European Community

HC Deb 05 March 1986 vol 93 cc335-418 4.57 pm

The Minister of State, Foreign and Commonwealth Office (Mrs. Lynda Chalker)

I beg to move, That this House takes note of the White Paper on Developments in the European Community January to June 1985 (Cmnd. 9627) and of European Community Document No. 8616/85, the Commission' s opinion on the Proposal for Amendments to the EEC Treaty.

Mr. Deputy Speaker (Mr. Harold Walker)

I have to inform the House that Mr. Speaker has selected the amendment in the name of the Leader of the Opposition.

Mrs. Chalker

The period covered by the report saw the conclusion of the accession negotiations with Spain and Portugal, culminating in the signing of the treaty of accession and the start of the process which led to the signing of the Single European Act, whose provisions the House will soon have an opportunity to debate and approve.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

Hon. Members, including some Government Back Benchers, are anxious to know exactly when the House will be given an opportunity to debate the Single European Act. It is important that we have an indication of the time scale.

Mrs. Chalker

The hon. Gentleman knows that the timing of the debate is a matter for discussion within the usual channels, but it will take place as soon as we can bring it forward. I shall write to the hon. Gentleman as soon as I have an indication of the timing. I hope that it will be within the next three months.

It is on the intergovernmental conference, and the changes to which it will lead, that the House will wish to focus this afternoon. Hon. Members will have seen the special report prepared by the Select Committee on European Legislation. The House will be most grateful to the Chairman, the hon. Member for Newham, South (Mr. Spearing), and his Committee for the thoughtful and constructive report. The hon. Gentleman kindly wrote to me to explain that he is chairing a Committee upstairs and that he will join us as soon as he can.

The report of the Select Committee on European Legislation draws some preliminary conclusions about the scrutiny arrangements, which are of great importance to hon. Members. I assure the hon. Member for Newham, South that we shall consider carefully and positively the suggestions made by his Committee. I am glad to tell the House that I am happy, too, to accept the Opposition amendment which will be moved shortly.

The desire for reform which led to the intergovernmental conference set up last June was commonly felt throughout the Community. At Fontainebleau in 1984, we achieved a settlement of the long-standing issue of our contributions to the EC budget. We also set in hand the imposition of budgetary discipline, particularly over the common agricultural policy. After years in which price rises were the norm, we secured two price fixings in a row in which prices fell in real terms.

It was against that background that the Community turned its attention from problems to opportunities: to such pressing questions as how to make Europe competitive in the new technologies; how to create the large market that would give us economies of scale, prosperity and jobs; and how to ensure that decisions were taken more quickly.

As the House will know, we believed that those objectives could be achieved by political agreement. But many other member states argued that it was essential to entrench reforms in amendments to the treaty, both to give them binding effect and as a symbol of the Community's determination to tackle its problems.

In the period covered by the report that we are debating this afternoon, there was intensive discussion of a wide range of proposals which were put forward, including some that would have radically altered the balance of the Community institutions. We tabled ideas of our own, particularly on decision-making procedures, and how the European Parliament might be enabled to contribute more effectively. Our proposals were notable for their severely practical focus, which contrasted sharply with the severely impractical—though no doubt visionary—flavour of some of the other ideas in the field.

Yet as member states focused more and more closely on the implications of the various proposals under discussion, it became clear that there was no widespread support for sweeping changes. There was, however, support for measures which would deal with the Community's most pressing needs.

Sir Russell Johnston (Inverness, Nairn and Lochaber)

When the Minister refers to impractical and visionary proposals, is she suggesting that the Italians—who 'were reluctant to sign the Luxembourg agreement unless it was approved by the European Parliament—were being impractical and visionary?

Mrs. Chalker

The hon. Gentleman knows that I meant nothing of the sort. He also knows that at certain stages a number of quite strange ideas appeared. I am glad to say that the view was taken that they would not be right in respect of the writing of the Single European Act.

It was on that basis that the intergovernmental conference, which is dealing with the Community's most pressing needs, was established, and it conducted and completed its work. That is now embodied in the Single European Act which incorporates the changes to the EEC treaty and the new treaty provisions on European cooperation in foreign policy.

The House will have a full opportunity to debate the treaty changes that were agreed at Luxembourg when it considers the forthcoming Bill to incorporate them into the European Communities Act, but it may be helpful if I describe the main features now.

It should be said, by way of preface, that the treaty changes agreed are modest in their legal scope, but they embody a political commitment which is practically significant.

Mr. George Robertson (Hamilton)

Why is it called the Single European Act?

Mrs. Chalker

That is a very good question. I do not think that my colleagues have given me any good reason as to why it is called that, but I shall consult and see whether I can come up with the real reason. I think that the hon. Gentleman is having fun at my expense.

The first noteworthy feature of the Single European Act is that it contains a new commitment to create, by 31 December 1992 a genuinely free internal market, which is vital. Britain has long championed the achievement of the freedoms set out in the treaty of Rome: the free movement of goods, persons, services and capital. We now have an important commitment to accelerate progress to that end; and to the extent that barriers have not been overcome by 1992, the Council may decide before the end of that year on the mutual recognition of national measures.

To enable progress to be made as quickly as this, the Single European Act introduces improved decision-making procedures. Qualified majority voting replaces unanimity for most internal market directives establishing common standards and procedures; for consideration of whether there should be policies for sea and air transport and how those policies should operate; for directives on co-ordination of policy on capital movements between member states and third countries; and for measures to remove obstacles to freedom of provision of services by nationals of third countries.

This extension of majority voting should make it harder for a few member states to block the adoption of measures liberalising air and sea transport, or the common standards for industrial products which help British firms export to Europe.

I should assure the House, however, that our special interests are fully safeguarded. Unanimity will still be required for tax measures; for the movement of persons across national frontiers, for example; and for the rights and interests of employees. We will also continue to be able to protect our high standards of animal and plant health. There has been no change whatsoever in the so-called Luxembourg compromise. It remains open to us, where necessary, to invoke that compromise to protect a very important national interest.

Mr. Foulkes

Why have the British Government insisted that unanimity should remain in respect of the rights and interests of employed persons? The hon. Lady will know that the British Government are blocking any agreement on parental leave, which would be of great help to people in this country and which the House of Lords Committee has indicated would cost nothing extra. Why are the Government blocking that? Why have we not moved towards majority agreement on this item?

Mrs. Chalker

When we talk of unanimity, we refer to the rights and interests of employees as a whole. So far as I am aware, parental leave is not at present being considered on that basis. That cannot be so, because we do not have the ratification by each of the 12 member states of the Single European Act. The matter may be resolved in the meantime, but we shall face it as it arises. At present, the unanimity rules will remain for all the matters to which I have referred because the Act will not have been ratified during the coming discussion on that issue. If I am in error, I shall come back to this when I reply to the debate.

Mr. Tony Marlow (Northampton, North)

Where majority voting takes place, can the veto still be applied?

Mrs. Chalker

That was the point of my last remark before I gave way to the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes). Of course, it remains open to us, where necessary, to invoke the compromise. That is exactly what I said.

The second important area covered by the Single European Act is research and technological development. The Community has long been concerned with research and development. The existing programme includes the exciting ESPRIT programme, in which more than 60 British companies are successfully participating, and which is playing a major role in helping to make our companies competitive in information technology. Up to now, the Community's R and D programme has lacked a sense of direction and purpose. It grew up in the 1970s, when energy needs dominated our thinking, and it has failed to adjust to Europe's industrial needs for the 1980s and 1990s. That will now change.

The purposes of Community research and development are clearly defined in the new Act in terms of practical application and the needs of industry. The Community will encourage research and technological development activities by companies, including small firms, as well as by research centres and universities. This will be supported by exploiting the potential of the internal market to the full, opening up public contracts and removing legal and fiscal barriers to co-operation.

The framework programme, which establishes the financial envelope for Community R and D over each five-year period, will in future define much more clearly the content, objectives and priorities of research and development programmes. That overall framework will remain subject to unanimity. The specific programmes to take place within it will subsequently be decided by qualified majority. In the early discussions on the next research and development framework programme we are already starting to see the benefits of the more industry-oriented approach which the Community is now adopting. There is much more emphasis on projects which will strengthen the foundations of European industry, such as RACE—research in advance communications in Europe —and BRITE—research to help modernise traditional industries, for example, through computer-aided design and manufacture. Those are the areas in which the Community needs to catch up in order to be able to compete. Those are the areas in which we shall now have the necessary legal framework in which to set Community activity.

The third major area covered by the new treaty amendments is the environment. Here, too, the Community has a long-standing involvement, as of necessity it must. Pollution knows no boundaries. Effective conservation requires an international effort. The Community has already taken many useful environmental initiatives, such as improving water quality, reducing pollution from motor vehicles, handling dangerous substances in industry and protecting the agricultural environment.

What we have now done is to establish the criteria for those activities. The criteria stipulate that the Community should take action relating to the environment only to the extent that environmental objectives can be better attained at Community level than at the level of individual member states; that the Community should weigh the potential benefits and costs of action before taking it; and that it should weigh the environmental conditions in the various regions of the Community. What is necessary in the Mediterranean may not be necessary in the North sea. We will be able to ensure that, where we wish, decisions continue to be taken by unanimity.

In reaching these decisions, the Heads of Government had to consider carefully the institutional balance within the Community. The European Parliament, directly representing an electorate of 320 million people, has an important role to play in decision taking. As we said in our manifesto for the European elections last year, on a growing number of issues, the Community is regarded as the voice of Europe. Yet the existing institutional arrangements have not enabled the European Parliament to play the positive role that it could and should. What we have therefore sought is a means of maximising the European Parliament's contribution and influence without, however, any change in its formal powers.

That is the effect of the new co-operation procedure which is most usefully and clearly analysed in the Scrutiny Committee's report. The procedure provides that, in certain areas where qualified majority voting applies in the Council, the European Parliament will be able to propose amendments if a majority of its members agree. If the Parliament proposes amendments, the Commission has to decide whether or not to amend its proposal accordingly. But it should be emphasised—in the words of the Scrutiny Committee report—that at end of the day the European Parliament still has no power to insist and the last word remains with the Council. Nor could any intervention by the Parliament lead to a vote which would normally be taken by unanimity in the Council being taken by qualified majority instead. That could not happen.

What we hope and expect, however, is that the potential of the European Parliament for constructive involvement in the development of Community policy can now be more fully realised. Too often in the past the European Parliament has used its negative powers to block proposals and delay decision-making when it has not—perhaps because it has not—been properly consulted, and when full weight has not been given to its opinions.

Sir Russell Johnston

I appreciate that the Minister has given way generously. It is not fair for her to attack the European Parliament on the ground of delaying decision-making when delaying decision-making lies firmly at the door of the Council.

Mrs. Chalker

I am sorry if the hon. Gentleman thought that I was making an unjustified attack on the European Parliament. There are times when there are delays in decision-making, as the hon. Gentleman knows. The point is that the whole of the Community has been bedevilled in much of the progress that it has sought to make by all sorts of delays. I was referring to a way of consultation through which we may minimise future delays.

Mrs. Elaine Kellett-Bowman (Lancaster)

Will my hon. Friend give way?

Mrs. Chalker

I will give way for the last time.

Mrs. Kellett-Bowman

The European Parliament frequently introduces reports on minor subjects which may be of interest to a limited number of people but which clog up the works. If the minor reports were not introduced, the major crucial reports could go through faster and delay would be obviated.

Mrs. Chalker

I have a great deal of sympathy with what my hon. Friend says. She is referring to the whole of the management of Community business, not just in the European Parliament but in the Community institutions. I hope that it will be possible to improve the management so that the major issues can get the attention that they rightly deserve.

In discussing the Single European Act, in the sphere of foreign policy, an increasingly potent symbol of unity in European policy was vividly demonstrated last week in the Philippines. It was a major goal of the Government throughout the negotiations to secure treaty provision for such co-operation, and it was finally agreed in very much the form that we originally proposed before Milan. The new provisions consolidate for the first time in legal form the existing commitments of European political cooperation to consult and co-operate, although they remain juridically separate from the treaties establishing the Communities. The Twelve undertake to consult before adopting a position on foreign policy issues of general interest and to avoid any action particularly in international fora, such as the United Nations, which could undermine their cohesiveness and ability to act as a force internationally. The treaty also strengthens the commitment to consultation on certain aspects of security questions.

The treaty enshrines the general feeling that the time has come after 15 years to give formal recognition to political co-operation as an important component of the policies of the Community of Twelve. We do not expect dramatic overnight improvements in cohesion on foreign policy issues. But there is now a more serious commitment to move foward together, while the creation of a small secretariat will provide permanent small machinery to enable the Twelve to react to events with greater facility than hitherto. As my right hon. Friend the Prime Minister told the House on 5 December, we expect that there will continue to be differences between us, but the Twelve will in future try to work together as far as possible to ensure that their voice is more generally heard and better respected. That has already begun to happen.

I have discussed how, in the period covered by the report, we prepared the way for the changes which are being introduced into the treaty. I have discussed the main features of the Single European Act by which they are to be accomplished. We warmly welcome the outcome of the Danish referendum last week, and the signing of the Single European Act by Denmark, Italy and Greece. The way is now clear for national ratification procedures, and, as the House knows, we plan to introduce a Bill as soon as practicable to carry that through. From now on our focus must be on the implications of the Act.

Mr. Marlow

Will my hon. Friend give way?

Mrs. Chalker

I have already given way a considerable number of times, and I understand that many hon. Members wish to speak, so I must finish my remarks.

The excellent Scrutiny Committee report discusses the particular implications for scrutiny by the House. That is one important aspect at which we wish to look carefully.

However, there are also implications for the development of the Community, and for Britain within the Community. During the second half of this year, Britain will assume the presidency of the EC. It is my earnest hope that, before the end of the year, the Single European Act will take effect. The Community will then have a good opportunity to build for the future, and Britain, in the presidency, will have a special responsibility to direct that process.

I want a Community that is relevant and is seen to be relevant by its people, especially the British people. The completion of the Common Market is the most important single step that we can take to achieve that aim. The treaty changes and other new procedures agreed in Europe will help us in taking that step. It is an important step for the future not only for Britain but for peace in the Western world. I commend the motion to the House.

5.20 pm

Mr. George Robertson (Hamilton)

I beg to move, at the end of the Question to add, 'and, noting the First Special Report of the Select Committee on European Legislation (Session 1985–86), calls on the Government to undertake to co-operate in improved procedures so that the House can effectively scrutinise proposals under the Treaties as they would be amended by the Single European Act.'. The Minister properly avoided the vast bulk of the White Paper that we are supposed to be debating and concentrated more on the future than on the past. Her peroration included memorable words about the importance of the EC being relevant to the people, and then invoked the internal market as the method by which the people should judge the effectiveness of the EC. If the people outside were consulted, they would consider the internal market, or the creation of Lord Cockfield's dream world, a most remarkable method of judging a Community of 12 nations in such a deep recession.

Such debates are, by definition, retrospective, but they are also an opportunity carefully to consider developments in the European Community and to look forward to what the Community could or should do for the people of Europe and for the people of Britain. All too often, our debates on the EC are dominated by its chronic budget problems. The Minister of State, Treasury, is here as an observer of the debate. No doubt he is relieved that the massed ranks of the Tory anti-marketeers are, surprisingly, absent today, leaving the Floor free — [Interruption.] The massed ranks are absent; only the hon. Member for Northampton, North (Mr. Marlow) is here to speak on their behalf. The Minister of State, Treasury, must wish that he could stand at the Dispatch Box today instead of on a later occasion, when his hon. Friends will be ready, knives in hand, to scalp him.

Our debates on the EEC budget usually degenerate into unintelligible, fairly negative and introspective seminars that do not enlighten the outside world about the potential of a 12-nation Community to contribute to solving Britain's and the European Community's problems.

As the Minister said, we are fortunate to have the first special report of the Select Committee on European Legislation. I am sorry that bad scheduling has meant that the Chairman and members of the Committee cannot be here for the beginning of the debate. The report includes an excellent analysis of the practical problems that we shall face because of the process of so-called reform, which started at the beginning of last year and therefore during the period that we are considering. The process has culminated in what is called the Single European Act. I look forward with interest to the Minister's explanation of that peculiar translation of a French phrase.

Mrs. Chalker

It seemed to be such an obvious phrase that I did not question how the Act came to have that name. However, I have thought about it and obtained a little help from my friends, and I can say that the changes to the European treaty and the new treaty on co-operation on foreign policy are brought together in a single Act. It is European and it is an Act. Indeed, it is a surprisingly logical name to come from the EC stable.

Mr. Robertson

But the hon. Lady's friends had to explain it to her. We accept, with gratitude, that information, which makes the Single European Act seem all the brighter. No doubt the practical problems that will be thrown at us will be greater than the interpretation of the name.

Our scrutiny of European legislation should worry us greatly. In 1984, the Select Committee published a report which damned the Government's attitude to scrutiny in general and cited examples of major changes that went through the Council of Ministers before debate or discussion took place in the House. It gave the examples of the ESPRIT programme and the new arrangements for the regional development fund. Those examples and the report came long before the increase in majority voting, which has made the problem much more severe and which will increase when the Act comes into force.

The latest report of the Select Committee shows how much worse the position will be if the new Luxembourg system comes into effect. Of course, that depends upon the House and 11 other Parliaments ratifying it. It will pose a genuine dilemma to the House of Commons. We have tabled this amendment because of the complex problems of the scrutiny of European legislation and the likely increase in workload. We are grateful that the Government have taken on board our point and have accepted the amendment. I am probably the only Opposition Front-Bench spokesman who has managed to get not just one but two amendments accepted by the Government. No doubt the "Guinness Book of Parliamentary Records" will note that.

Sir Anthony Kershaw (Stroud)

On a point of order, Mr. Deputy Speaker. It is not the Government who accept amendments, but Mr. Speaker or the Chairman of Ways and Means.

Mr. Robertson

I must correct the hon. Gentleman. Mr. Speaker simply selects an amendment. It is for the Government—the parent of the original "take note" motion—to accept the Opposition's amendment. I hate to dance round on a pedantic pinhead, but, uncharacteristically, the hon. Gentleman is wrong in this case.

We must consider how best we can effectively monitor, supervise and scrutinise the mass of important detailed legislation affecting our people which is being enacted by the Community and as a consequence of section 2 of the European Communities Act 1972. It is not enough for the House to have debates such as this — considering a period that started 12 months ago—and pretend that we get to the heart of keeping tabs on developments in the EC.

Mr. Marlow

The hon. Gentleman knows that the House of Lords Select Committee is allowed to comment, and quite properly comments, on the merits of the proposals put before us, but the House of Commons Scrutiny Committee is allowed only to decide whether a matter should be put for debate either in Committee or before the House. Would the hon. Gentleman like to see the Scrutiny Committee have the powers to comment on the merits of a particular proposal with regard to the United Kingdom interest?

Mr. Robertson

The hon. Gentleman makes a valuable point. I have not put forward any conclusions, but my hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) will deal with a number of positive suggestions that are available to us about the way in which we deal with such scrutiny. The House continually turns for advice to the House of Lords Select Committee and it is an example at which we should be looking carefully, especially given the fact that the bulk of scrutiny will increase substantially should Parliament choose to ratify the Single European Act.

The debate concerns a six-month period a year ago. We are now only a few months away from this country's tenure of the Presidency of the Community, and the debate would have been an opportunity for the Minister to set out an agenda for that period. She could have inspired us with the vision of reform and revitalisation that will motivate the Government when they hold the steering wheel of Europe in July this year. We might have expected her to tell us how they will take on the challenge of fighting for jobs in a recession-hit Community, with over 14 million of its citizens out of work.

The Minister might also have enlightened us as to how the Government see Europe grasping the opportunities for technological and industrial co-operation across the Community. We might even have expected to hear how they intended to deal with the recurring problems of the European budget, and what they intend to do with the common agricultural policy, whose faults threaten not just budget discipline—that has gone out of the window—but the whole of the Community. We might have expected to hear all that, but we waited in vain, and we can reasonably conclude that, not surprisingly, the Government have as little idea of what to do in the European Presidency as they have of what to do with the economy of Britain. The economy of Europe and our country are at the heart of politics today.

Mrs. Chalker

It is not true.

Mr. Robertson

The hon. Lady may say that, and she may tell us that the litany of clichés that she brought out was a substitute for the agenda for the Presidency. The idea that reform of the internal market will inspire confidence among the 4 million unemployed in this country, never mind the 10 million others out of work across the Community, leaves me in mystification, and will give no hope to the people of Europe.

The European Commission, in its annual economic report and programme for 1986, has elevated the strengths and potential of a co-operative strategy for growth. In its opinion, there is now a unique opportunity to boost wealth and reduce unemployment by 30 to 40 per cent. over five years. Even without Spain and Portugal, there are 14 million unemployed in the European Community, and 45 per cent. of them are young people, a growing proportion of whom are now chronic long-term unemployed.

The President of the Commission, Mr. Jacques Delors, said at the beginning of 1985, when he presented the Commission's first programme: Faced with the uncertainties and worries of the future, what people are looking for above all else is not freedom of movement (of peoples and goods) … Pulling down the frontiers will not convince them of our resolve to do away with massive unemployment. Economic convergence will be meaningless to people if we have not reversed the tide of unemployment within the next 2 years. We might reasonably have expected the British Government, who will take over the Presidency, at least to echo some of those heavily weighted sentiments.

Will the Government, during the Presidency, initiate talks to achieve a co-operative growth strategy to reduce unemployment by 1 million in the United Kingdom alone, as all the economic experts and the European Commission believe possible?

The Commission stressed in its 1986 programme that one of its strategic objectives will be the adoption of a framework programme for research and technological development … clear in form and content and attractive to firm and research centres encouraging them to cooperate. The Minister touched on this matter in her speech, but the Government must give an answer both in the House and beyond it, because the Presidency has a wider responsibility. Are the Government willing to increase the funds for ESPRIT and meet the challenges that it faces, and will they commit themselves to future financing of EUREKA projects? We have had many fine words about technological co-operation, but will they be accompanied by the standard public parsimony that the Government inflict on every programme that could make a contribution?

How can a clear European framework conducive to cooperation develop, when the Government have agreed to participate in the strategic defence initiative research programme in the United States, and when they have not laid down any guidelines regarding intellectual property rights and the ability of British scientists to use their work in Europe? How can Europe hope to establish some kind of technological superiority if it allows the technology to flow to the United States?

What is most disturbing of all—the Minister's speech highlighted this only too well—is that the Government have now adopted, as the flavour of the month, the crusading zeal of Lord Cockfield in his drive to create a true common market by improving the internal market. The internal market—in this Eurospeak which reduces the meaning of everything that we say in these debates —is a more clear-cut free trade area, which will involve wide and sweeping changes. This will have fundamental and dramatic implications for Britain, and there is no sign that the Government have grasped any of the issues thrown up by what they are saying.

For example, do the Government know what the effect of these changes will be on the structure of British industry, on employment, on our balance of trade in manufacturing policy or our invisible earnings through the free exchange of services about which we so often hear? From the answer that the Minister for Trade gave my hon. Friend the Member for Carrick, Cumnock and Doon Valley, it would seem that they do not have the slightest clue as to the implications.

Either the Government have carried out detailed studies of the effects, in which case they have an obligation to present them to Parliament in the form of a White Paper so that we can all judge their merits, or we can conclude that they have no real idea of the effects of the changes, and are simply gambling with Britain's future for the sake of a free market ideology. A free market ideology is just as valid in the internal market of the United Kingdom as it is in the internal market of the European Community. As the Minister for Trade, who gave such a characteristically vague, almost useless and optimistic reply to my hon. Friend, is one of the high priests of the free market, one can only conclude that the Government do not have the slightest clue about the implications of Lord Cockfield's dream on the structure of industry.

The evidence is clear. The Government's view of the internal market differs sharply from that of other European Community countries and from the view of the Commisson. The Government believe that the internal market will require the harmonisation of value added tax, which has been repeatedly stressed by both the President of the Commission, Jacques Delors, and by Lord Cockfield, but nobody except the Conservative party believes that on its own a free trade area will do anything for Europe and its problems. The Commission's programme for 1986 makes it clear that Completion of the internal market must not be allowed to compromise the Community's social priorities. However, the British Government have expressed no view about that.

When he presented the Commission's programme in January, Jacques Delors said: The creation of a vast economic area based on the market and business co-operation is inconceivable, I would say unattainable, without some harmonisation of social legislation. That criterion, which was quite right and proper, was laid down by the President of the Commission. There is no possibility of creating an internal market if the social obligations that accompany it are not recognised. However, this Government have not only stopped the people of Britain and the rest of the European Community from enjoying the benefits of directives on employee consultation and information, parental leave and worker participation by vetoing them every time they have been raised, but Lord Young of Graffham has presented a new programme of deregulation under which many of the benefits that are enjoyed in this country and in the European Community—for example, the benefit of equal opportunities—would be withdrawn.

In the letter last month of the Minister of State, Foreign and Commonwealth Office to my hon. Friend the Member for Carrick, Cumnock and Doon Valley—in his intervention the hon. Member for Northampton, North was getting, in his probing style, to the heart of the matter, although from a different direction from mine—she said that, despite the treaty changes which allow for majority voting in a number of other areas, Directives affecting the rights and interests of employed persons will remain subject to unanimity. What is the point of majority voting if British industrial employees are still to be denied the best that the European social structures have been able to offer to European employees for some time?

The prime example is the draft directive on parental leave, which the Government are opposing on the simple ground that it would impose costs on industry. The report of the Select Committee of the House of Lords has already been mentioned. It favoured the directive and declared that it could find no reason to believe that industry would suffer from the introduction of that directive.

The Government talk about a "people's Europe". They go along with the idea of a common stamp, a common flag, a common passport and a European anthem. If, however, the European Community is to be credible, as the Minister of State has said that it should be, and is to benefit the people of the Community, surely it must be allowed to be used in these areas where it can be of use. In recent months we have heard much about multinational companies that have the freedom to play off against each other the workers in their various subsidiaries, but many of these abuses can be curbed only by measures that can be applied on a European basis, such as those that are proposed in the directive on worker information. However, they have all been vetoed by this Government.

Mr. Marlow

If the hon. Gentleman wants more of these policies to be decided at the European level, does he consider that more powers should be given to the European Community? If so, will he say which powers he would give the Community?

Mr. Robertson

My point is that there are aspects of the European Community which would benefit the people of this country but that this Government, who pretend to be enthusiastic about Europe, choose to deny to the British people the opportunity to raise the level of benefits and increase the social infrastructure. They concentrate instead upon mealy-mouthed platitudes and upon reducing the standards that apply to British industrial workers.

The internal market will lead to a greater concentration of wealth and production. Even its advocates admit that any benefits will have to come through economies of large-scale production, in which case there is an even greater need for a European Community regional policy which is effective and which has sufficient resources to fulfil the demands that are caused by inequality in the European Community, especially on account of the greater disparities that accession have created. This will require a fundamental reform of the European Community's budget and, as a prerequisite, reform of the common agricultural policy. That is of major importance, in view of Britain's future Presidency of the European Community. The Minister of State chose not to deal with that point in her speech. My hon. Friend the Member for Carrick, Cumnock and Doon Valley will deal with it at some length and in devastating detail if he catches your eye, Mr. Deputy Speaker, at the end of the debate. Its importance should not be under-estimated.

Almost inevitably, our European Community debates tend to be over-critical—sometimes justifiably critical—and almost always pessimistic. The problems facing the Community always seem, to our eyes, never to exploit the opportunities that a huge community of nations provides for us. That is unfortunate. The House and the Community have a duty to offer the population of Europe and the British people more than just an eternal wrangle over incomprehensible details, or an endless financial crisis, or an agricultural policy which goes from the absurd to the obscene. Politicians, like our Government, who continually dodge all the real challenges and prefer playing with the sideshows of European politics are simply squandering the future of our continent.

5.46 pm

Sir Anthony Kershaw (Stroud)

A measure of the way in which European debates have almost become a part of our domestic scene can be gathered from the attendance this afternoon in the House of Commons. They rate slightly below Scottish housing debates.

The hon. Member for Hamilton (Mr. Robertson) made a very good and typical Opposition Front Bench speech. He railed against the Government. He criticised every kind of point and, luckily for him, he avoided making any positive statement. He complained that in these debates we spend our time wrangling over details. Every debate about Europe cannot turn into a Second Reading debate on whether or not Britain ought to be in the European Community. Of course we are wrangling over details, in a sense, but we are addressing the points that are of importance to our electors and to this country.

The hon. Member for Hamilton slightly puzzled me when he said that a free trade area in Europe would be useless. I thought that that was the policy of the Labour party.

Mr. George Robertson

I did not say that.

Sir Anthony Kershaw

The hon. Gentleman went on to amend that statement by saying that there must be more use of the European dimension. My hon. Friend the Member for Northampton, North (Mr. Marlow) intervened on that point. However, the hon. Gentleman should be careful. Although his party is in favour of free trade in Europe, it is against the extension of the European dimension.

Mr. George Robertson

I do not want to take up the time of the House, but I must correct the hon. Gentleman. I did not say any of those things. I criticised the Government's lack of precision in measuring the effect that the changes in the internal market will have upon the British economy. A better internal market would create a more common market for Britain, but we must consider its effects upon industry and upon employment in Britain before we embark upon it.

Sir Anthony Kershaw

I regret that I did not understand that to be what the hon. Gentleman said. I am grateful to him for having given us another explanation.

We must choose only a few of the tasks in the White Paper with which the presidency will give us an opportunity to deal. The first that I want to mention is European political co-operation. Not since Roman times has Europe spoken with one voice, and more is the pity. If it were able to do so, its influence—

Mr. Eric Deakins (Walthamstow)

Charlemagne, Napoleon, Hitler.

Sir Anthony Kershaw

It depends on who is in charge. If the hon. Member for Walthamstow (Mr. Deakins) or I were in charge, that would be all right.

The influence that Europe could exert would surely be beneficent in the world, because Europe, considered as a whole, is a satisfied power. We have no claims on other continents or countries; none of the sorts of claims which so disturbed the world before 1939 and brought us nearly to ruin. Therefore, our political experience and weight applied together would be a beneficent influence for the peace of the world.

In trade, there can be no doubt whatever that unless Europe stands together we cannot possibly have any influence in the Western industrial and economic scene. As individual countries we are incapable of facing the might of Japan and the United States, so it is necessary for us to act together. Some problems obviously cannot be settled without Europe working together. The world debt problem is one. The problem of aid to developing countries can surely not even approach a solution, let alone have one, except by European co-operation.

In the White Paper mention is made of the European attitude towards South Africa. The weight which a combined opinion in Europe can bring to bear upon the South African Government could be a great deal more useful than the specific sanctions that are urged by some. The influence that Europe has already exerted has caused the South African Government to shift their ground to some extent, and the attitude which the Foreign Ministers of the Twelve took at Lusaka was considerably more helpful to the South African scene than that which was taken at the Commonwealth conference in Bermuda.

We shall have to wait to see whether the recent speech of President Botha is implemented. On the face of it, he said that a great deal would change, but those who are close to him say that his words should not be so interpreted. It is a fact, and I am glad that it appears in the White Paper, that the Ministers were agreed that, unless desegregation is the objective at which the South African Government are ultimately aiming, no cosmetics short of that will cure the situation. I hope that the Foreign Ministers and the Prime Ministers of Europe will be able to continue to make that view clearly known to the South Africans.

Another matter which was discussed last year and which is in the White Paper is terrorism, on which the Government have taken a lead in putting the issue before the Ministers. Clearly that is another sphere which cannot be tackled usefully without general co-operation. I ask the Government to consider one thing, which I am sure they have done, but nevertheless 1 hope that they will consider it again if they have rejected it or been unable to persuade our allies—that to break off diplomatic relations is a weapon to use against states which harbour or encourage terrorists. If diplomatic relations are broken the diplomatic bag does not travel to and fro, and we all know that grave infractions of the law about diplomatic bags have occurred. It would be useful if we could make that easy transit of weapons, and apparently of people sometimes, more difficult. The more difficult terrorists find it to get weapons, and the more difficult they find it to move, the more difficult they will find their terrible tasks.

The White Paper also mentions the problem of overseas aid, and I want to single out one particular case where European co-operation could effect useful changes. Ethiopia is the largest recipient of European aid, mostly food aid. The amount of food aid that is promised, and doubtless will be delivered, at least to the ports of Ethiopia during the coming season will be enough to feed the people who need it to the extent that is considered essential. Unfortunately, whether it will reach them is another question. However, no doubt a lot of it will, and so the arrangements that have so far been made to. feed the starving Ethiopians are satisfactory.

What goes on inside Ethiopia is not satisfactory at all. The resettlement programme is a scandal. No doubt it is necessary, because it is impossible, especially during the late season before the rains start, for people to live in the arid regions from which they are being moved, but it is the way in which that is being done that is so reprehensible. It is said that the camps to which the people are moved have more casualties than the camps or areas from which they came. That is an unsatisfactory state of affairs which could be remedied by example and by our assistance.

The leadership of the Ethiopian Government is at fault. Mr. Mengistu seems to be a most unsatisfactory person. He has done his best to reduce his country to misery, and he does not stop intervening in the affairs of those round him. He sustains a civil war in the Sudan. He was active in Aden when that civil war broke out, and he keeps his own civil war on the boil all the time. He has reduced his country to misery and seems to want to do it to his neighbours as well. We should get together with our allies. I know that Italy has a soft spot for, or a guilty conscience about, Ethiopia—I do not know which—but nevertheless something should be done to try to alter that Government's policies, and Europe working together could do so.

Mr. Colin Moynihan (Lewisham, East)

Does my hon. Friend agree that the steps that have been taken by the international community in Ethiopia to encourage major reforms in the handling of the resettlement programme and the agreement by the Ethiopian Government to put an embargo on further resettlement as from 1 January this year are important moves and that we should monitor closely the success or otherwise of those proposals in assessing the effectiveness of the programme?

Sir Anthony Kershaw

I am grateful to my hon. Friend for that, because he has just come back from Ethiopia, having seen those camps. I am sure that what he says is wise and I hope that it is followed by the countries concerned and by ourselves.

Inside the EEC there is a long list of what at first sight may be thought comparative trivialities, although certainly the common agricultural policy cannot be classed as a triviality. I hope that it will be possible during our presidency to edge that policy along in the right direction. There are, however, one or two bad signs. For example, I notice that we are increasing the price of beet, which takes the place of cane sugar. Europe does not have to grow beet; it is unnecessary. I have a sneaking suspicion that most of the beet in northern Europe is grown only for the partridge shooting. If that were stopped, we would be able to take a great deal more cane sugar from countries which can export nothing else.

I notice also in the introduction to the White Paper that Portugal is being given an exemption to import 75,000 tonnes of cane sugar, but for only five years. What will happen after that? Will the Portuguese be condemned to buy French sugar or German sugar? It is absurd to increase the price of beet, which we do not want, at the expense of people who have nothing else to sell and are in dire straits.

I know that my hon. Friend the Minister of State, as a former Minister of State, Department of Transport, is very much aware of the ridiculous restrictions imposed at frontiers in the European Community. I am told—I may be a little out of date, but I am sure that my hon. Friend will correct me if I am—that it does not take a long time for a lorry to cross the German frontier. It takes about an hour of formality, but the driver must pay 45 deutschmarks—no one knows why.

Dr. Norman A. Godman (Greenock and Port Glasgow)

The Germans want it.

Sir Anthony Kershaw

Yes, but to what end?

The average lorry crossing the French frontier takes one and a half hours to go through the formalities and the driver has to pay a contribution towards the new computer which the French Customs has bought. I should have thought that the French could afford their own computer. I do not understand why each lorry should pay. Occasionally it becomes a tremendous business, with a French Customs officer deciding that goods inside a sealed container are liable to VAT. How does one open a sealed container without destroying it? This causes delays.

The other day one of my constituents took two large lorries to France. A trivial part of the form filling had not been done correctly—a signature or some such detail was omitted—and the driver was allowed, by mistake, to go through the checkpoint at Le Havre. He was pursued by the gendarmerie, arrested and brought back to Le Havre police station. The trucks remained at the side of the road and, in the end, £150,000 worth of machinery was dumped in a wood and he returned to Gloucestershire. That is absurd and should not be allowed.

Getting into Italy is virtually impossible if one is a truck driver. If, by chance, the driver does get in, he has to pay a thumping tax, which is levied, believe it or not, by the local province to pay for the paperwork.

We all know about sheepmeat. We are not entirely without fault in these matters. Of course, we have to certify that French milk coming into Britain is fit to drink. Unfortunately, we take such a long time making up our minds about sending someone to see what is happening that by the time he gets there the milk is indeed not fit to drink. We should, of course, look at our own actions.

Paragraph 6.6 of the White Paper seems to show that there are now or will be opportunities for British coastal shipping to enter continental ports hitherto banned. I am glad to note from paragraph 5.19 that the European Court is considering insurance law, especially in Germany. We expect the decision to be made by the summer. This is a blatant example of discrimination. It is a bit of a cheek for the Germans to buy our insurance companies, yet we cannot buy theirs.

Paragraph 5 is full of points which I hope will be cleared from the agenda during our presidency. Taken one by one they may not look important, but, taken together, they will make Europe a much more economic area. This will enable us to tackle the unemployment problem, to which the hon. Member for Hamilton referred, and the many other difficulties in Europe.

6.3 pm

Mr. J. Enoch Powell (South Down)

In this rather desultory and at times, it appeared, desolate debate, there were signs early on that discussion might centre on the results of the Luxembourg conference and that peculiarly named—it is still peculiar after the Minister's attempted explanation—Single European Act.

We have been assured by the Foreign and Commonwealth Office in its explanation memorandum on the second of the documents before the House: In the United Kingdom any such amendments that is, such amendments as the proposed amendments to the treaty by means of the Single European Act— would be submitted to the house for approval. It is important at this stage that the Government should make it clear what sort of legislative approval this will be. The Minister used different and contradictory adjectives in different parts of her speech. She referred to it first as a "formal opportunity" and then referred to it as a "full opportunity". The difference between the two is crucial.

In 1972 the House made a comprehensive renunciation of its powers—legislative and financial—and of British judicial authority and of the control of the House over policy. It did it on the then basis of the treaty to which we were acceding, but did it only after a most exhaustive examination of a Bill occupying some six months of a parliamentary Session. That Bill itself was limited because it presupposed the terms of the treaty and did not propound them to the House for examination. Nevertheless, the nature of the Bill was such — because of the comprehensive renunciation which it embodied — that during those debates the House was able to examine—or would have been able to examine but for the guillotine which the Liberal party enabled to be imposed—the major features and consequences of the treaty to which we were acceding.

That treaty is being profoundly altered by the proposed new treaty. Many of the aspects of that treaty which were taken for granted as the basis on which the House passed the legislation of 1972 are altered by the proposed Single European Act. It would be wrong if the House of Commons were to give its approval to the new treaty—that is what in effect it is—with a less comprehensive parliamentary procedure than that which was available to it in 1972.

I believe we should insist that the Government make clear in advance what kind of legislation they envisage, whether they are sincere in claiming that it is legislation that will give the House a "full opportunity" of addressing itself to the respects in which the treaty to which we acceded in 1972 is being altered by the Single European Act in matters which affect the House and Britain. I hope that, if we obtain nothing else either in, or as a result of, this debate, we shall bring home to the Government the necessity of being candid well in advance with the House about the nature of the legislative progress to which they will look before the new treaty can be ratified.

Every alteration proposed in the new treaty is an alteration which diminishes the powers of the House. The powers of the House were drastically diminished by the original treaty — that was why we had to have the renunciation embodied in the 1972 Act — but if we examine the changes which would be introduced by the Luxembourg conference, we shall find that in almost every case we confront a further erosion of the powers of the House, which means a further erosion of the opportunity for the British people to influence the policy and the laws under which they live.

Sir Russell Johnston

Does the right hon. Gentleman agree that if powers are eroded one's judgment of the consequences must rest on what the effect is? Does he agree that there is an argument for saying that as a consequence of our membership of the Community we have access to greater powers than if we were not in it?

Mr. Powell

That is the old trick of substituting one meaning of the word "we" for another meaning in successive sentences. I do not dispute that there are those, including the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston)—the hon. Gentleman has made no secret of this—who believe that we would take better decisions and be better off in this country if we in the House had less control and discretion over legislation and Government policies. That is a point of view which can be argued. It is not a point of view that I share, which is why I would like to draw the attention of the House to two specific areas in which the proposed treaty changes will limit in effect the legislative power and authority of the House.

Mr. Hugh Dykes (Harrow, East)

I am grateful to the right hon. Gentleman for giving way on a second occasion.

The right hon. Gentleman always uses the phrase the powers of this House." Would it not be more accurate and more helpful to the nation to describe them as the powers of the Executive within the House? Is this not, in all international comparisons, a parliamentary system in which Parliament is at its weakest in many respects, in comparison with the overriding powers of the Executive, which, in our system, is based on a simple majority system on a minority vote?

Mr. Powell

I am old-fashioned enough to think that one of the functions of this House is to criticise the manner in which the Executive exercises its powers and, by criticising, effectively to limit and control those powers. If the House does not do that, it is not exercising one at any rate of the functions for which it exists.

Another function of the House, which the hon. Member for Harrow, East (Mr. Dykes) may have had in mind, is to entrust the Executive with powers: part of the activity of hon. Members consists in defining the powers which we will concede for use by the Executive. Indeed, in the greatest periods of the power of this House—when it had real power—it was used by the Executive as an arm for creating law which the Executive would be able to use.

In both the respects to which I want to draw the attention of the House, the treaty which is by implication before us will limit the influence, the authority and the opportunities of the House.

The first is the legislative respect. Even with the assistance of the Select Committee on European Legislation chaired by the hon. Member for Newham, South (Mr. Spearing), whose presence we are glad to welcome at a late stage—not as a result of his fault, but because of an unhappy rearrangement of business—it is not easy to be certain as to the consequences of the change in the legislative process which the new treaty will embody. If I have understood it correctly—and there are those who will correct me if I have not—I believe that when the European Parliament—as we are to authorise it in future to be called — proposes amendments and those amendments are adopted by the Commission in a revised proposal submitted to the Council of Ministers, the proposal so submitted ceases to be a proposal requiring unanimity and becomes a proposal that can be dealt with by qualified majority.

Mr. Dykes

indicated assent.

Mr. Powell

I am obliged to have the assurances of the hon. Member for Harrow, East, a careful student of these matters. I seem at any rate to have got it right so far.

Mr. Marlow

rose—

Mr. Powell

I would like to continue without assistance from Northampton at this stage.

If that is so, the opportunity of this House through the Government as represented in the Council to influence and affect legislation is automatically diminished. That must be so as a consequence of the substitution of a qualified majority for unanimity as a result of the adoption by the Commission of amendments initiated by the European Parliament.

That is one of the consequences which were portended when we decided—mistakenly in my view and in the view of a considerable proportion of the House at the time —to agree to a directly elected European Assembly. One could not in the end deny to that Assembly control over both finance and legislation. Of course a rearguard action is being fought, and the so-called co-operation mechanism embodied in the Luxembourg agreement is part of that rearguard action. However, the rearguard action has been lost to the extent that the European Parliament has gained an effective input into Community legislation which automatically reduces the extent to which the House through its scrutiny and other procedures can influence Community legislation.

Mr. Marlow

The right hon. Gentleman will agree with me that he heard the Minister of State say that even in circumstances where unanimity is no longer required Her Majesty's Government will still have a veto in the Council of Ministers.

Mr. Powell

It is true that the Luxembourg compromise is, if I understand it correctly, comprehensive in its application. Nevertheless—and this is relevant to the amendment which has been proposed and which the Government have said they will accept—the powers of scrutiny, of influence and of intervention by this House are necessarily diminished by the procedure which will be followed wherever the Commission accepts amendments put forward by the Parliament. A kind of co-operation is established between the Parliament and the Commission which to that extent aborts the input from this House. Therefore, in legislation, as in other matters, the new treaty will curtail the control of the House.

Mr. Dykes

Is the right hon. Gentleman not really indulging in monumental fantasies in his continuing reiteration of absurd theoretical arguments that have no relevance or reality to modern-day constitutional parliamentary practice? The right hon. Gentleman objects to the real majority, which has to come from a qualified majority system which is developing in the Community, but he accepts a minority—majority system which appears to obtain here. What does the right hon. Gentleman mean when he refers to the House making policy and inputs into the Government? The Executive decides policy, whichever Government are elected. The Executive then bestows that on the House and the Whipping system ensures that it gets through.

Mr. Powell

That is an interesting insight into the mind of one of the most vigorous supporters of the European Economic Community. The hon. Gentleman thinks that the Executive "bestows" on the House the fruits of the exercise of its authority. I believe that the processes of debate, backed by the processes of voting in the House, do influence the information and behaviour of Governments. We do not have to exercise our memories very severely in March 1986 to recall recent examples where the House has, by its reaction and criticism of Government behaviour, brought about alterations in the way in which the Executive behaves. No doubt the hon. Member for Harrow, East regrets that—the hon. Gentleman, after all, wants our Executive to be absorbed into a larger Executive which would be beyond even what he calls the nominal control of this House. However, I will not weary the House further by demonstrating, as I am afraid he enables me progressively to do, how much I dislike and reject his view of the House of Commons and its function.

Another area in which authority—I shall continue to use that notion in the face of the hon. Member for Harrow, East—is effectively withdrawn from this House is that termed political co-operation. One can easily be mistaken about this because if one looks at the terminology it appears to be concerned with a desire for unanimity through consultation. For example, one of the subsections of a proposed clause says: In order to ensure the swift adoption of common positions and the implementation of joint action, the High Contracting Parties shall, as far as possible, refrain from impeding the formation of a consensus and the joint action which this could produce. Of course, under that terminology one is still allowed to dissent; but by an international instrument we shall have bound ourselves as a nation to make every possible endeavour to arrive at common positions and to arrive at them by "swift adoption."

"Common positions" and "swift adoption" are significant terms. In the past 10 years we have had much experience of the operation of political co-operation. It means that the Foreign Secretary has joined his colleagues from the other member states of the European Community and produced a European policy which is promulgated as such and as subsuming the assent of all the member states. Precisely through this process of political co-operation, the Foreign Secretary's and the Government's relationship with the House is profoundly altered in reality. The Foreign Secretary comes to the House after the event and says, "As in duty bound to attempt, I have concurred with my colleagues in the rest of the Community to achieve a European consensus and here is the European policy that we have produced." It is far more difficult for Members of this House to criticise a foreign policy decision when it can be presented as part of a collective European decision.

Sir Anthony Kershaw

A short time ago the Danish Parliament did exactly that which the right hon. Gentleman says is impossible here.

Mr. Powell

The Danes have a different arrangement, which I do not necessarily commend, in relation to European legislation and policy. In any case, they recently found themselves overruled by a popular vote into compliance with the very procedures that I am criticising.

The mere fact that the process is consultative and voluntary rather than binding in form does not deprive it of the power to diminish the input of this Assembly and of public opinion in this country into the formation of our foreign policy. The foreign policy of the United Kingdom, adopted by the United Kingdom as such, has to rest, and be seen to rest, upon the consent of the House of Commons —if necessary emerging out of debate. When it is part of a European foreign policy under the political cooperation arrangements to which we are binding ourselves by treaty, it is possible for a Government effectively to escape from all those pressures and from the necessity to stand upon the common will of this House as representing the electorate of this country.

I therefore stress the necessity not to be distracted by the apparently voluntary and optional form of the wording. To bind oneself by international agreement to arrive if possible at a consensus with 11 or 12 other states is a major derogation from the responsibility of the Executive to this House. In this context, it is right to draw attention to a fact to which the Select Committee referred in the context of the effect of this enlargement of the community on the relative position of the United Kingdom within the Community. On page 10 of its first special report the Select Committee made three points:

1. "(i) the position of the Big Four (France, Germany, Italy and the United Kingdom) has been reduced;
2. (ii) two members of the Big Four do not have, by themselves, a blocking power;
3. (iii) the new Mediterranean block (Greece, Italy, Portugal and Spain) can exercise a major influence."

In the past 12 months there has been a real shift of power inside the institutions of the European Economic Community. When deciding, as I hope that we shall be able to decide in due course in due legislative form, whether the House accepts the new treaty for a Single European Act, we must bear in mind the real invasion that it represents into the existing relationship between Parliament, the Executive and the institutions of the European Economic Community. I hope, at any rate, that this debate will not conclude until we have secured from the Government a specific undertaking that the legislative process will enable these matters to be separately explored, separately debated and separately decided.

6.25 pm

Mr. Michael Knowles (Nottingham, East)

I was heartened—as, I suspect, were others although I doubt whether they included the right hon. Member for South Down (Mr. Powell)—to read the comment of my right hon. and learned Friend the Foreign Secretary that the Community is not just a forum in which to defend national interests but a forge in which to fashion the means of achieving common objectives. Those of us who support the Community will endorse that. Our only question is why we were not there 20 years ago saying exactly that and fashioning the means to carry out that policy.

I wish to address much the same problems as the right hon. Member for South Down addressed, although my views differ somewhat from his. The White Paper on developments in the European Community, like others before it, suggests that we are groping towards agreement but that there is no positive means of getting action. One can see both opportunities and dangers ahead for parliamentary scrutiny, particularly with the Single European Act. One of our problems as a national Parliament was created quite deliberately in a way that marks us out from, I believe, all other members of the Community, in that we have no institutional link between this House and the European Parliament. Whenever such a link is suggested, it is opposed in all parts of the House. Labour Members are always very much against it, but I suspect that many Conservatives who take the same view are content to hide behind the opposition put up by the Labour party.

There is no institutional link but we kid ourselves if we suppose that the process that we use in this House gives us any real influence. I am honoured to be a member of the Select Committee on European Legislation. The Chairman, too, is present in the Chamber. In fact, however, because we cannot consider anything until we actually receive a piece of paper, by the time we discuss an issue and it is debated in the House things have gone so far down the road that we cannot influence them. If we wish to influence matters in the European Community, we must get in at an earlier stage, as a House and as a democratic institution. The bureaucratic link between the Commission and Whitehall is well built in, with constant contacts and plane flights, but if any Member of this House wishes to ring a Member of the European Parliament he has to pay for the call himself.

This House is effectively chopped off from the European Parliament, and that is no accident. The Select Committee therefore cannot act effectively. Indeed, it is designed not to act effectively. Yet any suggestion that its mandate should be widened is constantly resisted by the Executive because that would shrink the power of the Executive. That is the normal interplay of forces. We have a powerful bureaucratic link, but a democratic deficit between this Parliament and the European Parliament. We have been so jealous of our rights and prerogatives that democratic control of any kind over these decisions is being lost. This is a problem to which we must address ourselves—we need to be informed much earlier. The House of Lords is of more use to Parliament than are its Select Committees.

On 27 January, the House of Lords had an interesting debate on its report on the external competence of the European Communities. The debate contained serious implications which the House has not picked up. The fact that the Community can sign an external treaty means that, within the Community, the process, in terms of law, operates backwards. It overrides laws passed by this House or any other national legislature. The attention of the House was not drawn to that. There is no way in which this House can pick that fact up from the Select Committee procedure, and indeed it is not designed to pick it up. In this case the House of Lords is doing the job that we should be doing.

There is no point in our being jealous and moaning continuously about the European Parliament if we will not do the democratic job. It is my view that someone must do the job. If we fudge the job, then let the European Parliament do it. However, think we could and should do the job.

Mr. Nigel Spearing (Newham, South)

I think there is a slight misunderstanding. Although I agree that the reports from another place are often informative, surely there is nothing to prevent the appropriate Committee— the Select Committee or departmental Committee—in the House from fulfilling that parallel objective on merit if it so wishes. For instance, the hon. Member for Stroud (Sir A. Kershaw) and his Committee could if they wished look at the merits of the Single European Act that we are discussing. Any hon. Member may take part in the debates of the Select Committee on European Legislation and Standing Committees considering European documents.

Mr. Knowles

We know that that does not happen. That is the theory, not the practice.

I believe we need a better system. Some people have suggested a Grand Committee system. I am not enough of a parliamentary expert to know whether that is the answer, but the present system does not work and certainly a job which needs to be done is not being done. We must find a way of doing it. If this is not done, the House will lose power not to the European Parliament but to the Executive —somewhere between Whitehall and the Commission. That is the reality and that is what I oppose.

We shall soon assume the Presidency and I suspect that it will pose certain problems for Ministers. With the collapse of the dollar, there will be a great pressure on the CAP, to which an enormous part of the budget is still devoted. I suspect—I hope that I have to eat my words —that before the end of the year requests will be put before us for more money. It will be in some disguise, but it will be a request for money. The VAT increase of 1.4 per cent. will not take the strain.

We must address ourselves to the central problems and avoid fudging the issue. Is there a proper system of control? How is the Council of Ministers supposed to operate? The Council is sometimes treated as an intergovernmental conference or just as a sounding board for national disputes. At other times it is seen as the engine of the Community, which will push things along. It is sometimes viewed as a legislative body, but if it is I think it is the only one in the democratic world that meets in secret the whole time.

As we are debating the Single European Act, this is the right time to consider how the system operates. We are a member of the Community and we should stay a member and make it work effectively. That means that there must be great changes. There must be changes to the Council, to the Commission, and to the European Parliament. This House has to examine how it is carrying out its mandate of democratic control in this area. I do not believe that we are fulfilling that function.

6.34 pm

Mr. Eric Deakins (Walthamstow)

The importance of a parliamentary debate must not be measured by attendance at the debate. There have been many occasions in parliamentary history when there has been a low attendance at debates on matters of great importance.

I agree with a number of the comments made by the hon. Member for Nottingham, East (Mr. Knowles). Although we disagree fundamentally about progress in the EEC and Britain's role in it, I agree about the legislative role of the House. I applaud his work and the work of my hon. Friend the Member for Newham, South (Mr. Spearing) in the Select Committee on European Legislation.

This is an all-embracing debate. My hon. Friend the Member for Hamilton (Mr. Robertson) mentioned unemployment, social policy, and so on. The hon. Member for Stroud (Sir A. Kershaw) raised a number of issues which are mentioned in the six-monthly report. There is a danger that we shall ramble on from one subject to another without a coherent theme. I think that the theme pursued by the hon. Member for Nottingham, East is important, and I shall return to it later. However, I wish to concentrate on three areas where things are going wrong and which carry serious future implications for the House and the country. Those issues are mentioned in the six-monthly report. The first issue is the common agricultural policy, the second is the Single European Act and the third is the continuing dispute over finance between the Assembly and the Council.

With regard to the CAP, I draw the attention of the House to paragraph 1.10 of the six-monthly report. That paragraph relates to what was said by the Minister of Agriculture, Fisheries and Food in a written answer last year but which was never followed up. Last year, the House will recall that in the price fixing for agricultural commodities, in particular cereals, the Germans used the veto in the Council of Ministers to prevent cereal prices to farmers being reduced. That veto stood. However, the Commission, in its wisdom, subsequently managing the market in the absence of the Council's agreement, reduced cereal prices to the level to which they would have been reduced had the veto not been applied. That is mentioned in paragraphs 1.10 and 4.1 of the report.

Thus, the Commission has allocated to itself powers which are only for the Council. The Commission has no authority to change agricultural prices once they have been agreed by the Council. In the absence of the Council's agreement to change the previous year's agricultural prices for a particular commodity, the previous year's prices apply. Therefore, the cereal prices should not have been reduced. I believe they should have been reduced, but that is a separate issue. It is a matter of principle as to which body has the power to reduce the prices. I am surprised that hon. Members have not pursued the Minister and the Government on this issue. We have agreed, in default, to give extra powers to the Commission which are not laid down in the treaty of Rome, nor are they to be laid down in the Single European Act or in any other legislative provision.

It is a fact, within the memories of all hon. Members, that in the past year the argument for increasing the VAT contribution to 1.4 per cent. and subsequently 1.6 per cent. rested on an assurance and undertaking by the Government that that was all very well, but as a quid pro quo there would be strict control over Community expenditure on the CAP by the budget mechanism of financial guidelines. That has gone ahead and everyone has accepted it. Some of us had doubts about the validity of the financial guidelines, but at least we were prepared to give them a chance. The Minister may not read every written answer in Hansard, but I do every weekend, and it is amazing what one learns. I have to inform the House that the Minister of Agriculture, Fisheries and Food, in a written answer on 26 February, when talking about the agricultural price proposals put forward for the current year by the European Commission and the Council, said: I commended the Commission's determination to place the main emphasis on action through price, but I expressed concern about the proposal to exceed the financial guideline for agricultural expenditure. I made clear my very strong objections in particular to those aspects of the proposals."—[Official Report, 26 February 1986; Vol. 92, c. 549.] I shall not bore the House with those proposals, but I draw attention to the significance of the financial guideline. The Minister of Agriculture, Fisheries and Food is now telling the House that, although he disagrees with it, the Commission, which was supposed to have agreed to be the guardian of the financial guidelines, has now put forward price proposals for agricultural products for the current year which "exceed"—his own word—the financial guideline. If that is not a devastating admission on the part of the Government, I do not know what is. It should give us all cause for concern, whatever our views on the EEC.

The Minister "expressed concern" about the financial guideline being exceeded, but he used stronger language when talking about the possibility of income support for some small farmers—he strongly objected. Why did the Minister not object to the major issue of exceeding the financial guideline? He could have objected to other things —one has no objection to that—but he, or his civil servants, must have chosen the words of his answer very carefully. I hope that the answer does not mean that the Government are now backtracking on their commitment to ensure that the Council of Ministers observes the financial guideline.

Paragraph 3.10 of the White Paper refers to the intergovernmental agreement which gave the Community extra money by way of non-repayable advances, which are outside the scope of the treaties. Those advances are not included in the treaty mechanism procedure; they are agreed by a special Council meeting.

I am sure that my hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) will stress in his winding-up speech that more intergovernmental agreements will come this year. I challenge the Minister to deny that. My concern is not merely that more money will be allocated to the Community than was put forward in the budget discussion, but that it will weaken our case before the European Court later this year in the dispute between the Assembly and the Council. The prospect of further intergovernmental agreements to raise extra money to meet commitments and appropriations under the EEC budget will undermine our case.

If the Minister feels that there is some doubt about that, I refer her to the legal submission on behalf of the United Kingdom Government to the European Court, which was put in the Library at the end of January. It is an entirely legal submission. Paragraph 21 and following paragraphs give the view of the Assembly and say why it disagrees with the Council. One of the Assembly's arguments against the Council's budget and in favour of its own illegal budget is that the draft budget as adopted by the Council does not make adequate provision for existing commitments.

The Assembly's case for an illegal budget is likely to be supported by the Government having to come to the House later this year for extra money in 1986. I beg the Minister to take that point on board. I am glad to see the Minister of State, Treasury present as this matter is important for our future relations with the Community and for relations between the Assembly and the Council, which have a spin-off for the House.

The Single European Act represents a defeat for the Government. That is admitted in the White Paper, paragraph 2.7 of which says: [On the second and third points the European council decided by unprecedented majority vote to convene an intergovernmental conference to draw up a treaty]". We know from what the Prime Minister has said that she did not want any treaty amendments or a Single European Act, and we must assume that she was speaking for the Government as a whole. The Act was therefore a defeat for the Government. Since June, the Government have been involved in a part public relations and part damage limitation exercise. Once the intergovernmental conference was convened, the federalists in Italy, Holland and elsewhere, the Commission and the Assembly tried to get real amendments to the basic treaties which moved in a federalist direction. The Select Committee has done the House a service by drawing attention to the fact that, although we have limited the damage, as the right hon. Member for South Down (Mr. Powell) said, there have been incursions into the sovereignty of the House as a result of that relatively modest—so its supporters would claim—Single European Act.

The conflict between the Assembly and the House about the Assembly's legislative powers is merely postponed, but the Assembly has been encouraged by the Single European Act. The Assembly, thinking itself even more democratic than national Parliaments, will, given an inch, try to take much more. In due course, there will be further incursions into national sovereignty. The Assembly is being backed by the Commission. One of the safeguards mentioned in the final Act is removed by the fact that the Commission may accept amendments to a Council legislative proposal pushed through by the Assembly.

Of course, the Commission wants the Assembly to have more power and national Parliaments to have less, so it will always accept the Assembly's amendments. That will pose the dilemma, which the right hon. Member for South Down mentioned, about the powers of the House and those of the Council when it comes to rejecting, by qualified majority, the amended proposals put forward by the Assembly and the Commission. This is an additional power to the Assembly, courtesy of the Commission and of the Council having to work by qualified majority.

The major battle between the Assembly and this Parliament is still to be fought. These are preliminary skirmishes, but they are significant. If we do not stop the rot now, when considering the Single European Act, we shall have more incursions.

That brings me to the budget dispute, which has not received much publicity in the House or outside. assure the House that, as far as I can see, it is of the utmost significance in terms of relations between Community institutions and the House of Commons and the Government. The pretensions of the Assembly for financial control may not be all that well known. If not, I recommend hon. Members to read a publication of the European Assembly entitled "Effective Parliamentary Control of European Finances," which is basically a foreword from the President and an introduction by the Chairman of the Committee on Budgetary Control. There are many suggestions in it. From the foreword of this year's report—which may be an annual report, I do not know—the President, Pierre Pflimlin, says: The need for democratic control of Community revenue and expenditure underlies the increase in the European Parliament's budgetary powers brought about by the revisions of the Treaties of Paris and Rome in 1970 and 1975. Therefore, it is quite clear that the Assembly is using this dispute over the 1986 budget as a test case for its powers. That is why we in this House must take it very seriously.

Sir Russell Johnston

Does the hon. Gentleman find it interesting that this view is expressed by the President of the Parliament, not as a party politician but as someone speaking for the whole Parliament? That is something we seldom get in the same way in this House.

Mr. Deakins

I accept that the President was purporting to speak, and may well have been speaking for all I know, on behalf of 100 per cent. of the members of the European Assembly. That does not surprise me in the least, as, with the possible exception of a few British Labour members—I am not making a party political point—the vast majority of members of the European Assembly are federalist at heart. They want to see the European Assembly in complete control of the legislative procedures in the Community and of the budgetary procedures and so on. It is their right to demand that and it is our right to resist—certainly those of us who have the interests of the House at heart.

I have quoted the President, but I now wish to point out two features of the 1986 budget dispute which have perhaps gone relatively unnoticed. The first is on expenditure. Fortunately, that is mentioned in the legal submission against the illegal budget made by this country to the European Court. On expenditure, the Assembly is now ignoring the maximum rate of increase on non-obligatory expenditure and, for the first time, it is also trying to increase obligatory expenditure. I ask hon. Members to think seriously about the implications of the second point, if it is upheld by the European Court. It will give the European Assembly the right to increase expenditure on the common agricultural policy. In the past year the Assembly has passed at least one resolution saying that not enough money was being spent on the common agricultural policy.

That is bad enough, but worse is to come. There is an issue that has gone unnoticed in the legal submission, and I should be grateful if the Minister would give us some assurance that it will at least be looked at. I cannot expect her to answer it in the space of a few hours because it may need to be looked at by legal experts. The Assembly has put forward a balanced budget for 1986. The budget which it had rejected by the Council, the November budget, was also a balanced budget. As the Assembly had increased expenditure in its illegal budget, I was at a loss to know what happened on the income side. Therefore, I tabled a question to the Chancellor of the Exchequer. The reply came from the Minister of State, Treasury, who is present. I will not bore the House by reading the details, but he was referring to the Assembly's budget. He said: Within the 1.4 per cent. VAT ceiling, the amount of VAT own resources at the uniform rate was increased in the adopted budget".—[Official Report, 27 February 1986; Vol. 92, c. 691.] For the first time, the Assembly has sought to arrogate to itself the power to increase taxation. That has not happened before. I know that we are opposed to the illegal budget, and if it is thrown out by the European Court, as we hope, the issue will not arise. However, I want to put down a marker, and I think that the House would also want to do so, because until now the Assembly has been trying to increase expenditure but has done nothing about taxation. In the illegal budget — as we claim in the House — it has tried to increase, and has increased, expenditure. That expenditure will be financed by a revenue increase which will not have been approved by the Council of Ministers. I need hardly say what the implications of that will be if the illegal budget is upheld by the European Court towards the end of this year.

Mr. Spearing

I have been following what my hon. Friend says with great interest, particularly in relation to the question he asked the Chancellor of the Exchequer because it had escaped my attention. Is he saying that, irrespective of the court's judgment on the legality or otherwise of the Assembly's budget, the Assembly's motion will increase revenue? Surely in terms of the treaty of Rome, that was not within its competence. Had there been a Table Office, such a motion would have been ruled ultra vires.

Mr. Deakins

I hope that my hon. Friend will forgive me. I agree with his point and will come back to it.

On the national legal action which is now being taken by the Government against the Assembly—the Council of Ministers is also taking action and the two actions are running in parallel—one has to accept that there is no machinery in the treaty of Rome to curb the actions or the pretensions of the Assembly. That is the fault of the founders of the treaty of Rome. I think that there is such machinery in article 37 of the European Coal and Steel Community treaty, which is now merged with the other two basic treaties into a single uniform treaty for the Community. The Assembly is trying something on. I am not convinced that the court will not try to help it along that particular path.

The Assembly is claiming increased budgetary powers, but in the treaty of Rome there does not seem to be any direct provision for the Court of Justice to get at the Assembly for exceeding powers which are granted to it in the treaty of Rome. I believe that that was a mistake by the EEC states in 1957 and that mistake has been repeated in the latest treaty amendments in the Single European Act. There is nothing in the Act which would give the Council a proper power to take the Assembly to the European Court for abusing or trying to exceed the new powers which have been given to it in the Single European Act.

I read with great interest the United Kingdom submission to the court. I think that it put a strong case. It is obviously cogent and well argued. However, I have two questions, if not for the Minister who will reply, to be taken on board by the appropriate Ministers. I have had correspondence with the Prime Minister about these issues. First, why are we not taking action, in addition to article 173 of the treaty of Rome—it does not directly mention the Assembly but there is at least a legal argument for saying that by analogy the Assembly is caught by that provision—under article 177, paragraphs (a) and (b)?

It might help the House if I quote briefly from article 177: The Court of Justice shall have jurisdiction to give preliminary rulings concerning:

1. (a) the interpretation of this Treaty;
2. (b) the validity and interpretation of Acts of the institutions of the Community".

Surely, an illegal budget by the Assembly is, at least in part, a matter of interpretation of the treaty. I am astonished that the Law Officers, the Government in their wisdom, and the legal advisers of the Foreign Office have not thought fit to ensure that our case runs on two lines, one under article 173 and the other under article 177. It is still not too late to put in a separate submission and I hope that the Government will consider that.

Why have we not put anything in the legal submission on the Assembly claim, which I mentioned earlier, to have tax-gathering powers — powers over increasing the revenue of the Communities by increasing the VAT contributions within the 1.4 per cent. ceiling? The Assembly has no such powers under any of the basic treaties, so where does it get the power from? As it does not have the power, it should be possible to undermine its position by an appropriate reference to the court.

I am not a legal expert, but in my view, if the Assembly had wanted to increase expenditure and there had been a disagreement, the illegal budget should have been returned to the Council, and if the Council agreed with the extra expenditure that the Assembly wanted, it would have had the right to say, "We shall increase the revenue to make sure that we have a balanced budget, which we have to do." That has not happened. The Council is at fault. I have not seen its submission to the court yet, but I hope that it will also be made available to hon. Members. We might be able to offer some useful suggestions through our own Government as to the line that the Council might take, because, on the issue of authorising extra taxation, there cannot be any two ways about it. Either the Assembly or the Council will have that power. It cannot be shared between two institutions of the Community, both of which have democratic pretensions. I know which one most hon. Members will support—the Council.

We must shoot down the Assembly's case on that point by the end of the year. I am emphasising this point so much because I am not yet convinced that we have taken it on board in our legal submission. I do not expect a reply now on such an important matter, but I hope that the Minister will take it away and come back to the House with an answer in due course.

7.1 pm

Sir Anthony Meyer (Clwyd, North-West)

I shall return to budgetary discipline, which was so exhaustively dealt with by the hon. Member for Walthamstow (Mr. Deakins). It well illustrates the difficulty that the Government will find themselves in through rash boasts of their ability to contain increases in budgetary expenditure.

Like every speech that the right hon. Member for South Down (Mr. Powell) makes in debates on these matters, his speech today was brilliant and lucid. It was, at every stage, introvertible. At the end he had succeeded in creating an impossible object, which one sometimes sees in ingenious drawings. It was an impossible object of great terror to him and to those who feel like him. an impossible object that I and those who feel like me may marvel at; it was an impossible object none the less. It was the impossible object of a Community that was so organised that it could control its own destiny, sweep aside the will of the House and vote itself the money that it wanted to create the things that it wanted. Alas, it does not exist. I am sure that the right hon. Gentleman, in his heart of hearts, knows that it does not exist and rejoices thereat.

On these occasions, I usually find myself defending the Government against hon. Members on both sides of the House who want to stop the world and get off and who never lack for plausible reasons why we should all do so. I should be particularly glad to be able to do so today, with my hon. Friend the Minister of State at the Dispatch Box, because I know that she, like her predecessor, my right hon. and learned Friend the Member for Edinburgh, Pentlands (Mr. Rifkind) who was sitting in the Chamber a few moments ago, is more aware than almost any other Minister of the vital need for this country to exploit to the full the opportunities that membership of the Community offers.

However, it is not always too easy to defend a Government who, apart from four or five Ministers, are so half-hearted, so full of qualifications, reservations and withdrawals in their own defence, and who are so reluctant to proclaim the advantages that may arise for our country through a policy of full-hearted participation in a European Community that really works. The Government are far too ready to make concessions to their adversaries in that matter. So determined are they to avoid any charge of weakening in their defence of the right of national veto that they have, as the report on the activities of the six months in 1985 makes plain, contributed towards a further enfeeblement of the decision-making powers of the Community which, now that it has grown to a Community of 12, urgently needs to strengthen its decision-making capacity if it is not to relapse into total paralysis.

So keen are the Government to parade their zeal for budget-cutting that they are raising a series of hopes of being able to contain increases in the European Community budget. The fall in the value of the dollar and the consequent huge gap, which is becoming wider, between Community food prices and food prices in the rest of the world will impose a colossal strain on the budget of the Community, and it will be increasingly difficult to contain the increases within the ceiling that has been set.

Of course, the merchants of gloom are right. They are nearly always right. It will not be possible to reform the common agricultural policy because those same merchants of gloom refuse to consent to the improvements in decision taking which alone would enable the reforms to be made. Budgetary discipline will break down precisely because the unreformable common agriculture policy will run out of control.

However, I do not want to speak on that matter. I want to talk about developments in industrial policy in Europe in the period under review. There were no developments in industrial policy in the period under review. Here at home there were two tremendous industrial issues. At any rate, they were tremendous in the political sense. Those two issues were Westland and British Leyland. If there is to be such a thing as European industrial policy—that is to say, at its very lowest, a conscious attempt by European Governments to ensure the survival of some part of their manufacturing industry and the jobs that go with it by encouraging closer co-operation among European firms to enable them to withstand United States and far east competition—surely there should have been a credible European alternative to an American takeover of Westland and British Leyland.

Even so, the American solution might very well have been the more attractive choice for workers, shareholders and even the nation. However, despite the efforts of my right hon. Friend the Member for Henley (Mr. Heseltine), there was no credible European alternative for Westland. The total lack of interest by Her Majesty's Government and the short-sighted greed of the European helicopter manufacturers saw to that.

As for British Leyland, successive Governments of both parties who for years propped it up with large subsidies have systematically neglected to use that leverage to push it into a European partnership of near-equals and have contented themselves with allowing British Leyland to become a broken-winded Trojan horse to smuggle Japanese cars into the Common Market.

I do not go all the way with those of my hon. Friends who say that Land Rover must remain British at all costs, still less the rest of BL. However, if Land Rover is to be used as a sweetener to get General Motors to swallow the other more gristly bits of BL, why on earth was no attempt made to put together a similar dowry to tempt a European bridegroom? Once again, the American solution may well turn out to be the best for all concerned in the end, but why was there no choice? Thus, the last British helicopter facility, and the last British motor manufacturer, are passing out of British hands and straight into American hands, with no attempt by the British Government, or, for that matter, the other Governments in the Community, to devise a short or long-term policy to strengthen European helicopter capacity or consolidate European car manufacturing industry.

If what has happened in helicopters and motor cars has not happened in civil aircraft, it is precious little thanks to British Governments of either party, and no thanks whatever to British Airways. It is due solely to the foresight of Hawker Siddeley, which put its money into European Airbus, a family of aircraft that has been a big success, despite the British Government. Now, here too, continued British participation in further development is at risk because the Treasury is holding back on the launch aid that is necessary to keep British Aerospace in the later stages of the project.

There has been a series of sins of omission, each one excusable and possibly justifiable on its own but adding up to a culpable failure to have any coherent strategy to defend British industry and jobs. Such a strategy must have as its main element—I do not say its sole element because often there will be partnership legitimately with Japanese or American firms—the use of the vast economic potential of the European market.

The Government have two answers to the charges of negligence. The first is that each case should be judged on its merits. I am not saying that each industry needs to find a European solution to its problems. Nor can it make sense to ignore altogether the fact that we are a member of the European Community and that the mechanism of cooperation and the habit of working together on projects are already there, waning though they may be for lack of Government interest. To say that each case must be judged on its merits is another way of saying that we have no policy.

The other answer is to say that things must be left to the play of the free market, the judgment of the stock exchange and so on. That was the answer given in the Westland case. It is manifest piffle. What possible free market can there be in the technologically advanced industries which are defence-related when national Governments are the only purchasers?

Fortunately, the Government do not believe their own nonsense; they use their purchasing power to exert a British preference, very understandably, in arms purchases. All Governments in the European Community are in the same business of using their purchasing power to favour their own industry. In 1982, the last year for which figures are available, the United Kingdom spent no less than 98.3 per cent. of Government cash on equipment made within our own borders. The 1.7 per cent. left over is not much with which to encourage any joint European venture but it is at least better than the 0.3 per cent. left over by the Germans, the 0.09 per cent. left over by the French, or the nil per cent. left over by the Italians, every penny of whose procurement expenditure went on goods made within the Italian frontier.

All the political pressures in this Parliament, as in every other European national Parliament, will be exerted in support by a "buy national" policy. There are no votes in European co-operation; it just happens to be necessary for industrial survival. Not only do Governments vitiate, by blatantly protectionist policies in public procurement, the free markets to which they claim to be attached, but their attitude towards the completion of a single market in Europe, which in itself or by itself could do a lot to sustain a competitive European industrial base, is all too reminiscent of Arthur Clough's version of the sixth commandment:

Thou shalt not kill; but need'st not strive Officiously to keep alive. We British complain about German, French and Italian frontier delays, with good reason, but we all know how effectively Her Majesty's Customs manages to hold things up at our sea ports and with what derision it treats the notion of a green customs channel. It looks as if it will shortly be transferring its energies to ensuring that after the Channel tunnel is built it will take longer to get from London to Paris by train than it does at present by ferry.

I hope that the Liberal party will not offer itself as the champion of effective European industrial policy. The only Liberal voices that we heard during the whole Westland affair were those of the two hon. Members who had a direct constituency interest in a quick sell-out to the Americans. I am still waiting to hear proposals from the Liberal party for a thought-out European solution for the future of British Leyland. We know that, with the sole exception of the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston), who is an invariable attender at and participant in debates—he is the European policy of the Liberal party—the party is now giving all its attention to more electorally fashionable topics.

As for the Labour party, it is still officially committed to taking Britain out of the European Community.

Mr. Foulkes

No, we are not.

Sir Anthony Meyer

We are not sure about that. Although there may be legitimate doubts as to whether the Labour party means to take us out of the European Community, and whether it means that more than any of the other things it says, there is no doubt that the Labour party is still the same narrow, insular, suspicious party that it always has been. The hon. Member for Hamilton (Mr. Robertson) made a fair fist of something that sounded like a European speech. That was because none of his minders was present apart from the hon. Member for Walthamstow, but he is so amiable that I do not think he would strike fear into anyone's heart.

Only a Conservative Government can give the urgently needed new impulse to the evolution of an industrial policy which will enable Europe to remain an industrial society well into the next century.

Mr. Foulkes

The hon. Gentleman has said that only a Conservative Government can give such impetus. It is on public record that he wants a change in the leadership of the Government. Since we know that the Prime Minister is not the most enthusiastic European, is that one of the reasons why he wants a change in leadership? Does he want to make sure that the initiative he is talking about takes place?

Sir Anthony Meyer

I want to make sure that the policies of my right hon. Friend are successfully defended at the next general election. My right hon. Friend may be the person best qualified to defend her own great European achievements. As to my right hon. Friend's commitment to the European idea, I do not see how any impartial observer could question the depth of her attachment to the concept.

In the effort to ensure that Europe will remain an industrial society, we have a start of sorts in the EUREKA project—not, I fear, a British initiative, although it should have been. It covers only a tiny number of projects in the most advanced area of technology. It will not help us to keep our steel industry, our car industry or our aircraft industry, but we cannot keep those going by our own unaided efforts. We must work more closely with our European partners to create the conditions in which our industries can survive. I look to this Government to get on with it. It would be no use looking to any other.

7.17 pm

Sir Russell Johnston (Inverness, Nairn and Lochaber)

It is a pleasure to follow the hon. Member for Clwyd, North-West (Sir A. Meyer) whose courageous consistency in defence of the ideals of the European Community through fair weather and foul must attract general respect. I say that despite the somewhat limp slap on the hand which he felt obliged to give to the Liberal party.

It is also a great pleasure to welcome to the six monthly "take note" debates the Minister of State, the hon. Member for Wallasey (Mrs. Chalker). If it is not an embarrassment to her in her absence, I must say that I have always found her an exceptionally fair-minded Minister, not given to being dogmatic, but willing to listen—which cannot be said of all Ministers. Her arrival on the European scene will enhance the Government's contribution. We could do with more people with her engaging, intelligent frankness. I say that unreservedly.

In these debates we ask ourselves where we are in the Community and where we are going. An optimistic view, which is becoming fashionable, is that not only the Government but the great official structures, such as the Foreign Office, the Treasury and the Department of Trade and Industry, think that we are making progress, that we must make more progress and that there is movement and a more positive attitude.

One gets a taste of this in the first paragraph of the White Paper, which states: The enlargement negotiations were completed and the Spanish and Portuguese Accession Treaty signed. Agreement was reached on the new own resources decision embodying the budgetary corrective mechanism for the United Kingdom. With these long-standing issues resolved the Community was able to give greater attention to its future development and in particular to institutional reform and better decision-making. More than anything else, that changed attitude was enshrined in the paper presented by the Prime Minister to the Fontainebleau European Council in June 1984. Many of us felt that the hon. Member for Harrow, East (Mr. Dykes)—I am sorry that he has left the Chamber—had written that document in secret and that its publication was to be the precursor of his meteoric rise to office. Sadly, that did not happen.

It was certainly a positive document. I am surprised at how few hon. Members have read it. I strongly recommend it. It had the most positive tone of any document produced by any United Kingdom Government since the halcyon days of the right hon. Member for Old Bexley and Sidcup (Mr. Heath). Indeed, it will make an interesting speculation for future political historians whether, had the right hon. Gentleman won the 1974 election, our path into Europe would have been very different and whether we would have ridden the oil crisis that coincided with our entry quite differently. The pro-European mood was certainly there, as the 1975 referendum demonstrated, but thereafter it was steadily dissipated, first by an unenthusiastic Labour party and secondly by a very nationalistic lady.

What is now the status of the Fontainebleau paper? It was quite at variance with the spirit of the Fontainebleau paper—first, on institutions—that we should ally ourselves with Denmark and Greece in making reservations on the Dooge report. That is referred to in paragraph 2.6 of the White Paper, when the present Secretary of State for Scotland had the job of chumming up with Mr. Papandreou and the Danish representatives. It was also at variance with the spirit of Fontainebleau that, in making the argument for budgetary adjustment to take account of the United Kingdom's continuing economic decline and the GNP relative to other members, we should simply make a United Kingdom case without establishing this in a Community frame to take lasting account of the problems of other countries. For example, Portugal was in exactly the same position, but from an even lower economic base.

I also suggest that in our appointments to the Commission we gave no evidence of a wish to promote United Kingdom politicians of the first rank, far less those with enthusiasm for the institution that they were joining. In parenthesis, let me record that I very much regret the departure of Ivor Richard, who was beginning to do a very good job.

I again ask what the status now is of the Fontainebleau document, and I hope that the Minister will say something about it in his reply. I also hope that he has read it, studied it and agreed with it.

The Luxembourg meeting took place after the publication of the White Paper, but, even if the Government went along with the conclusions of the Luxembourg agreement and prised themselves apart from Denmark and Greece, their role was one of brake, not accelerator, and the vision one saw in the Fontainebleau agreement was surpressed.

In passing, I entirely agree with the Minister of State and am pleased with the result of the Danish referendum. I congratulate the various forces in Denmark on their success, particularly my political friends in Venstre.

Over the years, there have been a variety of approaches to reconciling the enthusiastic call of the Six with the others who joined later—who have always been a bit difficult, with the possible exception of Ireland, which has managed to get quite a bit out of it. In 1974, Socialist Willy Brandt coined the idea of a two-speed Community, and the Liberal Ralf Dahrendorf afterwards came up with the idea of an a la carte Community, although that had many federal connotations. The new French President of the Commission, Jacques Delors, was the variable geometry man. They have all been trying to find a way of reconciling those two problems.

Although the decision-making process was approved in Luxembourg, it must still be put to the test of vested interests. I was not terribly encouraged by what the Minister of State said. She said that our special interests were protected, and we all know the result of that. She also said that the Luxembourg compromise holds, but what happens then? The only direct thing that she said was that we will decide things for ourselves. That did not encourage me to think that the Government were of a mood to go in for majority decision making.

Even if all this works, we shall thereafter need stronger mechanisms for regional regeneration and for dealing with changing technology. The hon. Member for Hamilton (Mr. Robertson) spoke about this, and he was quite right.

Mr. William Cash (Stafford)

I take it that the hon. Gentleman is speaking on behalf of his party. Does the leader of the SDP agree with him on majority voting in all material respects?

Sir Russell Johnston

The leader of the SDP and myself have a very amicable relationship—

Mr. Cash

Will the hon. Gentleman answer my question? He will appreciate that this is central to the development of the European Parliament and the Community in the context of the aspirations of the alliance in a couple of years time. Therefore, it is important for the nation to know where the alliance stands on this very important question.

Sir Russell Johnston

If the hon. Gentleman wants me to answer his questions, he should oblige me by not interrupting before I have got through my preamble.

The Liberal and Social Democratic parties produced a joint programme for the European elections that dealt with majority voting. We stated our position quite clearly, and that is the position that I have just enunciated.

The Government's continued obstruction to an increase in the powers of the funding of the regional and social funds is difficult to understand. I have remarked before that I will never forget the enlightened first speech of my right hon. Friend the Member for Glasgow, Hillhead (Mr. Jenkins) as President of the European Commission in Luxembourg, to which I listened as a member of the European Parliament. His central theme was the increasing divergence between the magic square of Hamburg, the Ruhr, Paris and London, and the peripheries, which include the highlands of Scotland, which I represent, a great swathe of the United Kingdom almost down to the midlands, and Mediterranean countries and Portugal. Incidentally, I must say to the right hon. Member for South Down (Mr. Powell) who referred to Portugal as a Mediterranean country that it is Atlantic and quite different in attitude.

My right hon. Friend the Member for Hillhead believed that the trend must be reversed. Because of the Council's resistance, he could not do much about it, and since then the position has worsened. In those days a great deal of hope centred on the enlargement of the non-quota section of the regional fund. Now it has been abolished, which is a bad thing. I am referring to section V, paragraph 5.1 of the White Paper. Did the Government support that, and if so why?

The non-quota section, which at one stage increased to 13 per cent., seemed to hold out the best chance for the neglected peripheries of the Community to obtain help. I greatly deplore that change. Most, if not all, of the peripheries suffer from neglect by their central Governments. The opportunity to involve people from outside, operating on agreed criteria, was immensely helpful. That was certainly the view of Mr. George Thomson, now Lord Thomson of Monifieth, the Commissioner who established the regional fund. Incidentally, we also continue to ignore additionality.

Do the Government accept that economic convergence will not work unless it is balanced by social and political mechanisms? When the hon. Member for Hamilton said that enlarging the market is not likely by itself to inspire the confidence of the unemployed, he was right, especially regarding the peripheries. Nor will economic convergence work unless it is buttressed by an integrated financial system.

It is extraordinary that no hon. Member has yet uttered the three letters EMS. The hon. Member for Nottingham, East (Mr. Knowles) referred to the Foreign Secretary's speech which is reported in The Times of today, in which the Foreign Secretary said that perhaps we could not continue saying that the tide was not quite right. Shakespeare said: There is a tide in the affairs of men and in this matter the Government seem to be marooned on a tideless sea, unwilling to take any decision.

Jacques Delors, the President of the European Commission, said at the Luxembourg meeting: The Commission's proposal is for keeping on the idea of European Union. This resolve has been asserted by a number of heads of state and government. Now, it is hard to suppose European Union can come about without eventually operating on the basis of unified institutions. I freely admit this it is not feasible now. But we must nurture the feasibility of it in the future, given the close interdependence between foreign policy and security on the one hand and what may be called stewardship —economic, financial and monetary affairs—on the other. Again, stewardship involves the social side, the arts, the will to get along together. The issue of will is fundamental.

I did not expect to find very much about the European Parliament on page 38 of the White Paper, largely because in the contents it states that the Court of Justice is dealt with on page 39. What a miserable report it is. I accept that the Minister expanded on it. The reports are interesting and useful, and record in careful bureaucratic fashion in the peculiarly neutral language of the Committee Clerk what has happened, but it would be of immense advantage and would give bite to these debates if they included the Government's forward views. They do not. What do the Government think of the European Parliament in the long term?

At Luxembourg Jacques Delors said of the European Parliament: I would stress that it is necessary to increase the powers of the European Parliament. Is the European Parliament a parliament of the same standing, and the same nature, as the national parliaments? We shall not settle that question: anyhow, the answer differs from country to country. I would, though, make the point that the heads of state and government decided the Parliament should be elected by universal suffrage; and, however much some of its debates may on occasion be ridiculed, its members are elected by universal suffrage …We could help it by making it more responsible and involving it more in Community decision-making. That is not impractical or visionary, to use the Minister's phrase, but rational and positive. How do the Government respond to that question?

At the next European elections, the Parliament has responsibility for making proposals about a uniform electoral system. The Bocklet report is now before it as the successor to Seitlinger. What is the Government's view on Bocklet? We have not the faintest idea from the White Paper. After the 1979 European elections it was recognised, even by Mr. Angus Maude as was, that it was disgraceful that the Liberal party got 13 per cent. of the vote but no representation. In 1984 the alliance got 20 per cent. of the votes but no representation.

I do not know whether the Minister reads The Scotsman. He nods wisely, but that could mean anything because Ministers have a tendency to nod wisely when anything dangerous is in the offing. The Scots were asked what they thought about proportional representation, and 57 per cent. said that they would like to see it introduced. Even 50 per cent. of the Labour party thought that proportional representation would be more effective than the present system, and only 19 per cent. thought that it would be less effective. Those were the results for our present system of national government, and the argument for European elections is far greater because there is not the problem of direct accountability to constituencies.

If the Community is to move towards greater cohesion, even à la carte cohesion, there must be a democratic oversight, and the Council does not represent that. It is a compromise Council, negotiating inter-state disputes. It has none of the necessary supranational overview of a permanent commission of an elected parliament. What is the Government's view on that?

I began by asking about the Prime Minister's Fontainebleau paper. Since then the big change, or part of the change, is that British interests in the Community are now defined, not just by the Government, but by many other elements in the country, as lying in the reinforcement, rather than the erosion, of existing economic and commercial commitments and the strengthening of political co-operation. At last that is being recognised as the means to exercise greater influence, rather than a component in the reduction of our influence.

Mr. Foulkes

The hon. Gentleman's speech has been helpful and interesting, but he has not mentioned agricultural policy. As he knows, the CAP is a major part of Community expenditure. Recently, the other part of the alliance — the Social Democratic party — agreed that quotas are inevitable for all supported farm production. Does the Liberal party agree that quotas are inevitable in all those areas? Is that the policy of the alliance as a whole?

Sir Russell Johnston

It is true that I have not dealt with agricultural policy. One cannot deal with everything, and I have already spoken at some length. I have discussed the CAP previously. It must be evident to the hon. Gentleman that much discussion is necessary when two different parties work out policies—[Laughter.] It is all very well to laugh, but that is a fact. The same is true of any coalition on the continent. The hon. Gentleman asked what I think about quotas—

Mr. Foulkes

No, the Liberal party.

Sir Russell Johnston

The party is in negotiation. Personally, I accept that quotas are inevitable across the board, and that the SDP is correct.

The anti-Europeans have now mostly fled the Chamber. The only two Opposition Members who spoke before me were anti-Europeans—the right hon. Member for South Down who has a well-established and almost mythical record in this regard, and the hon. Member for Walthamstow (Mr. Deakins). Whatever criticisms they may have—I agree with some of them—they must begin to square up to the fact that the Community provides a bedrock of commitment and predictability to the United Kingdom. All of us must ask ourselves how best we can develop that, but they more than others.

The Liberal party and its alliance partners, the Social Democrats, are convinced that the only viable future for Britain — if it does not want to become a nation of hamburger salesmen, as my right hon. Friend the leader of the Liberal party remarked recently — is within the European Community, with all its industrial and technological challenge, in which we play a part. The hon. Member for Clwyd, North-West mentioned that. We must give the citizens of Europe a say in the political future of the world, strung taut as it is between the United States and the Soviet Union.

7.42 pm

Sir Brandon Rhys Williams (Kensington)

I warmly welcome my hon. Friend the Minister of State, Foreign Office, who opened this broad-ranging debate so satisfactorily. She began her political career in Kensington, which gave her the background for an informed and penetrating weltanschauung, as she has already shown us in her new post. The debate has ranged widely, and I hope that the House will not think that I am straying too far if I deal with some fundamental issues which it is important to review in the light of Britain's assuming the presidency of the Community during the second half of this year.

We have heard the usual chorus of hon. Members expressing their anxieties—one might almost call them heebie-jeebies—about the way in which the European Parliament appears to be growing in importance and the budget is becoming a slightly heavier burden on our national economies. I could not help but wonder whether, if one turned back to the accounts of the debates in the early years of the state legislatures in the United States of America, one might have found people with an equally timid and provincial outlook in view of the growth in importance of Washington as a force in the development of the United States. We can all be glad that the federal forces in the United States won in the end; the world has been a better place as a result. It would be good if, in time, the federal forces gained the ascendancy over the national parliaments in the EC. However, I also believe in the inevitability of gradualism, which is attractive to Opposition Members. We do not wish to build our constitution too quickly, because trees that grow quickly tend to decay quickly too.

We have not made great progress in the European Community since the striking move forward in the Fontainebleau agreement in June 1984, which can be counted as a special success for my right hon. Friend the Prime Minister. Since then, we have been marking time after Europe began to recognise the force of my right hon. Friend's arguments, very persistently put, on the necessity to control the budget, to reform the agricultural policy and to improve the workings of our institutions.

Britain has had the difficulty since its late entry to the EC that it feels some reticence about its membership. We have been members of the Community since 1973, yet to some extent we still regard ourselves as outsiders. That is partly due to the continuing attractions of our Commonwealth links. It is also partly due to the English-speaking link with the United States of America, which gives us hope that we can still build on our special relationship with that country. In dealing with economic matters, we still cling to the idea and the tradition of sterling as a world currency and the most important medium of trade. Unfortunately, it is no longer that, although it is still an important international currency.

That reticence has caused us to cultivate in the House of Commons and elsewhere what one might call the "greater Switzerland" fallacy: that we can have a friendly relationship with the Common Market, but that we will never be completely integrated into it. We think that somehow we can retain our independence and customs, look back on our independent history and never allow ourselves to be completely trapped in the clauses of the treaty of Rome. The difficulty with a "greater Switzerland" relationship with the Common Market, however, is that Britain is too big to become an appendix of a great continental economy, which is what happened to Switzerland. We cannot live in a marsupial relationship with the German economy; but, equally, we are too small to be a world power in our own right. Therefore, the greater Switzerland fallacy fails in both respects: Britain is too small in one way, and too large in another, to fit into that formula. If we are not careful we shall become a greater Iceland, because we shall have drifted away from the continent in business terms. We cannot afford to contemplate that.

The continent sees Britain as a timid child running to and fro at the edge of the swimming pool, but afraid to jump in and join the other children enjoying themselves in the water. We cannot afford to continue looking like timid members of the Common Market. Our half-hearted relationship with the Community has continued for too long.

However, Britain has lately been successful in persuading the other members to make the reforms which we believe are important if we are to participate more fully. That process must continue when Britain assumes the presidency. We must maintain the momentum for control of the budget, and we must continue the policy of agricultural reform while recognising that the agricultural vote is still an important factor affecting the democratic policies of the continental parties.

I hope that there will be some new, positive British initiatives while Britain has the presidency. The most important initiative will be the completion of the internal market. As a London Member, I believe it is vital that London should play the most active possible part in the development of a united European economy. We have set ourselves the target of creating an internal market by 1992, which is what one might call a six-year plan. Socialists usually love six-year plans, but they do not seem to be too enthusiastic about the six-year plan to complete the internal market. It must be the major British interest, since we are a nation that depends on trade. It is no good belonging to a so-called Common Market that maintains ridiculous frontier barriers and obstacles to the free movement of goods and services.

Lord Cockfield's excellent report on the subject is a tribute to what British thinking can offer to the Common Market, and it has been very widely supported on the continent. The British Government owe it to Lord Cockfield to give the maximum possible support now to his campaign for the completion of the internal market. We should also recognise the lead that has been given by Jacques Delors in this respect. He is a man of particular integrity and foresight, and the type of Frenchman upon whom one can rely to act in the interests of the Community and not just in the interests of France. This is an important matter, because we tend to be over-suspicious of prominent French individuals who take a lead in the Common Market, because we suspect that their first loyalty is to France, and we retain a suspicion that it is bound to do us harm to become too closely involved in their initiatives.

I had the pleasure of working for Jacques Delors for three years when he was chairman of the Economic and Monetary Committee of the European Parliament, and I can say that he is a man to whom we can look for a first-class lead in the Community. He has thrown his weight of influence behind the creation of the internal market, and I am sure that he accepts the necessity for the internal market to be not just a matter of the exchange of goods and services, but, what is particularly important for London, the way to the complete integration of the European market for capital.

It is no good thinking that Europe is a Community that can live on current account alone. We are trying to build a capitalist society—a society in which people can take long-term decisions. We must build a context in which long-term decisions are likely to be taken in the most fruitful possible way. That is also vital for London's financial institutions, which are not concerned just with insurance, with which the Government seem to be preocccupied in dealing with this aspect of the internal market.

On the stock exchange, in house purchase finance, in the commodity markets, and in all the other activities in which London is pre-eminent and is capable of making an important contribution to the smooth operation of the Community, we still have formal and informal institutional barriers, barriers of tradition, and protective devices of all kinds, which prevent the operation of a genuinely effective integrated European market for capital.

One of the major difficulties is that we are still clinging to our national currencies, repeating the mistakes of the 1930s. The British Government should be seen to be taking a long-term approach to currency stabilisation. But we are waking up to the fact that we are facing a great decision. Do we want the world to be organised into two zones of time for the movement of capital, one based on Tokyo and one on New York, with London taking a subordinate and suburban position, related to both the great capitals, but not making any great contribution? Or do we insist that the world should be divided into three time zones, in which London, making its contribution as the pre-eminent financial centre of the Common Market, is able to hold its own for eight hours of each day and contribute to the success of a world economy that is founded on three great centres of excellence rather than two? The crucial decision whether we belong to a world with two time-zones of 12 hours or three time-zones of eight hours is likely to be made in the coming year. The Government must recognise the importance of their opportunity, with the presidency of the European Community, to do what is necessary to create an integrated European market for capital.

The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) complained that nobody had yet spoken about Britain and the European monetary system. I have spent a considerable amount of time on this subject, and I had the opportunity to study it for more than 10 years as a member of the Economic and Monetary Committee of the European Parliament.

At the moment the EMS can be regarded as a considerable success, but it is a solar system in which Frankfurt and the deutschmark constitute the sun around which the other currencies revolve. If sterling were to join that solar system, we would face the danger of creating a solar system in which there were two suns which, from time to time, would be likely to move eccentrically. This could be disturbing for all concerned and eventually lead to what occurred when we tried to join the snake more than 10 years ago. After only a few weeks of membership, we had to withdraw. As I am committed to the necessity to achieve an integrated currency system in the Common Market, I do not want Britain to join the EMS and then have to withdraw prematurely.

We might create the conditions in which Frankfurt and London moved together, or sufficiently closely for the system to co-operate fruitfully, if we reintroduced capital controls. That is not only undesirable, but virtually impossible, and I would not support it under any circumstances. The other way that we can move is towards the complete integration of the capital market between London and Frankfurt, by the perfection of arbitrage and by broadening the relationship between London and Frankfurt, so that we achieve something approaching the stability and continuity that one sees between Chicago and New York.

If we do not achieve something like that, the pound and the deutschmark will inevitably drift apart. We need a single real underlying rate of interest under the currency values of the national currencies, and we need a single market for the distribution of savings into investment opportunities. The European market will have to be seen as an extension of our home market, or even as our home market itself. This means a great leap forward in the thinking of our business people.

Inevitably, the long-term currency relationships must be based on the purchasing power parities. Is that what we would achieve if we joined the EMS as it now is? We have to ask ourselves two questions when considering whether this is the right moment for Britain to join the EMS. The first is whether we have the currency relationships on a stable basis. Is the pound now facing the deutschmark on a rate of exchange that is likely to continue?

Until recently I had not felt that we had achieved purchasing power parity between the pound and the deutschmark; but now we have come a great deal closer to it. It has been achieved because of the movement in the price of oil, and nobody can predict what will happen next to that. However, I hope that it would be Treasury and Bank of England policy, if we joined the EMS, to retain a structure of currency relationships between sterling and the deutschmark and the other major currencies of the continent that corresponded as nearly as possible to the purchasing power parity. That is the right way to turn the Common Market into a real, genuine, home market for British goods and services.

The second question is whether we have gone far enough with the integration of the capital market to be able to regard London and Frankfurt as sufficiently closely bound to each other to be able to co-exist in the same monetary framework for a period not just of months but of years. The answer to that is yes, if our membership of the EMS permits us to adjust the pound to its purchasing power parity in an orderly way from time to time; but the answer has to be no if it means that we are obliged to gear ourselves to a system which inexorably brings sterling back to a condition of perpetual over-valuation.

Many people are waking up to the fact that the decline of British industry relative to the industries of other major manufacturing economies, such as the United States, Germany and Japan, has been due to the Bank of England's persistent policy of maintaining the pound as an over-valued currency. This has been a wonderful background for the prestige of the City of London, but a disastrous background for manufacturing.

I would not want to see the deutschmark, with an inflation rate of less than 1 per cent. per annum, tied to sterling, with an inflation rate still of 4 or 5 per cent. per annum, if the relationship were regarded as so permanent that we were gradually dragged up and up again into overvaluation. But other currencies that are inflating faster than the deutschmark have belonged successfully to the EMS and have made occasional adjustments to the deutschmark without obstructing the system unduly. Therefore, I feel reasonably confident that we can now do that as well.

How do we define the most important target for our presidency, which we hope our Ministers will bring a great step nearer? It is not just joining the European monetary system, and it is not just having certain agreements for winding down controls at the frontiers or eliminating certain particular difficulties in the operation of the capital market. We must create the conditions for the most successful achievement in the creation of wealth by an international capitalist economy within a genuinely democratic framework. Of course, it is an enormous and very ambitious task. The conditions that we have to achieve must be clearly foreseeable over a long span of time so that business men can take ambitious investment decisions, in the confidence that they will prove to be right.

Capitalism is not working in western Europe in the way that we hoped, because many business men are unable to look ahead for even a few weeks.—[Interruption.] If the right hon. Member for South Down (Mr. Powell) were a business man—I know it is claimed that he is many things, but I do not think that anybody has ever claimed that he is that—he would understand a little bit better what I am saying. One needs to be able to have a reasonable degree of confidence that decisions based on knowledge of the market and on knowledge of one's product will prove to be right. They do not prove to be right if there is unpredictable Government interference, or central bank interference, or tax changes, or other incidental movements which mean that decisions proved to be wrong, through no fault of the original investors or the economic planners.

This does not require merely the free movement of goods and capital. It requires also continuity and a favourable policy in matters of taxation, about which I want to say a few words. When we refer to the harmonisation of goods and services in the internal market, we must not forget the vital importance of tax harmonisation and the harmonisation of policy in regard to changes in taxation that will also be necessary.

Looking towards this country's Budget, I should like to say a word in support of those who are campaigning for a reduction in the stamp duty on investment decisions. We want to create favourable tax conditions for the integrated capital market. We want to take off London the burden which we ourselves have imposed upon London. I do not want just a halving of stamp duty. There should be an end to stamp duty altogether on investment decisions on the London stock exchange. We should set London free to exert its strength for the benefit of the whole Community.

We should also seek out the best ways to end the artificial frontiers that are created by differences of taxation interpretation, such as the different treatment of particular classes of goods for value added tax. Next, we should make a serious effort to tackle the anomalies that are created by the different systems for the taxation of corporations in all of the member states. We made a considerable study in the Economic and Monetary Affairs Committee of the different systems of corporation tax which operate in the different member states. We tried to find a way in which we could work towards their eventual harmonisation so that we could end the tax frontiers created through the corporation taxes. We reached the conclusion that the only practical road to the harmonisation of corporation tax was the progressive abolition of corporation tax altogether.

This is not such a wild ambition when one realises that corporation tax is simply a tax on the eventual consumer of the goods or services that the company provides. But it is virtually a random system of tax, and it is very unfair and uneven in its operation, whereas value added tax, which is a similar tax, in that it puts the ultimate burden on the eventual consumer, operates in a much more comprehensible and more even and general way. It would be better even to have a slow increase in value added tax if it were accompanied by a step by step reduction in corporation tax, and eventually brought us to the total elimination of corporation tax throughout the European Community.

I realise that I have caused mirth on the Opposition Benches and that what I am saying constitutes ambitious objectives; but do we sincerely want to raise the level of the British economy in order to suck into profitable employment all the people who are looking for cash rewards for their work? Are the Government—and, for that matter, the Opposition—sincerely looking for a way to reduce the level of unemployment in this country? If so, we have only one road to follow. That is to make a success of our membership of the Common Market. If we continue to stay on the fringes of the Common Market and do not make a success of it, we shall waste the opportunity that is provided for us by the treaty of Rome to create a really successful economy and one which needs the services of all the people who are willing to work. We must help the other member states to do the same.

Our presidency offers us the opportunity to make important progress. The continental members of the Community have accepted the Prime Minister's lead in the control of the budget and the reform of the common agricultural policy. I believe that they would also welcome a major British initiative towards the creation of the internal market.

I should like to say a few words about preparing British opinion for the consequences of completing the internal market. This is a job for the British Government at home. We talk about the internal market, but we have not yet prepared ourselves for what it means. It means that economic nationalism will become an obsolete and impossible policy. It will bring much greater efficiency, far superior exploitation of capital and more rapid technical advances, but it will also mean the amalgamation and rationalisation of old established industries.

In recent weeks we have seen the excitement that has been caused by talk of the rationalisation of this country's motor industry. We have seen manifestations of a movement of opinion which has been interpreted as anti-American sentiment, or as a determination to keep our industries British, and to rebut amalgamation with the car industries of other countries. I do not think that British sentiment is anti-American or, for that matter, anti-Japanese; but British workers do not want to be dominated by people whose decisions are taken far away in a totally different economic context. We do not want to be dominated from overseas by people who do not have a very close relationship with the particular interests of this country.

Public opinion polls have already begun to show that British workers do not feel the same degree of suspicion where Common Market enterprises are concerned. The reason for this must surely be that they are beginning to feel a sense of community with the Common Market countries which we do not generally feel to the same extent with the Japanese or with the dollar countries. This, at bottom, if we analyse it, must be because we have the protection of the Rome treaty. The treaty is a highly detailed device for creating a market in which its members work together, instead of against each other's interests in forms of competition, which is unfruitful. It is a relationship which is far more precise and much closer than we in Britain could ever hope to achieve either with yen area industries or with the industries of the dollar area.

I have spoken at length, and the House has been indulgent, but I should like to make one last point. I regard it as an important recommendation for our presidency. We should seek to make the most of the Lome convention, not just because it is a link with our former overseas territories, but because the accession of Spain and Portugal means that we have the opportunity to suggest a widening or a fresh development of the Lome convention, so that more formal relationships can be established with the Spanish and Portuguese-speaking territories that lie outside the European Community. We need to put Government enthusiasm into creating a better understanding of and better relationships with these important economic areas.

I have said before, and I should like to repeat it, that we must look ahead to the influence which satellite television will exercise before very long in the context of the world economy. We may not understand this, but the Americans and the Japanese already understand it. They are making progress which will either leave us behind or leave us out of the picture altogether. I should like to see, as a development of the Lome convention, the production of regular tapes for educational purposes. They could be shown in English, French, Spanish, Portuguese and, for that matter, in Russian on a world wide basis in order to give people at home in their own institutes of education what we used to try to give them by bringing them to this country for technical training, language practice and training in other subjects. Those services would be building on the success of the BBC overseas service and the Open University. We have taken the lead in those areas in an English-speaking context, but we have not yet grasped the idea of putting a world university of the air into effect as part of the EC's relationship with the outside world.

I should like to see a conscious, deliberate move by the Government during their presidency to take into account the influence that we can have, now that Spain and Portugal are members of the Community, on the Spanish and Portuguese-speaking territories of the world. This is an important EC opportunity to teach other nations how to live.

Let me conclude by wishing all success to our Ministers, who now have the duty to take the lead for six months in the running of the European Community.

8.10 pm

Dr. Norman A. Godman (Greenock and Port Glasgow)

We have listened to some grand and formidable compositions tonight. I want to follow the advice offered by the hon. Member for Stroud (Sir A. Kershaw) that in these debates we should occasionally wrangle over details of EEC decision making. That is precisely what I would like to do vis-a-vis the fishing industry.

I want to make a comment or two on the common fisheries policy in the light of what the White Paper and the Official Journal of the European Communities have to say. The White Paper devotes all of one paragraph to fisheries, an industry that is important to Scotland, particularly its more remote maritime communities. In that single paragraph the White Paper says: Under the common fisheries policy the European Community logbooks and Landing Trans-shipment Declarations were introduced on 1 April 1985. Along with the European Community's Fisheries Inspectorate they will help ensure that the common fisheries policy is applied equally and fairly to all Community fishermen and that member states observe TACs and quotas. It is that equal and fair treatment of fishermen on which I want to comment.

Given the present circumstances of the common fisheries policy and the approval, albeit qualified, that it engenders among fishermen, it is now time to strengthen some elements of it in order to ensure the continuing viability of the industry and—the industry is dependent upon it—the continuing viability of the commercially important stocks.

Last night, during the Second Reading of the Salmon Bill, harsh words were spoken about the devastation inflicted upon salmon by interceptory fishing methods employing monofilament nets. I have a great deal of sympathy for those views, but at the same time I have some concern for the villains in that drama—villains to some hon. Members. They are the fishermen of the northeast of Scotland drift net fishery. We need European Community-wide measures to deal with that and other problems.

In addition to what was said last night by the Under-Secretary of State for Scotland, a statutory instrument was laid this morning—the Inshore Fishing (Prohibition of Carriage of Monofilament Gill Nets) (Scotland) Order 1986. It says: The carriage of monofilament gill nets for any purpose in any British fishing boat in the specified sea area"— that is Scottish waters— is prohibited. Apart from the friction and anger that that order and the Government's proposals in the Salmon Bill will create for the drift net fishery, it will also create in the fishing ports on both sides of the border some considerable tension. These are piecemeal measures within the EEC framework. The Government should follow the advice contained in the report of the Select Committee on Scottish Affairs on the fisheries protection service which was published this morning. Paragraph 77 says: The ban on monofilament will apply to all British boats in Scottish inshore waters. The SFF,"— the Scottish Fishermens Federation— when questioned on this point, said that there was no opposition amongst its members to a ban per se, but there was strong opposition to a ban that affected only Scottish fishermen. That legislation affects British vessels in Scottish waters, not the vessels coming into Scottish waters from other member states.

The Committee went on to say: The Committee sympathises with the Scottish fishermen. In our view, the strongest possible representations should be made to MAFF and to the EEC for a total ban in EEC waters. The banning of monofilament nets could well be an important move to help protect salmon stocks; but it should not be selective. I hope that the House is given the opportunity to debate that report; at the very least, the Scottish Grand Committee should take it on board.

The report also has a sensible word or two to say about the vexed question of by-catches and the level of by-catches is again determined under the auspices of the common fisheries policy. The report says: The problem of by-catches by industrial fishermen has several facets. The permitted by-catch level is itself a matter of dispute. The permitted level returned to 10 per cent. at the end of May 1985; we were told that there was pressure within the EEC to raise the level to 18 or 20 per cent. again. There is to be no derogation from the 10 per cent. limit during the 1985–86 pout fishery. The members of the Committee go on to say: We commend the successful outcome of the negotiations by UK Fisheries Ministers to retain the 10 per cent by-catch limit, and we hope that no attempt will be made by the European Commission or Member States to raise the limit in future years. Let us hope that those member states opposed to an increase in the by-catch pay heed to that sensible observation and resist any attempt by the Danish Government to shift the percentage upwards. Such a move would be disastrous for the commercially valuable stocks of fish in the North sea.

The report also says: DAFS"— the Department of Agriculture and Fisheries, Scotland— told us that they had arrested boats carrying both a 16 min and 80 mm net and had not experienced any problem in securing a conviction, but that they had nevertheless taken up with the Commission the question of banning the carriage of 80 mm nets on industrial boats". On that important issue, the Committee says: We support the efforts of the Government to secure a ban on the carriage of 80 mm nets by boats fishing for industrial species. It is our view that no fishing vessel should be permitted to carry both types of gear at one and the same time. Again, I hope that the Government and the House remain vigilant on those matters.

Conservation measures of the kind introduced into Scottish and English waters need to be extended through our European Community seas. That should be the objective of the House and the Government. In the meantime, I commend to the House the report by the Select Committee on Scottish Affairs. I am a member of that Committee and—I hope the House will forgive my modesty—one of the authors of what some would call a commendable report.

Chapter 6 of the annual report by the Court of Auditors for the 1984 financial year deals with certain aspects of the common fisheries policy. Dealing with expenditure on biological studies carried out by institutions in the European Community, the annual report states: The appropriations for biological studies, entered in Article 412 of the 1984 budget and amounting to 640,000 ECU, are intended to enable the Commission to obtain, by means of specialized studies commissioned from external bodies or experts, the scientific information needed for the implementation of the policy for the conservation and management of resources. I am not sure that that work is being done well.

The report states: Up to the end of 1984, contracts for biological studies were mainly concluded on the basis of proposals submitted by research institutes in the Member States. These studies should meet needs identified in advance by the Commission and set out in clear and precise terms; this has not been the case up until the financial year in question. Replying to that criticism, the Commission stated: The Commission has decided to introduce a system of checking and, as far as possible, competitive tendering. The requirements will depend on the amounts involved. In its defence, the Commission stated: In the fisheries sector, however, the specialized nature of the studies to be taken plus the geographical constraints severely limits the number of research institutes potentially capable of satisfying the requirements. Consequently, the Commission's choice is inevitably restrictive from the outset. I believe that that is a weak defence of this poor method of controlling research.

The Commission should take a leaf out of the report by the Comptroller and Auditor General, entitled "Achievements and Costs of the Common Agricultural Policy in the United Kingdom". In regard to the poorly commissioned and inefficiently controlled research studies, it is worth pointing out that paragraph 45 states: While recognising the political problems involved in having (and indeed arriving at) precisely defined objectives, it seems to me that if greater attention were concentrated on the settlement of criteria and targets associated with the objectives, the negotiation of cost-effective measures to achieve them would be made easier. I commend that advice to those who seek to commission research within the European Community.

Paragraph 6 of the White Paper refers to the need for a more co-ordinated system of maritime transport. In paragraph 6.6 we are offered some hope of a more equitable system of cabotage. I suspect that that is a vain hope, given the reluctance of some member states to make any concessions. The Minister of State, with her experience in another Department, will perhaps agree. The British coastal trade suffers badly in this regard. When will there be an improvement in community maritime transport routes and practices?

The importance of the fishing industry cannot be over-emphasised. For many Scottish communities, it is the only industry that can provide employment not only for the present employed generation but for the youngsters who are still at school. In the long run, if it is managed properly and efficiently, it will provide employment and a first-class food for the consumer long after the offshore oil and gas industries have been shut down. The House has an important duty vigilantly to monitor the decisions taken in Brussels on fishing operations in United Kingdom waters.

8.26 pm

Mr. William Cash (Stafford)

I find debates of this kind somewhat disappointing, because so few hon. Members attend them, yet this debate concerns a matter of great importance to our constituents. It has oscillated frequently between the Euro-fanatics and the Euro-haters. The Government's position is made more difficult by this polarisation.

Legislative and harmonisation programmes and the problems of agriculture, commerce and competition policy are all matters upon which our legislation is firmly hinged on the European Community. People in our manufacturing and service industries are greatly affected, yet so little attention is paid to what is happening all the time behind the scenes.

I am a member of the Select Committee on European Legislation. This afternoon, that Committee had the good fortune to see my right hon. Friend the Minister of Agriculture, Fisheries and Food. I thought that it was important to ask him, in relation to his policy on Europe, whether we should adopt a sector by sector approach. The common agricultural policy takes up an enormous proportion of the Community's budget and directly affects farmers, including those in my constituency. I believe that the Government would like to help them, as I would. Farmers are greatly affected by overproduction, but opportunities to make alternative use of the land and to reduce the amount of nitrogen fertiliser used in farming are not being taken up.

It is all very well for us to complain that there is massive overproduction of food, but, in trying genuinely to help the farmers concerned, we should look at what we are doing in the European Community to help them. We should look through the mass of verbiage at the complexities of the market mechanism and consider whether wheat is grown in Duisburg and whether all the other factors are taken into account in determining target and intervention prices. However, when we consider everything, we are really talking about overproduction.

Why is there overproduction? There is overproduction, in part, because, according to the experts, there is too much use of nitrogen fertiliser. Instead of overly concentrating on the elaborate legal framework set up in the Community, we should ask questions, the answers to which will be of practical help to the farmer.

At present the Agriculture Bill is approaching Report. New clause 1 of that Bill includes several useful provisions provided by the Government. They provide that the farmer shall have services and advice available to him. I am sure that farmers will be extremely keen to take up that offer. However, it is no good providing such services and advice if, when farmers ask what they should do about overproduction, there is no opportunity for them to take advantage of alternative use policies because they are constrained by planning requirements from putting the land to alternative use. I urge those responsible in agriculture to consider such practical questions and, through consultation with the Department of the Environment, to find ways and means to alter the planning guidelines which were tagged on to the policies pursued in the mid-1970s. That will enable us to improve the rural economy, provide alternative land uses, such as forestry and tourism, and enable the farmer to maintain his income in practical terms.

I urge that we do not maintain the co-responsibility levy in connection with milk or cereals as is now being proposed by the Commission. I hope that the Minister will fight hard for the British farmer in that respect. I also urge the Minister to keep the beef variable premium scheme for which he fought so successfully last year.

The White Paper covers the question of the internal market and competition law. All of our commercial policy—the rows in the City about mergers, whether the City is ripping people off and the extent to which huge companies are entering into relations with one another and causing difficulties for the small investor and British industry as a whole—is dependent on our applying competition policy effectively. Our competition laws are based on the treaty of Rome. At the eighth European conference on competition law recently, the experts clearly stated that competition policy simply was not working. If that policy is not working and we cannot apply it, it is not surprising that criticisms are levelled against us about the difficulties that are cropping up through mergers and monopolies in the City.

The same problem could arise in connection with financial services. I am a member of the Committee on the Financial Services Bill. We have not so far reached the competition policy provisions in Committee, but they have a direct bearing on how our economy functions. We must recognise that there are problems and consider whether the provisions of the treaty of Rome are working effectively for the benefit of the people of this country.

I tabled a question to the Minister concerned, asking if he would be good enough to examine whether, for example, regulation 17 could be revised. One assumes a glazed expression as soon as the boring and technical subject of regulation 17 is mentioned. I find the whole thing very boring, but the fact is that it is upon such legal principles that so much of our commercial policy operates. There is no point in pretending that problems do not exist. The Civil Service operates upon such regulations and our courts make decisions based on them. In fact, all commercial policy is developed on the basis of such regulations. If they are not working effectively, we must seriously consider how to improve and reform them.

Reference is made to science and technological research in paragraph 5.13 of the White Paper. At the risk of trespassing on a subject in which I have been involved for the past few years, I would ask those concerned to consider whether, under headings such as science and research, policies are being developed and directives formulated on human genetic engineering. In its own way that topic is as important, if not more important, than the atomic bomb. We must consider whether, by developing policies along these lines at European level, we are storing up serious problems, which we will later regret, for ourselves and for future generations.

In connection with external relations, trade and aid, I sincerely hope that the proposals for the new general agreement on tariffs and trade are successful this time round. This matter brings me back to the central theme that I developed on the question of competition policy. I hope that the people responsible for negotiating the GATT will come up with a practical proposal which will deal effectively with the Japanese problem and whether the Japanese are importing a sufficient amount of manufacturing products from other countries.

I have been to Luxembourg and Brussels recently and had the opportunity to discuss overseas development in relation to food aid with people in the European Commission and with the Court of Auditors. I returned very depressed about the poor showing in providing food aid to the countries which needed it during the emergency. I appreciate that there are difficulties and that there are no magic wands. However, when one examines the way the process developed, the Court of Auditors' report is worth reading. The reality is that the European Commission, for some reason or another, did not respond effectively enough. If we place the responsibility for handling such matters in the hands of the people in Brussels, then I hope that they will come up with something rather more effective than occurred on that occasion.

I am not by any means anti-European in terms of political co-operation. One of the mainsprings of the European Community has been a desire to move closer to a sensible degree of political co-operation. By that I emphatically do not mean political integration.

The ideas raised this evening by the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) about majority voting and federalism are extremely dangerous for this House.

Paragraph 13 of the White Paper deals with Parliament, and in two paragraphs it disposes of the work of the two Select Committees on the European Communities. Legislation and harmonisation have an amazingly important impact on how we conduct our affairs in commerce and in industry. There is almost total ignorance of the principles of law upon which these operate. Those responsible for organising the examinations in the Law Society and in other colleges of law should give a higher priority to examinations in European law and legislation. We have been a member of the European Community since 1973, yet these subjects are not even part of the normal curriculum for law students. That is an extraordinary state of affairs, given the impact of that law and legislation on our daily lives.

I wish to touch briefly on the Single European Act, which has been deposited in this House, and the cooperation procedure that will operate under it. The Minister kindly wrote to me when I asked a question about this the other day. I appreciate that the nature of the Act makes it difficult to give a precise answer, but one is left with serious worries about the way in which it will operate in practice and about the apparently significant increase in the powers of the European Parliament which will accrue at the expense of this House. I appreciate that the Council of Ministers can have the final say, but that is not the real world.

In reality, constant accretions of power exercised within the Council, subject to the co-operation procedure as it develops, are gradually whittling away the powers of this House in relation both to scrutiny and to the mariner in which legislation is devised. The fact that so few Members are present for this debate shows the difficulty that we face in this respect. When matters of vital concern to our constituencies are debated at a late hour or come before the Select Committee on European Legislation for scrutiny, without in any sense being anti-European we must ask ourselves whether we examine these matters sufficiently carefully to ensure that the system of law being devised is genuinely in the interests of those whom we represent. Is it not possible for those with responsibility in these matters to ensure that the Select Committee is able to consider prospective legislation affecting our constituents at the earlier "avant-project" stage when the working groups of civil servants who go to Brussels are considering these matters?

There is no doubt that under the new procedures a number of things will occur. For example, there will be an increase in the number of matters subject to majority voting, which will undoubtedly reduce the power of individual member states to put a brake on progress. if they are so minded, the other member states can cut short attempts at negotiation and proceed to a vote, and that will have a significant effect on the way in which legislation affecting this House goes through.

It is also clear that, following the accession of Spain and Portugal, the position of the "big four"—France, Germany, Italy and the United Kingdom—has been reduced. Two of those four states will no longer be able to exercise a blocking power and the new Mediterranean bloc of Greece, Italy, Portugal and Spain will be able to exercise a major influence.

The first special report of the Select Committee on European Legislation shows one uncertain element at the centre of the whole question—the extent to which the Luxembourg compromise will operate under the new arrangement. There has been pressure to require member states to identify the very important interests that they seek to protect by invoking the compromise, but none of that appeared on the face of the Single European Act—nor could it do so, because, as the Select Committee pointed out, the compromise is not legally binding. In reality, however, because the compromise currently lies at the root of the way in which voting takes place, which is the basis on which we determine whether to insist on unanimity or go to majority voting, the question of whether the arrangements under the Single European Act will necessarily be in the interests of our constituents is vital.

Finally, although some of us take a pragmatic and, I hope, practical view of progress in the European Community and are in no sense anti-European, we wish to ensure that when legislation goes through this House it is properly scrutinised so that, when we have to answer to our constituents for the decisions taken in their name, we can give reasonable answers to the questions that they reasonably ask about the legislation that goes through. I therefore ask that great care be taken to ensure that the procedures under the Single European Act are truly in the interests of our constituents and that, when making procedural changes in this House, we ensure that the scrutiny procedure really works in a way that is both fair and reasonable to those whom we represent.

8.46 pm

Mr. Nigel Spearing (Newham, South)

The reference to "decisions taken in their name" was one of the most important aspects of the comments of the hon. Member for Stafford (Mr. Cash) because one such decision was taken in the name of the British people when the Minister of State signed the Single European Act on the royal prerogative. I do not think that the hon. Lady is yet a member of the Privy Council, but I make no complaint about that.

I am grateful to the Minister of State for her remarks about the Scrutiny Committee, of which I have the honour to be Chairman, and I apologise for not being present at that time. My absence was perhaps a symptom of things to come, in that it was the timetable of the European Council and of this House which prevented some Members from being present at that time as we were listening to evidence from the Minister of Agriculture, Fisheries and Food at a meeting arranged some weeks ago. But more of that anon. The Minister of Agriculture also take decisions for the people of this country, although he and the House have lost control over British agricultural policy— indeed, there is no longer any such policy.

I referred earlier to the prerogative of the Crown. We are now discussing, with other developments in the EEC, an Act which was signed by Her Majesty's Government unwillingly, as the Prime Minister told us when she went to Milan last June. I wonder when a Government last invited the House to ratify a treaty that the Government had signed unwillingly. I can think of no context in which that would have been possible in the past.

Mr. J. Enoch Powell

The Anglo-Irish agreement.

Mr. Spearing

That may be true, although there was a majority in the House for it, but the right hon. Gentleman will at least agree that that related to the British Isles and not to mainland Europe.

The assumption about the royal prerogative in signing treaties was, ever since the Labour Government of 1923, that nobody's Government would sign a treaty which could not command the majority of their own party. That was, as it were, taken as read.

When the Ponsonby rules were adumbrated, they said in effect that a treaty would lie on the Table, as a statutory instrument might, for some 40 days. If it was not prayed against or voted against it was deemed to be ratified. The Minister may go into greater detail on this but she and other Ministers have kindly said that our ratification procedure will not be of that type for this particular treaty. It will be subject to further legislation. We can be grateful to that extent. However, the right hon. Member for South Down (Mr. Powell) was right when he asked in what way we can actually scrutinise the terms of this treaty— which runs to 77 typewritten pages, some not full—and which is legislation by reference and changes the treaty of Rome.

In effect, that means changing the written constitution that exists in the United Kingdom. One might say that there is no written constitution; indeed, that is one of the things which people are taught in history. In practice, however, we know that it is not true. The written constitution of this country consists of a whole number of written documents. I believe that the Standing Orders of this House are one such document and the mysterious documents circulated by Prime Ministers inside the Executive may be another. It also includes a number of other Acts of Parliament such as the Representation of the People Acts, and the Quinquennial Act. These documents are all bound together by a series of understandings, custom and practice. That is our constitution plus the treaty of Rome.

The treaty of Rome is to be substantially amended by the treaty which has been the subject of discussion tonight. As the preamble has not been read this evening, I shall do so: Moved by the will to continue the work undertaken on the basis of the Treaties establishing the European Communities and to transform relations as a whole among their States into a European Union, in accordance with the Solemn Declaration of Stuttgart of 19 June 1983. Resolved to implement this European Union on the basis, firstly, of the Communities operating in accordance with their own rules and, secondly, of European Cooperation among the Signatory States in the sphere of foreign policy and to invest this Union with the necessary means of action". That is the preamble to the treaty. It is important to study some of the facets because they will make a great deal of difference to how this House keeps track of legislation and other developments which are continually going through the European system.

That system is complex. Many hon. Members present will know that, when listening to informed speeches such as that of my hon. Friend the Member for Walthamstow (Mr. Deakins) it is difficult to follow the labyrinthine constitution which has arisen. Indeed, I would suggest —the Minister may know this for herself—that unless one has been involved with these issues for perhaps the past 10 years and has organically developed with this tangled mass of interlocking growth, it is almost impossible to understand it, no matter how many lectures one might attend.

The greatest change occurs in the way in which legislation is created. It means a change in the scrutiny and oversight of this House, of how Ministers behave or of how, to refer back to the text given by the hon. Member for Stafford, "decisions made in our realm" are carried out and the way Ministers are accountable. The work of the Scrutiny Committee—recently committed to the House —will probably be changed by the changes in the treaty, if they are effective. It is up to the House to decide whether changes in our constitution are made.

The Danish people had a referendum on this matter only six days ago. It is true that they decided—not by a big majority—to go ahead with these changes. However, the referendum showed that there was a major divison of opinion in that country, just as there has been a difference of opinion in Britain on the main question.

Mr. Deakins

Does not a difficulty face any country with a written constitution—how those changes should be put to the Parliament or assembly concerned to represent the opinions of the people? We are faced with a difficulty which does not face countries such as the United States which have a written constitution. In the United States they consider constitutional amendments individually and can discuss them in great detail. In Britain we have to consider amendments en bloc and have no opportunity to consider them in detail; nor are we able to accept this or reject that. We have to accept or reject them all at one stage.

Mr. Spearing

Yes, that is one of the disadvantages of the way in which our constitution has arisen. It is based on an assumption that the Crown would not give away power. It also assumed that nobody would go against the Act of Praernunire—that is to give prior allegiance to another sovereign power. They are the assumptions on which our constitution rests. Thus, in respect of EEC legislation, there are difficulties which have been pointed out by my hon. Friend.

I do not wish to be partisan. It is clear that there are different views about how the EEC should operate. The hon. Member for Kensington (Sir B. Rhys Williams) made it clear that he wants progress towards a United States of Europe. I do not think I am doing him any injustice.

Sir Brandon Rhys Williams

indicated assent.

Mr. Spearing

Indeed, he nods his assent.

However, that is anathema to other hon. Members. In the discussion of this Act and the changes in the constitution there is a continual difference of emphasis between the people who take those views. I suggest to the Minister that even among people of differing views there is a fundamental common interest, that democracy, whether on a United Kingdom or pan-European level—which the hon. Member for Kensington wishes to see— is effective, efficient and seen to be democratic and is understood by the people whom it seeks to sent. When "decisions" are made in their name, whether at national level or at pan-national level, as with the EEC—it is not federal—they are understood and there is a chain of accountability which commands confidence. That view will bridge all opinions in the House, including the hon. Member for Kensington and even the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston). Public life and democracy demand confidence and transparency. Without them, the quality of democracy falls apart, just as rotting cement will cause a building to fall.

I should like to consider the change in the new article 149. At the moment, the House can examine documents and proposals on a proposal from the Commission, and anything to do with the internal market or harmonisation requires unanimity. As has been said, that will be changed to a qualified majority. We shall therefore get more harmonisation a la the Cockfield Green Paper, and it will come more quickly. Moreover, it will be more difficult for the Government to hold up 'those proposals if that is to the national advantage.

Of course, there is always the so-called Luxembourg agreement, but I think that, the Minister will agree that there are moves afoot—they may be right—to see that it is used in a less liberal way. Perhaps there are written orders. If one uses a dangerous weapon such as that agreement too often in the wrong way, it may become a little blunt. I suspect that we shall have more harmonisaiton, which it will be more difficult to keep track of.

Sir Anthony Meyer

This is all getting very muddling. I assume that the hon. Gentleman is talking about the traditional Luxembourg compromise and not the agreement that was recently reached there.

Mr. Spearing

The hon. Gentleman is quite right. I was referring to the historic non-agreement.

Sir Anthony Meyer

The agreement to disagree.

Mr. Spearing

The second feature of legislative change will be the insertion of a second round for some legislation. Hon. Members will be aware of what can happen. Instead of the Council trying to change a Commission proposal by sending it back, whence it will return in revised form, if the Council does not agree with what the Commission says, having obtained the opinion of the Assembly/Parliament, it has to produce what is called "a common position". That phrase appears in the treaty. The "common position" is passed to the Assembly/Parliament, which can amend it or reject it by simple majority. If the Commission receives an amended "common position", it puts a new proposal before the Council of Ministers, which can be passed by a qualified majority. If the Assembly/Parliament rejects the "common position", the Council can only insist by unanimity. That means that the House and the Scrutiny Committee will be faced with a second round, which I think I will call a second reading, for some legislation, including that relating to harmonisation and achievement of the internal market, which has aroused some of the greatest controversy.

The Select Committee said in its report that there could be difficulties, as there might be more, longer and possibly more acrimonious debates in the House. Moreover, the decisions might be more difficult for the Government as the pace of harmonisation could well increase. There might not be a single proposal. We all know that, in the EEC—I shall not say that it does not happen elsewhere —there is linkage to produce a package proposition. One considers the whole and cannot distinguish between the parts. That is one of the least satisfactory features of what is going on.

If the EEC is to work properly in the next two or three years, we want proper partnership and co-operation. I am anxious to carry the hon. Member for Kensington with me. One of the distinguishing features of a healthy and proper partnership is that one of the partners can say no, knowing that it will not be penalised. I am afraid that, as I understand it, all too often in EEC affairs a partner says no at its peril, whatever the merits of the issue.

Sir Brandon Rhys Williams

Is not the great danger that some other member will say no and that Britain will be penalised? We need progress with the Community. If other member states can block it, we may suffer the worst.

Mr. Spearing

The hon. Gentleman may be correct. However, there is an opportunity for blocking—it will be reduced to some extent; although some people believe that a reduction in the power to block is progress, other people take a different view—which I think is one of the inherent problems in the EEC. Its ambitions in terms of integrated Common Market harmonisation, whatever their merits, are so politically ambitious when one is faced with the vested interests, proper or improper, spoken or unspoken, which will prevent that, the whole machinery, good or bad, falls into disrepute.

I suggest that we shall see a new phase in the life of the EEC if this treaty is agreed. It will make life more difficult for this House, particularly in keeping up with legislation, because there will be more of it, it will move faster and it will be further away from the control of this House, and therefore from the people. I will not dwell on this at length, but that includes the creation of what some people will dub a European foreign office, which is now a treaty obligation.

There will be an obligation for consultation at every level and an obligation to have an EEC party group, if I can put it like that, inside every international organisation or conference where members of the Community are present in any number.

Therefore, we will find that most of the features on which we have prided ourselves through the ages, such as being a sine qua non of a Parliament and parliamentary democracy, will be diminished. We know that those features are legislation—the power to appoint judges, the power to tax and the power to control expenditure. There are other criteria but those are the primary ones. In respect of legislation, we know that we will now share it more and more and, for the first time, an Assembly which is not of this country will have a hand in originating legislation which then becomes binding on every citizen.

We know only too well from some dramatic examples in the past fortnight and exchanges across the Floor of the House, indeed even in statements from the Government, that the ruling of the European Court, whatever its merits, will be of increasing importance in this country. We know that our own courts have increasingly, formally or otherwise, to refer cases to the court of the EEC.

We still have, just about, the power to determine maximum levels of taxation—1.4 per cent. of VAT and so on. However, I suggest that we have largely lost control of the EEC's expenditure. It is true that we may not be too great on that inside the United Kingdom, but the Government are accountable and may be broken by the House. Therefore, when we passed greater powers of taxation to the EEC we did it, did we not, on the understanding that there was budgetary discipline? Some hon. Members have already said tonight that all the signs are that it will not bite in the year when we thought it was going to bite. It is becoming increasingly clear that in 1986 there will not be the budgetary discipline which the House was promised as one of the conditions of its voting extra money.

Therefore, if all those factors come together and if the House approves the Single European Act, we will be in a completely new phase of the EEC where it will accelerate and widen the ambit of its competence, not only to help the environment and other things of that sort, but in terms of a European foreign policy.

About 12 years ago, at the time of the great debate on the subject, the right hon. Member for Old Bexley and Sidcup (Mr. Heath) said that the position of the Queen would not be affected. I do not think that the right hon. Gentleman understood some of the basic constitutional principles on which the country has evolved. That is perhaps a charitable view, and it may be a startling view for someone who was then Prime Minister of our country. The position of the Queen, or the monarch, was not affected as much as the position of the Crown by the decision in 1973. It will be further affected if the Single European Act is approved by the House. Until that date, it was the Crown, in one form or another, which approved legislation, appointed the courts, and, in Parliament, was the highest point of appeal in the House of Lords. It also decided the level revenue of taxation.

That was not so on 1 January 1973. The power of the Crown in those matters, and so the power of the British people themselves, was diminished. I suggest to the House that if the Single European Act is ratified, it will be diminished further.

9.11 pm

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

I join my hon. Friend the Member for Hamilton (Mr. Robertson) and the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) in congratulating and adding my welcome to the Minister of State, who has joined our debates as well as the foreign affairs Front Bench team. I was going to say that the British motorists' loss was the Europeans' gain, but I thought that it might be taken the wrong way, so I shall confine myself to welcoming the hon. Lady.

In my reply I shall have some difficulty in living up to the billing given to me by my hon. Friend the Member for Hamilton, but I shall do my best, because, unlike the hon. Member for Stafford (Mr. Cash), who was a bit disparaging about the debate, I thought that it was unexpectedly interesting in several ways, and quite worth while. I was not expecting some of the comments and contributions that we have had. I accept that it has not been an exciting debate, but it has been interesting.

I should like to ask the Minister some questions. I hope that I shall receive some answers tonight, but, realising that this is a complicated issue, I shall understand if I do not. The Minister and I are becoming regular correspondents—[Interruption.] "Letter writers" might be a better phrase to use. Perhaps we can continue our letter writing on the points that the hon. Lady cannot answer tonight.

In the short time available to me, I hope to get down to the essentials of these complex matters. I sometimes think that the jargon, the Eurospeak and the gobbledegook that surround this area are designed as deliberate obfuscation by the Eurocrats, so that we know little about what is happening, and so that they can get on with things, and we remain without knowledge and understanding of what they are up to. I think that some of them like to keep the public and Parliament in ignorance of what is going on in the Community. I hope that part of our job is to try to sweep that away.

The right hon. Member for South Down (Mr. Powell), as usual, made some excellent points about the Single European Act. We now understand why it is called that. It is not a singular sensation for the House. However, it would be helpful for us to know how the Act will be considered by the House. I know that to some extent that is a matter for the usual channels and the Leader of the House, but obviously the Foreign Office is involved. When will we get it? Many Conservative Members, some of whom have not been here today, are anxious to know. The Minister said that it would be within three months. That is a fair leeway. I hope that it will be in the earlier part of that period. When we get it, what will the procedure be for its consideration? It is important to know whether we can amend it.

Many comments have been made about the useful report from the Scrutiny Committee. I should like to pay tribute here, as I do informally on other occasions, to my hon. Friend the Member for Newham, South (Mr. Spearing) for the work that he does. He is extremely valuable to my hon. Friend the Member for Hamilton and myself.

The major point that I want to make is to endorse on behalf of the Opposition the recommendations in the report on the need for greater parliamentary scrutiny of all the matters that come to us from Europe. As the hon. Member for Stafford said, whether they have been traditionally pro-European or anti-European, all lion. Members are anxious for greater accountability. Even in 1984 the Scrutiny Committee said that scrutiny was inadequate. It is clear from the present report that there will be more proposals to be examined. Because of majority voting, the House will have to debate major issues much earlier than it did in the past, and the British Government will not be able to hold up decisions of the Council of Ministers pending a debate in the House. For those reasons, scrutiny becomes even more important.

Even in 1984 the report of the Scrutiny Committee was already critical of the Government's attitude to scrutiny. As my hon. Friend the Member for Hamilton said, it pointed to major changes which had been agreed by the Council of Ministers before we had had the opportunity to debate them. I am thinking, for example, of ESPRIT and of the new arrangements for the regional development fund. Both those who are for and those who are against Europe think that it is wrong that changes should be made before we have had an opportunity to discuss them.

I hazard a guess that the United Kingdom is among the poorest, if it is not the worst, of the European Parliaments in its arrangements for scrutiny. It has already been said that within this Parliament the House of Lords does a better job than we do. The House of Commons is woefully inadequate in carrying out scrutiny. My hon. Friend the Member for Hamilton said that I would try to put forward proposals. I shall not go that far, but I shall suggest some points which may be taken into account by the Government, especially as they have said that they will accept the Opposition amendment.

Statements to the House after meetings of Ministers have to be drawn from the Government like rotten teeth. My hon. Friend the Member for Hamilton is on the telephone regularly to the Foreign Office asking for statements. I am referring not just to Foreign Affairs Council meetings but to important meetings of the Energy Council and the Environment Council. When matters of importance are on the agenda when decisions are being made or when consideration is undertaken on our behalf, it should be a natural course to have regular reports to the House. If that means that time for other debates is squeezed, consideration must be given to another way of dealing with the statements. I shall come in a moment to the suggestion of a Grand Committee—

Mr. Deakins

Does my hon. Friend agree that, in addition to having more oral statements, we should revert to the procedure whereby there was a separate slot of 20 minutes in Foreign Office Question Time for oral questions on European Community matters?

Mr. Foulkes

I am grateful to my hon. Friend for mentioning that. That was to be my fourth point but I shall deal with it now.

I do not want to criticise anyone. We ought to look at the arrangements for European questions, but we should do so without taking any time away from foreign affairs. Today, for example, questions were raised about South Africa, the middle east and the Falkland Islands, and an hour a month is not a great deal of time. We should therefore consider the possibility of having a separate Question Time for European matters, because today there were no questions at all on the EEC.

Sir Anthony Meyer

Perhaps the hon. Gentleman will recall that when we did have EEC questions hon. Members were allowed to table only questions that related directly to the Foreign Office, whereas one wanted to table questions relating to all European activities. That was the great defect of that 20-minute slot.

Mr. Foulkes

I accept that. That is why I said that I would have difficulty in living up to my billing. I am not trying to be definitive. I am merely trying to point to the way in which the Government ought to examine this matter.

Sir Russell Johnston

I thought that the Labour party was active in taking Europe out of foreign affairs questions. In the negotiations, I was certainly opposed to the idea.

Mr. Foulkes

It was agreed as an experiment, and I am sure the hon. Gentleman agrees that foreign affairs questions require a lot of time. The subject covers the whole world, and quite often certain issues are not covered.

Our one Scrutiny Committee is overwhelmed by paper. I do not criticise it in any way, because it does a marvellous job. Perhaps we should look at the House of Lords or at the possibility of having more Scrutiny Committees.

There is also the possibility of setting up a European Grand Committee, which might have a separate Question Time, to deal with statements and consider European business. I know that there are problems about that, and I am not advocating it. I am merely saying that these are some of the things at which the Government should be looking.

I also hope that we will look at other national Parliaments in Europe. I think that we can learn from our European partners and from their parliamentary set-ups. Having accepted the amendment, I hope that the Minister will tell us how the Government will consider this matter, and how Parliament will be allowed to consider any report that they make.

Having dealt with scrutiny as a principle, let me refer to some of the issues that we are scrutinising today. The Government keep stressing the blue-eyed concept of the internal market, about which they seem to be star struck, but the implications have not been spelt out. This is a very important development, but the House has not had the opportunity of dealing with it.

There is the proposed common market in banking and insurance and the liberalisation of financial services. What does that mean in relation to control over the City and Lloyd's? There will also be changes in public procurement policies. What does that mean in terms of safeguarding United Kingdom industries? There will be European directives on radio and television—not, I hasten to add, that that will mean "Coronation Strasse" for the Germans —[Interruption.] I thought that hon. Members might moan at that. The development of satellites raises some very important matters. What effect will that have on the Bill of the hon. Member for Davyhulme (Mr. Churchill)? There will also be the harmonisation of competition policy, including mergers. What effect will that have on the current merger mania that is under way in the City?

I have tried to obtain some answers from the Government. I tabled a question to the Secretary of State for Trade and Industry asking about the effects of the European internal market on the structure of British industry, the level of employment in the United Kingdom, the level of British exports to the EEC, the level of British imports from the EEC, the balance of payments and the rate of growth of the British economy. That gave the Minister for Trade an ideal opportunity to spell out what the internal market means. He said: Progress towards completing the internal market will be one of a number of factors influencing the development of the British economy. In general, removing barriers to trade within the Community should further increase our trade with other member states and reduce costs to business. It should, therefore, help to stimulate increased efficiency in the use of resources and accordingly encourage growth of the economy."—[Official Report, 24 February 1986; Vol. 92. c. 422.] Where have we heard that before? It is not an answer to the question. I hope that the Minister will make the position clear.

The Government's views, as we understand them, seem to differ from those of other countries, which believe that the international market will require harmonisation of VAT, which causes us great anxiety. Does it mean that? The Minister shakes her head, but Jacques Delors, Lord Cockfield, and others seem to think that. Why cannot we have a White Paper on the effects of some of the proposals? We get parliamentary papers of one kind and another on less important issues, yet these matters are not spelt out for Parliament and the people.

Another area for scrutiny is the budget and its overrun. During the six-month period that we are considering, a supplement of £120 million was requested, as my hon. Friend the Member for Thurrock (Dr. McDonald) will remember. We had to agree to pay our share of a £1.1 billion non-refundable advance. Soon the Community will run out of euphemisms for the money that it keeps asking us for. Although the limits on agricultural spending for 1986 were agreed only in June 1985 and the new budgetary discipline—that sounds good and rigid—was to be invoked in 1986, in the first year of their operation agricultural expenditure will break the limits. Yet the Government said that the great control was a major achievement and would be effective. Indeed, they said that they had agreed to the increase in own resources only because there was to be effective control and, preferably, legally binding control. They have now forgotten that, and the ceiling has been broken in the first year.

In The Scotsman recently, Mr. Andriessen, the farm Commissioner, is quoted as saying that surpluses are a time bomb. The headline was: EEC may seek £450 million supplement to budget. The Council spokesman, Mr. Junker, said in December that there would be a supplementary budget by the end of the year. May we have a categorical assurance from the Government that they will make no further requests for loans, non-refundable advances, or whatever they are called? The Minister must answer that question, which Labour Members have asked previously. We have the discipline, and if it is effective, there is no need for additional funds. Indeed, if it is effective, the Ministers should be using it to effect and we should have no further requests.

We in the Labour party are demanding fundamental reform of the common agricultural policy. Price freezing is not enough, as Mr. Andriessen has made clear. The system itself must change. We must have an end to a system which allows the EC to dump subsidised produce on world markets, causing great harm to developing countries. The latest inequity is dumping under-priced sugar in Jamaica. The EC is undermining the economies of Third world countries and making it more difficult for them to pay their debts.

I have been fairly critical of some areas, but I should like to welcome one aspect. Perhaps some of my hon. Friends will disagree with me, but if they consider the matter and understand fully the implications, they should welcome co-operation on foreign policy. But we must know how the secretariat will operate and where it will be sited. I understand that it will move with the presidency. We would welcome joint foreign policy co-operation if it meant more effective co-operation on South Africa and if it forced the Government to impose stronger sanctions on South Africa, as our European partners wish. We would welcome it if it meant that the European Governments could persuade the British Government to join the condemnation of American aid to the Contras in Central America. Indeed, Congress is considering further aid to the Contras to undermine the duly elected Nicaraguan Government.

Finally, I should mention the "people's Europe". The people who I meet in Dalmellington high street do not think that the internal market is a major priority. They do not talk much about it when I meet them on the street. They do not say how marvellous it would be if United Kingdom banks and insurance companies could sell their wares to other European countries. However, they are worried about unemployment. In my constituency there is 28 per cent. unemployment. In the Community 14 million people are unemployed—nearly half of them young people—and their despair, despondency and anxiety cannot properly be understood by anyone in the House. School leavers have a less than 50 per cent. chance of obtaining jobs, although, to give it credit, the Commission is proposing joint reflation.

Will the Government take the opportunity of their presidency starting on 1 July to advance a strategy of cooperative growth to reduce unemployment? Will they give more money to ESPRIT, EUREKA, the social fund and the regional fund, which would also help to reduce unemployment? The Minister will not give us that answer tonight. I assure the House that, after the next election, when the Labour party is returned to office, we shall use the mechanisms of the Community to ensure joint reflation among the increasingly Socialist Governments of Europe. Our priority will be a reduction of the appalling unemployment.

9.32 pm

Mrs. Chalker

With the leave of the House, I thank hon. Members for their kind remarks and for their welcome to this maze of a Community debate. It has been a long debate covering more than the documents before us. There were many ideas and misconceptions, and I am sorry that I shall be unable to comment on everything that has been said in more than five hours of detailed debate, with questions from hon. Members on both sides of the House. A few moments ago, I thought that the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) wanted, instead of a system of filibustering, a system of Eurobustering. That might be even less workable than the unsatisfactory system that we have now, but which we are trying to change for the better.

We have heard three sorts of contributions to the debate. Some hon. Members were highly critical, and we share some of their criticisms. Others were anxious, and some were forward-looking. My hon. Friend the Member for Kensington (Sir B. Rhys Williams) made some especially ambitious remarks. I should make two general points to those who were highly critical and anxious. In 1972, the House decided to join the Community. In 1975, the Labour Government conducted a referendum in which that decision was endorsed. Since then, we have been through a difficult process of accession—the most recent being that of Spain and Portugal. With two major allies making the decision to join us, we know that they, like us, consider the economic and political growth of the EC to be tremendously important.

Of course, there are problems with the essential workings of the Community. There is no way in which a Community of 10 or 12 would not have such problems, and we shall not be satisfied until we achieve better working methods and better scrutiny, as I have already told the hon. Member for Newham, South (Mr. Spearing), whose Select Committee has done such a good job.

Over a long time we have frequently experienced irrational results, but that must not mean that when things go wrong we should sit back and refuse to look at possible solutions to making the European Community a better and more workable institution. The length of time that it takes to consider many parts of European business is a problem. Coming to this matter from the Department of Transport, I am reminded of the average timetable from the inception of a road to putting the first vehicles on it, which is 13 years. There have been long-drawn out considerations but now, having had progress bedevilled for many years and after hard work in a number of Committees in past years, we have the Single European Act, which is an important step forward.

I shall try to go through the fears and anxietes expressed by a number of hon. Members, because I understand some of them. Other hon. Members have been more positive. I listened to the speech of the right hon. Member for South Down (Mr. Powell), as always, 'with respect. He is an authority on constitutional law, but I fear that his obsession with a narrow interpretation of national sovereignty is misguided. Every international treaty can be interpreted as a diminution of national power, in so far as it limits freedom of independent action, yet, inevitably and rightly, we have entered into treaties because we believed that the benefits of combined action at international level outweighed the theoretical limitations on our sovereignly. NATO is one such example, and political co-operation is another. We live in an international world, not a national environment that automatically seeks and abides by boundaries. The Single European Act acknowledges and gives form to the excellent and useful practices that have developed.

The hon. Member for Newham, South said that we were asking the House to approve an agreement that the Government had signed unwillingly. He rightly pointed out that in Milan we argued against an intergovernmental conference because we believed that the improvements that all member states recognised to be necessary could be achieved by other means. But once the decision was taken to hold a conference, the Government's main concern was to ensure that the outcome was one with which we could willingly agree. That is what happened, and that is why, on 17 February, I signed the initial stage in the process.

I have been asked about the nature of the legislation that follows from the Twelve having signed this agreement. The House will have a formal presentation—not going through on the nod—and a full opportunity to debate the matter. As my right hon. and learned Friend the Foreign Secretary made clear in the House several weeks ago, we shall introduce a Bill to amend the European Communities Act. The issues raised by hon. Members tonight can be aired on Second Reading and no doubt in Committee, on Report and on Third Reading.

Mr. Foulkes

When?

Mrs. Chalker

I wish that I knew the date on which the Bill will be introduced, for it would make my diary planning easier. I can say that it will come up within the next three months. The Bill will then pass on to the House of Lords.

The right hon. Member for South Down misunderstood what I said in my opening remarks about the co-operation procedure involving the European Parliament. There are no circumstances in which the European Parliament can cause decisions to be taken by a qualified majority that would otherwise be taken by unanimity. It is true that if the Commission incorporates amendments to its proposals, they can be further amended only by unanimity. That, however, is a feature of the existing provisions of the treaty, under article 149. So no change in the existing constitutional balance is involved.

The hon. Member for Newham, South asked about the extension of European Community competence on foreign policy. The treaty provisions in the sphere of foreign policy are entirely separate from Community treaties. There is no extension of Community competence. The treaty leaves us free to maintain, where necessary, a separate position. That we shall do, where necessary.

The hon. Member for Walthamstow (Mr. Deakins) asked whether there would be further intergovernmental agreements. He knows that this is an own resource decision. It neither provides for nor excludes further intergovernmental agreements. Such an agreement would be proposed only if the 1.4 per cent. value added tax ceiling were found to be inadequate to meet proposed expenditure. That is not the position now. Unanimity in the Council would be required if a proposal for an intergovernmental agreement were to be put forward. We could not proceed without it.

Mr. Terence Higgins (Worthing)

Will my hon. Friend give way?

Mrs. Chalker

I apologise to my right hon. Friend, but I have many questions to answer.

Mr. Higgins

Could my hon. Friend just confirm—

Mrs. Chalker

No, I shall not give way, because the time in which I can respond to all the points that have been made in this debate has been very severely clipped.

I was asked about the breach of financial guidelines. The 1986 budget is within the financial guidelines. However, recent developments, particularly the decline in the dollar-ecu rate, have led the Commission to say that it will need to seek a provision within the supplementary budget, which will be needed later this year anyway to cater for the expected increase in the United Kingdom's abatement. If we cannot get our abatement without a supplementary budget, then, for the sake of Britain, I am in favour of a supplementary budget. It depends upon the outcome of the price fixing. It would be idle to pretend that we can insulate ourselves from the effects of exchange rate movements. That is not possible.

The hon. Member for Walthamstow also asked about the budgetary powers of the European Parliament. Since the call-up of revenue in the Community is the product of expenditure decisions, the actions of the European Parliament have revenue implications. One cannot get away from that; we are dealing with the two sides of the balance. That is one of the reasons why the Council has decided to take the European Parliament to the European Court of Justice. The point is therefore covered in the Council's challenge. Our national case is that we are challenging the European Parliament's power unilaterally to set the level of the budget as a whole. Other nations are doing the same. I shall look at what the hon. Gentleman said about taking up the matter in another way.

The hon. Member for Walthamstow also suggested that we should give consideration to a preliminary ruling from the European Court of Justice under article 177 about the validity of the European Parliament's actions. I shall need to check that, but I understand that article 177 allows for preliminary rulings on points of European Community law that are raised in proceedings before national courts, not before the European Court of Justice. If that is the case, the proper way for us to challenge the European Parliament's decision is by direct action in the European Court of Justice. That is exactly what we are doing.

Several hon. Members referred to the budget. Of course we are concerned about the cost of the budget. However, it is unrealistic to expect there to be no net cost for member states such as Britain, which has an above average gross domestic product. We should expect to contribute to policies from which we benefit. Whereas, before Fontainebleau, we contributed at a level which did not reflect our relative prosperity, our contribution has now been established on a fair basis. Following Fontainebleau, the Federal Republic of Germany makes a net contribution three times as high as ours and France's net contribution is broadly on a par with ours. As a result of the two thirds abatement that was agreed at Fontainebleau, the rebate that we receive from the Community has doubled in two years from £440 million in 1984 to £605 million in 1985, and the estimate is that it will be £900 million, or more, in 1986.

In view of the remarks that have been made tonight, and also because I believe it to be vital, I need to address a fundamental problem that underlies so many of the Community's anxieties—the common agricultural policy. No one disputes the contention of several hon. Members that the costs of the CAP are too high. What is questionable is whether some of the simple solutions that have been suggested would have the effects that have been claimed for them.

The recent report of the Public Accounts Committee, House of Commons Paper No. 71, rightly pointed out that the objectives of the CAP are broadly the same as those of the Agriculture Act 1947 passed under the then Labour Government. The balance between achieving security of supply and reasonable prices to consumers has always been difficult to achieve, and the faults of the CAP are reproduced in most national schemes—not simply in Europe, but in other parts of the world as well.

There is no magic solution, save to those who would offer no support for agriculture, thereby putting at risk the security of supply, the working population involved in agriculture and the 80 per cent. of our land mass which is rural. The Community has not funked the issue of reform. Again, as the Public Accounts Committee reported, over the past four or five price fixings the price of wheat has been reduced in real terms by about 12 per cent. What makes the achievement of reforms at once necessary and difficult is the fact that technological improvements have led to a parallel growth in productivity. I shall be looking at the remarks made by my hon. Friend the Member for Stafford (Mr. Cash) who was obviously concerned about the productivity from the land today.

We cannot duck the fact that farmers have benefited from technological change, particularly in the cereal sector where one quarter of the surplus stocks in intervention are accounted for by United Kingdom production. We need no sudden about turns, but a sustained programme of reform. As a result of the Government's policies, we have achieved price reductions in real terms in six out of the last seven price fixings.

This year the Commission's price proposals are for a 4.1 per cent. reduction in real terms which, with its other reform measures, amount to savings of 408 million ecu in 1986 and 786 million ecu in 1987. That would be equivalent to a real terms price reduction of 7 per cent., and that is the direction in which we should be going.

The hon. Member for Walthamstow asked about the use of the German veto on the CAP and subsequent action by the Commission. There was no question of the Commission unilaterally implementing price cuts. Based on its own powers, the Commission managed the market arrangements and the timing of the intervention arrangements to achieve savings in costs, particularly in cereals. That is completely within its powers. I should have thought that the savings in costs were exactly what hon. Members wanted. Therefore, if it was possible by management, we should not decry it.

The hon. Member for Hamilton (Mr. Robertson) was worried about European Community White Paper debates. White Papers on Community developments have been a regular six-monthly feature since 1974. Debates on them in the House are usually held within three months of publication, but on this occasion that was not possible. The White Paper before us, as everyone knows, was published in September, but at the end of last year the House gave its attention to several major Community matters, including European Community Finance Bills and various EC budget documents, as well as the European Communities (Spanish and Portuguese Accession) Bill. That was all in the last two months of 1985.

Against that background I hope that hon. Members will agree that there was no lack of opportunity, but I assure Labour Members that I will do my level best to persuade my right hon. Friends that we should have debates within a reasonable time.

The hon. Member for Hamilton also asked about a White Paper on the projected benefits and implications of the internal market. It has not been the practice to publish White Papers on such matters. The proposals have been made available to the House and we have had several opportunities to debate them. However, it would be pointless to keep publishing projections. That is the sort of thing that centralised economies go in for. The hon. Gentleman gave us an interesting example earlier in the day when he told us that he had had a five-hour briefing in Moscow from President Gorbachev. We prefer results to hypotheses. It is clear to us that the liberalisation of the European market will be of benefit in its impact on jobs and prosperity.

Several comments were made on the need for a cooperative growth strategy. The Government's policies have led to the creation of more jobs than in any other European Community member state. We have a common strategy for growth. All the Heads of Government—Socialist as well as Conservative and other Governments—have agreed that jobs and prosperity can come about only by the continuation of the type of policies that we and all other European Community Governments are pressing. It is only the Labour party that has a different view—different even from its fellow Socialists in Europe. It is the only one that is out of step.

I want the benefits of the European internal market to be brought to the ordinary people of Britain. The Opposition are out of touch if they continue to claim that it is irrelevant to try to achieve a reduction in barriers to trade and an internal market. We have achieved cheaper air fares for travellers. In the first year of the United Kingdom-Netherlands air agreement, we had 10 new services, a 16 per cent. increase in traffic growth between London and Amsterdam and 70,000 extra passengers who would not otherwise have travelled. The pattern is exactly the same between the United Kingdom and the Federal Republic of Germany.

We have opened new markets for British goods and services. We are doing away with the barriers and the delays which cost the United Kingdom and the rest of the Community £6 billion a year. We intend to create the prosperity and the jobs that a single large market can bring. The Opposition claim to see no connection between a single internal market and new employment in Europe. The connection is there. It is obvious and crucial. We shall continue to ensure that it works to the benefit of people seeking employment in Britain, because that is what the liberalisation of the internal market is all about.

The hon. Member for Greenock and Port Glasgow (Dr. Godman) asked whether we would make progress on maritime cabotage. That is probably a strange subject for many of my colleagues. I am happy to tell the hon. Gentleman that we are making real progesss. A package of measures to liberalise maritime transporting, including cabotage, is now before the Council. The Dutch presidency is pressing hard, and we shall continue to make this an important part of our work in the second half of this year. As time is short, I shall write to the hon. Member for Greenock and Port Glasgow about fisheries.

The hon. Member for Inverness, Nairn and Lochabar (Sir R. Johnston) asked about the regional fund and the abolition of non-quota measures. As I think he is already aware, the regional fund will make allowance for a quota range as well as for the Community programme. We believe that we shall have every opportunity to be a substantial beneficiary, as in the past. I remind the House that, in 1985, the United Kingdom received nearly 24 per cent. of the fund. We have not been doing badly, and we intend to continue to do our best to get that which is due.

My hon. Friend the Member for Stafford asked about the new GATT round. I very much share his view on the importance of the new round. Preparations are under way in Geneva. I believe that it is important that we reach agreement on the outstanding issues to enable the launch of the new round at the next GATT ministerial meeting in September. We are taking a positive attitude to the GATT round, and I hope that other member states will take a similar attitude.

Many hon. Members raised the issue of the scrutiny procedures. We are well aware of the unsatisfactory nature of the arrangements which have been pointed out by the hon. Member for Newham, South, who is Chairman of the Select Committee on European Legislation. The Select Committee considered the operation of the arrangements in 1984. That was spelt out in House of Commons Report No. 527. The Select Committee concluded that the Government should make greater efforts to ensure that debates on European Community documents were held in good time. We revised our guidelines in August 1985 with the aim of ensuring that debates should, as a rule, take place as soon as possible after the Committee makes a recommendation. We are committed to doing everything possible to make the new scrutiny procedure work effectively. I should like to examine the Select Committee report. We must work within the new guidelines already accepted and consider other suggestions in the Select Committee's report.

It is sometimes very difficult to strike the right balance between debating a proposal at a very early stage, with the risk that it may be amended out of all recognition by the time that it goes to the Council of Ministers, and debating it late in the day when the debate may have to be hurried through at the eleventh hour. I give the hon. Member for Newham, South an undertaking that we will do our best to have the debate at the right time.

I should like to give further consideration to the suggestion about a Grand Committee. I do not believe that the House wishes to weigh itself down with yet more detailed debates, as some hon. Members already complain about the verbosity of other hon. Members on occasions when we discuss procedure.

My hon. Friend the Member for Stroud (Sir A. Kershaw), who unfortunately could not stay this evening as he had a prior engagement, made a number of remarks about political co-operation. It is helpful to be in firm political combination with our partners in Europe, as we have shown in the past two months in the statement on terrorism and the influence that Europe is having on the South African issue. My hon. Friend the Member for Stroud spoke about Ethiopia, and the views he expressed about resettlement are shared by the Government. I am glad to say that they are also shared by many of our partners in the Twelve.

Matters are frequently discussed and views exchanged. I am grateful for the welcome given by the hon. Member for Carrick, Cumnock and Doon Valley to the political co-operation part of the Single European Act.

It would be impossible to recount all the matters which have produced the present position. My right hon. Friend the Prime Minister's report, "Europe: the Future", is important, and we stand by it. It is positive and realistic. Equally, we have few reservations about the Dooge report. I pay tribute to my right hon. and learned Friend the Member for Edinburgh, Pentlands (Mr. Rifkind), now Secretary of State for Scotland, for all that he did to bring that about and to ensure that Britain's views were thoroughly and well known by our European partners.

I should now like to emphasise the importance of the second six months of this year. We have heard both negative and positive comments tonight. I hope that we can cease living in the past, wake up to the present and start working for a positive future. Although some hon. Members may not be reconciled to EEC membership, the negative comments and that lack of reconciliation have more to do with nostalgia than a realistic assessment of United Kingdom interest in many of the matters we have discussed.

We need the unity of the European market if our economy is to be competitive enough to provide prosperity and jobs. We need the strength of a united western Europe if collectively we are to counter Soviet foreign policy. We must also meet the commercial challenge of the United States and Japan rather than try to hang on as national champions. We need unity to fend off the growing threat of protectionism from whatever source.

The Community has achieved many things in the past few years. Some things, like Fontainebleau and the effective start of agricultural reform, are well known. Others, less well known, are none the less important to our prosperity. I was glad that the Community's research programme was mentioned by a number of hon. Members tonight, including research into information technology.

Environmental decisions are another important feature. These include exhaust emissions which protect the environment and preserve the unity of a single market. There has been a breakthrough on standards by the adoption of the 15 directives which had long been blocked, and agreements on future mutual recognition of standards. I mention toy safety because for many people that has been a major issue. How many families in this country do not have small children for whom they wish to buy a toy at Christmas?

There are many other areas in which we shall be working with our European partners. There are many objectives to be gained as well as interests to be defended. We shall do our best to achieve those objectives and to defend the interests of the United Kingdom and of the Community as a whole.

Amendment agreed to.

Main Question, as amended, put and agreed to.

Resolved, That this House takes note of the White Paper on Developments in the European Community January to June 1985 (Cmnd. 9627) and of European Community Document No. 8616/85, the Commission's opinion on the Proposal for Amendments to the EEC Treaty and, noting the First Special Report of the Select Committee on European Legislation (Session 1985–86), calls on the Government to undertake to co-operate in improved procedures so that the House can effectively scrutinise proposals under the Treaties as they would be amended by the Single European Act.'.

10 pm

The Minister of State, Treasury (Mr. Peter Brooke)

I beg to move,

That this House takes note of the Annual Report of the European Court of Auditors on the financial year 1984, together with the replies of the Institutions, and supports the Government's efforts to ensure implementation of the Court's recommendations where these would improve the Community's financial procedures. The annual debate on the Court of Auditors report offers a valuable opportunity for the House to discuss expenditure planning and control within the Community. Our discussion tonight will be much helped by the lucid report from the Select Committee on European Legislation, which highlights important themes from the court's report, and I pay tribute to the Committee's work.

The role of the Court of Auditors report in the Community's budgetary procedure is set out in the explanatory memorandum which I submitted to the House on 17 January. As the House will recall, one of the functions of the European Parliament, after advice from the Council of Ministers, is to grant a discharge each year to the Commission in respect of the implementation of the Community budget. The Court of Auditors report is the main document which the Council takes into account when making its recommendations to the Parliament.

Last year, at the request of the Netherlands and the United Kingdom, the ECOFIN Council discussed the court's annual report for the first time. That report related to the 1983 budget. This year, at the meeting arranged for 10 March, the ECOFIN Council will discuss the court's report on the 1984 budget. For the first time, the president of the court will attend to present the report. These arrangements for discussion in the ECOFIN Council are a sign of the importance which the Council now attaches to the work of the Court of Auditors.

As the Select Committee acknowledges in its report, the court has a formidable task. The United Kingdom has always strongly supported the court's efforts to improve financial control in the Community and welcomes the Commission's statement in part 2 of the report that many of the court's recommendations are already being carried out. There is, however, no room for complacency. The latest report provides ample evidence that further improvement is both possible and necessary.

I do not propose to discuss the court's detailed recommendations. It may, however, be helpful to the House if I draw attention to half a dozen areas in which the Government warmly support what the court has said, and to a couple of issues of budgetary procedure on which we respectfully beg to differ.

First, we strongly support what the court has to say about the overhang of past commitments, notably in the structural funds. The court notes that outstanding commitments increased again in 1984. It is evident, as the court says, that a better balance has to be struck between payments and commitments, within the framework of the budget discipline arrangements. The Community needs to cut back on new commitments so as to leave sufficient room for meeting inescapable commitments from the past. In the Budget Council disussions on the 1986 Community budget, the United Kingdom strongly opposed the provision of additional budgetry resources outside budgetary discipline limits to deal with the so-called "cost of the past."

Secondly, the court has recommended that the commission should improve the accuracy of its revenue and expenditure forecasts with a view, among other things, to reducing the number of expenditure appropriations which turn out to be in excess of need. A related recommendation is that the Commission should give more attention to multi-annual forecasting of revenue and expenditure. These recommendations, too, the United Kingdom strongly supports.

Thirdly, the court makes the telling point that functions should be carried out at Community rather than national level only if benefits are likely to be superior to national programmes of a similar cast. this again echoes arguments which the United Kingdom has put forward on many occasions.

Fourthly, the court has paid special attention, as in previous years, to the administration of development cooperation and food aid. The report highlights the continuing difficulties of delivery and timing. It is a matter of concern that, as we suspected, emergency food aid was not arriving significantly faster in 1984 than non-emergency aid. In 1985, by using flexible procedures outside its normal food aid arrangements, the Community was able to arrange swift deliveries of food to the African countries worst affected by famine. We have left the Commission in no doubt that the current review of food aid procedures must produce arrangements which are more responsive to emergency needs.

Fifthly, the court is critical, rightly in our view, of some aspects of the administration of the European development funds. There is still some way to go. In the light of previous Court of Auditors' reports, however, the United Kingdom has succeeded in obtaining agreement to some useful changes. The Commission will now introduce a more systematic method for forecasting contributions by member states, together with procedures to avoid accumulation of excessive balances. It has also brought forward proposals to charge interest on late payments by member states.

The court also draws attention to the problem of fraud and irregularities in the agricultural guarantee section of the budget. The Government take a serious view of this matter. We are concerned to ensure that all reasonable steps are taken to prevent fraud and to ensure that any fraud which does occur is promptly identified and dealt with.

Mr. Terence Higgins (Worthing)

My hon. Friend said that the Government hope that there would be a better balance between revenue and expenditure. It is not clear from the Court of Auditors' report that the treaty requires that there should be an exact balance between the two? Do the Government agree with that view?

Mr. Brooke

Clearly there should be a balance between revenue and expenditure. If the budget is drawn up and the Commission asks us to pay a contribution towards that budget under the usual procedure, there may be occasions when, although expenditure is allowed for in the budget, it is not actually spent. That is what I think my right hon. Friend was referring to.

Mr. Higgins

I was thinking in the other direction, namely, when expenditure appears to exceed revenue. Does my hon. Friend agree that that situation is not allowed under the treaty?

Mr. Brooke

My right hon. Friend has anticipated the issue relating to the Court of Auditors' comment. I was intending to deal with that as one of the issues on which we disagree with the court.

There are two matters of budgetary procedure on which the Government do not agree with the Court's recommendations. The first concerns the legality of the intergovernmental agreement for 1984 the court argues that, by using this agreement to provide some 1 billion ecu to finance inescapable financial commitments in 1984, member states failed to fulfil their treaty obligation to ensure that revenue and expenditure balance.

As explained in a memorandum which the Treasury submitted to the Treasury and Civil Service Committee last month, the member states, including the United Kingdom, do not share this view. In our view, payments under the intergovernmental agreements for 1984 and 1985 were entirely consistent with article 4 of the Community's 1970 own resources decision. This referred to the budget as being financed out of own resources "irrespective of other revenue". The Community receives other revenue, such as gifts and bequests. The Government consider that contributions under the intergovernment agreements are likewise a form of "other revenue" and are therefore available to balance the budget in accordance with article 199 of the EEC treaty.

The second area of disagreement concerns the Commission's proposal, in its supplementary budget for 1984, to cancel certain expenditure appropriations which it was then clear would not be needed. These cancellations enabled the Commission to raise less extra revenue from member states than would otherwise have been needed to finance the supplementary budget. This has been criticised by the Court of Auditors, but in the Government's view the Commission was right to reduce the calls on taxpayers in member states in this way.

In conclusion, then, the Government respectfully take a different view from the court on two general issues of budgetary procedure, as well as on certain specific cases discussed in the court's report. But the areas of agreement are far more important than the differences, and we continue to support the court's efforts to ensure that the community's expenditure is properly managed and controlled. I commend the report to the House.

10.9 pm

Dr. Oonagh McDonald (Thurrock)

I welcome some of the Minister's comments about the Court of Auditors' recommendations for stricter financial control at perhaps a lower level than overall budgetary discipline. There is much to be done in that regard if the Community is not to engage in wasteful expenditure. I am glad that the Government want some of the recommendations to be carried out.

I was anxious to note that the Government do not accept the Court of Auditors' strictures about the use of the intergovernmental agreement in 1984. The Minister's remarks lead us to expect a similar IGA in 1986. The Minister should make that absolutely clear. We have already heard that Mr. Andriessen, the farm Commissioner, talks about an extra £450 million being necessary to cover certain aspects of farm expenditure. If that is so, and the case is pressed, the Government will have to ask for another IGA.

I could not help smiling when the Minister referred to other forms of revenue such as gifts and bequests, as he merely suggested that the IGA was a form of gift. We shall probably find ourselves making a similar gift this year.

The Minister skipped rather lightly over some issues, such as the Court of Auditors' report for 1984, which made it clear that agricultural spending had increased by 16 per cent. over 1983. As is clear from my reference to Mr. Andriessen's demand for more money, nothing has been done to curb farm expenditure. We expect it to rise once again this financial year. It cannot be contained because the budget discipline is not strict enough, as the Minister of State, Foreign and Commonwealth Office said in winding up the previous debate. She said that the Community could not be isolated from changes in the exchange rate. That is true, and budgetary discipline is obliged to recognise it, but farm spending is bound to escape. We can expect a future Court of Auditors' report to show another large increase in agricultural spending this year.

The Minister should have drawn our attention to another feature of the Court of Auditors' report—the fact that a substantial proportion of farm spending in 1984 was squandered on storage. Storage accounted for almost half of farm spending and the losses on intervention stocks ran at 2.5 billion ecu. They are massive losses which affect dairy products, especially butter, skimmed milk powder and beef. It is plain that those substantial losses are about to occur again in 1986 and I think that the Minister should have referred to that. The whole design of the common agricultural policy leads to a continual growth in intervention stocks and as they decline in value, money is wasted, first in storage and secondly in further losses as the stock deteriorates.

The Minister referred to what had happened in food aid; that is a sorry story indeed. Not only were goods delivered late—cereals 14 weeks late, milk powder 23 weeks late and butter oil 19 weeks late— but even emergency consignments were late. He might also have mentioned that not only were many of the shipments made far too late, even when they were designed for emergency purposes, but they actually overran the date set by the mobilisation authority. Even worse, some of the food shipped out had to be rejected. For example, Indonesia had to reject over 1,000 tonnes of skimmed milk: its quality was unacceptable because of breakages of packets and excessive humidity during the voyage there.

The Court of Auditors once again draws the attention of member states to the disgraceful and sorry story of intervention stocks, the expense incurred by the Community in storing food and the further loss of value, as compared with what happens to food aid. Not only do we waste food by producing more than we need, but we cannot even manage to get food of decent quality to places which desperately need it on time. That is no record for a civilised community. We all ought to be ashamed and I hope that the Government will make the fiercest possible condemnation of such late deliveries and of the poor quality. More than that, I hope that the Government will take firm action within the Community to ensure that it does not happen again. It is something of which we are all thoroughly ashamed, but shame is not enough; action is what is necessary.

To cap that, millions of ecu—the Court of Auditors estimate 6 million—are lost in fraud. Unofficial estimates put the amount at 30 times the sum given in the Court of Auditors' report. The report lays specific charges against member states. It states that they do not report fraud before payments to the Commission, they do not scrutinise subsidy claims adequately and they refuse to cooperate with the Commission in the investigation of fraud. Some member countries are particularly guilty in that regard.

Once again, within the Community we want the Government to ensure that money is not wasted in that way. It is bad enough pouring millions of pounds into a wasteful and expensive agricultural policy. To be subsidising fraud, particularly in other member countries, makes matters even worse. I want an assurance from the Minister that our own methods of investigation and control are entirely adequate, that we co-operate with the Commission and that we do everything in our power to ensure that other member countries do the same.

I am glad that the Minister recommended the Court of Auditors' report to the House, as indeed I do. However, it tells a sad tale of the behaviour of the Community over the management of its funds and its disgraceful agricultural policy and it should give hon. Members cause for thought.

10.19 pm

Mr. Terence Higgins (Worthing)

It is noticeable that the motion that the House is being asked to consider refers to the House taking note of rather than approving the annual report of the European Court of Auditors.

I found the speech by my hon. Friend the Minister of State, Treasury disappointing in several respects. In the memorandum that the Government submitted to the Select Committee on the Treasury and Civil Service this week, which is now in the Library, they say: The United Kingdom considers that the Court of Auditors has a key role to play in improving financial control within the European Community. The proposed discussion in the ECOFIN Council of the recommendation for discharge provides an opportunity to support the Court's work and to ensure that the Commission responds to the Council's comments. The extraordinary thing about the speech by my hon. Friend the Minister of State is that he is projecting some of the points that the Court of Auditors made about the proper financial workings of the Community. He is in a similar position to a company chairman, who, having received qualification of his accounts from the auditors, stands up at the annual general meeting and says, "I do not agree with what the auditors said." Those who were investing in such an enterprise might react in a sensible way. Alas, the taxpayer is not in a position to do so. The plain fact is that the report of the Court of Auditors confirms all the misgivings that I have expressed on previous occasions and which, more particularly, the Treasury and Civil Service Select Commitee has expressed, about the way in which the Community has been conducting its finances.

The Court of Auditors' annual report comments on the practice of using reimbursable advances authorised by means of intergovernmental agreements to finance short falls in the European budget. The court is clear about that, as, indeed, the Select Committee has been on previous occasions. The court says: financing the budget by means of reimbursable advances does not fulfil the obligations placed on the Member States by the EEC Treaty". The court is absolutely clear about that. In his remarks, my hon. Friend said that that was not the Government's view. If there is a conflict between the auditors and the Government, how is the matter to be resolved? It is perhaps rather unfortunate that at a time when rightly, in my view, the Government are taking the European Parliament to the European Court, arguing that it has made an illegal budget, they are, at the same time, opposing the views expressed by the Court of Auditors that what they the Government have been doing is illegal. That does not seem to be a good arrangement, because the law should be indivisible.

The Court of Auditors is also critical of the introduction of article 302. That is an item in the accounts, the expected balance for the current year. It says: The Court considers that the introduction of this article into the budget of the current year was simply a device for disguising the fact that the budget expenditure exceeded available revenue, that is, own resources, plust the reimbursable advances, which is contrary to the provisions of Article 199 of the EEC. The Court of Auditors expressed that view in very clear terms. I have great difficulty in understanding why my hon. Friend the Minister is not prepared to accept the view that the court expresses, and which the Select Committee has pointed out on previous occasions.

After the Fontainebleau summit, on 27 June 1984, at column 1003, the Prime Minister told the House that it is not right to raise loans for budgetary purposes because it is contrary to the treaty of Rome. The intergovernmental agreement substitutes the words "reimbursable advances" for "loans". The Select Committee, in its report on the special supplementary estimate in January 1985, said: A distinction was argued between 'loans' and 'reimbursable advances'. We are not convinced there is any real difference and the requirement now proposed would certainly seem to be contrary to the spirit of those who originally drafted the treaty". I should be grateful for my hon. Friend's views on a more technical point. The Court of Auditors is there to audit; it is for it, not the Government, to audit. It says that the IGA does not come within the category of gifts and other bequests to which the Minister referred. The hon. Member for Thurrock (Dr. McDonald) rightly drew attention to the fact that that would be humorous if it were not so expensive.

My hon. Friend the Minister has not dealt with the point as to whether the Community is entitled to receive a reimbursable advance. Perhaps he would give his attention to that because it is separate from an advance which is not reimbursable. We may find that the two are indistinguishable because the advances which are said to be reimbursable do not come back to this country, as they are supposed to do. Perhaps my hon. Friend will be kind enough to tell us when he expects to get the advances back and whether they are likely to arrive back on time.

It is extraordinary that the 'Treasury, which is rightly stringent in many aspects of domestic expenditure, seems to be so profligate—that is the only word that I can use —in going along with such a proposal. It would be intolerable if the House were again asked to approve an intergovernmental agreement in the face of the clear view expressed by the Court of Auditors that intergovernmental agreements providing such advances are contrary to the treaty, not least because it means that once again, when we come up against the VAT limit—in this case 1.4 per cent. as against the previous 1 per cent.—we would be able to put off the evil day when the House had to be asked for an increase in that limit. We know all the consequences which would follow for the United Kingdom on rebates. After all, rebates do not continue indefinitely if the conditions on which they were granted are no longer fulfilled. The problem now is very serious. It should not be subscribed to by the Treasury, the British taxpayer or by those who might otherwise have the money spent upon them at a domestic level.

Budgetary discipline is also mentioned in the report of the Court of Auditors. After the Select Committee took evidence from my hon. Friend and further evidence from Treasury officials this week, I cannot avoid the conclusion that the idea that there is any real budgetary discipline in the Community is a farce. The extent to which that is so is amply demonstrated by the fact that the Government themselves are taking the European Parliament to the European Court on the grounds that the budget that has been made by the Parliament is illegal. Clearly the European Parliament has not the slightest intention of subscribing to any system of budgetary discipline. That is immensely sad.

The House has been told by my right hon. Friend the Prime Minister: More EC member countries are becoming net contributors. Frankly, that is the best discipline we can possibly have."—[Official Report, 27 June 1984; Vol. 62, c. 1001.] That has scarcely been borne out by the way in which some of the net contributors have been performing against the background of the European Assembly's own illegal budget; some of the net contributors are among those who have been less than forthright in taking the line that Her Majesty's Government have rightly taken on the issue.

If one goes into more detail on the report of the Court of Auditors, one should refer to paragraph 3.4 which says: Article 199 of the EEC Treaty provides that all items of revenue and expenditure of the Communities shall be included in estimates to be drawn up for each financial year and shall be shown in the budget". It then takes particular exception to two items. It says: The amending and supplementary budget No. 1, adopted on 25 October 1984, increased the VAT own resources rate to the 1% ceiling. The shortfall was covered within the budget by two new budget lines. The next words are very important: The Court"— the Court of Auditors— considers that these do not comply with normal budgeting principles, nor with the requirement of Article 199 of the EEC Treaty that annual revenue and expenditure of the Communities should be in balance". It is not good enough for my hon. Friend simply to say that the Government are sorry, that the auditors have qualified the accounts, but that they disagree with the qualification.

Article 820 relates to amounts to be financed by reimbursable advances granted by member states. It states: The Court adheres to the view which it expressed in its opinion No. 1/84, that financing the budget by means of reimbursable advances does not fulfil the obligations placed on the Member States. The same can be said of article 302 relating to expected balances from the current year.

One can go along with the view expressed in the motion that we should support the court's recommendations where these would improve the Community's financial proceedings. The regrettable and sad fact is that, on the most crucial aspect of the Court of Auditors' findings, the Government are not prepared to go along with what it recommends.

This is all in the past, and in one sense we are shutting the door after the horse has bolted. That would be worrying enough—and one accepts that it is difficult to claw back the money—but even more worrying—this was the point on which the Minister of State would not give way to me earlier—is that, having shut the door after the horse has bolted, they are opening the door again so that another horse can bolt. That is totally unsatisfactory.

It is deplorable that the Government should have taken such an attitude. They should stick firmly to the letter of the treaty. That is in the interests not only of United Kingdom taxpayers but of the future of the European Community itself. It cannot hope to get the support that it needs for the many other desirable objectives that have been mentioned if, when a report of this kind has been put before the House of Commons, the Council of Ministers and the Commission, those concerned are not prepared to face the true consequences of what it says.

10.33 pm

Mr. Nigel Spearing (Newham, South)

The ninth report of the Select Committee on European Legislation—HOC 21-ix of the current Session—attempts to summarise the auditors' report which is the subject of this debate. It is proper to point out that the Committee is assisted in its task by Officers of the House, and our weekly reports and this special report are greatly enhanced by their skill. When people thank the Committee and its members—sometimes even its Chairmen—they should be aware of the fact that it is assisted by Officers of the House.

I use that phrase advisedly, because this House is responsible for the proper expenditure of taxpayers' money. When, some time ago, the EC was running out of money, people said, "Ah! Wait till it hits the ceiling. When the 1 per cent. ceiling is reached there will be some budgetary discipline," and we all stood by as the graph reached the ceiling. However, as the right hon. Member for Worthing (Mr. Higgins)—who is Chairman of the Treasury and Civil Service Select Committee—pointed out, instead of discipline being applied at that point, the ceiling was pierced, and all that we had were ecus falling around the wreckage. That was achieved through the intergovernmental agreement, to which the right hon. Gentleman properly referred, because it was thought to be the way in which the House and taxpayers throughout the Community would achieve discipline. The Government are extremely hot on that in domestic expenditure, but the right hon. Gentleman outlined why that did not work.

Will that view, which I suppose will be adhered to, feature in the meeting on 10 March when the ECOFIN Council meets to discuss the budget? It is a little ironic that the budgetary discipline mechanism applying now will also be on the agenda. I understand that Agriculture Ministers will request that budgetary discipline is put into abeyance for the present year. It will indeed be ironic if budgetary discipline is put in abeyance this year through some treaty let-out, while at the same time the Government will tell the president of the Court of Auditors, who will be present, that they disagree with the court's findings in respect of the intergovernmental agreement in paragraph 3.6 on page 30 of the Official Journal at column 326.

I hope that the Minister will not take that view, but if he does he should so inform the House. In effect he will be picking and choosing from the auditors' report. He will be saying, "We accept a great deal of what the auditors say, but we do not agree with the part where the court says that we have been party to providing illegal funds." Indeed, that is implicit in the words of the motion. That may suit the Government politically, but it is novel for a Treasury Minister, or, indeed, any citizen, to pick and choose from an auditor's report. Indeed, it is a terrible thing to behold. But it appears that the Government will do that.

The position is even worse than the right hon. Gentleman suggested. He properly quoted the important paragraphs, in particular paragraph 3.6 of the report. I shall quote from the Commission's reply to those matters. Page 175, paragraph 3.6a states: In order therefore to ensure that Community obligations could be met and that Community policies could continue to be implemented, whilst respecting the requirement in Article 199 of the EEC Treaty, that the budget be in balance, the Commission made a proposal based on Article 235 of the EEC Treaty, for the Member States to make supplementary finance available to the Community in 1984 which would be repaid when new own resources became available. That did not happen, because the Council decided that that would not be the right way to proceed. The paragraph continues: The Legal Service of the Council shared the Commission's opinion that Article 235 was an entirely proper basis for the regulation. I do not think that the Council thought that, because the paragraph continues: In the event, the Council did not adopt such a regulation. The Member States decided rather to make an intergovernmental agreement to provide additional finance in 1984. The Commission regrets that this agreement was entered into outside the framework of the Community treaties. The view of the Court of Auditors that this was ultra vires and outside the terms of the treaty was apparently shared by the Commission. How can that organisation get away with such activities when a Select Committee of the House, the Court of Auditors and the Commission—with which some of us do not always agree—interpret them to be outside the terms of reference?

The Minister quoted an article in relation to miscellaneous income, but article 199 provides: All items of revenue and expenditure of the Community … shall be included in estimates to be drawn up for each financial period. The intergovernmental agreement did not feature in the estimates, or in the so-called budget. That is a bit dodgy, too.

The right hon. Member for Worthing said that no taxpayer could do anything about it. However, one taxpayer tried. The Government tried to get one intergovernmental agreement through by way of statutory instrument under section 1(3) of the Act, and we all know what happened. There was a court case; the Government withdrew from that route and, properly, introduced a new Consolidated Fund Bill, as they should have done from the start. The taxpayer lost his case because of the judge's view of the word "ancillary".

At that stage, we did not know that the Commission believed that the matter was outside the framework of the Community treaties. Mr. Smedley lost his case, and I understand that the Treasury is still asking him to pay its expenses. I do not expect a reply from the Minister tonight, but I put it to him that if the Court of Auditors, the Commission and another article of the treaty give at least some substance to Mr. Smedley's case on judicial review, it is a bit much for the Treasury, after picking and choosing whether to accept qualifications, to come down on a British taxpayer, and an old-age pensioner to boot, and insist on his paying its expenses for the test case. I hope that the Minister will note that point, if nothing else.

The role of the Court of Auditors is fundamental to transparency and confidence in the financial operations of the Community. In many ways, it does a good job—so good a job that apparently the Government object to its drawing attention to payments which the Government consider to be legal. In some ways, that is an excellent testament to its work and a large question mark against the Treasury, which persists in picking and choosing between qualifications in an audit report.

10.43 pm

Mr. Dennis Skinner (Bolsover)

As hon. Members have said many times, the Common Market has been riddled with fraud from the clay that it started. Although we have auditors in Britain who are supposed to examine malpractices and corruption, in the Common Market the British taxpayer has been paying heavily to be a member of the club. According to official answers, the total net cost to the British taxpayer during the first 10 years of membership, taking into account the barrowloads of money that the Prime Minister was supposed to bring back after all her well-publicised arguments with the Common Market, was £4,726 million. British taxpayers have had to pay a great deal of money for the United Kingdom to be a member of the club.

I read not so long ago that in Italy there were olive trees that existed on paper only and that the moneys claimed for them went to the Mafia. What would happen if a British local authority was involved in fraud to the extent of about 10 per cent. of its budget? That has been suggested of authorities in other countries on many occasions. That sort of money is not available in Britain to allow that degree of fraud to continue. I want to know why the Government have given the nod and the wink to others in the Common Market. Why have they allowed them to fiddle the British taxpayer at such an exorbitant level? A Minister told us the other day that there is not enough money to allow the Government to give pensioners another 40p a week. That was just about enough to allow pensioners to buy mustard plasters during the coldest February that we have had for 40 years. However, another Minister is accepting a report that details £600 million-worth of fraud.

As the right hon. Member for Worthing (Mr. Higgins) said, the Common Market was bailed out this Session by the British taxpayer to the tune of £252 million. Even then, it was still running an illegal budget. A stop must be put to all the money that is pouring out to all the gravy trains in the Common Market. The ex-leader of the Social Democratic Party is being paid a fat pension by the Common Market, and I notice that he is not in his place this evening. He is not present to defend the budget that is before us. I wonder where he has got to.

Where are all the other SDP Members who joined the then Conservative Prime Minister to drag an unwilling British nation into the Common Market without the issue having been put to the vote? Where are Dr. Death and all the rest of them? I suppose that they are in Fulham, but I bet that they are not telling the electors in Fulham of the extent of the fiddling within their beloved Common Market. I note that the hon. Member for Truro (Mr. Penhaligon) is in his place. He should be complaining about the demise of the 500 tin miners in Cornwall instead of trying to defend the rotten system that prevails within the Common Market.

The stage has been reached when we should put an end to this carry-on. The right hon. Member for Worthing has talked about illegal budgets and they have been acknowledged by the Government, including the Prime Minister. However, nothing has been done. That can be said on a day when 80 of my colleagues in Liverpool and Lambeth have been surcharged and threatened with being kicked out of office and made bankrupt for expenditure of less than £250,000. At the same time, others are gallivanting around the world from the Common Market. They are using British taxpayers' money to do so. I read that 63 of them have gone on a trip somewhere. In doing so, they are said to have just about exhausted the moneys that are available for trips, but I do not believe that. I am sure that some more money will be found. Those whose responsibility it is will come rabbiting to the Government for more money. The 63 have taken with them their wives, mates, friends and God knows who else.

However, in the British High Court the judges have decided to hammer 80 councillors for expenditure of less than £250,000. Those who have come before them have not been involved in fraud and they have not rigged the market. They tried to stop the Government from crippling the ratepayers and others who depend on services in Lambeth and Liverpool. That is why it makes me sick.

I have in my hand an article that I saw towards the back end of last year. It is headed "EEC's £600 million fraud" and it says: The official auditors to the common market have uncovered evidence of wholesale fraud in the trade of farm produce. Exporters are claiming millions of pounds in subsidies for food which in many cases does not exist. As much as £600 million a year could be involved … Among the irregularities discoved were: Falsified documents. According to customs officials, a British company was caught trying to export non-subsidised vegetable oil as heavily subsidised butter. There is another system of fiddling, called "the roundabout." The article says: Traders claim several subsidies by sending their produce repeatedly across the same frontier after smuggling it back into the country … At one stage Northern Irish farmers were sending the same cattle across the border so frequently that, in the words of one customs official, 'the cattle knew the way themselves'. There is another fiddle, called exploiting levies. A trader inports a low-fat product which attracts a low import levy, adds oil and re-exports it, claiming subsidy at the full rate. We can laugh at it, but the trouble is that the British people are having to pay through the nose to be in the Common Market. It is time that the British people understood what is happening.

Today, after a £600 million fraud, this Tory Government are giving a nod and a wink to all this irregularity and corruption. If the Government were really concerned about the British taxpayer, the pensioners, the nigh on 5 million people who are in the Tory dole queues, the disabled and all the other people who need assistance, they would not be doing what they are doing tonight. They would be saying to the Common Market, as the right hon. Member for Worthing said earlier, "We are not going to wear this. Take it back. Sort it out. We are not going to take note. It is time that you cleaned up the Augean stables over there in the Common Market."

There has been too much of this Euro-fanaticism during the last decade. We were promised all kinds of wonderful things. The British people were told that the Common Market would get rid of the dole queues, that there would be economies of scale, that in this giant market of 250 million people the economies of scale would result in more efficiency and that all kinds of British goods would be produced. British cars would be sent across to this wonderful market on the Continent and we would have more car workers. Industries in the west midlands and everywhere else would be burgeoning and there would be jobs for everybody.

The whole system has been a fraud from beginning to end. This is the tail end of it—after all these years, after something like £4,700 million, net, has been paid by the British taxpayer, after an illegal budget, after £252 million has been handed out to bale out the Common Market in this parliamentary Session. Yet the Prime Minister is continually telling sections of our society, "Oh, the Government have got no money. It all belongs to the taxpayer." But the British taxpayer has had to foot the bill for this. It is time that we put an end to it.

I do not know what this Minister is going to do tonight. I suppose he hopes that at this late hour he can sneak it through and that we shall carry on again. Then next year the Mafia in Italy, and all the rest of them who have been engaged in these fiddles, will be able to say, "Well, it has gone through that Parliament. It has gone through the others. They had a little bit of a set-to late one night in the British Parliament but they managed to get it through. They've got a 160 majority. One or two people complained." And on and on they will go. Those fat cats in Europe will continue to ride on the gravy trains and to laugh at the British taxpayers who will have to foot this bill.

10.55 pm

Mr. Brooke

With the leave of the House, I should like to reply to the debate.

This has been a brief but interesting and lively debate, and I am grateful to my right hon. Friend the Member for Worthing (Mr. Higgins) and those Labour Members who have participated in it. They have underlined once again the importance which the House rightly attaches to the sound management of Community funds.

The views expressed here this evening will certainly be helpful to myself and other United Kingdom representatives as we prepare for the forthcoming Council discussion in Brussels. As in previous years, I intend to draw this debate to the attention of the Community's Budget Commissioner, Mr. Christophersen, and the Chairman of the European Parliament's Committee on Budgetary Control, Herr Aigner, by sending them a copy of the Official Report of today's proceedings.

I should like to deal briefly with some of the points which have been made. The hon. Member for Thurrock (Dr. McDonald), like myself, welcomed much of what is in the report and supported it, but she did have three worries. The first related to intervention stocks. The Government share the court's concern at the level of public intervention stocks and the costs involved, both in budgetary and economic terms, in their purchase and maintenance. We remain firmly of the view that the only satisfactory long-term solution to the problem of increasing intervention stocks lies in a rigorous price policy, enforced over a number of years, which will bring the markets back into balance and enable existing stocks gradually to be sold off. That will restore intervention to its correct role as a seasonal or emergency support for agricultural production. The Court of Auditors has urged a more systematic approach to the depreciation of intervention stocks. That, however, can take place only after having regard to the availability of resources under the financial guidelines for agricultural expenditure.

The hon. Lady went on to talk about food aid, to which I also referred earlier. I said that the performance on the emergency side had been significantly better in 1985 than it had been in 1984. The average time taken to deliver most food aid which was given balance of payments support is not significant. Shipments may, for example, have to await the right market conditions in the recipient country. What concerns us is the fact that the emergency shipments have not moved significantly faster than non-emergency shipments. The Commission is now reviewing its food aid procedures, and we have left it in no doubt that we expect the review to produce more streamlined procedures for emergency aid.

The auditors do not suggest that their examples of badly packaged food aid, to which the hon. Lady referred, are typical of the programme as a whole. The Commission has spent more on quality control recently, and we have no reason to believe that the amounts of food aid from the Community unfit for consumption are higher than from other food aid donors, but of course we shall continue to pay attention to that.

The third subject mentioned by the hon. Lady was fraud, and in that she was supported by the hon. Member for Bolsover (Mr. Skinner). Of course the Government are concerned, as I stressed earlier, to ensure that all necessary steps are taken to eradicate fraud from the operation of the CAP.

Mr. William Cash (Stafford)

Paragraph 4.28, page 44 of the Official Journal of the European Communities says: The main thing the Court noted was a certain indifference on the part of the Member States to the financial interests of the Community and a more or less general lack of cooperation in a number of areas". I should like to be sure that when it comes to investigating such matters, Britain will not fall into the category described in paragraph (c), which says: finally, the Member States have frequently shown little inclination to cooperate with the Commission's enquiries, particularly when frauds or irregularities within their territory were involved. I want to be sure that that will not apply to Britain as a member state.

Mr. Brooke

I am grateful to my hon. Friend for raising that matter. I had intended to come to our position. We are generally satisfied with the current arrangements, but of course we are prepared to co-operate in any intensification of activity in that sphere, although naturally we would hope that controls and anti-fraud activities were cost-effective.

Reference has been made to the potential volume of undetected fraud and the fact that it might be larger than the figure that the Court of Auditors has quoted. It is easy to allege that there is a volume of undetected fraud, but if it is undetected it is, by definition, difficult to quantify.

The United Kingdom is active in the field in the prevention of fraud, with Ministry of Agriculture, Fisheries and Food and International Board for Agricultural Produce investigation units and Customs and Excise co-operating, not only internally, but through the mutual assistance framework with the authorities of other member states.

Dr. McDonald

The hon. Gentleman has rightly explained what the British Government are doing. Nevertheless, as I stressed in my speech, the activities of other member states leave much to be desired, to put it mildly. Just what is Britain doing to ensure that other member states play their pant? There is no reason why the British consumer should subsidise the fraudulent activities of others, never mind the wasteful CAP.

Mr. Brooke

I sought to say, both in my first speech and just now, that we are supportive of the general attitude to these problems. I give the assurance that the hon. Lady seeks.

The hon. Member for Bolsover quoted from a newspaper report and was good enough to state that people were being caught and arrested. Nevertheless, I have to contest the language that he used.

The hon. Member for Thurrock generally approved the report by the Court of Auditors, and in that respect we share her view.

Mr. Spearing

The hon. Gentleman referred to my hon. Friend the Member for Bolsover (Mr. Skinner) and implied that his language was a little extravagant. On the issue of the Mafia and olives, will the hon. Gentleman at the meeting to which he referred, request the president of the Court of Auditors to state his view or, if not, to report in the succeeding year?

Mr. Brooke

I acknowledge that the level of control exercised in certain member states has been a cause for concern. Olive oil production is obviously one of the issues to which that applies. As the president of the Court of Auditors is coming to the Council's meeting, no doubt there will be an opportunity for a discussion on that matter. the Commission has been assiduous is pursuing the allegations, but has not yet been able to substantiate them. Clearly, the pursuit continues.

My right hon. Friend the Member for Worthing returned to the subject on which he intervened during my first speech. My right hon. Friend and the hon. Member for Newham, South (Mr. Spearing)—I pay tribute to the Select Committee on European legislation, of which the hon. Gentleman is Chairman—referred to the intergovernmental agreements. As I said in my opening speech, the Government do not share the court's views on this matter. I take the point made by my right hon. Friend the Member for Worthing that we are taking issue with an observation by the auditors. I must say, in passing, that disagreements between auditors and their clients are not unknown in the conduct of ordinary professional business.

Whatever one's opinion of the desirablilty or otherwise of such agreements, the Government have no doubt that the agreements for 1984–85 were perfectly compatible with the treaties and involved no infringement of them. All other member states shared the Government's view, as did the Master of the Rolls in our Court of Appeal, as the hon. Member for Newham, South said.

Mr. Higgins

Will my hon. Friend take up my point about reimbursable advances? I said that if extra money was obtained by way of gift, or whatever, that was legitimate, in his view. The Court of Auditors and I do not agree. What about what are effective loans or reimbursable advances? Under what paragraph of the treaty do they fall?

Mr. Brooke

In my first speech I went on to refer to gifts and bequests, but I specifically referred to the phrase in article 4 "irrespective of other revenue" meaning items embraced by the measure.

Mr. Higgins

A reimbursable advance is not revenue; it is a loan.

Mr. Brooke

Just as the Government are in conflict with the Court of Auditors, so it appears that on this subject there will be a continuing debate between us and my right hon. Friend the Member for Worthing.

My right hon. Friend continued to refer to budgetary discipline and correctly identified the dispute between the Council and the parliament, as a dispute which the council is undertaking both in the context of the legality of the budget and to ensure that budgetary discipline is maintained. The hon. Member for Newham, South also drew attention to this matter.

Mr. Higgins

I am grateful to my hon. Friend for giving way. He is always very courteous, and I apologise for intervening again. Under which provision of the treaty is the Community allowed to accept a loan?

Mr. Brooke

It is clear that there are outstanding issues on which, as I said a moment ago, my right hon. Friend the Member for Worthing and I must correspond. I should like to return to the point that all member states are in agreement with the view that we have taken.

Mr. Spearing

They are all wrong.

Mr. Brooke

My right hon. Friend went on to refer to the two new budget lines. The Commission entered in the supplementary budget a new article entitled "expected balance for the year". I referred to this in my opening speech as the cancellation of expenditure appropriations which it was clear would not be needed. By taking this action we will improve budget transparency and ensure that revenue and expenditure are more accurately matched.

The hon. Member for Newham, South referred to the ECOFIN meeting on 10 March. The next step, which will follow the court case which the Council and our Government have initiated, is to ensure that budget discipline is respected in 1987. The ECOFIN Council meeting next Monday is due to discuss the confirmation of the 1987 reference framework. In particular, we will consider the Commission's figures for calculation of the 1987 agricultural guideline, and that will be an important constraint on the 1987 price fixing negotiations.

Mr. Spearing

The point that I made was about the 1986 agricultural settlement and the proposal which I understand will be made, which would breach the framework to which the Minister referred. Will this matter be decided on 10 March and so settle this year's non-budgetary arrangements?

Mr. Brooke

The issue will come before the Council on 10 March, but the Council of Agriculture Ministers will not discuss the matter until 25 March. Preliminary discussions were held a short while ago.

The hon. Member for Bolsover referred to fraud and drew attention, as did my right hon. Friend the Member for Worthing, to the text of the motion. My right hon. Friend referred to the fact that we were taking note. That motion goes on to endorse the Government's efforts to ensure implementation of the Court of Auditors' recommendations where these would improve the Community's financial procedures. This reveals the Government's strong support for the report from the Court of Auditors and its contribution to the draft procedures. I ask all right hon. and hon. Members to support the motion.

Question put:—

The House divided: Ayes 67, Noes 8.

Division No. 93]	[11.08 pm
AYES
Alton, David	Mather, Carol
Amess, David	Merchant, Piers
Baker, Nicholas (Dorset N)	Nicholls, Patrick
Baldry, Tony	Osborn, Sir John
Brandon-Bravo, Martin	Peacock, Mrs Elizabeth
Brinton, Tim	Penhaligon, David
Brooke, Hon Peter	Portillo, Michael
Brown, M. (Brigg & CI'thpes)	Powley, John
Butcher, John	Proctor, K. Harvey
Butterfill, John	Raffan, Keith
Cash, William	Rathbone, Tim
Chalker, Mrs Lynda	Rhys Williams, Sir Brandon
Chope, Christopher	Roe, Mrs Marion
Clarke, Rt Hon K. (Rushcliffe)	Sainsbury, Hon Timothy
Cope, John	Sims, Roger
Dover, Den	Spencer, Derek
Durant, Tony	Stanbrook, Ivor
Dykes, Hugh	Steel, Rt Hon David
Eyre, Sir Reginald	Stern, Michael
Gregory, Conal	Stewart, Allan (Eastwood)
Griffiths, Sir Eldon	Stradling Thomas, Sir John
Grist, Ian	Thompson, Patrick (N'ich N)
Ground, Patrick	Thurnham, Peter
Hamilton, Hon A. (Epsom)	Wallace, James
Hargreaves, Kenneth	Waller, Gary
Higgins, Rt Hon Terence L.	Watson, John
Howells, Geraint	Watts, John
Hunt, David (Wirral W)	Wells, Bowen (Hertford)
Knight, Greg (Derby N)	Wheeler, John
Lennox-Boyd, Hon Mark	Whitney, Raymond
Lilley, Peter	Wood, Timothy
Livsey, Richard
Lloyd, Peter (Fareham)	Tellers for the Ayes:
Lyell, Nicholas	Mr. Donald Thompson and
Maclean, David John	Mr. Michael Neubert.
Malone, Gerald

NOES
Clwyd, Mrs Ann	Parry, Robert
Duffy, A. E. P.	Spearing, Nigel
Godman, Dr Norman
Leighton, Ronald	Tellers for the Noes:
Lloyd, Tony (Stretford)	Mr. Dennis Skinner and
Loyden, Edward	Mr. Harry Cohen.

Question accordingly agreed to.

Resolved, That this House takes note of the Annual Report of the European Court of Auditors on the financial year 1984, together with the replies of the Institutions, and supports the Government's efforts to ensure implementation of the Court's recommendations where these would improve the Community's financial procedures.