Civilisation."
I do not think that even the hon. Member for Southend, East (Mr. Taylor) would take exception to such a document. However, it is clear that the document tends towards European union. That is made clear in chapter 4, which consists of only two paragraphs and calls on the European Council to agree to an intergovernmental conference to negotiate a draft European union treaty. The report is studded with footnotes bearing the name of the Minister of State, Foreign and Commonwealth Office, who, I understand, is a member of the committee. There is a footnote attached to chapter 4. I looked down the page eagerly to see what reservations the Minister had entered against the proposal, only to discover that his reserve is founded on the ground that the proposal is premature in an interim report. I had expected a more substantive reservation about a provision for European union. I do not know about the Minister, but I am not entirely confident that such a proposal would find a majority in the House. If we were to take a snap vote of those right hon. and hon. Members who are present, the Minister might be in some difficulty.
Mr. Budgen: But what about the Whips?
Mr. Cook: I welcome the insight offered by the hon.
Member for Wolverhampton, South-West (Mr. Budgen).
At no stage have Treasury Ministers come to the House to justify entering a European union. If they have no serious intention of entering such a union, they should at the very minimum tell their colleagues on the Dooge
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committee rather than hide behind the subterfuge that the conclusions are preliminary and that the report is only interim.
Sir Anthony Meyer: It would probably not he worth while taking a snap vote in view of the utter failure of Labour Members, apart from two conscientious exceptions, to attend the debate.
Mr. Cook: The numbers of Labour Members present make up precisely the same proportion of the parliamentary Labour party as do the numbers of Conservative Members present of the parliamentary Conservative party. I should naturally welcome a larger attendance to hear my pearls of wisdom, but we are represented equally.
Other items in this report are worth singling out for the attention of the House. The Dooge report contains a provision to limit the veto and to provide for more majority voting. Again, the Minister has entered a reservation on this item of the text, but he is quoted as having
"accepted the principle of a more frequent use of majority voting".
If that is the case, the House is entitled to know on what issues he is prepared to accept more frequent majority voting. On what issues is he prepared to abandon the use of the British veto?
Similarly, there is a provision for the European Parliament to have control over the revenue side of the budget. At any rate, I believe that is what the committee is recommending, because it is not immediately apparent from the language used. It wants to give the European Parliament
"responsibility in decisions on revenue as the coping stone of the establishment of a new basic institutional balance"—
whatever that means. The Government have entered no reservation on that proposal. Does the Minister accept that the European Parliament should have control over the revenue side of the budget and in what way?
Mr. Rifkind: If the hon. Gentleman has properly read the report, he will see that the United Kingdom reserve, which I introduced, refers to that whole chapter. We have not accepted the recommendations of the majority of the committee to increase the powers of the Parliament. The only point we wished to put forward was that there should be an improved conciliation procedure on the basis that has been discussed by the Council of Ministers, but blocked by one country up to now.
Mr. Cook: I am satisfied with that response and happy to accept the Minister's explanation. However, if he has entered a reservation against the whole of that chapter, it becomes even more meaningless to me why the Government are prepared even to temporise on the question of having an inter-governmental conference to render all this into a treaty of European union.
Mr. Spearing: I am grateful to my hon. Friend both for giving way and for drawing the attention of the House to these proposals which have not yet been to the Scrutiny Committee. These proposals are fundamental and relate to the constitution and treaties of the EEC. Can he say more about the vires and authority of the committee to which he has referred? Was it not formed after the Fontainebleau summit and was not that meeting outside the terms of the treaty? Will he invite the Government to tell us what

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authority this committee, which is suggesting changes to the treaty, has and with what authority the Minister sits on it?
Mr. Cook: I am not entirely sure that it lies in my mouth to answer for the Government, but my hon. Friend has given me an opportunity to refresh my memory of the text. The reservation to which the Minister referred applies to section B. No reservation has been entered by the British Government to any part of section C which deals with the increased revenue powers of the European Parliament.
Mr. Rifkind indicated dissent.
Mr. Cook: I am going only by the text which was placed in my hand by the Library. The Minister may, if he wishes, check the text and make appropriate corrections, but the only reservation entered on section C is by the Greek Government.
Mr. Rifkind indicated dissent.
Mr. Cook: The Minister shakes his head and says that it is not true. I take exception to that observation. I can only go on what is in the text as published, in which—and he is welcome to check it — there is no British reservation.
Mr. Rifkind: The hon. Gentleman implies that the reservation applies to one particular page. It refers not to section C or D, but to the whole chapter dealing with the powers of the European Parliament. As I sat on the committee, I can give the hon. Gentleman a categorical assurance that the reservation applies to the whole section on the powers of the European Parliament, including the proposal to provide it with powers over revenue.
Mr. Cook: I can only suggest that the Minister takes this, matter up with whoever drafted the presentation of the text, because it is quite clear that footnote II refers to section B and that the reservation entered in respect of section C was entered by the Greeks. I should have thought that had the British Government wished to enter a reservation to section C as well as to section B, they would have entered the footnote on both occasions. However, the Minister may wish to consider the matter.
Mr. Budgen: Does the hon. Gentleman agree that in general the powers of the Council are set out in the written constitution of the EEC? Was not the Luxembourg agreement a significant derogation from that, because after France had left for a period it became necessary to introduce the practice of allowing a nation state to exercise a veto when it said that its essential national interests were at stake? What has now happened is a promise to use the Luxembourg veto less generously.
Mr. Cook: It is plain from the text that the British Government appear to have committed themselves to accepting majority voting on more frequent occasions, and that implies a more restrained and less regular use of the British veto. There is a school of thought, of which the hon. Gentleman is a distinguished exponent, which takes the view that that is entirely desirable. If so, that case should be argued in the House by the Government. They should clearly tell us the occasions on which they wish to
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restrict the use of the veto and the occasions on which they would be happier to see an issue resolved by majority voting.
Mr. Rifkind: The hon. Gentleman is implying that somehow this is a new development. The Government have made clear on numerous previous occasions their belief that, in those areas where the treaty does not require unanimity, all member Governments should ensure that the veto be used only in a genuuine case when vital national interests are affected. Of course there have been occasions when various Governments have applied the veto when it would have been difficult to substantiate the view that a vital national interest was at stake. My right hon. Friend the Prime Minister and other British Ministers have said that we believe that it is in the interests of the Community as a whole for the use of the veto to be kept to a minimum where vital national interests can be said to apply.
Mr. Cook: I am grateful that we have had this exchange, because it is becoming clear that the Government have moved some way down the road of the Dooge committee to an extent that I had not previously observed. It may be remiss of me, but I do not recall the Prime Minister's clear statement that she is willing to contemplate more majority voting.
Mr. Rifkind: I undertake that this will be my last intervention. The hon. Gentleman is remiss. If he looks at the document "Europe—The Future", produced by the Prime Minister for the last summit, and which has since been made available publicly, he will see in it an explicit reference to the need for the veto to be used only as a last resort. There is a suggestion that when it is used, an explanation might be useful as to why the issue is a vital national interest. In that way we could seek to minimise the use of the veto and not allow it to be used unreasonably. Those matters have been aired publicly on many occasions.
Mr. Cook: I accept what the hon. Gentleman says, and I must apologise to the House for having let pass underneath my nose one of the many documents relating to Europe which come before the House. I accept that on this occasion I have been remiss. However, if the Government are willing to entertain a position in which they are more reluctant to use the British veto, it would be nice to know how they define the occasions on which they believe British use to be justified.
There is a considerable amount of merit in the idea of enlargement. I believe that there is something in the Minister's point that, by bringing in Spain and Portugal, enlargement would give added strength to the democratic institutions which are still taking root in those countries. I also believe that enlargement would bring an element of fluidity to the Common Market, which would be welcome to those of us who believe that the Common Market stands in need of substantial change. Yet, if the Community is serious about enlargement, it should put its house in order before inviting the Spaniards and Portuguese to share our present problems and, thus, to complicate them.
The Minister was censorious about the Greeks. It would be unrealistic to imagine that only the Greeks stand in the way of Spain's and Portugal's membership of the Community. If the Greeks had not objected, the French or the Italians would have done. If the Greek objections were

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met, I should be surprised if one or other of the Mediterranean countries did not raise an objection. Be that as it may, it is now obvious that there are two question marks over enlargement.
Will it happen at all, and will it happen by 1 January 1986? The retiring President of the Commission, Mr. Gaston Thorn, has made it clear that he does not expect enlargement to be completed by 1 January 1986. The Minister did not condescend to speak about the implications of that. What does the shift in enlargement mean for the decision on an increase in own resources? Conservative Back-Bench Members asked the Minister about that, and I wish to press the point.
The Government's position on the increase in own resources has gone through many phases. In February 1983 the Government took the view that there was enough money in the kitty, even if enlargement took place. They now believe that there is not enough money in the kitty, even if enlargement does not take place, and they want an increase in own resources to take place in advance of enlargement. Between them, there was a flitting phase in which the question of the increase in own resources was tied to enlargement of the Community. Even now the Minister still partly justifies an increase in own resources by reference to enlargement.
I invite the Economic Secretary to the Treasury to answer several points when he replies. The House is entitled to greater clarity about where the Government stand should enlargement not take place on 1 January 1986 or should it recede into the indefinite future. If it is not going to take place, is it possible to defer an increase in own resources? If an increase in own resources is required, we are entitled to know how much less that increase need be, if enlargement has not occurred and the increase is required only to pay for the return of our rebate.
What will happen to our rebate for 1984, which is payable next year? The 1985 draft budget made no provision for our rebate. The Strasbourg assembly has included a provision for a rebate on the expenditure side. Its motivation, with which hon. Members will be wearily familiar, is that it wants a rod with which to hit the back of the Council, for reasons which have nothing to do with British contributions. I am sure that the House will be united in resisting that provision.
If we consider the draft budget, even without the amendments of the Strasbourg assembly, we find, curiously, that the Commission has not made provision for the British rebate payable in 1985 on the revenue side either. Will the Economic Secretary tell us where the rebate is? Is he confident that the Government will secure it? How will they do so? If they secure it by means of an abatement, when will he proceed to deduct our refund from our payments to the Community? Will it start in January? How much will he deduct from our contributions to take account of the refund to which we are entitled for 1984?
That naturally and logically brings me to the budgetary discipline package, which is the sister to the rebate agreement, to which the Minister referred at length. We shall presumably have an opportunity to debate the matter again when we eventually debate the order which is at present before the courts. I noted what the Minister said about the objections to the document on budgetary discipline. I noted that he said that, although it had no legal status, it did not necessarily mean that the courts could not found on it. That is doubtless the case, but it does not mean
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that the courts would necessarily found on it; even less does it mean that the Commission is likely to take any action before the courts in respect of that agreement.
The Minister did not respond adequately to the point raised by Conservative Members about the aberrant developments, in the event of which rebate —. read "clawback" — would not operate. Agriculture, as Conservative Members are fond of reminding the House, is a chancy business. There are many changes with the seasons and with the harvest. It would be difficult to find a year when the CAP operated in which one could not find something to tag as an aberrant development to justify clawback not being stimulated.
A basic reason for not being over-persuaded by the Minister's arguments is the patent fact that he has failed to persuade the farming community that the impositions in the budgetary discipline document will bite. We do not need to search for quotations from the German Parliament or from Italian or French farmers. We need simply look at home. After the text on budget discipline was produced, Farmers Weekly stated:
"Farmers have nothing to fear from the EEC budget discipline agreement drawn up in Brussels to control the common agricultural policy because it is so full of escape clauses'.
Michel Rocard's name has already been taken in vain. After the final agreement, he said that the French had agreed to it because it provided sufficient flexibility for the CAP to continue unimpaired.
There is another reason why we should be sceptical about the extent to which a common position would be sufficient to control expenditure on agriculture in future, and the extent to which we can rely on our Community partners to observe that voluntary undertaking. It is provided by the way our partners have operated recently. The Minister attempted to persuade us that milk levies and quotas were being observed by our partners. Michel Rocard assured the French nation, even if he did not mention this at the Council of Agriculture Ministers:
"No dairy farmer will have to pay super levy on overproduction in 1984–85."
For the removal of doubt, Alain Clauzier, who is a principal agricultural commentator in the French press and a large farmer, said more bluntly:
"Delaying payment of the super levy didn't make any difference to us in France … We weren't going to pay it anyway, we're not worried about what anyone else in the Community thinks."
There is an entertaining footnote to that exchange:,n the dispute between the Strasbourg assembly and the Commission about the 1985 budget. The assembly provided for the insertion in the budget of revenue of 120 million ecu from payment of the milk super levy in November. The Commission has since deleted that insertion on the ground that it does not expect to receive any payments of the super levy. That speaks volumes for its confidence in the system which it set up.
However, we need not found our nervousness about the efficacy of the document on budgetary discipline on the milk quotas alone. Paragraph 11·7 of the White Paper is fascinating. It deals with infraction of Community law and cases referred by the Commission to the European Court. During the past five years, 173 cases have been taken to court, only seven of which involved the United Kingdom. We are almost at the bottom of the league, with only the Danes below us. Italy accounts for no fewer than 61 of the 173 cases, and France accounts for 27. In 1983, there was only one case against the United Kingdom, but 12 each

961
against France and Italy. Some of us believe that it is a bit rich in those circumstances for the French and Italians to lecture the British about being non-communitaire.
What is even more striking is that, although the British are punctilious about agreements made in the Council, our partners take what might charitably be called a more creative attitude. Given their record of imaginative interpretation of Council agreements, one is bound to be sceptical about the extent to which the agreement on budgetary discipline, which does not even have the merit of the legal status that resulted in those infractions being brought before the courts, will bite. Its failure to bite is fairly clear from the 1985 draft budget, because there is a danger that the formula for budget discipline will make things worse next year. It provides that 1985 will be one of the two base years. Therefore, the agricultural community has every incentive to bid up expenditure to establish a high base rate for future years.
The draft budget proposed by the Commission includes a dramatic increase in the agriculture budget. In the draft budget sent to the Strasbourg assembly the proportion of expenditure on agriculture increased from 66 per cent. to 72 per cent. Since then the Strasbourg assembly has added 1·3 billion ecu to agricultural expenditure. I noted that 5 million ecu relate specifically to additional help to beekeepers. The money has been doled out carefully among different agricultural interests.
The Commission responded to the increases by advising the assembly that they were illegal, to which the assembly retorted that the draft budget was illegal anyway as it did not cover the full 12 months. There is some justice in the charge levied by the assembly against the budget, but that was not an elevated set of exchanges between the two bodies. This is not an institution trembling on the verge of relaunch.
It is worth noting what has been cut to make room for the additional agricultural expenditure. The 1985 aid budget has been cut, and the proportion for aid has been reduced from 3·5 per cent. to 3·2 per cent. For the first time, the EEC will be spending less on aid to the Third world than it will spend on the salaries of the bureaucrats in Brussels, who will now swallow 3·4 per cent. of the budget—[Interruption.] Those are the figures provided in the draft budget.
Mr. Robert Jackson rose—
Mr. Cook: I will happily give way to the hon. Gentleman if he will contain his impatience, but I should tell him that we have not yet reached a position in which hon. Members intervene by means of a megaphone.
The cut in aid is pertinent, because last week we heard a statement, in response to the Dublin summit, in which the Prime Minister referred to the Community's commitment, given at the European Council, to provide 1·2 million tonnes of grain to the countries of north Africa. In their innocence, the Opposition welcomed that commitment, because they imagined that if the European Council was to will the food, it would find the funds to pay for it. We were wrong. We learn now that the food aid budget will remain at a fixed ceiling. Even as we speak, according to The Guardian,
"Community officials are working against the clock—and in some cases against their own consciences—to divert food aid from countries such as Bangladesh",
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to Africa. We understand from the report that the Prime Minister was a main opponent of any increase in expenditure. In that she was at least consistent. She is imposing on the Community budget precisely the same strictures as she imposed on the British overseas aid budget, thus requiring any additional aid to Ethiopia to come from our overall aid budget.
Mr. Jackson: I apologise to the hon. Gentleman for interrupting him earlier. He was wrong to say what he did. He should be aware that the Community has a separate budget for overseas aid in relation to the Lome convention. He referred to food aid, which is only a small proportion of our total effort.
Mr. Cook: The hon. Gentleman is correct, but I am referring to the appropriations included in the draft budget, which provides a reduction in the proportion for aid from 3.52 per cent. to 3·2 per cent. of the 1985 draft budget. The aid provision in the draft budget is less than the provision for expenditure on administration in Brussels. An institution that gets its priorities so markedly wrong is in severe need of outside advice to rethink its priorities.
In common with many hon. Members, I receive large volumes of mail from constituents who are deeply moved by what they see on their television screens about Ethiopia. A point that they raise repeatedly, and which plainly distresses them, is a simple equation. They see Europe stuffed to capacity with surplus grain—stuffed so much that the grain is overflowing into barns in Switzerland and Austria because the Community can no longer contain it—and they also see, not too far away from Europe, people perishing from hunger. They then make the reasonable equation that some of the surplus grain could be used to relieve the suffering and deaths that they have witnessed.
The 1·2 million tonnes of grain is not a large amount; it is less than one fifth of our intervention stocks and less than one tenth of the intervention stocks that we are likely to have next spring when they will reach their peak. It is less than the amount of wheat used by the Community for conversion into animal feedstuffs to feed the animals of the Community.
What happened, and what continues to happen, in Ethiopia is an appalling tragedy, but it was also an opportunity for the Community to redeem itself and to prove that there was some purpose, for the good of humanity, in the large surpluses produced by the CAP. The halting response of the European Community until the Dublin summit, and the hypocritical response given there, have knocked what last hope there might have been of the CAP redeeming itself by giving that necessary food aid to north Africa. Instead, the whole episode has sharpened the moral offensiveness of a system that extrudes ever-swelling surpluses in a world where two thirds of mankind go to bed hungry.
We are left with a draft budget for 1985 in which an offensive and extravagant agricultural system absorbs an even higher proportion of the budget than it did this year. Not only that, we have a document on budget discipline that cannot provide us with a guarantee that expenditure will not swell further. In the meantime, the trivial resources allocated to other projects are cut. The communiqu´ after Dublin called upon the European Council to implement without delay its commitment to transport policy. The Commission's draft budget cuts

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expenditure on transport. The communiqu´ after Dublin called upon the European Council to adopt further measures to strengthen the technological base of the Community. The draft budget presented by the Commission cuts expenditure on science and technology.
Had the Commission set out to confirm our prejudices about the mistaken priorities of the Community, it could not have done better than to present us with the 1985 draft budget. The House does not have the power to alter that budget. That is one of the unsatisfactory features of the position in which we find ourselves. However, we have one power. We can resolve that, in the light of the priorities displayed in this 1985 budget, it is inconceivable that there could be any rational and principled case or any consistent intellectual argument mounted to persuade the House that there is a basis for us to vote an increase in own resources to provide for even larger expenditure on the same priorities in 1986. I hope that the Minister, who is a rational and intellectual man, will take note of that, and will not put the House in the embarrassing position of having to vote down the increase.
7 pm
Mr. Teddy Taylor: I beg to move, to leave out from "Council of Ministers" to the end of the Question and to add instead thereof:
"but regrets that the arrangements made at Fontainebleau and Dublin provide for a major increase in public expenditure and that the restraint mechanism on agricultural spending has no legal force and would, even if effective in practice, provide for substantial further increases in this area of spending."
My hon. Friend the Minister did not say whether my amendment would be acceptable to the Government, but I thank the Chair for selecting it for debate, because it enables us to focus our attention on the basic issue of budget discipline, the issue on which the Minister concentrated.
Although we have had a bit of fun this afternoon, the whole thing is deeply depressing. It is clear that we shall throw away the one chance that this country has had in over 12 years to achieve reforms in the Common Market, and the only chance that we shall probably ever have to secure budget discipline. My hon. Friend the Minister gave way several times, but whenever there was a specific issue about whether or not there was any substance in the budget discipline, he made it clear that all that we would rely on in the Common Market was the goodwill of those taking part in the meetings of the Council of Ministers. He quoted the paper Le Figaro, which said that it liked what was going on. He quoted Italian farmers, who said that they thought that it was a grand idea and he told us of the French Agriculture Minister who was hopeful that France might, some day, abide by the milk quotas. However, when we come down to the details of the budget discipline, it is obvious that it is nothing more than a sick joke.
I shall go through the specific questions that I put to my hon. Friend the Minister but which, sadly, he was not able to answer. We are told that there are strict financial guidelines. Was there anything in the guidelines that would prevent the Council of Ministers, by a majority, from increasing the total expenditure to any sum that it thought fit, whether by 20 per cent., 30 per cent. or 40 per cent.? Under article 1 of the new so-called budget discipline agreement, there is nothing whatsoever to stop such a thing happening.
Mr. Marlow: If there is a new limit on own resources of 1·4 per cent. VAT, will that not limit what the Council of Ministers may agree?
Mr. Taylor: My hon. Friend may hope that that is the case, but I remind him that there is already a restriction for 1984 and there will be a restriction for 1985, as in both these cases there is a legal limit of 1 per cent. VAT. My hon. Friend is aware that, despite the attempts of that great British democrat Mr. Oliver Smedley to dissuade the Government from apparently abusing the law, we shall be giving more money to the Common Market this year above the legal limit. Next year, there is such a crazy budget that we shall obviously greatly exceed it.
I again put to the Minister and to the Treasury a sirnple question. Is it true that, despite all the talk of strict financial discipline, there is nothing in article 1 that will prevent Ministers from deciding to spend any sum that they might want, whether we like it or not?
There is then the question of the agricultural budget. What has been set as the basis for a major step forward is the principle that the Common Market will be able to increase the amount that it spends on agriculture only by roughly the amount of increase in own resources. There are severe problems here. First, the base on which we are working and on which we shall assess all the percentage increases is actual spending in the year 1984 and the envisaged spending for 1985. Surely Ministers are aware that 1984 was a year of horrendous over-production, a year in which mountains reached the most crazy levels. What is proposed now is that agricultural spending should be based on this year and on a prediction for next year, when agricultural spending is estimated to rise by about 15 per cent.
At the moment, the wheat mountain exceeds 4 million tonnes, the barley mountain is over 1 million tonnes, and the beef mountain, the height of which is continually soaring, is about 500,000 tonnes. We have all-time high mountains of food, expenditure on agricultual dumping and destruction of food. Despite that, the Government are asking us to regard it as an achievement that future agricultural spending will be based on this year and will not increase by more than Community own resources.
Even that has an escape clause, as the Minister is aware. In article 2 of the so-called binding agreement—
Sir John Farr: My hon. Friend refers to horrendous over-production, but he will recognise — I am surprised that he has not done so already—that none of that over-production has been done by British farmers.
Mr. Taylor: How right my hon. Friend is. Britain does not have a problem of over-production, although we over-provide on some things—for example, marginally on dairy and cereals. However, if the Common Market were ever to do anything about the agricultural policy, British farmers would suffer. Sadly, that is why the Government have never proposed a reform of the CAP. We hear my right hon. and hon. Friends talking, year after year and month after month, about the need to reform the CAP, if only these wretched Continentals would agree. As we know, and as my hon. Friend the Member for Harborough (Sir J. Fan) is well aware, at the Stuttgart summit we agreed that we would not seek any reforms in the basic structure or policies of the CAP and seek only modifications or adjustments in the CAP.

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The Government have said that they want to persuade the Continentals to reform the CAP but, sadly, there has been no sign, apart from the general broad sentiment, that the Government have any wish to reform the CAP. I do not believe they do, and I am sure that the Minister will accept that. Some people may think that there is a need to reform the CAP, but how do the Government intend to go about it? They have said that they want moderation in prices, but they know that that will not solve the problem and would not be acceptable to our colleagues. They say that change must be gradual, but they do not say in what direction the change will be. We are facing a crisis of overproduction and all that the Government intend to do is to spend more.
Even if we were just to say, "Spend more from the increase in own resources," there is an escape clause in article 2 of the so-called solemn and binding agreement which says that account will be taken of "exceptional circumstances". Is there not something else in this binding agreement? The Minister said that we should not worry, because if the Community overspends one year, we can claw back the money the next. I asked him a specific question which, sadly, he did not answer. That concerns article 5, which says that, if there is overspending, even on top of the increase in own resources, we shall not claw back if there are what are called "aberrant developments". Nobody knows what those are, or what exceptional circumstances are.
Mr. Johnston: Is the hon. Gentleman saying that he wants a solemn and binding agreement so rigid that no exceptional circumstances and no aberrant developments of any kind would affect it?
Mr. Taylor: I am almost a little impatient with the hon. Gentleman. He knows what the score is. There is no control in this so-called budget discipline. The Liberals have talked about the Common Market with much enthusiasm, but if they are that enthusiastic, they would grab the one and only chance that we have to achieve any reform of the CAP and the Common Market. The Community has run out of cash, and all that we shall do is give a lot more money to the Common Market so that it can spend much more on agriculture and other such things. In exchange, we have only a worthless piece of paper, which provides no protection.
These days we are accustomed to talking about the Common Market's great triumphs. The other day we talked about the great achievement of handing over 5 million people to red China with the assurance that the same would not happen to them as happened to the people of Tibet or Zimbabwe. This agreement is not an achievement in any sense. We are talking about a worthless piece of paper which gives no guarantees.
The Minister told us not to worry too much because he is confident that under the arrangement the percentage spent on agriculture will be down a little. That can be achieved only by spending more money on other things. For example, I might tell one of my hon. Friends that I am worried about the percentage of his income that he is spending on gin and whisky. He might come back and say that I should not worry because he was going to spend more on gin and whisky, but so much more on tobacco that the percentage total expenditure on gin and whisky would be reduced. That is what is happening. We are about to
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spend much more money on agriculture, on dumping and food destruction, and nothing in the agreement can prevent it.
My hon. Friends will have been receiving large numbers of letters from pharmacists and doctors who are worried about the change in the prescribing of drugs. The Government say that the change is vital and that it will save £100 million a year. University students were not happy about something that the Government planned to do and which we were told was vital because it would save £30 million. We hear talk of the need to reduce the pensioners' heating allowance, which could save us about £50 million.
How many of my hon. Friends are aware that every week—not every year—the Common Market spends £100 million on destroying, dumping or storing food? We are experiencing a crisis. What are we doing about it? The Government plan to give more money. The only protection that we have is the goodwill of Community members. We shall have to rely upon their solemn resolve to face up to their responsibilities and to try to reduce spending.
It is difficult for me to go back to my constituents and tell them that it is vital to reduce the pensioners' heating allowance, that it is vital to reduce the percentage of rate support grant and limit a doctor's right to prescribe whatever medicines he thinks fit because we must control public spending, when the Government are providing enormous additional sums which the Common Market will waste. It does not make much sense to cut spending on regional grants in Britain if we put more money into the crazy Common Market regional fund. It does not make much sense to cut out welfare payments if we put more money into the Common Market welfare fund.
Conservatives should unite on this fundamental issue. We should not bury our heads in the sand. The only way to achieve change is to control the money supply, say that there can be no increase in resources and that reform must come from within.
There is a strategic aspect. So long as this crazy spending on agricultural surpluses continues, we are providing a massive boost and subsidy to the Soviet Union and its immediate supporters. I do not think that people are fully aware of the immense boost that we are giving to the Soviet economy and war machine as a direct result of the CAP.
We were talking the other day about sending an extra £19 million to Ethiopia on the strict understanding that we cut aid to Bangladesh. How many people are aware that every week—not every month or every year—we send 164,000 tonnes of cheap, subsidised food from the Common Market to the Soviet Union, Czechoslovakia, Bulgaria and other essential parts of the Soviet bloc. What price do we charge? A recent parliamentary answer gives the information. We are sending beef at the equivalent of 40p a pound, sugar at 7p a pound, flour at 5p a pound and wine at the unbelievable price of 7p a litre. At one time I thought that that was a secret plot by the Common Market's Right wing to spread alcoholism in Russia and so undermine the people's will.
If those prices were reflected in the Russian shops, it would not be so bad, but the Russian housewives, I am sad to say, do not gain advantage. The Soviet state machine shoves up the prices and keeps the difference. We are talking about a massive sum which is a direct aid or subsidy to the Soviet Union and others. I do not mind paying high taxes in Britain to provide an Army, Navy and

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Air Force to defend ourselves against Russian expansionism, but it is crazy and nutty that I should have to pay additional taxes to subsidise the Soviet Union, Bulgaria and the Soviet war machine.
Despite the ever-growing surpluses, the Common Market has begun a system of super-subsidies. A recent example is the special sale of butter to Russia at Yip a pound in blocks of 50,000 tonnes. Is there anything in the Government's proposals which will reduce those figures? There is not. The figures and the mountains will continue to rise and nothing will be done about it. We know that to be so in our heart of hearts.
If hon. Members are not worried about subsidising Russia they should, for God's sake, worry about what they are doing to the Third world. It makes me sick to hear some of my right hon. and hon. Friends talk all this Brandt nonsense and how they want to help the Third world, when they are the architects of the most vicious policy against the Third world—the common agricultural policy.
Why are Third world countries unable to provide food for themselves? Why are they unable to pay their debts? Why are they unable to buy British machines? The reason is that we are deliberately depriving the Third world of a fair price for its agricultural produce by dumping food on the world market.
If one produces sugar in the ideal place in the world for that purpose, one receives about £90 a tonne. A farmer in Norfolk producing sugar beet receives about £350 a tonne. The world price is so low because we are dumping. It is not just a question of what we dump because everything is comparable—wheat with rice, and so on. We are causing hardship and damage, distress, starvation and misery in the Third world as a direct consequence of the agricultural policy. The Government plan to do nothing about it. That is wrong and shameful.
I have been speaking for just over 15 minutes and many other hon. Members want to speak. I hope that the Government and my hon. Friends will be wary about what they are doing about relations with the United States of America. It is abundantly clear—it was one of my original reservations about the EEC — that if the Common Market is to have any meaning inevitably it will conflict with the United States. We are seeing more and more signs of that. We forget at our peril that the United States pays for most of western Europe's defence. It pays 52 per cent. of the total cost. The Americans are becoming a little fed up. Motions in the Senate stress the need to reduce spending by the United States in western Europe.
What worries me is that the Common Market seems to be going out of its way to make life difficult for America, to be unfair and unreasonable. A good example is the recent Common Market outrage about the export of steel pipes and tubes to the United States. Our friends in the Commission said that the Americans were imposing outrageous and illegal restrictions on Common Market imports. They said they would have to retaliate and impose restrictions on American goods.
The Common Market came to an agreement. In 1982 it was called an exchange of letters. We said that we would restrict our exports of pipes and tubes to the United States to 5.9 per cent. of the US total market. In fact, our exports were not kept to that figure but soared to 14 per cent.—more than double the share that had been agreed. I asked the Government why we did nothing about that. They said that, as the agreement did not establish a binding limit on EEC exports of steel pipes and tubes, there was no
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question of the Government or any other EEC member seeking to impose a limit. In effect, they were saying that the agreement into which they had entered did not matter a damn.
The Government objected strongly when the Americans stepped in and said, "Sorry, we are going to impose the 5·9 per cent. limit until we obtain an agreement that will work." I am sure that there is some way in which the Government could claim that that was not fair or right. The fact is that we reached what the Americans thought was an agreement on 5·9 per cent., yet we exported 14 per cent. and did nothing about that. Indeed, the Government said in Parliament that they were not prepared to do anything about it, but they then objected like crazy when the Americans wanted to do something about it.
The same applies to the dumping of food. There are informal agreements on which parts of the world countries can dump food in. We are moving into areas that the Americans have traditionally regarded as their dumping grounds. I am concerned that the activities of the Common Market, especially those of the Commission, are deliberately creating a conflict between Britain and the United States, and that that conflict will grow.
Of course, there is also the effect on our country. Let us consider what is happening to Britain's trade. The figures for manufacturing trade in the White Paper are wrong and do not add up. I pointed that out to the Minister during a point of order. The White Paper puts exports at £3·6 billion and imports at £12·6 billion, with the difference being £3·9 billion. That is not even—
The Economic Secretary to the Treasury (Mr. Ian Stewart): I have been advised that there is an error in the printing. The figure for exports should be £8·7 billion, not £3·6 billion. The figures will then be reconciled.
Mr. Taylor: I am grateful to my hon. Friend. However, I find it difficult to understand how the difference between £3·6 billion and £8·7 billion can be a printing error. I appreciate my hon. Friend's courtesy in intervening on that point.
We must ask ourselves about the implications. My worry has always been for the British economy. We have hooked ourselves on to an area of structural decline and become a peripheral part of it. We are in an area that is destined to have higher unemployment than the remainder of the world, and we are especially vulnerable. The trade factor shows exactly what is happening with the movement of decision-making and investment towards the centre of the Market.
Our amendment is about the budget discipline only. I know that the Minister is one of the most honest Ministers in the Government. He must accept that all we have in the discipline document is a form of words that means absolutely nothing and will give us no security. All we have to rely upon is the word and the goodwill of Ministers in the Common Market who have made spending a total nonsense. They have spent money like water —wastefully and irresponsibly. There is not the slightest sign of any solid common sense in the EEC.
We will do just as well without the discipline document as we will do with it. The real crunch will come when the House must decide whether to vote for more resources. Nothing that has been said today should make the House do anything other than say no on that occasion.
7.24 pm
Mr. Russell Johnston: The hon. Member for Southend, East (Mr. Taylor) is a populist doctrinaire. During these debates he repeatedly produces an effective and fluent blend of facts and prejudices which are difficult to tackle in an ordered manner. I wish to take up some of his points, which I have heard not for the first time.
These debates are important—something upon which, at least, the hon. Gentleman and I can agree. It is a great pity that they are conducted again and again before a practically empty Chamber and a virtually empty Press Gallery. That is, perhaps, a measure of the mistaken set of priorities on which we conduct a great deal of our political dialogue. We often ignore that which is of quite great importance in favour of the transient and sensational.
As a pro-Community Member, I admit that I find it depressing that those who consistently oppose the Common Market again and again appear in these debates and express their views. Those of us who do not take that position, who I believe to be the majority, are often absent.
Mr. Marlow: Will the hon. Gentleman give way?
Mr. Johnston: Before I give way, I must tell the hon. Gentleman that in doing so I am not setting a precedent.
Mr. Marlow: I am grateful to the hon. Gentleman. I appreciate that he cannot see everything as it is. Those of us participating in the debate are concerned mainly to reform the Community. Just because we do not believe that the sun shines out of the back of the Community's head does not mean that we want to get out of it.
Mr. Johnston: The hon. Gentleman could have fooled me.
I want to direct my remarks to the Minister. I want to raise questions on a number of important issues. I hope that he can answer some of them when he replies to the debate and will correspond with me on the remainder. One asks questions in many of these debates, but receives no answers.
We did not hear that magic word "Spinelli". We did not hear the less onomatopaeic word Dooje, which was raised by the hon. Member for Livingston (Mr. Cook). There was no reference from the Government to the important development — whether or not we agree with it — in current Community thinking about the institutional change that may be required. When the Minister replies I hope that he will say something about the Government's thoughts: not necessarily that we must accept Spinelli hook line and sinker, but that he will address the basic question whether the Government think that the present treaty is adequate or whether it requires some change, and if so in what direction.
It is evident that the Government would agree with Spinelli on the tearing down of internal trade barriers and on having real freedom of movement. No doubt the Minister has seen the article in The Economist of 24 November, from which I shall quote briefly. It is entitled, "How Europe has failed". The thrust of the argument is not that advanced by the Minister for Southend, East, that the failure is to attempt to get together, but approaches the matter from the other side, namely that we have not got together sufficiently, and consequently our economic performance had been hindered.
The article states:
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"In producing the new generation of digital-telephone switches, North America relies on three companies, Japan on two. In western Europe nearly 10 companies produced these switches, at an R and D cost of $500 million—$1 billion per company, which they then could not sell anywhere in the EEC except their home countries because each government protected its own."
I want to know the Government's view on that sort of integration. There is no doubt that if, on a Community-wide level, we want to compete effectively with the United States and Japan, there will be some areas where firms will suffer and go to the wall. That is not an easy matter. It is a difficult issue. Let me quote again from this article:
"Government procurement accounts for an immense market —equal to some 17 per cent. of European Community GDP. European Governments have wielded their purchasing power for ill in two ways. The first is by discriminating in favour of domestic producers. This has been most flagrant in telecompunications, but it happens with all high-tech products. In October the EEC Commission issued a declaration which feebly 'urged' member states to open 10 per cent. of their telecommunications purchasing to products from other EEC countries. The other discrimination in European public procurement is in favour of big companies. Government contracts can be a lifeline for small firms and new industries."
If the Government, as they are continually telling us, are in favour of breaking down all the non-tariff barriers, do they also recognise that the logic of that position means that both in Government support policy and in intergovernmental co-operation within the Community we shall have to look at ways in which competing firms within the different countries of the Community can be integrated in some way? In some cases it will mean that some firms will be forced to -the wall. In forcing them to the wall, a more effectively competitive position will be created. That is not an easy matter, but it is part of the logic. So Spinelli, we would presume, is all right in certain respects.
May I also take the opportunity to remark that in the exchange between the hon. Gentleman the Member for Livingston and the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), who has temporarily left us, about majority voting, it seemed to me that at least on the face of it the Government were moving in the proper direction.
Secondly, I wish to ask a few questions about the Parliament. The hon. Member for Livingston perfectly properly referred to the Dooge committee. It is much to his credit that he did. It is remarkable that the Government made no reference to it at all. The hon. Member for Livingston and the Minister had an exchange of words about what exactly the Government's position was on the potential budgetary powers of the Parliament. After some pressure from the hon. Member for Livingston, I understood the Minister to say that he had more or less reserved the whole chapter on the Parliament. This is very interesting, but it tells us nothing about the Government's view on what kind of changes, if any, there should be in the Parliament.
If there is to be greater integration, and if more is to be done trans-nationally, does this not mean a stronger Parliament? Or is it, contrary-wise, the Government's position—I suspect that it would be the position adopted by the hon. Member for Livingston—that democratic control is exerted, not through the Parliament, but through the Council of Ministers, and that therefore one has a route to the fabulous veto which everybody goes on and on about?
When a Parliament is elected on a Community-wide basis, it develops Community-wide attitudes. The Budget Committee met on 3 and 4 December and was unanimous

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in rejecting the budget. There was not a single voice, not even an abstention, against its rejection. That means something. [Interruption.] I did not quite catch what the hon. Member for Northampton, North (Mr. Marlow) said. However, few Members of the European Parliament would be able to match the hon. Gentleman in that regard. There is no doubt that in the eyes of many Members of the European Parliament the conciliation procedure is farcical and not at all meaningful. The Council is not operating the treaty as it stands at present while there is any chance of change.
Mr. Robin Cook: I shall not detain the hon. Member for long, but he referred to the exchange that I had with the Minister. For the avoidance of doubt, perhaps I could confirm for him that it would appear that the reservation to which the Minister referred applies to the whole section on the European Parliament. There would appear—the Economic Secretary might wish to refer this to his officials —to be a misprint on page 20, by which footnote 2, which gives effect to this, appears at an earlier point in the text where it clearly intrudes upon section B. It was that which led me to the reasonable assumption that it referred to section B. But since footnote 2 appears to predate footnote 1, which comes later in the section, there has obviously been a misprint, which the Economic Secretary might wish to have corrected.
Mr. Johnston: I am grateful to the hon. Gentleman for his intervention, on which there is really no need to comment any further.
What about the uniform electoral system, for example? Does the Minister envisage any change taking place there before the next European elections in approximately five years' time? We in the Liberal party and our Social Democratic colleagues remain politely bitter about the last result and about the fact that 2,591,652 people voted for the alliance in the United Kingdom and obtained no representation at all, while fewer than double that number voted Labour and obtained 32 seats. Obviously that has affected the political balance within the Parliament and distorted it in a way that is not reflective of the general position in the Community as a whole.
Turning, thirdly, to the Commission, we know that the Prime Minister is in favour of one commissioner per country. I suspect the reason why the Prime Minister agrees to this position, which, on the face of it, looks very fair, reasonable and rational. Why do we have two commissioners for the large countries and one commissioner for the small countries? In a sense, it was to protect the realistic political weight of the large country. If one then proceeds to the argument that Britain should have one commissioner and that Luxembourg should have one commissioner, I suspect that at the back of her mind the Prime Minister is also saying, "We want a weak Commission, anyway, do we not, so it will not make any real difference, will it?" [Interruption.] I did not quite catch what the hon. Member for Livingston said, but I am sure that it was quite helpful.
Do the Government have any views on the reform of the Commission, apart from that which we do know about? What about the idea of the President of the Commission, when he is chosen, having the opportunity or the power to select in some way or another his commissioners, his team, who are to work with him? It does great credit to the diplomatic skills of Mr. Delors that
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he managed so quickly to sort out the portfolios last weekend. Nevertheless, the power of the President is very much limited. Very often, for various reasons which have nothing to do with any kind of nationalism, he is lumbered with people whom he would not otherwise have chosen.
The staff of the Commission were referred to by the hon. Member for Livingston in various critical comparisons of cost, but it must be said that there is a fair amount of crisis in terms of staff pressure within the Commission. There is the problem of older people who are holding on to fairly key positions which were inherited some time ago. Beyond that, the plain fact is that the Commission is being asked by each member country to do more and more things and does not have any opportunity, through its staff, to be able effectively to do them properly.
My fourth question relates to economic initiative and economic convergence. This point has been touched on in previous exchanges. I had an exchange with the Prime Minister on 5 December, when the right hon. Lady said:
"The hon. Gentleman mentioned convergent economic policies, but the Community is not meant to be a mechanical redistributive mechanism." — [Official Report, 5 December 1984; Vol. 69, c. 359.]
What is it supposed to be? [Interruption.] I thought that the hon. Gentleman was interested in reform and improvement. The Community was established to provide the sort of cauldron within which economic activity could be more effectively pursued, but there was also, undoubtedly, the concept of redistribution. Why else have a regional fund? Why else have a social fund? There was the concept that the poorer countries would be lifted up and that wealth would be shared out, and an attempt was made
—idealistic, perhaps too idealistic even, but a good idea—to create opportunity at a roughly equivalent level througout the Community.
Mr. James Hill: The hon. Gentleman is right to say that the original intention was to bring up the peripheral areas of the Community. How does that balance with the argument for enlarging the Community yet again? Spain and Portugal—possibly others — now want to join the Ten. They are poor countries by industrial standards. When will we be able to cope with the peripheral regions of the existing Ten and still enlarge the Community?
Mr. Johnston: The hon. Gentleman was an effective chairman of the Regional Committee of the European Parliament. If he will wait one minute I shall come to his point, which is linked with the social and regional fund.
The hon. Member for Southend, East made much of mis-expenditure in the Community. He referred to the regional fund as a silly fund—or a word to that effect. The regional fund now is so small that it has a limited effect and certainly nothing like the remarkable effect that many of us hoped it would have when the hon. Member for Southampton, Test (Mr. Hill) and I were in the European Parliament, when George Thomson was in charge of establishing that fund.
Mr. Marlow rose—
Mr. Johnston: If the hon. Gentleman will permit me to finish my point I shall give way, despite what I said earlier about a precedent.
The total EEC budget that we are discussing is about 2 or 3 per cent. of the Community's GNP. The regional and social funds, taken together, are less than 10 per cent.

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of that 2 per cent. That is tiny. How can one ever expect any convergence to be achieved using that sort of mechanism? It is not possible in a thousand years. No wonder Mr. Papandreou is making the point that he is making.
What is the Government's view on convergence? On page 18 of "Developments in the European Community January-June 1984" I find that the regional fund had £1,222 million in 1984, of which £1,157 million was what is called quota. In other words, it is already allocated between countries. It has very little to do with the central evaluation. Only £65 million was non-quota. There was a time when it was hoped that a much larger proportion of the regional fund would be non-quota and allocated by the Community according to the guidelines laid down by the Commission and advised upon by the Parliament, rather than simply as a result of a haggle between countries in a way that was most unsatisfactory.
Mr. Marlow: I am grateful to the hon. Gentleman for his courtesy in giving way a second time. I shall give the usual undertaking that, except in exceptional circumstances, I shall not interrupt him again.
The hon. Gentleman is putting the case for a regional fund. One way that he has suggested is that money could be moved from the richer to the poorer parts of the Community. Sadly, we are one of the poorer parts of the Community and are net contributors to the EEC budget. Therefore, the fund has not worked in that direction. I am sure that the hon. Gentleman is as sad about that as I am.
The other way in which the fund could work would be to have a series of policies devised at the European level which would apply throughout the Community. We have a regional fund at the moment and various policies within that regional fund. The main one relates to industrial training. The Government have also said that they want to spend more money on regional policy. Why is money spent on training better allocated at the Brussels or Strasbourg level than by national Government?
Mr. Johnston: There are fairly obvious reasons for that. If guidelines are laid down which are agreed to by all the individual countries, I do not see why that should not be the basis of the distribution. In fact, it must be the basis of the distribution if one is to have a Community-wide policy.
I come next to the question of enlargement. I should have liked to see the date of 1 January 1986 achieved. I agree with what was said by the hon. Member for Livingston. He quoted Gaston Thorn. I spoke to him last weekend and he repeated that he was very doubtful whether it was possible, particularly as it was unlikely that Papandreou would withdraw his veto.
Why is Papandreou pressing that? It must seem to him that this is the last opportunity that he will have. He is using the same sort of tools to bring pressure to bear as the British Prime Minister used. The British Prime Minister used those tools to achieve budgetary discipline and a rebate for the United Kingdom. Papandreou is doing so in order to achieve greater expenditure from the regional and social funds within Greece. He knows that if he does not get it now it is unlikely that he will get it after enlargement. It would not be possible to deal effectively with the
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problem, not so much of Spain, but certainly of Portugal and Greece, unless there was a considerable increase of own resources. There is no balking that question.
I hope that everyone remembers that if Spain fails to get in that will have an effect not just on Gibraltar and negotiations there, but a direct effect on the referendum on Spain's membership of NATO. Therefore, those matters cannot just be put into compartments.
The question of political co-operation is dealt with in section IX. On Iran and Iraq it says:
"The Ten noted with concern the continuing conflict … They appealed to the two parties to look for a peaceful solution".
It is not a particularly good example of co-operation if Britain has so increased its trade with Iran that it is thereby able to obtain the necessary income to purchase weapons, as I suspect it in part does, and to obtain from Britain motor parts and vehicles which can be used in the war effort, while on the other hand France directly supplies weapons to Iraq. That is not a good example of political co-operation within the EC.
The paragraph on the Arab-Israeli dispute says:
"They called upon the Government of Israel to put an end to its policy of establishing settlements in the Occupied Territories."
Good. That is an essential pre-requisite to a settlement in the middle east. What pressure, as a consequence of that, has the Community put on the United States? UNESCO is not mentioned, but one wonders what the logic is when the Government argue in favour of political co-operation and yet refuse to observe the unanimous request of all the other members of the Community that we should not withdraw from UNESCO. Indeed, the Minister knows their views.
In conclusion, let me quote the Minister of State. As I noted it, he said that "of course there are certain proposals which, if we had been left to ourselves, we could have made better." There is a certain arrogance in that which is perhaps not typical of the Minister. He does have glimmerings of open-mindedness. However, it is rather redolent of speeches of the hon. Member for Southend, East. As the Americans and the Japanese streak ahead of us and our unemployment queues lengthen, I find it extraordinary that the House spends its time lauding itself and endlessly going on about the virtues of the British veto, irrespective of whether it is applied by a Right-wing Conservative Government with Right-wing views or a Left-wing Labour Government with Left-wing views. I sometimes feel that instead of being in the Chamber of the House of Commons I am in a neolithic political tomb.
Mr. Teddy Taylor rose—
Mr. Johnston: If the Community is to proceed, it must set aside national prejudices and develop a coherent, common will.
7.50 pm
Mr. Robert Jackson: This debate will be the last for some time in the long series which we have had on the reform of the framework of the European budget. It is an opportunity for us to take stock of what has been achieved and to consider future prospects.
There can be no doubt about the cost to Britain of the long dispute that we have had with our partners about the framework of the budget. I emphasise that the quarrel was not of our making. The problems flow from the budgetary arrangements which were agreed among the Six before we

975
joined the Community, and they were anticipated by Britain in the negotiations for accession in 1972 and 1973, when we obtained assurances from the Community. Nevertheless, the cost of our efforts to get the Community to honour the commitments which it made in 1972 and 1973 has been high. There has been the disillusion among the British people, which is amply reflected in these debates. There has been the disillusion also of some of Britain's friends on the continent, who have never really understood what we have been worrying about. There has been the narrowing of the focus of our national vision of Europe. Perhaps most important of all, a series of concessions have been made and British interests have not pressed because of the overriding importance which the Government have rightly attached to making progress on the reform of the budget. Have we reached the end of this painful and debilitating argument, or will there be more to come? I must tell the House that in my opinion the answer to the question must be no.
In logic there are three possible solutions to the problem of imbalances in Britain,'s net contribution to the Community budget. First, there might be a corrective mechanism to reduce the gap between contributions and receipts. Second, there might be a reduction of spending on agriculture in the Community's budget. This is criminal because such spending falls most heavily on the United Kingdom with its relatively low share in European agriculture. Third, there is the idea of increasing Community spending on non-agricultural policies from which we are net beneficiaries. These three solutions are not mutually exclusive. Indeed, we have heard Ministers saying over the years that they expect all of them to play their part.
I wish to consider the implications of the Fontainebleau agreement and of the new text on budgetary discipline for those three solutions. Take first the Fontainebleau agreement, the essential feature of which is its provision of a new corrective mechanism to replace the temporary agreement of May 1980 and the failed mechanism negotiated at the Dublin summit in December 1974.
The Fontainebleau mechanism has been hailed as a permanent solution. Is it? Part of the agreement specifies:
"The corrective formulas will form part of the decision to increase the VAT ceiling to 1·4 per cent., their durations being linked."
There is no doubt that, from the British point of view, that formula represents a real achievement. We have obtained an abatement of two thirds of our net contribution over the period of the 1·4 per cent. ceiling, and we have succeeded in getting those arrangements embodied in new legal institutions and procedures which will become vested facts and will give us acquired rights. So much on the positive side. But what happens when the 1·4 per cent. ceiling is reached? Will the British abatement continue at two thirds of out net contribution at that time? Will we be able to retain that abatement while insisting on no increase in the 1·4 per cent. ceiling? If there is an increase over the ceiling, will our two thirds abatement be able to continue without challenge?
The answer to these questions is that no one knows. We are told that the abatement formula and the increase in own resources are linked. That is the phrase in the agreement. However, the character of the link is not specified. From close observation of the subject for some years, it is my belief that when the time comes there will be several different views about the nature of the link. We shall have
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the advantage of the principle of special treatment for Britain having been conceded and of the practice having become established, so I doubt whether we shall once again have to face fundamental arguments about whether or not we should have any rebates at all. However, I have no doubt that the idea of a two thirds reimbursement will come under heavy pressure in future.
In view of this prospect, Britain continues to have a special interest in the level of the Community's farm spending, which is the root cause of our special problem, and in the balance between that farm spending and spending on other policies.
What will be the impact on that balance of the new agreement on budgetary disciplines? Let us consider, first, the new discipline on farm spending. I do not quarrel with the Government for having been driven back from them original position that budget disciplines must be written into the treaty. Nor do I complain especially that it is envisaged that spending on agriculture will grow at a. rate that is "no greater than" the rate of increase of own resources rather than the initial British phrase which called for a rate "markedly below" the growth of own resources.
However, nothing in the budget discipline agreement has changed the fact that the Community's spending on agriculture is determined essentially by external factors, especially by the state of harvests around the world and the movement of currency rates of exchange. Essentially, the new agreement introduces a new element into the Community's procedures for making decisions about agriculture. It provides that if there is evidence that, the Commission is satisfied that the Agriculture Ministers are contemplating decisions that will cost more than is provided by the so-called "reference framework", Finance Ministers will be called in before any decision is made.
I have no doubt that this is a valuable innovation, and I am sure that the Finance Ministers, and my hon. Friend especially, will breathe heavily over the shoulders of their agriculture colleagues. But how likely is it that they will take a view that is radically different from that of colleagues in the same Governments who face the same political pressures? In my view, the physical presence of Finance Ministers around the Council table will constitute a factor of restraint, but no more. Therefore, I predict that until we have terminated the open-ended nature of CAP price supports—as we have now done in the milk sector — we shall continue to see spending on agriculture overshoot regularly. I must say that I find somewhat unconvincing the reasoning of my hon. Friend the Minister about the effect of majority voting.
What is to happen to the third possible solution to the British problem—that element in Community spending from which we might hope to make a net benefit? I refer to the non-farm spending — the so-called "non-obligatory" expenditure. My first fears were that the Government would lock Britain into a straitjacket in which non-farm spending would be bound to be as restrained as spending on agriculture. Happily, those fears have turned out to be mistaken. The budget discipline agreed for non-. farm spending is essentially no different from the arrangements which already exist, by which the Council has sought always to stay within the maximum rate.
Mr. Teddy Taylor: Why does my hon. Friend think it is good for the Common Market to increase its expenditure on non-agricultural items?
Mr. Jackson: I was about to explain that, because I expected that point. Briefly, I believe that it is in this area that we shall find a long-term solution to our problem of long-term imbalance.
Because the budget discipline for non-agricultural spending is no different from what we already have, the possibility remains that, from time to time, the Council may agree to spend more on non-agricultural policies than the amount prescribed by the maximum rate—although I note with regret that the Council will be able to do so only on the basis of unanimity. Therefore, in spite of my gloomy prognosis for the continuing growth of farm spending, the possibility remains that non-farm spending will grow just as fast, so the overall balance between farm spending and non-farm spending will not worsen —indeed, it may even get better. But if farm spending regularly overshoots, as I fear it will, that balance will turn ever further against us.
Where will that non-farm spending go? That is the $64,000 question. If I am right in saying that the Fontainebleau agreement does not solve our problem in perpetuity, and that the growth of agricultural spending is unlikely to be as constrained as we would like, the third solution—the growth of non-farm spending—will be very important to us in the long term. That is the answer to the question asked by my hon. Friend the Member for Southend, East (Mr. Taylor). We know that heavy claims will be made by other member states, especially after enlargement. Will the British Government be in there fighting for the share of that new spending that we will need if we are to turn the balance of our net contributions permanently on to a more favourable basis? I must confess that I am concerned that the Government have not yet come fully to terms with the problem.
So great is our concern with budget discipline that we run the risk of overlooking opportunities for doing ourselves a good turn through Community spending. I shall give a simple and topical example. It is now becoming apparent that Britain is almost isolated on the exceedingly sensitive issue of acid rain. We face the possibility that we may be outvoted on this question, and the probability that, in due course, we shall have to find the money needed to deal with the problem.
If we were not so worried about budget discipline that we had almost given up ways of spending Community money to Britain's advantage, we might have anticipated that position, saying, "All right, we shall go along with the majority on acid rain, but, since there are so many coal-fired power stations in Britain, and because this is so self-evidently a Community-wide transfrontier problem, we are looking for substantial support from the Community budget for the adaptation of our power stations." I have no doubt that, if such a programme were agreed, it would involve spending well beyond the limits of the budget discipline agreement. I would not worry about that. My concern is rather that it would worry the Government. Indeed, I fear that that consideration would be uppermost in their mind. With regret, I must say that such an attitude could be simply described as cutting off one's nose to spite one's face.
8.3 pm
Dr. Norman A. Godman: My remarks will be confined to the sections in the draft budget and the White Paper on the fishing industry. I should like to concentrate on the issues of
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maritime inspection and controls, Community education and vocational training and the adjustments of capacity in the fisheries sector.
The fishing industries in the Community operate within the framework of a common fisheries policy. That framework may be altered, following the accession of Spain to the Community. Earlier this evening, the Minister assured the House that the outcome of the negotiations would be satisfactory to the British fishing industry, and I hope that events bear that out.
The EEC's fish police inspectors are beginning to make their weight felt. There have not yet been any convictions, but fishermen are certainly aware of their presence. The problems of foreign overfishing have been with us for many years, especially in the case of the fleets from Denmark, Holland and the Republic of Ireland. Where such vessels are involved, excess captures have reached absurdly high levels — so high that one can say that orders placed with Dutch yards for new and large vessels have been made on the basis of illegal fishing. That is absurd. It looks as though the EEC will take legal action following a report drawn up by the EEC's fisheries inspectorate. Similarly, the Danish Government have decided, at long last, to take action against the owners of some 70 vessels for illegal fishing.
In Lloyds List of Friday last week, Ian Strutt said:
"The Danes were thought to have caught 150,000 tonnes of juvenile herring last year which would have matured into an adult stock of around 1 m tonnes.
Catching of juvenile fish was thought to be continuing this year until the Danish Government decided, for the first time, to take mass action against the fleet."
The policing of the Community's fishing effort has had partial success, but much more needs to be done. I still believe that we need an expansion in the EEC's fisheries inspectorate. I should like to hear the Government's view on that matter.
Item 4300 in section III B of the draft budget refers to
"Measures establishing a Community education and vocational training policy in the fisheries sector."
Yet the sum of money to be committed to achieving that commendable objective is about £80,000. To say the least, that is a derisory figure. If the aim is to move towards a common training and educational programme for EEC fishermen, we shall not progress far on that pittance. One essential feature of such a programme is, or should be, the interchange of those directly involved in the training of fishermen. How on earth can that be achieved, given the miserly sum of £80,000? At the very least, that sum should be trebled.
Training programmes and financial assistance should not be confined to the established educational and training bodies. They do a good job training fishermen, but we must not lose sight of the fact that many of our fishermen, especially in Scotland, live in remote communities far removed from the technical and nautical colleges that provide that training. In those circumstances, the group training associations play an important role, and I hope that they are here to stay. They were created by the sea fisheries training council, which is now defunct, and I hope that they will continue to flourish under the umbrella of the Sea Fish Industries Authority.
I am bitterly disappointed that the draft budget contains no proposals for the payment of compensation for those fishermen made redundant by the EEC's fisheries policies. I refer to the document that mentioned the adjustment of capacity in the fisheries sector. No mention is made of the

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fishermen displaced by the pursuit of this policy. We must remember that many of those fishermen were placed in the nasty, brutal front line of the fisheries dispute in the 1970s between the United Kingdom and Iceland. Those fishermen have been badly served by both Conservative and Labour Governments. I go further, and say that they have been betrayed by successive Governments.
While for many of those fishermen it is desperately late in the day, natural justice demands that they be given some compensation. The EEC should examine forthwith the means by which redundancy payments could equate with the financial assistance offered to those vessel owners who tie up, scrap or effect a change in the use of their vessels.
The Commission should devise a financial scheme of income guarantees for redundant fishermen in line with some aspects of the provisions available to coal and steel workers. I do not believe that such payments should be derived from a levy on each tonne of fish landed at United Kingdom ports. Some other means will have to be found. Other means have been found to compensate vessel owners so why not for the fishermen who crew those vessels?
The Commission should also investigate the possibility of a common state retirement and pension policy for all fishermen aged 55. Fishing is the most dangerous industrial occupation in Britain today. It is far more dangerous and causes more injuries and death than coal mining. No fisherman in his late fifties should be forced to go to sea. We should be talking about compensation for fishermen along the lines of that offered to redundant steel workers.
I remind the House, if it needs such a reminder, that fishermen are almost always denied redundancy payments by their employers and the state. I can give an example of that from my family. A brother of mine was given the princely sum of £385 by his firm after 19 years of service with it. The firm received £400 per gross registered tonne for each vessel that it decommissioned. It seems that the European Community believes that GRT is more important than fishermen.
Many of the vessels for which decommissioning compensation is being given were built with the aid of generous grants and loans from the Treasury. In terms of employment rights, fishermen are second-class citizens. I can give an example of that. At a recent industrial tribunal hearing in Hull, when several fishermen were claiming redundancy payments because their firms had accepted decommissioning grants and tied up their vessels—case numbers 4227/84, 7760/84, 14443/84 and 2792/84 of 24, 25, 26 and 27 September 1984—the chairman said:
"These men were on individual contracts and when they finished the voyage, and settled up, and were off articles and off pay, they were not employed, they knew they were not employed, they knew they were unemployed when they signed on as being 'available to work'; for their own reasons the applicants chose to stay loyal to"
their firm and
"for their own reasons they chose not to work elsewhere, they chose to remain with this employer and did not seek to go elsewhere or leave the trade".
The chairman found that, as a result, those claimants could not be offered redundancy. I find that disgraceful. I only wish that those fishermen could be offered a measure of hope, but reality precludes that. The Community's recalcitrance on the important issue of compensation to the crews of fishing vessels is a matter of deep regret. It is a disgraceful state of affairs.
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I believe that much more could and should be done for the fishermen who catch the fish that are so vital to our maritime communities.
8.14 pm
Sir John Farr: I am sorry that my hon. Friend the Member for Southend, East (Mr. Taylor) is not here because I wanted to refer to his remarks about the large surpluses of some products that are built up in the Community. Surpluses are bad, unwelcome and expensive. The two fashionable surpluses — wine and butter—are not produced by British agriculture. It is almost impossible to run farming anywhere in the world as an exact science because of the vagaries of the weather, which can make one year's surplus into a deficit the following year.
The point that my hon. Friend was making—it was a fair one—is that it is expensive to have large surpluses produced by the CAP. Homes have to be found for the surpluses. He cited the example of outrageously cheap butter and other commodities being sent to Russia. The EEC countries and others will not always be in surplus. Famine in Ethiopia has caught the headlines, hut only three or four years ago central and south central Africa suffered from famine. There are now countries in Africa, including Ethiopia, that are importing food but which for years were net exporters.
We must look sensibly at surpluses and not condemn them out of hand as my hon. Friend would have us do. We need sensible surpluses. The excess must be available for despatch wherever in the world it is needed. Until a few weeks ago, that happened to be Russia. I am glad to see that large supplies of food are now reaching Ethiopia. In December, 100,000 tonnes of food, including 30,000 tonnes of corn from the EEC and 8,000 tonnes of corn from Britain, are going there. Next month, 150,000 tonnes of food will go to Ethiopia.
I should like to see the CAP, with all its imperfections, geared to maintaining—as far as the weather permits—the reasonable, healthy food surpluses that may be needed in other parts of the world. I do not regard as immoral or wrong a reasonable surplus of commodities that can be made available to countries which may be in need of food today and which are likely to be in need of food in the future.
My hon. Friend mentioned the enlargement of the EEC and the accession of Spain and Portugal. That was designed to be agreed by the end of this year. It has now been slightly postponed. We in Great Britain have a great deal to fear from the expansion of the Community. Its enlargement poses a threat to British horticulture. Hundreds of horticulturists in this country are likely to face the chop once Spain becomes a member of the Community unless long transitional arrangements for its membership are made.
Portugal and Spain are substantial manufacturers of footwear, and Portugal is also a substantial manufacturer of knitwear. The House may not realise—I hope that when it realises this it will care about it—that last year Portugal exported no fewer than 48 million pairs of ladies' tights to Britain. Exports of knitwear to this country are also increasing, resulting in substantial job losses in the British knitwear industry. In the past couple of years, between 5,000 and 6,000 jobs have been lost. In five categories alone, between 1982 and 1984, Portugal's exports of knitwear to Britain increased by 100 per cent.

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In the last year for which figures are available, 48 million garments were imported from Portugal, equivalent to the loss of about 2,400 jobs. The United Kingdom knitwear industry is now losing 50 jobs per week. We must face those facts and recognise that, unless proper safeguards are established, the accession of countries such as Portugal to the EEC will greatly accelerate the loss of jobs in areas such as mine in the east midlands.
What kind of European Commission will be running our affairs in the future? We hear that there has been a big change and that we now have one of the most Leftward-looking as well as one of the most inexperienced Commissions in recent years. I believe that it includes two British Commissioners. In view of the inexperience and certainly the Socialist inclinations of the Commission, the Government should consider carefully several times any recommendation that it may make.
In the things that matter to my constituents the EEC seems to do its best to make itself unpopular. My constituents are neither anti-EEC nor pro-EEC, but they are not impressed by the ridiculous suggestions from the Commission that the Government and both sides of the House have to resist. The recent proposal for standardisation of the clock throughout the EEC was, I am glad to say, rejected by the Government, the Opposition, all the big unions and the CBI. Trivial suggestions of that kind to achieve some federal idealist dream help to bring the EEC into disrepute as a sensible and serious unit.
My constituents like their British passports and do not want mauve EEC passports. They also see no reason why we should join the European monetary system. We have managed very well without it for many years. My hon. Friend the Minister did not mention that, although pundits say that a decision is to be made very soon. I hope that before deciding whether Britain should join the EMS the Government will take careful soundings so that there is no repeat of what happened last week in relation to education. Although sterling is now of limited international consequence, many Members on both sides still believe that it has a role to play which is far better performed outside the EMS.
Another row is blowing up about milk quotas. Last spring, all member countries except Ireland agreed to reduce milk output. As Members on both sides have pointed out, however, some countries have implemented that agreement far more energetically than others. Strangely enough, a country that we have learned not to trust in international affairs —France — seems to have offered no sign of any intention to comply with the reduction in quotas. When this matter is next discussed in the Council of Agriculture Ministers, I hope that my right hon. Friend the Minister of Agriculture, Fisheries and Food will insist that a clear performance chart for member countries be made available and that countries which have fallen by the wayside and virtually ignored the reduction in quotas must be dealt with through the special penal levy to which my hon. Friend the Minister of State referred.
My constituents are also angered at the apparent decision by the outgoing Commission to take Britain to the international court in an attempt to dismantle our ban on imports of fresh milk. In the many debates on the subject at the time, it was clear that this was essential not only for the British dairy industry but to ensure continued doorstep deliveries of fresh, wholesome milk. Our overall trading
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deficit with the EEC is about £2·4 billion per annum, of which £2·1 billion is due to our deficiency in food, beverage and tobacco trading. Imports of fresh milk on top of that would not only threaten doorstep sales but cause many more redundancies in our industry as well as making it even more difficult for our farmers to meet their milk quotas, as they now do.
What about the future? I believe that the projected increase in VAT contribution to 1·4 per cent. in 1986 and 1·6 per cent. in 1988 is to be deplored and when the House debates that I shall seek to intervene to register my protest. I hope that the Government will comment on whether Britain's reservation about increasing our percentage quota has been raised energetically enough at EEC meetings.
It is transparently obvious to some of my hon. Friends that Britain is the largest net contributor to the EEC, and has the most to lose. The rest of the member states are, by and large, net beneficiaries—France, Greece and Italy, for instance — and they have the most to gain. We should have retained the 1 per cent. of VAT. Otherwise, it is so easy in the bottomless pit of European money for our hard-earned contributions to sink without trace. All that we will have left to remind us of what we have paid may be a European anthem and a common European currency with which to pay for it.
I suppose that, for the future, one must stay in.
Mr. J. Enoch Powell: Why?
Sir John Farr: That is a good question. Perhaps the right hon. Gentleman will seek to catch your eye, Mr. Deputy Speaker, and develop that point.
My own view is that we must be much more selective. We must stay in only if we can see that to do so clearly benefits Britain and our electors. So far, our membership of the EEC has had some very unfortunate results. For instance, my constituents fail to understand why a student from the EEC should be allowed a privileged position compared with a student from the old Commonwealth. They fail to understand why a relation or friend from a Commonwealth country such as New Zealand or Australia cannot come here to stay or may have great difficulty in obtaining a work permit, while foreigners from the nine countries can walk in on privileged terms. Such matters make the EEC very unpopular with my constituents.
Britain pays a big levy in order to belong to this club. One of the arguments on which it was sold to us was that in unity there is strength. However, those who sold the package to us forgot to add that, in order to obtain that strength from unity, we would have to pay a very large annual subscription. My constituents have yet to be convinced that that subscription is worth while.
8.32 pm
Mr. John David Taylor: The Order Paper shows that in this debate we are discussing many aspects of the EEC. We are discussing the details of the 1984 budget, the various stages of the 1985 budget, the Fontainebleau agreement, the White Paper and budgetary control—a wide variety of issues. That may be why the debate has become somewhat fragmented. It may also explain why so few hon. Members attend such debates. It is regrettable that we do not direct our attention to a specific EEC issue.
I wish to concentrate my mind on a crisis within the EEC which will be with us within 48 hours. I refer of
**
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course to the probable rejection of the 1985 budget by the European Assembly in Strasbourg on Thursday. We already know from this morning's newspapers that the budget committee of the European Parliament last night almost unanimously rejected the 1985 budget. Only two members voted against that decision—two memberss from Denmark who, it is said, oppose the Common Market. All the other members of the committee voted to reject the 1985 budget. Among them were British Labour Members of the European Parliament, and British Conservative Members. They all united to reject the budget approved by the members of the Council of Ministers, including our Government's representative. We know why that has happened. The meeting at Fontainebleau, to which the Minister referred in his excellent opening speech, has played a part.
The Minister concluded by praising the efforts of our Prime Minister at Fontainebleau. I should like to associate myself with his commendation of the role played by the Prime Minister in the past few years. The European Economic Community has treated the United Kingdom badly in budgetary affairs. We have had an unfair burden to carry. The Prime Minister has been in a difficult negotiating position but, for standing firm for our rights, she deserves our support.
However, we must also pay attention to the speech made by the hon. Member for Wantage (Mr. Jackson). The hon. Gentleman and I have worked together in Strasbourg and later in this place for some six years. He is one of the great optimists of the European Community. Never until now has he been critical of the EEC. Never until now has he displayed pessimism. We must, therefore, now take his opinions seriously. As a former rapporteur of the EEC budget committee in Strasbourg, he knows what he is talking about. The hon. Gentleman says that the Fontainebleau agreement is not a long-term settlement, and that there is no real budgetary control. His speech will be well worth reading tomorrow in the Official Report.
The 1985 budget is likely to be rejected for various reasons. British Labour MEP's will vote against it because they wish to undermine the achievements of our Prime Minister at Fontainebleau. They wish to undo the settlement of the British rebate. They dislike that settlement. They wish to bring it back to the floor of the European Parliament.
Why do the Conservative MEP's also oppose the budget? Why do other Members from other countries oppose it? They do so because of the issue of the powers of the European Assembly. That is the kernel of the problem—the contest between the national Parliaments and the European Assembly. Until that key issue is clarified, there will be crisis after crisis over European bugetary affairs.
The situation is chronic. Under article 201 of the treaty of Rome, only the Council of Ministers has power to raise revenue. However, under article 203 of the treaty, responsibility for expenditure is shared by the Council of Ministers and the European Assembly. When there is an assembly with no responsibility for the raising of revenue which yet shares responsibility for expenditure, there is a chronic problem which will continue to breed political irresponsibility. That is the situation today.
The European Assembly Members are rejecting the 1985 budget in pique. They are piqued, first, because they were not involved in the settlement of the British rebate
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at the Council meeting at Fontainbleau and, secondly, because they wish to bring that matter back into the 1985 budget. There is another reason for their annoyance. They recognise that the budget as proposed by the Council of Ministers will not cover expenditure for 1985. Within the 1 per cent. own resources limit, the budget is legal.; but the Members who reject the 1985 draft budget wish to proceed to exceed the 1 per cent. VAT limit and to go straight to the 1·4 per cent. figure for own resources.
Such a move would be illegal. It would pre-empt the general understanding that there would be discipline before we adopted the 1·4 per cent. VAT figure. That is the key issue—Members of the European Assembly are determined to rush the community into 1·4 per cent. before discipline in the budget has been created. That can happen in two ways. Either the budget can be rejected or it can be amended, at which point it becomes a disputed budget. However, whether it is disputed or rejected, there will be no budget within a few weeks on 31 December.
Some of us know what all that means because, as Members of the European Parliament, we lived through such an experience years ago. It means the one-twelfth system by which the Commission is limited from 1 January to spend one twelfth per month of what it spent this year or of the draft budget for 1985, whichever is the smaller. The effect of that is serious for the United Kingdom. It must be spelled out that those who are opposing the 1985 budget are acting in pique because they have limited power and in support of an expanded budget which would be illegal because it would be over the 1 per cent. VAT limit. It would also be against the interests of the citizens of the United Kingdom because the one-twelfth system will result in reduced expenditure through the guarantee fund for the agriculture industry. That is serious for our farmers.
The United Kingdom has benefited more than any other country from the expansion of the European social fund, money from which goes to areas of high unemployment to provide training. The 50 per cent. of the fund which may be used by the end of March will not be available if the 1985 budget is thrown out. Moreover, there will be a reduction in EEC development aid to Third world countries if the budget is not accepted. That, too, will not be popular in the United Kingdom, where there has been much public interest in African countries, especially Ethiopia. The effect of rejecting the budget on fishing areas is more than likely a stop on FEOGA grants to the fishery section so that the money can be used in other ways.
Such limited expenditure, which would affect the United Kingdom as I have just described, could continue for many months. Last time, it nearly took until 12 July —an appropriate date for us in Northern Ireland—before the issue was resolved. The problem might not be resolved until 12 July 1985. By then, the United Kingdom will be suffering in many ways. However, United Kingdom people and United Kingdom interests will not be all that suffer. The European Parliament will be damaged. That Parliament has not caught the imagination of the United Kingdom electorate and many of its Members are elected by less than 10 per cent. of the electorate. That is not a tribute to democracy and it does nothing to enhance the status of the European Parliament. By next summer, the Strasbourg Parliament might have to crawl back and accept what the Council of Ministers has suggested. That

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happened last time. If that happens, far from strengthening the European Parliament and increasing its credibility, its standing will have been damaged even further.
It would be in the interests of the people of the United Kingdom and that of furthering the cause of the European Parliament for that Parliament to sit back and reflect on what it is doing and to decide to support the Government and the 1985 budget.
8.45 pm
Sir Anthony Meyer: These debates are usually rather depressing affairs in which we rehearse familiar arguments and make the same speeches. The right hon. Member for Strangford (Mr. Taylor) went a long way to bringing a sense of reality into our proceedings. He did well to draw attention to the imminence of the crisis in regard to the future of the European Parliament. He put his finger unerringly on the central issue.
It might surprise my hon. Friend the Member for Southend, East (Mr. Taylor) to learn that I have always believed that there is great danger in the form and functions of the European Parliament as it was conceived. It has the power to spend money, but no responsibility for raising it. That is why I was so ferociously opposed to the Labour Government's proposals for devolution in Scotland and Wales. I do not oppose devolution, but their proposals were disastrous.
The Frankenstein is well and truly out of the bottle, if I have not mixed my metaphors too much, and we are now faced with a Parliament which is determined to assert its authority as a directly elected body, however slim that authority might be in view of the small turnouts for European elections. Moreover, it is on a collision course with the British and other European Governments. I have little doubt that one of the results will be a growing demand in Britain and elsewhere to do away with the European Parliament, although that means rewriting the treaty. Such pressure will not be easy to resist.
However small my enthusiasm for the European Parliament and however grave my misgivings about the form in which it was set up, I must utter a solemn warning. In order to abolish it, we shall have to rewrite the treaty. I am convinced that it will turn out to be impossible to conclude a new treaty which gives us even part of the satisfaction that we derive from the imperfect operations of the present Community. The outlook of the statesman who concluded the original treaties in 1957, to which we acceded many years later, meant that they were prepared to see the wood and not be blinded by the trees. They were prepared to subordinate the short-term interests of their countries to secure advantages which could be achieved only by a pooling of effort. I find no evidence of any such readiness among leaders of any of the countries that constitute the present Community. Much as I deplore the weaknesses of the present Community and regret the wrong functions given to the European Parliament, we must live with the present treaty and try to make it work.
By the same token, I share many of the pertinent criticisms of my hon. Friend the Member for Southend, East of a CAP which piles up ludicrous surpluses and seeks ways of funding ever larger surpluses.
I must also reflect that had we followed the policies advocated by the Labour party and a few Conservative
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Members—it is not unfair to include my hon. Friend the Member for Southend, East among them—and bought our food in he cheapest markets, we would today be bidding against those countries stricken by famine for the world's limited supplies of cereal. I do not believe for a moment that that would place us in a better situation.
I have never made any secret of my view that the European Community is unsatisfactory. However, it is the best Community we have, even though it is just not good enough. The Community in which we presently live is rapidly losing out to the rest of the world in industrial innovation, the creation of new jobs and raising the living standards of its people. It is failing to do the job it was set up to do. It is not even a Common Market. We shall not get even half of what the Community should be providing unless we are prepared to go forward rather than backward. We should not go backward by saying that the only things we want from the Community are those which advantage us. Frankly, we cannot run any kind of alliance, let alone a community, on that basis. We must go forward and strengthen the decision-making processes of the Community. Therefore, we must take seriously the proposals circulating in the European Parliament in respect of institutional reform. I believe that the Parliament is out of its depth on financial matters, but on institutional matters I believe that it may have a lot to teach us.
Nothing alarms me more than the gap which is now opening up between the common thinking within the European Parliament among parties of all nationalities—not, perhaps, among the British Labour group, but that group is all alone in the world — on the need for institutional change and more effective ways of taking decisions, and the total refusal on both sides of this House even to consider those ideas, let alone to consider accepting them seriously. We must move towards a system in which the use of the veto is altogether exceptional. No one is suggesting that we should give up the veto where vital national interests are at stake, but unless the nations which comprise the EEC are prepared to reconcile themselves to the fact that normally they will accept majority decisions and resort to the veto only in cases of acute national need, not much progress will take place.
The best that can be hoped for under the present system is the acceptance of what is familiarly known as two-speed Europe. That is frequently described as a great tragedy. I am not sure that it is, given the limitations of the present situation. We could possibly go along with a system under which, for example, the seven nations constituting WEU agree to co-operate more closely in providing a European pillar for the North Atlantic Alliance. Equally, those nations which are getting together to build up a European aviation industry could go ahead and build the aircraft, even if British Airways, for reasons of its own, prefers to buy inferior American aircraft rather than the superior European aircraft which are available.
The founder states have formed and operated a European monetary system that provides an element of stability to their exchange rates, but, for reasons best known to the Treasury, we prefer to remain outside that system. I believe that we would do very much better within it. We can operate that type of two-speed Europe for a certain time, but even that will not work without better decision-making processes. It is notable that among the institutions of the Community which do work — the

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European monetary system and the Airbus consortium are two examples—there are institutions which are able to take effective and swift decisions.
8.54 pm
Mr. Nigel Spearing: The hon. Member for Clwyd, North-West (Sir A. Meyer), who is sincere in all his contributions, has called for realism. I shall attempt to be realistic and shall echo some of the points made by the right hon. Member for Strangford (Mr. Taylor) who made a distinguished and fundamental contribution.
The ambit of our debate is extremely wide. In fact, the motion contains four debates. There is a debate on the arrangements for finances for 1984, another on the draft budget for 1985 and its various appendices, yet another on the preliminary document on own resources — an important document arising out of Fontainebleau's success or otherwise — and a fourth on the disciplinary document. If that were not enough, we have in the italicised sentence of the Order Paper consideration of Cmnd. 9348, with its 122 paragraphs. In my capacity as Chairman of the Scrutiny Committee, I wonder whether the House has taken on too large a meal.
The main purpose of my speech is to draw the attention of the House to the reports of the Scrutiny Committee on some of the documents referred to in the motion. It would be wrong of me to try to deal with all of them—the debate is too wide for that—but I want to emphasise some of the current practical points that have been mentioned so far. We are now talking about financial control in the Community. The long-awaited crunch has happened. The Community has run out of money, and its various institutions and member states are asking, "What will happen next?" In the midst of this, as the right hon. Member for Strangford reminded us, the Assembly is attempting to increase its own power and, perhaps, credibility.
We must remember that the power of this House over its own Executive is through the control of money, but the mere fact that we are asked to debate instruments which relate to running out of money in 1984, and the fact that there is also Cmnd. 9395—named as the Undertaking, but we are not discussing it now—tells us that the hoop has been burst, provided that it is possible for the House to approve that document in view of proceedings elsewhere.
If the House approves that document, the increased expenditure for 1984 will be approved. It may be a relatively small amount—a matter of 1,000 million ecu —but that is the principle, as can be seen from the 34th report from the Select Committee on European Legislation. The Committee, of which the right hon. Member for Strangford and I are members, owes a great deal to the assistance we get from our clerks. Among the batch of documents on which we reported-they were largely financial — was a consultative document, No. 8514/84, and a letter signed by Mr. Andriessen. He more or less told member states, "The Community will run out of money in 1984. Please see what you can do about it". Paragraph 7 of the document refers to raising money for the current year. It states:
"Similarly, the Council cannot, if it is to respect in full all its obligations under the Treaty, advocate an upheaval of those policies which are financed by non-obligatory expenditure. The
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transfer of a major volume of non-obligatory credits to EAGGF Guarantee would mean a decimation of the Community's structural and sectoral policies."
It then states that the Commission will not cut those to maintain the obligatory expenditure of the Community. That is a major statement of policy. We must be under no illusion that Cmnd. 9395 merely maintains the obligatory expenditure of the Community. It also maintains the non-obligatory expenditure, which is nevertheless above the 1 per cent. limit.
The right hon. Member for Strangford referred to the 1985 budget. The Scrutiny Committee summarised the proposals in House of Commons 78-xxxv. On page 10 we set out a schedule of the draft budget for 1985 and the preliminary draft budget for 1985. The original preliminary draft budget came to a total of 28,000 million ecu. The present budget is 2,000 million ecu less, which makes a total of 26,000 million ecu. The reason for the reduction was to keep within the 1 per cent. The Council makes it clear that expenditure will exceed that. It states:
"In deciding on a budget appropriation for the 1985 EAGGF of 18,000 million ecu, i.e. a reduction of 1,315 million ecu by comparison with the figure considered necessary by the Commission in the preliminary draft Budget, the Council for its part, while emphasising the need for rigorous market management, undertakes to meet by 1 October 1985 the additional budgetary requirements which will arise in 1985."
The 1985 budget is not realistic in the eyes of the Commission. The Council, in keeping with its legal obligations, has cut it to inside the 1 per cent. limit. However, at the same time it is saying that by October 1985 it will need more propping up. The Government may return to the House to ask us to approve yet another undertaking to fill the kitty, which may be empty sooner next year than it was this year. That is assuming that the own resources mechanism is not in place by then. It may be. We hope that own resources will provide repayments for 1984 and 1985, if they go through.
I turn to a change in the financial regulations. We commented on this in our report, House of Commons 78-xxxiii. It states that the Commission proposes
"that greater flexibility be given to the Commission to transfer funds between lines in this section."
In effect, that changes the appropriation. A reason why we have an appropriation Act is to maintain rigidly what
the Government can spend between different votes. In the EEC it is not a budget but an estimate of expected expenditure. The financial regulation will give greater flexibility for transfer of appropriation between one heading and another. There is already a lot of that.
I turn to the question of monetary discipline. In our report, House of Commons 85-ii, the Scrutiny Committee draws the following conclusion:
"The Committee do not perceive any legal implications in the Conclusions as presented in this document but have already commented on the unusual nature of its status, and the fact that it does not have legislative form. They note that the text will arise for discussion between the Council and a delegation of the European Parliament scheduled for 21 November 1984 and will be presented for adoption thereafter."
I mention this because it is clear, not only from the report but from a letter which I received in the nick of time from the Economic Secretary, that before the disciplinary document was discussed and agreed by the Council of Ministers, a delegation from the European Parliament talked to the Council about it. That was before the House

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talked about it. I received a letter from the Economic Secretary today telling me that, as a result of the Dublin summit, the Council adopted the following conclusions:
"Firstly, to invite the Commission and the European Parliament to examine with it ways in which the co-operation necessary for a budgetary discipline common to all three institutions may be brought about. Secondly, to invite a delegation of the Parliament to meet it shortly before the meetings at which the Council is due to fix the reference framework for the year."
There will now be regular consultation between the Council and members of the Strasbourg Assembly in respect of budgetary discipline. The points made by the right hon. Member for Strangford have been fulfilled completely, because the budgetary procedures will now include consultation with the Strasbourg assembly, but there will be no similar consultation with the House.
The present struggle — financial control over an executive not in Whitehall but in Brussels—is critical. I suggest that the same constitutional rules apply there as applied here hundreds of years ago and as still apply today.
9.6 pm
Mr. Bill Walker: In the few minutes available to me, I shall concentrate on a fairly narrow area, although I hope that Ministers will realise that I wished to say much more.
My hon. Friends will agree that when the Scottish National Farmers Union has met Ministers it has introduced sensible and realistic proposals. That body was the first to suggest to the Minister that quotas were the way to deal with the milk problem. The NFU accepted quotas, because it suggested them, but Scottish farmers are now unhappy because the super-levy is not working. They oppose the super-levy because they believe that, although they have honoured their side of the agreement, farmers in other parts of the Community have not.
The Scottish NFU believes that the way to deal with the over-production of cereals is to allow the price to dictate the market, but it qualifies that by saying, "We are prepared to promote the idea but we want the Government to be realistic. If the rest of the Community behaves as it has done with milk quotas, we want our backs to be protected."
I represent a constituency of 2,000 square miles which are largely agricultural. The vast majority of it is mountainous agricultural land, and some parts of my constituency include the most rugged agricultural land in Scotland. When I went to school, Scotland was split into three parts—the highlands, the central lowlands and the southern uplands—but some years ago we introduced a new animal called the Highlands and Islands Development Board. It would be hard to find a more misnamed organisation, because it does not represent all the highlands of Scotland. Indeed, a substantial part of the highlands of Scotland are completely outwith the board's responsibilities.
Unfortunately, the Europeans, hearing us describe an area of Scotland as the highlands and islands, naturally think that we are talking about all the highlands. There are communications problems, not only because of the language differences but because we cannot draw lines on the map to represent the mountain areas accurately, which causes problems. The constituency of the hon. Member for Inverness, Nairn and Lochaber (Mr. Johnston) adjoins
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mine. He will know that the northern stretch of the A9 that normally gets blocked in the winter months is in my constituency. However, that is not recognised and accepted as being as difficult for farming as the Inverness area. There is something wrong with this, and something should be done about it.
Areas such as Glen Lyon, Rannoch, Drumochter, which is next to Inverness, Glen Shee, Strathadle, Glen Prosen and Glen Clova are without doubt some of the most difficult farming areas in Scotland. Therefore, they should be treated as are the rest of the highland areas. [Laughter.] This is not a laughing matter. Labour Members would not laugh if they had to face the problems of farmers living in these difficult areas. They see their neighbours being treated differently because we have drawn a line on the map that does not represent the highlands of Scotland.
I make it clear that this is not a plea for more European spending. My farmers and I take the view that budgetary disciplines are essential if Europe is ever to work, but it must be seen to be fair and responsible, and at the moment it is neither.
9.11 pm
Mr. Ron Leighton: Once again we are discussing the payment of more money to the Common Market, and for what? Primarily, it is for the dubious privilege of buying dearer food. It is difficult to understand why the serried ranks on the Conservative Benches want to vote for this. I am struck by the painful and glaring contrast between the Government's stringency at home and their largesse abroad in the EEC. Recently we had the statement by the Secretary of State for Education and Science. After some arm-twisting, he had to climb down. To pay for that, he took a couple of million from university furniture and a couple of million from science. On these matters we get meticulous, penny-pinching economies, but just mention the EEC or the CAP and the Government open up their coffers and money is spent with gay abandon. They spend money like a drunken sailor with eight arms.
Why is a dash of monetarism not applied to the EEC? Instead, rather like the good fairy in a pantomime, the Prime Minister rushes in to play Lady Bountiful with our money. Gone are the days when she spoke of achieving a broad balance of our payments into the budget and about getting our money back, or when she went to the Dublin summit and claimed that she was not prepared to settle for half a loaf. Gone are the days when the present Chancellor of the Exchequer, when he was Financial Secretary, came to the Scrutiny Committee and said that our position must be that of the French and we must be roughly in balance. Gone are the days of resolute statements and firm intentions. All hopes have disappeared. We have been let down and strung along. We have been kidded and conned, and Agriculture Ministers are still coming along with their tree-grown theory of money supply.
There are two questions that have never been answered. First, why are we paying net any money to the budget? We are one of the poorer members of the Community, so why are we not a beneficiary? The bulk of this money goes to incentives for farmers to produce more food that cannot be consumed, so the second question is: why should there be any more money for agriculture? People keep going on about reforming the CAP, but if it were reformed it would not need any more money.

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We should let the countries which produce the surpluses pay for them. Not only are we denied cheap food from overseas and forced to pay the higher EEC prices, but we pay for the surpluses of other member states, which are caused by the higher prices. We are doing violence to our national interest. The policy is anti-British.
The higher prices are a type of danegeld paid by Governments on the continent to assuage their agricultural populations and lobbies. I am not against such bribes, but I do not see why we have to pay them. It would make more sense to make deficiency payments to our own farmers to keep prices low and give us cheap food.
The Foreign Secretary said that the Government had no intention of introducing legislation to increase own resources until the Finance Ministers had agreed
"on precise measures to guarantee the effective implementation of budget discipline."
On the same day the right hon. Member for Worthing (Mr. Higgins) said that it was wrong
"to proceed on the basis of fudge and hope—fudge the issues and hope that the outcome will be all right."—[Official Report, 10 July 1984; Vol 63. c. 894–907.]
Having read the documents, I am bound to say that the European political fudge-making industry has never been in better shape. We are in the ludicrous position of trying to persuade the EEC to spend less by offering it more money.
While farmers are encouraged to produce more, the budget will always push against the own resources ceiling. In the meantime, we continue to be Europe's major paymasters on a continuing and escalating basis. The truth is that the Prime Minister was out-manoeuvred at Fontainebleau. She conceded a 40 per cent. increase in tax contributions, without achieving the budgetary discipline and control of agricultural spending, in return for a refund mechanism the complexities of which serve only to conceal its imperfections. Had that mechanism been in operation from 1980 to 1983, our refunds would have been much less than they were.
Fotainebleau has provided no lasting solution to budgetary discipline and agricultural extravagance. When the EEC runs out of money again, as it will, we shall be asked to pay yet again even more. The threat is that VAT contributions will go up even further to 1·6 per cent. The prosperous farmers of West Germany were given a remission of 5 per cent. VAT, resulting in even higher prices and so even bigger surpluses. That is hardly a sign that the situation will improve.
Instead of resources determining expenditure, we have agreed to contribute £120 million to an inter-governmental whipround. Why is that? It is to bail out the CAP, to keep it going and to encourage its wasteful rake's progress. On the condition that we pay the extra £120 million, the EEC has agreed to pay us our 1983 rebate, which was agreed at Stuttgart.
The Government's "victory", or "diplomatic achievement", is that we can have some of our own money back if we pay in even more. The agreement on increasing our VAT contribution was to be conditional on the reform of the CAP. A requisite was the Council adopting measures guaranteeing budget discipline acceptable to Britain and the House.
The document is pathetic and hopelessly inadequate. It is not a regulation like the existing regulations that govern
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the budgetary procedure. Instead, it has the status of "Conclusions". What does that mean? I do not understand. It has no legislative force.
The sixth report for the 1983 Session of the Select Committee over which my hon. Friend the Member for Newham, South (Mr. Spearing) presides with such distinction states:
"The result of any such controls would clearly depend upon…the extent to which it was enshrined in legislative form."
It has not been, and why not? The answer was given by the Prime Minister on 5 December. I do not know why the hon. Member for Fife, North-East (Mr. Henderson) is making funny faces. I hope he understands that the debate can continue until 11.30 pm. The Prime Minister said:
"The text on financial budgetary discipline is binding on the Council itself, but is not being embodied into a treaty or technically—legally—into the budgetary process.—[HON. MEMBERS: "Why not?"] Because one simply cannot get agreement from all 10 countries."—[Official Report, 5 December 1984; Vol. 69, column 354.]
We could not reach agreement, which is why it is not enshrined in legislation. Are the member states likely to agree in future? I do not believe that they will do so. Therefore, we have absolutely no guarantee, yet despite that we are increasing our tax contribution to the EEC.
In article 1 of the so-called "Conclusions" it is stipulated that the EEC will act by a qualified majority. Again, that gives the veto to other countries to stop a satisfactory position. It is in no way binding-it is as watertight as a sieve. Articles 2, 3 and 4 refer to account being taken of "exceptional circumstances". What are they? From my experience of the Common Market, there are always exceptional circumstances.
Article 5 provides for a clawback of any excess expenditure over the following two years, barring "aberrant developments". What is the EEC except an aberration? It is an institutionalised aberration. We have absolutely no guarantee in any shape or form.
Once again, we have been led up the garden path—and not only on this count, but on every count, whether trade, jobs, food prices, taxation, investment in or out or fishing. Whatever the count, this country—like the Scandanavian countries—would be better off not being a member of the EEC.
9.23 pm
Dr. Oonagh McDonald: The Minister made an heroic effort at the beginning of the debate to prove to the House—[Interruption.] It was an heroic effort. I shall give the reasons for its failure later. He tried to convince the House that firm budget discipline had been achieved. As we listened to the debate, it became clear that with one or two notable and unconvincing exceptions—those sitting on the Liberal Benches—the Minister manifestly failed to achieve his aim. Even the hon. Member for Wantage (Mr. Jackson), on whose support the Minister could generally rely, was critical of the current position in the EEC.
Perhaps it is not surprising that the Minister's efforts failed. After all, it was only a short time ago—last July—that the Government told us that they were determined to bring this year's budget into balance and that there would be no question of any supplementary budget. However, by September it appeared that their resolve had weakened. Perhaps the Minister of State can blame his hon. Friend the Economic Secretary for that and move the blame for failure slightly away from himself, for

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it was then that the Economic Secretary agreed to the supplementary budget that is the subject of the undertaking that is now being considered before the courts and that may be considered by us before the end of this month. However, the Economic Secretary takes an opimistic view of the supplementary budget—this extra payment of £120 million—since he described it as a reimbursable advance. Drawing upon his experience as a banker, he said that this is a payment made to the borrower in advance of the receipt of his own funds. Presumably he expects that next year the Commission will have sufficient funds to pay back to us what he is pleased to call an advance.
Perhaps another reason for the failure of the Minister of State to convince the House is that the Prime Minister cast doubt upon the firmness of the budgetary discipline which had been obtained at the Dublin summit. When my hon. Friend the Member for Newham, South (Mr. Spearing) questioned the Prime Minister on 5 December he said:
"The Prime Minister has said that the Council has bound itself in respect of budgetary discipline. If that were to be so, would that not need financial regulations?"—[Official Report, 5 December 1984; Vol. 69, c. 355.]
The Prime Minister said that she would have preferred financial regulations, but that she regarded the conclusions as binding upon the council. Even if the Government had achieved the kind of regulations that were wanted, that would still not have dealt with the fundamental problem facing the EEC with regard to its budget. Even if regulations had been obtained setting a ceiling on agricultural spending, we would have been left with a self-contradictory set of regulations. Some of the regulations already in operation in the EEC allow open-ended price guarantees and commitments in terms of agricultural spending. All that the financial disciplinary regulations would have done would have been to try to hold that down. There would have been a contradiction. Indeed, the notion of imposing firm discipline upon farm spending is like trying to hold down the lid on a pot of boiling water. Sooner of later, the lid blows off, and out comes the boiling water.
The Minister of State failed to convince the House because it is recognised that the Government have failed to achieve the original objective that they set themselves—the radical reform of the common aricultural policy. That is why, quite rightly, hon. Members on both sides of the House have continued their sustained criticism of the common agricultural policy. The CAP is responsible for the budget overspending. Unless the CAP is reformed, we can talk about firm discipline until the cows come home—an appropriate metaphor, perhaps—but we shall not get control of the EEC budget.
What we have been offered in terms of the conclusions reached by the Council are, as one senior EEC official described it, not worth the paper they are written on. Its legal status is doubtful and it is full of holes.
Even if, as the Minister of State suggested, the Commission were to take one or other member country to the European Court and try to apply the strictures of the Council to it—let us grant to the Minister of State that supposition—what I fail to understand is how there could be any success in the European Court if what one is trying to apply is a set of guidelines with such gaping holes in their application. Obviously, even in that
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situation, there would be every opportunity for the country allegedly in breach of the conclusions of the Council to wriggle out of any charge that the Commission wanted to bring against it. It is no good saying that people can be taken to court. They have to be taken to court with a watertight case. Without that it would be pointless.
Many points have already been well made during the debate. The references to "exceptional circumstances" and "unusual circumstances" in the various articles show that the rules cannot possibly apply. As my hon. Friend the Member for Newham, North-East (Mr. Leighton) rightly asked, when do we find a situation in the EEC which does not have exceptional circumstances for the farming community? When can farmers not plead in their cause a gamut of conditions that they can pull into play, ranging from what is happening to the dollar to what is happening to world food markets whether in grain, sugar or whatever? Any of those situations can be used to justify whatever claim they wish to make.
We are left with a document whose legal status is unclear and whose guidelines cannot be binding because of the loopholes that they contain. We are also left with a series of conclusions that have as their major weakness that they set too high a ceiling on any future agricultural spending. That is because of the way in which the rules have been drawn.
Any of the major rules of the system can be breached or altered by a qualified majority vote in the Council. The way in which future calculations for agricultural spending are to be carried out will allow agricultural spending to rise both as a proportion of future budgets in 1985 and in the years thereafter and in volume terms. That is why the conclusions that have been adopted at Dublin cannot possibly prevent overspending in future. That is why the Minister of State completely failed to convince the House that we shall have firm control on agricultural spending.
Let us take one or two examples from what is happening now and see what confidence that will give us for the future. Look, for example, at what is happening with regard to milk production. The quota system that was introduced this year aimed at cutting EEC milk production by 7 per cent. Last Saturday the Financial Times pointed out that seven months after its introduction not one penny of the super levies have been paid and three delays to payments have already been agreed by the Commission. In October and on 1 December the Financial Times reported that the Commission had to take four EEC states to court over the milk super levy, and apparently those cases are still under consideration.
On 1 December the Financial Times commented:
"So complex are the rules that most member states are nowhere near completing the administrative arrangements to carry them out. Where they are reasonably well advanced, a number have tried strategems which the European Commission suspects are designed to soften the blow of quotas or enable their farmers to sell more milk."
West Germany is quoted as an example. It seems that it is defying the super levy regulations by exempting thousands of small farmers from more than half the reduction that is required. Although a reduced rate of cuts for small producers may be compensated for by the greater cuts that are made by large dairy farmers, the German move is believed by Commission experts to ignore both the letter and the spirit of the regulations and it has not been officially sanctioned.
We usually complain about the attitude of France towards Community regulations and Germany usually

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claims the virtue of wanting stringent spending controls. In this instance it appears that even West Germany, one of the more virtuous members of the Community, is bending and twisting the milk quota rules to ensure that many of its dairy farmers are exempt from Community strictures.
It is claimed that the milk quota rules show that the Community is moving towards stricter budget discipine and is prepared to accept quotas. It is said that the Community is prepared to restrict production and thus to reduce spending on agriculture. After the best part of a year following the introduction of the regulations, we find that member states are not observing them. They are busy adapting, avoiding and evading the regulations. Italy is a notorious example. One of the documents before us tells us that there are 61 cases against Italy in the European Court. Italy is flouting the rules.
If we are asked to believe that the Council's conclusions will take us forward into the future, that the EEC will present us with a balanced budget year-on-year and fulfil the Community ideal in that way and that farm spending cuts will take place, we must realise that there is little evidence for that in what has been going on so far.
The Government are trying to con us into believing that farm spending is under control and that they have obtained everything for which they have asked. Ministers return regularly from Brussels, Strasbourg, Stuttgart, Fontainebleau, or wherever the latest summit happens to be, and say, "We have won again. We have obtained everything for which we asked. Everything in the garden will be lovely." It is the greatest con job in history. They do nothing of the sort.
Mr. Hugh Dykes rose—
Mr. Budgen rose—
Dr. McDonald: I give way to the hon. Member for Wolverhampton, South-West (Mr. Budgen).
Mr. Budgen: Is the hon. Lady not being grossly unfair to the Government? It may have been a con job for the first time they tried it, but it cons no one now.
Mr. Dykes rose—
Dr. McDonald: I shall not give way to the hon. Gentleman, because he was absent for most of the debate. As I understand it, he is not in the Chamber to reply on behalf of the Government. If he is, he is sitting in the wrong place.
I take the point of the hon. Member for Wolverhampton, South-West. He is not deceived. Having read with interest the way in which he cuts through Ministers' condescending verbiage in Select Committee, I know that he is not conned by them. However, many members of the public believe the Prime Minister when she returns from a summit and tells us that she obtained everything for which she asked. It is our job in Parliament to make it clear that she has obtained very little of that for which she asked. In this instance she has returned with a 1985 budget—
Mr. Dykes: What did the previous Labour Government obtain?
Dr. McDonald: I shall educate the hon. Gentleman with a little history. One of the things that Conservative Members must understand—[Interruption.] The hon. Gentleman must not get over-excited. I heard his piece from a sedentary position.
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The transitional arrangements did not end until 1978, so the problems with which we are now faced did not arise. They have arisen since 1979 and worsened. We are now left with the 1985 budget. The proportion of that draft budget spent on agriculture will increase to 72 per cent., and in the real budget the proportion will increase to 73 per cent. As a type of palliative, the regional and social funds have been marginally increased, although, once inflation is taken into account, they probably have only stood still.
My hon. Friend the Member for Livingston (Mr. Cook) described in detail the cuts in aid which appal people in this country and other member countries—cuts in transport, science, technology, industry and other social measures. Those services are the immediate victims. Yet more and more money will be paid out next year to farmers. The laughable aspect of the whole business is that the budget will cope not with 12 months but with 10 months of a year and will immediately bring us into conflict with the European Parliament as it rejects a draft budget that is too stupid for words.
The Government, having come back for more money this year, once the court case is cleared up in the way they hope, will return next year with their begging bowl asking for yet more money from the suffering British taxpayer. In the following year, they will run into a further crisis, because the 1986 budget will also fail to meet the demands made on us. The Government will start talking about an increase in own resources from 1·4 per cent. No doubt by then the Government will have run out of goods. which have already been zero-rated, on which to oppose the imposition of VAT.
Ministers talk about firm controls on spending. Nothing they have said proves the point they wish to make. Next year's budget shows that nothing like that aim will be achieved. This year's budget shows that the whole of the Minister's work in Brussels has been a total failure. The British taxpayer pays the price, and it is up to him to realise whose fault that is.
9.42 pm
The Economic Secretary to the Treasury (Mr. Ian Stewart): As the hon. Member for Newham, South (Mr. Spearing) said, this has been a wide-ranging debate covering a large number of documents and a great many more Community topics. I do not have the time to enter into some of the wider considerations discussed by my hon. Friend the Minister of State. I shall have to leave it to the hon. Member for Inverness, Nairn and Lochaber (Mr. Johnston) to debate with my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) whether changes in the treaty are needed. I believe that a great deal could be done within the existing treaty, and that is where the priority lies.
I note the comments of the hon. Member for Greenock and Port Glasgow (Dr. Godman) about fisheries. I shall report what he said to my right hon. Friend the Minister of Agriculture, Fisheries and Food.
The right hon. Member for Strangford (Mr. Taylor) asked about the subdivision within the United Kingdom which results in Northern Ireland having a problem with the super levy. I understand that that has happened, because national quotas are divided into separate sections according to what is technically the organisation of dairies

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—in this case, the milk marketing boards—and, because there is a separate milk marketing board for Northern Ireland, that board is a separate entity.
General points have been mentioned in the debate. The hon. Members for Livingston (Mr. Cook) and for Thurrock (Dr. McDonald) have displayed a fundamental misunderstanding. They spoke as if the budgetary problems in 1984 and 1985 were somehow a condemnation of budget discipline. The point is that the difficulties of constraining expenditure this year and next have occurred because we did not have effective budget discipline. Had we had budget discipline, I have no doubt that many of the difficulties that we face would have been avoided.
The hon. Member for Newham, South asked whether supplementary financing would be reimbursable and what the provisions were in the 1985 budget. The 1985 budget was drafted and brought forward before the agreement on the supplementary finance was reached, and the proposals are that the advances should be reimbursable, starting in 1986. They do not appear in the documents before us today.
On the question of the overrun this year, the hon. Member for Thurrock sought to chide me for being reluctant to concede in July of this year that we should make a substantial payment for supplementary finance. I wonder what type of negotiations she thinks Ministers conduct if they do not try all along the line to ensure that they obtain the best deal. In this case, the amount of overspending was reduced to the irreducible minimum and the amount of supplementary finance required was also as low as possible. I should have thought that that was self-evidently in our national interest. Getting the figure down from well over 2 billion ecu in the original proposals to 1·35 billion ecu in the July Budget Council without conceding that we would agree to any supplementary finance was an achievement which the hon. Lady should be glad British Ministers could deliver.
Dr. McDonald rose—
Mr. Stewart: When we managed to agree a figure on 1,003 million ecu in September, that was less than half the original amount proposed. I should have thought that the hon. Lady would welcome the efforts that had been made on behalf of the United Kingdom.
Dr. McDonald: The Minister has misunderstood much of what has been said. On 10 July the Foreign Secretary said that
"we shall be pressing in the Budget Council next week for savings that will bring into balance the 1984 budget".—[Official Report, 10 July 1984; Vol. 63, c. 897.]
That is fine as an intention. No one quarrels with that, but we are saying that the Government did not succeed.
Mr. Stewart: The Government succeeded in reducing the figures substantially. We forced the Commission to make savings in its market management, and we forced the Commission and Council to agree to offsetting amounts against agricultural expenditure so that we were left with a much smaller figure to finance. The fact that there was a residual figure shows that budget discipline has not applied until now. I and most hon. Members must wish that budget discipline had been in place at least two or three years ago. It would have prevented many of the
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problems that we have had to face in the past two years. They are still with us, because the Fontainebleau agreement was not put in place until the middle of this year, and the post-Fontainebleau package—of which budget discipline is a part—is only now being put in place.
The right hon. Member for Strangford said that it would be undesirable if the European Parliament were to reject the 1985 budget, because that would be flat against the interests of all member states, and the agricultural sector in particular. I entirely agree with what he said in a thoughtful and impressive contribution. I hope that before members of the European Parliament seek to reject the 1985 draft budget they will realise that the consequences for the people whom they represent and who elected them to serve there would be entirely adverse and would not assist the reputation of the European Parliament or its claim for a greater part in the affairs of the Community.
Mr. Marlow: In his brilliant introductory speech my hon. Friend the Minister of State unfortunately did not have time to touch on the proposal to increase the Community's own resources. I hope that my hon. Friend the Economic Secretary will deal with that. The increase in own resources means that the Community will be spending more taxpayers' money. Will my hon. Friend tell us where that will substitute for current United Kingdom policy so that we know what the Community will be taking over from us? If there are to be new Community policies, will he tell us what they are? If not, which of the current policies are to cost more in the future? The sum must add up somewhere, and I know that my hon. Friend the Economic Secretary is very good at arithmetic.
Mr. Stewart: If I had not given way to my hon. Friend the Member for Northampton, North (Mr. Marlow), I should have had more time to deal with the points that he has raised and which have been covered many times in the debate. I shall be coming to the question of own resources.
Mr. Marlow: On a point of order, Mr. Speaker. Am I correct in supposing that this debate can go on until 11.30 pm?
Mr. Speaker: That is certainly true.
Mr. Stewart: I think that I should also take the wishes of the House into account in measuring the length of my speech.
The hon. Member for Livingston asked how the United Kingdom would get its 1,000 million ecu refund next year. We intend that the own resources decision should be brought into play before the end of 1985 and that we should receive the 1,000 million ecu by way of abatement. We have also arranged, and the Council has agreed, a general undertaking attached to the 1985 budget guaranteeing that the United Kingdom refund will be paid without specifying the means whereby that is to happen. The actual decisions are for the future, but the Council has recognised the unreserved right of the United Kingdom to the 1,000 million ecu compensation in respect of 1984, to be paid next year in that way.
The European Parliament wished to place our compensation on the expenditure side, but we were able to resist that. It also wanted to go above the 1 per cent. ceiling for the 1985 budget, and we were able to resist that, too. Nevertheless, we must face the fact that this year and

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next year there are temporary pressures on the budget because of the lack of a budgetary discipline system in the past.
Mr. Robin Cook: The Economic Secretary has just made a very important statement and I should like to press him a little further on it. The Fontainebleau agreement provided that the refund in 1985 in respect of 1984 would be payable by means of an abatement. If I understand the hon. Gentleman correctly, he does not envisage the refund coming into operation until the decision on the increase in own resources is taken. He will be aware that the date of that increase is a matter of contention in the Community and that the Germans are still holding out for 1 January 1986 so as to coincide with enlargement. Is the Economic Secretary saying that the agreement on our refund does not come into play if the date for the increase in own resources is not in 1985? More important, is he saying that the Treasury will not deduct the abatement from our payment to the EEC until the decision on own resources is reached? As I understand the Fontainebleau agreement, there is no reason why the abatement should not start running from January 1985.
Mr. Stewart: As I have said, it is our assumption and intention that the own resources decision should be implemented within the calendar year 1985 and that our abatement would come into play at that time. As it is possible that the own resources decision will not be implemented in 1985, however, the Council has agreed that the United Kingdom will be due to receive its compensation next year in any event.
I must move on to the question of budgetary discipline. My hon. Friend the Member for Southend, East (Mr. Taylor), who tabled the amendment, spoke of the budgetary discipline text as a worthless piece of paper. I take the strongest possible issue with my hon. Friend over that view. We undertook to arrange that measures necessary to guarantee the effective application of budgetary discipline would be put in place. The component parts of those measures are an overall reference framework covering all expenditure, separate provisions for an agricultural guideline and a maximum rate of expenditure covering non-obligatory expenditure.
My hon. Friend raised the question whether there was any limit on the reference framework which the Council could fix. The Council, being bound by the conclusions, will not fix a reference framework higher than that of the agricultural guideline and the maximum rate. It is limited in that way.
Mr. Teddy Taylor: I suggested that article 1 imposes no limit and that the Ministers can sit down and, by a majority vote, fix any ceiling that they wish. My hon. Friend now says that there is a restriction at the 1·4 per cent. figure. If the 1·4 per cent. limit is there anyway, what does article 1 provide which would not have been provided if that article did not exist?
Mr. Stewart: Article 1 refers to the reference framework itself and also to the agricultural guideline, but the reference framework is the total amount within which the budget must be set. The component parts of the budget are the agricultural expenditure and the non-obligatory expenditure within the maximum rate. As the budgetary discipline text provides for both those elements, that constitutes the reference framework.
Mr. Forth: Does not article 6 provide for the reference framework itself to be changed, and does that not render it meaningless?
Mr. Stewart: Article 6 provides that the Council of Economic and Finance Ministers may alter the reference framework, but that would be a matter of changing one of the elements within it. As the Council has bound itself in relation to the maximum rate, it would be able to alter the agriculture guidelines under the circumstances described in some of the clauses of the budgetary discipline text.
It has been said that because there is flexibility in the text it is useless, meaningless or full of holes. That is not the case.
Mr. Teddy Taylor: Why?
Mr. Stewart: I shall explain why, if I am given a chance to do so.
The purpose of the budgetary discipline is to move away from a system where price and the price-fixing of agriculture settlements in the early part of the year determined the cost of the programme to a system in which an acceptable cost works back to the establishment of the prices. No one can say, with something as erratic as agricultural expenditure, that one can always predict in March the exact outcome later in the year. That is why neither this country nor other member states could have accepted an absolutely rigid system. That would not have been realistic.
Comments have been made about the legal nature of the budgetary discipline text. The consequences are binding on the Council. That is the important factor. They are incorporated in the budgetary procedures of the Community.
On the question of own resources, it has been suggested that we would have a 40 per cent. increase in expenditure. There will be no step change, because the base is fixed on 1984–85, and therefore increases will be related to that. The increase will be much lower—probably less than 20 per cent.—because Britain will pay less than 1 per cent. in own resources for the next few years even if the VAT ceiling is increased to 1·4 per cent.
We now have a satisfactory arrangement on budgetary discipline and I commend the motion to the House.
Mr. Teddy Taylor: I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Main Question put and agreed to.
Resolved,
That this House takes note of European Community Documents Nos 8322/84, Preliminary draft supplementary and amending budget No. 1 for 1984; 8879/84, Letter of amendment to preliminary draft supplementary and amending budget No. 1 for 1984; the unnumbered document, Draft supplementary and amending budget No. 1 for 1984; Document No. 10222/84, European Parliament's proposed amendments and modifications to the draft supplementary and amending budget No. 1 of the European Communities for 1984; the unnumbered document, Draft general budget of the European Communities for the financial year 1985; Documents Nos 9482/84, Letter of amendment to preliminary draft budget of the European Communities for 1985; 10690/84, European Parliament's amendments and modifications to the Draft budget of the European Communities for 1985; 8454/84, Amended proposal for a Council decision on the Communities' system of Own Resources; 8445/84, Commission proposal for a Council regulation introducing reserve measures to cover requirements in 1985; 8514/84, Commission's communication on the budgetary requirements of the Community in 1984 and 1985; 5899/84,

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Amended proposal for a Council regulation amending the Financial Regulation of 21st December 1977 applicable to the general budget of the European Communities; and the unnumbered document, Budgetary discipline; common position of the Council of Ministers; and welcomes the agreement on budgetary discipline providing for the firm control of agricultural and other expenditure.

Overseas Aid
10 pm
The Minister for Overseas Development (Mr. Timothy Raison): I beg to move,
That the draft International Development Association (Seventh Replenishment) Order 1984, which was laid before this House on 7th November, be approved.
I understand that, with the leave of the House, we can take with this the second motion—
That the draft International Bank for Reconstruction and Development (1984 Selective Capital Increase) Order 1984, which was laid before this House on 7th November, be approved.
Mr. Speaker: Order. Does the Minister have the leave of the House?
Hon. Members: Yes.
Mr. Raison: The purpose of these orders is to authorise an increase in our subscription to the capital stock of the World Bank for the take-up of a further 529 shares, and a contribution to the seventh replenishment of the International Development Association.
The International Bank for Reconstruction and Development, which is known more popularly as the World Bank, owes its existence to the imagination of those concerned with the immediate financial needs of Europe after the second world war. The creation of the World Bank, along with the International Monetary Fund, was an act of faith. Her Majesty's Government's participation was agreed by this House almost 40 years ago, in December 1945. Since then, the bank has, of course, changed its emphasis to tackle the problem of the world's developing countries.
The IBRD' s basic aim, enshrined in its articles of association, is to promote economic progress in developing countries, other than the very poorest, by providing financial and technical assistance, mostly for specific projects, in the public and private sectors. Loans have been granted to Governments for projects in a variety of sectors—agriculture and rural development, education, energy, industry, population, health and nutrition, water supply and sewerage, transportation and telecommunications. There has also been some non-project lending, including structural adjustment loans. This recent form of lending is to provide financial assistance—foreign exchange—to a country which undertakes to make changes in its economic management. The bank's total lending in the year to June 1984 was $11·9 billion. The bank's goal is to bring its borrowers to a point at which they are fully able to turn to the world's financial markets to meet their needs. The bank has helped many countries graduate out of its lending programme. The most notable case is, perhaps, Korea.
The Bank has unparalleled first-hand knowledge of a wide range of developing countries' problems and an operating experience which is second to none. Moreover—we attach more importance to this—it has a first-class system of evaluating its lending operations.
The Government have consistently given the strongest possible support to the World Bank president and his staff. I welcome the opportunity provided by today's debate to reaffirm that support, and to pay tribute to Mr. Clausen and his team for their sheer professionalism and dedication to the formidable tasks in hand.
More directly, we support the bank's central aim of the alleviation of poverty and its concentration of resources in

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key areas, especially in agriculture, rural development and energy. We welcome particularly the Bank's very useful country macro-economic and sector analysis work, as well as its willingness to do more in donor co-ordination.
I shall now deal more specifically with the draft International Bank for Reconstruction and Development (1984 Selective Capital Increase) Order 1984. The purpose of this order is to enable the Government to make a further subscription to the capital stock of the bank of a sum equivalent to $63,815,915, of which only 8·75 per cent. - or $5·5 million—would be paid-in. The balance would be callable. A copy of the IBRD resolution No. 395 has been placed in the Library for the information of hon. Members, and the sum I have mentioned is the price of 529 shares as set by the terms of that resolution. The selective capital increase will add a further $8·4 billion to the IBRD's capital base. That will help the bank to maintain its lending programme at the current high level. The main purpose of the selective capital increase was not to provide additional capital, however, but to effect changes in shareholdings in the bank following the IMF eights quota review. The need for a long-term increase in the bank's capital base will have to be met by a general capital increase in about 1986.
As a result of the selective capital increase, and in the context of the negotiations on the seventh replenishment of the International Development Association, the ranking positions of the major shareholders in the IBRD have been re-aligned: the United States and the Federal Republic of Germany remaining respectively in first and third positions, Japan moving from fifth to second position, and the United Kingdom—formerly second—and France—formerly fourth—sharing joint fourth place. The United Kingdom has thus been given a lower allocation of shares, 529, under the Bank 1984 selective capital increase than would otherwise have been allocated to us. However, this does not mean that our support for the bank is in any way diminished. The World Bank shareholding is generally fixed in relation to members' economic and financial strength.
I turn to the International Development Association. As the House will know, the association is the soft loan affiliate of the World Bank. It was created to provide loans on highly concessional terms to developing countries which would have great difficulty in servicing borrowing from the World Bank itself. As the association is administered by the same staff as the World Bank, all that I have already said about that staff applies with equal force to the association's operations. With its concentration of resources on the world's poorest countries—some 60 per cent. to Commonwealth countries—the association's programme is almost a mirror image of the allocation of our own bilateral aid programme. Many in the House will be aware that negotiations on the IDA's seventh replenishment were tough, protracted and, in the end, disappointing. A total of only $9 billion was agreed, some 25 per cent. less than the nominal level of $12 billion approved for IDA 6.
Although at the final meeting of the IDA 7 Deputies in Washington last January donor representatives felt that the IDA was one of the most effective multilateral channels for transferring resources to the poorest countries, the United States' representative reiterated his country's earlier determination to contribute to the replentishment no more than $750 million in each of three years. The other countries represented were not prepared to meet the
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shortfall in the contribution of the major donor. and the size of the replenishment was predicated by the United States 25 per cent. share. The IDA management was given a mandate to try to raise additional resources to help close the gap between the $9 billion agreed and the level of $12 billion which most donors regarded as the minimum required by the association for its fiscal years 1985–87. As hon. Members will know, I was able to announce to the House on 27 January that Her Majesty's Government would be prepared to make a contribution to supplementary funding on the basis of the usual equitable burden-sharing among donors. Many other donors have expressed a willingness to contribute on a similar basis, but the IDA management has not pursued this question of supplementing IDA's general fund because of the declared non-participation of the United States and, in their absence, of Japan and the Federal Republic of Germany.
The draft International Development Association (Seventh Replenishment) Order 1984 will if approved by the House, give the Secretary of State authority to make a United Kingdom contribution of £401,520,000. Payment to the association would be effected by the deposit of three promissory notes, of equal amounts, over three years from 1985, to be encashed over a period of years, with the costs being met as they occur from sums voted for overseas aid.
I do not propose to go into the detailed arrangement of the workings of the replenishment. They are set out in the report of the Bank's executive directors, together with the IDA resolution, dated 24 May 1984. Both have been published as a White Paper—Cmnd 9402.
I should, however, draw the attention of the House to changes in the shares of contributions of several donor countries. Five countries—the United States, the United Kingdom, the Federal Republic of Germany, Kuwait and Sweden—have reduced their percentage shares; while 10 other countries have increased theirs—the most significant being Japan, France, Canada, Italy, Norway and Finland. In our own case, our percentage share has come down from a very high 10·1 per cent. contribution under the previous replenishment to 6·7 per cent. I make no apologies for that. Our reduced share is not a reflection of any weakening of the Government's resolve to support the association. We have determined the level of our contribution in relation to the United Kingdom's relative economic strength among donors.
I am glad to say, however, that we were able to negotiate a package with our Japanese friends whereby their share of IDA 7 funding was substantially increased as par of the arrangement for the realignment of shareholding positions in the World Bank, to which I referred earlier.
Mr. Russell Johnston: Will the Minister explain more clearly what he means by his statement that we have determined the level of our contribution in relation to the United Kingdom's relative strength among donors? What sort of calculation did that involve?
Mr. Raison: It is based on the gross national products of the different donor countries. The 10·1 per cent. share that we had in the previous replenishment was far above our proportionate share of the world's economy. We have reduced it to a more realistic level.
During negotiations, we made sure that the combined share of the United Kingdom, France, West Germany and

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Japan was no less than it was under the previous replenishment. In fact, it turned out to be slightly higher than last time.
The IBRD and the IDA are the world's leading development institutions. They constitute the cutting edge for change and for improvement in the social and economic conditions in developing countries. Successive British Governments have supported them, and our commitment now is as firm as ever. I commend both orders to the House.
10.12 pm
Mr. Stuart Holland: We deplore the failure of the United States Administration to contribute to the supplementing of the international development association funds. We regard that as critical for the role of IDA. I shall develop that argument and its relevance to Government policy shortly.
We also deplore the fact that the Government's IDA contribution will fall from 10·1 per cent. to 6·7 per cent. We do not accept the Minister's argument that that reflects Britain's economic strength among donors, because we do not accept that the Government are fulfilling their potential in the international arena, nor that they are participating with other countries in the sorts of project for joint international recovery which the World Bank report for 1984 stresses as critical to the future prospects of less developed countries. The report states that the world's economy is now:
"balanced on a knife edge."
Students of economics will be familiar with what is known as knife-edge theory. It is that an economy, such as the international economy, can either hit the ceiling or the floor. The hon. Member for Hertford and Stortford (Mr. Wells) is amused. I trust that during the debate he will argue for a recovery of the world economy rather than a continued collapse of trade among less developed countries, which has devastating effects on sub-Saharan Africa.
Mr. Bowen Wells (Hertford and Srortford): I shall not argue on the merits or demerits of knife-edge economic theory. I shall argue about the effect of the amount of money and help that we give to ordinary people in extremely poor countries.
Mr. Holland: I would be impressed by the hon. Gentleman's intervention if we were to have a significant increase in the amount of money given, but the Minister has just said that we cannot have such an increase because of the position of the United Kingdom economy. Although he claims that this is an outdated economic theory—by which I presume he means a Keynesian economic theory—it is very much to the credit of the World Bank that it has not fallen for the manic monetarism of some other institutions and is arguing the case for global recovery. The bank stresses that, without that recovery, the prospects for some areas of the world economy, especially sub-Saharan Africa, are extremely dire.
As the bank stresses, after three years of almost uniterrupted decline in growth in trade, the improvement in the world economy during the past year was due almost entirely to the United States recovery. That recovery is no longer in question, but it will be deflated by the American Administration's cuts in expenditure, including social
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expenditure. If, as expected, that reduces American exports to the level where they were about two and a half or three years ago, that will take about $100 billion worth of demand out of the world economy. Although Third world countries are not in as strong a position as they should be, in terms of the United States importing from them, that in itself will damage Third world prospects.
It is a double blow for Third world countries that the United States Administration can neither contribute to the replenishment of IDA funds, nor can it sustain its recovery, which we were told was secure, in such a way that world trade and payments can increase. The figure of $100 billion in total demand from the North is the equivalent of 4 per cent. to 5 per cent. of Third world export trade. The collapse of that trade will be damaging and will certainly dwarf the replenishment levels in IDA funds at present.
As the bank stresses, strains persist in the international structure of trade and payments, and faced with the need to reduce imports, the developing countries have been forced to reduce the level and alter the composition of their investments. Capital formation has been shifted towards the energy sector and economic infrastructure at the expense of the social sector.
The position of sub-Saharan Africa will be dire. The list of human miseries in the African continent has been well highlighted by UNICEF in its report on the impact of recession on children, which showed how children have been the victims of economic decline. Much attention has been focused, and will be—with good reason—in this debate, on the drought in Ethiopia and the relevance of the World Bank's proposals to the African Continent. However, in a country such as Zambia, the height-for-age ratios have fallen in all age categories of children under 15. Child mortality in sub-Saharan Africa was 50 per cent. higher than the average in developing countries in the 1950s; it is now almost double that average. The bank claims that there must be improvements in countries' internal economic management. We do not claim that internal economic management cannot be improved. The bank also claims that additional external assistance will not by itself solve Africa's problems.
Net capital flows to sub-Saharan Africa are expected to fall from $11 billion to $5 billion. We are talking about a difference of $6 billion, which is double what the replenishment of the IDA from $9 billion to $12 billion would have been. It shows how devastating will be the effect of not achieving the aimed-for increase in the IDA replenishment. Some of the figures illustrate how serious the position is. Against gross capital flows in 1980–82 of about $13·1 billion, the projections for 1985–87 for sub-Saharan Africa are a total of $13 billion. But amortisation, or the paying off of debt, will increase from $2·3 billion to $8 billion, so that the net capital flow into the area will be halved—instead of being $10·8 billion it will be $5 billion.
The World Bank, under pressure from the Reagan Administration, has felt obliged to endorse the role of market forces, but, because of the increased amortisation payments, net private capital flows, which, for 1980–82 were $2·5 billion, will now be minus $1 million. In other words, not only is the United States Administration failing to increase IDA, but the private sector lauded by that Administration is taking resources out of the region.
Mr. Dennis Skinner: Does my hon. Friend accept that, in the past decade or more, extremely high interest rates, for the most part led by the United States, have meant that when it comes to a crisis, rather than poor little kids in Ethiopia and elsewhere in the Third world being saved, the entrepreneurs in the casino economy—the bankers—are being bailed out? This results in the poor countries having to pay more and more to save their necks, when all that the Western economy is doing is bailing out bankers who should have had their fingers burnt. In other words, the bankers are all right when they are making a profit, but, when they look as if they will die, the so-called market forces do not operate and the bankers are saved by those who should be looking after the starving millions.
Mr. Holland: My hon. Friend has made a typically forceful and relevant point. It is apparent from the World Bank's recent statement that it is especially concerned about the impact of IMF policies on the countries that it helps through the development programme. In other words, the World Bank is concerned with long-term development prospects, issues and projects, but the IMF is concerned with short-term balance of payment adjustments. This has meant—I am glad to see that the World Bank has endorsed this in the case of Latin America—that the IMF has imposed a further deflation of some $30 billion in trade by imposing cuts packages on some of the leading Latin American countries. Therefore, while the World Bank is trying seriously to make a contribution to world development prospects, the IMF is making contributions to the global slump. My hon. Friend's point about the role of the banks is important. The banks have lost confidence in several less developed countries, and in so doing over the past few years have started for the first time in decades to draw resources out of the Third world.
If imagination and political willingness were shown by leading Governments, and this Government must still be considered one of the leaders among the official development donors, we would see a public institutional response to offset that decline in the private capital flow and in private capital lending to the Third world. That would mean a World Bank and IDA replenishment that was several times what we are being offered by the Minister tonight.
The bank is cautious about market forces in its annual report. I am glad that it does not simply want to let the market rip, and it is not waging a war against the mixed economy as the IMF is. It stresses the importance of other programmes such as health and education, as well as improved financial control. It stresses smallholders and co-operative agriculture as well as the promotion of private investment. That is right, as private investment will not come unless it is co-ordinated and promoted through public institutions and by public policy. But the bank is not being allowed to play the kind of role it should be able to play in the promotion of investment and world trade. Also, inasmuch as the bank is affected by the kind of monetarist market reasoning coming out of the United States, market forces alone, whether through smallholders or cooperatives, will not be sufficient to ensure the long-term development aids with which the bank is concerned.
It is relevant to compare the analysis of trade by the bank and that by UNCTAD. The UNCTAD statistical handbook lists the commodities on which the Third world depends. It refers to wheat, sugar, coffee, corn, rice,
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agricultural raw materials such as cotton, natural rubber and tobacco, and minerals and other materials. Between 65 per cent. and 95 per cent. of trade in those commodities is controlled by multinational companies. The donor countries in the development assistance programme, the funding countries in the World Bank programme and the funding countries on the IDA programme must face the fact that only a fraction of the value added from those exports goes to the less-developed countries. Typically, less than 20 per cent. goes to those countries and frequently less than 10 per cent.
If the bank is to fulfil its aim of long-term development, it needs to take a leaf from UNCTAD' s book and confront the question of why so little of the value added in key commodities goes to the less developed countries. Countries such as Britain with a high share of multinational company activity in Third world countries should seek to ensure that a higher share of that value added goes to the Third world. If they do not those countries will not be able to offset their grave domestic economic problems in the current economic climate.
The World Bank report stresses the role of the aid donor. It deals with the longer-term agricultural development programme and the relationship between the bank, the British Government and other World Bank board members. The bank is not concerned with short-term issues. The bank is not the most appropriate agency to deal with the drought problem.
In the debate on 22 November I welcomed the possibility of the funds which the Government are not now to make to the IDA replenishment programme, because of the non-co-operation of the United States, being rescheduled to the World Bank's programme for Africa. However, there was nothing in the Minister's statement to confirm that. What is to happen to the £200 million which would have gone to IDA? Will it be allocated to the World Bank programme? What will happen in Bangladesh, for example? The Minister did not reply to my earlier question about that.
It appears that the 6,500 tonnes of food aid for Ethiopia was to have gone to Bangladesh. That is giving with one hand and taking with the other. The problem in Bangladesh is severe. The floods between May and September affected 20 million people and caused $800 million worth of damage. There is a 2·8 million tonnes shortfall in foodstuffs compared with a normal shortfall of 1·5 million tonnes. What is the Government planning to do about that? If they are not planning to reschedule the funds what will they do for Bangladesh and the food need there?
Any sure foundation for the World Bank's longer-term development programme in Ethiopia and Africa must be based upon an adequate response to the drought problems.
The Prime Minister has said that not only are the Government doing their bit, but that they are doing more than other countries. That claim is contradicted by the facts. The United Kingdom's contribution to Ethiopia before October this year was £1·2 million and £2·5 million worth of cereals. Since 1 October, the contribution has been £6·2 million plus two Hercules aircraft. Italy has given £16 million as well as two Hercules. West Germany has committed more than £7·5 million, excluding the EEC contribution. Australia has contributed £7·5 million, Canada £16·5 million and Bulgaria £10·5 million.
Italy's contribution is critical, not only in quantity but in quality. It sent 150 trucks plus spares to Ethiopia. The

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trucks could double the aid distribution capacity of the Eritrean Relief Association and make a direct contribution because of which the World Bank's longer-term programme would be based upon the survival of agriculture in the critical drought areas in Ethiopia.
Mr. Keith Best: The tenor of the hon. Gentleman's argument is probably that the problems in Bangladesh and Ethiopia are not for solution by individual countries but—especially in the latter case—can be solved only by the international community. Does he accept that when I was in Bangladesh some years ago there was no prospect that it would ever be able to feed itself in the foreseeable future? Surely these are matters for the international community as a whole and cannot be laid at the door of any one nation.
Mr. Holland: I am glad that the hon. Gentleman raised that point. Bangladesh illustrates the problem to which he referred. When I was in Japan not long ago I spoke with members of its development institute, which had sent a team to Bangladesh for two years to study areas of potential comparative advantage that that country might have in the world economy. After two years, they decided that there were precisely none. In textbook theory that should not be possible—in the real world, it is possible. One reason is not only the technological change, which means that jute is not the export commodity that it once was, but that we now have a multinational division of capital and labour world wide. Thus reliance on low-cost wages alone with intermediate technology is not sufficient to guarantee Bangladesh an international future.
I would have agreed with the hon. Gentleman had he said that it was not for national governments alone to seek to solve the problems of a country such as Bangladesh. That must be supplemented by multilateral and international action. But it appears that the food aid allocated to Ethiopia has been diverted from Bangladesh—and it was a small contribution in the first place, some 6·5 million tonnes. Yet there is an 800-million tonne gap in the needs of Bangladesh.
Mr. Robert Parry: Does my hon. Friend agree that one of the real problems for Ethiopia is that of the Eritrean people, and that assistance from the Government should be given through the Eritrean Relief Association to ensure that it goes to those in greatest need? I have tabled a question on that matter.
Mr. Holland: I agree with my hon. Friend. That is one reason why Ethiopia and Eritrea cannot wait for the World Bank's long-term development programme for sub-Saharan Africa. It is a point that the Minister seems unwilling to admit. The fact is that 85 per cent. of the drought areas in Eritrea and Tigre are outside the Government's control because they are in the hands of the Liberation Front, and 50 per cent. of Wollo is similarly outside the Government's control.
The Minister has chosen to react to the points that we have made several times by claiming that he has no desire to hype-up the political confrontation with the Ethiopian Government, and I appreciate that. However, he assumes that that would happen by dealing wih the Liberation Front. If so—as we have said before, and now stress again—there is every reason to allocate a far higher
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share of food aid to the relief associations such as those in Tigré and Eritrea. I know that the Minister is doing that, but it is on a small scale. The caring British public, which responded so overwhelmingly to the drought crisis in Ethiopia, is beginning to understand that a far higher share of food aid is going to the Addis Ababa Government that to the liberated areas—30 times more.
Mr. Andrew F. Bennett: Would not my hon. Friend accept that a large proportion of the food aid which is going in through the good offices of the Addis Ababa Government and the relief agencies is finding its way into parts of Tigre and Wollo which are not necessarily under the control of the Government and that the practical logistics of moving grain mean that the grain must go that way?
Mr. Holland: I appreciate my hon. Friend's point and I respect it, not least because he has been to the areas concerned and seen what the problems are. But the fact at the moment is that no long-term development programme such as the World Bank is proposing for sub-Saharan Africa will start at rather than behind the post unless the current drought can be tackled. If millions of people leave their farms because of the current drought and have to go to the main towns of the area for food aid distribution, there will be no chance of a harvest next year. It is totally different case from Bangladesh where floods this year left deposits and sediments which may mean a good harvest next year. That is not the position in sub-Saharan Africa.
I put this point to the Minister because it is directly relevant not only to laying the foundations for a longer-term World Bank programme but also to the concern shown by the British public. If he cannot call for a ceasefire and cannot persuade the Council of Ministers of the EEC to call for a cease-fire in Ethopia, is he so timid that he cannot at least call for no attacks upon properly marked food convoys and for an assurance that airstrips for flying in food aid which the liberation fronts have offered to construct should not be bombed?
Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. We are discussing the operations of the World Bank and the association and the levels of contributions thereto. We must not stray too far into the unilateral contributions of the British Government.
Mr. Holland: I am grateful for your guidance on that, Mr. Deputy Speaker, but we are talking not simply about the bilateral contribution of the British Government but about the role played by the EEC and the relationship between short term food assistance or drought aid and longer term development assistance.
Mr. Deputy Speaker: Order. With great respect, we are talking about two orders which relate to the operation of the World Bank and the International Development Association and the level of contributions which are set out in the order.
Mr. Holland: I appreciate that point, Mr. Deputy Speaker, but my argument, simply, is that the kinds of costs which are likely to be incurred by failure now to distribute food aid effectively in sub-Saharan Africa will pre-empt the kind of resources which the World Bank wants to put towards development. It will simply be remedying a drought crisis after hundreds of thousands or millions of people have died rather than being able to build on a sure foundation. We are not an insignificant power.

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Although our share of the World Bank has diminished, we are still represented on the board of the Bank and this Minister is directly responsible for Government policy on the Bank.
I would stress a further point on the relationship between the current economic crisis and the Bank's lending policy and the role of IDA. The bank is seriously addressing itself to the longer-term development issue. It is not receiving adequate support from the leading countries and from its board members on this point. It is not simply a matter of United States policy. It is, firstly whether alternative ways can be found for like-minded members of the bank's board to undertake activities which fulfil the spirit of the bank's objective without necessarily undertaking them through bank agencies.
Secondly, on such individual projects as the bank's programme for sub-Saharan Africa, where the analysis has been published in detail and where the prospectuses have been published in detail, what will the Government's response be? Thirdly, what role will the Government play in relation to the longer-term issue of global economic recovery which the Bank stresses is so crucial for its own activities? It is very notable that, because of its concern about the recession in the United States economy, the bank in its report makes the case for a European economic recovery which would have a very significant impact on the export performance of less developed countries.
This week's issue of The Economist asks why, with a recession now under way in the United States as a result of Government policy, Europe cannot take up the recovery
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and face its responsibility for a recovery programme. I was glad to see this and it is rare for me to say that of something in The Economist. If Europe does not do so, not only shall we have had a cut in the IDA contribution which could cripple the IDA' s activities, but we shall have a deepening of the global slump.
It is possible for the Government to take action. The longer term development prospects depend upon a real recovery in world trade. For example, a real recovery of $100 billion a year spent would not only sustain Third world exports by 4 to 5 per cent. a year but would, over a 10-year period, add more than a half to the Third world's GNP. That would make it possible not only to offset the debt crisis in some respects through repayment. And the World bank stresses the imminent risks to the Third world countries from that debt crisis. It would thereby enable less developed countries to put the brunt of the debt crisis behind them within not 10 but five years.
The Government are making no contribution to such a recovery. They are reacting to the depression of world spending and trade. They claim that they are justified in reducing contributions to the bank because of the reduced circumstances of the United Kingdom's economy. call upon the Minister to say what he is doing in the international arena to encourage not only the bank's policies but, for example, Commonwealth countries and their New Delhi summit proposals and those of the recent meeting of the Commonwealth countries for economic recovery. If we do not do so, not only the World Bank and its programmes will suffer but the Third world too.
10.41 pm
Mr. Bowen Wells: I congratulate my right hon. Friend the Minister rather than criticise him, as the hon. Member for Vauxhall (Mr. Holland) did, on the way in which he led the group in the World bank to try to effect a special fund for the support of the IDA to replenish the figure of £9·5 billion. That is what the total IDA replenishment has been reduced to by the American's failure to contribute to it. My hon. Friend maintained the amount of money allocated in the ODA budget in order to continue to make that contribution.
Those countries which failed to support my right hon. Friend were Germany and Japan. We in the House should say straightforwardly that we resent that. The Third world should resent the fact that Japan in particular, with its responsibility for aid and trade relationships with the Third world in which it is very much the winner, has failed in its responsibilities to the Third world far more than has the Government, who were led by my right hon. Friend to replenish that shortfall in the IDA replenishment led by the United States.
Let me deal with the United States and the reasons why it did not support the replenishment of the IDA at its current level — £12 billion. Clearly, in view of rising overseas costs and inflation, that would have been below what had been agreed to previously. When one bears in mind that in the meantime China, an extremely large country with many poor people, has come into the IDA, the failure not only to renew at the same level of £12 billion, but to reduce it by 25 per cent. to £9·5 billion, is something that the developed world should be ashamed of.
I much admire my right hon. Friend's work and determination in trying to bring that about. The reason why the Americans failed to do that was that they resent the fact that 40 per cent. of the IDA fund goes to India. It was felt that with the addition of China, an even greater percentage would have gone to India and to China. That is because the allocation of funds under the IDA is to those countries which have a low per capita income. India and China can therefore command a large percentage of the IDA budget.
India is a powerful economy. It is a nuclear power with a major defence capacity. It has also a major industrial capacity. The Americans are right to criticise the IDA's distribution of money to India. In fact, India could devote a large amount of its funds—it has large reserves—to the support of the poorest in its own country. I believe firmly that development begins at home, and help must start at home. Developing countries must put their own houses in order and direct their money to the poorest in the communities before they can expect the international community to respond. I have some sympathy with the American view of the IDA and I understand why they chose not to replenish its funds. On the other hand, I criticise it because IDA grant funds are needed desperately, especially in Africa, as the hon. Member for Vauxhall has said and as my right hon. Friend would undoubtedly agree. Aid is necessary in Africa to prevent widespread starvation of the sort which we have seen on our television screens and which has accorded a major response from the British people.
Mr. Parry: Is it not deplorable that our assistance to the African continent is so small compared with that which
1014
is made available by some of our European partners? We are making available only half of the target which has been set by the United Nations.
Mr. Wells: I believe that the hon. Gentleman is talking about the United Nations target of 0·75 per cent. of GDP, which we have agreed to and at which we should be aiming. That is the target for total aid contributions. But we should not talk in meaningless monetary economic terms. We should be directing ourselves to sending aid to where it is most needed. I am not interested in global figures. My interest lies in directing aid to the poorest, to the starving people of Africa and elsewhere. The issue is directing money, people, materials, compassion, management and administration to those places and not 0·75 per cent. targets. The hon. Gentleman may agree that that aid should be directed to Africa and the poorest parts of the world.
My right hon. Friend has been trying to promote that policy. He has been supporting the World Bank's fund for Africa, which is designed to absorb the moneys which were available in the ODA budget and to support the IDA. Having failed to secure replenishment for the IDA, we are supporting a special fund for Africa.
What is my right hon. Friend forced to say to the World Bank and other organisations which come to him for money? What I am about to say may lead to cross-party agreement. He is forced to say that he does not have the money now. I should like him to tell me that that is not true, but I understand that the Government are saying that they cannot now lend money to Africa for a special Africa fund. There will be opposition from West Germany and Japan to the formation of a World Bank special fund for Africa, and Britain may be included in that category because the Government say that they do not have the money.
Why do we not have the money? Let us return to the debate on aid and take up the leader that appeared in The Times on the Saturday after the debate. It seems that many in the House did not understand what was happening; neither did the leader writer of The Times. The aid budget has not been compensated at all for overseas risen costs and adverse changes in the exchange rate, whereas the diplomatic budget has been compensated in part for those risen costs.
The Times leader said that the Foreign Secretary had given way to the aid lobby and had not cut the aid budget in favour of cutting the diplomatic budget. The reverse is true, and my right hon. Friend the Minister for Overseas Development has had to deal with the consequences. We have learned from a strange admission to the Public Account Committee that my right hon. Friend's budget for dealing with the Ethiopian crisis by emergency relief and food aid was £50 million. Anyone budgeting in the ODA hopes that he will not have to use all that money and that he will be able to use money in other directions through the unallocated funds within the ODA's budget. That aid money has been used up almost entirely in providing drought relief in Africa. My right hon. Friend the Minister gave generously to Ethiopia to try to relieve the drought and political problems. The hon. Member for Vauxhall paid tribute to my right hon. Friend in trying to deal with those problems — perhaps not enough was done; there can never be enough done in such cases — that lie beneath the Administration of the Addis Ababa Government, whom I deplore.

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I can see that you are becoming agitated, Mr. Deputy Speaker, because I am not dealing with IDA, but these budgets are related.
Mr. Deputy Speaker: This is a general debate on overseas aid. The debate is concerned with the two funds and our contribution to them. Any hon. Member taking part in the debate must address himself to the orders before the House.
Mr. Wells: I fully accept your ruling, Mr. Deputy Speaker. I am trying to say that these two budgets are intimately related; that is why my right hon. Friend the Minister has not been able to make the contribution to IDA which he would otherwise ask the House to approve. We have reduced, as we should do in the light of our economic circumstances, the amount we give to the IDA. The figure has been reduced by 25 per cent. because of the failure of the American and British Governments to contribute at the level at which they would have contributed if the aid contribution had been renewed at the previous level. I contend that it should have been renewed at a higher level. You have given me the opportunity, Mr. Deputy Speaker, to make a point on the IDA.
The House has decided to take together the issues of the IDA and the IBRD, and I shall try to be quick in dealing with the World Bank. I am concerned about the way in which the British Government control the votes of the World Bank. Contrary to what the hon. Member for Vauxhall said, the way in which the alternative director on the IBRD executive board and the IDA executive board votes is controlled not by the Overseas Development Adminstration and my right hon. Friend for Overseas Development but by my right hon. Friend the Chancellor of the Exchequer. How is the alternate director told how to vote?
Mr. Stuart Holland: When my right hon. Friend the Member for Clydesdale (Dame J. Hart) and others were in government, that was the responsibility of the Ministry of Overseas Development. It is simply a reflection of the downgrading of that Ministry that that is no longer the case.
Mr. Wells: I am asking for information. Perhaps my right hon. Friend the Minister for Overseas Development will be able to correct us and put us on line. As I understand it, that aspect is not under the control of the Overseas Development Administration.
The IBRD needs not only more money—in case you think that I am getting out of order, Mr. Deputy Speaker, I point out that is a reason why I welcome the order—but greater conditionality. Conditionality is required to ensure that the money that goes through the World Bank is directed towards the development of those countries which need it.
Why has the alternate director of the World Bank executive board voted against Guyana and denied that country more funds from the IBRD to which the order contributes? A policy decision must lie behind that, which has not been revealed to the House. I ask my right hon. Friend to clarify how and why that director is authorised to vote. We should not penalise or turn our back on Guyana. We need to help Guyana's economy through the World Bank with the money which will be voted through this order.
I believe that the special adjustment loan is on offer, and I call upon my right hon. Friend to ensure that the
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World Bank conducts itself properly in relation to special adjustment loans to aid development of the poorer countries. That must be combined with the conditionality of the IMF so that we achieve a longer-term programme through the two institutions than is available through the IMF alone to resolve the difficult development problems faced by the poorer countries.
I shall give an example of how some of the money from the IBRD and the IDA is used badly, in the development of one country. Let us take St. Kitts. Sanctions against sugar going to the United States and the EEC have caused St. Kitts to lose $5 million, but the World Bank and the IDA have just given it $5 million for additional development projects. That shows that there is insufficient co-ordination of policy not just domestically and bilaterally but also internationally, with other countries and multilateral agencies, and through trade relationships, to support the development of the poorest countries. The IBRD and the IDA have the greatest opportunity to bring about that co-ordination. That is why I ask the House wholeheartedly to support the orders. I hope that my right hon. Friend can bring about the necessary improvements to meet the points that I have made.
Several Hon. Members rose—
Mr. Deputy Speaker: Order. I am sure that the House wants to hear the Minister's reply. He would like to begin at 11.22 or 11.23 pm. I appeal for brevity.
10.57 pm
Mr. Eric Deakins: I cannot altogether follow the hon. Member for Hertford and Stortford (Mr. Wells) in the sympathy that he expressed for the United States over the seventh IDA replenishment. The Minister, perhaps inadvertently, gave some, but not all, of the figures on this issue. It is worth summarising them briefly, because they are stark.
The sixth IDA replenishment amounted to $12 billion. The World Bank, which operates the IDA scheme throughout the world to the poorest countries, wanted $16 billion for the seventh replenishment. That would have been an increase of one third. There is to be $9 billion. That is a decrease of 25 per cent. on the sixth replenishment, but what is more important is that it is a decrease of 43 per cent. on what the World Bank considered to be essential for multilateral aid from rich countries to help poor countries over the next three years.
That is not the final figure, because the figures that I have been quoting are all in cash terms. As my hon. Friend the Member for Vauxhall (Mr. Holland) said, there is inflation throughout the world and the 25 per cent. cut is probably even bigger if one takes account of expected inflation over the next three years.
The prime mover in making this cut has been the United States, as the Minister very fairly pointed out. I think that the whole House accepts that. The hon. Member for Hertford and Stortford suggested that there were reasons for this. No doubt there were—there are reasons for bad policies, just as there are reasons for good policies. In other words, there are good reasons and bad reasons. In making that cut, the United States has forced all the other rich countries to follow suit because of the way in which the IDA contributions are calculated. Once a major donor has taken the lead, the process cannot be stopped but

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spreads like the ripples in a pond when a stone is thrown in, and the poor countries of the world will suffer substantially as a result.
The United States took that action for bad reasons. I know a great about political opinion in the United States in relation to the Third world. There is a great deal of myopia and sheer ignorance, not merely among the American people, but among their legislators, about the facts of life in the poor countries which the IDA replenishment is designed to aid. If ever there was a case of spoiling the ship for a ha'porth of tar, it is the penny-pinching attitude of the United States in this regard.
In terms of the United States defence budget, let alone its total budget, the cut in contribution from $1 billion to $750 million, rather than an increase to $1,250 million, is penny pinching indeed. For the world's richest country to adopt such an attitude to the major issue of the next few years, which will affect the future of all of us — not even improving life in the poor countries, but just stopping things getting worse—will inevitably make it far more difficult for the World Bank and other international institutions to stop the rot getting worse.
The United States, aided and abetted — as the Minister again quite fairly said, although he did not use those words—by the Federal Republic of Germany and by Japan, has taken a very bad decision indeed. It is probably one of the most significant decisions that it has taken in relation to the Third world since the second world war, and possibly in its history. Those three countries, with the rest of us who are carried along willy-nilly due to the system of proportionality in contributions, will live to regret that decision.
As my hon. Friend the Member for Vauxhall explained in such clear detail, the situation in the Third world is getting worse. Let those who doubt that read the World Bank's annual reports, including the latest report. The problems are not just poverty, unemployment, disease and malnutrition, but heavy debt burdens, population increases and, above all, the fact that in real terms commodity prices are at their lowest for about 30 years so that Third world countries cannot earn the money to pay for the extra cost of their imports or even to finance their debt burdens properly.
I do not suggest that the whole system is about to collapse like a house of cards, because I believe that the rich countries have sufficient nous and self-interest to recognise that they must allow debt rescheduling rather than let the world banking system collapse. But that does not improve life in the poor countries. It merely staves off disaster for all of us, and that is what the IDA replenishment would have done if we had had the $16 billion to which I believe the British Government would have been willing to contribute. Certainly there would have been pressure from the House for them to do so.
We have to accept the order, because it is better than nothing, but symbolically it is a disaster for the Third world. Those countries need more multilateral assistance, but they will get less as a result of the ignorant and myopic policies of the politicians and leadership of the United States. My only regret is that the United Kingdom, as a close friend and ally of that great country, did not have sufficient influence to change opinion on Capitol Hill and
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in the White House and ensure that the United States, as the world's richest country, undertook its true responsibilities to the poor countries of the world.
I am ashamed of the action of the United States. We must accept the order, because by doing so we shall preserve something at least for the poor countries. However, I am afraid that the position will deteriorate. When, in three years' time—under a Government of whatever colour—we debate the eighth replenishment of IDA, I am afraid that the global situation will be much worse, and that will be partly because of what the United States, Germany and Japan have done.
Mr. Deputy Speaker: I am grateful to the hon. Member for Walthamstow (Mr. Deakins) for the brevity of his speech.
11.06 pm
Mrs. Edwina Currie: This is the first time that I have taken part in a foreign affairs debate. I do so because two weeks ago, as a member of an all-party delegation that included six other hon. Members, I visited the United Nations. I should like to thank all those, especially in the Foreign Office, who so excellently put to use some very scarce funds. Whether anyone apart from the participants benefited from the exercise, I leave the House to judge, but I hope that it will be possible to continue to send such delegations.
We had 24 meetings at the United Nations in three and a half days. One might have thought that in that time we would have run the gamut of the United Nations agencies. We saw politics, and we saw the aid agencies. We had lunch with Brad Morse, the director of the United Nations Development Programme, which was an experience that I would recommend to anyone. But we did not see the General Agreement on Tariffs and Trade or the United Nations Conference on Trade and Development, and we did not see the transfer and banking of funds. We did not meet anyone from IBRD or from the IDA. That was a serious omission, because without trade and without industrial development — without the hard-headed commercialism especially noticeable in the IBRD—we must be talking in a very limited way. For if trade and commercial enterprises are successful and mutually beneficial, as I believe that they are, much aid becomes less necessary. The political input that the Western world would like to see into the Third world will follow both more subtly and more effectively in that way than if it is simply fuelled through the political and soft aid agencies.
I have had some contact with IBRD in the recent past. I believe that is is easily the most hard-headed and commercially minded of all the agencies operating in that field. My husband's company has been involved in much of the supervision of its activities in parts of the Third world.
The rules of the IBRD could be commended to one or two other organisations, including, perhaps, some of our own companies. I quote from the guide to the United Nations:
"Under its charter, the Bank must lend only for productive purposes—
in other words, not direct to Governments—
"and pay due regard to the prospects of repayment … loans must be for specific projects … The bank must assure itself that the necessary funds are unavailable from other sources on reasonable terms. The use of loans cannot be restricted to

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purchases in any particular member country or countries, and the bank's decisions to lend must be based only on economic considerations."
Most of the money comes from private investors—from the bank's own borrowing — and the disbursement is done entirely against invoices, most of which are for contracts based on international competitive bidding. After that, an extensive audit is required.
That is not a bad collection of commercial rules on which this and other Governments could allocate funds to the developing countries.
In 1974–75, my husband was involved in supervising some IBRD projects in Turkey. I went with him. This week, I checked on what has happened to some of the projects in the decade since then. The experience was salutary. The IBRD projects have continued to be profitable, despite all the political vicissitudes of that sad country. I found it hard to believe, but one particular project was in fact set up to break a government monopoly in one industry, and it has had a dramatic effect on that part of the economy.
The IBRD has encouraged and made possible an input in kind—not just cash—from other donor countries, so that, for example, the link between West Germany and Turkey has been emphasised. We should recognise and value such links. We would be far more worried if such links were forged between Turkey and East Germany or some other Eastern bloc country.
My hon. Friend the Member for Hertford and Stortford (Mr. Wells) says that funds should go to the countries where they are most needed, but there are occasions when funds should go where they are most ably used. If we concentrate on a country that is rising and that has potential for development, and if we can transform it from a poor to a moderately well-off country, we will have helped the world economy more rapidly and more effectively than by simply pouring money into the countries with the greatest difficulties.
There has recently been much criticism of attitudes to aid of various types. Some of the most telling appeared in a leader article in The Times of 27 November, which came out while we were sitting at the United Nations. It sent a shiver of fear through representatives of all of the countries sitting there, so much so that several agency leaders came up to us waving a copy saying, "You do not all believe this, do you?" The article's comments were based on a debate in the House on Overseas aid on 22 November. Two comments were especially apposite. First:
"MPs showed an obsession with volume."
It went on to say that aid should be
"subjected to more critical cost benefit analysis for donor and recipient together."
I do not think that I could be described as an aid freak because, perhaps more than any other hon. Member present, I am aware that the funds which we are voting are competing with my pet activities such as pensions and the National Health Service. We should try and we should admit that we are obsessed with inputs at the expense of outputs. If I might say so with the greatest respect, the speech of the hon. Member for Walthamstow (Mr. Deakins) was a classic example of an obsession with inputs without any consideration of the results. That, of course, is a British failing. We do it all the time. We do it with the National Health Service and with the Department of Health and Social Security, and we have just done it with the Common Market. I suspect that much of the funds that
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we have just voted for the EEC might have been better devoted to filling the grain silos of the rest of the world rather than those of Europe.
I suspect that much of the grumbling about inputs that we get from newspapers such as The Times is an excuse for not examining the results. Those who have doubts cannot be smug. We must ask three questions about where the money is going to and what we get out of it. First, what do we as donors get out of it?
Mr. Parry rose—
Mrs. Currie: Secondly, what do the recipients get out of it; and, thirdly, what is the result for both of us? We must ask what we donors get. It is a selfish and cruel question, but in this world the best things are often clone for the wrong reasons and we should remind ourselves and our constituents that, through the IBRD and IDA, about 80 per cent. of what we give comes back to us in direct procurement. One or two agencies provide even more. The United Nations development programme, for example. brought back twice as much to the United Kingdom in terms of dollars in 1983—we gave $28 million and got $63 million back. We are on to a good thing in some of these programmes and we should not let our constituents forget it. I commend to my right hon. Friend the practice of the Ministry of Defence which, when there is any argument about what we should do about that programme, circulates to all hon. Members a list of companies in our constituencies which benefit from the programme so that we can be assured how employment prospects in our constituencies are affected.
We must ask what developing countries get. For IBRD it is easier to say what they do not get. They do not get weapons from IBRD. They do not get political infiltration. We are not talking about CIA or KGB funding of tin-pot dictators. They do not get unrepayable debts. They do not get grandiose white elephants and triumphal arches. They do not get schemes which break down for lack of infrastructure, parts or skills. The Third world is littered with past mistakes and especially the neglect of agriculture. It is significant that all those things that I have listed are the result of bilateral aid programmes, especially of Government-to-Government direct bilateral aid. We in the United Kingdom give about two-thirds of our total aid through bilateral aid and about one-third in multilateral aid of this type. I cannot tell whether that proportion is right but I know that if we go on—
Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. The hon. Lady must relate what she is saying to the orders.
Mrs. Currie: I am referring directly to the orders., or at least I am trying to. I know, however, that if we head entirely away from programmes such as we are dealing with, we are probably going in the wrong direction.
We must ask what we get together. IBRD and IDF have shown the success of programmes which have a hard-headed and commercial element, for many of the nations that were once the recipients of IDA are now donors to IBRD. They work. Sentimentalitly alone is not enough. Long after the starving have disappeared from the television screens and long after the urgency of the immediate aid programmes has faded, the money that we vote tonight will contribute far more to a prosperous world from which we shall all benefit.
11.14 pm
Mr. Russell Johnston: Time is short and I want to make only one simple point. The Liberal party entirely agrees with the criticisms of the hon. Members for Vauxhall (Mr. Holland) and for Walthamstow (Mr. Deakins) of the United States for its failure to respond to the World Bank's request for replenishment to IDA. I wish to put that firmly on the record.
Did the Government make representations to the Reagan Administration about this, and if so, what response did they receive? Did they receive a response in the terms referred to by the hon. Member for Hertford and Stortford (Mr. Wells)
11.15 pm
Mr. Keith Best: I, too, congratulate my right hon. Friend on what he has done and on his personal commitment to this matter. I welcome these orders because they are directly relevant to what is happening to the poorest countries—something on which a number of hon. Members have rightly concentrated.
Of course we must increase the viability of developing countries as partners with industrialised nations in a mutually rewarding expansion of international trade. Every developing country, in addition to needing financial resources, also needs human resources. My hon. Friend the Member for Derbyshire, South (Mrs. Currie) mentioned Mr. Bradford Morse, the administrator of the UNDP. I was in New York two weeks ago and had more than one meeting with Bradford Morse. I endorse what my hon. Friend said. It is quite an experience, which unfortunately too few people have. I am indebted to him for reminding me that development is all about human beings. That is an axiom, but it is often forgotten when one gets bogged down in figures and percentages.
Mr. Morse reminded me that for far too long we have suffered from a Marshall plan mentality on aid. After the second world war in Europe all that was needed was a transfer of capital, but development in the Third world is still too concerned with investment and the transfer of capital, without concentrating on developing human resources.
In Europe that was not necessary, because the human resources were already fully developed after the second world war. We must do far more to improve skills, human resources and capacity. Only 10 per cent. of improvement in development comes from capital—the rest is in the development of human resources. The latter has been neglected, and in the last five years the World Bank has tried to fill that gap. That is why I am pleased about the orders.
I do not entirely follow the doom and gloom that is sometimes spread by Labour Members, although I share many of their criticisms and much of their concern. However, it is right to put on record that in the 30 years between 1950 and 1980 there has been a greater improvement in the less-developed countries than in any other 30-year period for any nation at any time, including Japan. Literacy in the poorest countries increased from 22 to 48 per cent. Life expectancy rose from 41 to 57 years. Child mortality decreased from 28 per 1,000 to 12 per 1,000. There has been a dramatic and worthwhile benefit over that 30-year period.
These orders are directly related to what we can do for the poorest countries. I am concerned about the fact that
1022
for the poorest 50 countries our percentage of gross bilateral aid was 63 per cent. in 1983, the lowest since 1979, with the exception of 1982. Our total overseas aid expenditure in 1983 was only 0·35 per cent. of GNP, the lowest for the last 20 years, except for 1980.
I appreciate that technical factors—for example, the timing of our contributions to IDA—have been largely responsible for those lower percentages, but that percentage of GNP is exactly half that suggested by the Brandt Commission. Indeed, it is necessary to remind the Government that in the Foreign and Commonwealth Office memorandum to the Brandt Commission in July 1980 there was a commitment to work towards the 0·7 per cent. of GNP for official aid, although without a target date. The percentage in 1979 was 0·52 per cent.
The poorest countries need international institutions because they are unattractive donees for bilateral aid as they have little to offer in return. I urge my right hon. Friend, when considering the orders, especially that relating to the IDA, to ensure in future that there is no flight of capital from Third-world countries, and to review the terms for loans because many of them are no longer applicable to the problems of Third-world countries. Finally, there is a need to fix interest rates for the future. Third world debtor countries cannot plan their next year's budget when they do not know what interest rates will be.
I commend the orders to the House.
11.20 pm
Mr. Tam Dalyell: I was told tonight by Mr. George Galloway, who is to give evidence to the Foreign Affairs Select Committee tomorrow and who has just returned from Ethiopia, that he has evidence from aerial photographs that about 500,000 people are making their way towards the southern Sudan. The position in sub-Saharan Africa, as the Minister knows, is beyond description.
In those circumstances, should this oil-rich country make this cut? About every eight hours a tanker leaves my constituency at Hound Point for Japan, Korea or heaven knows where, loaded with North sea oil. We are rich in oil. Even in our own national interests, should we not do something more to help the Third world?
My hon. Friend the Member for Liverpool, Riverside (Mr. Parry) has been waiting patiently to speak, as I did, so I shall end on a point which will not surprise the House. The Sunday Times estimates—it is an underestimate—that £3 million a day is spent on those islands in the south Atlantic, yet the Government propose this international penny-pinching. That is not the way that the United Kingdom should conduct its affairs in 1984.
11.22 pm
Mr. Robert Parry: When the Minister replies, I hope that he will deal with how aid is distributed. He may have seen the admirable article in this week's New Statesman by James Firebrace about large donors, such as the United States, Canada, and European countries. There is no examination of where their aid goes, but aid given by voluntary organisations is monitored.
My hon. Friend the Member for Vauxhall (Mr. Holland) rightly said that 85 per cent. of people in Eritrea can be reached only by the Eritrean Relief Association. I hope that the Minister will say that the Government

1023
recognise the ERA and will give it full support to ensure that vital supplies are given to the people there, who need them desperately.
11.23 pm
Mr. Raison: I shall deal with the last point immediately, although it is perhaps a little outside the scope of the debate. We believe that the best way to get help to the rebel-held areas of Ethiopia is by working discreetly through voluntary agencies. I believe that to be a better way than to recognise all sorts of bodies and to hype the matter up politically.
There was great unanimity in the debate, in that we all respect the World Bank and what it does. No hon. Member seriously dissented from that, and I echo that shared respect. I was glad to hear from a newcomer to our debates, my hon. Friend the Member for Derbyshire, South (Mrs. Currie). It is always nice to have fresh blood in these debates. Her stress on outputs as opposed to inputs is right. It occasionally worries me that we spend all our time during the Lomé negotiations talking about how large the next one will be, and little time talking about how large in terms of effect the existing one has been, or, indeed, why it has not been possible to spend much of the money that was allocated to Lomé 2. We should talk about the consequences of our aid programmes, rather than only about their size.
The debate was wide-ranging and not especially disciplined, but nevertheless it was valuable. All that I can do in the time available is pick out a few points, and one in particular. We all share the regret that the next IDA replenishment will be as low as $9 billion. I should tell the hon. Member for Inverness, Nairn and Lochaber (Mr. Johnston) that Britain and the EC made clear to the United States their views on the size of the replenishment.
My hon. Friend the Member for Hertford and Stortford (Mr. Wells), the hon. Member for Vauxhall (Mr. Holland) and others mentioned the World Bank's proposal for a special facility for Africa. The matter has been mentioned directly in relation to the orders and to the possibility of an IDA supplementary fund. The proposal was discussed by the World Bank's executive board earlier today. The facility will take the form of a voluntary fund with a target of $1 billion to be committed over three years. The fund would be outside the IDA and the normal burden-sharing arrangements among donors would not apply. The precise purposes for which it would be used will be agreed by donors at a meeting in January or February. The United Kingdom would expect to attend that meeting. Until then, we shall continue to discuss with the bank how best we can play our part not only in relation to the facility, but in the wider context of the bank's joint programme action for sub-Saharan Africa, of which the special facility will be only a part.
The bank's purpose—this is in line with what we have heard in the debate — is to support reform and adjustment undertaken in African countries that have structural problems. That is precisely the underlying aim of our bilateral aid programme in Africa. During the past year alone, we have committed programme or sector aid worth nearly £33 million to eight countries in pursuit of that policy, and we shall need to bear in mind the strength of our bilateral programme when considering how to respond to the bank's latest initiative. We must ask ourselves whether a United Kingdom contribution to the bank's proposed special facility would be likely to yield
1024
greater value to African countries than would our programmes, and whether, in consequence, it represents a higher priority claim on our resources. Hon. Members must understand that, in the final analysis, there are limits to what we can do.
In the wider global context, there is a general decrease in official development assistance available to developing countries. Therefore, it is more important than ever that aid flows are used to maximum effect. We know that aid alone is not sufficient to bring about change; the right climate and policies must also be there. We must ensure that we have an effective policy dialogue such as we have been seeking in the Lomé negotiations.
As the House probably agrees, the World Bank and IDA staff are taking a positive lead in those directions, especially in the creation of more consultative groups in which policy dialogue with recipient countries can take place, and donors can exchange information. The bank intends to strengthen its staff in that area. We can take encouragement from that. I say firmly that my Department will work closely with the bank and IDA staff wherever and whenever we can. That is the real thrust of the joint programme of action for sub-Saharan Africa.
I cannot say now exactly what will happen in the discussions on the special facility, but I can say categorically that we believe that nothing is more important in tackling the problems of the world, especially Africa, than that we should work together as closely as possible with the World Bank and the other multi-lateral and bilateral donors. That must by the keystone of our approach to Africa in the difficult period that lies ahead. The House recognises those difficulties. and it recognises that, in the short term, we have the desperate problem of dealing with the immediate famine. which I have seen so vividly, and which everyone has seen on television. That is the immediate problem, but beyond that is the crucial problem of finding out how best we can begin to get the long-term development that Africa has so far not seen, in spite of the great resources that have been poured into it.
When the House passes these orders, as I believe it will, it will be making a significant and important contribution to this enormously challenging and worthwhile task.
Question put and agreed to.
Resolved,
That the draft International Development Association (Seventh Replenishment) Order 1984, which was laid before this House on 7th November, be approved.

OVERSEAS DEVELOPMENT AND CO-OPERATION
Resolved,
That the draft International Bank for Reconstruction and Development (1984 Selective Capital Increase) Order 1984, which was laid before this House on 7th November, be approved.—[Mr. Raison.]

LAW REFORM (MISCELLANEOUS PROVISIONS) (SCOTLAND) BILL
Order for Second Reading read.
Ordered,
That the Bill be committed to a Scottish Standing Committee—[Mr. Sainsbury.]

LAW REFORM (MISCELLANEOUS PROVISIONS) (SCOTLAND) BILL [MONEY]
Queen's Recommendation having been signified—
Resolved,
That, for the purposes of any Act resulting from the Law Reform (Miscellaneous Provisions) (Scotland) Bill it is expedient to authorise the payment out of money provided by Parliament of—

(a) any expenses incurred by the Secretary of State—

(i) in paying remuneration or allowances to persons appointed as a temporary measure to act as judges of the Court of Session and High Court of Justiciary;

(ii) in assisting persons to conduct research into any matter connected with the law;

(b) any expenses incurred by the Lord Advocate in assisting persons to conduct such research; and

(c) any increase attributable to the said Act in the sums which, under any other Act, are payable out of money so provided.—[Mr. Sainsbury.]

PETITION

  Human Embryos
  11.31 pm
  Mr. Albert McQuarrie: I beg leave to present a petition from the ministers and members of the church congregations in the Banff and Buchan constituency. The petition contains 449 signatures and was initiated by Rev. David J. Randall of Doune Manse, Macduff, and the other ministers in the constituency.
  The petitioners believe that the newly fertilised human embryo is a real living individual human being, and oppose all practices which discriminate against the embryo, or violate his, or her, human dignity and right to life.
  The petition continues as follows:
  Wherefore your petitioners pray that the House of Commons will take immediate steps to enact legislation which forbids any procedure that involves purchase or sale of human embryos; the discarding of human embryos; their use as sources of transplant tissue; or as subjects for research or experiment (unless this is done solely for the embryo concerned).
  The petition initiated by Rev. David Randall, and the others to whom I referred, concludes:
  And your petitioners, as in duty bound, will ever pray for the guidance of Almighty God upon all your deliberations etc.
  To lie upon the Table.

Teachers (Scotland)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Neubert.]
11.32 pm
Mr. John Maxton: This is—
Mr. Gavin Strang: On a point of order, Mr. Deputy Speaker. My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) has done the House and the people of Scotland a great service by securing this debate this evening. However, the Secretary of State for Scotland has made a major announcement, which will have enormous consequences for teachers in Scottish education, but he is not here on the Front Bench tonight. Is that not an outrageous affront to the House of Commons?
Mr. Deputy Speaker (Mr. Ernest Armstrong): Order.
Mr. Dennis Canavan: Where is he? Where is the Secretary of State?
Mr. Deputy Speaker: Order. The hon. Gentleman must resume his seat when I am on my feet.
Mr. Canavan: The Secretary of State is not in his seat.
Mr. Deputy Speaker: Order. The hon. Gentleman knows that he is taking time from the Adjournment debate by continuing the point of order. The presence or otherwise of the Secretary of State is not a matter for the Chair.
Mr. Canavan: On a point of order, Mr. Deputy Speaker. Where is the Secretary of State if he is not in his seat?
Mr. Deputy Speaker: Order. I have already told the House that this is not a matter for me.
Mr. Maxton: I take the point that my hon. Friends the Members for Falkirk, West (Mr. Canavan) and for Edinburgh, East (Mr. Strang) are making, because the issue of teachers' pay and salaries, and their demand for an independent inquiry to examine their pay and conditions, is an important one for Scotland.
When I first applied for this debate two weeks ago, the major teaching union in Scotland, the Education Institute of Scotland had been demanding such an inquiry for four months. When I was eventually granted the debate last week, it was against the background of the teachers in Scotland being on strike for one day. That strike achieved a turn-out of 31,000 out of 41,000 members of the EIS. In areas which are traditionally moderate such as Dumfries and Ayrshire, the strike was 90 per cent. effective among EIS members. Tomorrow, yet again the teachers of Scotland will be on strike.
In the meantime we have had a written answer from the Secretary of State to a question carefully planted by the hon. Member for Stirling (Mr. Forsyth). Planted questions are not unknown. In that reply the Secretary of State made important announcements about the inquiry into teachers' pay.
The first point that must be made is that the Secretary of State is not present to hear the debate. Secondly, he should not have made such an important statement in a written answer. He should have made a statement on the Floor of the House this afternoon so that we could question
1028
him about it. It is an insult — a continuing insult — because time after time the Secretary of State makes statements by way of written answers.
I understand that on television in Scotland tonight the Secretary of State said that a written answer was the usual way to deal with such matters. His colleagues in the Cabinet do not believe that. They believe that the correct way is to make a statement on the Floor of the House. How much better it would be if we had an assembly in Scotland where such matters could be properly debated and decided.
If the statement is so important, why did it have to be made today and what effect does the Secretary of State think that it will have? If I were being slightly less immodest than usual, I should say that it was to forestall my Adjournment debate. I do not believe that to be so. I think that the Secretary of State must have thought that if he issued the statement today it would appease the teachers in Scotland and that the industrial action promised for tomorrow would be called off. I have spoken to teachers' leaders in Scotland tonight and I am afraid that I must disillusion the Secretary of State.
The Secretary of State was given a roasting tonight on Scottish BBC television. He was taken apart by that most moderate of women, Mrs. Mary Marquiss, and made to look foolish. That says something about his case.
Far from appeasing the teachers, he has made matters considerably worse. It is likely that what he has said will cause considerable confusion in Scotland tomorrow and that the industrial dispute will go on even longer than first intended. It is possible that the teachers will ballot for an extension of industrial action and that they will be joined by other trade unions in the teaching sector.
The Secretary of State has treated the legitimate demand for an inquiry with contempt. He is not prepared to admit that teachers' pay has been seriously eroded. He said in the letter which formed part of the written reply:
"it is of course no part of the Government's policy that salary increases should be indexed either to the rate of inflation or to some measurement of pay increases in the economy generally … However, pay awards to teachers over the last 10 years or so have in fact been very closely comparable with those made to other groups of local authority employees in Scotland."
I do not know about whom the Secretary of State is talking.
Mr. Canavan: What about the police?
Mr. Maxton: Indeed, what about the police? Their salaries have gone up considerably more than teachers' salaries.
The Minister has treated that argument with complete contempt. He has said to the teachers, "We do not believe that your salaries should be increased. We believe that the erosion of your salaries against the cost of living and other comparable professions is right." From what he said on television about pay, it would appear that one reason why he is refusing to set up an independent inquiry is that it would give a blank cheque to the Educational Institute for Scotland. Conservative Members might agree—do that they think that it would so so? Let us consider what that means. They are saying that an independent inquiry—one set up not by the EIS but by the Secretary of State—would be so convinced by the teachers' case that it would give them everything they want.
The Minister said that the workload of pressures on teachers has not increased. Anyone who knows anything about the teaching profession knows that that is not the case. There has been enormous curricula development in

1029
relation to those two great men of Scottish education, Dr. Munn and Mr. Dunning. The Secretary of State says that, essentially, the curricula development will be over in a short time. Anyone who studies the matter knows that examinations will have to be set up and the work by teachers will continue for a long time yet. Many children face prospects of no employment when they leave school. They are not interested in education because they feel that they will be on the dole queue anyway. That places an additional burden on teachers.
The Secretary of State makes an offer of a possible award of additional money. Let us be clear that that is hedged about by so many clauses, sub-clauses and sub-contracts that it is difficult to say that it is any more than a con-trick. In return for that fraction of a promise, the teachers will be asked to give up hard-fought and hard-won conditions of service for essentially nothing. They are not being offered anything in return.
The Minister has solved nothing by his statement. The teachers are angry, depressed and frustrated. That will lead in the short-term to industrial action. No teacher wants that—the teaching profession is not renowned for industrial action. The Minister must ask why the Government have forced teachers into industrial action that they do not want. Even more important are the long-term effects on the morale of Scottish education of such a statement.
I ask the Minister to change his mind and set up an independent inquiry to decide the rightful position of Scottish teachers.
11.44 pm
Mr. Harry Ewing: I congratulate my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) on his good fortune in having an Adjournment debate tonight on this important matter. I am grateful to him for leaving me a few minutes before the Minister replies.
It is significant that the Minister and his right hon. Friend the Secretary of State have had ample opportunities to address the House on this matter, but they have declined to do so. Had it not been for the fact that my hon. Friend was fortunate in obtaining the Adjournment debate tonight, there is a strong possibility that we should not have heard from the Government today.
I said earlier today that the Secretary of State's letter on this issue was an insult to the teachers and to the House and therefore it would have been a complete waste of time had he come to the House to make a statement today. I have come to the conclusion that the Government have now set themselves on a road which turns every grievance in this country into an industrial dispute.
The Scottish teachers have a justifiable grievance. The Munn and Dunning reports have been produced. The whole context of a teacher's work load has changed quite dramatically. The Secretary of State does not even acknowledge that in his letter to Bob Beattie, published today. Teachers' salaries have fallen substantially, in a way which no other profession in this country has experienced. The Secretary of State acknowledges that fact but goes on to say that that is part of the Government's policy in any case.
The right hon. Gentleman adds a final insult to injury by saying that he is prepared to try to find a way around all this by setting up some kind of inquiry, but that he will
1030
dictate the terms. He wants an investigation into nine or 10 points which would dramatically alter teachers' contracts of employment by taking up hard earned home time in order to right a grievance'. The teachers have a justifiable grievance. The Secretary of State and his hon. Friends want to alter the teachers' contracts in order to right what undoubtedly is a justifiable grievance.
If my hon. Friend the Member for Cathcart is right and there is prolonged trouble in Scottish schools, it will be because the Secretary of State does not understand Scottish education. Never having attended a Scottish school, he does not understand that we aim for the highest standards. Nor does he understand the dedication of Scottish teachers. Therefore, he plays on something which he simply does not understand.
If there is trouble in our Scottish schools, the responsibility for it—let it be said before the trouble begins; it is not a case of being wise after the event—will lie at the door of the Secretary of State. I hope that the parents of children in Scotland will understand clearly that the teachers are the victims of this Government's dogma and of a policy which is so unjust and so reprehensible that it is bound to lead to trouble. Even at this late hour I plead with the Minister to try to persuade his right hon. Friend to use common sense, to withdraw the letter which he sent today to Bob Beattie and to accept the teachers' request, not a demand, for an independent review so that the teachers can get on with the job which they so want to do—teaching our children.
11.45 pm
The Parliamentary Under-Secretary of State for Scotland (Mr. Allan Stewart): On such a serious subject, it is a pity that the hon. Member for Falkirk, East (Mr. Ewing) did not resist the temptation to make some cheap and totally unjustified personal remarks about my right hon. Friend the Secretary of State. The hon. Member for Glasgow, Cathcart (Mr. Maxton) will not be surprised to learn that I did not agree with much, if any, of what he said. But this is a serious subject and I am glad of the opportunity tonight to set out the position, following my right hon. Friend's statement, and in particular to put on record the Government's decision today on the postponement of the implementation of the standard grade, following the receipt today of a letter from the Convention of Scottish Local Authorities.
The complaints of hon. Members opposite about the absence of an oral statement were totally bogus [interuption.] I have checked what the last Labour Government did on teachers' pay under similar conditions. Not only was there not an oral statement, but I have not found a written statement, although one may exist.
I assure those hon. Gentlemen who have suggested that in some way the timing of today's decision was related to industrial action that it was completely unrelated to any disruptive action. Of course we deplore the disruptive action that has been taken. I hope that disruptive action will not continue once the teachers have had the opportunity to consider precisely what my right hon. Friend said. Disruptive action will damage pupils, Scottish education and teachers' reputations. I can say unequivocally that disruptive action from the teachers' point of view will achieve nothing.
No responsible Government could possibly have signed a blank cheque in the way that the teachers wanted. But my right hon. Friend has said clearly in his statement that

1031
he fully appreciates the strong feelings of many teachers. He has pointed out that there is another possible and proper way to handle the matter.
Mr. Canavan: Give the teachers the same money as the police.
Mr. Stewart: If I have time, I shall come to the hon. Gentleman's point about the police.
It is the statutory responsibility of the Scottish joint negotiationg committee to determine the salaries and conditions of service of school teachers in Scotland. We are prepared to consider on their merits, and in the framework of the Government's existing public expenditure plans for Scotland, any proposals relating to pay and conditions of service which might result from a detailed examination undertaken by the SJNC for school education.
Mr. Maxton: If the Minister is prepared to do that, why does he not accept the report that has already been drawn up by the working party of the joint negotiating committee which has representatives of the Secretary of State on the management side?
Mr. Stewart: I am about to deal with that report, which I have read, unlike, I suspect, many hon. Gentlemen.
My right hon. Friend has, however, pointed out that a review of conditions of service would have to deal specifically with areas where existing arrangements appear not to be in keeping with the present-day requirements, including the definition and prescription of teachers' responsibilities in the planning of personal teaching methods and programmes; the teaching, discipline and assessment of pupils; participation in schemes of personal professional development; participation in pastoral, tutorial and guidance arrangements; lunchtime and playtime supervision of pupils and consultations with parents, including attendance at parents' meetings, and control by employers of time within conditioned hours when teachers are not in class contact.
I cannot accept that it is other than realistic and constructive to want to examine teachers' conditions of service as well as their salaries. In much of the discussion of the teachers' request for an independent review of their salaries alone, great play was made of their status as professionals. But the argument that we have been hearing is that teachers should be paid on what they conceive to be professional scales but that their conditions of service, which in a number of respects are favourable, should not come under scrutiny. Teachers currently work a 32½-hour week. I shall rephrase that. Teachers currently have a 32½-hour working week.
Mr. Ewing: That is a cheap point.
Mr. Stewart: No, it is not a cheap point. It is surely unusual, by the standards of any profession, that teachers should have several hours in the week—the difference between their class contact time and their working hours—in which it is up to them to decide where they put in the hours that they are expected to spend on non-class contact duties.
I understand that there has been something of a hysterical reaction about the conditions of service point from the Educational Institute of Scotland this evening.
Mr. Tam Dalyell: A what reaction—historical or hysterical?
Mr. Stewart: I understood that there has been a hysterical reaction to this point. There is a good deal of
1032
confusion about such matters as playground and lunchtime supervision, discussions with parents and attendances at parents' meetings. There is much doubt in the minds of many teachers whether these matters are part of their professional duties. It is in no one's interests—parent, teacher or pupil — to leave the issue unresolved. A review is a sensible response to what has been said.
I shall respond to the arguments advanced by the hon. Member for Cathcart about the teachers' case for substantial salary increases.
Mr. Donald Dewar rose—
Mr. Stewart: As the hon. Gentleman knows, I usually give way to those who wish to intervene. However, I should like to get on with my speech. If I have time later, when I have put my case on the record, I will give way to him.
Mr. Canavan: Did anyone teach the Minister to make a speech?
Mr. Stewart: I had excellent teachers.
Mr. Canavan: It does not sound like it.
Mr. Stewart: We have been told by the hon. Member for Cathcart that the teachers have an unanswerable case for salary increases. That is based on the proposition that if something is said often enough and loudly enough it automatically becomes true.
Mr. Canavan: Give teachers the same money as the police.
Mr. Stewart: I am coming to the hon. Gentleman's point about the police. Teachers have been treated very much like other comparable groups of employees. Teachers say that comparable groups have received much larger pay increases than themselves, but if they are compared with other public service groups, especially others employed by local authorities such as manual workers, social workers, administrative, professional and technical grades, and with civil servants, it emerges that they have been treated in much the same way. When one compares teachers with civil servants in the comparable salary bands, it emerges that teachers have had larger salary increases over the past 10 years than those groups.
The hon. Member for Falkirk, West (Mr. Canavan) referred to the police. The police provide security and they are significantly different from other groups because they have no right to strike. I need hardly say, in more general terms, that it is not the Government's policy to index pay increases either to the rate of inflation or to earnings of other groups.
Mr. Canavan rose—
Mr. Stewart: That would not be consistent with our policy of fighting inflation—
Mr. Canavan: It is on the police—
Mr. Stewart: —or of keeping down expenditure—
Mr. Canavan: Will the Minister give way?
Mr. Deputy Speaker: Order.
Mr. Canavan: It is unfair of the Minister to compare teachers with the police.
Mr. Deputy Speaker: Order. I must ask the hon. Member for Falkirk, West (Mr. Canavan) to resume his seat. The Minister has not given way.
Mr. Canavan: Then he will give way now. The police cannot be compared with teachers. Teachers educate children.
Mr. Deputy Speaker: Order.
Mr. Canavan: The police are employed by this Government to beat miners and others over the head on picket lines.
Mr. Deputy Speaker: Order. The hon. Gentleman is not being fair to the hon. Member for Glasgow, Cathcart (Mr. Maxton), who was fortunate enough to secure the Adjournment debate. The debate is personal to him and we want to hear the Minister's reply. Mr. Allan Stewart.
Mr. Canavan: Will the Minister give way?
Mr. Stewart: No, I have given way to the hon. Member for Cathcart, who initiated the debate. I am not giving way to the hon. Member for Falkirk, West. The local authority sector must be a part—[Interruption.] The hon. Member for Falkirk, West is not doing any good by making constant interjections. Hon. Members on both sides of the House want to hear what I am saying in response to the arguments of the hon. Member for Cathcart.
Hon. Members will know that my right hon. Friend sought the advice of the Scottish Examination Board and COSLA on whether phases II and III of the standard grade reforms in the implementation programme should be postponed. The SEB advised that for its interest there was as yet no reason for postponement. I have today received the advice of the convention that phases II and III should be postponed, and my right hon. Friend has accepted that advice. I agree with the convention that the policy of non-co-operation in new curricular developments, which the EIS has adopted, makes it necessary to postpone the new courses due to begin in August 1985 and August 1986.
I share the extreme reluctance with which the convention said it decided that postponement was now inevitable. The refusal of teachers to co-operate in new developments is a complete betrayal of the expectations of parents and pupils. I regret particularly the loss to those pupils who have not hitherto had the opportunity to show what they can do in national examinations and to gain a certificate showing their achievements. The policy now adopted by the EIS contrasts strangely with its view, less than two years ago, that implementation should be speeded up—a view that the Government then accepted.
Mr. Dewar rose—
Mr. Stewart: By its action — or rather policy of inaction the EIS has now prolonged for the schools the
1034
period of overlap during which both old and new courses are taught, a period which, not so long ago, the EIS was anxious to reduce to a minimum.
Mr. Dewar rose—
Mr. Stewart: May I finish this point?
I must reiterate what my right hon. Friend the Secretary of State has already made crystal clear: there can be no going back on phase I of standard grade, the new courses in English, mathematics, science and social and vocational skills which pupils started in August this year. We cannot betray the trust of those pupils by saying to some of them that, after all, they will not have the opportunity to gain the Scottish certificate of education in 1986 and saying to others that, after a term spent on the new courses, they must revert—
Mr. Dalyell: On a point of order, Mr. Deputy Speaker. I thought that you were going to bring the proceedings to an end. The Under-Secretary of State has made an important statement. There has been a difficulty in getting such statements from the Library the following day. May we have the statement placed in the Library? Will you approach Mr. Speaker on this subject? A statement made around midnight has not been available to hon. Members.
Mr. Deputy Speaker: The Under-Secretary of State has heard the hon. Member's comments.
Mr. Dewar rose—
Mr. Stewart: I cannot give way; I have only one minute to go. I shall be happy to ensure tomorrow that hon. Members have an early copy of what I am saying, because this matter is important.
Phase I of standard grade must go ahead as planned, and we shall, of course, monitor the position. We are consulting the local authorities and the examination board. I hope that we can minimise any further disruption to pupils now embarked on these new courses, to pupils studying for ordinary grade and higher grade examinations and to the conduct of the examinations next year.
The Opposition have talked about the additional work load for teachers. I must say to the—
The Question having been proposed after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned accordingly at two minutes past Twelve o' clock.