HC Deb 01 July 1985 vol 82 cc78-110
Mr. George Robertson

I beg to move amendment No. 5, in page 1, line 9, after 'resources', insert 'and related communication COM (85)36'. Earlier in our proceedings, Sir Paul, you said that some light may be cast upon the events that have already been debated in the ensuing debate on the amendments. However, it will be obvious to members of the Committee that among the Ministers on the Government Front Bench is the Minister of State, Foreign and Commonwealth Office, the hon. Member for Edinburgh, Pentlands (Mr. Rifkind). Opening the debate on the European Community on 20 June, the hon. Gentleman said: The Government, and a substantial number of other member Governments do not see any necessity for an intergovernmental conference such as is proposed."—[Official Report, 20 June 1985; Vol. 81, c. 475.] If the Minister had that degree of perception about the possible outcome of the Milan summit, it is unlikely that he, above all others, will be able to enlighten us this evening on the dramatic turn of events that took place at the Heads of Government summit.

This technical amendment would add to clause 1 a provision showing the calculation of the abatement which is now on offer to the United Kingdom and which was agreed at the Fontainebleau summit. As the earlier remarks concluded, the abatement is at the heart of the Fontainebleau agreement. Without an abatement agreement there would have been no chorusing from the Government about the great success and triumph that Fontainebleau represented for Britain.

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Fontainebleau was designed to be a permanent arrangement. The Economic Secretary to the Treasury went into print in The Times last week, saying that Fontainebleau had changed the rules for ever. Yet the events of last weekend clearly show that in Common Market language, permanency is confined to the last speech that was made rather than to the next speech.

As we are considering the permanence of the United Kingdom's abatement, we cannot ignore events that took place in Milan. Only a week ago Ministers were telling the House that Milan was to be dominated by proposals put forward by the United Kingdom. We were told in a headline in The Observer: Britain basks in the EEC's spotlight. The Sunday Times declared: Sir Geoffrey Howe tried to pre-empt the conference by putting forward a series of more modest proposals and it now looks as if the Howe plan will carry the day at Milan. In The Times last Tuesday, Mr. Ian Murray wrote: Britain's quiet takeover of the European Community this year … There are three areas which now dominate EEC thinking and Britain is in the forefront of all of them. This week's Economist—which went to print before the events of the weekend—was clear on the subject: A successful diplomatic offensive by the British. Thus, we had a well orchestrated attempt to show that the Foreign Secretary was the new triumphant statesman of Europe and that his proposals would dominate a weekend that we now know was a sad humiliation for Britain.

Mr. Eric Forth (Mid-Worcestershire)

Perhaps the hon. Gentleman in developing his argument will make it clear whether he would prefer the line that the British Government were proposing at Milan to have prevailed or whether he backs the proposals that were made by the other Governments against which we voted. It would be instructive to have the Labour party's view on that.

Mr. Robertson

The hon. Gentleman more than most should know the answer to that, because he, unlike many of his hon. Friends, was present for all the debates that we had on this subject. He will recall, for example, that the debate to which I referred, on 20 June, concluded with the surprising decision by the Government to accept the Opposition's amendment. It may have been unique in this Parliament for an Opposition amendment to be accepted. That amended resolution represented the collective view of the British House of Commons. That made it absolutely clear that the negotiating position taken by the Prime Minister at the weekend represented a fair consensus of the parties.

I would not underestimate, or even disagree with, the Prime Minister's anger. However, that anger is only a cover-up for her incompetence. It is a synthetic fog that masks the fact that she went to Milan unprepared and with her homework undone. The humiliation that was the end result of Milan could have been avoided had she made even a basic assessment of the view of other Governments.

The Minister of State, Foreign and Commonwealth Office, who was the Prime Minister's representative on the Dooge committee, told us that a substantial number of other member Governments did not see the need for an intergovernmental conference. In fact, as seven of them voted at Milan at the weekend, it is clear that there had been a misreading either by the Prime Minister—who, after all, must carry the can—or by her advisers, who not only led her to expect that the British Government's view would be adopted but went to enormous lengths to brief the press so as to get the headlines and carry the fiction that we would be the pioneers of what was to be the new European union.

The Prime Minister underestimated her colleagues in Europe and did too little preparation. This orchestration of press coverage provoked the other nations, which must have had an effect on events at the weekend. Now we have a shambles which makes no contribution to the vast task that needs to be done on behalf of the jobless citizens of the European countries. In having been so spectacularly wrong-footed, the Prime Minister has made this country look like a sick joke in Europe.

Mr. Marlow

The hon. Gentleman is being characteristically less than charitable — [Interruption.] Perhaps I should have said that he was being uncharacteristically charitable.

Mr. Robertson

I am obliged to the hon. Gentleman.

Mr. Marlow

The hon. Gentleman can take his choice. It is generally recognised throughout Britain that the Prime Minister has done more to secure Britain's interests in Europe, despite the difficulties that she has faced, than any of her predecessors and anyone else in this country could have achieved. The hon. Gentleman should recognise that. To go on berating the Prime Minister for what she has or has not done, given the failures of her predecessors, is wrong, unfair and gross. I wish that he would withdraw his remarks on that aspect.

The Second Deputy Chairman

I hope that the hon. Member for Hamilton (Mr. Robertson) will resist the temptation to take the debate too wide. I appreciate that he is still on his preamble, but I want to hear quite frequent references to the document to which reference is made in the amendment.

Mr. Robertson

You will hear so many references to that document, Sir Paul, in later stages of my speech that you will probably worry about having given me that advice. At present, I am trying to shed that light that you thought might come later in the debate on the events of the weekend and how they relate to the measures contained in the Bill that we are debating. I am sure that you, Sir Paul, and the Prime Minister, will have been deeply touched by what can only be described as some completely uncharacteristic remarks of support from the hon. Member for Northampton, North (Mr. Marlow). Whether or not my charitable nature is characteristic, for that hon. Gentleman to be charitable to the Prime Minister's view of the European Community will, I am sure, be seen unanimously as uncharacteristic.

The Prime Minister was frog marched up the garden path at Milan over the weekend. Our country suffered a humiliation, and we are left with a shambles. That can be put down only to a lack of preparation and incompetence in being out-manouevred by other members states of the Community. The amendment points out the nature of the deal that the Prime Minister has foisted on the nation and how we can be out-manouevred yet again if the Bill goes through unamended.

Mr. Teddy Taylor

The hon. Gentleman made the serious charge that the Government were in some way involved in the outrageous press coverage in that joke article in The Times by Mr. Murray, which contained at least five factual errors which have since been pointed out. I should be most disturbed if there were any suggestion that the Government had had any relationship whatever with that ridiculous joke article in The Times, which, I am afraid, is typical of its coverage of EEC issues. Has the hon. Gentleman any proof to substantiate what he said? If not, will he withdraw the scandalous accusation that the Government had some relationship with or support for that outrageous joke article?

The Second Deputy Chairman

I am sure that the hon. Member for Hamilton will not be distracted from the amendment.

Mr. Robertson

Not even by a member of the National Union of Journalists will I be distracted from the serious points that I intend to pursue. If The Times article was the only article that was on the table in a joke form, the Committee might listen more carefully to such remarks by the hon. Member for Southend, East (Mr. Taylor).

The Bill is designed to make amendment and calculation more difficult. Two clauses and an explanatory memorandum that runs to two and half pages seem to be a device to preclude the Committee from properly scrutinising the legislation. When we consider the other documents which we wish to include in the Bill, the nature of the device becomes more evident.

The own resources document is not the only one that must be considered regarding the decision reached at the European Council meeting. Document COM(85)36 and its explanatory memorandum are of crucial importance. The hon. Member for Southend, East has already referred to the variations that are possible within that document. The impact of the document and the loopholes in it could easily affect the calculation if the good will that we are told has existed up to now were to break down. The communication underlines the failures at Fontainebleau. It underlines clearly how much less value are the undertakings than the objective set out by the Prime Minister in March 1984 after the Brussels summit, when she said: first, that instead of a lasting, equitable system for Community financing there should be a five-year ad hoc arrangement which would have left us receiving less than the average refund which we received in the years 1980 to 1983. That is what the Prime Minister said was wrong with the arrangement offered by Community Heads of Government at Brussels in March 1984. She went on to say what she thought of it: I made it plain that neither the Government nor the British Parliament could accept such a package. Therefore, I did not agree to any increase in the Community's resources." — [Official Report, 21 March; Vol. 56, c. 1049.] However, more than 12 months later, the package before us today is worse than the package offered at the Brussels summit in March 1984. Instead of a five-year ad hoc arrangement, we have an arrangement that will last only as long as the 1.4 per cent. limit holds within the European Community. That is how long this permanent arrangement will last.

It is clear from the Community's draft budget for 1986 that if it has already committed 1.35 per cent. of VAT on the strictest of assumptions which have never been adhered to in the past, the duration of the Fontainebleau formula will be only 12 or 18 months. Instead of a five-year arrangement and the "generous" proposition on offer in 1984 at Brussels, we now have an arrangement that will give us less than we got in our average rebates between 1980 and 1983. The arrangement will be less than two years old before it will inevitably have to be renegotiated or subjected to intergovernmental agreement. That will mean pouring more money into the unknown targets that the European Community throws up.

In the explanatory memorandum and the own resources document there is a calculation that provides for two thirds of the real net contribution to be refunded to Britain. But now we are talking about 66 per cent. of a new net contribution. The figures have been massaged carefully by the EEC to reduce the contribution on which the 66 per cent. abatement will be calculated.

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We are fortunate in that the House of Commons Library has done the calculation. Its re search document 174 shows precisely what the rebate would have been in 1982 and 1983 had the Fontainebleau agreement applied. I will spare the House the details of the calculation, but the abatement, which is 66 per cent. of the gap between receipts and payments, would have amounted to £669 million. It estimated that the net contribution to the total budget before the abatement would have been £1,131 million. Therefore, in 1982, the abatement calculated on the Fontainebleau formula would have been 58 per cent. of the net contribution calculated on the new formula that is included in document COM(85)36. We are now talking in comparable terms of an abatement of 58 per cent., not the highly publicised and much trumpeted rebate of 66 per cent., which is often mentioned by Government spokesmen and which is included in the explanatory memorandum.

Mr. Spearing

Is not the difference even larger than that? Perhaps in asking my hon. Friend a question, I could give advance notice to the Government. That abatement is a percentage of the VAT rate that we would otherwise pay, but the abatement as a whole is over our total contribution to the EEC, not just the VAT element. It includes the large element from levies and customs duties that goes to Brussels, apart from the 10 per cent. retained for management costs. Therefore, the figure is even lower than the one given by my hon. Friend.

Mr. Robertson

My hon. Friend, who is a great authority on these matters, is right. Another calculation, which has been used to try to assess the abatement, shows it to be 49 per cent. instead of the much-vaunted figure of 66 per cent. We await with great interest the Minister's speech at the end of this debate, because we wish to see the Government's figures based on the new massaged figures that will be produced if this document is used.

On 24 April, the hon. Member for Southend, East asked the Economic Secretary to the Treasury which items have been subtracted from the calculation that will be made under the Fontainebleau agreement. He received this extremely significant reply: The rest of the Commission's communication sets out its proposals for including in the allocated budget items that have hitherto been excluded."— [Official Report, 24 April 1985; Vol. 77, c. 482.] The Minister peddles the same gobbledegook as the Commission. The hon. Gentleman asks, "What items have been omitted?" and the Minister replies, "Items have been omitted." If this was not a serious matter of enormous importance to Britain, one would have thought that that question and answer came straight out of a "Yes, Minister" script.

The matter becomes even more confused, because the documents do not make clear who will decide which items are included in or excluded from the calculation of Britain's net contribution to the EEC.

Mr. Teddy Taylor

That is made clear in the document that the hon. Gentleman is seeking, rightly, to incorporate in the treaty. The Commission makes the decision. Although its current view may be that everything should be brought within the allocated budget, it could change its view next week or next month unless the hon. Gentleman's amendment is successful.

Mr. Robertson

The hon. Gentleman is wrong, despite being right on a number of issues, because it is not clear that this is a matter solely for the Commission. If it were that clear, we would not be seeking clarification this evening. The document COM(85)36, final draft, on page 3 says: The non-allocated expenditure will then be limited to those activities which are excluded on principle—development co-operation and similar measures which will be excluded by Council decision. The hon. Gentleman will find that I am coming to the apparent contrast between that statement and the explanatory memorandum to precisely the same document, which in paragraph 10—and it is signed by the Economic Secretary to the Treasury—says: Impact on UK law — None. The paper is an internal Community document which sets out the line of procedure that the Commission intends to follow in a process that is its sole responsibility.

Mr. Teddy Taylor


Mr. Robertson

I have a feeling that that is the definition to which the hon. Member for Southend, East is about to draw my attention, but there is a contrast between the two documents, which appear to say two different things.

Mr. Teddy Taylor

Does the hon. Gentleman accept that paragraph 4 of the paper given to us by the Treasury clearly states: The Commission is now proposing that these items should be included in the allocated budget—some immediately and some gradually"? It is signed by the Economic Secretary to the Treasury. In other words, he is saying, under his own signature, that the Commission is to determine these things. Surely the hon. Gentleman was not suggesting that that is not the case. The paper signed by the Economic Secretary to the Treasury makes it abundantly clear that it is the Commission, and only the Commission, that has the power to propose these things.

Mr. Robertson

The purpose of my amendment—and the purpose of the debate—is to try to elicit from the Economic Secretary to the Treasury, on behalf of Her Majesty's Government, what precisely is the case. There are conflicting statements, either of which would conflict with the Government's apparent boast that this is a permanent arrangement, which, if enshrined in British law, will lead to a permanent system of rebates for Britain and automatically guarantee that we shall be better off than we were under the pre-existing system.

The hon. Gentleman is right inasmuch as he points to a statement contrasting with the two statements that I have already made. Indeed, the 19th report of the Select Committee on European Legislation says: The Committee are advised that once it"— this document— has been endorsed by the Council in this way, the Commission would be obliged to carry out the calculations in the form so endorsed. There could be a legal (as well as a political) base for contending that the Commission could not vary its terms without reference to the Council. There is a clear conflict between statements made in those different documents and what is being said to the Committee.

Mr. Marlow

Will the hon. Gentleman give way?

Mr. Robertson

No, not at the moment.

There is an important issue of principle at stake here. We have been told, on Second Reading and in the Economic Secretary's article in The Times, that we have a permanent arrangement—something that has changed the rules for ever. The Economic Secretary was driven to say that in his article. Yet it is clear from the documents that the Council can make a decision to vary the terms on which our abatement is calculated or the Commission, off its own bat, can make a decision to vary the conditions under which our abatement is to be calculated; and on the basis of all historical precedent there is no chance that any arragement that they would calculate would be to the financial advantage of Britain.

It is incumbent on the Minister this evening, on behalf of the Government, to spell out precisely which of the conflicting statements is true and, whichever one of them is true, to explain to the Committee how the arrangement can be portrayed as a permanent one when the decision as to the calculation is again to be left in the hands of the faceless bureaucrats who operate in Brussels.

Mr. Marlow

The hon. Gentleman has made the point very clearly that we do not now know what our gap is and that control to calculate our gap is in the hands of the Commission. There are certain rules and the Commission can change them. He has made several points which contradict that position. We are in the early stages of a very important debate. If the Economic Secretary sought to catch Sir Paul's eye because he wanted to state the proper position as a foundation for the debate, would the hon. Gentleman be happy to sit down and let the Economic Secretary make his point?

Mr. Robertson

The hon. Member for Northampton, North knows that I have already shown my generosity in the debate. If the Economic Secretary wanted to enlighten the Committee or, to use your words, Sir Paul, to cast some light on the debate, he would find me more than willing to give way. The House of Commons will come to its own conclusion about the ability of the Economic Secretary to rise to his feet and to enlighten us on the matter. It is conceivable that he is waiting for further instructions—perhaps even from Milan—as to how he should answer the point.

The fact is that the arrangement is not permanent. It is much less generous than the system of rebates, as they were called. We now call them abatements to distinguish them from the previous arrangement. The new system is much less generous than the system of rebates which applied between 1980 and 1983, and which the Prime Minister made her benchmark at the Brussels summit last year. The arrangement is not permanent, because, instead of even the five-year ad hoc arrangement that was offered at Brussels, we have an arrangement which is unlikely to last for more than two years before we are thrown back again into the maelstrom of financial negotiations.

The Bill before us, the abatement that is offered, and the calculation of it that is contained within the document and within the explanatory memorandum still does not provide for a system that puts our contribution to the European Community on the basis that was the objective that the Government set themselves at the beginning of the negotiations— an objective with which the Opposition heartily agreed.

On all those counts, and amid all the confusion that will surround the abatement now and in the future, it is right to underline the sense of failure from which the Government must be suffering in the wake of the Milan summit. We must hope that at the end of the debate the Committee will be more enlightened. If it is, I am sure that it will be even less enthusiastic about the Bill than it has been up to now.

Mr. Teddy Taylor

We owe a great debt to the hon. Member for Hamilton (Mr. Robertson) for raising a fundamental and important point on which we must have proper clarification.

The amendment proposes that certain detailed documents on the calculation of Britain's rebate should be incorporated in legislation and thereby not be subject to variation; in other words, they should constitute part of the treaty and not be something to be changed at the whim of the Commission.

What worries me is that, whereas the decision that is incorporated in the clause which the hon. Gentleman is seeking to amend states clearly and categorically that our rebate will be based on applying a formula to the difference between VAT and allocated expenditure, we have an assurance that the definition of allocated spending will not be changed. The assurance in the other paper is that the present criteria on allocated expenditure will be adjusted so as to eliminate the exceptions made for practical reasons.

The Commission is proposing that adjustments should be made so that more items are regarded as allocated expenditure and thereby potentially qualify for a rebate. If the Commission's objective is not regarded as a treaty as the decision is, there will be nothing to stop the Commission from changing its mind and altering what is regarded as allocated expenditure. That will have an effect on Britain's rebate or on the way that it is calculated.

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If the Government wish to gain approval, quite apart from the inadequacies of the contribution arrangement, we must have some certainty. I have already expressed serious misgivings over the fact that, at a time when the Government are reducing expenditure in many vital areas, for reasons which they have made obvious, and which I support, we shall be paying such an enormous sum into the Common Market. It is important that the Government justify the principle behind the Bill. The formula which the Government believe is good should be clear and not subject to adjustment by the Commission.

My hon. Friend the Minister may think that I am being unduly suspicious. He may claim that the Commission has given that assurance in the document which is covered by the amendment, and that it is in fact contained in a letter which was sent from a Mr. Andriessen to a Mr. Andreotti, who was President of the Council of the European Commission. Is that assurance enough? On the basis of past assurances we cannot accept messages of good will and good intentions from the Commission. We must remember that the Commission is not answerable to the people of this or any other country. It is a body of unelected civil servants. The Commission is constantly changing. Some strange people move in and some unusual people move out. That represents an enormous staff migration.

My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) said during our last debate that the Commission staff was smaller than that of the Scottish Office. That may have been true in the past, but I must point out that the staff of the Scottish Office includes all the warders of Scottish prisons and the staff of the state mental hospital in Carstairs. Even with all those people, the Commission staff is now bigger than that of the Scottish Office. There are now 12,700 staff and, sadly, the numbers are still growing. A Foreign Office Minister wrote to me this morning and said that that number would increase because of the admission of Spain and Portugal, which would mean more staff, including translators.

Is it right that the calculation upon which our rebate will be based should be decided by the Commission and its civil servants? My hon. Friend would save the House a great deal of time if he were to interrupt now and say that my query is answered by the decision—the document which we are incorporating into the treaty. If it is the Commission's decision that it will eliminate unallocated expenditure for the purpose of calculating our rebate, I can immediately resume my seat and say that my fears are groundless. Although there are repeated references to that in the method document, it is not in the decision document, and surely that should worry us.

My hon. Friend may say that I am being unduly suspicious and that the Common Market has always kept its word in the past. Unfortunately, that has not been the case. We have disagreed with the Common Market on many occasions where our national interest has been at stake, and Britain has invariably come off worst. I quote as an example the case of some of my former constituents who worked in the steel industry. They were told that a new policy would be introduced which would be fair to everyone. The Commission gave assurances that everything would be applied fairly. When I and other hon. Members asked about that we were told not to worry and that the Commission would ensure that the policy was applied fairly and properly.

We have all seen the results of that assurance. We know what has happened. The number of people employed by the British Steel Corporation has been cut by more than a half, whereas we know from a written answer that Italy's capacity has increased. Those poor unemployed British steel workers who relied upon the assurance that they had from the Commission are on the dole, while Italy has been expanding its steel industry. That is surely wrong.

Mr. Forth

My hon. Friend is correctly drawing Italy's conduct to the Committee's attention. Is it not relevant that over the past week it is the Italians who have been leading the cry for greater European unity in Milan, but on the important issue of the steel capacity it was the Italians who let down the Community by not adhering to what was supposed to be Community policy? I am sure my hon. Friend is also aware that it is the Italians who are constantly in breach of rulings of the European Court of Justice—another of the key institutions which will no doubt contribute to increased European unity. How does my hon. Friend explain the fact that the Italians always lecture us — they have been lecturing my right hon. Friend the Prime Minister in Milan about European union — although it is the Italians who are further from upholding the concept of European unity than anyone in the Community?

The Second Deputy Chairman

Order. I hope that the hon. Member for Southend, East (Mr. Taylor) will not be led astray. That point goes rather wide of the amendment that we are discussing.

Mr. Taylor

My hon. Friend has made an important point about the way that the Community's policies work. We could not, however, discuss that point under this narrow amendment. He was right to point out yet another example of the way in which the Commission does not work well unless points are clearly spelt out and entrenched in law.

That is the point of the amendment. It has not been spelt out clearly in the document, which the hon. Member for Hamilton wants to incorporate in the legislation, that the Commission's policy is to eliminate the exceptions of unallocated expenditure. As the hon. Gentleman correctly pointed out, unless that is incorporated and becomes part of the deal we shall have no protection, first, against any decision being changed and, secondly, against the decision being torn up, as my hon. Friend the Member for Mid-Worcestershire (Mr. Forth) said, by the Italians, just as they have torn up other decisions.

Unless we have an agreement on which we can go to the European Court of Justice, we have no protection. I wonder, Sir Paul, whether you have had the pleasure, as some of us had, of reading the European Community's Court of Auditors' report. I was appalled to read how some members of Italy's criminal element have been financing themselves by obtaining huge payments for the destruction of non-existent tomatoes. It cuts down crime, because those people do not need to become involved in crime. They obtained their cash flow by applying to the Italian civil servants to destroy non-existent tomatoes from nonexistent farmers.

Mr. Budgen

Will my hon. Friend comment on the story that we read in the newspapers some months ago that when someone from the European Court of Auditors went to Italy to investigate a number of those allegations he was attacked and suffered a broken leg?

Mr. Taylor

Yes, unfortunately that type of thing is happening. It proves that it is not good enough to have a gesture of good will or good intention from the Commission. We must have the points spelt out so that we can go to the court.

Mr. Richard Body (Holland with Boston)

My hon. Friend has referred to the Court of Auditors. Does he appreciate that it has repeatedly made allegations and urged the Commission to put matters right? The Court of Auditors has twice submitted a report to the European Parliament on a number of issues and yet, despite there being an opportunity to put matters right, they have not been put right. The Court of Auditors, laudable body though it may seem, is not proving effective, because neither the Commission nor the European Parliament pays sufficient regard to it.

Mr. Taylor

If this were a wider debate, I should agree with my hon. Friend. It is rather unfortunate that we spend money on this so-called European Assembly. I am sure that no one would notice if it disappeared tomorrow, but we cannot discuss that point when we are dealing with a narrow amendment. Unless the Government can spell the matter out so that we can go to the European Court of Justice, there is no assurance.

My right hon. Friend the Prime Minister is a doughty fighter to control public expenditure. She is a splendid campaigner for common sense in public spending, and she has had repeated assurances from the Commission that it will take steps to cut the export of cheap food to the Soviet Union. Those assurances have been repeated in the House. We know what happens, however—the export of cheap food to Russia is now breaking all records. We are now sending 145,000 tonnes of cheap subsidised food to Russia and Eastern Europe every week, and at the most crazy prices—top quality beef at 35p per pound and wine at 4.5p per litre. If, instead of assurances and good will, we had matters spelt out in law or in treaty, we could go to the European Court of Justice and say, "They are breaking the rules. They are giving money to the mafia to destroy non-existent tomatoes. They are refusing to give compensation for a broken leg suffered by a civil servant who tried to stop it."

Mr. Leighton

Is the hon. Gentleman aware that there is no proper auditing of these accounts? Is he aware that the Court of Auditors does not have the machinery, but relies on national machinery, the quality of which varies? Is he further aware that the intervention price of oranges is decided by the price set in Sardinia, and that the price in Sardinia is set by the supply of water, which is controlled by the Mafia? Therefore, the price of oranges is controlled by the Mafia, and we are all being ripped off.

Mr. Taylor

The hon. Gentleman is absolutely right, but I cannot pursue that matter because it is not covered by this narrow amendment. It makes by blood boil that my local hospital authority has to contemplate ward closures when millions of pounds are flowing daily to the extravaganza of the Common Market. Unfortunately, we cannot discuss that on this narrow amendment.

We should not make the same mistakes again. When we are told that Britain will get a substantial rebate, we must ensure that there are no loopholes. The only way to block those loopholes is to ensure that everything is covered by law, so that we can go to the European Court of Justice.

Why are the Government unwilling immediately to accept the amendment? What would be wrong in incorporating the document? I have looked for an explanation and read the Government's papers. The Treasury document refers to COM (85)36 in the following terms: In order to accurately calculate the figures involved, a more detailed methodology is required than could conveniently or appropriately be included in the own resources decision itself'. What on earth does that mean? We are not incorporating or printing the own resources decision. It is not in the Bill, because if it were there would be 1,000 amendments on account of its inadequacies. We merely have a reference to the fact that the decision is regarded as a treaty in terms of the European Communities Act 1972. If the Government decided to accept amendment No. 5, they would not have to spell it out or print it—they would simply have to say that this Commission decision is included. I cannot understand what is to be lost by doing that. It would mean one extra line in the Bill—perhaps only half a line.

8.15 pm

Can the document covered by the amendment be changed by the Commission, which is comprised of civil servants, or by the Council of Ministers by directive? Is it not just possible that our firm assurance on the rebate could be adjusted by the Commission changing what it regards as unallocated expenditure? I have no complaints about the document COM (85)36, because it says: As for the future, the final objective should be to apply the criteria in full, i.e. to eliminate the exceptions made for practical reasons. The final objective will he achieved, as rapidly as possible, as set out in Table 2 in Annex 3: for chapters in the first column: immediately, that is when the breakdown of expenditure for 1985 is calculated; The intention is good — all expenditure, with the possible exception of overseas development expenditure, will be included. Rebate will be on total allocated expenditure. That means something. However, there is nothing to stop that being changed unless the policy decision of the Commission is incorporated in law. That is why the amendment should be accepted.

Is COM(85)36 considered too long for inclusion? That cannot be the answer, as it is no longer than the decision. As was said several times during the points of order that were raised, we are still somewhat in the dark about amendment No. 5. because relevant decisions have been made in Milan. We have read in the papers — it might or might not be true — that they are thinking of setting up some grand new office to establish a European political policy, under which, it has been suggested, Governments would be instructed on how to vote at the United Nations. Will that use allocated expenditure, or unallocated expenditure? I do not know, but we are entitled to know.

Some people have said that it would be good to have a Community foreign policy. I remember the invasion of Afghanistan, when the Council of Ministers issued a statement that was less strong than that issued by the Italian Communist party. The Government are using money to establish a new bureaucracy which will form a Common Market Foreign Office. It will obviously be a big thing and expensive, and it is quite likely that some of our Foreign Office staff who work on EEC affairs will join it.

I have another question which also arises directly out of the meeting at Milan, which is why we should not be debating the Bill today. We should know first what was decided in Milan, rather than what accurate newspapers, such as The Guardian, and inaccurate ones, such as The Times, have to say about what might have been agreed. It has been confirmed in parliamentary answers that overseas aid expenditure has gone haywire because, although the Common Market said at Dublin that it would send 1.2 million tonnes of food to the drought-afflicted countries of Africa before their harvest, it has not been able to do so.

The Common Market has managed, however, to expand its export of cheap food to the Soviet Union, Bulgaria, East Germany and Czechoslovakia, but the export of 1.2 million tonnes of food to the Sahara has gone wrong. It seems that less than half has been delivered. We shall therefore have a substantial underspend. It is tragic that, when the Common Market is overspending wildly on the export of cheap food to Russia, on steel and on the expense of the European Assembly, the one area on which it is underspending substantially is aid to Ethiopia, Mali and other countries facing hardship.

We cannot discuss that matter on this narrow amendment, but what will happen to the money that is saved by not sending food to Ethiopia and Sudan because of inefficiency or a lack of will? Will the money be allocated expenditure for next year? According to the decision, money can be carried forward after 1986, but can it be carried forward from 1985?

This is a matter on which we must advance. If we do not incorporate the measure, what will happen to 1985 underspending, which has meant that, tragically, the Common Market has failed to keep the promise made at Dublin, to deliver food to the drought-stricken countries of Ethiopia, Mali and Sudan? I should like to know what the score is. Is that allocated or unallocated expenditure?

Surely the Minister accepts that on this bad deal for Britain, according to the estimates in the Treasury White Paper, we as a nation will pay £970 million net into the Common Market in 1987, which is well above what we have paid in previous years and much more than countries such as Italy which are paid for being members of the Common Market. If we are to pay the absurdly high sum of £1 billion a year net into the Common Market, surely the least that we are entitled to is a clear assurance that the total will not be increased by an administrative decision of the Commission.

Is it sensible for a great democracy such as Britain to have such decisions in relation to the amendment made by people who are not elected, but are civil servants of the Common Market? European union just cannot work, because the democratic tradition of the continent is so different, by giving more power to the Administration rather than to the politicians.

Surely the Minister can accept that even on this poor agreement for Britain, which will mean spending £1 billion a year on our net contribution, we must have certainty. We cannot have that certainty until the basis of allocated expenditure is spelt out in such a way that if anyone should try to cheat, and if the Commission tries to change the rules, we can go to the European Court of Justice and demand that something be done. Can we go to the European Court of Justice on the basis of a letter that was written way back in February 1985 from Mr. Andriessen to Mr. Andreotti? We cannot do that, but we can go to the court if something is regarded as a treaty, or is fact. Therefore, I think that the good intentions of the Commission, and its intention to eliminate the exceptions to allocated expenditure, must be incorporated as part of the treaty. Then we can do something if attempts are made to change our contribution.

I hope that the Minister will not simply say that we have full confidence in our friends in the Community, that they will do everything right. The way that things are going, the Minister may well find that before the Bill has been law for six months the Community has been changed. The six original members will have their Common Market, and the others, including ourselves, will be in a different sort of Common Market. What will be our position then in appealing to the Commission to carry out its message of good will? It is abundantly clear that the six original members of the Common Market are desperately keen to go their own way and have a treaty of union and goodness knows what.

The British people would never stand for us being involved in such a denial of our basic democracy. The change will come. Unless it is spelt out in law, we have no assurance at all. Without that assurance it would be possible for the Commission or the Council of Ministers to say that they had decided to change what they regarded as allocated expenditure and that they were pressing a new decision, passing a new directive. They should do so by majority vote, because more things can now be done by majority vote, but where is our protection? The Minister might say that it would be intolerable if that happened and that the Republic of Ireland and Denmark might rush to our aid. That is not much help if all the other member states are voting against us. Britain is sometimes on its own in the EEC. We do not have many friends in the Community, so that could happen. Therefore, we must incorporate the measure.

The Minister may say, "Even if the calculation is incorporated it will not safeguard us fully against the dangers, because it says simply that the objective of the Commission is to eliminate unallocated expenditure." Of course it will not be a full safeguard, but at least it will be something on which we could go to court. If one incorporates the provision in a treaty, saying that something is the objective and intention, one has something to go on, instead of nothing. If we do not do that, what is already a tragic deal for Britain, which will cost us £1 billion per year, will look a great deal worse.

As the Minister is aware, we are all the time finding out that things are worse than they were. The other day we received the appalling information that on top of our £5 billion net contribution so far, £1,700 million of our receipts are not receipts to Britain, but payments to British traders to send cheap food to Russia. So the money does not come to us at all. Therefore, we are finding all the time that it is costing more and more. Unless we can firm up on what has allegedly been the deal, we shall be relying totally on the good will of the Commission and the Council of Ministers. That is not good enough for us. The Government are insisting that we pay £1 billion net per year to the Common Market. We must say, "That is all. No more." When I say "no more", I mean, as well as no more contributions, no more fiddles, frauds or ways of getting around it. Unless that is incorporated, we have no assurance.

For once, let the Common Market be united and say whether it agrees with the British deal. We should say whether we think £1 billion a year is too little, as some of our right hon. Friends think, or whether £1 billion a year is too much, as I believe. Whether we disagree or agree with that, let us agree at least to firm up the arrangement so that the Common Market cannot make us pay more by shifting round allocated and unallocated spending.

I hope that the Government will accept the amendment. I hope that they will not reject it because they say that it is inadequately drafted. I hope that they will agree to another one to firm up the arrangement. We want a clear, binding assurance that we shall not give the Common Market a penny more than the £1 billion net payment a year under the agreement. That is more than enough for me. I hope that every hon. Member, including those who vote for the Government and think that the Common Market is the best thing since sliced bread, will at least agree that we should not leave a loophole, which will mean that the £1 billion a year could become £1.25 billion or £1.5 billion. It should not happen at a time when the Government and the Treasury are telling local authorities and hospital authorities to cut down on spending. We must be firm on the matter. If we are not firm there, we might as well give up.

Mr. Nigel Spearing (Newham, South)

The hon. Member for Southend, East (Mr. Taylor), which, after all, is the VAT capital of the country, has put a most compelling case. We look forward to the Minister's reply.

In the relative informality of Committee, I should like to thank you, Sir Paul, for your patience at the beginning of our proceedings. However, you may recall that when the European Communities Bill was discussed in 1972, your predecessor, Sir Robert Grant-Ferris, started taking points of order at 3.30 pm one day. I think that they went on all night for some 16 hours, and we started on the first amendment at 7 am the next day. That was not surprising because the points of order, like those that we are dealing with at the commencement of the Committee, were about the powers of the House and its control of money. That is the heart of the power of Parliament.

The amendment relates to the method of calculation of such a transfer of money. It is a refinement; it is an additional requirement that we are making of the Government in the way in which the hon. Member for Southend, East described, precisely to put that formula and its rules into treaty form and into British legislation by becoming part of the Act. Unless the amendment is accepted, that will not happen.

The calculations relating to the flow of money are important. During the discussion of the Bill to which I have just referred, the then Prime Minister said that those matters did not affect the Crown, and that the position of the Queen would be unaltered. However, that is not true, because the money that will flow from the Act, the treaty and that calculation, if it is incorporated, relates to section 2(3) of the European Communities Act itself, which states: There shall be charged on and issued out of the Consolidated Fund or, if so determined by the Treasury, the National Loans Fund the amounts required to meet any Community obligation to make payments to any of the Communities or member States, or any Community obligation in respect of contributions to the capital or reserves of the European Investment Bank. It then lists all sorts of other obligations placed on the House and the Treasury. The document that we want to include in the decision will determine the sums that the Treasury is obliged to pay. In other words, it affects the obligation of the Crown to pay without further question more or less moneys. That is why we want the document included in the decision.

8.30 pm

The decision, which is Cmnd. 9549, says in article 3, paragraph 3: The rates shall be calculated as follows. Subparagraphs 3 and 4 spell out how the calculations relating to rates and rebates are made. One might have thought that that was sufficient. What is the need for any further document? As the hon. Member for Southend, East said, there is considerable further documentation in COM (85) 36. Indeed, a full description is given in the Treasury financial memorandum, which the Financial Secretary signed on 27 March, and which the hon. Member for Southend, East quoted. I repeat the extraordinary sentence: In order accurately to calculate the figures involved, a more detailed methodology is required than could conveniently or appropriately be included in the own resources decision itself. That is an extraordinary statement. I am not blaming the Financial Secretary for inserting it in the explanatory memorandum because it is a true description. Why is it not included in the decision in Cmnd. 9495, which was originally a council document translated into a British command paper? I shall return to that point towards the close of my remarks.

The Scrutiny Committee on European Legislation in its fifth report this Session, HC 5 XIX, comments on the status of the document. It states: The Committee understand that the calculations proposed in this instrument follow precisely the form expected following discussions with the Commission and that it meets the Government's requirements accordingly. They note from the Treasury Explanatory Memorandum that the Council of Ministers will be invited to endorse it by a statement in its Conclusions when it finally adopts the new Own Resources Decision (i.e. placing on the record that the Commission has proposed this method of calculation and that it has been accepted by Member States). The Committee are advised that once it has been endorsed by the Council in this way, the Commission would be obliged to carry out the calculations in the forms so endorsed: there could be legal (as well as a political) base for contending that the Commission could not vary its terms without reference to the Council. I take it from that that there may be other possibilities. The Committee continues: The Committee note that the unusual status of the present instrument arises from its origins in Article 3(3), (4) and (5) of the main 'Own Resources' instrument. If the instrument arises from the decision, why can it not be part of it? Why is that instrument not part of the designated documents, which make up the whole treaty? We look forward to the Minister's replies to those questions.

Mr. Teddy Taylor

Did the hon. Gentleman's Committee believe that the Government could go to the European Court of Justice, if the Council of Ministers or the Commission decided to adjust what they regarded as allocated expenditure for the purpose of Britain's repayment?

Mr. Spearing

I am grateful to the hon. Gentleman because that is the legal nub of the matter. The matter is completely uncertain. It is uncertain whether the Commission can change the formula with or without the permission of the Council, whether the Council's decision must be unanimous or in some other form, and, whatever the outcome of that, whether COM(85)36 is part of the treaty. The formula is not part of the decision, and, therefore, I am not sure whether the European Court of Justice could accept locus in it. The court might accept locus because the document is a council decision. If there were an argument between the Council and the Commission about who had the final say about whether COM(85)36 should be changed and, if the document changed, within what limits, there might be locus for the European Court of Justice. I do not know whether it is binding as an international treaty and as a Community treaty, which is what our Bill attempts to designate. That is a grey area which should not exist. That is a reason why the amendment should be accepted.

The Government have not made it clear how they stand in relation to other parts of the calculation, of which the document is part. I referred to that in a brief intervention in the speech of my hon. Friend the Member for Hamilton (Mr. Robertson). During the past few weeks, all the talk has been about VAT contributions. The percentage has been raised from 1 per cent. to 1.4 per cent., and it has been claimed that the present Community partners will have to raise their VAT contributions to 1.35 per cent. while ours will be less than 1 per cent. We forget that the VAT element is but one component, albeit an important one, of our contributions to the EEC.

That was spelt out in the document produced by the Scrutiny Committee, HC 78 VI, Session 1983–84 entitled: Future Financing of the European Community. Table 1 is clearer there than any Government statement. The Economic Secretary will correct me if I am wrong, but I have not seen the table brought up to date so clearly. It shows that in 1982, the last year shown in the table, our VAT contributions amounted to £1,554 million. However, our combined customs duties and agricultural levies amounted to more than £1,200 million. Therefore, although the VAT element was greater than that of levies and customs, it was only slightly more than half of the total contribution.

The reason for new own resources is that the agricultural levies and the customs duties are a fixed sum. If anything, they may decrease, but they cannot be enlarged unless the common Community tariff is increased. That would not bring in a great increase. Therefore, all the increase must fall on the VAT element, which is why the 1 per cent. ceiling has had to be increased. At this stage, I must ask the Economic Secretary to confirm that the 1 per cent. VAT contribution is incorrect and that the figure is more like 10 per cent. of VAT take.

One of two consecutive articles by Mr. Ian Murray, which tell us why we should have passed the Bill last week, got that entirely wrong. He implied that the 1 per cent. VAT was 1 per cent. of VAT yield. In our Select Committee report it was clear that the figure was 10 per cent. or more of VAT yield, even at 0.98 per cent., or whatever we paid last year. As a rough guide, therefore, a 1 per cent. VAT contribution means about 10 per cent. of our VAT take.

Let us consider what has happened so far. I am obliged to the Library for providing figures not easily ascertainable without poring over many pages of Hansard. I understand that the provisional figure for our VAT own resource contribution for 1984 is about £1,729 million while the amount arising from customs duty and agriculture levels is about £1,500 million. I mention those figures because the Economic Secretary, whom I am glad to see in has place, in his article in The Times of 25 June made great play, as all the publicity does, of the fact that we shall be paying much less as a result of the rebate formula being discussed in this debate. The article says: Although the VAT rate for other member states is put at 1.35 per cent., the UK's Fontainebleau abatement of over £800 million means that our VAT rate would be 0.82 per cent., well below the current ceiling. I hope that when the Economic Secretary replies to the debate he will confirm two facts. First, the 1.35 per cent. is the enhanced VAT rate for the other partners and not the standard rate on which our 0.82 per cent. would be calculated. In other words, to the casual reader the gap seems much greater than it really is. If that is the case, as I have every reason to believe that it is, the Economic Secretary should say so and tell us why that inaccuracy occurred in his article in The Times.

The Economic Secretary to the Treasury (Mr. Ian Stewart)

indicated dissent.

Mr. Spearing

The Economic Secretary shakes his head, but I understand that the figure of 1.35 per cent. in the documents which have emerged unofficially from Luxembourg includes the additional VAT contribution that our partners would have to carry as a result of our abatement. One of the complexities of this matter, with which even in Committee we have scarcely been able to grapple, is that the document under discussion provides for a cascade of recalculations. The rebate to Britain is calculated and that amount is then redistributed to increase the VAT contribution of the other member states. Moreover, that is not the end. There is a second cascade because the German contribution is then abated by 30 per cent., which is also redistributed. I suggest, therefore, that the 1.35 per cent. relates to the second final calculation and that the standard rate is more like 1.28 per cent., as has been unofficially quoted in Brussels. The hon. Gentleman's article in The Times thus makes the difference appear greater than it really is.

My main complaint about the Government's wide publicity on this is that the abatement is not even as great as I have suggested if I am right about the 1.28 per cent. standard rate because the abatement relates to our total contribution and not just to the VAT element. The Library tells us that the total contribution for 1984 will be about £3,259 million. If the abatement mechanism comes into effect our VAT rate may well fall to 0.82 per cent. and thus be below the 1 per cent. as the Government claim. My complaint is that the Government are applying the reduction just to the VAT contribution and not to the whole contribution. If one goes into a motor car showroom and is told that the basic price of a car is £5,000 and the extras are another £5,000 but that there is a rebate of 66 per cent. on the extras, the ultimate price will be reduced from £10,000 to between £7,000 and £8,000, but it would be quite wrong to claim that one had secured a rebate of 66 per cent. on the price of the car. The Government in their publicity have successfully exaggerated the rebate because it should be applied across the whole range of our contributions and not just to the VAT surcharge.

8.45 pm

At the end of document COM(85)36, which has been omitted from the decision that we are asked to endorse in the Bill, there is a series of tables and annexes setting out the exact criteria relating to allocated expenditure. The hon. Member for Southend, East repeatedly and effectively asked why the definition of allocated expenditure was not included in the decision when clearly it should be there. It is not found in the decision or even in document COM(85)36, but in the annexe to that document. The Economic Secretary said that that document is illustrative, but if he cannot accept the inclusion of the whole document he should at least agree that the annexes should be part of the decision. If he cannot agree to include them he must tell us why they were not included in the first place. Although those illustrative figures and calculations are extremely helpful, especially the calculation of Britain's 66 per cent., it may have been regarded as inappropriate to include illustrative figures in a treaty. Nevertheless, it is highly appropriate and indeed essential that the definition of allocated expenditure should be included. It is a matter of frightening complexity. The abatement of 66 per cent. about which the Government have been shouting so much applies only to the difference between our VAT share contribution and our share of allocated expenditure—that is the nub of the formula—so the definition of allocated expenditure is vital and should have been included in the decision. That is why the amendment has been moved and that is why I shall support it.

Mr. Budgen

The hon. Member for Newham, South (Mr. Spearing) has much assisted the Committee by explaining the importance of the definition of allocated expenditure. In so doing, he has reminded us of the fundamental conflict which occurred in Milan at the weekend. The Government frequently refer to the arrangement that they so fortunately and skilfully obtained at Fontainebleau as a permanent reduction of 66 per cent. in our contribution to the EEC. They also stress that instead of the old arrangement, whereby we paid a gross contribution and snatched back a rebate later after many rows and difficulties, we shall now have an abatement and make a net contribution. As the hon. Member for Newham, South so helpfully pointed out, however, the Government have said very little about the basis on which the 66 per cent. reduction is calculated. That is important.

I hope that I do not see disagreement where none exists, but I suspect that last weekend at Milan there was a fundamental conflict between my right hon. Friend the Prime Minister and the Foreign Office. It may well be that the Foreign Office had got the whole thing nicely lined up for a sell-out from which the Prime Minister would not be able to escape.

In no way, Mr. Walker, do I wish to give you unnecessary exercise, but I say that because we are talking about allocated expenditure, and expenditure is at the very root of political decision. Ten days ago my extremely eloquent hon. Friend, the Minister of State, Foreign and Commonwealth Office, spoke about the Foreign Office's attitude towards majority decisions — [Interruption.] I hope, Mr. Walker, that you will not keep looking as though you are about to take some unnecessary exercise, because this is about expenditure. My hon. Friend said: The Government believe that it is desirable to encourage more majority voting within the Community." — [0fficia/Report, 20 June 1985; Vol. 81, c. 472.] My hon. Friend went on to explain that at length. As he does not speak from any notes or prepared text, no doubt he spoke from the bottom of his Foreign Office heart, for I assume that even the Foreign Office has a heart. He explained that he and the Foreign Office were in favour of a substantial extension of majority voting in the Community.

Was that just a fraud? Was it just something that he thought up as a Gaullist bit of hypocrisy in order to con the rest of the EEC? That is not the spirit of the modern Foreign Office. It does not talk in terms of the British national interest or of trying to put forward the legitimate interests of our people. It talks, as do American Foreign Secretaries, in terms of human rights and morality. It uses all the jargon that Mr. Gladstone used to use. It no longer talks like vulgar, coarse old Tory Foreign Secretaries of State. There is not the sort of talk that Mr. Disraeli would have enjoyed as he denounced the moralistic vapours of Mr. Gladstone.

I am tempted to call the Minister of State my right hon. Friend. I am sure that as he speaks on foreign affairs with the voice of the modern Tory party, he will become just that. However, I am sure that my hon. Friend was right when he put forward the Foreign Office view about wanting more majority voting. We then must ask the Prime Minister about the areas in which we want this extra majority voting, because if the area is in any way to be important, it is likely to lead to extra expenditure. If my hon. Friend means majority voting in relation to an extra burst of the European international outlook, that will not cost very much. But if, for the sake of argument, he believes that majority voting should, for instance, be allowed on the setting up of the new secretariat that will concern itself with EEC foreign affairs policy, that will surely give rise to increased allocated expenditure.

Mr. Teddy Taylor

My hon. Friend obviously knows a great deal more about this than most of us. He has said that the new Common Market foreign office will mean allocated expenditure. How does he know that? Ever since I read the reports of Milan, I have tried to discover whether this will be allocated or non-allocated expenditure. Where has my hon. Friend learnt of this firm decision which I cannot obtain from any Government Department? Who told him that it would be allocated expenditure?

Mr. Budgen

I am not saying that, and I apologise to my hon. Friend and the Committee if I have given a false impression. I was simply saying that the area in which the British Government would agree to an extension of majority voting ought to be carefully defined. If we talk in the eloquent terms in which the Minister of State — who I hope will soon be my right hon. Friend — spoke 10 days ago, that will give rise to extra allocated expenditure, and the poor old British taxpayer will have to pay for it.

My hon. Friend the Member for Southend, East (Mr. Taylor) reasonably attacks me for the looseness of my speculation. But that looseness is entirely caused by the fact that, sadly, the Prime Minister is unable today to see off a large number of European nation states and the Foreign Office by explaining that she wants the most important limitation of this extension of majority voting. That inevitably leads me to loose speculation which my hon. Friend, with his practical Scottish mind, finds deeply disagreeable.

I point to an attitude towards public expenditure—for EEC is certainly public expenditure — that was recently indicated by my right hon. Friend the Minister of Agriculture, Fisheries and Food. On 13 June, I asked my right hon. Friend, when he was trying to agree some form of restriction on the prices of cereals, whether he had inquired if the proposals were within the budgetary guidelines. In what was no doubt a Freudian slip, he said: I have been alone in asking the Commissioner, at almost every point of the negotiations, whether he remains satisfied that the cost of the package is within the financial discipline that has been agreed for the agricultural budget."—[Official Report, 13 June 1985; Vol. 80, c. 1039.] If we do not know where the majority voting is to be extended, we shall find that the base—

Mr. Marlow

My hon. Friend knows that this issue exercises my mind and worries me almost as much as it worries him. He will be aware that this Bill is about setting a limit and a ceiling on the amount of Community expenditure. He is saying that if we are to go towards majority voting, other policies may be brought forward, with detrimental effects on the interests of the British taxpayer. Within the allocation of European policies that might have an effect, but there is to be a real ceiling on European expenditure because we shall agree to a 1.4 per cent. limit.

The Government have given no sign that they would dream of exceeding that 1.4 per cent. ceiling. I am sure that when my hon. Friend the Economic Secretary makes his winding-up speech, he will go beyond that and say that not only will the Government not go beyond the 1.4 per cent. ceiling in the life of this Parliament but that they have no intention, and it would be over their dead body, that there should be any further loans or intergovernmental agreements. I think that my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) is unnecessarily concerned.

9 pm

Mr. Budgen

I hope that my right hon. Friend the Prime Minister will see off the Foreign Office tomorrow and explain that she is not prepared to agree to any majority agreements that could give rise to extra allocated expenditure. That, as you were implying to me by your firm look, Mr. Walker, is what we are talking about.

Mr. Chairman

Order. That is not what we are talking about, because, as I understand it, there is no reference in the Bill to, nor has it any relationship with, majority decisions taken within the Council of Ministers or any other meeting in the EC. I hope that the hon. Gentleman will keep to the terms of the amendment and the Bill before the Committee.

Mr. Aitken

On a point of order, Mr. Walker. It may be helpful to the Chair to know that during points of order earlier, the Second Deputy Chairman ruled that it was in order for us to discuss things to do with the Milan summit in the course of our debates on these amendments.

Mr. Budgen


The Chairman

Order. The hon. Member for Thanet, South (Mr. Aitken) has raised a point of order and I shall respond. As I understand it, the Second Deputy Chairman ruled that it was in order to refer to the meeting in Milan in so far as that related to our proceedings. It is highly questionable whether it would be in order to discuss the effects of majority decisions on the Bill before the Committee.

Mr. Budgen

I think that you will agree, Mr. Walker, that we are trying to incorporate within the Bill a Community decision. The Community decision refers to allocated expenditure; but, as my hon. Friend the Member for Northampton, North (Mr. Marlow) pointed out, it does not define allocated expenditure. I am saying that if we are not careful, an extension of majority voting, which was so eloquently advocated by the Foreign Office, but sadly apparently not with the approval of my right hon. Friend the Prime Minister, over the weekend, might mean that there is a majority decision — for the sake of argument., setting up an enhanced EC energy policy, which has been fashionable among those who are keen on the EC — which will have an effect on British interests.

It might be said that there can be an enhanced energy policy but we shall not allow it to be regarded as allocated expenditure. That is to say, the EC can, if it wishes, carry on spending all the money that it likes on some policy that it has enforced by majority ruling, but the British are not prepared to pay. These are some of the issues that my right hon. Friend the Prime Minister will be able to clarify when she makes her statement to Parliament tomorrow, as I hope she will. It would be difficult, even for a loyal supporter such as myself, to try to support her position if she failed to come to the House of Commons even tomorrow.

My hon. Friend the Member for Southend, East spoke about the activities of the European Court of Auditors. He made a certain amount of fun of the Italians. In many instances, the Italians are not as nationalistic as we as a nation are, but they displayed a rather violent nationalism when they set about the gentleman from the Court of Auditors who wished to inquire whether they were ripping off the rest of the Community. I do not wish to make fun either of the Italians or of the unfortunate nark who came to inquire into their activities. They demonstrated for all to see an interesting problem in the EEC.

We all complain about the dishonesty of other nation states in the Community. We talk about the way in which the Germans are reluctant to allow cereal prices to be reduced. We talk about the potential that the Greeks have for creating another wine lake. We talk about the problems of persuading the Irish to accept milk quotas. But we come to one fundamental question every time that we do so: would we as a nation accept a supranational authoritative EEC enforcing against us any of the decisions of the EEC?

If we were sitting at home, for instance, filling in our suckler cow subsidy or our sheep subsidy form and, bang, bang, there was a knock on the door and a big man with a staff in his hands, perhaps with a Napoleonic eagle on the top or some other symbol of pan-European authority, came in and said, "Let me look at your application for sheep subsidy," suspecting that we had falsely claimed for too many sheep, what would happen? Would we say, pulling the remains of our forelock, "Yes, oh great and good man from the EEC, we invite you in. Pray look at all our books," or would we say, "Pray leave our house. We much admire you, but we do not wish you to interfere in our affairs"?

Some of my constituents resent the advice that gentlemen from Customs and Excise give them about their VAT forms. I also observe that, despite all the eloquence of my about-to-be right hon. Friend from the Foreign Office in his advocacy of Gladstonian and moralistic views about foreign affairs, sadly we remain a very nationalistic nation.

I suspect that we would entirely resent any form of EEC authority. Those wicked men in Italy who so attacked the gentleman from the Court of Auditors demonstrated that if the Italians, the least nationalistic of our friends in the close family of the EEC — is not the gobbledegook good, and am I not becoming communautaire? — can behave in that manner, so long as we are in the Community we shall have frauds, evasions and growing resentment between one nation state and another at the way in which other nation states spend the money that is collected for these apparently idealistic purposes.

Mr. Leighton

The hon. Gentleman made a big point about the extra expenditure, allocated or unallocated, which could come from majority decisions. Will he comment on the words of the Prime Minister about what stuck in her gullet? Apparently what stuck in the right hon. Lady's gullet — I suspect that we shall have to wait till tomorrow to hear what she has to say about it — was that the Germans paid lip service to majority decisions, but, when it came to cutting marginally the return to their Bavarian farmers, they were prepared to veto it. So the German lip service to majority—

The Chairman

Order. Interventions should be brief, and equally they should be relevant. I find it difficult to relate any of this to the amendment. I hope that hon. Members will stick to the amendment. Mr. Budgen.

Mr. Leighton

If I may—

The Chairman

Order. I have called Mr. Budgen.

Mr. Budgen

If I may respond to the first part of the hon. Gentleman's intervention, perhaps I may then give way again because he may regard my answer as inadequate. Those are all issues that my right hon. Friend the Prime Minister will, if given the opportunity—

The Chairman

Order. We are not talking about what the Prime Minister may or may not say tomorrow or any other day. We are discussing the document COM(85)36. I hope that the Committee will stick to that.

Mr. Budgen

Exactly, Mr. Walker. We are trying to find out what allocated expenditure means. We are asking who will pay when majority decisions are taken in future. Will they be debited to allocated expenditure?

The Chairman

Order. If the hon. Gentleman can tell me where in this document, to which the amendment relates, there is reference to majority decisions in future, he may be in order, but I fail to see it. I hope that we can get back to the amendment that is before the Committee.

Mr. Budgen

While I deeply respect your decision, Mr. Walker, I am addressing all my remarks to the term "allocated expenditure." One of the great dangers of the EEC is to talk in terms of policies and objectives as though they did not cost money. We have a large number of Keynesian supporters of the EEC on this side of the Committee. By their vigour and idealism they illuminate these debates, but they always talk about policies in vacuo as though, for instance, an EEC energy policy had no cash consequences. If there are majority decisions over whatever defined area, they will have an effect upon allocated expenditure. Therefore, it is better that we should define strictly "allocated expenditure" so that majority decisions cannot extend the expenditure of the EEC. That is the limited point. I hope that in due time the Committee will be able to support the sensible amendment on this point tabled by the Labour party.

Mr. Austin Mitchell (Great Grimsby)

I support the amendment which would incorporate COM (85) 36. I assume that the copy before the Committee is the final draft. It should be incorporated in the Bill because it defines the machinery for operating the Council's decisions. That machinery would define the disputed areas of allocated expenditure. It is not the most exciting, appetising or thrilling of documents but because of the definition it gives to the agreement it is essential to incorporate it in the Bill.

That is even more essential after the setback of the Milan summit. That setback was heightened by the enormous hype that the Foreign Office went in for in advance of the summit. We were told what the British achievements would be. We heard about the quiet British takeover. How odd all those headlines are now. They emphasise the subsequent failure. It might be more relevant to discuss this matter in the clause stand part debate.

The point is that we suffered a setback. Therefore, it is even more curious that the Government are proceeding at such speed with this measure when all the counsel on diplomacy and negotiation would argue for proceeding much more slowly, or dragging our feet so as to strengthen our negotiating position in subsequent discussions. The Government decided to press ahead, which was a mistake.

9.15 pm

Undoubtedly, the Prime Minister was let down by the way in which the Foreign Office prepared her and the Government for the Milan summit. She was made a fool of by the Foreign Office's hype and the lack of briefing about the predictable realities. It was always predictable that, at the end of the discussions, Britain, with two other maverick states, would be in a minority.

The fact that the Prime Minister was let down does not exclude the fact that her position at Milan was essentially right. She opposed the rush to revise the treaties and, effectively, the rush to a two-speed Europe. In 1975, Britain decided in a referendum to accept the treaties. Presumably, the Prime Minister's reluctance to follow the Gadarene rush to revise the treaties stems from the need to hold a referendum to make that change. Some of us argue that this legislation would justify holding a referendum. Any change in the basis of the agreement on which the Common Market rests along the lines suggested in Milan would require a referendum.

I have no doubt that these changes will go ahead, despite opposition by the British Government. We are rapidly moving towards a two-speed Europe—a first and second-class Europe in which we are the second-class passengers. The Government will eventually have to go along with this proposal because it suits their interests, whatever the legal restrictions it imposes on their decision-making power. Progress towards this end is irresistible. During that process, the usual cries will be made—"Can we afford to be left out? Should we not go along with it? Should we make more concessions? Should we prove that we are more communautaire? Should we get within the guiding nucleus?" We shall be dragged step by step along a road along which the public do not want us to go. We were initially tricked into taking this road and it is not in our interests to pursue it. Following the Milan summit, this process is almost inevitable.

We need to take a firm and clear position. If the amendment is accepted, we shall stop the remorseless process that is dragging us further down the road towards revising the treaty of Rome and towards a more powerful Community. That is why the rush to pass this legislation is extraordinary and why we on this side of the Chamber will vote for the amendment to give us a firmer, stronger negotiating position. The definition to which the amendment refers will enable us to do that. Ideally, the Government should put the Bill into cold storage. They have shown their reluctance to do so by extending the procedures and dragging their feet. The Government should strenghten their negotiating position in future proposals. As the Government have failed to take up that stance, hon. Members must tie their hands with this amendment.

Mr. David Crouch (Canterbury)

Does the hon. Gentleman not think that he is exaggerating when he talks about "this side of the Chamber" having to do this or that? In fact, he is supported by three hon. Members on his side of the Chamber. Is it not a bit of a cheek to the electors who elected the hon. Gentleman and other hon. Members to talk about having to hold a referendum when only three Labour Members want to support him in this momentous decision? That is a ridiculous stance.

Mr. Mitchell

The hon. Gentleman has asked me to intrude in domestic grief, which I have been doing for most of the evening. It is the domestic argument within the Conservative party which is the prime feature of our discussion. I was saying that the Opposition will vote to support the amendment. The discussion is focused primarily on the differences within the Conservative party and the hon. Member for Canterbury (Mr. Crouch) is a well-known protagonist on one side of the Community argument. He should not try to shift the consequences of the discussion between his right hon. and hon. Friends by diverting the argument and involving Opposition Members.

The amendment must be accepted because of the inadequate definition that is set out in the agreement. We must provide a firmer basis for the definition in our law than it would have if we passed the Bill as it stands.

It is clear that the Bill has an unsatisfactory title. It should have been given the title of the European Community (Refinance) Bill at the very least. My amendment, which was intended seriously, sought to change its title to the European Community's Bigger Bail Bucket Bill. Apparently that amendment was considered unworthy of appearing on the Notice Paper.

Mr. Marlow

I am grateful to the hon. Gentleman. I am sympathetic with much of what he is saying, but how will adding this particular document strengthen the Bill when-1 know that he, like me, respects the Economic Secretary to the Treasury — the Economic Secretary, in his explanatory memorandum, says in paragraph 10 on United Kingdom law: The paper is an internal Community document which sets out a line of procedure that the Commission intends to follow in a process that is its sole responsibility. So this particular document is at the whim of the Commission. The hon. Gentleman and his colleagues seek to put this in as part of the Bill on the basis that it will strengthen the Bill. How does it strengthen the Bill when it is a whimsical piece of nonsense in the hands of the Commission in Brussels?

Mr. Mitchell

I shall address myself to that argument in a few minutes. It is important and I wish to take it up specifically. I think that we must try to define the current whim of the Commission in our legislation so as to stop the whim changing.

As I have said, I tabled an amendment that was designed to change the title of the Bill. The amendment before us is designed to specify he contents of the bucket. The Government have been triumphant in telling us that they have secured a rebate. Apparently they expect the country to gibber with gratitude at their self-described skill and effectiveness in securing the rebate. We are supposed to regard the Government's achievement with a kind of adulation in our eyes as alliance Members show when listening to the speeches of the right hon. Member for Plymouth, Devonport (Dr. Owen).

The Government have agreed to a fundamental shift in financial power towards Europe and towards the Commission and to give larger contributions in return. Our contributions, even after all the rebates and all the allowances, will be £973 million for 1987. That is the estimated figure on the basis of the Blue Book. We are seeing the introduction of greater contributions and a shift in power towards the Market. We are agreeing permanently to underwrite the common agricultural policy, which, despite all the vaunted limitations, which have no effect against German vetos, remains a bottomless pit.

We cannot limit expenditure on the CAP by means of the Bill, but I wish that that were possible. The enactment of such a Bill would be a field day in introducing the limitations that must be imposed on the CAP. However, we can specify the procedures by which our so-called rebate is to be decided.

Mr. Spearing

The hon. Member for Northampton, North (Mr. Marlow) used the word "whim." The document that we are discussing describes the present disposition of the Commission in relation to the calculation of the formula, which, although it may not be ideal, is at least decisive. If it is not incorporated either in the decision or the treaty, there will be some scope for its change without necessarily the agreement of the UK. That is the objective of including it in the decision.

Mr. Mitchell

Precisely, and my hon. Friend, with his knowledge of these issues, anticipates a point that I shall be emphasisng. We can specify exactly what we are doing and, as my hon. Friend pointed out in his speech, we are not getting the 66 per cent. that the Government have claimed we are getting. We are getting a rebate of 66 per cent. on the difference between the value added contribution and allocated expenditure, and the latter is inadequately defined.

Will the Economic Secretary explain whether allocated expenditure includes the £300 million a year paid to British agri-business to export food at knock-down prices to Europe? Is that part of the allocated expenditure with which we are dealing in the Bill? All that we are getting is a rebate on the difference between VAT and that allocated expenditure. It does not include the other contributions that we make, the food levies and tariffs that go directly to the EEC.

We can specify how the rebate system will work. We must specify that, whatever the Government say about this having been a permanent victory and a permanent decision on rebates. This is essentially a temporary arrangement. It lasts only for so long as the 1.4 per cent. ceiling on VAT lasts, and all indications are that that will not last long. As soon as the 1.4 per cent. ceiling is raised, our rebate system, of which the Government have made such a triumph and fetish, will be back in the melting pot with everything else.

At that time, when we come to try to extend it and even improve on it, we shall be back in a minority of one arguing in an even more difficult situation because, by then, the other member states will be well aware of the increases in their VAT contributions which have been necessary to reduce ours. That is causing resentment already, even before the scheme comes into operation. The fact that it will be in operation at that stage will heighten that resentment and make it more difficult to get the rebate system extended.

It is, therefore, not a permanent but a temporary rebate system. For that reason we must include all the definition that we can in this piece of legislation. That is why we must include, as the amendment says, "COM(85)36" in it. The whole system can be varied by the Council and the Commission. That is my reading of the situation. Indeed, it already has been varied by the Commission. After all, the Government's explanatory memorandum on the document dealing with the method of calculation and correction defines the expenditure from which the gap will be calculated, and says: The Fontainebleau Council agreed that the expenditure to be included in the calculation should be that 'allocated in accordance with the present criteria'. This in principle means everything that is not obviously intended for the benefit of third countries ie. development aid. In practice certain other items of expenditure have in the past been excluded because of practical difficulties in allocating them to Member States. The Commission now proposes that those items should be included in the allocated budget, some immediately and some gradually. Therefore, even at the start of the process, it has changed the basis on which the allocation is decided. How can we trust the Commission, if it has done that already, not to make changes which will further weaken Britain's position?

9.30 pm

That change in the allocation system should have been strongly opposed. Why should a system that has been accepted and become almost traditional — if anything can be traditional in the Common Market — be changed by the Commission simply for the opportunistic purpose of increasing the British allocation and, therefore, decreasing the gap to be filled by the rebate system? That should have been contested, but apparently the Treasury accepted it. The 19th report of the Select Committee on European Legislation states: The Committee understand that the calculations proposed in this instrument follows precisely the form expected following discussions with the Commission and that it meets the Government's requirements. It was the Government's decision not to oppose the change in the allocation, and the Committee is now seeking to enforce that by specifying the inclusion of this system of adjustment in the document. Since that basis of allocation has been accepted by the Government, all that the Committee can do is to confirm the Government's decision and incorporate it in the Bill.

We must do that, because unless the document is incorporated in the Bill the Commission and the Council can change their minds. Once it has been ratified by all the member states and it is included in the final ratification by the Council, it will be accompanied by a declaration that is not binding, not by a decision that is binding. I hope that the Economic Secretary can enlighten us on this point. My understanding is that the declaration which would incorporate that machinery would not be binding in the same way as a decision, which it is now too late to get, would be binding. Therefore, it could be changed by the Commission.

The Minister might say that we can take for granted the good faith of the Commission. If we can trust the Commission, there should be no objection to the incorporation of its decision in our legislative process, thus effectively making it a condition of payment, and thus specifying the exact machinery by which payments should be made. My view, which is perhaps more cynical, is that we cannot trust the Council, because of the unpredictability of its decisions, or the Commission. We heard earlier in the debate how little we should trust the Commission's decisions when the fundamental moral decision on the scale of aid to Ethiopia has not been fulfilled. We must also accept the political position and the pressures under which the Council and the Commission will be.

Despite the increase in VAT contributions, the Community will still be in severe financial difficulties. In that position of severe financial difficulty, anything that is not essential — common agricultural policy expenditure is essential and is mounting steadily — will have to be squeezed to make way for the continual increase in CAP expenditure. The concessions made to Britain will be one area in which the squeezing process is certain to continue by the traditional method of re-jigging, recalculating and re-working the figures, trimming the concession by administrative decision. In resisting that process we are as popular as the man in the Amplex advert. That is the sort of influence we have on the councils of the Commission.

I do not trust the Commission or the Council which may well change the arrangement; therefore it is important to incorporate it in our law. The amendment would provide the legal basis to object to any change in the machinery that the Government have accepted. On that basis, we are seeking to ratify the Government's decision and incorporate it in our legislation. Once it is incorporated in our law it cannot be changed, because that is the condition on which we are making the payment in the first place, and it is certainly the basis for an objection in the court to any attempt to change it.

The amendment is vital because the process of change is going on apace in Europe and the pattern of that change is against us. We are not in a strong position in the EC. We are a natural and inevitable minority in an institution that does not suit us. As we are constantly trying to improve the inadequate terms on which we joined the EC, and to redress the difficulties that we have faced, we are always negotiating from a position of weakness. Therefore, it is always difficult to get changes made. We are not beneficiaries from the CAP in the way that the other member states are.

The whole tenor of the debate in Milan has been to underline our inevitable minority position of difficulty. In that position we need all the strength and legal clarity and all the firm negotiating positions that we can get. That is the reason for the amendment. We can always be communautaire, as the Euro-enthusiasts would like us to be. Indeed, the Foreign Office, which is the prime home for the Euro-enthusiasts, would like us to be cornmunautaire and to lie on our back and be tickled by the toe of the Common Market, but that should not be the position of this House. We should seek to get the existing agreement incorporated in our legislation. It is no use expecting that political decisions will not be changed in directions that are unfavourable to us. We can oppose that process by incorporating the Commission's own decisions—accepted by the Government — in the clause.

Sir Richard Body

There have been some cogent arguments in favour of the amendment, in particular from the hon. Member for Great Grimsby (Mr. Mitchell). I hope that by now the Minister has been persuaded that we must have firmer provisions in the Bill.

In the past there have been many misunderstandings. My hon. Friend the Member for Canterbury (Mr. Crouch) and I were once shoulder to shoulder in agreement. Years ago we argued together in favour of Britain being in the Community. We then hoped that there would not be perpetual bickering and misunderstanding, nearly always about money. It has not advanced the cause of European unity, as the Minister knows only too well. Therefore, it is essential that our position should be made absolutely clear. It is not good enough for the Foreign Office to say that we are among friends.

My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) talked about Disraeli. I shall go further back to Palmerston, who said that a nation did not have friends: it only had interests. I sometimes wish that the Foreign Office would remember those words. They were said when only two or three clerks were employed in the Foreign Office. The Foreign Office was then a great deal more effective not just on the world stage but in looking after our wider interests than some of us believe it is today. It is in our interest to be part of Europe and to try to solve a number of problems with our European partners.

There are two points where there will be trouble in the next few years if we do not get the Bill right. My hon. Friend the Member for Mid-Worcestershire (Mr. Forth) has been an almost lone voice with his warnings about what might happen when Spain and Portugal enter the Community. I visited those two countries not long ago with the Select Committee on Agriculture. I applaud and support everything that my hon. Friend has warned the House about, argued about elsewhere and written in articles.

I do not believe that we have realised what the cost of Spain and Portugal's entry will be. That does not relate solely to the common agricultural policy. We shall be doing things to Portugal which will cause great damage to that country's economy. We shall then need more money — not for the common agricultural policy because that will not help Portugal — for the regional and social funds to prevent an increase in unemployment among those Portuguese farmers who will be driven off the land as a result of the common agricultural policy.

We understand that one of the reasons why we seek to bring in Spain and Portugal is to strengthen their role in Western Europe and to make them more certain NATO partners. If they become impoverished and have increased unemployment, in addition to the 30 per cent. rate of inflation that they now have, that will not make them suitable NATO allies. That is why my hon. Friend was correct to say that we have not correctly understood the great burden that will be placed upon us and upon Portugal when Spain and Portugal enter the Community.

We must be ready to advance a great deal more money to Portugal—a great friend of ours, as we are all aware—to enable it to play its part in the Community.

The story of Spain is different. There will undoubtedly be an added cost to the common agricultural budget as a result of Spain's admission to the Community.

I am also worried about development aid. My hon. Friend the Minister has given us the explanatory memorandum. If I understand it correctly, development aid is secluded. In the allocation of the budget there may be items of development aid which will not be considered under the Bill. In the past 12 months there has been a considerable increase in public interest in the Third world. At the same time, we have been growing angry about the mounting wheat surplus. All of us in the House know that under the common agricultural policy we cannot hand over the wheat, maize or those other commodities that could be eaten in those countries where there is starvation. Those items must come under a different heading in the Community budget. I understand that they will not be affected by the Bill. It seems that there is likely to be another bumper harvest this year, and we already have millions of tonnes of surplus wheat. If we have still more, there will be a demand that some of it go in development aid to countries which need it. The explanatory memorandum says that such expenditure would be outside the allocated budget.

Those two areas are in danger of causing trouble, bickering, ill feeling and accusations of bad faith. We have had that for 20 years now and if we want genuine progress towards European co-operation, we must take every step to prevent matters getting worse. I therefore support the amendment and hope that my hon. Friend will be good enough to accept it.

9.45 pm
Mr. Aitken

Like my hon. Friend the Member for Holland with Boston (Mr. Body), I shall be brief, not least because we should move on to the important group of amendments that my right hon. Friend the Member for Worthing (Mr. Higgins) intends to introduce.

This has been a useful debate because, at the heart of the amendment lies the worry that the so-called permanent arrangements for rebates and abatements is impermanent. Several hon. Members have drawn attention to the fact that we are already spending 1.35 per cent. of own resources and that it does not take much of a push to reach the 1.4 per cent. limit. Once we are over that limit, the whole edifice of these abatements and rebates is in jeopardy.

My hon. Friend the Economic Secretary to the Treasury seemed recently to suggest that even the weather might push expenditure over the 1.4 per cent. limit. If the basis of these arrangements is that shaky, we must get something more certain. Certainty is the one thing that we lack in much of the Bill and in many of the calculations. The Bill should be called the European Communities (Temporary Finance) Bill. The arrangements are built on sand, or rather quicksand in view of the conflicting statements on the Government's explanatory memorandum and the Commission's document.

The explanatory memorandum honestly states the truth. It says that there will be no impact on United Kingdom law and that: The paper is an internal Community document which sets out the line of procedure the Commission intends to follow in a process that is its sole responsibility. In plain English, we have to trust the Commission. Trusting the Commission, however, is the triumph of hope over experience.

My hon. Friend the Member for Southend, East (Mr. Taylor) drew attention to the fact that the Commission's assurances that the quantity of food being sold cheap to the Soviet Union and its satellites would be reduced have proved worthless. My hon. Friend the Member for Mid-Worcestershire (Mr. Forth) mentioned the unreliability of the Italians. It is a fallacy to say that we can treat the Commission as a rock on which all calculations can be based.

In addition to the already doubtful and shaky basis for our calculations, we have had the dramatic events of the past 48 hours at the Milan summit. I suppose that a good communautaire figure would say that the situation is now movementé. After those convulsive changes and extraordinary disagreements, how can we possibly put trust in the Council of Ministers or the Commission itself as being a firm, rocklike structure on which calculations on Britain's level of contributions and abatement can be based? Therefore, my plea is that what is needed above all, with regard to the amendment, is not a sentiment of Foreign Office good will—"Trust the Community"—but a firm legal basis. If there is a row, can we go to court? At the moment, the answer seems to be definitely no.

What we are after is certainty. In later amendments, we are after limits. I noticed the other day that my hon. Friend the Member for Watford (Mr. Garel-Jones), who seems to be wearing a more anxious expression than usual on his normally cherubic countenance, was reported as saying words to the effect that the rebellion on the Bill would not amount to very much because it would be just the usual few old lags. I say to my hon. Friend that the old lags may be few in number — not that that has ever mattered in this place, because, as Burke said, one man with conviction makes a majority — but the few old lags are being joined by a great and powerful ally. The title of that ally is the march of important events. The events at Milan have shown the Government's vague, hopeful, optimistic sentiments to be quite worthless.

I am sorry that the point of order at the beginning of the debate was not decisively accepted, although a broad hint was dropped by the Chair that it might be accepted. We are debating those hoped-for certainties in a vacuum when as a result of the Milan summit nothing is certain in the Common Market any more. We have chaos and confusion. The whole institution is in disarray. If, despite all that chaos, we say that we can be absolutely certain that our little abatement arrangements will be rock solid, that is dangerous nonsense. That is why the Opposition amendment deserves the support of the whole House.

Dr. Oonagh McDonald (Thurrock)

We have had an important debate on an amendment which, at first sight, looked as if it were simply a technical amendment. The Economic Secretary's article in The Times of 25 June will give us the reasons for the doubts. In that article he says: Britain's abatements are now entrenched into the Community's financial legislation and cannot be changed without our agreement. When we began to look at that, we realised that that was not clear in the Bill, so it was necessary to include the abatement document as part of the Bill. Therefore, our amendment makes that abatement mechanism legally binding.

On further examination, the following question arises: who can change the abatement mechanism? From the Select Committee's report it is clear that the Committee considered, on its examination of the document, that the Commission could not vary its terms without reference to the Council. That is stated on page 8 of the 19th report. The Committee then notes the unusual status of that document and concludes that the communication — the consultative document to which we have referred in the debate — may be seen as additional help to Member States in understanding the Decision rather than a matter of formal necessity. When we look at the explanatory memorandum provided by the Economic Secretary, which has been much quoted in the debate, it appears that the abatement mechanism is a procedure for the Commission alone. The debate has brought that uncertainty clearly to light. Hon. Members on both sides of the House have contributed to that. The Economic Secretary must tell us clearly who can change the abatement mechanism. That is in doubt from an examination of his explanatory notes, the report of the Select Committee on European Legislation, and even of the document which, regarding the allocation or exclusion of expenditure, on page 3 states: similar measures … will be excluded by Council decision. Annexe 3, table 2, to which an earlier part of the document directs us, refers to expenditure still to be allocated and expenditure to be excluded by chapter. It talks about chapters to be incorporated immediately by the Commission. Even in that consultative document, 5046/85, there appears to be some confusion about who is meant to take what decisions. The Economic Secretary must answer that question this evening. Unless that matter is sorted out, he cannot say, as he said in his article in The Times, that Britain's abatements are now entrenched into the Community's financial legislation and cannot be changed without our agreement. Hon. Members have rightly referred to the Milan summit, the way it ended and the future. Today's leader in the Financial Times makes the point clear when it states: Mrs. Thatcher must now rethink her position. Since she attaches great importance to the liberalisation of the Community's internal market and the removal of all national barriers to trade, it is essential to reach agreement on how the necessary decisions are to be taken. This means that she must reach an accommodation on the constitutional issues with the majority of the member states, on political as well as practical grounds. I wish to emphasise the phrase how the necessary decisions arc to be taken. If decisions are to be taken by majority voting in future, because of the collapse of the Milan summit and all the acrimony, anger and hostility which that generated, and if the Council can alter the abatement mechanism or decide what counts as allocated expenditure and what does not, that could be taken by a majority decision and we could, presumably, be voted down. The issue of who takes what decisions is of crucial importance. The Economic Secretary must answer that question.

The reduction in our contributions has been expressed misleadingly. The agreement reached at Fontainebleau provides for a refund of 66 per cent. of the difference between the United Kingdom's VAT share payment to the allocated budget and its receipts from the allocated budget. Yet if we apply the Fontainebleau mechanism to our 1982–83 payments, the figure would not be 66 per cent., but 58 per cent. in 1982 and 52 per cent. in 1983. The reason for that is that the Commission has decided that some, if not all, of our payments of agricultural levies and customs duties count as payments to the Community. The 66 per cent. figure is therefore misleading and suggests that our refunds from the Community will be better in the future. In fact, our net payments to the Community will increase to reach almost £1 billion in 1987–88, as the Government's own public expenditure White Paper shows.

Not only have we an abatement mechanism which now looks insecure and subject to change but the position has been presented by the Government in a misleading fashion suggesting that we shall do better in the future—

It being Ten o'clock, the Chairman left the Chair to report Progress and ask leave to sit again.

Committee report Progress.

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