Several hon. Members rose—

HC Deb 03 February 1986 vol 91 cc45-80

Mr. Brooke

I am anxious that hon. Members should have an opportunity to speak in the debate.

Mr. Nigel Spearing (Newham, South)

This is an important point, especially in view of the possible year's gap. Is the Minister saying that the Commission, its President or an official statement has suggested that despite the matter being sub judice—at least in EEC terms—the Commission will nevertheless go ahead and pay out the money before the court makes a decision? Who made that statement, and on what authority?

Mr. Brooke

The Commission has presented its demand to the United Kingdom for payment, and that is the subject of today's debate. It is on that ground that we intend to move our interim application that the demand is inappropriate in terms of the margin. Once the demand payment is paid, the resources can be spent under the Commission's powers. Failing our first request to the court, we are asking it to annul the budget in its entirety; in other words, to find that no valid budget exists.

Our third action is to ask the court for an interim order in effect suspending implementation of the illegal elements in the budget until the court has given judgment. We shall be applying for this order within the next week or so. Our application will ask the court to suspend implementation both of the excesses of expenditure in the budget above the Council's "Second Reading" levels and of the extra contributions required to finance these excesses. Our advice is that the court is unlikely to reach judgment on the substantive cases before the end of this year, or quite possibly later. In our view, this reinforces the case for requesting an interim order, on which we would expect the court to decide within a few weeks. Other member states are likewise considering whether to request interim orders, but we are the only country to have decided firmly to do so.

The other policy issue which the Government have had to address is how much the United Kingdom should pay towards the disputed budget in the meantime, pending rulings by the European Court. The Government have decided, after careful consideration, that the best course is to pay in full towards the budget as adopted, on a without prejudice basis, pending the court's rulings. That is why we decided to present the special Supplementary Estimate.

Sir Nicholas Bonsor (Upminster)

I am trying to follow the logic behind my hon. Friend's argument. I simply cannot understand how we can pay money on a without prejudice basis, which will then be spent and become unrecoverable. I cannot understand why my hon. Friend cannot defer that payment until the interim decision of the court.

Mr. Brooke

If my hon, Friend will be patient, I shall come to that part of the argument.

Sir John Biggs-Davison (Epping Forest)

In the event of the Commission spending the money illegally, will it be open to us to deduct that amount from a future budget payment?

Mr. Brooke

There would be freedom for us to deduct that amount from a subsequent contribution. However, obviously that would be contingent upon the decision of the court in responding to our interim application.

The first and most important consideration is that the Council and individual member states must win the court cases if a major shift in power towards the European Parliament is to be avoided. The Government's legal advice has been that payment in full would enable the United Kingdom to appear before the European Court in the best possible posture. On the other hand, failure to pay in full would impair the United Kingdom's posture and tend to prejudice the substantive cases brought before the court and, still more, the United Kingdom's application for an interim order.

A second important consideration is that all other member states have decided to pay in full. We ought not lightly to break ranks with the rest of the Council.

A third consideration is that the United Kingdom would incur a potential liability to penal interest charges—

Mr. Budgen

When my hon. Friend gave evidence before the Treasury and Civil Service Select Committee last week he said that the sole reason for paying the money was that the legal advice to the Government was that they should do so. He said that he would make available further details of that legal advice. When it was suggested that the payment was being made because the Government wished to appear Communautaire, my hon. Friend returned to the argument that it was being done on legal advice. Will he please explain in detail the basis of the legal advice?

Mr. Brooke

I repeat what I said a moment ago, that failure to pay in full would prejudice the United Kingdom's posture, and still more the United Kingdom's application for an interim order — [SEVERAL HON. MEMBERS: "How?"] Because there would be a degree of illogicality in asking the Commission to cease to insist on a payment from us if we were not in fact making that payment.

Mr. Marlow

On a point of order, Mr. Deputy Speaker. As the whole of this case seems to hang on legal advice, is there any way in which the House, before it decides on the matter at 7 o'clock, can have the benefit of the presence of the Attorney-General so that we can ask him questions?

Mr. Deputy Speaker

That is a matter of argument, and is not a matter for me.

Mr. Brooke

As I was saying, a third consideration was that the United Kingdom would incur a potential liability to penal interest charges on delayed payments if we failed to pay in full. The penal rate is currently nearly 21 per cent., and rises with each month of delay.

It may be helpful to my hon. Friends if I expand a little on the legal background. Although the Government have been advised that they are not legally obliged to contribute to the disputed part of the 1986 budget, there is a contrary view — which we understand to be held by the Commission, among others—that the budget must be treated as valid unless and until it is annulled by the court. If the Government refused to contribute to the adopted budget in full, they would almost certainly be challenged by the Commission. Indeed, it is possible that the Commission could ask for an interim order against the United Kingdom. If, at the end of the day, it was held that the United Kingdom should have contributed to the budget in full at this stage, any delayed payments would be subject to the penal interest charges that I mentioned.

Several members of the Treasury and Civil Service Committee argued last week that, contrary to the argument which I have given, payment in full would tend to prejudice the case rather than failure to pay in full. The Government do not accept that view. In our view, the only sensible way to proceed in such cases is to be guided by the judgment of those who are expert in the areas concerned, and our advice has been that it is failure to pay in full that would tend to prejudice our cases, and in particular our request for an interim order.

There are three particular points. First, our advice is that the court is likely to be more impressed if the Council and member states adopt a common approach than if different member states pursue different courses. The dispute is effectively between the Community's institutions. The more an institution shows itself divided, the weaker its position will be. We have therefore been concerned to co-ordinate our approach with other member states and the Council. Although we shall wish, where appropriate, to bring additional arguments to the attention of the court, we do not want to fragment the Council's position or divert the court's attention from the main area of dispute. As I mentioned before, all other member states will be contributing in full.

Secondly, the court may be expected to have some regard to the reasonableness of the conduct of the parties before it. Our advice is that our case will not be helped, least of all our application for an interim order, if we act in a way which appears to pre-empt the very judgment that we are asking the court to make. It is worth bearing in mind that our application for an interim order in the present circumstances will, from the Community's point of view, be novel and controversial.

Mr. Eric Forth (Mid-Worcestershire)

rose—

Mr. Brooke

I shall not give way. I have given way at least 10 times already.

Thirdly, our advice is that there is advantage in being plaintiff rather than defendant throughout the nexus of cases surrounding the disputed budget. Our posture will be strengthened by standing on the high ground rather than being on the defensive. If we did not pay in full, we should almost certainly find ourselves on the defensive. The Commission would almost certainly sue us for the amounts not paid and for penal interest charges on these amounts. It takes the view that member states have an obligation to pay in full towards an adopted budget unless and until the court has ordered otherwise. We would then be defendants in one of the nexus of court cases and our posture would consequently be impaired.

To sum up, the important thing in the Government's view is to win the court cases, or the European Parliament will gain substantial power at the expense of national Governments and Parliaments. I freely acknowledge how tempting it is not to pay in full in the meantime. However, in the Government's view it would be quite misguided to act in ways which, on the best available legal advice, would tend to prejudice the court cases.

I turn to the parliamentary and payments procedures. The Select Committee on the Treasury and Civil Service questioned me at some length on these issues last week, and I want to say at once how much I respect and share its wish to protect the rights of this House in matters of Supply.

Before coming to the substance, I want to stress that the procedures that we are now adopting — the Supplementary Estimate and the debate in the House today —are those suggested by the Committee's predecessor in the last Parliament in 1982. The Government have complied with its suggestion and that is why the House has the opportunity today to debate the issues fully before any payment is made towards the disputed part of the budget.

Mr. Forth

rose—

Mr. Brooke

On substance, I should like, first, to say something about how payments will be made and financed. The due date for our first VAT payment towards the 1986 budget as adopted by the Parliament is today — January's payment is based by convention on the draft budget—and the Commission will seek to charge penal interest in the event of any delay. The Government therefore intend, if the House approves the Supplementary Estimate, to credit the Commission's account today with some £12 million in respect of January and February. This will be financed initially from the Contingencies Fund pending formal proceedings in due course on the March Consolidated Fund Bill.

As I have already mentioned, the Government are applying to the European Court for an interim order suspending implementation of the disputed part of the budget. If our application succeeds, we hope that it will not be necessary to go on contributing to the disputed elements of the budget. If we do not succeed, it may be necessary to make further ex gratia payments in early March and during 1986–87. Any such payments would similarly be financed initially by advances from the Contingencies Fund. From April onwards these advances would be made pending parliamentary approval of a 1986–87 Estimate and the Appropriation Act next summer.

Several members of the Select Committee on the Treasury and Civil Service suggested last week that payment should be delayed until the House has passed a Consolidated Fund Bill. I have considered these suggestions most carefully, but have to say that I cannot accept them. Payment is urgent, and the best interests of the United Kingdom taxpayer require that we should credit the Commission's account tonight.

Mr. John Browne (Winchester)

Can my hon. Friend assure the House that the Government have investigated fully the ability to pay to the Commission on an escrow basis? Such a payment would not prejudge the court's decision, and interest would accumulate for the United Kingdom if we were proved to be right in our application to the court. That is a common practice in commerce.

Mr. Brooke

The Government have investigated that course, but we could not proceed on that basis because of the effect of current European regulations.

It was not possible to plan on having sufficient time to complete all stages of a Consolidated Fund Bill in both Houses and obtain Royal Assent. These procedures, which are now formal, will be completed as part of the usual March Consolidated Fund Bill. The well understood and recognised role of the Contingencies Fund is to provide for payments that are urgent, in anticipation of Supply procedure. In accordance with the long-established practice, therefore, the Government are justified in assuming that if the House votes in favour of the Estimate tonight, it will not vote differently in the formal proceedings on the Consolidated Fund Bill.

Finally, I shall say something about the Government's statutory authority for making payments towards the disputed element of the budget. This, too, is a subject which was raised by members of the Select Committee on the Treasury and Civil Service. As the special Supplementary Estimate makes clear, this will be one of the many cases where expenditure relies on the House's approval of the Estimate and, in due course, of the confirming Appropriation Act. In the Government's view, such authority is sufficient and by no means uncommon. I should like to explain to the House rather fully why the Government are in no doubt that this is a perfectly proper way to proceed.

As long as the House of Commons provides any necessary funds, a Minister can carry out any appropriate function which has not been prohibited by statute. In the present case, there is no legal restriction which prevents the Treasury from making an ex gratia payment to the Community, and funds are available from the Contingencies Fund initially and then through completion of the Supply procedures.

There are, I accept, cases where specific statutory authority is appropriate, although not legally necessary. The relevant doctrine is based on exchanges between the Treasury and the Committee of Public Accounts in 1932. The Treasury and the PAC reached general agreement on the subject of when an Estimate and the Appropriation Act would not suffice, and I cannot do better therefore than to quote from the relevant Treasury minute on the PAC second report of that year. The Treasury then agreed that practice should normally accord with the view expressed by the PAC that, where it is desired that continuing functions should be exercised by a Government Department (particularly where such functions involve financial liabilities extending beyond a given year) it is proper that the powers and duties to be exercised should be defined by specific statute. In all other cases, by implication, the Treasury and the PAC agreed that specific statutory authority was unnecessary.

The Select Committee on the Treasury and Civil Service referred to "Erskine May", page 791. Our proposed method of proceeding does not fall into either category described by "Erskine May" as having been criticised by the PAC. First, this ex gratia payment is not illegal under any existing statute. Secondly, as I have already implied, we do not propose to create a continuing function of Government involving financial liabilities extending over several years. Perish the thought! The procedure that we are adopting for obtaining the consent of the House is, therefore, fully in accord with established practice and with the recommendations of the PAC.

There are two conclusions which emerge clearly from what I have been saying. First, the Government are pursuing the right policies with regard to the disputed Community budget for 1986. Secondly, we are seeking Parliament's approval in the right way. I therefore have no hesitation in commending the Supplementary Estimate to the House.

5.7 pm

Mr. George Robertson (Hamilton)

It is incumbent upon me, on behalf of the Opposition, to welcome the Minister of State to the first of his many EEC budget debates. It would not be an exaggeration to say that he has marked his debut at the Dispatch Box by not fully taking the House along with him as he advanced his arguments. Basically, the Government's argument, as I followed it, could be summarised by the example of a Mafia mobster saying, "Here is your demand for protection money. I suggest that you pay it. If you do, you will not have a case for going to the police." That seems in logic to be the way in which the Government's argument is being pursued.

The outside observer would regard the Government's posture this evening with incredulity, and wonder what it was all about. Is an ex gratia payment really being made by the Government to an illegal budget in Europe? Is it really a Tory Government, who have arraigned Liverpool and Lambeth councillors in the dock for their illegal budgets, who are happily paying over £6 million a month to the EEC in response to an illegal demand? Is this not unreasonable extortion by the extravagant Brussels machine on the understanding and long-suffering British taxpayer, or is it something entirely different?

On the surface, it seems that we are being presented with a mystery, and the issue was more mysterious when the Minister resumed his place than before he explained the Government's case. In reality, we are faced with a piece of organised hypocricy. We have been presented with a self-generated smokescreen and much of the smoke has been generated by Conservative Back Benchers. The purpose is to disguise the real purpose of the payments.

The Government have brought in yet another duo of Ministers to deal with complex subject. We have another duo to succeed the great Rifkind-Stewart duet, which sang to us in so many previous debates. It was interrupted only by the Halley's comet of the hon. Member for Eastbourne (Mr. Gow), who burst on the stage and made a number of grandiose promises. Before any of us could even quote them, he had disappeared to the Government Back Benches.

Mr. Geoffrey Dickens (Littleborough and Saddleworth)

Did the hon. Member write this himself?

Mr. Robertson

I am sure that the hon. Gentleman would like an interpreter for these debates but if he listens carefully he will hear an argument that will appeal even to him.

In September the Council produced the 1986 draft budget, which made no provision for the costs of the accession of Spain and Portugal, or for the so-called burden of the past. The burden of past commitments is not yet paid. The European Parliament then chose to add those commitments to the budget. Rather than say that the European Parliament was wrong, the Budget Council of Ministers added 900 million ecu to the budget. That included about 320 million ecu for the cost of enlargement which it had omitted from the original draft budget, no doubt through some misunderstanding. The European Parliament was still not satisfied that the budget would meet all the commitments, and the Council of Ministers then offered to add a further 242 million ecu, but the European Parliament turned it down.

The 242 million ecu is a significant sum. If it had been accepted by the European Parliament it would have reduced the illegality, with which we are so consumed this evening, from 629 million ecu to 387 million ecu. That 242 million ecus would have reduced the illegal supplementary margin to barely 1 per cent. of the total EC budget for 1986. The original climbdown by the Council of Ministers was a visible admission that the original draft budget of September 1985 was wrong and wholly irresponsible, as it was massively short and could not meet the Community's commitments for the following year. If the budget is illegal, the bulk of it is illegal because of the actions of the Budget Ministers, and the Minister was more culpable than most, as he attended the meetings. They knew that they were framing a budget which was inadequate for the demands on it, and they had to admit it to the tune of the 950 million ecu increase that they offered in December.

In the European Parliament the budget Minister's spokesman confessed in December that a further supplementary budget would be necessary later this year. Yet the Ministers, including our Minister, insisted on artificially cutting the amounts that everyone knew would be needed this year. In January the budget rapporteur, Mr. Christodoulou, offered a compromise to the Ministers. He said that if they would agree to a specific amount for the supplementary budget, a deal could be done because the supplementary budget would be necessary. He was spurned, and the Minister led those who rejected and demanded more cuts in the regional and social funds. He continues to insist on the fairy-tale fantasy of budget discipline and farm spending cuts. He is responsible for the budget.

This crisis of illegality is self-created, as is the looming and much greater financial shambles facing the Community. It is pure humbug and pedantry of the worst kind for the Government to attack and lambast the European Parliament, whatever its manifest failings, as a cover for the budget Ministers' short-sighted, weak-willed abdiction of control over the common agricultural policy's appetite for Community cash.

Why this great speed? By midnight tonight the House must agree the payment through one of the most unique forms of parliamentary subterfuge. In April 1985 Ministers passed the intergovernmental agreement to cover the shortfall in the 1984 budget. It was agreed in April, came before the House in June, and the Government delayed ratification until November and did not make the payment to Europe until a final demand was made by the budget Commissioner at the end of 1985.

Many hon. Members who questioned the Minister will be interested to know that in 1984, the last full year for which accounts are available, the Court of Auditors' report shows that the European Parliament also added expenditure to the European social and regional funds. Ninety four million ecu was added to the budget, but not a single ecu was spent by the Commission on items outwith the Council of Ministers' budget. Although we shall pay the European Commission, it will not spend the money on the items that are laid down by the European Parliament. Every hon. Member knows that the Commission will spend it by and large on the obligatory side of the equation which grows inexorably every day — on more and more Community farm spending. Taxpayers are the last people likely to get back anything from that. In 1984 the Commission ignored the additional provisions, and the money simply disappeared yet again into the vortex.

The crux of the matter, of which Conservative Members will undoubtedly make a meal, is: if the Government are so sure of their ground on illegality, why are they capitulating so easily and quickly? The supplementary memorandum to the Select Committee makes it absolutely clear. It states: The Government's lawyers have advised that there is no legal obligation on the United Kingdom to pay the disputed amounts. That could not be clearer. Why are the Government, who have arraigned councillors and threatened them with disqualification, surcharge and bankruptcy, laying down their arms and surrendering before the European Parliament, if their case is so strong?

Mr. Dykes

Has not the hon. Gentleman missed the Minister's point, which is that precisely because there is no legal obligation to make the payment, the act of making it in advance of the court's judgment increases the Government's moral and juridical position?

Mr. Robertson

The hon. Gentleman is a suave operator in most circumstances, but one would have to be truly gullible to accept that argument. If this is a juridical court considering the case, there is absolutely nothing to suggest that the fact that one has made illegal payments gives one higher ground over one who says that on principle there is no legal case for paying, goes to court and argues the case.

Mr. Budgen

One would certainly think that of a judge in the United Kingdom, but judges in the EEC may be affected by political considerations, such as whether the money has been paid. Indeed, that could be a reason why the lawyers who advised my hon. Friend the Minister did not wish their advice to be made known to the House. If the judges of the EEC are politically corrupted, it is an important issue, about which the House should know.

Mr. Robertson

The hon. Gentleman makes at least one valid point. If European Court judgments are to be influenced by the willingness of parties to make payments which they believe to be illegal, we should be worried about it. The Minister's interpretation is interesting, and I am sure that it will be studied by constitutional lawyers, who have greater skill than I, with due care and attention. Whatever legal advice is being given to the Minister, some of which he has faithfully relayed to us, it will undoubtedly be made available to the House and the wider world via Mr. Chris Moncrieff or some other oracle.

Mr. Teddy Taylor

Will the hon. Gentleman explain to my hon. Friend the Member for Harrow, East (Mr. Dykes) something which may have escaped his broad vision? If one makes the payment before the matter comes up in court. and if the other part is spent, there is no point in winning the case at all.

Mr. Robertson

Payments to the EEC are made on a monthly basis. If we are right, we can stop those payments at any time and make sure that the balance is kept at the end of the financial period.

How limp and lame the Minister's explanations are this evening. It is doubtful whether anybody in the House accepted the limp and lame excuses he has given. They seem even more limp and lame when set against the backdrop of the penal sanctions levelled against rate-capped councils in this country. Of course, it does not just smell of that. It smells of a cover for something else which has nothing to do with the claimed illegality of that 1 per cent. of the budget which the Parliament has added to its estimate. The truth is that it is yet another payment to fuel the mighty and uncontrollable engine of the CAP, which is yet again driving the Community into another horrendous financial crisis. This is not a payment on account and it will not be returned to this country even if the court action over the 1 per cent. is a triumph for those self-same legal masterminds.

In his evidence to the Select Committee the Minister said: the disputed elements in the budgets are likely either to be repaid to the United Kingdom or to be broadly offset by extra receipts from the budget: the disputed elements related mainly to the Regional Development and the Social Funds. On Monday December 2 in the Financial Times the regional commissioners of the EEC made it clear that Britain is in danger of suffering most from the freeze on EEC spending on the social and regional fund next year".

Even if the Minister's prognostications come true we shall not find ourselves in balance, because when the funds for the regional and social fund dry up in the middle of this year, as everybody confidently expects, Britain is likely to lose most. It is simply providing more cash for the EEC to rescue the budget Ministers from the dishonest and shoddy way in which they put together a budget for 1986 which did not add up, will not add up, and cannot add up, and which will inexorably demand more and more cash as the truth catches up with it.

Mr. Marlow

rose—

Mr. Robertson

The truth makes the Supplementary Estimate look like a petty cash box. We have a right to expect frankness, perhaps a rare frankness, from the new Minister about the scale of the real crisis and the kind of demands likely to be made on the British taxpayer this year.

Budget commissioner Hanning Christopherson was right in January when he warned that regional and social fund projects would grind to a halt this year on the basis of present funding. As I said, we have been warned by the regional commissioner that the United Kingdom will suffer most heavily if spending is curtailed. That news is bad enough but as usual there is worse to come. The 1986 budget, even the illegal one over which we are getting heated this evening, has some vital pieces missing from it. There is no provision in that budget for the 1986 fixing of agricultural prices. We know what that usually leads to. Secondly, and most significantly, there is no provision for a change in the dollar-ecu rate, which has already this year added 400 million ecu to the CAP expenditure. Thirdly, there is no provision for the massive drop in world grain prices, which is likely to bloat European Community costs and keep the price of food ludicrously high for British citizens.

Mr. Junker, who spoke on behalf of the budget Ministers in the Parliament, was spot on when he warned of an indeterminate supplementary budget to be presented to European taxpayers later in 1986 like some sickening surcharge on a long paid-up continental holiday.

Mr. Austin Mitchell (Great Grimsby)

There is no pleasure in it.

Mr. Robertson

Not all holidays are pleasurable, as my hon. Friend knows.

The debate is about the truth of the European Community budget discipline which we have been promised again this evening, as though telling us about budget discipline was a substitute for budget discipline itself. We warned at the time that budget discipline was a sham and it is now seen to be as bogus as we predicted.

Mr. Marlow

rose—

Mr. Robertson

Will the hon. Gentleman bear with me? Many hon. Members wish to speak and I do not want to use too much of the short amount of time that the Government have allowed for the debate.

The debate is about a European Community, the whole effort of which is now being subverted by a farm policy that has gone berserk and which now consumes 74 per cent. of the entire budget and which again threatens to burst its banks. Agriculture should be at the front of our minds this evening because it is the common agricultural policy that is at the heart of the shambles and that will bring this hapless Treasury Minister, as it did with so many of his predecessors, back to the Dispatch Box again and again this year.

The newly promoted Secretary of State for Scotland, the predecessor of the new Minister of State, Foreign and Commonwealth Office, stood at the Dispatch Box on 14 November and used the memorable words "an inbuilt control" when referring to agricultural spending. The right hon. and learned Gentleman has an affectation for not using notes when making his speeches. If one is being generous to him one could say that it was a lack of notes that made him so rash and brave as to utter those words. I think that those words should give comfort to many hon. Members on the Government Back Benches because if someone can say something like that without shame and get in to the Cabinet there is hope for many others to come.

We now know what he meant by those words. He was talking about a secret report. We know that it is a secret report because we read about it in the Financial Times. That report has been drawn up by Mr. Frans Andriessen and Mr. Henning Christophersen, the farm and budget commissioners. It tells us that the unsold food in store in the European Community is now worth 10.5 billion ecu. That is 10 times the stocks of only four years ago. Cereal stocks alone are up from 6 million tonnes to 17 million tonnes in the last year. The cost of storage and destocking is up by 1 billion ecu this year, to 4.4 billion ecu. That is nearly one quarter of the entire agricultural budget.

From the Press Association tapes this evening we learn that the journal Agra Europe tells us that Commissioner Andriessen has today called for an extra £2,000 million over the next three years to set up a special stock dumping fund for special additional subsidies to dump food surpluses on the international market—additional money for an additional special fund yet again. That is all happening as farm incomes drop this year across the Community by 8 per cent. and fall in this country by 17.5 per cent. If that is what is known as "inbuilt control" we know precisely how to trust the Government's estimates. All the time the discipline disintegrates as American grain prices fall on the international market.

In November we reminded the then Common Market team here that the existing budget was only 150 million ecu from the 1.4 per cent. VAT own resources ceiling. We demand and need to know where that is now. There is the extra 400 million ecu for the drop in the dollar-ecu rate. There is the extra £2,000 million over three years for the special fund. The regional and social funds are drying up. The agriculture prices are still unfixed. When all those things are happening, how far are we from the ceiling on own resources? How much will be needed in intergovernmental agreements and cash handouts to the Community this year to keep the bloated food surpluses growing? The House has a right to know, especially in the context of the debate. It is time that Ministers told us what they know to be the truth about what is yet to be demanded.

The Government come here today telling the House that this is a one-off payment, a temporary payment, until they can get the illegally demanded cash back. They seem willing to face the rage of their Back Benchers, or maybe it is all a big misunderstanding again. Conservative Back Benchers are raging against those payments, made under extortion. The Government want that rage turned away from the incompetence of Ministers, including British Treasury Ministers; away from the sheer irresponsibility of the looming financial fiasco, and what it will mean for this country's taxpayers. The Government want that rage to be turned away from the fact that this is the start of another drip feed, not to food aid or regional or social fund schemes, to which some of us would subscribe, on a regular basis, but to an uncontrollable common agricultural policy. They are willing to face all that rage and embarrassment to protect the pure fiction that this is an ex gratia payment, and a reimbursible one at that. They may fool some of the people in the Chamber, although it seems to be precious few, and they will probably fool a few Conservative hon. Members who vote, but they do not fool the Opposition.

As the House of Lords report told us in December, the European Community's agriculture budget is out of control because of a "lack of political courage" to do something about it. When the Government and their Ministers representing us in the European Councils have the courage to control farm spending before it bankrupts us all perhaps we shall assist them in putting through measures such as tonight's, but in the meantime, as they watch farm spending spin away again into the red, and while all the time they champion and protect the charade that budget discipline is working, we shall, with honour and conviction, vote against the motion.

5.32 pm

Mr. Terence Higgins (Worthing)

This is the sort of debate for which those concerned with parliamentary control of public expenditure require either a strong stomach or a very strong sense of humour. It raises several serious issues that we shall have little time to debate as we should.

I do not believe that one's attitude to the Estimate turns on whether one is in favour of or against British membership of the EEC. The plain fact is that it gives rise to more cause for concern for those who, like myself, are in favour of membership of the EEC than for those who take the opposite view. It is a dangerous development that has been described by my hon. Friend the Minister of State.

I am sorry that the Select Committee on the Treasury and Civil Service was unable to produce a report on the matter because of the short time that we had to go into it. I hope that the evidence that we took, which is available in the Vote Office, will be of interest and help in clarifying a complex situation.

The Minister of State rightly said that the first part of the Estimate is concerned with repaying to the Contingencies Fund some £118 million, expended at the end of the past year, which meets the tranche of the additional own resources that were paid in advance. I do not wish to comment on that now. I hope that the Select Committee will look further into it. We do not get interest on the advance payment that we have made, and we are now being told that we shall pay penal interest on the ex gratia payment, referred to in the second part of the Estimate.

We are faced with a budget that is clearly illegal, and raises some difficult questions. It is true that, even if we succeed in the court case and the budget is declared illegal, the budget as it then stands will still be one that the Government oppose as not being consistent with effective budgetary discipline. Yet that is the basis on which the House was persuaded to increase the own resources from 1 per cent. to 1.4 per cent. That is very important. At that time, several of us said that in our view the intergovenmental agreement was not consistent with the treaty, and it was wrong that the situation should arise in which budget expenditure exceeded available revenue. That view has been upheld by the EEC's own Court of Auditors. Therefore, I hope that there will be a further statement on that aspect.

The Estimate itself raises several important questions about parliamentary procedure, to which the Minister of State referred at the end of his speech. As my hon. Friend said, it is true that in 1982 the Select Committee objected to a system whereby money was paid to the EEC out of the Contingencies Fund and reimbursed by a spring Supplementary Estimate. The procedure now adopted is also objectionable. We have before us an Estimate, but we do not have before us a Consolidated Fund Bill. Under the new procedures nowadays, that is entirely formal. There is no reason why we should not have had a proper Consolidated Fund Bill, even in the short time that is now available to us. That would have been the right procedure for the Government to adopt. The more important point that gives the Select Committee cause for concern, to which the Minister sought to reply, is the fact that there is no underlying legislation, no primary legislation, which would justify the payment. The House is being asked to make an ex gratia payment that is not covered by existing legislation. As the Minister of State said, it is possible for a Government to put forward an Estimate, a Consolidated Fund Bill and so on, which provides the basis for the expenditure being made. But I question strongly whether what my hon. Friend said in his closing remarks was correct, because the Public Accounts Committee, on former occasions, has drawn attention to the way in which the procedures can be abused. In particular, I refer my hon. Friend to page 791 of "Erskine May," which says: Expenditure by a department for purposes not covered by its existing legal powers normally requires to be specifically authorised by a financial resolution associated with a bill". That is not being done in this case. The Minister sought to make a distinction and to say that the circumstances that we now face were appropriate, but "Erskine May" states later on: There have been cases, too, in which the Appropriation Act has been used, not merely as a substitute for specific legislation, but to override the limits imposed by existing legislation. The Minister of State did not answer that point. I believe that it is clear that we are overriding the limits imposed by existing legislation. That is embodied in the European Communities Act 1972, which in turn is reflected in the treaty. The Government themselves say that what is happening is illegal. Therefore, it seems to me that they are going beyond the existing legislation. That is an abuse of procedure of the sort to which the Public Accounts Committee has objected. I hope very much that the Public Accounts Committee will look into that matter and let us have a considered view. Perhaps such abuses could be prevented in future by the Standing Order being amended, for example.

It is also objectionable to use the Contingencies Fund if one has time to go through the proper procedures. There is no reason why we should go on this merry-go-round. We could have had the Estimate, a Consolidated Fund Bill and a Bill justifying the payment in the time that is available, short though that has been.

Mr. Deakins

Will the right hon. Gentleman give way?

Mr. Higgins

I should like to continue because hon. Members wish to speak, and this is a difficult matter to explain.

I now come to the substance of the argument. I welcome the fact — it is common ground — that the Government believe that the way in which the European Parliament has behaved is illegal. In my view, they are right to fight the case, as the Council of Ministers is right to fight the case. It would be an enormous extension of the powers of the European Parliament if it were allowed to get away with what it is seeking to do.

The Government are right to take the action that they have proposed. Nevertheless, I am very doubtful about the ex gratia payment device. The Select Committee was told that it was essential that this procedure should be ratified by midnight tonight, otherwise there is a danger that we shall be charged interest on the ex gratia payment. This is pure Alice in Wonderland. We ought not to be confronted by such a ridiculous situation.

I believe I am right in saying that all Conservative Members have grave doubts—nobody, apart from my hon. Friend the Minister of State, has expressed a contrary view — that our chance of winning the case will be enhanced if an ex gratia payment is made. If the Government have confidence in the strength of their case, that is a very odd approach.

My hon. Friend the Member for Epping Forest (Sir J. Biggs-Davison) asked whether we would get back the ex gratia payment if we won the case. I was heartened when my hon. Friend the Minister said that it could be deducted from a future payment, but I should like to know the basis for his statement. I was not aware that we could adopt such a procedure.

Mr. Brooke

I understood my hon. Friend the Member for Epping Forest (Sir J. Biggs-Davison) to be asking his question in the event of the interim action being decided in our favour. I said that any sum that we had previously paid might be deducted from future payments, but that it would depend upon the judgment of the European Court in response to our interim application.

Mr. Higgins

I am not sure that I understand that answer. We should like to know the basis for my hon. Friend the Minister's statement. It appears to contain a large number of uncertainties. If we are to make this ex gratia payment we need to know whether, if we win the case; we shall get it back; otherwise it will be a straight payment to the European Community.

Mr. Peter Thurnham (Bolton, North-East)

The fact that interest rates are higher in this country than in most of the other European Community countries suggests, surely, that the penalty factor should weigh less with us than with others, and it is all the more reason for us to be given credit for the interest charged if the payment is found to have been unnecessary.

Mr. Higgins

I agree with my hon. Friend. Most unfortunately, however, the Select Committee understood that we should be charged a penal rate, the highest rate in the European Community, which is over 20 per cent. I am therefore unable to reassure my hon. Friend on that point.

The argument is simple. It turns upon the legal advice and the expert advice that was given. After two and a half hours of questioning, in which my hon. Friend the Minister of State, Treasury, was as forthcoming as he could possibly be, he failed completely to produce any substantial legal argument which suggested that we stand a better chance in the European Court if we pay in advance than if we do not pay in advance. It was pointed out earlier that it would be very surprising if the European Court were to be influenced by that kind of payment.

The whole matter gives one very grave cause for concern. There is no evidence that budgetary discipline is effective. The non-obligatory payments are in excess and the obligatory payments for agriculture are far in excess of anything that had been justified in argument to the House. Unless, therefore, my hon. Friend the Minister of State can do very much better in his winding up speech than he did in his opening speech, I fear that I shall be unable to support the motion.

5.45 pm

Sir Russell Johnston (Inverness, Nairn and Lochaber)

The right hon. Member for Worthing (Mr. Higgins) has made his usual careful and in debates of this kind, highly critical speech. I do not propose to follow him into the legal and constitutional area. I am well aware that I do not share his competence. It is sufficient to say that, particularly for the layman, there is a great deal of uncertainty about the legality of the European Parliament's action. I presume that we should not be going to the European Court unless there was an argument about its legality. I presume that we should not otherwise be going to the European Court to establish whether its action was legal or illegal.

There is also uncertainty about whether the Government have exceeded their proper powers. I fail to follow why an ex gratia payment should affect a judgment of the European Court. It was suggested in an intervention by the hon. Member for Wolverhampton, South-West (Mr. Budgen) that the judges of the European Court are politically corrupt. That may have been a rumbustious way of putting it rather than a serious suggestion. At least, I hope so. In our view, the Community budget—

Mr. Marlow

There is only one of you.

Sir Russell Johnston

There are two of us. The hon. Gentleman's mental powers have been failing for many years. His eyesight seems to be following.

The Community budget is inadequate to meet effectively the redistributive and regenerative roles of the European Community, which have been unable to develop properly. I refer in particular to the regional and social funds. I recall, because I was there, that when the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) was the President of the European Commission he referred not to a 2.5 per cent. but to a 1.4 per cent. of VAT budget. The Liberal and Social Democratic parties believe that a way should be found to give the directly elected European Parliament more budgetary authority. That was stated clearly in our manifesto.

Mr. Heathcoat-Amory

Will the right hon. Gentleman give way?

Sir Russell Johnston

I shall give way in a moment.

We dissent from the approach which the Government and the Opposition have adopted to the budget. We wish that a more generous approach had been adopted, even before the Council's "Second Reading" debate. If that had happened, we should not be in this mess.

Mr. Heathcoat-Amory

We respect the hon. Gentleman's pro-European views, but we are not debating whether the European Community's budget is good or desirable, but whether it is illegal. Is the hon. Gentleman saying that he wishes this House to condone and to be an accessory to an illegal act?

Sir Russell Johnston

I am saying no such thing, nor am I quite so sure as the hon. Gentleman is what it is we are debating. I suspect that in all of these debates we are debating practically the same thing, and I do not believe that quite that distinction can be made. We believe that the European Community should have a greater role to play in non-obligatory expenditure. That is in question tonight because of the actions of the European Parliament.

Mr. Marlow

Will the hon. Gentleman give way?

Sir Russell Johnston

Before I give way to the hon. Gentleman—there must be a record kept somewhere of such things—for perhaps the 54th time, I would remark, as the Minister did en passant during his speech, that the agreement on budgetary discipline, which with some justice has attracted a bit of scorn, has, nevertheless, not yet been breached on non-obligatory expenditure, where, after all, the problem of excessive expenditure arises.

Mr. Marlow

I am grateful to the hon. Gentleman for his courtesy. He says that he would like the European Parliament to have greater budgetary powers. Does that mean that it is the Liberal party's policy that the European Parliament should be entitled to levy taxation upon the British people? What else could it mean?

Sir Russell Johnston

In the long term a way must be found to do that.

Mr. Marlow

A sharing of burdens.

Sir Russell Johnston

Certainly a sharing of burden. One of the great criticisms of the European Parliament at the moment is that it has the power only to spend taxation without any responsibility for the raising of it. There is no direct accountability, and that is a fair criticism. So, yes, essentially I would agree with the hon. Gentleman, but before I leave that point I must add that we must remember that while it is true that the European Parliament has added to the budget, when it comes to the actual expenditure of that money it is not the Parliament that spends it, but the Commission, and the Council regulates that expenditure and determines what are the proper projects.

Essentially, I am saying that the situation in which we now find ourselves need not have arisen if the Government had adopted a positive approach in Milan and Luxembourg when there were the makings of an acceptable accord in the Council which Parliament would have considered to represent a reasonable response. We have brought this on ourselves. It is tragic that we should now have got ourselves into what is clearly a thorough-going legal mess, which, in response to an intervention from the hon. Member for Northampton, North (Mr. Marlow) the Minister said could well go on for 18 months or so before a determination is made, and it is likely that the institutional conflict will worsen during that time.

The way in which the European Parliament has behaved has been heavily criticised by those unfavourably disposed to the EEC in the press and elsewhere, and doubtless there will be criticism during the debate, but, as the hon. Member for Hamilton (Mr. Robertson) said in an incisive speech, this is "a self-created crisis" and those responsible are the Ministers whose original draft budget was grossly inadequate and who failed abjectly in a situation in which a rational negotiated settlement could have been achieved. To that failure British Ministers made their full contribution.

The Parliament has added 1 per cent. of its budget. That is the scale of this issue, as the hon. Gentleman reminded us. I must support the hon. Gentleman on the fact that the regional and social funds may run out. That is a real danger. He is right. That is the sort of thing to which the Government should be addressing themselves anxiously. I also agree that the problem of the CAP is at the heart of this. Although, as I have said many times, it is an illusion to believe that somehow or other that can be dealt with at a stroke, what disturbs me is the absence of a clear forward plan.

That is the serious issue, not the desire of the Parliament to try to ensure that the Community's limited social contribution is sustained. Those circumstances do not require one to oppose the Government in the Lobby, even though one is highly critical of the way in which they have conducted affairs.

5.53 pm

Mr. Hugh Dykes (Harrow, East)

The hon. Member for Hamilton (Mr. Robertson) said that he would be brief and then spoke for 26 minutes.

Mr. George Robertson

I never said that I would be brief.

Mr. Dykes

Perhaps I misheard. I thought that that was the implication of his anxiety to get on and not take interventions.

Mr. Neil Hamilton (Tatton)

The hon. Member for Hamilton (Mr. Robertson) said that he would not take long.

Mr. Dykes

The hon. Member for Hamilton then spoke mostly about agricultural policy, but I agree with the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) that he put his finger on the reality of what had happened in what amounted to the Council of Ministers' obstinacy and obduracy in failing to grasp the realities of the situation with the enlargement of the Community. What other course did the European Parliament have, faced with that obduracy and refusal to draft a proper budget, even to use the appropriate conciliation mechanism, than to do something that can be regarded in some circles as an illegal act? We may have to reserve our judgment on that until the European Court reaches its decision. It may dig up all sorts of precedents and evidential items which show that the European Parliament had no other realistic course of action. It would be wrong to predjudge that, so we are dealing with only a technical motion tonight.

Mr. Teddy Taylor

Is not the argument about what else they could do exactly the same argument used by the Socialist councillors of Camden and Liverpool who took the view that the limitations imposed by the Government did not allow them to spend as much money as they felt was right? Therefore, is not my hon. Friend supporting the Socialist councillors of Camden and Liverpool in breaking the law?

Mr. Dykes

Despite the obvious temptations, my hon. Friend is not right in trying to draw that comparison between the domestic political crisis between local authorities and the Government, and the European situation. The conciliation and consultation procedure in the budget formation of the EC is a different exercise where the parties get together round a negotiating table and negotiate agreed figures, not on obligatory expenditure but on non-obligatory items.

Once again, it shows that the whole budget procedure is out of kilter because the European Parliament should now have a greater role and should be able to deal with much more than a tiny marginal tranche of total spending in non-obligatory categories unless the Council of Ministers is to be more like-minded with the European Parliament in future on taking budget outlays ahead as the Community expands, both on enlargement and the need to spend more on the regional and social funds.

Of course, hon. Members and others are right to put their finger on the glaring problem that is building up over agricultural spending. But in dealing with the motion tonight it is absurd for my hon. Friends—there is a glaring absence of Labour Members, who, apart from one distinguished presence on the Opposition Back Benches, do not seem to be interested, and Members of other parties,—to express, I hope not in a semi-hysterical fashion, tremendous indignation about what is a technical motion on a Supplementary Estimate. I think that it is literally correct to say that it should excite no one beyond saying that we are all in the business of trying to control, rationally and reasonably, Government spending.

We all listen with great care to everything that my right hon. Friend the Member for Worthing (Mr. Higgins) says on this subject. He knows a profound amount about it. But even he faces the danger of always being much more excited and indignant about tiny amounts of money in the EC than about domestic items. We are talking about £6 million a month of extra interest payments to be incurred and £18 million over three months in comparison with huge quantities of domestic Government spending which, if one looks back at the record of what was said in Committee and in the House, he and other hon. Members do not get so worked up about.

I do not often hear my hon. Friend the Member for Southend, East (Mr. Taylor) referring to the fact that we now spend £20 billion on unemployment benefits because of our huge level of unemployment. Surely that is a much more serious problem than the minuscule amounts of money in the EC. Even the total budget of £22 billion. is tiny in comparison with the total United Kingdom Government's spending of £150 billion. Our portion, moreover, as a result of the budget rebate—that has not been referred to so far tonight, although we are only halfway through the debate, and I hope that my hon. Friends will refer to it—swamps any tiny amount that we have to pay here, we hope temporarily, as a result of the future court judgment, on the basis, I presume, of expert legal advice.

My hon. Friend the Minister referred to that and I am content that on the basis of sound legal advice from Government lawyers, they have decided that that is correct. The revelation of Legal advice to Government is always a difficult area. I said that on the basis of what my hon. Friend said. I am content to rest on his recommendation that, on the basis of legal advice received by the Government, it seems right to make that payment. It would look awful and crazy if we were to take a position separate from the other member states who, with their equally clever and highly paid Government lawyers, have decided to pay the money in advance. It would look ridiculous if there were a difference of position. The court would notice that immediately.

It is important for the position of the Council, even of one disagrees with the larger background which, as a good and enthusiastic European I do, that it and the Government should maintain the same position. Perhaps the Governmment feel that they are likely to win the case anyway, and then the money can be refunded.

Sir Nicholas Bonsor

rose—

Mr. Dykes

If my hon. Friend will forgive me, I shall not give way, because by looking at the clock, I know that it would be unfair on other hon. Members.

Let me assume that the money could be refunded. To some extent, this is new territory, and I can only say with my subjective confidence that we shall get most of the money back. This is the only, absolutely essential, way for the Government to establish their moral position in the face of such a course of action. They must be whiter than white as they approach the European Court, and be able to say that they have done certain things that their legal advisers have suggested that they do.

This may be a historical judgment about the relationships between the institutions of the Council of Ministers and the European Parliament. Tonight's motion is only a small, limited part of the wider scene and it would be wholly irresponsible for hon. Members, particularly those on my side of the House, not to support the Government on the motion, which remains entirely technical. It is not a matter to cause great anxiety and it is much more important to see the wider picture both for the development of the Community budget — the 1986–87 budget will be even more important because of its expenditure on agriculture—and the way in which the Government will respond when the court has had time to deliberate.

6.2 pm

Mr. Eric Deakins (Walthamstow)

I remind the hon. Member for Harrow, East (Mr. Dykes) that big issues can arise from the expenditure of small amounts of money. I refer him to the 1630s and the case of ship money, which eventually involved the country in a civil war. The principle is what is important, rather than the amounts at stake.

The right hon. Member for Worthing (Mr. Higgins) made an interesting speech. Tonight we are dealing with a House of Commons matter, to which there are two aspects. The right hon. Member spoke about one aspect, that of Supply procedures and so on. The PAC, of which I have the honour to be a member, may need to take a look at procedures again. Apparently it has not done so since 1932.

The PAC should say, in the light of the interim judgment given by the court, whether we should seek to make some other recommendations, if the court were to refuse the interim judgment for which the Government have asked and we were therefore obliged to make these ex gratia payments until the court had reached a substantive judgment later in the year. In those circumstances, we would have to make sure that the Government provided time in the next financial year for us to consider these things properly as this Supplementary Estimate takes us only to the end of the financial year.

Some substantive issues have been raised. This is a House of Commons matter, and I am concerned about the aspects of the relationship between the Assembly and the Council of Ministers. In a sense, the Council of Ministers is a euphemism for national Governments and Parliaments, because that is what it represents. The issues that we have raised are at least as important as those raised when we discussed the intergovernmental agreement which was outwith the treaties and possibly the most important aspect of our relationship with the EEC institutions since we joined in 1972–73.

I have been pointing out for several years that the Assembly is constantly seeking to increase its powers. I see at least four federalists here today, on both sides of the House, and they will naturally welcome that move. In its attempts to increase its powers, the Assembly is constantly aided and abetted by the Commission and, where appropriate, by the European Court. I am not as sanguine as the Government that we shall necessarily win the dispute when the Court makes its substantive judgment.

The Assembly has passed an illegal budget and the Commission is backing that against the Council. This is part of the process of creeping federalism, whereby Community institutions are always working to increase their power, not always but often, at the expense of national Parliaments, and there is a ratchet effect because power once conceded to the EEC is never regained. Therefore, the Assembly, the Commission, the Council and the Court are constantly receiving accretions of power, gained in various ways and through various procedures within the Community. That strengthens their power as against national Governments and Parliaments.

Control of finance is the key to power, as we know from the history of this country, and the Assembly recognises that. In its budget resolution, the first of two last year, on 14 November 1985 it said, in paragraph 9: the Commission should submit to the budgetary authority a proposal for a minimum-term course of action taking account of the need for the gradual transfer of certain funding operations from the national to the Community framework". Funding operations are a means of raising money — forms of taxation. That shows the way that the mind of the Assembly is always working. We should always have that in the back of our minds.

The battle between the Assembly and the Council over funding is a battle between the Assembly and national Parliaments. The House could teach many in Europe a great deal about these things. We also have an important right. Federalists will support the Assembly, and we have already heard one or two expressions of support. However, non-federalists, and even those in favour of the Community, such as the right hon. Member for Worthing, will have to take careful note of what the Assembly is trying to do. Even the Government, in the Treasury minute to the Select Committee on the Treasury and Civil Service, made clear their view that this would be a major change in the balance of power between Community institutions, and therefore between Community institutions and this national sovereign Parliament.

As is well known, the history of our Parliament started with disputes between Parliament and the Crown over the power to tax people. It was only later that Parliament sought to gain control of expenditure. In the case of the Assembly, the process has begun in reverse, partly because of the powers given to it in the Community treaties. It is starting with the power to spend money. In paragraph 16 of the budget resolution it says that the Assembly Takes the view that the Community cannot ignore or curtail, via the budget for 1986, the financial commitments it has entered into: is therefore resolved to ensure compliance with this principle throughout the budgetary procedure". In other words, it is saying that spending must take priority over raising money to finance the expenditure. Eventually that will lead to the Assembly demanding the power to tax as well. We have already heard something about this from the federalists tonight.

The annual report of the Assembly is entitled "Progress towards Integration" and it shows, in the report of the budgetary committee, that it is working towards this. At long last, the Government have finally woken up to this creeping federalism. It was remarkable that the Prime Minister, in her statement to the House on the Luxembourg summit, consistently throughout both statement and answers—I bet that there were many anguished faces in the Foreign Office — used the words " European Assembly" to describe what she had previously called the European Parliament.

The Assembly has been encouraged in this spendthrift approach by the big increase in own resources that this House and other Parliaments have granted. Its debates show that the Assembly is looking forward to the 1.6 per cent. VAT rate being introduced at a much earlier date than the Council and the Government would wish.

But that is not the only thing that has encouraged the Assembly in its spending spree. It has now proved possible, through the intergovernmental agreement, to raise money outside the framework of the treaties. Those two facts combined have convinced the Assembly that it an do what it likes on spending—we shall see more of this in the future—because national Governments will pay in any case, whether the spending is legal or illegal and whether or not it exceeds the budget. That is a cavalier attitude to expenditure and a threat to budget discipline.

The House must accept that the Assembly does not consider itself bound by budget discipline. Paragraph 12 of the budget resolution of 14 November states that the Assembly expresses its support for measures to contain expenditure as part of a coherent reform of the common agricultural policy, but demands that the nature of such containment be jointly defined by the budgetary authority and the Commission"— that is, the Assembly and the Commission— and repudiates any unilateral decision by the Council in the matter. That means that the Assembly will not go along with budgetary discipline until its powers are substantially increased by agreement with the Council and, no doubt, with national Governments.

The Assembly is now an enemy of national Parliaments in the EEC. It is competing for a share of the real power currently exercised by national Parliaments. It is encouraged by more powers than were given to it at the Luxembourg summit. It has an insatiable appetite for power and it must be stopped. The question is whether the action that the Government are taking will stop it.

I hope that the Minister can reply later to two semi-legal points. First, the Council is taking action under article 173 of the Treaty of Rome which states: The Court of Justice shall review the legality of acts of the Council and the Commission other than recommendations or opinions. Nothing in that article states that the court shall review the actions of the European Assembly. Therefore, it makes it all the more astonishing that, with all their substantial legal advice, the national Governments represented at the last Council meeting did not seek to couple the Commission with the Assembly in the substantive court case. If they had coupled the two, they might have lost on the Assembly—because it is not mentioned in the article—but they would almost certainly have won on the Commission. I do not understand why the Government weakened their case on the substantive issue by not using the words in article 173 and taking parallel action against the Commission.

If the Minister cannot reply to my second point tonight, I hope that he will none the less consider it carefully, because it is in the interests not only of the House but of the Government. Later this year, we are threatened with a supplementary budget—everyone agrees that that is likely—and my hon. Friend the Member for Hamilton (Mr. Robertson) made clear what the components of that budget would be and what its causes would be. If there is a supplementary budget, in addition to the budget that the European Assembly increased, will that not weaken our case before the court? We shall be asking national Parliaments for money additional to the budget that was originally approved by the Council and rejected by the Parliament. If I were not parti pris in the matter. it would suggest to me that the European Assembly was right in its attitude to Community expenditure in 1986. If and when the Government are faced with a supplementary budget, I ask them to think carefully about whether it might prejudice their position and that of the Council on the main issue.

If the United Kingdom loses, the Council and national Parliaments will have serious problems. More power will be granted to the European Assembly and it will mean an end to any semblance of budget discipline. An adverse verdict would lead to a crisis in the relationship between Britain and the rest of the EEC. I look forward to that very much.

6.14 pm

Mr. Nicholas Budgen (Wolverhampton, South-West)

Anyone listening to my hon. Friend the Minister of State opening the debate would have concluded that it was a debate of great technicality and that only those who have studied the European institutions and obtained a PhD in law could usefully consider the matter further, but that is not so. The debate is mostly about a relatively simple value judgment as to how people get their will in political institutions.

We start with the assertion set out in the Government's briefing to the Treasury and Civil Service Select Committee that the legal advice is that failure to pay in full would impair the United Kingdom's posture before the European Court. Yet my hon. Friend has never explained that to the House or to the Select Committee. He has never — as my right hon. and learned Friend the Foreign Secretary would say—addressed himself to the question of how the judges could disadvantage the United Kingdom in the proceedings. It must be emphasised that there are multiple proceedings. Of course, the proceedings brought by the Council could be dropped, but separate proceedings have been brought by France, Germany, Luxembourg and the Netherlands.

We know that France, Germany, Luxembourg and the Netherlands have already paid on the nail, so let us consider the likelihood that at least one of those nations will continue with its proceedings. How will it be possible, on this issue of principle, to disadvantage the United Kingdom as against another nation state? My hon. Friend has not explained, and I do not believe that it is explicable.

My hon Friend has not explained whether he is serious in his implied criticism that the EEC judges are affected by political considerations, but that is perhaps a narrow point.

Mr. Forth

Does my hon. Friend share my sense of mystery about how the court will be swayed in its consideration of the matter by whether Britain pays on this occasion, yet the Commission and the European Parliament are prepared to overspend illegally in advance of the judgment? They do not believe that that action will prejudice their case in front of the court, yet we are being asked to accept that if we do not pay it will affect us.

Mr. Budgen

I share the mystery. Like all great mysteries, it is incapable of explanation. Had it been capable of explanation, I am sure that my hon. Friend the Minister of State would have explained it long ago.

We are talking about political will. Anyone who observes the forces in the EEC institutions and here must have sympathy for a Treasury Minister who is trying to contain expenditure in the EC. The hon. Member for Walthamstow (Mr. Deakins) set out helpfully and with great knowledge the way in which the European Parliament, as it calls itself, wishes to extend its power to the disadvantage of the Council of Ministers, often with the connivance of the Commission. There are assertions that a proper system of budgetary control has been instituted, but we must compare those assertions with our knowledge that the American farmer will be substantially better supported by a new farm Bill. We know that the Americans are trying to reduce the value of their currency against that of other countries, and we know the effect that that will have on the cost of disposing of farm surpluses created by the EEC. Those who see those forces must sympathise with the Treasury in trying to push back this vast tide that is enveloping it.

We must also consider the political forces. The Labour party says that it favours strict control of expenditure in the EEC, but it also talks about the EEC being an organisation that can reduce unemployment in Britain. Labour Members speak in grandiloquent, even mawkish terms, about the regional and social funds. Even if the present Government are, at best, only lukewarm on industrial intervention, we are led to believe that a Labour Government would favour more EEC expenditure to create jobs.

The Liberal party is much more open about that. It is in favour of a very much higher level of expenditure, particularly on the infrastructure of the EEC. To that end, Liberal spokesmen say that they would be in favour of a much higher contribution from VAT to the EEC. They are quite open about that.

The constitutional, economic and political forces are all against the restriction of expenditure in the EEC. What is required most of all from the United Kingdom at the present time is a gesture of political will. We have the opportunity now to demonstrate that gesture, and that would not cost very much. Let us assume that my hon. Friend the Minister is correct in saying that, in this instance, that would lead to the imposition of penal interest charges. We are talking about only £18 million, so the penal interest would not be very high, but the gesture would demonstrate to everyone in this country — farmers, those who want extra payments from the regional fund and the multiplicity of interest groups that are ganged up behind increased expenditure in the EEC—that the Government are serious on this issue.

In the face of that, the Government have said that they have received expert legal advice. They do not want to tell us what that legal advice is and they will not be too specific about it. They do not mind junior Ministers coming before a Select Committee and having a disagreeable time for a couple of hours, but they will not condescend to particularities about that. All that the Government want us to know is that they have jolly good legal advice and, what is more, they probably paid pretty well for it.

Be that as it may, most legal advice of that sort is a value judgment. It is a judgment about how institutions and people respond to a token gesture. We now have an opportunity for a token gesture. The mood in this country towards the EEC is changing. In 1974 I campaigned for us to enter and remain in the EEC, but I, as well as anybody, now feel a change in mood.

In the Fontainebleau agreement, the Government, by giving a moral commitment to a further increase in the VAT contribution, while at the same time asserting that they had control over expenditure in the EEC, placed themselves in a difficult situation. If the Government come to the House time after time asking for more and yet more money, at some stage the nation will want to know why the Government did not refuse to pay what they regarded as an illegal demand. It would have been an illegal demand in respect of £18 million only, but the nation will want to know why the Government did not have the guts on this one occasion to say, enough is enough.

We are not really talking about legal advice. Rather, it is a matter of the Government's desire on all occasions to be seen as Communautaire, to go along with the consensus in Europe. The consensus in Europe, like the consensus within the interest groups in the member states, is towards increased expenditure. That uncontrolled expenditure is deeply damaging to those who hope that this country will continue to remain in the EEC.

6.24 pm

Mr. Robert Harvey (Clwyd, South-West)

Today's debate goes to the heart of the European issue. Many would argue against giving greater powers to the European Parliament as it encroaches upon the sovereignty of our country. That argument comes from the so-called internationalists on the Labour Benches and from those Conservative Members who argue that Britain's sovereignty is being eroded by the EEC.

It ill suits those who criticise the EEC for being remote and bureaucratic to be against the proposed expenditure, except on the narrow legal grounds touched upon in the debate. The elected EEC Parliament has amended a budget proposal from the Commission that would absurdly have made Portugal and Spain net contributors to the Community — Portugal being one of the poorest countries in the EEC. If that had not been corrected, if the Parliament had failed to exercise the proper scrutiny over the EEC budget, there would be no control over the Commission's proposals—and in Strasbourg I witnessed the deliberations as the Parliament went line by line, page by page, through a great volume of EEC budget proposals — other than the control exercised in these debates by hon. Members. With the best will in the world, that cannot be classified as detailed or even detailed scrutiny.

Mr. Spearing

I appreciate the hon. Gentleman's point, but does he agree that one of the anomalies is that the Assembly, while having some powers—now under argument — of increasing expenditure, has as yet no powers of taxation? If it were to have both, there would be a unitary state. If the Assembly is to have some power, does the hon. Gentleman agree that it should, as the House did during the 1780s, combine these powers? There is no way out of the conundrum that the hon. Gentleman is proposing.

Mr. Harvey

I accept the hon. Gentleman's point, but there are some hon. Members, and I am one, who believe in the principle of no taxation without representation. If the European Parliament can continue to extend its financial control over the EEC budget, that will be a step towards greater accountability and representation.

If the anti-Marketeers were heeded, there would be more power for the Commission and the bureaucrats and less power for the elected representatives of the people of this country. Let us remember that the elected Members of the European Parliament sit as representatives for the people of this country.

The nitpicking, small-minded, critical tone of EEC debates is sometimes sad to witness. Strengthening the European Parliament is another crucial step on the road towards greater European integration. In 1945 the second great war of this century came to an end. Less than 30 years later, all the main European countries which fought that war, on the Continent that shaped the rest of the world, were joined in a Community which banished for ever war between them.

That was a political miracle of astonishing dimensions. For a decade, however, little else has happened. The Community has expanded and become a formidable trading block but progress towards the accountability of its institutions — that is what is enshrined by the move towards budgetary accountability in the Parliament, and towards political union—has moved at a snail's pace.

To most people, Europe represents the stuff of today's debate. The Community is steeped in obscure financial haggling and there is constant fire from hon. Members on both sides of the House who argue that it is wasting our resources and usurping our national sovereignty. They do not realise that Britain's real sovereignty, our say in determining our own destiny, has already been usurped by the bigger political and economic powers in today's world. European co-operation is the only way of regaining a say in the major issues that affect us all.

Mr. Dykes

I agree with my hon. Friend. Is it not really sad to reflect that the only places where such absurd debates still occur are in this country, in Demark in its slightly eccentric way, particularly given the recent resolution in its Parliament, and in Greece which is very esoteric and bloody-minded anyway?

Mr. Harvey

I agree wholeheartedly with my hon. Friend, although for safety's sake I shall not associate myself with his remarks about the Greeks.

For 10 years, we have seen Europe ignored as a priority and degenerate into a series of annual bazaars for the allocation of EEC resources, coupled with well-meaning but always frustrated calls for the reform of the Community budget. The wider issues on which Europe can and should be making its voice heard are forgotten. On each of those wider issues there are 12 faint EEC voices—not one strong one—all of which are lost in the roar of super-power dialogue. The only way that we can regain our sovereignty and our say on those grave issues is to act with greater unity.

Considerable effort has been made to find a common European view on the Arab-Israeli conflict. Those efforts are to be applauded. How much more important is it that a common position be adopted on the greatest issue facing the Continent since the cold war began — that of controlling the arms race before it enters a new, dangerous and vastly expensive phase. Today, the Russian fear of the American strategic defence initiative—

Mr. Deakins

On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker (Sir Paul Dean)

Order. I find it a little difficult to relate the remarks of the hon. Member for Clwyd, South-West (Mr. Harvey) to the Supplementary Estimate. I am sure that he will be able to relate them to the Estimate.

Mr. Harvey

I was just about to return to that matter, Mr. Deputy Speaker. The arms issue is one upon which Europe should begin to have a voice. What is Europe's position? My right hon. and learned Friend the Foreign Secretary has properly expressed his reservations about American reliance on the Maginot line in space—

Mr. Deakins

On a point of order, Mr. Deputy Speaker. I thought that you had given a ruling that in such a truncated debate the hon. Gentleman should bring his speech into line with the purpose of the debate.

Mr. Deputy Speaker

I am sure that the hon. Member for Clywd South-West will relate his remarks to the subject of the Estimate. It is a short debate.

Mr. Harvey

I shall do that, Mr. Deputy Speaker. I was about to conclude. The debate should touch upon the issue of European union. I feel that the narrow issue that we have allowed ourselves to discuss—

Mr. Thurnham

Perhaps I can help my hon. Friend return to the subject that we are discussing. He made the interesting point that part of the expenditure was necessary because Portugal, one of the poorest members of the enlarged Community, would be a net contributor. This country is now one of the poorest members of the Community and we are a contributor. Is that one of the reasons why we are so unhappy about this increased expenditure? Does not the breakdown in budgetary control go against the need for unity which I believe he said was the Common Market's greatest strength?

Mr. Harvey

I associate myself wholeheartedly with my hon. Friend's remarks. For most people, Europe is represented by the kind of detail that we have been discussing and is not seen as the uplifting ideal that it once was. I hope that it is not too late to revive the ideal of a united and respected Europe and Community whose values, civilisation and good sense exceed those of the great powers that dominate today's bipolar world and which can act as a bridge between them. In that context, I welcome recent moves towards European foreign policy co-operation.

If Europe can find a common voice in the world, economic integration and the greater accountability of EEC institutions will follow at their own pace. In the meantime, the House should vote to support the greater accountability of EEC institutions to the people's elected representatives. Let us strengthen powers of the European Parliament. Let us strengthen the cause of Europe and democratic accountability, and let us approve these Supplementary Estimates.

6.33 Pm

Mr. John Townend (Bridlington)

I do not agree with my hon. Friend the Member for Harrow, East (Mr. Dykes) that we are discussing a narrow technical point. It is a matter of considerable principle. There are a number of matters about the current EEC budget and the proposals before the House that I find deeply disturbing. Clearly, time will not allow me to deal with them all.

If the actions being taken in the court by the United Kingdom and the other four countries fail, the whole agreement negotiated by the United Kingdom when it approved the lifting of the VAT ceiling from 1 to 1.4 per cent. will become worthless.

Budget discipline was one of the salient points of that agreement. We were assured in the House by the Prime Minister that that agreement would give us effective budget discipline. If the Assembly's action is upheld in the court, it will drive a coach and horses through the agreement. Those of us who opposed the increases in net resources will be completely vindicated. Will my hon. Friend tell the House what contingency plans the Government have should they lose the court case? I agree with my hon. Friend the Member for Clywd, South-West (Mr. Harvey) that it is not beyond the realms of possibility that they could lose it.

I wish to deal with the so-called ex gratia payment into court. I found it disturbing to be told by my hon. Friend the Minister before the Select Committee on the Treasury and Civil Service and in the House today that he had been advised by his legal advisers that if we did not make an ex gratia payment our position in the case would be jeopardised. That is not just against the tradition of British justice; it is against natural justice.

Mr. Budgen

It may be part of European justice.

Mr. Townend

I sincerely hope not. My hon. Friend is a little cynical. The Government are implying that the court is incapable of making a fair and balanced judgment on the issue before it—whether it is a legal or an illegal budget—but will be influenced by whether this country makes an ex gratia payment in respect of what we submit is an illegal demand. If that is how European justice works, how can we ever expect fair and impartial decisions to come out of the European Court?

I should like to deal with the subject of interest. It is inconceivable to anyone brought up with the idea of equity before the courts to believe that if we make an ex gratia payment in advance and win we are not paid interest on that payment, but if we do not make a payment and lose we pay a 20 per cent. penal rate of interest. That is unjust and indefensibe.

Mr. Marlow

As I understand it, my hon. Friend is a successful business man. We have two alternatives. We believe that we are right and that we will succeed in the court. If we withhold the money and turn out to be wrong, we will have to pay the money plus the interest. That, however, is a small chance. If we believe that we are right, and we are found to be right, we shall not have paid the money. My hon. Friend is a business man. If it were his own money, which course would he take in those circumstances?

Mr. Townend

I should take the same course as my hon. Friend.

Mr. Budgen

Does my hon. Friend agree that, in view of the great sums of money involved in our contribution to the EEC, the interest on £18 million, even at 20 per cent., is peanuts? Even if we have to pay that, if we make an effective gesture against EEC overspending it will be a small price to pay.

Mr. Townend

My hon. Friend has made a relevant point. He should remember that the total cost is not 20 per cent., because we would save the interest on the money that we would have to pay through the gilt market. The net cost would probably be only 8 per cent.

Unless my hon. Friend's reply is far more convincing than his opening speech, I, like my right hon. Friend the Member for Worthing (Mr. Higgins) will find that I cannot support the Government in the Lobby tonight.

6.39 pm

Dr. Oonagh McDonald (Thurrock)

On the Third Reading debate of the EC Finance Bill the then Minister of State, Treasury, the hon. Member for Eastbourne (Mr. Gow) was asked by the hon. Member for Northampton, North (Mr. Marlow) to give a commitment to the House … that there will be no soft loans, intergovernmental agreements, whip rounds or any other form of temporary subvention to the Community". The Minister, of course, had the sense to decline, although he did say: provided that the budgetary discipline that has been agreed is observed … there will be no need to come back to the House for another intergovernmental agreement. He later added: I find it impossible to envisage circumstances in which the Government will come back to the House."—[Official Report, 22 October 1985; Vol. 84, c. 185-188.]

Neither the Minister nor we imagined this rather extraordinary set of circumstances in which the Government would come back to the House to demand a Supplementary Estimate. It is apparently designed, dare I say, to sweeten the judges so that they will judge in our favour.

One of the questions that hon. Members have rightly pursued in this debate is what is the exact nature of the European Court. The Treasury itself stated in evidence to the Treasury and Civil Service Select Committee that payment of this kind would enable the United Kingdom to present its arguments before the Court in the most attractive light, a factor seen as an important advantage". The Minister will have to tell us a great deal more about how he and his officials view the workings of the European Court in regard to this advance payment. The Government should tell us more about the nature of their own legal advice — they certainly have not been so coy about revealing the nature of their legal advice in the recent past. The Minister has many questions to answer.

The Minister, in his opening remarks, said that it was necessary for the United Kingdom to act in the same way as the other Council members who are also pursuing this case before the court. Why did the United Kingdom, together with the other European members of the Council, not come to a quite different view? Why did they not agree that no one should pay until the court case was settled? Surely that would have been possible by agreement. Why was that not done?

The reason for the advance payment, before the court case has been settled — as the Minister knows well, despite assurances given to the House — is that extra funds will be needed anyway. When the Minister was pressed about the possibility of withholding payment if the judgment goes in our favour, he said that this was possible. The Minister did not say that we would be in a situation where we would withhold payments of that kind.

The Minister and the Government know that this will not be the first time that the Government will come back to the House this year and ask for more money. This £18 million is only the first request. The spokesman for the Commission, Mr. Junker, has already said that there would be a supplementary budget required during the course of 1986. When will that happen and how much will it be? The Minister and the Government cannot continue to rely on the claim that budget discipline has been achieved and that there will be no need to come back to the House.

There are two issues on which the Government might find themselves in difficulties. First, there is the question of the regional and social funds. It is true that that is non-obligatory expenditure, but the expenditure which the European Assembly added to the budget was added for two reasons. First, it was added because over 50 per cent. of the regional and social funds element of the budget refers to past commitments. That means that this year the Commission may not be able to meet promises that have already been made for payments under the heading of the regional and social funds. The second reason is that the European Assembly takes the view that agricultural spending, running at 70 per cent. of the budget, absorbs far too much of the budget.

If the regional and social funds run out of money and if we refuse to pay any additional money into the European budget we shall lose because much of that money would come to us. Have the Government thought about this problem and if so what conclusions have they reached?

The Government have refused to face up to the problems of agricultural spending. During the course of this debate it has already been stated that any fall in the dollar-ecu exchange rate below 1.2 will lead to budget increases in terms of export refund payments. A fall of 4 per cent. has already taken place this year and that means another £400 million on export refund payments alone. No agreement on cereal prices has been reached but this is not the only problem which agricultural spending faces.

In the newspapers this weekend there were reports about our food surplus, which increased by 75 per cent. to £1.4 billion last year. Inevitably that means a rise in the cost of servicing the stores of such surplus stocks. The Observer reported that the European Commission is planning to dump £4 billion worth of surplus food on to the world market over the next three years. The cost of that would be at least £2 billion. A secret European Commission report was referred to as the source—since it has already appeared in The Observer it is perhaps not all that secret. The Minister should tell us whether these reports are true. Is it true that the cost of dumping and the costs of servicing the storage of the stocks will rise in Britain and in the whole EEC to the extent of £2 billion? If so, agricultural spending will certainly run out of hand again. What will the Government do about this?

Will the Government come before the House with demands for yet more money for the worst possible reason — for the continuing, obscene food mountains and money for the practice of dumping surplus products on the world food markets, with dire consequences for Third world countries? That can only increase starvation and the difficulties that many Third world countries face.

Why will the Minister not come clean with the House and tell us that the £18 million is to be paid into the European Commission not just to make our case appear in the most attractive light but as a kind of down payment on the calls that will be made on our resources in the coming months of 1986? Why will the Government not admit that there is no such thing as budgetary discipline? Budgetary discipline does not exist because the Government have done nothing to reform agricultural policy within the Community.

If the Government persist in believing in the existence of the budgetary discipline they are the only member Government who continue to do so. The European Commission has abandoned any such behief. The Commission's annual report on agricultural spending last year made it quite clear that: Even in those sectors in which substantial reform has already been achieved—e.g. milk products and wine—much remains to be done by way of stock reduction and supply management. That is a polite way of saying that the reforms have done nothing to reduce agricultural spending, but rattier it will get out of hand, as it has with cereals.

The £18 million is only the first instalment. It is a sweetener to the court. The Minister should tell us more about that and when he proposes to demand more money from the House for obscene and wasteful farm spending. He should come clean with the House tonight.

6.50 pm

Mr. Brooke

With the leave of the House, I shall reply to the debate.

This has been an excellent and forceful debate. Some hon. Members have asked questions about Government policy with regard to the disputed 1986 budget, and others have been more anxious to discuss our parliamentary procedures in such a case. I shall do my best to comment on as many of the issues that have been raised as possible.

I should like to underline three fundamental points in my opening speech. First, the question at issue is nothing less than the balance of power between the European Parliament on the one hand and the Council and national Parliaments on the other. Secondly, the key to resolving the issue satisfactorily is winning the court case. Thirdly, the procedures that we have adopted for seeking parliamentary approval are those recommended by the Treasury and Civil Service Select Committee in the previous Parliament. I trust that the critics of those procedures will not overlook that fact.

I would not accuse the hon. Member for Hamilton (Mr. Robertson) of the Latin American delegate's technique of putting in the margin, "Weak point-shout," but amid his charges of humbug and pedantry he glossed lightly over the illegality that the European Parliament had committed. He either does not understand the process of budget making, or he is saying that breaking the law does not matter if the infringement is small. I am glad that the hon. Member for Walthamstow (Mr. Deakins), with a reference to ship money, issued a powerful corrective from the Opposition Back Benches. Of course it could be argued that this is the thin edge of the wedge, but the critical fact is that what the Parliament has done is illegal, and we intend to reverse that.

My right hon. Friend the Member for Worthing (Mr. Higgins) mentioned the dilemma of our having a short time, which made more difficult the handling of a complex matter. It also made more difficult the Government's handling of the case in terms of whether a Consolidated Fund Bill could be introduced. The dilemma was serious. As for timing, the preoccupation, apart from the dislike of paying interest, is with not finding ourselves being sued for interest on a payment that we were making without prejudice and ex gratia.

Mr. Thurnham

Will my hon. Friend give way?

Mr. Brooke

I am sorry, but no. I have very little time.

As for the method, which was recommended by the Select Committee, the use of the Contingencies Fund is dictated by urgent cases. It is difficult to envisage a more urgent case or one for which the fund would be more relevant.

Mr. Higgins

My hon. Friend said that we were making the payment without prejudice. Without prejudice to what? As we understand it, we are to make a payment but cannot get it back.

Mr. Brooke

We are making it without prejudice in the sense that we are making it not under the authority of the European Communities Act 1972, but under a separate head. In paying, we are saying that we regard the demand as improper, but we need to pay it in the context of the court cases.

My right hon. Friend the Member for Worthing mentioned page 791 of "Erskine May" and overriding the limits. The payment is not obligatory under existing legislation, but nor is it ruled out, which is the critical feature, as I think my right hon. Friend implied. The Estimate is brought forward on a separate basis, but not one which requires legislation to override the 1972 Act.

The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) criticised the Council of Ministers for its responses, but, in the process, ignored the issue of budgetary discipline, and was, I fear, joined in that by my hon. Friend the Member for Harrow, East (Mr. Dykes). I was grateful to my hon. Friend the Member for Southend, East (Mr. Taylor) for emphasising that the issues adduced by others as excuses for the European Parliament were simply justifications for illegality.

Mr. Teddy Taylor

My hon. Friend has kindly said that I helped him by saying that the payment was illegal. Why should we make an illegal payment which we shall not get back and which the Commission will spend for us?

Mr. Brooke

What I said, and what I thought my hon. Friend joined me on, was that the European Parliament's act was illegal.

The hon. Member for Walthamstow asked two questions. One related to section 173 of the European Community Treaty and the basis for our case. The very fact that the Parliament is not mentioned there raises the possibility of the Council's action being inadmissible. That is the basis for bringing our own case. The answer to his second question is that we could sue the Commission, and can still sue it, but there is no prospect of the Council of Ministers doing so. In that respect, we should be acting independently. The hon. Gentleman also mentioned the Assembly overspending. I would not have thought, from what he said, that none of his colleagues in the Assembly had voted against the illegal budget, but I agree that he is not responsible for them.

My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) mentioned the disagreeable time spent before the Treasury and Civil Service Select Committee. I did not think that it was disagreeable at all. I thoroughly enjoyed it and look forward to another occasion. He threw the word Communautaire at me. I suspect that it might well be an unparliamentary expression. The critical thing from the Government's point of view and in the context of the future of the Community is that we win the case. We believe that that can best be achieved by maintaining common cause among member Governments.

My hon. Friend the Member for Clwyd, South-West (Mr. Harvey) emphasised the importance to the future of Europe of winning the case. In that respect, he was joined by my hon. Friend the Member for Bridlington (Mr. Townend), although my hon. Friend the Member for Bridlington disagrees about the best way in which to win the case. The disagreement is simply one of tactics.

The hon. Member for Thurrock (Dr. McDonald) achieved the considerable feat of speaking for 10 minutes on behalf of the Opposition without referring once, as far as I am aware, to the illegality of the Parliament. She raised other issues which are relevant to the debate, but did not tackle the central one, which is the basis for the Government's action. I am happy to deny on behalf of the Government that we are bringing forward this Estimate because extra funds will be needed anyway. We are bringing the Estimate forward to assist the conduct of our case in the court and to reinforce our expectation of winning.

Dr. McDonald

Will the Minister give way?

Mr. Brooke

Not at this stage. My right hon. Friend the Member for Worthing asked why we were making the payment to support our case. We are anxious to maintain a common approach among member Governments in this nexus of cases. We do not want to pre-empt the court. As for the interim application, we are uniquely bringing forward the motion.

When I referred to high ground, my metaphor was as much military as moral. We are anxious to remain the plaintiffs in these cases, not the defendant.

In conclusion, I express the hope that right hon. and hon. Members on both sides of the House will vote in favour of the special Supplementary Estimate. The procedures for which the Government are seeking approval are those recommended by no less an authority than the Treasury and Civil Service Select Committee in the previous Parliament.

Several hon. Members have expressed surprise at the nature of the Government's legal advice, but to my memory no one has suggested—or at least no one has convinced me—that we should ignore that advice.

The balance between the Government's argument and that of some of my hon. Friends is that they believe that one act of political will in withholding payment is crucial to the future of Europe, and the Government believe that another act of political will is critical, which is acting in unison with our friends in the Community to defeat that illegality by the Parliament in the court. I ask the House—

It being Seven o'clock, MR. DEPUTY SPEAKER put the Question pursuant to the Order of the House, 31 January.

The House divided: Ayes 332, Noes 200.

Division No. 58]	[7.00 pm
AYES
Adley, Robert	Emery, Sir Peter
Alexander, Richard	Evennett, David
Alison, Rt Hon Michael	Eyre, Sir Reginald
Alton, David	Fallon, Michael
Amery, Rt Hon Julian	Fenner, Mrs Peggy
Amess, David	Finsberg, Sir Geoffrey
Ancram, Michael	Fletcher, Alexander
Arnold, Tom	Fookes, Miss Janet
Aspinwall, Jack	Forman, Nigel
Atkins, Rt Hon Sir H.	Forsyth, Michael (Stirling)
Atkins, Robert (South Ribble)	Fowler, Rt Hon Norman
Atkinson, David (B'm'th E)	Fox, Marcus
Baker, Rt Hon K. (Mole Vall'y)	Franks, Cecil
Baker, Nicholas (Dorset N)	Fraser, Peter (Angus East)
Baldry, Tony	Freeman, Roger
Banks, Robert (Harrogate)	Freud, Clement
Batiste, Spencer	Gale, Roger
Beith, A. J.	Galley, Roy
Bellingham, Henry	Gardiner, George (Reigate)
Bendall, Vivian	Gardner, Sir Edward (Fylde)
Benyon, William	Garel-Jones, Tristan
Best, Keith	Gilmour, Rt Hon Sir Ian
Bevan, David Gilroy	Glyn, Dr Alan
Biffen, Rt Hon John	Goodlad, Alastair
Biggs-Davison, Sir John	Gow, Ian
Blackburn, John	Gower, Sir Raymond
Bottomley, Peter	Grant, Sir Anthony
Bottomley, Mrs Virginia	Greenway, Harry
Bowden, A. (Brighton K'to'n)	Gregory, Conal
Bowden, Gerald (Dulwich)	Griffiths, Sir Eldon
Boyson, Dr Rhodes	Ground, Patrick
Braine, Rt Hon Sir Bernard	Grylls, Michael
Brandon-Bravo, Martin	Gummer, Rt Hon John S
Brinton, Tim	Hamilton, Hon A. (Epsom)
Brooke, Hon Peter	Hampson, Dr Keith
Browne, John	Hancock, Michael
Bruce, Malcolm	Hanley, Jeremy
Bryan, Sir Paul	Hannam, John
Buchanan-Smith, Rt Hon A.	Hargreaves, Kenneth
Buck, Sir Antony	Harris, David
Bulmer, Esmond	Harvey, Robert
Burt, Alistair	Haselhurst, Alan
Butcher, John	Hawkins, C. (High Peak)
Butler, Rt Hon Sir Adam	Hawkins, Sir Paul (N'folk SW)
Butterfill, John	Hayes, J.
Carlile, Alexander (Montg'y)	Hayhoe, Rt Hon Barney
Carlisle, Kenneth (Lincoln)	Hayward, Robert
Carlisle, Rt Hon M. (W'ton S)	Heath, Rt Hon Edward
Carttiss, Michael	Heathcoat-Amory, David
Cash, William	Heddle, John
Chalker, Mrs Lynda	Henderson, Barry
Channon, Rt Hon Paul	Heseltine, Rt Hon Michael
Chapman, Sydney	Hickmet, Richard
Chope, Christopher	Hicks, Robert
Churchill, W. S.	Hill, James
Clark, Hon A. (Plym'th S'n)	Hind, Kenneth
Clark, Dr Michael (Rochford)	Hirst, Michael
Clark, Sir W. (Croydon S)	Hogg, Hon Douglas (Gr'th'm)
Clarke, Rt Hon K. (Rushcliffe)	Holland, Sir Philip (Gedling)
Clegg, Sir Walter	Holt, Richard
Cockeram, Eric	Hordern, Sir Peter
Conway, Derek	Howard, Michael
Coombs, Simon	Howarth, Alan (Stratf'd-on-A)
Cope, John	Howell, Rt Hon D. (G'ldford)
Cormack, Patrick	Howell, Ralph (Norfolk, N)
Corrie, John	Howells, Geraint
Couchman, James	Hubbard-Miles, Peter
Critchley, Julian	Hughes, Simon (Southwark)
Crouch, David	Hunt, David (Wirral W)
Currie, Mrs Edwina	Hunt, John (Ravensbourne)
Dickens, Geoffrey	Hurd, Rt Hon Douglas
Dorrell, Stephen	Irving, Charles
Douglas-Hamilton, Lord J.	Jenkin, Rt Hon Patrick
Dunn, Robert	Jenkins, Rt Hon Roy (Hillh'd)
Durant, Tony	Johnson Smith, Sir Geoffrey
Dykes, Hugh	Johnston, Sir Russell
Edwards, Rt Hon N. (P'broke)	Jones, Gwilym (Cardiff N)
Eggar, Tim	Jones, Robert (Herts W)

Jopling, Rt Hon Michael	Pollock, Alexander
Joseph, Rt Hon Sir Keith	Portillo, Michael
Kellett-Bowman, Mrs Elaine	Powell, William (Corby)
Kershaw, Sir Anthony	Powley, John
Key, Robert	Prentice, Rt Hon Reg
King, Roger (B'ham N'field)	Price, Sir David
Knight, Greg (Derby N)	Prior, Rt Hon James
Knight, Dame Jill (Edgbaston)	Pym, Rt Hon Francis
Knowles, Michael	Raffan, Keith
Knox, David	Raison, Rt Hon Timothy
Lamont, Norman	Rathbone, Tim
Lang, Ian	Renton, Tim
Lawler, Geoffrey	Rhodes James, Robert
Lawrence, Ivan	Rhys Williams, Sir Brandon
Lawson, Rt Hon Nigel	Ridley, Rt Hon Nicholas
Lee, John (Pendle)	Ridsdale, Sir Julian
Leigh, Edward (Gainsbor'gh)	Rifkind, Rt Hon Malcolm
Lennox-Boyd, Hon Mark	Rippon, Rt Hon Geoffrey
Lewis, Sir Kenneth (Stamf'd)	Roberts, Wyn (Conwy)
Lightbown, David	Roe, Mrs Marion
Lilley, Peter	Ross, Stephen (Isle of Wight)
Lloyd, Ian (Havant)	Rossi, Sir Hugh
Lloyd, Peter (Fareham)	Rost, Peter
Lord, Michael	Rowe, Andrew
Luce, Rt Hon Richard	Rumbold, Mrs Angela
Lyell, Nicholas	Ryder, Richard
McCrindle, Robert	Sackville, Hon Thomas
McCurley, Mrs Anna	Sainsbury, Hon Timothy
Macfarlane, Neil	Sayeed, Jonathan
MacGregor, Rt Hon John	Shaw, Giles (Pudsey)
MacKay, Andrew (Berkshire)	Shaw, Sir Michael (Scarb')
MacKay, John (Argyll & Bute)	Shelton, William (Streatham)
Maclean, David John	Shepherd, Colin (Hereford)
Maclennan, Robert	Silvester, Fred
McNair-Wilson, M. (N'bury)	Sims, Roger
McNair-Wilson, P. (New F'st)	Skeet, Sir Trevor
McQuarrie, Albert	Smith, Sir Dudley (Warwick)
Madel, David	Smith, Tim (Beaconsfield)
Major, John	Soames, Hon Nicholas
Malins, Humfrey	Speed, Keith
Maples, John	Speller, Tony
Marland, Paul	Spence, John
Marshall, Michael (Arundel)	Spencer, Derek
Mates, Michael	Spicer, Jim (Dorset W)
Maude, Hon Francis	Spicer, Michael (S Worcs)
Mawhinney, Dr Brian	Squire, Robin
Maxwell-Hyslop, Robin	Stanbrook, Ivor
Mayhew, Sir Patrick	Stanley, Rt Hon John
Mellor, David	Steel, Rt Hon David
Merchant, Piers	Steen, Anthony
Meyer, Sir Anthony	Stern, Michael
Mills, Iain (Meriden)	Stevens, Lewis (Nuneaton)
Mills, Sir Peter (West Devon)	Stewart, Allan (Eastwood)
Mitchell, David (Hants NW)	Stewart, Andrew (Sherwood)
Monro, Sir Hector	Stewart, Ian (Hertf'dshire N)
Montgomery, Sir Fergus	Stradling Thomas, Sir John
Moore, Rt Hon John	Tapsell, Sir Peter
Morris, M. (N'hampton S)	Taylor, John (Solihull)
Morrison, Hon C. (Devizes)	Temple-Morris, Peter
Morrison, Hon P. (Chester)	Terlezki, Stefan
Mudd, David	Thatcher, Rt Hon Mrs M.
Murphy, Christopher	Thomas, Rt Hon Peter
Neale, Gerrard	Thompson, Donald (Calder V)
Needham, Richard	Thompson, Patrick (N'ich N)
Nelson, Anthony	Thorne, Neil (Ilford S)
Neubert, Michael	Townsend, Cyril D. (B'heath)
Newton, Tony	Tracey, Richard
Nicholls, Patrick	Trippier, David
Norris, Steven	Trotter, Neville
Oppenheim, Phillip	van Straubenzee, Sir W.
Osborn, Sir John	Viggers, Peter
Ottaway, Richard	Waddington, David
Page, Sir John (Harrow W)	Wainwright, R.
Page, Richard (Herts SW)	Wakeham, Rt Hon John
Parkinson, Rt Hon Cecil	Waldegrave, Hon William
Parris, Matthew	Walden, George
Patten, Christopher (Bath)	Walker, Rt Hon P. (W'cester)
Patten, J. (Oxf W & Abgdn)	Wallace, James
Pawsey, James	Waller, Gary
Percival, Rt Hon Sir Ian	Walters, Dennis

Ward, John	Wolfson, Mark
Wardle, C. (Bexhill)	Wood, Timothy
Warren, Kenneth	Woodcock, Michael
Watts, John	Yeo, Tim
Wells, Bowen (Hertford)	Young, Sir George (Acton)
Wells, Sir John (Maidstone)	Younger, Rt Hon George
Wheeler, John
Whitney, Raymond	Tellers for the Ayes:
Wiggin, Jerry	Mr. Carol Mather and
Wilkinson, John	Mr. Robert Boscawen

NOES
Aitken, Jonathan	Deakins, Eric
Anderson, Donald	Dixon, Donald
Archer, Rt Hon Peter	Dobson, Frank
Ashton, Joe	Dormand, Jack
Atkinson, N. (Tottenham)	Douglas, Dick
Bagier, Gordon A. T.	Dover, Den
Banks, Tony (Newham NW)	Dubs, Alfred
Barnett, Guy	Dunwoody, Hon Mrs G.
Barron, Kevin	Eadie, Alex
Beckett, Mrs Margaret	Eastham, Ken
Benn, Rt Hon Tony	Edwards, Bob (W'h'mpt'n SE)
Bennett, A. (Dent'n & Red'sh)	Evans, John (St. Helens N)
Bermingham, Gerald	Ewing, Harry
Bidwell, Sydney	Fatchett, Derek
Blair, Anthony	Faulds, Andrew
Body, Sir Richard	Field, Frank (Birkenhead)
Boyes, Roland	Fields, T. (L'pool Broad Gn)
Bray, Dr Jeremy	Fisher, Mark
Brown, Gordon (D'f'mline E)	Flannery, Martin
Brown, Hugh D. (Proven)	Foot, Rt Hon Michael
Brown, M. (Brigg & Cl'thpes)	Forrester, John
Brown, N. (N'c'tle-u-Tyne E)	Foster, Derek
Brown, R. (N'c'tle-u-Tyne N)	Foulkes, George
Brown, Ron (E'burgh, Leith)	Fraser, J. (Norwood)
Buchan, Norman	Freeson, Rt Hon Reginald
Budgen, Nick	Fry, Peter
Caborn, Richard	Garrett, W. E.
Callaghan, Rt Hon J.	George, Bruce
Callaghan, Jim (Heyw'd & M)	Gilbert, Rt Hon Dr John
Campbell, Ian	Goodhart, Sir Philip
Campbell-Savours, Dale	Gould, Bryan
Carter-Jones, Lewis	Gourley, Harry
Clark, Dr David (S Shields)	Hamilton, James (M'well N)
Clarke, Thomas	Hamilton, Neil (Tatton)
Clay, Robert	Hamilton, W. W. (Fife Central)
Clelland, David Gordon	Hardy, Peter
Clwyd, Mrs Ann	Harman, Ms Harriet
Cocks, Rt Hon M. (Bristol S)	Harrison, Rt Hon Walter
Cohen, Harry	Hart, Rt Hon Dame Judith
Coleman, Donald	Hattersley, Rt Hon Roy
Conlan, Bernard	Hawksley, Warren
Cook, Frank (Stockton North)	Healey, Rt Hon Denis
Cook, Robin F. (Livingston)	Heffer, Eric S.
Corbyn, Jeremy	Hogg, N. (C'nauld & Kilsyth)
Cox, Thomas (Tooting)	Holland, Stuart (Vauxhall)
Craigen, J. M.	Home Robertson, John
Crowther, Stan	Howarth, Gerald (Cannock)
Cunliffe, Lawrence	Howell, Rt Hon D. (S'heath)
Cunningham, Dr John	Hoyle, Douglas
Davies, Rt Hon Denzil (L'lli)	Hughes, Dr Mark (Durham)
Davis, Terry (B'ham, H'ge H'l)	Hughes, Robert (Aberdeen N)

Hughes, Roy (Newport East)	Powell, Rt Hon J. E.
Hughes, Sean (Knowsley S)	Powell, Raymond (Ogmore)
Janner, Hon Greville	Proctor, K. Harvey
John, Brynmor	Radice, Giles
Jones, Barry (Alyn & Deeside)	Randall, Stuart
Kaufman, Rt Hon Gerald	Redmond, Martin
Kilroy-Silk, Robert	Rees, Rt Hon M. (Leeds S)
Kinnock, Rt Hon Neil	Richardson, Ms Jo
Lambie, David	Roberts, Allan (Bootle)
Lamond, James	Roberts, Ernest (Hackney N)
Leadbitter, Ted	Robertson, George
Leighton, Ronald	Robinson, G. (Coventry NW)
Lewis, Ron (Carlisle)	Rogers, Allan
Lewis, Terence (Worsley)	Rooker, J. W.
Litherland, Robert	Ross, Ernest (Dundee W)
Lloyd, Tony (Stretford)	Rowlands, Ted
Lofthouse, Geoffrey	Ryman, John
McDonald, Dr Oonagh	Sedgemore, Brian
McGuire, Michael	Sheerman, Barry
McKay, Allen (Penistone)	Sheldon, Rt Hon R.
McKelvey, William	Shepherd, Richard (Aldridge)
MacKenzie, Rt Hon Gregor	Shore, Rt Hon Peter
McNamara, Kevin	Short, Ms Clare (Ladywood)
McTaggart, Robert	Short, Mrs R.(W'hampt'n NE)
McWilliam, John	Silkin, Rt Hon J.
Madden, Max	Skinner, Dennis
Marek, Dr John	Smith, C. (Isl'ton S & F'bury)
Marlow, Antony	Spearing, Nigel
Marshall, David (Shettleston)	Stott, Roger
Martin, Michael	Strang, Gavin
Maxton, John	Straw, Jack
Maynard, Miss Joan	Taylor, Teddy (S'end E)
Meacher, Michael	Thomas, Dr R. (Carmarthen)
Michie, William	Thompson, J. (Wansbeck)
Mikardo, Ian	Thorne, Stan (Preston)
Millan, Rt Hon Bruce	Tinn, James
Miller, Dr M. S. (E Kilbride)	Torney, Tom
Mitchell, Austin (G't Grimsby)	Wardell, Gareth (Gower)
Morris, Rt Hon A. (W'shawe)	Wareing, Robert
Morris, Rt Hon J. (Aberavon)	Weetch, Ken
Nellist, David	Welsh, Michael
Oakes, Rt Hon Gordon	White, James
O'Brien, William	Williams, Rt Hon A.
O'Neill, Martin	Winnick, David
Orme, Rt Hon Stanley	Winterton, Nicholas
Park, George	Woodall, Alec
Parry, Robert	Young, David (Bolton SE)
Patchett, Terry
Pavitt, Laurie	Tellers for the Noes:
Pendry, Tom	Mr. Ron Davies and
Pike, Peter	Mr. Frank Haynes.

Question accordingly agreed to.

Resolved, That a supplementary sum, not exceeding £135,917,000, be granted to Her Majesty out of the Consolidated Fund to defray the charges which will come in course of payment during the year ending on 31st March 1986 for expenditure by the Treasury in connection with payments to the Budget of the European Communities not covered by direct charges on the Consolidated Fund under section 2(3) of the European Communities Act 1972, as set out in House of Commons Paper No. 177.