European Communities (Finance) Bill

HC Deb 22 October 1985 vol 84 cc180-244

Considered in Committee [Progress, 1 July]

[MR. HAROLD WALKER in the Chair]

Mr. Teddy Taylor (Southend, East)

On a point of order, Mr. Walker. I wish to ask whether it is in order to proceed with the Bill in the light of the following circumstances. On Second Reading on 25 June, as reported at column 801 of the Official Report, the Minister introducing the Bill said that on the basis of his calculations our contribution this year would he £750 million. Only two weeks ago, however, the Government published a White Paper, Cmnd. 9633, saying that our net contribution would be £1,212 million. In view of the uncertainty created by that enormous difference of more than £500 million would it not be best to adjourn the debate and ask for a statement from the Chancellor to explain why that alarming difference has arisen in three short months?

The Chairman of Ways and Means (Mr. Harold Walker)

These are not matters for the Chair although they are clearly matters that can be discussed in the debate and taken into account by the House when it makes its decision on Third Reading.

Mr. Eric Deakins (Walthamstow)

On a point of order, Mr. Walker. We are now in Committee on the Bill but we have not proceeded to any amendments and I understand that provisionally none has been selected. The first sitting of the Committee began on 1 July and ended at 12.12 the following morning. At that stage there was an understanding between the usual channels—I appreciate that you, Mr. Walker, would not have been a party to this or take cognisance of it—that, for a very good reason, the Bill would not be proceeded with any further before the summer recess. That was indeed the case, as in the remaining four weeks of parliamentary time no further progress was made and no attempt was made by the Government to cause the Committee to sit again. Our proceedings today are the result of that arrangement. The Milan summit meeting forced the Government to realise that they might have to make certain concessions and they wished to have a bargaining counter—the passage or non-passage of the Bill — to use in international negotiations.

In the course of the summer, a number of meetings of Foreign Ministers and Finance Ministers took place but so far there has been no opportunity for the House to consider the progress of those deliberations, many of which have a most important bearing on the Treaty of Rome, the powers of the European Assembly, the competence of the Commission and various other issues with which I shall not weary the Committee. As those issues have not been resolved, the Committee should now be looking for a statement from the Government explaining why no statement has been made about the results of the deliberations which originally caused them to postpone the Committee stage in July.

The Chairman

I have listened patiently to the hon. Gentleman but there is no point of order for me. Disputes about what did or did not happen through the usual channels must be pursued with the usual channels and not with me, although it seems to me that the matters raised by the hon. Gentleman are matters which the House will wish to take into account in deciding whether the Bill should be given a Third Reading.

Mr. Nicholas Budgen (Wolverhampton, South-West)

On a point of order, Mr. Walker.

The Chairman

If it is on a different matter I will take the point of order.

Mr. Budgen

Further to the latter part of what the hon. Member for Walthamstow (Mr. Deakins) said, it was well understood——

The Chairman

Order. We cannot have a debate in Committee about what might or might not have been said or understood between the usual channels. They have nothing to do with me.

Mr. Budgen

Of course not. I did not intend to refer to that. What the Committee anticipated was that if there were international discussions which might affect the value of the dollar, which is a crucial factor in deciding the cost——

The Chairman

Order. I am sorry. We cannot have a debate about these matters under the guise of points of order. They are not points of order. They are not matters for me; with respect, they are not matters for the Committee. If the hon. Gentleman seeks to catch the Speaker's eye, they may be relevant on Third Reading, but they are not matters for the Committee.

Mr. Budgen

The only point I wished to make was whether the Committee would want to proceed. We have the good fortune to have the Chancellor of the Exchequer here this afternoon. He has been engaged in international negotiations designed to reduce the value of the dollar against other currencies. That could have a horrifying effect on the cost of the common agricultural policy.. He has an opportunity——

The Chairman

Order. I must check the hon. Gentleman. He is raising highly contentious and debatable matters. If I allow him to continue, in fairness to the Committee I would have to allow other hon. Members to follow his line of reasoning. That I cannot do. It would be out of order. The Committee should continue with——

Mr. Budgen

rose——

The Chairman

Order. The Committee should continue with its proper business.

Question put, That the Bill be reported, without amendment, to the House.

The House proceeded to a Division—

Mr. Teddy Taylor (seated and covered)

On a point of order.

The Chairman

The Question was put. The hon. Gentleman should have sought to catch my eye before I put the Question. The Committee is now dividing.

Mr. Budgen

With great respect, that is what we were trying to do because we anticipated that the Committee might not wish to proceed further. We sought as best we could to raise those points that might concern the Committee. If the mood of the Committee had been that we should continue we would not have wished to take the matter to a Division. Since it seems impossible to discuss these preliminary matters, we are forced to bring the matter to a Division.

The Chairman

The motion before the Committee was not debatable and it would not have been in order for me to allow the hon. Gentleman to pursue a line of argument on the Question that was before the Committee. The Question has been put and the Committee is dividing.

Mr. Teddy Taylor (seated and covered)

On a point of order, Mr. Walker. Can you explain why the official Community document which relates to Cmnd. 9548 has different words on it from the one that was presented to the House? Is it therefore in order to proceed with the debate? I can give the papers to you.

The Chairman

Perhaps the hon. Gentleman will bear with me for a moment.

Mr. Teddy Taylor (seated and covered)

On a point of order, Mr. Walker. I was raising a serious point of order but clearly you do not wish to consider it. May I put a second point of order? As a guardian of the interests of hon. Members you must be aware that at least 20 hon. Members wished to participate in the debate but did not stand up because they thought that you were considering points of order. Surely it is a negation of the rights of hon. Members that you should not permit a debate to take place.

The Chairman

I thought I had made it clear to the Committee that the Question before the Committee could not be debated. The only Question before the Committee is the Question that I put, and it is not debatable.

Mr. Teddy Taylor (seated and covered)

Why is it not debatable?

The Chairman

I hope that the hon. Gentleman will not persist in challenging my rulings.

Mr. Neubert and Mr. Donald Thompson were appointed Tellers for the Ayes but, no Member being willing to act as Teller for the Noes, The Chairman declared that the Ayes had it.

Question accordingly agreed to.

Bill reported, without amendment.

5.45 pm

The Minister of State, Treasury (Mr. Ian Gow)

I beg to move, That the Bill be now read the Third time.

Perhaps it would be in order to express the hope that those of my hon. Friends who sought to speak earlier may catch your eye, Mr. Deputy Speaker.

When my right hon. and learned Friend the Foreign Secretary moved the Second Reading of the Bill on 25 June he described it as the most significant piece of primary legislation affecting our position in the Community since the European Communities Bill 1972."—[Official Report, 25 June 1985; Vol. 81, c. 797.] The Bill before the House has two purposes. First, it is to enable the United Kingdom to ratify the Community's new own resources decision, which implements the Fontainebleau agreement of 26 June 1984. That agreement provides for an abatement system for the United Kingdom and for the raising of the Community's VAT ceiling to 1.4 per cent. with effect from 1 January 1986. Secondly, it is to enable the Government to pay their contribution of some £250 million under the intergovernmental agreement of 24 April 1985 on supplementary financing for this year's Community budget.

The first of these purposes is by far the more important. The agreement reached at Fontainebleau constituted a fundamental change in the operation of the Community. It provided for a lasting and automatic mechanism for reducing the UK's net contributions to the Community budget—

Mr. Austin Mitchell (Great Grimsby)

Temporary.

Mr. Gow

—the kind of mechanism which successive British Governments have been seeking since we joined the Community on 1 January 1973. [HON. MEMBERS: "Temporary."] Despite the dissent of some of my hon. Friends, I use the word "lasting" deliberately because the new system will last until such time as all member states —[Interruption.] I invite Opposition Members to listen. The new system will last until such time as all member states, including the United Kingdom, agree unanimously to change it. I welcome the former Foreign Secretary because the Government are now celebrating an achievement which eluded him when——

Mr. Dennis Healey (Leeds, East)

On a point of order, Mr. Deputy Speaker. I am grateful that the right hon. Gentleman thinks I was Foreign Secretary. That is after the next election.

Mr. Gow

I apologise to the right hon. Gentleman. I should have said the former Chancellor of the Exchequer.

Neither the 1.4 per cent. VAT ceiling nor the abatement system can be altered save with the consent of the House. The principle and the mechanics of an abatement system have been established.

Mr. Tony Marlow (Northampton, North)

I apologise for coming in so quickly, but my hon. Friend said that this is to be a permanent and durable system. Will he give a commitment to the House at this stage that there will be no soft loans, intergovernmental agreements, whip rounds or any other form of temporary subvention to the Community in the meantime?

Mr. Gow

I was developing the argument that the present arrangements can be altered only with the House's consent. We have an abatement system which lasts until the House decides otherwise.

The years of protracted argument about whether there should be such a system and, if so, what form it should take, are behind us. As my hon. Friend the Economic Secretary to the Treasury has said, Fontainebleau has changed the rules for good.

A second advantage of the new abatement system is that it is automatic. The United Kingdom now has an absolute and guaranteed entitlement to VAT abatement linked to our budgetary position. With effect from January 1986, we shall recover 66 per cent. of the gap in the previous year between our own VAT share of the Community's allocated budget and our share of receipts from the budget.

In Committee on 1 July, hon. Members expressed concern that the Commission had been entrusted with the task of calculating the amount of our abatement, but the Commission has always been responsible for making calculations of this kind. It has access to all the relevant figures and is better equipped for the task than anyone else. It goes without saying that the Treasury, and notably the Minister of State, will be monitoring the Commission's calculations most carefully.

I remind the House that, a fortnight ago, the Commission proposed an increase in the provision for our 1986 abatement. I should explain how this has come about. After the Commission had prepared the preliminary draft budget for 1986, the United Kingdom made an additional payment, in accordance with the Community's established practice, to adjust for an underpayment of VAT in respect of 1984 and earlier years. This payment is eligible for abatement and the Commission has therefore proposed a correction, which would increase the provision for our abatement in the 1986 budget from about £830 million to about £980 million.

Mr. Eric Forth (Mid-Worcestershire)

Can my hon. Friend help the House by giving his estimate of the VAT percentage represented by the 1986 preliminary draft budget as it is known at this stage? Can he help us further by saying when he thinks the Community will reach the full extent of the 1.4 per cent:. of VAT? Moreover. can he give an absolute undertaking that under no foreseeable circumstances will the Government ask the House to go beyond the 1.4 per cent.?

Mr. Gow

I shall deal with my hon. Friend's first point later in my speech. As for the other two, my hon. Friend knows that the 1.4 per cent. ceiling that was agreed at Fontainebleau applies unless and until it is altered by the House. That was made clear by my right hon. and learned Friend the Foreign Secretary.

Mr. Budgen

Perhaps my hon. Friend will give his interpretation of why, in the Fontainebleau agreement, 1.6 per cent. was mentioned.

Mr. Gow

My hon. Friend well knows that, alas, some members of the Community are not as keen as the Government to restrain the growth of Community spending. That is why that figure was put in. The Government are determined to do everything that they can to restrain the growth of Community spending.

Mr. Budgen

That is what people said about sanctions in South Africa.

Mr. Teddy Taylor

My hon. Friend might have misunderstood the question asked by my hon. Friend the Member for Mid-Worcestershire (Mr. Forth). He was asking whether the Government will give a commitment that they will not come to the House with another intergovernmental payment additional to the 1.4 per cent. and quite apart from any increase in own resources. The Government have said that they regretted doing that. Will they give a categorical assurance that they will not do it again?

Mr. Budgen

Even a teeny one?

Mr. Gow

Provided that the budgetary discipline that has been agreed is observed, as I hope that it will be. there will be no need to come back to the House for another intergovernmental agreement.

The effect of the Fontainebleau agreement is that, taking one year with another, our net contribution will be about half of what it would have been if we had insisted on retaining the VAT ceiling but had been unable—as would almost certainly have been the case—to negotiate any further refunds and abatements. As it is, over this and the next two financial years we expect to receive abatements totalling some £2.6 billion.

Our own VAT contribution rate is likely to remain below 1 per cent. throughout the lifetime of the 1.4 per cent. ceiling. On the basis of the 1986 draft budget established by the Council last month, and taking account of the Commission's correction to our abatement, our VAT rate in 1986 would be about 0.56 per cent. The other member states will be paying about 1.2 per cent.

Earlier this month the Government laid before Parliament the White Paper on the 1985 Community budget that gave an estimate of £1.2 billion for our net contribution for this calendar year. That figure is very high —it is far too high—but, mercifully, it is an erratic figure which will be reflected automatically in a particularly high abatement in 1986.

There are two special features about the 1985 figure which I must emphasise to the House. First, 1985 is the last year in which we are due to receive a flat-rate correction to our net contribution. On the assumption that the new own resources decision is ratified by all member states, the full automatic abatement of our VAT contribution, as agreed at Fontainebleau, will take effect from 1 January. That means that next year's abatement will be much greater than this year's. The Commission's latest estimate is for an abatement of some £980 million next year compared with £590 million this year.

Secondly, this year's net contribution figure has been inflated artificially by two exceptional factors. It includes our special contribution of some £119 million under the intergovernmental agreement for the 1984 budget as well as the special contribution of some £250 million in respect of the 1985 budget. It also includes a payment of £75 million of VAT own resources which has resulted from the change in 1984 in the United Kingdom's system for collecting VAT on imports.

The 1.2 billion for our net contribution this year also includes some £135 million in respect of the United Kingdom's contribution to the Community's overseas aid programme. That £135 million is part of the United Kingdom's overseas aid budget, and is shown as such in our public expenditure White Paper.

Mr. Deakins

Can the Minister assure the House that the special contributions of .250 million for 1985 to top up the budget will not be repeated in any form? By giving the figure for our net VAT contribution, the hon. Gentleman is in danger of misleading the House and the country about the United Kingdom's total payments to the EEC, as they must take account of the possibility of the big rebate that we hope to get next year and of the possibility, which is not ruled out by this legislation, of a further special contribution under another intergovernmental agreement.

Mr. Gow

It is extremely difficult to envisage the circumstances in which the situation that the hon. Gentleman describes would arise.

The second element in the Fontainebleau agreement was the increase in the VAT ceiling from 1 per cent. to 1.4 per cent. The Government have been criticised for agreeing to it, but the United Kingdom's VAT rate is virtually certain, because of our abatement, to remain below 1 per cent. Moreover, the raising of the ceiling was necessary to enable the other member states to fund our abatement. As our VAT rate goes down, theirs has to go up to maintain the Community's revenue. This would have been impossible within a 1 per cent. ceiling.

My right hon. Friend the Member for Worthing (Mr. Higgins) said during the Second Reading debate that he regretted that the Government had agreed to link the questions of our abatement and the increase in the VAT ceiling in a single package. With the greatest respect to my right hon. Friend and to the work of his Committee, that criticism is not justified. It was only as part of a package that the United Kingdom was able to secure an abatement system at all. What we have secured is immensely valuable to us and infinitely preferable to that continuation of the status quo, which some right hon. and hon. Members say that they would have preferred.

Mr. Terence Higgins (Worthing)

I am grateful to my hon. Friend for making that reference. However, the Government did not start from that position, but from the position that we were being unfairly treated and had no reason to give a quid pro quo.

My hon. Friend's response to an earlier intervention was extremely worrying. When asked if there would be any further topping-up above the 1.4 per cent. ceiling before negotiations were held to raise that ceiling, he said that that might be the case if the budgetary discipline did not work. Yet the whole basis on which we are being asked to agree to the Bill is that effective budgetary discipline is in place. How, then, can there be any question of increasing the amount above the 1.4 per cent. ceiling by IGA or another device between now and any negotiations on raising that ceiling?

Mr. Gow

I repeat that the 1.4 per cent. ceiling is in place. It can be altered only with the consent of the House and with the unanimous agreement of the Governments and Parliaments of other member states. It is impossible to envisage the kind of circumstances in which it would be necessary for the Government to come back to the House in the way which my right hon. Friend the Member for Worthing describes.

Mr. Higgins

I apologise for interrupting my hon. Friend a second time. but I do not understand what he just said. Are we to understand that he thinks it impossible that there will be any need to come back to the House before any negotiations on raising the 1.4 per cent. ceiling take place? If so, can he give us a categorical assurance that the Government will not in any way increase the sums available to the Common Market before those negotiations take place?

Mr. Gow

I repeat that I find it impossible to envisage circumstances in which the Government will come back to the House in the way that my right hon. Friend describes.

Mr. Ron Leighton (Newham, North-East)

Give a guarantee.

Mr. Gow

No, I cannot give a guarantee, but I find it impossible to envisage circumstances in which my right hon. Friends or I would come back to the House.

Mr. Forth

Does my hon. Friend understand the basis of the unhappiness at this state of affairs? For many years and until only a few months ago the Government assured us that they found it difficult to envisage any circumstances in which the 1 per cent. ceiling would have to be breached, precisely because it was a source of discipline on the Community. Does my hon. Friend accept that the cause of unhappiness among some of us now is that he is giving the same assurance about the 1.4 per cent. ceiling as was repeatedly given about the 1 per cent. ceiling, and that we doubt its validity for the same reason?

Mr. Gow

I am not saying that the Government will never come back and seek an amendment to the 1.4 per cent. ceiling. My right hon. Friend the Member for Worthing made a different point about the IGA. I am telling the House that it is sovereign in the matter. Only if Parliament agrees to an increase in the 1.4 per cent. ceiling, can that ceiling be raised.

Mr. Nigel Spearing (Newham, South)

Will the Minister give way?

Mr. Gow

I should like to make progress as I have already given way.

Some hon. Members have sought an assurance that the House will be kept fully informed about the financial implications for the United Kingdom of the new own resources decision and, in particular, about the United Kingdom's VAT abatement. I give the following undertaking. We will continue to provide to the House the most comprehensive information about the United Kingdom's transactions with the Community. White Papers and explanatory memoranda will draw specific attention to figures relating to the United Kingdom's abatement.

I turn next to the point raised by my hon. Friend the Member for Mid-Worcestershire (Mr. Forth) about budgetary discipline. The Government have never claimed, and I certainly do not claim this afternoon, that last December's budget discipline agreement is perfect. My hon. Friend the Minister of State, Foreign and Commonwealth Office, made this clear when the House discussed the agreement. What we have said, as I do today, is that the agreement is an enormous advance on what has gone before.

Community spending is still too high. Nevertheless, the Commission has agreed to make all its proposals on agriculture in the light of the guideline limiting the rate of growth of agricultural guarantee spending to the rate of growth of the own resources base. The Commission's price proposals in June, and its budget proposals, are consistent with the guideline figure established for 1986. As a result, agricultural market support expenditure next year for the 10 member states is planned to grow by only 2.5 per cent., compared with 27.6 per cent. in 1983, 16.1 per cent. in 1984 and 8.9 per cent. in 1985. The downward trend is continuing. Last year, real price cuts of 4 per cent. were imposed on the CAP. This year there are real cuts of 3.5 per cent. Prices for most product regimes have been frozen.

Last month the Council established a draft budget for 1986 which respected the budget discipline conclusions and the reference framework set by the ECOFIN council in July, with limited additions for enlargement. The extra expenditure in 1986 on account of enlargement is covered by the extra revenues which Spain and Portugal will contribute.

Mr. Teddy Taylor

Does my hon. Friend accept that the assurances and safeguards about restrictions on agricultural spending become worthless and of no account, if the majority of member states consider that there have been exceptional or aberrant circumstances and can define what they are? It might mean rain on a Wednesday afternoon.

Mr. Gow

I do not agree with my hon. Friend, because there is a clear resolve on the part of the Community, and certainly an emphatic resolve on the part of the Government. that the budget disciplines laid down should be strictly adhered to. I am glad to say that that discipline has been observed in the draft budget agreed. in Luxembourg last month.

Mr. Budgen

On this important point my hon. Friend asserts that there is an emergence of political will to reform the CAP by reducing prices. Apart from the draft budget, can he point to any evidence that any of our European partners are determined to act by reducing prices?

Mr. Gow

Yes I can, because prices for most product regimes have been cut or frozen. I made that point earlier, and I am sorry that my hon. Friend was not listening at that point in my speech.

I turn now to the IGA for the 1985 budget. I share the disappointment, which has been expressed, that the Community found it necessary to ask for the extra money in 1985. However, we were satisfied that the extra money was essential, and was the irreducible minimum required to meet the Community's obligations.

The United Kingdom's gross payment under the IGA is some £250 million. That is a large sum. But about half will return to the United Kingdom in the form of receipts, and the remainder will be eligible next year for abatement under the Fontainebleau system. Our eventual net contribution will therefore be reduced from about £250 million to £40 million.

I remind the House that, without the IGA. the 1985 budget could not have included provision for our agreed £590 million abatement in respect of 1984.

I refer briefly to the intergovernmental conference set up at the Milan European Council in June. My hon. Friend the Minister of State, Foreign and Commonwealth Office represented the United Kingdom at a meeting of the conference yesterday. If he should catch your eye, Mr. Speaker, he will be reporting to the House later in the debate. It is not yet clear what conclusions the conference will reach. What is clear, is that the United Kingdom's interest will be served by ratifying the own resources decision, providing for our VAT abatement, whatever those conclusions may be. No part of the own resources decision is dependent on the outcome of the intergovernmental conference.

Mr. Marlow

I think that my hon. Friend will want to clear up one point. He said that we shall not be paying more than 1 per cent. VAT after rebate, but for the past four years our VAT payment after the subsequent rebate has amounted to 0.5 per cent. My hon. Friend says that it will not now be more than 1 per cent., although other people say that it will be more.

What additional benefits will we get from the EEC that we did not get when we were paying only 0.5 per cent. net of rebate?

Mr. Gow

I am sorry if my hon. Friend was not listening, but I said that the estimate for next year is 0.56 per cent.

When my right hon. Friend the Prime Minister returned from the European Council at Fontainebleau she said that the agreement reached there was good for Britain and good for the Community. It has changed the status quo for the United Kingdom. Previously, we had to fight each year for refunds of our excessive net contribution. Now we have a system for automatic abatement—a system of the kind which successive British Governments have striven to obtain and a system which will continue to operate unless and until the House agrees to change it.

Our position is far better than it was before Fontainebleau, far better than it might have been and far better than it would be if the new agreement were not ratified. The Prime Minister and the Foreign Secretary have fought tenaciously for the interests of the United Kingdom. The purpose of the Bill is to enable the United Kingdom to ratify the agreement that they have won. I commend the Bill to the House.

6.11 pm

Mr. George Robertson (Hamilton)

When the Government abandoned the Bill in the early hours of the morning of 2 July, the House was told that it was a decision to allow more time for debate. Of course, it was nothing of the sort.

The decision on 2 July was a retaliation against the humiliation of the Prime Minister at the Milan summit —a pretty feeble gesture to our European partners that the much trumpeted enthusiasm of the British Government to be the first with the new own-resources decision had been diluted by the egg that was running down the Prime Minister's face that week.

In June, the Bill was urgent, necessary, desirable and, of course, a great illustration of the magnificent negotiating skills of our revered leader. Overnight, as the great British initiative at Milan died a much-publicised death, the enthusiasm died too, and the mad dash to get ratification of the 1.4 per cent. increased ceiling on the EEC's own resources and the endorsement of yet another £250 million supplementary levy to the EEC suddenly ground to a slow, humbling crawl for cover.

It is no wonder that we were crawling and no wonder that the former Economic Secretary to the Treasury, the hon. Member for Hertfordshire, North (Mr. Stewart) has scuttled away from his regular sandbagging by the Select Committee on the Treasury and Civil Service, away from the hand-on-head cross-examinations that he so rigorously faced and failed and away, at last, from the endless, shaming excuses that had to be put forward lamely each time that another unforeseen supplementary payment was required.

Of course, the hon. Member for Hertfordshire, North never rose to the dizzy ambitions of his successor. In January, the hon. Gentleman came to the House for a debate on the supplementary payments that are so exercising the House today. He said: I should like to think that supplementary budgets for the European Community would not be a thing of the future, but that would be too optimistic."—[Official Report, 22 January 1985; Vol. 71, c. 884.] Hon. Members will have noticed the confidence with which the Economic Secretary's successor finds it inconceivable that there will be circumstances that could drive the Government to bring back to the House yet another intergovernmental agreement. If the new Minister can carry off that trick, it will be the first year in the history of this Government that the trick has been carried off. As I shall demonstrate, all the experience in the four months that have passed since we last debated this subject shows that that will not happen.

Sir Russell Johnston (Inverness, Nairn and Lachaber)

Is the hon. Gentleman saying that he does not envisage any time at which there would be a need to increase the Community's own resources?

Mr. Robertson

The hon. Gentleman misunderstands me. The cross-examination is of the Government's intentions and commitments and the assurances that have been given to us today. The question is whether they are tenable or sustainable. We are not having a hypothetical debate about whether the Community will need an increase in own resources. Is the budget discipline that has been talked about previously a reality and are the Minister's assurances likely to stand up? Previous assurances have not stood up.

The new incumbent on the Treasury EEC team is the man once dubbed "Supergrass". He has been parachuted in over the recess to fill the EEC straight-man spot and he instantly becomes the EEC's Marie Antoinette as he tells the starving million in Africa to drink the rain and abandon the idea of more food aid or emergency reserves from Europe.

The Minister's predecessor was the archetypal grey man—God's own accountant, with a clueless mastery of how to mangle statistics. Now we have Bob Geldof in reverse: a Treasury Minister who can deny the evidence —seen nightly on television—of people continuing to die in the Sahel of Africa from lack of food. a Minister who can ignore all the facts that although the rains came, the seed had been eaten and had not been sown. With the arrogance and, on a day when we have a lobby by the world development movement, the indecency and insensitivity of a master at work, the Minister says that no reserve is necessary—that is what it is claimed that he said—because the rains had come and eased the famine.

We have a Minister who can lead the Common Market budget Ministers, in one of the richest conglomerations of nation states on earth. into a decision to cut food aid to Africa by 6 per cent. in real terms next year, saving a miserable £130 million in a total budget of £20 billion. I believe that the House will repudiate such an attitude.

Today of all days — the anniversary of the first showing on BBC television of the horrifying film from Ethiopia, which so galvanised and electrified our people —the Minister comes blandly to the House and does not even tell us about that decision in his account of the Budget Council. That is a mockery of what concerns the British people. This is the man who served the Prime Minister so well and is now set loose to do the same promotional job in the world at large. Even the strongest opponents of the EEC. and there are plenty of them present tonight, must wonder what the Community has done to merit the attentions of the hon. Gentleman.

Mr. Marlow

Many of us agree with what the hon. Gentleman has said about the vast waste of money by the Community and how it could be better spent, particularly in some areas of great distress. Many of us have also read that the Labour party is to mount a massive campaign in Parliament against Government policies. With all the tragedies and the waste of money, and with the new impetus of the Labour party, why does the hon. Gentleman have only four Back-Bench colleagues behind him?

Mr. Robertson

There is a massive campaign in the country. The hon. Member for Northampton, North (Mr. Marlow) should examine the real force of the arguments and recognise that the majority of his hon. Friends are here tonight to attack the Government and not to praise them. The hon. Gentleman has to make a ritual criticism of the Labour party to save his own face at the end of the debate, but the Government are being put on the rack by their supporters and the official Opposition.

Four months ago, before the Government's conversion, the Opposition warned that the Bill was a confidence trick. We said that Britain had given up the main—indeed, the only—negotiating weapon which would bring sanity to the Community's out-of-control finances. We said that the Government had given that up in return for worthless guarantees on financial discipline; for an unwritten agreement so shot full of loopholes and exemptions as to be a recipe for the opposite of discipline. We said that it would not be long before the House was faced yet again with a demand for yet more cash to feed the black hole of a runaway EEC agriculture budget. It took less than four months for us to see, writ large, the incontestable evidence of all that we had said.

First came the 1986 draft budget from the European Commission proposing 34.9 billion ecus on a budget up 12 per cent. on what it was in 1985. That involved taking the EEC spending up to 1.35 per cent. in terms of VAT. That is just below the 1.4 per cent. ceiling that the Bill is designed to ratify. There is a gap therefore of only 900 million ecus for all contingencies in 1986.

After that came the famous Budget Council on 17 September when the new Minister of State sprang upon the EEC stage. The Budget Council cut the Commission budget by 3 billion ecus, still leaving 2.3 billion ecus above the self-imposed ceiling set by the Finance Ministers to which the Minister rather riskily referred tonight.

How were the 3 billion ecus cut from the Commission's proposals? Was it by reducing the overbearing impact of agriculture on the budget from its present level of 74 per cent. of the total? Was it by setting realistic limits on the proportion of Community funds which will be devoted to piling up surpluses and then destroying them? Of course it was not. The 20.45 billion ecus represented by agriculture guarantees were left unscathed and completely protected. Instead, the budget Ministers cut the Commission's proposals by yet again squeezing the regional and social funds.

For the first time in the EEC's history the preliminary budget proposals for increases in the social and regional funds are lower than the maximum possible rate. Only 5 per cent. is proposed instead of a potential 7.1 per cent.

After the Fontainebleau summit last year the Prime Minister said: With regard to regional expenditure, we hope that expenditure on the economic and social funds will take a bigger proportion of the European budget, not a lesser one as it has in the past."—[Official Report, 27 June 1984, Vol. 62, c. 1006.] I do not know what briefing the Prime Minister's former Parliamentary Private Secretary took with him to the Budget Council but it cannot have been based on those words uttered only a little over a year ago.

Then, the Budget Council, like Billy Bunter waiting for his postal order, made savings by postponing paying the bills for former commitments. It then disgracefully cut the proposed increases in food aid. All the fine decisions taken in Milan about transferring some of the obscene surpluses in Europe to places where people had nothing to eat; all the fine words about the needy and the starving designed to capture the public mood aroused by the film about Ethiopia a year ago, were discarded. The surpluses still mount up and the millions in Africa continue to starve.

Since June, four short months ago, when we last considered the issue, the surpluses have continued to mount. Since June, beef stocks have risen by 85,000 tonnes and now stand at 785,000 tonnes. Butter has piled up to more than 990,000 tonnes— within reach of 1 million tonnes—and stocks have increased by 150,000 tonnes since June. Another 208,000 tonnes are in private stocks on the Continent.

Skim milk powder mountains now total 500,000 tonnes and have risen by 88,000 tonnes since June. The sugar mountain contains over 2 million tonnes and has risen by almost 310,000 tonnes since June. This is when millions of people continue to starve in Africa. The surpluses continue to mount and the Minister tells the world on 17 September that no further food reserves are required.

The saving of £130 million on a budget of £20 billion is at the expense of dead children and dead people in the Sahel of Africa. That is a blight on the Minister and on the Government he serves. We in the Opposition repudiate their blindness and callousness. The Government's attitude is unworthy of the concern which was shown so vividly throughout the last year and which is displayed in all its vividness outside the House today by the huge lobby of Parliament.

At the end of the cheese-paring at the Budget Council meeting, what was the result? A comprehensive package, perhaps, for 1986; a coherent plan for the next 12 months costed within the budget discipline; a framework perhaps? Perhaps, but chance would be a fine thing.

Jean-Pierre Cot, the European Parliament Budget Committee chairman, said: The council is incorrigible. In 1985 it proposed a budget over 10 months and not 12. In 1986 it proposes a budget for 10 member states instead of 12. Here is the crunch. The new budget is jammed up against the 1.4 per cent. ceiling and that is workable only if this and 11 other Parliaments allow it. It is prey to all the imponderables of demand and of the rise and fall of the dollar. The new draft budget does not take account of the cost of the accession on 1 January next year of two new member states—Spain and Portugal. That is unbelievable. With that bizarre quality to which only EEC budgets can rise, the cost of the accession has been missed out in the crucial budget discipline paraded before us. We have not a clue about what that cost will be.

We are told that 400 million ecus will have to be found if Spain and Portugal are not to be net contributors to the Community. That was pledged during negotiations on the accession.

Secondly, Mr. Jean-Claude Juncker who is the Luxembourg president of the Budget Council, admitted and was quoted in Agence Europe on 27 September that: If commitments undertaken with regard to Spain and Portugal were to be fulfilled, this draft budget would have to be amended. "Pacta sunt observanda" was his comment. The classics scholars in the Library tell me that that means that the agreement must be observed. He said that about 2.5 billion ecus was required to make up the shortfall—and that on a budget which is only 900 million ecus away from the 1.4 per cent. sound barrier. It is in the land of the funny money.

I remind the House that on 10 July 1984 the Foreign Secretary said about the deal which is to be rubber stamped in this Bill, and which arises from the Fontainebleau summit: Let me repeat that only when Finance Ministers have adopted the necessary measures on budget discipline will the Government be prepared to recommend to the House that the own resources ceiling should be increased."—[Official Report, 10 July 1984; Vol. 63, c. 897.] How do those words appear in the dazzling light of the September Budget Council and its 10-nation budget for a 12-nation Community?

One week later, the Financial Times had it right when, after the farm Ministers had met, it said: Unanimously they agreed that something needed to be done. But to a man, they disagreed as to what it should be. But the ministers did find one area of agreement — that budgetary discipline provisions restricting farm spending should not necessarily be rigidly imposed in future. Britain's leading financial daily newspaper concludes: However, it was not clear whether Mr. Jopling was in the room at the time of this discussion. The central issue of tonight's debate and of this massive, important constitutional Bill is being decided at the farm Ministers meeting. They are abandoning the budget discipline that has been trumpeted as the central feature of the Bill— and nobody knows whether the Minister of Agriculture, Fisheries and Food was even in the room while they abandoned that central pillar of budgetary discipline.

Mr. Christophersen, who is the Budget Commissioner, said authoritatively; The Budget Ministers' discussions have resulted in more a book-keeping exercise than a real budget. The outcome is quite unsatisfactory and difficult to understand. In the midst of all that, the Chancellor—who graced the Treasury Bench for the Minister's speech—appears to be missing the whole point, as usual. He was whistling in the wind yet again at the Tory party conference. The Guardian said: The Chancellor was in boisterous mood"— it is rare that he is described in that way— boasting that he had cut where cuts were needed — in Britain's contributions to the EEC, handouts to nationalised industries and new council house building. He was boisterously boasting about something that was not true. Net contributions to the EEC during the six years that the Prime Minister has been in office have totalled £4,245 million, an average of £708 million a year. Under the Labour Government, the average was £450 million a year. If the Chancellor is capable of being boisterous, I suggest that he picks stronger ground.

In September the Financial Times quotes the Chancellor on the limit of 29.6 million ecus for the 1986 budget set by Finance Ministers using the new budgetary disciplinary system for the first time as saying that it was a very positive development in the context of budgetary discipline. Yet by October, a month later, the Finance Ministers—including our Minister — had already exceeded the Chancellor's limit by more than 2 billion ecus. If that was in one month, what will be the position after a few more months?

This is the vivid, unquestionable truth about the so-called budget discipline. It gives the lie to the empty triumph of Fontainebleau and the very foundations of the Bill. In reality, budget discipline is now little more than a joke. As Mr. Christophersen said, it is little more than a book-keeping exercise, bloating yet again the agricultural budget and trimming the valuable, essential job of reinvigorating the European economy and getting people back to work. The deal sold to Britain at Fontainebleau is seen as a fake—a self-delusion that the Prime Minister and the Foreign Secretary swallowed far too easily for this nation's good. On the Government's own criteria, the conditions for an increase in own resources have not been met, and will not and cannot be met.

The ludicrous boast of the hon. Member for Hertfordshire, North (Mr. Stewart), the former Economic Secretary when he was in charge of the Treasury team quoted in The Timesin June as Fontainebleau has changed the rules for good is seen simply for what it was—an attempt to kid only himself, and even he has now departed from the scene.

The very basis on which the Bill was laid—that it represented a good deal for Britain—is now seen to be demonstrably untrue. I call on all hon. Members on both sides of the House with the nation's interests genuinely at heart to vote against Third Reading.

6.36 pm

Mr. Terence Higgins (Worthing)

On Second Reading I stressed that the Bill raised strong passions. Although the House is only now returning from recess, perhaps like a hospital patient recovering from anaesthetic, there is no doubt that the passions remain strong. Therefore, it is right to have this debate this evening.

I disagree strongly with the hon. Member for Hamilton (Mr. Robertson) on the role of the previous Economic Secretary in our discussions. The fact is that, before the Select Committee—and, I believe, on the Floor of the House—he has been immensely helpful in seeking to clarify many highly complex issues. If it had not been for the Select Committee and the help of the former Economic Secretary and his senior officials—one in particular—it would have been difficult for the House to have the remotest idea of what was really happening.

The Select Committee had occasion to complain about the bad documentation that has been a feature of the whole affair from the so-called Fontainebleau communiqué right through the proceedings. Having said that, we should pay tribute to the presentation of the statement on the 1985 Community budget, Cmnd. 9637. Certainly the story is spelt out with great clarity. Unfortunately, it is a very sad story of a succession of positions that have steadily deteriorated. The document shows that our net contribution over the year is to be about £1,212 million — a marked contrast with the statement made by the Foreign Secretary when he placed the Bill before the House for Second Reading. He said that the figure would be half of the £1.5 billion that we would have paid had the figure remained at the 1 per cent. ceiling. That deterioration has been very marked in a matter of only a few months.

While there are obviously some exceptional circumstances—to which my hon. Friend the Minister referred in his opening speech—they clearly should have been anticipated when the Foreign Secretary made his speech suggesting that the House should give the Bill a Second Reading. Had he done so, the House might have taken a different view.

In addition to congratulating the Government on the clarity of this White Paper. congratulations are due to the draftsmen of the Bill. It has proved difficult to table amendments that seek to reassure hon. Members who have doubts about these proposals.

I do not wish to delay the House by repeating what I said on Second Reading, but I wish to refer to one point raised by my hon. Friend the Minister. It is wrong that we should be presented with a package. The Prime Minister's original position clearly was that we were being unfairly treated and that that should be rectified. To then say that we have to give something in exchange to achieve that rectification is not right. We had the case to be treated more fairly without giving any quid pro quo. My hon. Friend said that we had to increase the figure to 1.5 per cent. overall so that we could obtain a refund, but that only shows the extent to which Community finances have become out of control. It should have been possible to obtain that refund without raising the own resources ceiling. That was the position of the Government at the beginning of the negotiations.

As I said on Second Reading, my complaint is not simply about the position of the United Kingdom but about the Community as a whole, because to have raised the ceiling in the way in which we have is not desirable. The Community had a real opportunity to get the CAP under control. It has lost that opportunity by agreeing to the increase in own resources.

I interrupted the Minister earlier to ask for an assurance that the Government would not again resort to intergovernmental agreements, reimbursable advances, non-reimbursable advances or other devices, in advance of any further negotiations, to raise the ceiling from 1.4 per cent. to 1.6 per cent. My hon. Friend said that he found it impossible to envisage any situation in which the Government would wish to do that.

That was a strange remark for my hon. Friend to make. I do not see it as being impossible by any means. It is likely that things will again get out of control and that it will be necessary for further devices to be introduced. Not only may it not be impossible, but the Government may regard it as necessary. It seems highly undesirable to have a limit on own resources of 1, 1.4 or 1.6 per cent. and then, each time the limit is exceeded, top it up, going outside that limit. What is the point of having a limit on own resources if it is constantly being exceeded as the result of other negotiations? That has happened on this occasion and I was asking the Minister for an assurance that it would not happen again.

My hon. Friend declined to give that assurance, and he was unwise not to give it. It might be wise to have such an assurance on the record, and I commend that course to the Minister of State, Foreign and Commonwealth Office, who might care to give such an assurance when he replies to the debate. Then, should matters deteriorate again, he could enter the negotiating chamber and say, "We cannot go along with that because we have given an assurance to the House of Commons not to do so." There is every reason for the Minister to give that assurance and I hope that he will give it.

In his opening remarks, the Minister of State, Treasury, referred to the whole issue of budgetary discipline. We were told that effective budgetary discipline was a condition and that unless it was met, we would not raise the own resources ceiling. As the Select Committee and the hon. Member for Hamilton pointed out, the budgetary discipline, so-called, is not likely to be effective.

It was frightening to hear the Minister say that if it did not work we should have to resort to other intergovernmental agreements. The argument becomes circular. Unless budgetary discipline will be effective, we should not undertake the Third Reading of this measure.

The common agricultural policy is tied up with the whole idea of budgetary discipline, remembering that we have been told that the agricultural budget will not go up as fast as total spending. There is no case for increasing subsidies to agriculture, and no case has been made before this House in support of the Bill in that respect. We were told that the figure was likely to go down, from over two thirds to under two thirds of Community expenditure, but the latest White Paper, published only this month, says that it is likely to be not less than two thirds but 73 per cent.

There are two other aspects of the agricultural policy that should be stressed. First, I spent some time this summer in the United States, and I am worried about the protectionist pressures that are building up there. There is no doubt that an area where the Administration there will be under great pressure, given what is happening to farming in the United States, is concern about protectionism in American agriculture, which is already heavily supported, in relation to the EC.

There is no doubt that the Bill increases the protectionism that is given to the CAP and, as a result, is likely to exacerbate the difficulties of trade negotiations between ourselves and the United States. It is important for us to resist protectionist pressures—I thought that that was common ground—and clearly those pressures are not diminished by spending more on agriculture.

The second aspect was dealt with by the hon. Member for Hamilton, and it is appropriate for us to consider it when there is a large lobby today inside and outside the House on the subject of overseas aid and agricultural surpluses. It is important for us to consider the real cost of giving assistance by way of food aid to Third world countries.

It is clear from the figures that storage costs are extremely high. The suggestion that if we got rid of stocks by shipping them to Africa it would result in our having to pay the shipping and other costs is not a good argument because we would still save money by shipping the stocks out.

The counter-argument is that, once the stocks got to Africa, somebody would have to move them on. While that may be so, it is no reason for piling up ever bigger agricultural surpluses at huge storage costs when those stocks are desperately needed elsewhere. They are doing nobody any good here, remembering that their costs in financial terms have already been met. I hope that the Government will review the position and do something to ameliorate the adverse effects that some of the consequences of the Bill will create.

In Committee I asked the Minister of State, Foreign and Commonwealth Office, a question which he did not answer, mainly because he misunderstood the point I was making. We are overpaying this year, not in terms of the abatement but because of the way in which the timing of the payment is worked out. In Committee, the Minister replied in terms of the abatement. We are overpaying and are due a refund. I asked what guarantee existed that we would get that refund. I also asked whether we would receive interest for paying earlier than we were supposed to pay. Will he give that information tonight? And when does he expect to have to return to the House to ask for the 1.4 per cent. increase in the VAT figure to be raised yet again?

6.48 pm

Sir Russell Johnston (Inverness, Nairn and Lochaber)

The right hon. Member for Worthing (Mr. Higgins) has been critical and some of his criticisms have merit, but I believe that the Government and other members of the Community—and let us not forget them—deserve credit for achieving this agreement. The points made at the outset by the Minister about the difference in our contribution are facts that cannot be denied or lightly set aside.

I say that despite the fact that I still profoundly disagree with the style that the Government felt it was necessary to adopt in the negotiations. They could have adopted a more reasonable stance and obtained the same result. I am certain that that has caused long-term damage to this country's capacity to exert constructive influence in the councils of the Community. It has left many scars, as I dare say the Minister, who is new to this responsibility, is finding out.

The Minister concentrated exclusively —not so the hon. Member for Hamilton (Mr. Robertson)—on the British position, and in doing so he followed the pattern of his predecessors. That was bad because his predecessors were also wrong to approach the matter in that way. If the Community is to be examined in this House simply and exclusively—as is the case with anti-marketeers— in terms of its direct effect on this country, rather than in terms of evolving a structure of which we are a part and which is seen by all participants as being not only competently managed but fair in operation. the Community will not work.

The hon. Member for Hamilton referred, rightly and properly, to enlargement. I can remember saying in the Chamber previously during debates on enlargement that if the process was to work, our political enthusiasm for it in the aftermath of dictatorships in Spain and Portugal would have to be matched by financial generosity.

Spain and Portugal are normally lumped together and it can be argued that that was a mistake in the enlargement negotiations and that it might have been better if the two countries had been dealt with separately. It must be recognised that they are very different. Spain is quite a large economy while Portugal is the poorest country in Europe by some measure. I agree with the hon. Member for Hamilton that it is monstrous that it should end up as a net contributor. As the right hon. Member for Worthing said, we are dealing with a Community issue in which we are all involved. Therefore, we should be expressing our concern about Portugal's position. If we are seized of the reality, it must surely mock any of the ideals of economic convergence which inspired the Community's founding fathers.

Ministers say repeatedly that the United Kingdom is a good Community member. That is trotted out in debate after debate. It seems that they fail to understand that if any collective organisation is to work it is necessary to show an interest in the problems of others as well as those that face us directly. That applies all the more, and not least in the case of Portugal, when the others are much less well off than ourselves.

I understood and sympathised with the remarks of the hon. Member for Hamilton about the Community's failure, despite its considerable food surpluses, to respond to the famine in central Africa. It has to be appreciated, despite the remarks of the right hon. Member for Worthing, that it is pretty likely that if considerable allocations were made from the surpluses for the purpose of famine relief, the result would be an on cost for the Community. It is doubtful whether saved storage costs could be set against new transport costs. The reality is that such allocations would probably require some supplementary estimates. When the Labour party was last in government I did not perceive any evidence that it would have been willing to have advocated such a course, as the hon. Member for Hamilton appeared to do. I do not believe that it would have done so if it had been faced with comparable circumstances.

This is not the occasion to dilate on the common agricultural policy. There is a large area of agreement about the CAP, although sometimes one would not guess that, between those who are in favour of the Community and those who are opposed to it. Believe it or believe it not, those of us who are, like myself, much in favour of the Community agree entirely that there is a necessity to exercise discipline and control and to stop the policy expanding endlessly, which it appears to be doing.

Mr. Teddy Taylor

Tell us how that is done.

Sir Russell Johnston

If the hon. Member for Southend, East (Mr. Taylor), whose dulcet tones I have heard so often in debates on this subject, would bide his whisht for a second, if I may use a Scotticism, it was always a mirage to imagine that that discipline and control could suddenly be exercised. Anyone who knows anything about agriculture knows that nothing significant can be done in less than four or five years to change direction.

Mr. Terry Dicks (Hayes and Harlington)

So we shall still go on paying?

Sir Russell Johnston

I make the assertion and leave it at that. It is a mistake to imagine that movement could be introduced instantly. Also, some hon. Members appear totally to ignore any of the consequences for rural populations that would follow such a change in direction. It appears sometimes that they are entirely indifferent.

Mr. Richard Body (Holland with Boston)

Does the hon. Gentleman agree that when the Liberal party repealed the Corn Laws there was great prosperity in the countryside four years afterwards?

Sir Russell Johnston

I fear that if I engaged in a prolonged historical dissertation with the hon. Gentleman I should probably be ruled out of order, and for that I would be grateful.

I understand that the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), the Minister of State, Foreign and Commonwealth Office, is to reply. We have been led to understand by the remarks of the Minister of State, Treasury that he will deal with the Luxembourg summit. I hope sincerely that the Minister will be able to tell us that the British Government are not taking a lambent position in the negotiations and are not merely waiting for someone else to make proposals so that they can consider whether they are reasonable or unreasonable. That would be no way for the United Kingdom to behave. It has been said by Conservative Ministers on many occasions that Britain will take a lead in the European Community. We have an opportunity to do so and I hope that we shall propose constructive reforms instead of merely responding to the proposals of others.

Mr. Jonathan Aitken (Thanet, South)

I begin by congratulating my hon. Friend the Member for Eastbourne (Mr. (Gow), the Minister of State, Treasury, on his new appointment. I take some comfort from the fact that he is now to be at the helm of our financial affairs in Europe. That is not entirely because of what he said this afternoon but because of my happy memories of his pre-ministerial days as a Back Bencher, when he always displayed a vigorous and healthy scepticism of public expenditure at home and abroad. I hope that he will live up to those youthful ideals. I must warn him that one of the matters which concern some of us is that there seems to be a degree of belt-tightening at home in areas of expenditure which are dear to our constituents and by no means such a disciplined attitude to expenditure on the EEC. I hope that my hon. Friend will not turn out to be the equivalent of a puritan at home and, in financial terms, a libertine abroad. I wish my hon. Friend well in his new appointment.

When our proceedings broke up in some disarray on the night of 1 July, I was the last Back-Bencher to be called before Progress was reported. I warned then that we seemed, in EEC expenditure terms, to be at a level of 1.35 per cent. of own resources and perilously close to the limits which we were then debating. I said that those of us issuing warnings saw that we were heading towards breaking the level of 1.4 per cent., and I predicted that we were shortly to be joined by a new and powerful ally, which might he described as the march of events.

In the ensuing months, events have more than justified the point of view so eloquently expressed by my right hon. Friend the Member for Worthing (Mr. Higgins) and others. We are witnessing the failure to achieve adequate budgetary discipline in the EEC. Let us not forget that it is a fundamental condition of the Bill that effective budgetary discipline should be imposed in the EEC. The twin pillars of the debate are abatement and budgetary discipline. As my right hon. Friend the Prime Minister said on 5 December 1984: All of them have, however, agreed that the Council, which is the deciding unit in the whole Community, shall be bound by the clause on financial budgetary discipline.—[Official Report, 5 December 1984; Vol. 69, c. 354.] The picture of budgetary discipline in the EEC over the past few months is far from satisfactory.

Last year's EEC farm budget breached its ceiling of 16.5 billion ecu by 11 per cent. The total overspend of 1.8 billion ecu would have been 900 million ecu higher had not the strong dollar last autumn created savings in the sum allocated to cover export subsidies for cereals. On putting last year's EEC farm expenditure under the microscope, one must conclude, first, how vulnerable it is to dollar fluctuations. Every time the dollar slips one point against the ecu, it costs the EEC budget approximately £60 million. The dollar has slipped several points since the budgetary assumption for 1966 was fixed at $1 = 1.2 ecu. Secondly, one must conclude just how disastrous to budgetary forecasting and discipline are the effects of unsold surpluses. Merely storing the EEC beef mountain costs 2.7 billion ecu—an increase of 700 million ecu.

This brings me to the ultimate madness of CAP—the growing and mounting surpluses. The EEC has 14 million tonnes of grain, 800,000 tonnes of beef, 1 million tonnes of butter, 427 million tonnes of milk powder and 2 billion litres of wine in store, and all are increasing.

Mr. Budgen

My hon. Friend is understating his case. According to The Times on 16 July—just before the new cereal harvest— 20 million tonnes of EEC cereals in stock remained unsold.

Mr. Aitken

I am grateful to my hon. Friend. Perhaps a cheap Soviet side deal changed the figures. Either way, it is highly unsatisfactory.

Fifty per cent. of the EEC's entire budget now goes on the storing, distribution or dumping of these food surpluses. As the problem mounts, the EEC Commission is becoming increasingly desperate and is resorting to crazier and crazier measures. The Commission has announced that, in order to dispose of the butter mountain, it will feed a large part of the butter surplus back to the cattle that originally produced it. What nonsense. We have heard of jobs for the boys; now we have butter for the cows. Marie Antoinette, where are you now? The phrase which was said to have started the French Revolution—"Let the peasants eat cake" — has been replaced with "Let the poor people in Africa starve while the EEC cows eat butter." The only result of budgetary discipline so far is that the smack of firm government has been used to drive cattle towards the butter trough. That is nonsense.

The butter situation is only the tip of a massive surpluses iceberg which is building up problems for the ideal of budgetary discipline. The cold storage space for beef in Europe is so full that the Commission has had to hire additional cold stores in Austria, Switzerland and other countries. Ships with cold storage space have had to be chartered in France and Italy. Beef is pouring into the intervention stores at a rate of 25,000 tonnes a week because of a recent decision to extend intervention of beef carcases. Even with an expected sale of 75,000 tonnes of surplus beef to the Soviet Union, the EEC will still have a beef surplus of well over 1 million tonnes by the end of the year, at enormous cost.

Other factors make budgetary discipline in the EEC increasingly impossible to achieve. An item in The Sunday Times on 5 October, which was headed "EEC's £600m fraud", began: The official auditors to the common market have uncovered evidence of wholesale fraud in the trade of farm produce. Exporters are claiming millions of pounds in subsidies for food which in many cases does not exist. The article gave some examples, stating: Northern Irish farmers were sending the same cattle across the border so frequently that, in the words of one customs official, 'the cattle knew the way themselves'. The article continued: The European Commission …'could not confirm or deny' an … estimate that the irregularities account for more than 10 per cent. of the £6 billion spent on export refunds each year, because it 'does not have the information'. I turn now to the 1986 budget which so far has had several different manifestations. Originally Ministers set a ceiling of 29 billion ecu, or £17 billion. The Commission then produced a draft budget of 35 billion ecu, or £20 billion. In September EEC Ministers, attempting budgetary discipline, set a budget of 32 billion ecu, or £18.4 billion. Those levels which, however one looks at them, amount to increases of between 8 per cent. and 17 per cent. over the July ceiling were achieved not by the desirable objective of cutting agricultural spending but by accountants' conjuring tricks or creative book-keeping.

I can do no better than quote Mr. Jean-Pierre Cot, the chairman of the European Assembly's Committee on Budgets, who said: The Council of Ministers is incorrigible. In 1985 they proposed a budget for 10 months instead of for 12 months. Now for 1986 they are proposing a budget for 10 member states instead of 12 member states. A furious row about the future budgetary treatment of Spain and Portugal is emerging. Those countries expected to be beneficiaries in their first year, but instead they are turning out to be contributors. We seemed to be assuring them that, because of the desirable ideal of strengthening democracies, they would be helped financially. Instead, for them it is more a case of pay up, pay up and pay the game. I believe that a dangerous political backlash will emerge in those countries when it is discovered how they will be treated under these proposed budgetary arrangements. Spain and Portugal will have to contribute 3.3 billion ecu under this budget.

There have also been cuts —to many observers these are unacceptable — in the social and regional funds, instead of cuts in agricultural subsidies. Perhaps the complete freeze on food aid to Third world countries is the most unacceptable budget policy of all. The motto seems to be, "Let us go on enriching the grain barons but do not feed the hungry and starving of Africa." This is morally unacceptable.

A sorry picture emerges on this crucial issue of budgetary discipline. What a bleak outlook for sound accounting. When we discussed this matter in July, the rising cost of the budget had pushed the EEC's level of expenditure up to 1.35 per cent. of own resources—perilously close to the 1.4 per cent. limit which we are supposed to be authorising in the Bill. My hon. Friend the Minister of State, Treasury, said that he thought that it was impossible that we would soon be considering this issue again, but I think that it is almost certain that we shall be back regretting that we did not take a stand with this Bill at the 1 per cent. level so that we have to fight against a 1.4 per cent. increase. It seems like an annual Christmas pantomime. In comes Buttons, the Foreign Secretary, asking us all to clap our hands and show that we believe in the good fairy, Tinkerbell, who represents the good fairy of effective budgetary discipline in the EEC.

Mr. Austin Mitchell (Great Grimsby)

That is the way to do it.

Mr. Aitken

The hon. Gentleman, with his previous career in show business, knows exactly how to clap at the right time when one is asked to believe in fairies. He would have us all walk through the Division Lobbies saying that it is now time for Mother Goose to lay a golden egg worth £1 billion or more to the EEC. Mother Goose, instead of living at No. 10 Downing street, will be at No. 10.4, No. 10.6 or No. 10.8 Downing street.

Mr. Budgen

Each teeny weeny bit.

Mr. Aitken

Let us get away from the pantomime and return to reality. We must force effective budgetary discipline, as the Bill does. By holding the 1 per cent. limit we have missed our chance to reform the CAP. We cannot continue with this madness, which is offensive to the Third world and bad for the consumer who, it is estimated, will have to pay an extra £7 a week from the family budget for these extravagant CAP surpluses. Sooner or later the public's patience will crack and they will say, "This dance will go no further." Although some of us are saying this with our votes, it is a great pity that we are not all saying it in this debate..

7.9 pm

Mr. Ron Leighton (Newham, North-East)

I come as hon. Members will be aware, from the London borough of Newham. There we are asking the Government for partnership status, which might give us an extra £10 million a year to ameliorate the bleak conditions of our inner city. So far, the Government are resisting. They seem to be saying to us that they do not have the money. They do not have the money for British inner cities, yet they seem to have hundreds and hundreds of millions of pounds to throw down the black hole of the Common Market. They are throwing good money after bad. I find that unacceptable.

What we are doing in the Bill is the opposite of what we should be doing. Against the background of agricultural surpluses, as the right hon. Member for Worthing (Mr. Higgins) said, there is no case for any increase in agricultural expenditure. Increasing the VAT contribution by 40 per cent. will only encourage further overproduction, and then 1.4 per cent. will not be enough.

In the Bill we are throwing away one of the few cards that we held. We are abandoning the only limit that we had on the lunacy of the common agricultural policy. That was the 1 per cent. VAT limit. We were told that a condition of agreeing this increase was the obtaining of financial discipline. The hon. Member for Southend, East (Mr. Taylor) asked many questions about that. We were told that before we agreed there would be a watertight arrangement for financial discipline. That has not been achieved, and no one can say that it has. There is nothing legally binding. There is nothing in any treaty.

Why not? The Prime Minister explained that to us on 5 December 1984 when she said: It is not being embodied in a treaty or technically —legally—into the budgetary process. … Because one simply cannot get agreement from all 10 countries." — [Official Report, 5 December 1984; Vol. 69, c. 354.] There we are. That says it all.

The so-called guidelines arrived at at Fontainebleau are in my view completely worthless. The new Minister will discover that as he goes along. I note that he did not give any guarantees to the House this evening. The agreement is full of phrases, as he is aware, such as "exceptional circumstances" and "barring aberrant developments" and all the rest. As he will soon find, the Common Market is an aberrant development.

If there were budget discipline, we should not need the Bill or any increased spending. We were told that we had to agree to the increase to get our rebate. What is that rebate? It is a percentage of our own money coming back. Before, rebates were unconditional. This rebate is conditional on us agreeing that we shall pay even higher taxes to the EEC. In other words, we are paying for our own rebate plus some extra. As everyone should be aware, we shall be paying more in net terms than we were before.

According to the Treasury—it admitted that in 1985 — we shall contribute an astonishing figure of £1.2 billion net. I have been speaking this evening to some of the people who came to lobby the House about British aid to the Third world. I wonder what they think when they hear that we give virtually twice as much to subsidise the richest countries in Western Europe as we give to the Third world. I do not believe that that makes any sense.

What is that money for? Why should we pay anything in net terms? After all, we are one of the poorest members of the Common Market. Why should we pay anything? Why should we subsidise our richer neighbours, many of whom pay nothing in net terms and yet draw benefit? Why should we pay more than anyone else? I have never had that explained satisfactorily. What do we get for the money? What special benefits do we receive that others do not? Why should we spend £1 billion to obtain what they get for nothing? The House should ask those questions because we are supposed to be the custodians of the taxpayers' interests. If Newham cannot have £10 million, before we have a riot, why should we give those huge sums to the Common Market?

We should also ask how long the 1.4 per cent. VAT ceiling will last, because the effective VAT rate for 1984 and 1985 was well over 1 per cent. That is why the difference was made up in the intergovernmental agreement—the so-called intergovernmental whipround. In 1986, the EEC will already be spending 1.35 per cent. In other words, expenditure will already be bumping along the ceiling. Is it not clear that the life expectancy of the 1.4 per cent. ceiling will not be long? Then, because the Government propose to sell the pass now unless the House can stop them, we shall be asked to pay even more. What are we spending that money for? We should be clear that it is for the indefensible common agricultural policy. There have been no changes in the common agricultural policy. It continues to increase production, which results in uncontrolled rises in expenditure. Food prices are divorced from any economic criteria. They are political prices, not economic ones.

Income support for the smaller or less efficient farmers is guaranteed by fixing high consumer prices and keeping out and penalising products from overseas, regardless of the disruptive effect on poorer Third world countries. Prices high enough to keep less efficient farms in being mean excessive profits — a bonanza — for the large producers, while not even ensuring a reasonable income for the smaller ones. Moreover, those artificial prices have stimulated over-production and resulted in huge surpluses that cannot be absorbed. The open-ended commitment to buy into intervention links subsidies to production. In other words, those who produce most benefit most.

As taxpayers, we pay to produce what, as consumers, we cannot afford to buy. The burden of agricultural support is placed upon the consumer. That discourages consumption. It penalises the poorest in our society because they spend more of their income on food. It has even more damaging effects. It gives incentives to expand production through capital investment and the costly input of energy and fertiliser. That pushes even the large farmer into an economic trap due to the high costs of his overheads and because of rising land prices. Even he finds that his future is mortgaged and fears that the bubble will burst, as eventually and inevitably it will.

Such a policy threatens our environment and the quality of the soil. It encourages intensive monoculture systems of farming and the amalgamation of farms, the grubbing-up of hedges and woodlands and the massive injection of chemicals and fertilisers into the land. Those surpluses have further to be subsidised and sold abroad at a loss, disrupting the economies of our friends overseas and some of the poorest developing countries. Furthermore, that crazy price support mechanism is the opposite of an instrument for social or regional policy. It works to the advantage of the largest and the well-to-do producers who are to be found primarily in the north of Europe, where heavily supported products such as cereals, milk and sugar are produced.

It is an astonishing fact that farm incomes in the five most prosperous regions of the EEC are nearly seven times more than the average farm incomes of the five poorest regions. These disparities are growing wider every year so this public money is going to richer farmers, not poorer.

Mr. Forth

Will the hon. Member concede, in developing this point, that this position is very likely to change because if we allow Spain and Portugal to come into the Community and the political balance shifts towards the south, we may find that the available money under either a 1 per cent. or a 1.4 per cent. ceiling will go increasingly to the southern producers and not ours? That development would reverse the trend that he has described. He might also care to think about the effect it would have on our own people here, farmers and others.

Mr. Leighton

The hon. Member is well known in the House for his expertise on these matters and what he says may well be true. Were that to be the case, it would mean a lot more money. We would have to go well above 1.4 and 1.6 per cent. We would have to be taxed more highly in order to give even greater subsidies.

Producers' co-responsibility, quotas or levies are not a solution, mainly because they envisage no reduction in prices, which would still provide the present stimulus to over-production. Again, the rigidities and the unfairnesses that they would cause would lead to constant presure for their removal or their increase. Crucially, whilst prices are fixed politically, there would be irresistible demands from farmers for prices to be raised to compensate them for reduced production.

By not allowing demand to regulate or at least influence supply, we have a huge waste of economic resources. Because of an open-ended commitment to buy in whatever is produced, the whole system is out of control. This is why agriculture consistently swallows the vast bulk of the budget. The proportion of the budget going into agriculture has gone up again; I think that the Minister of State will admit that it is now running at a rate of 73 per cent. Not only is there no market discipline, there is no budgetary discipline, because agricultural spending alone is classified as compulsory. It is demand-led. All the rest —social, regional, industrial policy—competes for any crumbs left.

Mr. Marlow

The hon. Gentleman has just made a point that agriculture expenditure is going to take 73 per cent. of the budget. He will know that way back in 1977 agriculture took 73 per cent. of the Community's budget. It was a much smaller budget in those days but we were told then that salvation was just around the corner, that there would be new policies, restraints and controls and that everything would be all right. It was not right then. Why is it going to be right now?

Mr. Leighton

The hon. Member has put his finger on a very valid point. This is one of the causes of our frustration. We listened to the new Minister being very optimistic. When we asked him to give a guarantee, he did not do so because I think he knows in his heart that there is no guarantee.

When will the House learn? Are we ever going to learn? When will the Conservative Whips' Office learn, when the Minister says that it will be decided by the House? Perhaps that is really the question that we have to ask. Nevertheless the Government tonight are asking the House to throw even more money into this crazy system which is so damaging to British interests, when I believe and, I think, hon. Members on the Government Benches believe, that we should be doing precisely the opposite.

Agriculture and food policy should be repatriated and brought once again under the control of the House. We should set prices that would bring demand and supply together, prices rather nearer to world levels. We should once again open our ports to efficiently produced food from the Commonwealth and from the prairie countries. If we wished, as I am sure we would, to give income support to our farming community, it should be done directly rather than by artificially high consumer prices. Such a sensible policy would be in the interests of Britain, in the interests of poorer people and in the interests of world trade. It is long overdue and we should begin its introduction as soon as possible.

7.25 pm

Mr. Tony Marlow (Northampton, North)

I oppose this Bill because it is bad for Britain. What it means is that we will have to spend more money. Our net contribution will increase and we shall have to spend more money gross for exactly the same mish-mash that we have had in the past. I oppose the Bill because it is un-Conservative, because it means more public expenditure — and less adequately controlled expenditure at that. Public expenditure which was controlled by this House will now be in the hands of the Commission in Brussels. Money which we would have spent will be spent elsewhere by people in whom no Member of this House has faith when it comes to spending the money wisely, efficiently, without fraud and without waste.

The Bill is of course of benefit to some. Some people will welcome it — the "Europeans", that very small minority which wants to see a United States of Europe by stealth.

Mr. Teddy Taylor

Just a lunatic fringe.

Mr. Marlow

My hon. Friend says, "The lunatic fringe". I was about to say, "European Assembly". I leave it to hon. Members to decide for themselves whether the two are compatible. The Spinellis, the people who want European union, will be in favour of this; it will be moving in their direction. The ratchet will be moving slowly towards European unity—the Dooge report, the people who want to see the gradual achievement of a homogeneous judicial area, the same laws throughout the Community, the promotion of common cultural values, the same culture throughout the Community, the development of new media in a Europewide context, a European broadcasting corporation. How will that be financed? Through the VAT contribution? Or are we to have another licence fee?

Mr. Forth

Does my hon. Friend agree and is he not reassured by the fact that one of the joint budgetary authorities in the Community is the directly elected European Parliament? Is he not confident that the elected members of that body will join in exercising strict budgetary control over future Community budgets?

Mr. Marlow

I wonder whether my hon. Friend is so confident? He has spent some time there. It is my view — I do not know whether he will agree — that the members of the European Assembly would like to increase European competence and dominance. They would like to increase European policies over which they have control. Basically what they wish to do is to increase European expenditure. It gives more power to bureaucracy and less power to democracy. It allows——

Sir Russell Johnston

I give way frequently to the hon. Gentleman, so he must allow me a little pleasure as well. He cannot jump in this illogical fashion from, at one moment, condemning the European Parliament on the ground that it takes the sort of decisions he does not like to saying that, of course, all this means an increase in bureaucracy and a reduction in democracy. He cannot have it both ways—although he almost always tries to.

Mr. Marlow

The European Parliament is not a legislature; it does not have legislative powers or functions. It is an assembly. When we discuss in the House treaties or documents dealing with it, it is always called the European Assembly.

The European Assembly is for ever trying to increase its powers and competence. It is not a legislature, nor a parliament; it is a lobby and that is the problem. The European Assembly wants to spend public money that it does not earn itself, just as Liverpool wants to spend public money that it does not earn itself.

May I trouble the House very briefly with a private address to my friendly neighbourhood Whip? I shall be voting against this nonsense tonight. I am second to none in my admiration for the Prime Minister — [Interruption.]—if my hon. Friend will listen—because nobody could have negotiated on this issue a better deal than she did. She was dealt an appalling hand by her predecessors. The Government were in a difficult position. Nobody can negotiate as effectively and efficiently as the Prime Minister. Nobody bats for Britain as well as she does. On this issue, she has done as good a job as possible. For example, our future rebates will be by abatement rather than other people being allowed to discuss, decide and deliver what is in effect our money.

Mr. Hugh Dykes (Harrow, East)

Is not that illogical, as was a previous point made in an intervention? My hon. Friend says that the Prime Minister has done the best possible negotiating job. She has wholeheartedly, unequivocally and without exception or exclusion recommended the intergovernmental agreement and the legislation to the House. Therefore, why cannot my hon. Friend, logically and directly connecting the two concepts, vote for the Bill?

Mr. Marlow

I am pleased that I gave way to my hon. Friend because I enjoyed the courtesy of doing so, but in a way I am sorry because I was proposing to answer the question before he asked it. We are not the Prime Minister. We are the House of Commons of England— [HON. MEMBERS: "Of Britain."] We are Parliament. The Prime Minister is in a specific personal position. She negotiates with other Prime Ministers in the EEC. She has to deal with those Prime Ministers on a day-to-day basis. There is a limit to how far she can press an argument, whereas we in Parliament do not have to take the same direct view as the Prime Minister. If we as Parliament believe that by withholding our agreement from the measure we can secure a better deal for Britain, that is possible. We are in a different position from the Prime Minister. We have different powers and a different relationship with the Community. We have a different job to do.

If we vote against the measure tonight — [HON. MEMBERS: "When."] When some of us vote against the measure tonight, I hope that there will be a sufficient number of people here to defeat it. The immediate effect would be no increase in Community own resources. Europe, like Liverpool, would be rate-capped. If rate capping is good for Liverpool, why is it not good for Brussels? For the first time Europe would be required to live within its means. It would have to restrain waste on existing policies.

We talk a lot about our net contribution and what will happen to it. However, we must not lose sight of the gross contribution. The United Kingdom's gross contribution to the European Community went up by 50 per cent. in the three years from 1981 to 1984. As far as I know, the policies run, administered and decided by the Community have been much the same over that period yet we are paying 50 per cent. more. It must be grossly, crassly inefficient. If we denied more money, that waste would have to be tackled at source.

If we restrained the Community's expenditure by not voting for the Bill, it would not be able to embark on new money-based policies. There is a great vested interest: there is a lobby; there is a machine; there is an engine of Europeanisation in Brussels. The Commission proposes policies. It wants to see the influence and interests of Europe expanded. So does the European Assembly. A ceiling on expenditure would restrict the number of money-based policies that can emanate from Brussels.

There is much that we want to do with our partners and friends in Europe. There are harriers to trade that we want to break down. There is bureaucracy that we want to cut. However, none of that will cost money. If we increase the resources available to the Community, people will think of expensive policies additional to the existing ones and in some cases additional to the policies that we operate in this country—more policies, more laws, more public expenditure. Those are reasons for imposing a ceiling.

As I said in an intervention in the speech of the hon. Member for Newham, North-East (Mr. Leighton), in 1977 the common agricultural policy accounted for 73 per cent. of the Community budget. Now, after years of being told that the matter was being gripped and would be sorted out, and that the obscenities of the surpluses would be dealt with, Community expenditure on agriculture has doubled. That has happened in the past four years. Since 1977 it must have trebled or quadrupled. Now we are still spending 73 per cent. of the Community budget on agricultural policy.

Various undertakings have been given, but as my hon. Friend the Member for Southend, East (Mr. Taylor) has said, if it rains on a Wednesday afternoon those undertakings cannot be met. Some 15 or 20 years ago Professor Mansholt had a plan for reducing Community expenditure on agriculture and making it more effective and efficient. What happened to that? What happened to all the plans and promises, all the commitments that have been given in the past? They have all been swept aside by the lobbies, the vested interests and the political realities in some of our European neighbours' countries. That is what will happen now because we have not put a cap on the CAP because we have not put a ceiling on Community expenditure.

If we give way once, the lesson is there— we have given in and we shall give way again. We have heard all the talk about it being up to the House and expenditure not being increased again unless the House wants it. We know what happens with a Government with a massive majority, and an effective and pleasant Whips' office. If the Government say that, because they have given a commitment on the other side of the channel, Community expenditure will be increased, they can deliver. Barely half a dozen hon. Members begin to understand the Community financing system. I do not include myself in that number, and I take an interest in the issue. If the Government ask for more money, is it possible or likely that the House of Commons will act as a restraint on the Government's decision?

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

Given my hon. Friend's stated admiration for my right hon. Friend the Prime Minister, does he seriously believe that she and the Government as a whole would at any stage wish to make to the House any recommendation involving increased expenditure unless they were entirely convinced that it was in the national interest of the United Kingdom to do so?

Mr. Marlow

I respect the Prime Minister, and I understand what my hon. Friend says. My hon. Friend's predecessor was asked whether the Government would give an undertaking that they would not ask for another intergovernmental agreement. He did not give that undertaking. The reason was that the Community is a system of barter. If one wants a sensible policy on reducing non-tariff barriers and on freedom for the City of London to trade insurance policies in Germany, Paris and so on, one must scratch the other person's back too. Because of that, the Minister could not give a commitment from the Dispatch Box that he would not come back for more money. The Prime Minister is part of it. She cannot help it. It is part of the institution of which she is a member as Prime Minister.

That does not mean that we here in Parliament have to take the same view. I shall be interested to hear what my hon. Friend the Minister of State says at the end of the debate. I still do not understand why the Government cannot give the commitment that my right hon. Friend the Member for Worthing (Mr. Higgins) requested in his excellent speech, that we shall not give a loan or agree to distend this excessive expenditure further.

People might say that if we were to throw out the measure there would be massive retaliation from our partners in Europe, life would become unbearable, we would not get any rebates in future and so on. That cannot be true. When we joined the Community we had a balance of payments balance with the Community. This year, on the latest figures, we expect to have a deficit of £9,000 million in manufactured trade with the Community. We are a massive market for the industries of continental Europe. We buy their foodstuffs to a greater extent than they buy ours. We are a market for their food and manufactures. Even at a lower level of financial net contribution to the EEC, we would still be a net payer. Europe with us is more powerful politically and in foreign policy than Europe without us. We have a massively strong position and if my dream were to come true and we were to defeat this measure tonight, there is nothing Europe could do which would be against our interests. We are in a stronger bargaining position than we give in account of ourselves.

There are several myths, too, which ought to be dispatched. First, there is the myth that if we did not have this agreement we would have to pay more. After this agreement we will be paying more net than we were paying before the agreement, and it is not conceivable that whatever we do we would not have an agreement. Let us try to compare apples with apples and not apples with oranges. We are worse off now than we were before the agreement, and to say if we did not have an agreement we would be worse off is really a weak, shallow and shabby argument and it does nobody any credit to use that argument.

Secondly, under the new arrangements we will be paying less than 1 per cent. VAT. As I said in an intervention in the speech of the Minister, over the past four years we have paid an average of 0.5 per cent. My hon. Friend came back as quick as a flash and said, "But next year we shall be paying only 0.56 per cent." My hon. Friend knows that we shall be paying 0.56 per cent. next year because of our massive payment this year which will entitle us to this exceptionally large rebate next year. However, the likelihood is that we will get it up to that 1 per cent. so that we will be paying more net after rebate —almost twice as much more—than in the past. Let us not be political about everything and try to disguise everything. Let us state the facts and show things as they are, warts and all.

As I have said many times before, we all want to control and reorganise the CAP. It is a policy which might suit continental farmers, but it is not a particularly good policy for our farmers. However, continental farmers have the votes, so they persist in it and we persist in paying for it. As I said, this is good for the Europeans, good for those who want a national Europe, a European state, but that is not what the people of this country want and that is not what the people of this country have been told they will get. But drip, drip, slowly, slowly, we are moving towards a European state, and this measure moves us a step further in that direction.

The Bill is bad for Parliament. We are losing control over people's money and giving that control to non-elected bureaucrats. It is bad for Britain. We are trying to deal with the problems of big, nationalised organisations which are answerable to nobody, yet here we are passing money to an organisation which is not directly answerable to anybody. It is also bad for Europe. What we want in Europe is mutual deregulation, we want free trade, and we want to cut out bureaucracy. We do not want new, expensive policies. We do not want to feed the appetites of the bureaucrats, and that is what this measure will do.

7.35 pm

Mr. Nigel Spearing (Newham, South)

This Bill is about money and about power. It is about the transfer of money and therefore about the transfer of power. My hon. Friend the Member for Newham, North-East (Mr. Leighton) spoke last from the Labour side and I commend his speech to the House. He mentioned the people of the area we represent. They do not have much money and they do not have much power. The Government have power to provide money for the economy and that will provide young people in that borough with jobs. They should do that instead of voting it away from the United Kingdom.

My hon. Friend also mentioned that we have a massive lobby, concerned not with domestic affairs, grievous though they are, particularly for young people, but for those in some parts of the world who cannot even expect to live. The Government have the power to provide resources and money to prevent famine and starvation. Instead, at the express behest of the Prime Minister through the Rayner cuts, the scientific units of the Overseas Development Administration were butchered. Select Committees have asked for those cuts to be reversed but they have not been. The Government are providing neither the money nor the power even to do what the Prime Minister claims the country is trying to do in respect of the prevention of famine.

Mentioning the Prime Minister brings me to the hon. Member for Eastbourne (Mr. Gow), whom I welcome to this debate on the EC. He is going to find a certain degree of difficulty—even, if I may suggest, greater difficulty than is inevitable for almost anybody in housing. He illustrated that himself, perhaps unwittingly, when he was interrupted by the right hon. Member for Worthing (Mr. Higgins), the Chairman of the Select Committee on the Treasury and the Civil Service and he could not give an undertaking. If I remember his words correctly, and I do not want to do him down, he said, "I cannot conceive of circumstances where it would be necessary."

The hon. Gentleman has a lot to learn about EC affairs because I suggest to him that this Bill illustrates in both its clauses those very circumstances that he claims he could not conceive of. The first part of clause I deals with the new arrangements for own resources and the second part, sub-paragraph (f), deals with the undertaking irregularly to top up the EC budget for 1985 because those own new resources are not yet ratified in the vote. It is flowery and eloquent to talk about not conceiving the circumstances. He did not understand that those very circumstances are with us at this minute in debating the Third Reading of this Bill.

This brings me to paragraph 1(f) itself. It relates to this intergovernmental agreement, at which is presumably an international treaty because it has been added to the terms of the European Communities Act 1972 and its terms are set out in Cmnd. 9548 on one page. It refers to an undertaking. I have attempted to identify the nature of this international agreement, at which Ministers were present, who appended the signatures and so on. All that the Library and the Minister could provide was a rather scrappy piece of paper which relates to Ministers meeting within the Council and idly agreeing to put hundreds of millions of pounds of taxation on their respective constituents in European countries.

That might just be legal. I understand that if the Command Paper tells us it is a treaty we have to accept it. The Ministers themselves might look at those procedures a little more carefully, but let us say that that is just legal. I doubt very much whether it is legal in terms of the treaty of Rome, because as we all know, that treaty says the Community must keep within its own resources. As was pointed out in the earlier Committee debates, paragraph 1(f) is highly unlikely to be fully legal. It may indeed he ultra vires and it is demeaning this House to put such a proposal before it on Third Reading.

Paragraph 1(e) is the decision, the Fontainebleau package, the 1.4 per cent. VAT increase. I should like to reiterate something, which ought to be reiterated time and time again, that it is not 1.4 per cent. of VAT, it is not 1.4 per cent. of the 15 per cent. nor is it 1.4 per cent. of the VAT take. That well-known newspaper The Times seemed to reiterate this on 24 June 1985 in an article which said: At the moment it can claim a maximum of 1 per cent. of this VAT revenue. That was an article in The Times written by a gentleman called Ian Murray. Of course, that is not correct: it is 1 per cent. of the VAT base which is equivalent to a rateable value assigned to us, and of course we are now paying about 11 per cent. of that take from VAT. Any Chancellor —it might even be the hon. Member for Eastbourne or perhaps even the right hon. Member for Worthing—in future would have to pay upwards of 11 per cent. and perhaps more if sterling drops or the 1.4 per cent. goes up, at least 11 per cent. and perhaps up to 15 per cent. of the VAT take straight to Brussels. Do not pass Go; do not pass Whitehall; do not pass the Treasury; do not even pass Parliament because it is paid out of the Consolidated Fund under the 1972 European Communities Act without even leave of the statutory instrument. That will be the position of any future Chancellor so long as the legislation remains in force.

Finance is power and the transfer of power weakens the giver. By this legislation the Chancellor's hand will be weakened in relation to the poor and needy in Newham as much as to the poor and needy in Africa. Thus will the power of any future Government be constrained. Their life blood—their taxation powers—will be less than would otherwise be the case because it will automatically be siphoned off, away from these shores.

There is, of course, the rebate, but it is not two thirds of the VAT share. We have been told how difficult it is to express clearly, but it is two thirds of the gap between what our share would be if we paid the full VAT rate, whatever it might be, and what we get back as a proportion of Community expenditure. We must not forget, however, that what we receive consists not just of grants for visible projects such as roads and for regional projects or youth projects but of all the allocated expenditure. That, of course, includes all the common agricultural policy expenditure to which my hon. Friend the Member for Newham, North-East (Mr. Leighton) referred, because that, too, is "money for Britain", so the more money that is poured into the agricultural industries and the agriculture support industries of this country the smaller the gap, and therefore the rebate, becomes. In other words, the more that is spent on inappropriate support the smaller will be the rebate in relation to which the Minister so proudly proclaims the Government's success.

The Minister's predecessor said in Committee that the Government would try to present all these complex calculations as clearly as possible. The Commission has been given competence to do the calculations but the Government, we are told, will monitor them. The Government. however, have no power to change them. The Council of Ministers also has no such power. That power rests entirely in the hands of the Commission. The Minister's predecessor said The Government will endeavour to provide the necessary information in as clear a form as possible."—[Official Report, 1 July 1985; Vol. 82, c. 141.] I have here their first attempt. On 14 October the Government deposited in the Vote Office, under the signature of the Minister of State, an explanatory memorandum on the preliminary draft budget of the European Communities for 1986. That document contains a description of the rebate mechanism. According to the description given of the expected rebate for 1986, the gap is between 21.3 per cent. VAT-related expenditure and 13 per cent. allocated expenditure—that is, about 8 per cent. The Minister says that we shall thus receive a rebate of £870 million and pay about £73 million per month less than we otherwise would have paid. The explanatory memorandum, however, fails to show the calculations. I should have thought that the Government, having undertaken to provide a step-by-step child's guide, would have taken the opportunity to do so in the first explanatory memorandum in which they could boast of the success of their scheme, but no such thing appears in this document.

The memorandum, however, helps us considerably by stating that the VAT rate for 1986 is likely to be 1.24 per cent. of the VAT base. Thus, in the first year, we are more than halfway to reaching the 1.4 per cent. My hon. Friends have been asking how long this arrangement will last and how soon we shall be back in the same position. If things continue at the present rate, it will be next year. I admit, however, that the present figures include the paying back of certain loans and money drawn out, so two or three years might be a more reasonable estimate. So much for the Minister's suggestion of a lasting arrangement.

Interestingly, too, the explanatory memorandum shows that Community expenditure this year is up no less than 23 per cent. Tell that to the people north of the border, to the people in Liverpool, in Newham and in the Sudan. Tell that to the staff of the scientific units of the Overseas Development Administration, now fewer than they were a few years ago.

That is bad enough in itself, but there is also no discipline. In November 1983 the then Chancellor said that the Government were prepared to consider an increase in own resources provided, first, that agreement was reached on an effective control of the rate of increase of agricultural and other expenditure, and, secondly, that it was accompanied by an arrangement to ensure a fair sharing of the financial burden."—[Official Report, 14 November 1983; Vol. 48, c. 609.] There may be a fairer sharing of the Community burden but without any doubt at all the burden is now much heavier than before. Indeed, it will be 23 per cent. heavier next year than it was this year.

There may be a fairer sharing, but there is clearly no discipline. As my hon. Friend the Member for Newham, North-East pointed out, the Prime Minister has said that there is no discipline. The Select Committee on European Legislation, of which I have the honour to be Chairman, has also said that there is no discipline. Our second report states: The Committee do not perceive any legal implications in the Conclusions as presented in this document"— that is, the document relating to financial discipline. Thus, in the first big parliamentary debate since the publication of certain newspaper articles, the Prime Minister and a Select Committee of the House of Commons are in full agreement that there is no financial discipline in the pretence put before us in earlier debates.

I began by saying that the Bill was about money and power and the use of both. It is clear that the expenditure of the EC has increased and is increasing. Thus, the powers of the EC have increased and are increasing. It is also patently clear that the powers of this House have decreased and are decreasing. All who vote for the Third Reading of the Bill today will be adding to that process. They will be accelerating the decline of the powers of this Parliament and, by that token, the legal powers and rights of the British people within their own land.

7.58 pm

Mr. Nicholas Budgen (Wolverhampton, South-West)

The hon. Member for Newham, South (Mr. Spearing) ended his speech on the high ground of constitutional propriety and loss of sovereignty by the House to the institutions of the EEC. I suppose the English frame of mind is more inclined to look towards the practical arguments. The proponents of Fontainebleau said that we had got firm control of expenditure within the EEC because we had a cast-iron system of budgetary control. They said that the Fontainebleau agreement was but the beginning of the manifestation of a firm political resolve to come to terms with the ever-growing expenditure in the EEC and, most of all, with the distortions and waste of the CAP. Not so, said those of us who were from the start opposed to Fontainebleau. We said that by allowing an increase in the contribution that we made through VAT we had taken away the one firm barrier to increased expenditure in the EEC.

There are advantages in the delay that the House has enjoyed as a result of the earlier protracted discussion of the Bill. Three more months have elapsed and we are entitled to consider the new evidence to see whether it tends to support the Government's position or the position of the opponents. All the evidence since late June and early July tends towards support for those of us who were opposed to an increase in own resources.

Let us consider for a moment the broader issues of public opinion. Of course, no man in the pub knows exactly what our contribution is to the EEC. When he is told that the Prime Minister has secured an automatic, lasting and cast-iron agreement, the man in the pub tends to believe it. He does not notice that, as it is put, teeny-weeny concessions are made here and there. It is only at a later stage that he adds up the various teeny-weeny concessions and begins to notice that there has not been strong control of expenditure.

There are broad areas where public opinion is beginning to notice the disadvantages of the common agricultural policy. In July the Halvergate marshes issue came to a head. What caused that? It was caused by farmers responding to price stimuli. Instead of leaving ancient meadows in the state in which they had been for centuries, the farmers wanted to plough them up. The Government could not say that this was inevitable because of market forces, albeit a distorted market, and that if wheat is selling at over £100 per tonne people will prefer to grow wheat on the Halvergate marshes rather than run store cattle on them. The Government could not say that. They had to say that by a mixture of planning control and countervailing subsidy they would endeavour to persuade the farmers to keep the marshes in the state they had been in for centuries.

The swing of public opinion is such that people are beginning to notice that the enclosures that were a beautiful part of our countryside for over 200 years are rapidly being ruined by being turned over to prairie farming, not because of great wickedness by farmers but because they are responding to price stimuli when cereal farming has become extremely profitable.

We are grateful to my hon. Friend the Member for Southend, East (Mr. Taylor) for pointing out the rising interest in the effect that food may have upon the human body. There is increasing interest in the amount of nitrogen used on cereal crops and the effect that that nitrogen has when it drains off into water courses.

Those two matters have drawn to the attention of the public the effect of high cereal prices on the common agricultural policy. I do not pretend that the man in the pub will say tomorrow, "I heard a splendid speech by Mr. Terence Higgins in the House of Commons and I agree with all that the Treasury Select Committee has said about the common agricultural policy." But people notice when someone says that if 5 cwt of nitrogen is put on an acre of marginal land it may go into the water courses and cause various forms of cancer. They notice when Bert in the village rips up a large number of hedges and explains that he has done so because he needs to cash in on the cereal bonanza.

Public opinion has moved since July in favour of those of us who were highly sceptical of the Fontainebleau agreement. Other factors are moving in our direction. The Chancellor of the Exchequer was a party to an agreement to attempt by intervention to reduce the value of the dollar against other currencies. The right hon. Member for South Down (Mr. Powell) is smiling at the impertinence and arrogance of central bankers who believe that they can, by intervention, permanently affect the value of currency. With that I agree, but I am sure he would agree that if the Americans are serious about wanting to reduce the value of their currency against other currencies they can do it by printing more dollars. I am not sufficiently expert in American politics to know whether they are serious about wanting to do that. but if they increase the quantity of dollars and thus reduce the price, it will have a horrifying effect upon the principal cost within the CAP — the disposal of the surplus upon world markets. We should have had an explanation of the effect upon the CAP and upon the budget of the EEC.

The supporters of the Fontainebleau agreement also said that it was not a botched-up, linked agreement but the beginning of a new political initiative in Europe by which the common agricultural policy would be transformed. It was said that it was not a desperate step to hike up the funds by sharp footwork but the beginning of a sustained political endeavour. It became clear when we examined the details of the agreement that there were so many ways in which member states could avoid the effects of the so-called system of budgetary discipline—by the aberrant circumstances clauses and all the rest — that it all depended upon the political will of member states.

We have had a quiet political time since the end of July but the EEC met throughout September. Through the good offices of the Financial Times we have been able to see which way the wind seems to be blowing in the EEC. On 20 September the Financial Times reported: Mr. Henning Christophersen, the Budget Commissioner … launched a strong attack on member states for agreeing to cuts which, he said, make the new members substantial net contributors". That is significant because a commissioner, as a hybrid between a politician and a bureaucrat, is anxious to feel the political wind throughout the Community. He takes the view that it is necessary to expand the budget. If that is thought to be an aberrant view, as compared with that of the Commissioners, I invite the House to consider the Financial Timesof 8 October which carried an interesting report by Mr. Ivo Dawnay in which he says that, because of political disagreement, proposals that had been made earlier to reduce the price of cereals — and thus the enormous cereal surplus which The Times says was running at 20 million tonnes before the present harvest came in — came to nothing. Everybody knows that although the harvest was difficult to get, it was very large. We have got a great deal of second grade corn. Before that harvest, there was a surplus of 20 million tonnes in store. We learnt that the Commission had proposals to reduce that surplus, but they were left vague. I do not want to read every word of Mr. Ivo Dawnay's report, but he said that the Commission concluded that there was simply not enough political will in the EEC to make any reductions in cereal prices.

The delay that the House has enjoyed, and which has given us a further period of reflection, reveals yet more evidence that the Fontainebleau agreement was not the beginning of the new political resolution to cut the budget and to reform the common agricultural policy, but merely a short-term desperate measure to persuade Parliaments of the EEC to give more money. All that has happened since July shows that we shall be back again and that we have thrown away the only real lever to control the vast expenditure of the EEC. It is so vast that nobody can understand it without a few hours of head scratching. I do not pretend that the British people understand the EEC's finances but, as they look at the countryside that they love and which has been a great feature of our national way of life, they see changes. They do not like those changes and, in the end, will express their dislike.

8.12 pm

Mr. Austin Mitchell (Great Grimsby)

I do not want to follow the hon. Member for Wolverhampton, South-West (Mr. Budgen) down all the avenues in his concise, telling and effective speech, except to assure him that, on this matter, he speaks for England as surely and more devastatingly than the hon. Member for Northampton, North (Mr. Marlow) shouts for it.

The Bill is born out of dithering and duplicity. The dithering involves the procedures by which the Government decided to implement intergovernmental agreements, although they later changed their minds. In 1984, the Government introduced the first intergovernmental agreement under the European Communities Act 1972 and as being ancillary to the treaty, although it was a fairly fundamental constitutional matter. They were implementing an IGA which specifically stated that it was outside the treaty by procedures developed for passing treaty agreements. When that was challenged in the courts by Mr. Oliver Smedley, the Government changed their mind and decided not to use the procedure but laid Estimates and introduced a Consolidated Fund Bill. This Bill is the third approach.

Yet, having implicitly accepted Mr. Smedley's criticisms of the procedure by changing their approach, surely it is incumbent upon the Government to pay the considerable expenses that he incurred in clarifying the law for them. Their generosity to the EEC is in appalling contrast to their meanness to Mr. Smedley by the Government dithering about how to implement the IGA.

The Bill is being pushed through on the basis of misinformation and after a considerable hiccup in the proceedings. Initially, the Government intended to push it through fairly quickly at the end of June and the beginning of July but they then grasped the idea that it might be useful to drag their feet after the Prime Minister's humiliation at the Milan summit. She was humiliated largely because of the contrast between the decisions reached at that summit and the Foreign Office's propaganda about the quiet British takeover of the Common Market and how Britain was giving the lead. The sad contrast between that and reality meant that it was ill-advised, even for this Government, to rush through a Bill showering money on the EEC. The Government therefore agreed to what they should have accepted all along—delay.

The parking meter has now run out and the Bill must be passed if we are to get the principle of a rebate accepted. The Government want that principle in their financial calculations especially because of their current massive struggle to cut Government expenditure. The Prime Minister has to feed in more money to the Euro-meter or have the rebate towed away.

Even now, the Bill is being urged on misleading and fallacious arguments. The argument on which the case for the Bill is put is that we have a concession in return for the EEC's acceptance of budgetary discipline. Successive hon. Members have said that the only effective way in which to achieve budgetary discipline is to use the weapon that was in our hands before we agreed to the principle of this legislation—refusal to increase the ceiling on own resources contributions to the Community. That was the one method by which we could automatically, inevitably and certainly have forced the EEC into sensible budgeting, because implicit in that refusal was the threat of bankruptcy unless it mended its ways. It was a pistol directly to the head. We have thrown it away for a mess of Euro-promises.

It is a distortion to talk of budgetary discipline being achieved when, for no good reason, we have thrown away the only means by which it could have been enforced. There is no possibility of budgetary discipline in a CAP when an increase in production means an increase in subsidy. There is no discipline from the market—there is no discipline on production. There is not the discipline of the market because the subsidies guarantee the production. There is equally no budgetary discipline on production and as production increases, so does he cost of the CAP. We are throwing money into a bottomless pit and creating an environment in which there is no possibility of budgetary discipline.

Even in the so-called provision for budgetary discipline there is the amazing exception that the ceilings do not apply in "aberrant circumstances", whatever they may be. What way of enforcing discipline is that, for example, if there is a bumper harvest? More important, discipline is essentially a political decision taken by nations which have a vested interest in paying more to farmers and in ignoring their own brave words about discipline because of the political strength of the farming lobby in their systems. The Germans did that when they imposed the veto on the cut in cereal prices. They pay more to farmers because they are politically dependent on the farming community. Given that these are political decisions taken by a collection of states which have a vested interest in paying more to their farmers, there is no way that budgetary discipline will be enforced. In this matter as in others, we shall be in a minority of one.

All the evidence—the volume even since our debates in July is impressive—shows how inadequate the so-called discipline is. One can cite examples. The recent year-long investigation by the Court of Auditors concluded that the EEC has virtually no control over the payment of export subsidies. Those export subsidies make up a quarter of the farm budget. A recent report in The Sunday Times pointed out that the Commission was unable either to confirm or deny that £600 million-worth of fraud was involved because it did not have the information". The auditors state that the Commission is powerless to enforce its own regulations.

A further report of the auditors relates to the olive oil regime, which takes up 5 per cent. of FEOGA spending, and which will rise after the enlargement of the Community. The report occupies 10 closely typed pages. Twenty substantive criticisms are made, none of which the Commission has answered.

Regarding projections for the future, the Home Grown Cereals Authority calculates that on present policies the cost of supporting cereals alone—the enormous, insane attempt to turn the whole of England into second-rate prairies—could reach 14 billion ecu by 1991. That is just 1.8 billion ecu short of all agricultural spending in 1983, and more than five times the cost of supporting cereals this year. To pay so much to encourage production so that one must then pay more to store it, is yet another folly. The 2 to 3 per cent. increase in yields per annum is certain to continue. Indeed, Agra Europe, which is a respected authority on these matters, estimates that we are now heading for a 50 million tonne grain mountain. That is yet a further folly. Yet the Foreign Secretary shows a touching faith in the Commission's ability to administer budgetary discipline.

The Commission—the body charged with implementing budgetary discipline — had to implement the supposedly automatic 5 per cent. cereal cuts this year. It tried and found that it could not hold the line on a 3.6 per cent. cut, and it now seems as if it will be unable to implement a 1.8 per cent. cut. Indeed, the Commission has now made so many concessions to the German farming interest that Mr. Andriessen has said that the effect of the changes so far agreed will be to cut cereal prices by something less than 1 per cent. So much for budgetary discipline and for the 5 per cent. automatic cut. The cut of less than 1 per cent. is at a time when cereal prices are about 20 per cent. or more too high. The 1986 budget assumes a mere 1.8 per cent. cut in cereal prices.

In addition, the Commission has been sending out its scouts for storage space not only in EEC countries because it is fast running out of storage space. It is now busy hiring storage space for the growing surpluses outside the Community in Switzerland, Austria and elsewhere. Beef is pouring into intervention at the rate of 25,000 tonnes a week, which will produce a surplus of 1 million tonnes by the end of the year. Agra Europe—an eminent source on these matters — notes that since the Council has refused to agree even to the Commission's reform measures, expenditure will climb steadily towards and collide with the Community's own financial resource limit.

According to Mr. Andrew Cahn, agricultural policy adviser to Lord Cockfield, At the end of 1985, intervention stocks will be worth Ecu 9 billion more. The annual cost of servicing these stocks is about Ecu 3.5 billion, which represents a contingent liability which has not been paid for. In other words, there is a cost of 3.5 billion ecu, which has not been budgeted for. That figure is equal to 10 per cent. of the entire 1986 budget, yet it has not been allowed for in the calculations that are held so beguilingly before us to tell us about budgetary discipline.

We are being asked to push this measure through quickly at this washing-up end of the session because all the evidence, information and facts conspire to invalidate the promises of budgetary discipline which Ministers have held out to justify the measure. I welcome the Minister to his new job, but it is an awful one. In the past, the response to assault has been to lie back and think of England, but now it is to stand up and lie for Europe while Europe conspires to pull the rug from under every argument held out by Ministers to justify their actions. The proceedings over the 1986 budget demonstrate how far the rug is being pulled out from under Ministers' promises of budgetary discipline.

On 18 September, when the Council met to consider the Commission's draft budget, it agreed to a budget totalling 32 billion ecu, which was well above the Finance Ministers' self-imposed limit of 29.7 billion ecu. The Council agreed to nearly 3 billion ecu more than that limit. Although it cut nearly 3 billion ecu from the Commission draft, it was achieved by the various procedures which hon. Members have pointed out.

The Council postponed decisions on the accumulation of past commitments to regional and social policies. How will those commitments be paid? They have been postponed and left out of the calculation. Just as, in the past, the Community has assumed a 10-month year, it now assumes a 10-member community. It has taken no account of the advent of Spain and Portugal in the year in which they join, and has budgeted only for 10 members. Most monstrous of all, as the Labour Front Bench pointed out, it cut 130 million ecu from the Commission's proposed food budget. That would leave the food aid budget static, and represents a real cut of about 6 per cent.

In one of the Minister's first tasks in his new job, he assured the Community that that was acceptable because there had been reports of rain in Africa. As Minister for Housing, he dreaded the prospect of rain because it would have revealed the inadequacy of the Government's housing programme, yet in his new job he welcomes the prospect of rain because it allows him to cut our contributions to the food budget and therefore impose some budgetary discipline at the expense of starving people in Africa.

That is how the figures were manipulated by the Council of Ministers on 18 September, and that bodes ill for future control.

The CAP budget overshot by 11 per cent. last year, simply because of unforecast increases in beef intervention and continuing high dairy costs. The same problems will happen, perhaps with different products, remorselessly year after year, particularly because of the fall of the dollar. The budget assumes an ecu-dollar exchange rate of 1.20, which is approximately the current level, but the dollar is coming down and we are told that the policy of European Governments will be directed to getting the dollar down further.

However, for every percentage point fall in the dollar below 1.20 to the ecu, CAP costs will increase by between 70 million and 100 million ecu. In other words, if Governments achieve the object of their exchange rate policy we shall be imposing on ourselves an ever higher CAP burden.

By the so-called budgetary discipline, we are strengthening agricultural protectionism, which is bad for the world and particularly had for this country and bodes ill in the climate of increasing industrial protectionism towards which we are heading as a result of the American trade deficit. What right have we to argue against American protectionism when, for no valid reason, we have so eagerly accepted agricultural protectionism at such enormous cost? We are essentially legislating lies, or at least gross distortion.

The process of argument and justification for the Bill must encourage a cynical view of the Community. There are lies, damn lies and Euro-truths. Ministers defend the indefensible, pretend that suffering in the market is a benefit and that the unacceptable is not happening and justify it all with a new framework of distortion.

Ministers could have said that it is a bad deal, but that it is the only one we can get and that if we are to stay in the Common Market and derive all the myraid benefits of membership we shall have to accept it. They could have said that we are getting a bit back and it is worth having to pay a lot more to get that bit back. They could have said that the Common Market had us over a barrel over the rebate, but had offered us a few promises of good behaviour — which it does not mean — so that the Government could save face in the House.

The Government could have justified the measure in those honest but minimal terms, but they did not. They went so far as to say that this is a new beginning and that tough, dynamic negotiations by our abrasive Foreign Secretary had won a major advance. They said that there had been a dramatic change, that the whole of Europe is different, that budgetary discipline would be imposed and that we had a permanent settlement of which we could be proud — at least until we have to increase our contribution to 1.6 per cent., when the whole thing is up for grabs again.

Ministers justified their case with a hype that took distortion to ludicrous lengths. When giving us those distortions, Ministers ought to think about what justifications and excuses they will be able to give when they have to return to justify the increase in agricultural expenditure that occurs after the imposition of the so-called budgetary discipline, a sudden new intergovernmental contribution for another Christmas present for the Common Market and the early increase in the own resources ceiling which is inevitable and will come quickly. Having trundled out every possible excuse, distortion and argument as hostages to get this inadequate Bill, what excuses will Ministers be able to give us in the future?

Why are the Government so generous to the Common Market? Why are they so strict, stern and mean towards every useful purpose of spending in this country and so generous in handing money over to that inadequate institution? Why is housing being slashed in this country? Why is there no money to expand our economy? Why are our local authorities being rate-capped and local government spending and services castrated? Why is our infrastructure creaking? Why is Britain shabbier, meaner and nastier than ever before? And why, in those circumstances, are the Government handing out money in an unquestioning fashion and with half-baked excuses to a Common Market from which we get so little?

What do we get for our contribution, which will be £1,200 million this year and £1,000 million in a year after the settlement comes into force? We know the massive benefits in trade — a turning round of a surplus in manufacturing trade of £2,000 million in 1970, at 1983 prices, to a deficit of about £8,000 million or £9,000 million. We know the benefits in terms of the cost of food and the food mountains. We know what benefits we have given to underdeveloped countries by distorting their trade, with Europe producing highly subsidised and expensive sugar while the sugar industry of underdeveloped countries staggers into ruin.

Can the Government please quantify the benefits that we get in return for our massive contributions of £1,200 million this year and £1,000 million a year after the settlement goes through?

8.37 pm

Mr. Richard Body (Holland with Boston)

Once again, I follow the hon. Member for Great Grimsby (Mr. Mitchell) in a Common Market debate and once again I agree entirely with the hon. Gentleman, though his peroration went slightly awry.

My hon. Friend the Member for Northampton. North (Mr. Marlow) said that he opposed the Bill because it was bad for Britain. I oppose it because it is bad for Europe. It is almost exactly 30 years since, as a new hon. Member, I joined a small band of colleagues to argue for this country to be represented at the Messina conference and to join the Common Market. After three decades, all that we seem to have is a common agricultural policy. No one can really dispute that.

As several hon. Members have said, we shall be back again in a year or two being asked for more money to hand over, not for Europe—do not let us deceive ourselves about that—but for the CAP.

The hon. Member for Great Grimsby spoke about the increase in output. If anything, he understated the figures. We are poised for a remarkable expansion of food production. My hon. Friend the Member for Wolverhampton South-West (Mr. Budgen) spoke about nitrates. We are developing varieties of wheat that will be able to absorb and make much greater use of nitrates, so that by the 1990s we shall be growing about twice as much wheat as we are growing now. On land where 3 tonnes to the acre is grown—that is about the national average on good land for this year's harvest —6 tonnes per acre will be grown. It will not be milling wheat suitable for consumption by people in this country or even in Ethiopia. It will be feed wheat, of poor quality, to be used for making food compounds to be consumed by cattle, pigs or poultry. Those who say, in good faith no doubt, that we should send such food to Ethiopia do not understand the poor quality of so much of the wheat being produced in northern Europe.

Mr. right hon. Friend the Member for Worthing (Mr. Higgins) spoke of his visit to the United States. There millions of acres capable of growing good quality milling wheat for human consumption are out of production. Two or three years ago I was in Australia and flew over tens of thousands of acres of land capable of growing top quality milling wheat which were out of production and reverting to scrub. That is a direct consequence of the common agricultural policy. Large areas throughout the world which could grow wheat for human consumption are not being cultivated while in the United Kingdom and northern Europe we are laying waste to our countryside. We are draining the wetlands, as my hon. Friend the Member for Wolverhampton, South-West said; and we are ripping up the hedgerows, as another hon. Member said, to produce food for the intervention stores.

We began the last harvest with a surplus of 3 million tonnes of feed wheat or cattle food. After the harvest the surplus is even larger. The Select Committee on Agriculture begins on Thursday to investigate what will happen to the feed wheat. The evidence will probably be that large quantities are to be destroyed by pests such as weevils and that no market for this surplus feed wheat exists.

By giving more and more money to the common agricultural policy we are stimulating further output in types of food which the world does not want. Not even Ethiopia wants it. I hope that no one will suggest that we should send our vast surpluses of butter and sugar to people suffering from malnutrition.

In the next few years resources will be transferred to southern Europe in an effort to support agriculture in Greece, Italy, southern France, Spain and Portugal. Anyone who has visited those countries knows that just as a tremendous potential exists for expanding the production of northern European foodstuffs, so there is a tremendous possibility of expanding the output of olive oil, tobacco, lemons, oranges, wine and paddy rice. We do not produce such crops so our farmers have no interest in them. That is a major argument for repatriating agricultural policy.

The CAP is a mechanism for continually increasing output, but it fails to support farmers. Throughout the Common Market there is a steady exodus from the land. When the CAP was introduced 20 million European families earned their living from the land. Today fewer than 8 million families succeed in doing so. Families leave the land in their hundreds and thousands each year. The CAP is inherently wrong. It increases output yet fails to support farmers.

We need a policy which has the opposite effect. It should cool down the system, curb output and support farmers in the way in which the hon. Member for Newham, South (Mr. Spearing) described. The CAP is damaging to agriculture in western Europe. It will cause great troubles in the future.

Only a few Euro-fanatics are present today. Perhaps we should devise a new rule for Common Market debates so that only hon. Members who attend a debate may vote. We would swamp them by two to one at least every time we voted.

I ask the Euro-enthusiasts who are here — one of whom is sitting on the Government Front Bench —whether we shall achieve any European unity in what matters by continuing to encourage the CAP on its present course. If we are in earnest about reforming the CAP we must be firm. We do not want rancour or bitterness. We should simply say to our partners that the CAP is not achieving what we set out to achieve in the 1950s. We must bring it to an end and, quietly and patiently, without a row, say that we shall give no more money to the common agricultural policy. Until we do that — and Britain can do it—there will never be any real reform of the CAP. That is why I hope that those who wish to see some movement towards European unity will think again about the Bill.

8.48 pm

Mr. Eric Deakins (Walthamstow)

I agree with almost everything that the hon. Member for Holland with Boston (Mr. Body) said. He is a noted expert on agriculture, as is my hon. Friend the Member for Great Grimsby (Mr. Mitchell), with his wealth of statistics. I shall devote most of my speech, not to agriculture, but to the circumstances surrounding the Bill.

I expect that the Minister of State will tell the House boldly that the Bill marks a new stage in the financial relationships between the United Kingdom and the rest of the Common Market. I have no doubt that he will believe that. However, we must remember that this is just another crisis in the continuing series of financial crises and problems connected with the relationship between Britain and the rest of the Common Market.

Similar crises have arisen under both Labour and Conservative Governments. Each time the crisis has been patched up with agreements, some of which were better than others. Not a single agreement on finance has been reached since Britain became a member of the Community in January 1973 which has not subsequently been unravelled or turned up in a different form, presenting another problem for the House and the Government of the day.

I am sure that we shall be told that the Bill marks a new beginning in the financial relationship between Britain and the rest of the Community. I think that we should take such assertions with a pinch of salt.

That the debate is taking place after the events of 1 July and 2 July in Committee shows that the Prime Minister has had a substantial change of mind. I hope that the Minister of State will explain the background because it is a mystery.

After Second Reading we moved on to the Committee stage on 1 July, before the recess. The Committee continued into the small hours of 2 July. We disposed of all the amendments. Before the Committee stage began we had an agreement—I hesitate to say in this context that it was an inter-party agreement—that all stages up to Third Reading would be taken in one sitting. Only one vote took place in Committee. In return for that agreement the Government said that they would not bring the Bill back to the House before the recess.

The events about which I am speaking happened at least four weeks before the summer recess. Usually we would have expected the Committee stage to be concluded in the following week and the Bill then to have moved to Third Reading and to the House of Lords. That did not happen for one good reason—the Prime Minister, and not in a fit of pique, was alarmed at the proceedings at the Milan conference. She decided to reserve the Bill as a useful weapon so that if other countries did the dirty on Britain in the post-Milan negotiations we would have a weapon up our sleeves to repay them in the same coin by withholding assent to the 1.6 per cent. agreement reached at an earlier meeting.

I hope that the Minister will enlighten us on what has happened since 1 July to render the Prime Minister's fears and worries nugatory. The negotiations in various fringe meetings of the Council have been taking place throughout the summer, and are not concluded. I accept the Prime Minister's feelings about that major threat, and it remains a threat. It consists of possible amendment to the treaty of Rome—we would find any amendments unacceptable—a major extension of competence for the EEC into areas such as education and the environment and an extension of the powers of the European Assembly. Those were being discussed at fringe meetings during the Milan conference.

I want the Minister to tell us what assurances we have received since 1 July, when the Committee stage of the Bill was postponed, to show that we are now safe and that there will be no amendments to the treaty of Rome, no extension of competence for the EC into areas that are not covered by the treaty and no extension of the powers of the European Assembly.

I know that the Minister will almost certainly say that negotiations are continuing—but that he can assure the House of the British Government's attitude. With great respect, that is not good enough when we are considering a Bill on Third Reading. Once it has been passed, we will not see it again and the damage will have been done. We have a duty to ensure that the Government retain the weapon that they required following the Milan conference.

The Minister can give us no assurance that the three points that I have mentioned will not take place. The Minister will tell us that the Government will resist such change, but they have resisted EEC proposals before. There was a time when the Prime Minister was on record as saying that the Government would resist to the utmost any increase in the 1 per cent. VAT limit. We have now conceded such an increase—although I make no party political point about that.

What assurances are we likely to receive? There will be none from the Minister tonight. That must mean that the Prime Minister has changed her mind on the vital issue of protecting British national interests. Once the Bill has been passed, she will have no weapon with which to answer those in the EEC who wish to push the country and the Community further towards federalism. That would involve treaty amendments, an extension of power of the European Assembly and an extension of competence for the EEC.

As we said in July, the intergovernmental agreement is one of the most amazing pieces of paper ever to be put before this House in the guise of a legal agreement. The interesting question is why it should be an intergovernmental agreement. It involved all the same Ministers who were meeting in the Council, so why could they not have taken a Council decision? We know that that is because the Council would then have been going against its declared policy on the VAT limit and own resources. In 1984, and again in 1985, the Ministers invented a subterfuge to get around the member states meeting in council, but not meeting as a council.

I have a copy of the French text, which puts things beautifully. It is much better than the English version before the House. It refers to one of the objectives of the member states, meeting "au sein du Conseil", which means "in the bosom of the council". That is a heartwarming expression and much better than "within the council", which is the English translation. It conveys the flavour of the character of the subterfuge in which they were indulging at our expense.

The members of the Council were unable to do something acting as the legally constituted Council of the European Community. They were foiled in their attempt to do anything under the basic treaties, so they invented a new mechanism. That raises a problem for the House. We are told that the Bill will clarify the future of our financial relationship with the Community. It will be put on a sound footing and, as the Minister said, there will never be any need to come back for additional money. Indeed, I think that his actual words were that that would be "impossible to conceive." As the Minister of State, Foreign and Commonwealth Office is to reply to the debate, it is apposite to draw attention to a parliamentary answer that he gave to the hon. Member for Southend, East (Mr. Taylor) on 20 June. He said: The new own resources decision, like the existing own resources decision, makes no provision for additional sums to be made available in the event of the VAT ceiling being reached but neither does it exclude them. Sums provided under intergovernmental agreements are not own resources." —[Official Report, 20 June 1985; Vol. 81, c. 204.] There is another subterfuge now. Not only has the Council invented a new mechanism entirely outwith the scope of the treaties that will put more money into the budget of the European Community, but we now have a mechanism for getting around any conceivable decision taken by any national Government on own resources. We now have a mechanism for pushing money into the EEC from member states which, we are told, has nothing to do with own resources.

The member states, meeting in the bosom of the Council, have invented a new financial mechanism. We will, of course, be told that that is still subject to parliamentary control. It is nice to be told that, but we have not been consulted, and I bet that the other member Parliaments have not been consulted, on whether they want an additional financial mechanism. Why is not the VAT and own resources system good enough? It proved not to be good enough in both 1984 and 1985, so we now have intergovernmental agreement.

That is not the end of the matter. The status of the intergovernmental agreement is uncertain in Community law. If we had a Government really looking after British interests and concerned to ensure that everything done by the European Community was in accordance with the basic treaties, rules and regulations laid down and decided by member states, they would be challenging this intergovernmental agreement in the European Court. It is not within the scope of the treaties. It is ultra vires.

Ministers — whether they are meeting within the Council or within the bosom of the Council or as the Council—do not have the power to take such action. Nevertheless, meeting within the bosom of the Council, they have arrogated to themselves powers which no Parliament and no basic treaty has given them.

I am surprised that more has not been made of that point. We shall return to it because, despite the soothing words of the Minister—in which he said that he found it impossible to conceive that the new financial mechanisms would not give the Community the money that it required —I fear that we must take the matter with a pinch of salt because we have received such assurances before.

For example, we were told that 1 per cent. would be enough. We are now told that we can be sure that 1.4 per cent. will be enough. However, on the basis of the figures given by my hon. Friend the Member for Great Grimsby, it seems that 1.4 per cent. will soon not be enough.

Much has been said about budgetary discipline, so I will not weary the House on the subject. While the system of budgetary discipline even on paper did not look too good, some of us were willing to give it a chance. Indeed, we had no choice but to do so. There has been some cut back on the dairy products side because of the milk quotas, but those who know and have worked in agriculture appreciate that farmers do not respond to incentives in the same way as to other sections of the community.

If quotas are cut and prices reduced, the chances are that some farmers will produce more. I appreciate, of course, that some will go out of production. The result is likely to be that the end position will be no better than the earlier position. It could conceivably be worse.

If we cut cereal prices this year or next year, which is the hope of this and some other Governments, that will not reduce the cereal mountain because, as with "Alice Through the Looking Glass," farmers will run twice as fast to stay in the same place; they will produce more to maintain their net incomes and profits, and we shall have to shoulder that burden.

I fear, therefore, that the CAP is out of control, and I draw the attention of the House to the wise remarks of the hon. Member for Holland with Boston in connection with Mediterranean agriculture. This aspect has worried me at least for the last 10 years in view of previous agreements on Mediterranean agriculture. This country has not played any real part in those agreements, because of our lack of Mediterranean-type agriculture, and we have let the southern Europeans get on with it. The Germans have done the same, although we are the paymasters of the Community.

With Spain and Portugal coming in, there will be a large expansion of production in items such as olive oil, citrus fruits and wine. The cost of disposing of those will eventually approach the current cost of disposing of the beef surplus, though perhaps not as high as the dairy surplus and certainly not as high as the cereal surplus.

I am concentrating on the trend in common agricultural expenditure. I challenge any Minister to deny that that expenditure will continue to go remorselessly upwards. That would happen even if the budgetary discipline agreement were adhered to by everybody, and we know that it will not because there are sufficient loopholes in it to drive through a coach and horses.

The agreement before the House tonight is based on a trade-off, the sort of bargaining to which we have got used during our 12 years' membership of the Community. It is ironic that in our 13th year of membership we should still be talking about finally resolving our. financial relationships with the Community. It may be an unlucky thirteenth because the Bill marks a new departure since 1 January 1973, and it is significant on that account.

We bargained away the 1 per cent. VAT limit. As the right hon. Member for Worthing (Mr. Higgins) pointed out to the Minister in an intervention, the Prime Minister's original intention was to stick to the justice of our case. We should now constantly emphasise the fact that in our relationships with the rest of the EEC we can no longer, as the Bill shows, rely on getting justice simply because of the justice of our cause. Justice in the European Community now, as the Bill shows, must be purchased by concessions. Justice in itself is no longer good enough. We must buy it. That has been the case with many societies and institutions in the past, and hon. Members in all parts of the House must be critical of such an approach.

That is a bad deal for Britain and we are likely to see further developments towards federalism. We have thrown away all the financial weapons that we ever had. The Minister says that we still have to move from 1.4 per cent. to 1.6 per cent. and that that can happen only with the agreement of all Governments. However, the issue will not be presented to the House in that way in one year's or two year's time. There will be a trade off. We shall be told by our partners that if we do not agree to 1.6 per cent. there will be no rebate for us, or we shall be denied something else that we want. We shall have to bargain and in the end we shall concede because 1.6 per cent. will be on the statute book.

The presence of 1.6 per cent. on the statute book, or provision for it, is a sign that the Government accept that the ceiling of 1.4 per cent. will eventually be breached. That can be only because the budget discipline mechanism within the common agricultural policy will not work. If it worked, there would be no need to breach 1.4 per cent. It is a fact that we are making provision for the breach, albeit with the safeguards of parliamentary scrutiny and approval. The principle is before us. We know that a ceiling of 1.6 per cent. will appear on the statute book. That is a sign that the Government have no confidence in the financial discipline mechanism.

If the proposal that is before us were put to the British people and explained to them, I believe that they would reject it. We must continue arguing our case in the absence of our colleagues who are likely to flock into the Chamber prior to supporting the Government when the Division takes place. It is a bad deal and a bad Bill and I hope that more and more Members, especially on the Government side, where the influence really lies, will object to it and show that objection by voting against it.

9.7 pm

Mr. Terry Dicks (Hayes and Harlington)

It is with great trepidation that I contribute to the debate in the presence of so many experts on both sides of the House. The issue before us is not one in which I have taken a great deal of in-depth interest. I shall speak from the point of view of someone who obtains information from the newspapers, be they the Daily Telegraph or The Sun. In other words, I contribute to the debate as an ordinary person. That is the person that the Government must bear in mind when they make these decisions.

My hon. Friend the Minster of State, Foreign and Commonwealth Office, made an intervention to ask whether it was believed that the Government would recommend additional expenditure if that were not in the public interest. Surely that depends on how one conceives the national interest. I do not believe that the national interest is being reflected by the Government on this issue. The ordinary person is sick of ever-increasing expenditure on the EEC budget, especially at a time when the contribution from central Government to local authorities is declining. The public are asked why restrictions are being places on local authority spending if we can afford to waste money by directing it to the EEC.

The public are also sick of unfulfilled promises. We have heard much about tighter financial discipline within the EEC and I was rather surprised when I read the speech that the Home Secretary made last week on additional manpower for the Metropolitan police. He made it clear that he expects greater efficiency and more value for money in the Metropolitan police before he will provide additional resources. It is a pity that the Government do not take that view about EEC expenditure. If we adopted the same approach to the EEC, the British people might be more receptive to some of the things that take place within it.

The Government might say, "Do not worry, we shall get something from the additional expenditure." The same argument applies when it is advocated that more money should be made available to local authorities. The same can be said of additional expenditure on the police. I am sure that the local authorities would say—I speak as a local councillor—"If we are given more money, we can improve local services, such as the roads and housing. We shall ensure that the police provide better patrolling, especially in the inner city areas." The argument that we get more for paying more is justified nationally as well as internationally.

The ordinary British person is sick of wasted expenditure, which leads to the production of surpluses that are stored, destroyed or sold to Russia at give-away prices. The people cannot understand how we can continue encouraging overproduction and the sale of the produce for almost nothing to our sworn enemy, the Soviet Union. How on earth can that be justified? How can it continue at its present level? Surpluses in beef, butter, skimmed milk and sugar are still growing.

Hon. Members, whether those who have been present in the Chamber or those who will flock in later to vote, who believe everything said by my hon. Friend the Minister will believe anything.

9.10 pm

Mr. Bill Walker (Tayside, North)

I take part in this debate because of the effect of the common agricultural policy on my constituency. It must be obvious to my Front Bench colleagues that this is not the most popular Bill before the House this Session. It is certainly not popular among Conservative Back Benchers. That view is taken not just by people who are hostile to the EC. We are adopting the same attitudes to Europe as we adopt towards local government expenditure. Later this evening we shall debate the clawback from Scottish local authorities. It is interesting to note some of the local authorities that are listed for clawback. If anyone had said to me six years ago that I would be supporting a Bill to deal with Perth and Kinross district council as an authority that spends vast sums I would have said "Bonkers". We are asked to penalise one of the most prudent authorities that I have come across during my years in politics. Local authorities have been affected by factors that are largely outside their control.

Against that background I have to say to the farmers in my constituency, "You realise that one of the reasons why we are agreeing to this additional expenditure and why our local authority is being penalised is that the measure will benefit farmers in the country at large." They do not believe me. They tell me that they find it difficult, if not impossible, to involve themselves in long-term planning. If this policy were to benefit the country at large, even farmers in my constituency would accept that it was worth while. The problem is that they do not believe that these measures will benefit them or the country at large. They recognise that the production of surpluses cannot go on for ever.

The raspberry crop in Scotland does not enjoy massive EC funding and does not generate surpluses. Other member states have been cheating — I use the word carefully and deliberately—by exporting EC soft fruit surpluses and selling them to the United Kingdom. Raspberries have been dumped in Britain as below production costs. Raspberries have been grown in Scotland throughout this century and for a large part of the last century. This Scottish production has largely met the demands of the United Kingdom market and has had export potential. However, the raspberry crop in Scotland no longer gives the returns that it should and could produce in a free market. We are not asking for anything other than a free market. Farmers are unhappy because they believe that the way in which we are operating the CAP in the long term will be damaging to the country at large. They believe that the original strategic reason for exporting agricultural products has been forgotten. It will continue to be forgotten because Europe does not have the same strategic interest in these islands that we have. The farmers in Perthshire and North Tayside feel that they would be looked after better by the Westminster Government than by Brussels.

We must study the Bill against that background. One may not be hostile to the European concept or against trying to make something work in Europe, but the common agricultural policy is not working to the farmers' advantage, as they see it. It is not working, as the taxpayers see it, to their advantage, and it is not working to the advantage of Third world countries, which have seen their economies substantially damaged first, by the way that we have operated the CAP and, secondly, by the way that we have disposed of surpluses.

This Government of all Governments have a policy of prudent management. I support that fully. I do not equivocate on that. But within prudent management there must be sensible and logical management. It must be seen by the public to be sensible and logical.

No one should under-estimate the difficulties facing our Ministers when they go to Europe. Anyone who thinks that to take part in the horse trading that goes on in Europe is a sinecure has made no attempt to discover the pressure under which everyone there works. Whether one is a politician in France, Germany or the United Kingdom, one of the difficulties that must be faced in a democracy is that we all have to go for re-election. European politicians may be under much greater pressure because of the way the CAP operates to their advantage. We have a responsibility to adopt a much more positive and tougher line.

My hon. Friends on the Front Bench may just get away with things tonight, and in terms of votes the result may look good, but they should not for one minute think that the vote will represent how people in the House or the country view the way Europe is going with the common agricultural policy.

9.17 pm

Mr. Teddy Taylor (Southend, East)

Like my hon. Friend the Member for Tayside, North (Mr. Walker) I hope that one thing is achieved tonight. I hope that the Government will think carefully about the fact that every Conservative Member who has spoken has spoken against the Bill. They have said that they will either vote against the Bill or not support it.

This is the first time in the 21 years that I have been in the House of Commons when traditional Euro-people have not been putting what is called the other side of the case. The numbers have not declined. The so-called Euroenthusiasts have not been here. We know that that is because they are acutely embarrassed by the Bill. It goes against everything for which Conservative Governments stand. That is bad for Britain and for the future of the Common Market.

We cannot ignore the fact that the purpose of the Bill is to increase public spending on the Common Market by about 25 per cent. We must ask ourselves how that is consistent with the attitude that Ministers have taken over every other authority. My health authority's cash has been clobbered. We have had to make cuts in the things that we need. Our county councils cannot repaint our schools because, rightly, the Government have said that we must curb public expenditure. Our district councils have great difficulty in maintaining parks and playgrounds for children because public expenditure must be controlled in the public interest.

My hon. Friend the Member for Hayes and Harlington (Mr. Dicks) eloquently asked how the blazes more public expenditure on the Common Market is good but more public expenditure in Britain is bad. Have we any evidence that the Common Market spends money more sensibly than local councils and health authorities? The sad fact is that all the evidence shows that the Common Market spends money like a drunken sailor, and everyone knows it. The Government also know that. We are to increase the Common Market's money by 25 per cent. and give it billions of pounds more to spend on our behalf.

But, of course, the argument is: maybe more money is going in, but we will probably get more money out. The Minister of State, who opened the debate, is certainly, as a sensible and prudent person, more aware than anyone that when we talk about the money coming back it is not a question of money coming out of one pocket and going into another. Where does the money go? The Minister may recall that I got an answer in Parliament only today about where some of Britain's money goes to, and what we get back. Last year £400 million of the money that we got back did not actually come to us; it was given to traders as a subsidy to dump food in the Soviet Union. So the £400 million does not really come to us. When Government say, therefore, that this year our net contribution is £1,200 million after payments to ourselves, it must be remembered that a lot of payments are not to ourselves, they are simply subsidies for dumping food abroad at a very low price. So we must ask ourselves why we are doing it.

What I think is a tragedy for those who accept the Common Market is that we have thrown away the one chance in 12 years of obtaining reforms of the agricultural policy. Everybody admits that the CAP is nonsense, that it is appalling. There are some who are slightly cautious. I remember the hon. Member for Inverness, Nairn and Lochaber (Sir Russell Johnston) saying that his policy was that, while we had to change it, nothing must happen quickly, nothing must damage farming, particularly in Inverness.

Most do not accept that point of view. We say that change must come but we know that there is no will whatsoever in Europe to change the CAP. Everyone knows that it is crazy, but I believe that even in the Government quite a few Ministers are happy that other member states are blocking the reform of the CAP because they know that it would not be very popular, that it would involve some harsh decisions and that some people would be hurt.

Surely, if we really believe that the CAP should be reformed, we cannot pass this Bill. The only way we will reform the CAP is to hold back on the cash. The only way to stop wasteful expenditure is to hold back on the cash. Why is it that what is good for Lambeth and Liverpool is not good for the Common Market?

It would not be so bad if the money were not wasted in such an appalling way, but, according to a parliamentary answer only the other day, 51 per cent. of every penny now spent by the Common Market on all its activities is spent on either destroying or dumping food or on storing surpluses, with the Soviet Union and east Europe being the main beneficiaries. I wonder how many Conservative Members are aware that. since the Conservative Government came to power, the export of cheap, subsidised food to the Soviet Union has increased tenfold—by 1,000 per cent.—and an answer in Hansard only this morning shows that this year it has increased yet again by 50 per cent.

We are now sending 200,000 tonnes of cheap food to Russia every week at crazy prices. I said in an earlier debate that we were sending top quality beef at 40p a pound; we are now sending it at 19p under a special deal. We are sending butter at 18p a pound, sugar at 5p a pound and, of course, we are sending wine at this crazy figure a 5.5p a litre.

That is where the money will go, so let those here tonight be fully aware of what we are doing. We are allowing more cash to be spent by this Government on dumping more cheap food in the Soviet Union. That is absolutely crazy. Of course, the Government said that we have an assurance from the Common Market that it will try to spend less on farming in the future, but the Government know that that is wholly bogus because this so-called agreement says that we can exceed that by any amount we want at any time if the majority of member states say that it has been an exceptional year. We know that every year has been an exceptional year, as every year will be an exceptional year; and we have absolutely no protection. We have no veto. We cannot stop it. With this Bill, if the Common Market wanted to increase its spending on agriculture by 50 per cent. next year, we could do nothing about it. Our only protection would consist in the majority of states agreeing that it has not been an exceptional year.

Today most of us have been seeing people who are concerned about world poverty. They talk about how crazy it is that we have all these food surpluses and starving people. There is a far greater danger to the Third world. Why is there so much poverty? Why cannot those countries pay their debts? Why do we find so much starvation and misery in the Third world? The main reason is that world food prices are at an all-time low, and those wretched countries are not getting a decent price for their agricultural produce.

Why are food prices at an all-time low? The only reason is that the Common Market is dumping more and more food. If we want to do something for the Third world, we do not want to send those countries more wheat that they cannot consume or transport. Instead, we should not distort world food prices, as we are now doing, and deprive those people of a decent price for their food. For example, the Common Market export rebate for beef is almost its total price, when we are dumping it at 18p a pound. How do we expect people to compete with that? When we are dumping sugar at £80 at tonne on the world market because we buy it in at £400 a tonne and then dump it, how do we expect the poor people of Pakistan, Mauritius and other places to get a decent return on their produce?

If we pass the Bill, it will mean more money to spread devastation, misery and distress in the Third world. It will mean more countries unable to pay their debts or buy goods from Britain. In my heart, I believe that every Tory here knows that this is a wretched Bill, which will stop Common Market reform. It will mean more waste of our money going to the wrong policies. At some stage we shall have to say no. I wish that we would do it tonight.

9.27 pm

Mr. Eric Forth (Mid-Worcestershire)

I should like to break the mould referred to by my hon. Friend the Member for Southend, East (Mr. Taylor) and make a small contribution as a Euro-person— that is, someone who has slaved for five years in the trenches of the European Parliament trying to build a better and greater Europe. It is in that spirit that I wish to make a few remarks, but in a context that has not been given full consideration.

One of the main reasons that has been given —although little reference has been made to it in the debate —for the increase in the budgetary requirements of the EC is the enlargement of the EC. I make no apology for returning to that theme, because I think that I am correct in saying that the only time that the subject has been touched upon in the House since 1978 was during my Adjournment debate just before Easter this year. My hon. Friend the Minister of State may remember it because he and I discussed the very important matter of the enlargement of the EC. I say "he and I" deliberately because it was he and I. It is an important matter in respect of the argument.

One of the main reasons that we are given for increasing the Community's resources is that it will enable us to finance the enlargement of the Community to include the entry of Spain and Portugal. Those of us who have given the matter any thought are few to date, although it will be brought to us between now and the end of the year. I hope that it will be fully debated by the House. We should cast our minds back to those who argued for the entry of Greece to the EC some years ago, and consider the effects that that has had.

Greece is a small country. I was going to say that it is a peripheral country, but it is not even geographically contiguous to the Community. Yet we have brought her in and it has caused nothing but trouble since. Politically, in terms of external relations and political co-operation, to say nothing of the budget, the entry of Greece into the Community has been an unmitigated disaster. We are now being told that the entry of two much more significant countries will be of great benefit to the Community, with all the budgetary implications.

The argument is based on two or three important legs. One is the strategic argument about NATO. It has always puzzled me because, in the Community, Ireland is neutral and not a member of NATO. France's connection with NATO is variable and dubious. Greece is in the European Economic Community and will probably keep Turkey, the single most important member of NATO, out for as long as she can. Yet we are asked to accept that the entry of Spain and Portugal is somehow linked with their continuing membership of NATO.

Then we are asked to be persuaded that there will be benefits to the people of the Community and of this country by the entry of those two countries. Let us consider Spain because it is by far the more important and significant. I ask hon. Members to consider how we shall benefit by bringing into the Community, which allows the benefits of free trade and free movements of goods, a country such as Spain which enjoys lower labour costs and greenfield automobile manufacturing sites. Those things will enable her to compete more directly and competitively with our own manufacturing industry, particularly in the west midlands, which I happen to know best. It has a drop forging industry and an automotive industry, together with the related industries. We are asked to agree that, by bringing such a major potential competitor into the Community, we shall benefit. I doubt that.

Even more significantly, our horticulturists and those involved in agriculture are being asked to accept that when we are asked to spend our money irrigating Spain to increase the productivity of Spanish agriculture we shall benefit. I ask those hon. Members with horticultural interests to go to those involved and say, "How will you benefit from the inclusion of Spain in the EC?".

I ask the House to consider further how altering the political balance of the Community from one which has been, quite frankly, dominated by the northern countries to a potential alignment of Greece, Spain. Italy, Portugal and France—when it suits her purpose—will benefit us. How will we benefit from that? Those countries have already given the signals in all the Mediterranean plans that have been referred to.

We shall see a significant shift in the political, economic and financial balance of the Community towards the south. That is directly related to budgetary matters. The argument will be a powerful and persuasive one: that the poor countries of the south need our assistance and support. But, make no mistake, we will have to answer to the people of this country because the benefits which our farmers have obtained from the Community will. in a direct and relevant sense, suffer in the future when the resources of the Community are shifted, as they will inevitably be, to the south of the Community if we accept these two countries into membership.

Sir Russell Johnston

The only argument which the hon. Member has not dealt with in putting up these Aunt Sallies and knocking them down is the basic argument that both Spain and Portugal were under dictatorships, and the European Community will provide them with the political stability which they previously lacked. It was never argued that it would be of direct benefit to this country, for those countries to come in.

Mr. Forth

I wondered whether that might arise. I am not entirely persuaded by that argument, for two important reasons. If we bring those countries in and the political nature of their Governments change, there is no mechanism in the Community for throwing them out. The hon. Member knows probably better than I, because he has long experience of such matters, that there is no mechanism in the EC for ejecting a member country. For that reason I do not follow the hon. Gentleman's argument. Nor do I accept that mere membership of the EC is necessarily some guarantee of democracy, however we may define that. Nor do I know who is to judge whether a shift in the political system in any member state is acceptable.

I am not sure that I could ask my electorate to pick up the financial tab for guaranteeing democracy in a country like Spain or Portugal. I am not convinced that their democratic regimes are as necessary to the defence of the West as many people imagine. But that must be left to individual judgement. I am not arrogant enough to seek to impose my political views or my political system on a country with a political tradition, such as that in Portugal, which is much longer than ours.

I am at a loss to understand why I am expected to endorse this major increase in Community resources in order to give me, my constituents or my country the benefits that it is said would flow from enlargement of the Community. That is my principal reason, although many others have been referred to by many of my hon. Friends. I look forward to returning between now and Christmas to the issue of enlargement of the Community. I hope that we will have a full debate on the matter before being asked to agree. It is for that reason that I shall vote against the Bill as my first gesture to warn the House on the arguments about the enlargement of the Community.

9.34 pm

Dr. Oonagh McDonald (Thurrock)

Hon. Members on both sides have put a large number of important questions to the Government. They have asked for a guarantee that the Government will not bring in another Bill of this kind asking for endorsement of a further intergovernmental agreement and yet more money to be given to the Community. They have asked when the VAT ceiling will be raised to 1.6 per cent. and for the Government's views on that. Even more fundamentally, they have raised important issues about the powers of the European Assembly and whether there will be any further encroachment on British sovereignty.

All those issues have properly been raised by hon. Members on both sides in today's debate and we now await the winding-up speech of the Minister of State, Foreign and Commonwealth Office, but we know that none of the questions will be answered. Instead, the Minister will make one of his usual speeches. First, he will put both hands on the Dispatch Box, making a great show of the fact that he has no notes before him. His speech will be delivered with great style. There will no stopping the endless flow of words, but none of them will answer any of the questions. It will be words, words, words. There will be no substance at all. That is why the hon. Gentleman's speeches are so rarely quoted in the press — because they have no substance at all. Part of his speech, of course, has been prepared — a few cheap jibes about the Labour party with which he will hope to win a few smiles and little warmth from the Conservative Benches, and no doubt he will succeed. Perhaps that will make up for the fact that he did not obtain a Cabinet seat and remains the best Secretary of State that Scotland never had.

The Minister will have nothing to say about the deep concern that has rightly been expressed today about the 6 per cent. cut in real terms in the EC food aid budget. On this very important day when, as the hon. Member for Southend. East (Mr. Taylor) and others have pointed out, many of us have been meeting the food aid lobby, I hope that the Minister will show some concern about Africa. I hope that he will show more concern than the shocking complacency of the Minister who opened the debate in Brussels and was reported as saying that, as the rains had now brought an end to the famine, there was no need to worry about further food aid there. That view is tragically wrong and I am sorry that the Minister concerned did not have the grace to apologise to the House for words which, spoken by a British Minister, will be taken to represent a British view of what has happened.

As we know full well, the budget proposed by the Commission left food aid at the same level as last year, but Ministers proposed a cut of 130 million ecu. That means a 6 per cent. cut in the food aid budget at a time when famine continues in Ethiopia and other parts of Africa. Sadly, it was left to the Irish and the Danes to call for a generous increase in food aid and the Italians and Greeks both rejected the budget at least partly on the same grounds.

It is a pity that Britain was not among those countries which asked for an increase in food aid when that small amount of money—the £290 million proposed by the Commission and subsequently cut—compares so badly with the £12 billion going to CAP agricultural support. It contrasts badly with the surpluses which continue to exist when 1 million tonnes of butter are insanely fed back to the very animals which produced it, when ships with cold storage facilities are being hired in France. Italy and Ireland to hold yet more surplus beef and when the surplus of cereals continues to rise.

Much has been said in the House in the past about the obscenity of the surpluses. The hon. Member for Southend, East was entirely correct in his argument that it is not so much the existence of surpluses as the fact that world commodity prices are held down by over-production in the Community, that makes it impossible for Third world countries to earn the foreign exchange that they badly need to pay off their debts or to bring about investment in their own countries. I hope that the Minister of State will say something about Britain's performance on the 1986 budget and that what he says will go some way towards putting right the wrongs perpetrated in our actions in cutting part of the 1986 budget.

We have before us a Bill to lend the Community another £250 million as a face-saving device for the German agriculture minister who last June vetoed the cereal price cut. Even more important, do we not have here a Bill that throws away the trump card which the Prime Minister once brandished? Hon. Members asked what has changed between 1 July and now which makes the Prime Minister and the Government prepared to put forward a Bill to allow Parliament to consent to an increase in the United Kingdom's VAT contributions without ensuring an effective budgetary discipline. Does this not mean that the Prime Minister will go on to play sister bountiful to the Community? A long time ago, in November 1979, the Prime Minister said: I must be absolutely clear about this … I cannot play sister bountiful to the Community when my own electorate are being asked to forgo improvements in the fields of health, education, welfare and the rest. Interestingly enough, hon. Members on both sides of the House have admitted that they have experienced cuts in health, education and welfare in their own constituencies. They are rightly concerned about those cuts. All they see is a 1985 budget in which we give even more; we give £1.2 billion to the common agricultural policy yet we cannot find the odd £100 million that might be needed urgently for the Health Service somewhere in this country or as a small part of the cure for the state of our schools and educational system.

The money is always there for the Community. It is not there for the needs which all hon. Members have referred to in the debate. Contrary to what she once said, the Prime Minister is prepared to play sister bountiful to the Community. She knows full well that she will go on playing sister bountiful. She is no fool; she knows that the budgetary discipline is shot full of holes. She knows full well that rules which allow for exceptional circumstances and aberrant conditions to justify price increases do not mean budgetary discipline. Of course she is aware of that, but she is prepared to take the consequence, which is to go on playing sister bountiful to the Community. She must know that she has thrown away the one important opportunity that she had of putting pressure on the Community to reform fundamentally the CAP.

Unless that is done, there is no hope of budgetary discipline, yet the Commission is proposing only adjustments to agricultural policy. Any suggestion that price support he cut is met with the utmost resistance by the Commission, just as it will be by many agriculture Ministers.

The Prime Minister knows full well, as does the Minister of State if only he would admit it, that the 1986 budget cannot possibly be confined to the ceiling laid down by budgetary discipline. It is bound to overrun. The Minister knows that that budget will bring significant political problems in its train.

Hon. Members rightly said that the budget covers only 10 Community members. What will happen with the entry of Spain and Portugal? These are fundamental questions, and they are not just economic. We are not just talking about millions of ecu. There will be political consequences of proposing budgets such as this leaving out those two countries. What answers has the Minister for the fundamental questions raised by the 1986 proposals?

I hope that we shall hear a different speech from the Minister today. I hope that we shall hear some answers. Unless he provides them, Conservative Members will vote against him or abstain. I hope that they are many because we know that the Government have no answers and that the Bill ought never to have been brought forward. It should be rejected firmly.

9.46 pm

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

It was extremely kind of the hon. Member for Thurrock (Dr. McDonald) to reply to the debate by almost exclusively trying to anticipate my speech. I regret to say that she will be disappointed because I intend to concentrate on answering many of the important issues that have been raised.

The hon. Member for Hamilton (Mr. Robertson) and some of his colleagues made some extraordinary propositions. He and the hon. Member for Walthamstow (Mr. Deakins) suggested that we were debating the Bill's Third Reading at this stage in the Session because of some extraordinary last-minute change of strategy by the Prime Minister in the light of the Milan summit. A more extraordinary example of fantasy from Opposition Benches it would be difficult to contemplate. Nothing at the Milan summit and nothing that flows from it has the slightest effect on the Government's views about desirability of the House approving the Bill.

The hon. Member for Hamilton spent a considerable time attacking my hon. Friend the Minister of State, Treasury for decisions that were taken at the Budget Council concerning food aid. He and the hon. Member for Thurrock suggested that they reflected a heartless approach by the Government. He should remind the country that a substantial majority of Ministers at the Budget Council made that decision. The hon. Gentleman's accusations are absurd. It was decided to agree a level of food aid equivalent to the historically high level of the current year. The point at issue was not whether the Community would respond to an emergency with adequate food aid but whether, in addition to the normal food aid programme, there should be a new mechanism for a parallel food programme. The majority of members of the Council of Ministers in the Budget Council thought that emergency aid should be provided through the normal programme of the food aid available through the Community, which can be increased if necessary and if emergencies require it.

The hon. Gentleman's third point, which other hon. Members have also raised, was that somehow the Foreign Secretary misled the House by not saying that the figure of £1,200 million of net contribution, which appears in the Budget White Paper, was the appropriate one. It was suggested that that has only been revealed in recent months. The earlier figure to which the hon. Gentleman referred was the one in the Public Expenditure White Paper based on the financial year. The figure of £1,200 million reflects the calendar year and is a different reference. As my hon. Friend the Minister correctly and cogently pointed out, the reason for the unduly high sum this year is primarily that two, not one, intergovernmental agreements have to be included in the figure, as well as overseas aid and other temporary considerations. Those important factors are highly relevant to the matter.

The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) asked specifically about the implications for Portugal and Spain arising from their accession to the Community. The position agreed in the accession negotiations, which will be honoured, is simply that for Spain there will be financial neutrality, while Portugal will become net modest beneficiaries. It is intended that that should be honoured from the moment when they enter the Community.

My right hon. Friend the Member for Worthing (Mr. Higgins) asked a specific question which was not answered during our last debate because I had not properly understood his question. He asked whether, if part of the 1,000 million ecu, which is to be our refund for the current year, had to be paid in cash because of the way in which the system operates, there was a guarantee that that sum would be paid and whether interest would be paid on it. The guarantee that the sum will be paid is found in the fact that the sum is in the 1985 budget, which has been approved, and also in the own resources decision, which, under the terms agreed, will come into effect immediately on ratification of the own resources decision by all the member states. There is no provision for interest in the own resources decision and, therefore, no interest will be paid on that sum. But there is a guarantee that the sum will be made available.

Mr. Higgins

Why is no interest being paid since we paid the sum before we had to and we are getting it back later?

Mr. Rifkind

When the figure of 1,000 million ecu was fixed—the last occasion on which the rebate was a fixed sum — the delay in its payment was not anticipated. The payment is guaranteed, but interest is not provided for in the original agreement. Moreover, I believe that there is no tradition of interest being paid on such payments.

Mr. Higgins

Why not?

Mr. Rifkind

I have given the answer, and on another occasion we may develop the question whether an alternative approach would be preferable. At present that is the legal position. There were a series — [Interruption.] That was the position in the own resources decision. The basis on which we are entitled to that sum flows from that decision and, therefore, the question of interest must be determined under it.

Speeches from Opposition Members and some Conservative Members pointed to various defects in the way in which the European Community operates. The Government do not dissent from many of the criticisms. There is no disagreement about the fact that there are many defects in the Community. However, differences exist about the best way of rectifying those problems. Primarily Opposition Members, but also some Conservative Members, are essentially opposed to British membership of the Community and do not wish to see it reformed. [Interruption.] If the House will allow me to explain, hon. Members will find that there is no basic disagreement on this. Many Opposition Members and some Conservative Members are hostile to our membership of the Community, and passionately desire to see the United Kingdom out of the Community. No one will dispute that. I also accept that many Conservative Members consider themselves to be committed believers in the Community, want it to be successful, and want Britain to be a member state. I address my remarks primarily to them, because they have the most open minds on the issue. I say to those who consider themselves to be in that position that they and the Government must consider what is the most effective way of ensuring that the interests of the Community and of the United Kingdom are best safeguarded.

I hope that my hon. Friends share the Government's view that in a Community of 10 members it is impossible for all the United Kingdom's objectives to be achieved in one go. I hope that most of my hon. Friends acknowledge that the Government have achieved a substantial amount through the Fontainebleau agreement. We have ensured massive rebates for the United Kingdom and I say to my hon. Friends and to Opposition Members who wish to listen that if, in the real world, it is not possible to achieve all the reforms within the period that we should like to achieve them, the minimum requirement that the nation would expect of the Government is that we should at least ensure that, until all the reforms can be achieved, we provide the maximum protection for the United Kingdom taxpayer. That is what the Government have achieved.

Hon. Members know that as a result of the Fontainebleau agreement, which the Bill incorporates, Germany will pay 32 per cent. of any increase of the net expenditure of the Community and France will pay 26 per cent. of any such increase, but the United Kingdom will pay only 7 per cent. instead of the 21 per cent. that we paid before the Fontainebleau summit.

Mr. Marlow

My hon. Friend says that there are defects in the Community. One is that if the Community is given a glimpse, a sniff or a sight of more money, it will spend that money. We have seen that tonight. Will my hon. Friend enhance his reputation and save hon. Members many sleepless nights in the House by saying that under no circumstances will the Government agree to any further subventions, IGAs or handouts to the Community?

Mr. Rifkind

If my hon. Friend had listened to what has been said, he would be aware that 93 per cent. of the payments required to finance any additional net expenditure of the Community will have to be found by other member states. The suggestion that the United Kingdom will be the only member state interested in economy or budgetary discipline does not accord with the facts. Through the Fontainebleau agreement we are protected more than any other member state. The House recognised that fact when it voted overwhelmingly in favour of the Fontainebleau mechanism some time ago.

Mr. Budgen

Will my hon. Friend please leave his optimistic generalities for a moment and tell us what evidence there is from the past three months to show that there is a sustained political will within the Community to reform the common agricultural policy?

Mr. Rifkind

I think that my hon. Friend will admit that a fascinating and long overdue feature of not just the last few months, but the past three years is that on each occasion when the price fixing of the European Community has been determined, the debate has been not about increases, but about cuts. We have had cuts in real terms in each of the past three years.

Even this year, when Germany was holding out against the other nine members of the Community, it was significant that the dispute was not about the size of an increase in agricultural prices, but about the size of the cut that should take place. All member states, including Germany, accepted that some cut was inevitable and nine states wanted a more substantial cut than Germany.

Mr. Deakins

Does the assurance just given by the Minister apply to sums raised by intergovernmental agreements?

Mr. Rifkind

The inter-governmental agreement must be lawful and any group of member states can agree to finance expenditure in that form, subject always to approval by their national Parliaments. Precisely for that reason, one of the Bill's provisions ensures that the United Kingdom payment will be made only if Parliament's approval is obtained.

It being Ten o'clock, the debate stood adjourned.

Ordered, That. at this day's sitting the European Communities (Finance) Bill may be proceeded with, though opposed, until any hour.—[Mr. Archie Hamilton.]

Question again proposed, That the Bill be now read the Third time.

Mr. Rifkind

Some hon. Members asked whether the intergovernmental conference has any relevance. The two sessions of the conference that have taken place show that, despite a multitude of amendments, not one would diminish the national veto, a major pre-occupation for the United Kingdom. The discussions so far have identified the extent to which increasingly member states are concentrating on more realistic options rather than on the wilder fantasies which have been a feature of such debates.

Mr. Forth

Have proposals at the intergovernmental conference been made for increases in the European Parliament's powers? I ask that because the European Parliament has attempted to increase Community expenditure each year. Will my hon. Friend comment on proposals for increases in the European Parliament's authority since that might have a bearing on future Community budgets?

Mr. Rifkind

Proposals for increasing the European Parliament's powers have been made. The United Kingdom has made it clear that, although we want the European Parliament to have a useful role, we do not believe that the case has been made for increasing its powers in a significant or substantial form. I am happy to say that that is the view of the majority of member states.

One of the most attractive features of the Fontainebleau package is that for the first time the European Parliament will have no power to interfere with payments to the United Kingdom. In recent years the Parliament has exercised that power in a negligent and irresponsible fashion. That power will cease to exist because of the Prime Minister's achievements at the Fontainebleau summit.

Sir Russell Johnston

The Minister has told the House about the various propositions that the Government oppose. Can he say whether the Government are proposing anything?

Mr. Rifkind

We have proposed many changes which do not require treaty amendment because they would be quicker to implement. We shall consider any suggestions which require treaty amendment on merit, and if they are thought to be in the United Kingdom's interests or in the interests of the Community as a whole, we shall make a positive response. At this stage, we continue to believe that changes that do not require treaty amendment will be quicker to implement, and therefore should command greater attention.

The debate has concentrated on the anxieties understandably expressed by many hon. Members about what they believe to be defects in the way in which the Community operates. The Government have never maintained that the Community is in an ideal form or that there is no cause for concern. However, we believe that the Fontainebleau package offers the British taxpayer unprecedented protection against increases in expenditure by the Community by ensuring that 93 per cent. of any additional expenditure has to be paid by other member states.

Over the next three years it is expected that £2.6 billion will be refunded to the United Kingdom by reductions in our contributions. That is an achievement that eluded the Labour party through all the years that it was in office. It did not achieve a single, solitary' ecu for the United Kingdom when in office.

The Government are quite content to appeal to the House to support the Bill on the basis of what we have achieved so far and what we are seeking to achieve over the years to come. I commend the Bill to the House.

Question put, That the Bill be now read the Third time:

The House divided: Ayes 307, Noes 190.

Division No. 295]	[10.05 pm
AYES
Adley, Robert	Corrie, John
Alison, Rt Hon Michael	Couchman, James
Amess, David	Critchley, Julian
Ancram, Michael	Crouch, David
Ashdown, Paddy	Currie, Mrs Edwina
Aspinwall, Jack	Dickens, Geoffrey
Atkins, Rt Hon Sir H.	Dorrell, Stephen
Atkins, Robert (South Ribble)	Douglas-Hamilton, Lord J.
Atkinson, David (B'm'th E)	Dunn, Robert
Baker, Rt Hon K. (Mole Vall'y)	Durant, Tony
Baker, Nicholas (N Dorset)	Dykes, Hugh
Baldry, Tony	Edwards, Rt Hon N. (P'broke)
Banks, Robert (Harrogate)	Emery, Sir Peter
Batiste, Spencer	Evennett, David
Beith, A. J.	Eyre, Sir Reginald
Bellingham, Henry	Fallon, Michael
Bendall, Vivian	Farr, Sir John
Benyon, William	Favell, Anthony
Best, Keith	Fenner, Mrs Peggy
Bevan, David Gilroy	Finsberg, Sir Geoffrey
Biffen, Rt Hon John	Fletcher, Alexander
Biggs-Davison, Sir John	Fookes, Miss Janet
Blackburn, John	Forman, Nigel
Bonsor, Sir Nicholas	Forsyth, Michael (Stirling)
Bottomley, Peter	Fowler, Rt Hon Norman
Bottomley, Mrs Virginia	Fox, Marcus
Bowden, A. (Brighton K'to'n)	Franks, Cecil
Bowden, Gerald (Dulwich)	Fraser, Peter (Angus East)
Braine, Rt Hon Sir Bernard	Freeman, Roger
Brandon-Bravo, Martin	Freud, Clement
Brittan, Rt Hon Leon	Gale, Roger
Browne, John	Gardiner, George (Reigate)
Bruce, Malcolm	Gardner, Sir Edward (Fylde)
Buchanan-Smith, Rt Hon A.	Garel-Jones, Tristan
Buck, Sir Antony	Gilmour, Rt Hon Sir Ian
Bulmer, Esmond	Goodlad, Alastair
Burt, Alistair	Gow, Ian
Butcher, John	Gower, Sir Raymond
Butler, Hon Adam	Grant, Sir Anthony
Butterfill, John	Greenway, Harry
Carlile, Alexander (Montg'y)	Gregory, Conal
Carlisle, Kenneth (Lincoln)	Grist, Ian
Carlisle, Rt Hon M. (W'ton S)	Ground, Patrick
Carttiss, Michael	Grylls, Michael
Cash, William	Gummer, Rt Hon JohnSelwyn
Chalker, Mrs Lynda	Hamilton, Hon A. (Epsom)
Chapman, Sydney	Hampson, Dr Keith
Chope, Christopher	Hancock, Mr. Michael
Clark, Hon A. (Plym'th S'n)	Hanley, Jeremy
Clark, Sir W. (Croydon S)	Hannam, John
Clarke, Rt Hon K. (Rushcliffe)	Harris, David
Clegg, Sir Walter	Haselhurst, Alan
Colvin, Michael	Hawkins, C. (High Peak)
Coombs, Simon	Hawkins, Sir Paul (SW N'folk)
Cope, John	Hayes, J.
Cormack, Patrick	Hayhoe, Rt Hon Barney

Hayward, Robert	Miller, Hal (B'grove)
Heathcoat-Amory, David	Mills, Iain (Meriden)
Heddle, John	Miscampbell, Norman
Henderson, Barry	Monro, Sir Hector
Heseltine, Rt Hon Michael	Montgomery, Sir Fergus
Hickmet, Richard	Moore, John
Hicks, Robert	Morris, M. (N'hampton, S)
Hind, Kenneth	Morrison, Hon P. (Chester)
Hirst, Michael	Moynihan, Hon C.
Hogg, Hon Douglas (Gr'th'm)	Mudd, David
Holland, Sir Philip (Gedling)	Neale, Gerrard
Hordern, Sir Peter	Nelson, Anthony
Howard, Michael	Neubert, Michael
Howarth, Alan (Stratf'd-on-A)	Newton, Tony
Howell, Rt Hon D. (G'ldford)	Nicholls, Patrick
Howell, Ralph (N Norfolk)	Onslow, Cranley
Howells, Geraint	Oppenheim, Rt Hon Mrs S.
Hubbard-Miles, Peter	Ottaway, Richard
Hunt, David (Wirral)	Page, Sir John (Harrow W)
Hunt, John (Ravensbourne)	Page, Richard (Herts SW)
Hunter, Andrew	Parris, Matthew
Hurd, Rt Hon Douglas	Patten, Christopher (Bath)
Irving, Charles	Patten, J. (Oxf W & Abdgn)
Jackson, Robert	Pattie, Geoffrey
Jenkins, Rt Hon Roy (Hillh'd)	Pawsey, James
Jessel, Toby	Percival, Rt Hon Sir Ian
Johnson Smith, Sir Geoffrey	Pollock, Alexander
Johnston, Sir Russell	Porter, Barry
Jones, Gwilym (Cardiff N)	Portillo, Michael
Jones, Robert (W Herts)	Powell, William (Corby)
Joseph, Rt Hon Sir Keith	Powley, John
Kellett-Bowman, Mrs Elaine	Price, Sir David
Kennedy, Charles	Pym, Rt Hon Francis
Kershaw, Sir Anthony	Raffan, Keith
Key, Robert	Raison, Rt Hon Timothy
King, Roger (B'ham N'field)	Rathbone, Tim
Kirkwood, Archy	Rees, Rt Hon Peter (Dover)
Knight, Greg (Derby N)	Renton, Tim
Knight, Dame Jill (Edgbaston)	Rhodes James, Robert
Knowles, Michael	Rhys Williams, Sir Brandon
Knox, David	Ridley, Rt Hon Nicholas
Lamont, Norman	Rifkind, Malcolm
Lang, Ian	Roberts, Wyn (Conwy)
Latham, Michael	Robinson, Mark (N'port W)
Lawler, Geoffrey	Roe, Mrs Marion
Lawrence, Ivan	Rossi, Sir Hugh
Lawson, Rt Hon Nigel	Rost, Peter
Lennox-Boyd, Hon Mark	Rowe, Andrew
Lewis, Sir Kenneth (Stamf'd)	Rumbold, Mrs Angela
Lightbown, David	Ryder, Richard
Lilley, Peter	Sackville, Hon Thomas
Livsey, Richard	Sainsbury, Hon Timothy
Lloyd, Ian (Havant)	Sayeed, Jonathan
Lloyd, Peter, (Fareham)	Shaw, Giles (Pudsey)
Lord, Michael	Shaw, Sir Michael (Scarb')
Lyell, Nicholas	Shelton, William (Streatham)
McCrindle, Robert	Shepherd, Colin (Hereford)
McCurley, Mrs Anna	Shersby, Michael
Macfarlane, Neil	Silvester, Fred
MacGregor, Rt Hon John	Sims, Roger
MacKay, Andrew (Berkshire)	Skeet, T. H. H.
MacKay, John (Argyll & Bute)	Smith, Tim (Beaconsfield)
Maclean, David John	Soames, Hon Nicholas
McQuarrie, Albert	Speed, Keith
Madel, David	Speller, Tony
Major, John	Spence, John
Malins, Humfrey	Spencer, Derek
Malone, Gerald	Spicer, Jim (W Dorset)
Maples, John	Stanbrook, Ivor
Marland, Paul	Stanley, John
Marshall, Michael (Arundel)	Steen, Anthony
Mates, Michael	Stern, Michael
Maude, Hon Francis	Stevens, Lewis (Nuneaton)
Mawhinney, Dr Brian	Stevens, Martin (Fulham)
Maxwell-Hyslop, Robin	Stewart, Allan (Eastwood)
Mayhew, Sir Patrick	Stewart, Andrew (Sherwood)
Meadowcroft, Michael	Stewart, Ian (N Hertf'dshire)
Mellor, David	Stradling Thomas, Sir John
Merchant, Piers	Sumberg, David
Meyer, Sir Anthony	Tapsell, Sir Peter

Taylor, John (Solihull)	Ward, John
Temple-Morris, Peter	Wardle, C. (Bexhill)
Thomas, Rt Hon Peter	Warren, Kenneth
Thompson, Donald (Calder V)	Watson, John
Thompson, Patrick (N'ich N)	Watts, John
Thornton, Malcolm	Wells, Bowen (Hertford)
Townsend, Cyril D. (B'heath)	Wells, Sir John (Maidstone)
Trippier, David	Wheeler, John
Trotter, Neville	Whitney, Raymond
Twinn, Dr Ian	Wolfson, Mark
van Straubenzee, Sir W.	Wood, Timothy
Vaughan, Sir Gerard	Woodcock, Michael
Viggers, Peter	Yeo, Tim
Waddington, David	Young, Sir George (Acton)
Wakeham, Rt Hon John	Younger, Rt Hon George
Waldegrave, Hon William
Walden, George	Tellers for the Ayes:
Walker, Rt Hon P. (W'cester)	Mr. Carol Mather and Mr. Robert Boscawen.
Wallace, James
Walters, Dennis

NOES
Abse, Leo	Douglas, Dick
Adams, Allen (Paisley N)	Dover, Den
Aitken, Jonathan	Dubs, Alfred
Anderson, Donald	Dunwoody, Hon Mrs G.
Archer, Rt Hon Peter	Eadie, Alex
Ashley, Rt Hon Jack	Eastham, Ken
Atkinson, N. (Tottenham)	Edwards, Bob (W'h'mpt'n SE)
Bagier, Gordon A. T.	Evans, John (St. Helens N)
Banks, Tony (Newham NW)	Ewing, Harry
Barnett, Guy	Fatchett, Derek
Beckett, Mrs Margaret	Faulds, Andrew
Beggs, Roy	Field, Frank (Birkenhead)
Bell, Stuart	Fields, T. (L'pool Broad Gn)
Benn, Tony	Fisher, Mark
Bennett, A. (Dent'n & Red'sh)	Flannery, Martin
Bermingham, Gerald	Foot, Rt Hon Michael
Bidwell, Sydney	Forrester, John
Blair, Anthony	Forth, Eric
Body, Richard	Foster, Derek
Boyes, Roland	Foulkes, George
Bray, Dr Jeremy	Freeson, Rt Hon Reginald
Brown, Gordon (D'f'mline E)	George, Bruce
Brown, Hugh D. (Provan)	Godman, Dr Norman
Brown, M. (Brigg & Cl'thpes)	Golding, John
Brown, R. (N'c'tle-u-Tyne N)	Gould, Bryan
Brown, Ron (E'burgh, Leith)	Gourlay, Harry
Buchan, Norman	Hamilton, James (M'well N)
Budgen, Nick	Hamilton, Neil (Tatton)
Caborn, Richard	Hamilton, W. W. (Central Fife)
Callaghan, Jim (Heyw'd & M)	Hardy, Peter
Campbell, Ian	Harman, Ms Harriet
Campbell-Savours, Dale	Harrison, Rt Hon Walter
Canavan, Dennis	Hart, Rt Hon Dame Judith
Carlisle, John (N Luton)	Hawksley, Warren
Clark, Dr David (S Shields)	Haynes, Frank
Clarke, Thomas	Heffer, Eric S.
Clay, Robert	Hogg, N. (C'nauld & Kilsyth)
Clwyd, Mrs Ann	Holland, Stuart (Vauxhall)
Cocks, Rt Hon M. (Bristol S.)	Home Robertson, John
Cohen, Harry	Howell, Rt Hon D. (S'heath)
Coleman, Donald	Hoyle, Douglas
Conlan, Bernard	Hughes, Dr. Mark (Durham)
Cook, Robin F. (Livingston)	Hughes, Robert (Aberdeen N)
Corbett, Robin	Hughes, Roy (Newport East)
Craigen, J. M.	Janner, Hon Greville
Crowther, Stan	John, Brynmor
Cunliffe, Lawrence	Jones, Barry (Alyn & Deeside)
Cunningham, Dr John	Kaufman, Rt Hon Gerald
Dalyell, Tam	Kinnock, Rt Hon Neil
Davies, Rt Hon Denzil (L'lli)	Lambie, David
Davies, Ronald (Caerphilly)	Lamond, James
Davis, Terry (B'ham, H'ge H'l)	Leadbitter, Ted
Deakins, Eric	Leighton, Ronald
Dewar, Donald	Lloyd, Tony (Stretford)
Dicks, Terry	Lofthouse, Geoffrey
Dixon, Donald	Loyden, Edward
Dobson, Frank	McDonald, Dr Oonagh
Dormand, Jack	McKelvey, William

MacKenzie, Rt Hon Gregor	O'Brien, William
McNamara, Kevin	Park, George
McTaggart, Robert	Pavitt, Laurie
McWilliam, John	Pendry, Tom
Madden, Max	Pike, Peter
Maginnis, Ken	Powell, Rt Hon J. E. (S Down)
Marek, Dr John	Powell, Raymond (Ogmore)
Marlow, Antony	Prescott, John
Marshall, David (Shettleston)	Proctor, K. Harvey
Martin, Michael	Radice, Giles
Mason, Rt Hon Roy	Redmond, M.
Maxton. John	Rees, Rt Hon M. (Leeds S)
Maynard, Miss Joan	Richardson, Ms Jo
Meacher, Michael	Roberts, Allan (Bootle)
Michie, William	Roberts, Ernest (Hackney N)
Millan, Rt Hon Bruce	Robertson, George
Miller, Dr M. S. (E Kilbride)	Robinson, G. (Coventry NW)
Mitchell, Austin (G't Grimsby)	Rooker, J. W.
Morris, Rt Hon A. (W'shawe)	Ross, Wm. (Londonderry)
Morris, Rt Hon J. (Aberavon)	Rowlands, Ted
Nellist, David	Sheerman, Barry
Oakes, Rt Hon Gordon	Sheldon, Rt Hon R.

Shepherd, Richard (Aldridge)	Tinn, James
Shore, Rt Hon Peter	Torney, Tom
Short, Ms Clare (Ladywood)	Townend, John (Bridlington)
Silkin, Rt Hon J.	Walker, Cecil (Belfast N)
Skinner, Dennis	Wardell, Gareth (Gower)
Snape, Peter	Weetch, Ken
Soley, Clive	Welsh, Michael
Spearing, Nigel	White, James
Stewart, Rt Hon D. (W Isles)	Whitfield, John
Stott, Roger	Williams, Rt Hon A.
Strang, Gavin	Wilson, Gordon
Straw, Jack	Winnick, David
Taylor, Teddy (S'end E)	Woodall, Alec
Thomas, Dafydd (Merioneth)
Thomas, Dr R. (Carmarthen)	Tellers for the Noes:
Thompson, J. (Wansbeck)	Mr. Sean Hughes and Mr. Allen McKay.
Thorne, Stan (Preston)

Question accordingly agreed to.

Bill read the Third time, and passed.