HC Deb 25 February 1987 vol 111 cc371-92 10.12 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 1985, together with the replies of the Institutions; and approves the Government's efforts to press for effective Budget discipline and proper financial control of Community expenditure.

The House has before it for scrutiny this evening the European Court of Auditors' annual report on the Community's 1985 financial year. This report offers to the Community, and to its member states in particular, a key opportunity to consider in some detail the effectiveness with which the Community's resources are in practice used. We are fortunate to have as a basis for our debate the clear and helpful report from the Select Committee on European Legislation. I should like on behalf of the Government to pay tribute to the important work of the Committee and to its thoroughness in carrying out its scrutiny role on behalf of the House.

The Government share the Committee's assessment that the court's role is a daunting one. As the range of Community activities has expanded in recent years, the court's task has been made more difficult and even more vital to the task of ensuring that the Community's finances are managed with the necessary efficiency and rigour. I am sure the House will join me in putting on record our appreciation of the importance of the court's work and our support for its endeavours. We must constantly make it clear that the same standards for which we strive in matters of national public expenditure must also be applied to the Community.

The role of the Court of Auditors' report in the Community's budget procedure is set out in the explanatory memorandum which I submitted to the House on 22 January. As the House will recall, it is the responsibility of the European Parliament, acting on a recommendation agreed by qualified majority in the Council of Ministers, to grant a discharge each year to the Commission in respect of its implementation of the Community budget. The Council bases its recommendation for discharge upon discussions of the court's annual report. The ECOFIN council will be debating this question on Monday 9 March, and comments made by hon. Members this evening will be a useful input to the Government's preparation for that discussion.

Mr. Mart will again be present at ECOFIN to present his report in his capacity as president of the court. I am pleased to be able to report to the House that over the last few years pressure from the United Kingdom has helped to ensure that these discussions reflect more fully the importance of the work of the court in the financial affairs of the Community.

I would like to highlight key areas in the court's report. The court draws attention to the need for a review of commitments outstanding which could turn out to be defunct. The United Kingdom Government support this call strongly and we look to the Commission to take further measures to weed out commitments still on the Community's books which no longer relate to real projects. The financial pressures faced by the Community mean that this must be a priority over the coming year.

The court also highlights the outstanding liabilities of the Community. A figure of 20 billion ecu has been mentioned in this context. In considering the Community's liabilities it is important to distinguish between those which relate to binding contracts entered into and those which concern wider political commitments made by the Community which have yet to be translated into financial terms. It is not always helpful to lump together definite and contingent liabilities in this way, and the resulting figures must be used with caution.

The United Kingdom's position is clear. It is normal for the Community to have outstanding liabilities, particularly in the structural funds. Indeed, in a system where some of the payment may be made a considerable time after the contract is signed this is advisable to ensure that funds are not disbursed before it is necessary to do so. However, we need to maintain stricter control over the growth of those liabilities. The Commission must ensure that outstanding debts are held to the minimum necessary for the efficient functioning of the Community. The budgetary authority decided in the 1986 budget to take major steps to redress the imbalance between commitments and payments to which the court drew attention. Now that this has been achieved, a strict implementation of budgetary discipline is required to ensure that its future decisions maintain a sensible balance in this area.

The court reiterates points made in previous years concerning the use of an intergovernmental agreement—IGA—to balance revenue and expenditure in 1985. For reasons set out at some length on other occasions, the Government do not accept this criticism and, in common with all other member states, consider that the use of an IGA in the particular circumstances of 1985 was a proper and legal means of providing a balanced budget. The Government agree strongly, however, with the underlying concern of the court to ensure that expenditure is maintained within the revenue available.

Mr. Terence Higgins (Worthing)

My hon. Friend has said that that brought about a balanced budget. Was it not absolutely clear that the budget did not balance and that the IGA was used to bring about a balance which did not exist within the terms of the treaty?

Mr. Brooke

As my right hon. Friend will recall, that is an issue on which he and If exchanged words on the Floor of the House and in correspondence.

Mr. Nicholas Budgen (Wolverhampton, South-West)

A very serious criticism has been made of the system of advances, which is described in paragraph 1.11 as being temporary, because it has become a permanent feature of the Community finances. Will my hon. Friend please answer that criticism?

Mr. Brooke

It is going a little far to say that the particular arrangements which were made in 1985, and which, as my hon. Friend says, were described as temporary, have become a permanent feature of the Communitys affairs.

Mr. Tony Marlow (Northampton, North)

Will my hon. Friend give way?

Mr. Brooke

No. I want to make a little progress, and then I will gladly give way.

The court also comments in some detail on the operation of the provisional twelfths regime, which ruled Community finances from January 1985 until a 1985 Budget was finally adopted in June 1985. The court made clear that there are several unsatisfactory aspects in the manner in which the provisional twelfths regime currently operates. The Government broadly support these criticisms and will be pressing for amendments to be made to the necessary legislation in the context of amendment of the financial regulation.

The court found that the number of irregularities detected in CAP expenditure increased by 70 per cent. between 1984 and 1985, and noted the high concentration of those irregularities in some countries. The court thought that regulations should be amended to enable the Commission to intervene directly to investigate fraud. The Commission replied that it was taking steps to improve cooperation between its officials and those in member states and had put forward to the Council an amendment which would enable it to carry out inspections in member states.

Mr. Marlow

My hon. Friend has said, and we are very pleased to hear it, that the IGA will not become a permanent feature and will not become embedded in stone for ever, but he will know that there is to be some sort of whip-round—perhaps sensibly—to deal with the vast mountains of agricultural produce and huge lakes that exist at the moment. Could my hon. Friend, who has said that the IGA will not become a permanent feature, give the House an undertaking that if this whip-round takes place, and it is a loan, and we are to be repaid that loan, the repayment will in no way be dependent upon this House agreeing to a further increase in Community own resources at a later stage?

Mr. Brooke

That was a somewhat convoluted question, but I repeat what I said to my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen): the features which were described as temporary have not become permanent. Indeed, during the 15 months in which I have held my present post, I cannot recall any discussion in the budget Council of an IGA. I acknowledge the overhang of agricultural expenditure, for which proposals will be required from the Commission and to which the Council will address itself.

Mr. Marlow

Will my hon. Friend give way?

Mr. Brooke

No, I will continue if I may. My hon. Friend will have ample opportunity to catch your eye, Mr. Deputy Speaker, in our less than full House tonight.

The court has taken its usual careful look at the administration of the Community's development aid. We were especially pleased to see the court's comment that administration of the Dublin plan, under which the Community and member states undertook to deliver 1–2 million tonnes of cereals to famine-affected countries in Africa in 1985, was "entirely satisfactory". It was a difficult programme to implement, but the total European effort of the Community and member states combined undoubtedly made a significant contribution to relieving famine in that year.

There is less evidence of delays in delivery of food aid than in previous years. Previous Court of Auditors reports about such delays were a significant factor in the Council's decision to reform radically the Community's food aid procedures under the United Kingdom presidency last November. We believe that the new arrangements will allow much faster response in emergencies.

Some deficiencies in the administration of aid from the European development fund are again brought to light, but at least some of the difficulties mentioned are being tackled in the implementation of the new Lome convention, which was signed by the Community and by 66 African, Caribbean and Pacific countries. It came into force on 1 May 1986.

Mr. Budgen

Will my hon. Friend give way?

Mr. Brooke

Does my hon. Friend wish to intervene on the subject of the Lome convention?

Mr. Budgen

I hope that my hon. Friend will not pursue the tactic of talking at great length about peripheral issues to avoid answering questions that have been put to him properly by my hon. Friend the Member for Northampton, North (Mr. Marlow). The House is interested in how the books will be made to balance properly, and a lot of talk about peripheral issues will not interest us very much.

Mr. Brooke

I do not wish to take issue with my hon. Friend, but I asked him whether his question was about the Lomé convention. Having heard his question, I do not think that it was. We have ample opportunity for debate this evening, and I look forward to hearing the points made by my hon. Friends and by other hon. Members.

The Lomé convention entered into force on 1 May 1986. It allows European Community aid to be better planned, more coherent and so more effective.

There is now recognition that developing countries have to be helped over the shortage of foreign exchange which prevents them making use of existing investments. There is provision in the new convention for the supply of spare parts and essential commodities, alongside more conventional investment projects. The concentration on particular sectors for Community aid and the introduction of policy commitments by recipient countries also mean that the Community can make a better evaluation of the extent to which developing countries will provide the policy environment and, if necessary, local finance to make the aid work.

In conclusion, the Government recognise the need for greater rigour in decisions on the spending totals available to the Community and in the financial control exercised over that spending. We shall continue to impress on our partners the need for the Community to live within its means. Resources are limited, and it is as important for the Community, as for its member states, to cut its coat according to its cloth.

Similarly, for any given amount of Community expenditure, it remains just as important as ever that such spending should be as efficient and cost effective as possible. The Court of Auditors has a central role in helping to bring that about and we shall continue to support the court in its efforts.

10.25 pm
Dr. Oonagh McDonald (Thurrock)

I want to agree in one sentence with what the Minister said and to welcome the Select Committee's report and its useful analysis of the report of the Court of Auditors. It makes much better reading than the large heap of papers that we have received from the Court of Auditors. However, from there on agreement between us must cease. Indeed, there did not seem to be much agreement between the Minister and his hon. Friends either.

The Minister referred to the removal of defunct commitments— that is something with which we all agree and which we want to happen. However, he was really clutching at straws in a desperate effort to find some way of reducing Community expenditure, that being the only possibility.

I find the motion puzzling. We are asked to take note of the annual report and to approve the Government's efforts to press for effective Budget discipline and proper financial control of Community expenditure. I am not quite sure to what the final part of that sentence refers, because budgetary discipline did not apply in 1985.It allegedly began to apply in 1986 when the own resources ceiling was put up to 1.4 per cent. However, most of us doubt that budgetary discipline applies at all.

On the Government's efforts to press for effective budget discipline, if the Prime Minister occasionally going along to the Council of Ministers and hectoring the other Ministers—telling them that we must stop spending as much in the Community—counts as that, it has been remarkably ineffective ever since the discipline was allegedly introduced.

The Court of Auditors' comments about 1985 will no doubt be repeated when it reports on 1986 and 1987. In 1985 the percentage of agricultural spending steadily increased and reached 70 per cent. In the current budgetary year, agricultural spending will overrun yet again and there will be a 5 billion ecu deficit. It is expected that the figure will range between 3 and 5 billion ecu at the end of this year, precisely for the reasons that many of us pointed out right from the start—the gap in budgetary discipline which allowed for account to be taken of changes in the exchange rate. The fall in the dollar has brought that about exactly as everybody— certainly most hon. Members present—repeatedly said it would.

Turning away from what we expect to happen in 1987 and referring back to what we are supposed to be debating, which is the Court of Auditors' report, what the Court of Auditors has to say about the way in which the Commission and certain member states run their finances shows that the notion of ever imposing budgetary discipline on that lot is little short of a farce.

Let us consider what the Court of Auditors says about the accounts in the opening paragraphs of its report, from 1.5 onwards. It states: Setting them out in this way lays the Commission open to the accusation of not having given a true and fair view of the Community's actual financial situation. That point is emphasised in paragraphs 1.10 and 1.11. Paragraph 1.10 states: For the second year running, the Communities have not observed one of the fundamental principles upon which their financial organisation is based, namely the need to cover fully each year's financing needs with the equivalent amount of annual revenue …use of advances from the Member States, far from helping to amortize the 'burden of the past' … has, on the contrary, allowed it to increase throughout the financial year 1985. And so the report goes on; there is no real attempt to control Community spending—

Mr. Budgen

What about the stocks?

Dr. McDonald

I shall come to that matter, if the hon. Gentleman will just wait for a moment or two.

Community spending continues to get out of hand, and at the end of the report the Court of Auditors says that, had the accounts been properly presented, it would have been clear that the 1 per cent. ceiling was busted in 1985 and had approached a ceiling of 1.3 per cent. of VAT.

If the Government really want anything like financial discipline to be imposed, they could make a start by ensuring that every member Government paid. Paragraph 3.7 of the report records that, by 31 December 1985, France, Italy and Luxembourg had failed to pay the amount agreed under the intergovernmental agreement. We want to know when those amounts were paid and what happened to France, Italy and Luxembourg for delaying their payments. If major members of the Community such as France delay their payments, how can we rush to pay so nobly? How about a little delay on our part? Why do we not say to the French Government, "You pay first and we will follow"? Rather than the Prime Minister leaning on other Governments with empty hectoring, following that suggestion might be more to the point.

Paragraph 4.40—the Minister referred to this point in passing, but he was considerably more optimistic than the Court of Auditors— refers to 219 cases of irregularities involving 12 million ecu. After a long investigation, the recoveries made in 1985 a result of overpayment related to 70 cases for the amount of only 1.3 million ecu. To suggest that there is any greater efficiency or that the Community can make any proper checks on that is to be far too optimistic. Paragraph 4.40 states: Faced with the same observation for the financial year 1984, the Commission agreed to give the reasons for this imbalance; at the present time, the Court has still not received the answers promised by the Commission, which are even more necessary considering the considerable increase in 1985.

Irene— not a lady, but a computerised system—should have been introduced., but is still delayed. it is to be used for recording and analysing frauds and irregularities reported by member states. Not surprisingly, the olive oil problem referred to in paragraphs 4.64 and 4.65 still exists, despite— and this shows why the Minister's optimism is so ill-founded— the confident prediction of the Commission in reply to the Court of Auditors' special report of June 1985. Perhaps the Minister could say a little more about what happens on issues such as olive oil and what progress has been made on the recording and analysing of frauds and irregularities, instead of expressing the type of optimism that he did.

Table 4.5 shows clearly the costs of public and private storage in 1984 and 1985. It states that the commission's accounting procedures make it no longer possible to get full or accurate information for a particular financial year. The Select Committee quite rightly drew attention to that fact. The Commission is not in a position to provide a full disclosure of costs and financing of stocks, an increasing share of which is borne directly by the member states. By November 1985 the total value of the cereals in storage was two fifths of the value of the stock of all farm products. The price package of 1986–87 is better, hut, in the Court's view, does not go anywhere near to achieving a solution.

The Government, in their motion, refer to their pressing for budgetary discipline, but, quite honestly. there is little sign of such pressures having any effect in 1985. There is little sign that they will have had any effect in 1986. As for 1987, we all know full well that the budget will run into enormous difficulties and that, yet again, there will have to be a Government whip-round, probably towards the end of this year—though, if we say that at this stage, we shall probably find that it comes earlier rather than sooner.

I suppose that that is one of the events that the Government hope will happen after a general election, so that they will not have to deal with the problem and come to the House with their collective tail between their legs and say, "Sorry, budget discipline failed. The 1.4 ceiling has been busted. We have not succeeded in reforming agricultural policy. We have not found proper agreement. By the way, talk has been going on with other members of the Community about "possibilities." Who knows what the discussions that the Foreign Secretary has been having over the past few days entail for future expenditure, but most commentators suggest that the future of that expenditure and the future Community burden on us is not at all bright.

When we are asked to approve the Government's pressure to bring about budgetary discipline, we can record yet another year of dismal failure that the Court of Auditors has quite properly and fully exposed. If a company kept its finances in such a way, it would not be allowed to conduct any business. In its present state, we should not allow the Commission to have vast sums of public money to fritter away in such a fashion.

10.38 pm
Mr. Terence Higgins (Worthing)

The House should be grateful to the Select Committee, under the chairmanship of the hon. Member for Newham, South (Mr. Spearing), for its report. I should like to refer to a point made in the report. It states:

"It—

That is to say, the Court— notes that some Member States are not prepared to cooperate with the Court and the Commission over access to information … with the result that the court has not so far been able to discharge fully its responsibilities for the audit of the VAT own resources and the EAGGF Guarantee.

What will the Government do about this matter? Quite clearly, it is not acceptable that taxpayers' money should go out in that form. The body responsible for auditing such matters cannot get information from other Governments. My hon. Friend said that he would take into account the views that are expressed in this debate when the matter is discussed in the wider forum. I hope that he will express in the strongest possible terms that this is not acceptable. I want to know what he can do about it, and also what he proposes to do about it.

We were assured by my right hon. Friend the Prime Minister some time ago that as more countries became net contributors, this would provide an effective guarantee of budgetary discipline. However, one has only to look at the long written answer that my hon. Friend the Minister of State gave on 17 February 1987 to see that he said that he voted against the Council's proposals but that all the other member states voted in favour. So much for the argument that the most effective guarantee of budgetary discipline is the fact that more countries are now becoming net contributors.

As for the wording of the motion, it takes note of the Annual Report. It does not approve it. Last year I pointed out in our debate that it would be more appropriate for the House to approve it. There is certainly a case for spelling out in greater detail the kind of concerns that are expressed in the Select Committee's report, so that when they are discussed in the European forum my hon. Friend can put clearly before that wider group the fact that the House of Commons has expressed the view, for example, that it is deplorable that the information has not been provided to enable the court to carry out its duties.

Mr. Bowen Wells (Hertford and Stortford)

Does my right hon. Friend have any evidence that suggests that the auditors' report is discussed by Ministers at any time?

Mr. Higgins

I understood my hon. Friend the Minister to say that that will happen. if that is not so, perhaps he will correct the matter in due course. My hon. Friend the Member for Hertford and Stortford (Mr. Wells) may be right. If so, that would be very bad indeed.

The second part of the motion approves the Government's efforts to press for effective Budget discipline and proper financial control of Community expenditure.

As the Treasury Select Committee has pointed out on previous occasions, it is quite clear that effective budgetary discipline has not been imposed. The motion implies as much, although the increase in the VAT ceiling was made only on the clear understanding that there would be effective budgetary discipline. However, all that we are told in the motion is that we should approve the Government's efforts to press for effective budgetary discipline. That has not yet been realised, but the increase in the VAT ceiling has been realised and the money paid under that ceiling has been realised, too.

Most of the problems are caused by the common agricultural policy. It does not meet the case for Ministers to come back after negotiations and say that they have had a splendid success over the CAP. It is not possible to patch it up. The only effective way to deal with the CAP is to abolish it. It is incapable of reform. This week's edition of The Economist contains a very cogent article. I could not hope to express the matter as clearly as it is expressed in that article. It relates to the green currencies, the multiple green currencies and the various monetary compensatory amounts that have been introduced.

I ask my hon. Friend the Minister a very simple question. Why is it that agriculture should be protected from fluctuations in exchange rates when no other industry is? I do not understand why that should be so. Perhaps he will give us an answer to that rather simple question, since many of the problems to which the Court of Auditors has given attention stem precisely from those arrangements.

I ought to spend a moment or two on the criticisms that are made in the Court of Auditors' report. It states very clearly, as it did last year, that the Court particularly regrets that a situation has been gradually allowed to arise that increasingly contravenes the requirements of a balanced budget and that the institutions have not always exercised the budgetary powers conferred upon them under the treaty. My hon. Friend said that all these things were temporary and not a permanent arrangement. That is contrary to the clear implication of paragraph 1.12 of the Court's report; referring to paragraph 1.10, it says: This being so, calling for advances from the Member States, though presented as a temporary emergency measure, will inevitably"— I stress the word "inevitably"— become a permanent financing tool if the Community is both to remain within the 1.4 per cent. limit established for 1986 and 1987 for the Community rate of VAT own resources and start seriously to amortize part of the accumulated past liabilities which, alone, already represent the equivalent of more than one year's VAT revenue for the Communities. For my hon. Friend to come before the House and to say that this is all a temporary arrangement is contrary to what the Court is clearly arguing, namely, that it is inevitable that it should go on from being a temporary arrangement year after year to becoming a permanent arrangement. I hope that he will accept that point and tell us what the Government propose to do about it.

My hon. Friend put great stress, as indeed the Court does, on the question of the outstanding commitments or liabilities. He distinguished between binding contractual commitments and political ones. Let us concentrate for a moment on the binding contractual commitments. My hon. Friend was not quantitative in his approach. Could we be told what he understands the binding contractual commitments to be in the period covered by the report and in subsequent periods to the extent that figures are available?

My hon. Friend emphasised, as the Court does, that some of the commitments may be defunct. It is greatly to be hoped that some are defunct. Of course, the numbers that are likely to be defunct are very small compared with the total. Just to grasp at straws by saying that some of the commitments probably will not be realised is to cast on one side the much more important question, of the size of the commitments and liabilities that are likely to be realised.

The position outlined by the Court of Auditors is deplorable. The Government must get a grasp on it rather than seek to suggest that all is allright, that we need not bother and so on. No one who reads this document could possibly believe that that is so. I am sure my hon. Friend does not believe it. Since no doubt we shall return to this year after year, let us on future occasions have motions which set out in the clearest possible terms that the position outlined in the court's report is not acceptable and that the Government are not prepared to accept it.

10.48 pm
Sir Russell Johnston (Inverness, Nairn and Lochaber)

As a general principle I always prefer agreeing to disagreeing with people.

Mr. Marlow

Does that apply to the SDP?

Sir Russell Johnston

If I may respond to that, it is indeed a principle of the alliance.

I am happy to begin by associating myself with the points made by the right hon. Member for Worthing (Mr. Higgins) at the beginning of his remarks. Clearly it is not only unsatisfactory but wrong that information should be denied to the Court of Auditors. I hope that the Minister will respond to that point and say that Her Majesty's Government are as anxious as the right hon. Gentleman to see the matter corrected.

Like the Minister, when I looked at the report of the Select Committee on European Legislation my eye also fell on the sentence about the Court of Auditors having to face a range which is "increasingly formidable" and a task which is "correspondingly daunting". I accept that not only as a comment but as a compliment to its 12 members.

To those hon. Members who will probably use this debate as yet another opportunity to knock the European Community around the ring I would say—the hon.

Member for Northampton, North (Mr. Marlow) looks shocked at that suggestion, but, judging from my experience, he should not be shocked—the Court, in the face of complex problems, succeeds in producing penetrating and effective criticism. The members of the Court deserve congratulation for that success. The Community also deserves some congratulation for having an instrument as effective and forthright as the Court of Auditors. It is welcome that the reply of the Commission refers to changes in administration. The idea of a four-year financial perspective is also welcome.

It is not easy to deal with a wide-ranging report in a short time, and I shall concentrate on a number of central issues. The right hon. Member for Worthing quoted from the conclusion of the first part of the Court's report. I would like to quote another paragraph, which I fear is equally critical. The right hon. Gentleman quoted paragraph 1.11 about the advances, but paragraph 1.10 bluntly states that the Communities have not observed one of the fundamental principles upon which their financial organisation is based, namely the need to cover fully each year's financing needs with the equivalent amount of annual revenue. What is more, use of advances … a preponderant and growing share of these liabilities does not correspond to this natural growth of commitments entered into in connection with future common policies, but rather corresponds to the systematic carrying-over of previous budget deficits and to postponing the task of accounting for certain costs arising from agricultural stocks to future budgets.

That is a serious fundamental criticism of the budgetary position. The right hon. Gentleman did not refer to another criticism that I, from my pro-European standpoint, find as grave as the financial criticisms. That criticism is contained in paragraph 1.12, which states: This prospect is all the more regrettable as recourse to advances from the Member States has already shown, in 1984 and 1985, the extent of the damage done to the financial autonomy of the Communities which was the objective of the authors of the Decision of 21 April 1970 on the Communities' own resources. The fact is that the use of a system of advances is tantamount to renationa.lising the budget of the Communities and, in so doing, negating the objective of the above-mentioned decision. Secondly, the need to obtain from each Member State prior approval of the advances reintroduces the power of individual veto into the Communities' budgetary decision-taking procedure, which has hitherto been characterised by voting by qualified majority. When the Minister replies, I hope that he will say something about that.

Those who believe that there are considerable advantages to be derived from our membership of the Community cannot baulk at the grave position of the budget. There is an urgent need to reform the budget.

Hand-to-mouth solutions, such as non-reversible advances, carrying-over of deficits to the following years and those suggested by the right hon. Gentleman are not long-term solutions. That is clearly stated by the court and the Commission.

With respect to the hon. Member for Thurrock (Dr. McDonald), I did not think that she was fair to castigate the Commission. The Commission's record is good. It has tried very hard to put pressure upon the Council of Ministers to act with more prudence and probity than it has done in the past. I do not believe that the blame rests at the Commission's door.

The increase in the VAT element of our resources following the Fontainebleau summit was largely swallowed up by carried-over commitments from previous years, Britain's rebate, and agriculture, which has left little for new policies. The 1987 budget, which was agreed two and a half weeks ago, will be about £3 billion short. That is a fact. It might be a bit more or less, depending on the United States dollar and the agricultural harvest. It will still be short of the figure that is necessary to cover inescapable commitments to the common agricultural policy.

The need for budgetary reform is obvious, but it is important for the Government to realise that one will not achieve that unless one takes a collective attitude. Constantly to put national interests, which often are electoral interests, before the overall benefit of the Community is a certain way to create future budgetary problems.

I know that it has been said before, and that it does not diminish the force of the criticisms that have been made, but one should remind oneself that the overall budget of the European Community, through which 12 countries coordinate a range of policies for joint action, and which represents them on the world stage in all trade, agriculture and fisheries negotiations, is about three fifths of Britain's social security budget. So one should get it into perspective. That does not reduce the force of the criticisms made, but it is something that one should remember.

In the view of members of the alliance, the structural funds are an important component in the budget. We would argue for an increase in investment to deal with the problems of unemployment. There is no doubt that the gap between rich and poor regions of the European Community, which is already a major problem, is likely to get worse still as a result of the achievement of the internal market by 1992. One is in favour, but there must be some checks or the situation will become much worse. That is the major issue, which Liberals in Europe will discuss at our European Community conference of European Liberal Democrats, in Lisbon, at the beginning of April.

The Select Committee's report refers to the regional fund and the fact that ten years after the creation of the Fund it is still hard to assess its effectiveness. That is true. But one of the reasons for that is the lack of information about additionality of aid from the Community and the extra development effort that such aid will make possible. Therefore, we in this country contribute to the inability of the Community to assess that properly. We have long criticised the United Kingdom practice of EC aid being simply swallowed up by the Treasury instead of being clearly viewed as additional to the United Kingdom's own effort.

It is perhaps too early to say anything specific or definite about what Mr. Delors has been saying, but it is impossible to have such a debate on the Court of Auditors comments without making some reference to Delors. I am surprised that that has not yet been done. Although it is not possible to be firm about it, on a reading of his presentation to the European Parliament last week, I believe that it is a thoughtful, practical and forward-looking basis for negotiation. That is the sort of approach and initiative that one would have liked to see occur during the United Kingdom presidency.

I have said many times in these debates that when the United Kingdom— very successfully, I do not deny— negotiated the rebate, it should have not simply negotiated a rebate, but tried to negotiate a fair general basis for budgetary payments. The only fair basis seemed to be some relationship between gross national product and the payment that the country made. That is what is contained in the Delors proposal. Equally, Delors said that without CAP discipline everything else is meaningless. I accept that completely. His aim is to allow an increase in European Community income from about £27 billion as it will be this coming year to £36 billion by 1992. That is a modest objective if one is to have realistic increased expenditure on research, the environment, regional and social funds and matters of that nature.

If the Community criticises itself, as the Court of Auditors has done, it is seized upon by people who criticise every aspect of the European Community. We continue to believe that the Community is essential to Britain's future prosperity and security and influence in the world. We should take the lead in seeking more effective co-operation with our European partners over the widest possible range of issues.

11.2 pm

Mr. Hugh Dykes (Harrow, East)

Following the remarks of the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston), one is tempted to discount slightly the remarks and advice of the Opposition spokesman and also perhaps some of my hon. Friend's advice because their motives are bound to be a little suspect, at least politically. The Labour party seemingly is in favour of a huge expansion of public spending, but is not in favour of Commission public spending. It is always severe about measuring and testing it. I suspect some of my hon. Friend's motives slightly, because their criticisms transcend in an existential way more than just looking at the Court of Auditors.

It is equally possible, perhaps in a reverse sense, not least as a member of the Select Committee, to express some doubts and ask some searching questions about this annual examination by the Court of Auditors. Obviously and manifestly some of these practices, procedures and problems are still unsatisfactory. Therefore, we pay tribute to the Court of Auditors and its developing work, and for the manner in which it has established its own collective corpus and attitude in trying to examine properly Community expenditure. This is an enormous report, and akin to that the Select Committee's comments are traditionally rather long on this subject.

One of the encouraging aspects of the report for enthusiastic Europeans like myself is that the Court of Auditors is presided over by Mr. Marcel Mart from Luxembourg, who is an extremely enthusiastic and creative European, like many Luxembourgers, but none the less a good and effective guardian of this type of scrutiny of Community expenditure.

The overriding conclusion from this report, from the annual report and from the Select Committee's own examination of them is that the Community's budget problems are, to some extent, substantially artificial because of the ceiling constraints. When all the financial pressures are there— financial pressures which exist equally in the member states which do not have those constraints—there is no ceiling; there is just a deficit in the member states. In the Community budget there is this artificial constraint and ceiling, about which some hon. Members are enthusiastic.

The other related problem is in trying to get information from the member states, including ourselves. The Court of Auditors has said in previous reports that it did not get the right kind of information from this country as well as others. It is a general problem, perhaps applicable to one or two members more than most, but none the less is not necessarily to be singled out in a highly discriminatory way as a piece of Daily Express-type criticism of foreign countries and the way that they run their finances. It is also a developing problem because in many areas the Commission is unable to get the right information, and the Commission does not give efficient and correct answers to the Court Auditors, and the court is groping towards the truth.

The main problem, highlighted by the Committee's report and the report of the Court of Auditors, is the liabilities that have arisen and that are producing an enormous deficit that has to be made up. The Commission needs to draw up a list of the financial liabilities that have accumulated. The Community needs to observe fundamental principles of financial planning. Within the current framework, with which I disagree, as hon. Members will know, but which has to be adhered to, each year's financing needs have to be covered with an equivalent amount of annual revenue, and a growing share of liabilities has come not from the growth of commitments but from the carrying over from the previous budget of deficit figures, and the postponing of accounting for certain costs that arise principally from agricultural stocks.

The Commission has been unduly criticised by the hon. Member for Thurrock (Dr. McDonald)— I agree with the hon. Member for Inverness, Nairn and Lochaber on that—but it needs to be much more active, energetic and efficient in co-ordinating the supervisory role, to get a better result for the whole of the Community, rather than just be more critical of what is happening. The number of member states not wishing to co-operate with the court will, I hope, rapidly diminish—this is still too much of a disturbingly strong manifestation.

There are still all the weaknesses of the European agricultural guidance and guarantee fund, which is an intractable problem. I sympathise with my hon. Friend the Minister, who has to give advice to the Ministry of Agriculture, Fisheries and Food on the way in which it should represent United Kingdom interests, and Community interests, as the two should fit together, in the Agricultural Council and the Budget Council.

I am worried by the fact that the Commission's literal instrumentation of cash management needs altered practices to become more efficient. There are still many differing habits and practices in the banking sense between different member states, and these are difficult to harmonise and bring into a single coherent whole for both the Court of Auditors and the Commission.

Better use should be made of the lessons learnt in connection with previous regional aid disbursements and regional aid measures to prevent similar problems and to produce a much more realistic forecast of what is likely to happen. There are parts of the Community budget that still remain unsatisfactory, and others that will be handled well from now on. One example is not particularly relevant to the Court of Auditors report, but will, I hope, be a growing feature in the future. It is the amount of money dispensed in the central Community organism on research and development. There is a raging debate in the council of research Ministers on this subject. That, too, will be a difficult sector for the Court of Auditors to monitor in the future.

Progress is being made. Equally, European enthusiasts, and people who are keen on the Community, such as myself and the hon. Member for Inverness, Nairn and Lochaber, are entitled to be stringent and observant of financial controls and scrutiny. We need to encourage the Court of Auditors to have much stronger authority and powers. That must, to some extent, come from legislative changes within the Community, because some members of the Court complain that their powers are insufficient, and that they do not have the direct and determining power to intervene, visit the member states and get the proper information out of the local national public sector accountants that they should have to do a proper job. That is all a million miles away— probably much to the chagrin of the Labour party— from saying, in a transcendental fashion, that everything in the Community is rotten. That is just a feature of the painful, developmental stage in the Community, and I have every confidence in the future.

11.9 pm

Mr. Nigel Spearing (Newham, South)

I echo the points made by the hon. Member for Harrow, East (Mr. Dykes) at the end of his speech. When any auditor of any organisation feels that he does not have sufficient powers, that shows that there is something not quite right. That in itself is a danger signal, although I understand the hon. Gentleman's feeling that it is not as serious as some other hon. Members have said that it is.

As chairman of the Select Committee on European Legislation, I thank the Minister of State, Treasury and other hon. Members for their kind remarks. Our report on the auditors' report comes out every year and is part of a series of weekly reports that the Committee issues when the House is sitting. It comes under HC22 and is our ninth report of this Session. These reports provide a useful compendium of the legislation that is likely to have legal or political impact on the United Kingdom. Some of that legislation we debate, and some we think should be reported without debate.

Perhaps our report is not as complete as it might be. For example, the debate that we had yesterday on the distribution of cheap food was reported by the Committee through a documentary accident in that it came just within our terms of reference. With the coming of the Single European Act— assuming that it is passed— some actions, especially those taken by the Commission, will not come within the terms of reference of the Committee. The Committee drew this to the attention of the House in its second special report last May. I am quite sure that, being a gentleman of financial stringency and documentary exactness, the Chief Secretary to the Treasury would riot wish the Committee to be hindered by an accident of terms of reference, particularly as the Select Committee of the House collectively have powers which enable comprehensive reports to be made.

I now turn to the Court of Auditors' report. It is worth putting on the record some of the Committee's summary. We receive from the House some thanks for our work, and my Committee is one of the best staffed of the Select Committees. That is as it should be, because some of this legislation is complex and difficult and on occasions takes some disentangling. In our report we say: The Court concludes (para 1.10) that, for the second year running, the Communities have not observed one of the fundamental principles upon which their financial organisation is based, namely the need to cover fully each year's financing needs with the equivalent amount of annual revenue. What is more, use of advances from the Member States, far from helping to amortize the 'burden of the past'— apart from a few timid attempts to depreciate agricultural stocks— has, on the contrary, allowed it to increase throughout the financial year 1985. That is a mild qualification, at least in accountancy terms. The heavy qualification has already been referred to by hon. Members who quoted paragraph 1.21 about member states not being prepared to co-operate with the Court. In that context I should like to quote to the House a little more detail on this matter. It is contained in paragraph 3.19 on page 32 of the auditors' report. On this important matter they say: The Court was able to carry out and complete these enquiries"— that is, into VAT,— in the following Member States: Belgium, Denmark, Ireland, the Netherlands and the United Kingdom. Other member States, however, refused to accept that such enquiries were within the court's sphere of authority". That point was raised by the hon. Member for Harrow, East. Specifically, Italy and Luxembourg refused to provide the Court with tax statistics, France would not agree to supply all the information needed for a description of the systems and the FR of Germany, France, Italy and Luxembourg refused the Court leave to carry out compliance tests. There we have a clear indication of at least some disagreement about powers, and one might think that those powers ought to be made clear or increased by legislation if the need arises. Our report also deals with this important matter of the burden of the past. I shall quote from our report: The Court also lists a number of other liabilities, either firm or contingent, and calculates that by adding these to the outstanding commitments already described, the Communities' total liabilities at the end of 1985 amounted to about 20 billion ECU (.12 billion). It comments that the way in which these liabilities were then set out was partial and heterogeneous, incomplete and hard to grasp. It sees this as leaving the Commission vulnerable to the charge of not having given a true and fair view of the community's actual financial situation. It points to specific steps which could be taken to improve presentation, and stresses that a full and clear 'calender of maturities' would oblige the budgetary authority to face up to its responsibilities, and enable it to draw the appropriate conclusions with full knowledge of the facts (paras 1.3–1.6). I have searched in the reply of the Commission, particularly on page 192, but I cannot see any reference to the suggestion of the introduction of "calendar of maturities". Surely, in any description of the liabilities of any firm, a calendar of maturities is something that is necessary in order to show the full and fair view of the Community's affairs.

I ask the Minister two questions. We know that the audit report has to have a discharge, and before it is discharged by the Strasbourg body it is discussed by the Council of Ministers. Why could it not recommend to the Parliament-Assembly that before a discharge is granted there should be proper powers, or at least a commitment to give the increased powers at issues, to the Court of Auditors? There is clearly some difficulty there, as I have shown by the quotation. Secondly, why could it not insist on the calendar of maturities? There, at least would be two tools whereby the necessary and proper mechanism of discharge, instead of being something that one suspects is automatic and not really taken with the necessary seriousness, could be used to ensure that we do get something of a grip, if not on the major financial difficulties with which we are familiar, certainly with the tools of the auditors' trade, which although they are in the hands of the Audit Commission, appear not to be as great or powerful as it would wish.

11.17 pm
Mr. Nicholas Budgen (Wolverhampton, South-West)

The hon. Member for Newham, South (Mr. Spearing) asked, not for the first time, that there should be some extension of powers to the Court of Auditors. To a marked extent, he goes against the principles that he has so consistently fought for.

Those who ask for more public expenditure to be made through the EEC speak often as thought the EEC were a unitary state. They speak as though it had an apparatus of investigation, and apparatus of police, of public prosecutions and of EEC criminal law. It has no such apparatus and I suggest that it never will. Even if, for the sake of argument, he and others were successful in persuading the nation states of the EEC to allow the Court of Auditors to investigate more effectively, he would still never overcome the inclination of nation states to regard the EEC funds as a pot of gold which is contributed by others; a pot of gold into which they are very pleased to put the hands of their constituents and citizens even if at times they know that their constituents and fellow citizens are not entitled to put their hand into that pot of gold.

If the hon. Gentleman thinks for one moment that the EEC, for instance, could ever have its own police and investigation department he should think carefully. Let us suppose that he persuades the EEC to allow the Court of Auditors to serve notice on the Italians to allow people to investigate how many olive trees there are in the length and breadth of Italy. It is found, for the sake of argument, that they are claiming for olive trees which cover an area greater than the whole of Italy. Some other people haul off some distinguished gentlemen from the toe of Italy and suggest that they might be indicted for EEC fraud. There would be great disturbances in the toe of Italy. That would wreck and rock the constitution of Italy and there would be a risk that Italy would wish to withdraw from the EEC. That will never be done.

People, like my hon. Friend the Member for Harrow, East (Mr. Dykes) and the vehement supporters of the EEC in the SDP, had better understand that every time they ask for more collective expenditure through the EEC they are in effect saying that an unknown proportion of it will inevitably be misused and some of it will be the subject of fraud. There is no way whatever in which that can be stopped, because this institution does not have the characteristics or authority of a unitary state and no member state wishes it to have that.

Hon. Gentlemen may not be as dishonest as Italians, but they wish to see their constituents get a greater proportion of the EEC cake than other nations. They want to get out more than they put in. That is essentially a duplicitous, even dishonest, attitude to the EEC.

Sir Russell Johnston

rose—

Mr. Budgen

No. So long as we extend the expenditure of the EEC, we shall have to grin and bear enormous elements of waste.

11.22 pm
Mr. Bowen Wells (Hertford and Stortford)

I wish to make four points in this brief debate.

First, I congratulate the EEC on its administration of aid through the European development fund to sub-Saharan Africa in the famine year of 1985. There was a slow start to that programme, but by the end of the year the fund had disbursed the necessary assistance effectively to help the starving people of Africa. The main support from the British Government to the starving people of sub-Saharan Africa in their terrible plight came through the EEC.

The EEC arranged an airlift not only of European food supplies to the Sudan but of American food to the western part of the Sudan and to Chad to avert famine there. That is a proud record and it resulted from a great deal of hard work in the Commission in the DG VIII which administers the European development fund. That is the good news. The rest are points of criticism which I make more in sorrow than in anger. Like many hon. Members, I support the EEC and wish to see its affairs administered and conducted properly.

I wish to concentrate on the periphery—part II of the report on the administration of the European development fund.

Secondly, I shall deal with the way the European development fund is allocated. At the beginning of part II a table shows how its funds from Yaounde to Lomé 2 have been committed and then disbursed. The same problem exists in the European development fund— that of rolling forward one year's programme to another. Several hon. Members have referred to this. We are never certain how much will be drawn down on the European development fund and, therefore, how much will be debited against our aid budget so it is extremely difficult for our national aid budget to he accurate in disbursing funds. [Interruption.] I am hurrying, but there are four points to be made.

Mr. Marlow

There are three minutes left.

Mr. Wells

All right. My hon. Friend is just delaying me.

Table 1 in part II shows that we still have not disbursed or even committed 34 mecu from the 1976 Yaounde 1 commitment. That rolls through Lomé 1 and 2 and we are now on Lomé 3.

I should like my hon. Friend the Minister, if he is going to have a detailed discussion on the findings of the Court of Auditors, to raise one particular matter in Brussels. Officials run around trying to get an "umbrella" agreement, as it is called—a commitment to disburse a certain amount of money which has been pre-allocated on some unknown basis to each of the countries—and then there is an indicative programme. I suggest that that is the wrong way to administer an aid programme. First, the developmental needs of those countries should be identified and then a programme which is properly focused on those needs should be developed in agreement with them. But the Court of Auditors referring to the programme in some of the states in which the European development programme is administered, said in paragraph 11 of part II: The bottlenecks which these projects have encountered prove that an important stage has been omitted in the planning process, namely that of compiling an accurate list of the priority needs of the national economy, prior to making a judicious selection of the measures to be promoted. I should be grateful if my hon. Friend the Minister would take up the point about the administration of the European development fund and the way in which it decides which projects it will support and what the objective is.

Thirdly, there seems to be no co-ordination between my hon. Friend the Minister of State, Treasury and my hon. Friend the Minister for Overseas Development. It seems to me that they do not get together to discuss the European development fund programme, so there is no British control over the second most important programme, in terms of money. I ask my hon. Friend the Minister to ensure that the machinery is set up to establish the administration of the European development fund and to put right some of the aspects about which I have been talking.

Fourthly, there is no co-ordination between the objectives of the European development fund in many of the same countries in which member states of the European Economic Community also have aid programmes. I have seen on the ground the confusion between the two groups with several member states competing with the fund's objectives. Often the European development fund gets the slowest moving and worst development project simply because it is much slower at agreeing and then permitting draw-down. As the figures which I cited earlier show, it still has not disbursed money which was originally committed in 1976.

The Court of Auditors brought these important points of administration to our attention. It has complimented the European Community on disbursing the aid programme in Africa during those starvation conditions. This contrasts sharply with the court's report for the previous year which showed that disbursements were very small— in fact, only about two months' worth took place. The court was rightly critical of that.

There is good news and bad news. I hope that my hon . Friend the Minister will ask those questions so that we can have a more tightly administered budget.

11.29 pm
Mr. Tony Marlow (Northampton, North)

The Community exists. The Community will continue to exist. The Community should be about regulation—regulating those issues at Community level that are best done at Community level. It should be about deregulation, so that we may have a unified Common Market by the year 1992. which I support. But I wonder whether it should be. as it is at the moment, so much about money.

Two reasons why I wonder whether it should he so much about money are highlighted in the auditors' report that we have before us today. The first is the point made eloquently by my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) and equally eloquently by the hon. Member for Thurrock (Dr. McDonald), and that is the olive oil swindle which comes up year after year after year in the auditors' report. We know why the swindle takes place and we know perfectly well that nobody is going to do anything about it. This is the nature of Community finance.

There is another equal problem which we can see on top of the common agricultural policy, which is always a great waste of money, and that is that we notice in the auditors' report that Italy, which we are told has a greater gross national product than the United Kingdom, pays a smaller VAT share. Could my hon. Friend explain to the House how this comes about? I have a pretty shrewd idea. That is because of, again, the nature of Community finance, the imprecision of Community finance and the strings that are pulled within Community finance. This is one reason why the Community should have a smaller rather than a larger area of financial control.

There are two specific points that I want to put to my hon. Friend, given the nature of the abuse and the waste of financial resources that take place through the Community and are bound to continue to take place through the Community. The first is that we know there is going to be a whip-round to get rid of the agricultural surpluses. Her Majesty's Government will be asked to fork out some of our hard-earned taxpayers' money as a loan to the Community to solve this problem, and this problem should be solved—[Interruption.] Could I have my hon. Friend's attention? I am perfectly prepared to give way to my hon. Friend if he wants to give me the answer now rather than in his speech at the end of the debate. Will the House be asked to approve this loan? If the House is to be asked to approve this loan, can my hon. Friend say at this stage, to make life much easier in the long run, that the repayment of the loan will be in no way dependent upon the United Kingdom Government agreeing to an increase in Community own resources? It is a question that I have asked my hon. Friend once. I am asking him a second time. I am prepared to give way if my hon. Friend wants to intervene in my speech at this stage or—my hon. Friend is nodding. I believe that he is going to come to this point when he winds up the debate later on. I am very grateful for that.

There is one other point that I would like to make before I sit down. At the moment, we are on the basis of a 1.4 per cent. VAT. Yesterday, Mr. Delors suggested that we should increase from 1.4 per cent. VAT to 1.4 per cent. of GNP which, as we know, is equivalent to 2 per cent. VAT— a massive increase in Community resources. There is no suggestion that the Community competence in terms of policies that will require Community finance should be increased, so the increase in Community resources can mean but one thing: that those policies for which the Community is responsible will become yet more expensive than they are at the moment. Given the lack of proper financial control that we see within the Court of Auditors report, I am sure the whole House would be grateful if my hon. Friend would say here and now that Her Majesty's Government have no intention whatever of following the line put out by Delors last week.

11.33 pm
Mr. Stephen Dorrell (Loughborough)

I welcome the Government's deep commitment to imposing some order and financial discipline on the Community, but rhetoric itself is not enough. Those who are anxious to impose an order of priorities and a discipline on the total Community budget must also tackle the more difficult issue of how to tackle the institutions of the Community to ensure that they do not remain, as they are now in a technical sense, irresponsible. As other Conservative Members have said, they are too much the prisoners of those who want to spend. There is an insufficient central authority in Brussels whose job it is to determine the maximum level of the budget and also the priorities within the maximum. People who are concerned about the budget must address that issue in the near future.

Mr. Brooke

With the leave of the House, Mr. Deputy Speaker, I shall respond as briskly as I can to this interesting debate, the text of which I propose to send to Mr. Mart, the President of the court, to Vice-President Christophersen of the Commission, and to Herr Aigner, the Chairman of the European Parliament's Committee on Budgetary Control, whom I had the pleasure of welcoming to this country last year.

Inevitably, the debate has gone wider than the Court of Auditors report. I shall touch on a series of issues that have been raised. The hon. Member for Thurrock (Dr. McDonald) pressed for budget discipline. My right hon. Friend the Member for Worthing (Mr. Higgins) expressed some surprise about the parliamentary answer that I gave on 17 February. The budget that the Council proposed to reach in conjunction with the Parliament in the course of the past fortnight stuck very closely to budget discipline, and I am delighted' that discipline was maintained. The countries that are net contributors played a large part in that process.

The hon. Member for Thurrock referred to the issue of stocks. I agree with her that, by definition, their depreciation is a problem and it is one that the British Government would wish to be attended to. However, the critical point is to prevent the stocks arising in the first place. The hon. Lady referred to the fact that the ceiling was busted in 1987. She must concert her position with her hon. Friend the Member for Hamilton (Mr. Robertson), because in the last debate on this subject, he criticised the Government for having left the budget unfinished when we left the presidency. The only way in which we could have concluded the budget at that juncture would have been for us to break budget discipline; we were determined not to do that. As to her likeness to a company's trading and to its auditing, the likeness is much more clearly to the Comptroller and Auditor General and to the proceedings of this House than to a company.

My right hon. Friend the Member for Worthing asked me several specific questions relating to the co-operation of member states. The court's rights of access are clearly set out in the treaty and it is not for the United Kingdom to comment on the way in which other member states interpret that. Ultimately, that is for the European Court of Justice to decide and the United Kingdom supports the Court of Auditors in exploiting to the full its treaty powers of investigation. To a degree, that is also an answer to the question asked by the hon. Member for Newham, South (Mr. Spearing). I give an assurance that the matter will be discussed in ECOFIN on 9 March, in the same way that I participated in an ECOFIN discussion last year.

As to the agrimonzetary agreement, about which my right hon. Friend the Member for Worthing also asked a question, and on which my hon. Friend the Member for Hertford and Stortford (Mr. Wells) intervened, we are pressing for reform of the green rate system—especially to break the link between agricultural prices and movements in the strongest currency, which simply tends to increase prices and expenditure. I take the point about the protection of one part of the economy in terms of the fluctuations in exchange rates.

As to the issue of rolling forward—

Sir Trevor Skeet (Bedfordshire, North)

Why should agriculture be protected from fluctuations in the exchange rates when nothing else is?

Mr. Brooke

I was saying that that very question informed the attitude with which we are looking at the proposals which the commission is now bringing forward.

My right hon. Friend the Member for Worthing asked a series of questions about binding commitments. Paragraphs 1.2 and 1.3 of the court's report list the outstanding commitments and the other liabilities of the Community at the end of 1985. The major binding items are some 11,000 mecu of outstanding commitments, some of which may no longer relate to real projects— the Commission is urgently reviewing this point—and the 5,650 mecu estimated cost for the future disposal of agricultural intervention stocks, to which the hon. Member for Thurrock referred. Following the successful agricultural council, chaired by my right hon. Friend the Minister of Agriculture, Fisheries and Food last December, positive steps are now being taken to resolve that issue.

The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) raised the question of additionality. Payments from the European Community budget enable United Kingdom public expenditure programmes, including those to which the payments relate, to be maintained at levels higher than could otherwise have been afforded. United Kingdom policy is similar to that adopted by other member states. The court noted previously that most member states' reimbursements, notably from the regional development fund, were added to expenditure allocated generally for regional development.

My hon. Friend the Member for Harrow, East (Mr.

Dykes) welcomed the report, and I welcome his sympathy for me on agricultural issues.

The hon. Member for Newham, South raised the question of the burden of the past. During my opening speech I touched on very much the same figures as he quoted. He asked whether before discharge the Council of Ministers could recommend that the Court be given more powers to investigate. Its powers are clearly set out in article 206(3) to which, to some extent, I alluded earlier.

He also asked for a calendar of maturities. We are all agreed on the need for full information on all the Community's actual and potential liabilities. To the extent that policy decisions are required concerning the liquidation of outstanding commitments, they need to be taken by the Community's budgetary authority; no purely mechanistic timetable can be laid down.

At official level discussions on this issue in Brussels, the Commission agreed to the need to improve its presentation of the information already available, and the court expressed itself satisfied with that response.

My hon. Friends the Members for Hertford and Stortford and for Wolverhampton, South-West (Mr. Budgen) made speeches that I shall certainly study. My hon. Friend the Member for Hertford and Stortford made a thoughtful speech about aid. To my hon. Friend the Member for Wolverhampton, South-West, I say that the issue of value for money is one to which we should also pay attention, and which was not adequately covered in my view by the hon. Member for Inverness, Nairn and Lochaber.

Finally, to my hon. Friend the Member for Northampton, North (Mr. Marlow), who asked a specific question, I say that there is no question of additional resources being made available this year. The Community must live within its means. That is the way in which I concluded my earlier speech, and I am delighted to reiterate my remarks now.

Question put and agreed to.

Resolved, That this House takes note of the Annual Report of the European Court of Auditors on the financial year 1985, together with the replies of the Institutions; and approves the Government's efforts to press for effective Budget discipline and proper financial control of Community expenditure.

    c392
  1. CROWN PROCEEDINGS (ARMED FORCES) BILL [MONEY] 58 words