Foreign Affairs Council (Hansard, 22 February 1984)

§ The Secretary of State for Foreign and Commonwealth Affairs (Sir Geoffrey Howe)
With permission, Mr. Speaker, I will make a statement on the outcome of the Foreign Affairs Council held in Brussels on 20 and 21 February, at which I represented the United Kingdom and at which my right hon. Friend the Minister for Trade was also present. A co-operation council with Israel on 20 February and a ministerial conference with Spain on 21 February were also held in the margins of the Council.
The Council gave unanimous support to my proposal for a request for the Parliament's opinion on the 1983 refund regulations to be given in time for them to be considered at the next meeting of the Foreign Affairs Council on 12 and 13 March.
There was a follow-up discussion to the talks which had taken place over the weekend on preparation for the European Council next month. It was agreed that the Commission should now produce a document covering all those aspects of the negotiations not already being handled in other specialist Councils. The paper will therefore cover the central budgetary issues—budget imbalances and budget discipline—for discussion at the March European Council. Separate discussions between individual member states will of course continue in the meantime.
The Council agreed a substantive declaration on the agricultural transitional arrangements with Spain, which was presented to the Spaniards at the ministerial conference.
The Council reached agreement on the arrangements which will govern Greenland's relationship with the Community from 1 January 1985. There will be a treaty amendment linked to agreements on fisheries which balance the development of Greenland's own fisheries with the needs of the Community. The change in status is subject to ratification by member states in accordance with their constitutional procedures.
The Council had a first discussion, without taking any decisions, of the Commission's proposal to stabilise imports of certain cereal substitutes.
The Council agreed a declaration emphasising the Community's concern at the build-up of protectionist pressures in the United States. The Council also discussed the proposal for a new common commercial policy regulation. Work is to continue on the technical aspects of this.
The Council reviewed progress in negotiations to renew voluntary restraint agreements for steel imports from European Free Trade Association suppliers and Spain.

§ Mr. Robin Cook (Livingston)
On Monday, the Economic Secretary to the Treasury assured the House that Europe was at a crossroads. In the light of this afternoon's statement it would appear that the Foreign Affairs Council has parked heavy lorries over all the exits and left the Foreign Secretary boxed in.
The Foreign Secretary referred to the settlement with Greenland. He will be aware that that settlement provides for a payment for every man, woman and child in Greenland of £211 for every year for the next 10 years. As Greenland was plainly much more successful than Britain at obtaining progress at the Foreign Affairs Council 824 meeting, will the Foreign Secretary consider approaching the diplomatic corps of Greenland and asking them to represent British interests at the Council's next meeting?
Will the Foreign Secretary confirm that it is true, as suggested in his statement, that the only progress that he can show on the payment of Britain's budget refund is the fact that a nice letter is to be sent to the European Parliament? As that Parliament decided only last week to block the rebate for another month, what possible progress does the Foreign Secretary hope to achieve on that matter?
While we are considering exchanges of letters, has the Foreign Secretary been informed that, on Monday, the House was told that it could not bear what was in the reply that he received concerning the £42 million for 1982 because he had taken the only copy of it to Brussels? Has he brought it back with him? If so, can the House hear what is in that reply? As the Common Market has now been in default on that payment since 31 December why does he not now start withholding in respect of that sum?
The Foreign Secretary referred to the curb on imports of cereal substitutes and said that no decision was taken. Will he tell us what view he expressed? Did he not oppose that measure, which will simultaneously mean higher prices for consumers and lower incomes for livestock farmers? If he did not oppose that measure, what credence does he expect the House to attach to his claim that he is determined to reform the common agricultural policy, since any reform must involve wider access to the cheaper markets of the world?
Can the Foreign Secretary name one concession that he has achieved from our partners since the Athens summit? If he cannot, will he bear in mind the fact that it will be the House which will have the last say about any increase in own resources? If he is unable to secure major concessions he cannot expect the House to rubber-stamp any surrender on that issue.

§ Sir Geoffrey Howe
The hon. Gentleman is more to be congratulated on his phraseology than on his insight.

§ Mr. Peter Snape (West Bromwich, East)
No one could say that about you.

§ Sir Geoffrey Howe
I need no reminding of the importance of securing an outcome to the negotiations which can be commended to the House on the basis that my right hon. Friend the Prime Minister and I have made clear many times. The arrangements in relation to Greenland, for example, lead to a reduction in payments to the Community and move into a different status.
On the 1983 refund, the steps that we are taking so far are those which can and should be taken at this stage to secure the refunds by the end of March. We have taken steps in relation to the European Parliament. In due course we shall need regulations and transfer to the line of the money now in the reserve chapter of the budget. We shall continue to press for action along those lines.
The status of the 1982 refunds is different. I have received a communication from the President of the Commission saying that the amount adopted—this is the central point—by the budget council was a political figure. It is therefore something to which we shall have to bring attention in the negotiations now taking place. The status of those refunds is quite different from that of the 1983 refunds about which we have also had questions.
As for cereal substitute imports, of course we have made it plain that the objective is a reduction in prices 825 within the Community to bring them progressively closer to those prevailing in the rest of the world. That is the important feature. If it is possible in the negotiations to secure clear agreement on that, it would be foolish to reject out of hand the case for considering negotiations with the United States in the wider world context and indeed with other suppliers. I assure the hon. Gentleman that the negotiations are being conducted on the basis of the plain provisions outlined to the House on many occasions by my right hon. Friends and myself.

§ Mr. Bowen Wells (Hertford and Stortford)
Did my right hon. and learned Friend raise in the foreign affairs forum the issue of the Luxembourg agreement and the continuation of the proceedings by means of a veto in the hands of each member country? If he did not raise that issue on this occasion, what attitude do the Government intend to take to it in future discussions?

§ Sir Geoffrey Howe
That question was not raised at the last Council meeting and there has been no change in our position.

§ Dr. David Owen (Plymouth, Devonport)
I strongly support the stance of the Foreign Secretary on the 1982 rebate and on the vital importance of achieving a key for the long-term financial contribution, but does he accept that there is a strong feeling in the European Community that Britain should express readiness to increase the social and regional funds, commit itself wholeheartedly to the ESPRIT technological investment and be prepared to see an overall increase in the Community budget? Does he agree that only in that context, linked with joining the European monetary system, can we obtain the financial key and rebate owed to this country by the rest of the Community?

§ Sir Geoffrey Howe
As the right hon. Gentleman will recall, we already belong to the European monetary system but not to the exchange rate mechanism of it; nor has there been any recent pressure for a change in that respect. We recognise the importance of the social and regional funds, but the scale of any increase must depend on various other matters. As the House knows, we rightly attach importance to the ESPRIT programme, but, again, in the context of proper negotiations and provision of financial resources.
Equally, provided that agreement is reached on the right arrangements for effective control of agricultural and other spending and on a fair budgetary mechanism which takes account of that important point, as we have said many times, we are prepared to consider the case which has to be made out for an increase in own resources.

§ Sir Anthony Meyer (Clwyd, North-West)
Is my right hon. and learned Friend aware that the BBC and any other organ of public opinion which bothers to reproduce today's exchanges will doubtless describe him as being "at bay" and facing great difficulties from all parts of the House? Does he accept that, on the contrary, there is great support not just among Conservative Members for the very difficult hand that he is now trying to play?

§ Sir Geoffrey Howe
I am grateful to my hon. Friend. I should make one point clear. Throughout all the negotiations there is increasing agreement on many points among all or almost all member states. For example, the case being made for effective control of Community expenditure, with express provision for control of 826 agricultural expenditure, is now almost universally accepted, with the formidable support of the French Government, who are now applying precisely the same principles in the control of their domestic expenditure as we have advocated in this country for many years. This is only one example of the many subjects on which there has been wide agreement. There is only one such subject in which we are, almost by definition, likely to find ourselves arguing a lone case, because it concerns our contribution, on which we are seeking to secure a proper adjustment of the budgetary measures. Over the widest part of the front, we have widespread support from our Community partners, and I am also conscious of the widespread support on both sides of the House.

§ Mr. Eric Deakins (Walthamstow)
How will it be possible to reach adequate and satisfactory agreement on new financial arrangments in the Community in the next couple of months when they depend crucially on two variables—the cost of the admission of Spain and Portugal to the Community, after the two months and not before, and a major restructuring of the common agricultural policy? Neither will happen in the next couple of months, so how can the Foreign Secretary be so sanguine about achieving progress in this matter?

§ Sir Geoffrey Howe
The hon. Gentleman is right—although he may not realise it—to draw attention to the extent to which all these meetings are interlinked. It is for that reason that they were brought together in the Stuttgart mandate and are now being considered at the same time. We shall not be able to secure a satisfectory conclusion, for example, on the budgetary burden problem unless we also secure, for example, proper agreement on the effective control of expenditure on agriculture. They must all be handled together.

§ Mr. Richard Body (Holland with Boston)
I appreciate what my right hon. and learned Friend said about approaching agreement, but to what extent has there been any concession to our point of view since the summit in Athens?

§ Sir Geoffrey Howe
One can give a great deal of detail in answer to that. [HON MEMBERS: "It will be the first time."] First and most important is the extent to which the case for budgetary control in the Community is being accepted on the footing that finance must determine expenditure and not expenditure finance, and the universal recognition of applying that principle and doing so expressly to agricultural expenditure. As to the budgetary burden, there is increasingly wide agreement that: a budgetary mechanism taking account of Britain's special needs must be durable and must not involve the provision of special expenditure programmes such as the one with which we have been concerned over the past two years. There are many other problems on which advances have been made, and I am grateful for the support of my hon. Friend.

§ Mr. Dennis Skinner (Bolsover)
Will the Foreign Secretary adopt the same tactics as those that the Secretary of State for the Environment has adopted towards local authorities by bringing in rate capping, and apply that to the Common Market if it runs out of money, in case it finishes up doing a Liverpool? Is this master of detail aware that one of the reasons why the Common Market is on the verge of backruptcy is that in 1982 the Court of 827 Auditors report showed that it managed to lose £700 million? There were olive groves that did not exist but were on paper only, the Mafia was running cheese processing plants in Italy and there was a holiday account of £180 per month for every one of the bureaucrats in the Common Market. Is it any wonder that it has run short of money and that the British people are saying that we are not prepared to bail it out by increasing value added tax and all the other fancy proposals that the right hon. and learned Gentleman is trying to put forward?

§ Sir Geoffrey Howe
I am always grateful for advice from the hon. Gentleman, who is the master of the need—

§ Mr. Skinner
They are all facts.

§ Sir Geoffrey Howe
—for budgetary discipline at home as well as abroad. The fact is that the present limit on the expenditure of the Community is itself a manifestation of a rate cap. There can be no increase in own resources unless the House of Commons, together with nine other Parliaments, is satisfied of that need. It is because of that that we are seeking at the same time the reforms that we want in another direction.

§ Mr. Nicholas Winterton (Macclesfield)
Is my right hon. and learned Friend aware that, despite what my hon. Friend the Member for Clywd, North-West (Sir A. Meyer) said, there is growing impatience not only in the House but throughout the country at the delay in this country receiving the refunds to which it is entitled? My right hon. and learned Friend has implied that the accession of Portugal and Spain will cost the European Community a great deal of money. Will he please come clean with the House, and with his colleagues in particular, and let us know where this extra money will come from? The decision to allow Spain and Portugal accession to the Community is not an economic one but a political one. Who will pay, and how will they pay?

§ Sir Geoffrey Howe
Once again I return to the fact that a range of questions must be considered together: first, a reduction in the rate of growth of costs in the Community and a control of expenditure, especially agricultural expenditure; and, secondly, the achievement of a mechanism to control the budgetary burden of Community states.
If all those things can be achieved, it should not be regarded as inadmissible to secure the accession of Spain and Portugal to the European democratic Community. Of course it is a political matter, but there is a legitimate political interest in securing a safe place for those democratic countries in the European democratic Community. The entire House should recognise that.

§ Mr. Nicholas Winterton
Who is going to pay?

§ Mr. Roland Boyes (Houghton and Washington)
Is the Foreign Secretary aware that on Monday evening the Economic Secretary to the Treasury said: The current arrangements between the Community's institutions for dealing with the Budget process are unsatisfactory."—[Official Report, 20 February 1984; Vol. 54, c. 576.] He also said that the Foreign Secretary was discussing that very matter that day. As the Foreign Secretary is currently grovelling to the President of the European Parliament, and might even have to beg the European Parliament to 828 have a special meeting before we can get our rebate, did he discuss curbing the powers of the European Parliament so that it cannot take such action in future?

§ Sir Geoffrey Howe
The essential point is that the new machinery for the control of budgetary expenditure in the Community must involve putting in place a set of rules which apply to all the Community's institutions—the Commission, the Council of Ministers and the European Parliament. It is an essential feature of a change in Community procedures that we should have effective control of Community expenditure, especially agricultural expenditure.

§ Mr. Tim Rathbone (Lewes)
Is my right hon. and learned Friend aware that most Conservative Members will welcome his stance at the Council discussions? However, can he tell us about the specific benefits of his presence there, for the benefit of my constituents in Lewes and of those who live in constituencies not at present represented in the House, such as Chesterfield?

§ Sir Geoffrey Howe
I have no doubt that the benefits of our membership of the Community extend to all our constituents. They secure an effective distribution of resources in relation to agricultural policy, without which many parts of Britain would be seriously disadvantaged. They secure for Britain a much stronger position in international trading relationships, and give us a position in relation to affairs on the continent of Europe which, if we were to throw it away, we should sadly regret.

§ Mr. Tom Clarke (Monklands, West)
Does the right hon. and learned Gentleman recall the reference in his statement to the negotiations on steel imports involving EFTA and Spain? Will he assure the House that the interests of the British steel industry will be very much borne in mind, and that the Government will not present themselves with an excuse for closing any of the five major plants?

§ Sir Geoffrey Howe
As the hon. Gentleman suggests, the arrangements that have been made in the Community for voluntary restraint arrangements in EFTA countries and Spain are important. It must also be recognised that only as a result of measures adopted within the Community in face of the present worldwide surplus of steel capacity have we been able to limit the import penetration of our markets to the extent that we have in recent years.

§ Mr. Tony Marlow (Northampton, North)
When is the Community likely to run out of money? What is the burden of the Delors proposals? Given that my right hon. and learned Friend says that the only thing that is likely to require an increase in Community own resources is the accession of Spain and Portugal—apparently the status of the organisation has reached such a low ebb that people now have to be paid to join—why is it not possible to sort out the problems of the budget and those of the agricultural policy within existing own resources, and then at a later stage get on with the problems of Spain and Portugal?

§ Mr. Skinner
Let us give them £1,000 and get out.

§ Sir Geoffrey Howe
Negotiations on the accession of Spain and Portugal have been under way for seven years, and it would hardly be fruitful to seek to postpone them now for the reasons suggested by my hon. Friend. A case for an increase in Community own resources can be 829 advanced, first, in respect of enlargement to include Spain and Portugal; secondly, in the adoption of new policies; and, thirdly, in respect of the redistribution of budgetary burdens within the Community. The community was very close to the 1 per cent. VAT ceiling in 1983, and it is likely to reach the 1 per cent. ceiling during 1984.
That is why it is so important to secure adoption of effective measures for control of Community expenditure. It was to that question that the Delors proposals were specifically directed. The Delors proposals asserted in Community terms the principle that has been at the heart of our economic policy in this country, that finance must determine expenditure, and not expenditure finance. It is on the basis of that approach that we are now considering arrangements to that end.

Several Hon. Members
rose—

§ Mr. Speaker
Order. I will call the two hon. Gentlemen who have been rising to ask their questions briefly.

§ Mr. Tam Dalyell (Linlithgow)
The Foreign Secretary said that the Council had reached financial arrangements with Greenland. What are the figures in his brief for the amount of money that will be given to Greenland over the next few years? I am not saying that it is wrong, but we are giving them quite a nice financial igloo, are we not?

§ Sir Geoffrey Howe
I am not quite sure from what posture the hon. Gentleman asks his question.

§ Mr. Skinner
Curiosity.

§ Sir Geoffrey Howe
The fact is that the Community has agreed to pay Greenland about £15 million a year to maintain the Community's existing quotas in Greenland's waters; that is about 100,000 tonnes of cod equivalent and is less than Greenland currently receives from the Community as a member, which is about £19 million a year.

§ Mr. John Farr (Harborough)
Is my right hon. and learned Friend sure that enlargement of the Community is necessary or desirable? Is he aware that there are many firms in Britain that, once Spain and Portugal join, will become bankrupt? Can he look at the present position of these firms and, if he is going to arrange a transitional period, make it as long as possible?

§ Sir Geoffrey Howe
I appreciate the importance of my hon. Friend's point about transitional periods. The period 830 currently proposed for transition for agricultural matters is 10 years. All these matters have to be taken very closely into account. I return to the fact that this country and the European Community stand to gain real advantage from the secure accession of Spain and Portugal to the main stream of European democratic society.

§ Mr. Robin Cook
On the outstanding £42 million, does the Foreign Secretary recall that, when his letter of January was leaked to the press, it was claimed that he was seeking prompt repayment of the £42 million, not a legal opinion as to the standing of the £42 million? As he has now received a reply saying that this £42 million repayment is a political judgment, can we have an assurance that on 31 March we will not be told that he has received a further letter stating that the refund for 1983 is also a matter of political judgment, for political negotiation?
If the Foreign Secretary is determined to ensure that revenue determines expenditure rather than expenditure determining revenue, is not the best way of enforcing that objective to decline to approve an increase in own resources? If the Delors proposal adds up to a statement of principle only, what confidence can we have that, if we remove those financial constraints, the Community will not once again spiral merrily upwards in expenditure until it hits the next financial ceiling?

§ Sir Geoffrey Howe
On the first point, the hon. Gentleman is right to understand that the position of the 1983 refunds is distinct from that for the 1982 risk-sharing payment. We have made it quite clear that, if the Community does not meet its olbigations in respect of the 1983 refunds, we shall have to take steps to safeguard our position. I remind the hon. Gentleman, however, that in respect of the 1982 refunds we were in an exactly similar position, and those refunds were paid by the end of March 1983.
On the second point, the hon. Gentleman is also right to say that, if we were going to be content on the control of expenditure, and if we were going to be content on the important principle, which I am glad to see gaining ground on the Opposition Benches, that finance must determine expenditure and not expenditure finance, then we need something more than a declaration of principle. For that reason, we need precise procedures incorporated in the Community's budget procedures which are going to be effective. That is one of the strengths of the proposals that we are now considering.