Own Resources (Hansard, 23 January 1985)

§ 35. Mr. Andrew F. Bennett
asked the Secretary of State for Foreign and Commonwealth Affairs when he next expects to discuss the increase in own resources at the Foreign Affairs Council.

§ Sir Geoffrey Howe
This issue is on the agenda of the Foreign Affairs Council of 28 and 29 January.

§ Mr. Bennett
Does the Foreign Secretary agree that the only people pushing the British Government to expand the VAT base are the Commission and the other member states? Is it not unacceptable to the British people to be contemplating putting VAT on books, newspapers, children's clothes and other things such as food? Will the right hon. and learned Gentleman make it clear that the House will not put up with such a proposal?

§ Sir Geoffrey Howe
The hon. Gentleman has misunderstood the position. The scope and coverage of VAT in this country does not relate to the proposal, which has been accepted, for an increase in resources by raising the maximum VAT rate. They are quite separate and distinct from each other. Under the adjustments agreed at Fontainebleau, which include the acceptance of a possible increase in own resources, our adjusted net contribution will be about half what it would have been without that agreement, and our effective VAT rate in the Community will remain below the 1 per cent.

§ Mr. Yeo
Does my right hon. and learned Friend share my hope that any increase in own resources will be subject to the same critical scrutiny as the Government quite properly apply to all sectors of public expenditure? Will he undertake not to recommend the House to accept any such increase in own resources unless it can be shown that it is in the interests of Britain?

§ Sir Geoffrey Howe
The question of an increase in own resources has at all times been stated to be conditional 977 upon other conditions being fulfilled. That remains the position. It is on that basis that it will eventually be brought before the House.

§ Mr. Foulkes
Can the Foreign Secretary tell the House how much of the increase in own resources is attributable to enlargement, how much is attributable to paying the United Kingdom abatement and how much is attributable to new expenditure? Can the Foreign Secretary also tell the House what will happen to the United Kingdom abatement if there is a delay in enlargement and a delay in the agreement to increase own resources?

§ Sir Geoffrey Howe
There is no recent estimate of the extent of the increase that is likely to be necessary as a result of enlargement. Earlier Commission estimates suggested that at the end of the transitional period enlargement would cost annually between 0.1 and 0.2 per cent. of the present VAT ceiling. The increase in own resources is connected with enlargement. That is why the Fontainebleau agreement provides for 1 January 1986 as the completion date for the enlargement negotiations. The agreement also provides for the abatement of the United Kingdom's contribution for 1985 to be met on the revenue side during that year.

§ Mr. Budgen
Will my right hon. and learned Friend explain why the public expenditure White Paper published yesterday anticipates that a further supplementary payment of £200 million will be required to be paid to the EEC in 1985?

§ Sir Geoffrey Howe
There are a number of reasons for variations between the figures set out in the public expenditure White Papers for this year and last year. I should not like to hazard an answer to the question posed by my hon. Friend on the premise that his question might be accurately founded.

§ Mr. Spearing
I understand that the scope of VAT in the United Kingdom is partly, at least, the responsibility of the Chancellor of the Exchequer and partly that of the European Economic Community, does the Foreign Secretary agree that the actual rate of VAT "take" that we now send to the EEC is in the region of 10 or 11 per cent.? Will not that go up with the increase in own resources, and does it not increase if sterling declines relative to the ecu?

§ Sir Geoffrey Howe
It is right that the increase in the own resource ceiling, while not affecting the VAT rate payable by way of tax in this country, is bound to have an effect on the sum being transferred, gross, from this country to the EEC. That was the importance of securing in the course of the Fontainebleau negotiations the machinery that we achieved for the very substantial abatement of our own contribution, thus achieving the significant reduction in our net contribution that I have described.