European Community

HC Deb 29 January 1987 vol 109 cc504-81

Mr. Speaker

Before the Minister rises, I must tell the House that I have not selected either of the two amendments on the Order Paper. However, the arguments that they contain may be pursued during the course of the debate.

4.29 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 1986 (Cmnd. 9911); and supports the emphasis which the Government placed during the United Kingdom Presidency on developing Community policies of practical benefit to industry, business and the consumer. At the outset, Mr. Speaker, I am sure that the House would wish to be informed that agreement was reached early this morning between the European Commission and the United States over the trade effects of enlargement. The agreement has yet to be formally confirmed on both sides, but I am confident that it will be. Of course, the immediate point for the United Kingdom is that the threatened trade war will be avoided. This will be welcome to all hon. Members especially those who have written to me and my colleagues expressing concern at the effects on our exporters if agreement was not reached.

There will be no increases in United States tariffs on gin or other exports from the European Community. The European Community has confirmed its offer of a reduced levy quota for corn and sorghum exports to Spain, mainly from the United States, plus some other lesser concessions, and agreement has been reached on that basis.

This outcome has been possible because of the skill and tenacity with which the Community has negotiated. It is an obvious and practical demonstration of the way in which our combined negotiating weight in the Community can defend British interests in a way that we could not hope to do on our own. It also shows the effectiveness of the approach that my right hon. and learned Friend the Foreign Secretary and I have consistently urged on the Commission and on our colleagues in the Council of Ministers.

The Community has made clear throughout its determination to work wholeheartedly for a settlement. It has also made it clear that if the United States proceeded with any unilateral raising of tariffs, the Community would be ready to respond in defence of our interests. It is that which helped to bring agreement in this dispute, as in the earlier negotiations of equal importance to us over access to the United States market for steel products. In accordance with the mandate laid down by the Council of Ministers, Commissioner De Clercq has negotiated well and effectively on the Community's behalf and deserves our congratulations.

The growing United States global deficit, estimated at $170 billion in 1986, has made the negotiations particularly difficult. The Community will need to be equally firm over the protectionist measures passed by the last Congress on which action is already being taken in the general agreement on tariffs and trade. Those could affect a considerable volume of British trade. Both the Community and the United States are committed to avoid new protectionist actions by the agreement which launched the Uruguay round, and it is essential that both should honour that commitment.

Here too, the House will wish to know that a further agreement has been reached today in Geneva on the procedures which will enable the Uruguay round negotiations, launched at Punta del Este, to begin in earnest. Their success will be vital to preserving the open trading system on which this country depends. The further liberalisation of world trade is as important to our prosperity and the creation of jobs as the creation of the internal market within the EC. The House will agree that those are important themes of the White Paper with which I shall now deal.

Mr. Teddy Taylor (Southend, East)

Was any cash compensation for the United States included in the agreement with the United States, which I am sure everyone will welcome, and, if so, how much?

Mrs. Chalker

I may return to the figures when I reply to the debate, but I understand that the cost is minimal compared with even a short period of a trade war. We shall publish the details in the Official Report.

The White Paper describes in detail the situation in the Community up to the moment when the Government took over the presidency in July last year. In the first half of the year Spain and Portugal joined the Community, a significant achievement for their democracies. The Single European Act, amending the treaty of Rome, was also signed. In April a somewhat shorter but no less vital negotiation in the Agriculture Council resulted in a tough but necessary CAP price fixing, including important reforms. A new production tax on cereals, a cut in dairy quotas and big price cuts for Mediterranean products were included in that. A new action programme for the internal market was agreed and some significant measures were adopted — for instance, on transmission standards for direct broadcasting by satellite. Those are dealt with in full in the White Paper.

All the same, a number of difficult and unresolved issues awaited the start of our presidency last July. On EC-United States trade there were problems on steel, citrus and pasta, and on the effects of enlargement; disagreement with Japan over access to her markets; renegotiation of New Zealand's dairy trade agreement; and the opening of a new GATT round to set the pattern of world trade for the next decade.

Nearer home, the Community had no budget for 1986. Despite the price freeze in April, the costs of the common agricultural policy were increasing as a result of the fall in the value of the dollar which determines the world price of most agricultural products. Therefore, as with all presidencies, much of the agenda was set by the obligations that those problems placed on us. But there were opportunities as well as obligations.

First of all, there was an opportunity to achieve further reform of the common agricultural policy. Such reforms are traditionally achieved at the annual price fixing at the first half of the year. In last year's price fixing the Council had agreed to introduce a co-responsibility levy on cereals coupled with a tightening of intervention criteria. We were determined to build on those decisions and not to lose the momentum achieved at the June European Council when Heads of Government expressed their determination to bring Community agricultural prices closer to those of the world market. Therefore, as my right hon. and learned Friend the Foreign Secretary told the House on 5 March —at columns 176–77—we concentrated our efforts on further reform, in particular in two key sectors, milk and beef, where expenditure was running at a combined total of over £6 billion a year and where surpluses were at record levels.

Secondly, after a lengthy period of institutional introspection, we were determined to show that institutional reform could be put to practical use for the benefit of the Community's citizens. We had identified four significant areas for action. First, there was the internal market, where the lack of common rules has placed this country at a disadvantage compared with our competitors in the rest of the Community. Secondly, we wanted progress on air transport and in shipping. We wanted cheaper services and better access to them. We wanted protection for Community shipping in its dealings with third countries and open access to Community coastal trade.

Thirdly, we wanted specific measures to help small business and to promote employment growth. All the member Governments of the Community, of Left or Right, were agreed on one overall economic strategy. But at that time there was no coherent plan for bringing together the action against unemployment which was being taken in each member state. Fourthly, there was action at the Community level to deal with the problems of terrorism, crime and traffic in drugs.

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

The second area to which the hon. Lady referred included coastal shipping. How far have the discussions on cabotage advanced? Shall we see a greater input into British coastal traffic by British vessels in the near future?

Mrs. Chalker

We have so opened up the cabotage proposals that that should indeed be so. I may deal with that in greater detail when I reply to the debate.

Let me explain why action in those four areas was so important for Britain. Of the 48 internal market measures agreed during our presidency a number were of obvious practical benefit to the public — for instance, the agreement on maximum noise levels for motorbikes which will help to reduce a serious public nuisance; the agreement on standards for fire safety in hotels, an important protection for travellers; agreement on permitted food additives, improving safety standards for the consumer and the introduction, largely under United Kingdom instigation, of proposals governing toy safety in the Community.

A number of the other measures taken were of less immediate benefit to the consumer but of obvious benefit to industry — for example, the directive requiring compatible standards for direct broadcasting by satellite; the agreement on a standardised tractor control layout and standardised pedal layout for forklift trucks. Each of those agreements alone may seem only a small step towards the completion of the common market in goods and services. But each is important for our industry and each is a positive step forward. After all, the European tractor market alone is worth £130 million a year to our exporters.

The internal market is not just about breaking down existing barriers to trade. Our aim is to avoid the creation of barriers in new industries. That is why our action programme focused on the new technologies. We secured agreement to more open rules for public purchasing; agreement on the use of European standards for the purchase of information technology and telecommunications equipment and on advanced data network systems.

In air transport, we had already shown, through bilateral agreements, that liberalisation could lead to a dramatic reduction in air fares and an increase in new services. By the end of our presidency we had secured majority support for two significant changes in the organisation of Communitywide aviation.

The first is a shift to new capacity sharing arrangements that will improve competition between the carriers. The shift is not as much as we would like but it represents a major change from the deadlock of earlier years that I remember only too well. There has also been an opening up of routes between hub and regional airports—for instance, the service between Paris and Bradford. Those are significant advances.

The next and major priority must be air fares. We want airlines to be free to set fares and conditions according to their commercial judgment.

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

Such as services between London and Glasgow?

Mrs. Chalker

Between all areas of the Community. It is something that not all member states accept. At the beginning of our presidency only two states were in favour —Britain and the Netherlands—but by the end of our presidency seven member states accepted the proposals. I hope that when the Single European Act is implemented majority voting will enable those proposals to go through under the Belgian presidency.

The internal market measures are important, not only for business, not only for people, but for jobs. We are determined to do more in this respect.

Another genuine success has been in reducing the regulatory burden on small firms in this country, which is now being repeated across the Community. I read in today's Financial Times of the French campaign launched by Alain Madellin, the French Industry Minister, to reduce red tape and the burden of administration for French companies. That is happening across the Community. We require that all new proposals should be assessed for their impact on business and therefore on job creation. Existing regulations are also being re-examined.

During the presidency, we negotiated a £1 billion package of loans for small firms. We got proposals brought forward to increase the VAT exemption limit to £25,000. Those measures to help small business parallel to the steps outlined in the resolution agreed by the Social Affairs Ministers on employment growth. This was not just a United Kingdom initiative. It had the support from the outset of other member states and was discussed and eventually agreed with the European TUC. The measures provide a framework for proposals which the Commission will now bring forward covering the creation of new job opportunities, improved training and help for the long-term unemployed and for disadvantaged groups.

In addition there has been an intensification of European co-operation in the fight against terrorism and drugs; and new impetus has been given to co-operation in seeking better prevention and treatment of cancer and of AIDS. Those steps demonstrate that the Community is determined to work for its citizens. It has already started and that work will continue.

Mr. Tam Dalyell (Linlithgow)

I am sure that the Minister will recollect that in parliamentary questions and in correspondence I have raised with her and her colleagues at the Foreign Office the question of the European cancer initiative. What is being done regarding funding in Europe and help for centres of excellence—mostly universities and Medical Research Council units — in Britain? Some of us get the impression, perhaps wrongly, that the initiative is a great gimmick and that not very much is happening. Will we be persuaded that something is being done? Perhaps her parliamentary private secretary will bring her information by pigeon post.

Mrs Chalker

I had already heard, earlier this week in Brussels, that the Commission has agreed to bring forward new proposals which will be presented to Ministers at the next round of Council meetings. Although health is not my particular responsibility, I assure the hon. Gentleman that my colleagues in the Department of Health and Social Security have been pushing for such proposals. Those proposals are regarded with all seriousness, and I hope that when we are further down the track the hon. Gentleman will welcome those proposals.

We want to increase, not diminish, the personal liberty and choices of individual European citizens. The Government see the European Community as a vehicle for widening the scope for enterprise in Britain and Europe and for widening the freedom enjoyed by the people of Britain and Europe. As a country we have succeeded in loosening the dead hand of state control over individuals and enterprises.

Mr. Robert N. Wareing (Liverpool, West Derby)

Ask the local authorities.

Mrs. Chalker

As a continent we are succeeding in relaxing the grip exercised by other states.

That approach is shared by most of the rest of the developed world. A wind of popular enterprise is sweeping Europe. Two years ago, there were only 2 million small shareholders in Britain. There are now about five times that number. The story is the same all over Europe.

The European Community ensures that personal enterprise is allowed greater expression by letting it expand across national boundaries as well as flourishing at home. The difference it makes is that it creates more trade and more business, and that is the way we create enterprise.

Britain is a trading country. It must trade to survive. Europe is an excellent, stable and expanding market in which to do business. The rest of the Community agrees with us on an agenda which is increasingly devoted to realistic, immediate goals. They are tackling the problems of the CAP, achieving a fair trading relationship with the United States and Japan, completing the internal market and helping business and creating new jobs.

The record of the six months of our presidency gives us good reason to believe that these problems can be tackled successfully. In international trade the multilateral trade negotiations in the GATT were successfully launched. As we told the House last year, we secured agreement with the United States on steel, citrus and pasta. We have successfully renegotiated New Zealand's dairy trade agreement with the Community and we took vigorous action with Japan on discrimination in trade.

Far from neglecting the problems of the common agricultural policy, as has sometimes been alleged, we made reform of the beef and milk regimes a top priority of our presidency. A 3 per cent. cut in milk production had been agreed in April last year. In December we secured a further cut in production of more than double that amount and an effective cut in milk production of 9.5 per cent. over the next 15 months. In April we reached agreement on a price freeze for many agricultural products and in December we agreed an average price cut for beef of 13 per cent.

We know, of course, that further steps are needed to level the butter and beef mountains and that we need further cuts in cereal prices and a further reduction in the availability of intervention. We need a limit on the levels of guaranteed production, not just for products already in surplus, but for those such as vegetable fat crops which threaten to go into surplus if action is not taken. We must not only curtail the cost of individual agricultural commodities but achieve a mechanism to ensure that the Community budget alone does not bear the costs of surplus production.

Many of those arguments are familiar, but the Community has changed since the negotiations of the early 1980s. The case for CAP reform is now not just compelling but widely accepted. We must ensure that money devoted to Community policies gives added value over money devoted to national policies. We must ensure, too, that the structural funds address the needs of the unemployed and of areas of industrial decline. The reorganisation of those funds, which is called for under the Single European Act, gives us the opportunity to press ahead with those reforms.

I shall not disguise from the public the true state of the Community today. Significant problems remain, as they are bound to do in a Community of 12 nations, but the record is also one of solid achievement. I do not underestimate the task for the year ahead. There will be difficult negotiations on the future financing of the Community and the continued adaptation of the common agricultural policy, but in a year in which we achieved a record number of internal market agreements and a record level of CAP reform, we proved Britain's capacity to achieve results. There are many challenges ahead and there are many opportunities. We have begun a very great change. That change is embodied in the motion, which I commend to the House.

4.52 pm

Mr. George Robertson (Hamilton

Given the state of the Minister's health and of my own we should perhaps be talking about a common cold policy rather than a common agricultural policy.

There is something absurd about debating on 29 January 1987 developments in the European Community between January and June 1986, and it was notable that the Minister disposed of that and the preceding period in four and a half minutes before going on to the following six-month period and the British presidency. It cannot be beyond the wit of the Government to produce reports and arrange debates at earlier stages so that we can discuss matters that are real and relevant and a good deal more immediate than those before us today.

Perhaps the Government's view on this is similar to their attitude to the treaty of Rome. When I asked the Vote Office for a copy of that most fundamental of laws affecting this country, I was told that it was out of print and that there were no plans to reprint it. I was flabbergasted to receive such a reply in the very week when the Government were hosting the summit of all the Community nations. I therefore took the matter up with the Prime Minister, who replied five weeks later that the Stationery Office ought to have told me that the House of Commons library would in any case be able to supply photocopies for members. The Services Committee might have something to say about the idea of the Library being asked to photocopy 900 pages.

Mrs. Chalker

As the hon. Gentleman well knows, when he acquainted me with the rather inept reply that he had received from the Vote Office, I made inquiries immediately. I was informed that the treaty was being reprinted to bring it up to date with the Single European Act. That is taking place. In the meantime, I think that to require all 900 pages for simultaneous study would be unusual, even with the hon. Gentleman's capacity. I hope that he will get those parts that he needs—or he can even borrow my copy.

Mr. Robertson

1 am grateful to the Minister for that generous offer. I am sure that the Government have plenty of copies. Nevertheless, their unwillingness to print the basic law of the European Community gives us some idea of their commitment to the idea of European unity.

Among the many surprises—mainly of omission rather than inclusion—in the Minister's speech was the absence of any reference to Sir Henry Plumb. I had expected joyful cheers from the near empty Conservative Benches at the elevation of Sir Henry to the presidency of the European Parliament, albeit by a small majority, but perhaps the attitude today has something to do with the less than ecstatic response from No. 10 Downing street to Sir Henry's ideas. The Guardian perversely described him as "one of nature's diplomats", who was no sooner in post as President of the Parliament than he announced his conversion to an element of proportional representation in British Euro-elections. When one adds to that Sir Henry's belief in fiscal harmonisation and harmonisation of VAT in the Community, even if the Prime Minister feels that any Tory is better than no Tory, he is unlikely to receive much support from her for those ideas.

Mr. Stephen Dorrell (Loughborough)

Does the hon. Gentleman support them?

Mr. Robertson

That question is a waste of time, as the answer is self-evident.

Before dealing with the major issues, I should stress two developments in the Community that are worthy of praise. First, I welcome the decision to convene a new conference on the middle east. Rarely has there been greater need for a new initiative to make a start on the sordid jungle of wars, threats of war, killings and kidnappings that are going on in that part of the world and could yet engulf us all. That was a proper decision for the Community to take.

Secondly, we should applaud the decision, albeit belated and characteristically slowly implemented, to distribute some of the ludicrous food stockpile to the old and the needy in this bitterly cold European winter. Some welcome should certainly be accorded to that.

Mr. Hugh Dykes (Harrow, East)

Does the hon. Gentleman agree that the Venice declaration remains the best international document on solving the middle east problem and that, if the conflicting parties would only accept some of the suggestions in that still valid document, there might be the beginnings of real peace in the area?

Mr. Robertson

I agree that the Venice declaration made a major contribution to progressing the argument, but it has taken the Community too long to get round to a new initiative. The priority now being given to the matter is therefore welcome.

The Minister talked about the British presidency of the Community, and no doubt there will be more of the propaganda parade of trivia that is being used to sell the tarnished British presidency. The Timesdescribed it as "lacklustre". The Financial Times said that the failure to tackle the main Community programmes was the result of deliberate policy by the United Kingdom Presidency and described the United Kingdom's record as "patchy."

An unnamed EEC official was quoted in another paper as saying: To some people it looks as if Britain has deliberately engineered a cash crisis so that the EC will be forced to take drastic measures—unfortunately, it falls to Belgium to deal with the crisis.

In June the Foreign Secretary said that he wanted the Community to make a real contribution to the lives of ordinary people. But what was the result? The legacy of that six-month presidency is striking both in its failure and in the damage that it left behind for the Belgians to pick up.

First, there was the trade war with the Americans, which the Minister has mentioned. The fact that a last-minute face-saving device may well be found by the weekend by means of satellite-televised diplomats will not diminish the damage done to European-United States relations by the bitter and often near-hysterical exchanges across the Atlantic since November. No splitting of the difference at midnight on Saturday will wipe out the abuse and counter-abuse, as first the Americans threatened sanctions against their principal European allies and then the EEC made its justified and savage counter-threats.

Mrs. Chalker

I do not think that the hon. Gentleman listened to a word I said at the beginning. We worked consistently through the whole of the second half of last year, from the time that we settled the steel dispute, the citrus dispute, the pasta dispute—we cannot leave pasta out—to make sure that every mortal thing was done to avoid a trade war over the effect of the enlargement of the Community. Throughout the months of our presidency the Commissioner, Willy de Clercq, made repeated visits; so did some of the Americans and so did the Ministers in the presidency—I for one.

Before Christmas we believed that there was a way to avert the trade war, but it had to be agreed on both sides of the Atlantic. The fact that on Monday in the Foreign Affairs Council it was reported to us that there was a good chance of success—and that news came through early this morning—should be something for the hon. Gentleman to welcome. It prevents the imposition of a tax of 200 per cent. on exports of British gin and of taxes on all sorts of other goods from different countries in the Community. It is actually a great success which has been shouldered not only by the Commission but by the British presidency as well as the current Belgian presidency.

Mr. Robertson

Now that the hon. Lady has got that off her chest, perhaps she will get from her civil servants an answer to the question posed by the hon. Member for Southend, East (Mr. Taylor), because we require to know the cost. At what cost has this solution been found—the solution that we should so rejoice about?

Mr. Teddy Taylor

I should make it abundantly clear that it is not the cost that bothers me. I understand that it will be about £400 million. What really worries me is where the money is to come from when the Common Market has none.

Mr. Robertson

The hon. Gentleman is right, and I will come to this catastrophe of the finances in just a moment.

Whatever the Minister says and whoever she seeks to convince, the fact is that most of the acrimony could have been avoided and the real damage done to the Western alliance as a consequence of this looming trade war could still have been averted if the spirit of compromise and skill on display this week had been encouraged by Britain when it had the reins of power. Instead, the problem was avoided and it was left to the Belgians to pick up the pieces.

The second legacy of our presidency was the so-called triumphant deal on the common agricultural policy, engineered with maximum public relations trumpeting by the Minister of Agriculture, Fisheries and Food. In the cold light of day a month later, the deal that his little bespectacled friend brought back to the House in December looks pretty threadbare. It was claimed that the milk agreement would cut production and save £1.2 billion for the Community over three years, but earlier this month the distinguished Agra Europe published an article pointing out that the agreement will not solve the Community's milk problem nor give the budgetary savings associated with it. The milk and beef arrangements, the basis of the December package, represent only the start, no more, of the process to reform the common agricultural policy before it relentlessly destroys the European Community itself.

The third legacy of the presidency is the botched job on promoting the internal market, always seen by the Prime Minister as the export of Thatcherism, with all the clearly manifested British failures of it, to our European partners. The drive to deregulation crashed, as she implied, on the rocks of its first and only tangible objective—breaking the cartel of maintained air fares in Europe. Without the essential safeguards for the weaker economies and more vulnerable areas of the Community which are mentioned in the Single European Act, there will be no real progress in breaking down barriers in Europe. Jacques Delors, the president of the European Commission, has repeatedly said it, but our Prime Minister continues to ignore the fact, and the result is the wishy-washy list of advances faithfully and unconvincingly broadcast to us by the Minister—and by the Back-Bench sycophants with a script later on, no doubt.

The fourth legacy of the British presidency's failure is the rightly exposed bogus plan to tackle unemployment. The Minister has the nerve to proclaim this as one of the successes of the presidency, when we all know that it was simply a feeble gimmick dressed up to placate an increasingly worried electorate throughout Europe. It was the Financial Times, almost the establishment voice now in Europe, which in December said: On unemployment, the UK Presidency has perhaps been most cunning of all. Fearing pressure from other sides, including the European Commission, for some acceptable form of concerted action, the British produced their own plan which effectively requires very little action at all". In the face of the largest single challenge to our continent today, that telling and humbling indictment by the Financial Times shows precisely what the Government's record is.

If we require any more evidence, today's Financial Times gives it only too clearly. The figures published yesterday in Social Trends show how far this Government have gone down the road. The number of unemployed people in this country rose by 2 million between 1979 and 1986, but, as Mr. Joe Rogaly says in the Lombard column today, that statistic alone does not tell us the full extent of the human devastation. For in 1979 a mere quarter of the unemployed had been out of work for over a year; by last July this figure was 41 per cent. Nearly 18 per cent. had been unemployed for over three years. Mr. Rogaly says that is 575,000 people on a long trip down from the top left to the bottom right of the graph. That is the evidence of the Government's record in this regard. How much value can be placed on their pious words during their presidency?

The other legacy of the British presidency, of course, comes in the special category of the financial chaos of the budger, the unmentioned, unspoken legacy that did not even figure in the Minister's opening speech. There is no budget for the European Community for 1987, and when the Minister of State, Foreign and Commonwealth Office opened this debate, she did not even tell us that. We are so used to the soap opera of the European Community budget crisis that we may be forgiven for thinking that this is just another one of the same. But no way. This one is in a special category, a category all of its own, and it is much worse because British Ministers last year deliberately and cynically pushed the problem off their plate and on to that of the Belgians.

Mrs. Chalker

We solved the problem of the 1986 budget within a week.

Mr. Robertson

The hon. Lady is probably the only person in the House or in the country who believes that the Minister of State, Treasury solved anything at all. When one looks at the figures for 1987, one sees what a triumph the juggler at the Treasury managed to get away with—the size of the deficit inherited by the Belgians. Even if one takes away the difference with the European Parliament, it will still be 4 billion ecu—almost £3 billion—for 1987. That is the gap, the deficit, the overdraft, that has to be covered.

The overdraft of £3 billion—so lovingly, eloquently and dishonestly called the negative reserve—cannot be covered by a 1.6 or 2 per cent. increase in the VAT ceiling, even if the British rebate of £1 billion is confiscated. We all know from the Prime Minister's recent weasel words when she faced the House of Commons after the summit, that before the summer is out the hapless Minister of State, Treasury will come crawling to the House of Commons asking it to agree to yet another intergovernmental agreement on a non-reimbursable advance. One can bet a lot of money that that is going to happen, but the Prime Minister and the Minister of State, Treasury really should not be betting that it will get through this House.

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

As the hon. Member has been good enough to bring me into this debate, let me remark on the subject of the negative reserve. The hon. Member for Thurrock (Dr. McDonald) did not understand it in July and the hon. Member for Hamilton (Mr. Robertson) did not understand it last December. Indeed, he has demonstrated today that he still does not understand it. That sounds to me like somebody who does not expect to be in government.

Mr. Robertson

That is the least convincing argument—that nobody understands it except the Treasury or the Minister of State, Treasury. How often in the past have we heard that? We all know that these figures have been published. If I have got it wrong, so has everybody else. We will wait to see whether we are all proved to be wrong.

There is an inbuilt suicide mechanism in the common agricultural policy which will relentlessly drive the Community into more wholly unproductive debt. Normally, when one acquires a debt in this world, one at least gets some pleasure out of it, but not in the common agricultural policy fruit machine. One simply loses money and gets nothing out of it at all. Few, if any, proposals are being put forward by this Government to solve this crisis.

The casualties of this crisis will not be the agricultural empires, because they are drowning in money. The social and regional funds—about which the Minister dared to speak a word of welcome—the research budget, the energy and industry budget and the aid budget will be caught in the vice of obligatory spending on agricultural surpluses that nobody wants. The Minister is not alone in being enthusiastic about the regional fund. On 10 December her hon. Friend the Minister of State, Department of Trade and Industry, referring to the European regional development fund, said: I intend to ensure that next year's discussion in the Community takes full account of the claims of those regions which have a disproportionate share of the declining industry. It is peculiar that the Minister of State, Department of Trade and Industry does not share that view with the Minister of State, Treasury. They should get together and agree with the common-liners, because the guy In the Department of Trade and Industry who is trying to get the maximum for this country is battling not only with the European Community but with the Treasury, which is trying to squeeze the regional fund down to negative figures, if it can get away with it.

In this country we need it and we need it well. Of the European Community's 40 most depressed areas 28 are i n the United Kingdom. If ever we needed evidence—if we did not see and represent the evidence of this country's decline in this region—the Government's own evidence to the European regional development fund earlier this year provides eloquent testimony to prove the case for us.

What did the Government say about Merseyside? The Minister comes from that part of the world, representing Wallasey. The Government's own analysis is: Prospects for reducing unemployment are frighteningly bleak. How did the Minister explain that to her constituents? I wonder how they can explain that away.

What about Greater Manchester? The Government say: The scale of the problem is far in excess of the level of the resources which are available.

What about Scotland, which I and my hon. Friends represent? Of Strathclyde, the most populous and economically important region of Scotland, the Government say: there appears to be little possibility of sufficient expansion in the economy to reduce unemployment significantly in the next few years. The analysis goes on. About the west midlands it says that there is little prospect of an improvement in the region's basic unemployment problem in the period between now and the end of the decade. As regards Wales, the report states: The overall economic activity in Wales is lower than any other region of Great Britain and is expected to remain so during the period that this programme covers. On Northern Ireland, it says: In the absence of an increase in labour demand there is every likelihood that unemployment will increase. About south Yorkshire it says that until the upturn comes the area is likely to remain fairly depressed. The comment on the north-east of England is: the present, unacceptable high levels of unemployment will not improve until other fundamental problems, such as water supply, land drainage, waste disposal, telecommunications, industrial land . . . are resolved. That is an indictment of the Government in their own words and by their own evidence. How can that be explained?

My hon. Friend the Member for Dunfermline, East (Mr. Brown) unearthed this treasure trove of Government culpability. If he catches your eye, Mr. Speaker, to wind up this debate, I am sure he will point out, as will others of my hon. Friends, how the Government have wrecked this country. No wonder, when the objective of regional policy has been laid down.

The Government's objective is to reduce regional disparities in employment opportunities on a stable longterm basis. What a sick joke that is. No wonder the Financial Times last Monday said: In the wider context, Government regional policy has clearly failed. There is all the evidence of damage in the Government's own words—a record of where this country has gone wrong. Yet at the same time the Government inexorably squeeze the resources that are available from the European regional development fund to assist areas in this country. This is today's Tory Britain. In the Government's own words, their own report from their own point of view—the least we can call it is a confession of failure. They have no remedy or answer and they seem to have no genuine care—although they display it so often that even their own supporters come to believe it—about the damage that is being done.

Oblivious to the misery, hopelessness and heartache over which they are presiding, which even their own experts have identified, this Government are devoid of caring. The British presidency last year could have been a chance for vision, given the tasks and challenges both here and in our partner countries. Instead we got shortsightedness. It would have been an opportunity for joint action on jobs and high-tech projects that Europe needs to compete with the United States and the far east. Instead, we got more short-term self-seeking. It could have been a time for tackling the roots of the running problems. Instead, they were swept under the carpet again and again. There is disarray at home and complacency abroad. This Government are played out. The sooner they go, the better for all of us.

5.18 pm

Sir Anthony Meyer (Clwyd, North-West)

What would the Labour party have said if the Government had not put forward the strongest possible case for getting a large share of the European regional development fund? I think it was Harold Nicholson who once said that democratic statesmen at an international conference were rather in the position of a chap trying to play cards with somebody behind him commenting on the cards in his hands for everybody to hear. The attitude of the Labour party in this matter is, as one might expect, very unhelpful.

I look forward to the day when the hon. Member for Hamilton (Mr. Robertson) is able to come out and openly admit that he is a crypto-European and be obliged no longer to disguise his real views with a welter of rather irrelevant rhetoric. It will be no doubt some consolation to him that the impending third consecutive defeat of the Labour party at a general election will for ever remove from serious debate the issue of continued British membership of the European Community, as in fact it has already been removed from serious consideration.

I agree with the hon. Gentleman that it is silly that theoretically we are debating events in the European Community from January to July of last year. As my hon. Friend made clear in her eloquent speech, what we are really talking about is the British presidency. The mere fact that the debate is apparently irrelevant may account for the poor attendance. We have not on this occasion—for the first time that I can recall—the pleasure of the company of the Liberal party's European policy spokesman—in other words, the hon. Member for Inverness, Nairn and Lochaber and pretty well every other point on the road to the isles. We very much miss him from our debates and look forward with interest to what the hon. Member for Berwick-upon-Tweed (Mr. Beith) will say.

Mr. A. J. Beith (Berwick-upon-Tweed)

I hope that the hon. Gentleman has taken notice of certain appointments that were made only a week or so ago. I might point out that my hon. Friend the Member for Inverness, Nairn and Lochaber (Sir R. Johnston) has 'flu, or he would be here to make sure that he approves of what I say.

Sir Anthony Meyer

I know the hon. Member for Inverness, Nairn and Lochaber well enough to realise that nothing else would have kept him from the debate. As usual, we observe the crowded Benches of the Social Democrats, the other party of Europe as they claim to be.

I give a wholehearted welcome to the agreement that was concluded only a few hours ago with the United States. It has averted a threatened trade war which would have been intensely damaging in itself and would have gives a fresh momentum to the growth of protectionism across the Atlantic and probably worldwide. The agreement shows the immense benefits that flow from a firm and united stand by the European Community.

At first sight, and before I heard my hon. Friend's speech, the achievements of the British presidency looked a trifle meagre, apart from the startling achievement, against all expectations, of my right hon. Friend the Minister of Agriculture, Fisheries and Food in securing agreement on measures that will check the accumulation of agricultural surpluses. All the expectations, right up to the moment of agreement, were that no such agreement was possible.

The presidency now looks bleak only to those who, like myself, are never satisfied that progress in this sphere is fast enough, or to those who never read beyond the headlines in the popular newspapers. What is happening is that the process of European Community integration is going ahead slowly—oh, how slowly—but the semi-inertia, as it seems to be to those who look at it superficially, is in itself steadily promoting the setting of the European mixture. In this perspective the steady, efficient, conscientious work of British Ministers during the presidency has contributed its share of pectin to the mixture.

Criticism in other EC countries of Britain as a member of the European Community is far from dying down, but what is dying down is doubt about Britain's commitment to the Community. It was significant that the President of the French Republic, Mr. Mitterrand, chose to come to London, to Chatham house, especially to make a speech about his views on the future of Europe. Those of us who heard it judged that speech to be aimed primarily at a French audience rather than a British audience. Clearly it was part of his internal political activity, but none the less it was significant that he should have chosen to make that speech in London. Those of us who listened to it had no doubt that the whole operation had been most carefully thought out in advance. If we were now to do ourselves a good turn by joining the exchange rate mechanism of the European monetary system, we would finally and for ever lay to rest any lingering doubts about our permanent commitment to Europe.

The process can be seen at work in the history of attitudes towards the Single European Act. When it was first proposed, the Government regarded it as totally misconceived and sought to sidetrack it. Then they went along with underwhelming enthusiasm with the negotiations that led to the Act. Now, in paragraph 1.4 of the White Paper, we have this statement: It is the Government's view that the Single European Act will enhance the Community's ability to respond to the challenges of the 1980s and 1990s, and will strengthen the ability of the twelve member states, acting together, to make their voice heard in international affairs. It advances the United Kingdom's interests by making it easier to break down the remaining harriers to trade and the provision of services (a long-standing United Kingdom objective); by helping the Community to compete in the new technologies; and by making co-operation in foreign policy more effective. As the Prime Minister told the House of Commons on 5 December 1985, it will enable the United Kingdom 'to realise more fully the benefits of our membership of the European Community'. That is music in my ears. It gives me great encouragement to see those words in black and white in a Government White Paper.

My hon. Friend told me before the debate that the Single European Act played no part in the remarkably successful conclusion of the negotiations on the common agricultural policy, but these things cast a shadow ahead of them. We have seen more than once, for example, that the threat of privatisation has been as effective as privatisation itself in inducing more realistic attitudes. Whatever the direct impact of the Single European Act on the agricultural negotiations, they must necessarily have been influenced by the prospect that the use of the national veto would be seen as less and less respectful and that the use of majority voting in its turn would become more and more the ordinary course of events.

Mr. Eric Deakins (Walthamstow)

The hon. Gentleman will be aware of the well-known quotation of Dr. Johnson: when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully. But that is not an argument for hanging.

Sir Anthony Meyer

That is right; it is an argument for second thoughts. I think I am justified in saying that we are moving steadily away from the total paralysis which the opponents of the Community, on both sides of the House, had hoped to see.

An element in the Single European Act is the enhanced role given to the European Parliament. I was much impressed by the remarkable record of attendance of United Kingdom Ministers at plenary and Committee meetings of the Parliament. I should like to congratulate in particular my hon. Friend the Minister of State, Treasury, for the part that he played in proceedings of the Committees of the Parliament where he gained an enviable reputation for his assiduity, courtesy, knowledge and diplomatic skills.

Ministers have proved that they take the Parliament seriously. I wish that the same could be said of this House. We continue jealously to refuse access to this place to Members of the European Parliament, eyeing them suspiciously, like locals eyeing visitors to the saloon bar. Of course, feeling unwanted, they no longer wish to come here. That is our loss, not theirs. It is we who are cutting ourselves off from wider perspectives, new ideas and the chance to break away from the parish pump mentality which so often prevails in the House.

The election of Sir Henry Plumb as President of the European Parliament provides an opportunity to break bad habits and to enlist popular support for better links between the European Parliament and this one. Despite his antipodean connections, it would be difficult to envisage a more typically British personality than Sir Henry. The fact that the 12-nation Parliament has elected him as President shows that, for them, to be British and to be European are two sides of a single coin, as Sir Henry Plumb so clearly demonstrated by saying that he was born British and would die a European. If Sir Henry, as President of the European Parliament, wished to call on Mr. Speaker, he, in theory at any rate, would be obliged to undergo the humbling process of the security search.

Mr. Deakins

Why not?

Sir Anthony Meyer

Any stranger visiting this Palace is rightly expected to undergo a security search. I doubt whether Sir Henry Plumb would receive such treatment in any of the other 11-member Parliaments of the European Community. I have no doubt that an expedient method can be found to enable Sir Henry to visit this place in the style to which the President of the European Parliament is entitled.

Ours is a two-Chamber legislature. For the life of me I cannot understand why the Prime Minister, who has never hesitated to put some fairly run-of-the-mill past Members of the House into the other place, will not do the same for the leader of the British delegation to the European Parliament, and indeed for its President.

Mr. Deakins

How can he do two jobs?

Sir Anthony Meyer

Four Members of the European Parliament are already Members of the other place. It would make sense that the President of the Parliament—obviously, he could not be in the other place very often—had the occasional right to speak there, and most certainly this applies to the leader of the British delegation.

If there were complaints—no doubt there would be complaints from the Labour party—that to do that would give an unfair advantage to the Conservative party, I am sure that my right hon. Friend the Prime Minister would be prepared to balance this matter by conferring peerages upon Mr. Alf Lomas and Mr. Les Huckfield, and grant them admission to the other place. Their contributions, I am sure, would be of enormous benefit to the Labour party and, indeed, to the other place.

In his wisdom, Mr. Speaker decided not to select the amendment that I put down. I quite understand the reasons why he did so, but in a way I am rather sorry about it. In the past, amendments to take note motions have often been put forward by some of my hon. Friends. On occasions, we have voted on them. I should have welcomed the opportunity to demonstrate that a substantial number of Conservative Members while supporting the Government's stance on Europe, would be glad to see a little more forward motion and a little swifter progress than we have seen to date. By and large, my hon. Friend has presented us with an encouraging report and we look forward to further progress in the same direction.

5.33 pm

Mr. A. J. Beith (Berwick-upon-Tweed)

I share the sense of disappointment expressed by the hon. Member for Clwyd, North-West (Sir A. Meyer) that hon. Members will not have the opportunity to go to the Division Lobby in support of his amendment, since it contains a great many things with which I agree. It would be interesting to see who is prepared to join him and who is left to vote against us. The amendment contains, among other things, that note of welcome to Sir Henry Plumb that was missing from the Minister's remarks.

Mrs. Chalker

I said it last week.

Mr. Beith

Things like that should often be said. On occasions as appropriate as the first debate after Sir Henry has assumed the presidency, it is right to wish him well and to set out some objectives for what we consider should happen during his presidency.

I have tried to commence my remarks by looking back as far as the White Paper with which we are dealing looks back. As some hon. Members have said, it is an odd feature of these debates that we pin them to a period over a year ago. In looking back, we must recall the accession of Spain and Portugal. It is important to remember that their accession to the Community represented a significant political event for those countries. Quite explicitly, for the Government and the peoples of both countries, membership of the Community, to which they attach great importance, was part of their commitment to democracy, which they each had been denied for so long. That is a point that we can usefully recall, and perhaps usefully draw to the attention of the United States in the arguments that seem to lead to threats of a trade war between the United States and Europe arising out of the application of levies by Spain and Portugal—Spain in particular—on United States agricultural exports.

It behoves the American Congress in particular to remember the significance for Spain and Portugal of their membership of the Community and to set those vital political considerations about the future of democracy and the Atlantic alliance alongside the economic and trade considerations which loom large in any discussion in Congress. The two aspects must be looked at alongside each other. Our American allies might well remember the democratic and strategic importance of the accession of those countries to the Community.

We can look back also to the Single European Act, which we certainly welcomed as a step forward. I endorsed the note of welcome that now features in Government statements on the subject.

Mr. George Robertson

I do not wish in any way to be irreverent, but if the Liberal party, on whose behalf the hon. Gentleman speaks, is so much in favour of the Single European Act, why is it that only the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) came to any of the debates to put that measure through the British Parliament?

Mr. Beith

That is not true. I attended some of the debates myself. The hon. Gentleman should look around his own Benches to realise that there is a higher proportion of Alliance members in the Chamber, as on most occasions, than there is or was of the parliamentary Labour party. I can see five Members of the parliamentary Labour party, plus two Members on the Labour Front Bench. That makes seven. If one puts that figure into a couple of hundred and determines the proportion involved, one will see the responsibilities which rest upon a couple of dozen Alliance MPs in the proper perspective.

Dr. Godman

What about the Conservatives?

Mr. Beith

The hon. Member for Hamilton (Mr. Robertson) addressed me from the Labour Front Bench. He must have a reply in terms that relate to his own position.

The British presidency has been disappointing because of its lack of vision. That view is reflected by those hon. Members who desire to see the European Community develop and become a more effective and democratic institution. The British presidency has involved a major effort by individual British Ministers—I pay tribute to the effort that they have put into it—and a major effort by the British diplomatic service. Considerable additional work has been done. I noticed it when I visited the United Nations in the latter part of last year. An enormous effort went into trying to secure a European position on issues arising in the United Nations by British Foreign Office representatives there. They deserve some credit for the amount of effort that went into that period of the presidency. It is a precedent that we might adopt in other areas. A lot more could be done in Commonwealth cooperation if that kind of effort were deployed. It certainly brought out some of the best characteristics of our diplomatic service.

The British presidency was marked yet again by a failure to join the European monetary system. The Prime Minister says that she is in favour of joining the European monetary system when the time is right. I interpret that, in the Prime Minister's language, to mean when she is no longer around. The only definition of "when the time is right", according to the Prime Minister, is 'over her dead body'. I see no sign in any of her comments so far that she has any serious intention of committing Britain to the European monetary system. That makes her stance absurd. Obviously, it is one of those compromise phrases which somebody in the Cabinet Office has dreamt up to patch up the difference between those who believe that we should join now and those who believe that we should never join at all. We set our position quite firmly. By now, Britain should have seized the opportunity to join the European monetary system and gained considerable advantages in doing so.

Mr. Roger King (Birmingham, Northfield)

I am in some confusion about this matter. As the hon. Gentleman may possibly be aware, some concern was expressed today about the difficulty of trying to ascertain whether it is a Liberal or Social Democratic viewpoint. As the hon. Gentleman is probably aware, last night, when the time came to vote, they disappeared into the sunset in various Lobbies. When the hon. Gentleman says "We", does he express a Liberal, SDP or alliance point of view? It is essential that we know.

Mr. Beith

As an ex-Whip, I can supply the hon. Gentleman with a list many volumes long of the occasions on which Conservative Members have done what two of my hon. Friends did, which was to stray mistakenly into the wrong Division Lobby. The list would include serving Ministers. Clearly, the hon. Gentleman has not been attending debates on this subject, or he would have heard my right hon. Friend the Member for Glasgow, Hillhead (Mr. Jenkins) describe the Prime Minister's commitment to the European monetary system as rather like somebody trying to live in a lift, constantly saying that she has not yet reached the right floor at which to alight. There is no doubt about the shared commitment of the alliance partners to British membership of the European monetary system and British commitment to the development of the Community.

Another disappointment of the British presidency has been the failure to come to terms with the problems of the common agricultural policy. It is a partial failure, because one has to acknowledge the efforts made by the Government in two areas. However, they have left agriculture desperately wondering which way to turn. The industry was told to "produce, produce, produce" and then quotas were slapped on it overnight. The fear, based on what happened in the dairy sector, has now spread abroad among the other agricultural sectors. The Government owe it to agriculture to set out what they are trying to achieve and how they are going to do it.

I recognise that the process, which is one of negotiation, necessarily means that the Government cannot say at this stage what the end result will be. However, they must give a much clearer lead to the agricultural community, which simply does not know what to do. The figures of declining agricultural investment are there to be seen. That decline is inexorable. The industry can hardly be encouraged by what the Chief Secretary to the Treasury said at the Oxford farming conference a few weeks ago. He was referring to the CAP budget when he said: It would be wrong to encourage the belief that as savings . . . are made, so the current subsidies can be automatically diverted to alternative support systems. That sent a tremor, understandably, through all those who heard it and through those in the industry who listen to such things.

There is clearly no way of resolving the problems that the industry will face unless the withdrawal of support necessary to bring supply and demand into some sort of balance is followed by investment into other uses of agricultural land, other employment in the countryside and other activities that can be related to farming so as to replace that which will be lost. Merely setting aside land to lie fallow, as the Government propose, could mean that more is produced on smaller amounts of land. The British farming industry has shown its willingness, capacity and ability to grow ever-increasing amounts by sheer efficiency and productivity.

Setting aside land to lie fallow will not solve the problem of balancing supply and demand in the long run. That is why. anybody who looks at the problem realistically, including the National Farmers Union, goes to some trouble to look at alternative ways in which it would be possible to ensure that the support given by the CAP does not go beyond the requirements and needs of the Community. We cannot afford to go on supporting and financing surpluses which we then have to store at considerable expense. The industry knows that and it is looking for a lead from the Government and a sign that the Government are determined to find a way out of the problem that will provide a future for the communities that depend upon agriculture.

As long as that is not done, the other crucial current objective for the Community—sorting out budgetary discipline and budgetary coherence—cannot be attained. No sort of budgetary discipline can survive the open-ended nature of the financial commitments of the CAP. As long as budgetary discipline cannot be achieved, it will be increasingly difficult to win the necessary support for enlarged activity in other areas of policy in Europe, such as environmental policy, social policy, economic policy, and regional policy.

Dr. Godman

When the hon. Gentleman talks about the alternative use of land, I hope he does not mean the frivolous utilisation of such land such as the creation of more golf courses. Surely it is the small farmer who requires the most vigorous of defence measures.

Mr. Beith

If anyone seriously imagines that the entire agricultural estate of this country can be covered with golf courses, he over-estimates the golfing capacity even of a nation in which there is a great deal of affection for the sport. There are already 15 golf courses in and around my constituency and there is not much scope for creating more.

The changes that we are talking about, whether achieved by alliance proposals or by the Government's set-aside policy, will involve looking for some alternative uses of land. One would expect to see an increase in the recreational use of agricultural land on the edge of towns. The best recreational use of agricultural land for many people, however, is to see it in agricultural use when they walk through the countryside and enjoy it as one of the most attractive features of life in Britain. For agriculture to cease to be the main activity of the countryside would not only be an economic disaster; it would lead to a considerable loss in its recreational value for many people who enjoy travelling in areas of the countryside, in which farmers are the caretakers who keep the land looking as people have grown accustomed to seeing it.

I want to deal with regional policy. The Government, by their decisions on development area status, control the availability of European regional funds, even under the existing regional fund provision of the European Community. They have done that so rigidly that they have brought about a situation in which areas which staff in Brussels know deserve support cannot obtain it. They have drawn a map of assisted areas which is increasingly out of touch, even in the two or three years since it was last revised, with the real unemployment problems of the country. For example, the Alnwick and Amble travel-to-work area in my constituency, where male unemployment is 22 per cent., even before the impact is felt of the recent closure of Whittle colliery, is denied assistance from the European regional fund because of the map that the British Government have drawn. I ask the Government to look at whether they can expand, within the rural development areas, the physical area to which European regional development assistance is available because the population involved in those areas is small.

I usually speak on foreign affairs, and one of the areas in which I would expect to see some benefit from the British presidency is foreign policy. The British presidency coincided with an issue of foreign policy which is of major concern to Britain as well as to many other member countries—that of South Africa. The Foreign Secretary found himself the emissary of the European Community after the Hague summit and the agreement to consider a range of sanctions. He was sent on a mission that was bound to fail. We wished him well, although we were in no doubt that it would prove to be abortive, because any useful contact that he could make, or persuasion that he could apply to those in South Africa was better than nothing. I am sure that he used his natural charm and abilities to the full as he went on that ill-fated tour, but there was no indication at the start of the tour, during or after it, that it would lead to any change in the circumstances in South Africa, which have got infinitely worse since then.

The Foreign Secretary went to South Africa against the background of the Prime Minister having already dismissed the sanctions package that had been put together by Commonwealth leaders. That package was put together in the face of great difficulties posed by the British Government, and even when it was agreed it was devalued by our Prime Minister. Therefore, it was much more difficult for the Foreign Secretary, speaking on behalf of the European Community, to give South Africa the impression that he was speaking with the sort of authority which, if it was not respected, would lead to the imposition of measures seriously challenging the regime's ability to carry on in its present way.

Nobody, I hope, has any illusion about the possibility that large-scale sanctions could bring the South African Government to their knees or overturn the system of apartheid. However, sanctions are an essential part of demonstrating our willingness to make sacrifices because of the extent of our opposition to apartheid, and they are a vital part of the process by which change will eventually come about. That was made clear by the Eminent Persons Group and the Foreign Secretary was aware of it. His ability to carry that forward into concerted policy was undermined by what had already happened at the Commonwealth Ministers' meetings. At the end of the day, we know that the European package of sanctions lacked that essential element—the ban on coal imports that was part of the original proposals.

It is perhaps on the issue of terrorism that the need for European co-operation is the most urgent. One is bound to express disappointment at the fact that member countries are still going off in different directions, often impelled by the most urgent humanitarian considerations. One thinks, for example, of the position of the French and the Germans because of the holding of hostages from both these countries. When the EEC Foreign Ministers agreed to act against people engaged in international terrorism they combined that agreement with a declaration that increased military tension was dangerous and ought to be avoided. The Foreign Secretary was a party to that agreement and was present at the meeting, but within three days of the meeting the Government gave consent to the United States to use British airbases for the strike against Libya. What kind of concerted European policy was that, within three days to do precisely what the Ministers had agreed would increase international tension?

Hon. Members have mentioned the important contribution that the Community can make to the middle east. An international conference is highly desirable and the Foreign Secretary said that when he met Mr. Peres in London. It is clearly important for the EEC to play a positive role in such discussions. I hope EEC Ministers also recognise that the Soviet Union must be brought into those discussions so that it can bring some influence to bear on some of the other actors involved in this increasingly desperate situation.

The White Paper mentions EEC support for the Contadora Group, the efforts of which have recently been revived, so far without much promise or success. There is to be a meeting of EEC Foreign Ministers and central American Foreign Ministers in Guatemala on 10 February. It is important to continue to keep a European dimension on this issue and for Europe to make it quite clear to the United States that its continued support for the Contras in Nicaragua does not enjoy the backing of an European country, and ought not to enjoy the backing of the Community, just as it does not enjoy the backing of large parts of Congress or of the American people. It ought to be part of a mature relationship with our allies, the United States, that we are prepared to tell them when we think the President is mistaken.

In the matter of foreign affairs, it would be wrong not to mention the Philippines. The EEC has made declarations of support for democratic government there. There is considerable European industrial involvement in the Philippines by companies such as Unilever, Shell, Hoechst, Bayer, and Telefunken. Many people there who seek to sustain democracy want to see a broader international base of support than is provided by the Philippines' present close relationship with the United States of America. Europe must be seen there as one of the supporters of the frail democracy which, thankfully, has survived the assaults of the last few days.

I said earlier that I welcomed the amendment tabled by a number of hon. Members, including the hon. Member for Clwyd, North-West. The amendment contains comments about Sir Henry Plumb, who made it quite clear when he gained the support on the last round of the ballot of the European Liberal and Democratic Group in the European Parliament, that he believes that the United Kingdom should become a full member of the EMS, that the power of the Parliament democratically to control the Community's policies should be increased, that he will press for greater use of majority voting in the Council of Ministers, and that he supports proportional representation in European elections in all member states. I wish him every success in the pursuit of those aims. I know that they are shared by a distinguished but small minority of Conservative Members, some of whom have their names to the amendment. I wish Sir Henry success during his period of office.

The European Parliament is soon to debate a uniform electoral system, and it is about time that the Government stopped using their power to defraud the British public and, indeed, all the people in the Community out of fair representation. No other country in the Community attempts to distort representation in this way. Even this Government do not attempt to do it in one part of the United Kingdom, Northern Ireland, but continue to deny England, Scotland and Wales fair representation in the European Parliament. When speaking on behalf of the Conservative party in opposition, the present Home Secretary said that only the first European election should take place on the system that we now use, and that from then on a common system would have to be used. Now he is the Home Secretary and is responsible for electoral law and he ought to ensure that the system used at the next European election is fair.

The failings and weaknesses in the institutions of the Community cannot be reformed and put right without a real commitment to the success of the Community. We will not get that commitment from the Labour party, which rather mutedly in this House, but much more clearly at Strasbourg, displays that deep hostility to the Community that is part of the siege mentality of post-war Socialism. That hostility is heard again and again from Labour party representatives at Strasbourg and if they were brought back more fully into the precincts of Westminster, as one hon. Member asked earlier, we would hear that anti-European voice even more stridently.

The Government give us a mixed picture. Clearly, there is a willingness to remain in the European Community, but there is a reluctance to accept the implications of that, and that goes along with the Prime Minister's well-known habit of lecturing all foreigners as if they were of some inferior social status to her own. It amounts to a failure to recognise that we cannot make democracy work in Europe unless we are prepared to make some sacrifice in sovereignty. Unless there is willingness to surrender some sovereignty, there can he no strengthening of the Parliament and no real budgetary accountability. We must believe in Europe if we are to make European institutions effective.

5.56 pm

Mr. Teddy Taylor (Southend. East)

We are grateful to the Minister for turning up despite a bad cold and showing once again her essential effervescence and optimism. I suggest that perhaps the Government are making an error in being quite so optimistic and looking for a bright side that does not exist. All hon. Members will welcome enormously the agreement between Europe and the United States of America, but perhaps it might be unrealistic for us to suggest that this was achieved by a combination of Europe being firm and of Sir Henry Plumb threatening the equivalent of war.

As I understand it, the United States, justifiably, said that the action taken following Spain's accession was such that it was entitled to cash compensation under the GATT rules. The United States felt strongly about that and said that it was entitled to compensation either by a concession in kind or by cash. I understand that negotiations took place, but that no progress was made, and that the Americans threatened to do to gin the equivalent of what the Japanese do to Scotch whisky—for reasons other than temperance. Of course, we said that if they carried on like that we would do something nasty. Understandably and correctly, we have accepted our responsibilities under GATT. I welcome this, but I hope that the Minister will give a further explanation of the details of the agreement.

Looking back over the six months of the European presidency one sees that there are no grounds for excitement, or for the optimism which my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) exhibits. We talk, as did the hon. Member for Berwick-upon-Tweed (Mr. Beith), about progress in foreign affairs. It is splendid that the member states of the Common Market can meet and express collective views on what they think might happen in south America, Nicaragua, South Africa or the middle east, but when it comes to the hard crunch issues, where is the huge benefit of this speaking with one voice and Britain not being alone?

The only recent example that I can think of was in the United Nations when Britain was condemned in a vicious and spiteful motion attacking this country and calling upon us to do things about the Falkland Islands which we thought were against our national interests and an insult to those who lost their lives in the war. Where was that popular united front when it came to the vote? We got support from countries such as Oman, Belize and Sri Lanka but not a single vote of support from any member state of the European Community. Indeed, some of them voted against us.

I suggest to the Minister that we should bear this in mind and not claim that there has been a dramatic and fundamental change in the attitude of different member states about speaking with one voice and acting in one way.

We have not heard a word about trade. I wish that the Minister had been here yesterday to hear the Minister of State, Department of Trade and Industry understandably express his serious concern about the appalling gap in the balance of manufactured trade. That is more than 100 per cent. a Common Market problem. There is now a gap in our trade in manufactured goods of more than £10 billion with the Common Market and a substantial surplus with the rest of the world. Before membership, we always had a profit. This is a matter of serious concern and the problem appears to be getting worse.

In such circumstances, I suggest that there are insufficient grounds for optimism. I want to concentrate on the budget and the EEC. However, before I discuss those points, I want to consider sovereignty. The Minister of State, Department of Trade and Industry has said that he is very worried about our trade balance, the state of which is a serious threat to jobs and employment in Britain. He explained that the causes of the present state of the balance of trade are not Government policy, either Labour or Conservative. The causes are an aggregation of consumer choice. As other Ministers have suggested, lie said that we should consider what we are buying and where the product is made in our purchasing decisions.

However, we shall not be able to do that from next year, not because the Government want to change the rules but because the Commission—a wholly non-elected body—sent a letter to the Government saying that our law on origin marking, whereby goods must display the country of manufacture, is illegal in European terms. If I wanted to buy a clock at the moment, it might have a label saying "Made in Taiwan", "Made in Japan", "Made in Germany", "Made in Italy" or "Made in Britain". The country of origin must be displayed. At the moment, as the Minister is aware, the Consumer Protection Bill is in another place. That will remove the legal responsibility for labelling the country of origin. That means that other countries will not have to display the country of origin. Unless a British manufacturer decides to put "Made in Britain" on his goods, consumers will not have the slightest idea where goods originate.

My point is not simply that I regard that as a bad thing—although I do, because the Government rightly said in the Trade Descriptions Act 1968 that consumers were entitled to know the country of origin as that adds to consumer knowledge. I am upset at the fact that the Government did not want to make the change. The Government have put it on the record in Hansard that they regretted the move, but were forced to make the change because of the letter from the European Commission and because Government lawyers advised that they would not win a case in the European Court. That is only one example of the consequences of the treaty and the Single European Act which have caused a substantial erosion of our sovereignty. I do not think that the Government have much to be proud of.

Mr. William Cash (Stafford)

Would my hon. Friend bear in mind that there are procedures, if what he says is correct, for ensuring that if there are doubts about matters of European law, these can be resolved by what is effectively an action for a declaration in the European Court?

Mr. Taylor

I accept that point and I am grateful to my hon. Friend, who probably knows more about European law than anyone else in the Chamber. However, as my hon. Friend knows, the Government consulted their lawyers and barristers and were told that they did not have a hope of winning the case. There was no point in them taking the matter to the court. The Government have had to bring in a law against their judgment, and against the wishes and the interests of the British nation, which is wholly contrary to the Consumer Protection Bill for which my hon. Friend the Member for Stafford (Mr. Cash) and I voted.

Mr. Dykes

Is my hon. Friend not misleading the House—and I ask this because I might be incorrect—because he is referring to a Commission letter which reflects a decision of the European Court? I believe that it was a court decision and not a Commission decision.

Mr. Taylor

That is not the information that I received in a written answer. Perhaps we can discuss this later. I can assure my hon. Friend that I received that information from a Minister. I was told that a letter was sent. I am glad to see my hon. Friend the Minister of State nodding in agreement, showing that she believes that my hon. Friend is wrong. A letter was sent according to the written answer.

The essential point is that the Government do not want to repeal the Trade Descriptions Act 1968. The Government believe that it would be damaging to abandon the Trade Descriptions Act. However, they must do that because of an instruction from the Commission or the decision from the European Court. It certainly has nothing to do with this country. This is another example of a loss of sovereignty and there are much such examples.

Within the next six months, we shall receive the decision of the European Court as to whether we should levy VAT on new house building in Britain. Here again, the decision is not taken by the 650 Members of Parliament in this House. Even if we all thought that it would be catastrophic for the building industry to impose VAT on new house building, even if we thought that that would be a scandalous undermining of the living standards of young couples trying to buy their own houses, there is nothing that we can do about it if the European Court takes the decision. The same applies to VAT on gas, electricity, protective clothing and protective footwear. As the White Paper sadly does not mention, this loss of sovereignty has been happening and the people of Britain are just beginning to wake up to the facts after the passing of the Single European Act.

For many of us the crucial factor, and the most dangerous issue at the moment in the European Community, is the apparent abandoning of the drive to control the European Community budget. When my hon. Friend the Member for Harrow, East (Mr. Dykes) and I first took an interest in European affairs, we were comforted—perhaps he was not comforted to the same extent as I—by the fact that there was a legal limit on Common Market spending. There was an amount beyond which the Community could not spend or budget for and that was clearly and precisely laid down. This was different from the position with countries which could spend as much as they wanted. That was a safeguard and we were told that there was a limit on what could be spent. However, we know that the legal budget is dead. We all know that this year the Common Market will spend at least £3 billion more than it is legally entitled to spend. I am worried that during the six months that we are discussing, for a number of reasons that I will elucidate, we have virtually abandoned the battle for budgetary restraint.

At the moment, the Belgians have the presidency. As a result of the chronic crisis in the Community budget, we understood that there was to be an emergency meeting of the Council in March. However, we now learn that there will be informal discussions, with the possibility of a meeting in June. Britain has traditionally been the one country—because we still have a veto—to stand for firm budgetary control. Sadly, however, the way that events have progressed makes me doubt whether Britain still has a financial interest in budgetary control.

I want to illustrate that point by considering the issue about which the Minister of State has kindly written to me and referred to today. When we agreed at Fontainebleau to an increase in the VAT contribution to 1.4 per cent., most of us thought that we did not need to worry about a future rebate. We thought that that would not be a weapon to be used against Britain because that could be deducted at source. In other words, that was no longer an issue. However, like all Common Market agreements, we find that it was not quite so simple as it seemed at the time. We make a partial direct deduction of our rebate and then have to get the other part direct from Brussels, not as a direct deduction but paid as a sum. Sadly, in respect of the year 1986, there has been only a partial payment of our rebate of 1,633 mecu to date. In a letter to me on 26 January, the Minister of State said that that is: already acknowledged to be a substantial underestimate of our true entitlement. In other words, the sum that we have deducted is a substantial underestimate. A lot more money should be paid in 1987 in respect of our 1986 abatement.

The problem is that the Common Market has no money. Not only has it no money, it will spend a lot more than is legally available to it. It will not be possible for us to receive the partial rebate in 1987 unless the EEC spends a lot more money. The Minister has said today that we may receive the money in the 1988 budget, although the 1987 budget has not yet been agreed.

Sadly, our previous insistence on and interest in budgetary restraint is not in our national interest. Once again, the Community can hold us to ransom and state that we will not get the corrected rebate unless the Community receives more cash. There is another reason why that is not in our national interest, especially as we are approaching the election. If we were to insist that the Common Market adhered to its legal budget, it would not be able to pay for the costs of intervention and the various sums paid to agriculture. That would not be particularly popular at the moment. I believe that budgetary discipline is important with regard to public spending. Every Conservative believes that passionately and we believe at home that budgetary control is important. It is more important because the budgetary limit has always been Britain's lever to achieve reform.

We have always said that, if the Community thinks that it will go bust, it had better do something about the common agricultural policy. I have gained the unfortunate impression, however, that we no longer have a national interest in budgetary restraint and that nobody in the Community or the Council is adopting anything other than an attitude of dull resignation, believing that there is nothing that can stop legal budget limits being greatly exceeded.

Mr. Dorrell

Does my hon. Friend understand that there is an inconsistency in his case? A few moments ago he criticised the Single European Act and several of the decisions that have been handed down by the European Court of Justice on the grounds that they were supranational decisions and that an immediate national priority was being submerged in a common European interest. He is now describing the budgetary chaos, which we all recognise exists. Is he aware that it is precisely because of the weakness of the supranational agency, which he criticises, that it is impossible to put some order into the Community's budget?

Mr. Taylor

I am saying the very opposite. I believe that not one member state is prepared to argue that the budgetary limits that have been agreed for 1987 should be kept. Each one will stand idly by while we exceed it by at least £3 billion.

Mr. Brooke

Contrary to what my hon. Friend said a moment ago, our entitlement to abatement remains absolute, although I agree that there are some considerations about when it arrives. Assuming that the abatement is incorporated in the main budget for 1988, as I said earlier this afternoon, it will be deducted at source just as it is now. I have now participated in five Budget Councils in connection with the 1987 European budget and there has consistently been a qualified majority in favour of maintaining budget discipline.

Mr. Taylor

I hope that my hon. Friend is not trying to mislead himself. Nobody is suggesting that the Common Market is doing anything other than passing a legal budget. We all know, however, that irrespective of the fact that it will have a legal budget which is restricted by the 1.4 per cent. VAT ceiling, it will spend at least £3 billion more. Does my hon. Friend believe that the Common Market will spend a legal budget in 1987? He must know that it will not. It will greatly exceed it. There is not much point in his sitting around saying that the budget for this year will be 20, 30 or 40 mecu, as he knows that it will be greatly exceeded.

As for the corrective rebate, the Minister has said that the 1,633 mecu included in successive drafts of the 1987 budget is already acknowledged to be a substantial underestimate. I hope that he accepts that, under Fontainebleau, we are entitled to receive that rebate in 1987—but we will not get it. He is now saying that we might get it, or that he expects us to get it in 1988.

Mr. Brooke

I am most grateful to my hon. Friend for giving way again. At the moment, we do not have a European Community budget for 1987. We are working on provisional twelfths, as the Commission is not entitled to spend on behalf of the Community more than is allowed under the provisional twelfths regime. The same will apply after we have a Community budget for 1987. The Commission cannot spend money that it has not been authorised to spend.

Mr. Deakins

On a point of order, Mr. Speaker. As the Minister of State has given us two lengthy but much-needed interventions, would it not help the House if he replied to the debate on behalf of the Government?

Mr. Speaker

That is not a matter for me.

Mr. Taylor

The Minister has been extremely helpful and explained a great deal. He has said that the Common Market cannot spend more than its budget entitlement. May I suggest that the Government have connived in the exceeding of those limits in several ways? We all know one example of that.

Hon. Members will recall that, just before Christmas, we heard a statement from my right hon. Friend the Minister of Agriculture, Fisheries and Food in which he proclaimed the merits of the agreement on milk quotas. He said that it was wonderful that, for the first time since we had joined the Common Market, we had reduced CAP expenditure. In a letter that was sent to all Conservative Members, which we were all glad to get, he said: The package as a whole involved saving in the Community Budget in 1987 of nearly 1 billion ecu (£750 million), and makes a valuable contribution in the major task facing the Community of containing 1987 expenditure…The package represents by far the most significant reform of the CAP since our accession in 1973. We expect Agriculture Ministers to say things like that because it is a competitive industry, but I was astonished to hear the Minister of State use virtually those words this afternoon because he, if anybody, knows what the score is.

The real score was set out in a written answer which we have had to dig out. It showed how the £750 million saving was made. I hope that the Minister will say something about it. We have all seen it in the banner headlines and received letters saying that £750 million has been saved. How? By transferring £800 million to national expenditure for butter dumping. In other words, it is a cheat. There is technically a saving in CAP expenditure, but we are saving by switching responsibility for butter dumping to member states. I am sure that the Minister of State, Treasury will say, "Do not worry. They still have responsibility for paying and they will give us an IOU which is repayable in 1989 or thereafter." He and the Government know that we are simply kidding ourselves. We have adopted a device to pretend that agriculture spending has been cut when in fact it has been increased by transferring spending from the Community to member states. My right hon. Friend the Minister gave that written answer on 12 January.

This is not the only device that we have used to find a means of increasing Common Market spending by not increasing the budget. The Minister of State knows that a court decision went against us in December. As a result, the Community can now have a direct debit facility on the United Kingdom Treasury for advance payments that it asks for, and it is not necessary to come to the House for approval. That was a case which the Government fought and lost. The contributions are to come from our Consolidated Fund.

We had a decision last year to transfer 25 per cent. of the storage costs, which are substantial, from the Community to member states. We had the co-responsibility levy, which meant that £400 million which was formerly carried in the budget is now the responsibility of cereal farmers. A series of devices have been used to increase total expenditure by what I can only describe as accountancy stretching which would make Derek Hatton blush.

We know that the budget will be overspent or that the Community will be bust. Almost every month, various devices are used to transfer spending from the Community to member states. Looking on the brighter side, I suggest that the Government are kidding themselves. We know that the 1.4 per cent. VAT ceiling, which was meant to last several years, has now been used up. We know, too, that world food prices are collapsing. We know that dumping is on a larger scale than ever before and that production is soaring.

I suggest that we have to accept that we shall not reform the CAP. It is not possible for member states to find a reform because the only way in which to reform it effectively is to put a heck of a lot of farmers out of business. The only way to resolve too much production leading to huge surpluses, and to match production with needs would be bankrupt many farmers and put them out of business—unless, of course, they are to be paid for doing nothing. The Community will never make such a decision because one country will always be having an election, and there is no way in which such a package will not discriminate against one member.

We should realise the responsibility and potential of our farmers. For the sake of our agriculture and the Community, and in the interests of the farmers, why do the Government not aim to repatriate agriculture from the Community to member states? Some people may say that that would wreck the Common Market, but it would do nothing of the sort. It would take away from the Common Market the nightmare that knocks its finances for six and gives it a bad name.

Member states would be far more effective in resolving the problem of surplus than is the Community, even when it works together. In considering the great triumph—as it has been called — of the epic agreement on milk quotas, we should realise that, like last time, we are paying a heck of a lot of money to farmers to agree not to produce milk, although the total production will still be in excess of our needs. Those farmers could quite readily transfer their land to the production of other foodstuffs which are already in structural surplus. Like other agreements, it will not solve the problems, but will simply cost more money and transfer the problem from one side to another.

The Common Market needs two things. First, it needs a country that has the guts to say that it will not grant any more resources until the problems are resolved. As this is one of the few subjects on which we still have unanimity, I hope that it will be us. I hope that when the supplementary budget allocation comes, as sadly it will, the British Government will have the guts to say no, because that is the only way to achieve reform. Secondly, we should concentrate on ensuring that, in the interests of British farming and the Common Market, our policy takes agriculture away from the Community and allows it to concentrate on the other matters which could, and would, be more helpful.

We should not try to kid ourselves that there is progress where it does not exist. The Government should stop saying that silly agreements are solving problems when they are not. We should be realistic and accept that, although there is a crisis, there is a way out. For the sake of Europe, we need the courage not to allocate any more resources.

6.22 pm

Mr. Jack Thompson (Wansbeck)

I shall concentrate on those EC matters in the report that are relevant to the northern region, which is my part of the country. Like several hon. Members who have already spoken, I note that the document covers the period from January to June 1986. It was printed and presented in October 1986, but it is now being debated in January 1987. Like others, I believe that there should have been an opportunity to discuss those issues long before now.

Northerners are not noted for their sympathy towards many aspects of the European Community. When the United Kingdom decided to join the EC, there was considerable concern in the north about the costs and benefits which could result from our membership. That concern has been proved well founded as regards regional aid. However, total responsibility for the limited evidence of response to regional needs does not rest entirely with the EC.

On 8 December 1986 the Prime Minister, in her statement to the House at the end of the United Kingdom's presidency of the European Council, said: It has been a priority of the British presidency to make the Community work better for the benefit of individual citizens. This was a practical and successful Council, relevant to jobs, to our future prosperity within the Community and to the future safety of our citizens."—[Official Report, 8 December 1986; Vol. 107, c. 22.]

Those of us from the northern region, who reflect upon the problems besetting us, regard that comment with some cynicism. That is because there is evidence in the document, although it is six or seven months out of date, to suggest that the committed budget for the regional development fund in 1986 was £1,879 million. Of that, £1,823 million was in the main allocation and £56 million was for the non-quota measures. It is incredible that less than one third of the main allocation has been taken up in the half year. I assume that it has now been taken up, but we cannot be certain. However, £593 million was taken up, of which the north received £21 million. I am taking these figures from the document because it is the only evidence that we have. That represented 3.54 per cent. In the non-quota section, we should receive £7.5 million over a five-year period to compensate for, among other things, the decline in the steel industry. That is a miserly average of £1.5 million per year. If that is the situation that the United Kingdom faces, what about the northern region?

The north of England has the highest level of unemployment in the United Kingdom, apart from Northern Ireland. More than 83,000 young people under the age of 25 are genuinely out of work, of whom one third have been out of work for more than a year. Although the Paymaster General announced new measures yesterday, I am concerned because young people do not see those measures as real jobs, no matter how well-intentioned the measures may be.

The regional average for unemployment in the north is nearly 17 per cent. In south Tyneside it is 27.5 per cent., in Hartlepool 23.3 per cent., in Middlesbrough 21.8 per cent., and in Sunderland it is 20.8 per cent. The hon. Member for Berwick-upon-Tweed (Mr. Beith) said that the average in his constituency was 22 per cent. In my constituency, which covers Warton and Ashington, it is 18.3 per cent. Unemployment is the nub of the problem, yet, to help alleviate it, we received a derisory 7.6 per cent. of the total United Kingdom allocation.

A year or two ago, as a member of my local authority, I was a member of a delegation from the Association of County Councils from the north of England that made a representation to the Government on behalf of the region. We were advised by the then Under-Secretary of State for the Environment, now the Minister of State, Department of Trade and Industry, who has been mentioned earlier today, to go back to the north because there would he no new initiatives to combat our problems. He said that we should pull ourselves up by our boot straps. That Victorian expression is as out of date as the Government's policies for the regions. The fact that the delegation represented the entire region was completely ignored.

Since then there has been a further development in the formation of the Northern Regional Councils Association and the Northern Development Company. That represents important progress towards a regional dimension. It is vital that the Government recognise that progress and show some evidence of support for those new initiatives.

Although efforts have been made to attract EC support by direct approaches to Brussels — I have been a member of one of those delegations—the Department of the Environment seems to have a policy of blocking applications. For example, my region made an application under article 15 in respect of many areas that are hard hit by job losses. There are several such areas. Blyth, for example, has suffered the closure of Bates' colliery, and significant help is needed to overcome that problem alone. Along with many other projects, there has not been any response, except for some moneys that have gone to Sheldon. Only this afternoon I have found that there is still no response from the Department of the Environment on those applications. This year, sympathy has been shown in Brussels towards the regions, but sympathy has not been shown by the Department of the Environment.

Mr. Eric Forth (Mid-Worcestershire)

Does the hon. Gentleman agree that since the entry of Spain and Portugal to the Community—which he and the Labour party supported wholeheartedly—it has been inevitable that there should be a movement of Community regional support away from his part of the country—the United Kingdom is one of the wealthier countries in the Community—and towards the less prosperous parts of the Community, especially Spain and Portugal, the Mezzogiorno in Italy, and Greece. Does the hon. Gentleman, in his Socialist heart, agree that we should ensure that Community resources are allocated to the poorer members of the Community and that, therefore, his own region, however hard hit, should give way, in the greater scheme of things which the Labour party has supported, both in terms of regional policy and of the enlarged Community?

Mr. Thompson

I assure the hon. Gentleman that I have a Socialist heart, and it reflects many of the things that he has said. We have to identify the position within the European Community as a whole, including countries which are as wealthy and substantial as we are, and within the United Kingdom.

Since 1979, more than 170,000 jobs have been lost in the northern region, mainly in mining-associated industries, heavy engineering, construction, distribution, hotels and catering. There is a question mark over further jobs in those sectors. N.E.I. Parsons is facing the prospect of reducing its manpower by another 800, and possibly losing all the skills that it has unless we get some orders for power stations. The northern region is putting pressure on the Government to make a decision about a couple of coal-fired power stations, but not with a great deal of success.

The northern region has a large, highly skilled work force, many of whose members are out of work. They have the talents, but their time is being wasted. They are standing in dole queues. There is a keen interest in learning new skills. I have just noticed in my local regional newspaper a typical example of the northern attitude to life. At the age of 82, Mr. George Bow, from Durham, has just achieved a Bachelor of Arts degree through the Open university. That is an astonishing example of the characteristics of the people in that region. He is not the only one of that age who has made such an achievement.

The Open university recently told me that it is keen to put on courses for people who have particular skills that are no longer required in shipbuilding, heavy engineering and mining, so that they can retrain and move further in the education system. However, the finances are not there, and the funding of the Open university has been cut.

I remind the House that, historically, the region has contributed considerably to the wealth of this country—for example, in the development of the electricity generation industry. Since the establishment of power stations, they have principally been fuelled by coal. They were designed and built by many of the electrical, mechanical and civil engineers from the north, and they provided the base for the massive expansion of employment opportunities in other parts of the country, in particular the south-east. That expansion depends on energy, as it has done for many years and will continue to do. We have made a great contribution to the economy.

There is a significant difference between the attitude of the EEC and that of the Government towards regional policies. Although I have claimed that not sufficient EC funding has been channelled into the north, I accept one thing—that at least the EC has some form of regional policy which, with all its limitations, identifies regions within the Community which, because of the changing pattern of national economies, warrant preferential treatment. There is no doubt about the sincerity of the EC towards the peripheral regions. What is in doubt is the Government's commitment to the regions.

6.33 pm

Mr. Roger King (Birmingham, Northfield)

I was relieved to hear, at the beginning of the speech of the Minister, that an agreement has been reached between the EEC and America over the trading difficulties that have occurred over the past few months. There is always the danger that, once one commences on the slippery slope of a trade war in any shape or form, there is no knowing when one can get off that slope. We in the west midlands were concerned lest the development of a trade war included aspects of the car industry, on which many of our hopes and aspirations are concentrated, with products that are due to enter, or are already selling well in, the United States market.

It is funny that so many European countries and organisations, and not a few in our country, tend to pour out anti-American sentiments but the moment that there is the whiff of a trade war, hands go up in horror, and it is the end of civilisation as we know it. We should put on record our grateful thanks to the United States for maintaining as much as it can an open policy for European exports into her market place, bearing in mind that she is very much the engine of the western industrial world.

Mr. John Mark Taylor (Solihull)

Is there not a justified appreciation in this country for the defensive shield that the Americans provide in Europe?

Mr. King

Yes, Europe owes the United States a great deal and I am grateful, as I am sure that all of us are, that we have arrived at an agreement, which we hope will stand the test of time, and that we can continue to trade with the United States on as fair and equitable a basis as possible.

My criticism of the six-monthly report tends to centre, as it so often does, on the problems of the food mountain and the agriculture policy. I am not one who can go into great detail over various economic aspects of it, but my constituents are at a loss to understand why we constantly generate vast surplus stocks of butter, beef, wine and so on. They are always astounded to learn that we sell large quantities of these surpluses to the Russians. I believe that, as we speak, a deal is going through to sell large quantities of butter, on which some people have put the price to the Community at £250 million. That is a £250 million gift to the Russians, which obviously they will be able to spend in other ways that are probably not at all beneficial to the western Alliance.

Latterly, some steps have been made in tackling this problem. It has not occurred during the first six months of the report, but in the last few weeks, steps have been taken to try to distribute some of these surplus stocks to the various member nations. These concessions will be available through various relief agencies. We all look forward to that happening. However, surely it is not inconceivable that we can arrive at a more permanent answer as to how to tackle the growing problem of surpluses. Is it not possible to develop a system whereby these cut-price European gifts are available to certain members of our community who are not normally able to purchase butter, beef and wine?

In my constituency, many pensioners and those on low incomes have not had the benefit of a joint of beef for many years. Could we not create supermarket Euro-zones where such produce is available at reduced prices for those who qualify for it? After all, those on supplementary benefit or who are unemployed, and have a family, are entitled to milk tokens. It would not be out of the realms of reality to have a system of beef tokens, butter tokens and even wine tokens, which would be a step in the right direction.

Mr. Forth

I am interested in the line that my hon. Friend is pursuing. Is he aware that, ever since the CAP was set up, those who support it have argued against what he is suggesting, because they say that the policy of having a minimum price, which is the basis of the CAP, cannot allow a policy of lower prices or give-away goods because it would create a second market with the possibility of black markets, which would destroy the concept of the CAP? Therefore, does my hon. Friend share my puzzlement at the Government's acceptance of a recent scheme that appears to introduce the very element that he is suggesting and might, in the medium to long run, destroy the basis of the CAP?

Mr. King

I prefer to think that the Government have seen the light, because the section of our community that is likely to be able to purchase these products at reduced prices is made up of those people who have not purchased butter, beef and wine in the past. I see no difficulty in offering those people the opportunity of buying that sort of food and drink at reduced prices, because it would not necessarily affect the ordinary market which the vast majority of the population uses to buy those products. It is a reasonable way of having a two-tier price system, and I do not think that it would affect the overall market for the products sold at normal retail prices if these goods were sold at a discount in so-called supermarket Euro-zones. We should look closely at the experiment that will take place and find out how successful or otherwise it is.

I am disappointed in the world of aviation, because little progress has been made to reduce air fares throughout Europe and to open up the skies of Europe. The report suggests that by 1992—a dim and distant date in the future—some progress will have had to be made and some policies introduced. I wonder whether the report gives a date in the distant future as a way of shelving the problem in the face of great difficulties being put forward by some member nations. I am grateful to note from my hon. Friend's opening speech that the number of states that are prepared to introduce an open-skies, competitive aviation policy is growing year by year. One looks forward to that growing ever further.

One of the obstacles to progress is the concept of a national state airline, which so many countries throughout the world consider to be a macho point. A country must have its own national airline. That is probably a stumbling block, especially where the national airlines are subsidised by member states in various ways. If we had free and true competition by privatised airlines and those state airlines that are competitive, other national airlines might be in difficulty and end up going out of business. Europe looks closely at what has happened to the United States' open-skies policy. Some member states can be forgiven for thinking that that is not a solution that they would like for Europe.

If the European Community is to mean anything at all it should be an open community, market and business area. We should work to reduce and eliminate national organisations such as airlines, which are sheltered from the full blast of competition.

I notice that there are problems with various aspects of the trade that we enjoy with member states, but looking closely at the chart at the back of the report, there are grounds for optimism, certainly with regard to our manufacturing industry. It is fashionable for many hon. Members to suggest that our manufacturing industry is on the way out, but the figures show something different. Between January and June 1985 and January and June 1986, taking those two dates for comparison, there has been growth in our exports—small and modest though it may be—from £10.9 billion to £11.3 billion. That is not as big a growth as we would like, but the reasons for that will have to be looked at. The reduction in the price of oil — which has shown a downturn in the corresponding period—has affected our balance of trade with Europe. Imports have gone up correspondingly.

However, there are grounds for optimism, because as the months have passed and our currency has become competitive—compared with Germany and one or two other member states — the market for our goods has grown. There has been substantial growth for the car industry in the European market. In Germany, exports of Austin Rover cars have increased 90 per cent. in the past 12 months. In Spain — despite the problems of the import tariff restrictions—the number of cars entering on the full tariff is about 4,000 to 5,000 above the normal, acceptable levels that we are allowed at the reduced rate.

Given the present trend, there is no reason why growth in Germany should not be another 90 per cent. this year. We shall then begin to experience the real volumes of car sales that we need in Europe.

The picture is not confined to our own indigenous car manufacturer. Ford, Vauxall and Peugeot-Talbot are exporting finished cars back into the European market because of the competitiveness of the product. Component manufacturers also have an unparalleled opportunity to supply to companies that produce cars in Britain, and, indeed, to supply to the continental assembly plants the thousand and one components that are used to make a motor vehicle. That shows the substantial opportunities that we have over the next six months or so to make inroads into our balance of payment deficit with the European Community. One would expect to see the manufacturing figures rise substantially.

European Road Safety Year started in 1986, and the report touches on the first six months. Having had the benefit of 12 months of European road safety, I am not sure how many suggestions or how much road safety legislation have been put forward—not a great deal, I suspect.

I hoped that some coach safety legislation would be drawn up—for example, a European standard of coach construction as a response to the many accidents that have occurred throughout the European highway system, where coaches have been involved in accidents and have been badly affected structurally. We have waited in vain, and presumably negotiations are continuing to arrive at the right sort of legislation, which is acceptable to all and offers improved safety for the user of those vehicles.

All in all, the situation is—as one might say in a school report — "fairly satisfactory, but must keep trying". There are grounds for optimism for the country's manufacturing industry as a result of our currency competitiveness, and many manufacturing concerns realising that at long last their products are extremely competitive in the European market. It has taken longer than we would like, but if one is making the right product at the right quality and right price, and can deliver on time, and if one is prepared to go and sell that product in Europe, the European Community can give the results that our manufacturing industry has been asking for all these years.

6.48 pm

Mr. Jack Dormand (Easington)

There can be little doubt that the most important issues in this debate were those raised by the hon. Member for Southend, East (Mr. Taylor), who made a powerful speech. I am tempted to follow him in his arguments. However, I shall make a short contribution and concentrate on drawing attention to that part of the report dealing with EEC regional policy. My hon. Friend the Member for Wansbeck (Mr. Thompson) has spoken for the northern region, but perhaps I can go a little wider than that. However, I shall certainly refer to my area.

Many people's expectations of EEC help for their region have simply not been realised. That does not surprise those of us who still reel that our membership of the Community has little to offer the United Kingdom. However, we are a member and we do what we can to improve it.

The EEC requires its member countries to submit reports on their regional policies. I remind the House that it was fortuitous that we learned about the British Government's submissions. It was the assiduity of my hon. Friend the Member for Dunfermline, East (Mr. Brown) which revealed the content of no fewer than 17 volumes of the Government's report entitled "UK Regional Development Programme 1986–90". In particular, my hon. Friend drew attention to its frightening annex called "UK Regional Job Deficiency Projections". Among other things, those projections show that in 1990 3.2 million people will be unemployed in the United Kingdom. That contrasts vividly with the Prime Minister's statement yesterday about getting rid of unemployment within two or three years.

The Government's guilt with regard to that report was demonstrated by the Prime Minister who, when questioned about that unpublished report — my hon. Friends will remember this—tried to give the House the impression that the Government's only role was to collate the information for which the Government had asked regional bodies, local authorities, business and trade associations and others, and that the Government had simply put it together for the EEC. That was very misleading. The report is the most devastating commentary yet on the failure of the Government's regional policy. It is little wonder that they tried to conceal it.

Therefore, in a debate of this nature, we are entitled to ask what the EEC and the British Government are doing about such a sorry state of affairs. That report and the recently published, much publicised, and, incidentally, long-delayed, 1984 census of employment are the most savage indictment of the Government's incompetence and uncaring attitude towards the worst hit areas of Britain.

Those reports have given rise to the phrase which now dominates the media — the north-south divide. That division has led the Government to try a new tactic in an attempt to fudge the issue. "Ah," they say, "it is not really like that. There are prosperous areas in the north and depressed areas in the south." Are the Government really saying that pockets of so-called prosperity or pockets of depression are the criteria by which to judge large areas of the country? That is what they appear to be saying. Is the Prime Minister saying that my area, the northern region, which has consistently had the highest rate of unemployment outside Northern Ireland, is to be compared with the southern region?

Is that what is to be said when the census to which I have just referred shows that 94 per cent. of total jobs lost since the Government took office in 1979 have been in the north, in Scotland, Wales and the midlands, and when the southern triangle, which, incidentally, has 42 per cent. of Britain's population, has had job losses of only 6 per cent.?

Although the blame for that must lie with the Government, we must ask, in a debate such as this, how EEC rules, regulations and policies can mitigate the worst effects of the Government's incompetence and lack of understanding and compassion. The present position is that the EEC regional moneys have no noticeable effect on the hard hit areas of Britain. The report gives the following figures. The European regional development fund commitment budget for 1986 was £1,879 million. As hon. Members will know, that fund has two sections. Of that, £1,823 million is for allocation to member states in accordance with the quota ranges in the main regulation and £56 million for the specific Community—non-quota—measures.

That sounds an awful lot of money, but by the end of the six-month period that is under debate this evening, the United Kingdom had received £21 million. In my county of Durham alone, which is suffering from the devastation of pit, steelworks and other closures, shipbuilding contraction and bankruptcies, we could use double that amount. I hope—I am glad that we have not seen it so far—that there will not be any cheering or euphoria about the effectiveness of the EEC's regional policy.

Mr. Forth

I am most grateful to the hon. Gentleman for giving way. Given that regional policy has existed in the United Kingdom for some 50 years and has been pursued by Governments of all parties in an effort to reduce regional disparities, and since we have arrived here in the 1980s, having gone through all that process but still experiencing what he has just described, how can he persuade the House that regional policy, applied throughout that period by all Governments, has failed so miserably?

Mr. Dormand

That is the third rather lengthy intervention that the hon. Gentleman has made. I do not deny that the hon. Gentleman has made salient points, but it might be better for him to make his own speech. My specific answer is that we do not yet have a perfect regional affairs policy. However, as my hon. Friend the Member for Wansbeck said, the regional policies of Labour Governments were a darned sight better than anything that has been produced since 1979. If I had more time I could deal with the deplorable consequences of the Government's regional policies since 1979, and I intend to do so in future debates.

What power does the EEC have over the decisions of member countries which are manifestly detrimental to our depressed regions? I hope that the Minister will give me specific answers when she replies. I give two current examples. The Government announced last week that regional development grants will be cut by half next year. That aid will be reduced from £396 million in 1986–87 to £197 million in 1987–88. The north's share of £67 million will be halved at a time when unemployment in the region continues to rise. Many firms depend on regional development grants and have based their investment programmes on the assumption that they will get the allocation promised to them. The Government and Conservative Members are continually calling, and with complete justification, for stability in financial and economic matters, but they are not practising that.

The position is exacerbated by my second example—the Government's decision to delay the payment of regional development grants. The Minister need not accept my view of the problems arising from such erratic policies — she probably would not, anyway. However, this month the CBI said: We know just how disruptive these moratoria can be for firms in the regions. Companies budget for an expansion project having received grant approval, only to find a two-month delay on payments slapped on at the last moment. Cash flows suffer. What the CBI then says causes me even more concern: More worrying is that businesses might start to turn away from RDGs because they just do not think that the time and effort involved are worth the grant. Those are the words of the CBI. It is a chilling statement, particularly for areas such as the northern region, where so much employment is literally dependent upon those grants. Of course, there is no guarantee that any shortfall in United Kingdom grants is made up by assistance from the EEC. Indeed, that is not the way the system works.

Another problem of regional policy that disappointingly receives no mention in the report—I must admit, in deference to the hon. Member for Mid-Worcestershire (Mr. Forth), that neither Conservative nor Labour Governments have solved the problem—concerns what is usually called the branch plant economy. Those are units of either national or multinational firms placed in the regions. Unfortunately, they have not stood up to the economic recession.

In the 1960s and the 1970s those factories were welcomed and hailed as a success story, but not many of them have survived. My region, more than any other, has suffered from this problem. I believe that such units could be made viable but the financial, industrial and economic structure on which they should be based can only be brought about by a fundamental change of policy. I suggest to the Minister that the problem is worthy of a joint study and investigation by the British Government and the EEC. I hope that the Minister will give serious consideration to that suggestion.

We are forced to conclude from this report that EEC regional policy is largely ineffective. I do not lay the blame for that state of affairs entirely at the door of the Community because it works under considerable constraint with regard to that policy. If we have to be members of the EEC, I hope that the Community will strengthen its regional policies, if only to mitigate the disastrous results of Tory Government's policies, national and regional.

Between 1979 and 1986, job losses in the United Kingdom totalled 1,632,000—representing 7 per cent. Of the total work force. In the northern region that loss has been 171,000, representing 14 per cent. of its work force. Those are figures that we have to live with, and they get worse every day.

The Government's deliberate reduction of regional aid in the eight years since dry came to power is one of the worst features of their deplorable record. The Government's recent decisions, some of which I have mentioned — indeed, the hon. Member for Berwick-upon-Tweed (Mr. Beith) gave another excellent example — show that the Government have no intention of changing course.

There is less than one page on regional policy in the report before us today and that is yet further proof of the fact that we cannot rely on the EEC to bring some hope to our deprived areas. It is a bleak picture and one which will be changed only by the return of a Labour Government at the next general election.

7.3 pm

Mr. Hugh Dykes (Harrow, East)

I am grateful for the opportunity to participate in the debate, but I shall be brief, as I am aware that other hon. Members wish to speak.

Part of tonight's debate has been the usual run-around on some familiar tracks and themes.

Mr. Eric Forth (Mid-Worcestershire)

This will be no different.

Mr. Dykes

I paused for that intervention, and I hope my hon. Friend appreciates that. I am grateful to him for reminding me that we should try to say something different on these occasions. It is rather difficult, because the existentialist question about our membership of the Community arises, and that diverts us from dealing with the practical points of that membership. I believe that the worries about our membership are declining and I get the impression — I again run the risk of amusing my hon. Friends — that Europe is on the move and that the United Kingdom's attitude is more positive.

If politicians give the public the opportunity, they are interested in what is going on in Europe and they have a true interest in developing one of the leitmotivs of the Government—the development of the internal market. That market is not only a mercantile, commercial, industrial and infrastructural body, but it is concerned with politics.

We are witnessing the development — in terms of industry and commerce—of a unitary state. The United Kingdom and other countries will come together because of economic harmonisation and unity and slowly — perhaps too slowly for certain Members of this House and other good Europeans elsewhere — that will have a political effect.

I look forward to the day when someone quite naturally, without any feelings of strangeness or inhibition — indeed, someone who is used to the habits of foreigners—goes to whichever financial institution, in whichever country, offers the best mortgage. It may be for a house or flat in Britain or within the Community. There are myriad examples in the future tapestry. The development of the internal market is the fulcrum of future developments. The Government are enthusiastic about it, but there are other areas where the Government have to enhance their enthusiasm. I refer to the membership of the European monetary system, which has already been mentioned in the debate.

I believe that our amendment is constructive and detailed, and the last line quite rightly refers to Sir Henry Plumb's accession to the presidency of the European Parliament. In a remarkable way, Sir Henry Plumb combines the very Englishness to which my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) referred with a striking enthusiasm for Europe. In chemical terms, that must be reassuring to the small and dwindling number of people who may still be uneasy about working, living and operating with foreigners. However, more and more people have become excited about developing and encouraging different aspects of European co-operation, and a number of items have been referred to in the debate.

I believe that air fares are a pressing matter. I hope that my hon. Friend the Minister and her colleagues will pull out all the stops—if that is the appropriate phrase—to reach a European system of justifiable, low air fares. One can give a homespun example by comparing the United States air fares with our system of air fares. Indeed, the example was quoted on a recent radio programme on Europe in which I participated. In the United States there is a service distinguished by the colloquial name "the red-eye special". It is a late night flight from New York to Los Angeles. The cost of the fare is cheaper than the fare between London and Nice. That is a disgrace by any objective measurement. I hope that we shall achieve significantly lower air fares when all the elements in that complicated tapestry come together.

The future of the EC depends on many things, but I believe that its progress is inexorable. Many people are now aware of the Community's advantages, be they practical, political or to some extent ideological. I do not believe that that ideological advantage is in any sense similar to the polarised ideological descriptions that are used in Britain.

The Single European Act is brand new, and as such no examples of its work are available, but I believe that it represents the basis for constructive, serious majority voting within the European Community. I am sure that that majority voting will operate more often in the interests of Britain than against. As good democrats, we should accept the notion of majority voting, as it has taken Europe a significant step forward. We should also accept any decisions when we represent the minority, because that is what it is all about. I also hope that the use of the national veto will almost disappear.

One of the items mentioned in the description of the presidency and also in a White Paper refers to the development of European television. There have been complaints from a number of quarters that the proposals would mean an unfair and bureaucratic quota system which would demand a minimum percentage of European programmes being shown on the developing Europewide television nexus. As a good Conservative I abhor any extension of bureaucratic structures, but I believe that some such system will be essential at least in the initial, rather shaky development of European television.

First, there is the pre-eminence of the English language in the European scenario. That is very attractive for us, so why should we complain about it? It will, however, militate against programmes in other languages having more than a very limited market unless they receive some special assistance in the launching period. Secondly, world television will be swamped not just by world satellite development, including pop channels, but by United States programmes, which are marketed on a much wider basis and often dubbed in the United States. There is thus, sadly, a danger of being consigned an excessive weight of "Dynasty", "Dallas" and other admittedly popular rubbish from the United States and being deprived of the opportunity to see better programmes from Europe. [Interruption.] There are, of course, exceptions. There are some very poor quality programmes in Italy, for instance. Nevertheless, the intellectual development of European television with the sharing of knowledge and culture among member states will initially require some special arrangements, although I hope that they will wither away as time goes on.

There are also technical considerations, such as the need to avoid duplication of system, and I hope that when high definition television comes in 1992 or 1993 the essential agreement with the Japanese will be achieved.

Mr. Teddy Taylor

As a democrat as well as a Conservative, does my hon. Friend not appreciate the enormous danger to the freedom and independence of broadcasting organisations if they have to show programmes simply because there is an EEC quota, rather than use their artistic and intellectual judgment? That is why the BBC, the IBA and, happily, the Government utterly oppose such a system. In a democracy the decision should be left to the broadcaster, not to the bureaucrats in Brussels.

Mr. Dykes

I can see the attraction of that argument, but not in the initial stages, because expert producers in this country are becoming increasingly knowledgeable about the high quality of programmes being made in other European countries. So long as the quotas remain minority percentages, as they are in the proposed scheme—

Mr. Taylor

Sixty per cent.

Mr. Dykes

That is the highest percentage that has been enunciated, but lower percentages are proposed in other areas. So long as the quotas remain minority percentages, there will not be total dominance, but programme makers in all countries will be assured of a fair crack of the whip. There will also be programmes made by British, Italian and German programme makers together. Those programmes will have a reasonable chance in the initial stages which they would otherwise not have. I do not think that that modest statement counteracts the democratic impulses that I share with my hon. Friend the Member for Southend, East (Mr. Taylor).

With regard to the budget, it is sad that some hon. Members — again, the number is dwindling and I am sure that it will continue to diminish—are still prone to hysteria. I am saddened when they misunderstand these matters. Yet they ignore the vast expenditure, despite monetary discipline of individual member Governments, including the British Government. Those Members are very rarely present when millions, if not billions, of pounds of expenditure go through on the nod, but if the European Community tries to get by with £200 million or £300 million there is a great outcry. They continue to see all manner of sinfulness in the European budgetary system, yet they participate in national budgetary decisions in countries with substantial deficits, such as our own. Italy probably has the largest, although Germany has a large deficit when one includes the Lander. The deficits of member states total about £100 billion compared with the very modest amounts required for the European budget.

Payments and receipts are supposed to be equal in the European system, although the system is out of line at the moment. I believe that the problems can be fairly easily resolved by correct procedures in the Budget Council and throughout the Community, but not by the hysterical view that they represent some terrible catastrophe. I wish to see budgetary discipline in the European Community and curbs on excessive agricultural spending. It should be noted, however, that last year aggregate farm support in the United States was just above that in the EEC, although it involved less than half the number of farmers in an approximately equivalent population.

Mr. Teddy Taylor

That is wholly misleading.

Mr. Dykes

My hon. Friend the Member for Southend, East frequently, though probably accidentally, misleads the House on these matters. For example, he claimed earlier that the European Commission had issued a diktat that marks of origin had to be abandoned. In fact, the Commission sent out a letter following the decision of the European Court — rightly, in my view — saying that compulsory marking as it existed in some member states was in restraint of community trade and therefore could not be compulsory. It did not stop manufacturers putting marks of origin on their products if they wished.

Mr. Taylor

Will my hon. Friend give way?

Mr. Dykes

No, my hon. Friend made a long speech and he has constantly interrupted from a sedentary position. We listened to him in relative silence.

Mr. Taylor

It is in Hansard of 1 December 1986, at columns 434–35.

Mr. Dykes

It was a decision of the Court, not the Commission, as my hon. Friend the Minister confirmed earlier.

It is interesting, attractive and worth while to see the Community developing a common foreign policy. I hope that it will have major views on the middle east, given the paralysis of decision-making on these matters in the United States. As the United States does not usually handle foreign policy matters with any great skill—I say this with regret as we are all friends of America, but the evidence in recent years has been monumental — the European Community, with its greater skills in this area, has a great deal to offer in reaching towards solutions in very difficult areas of policy and crisis such as the middle east.

An area of great concern to us all which has already been mentioned in the debate is South Africa. Paragraph 10.6 of the White Paper begins: On 27 June the Heads of State and Government expressed their grave concern about the worsening situation in South Africa". I congratulate my hon. Friend the Minister on her forthright statement on the severe and agonising crisis in South Africa and on what she and her colleagues have tried to do.

Since that paragraph was written — it is now a historical document, issued in October 1986 — the situation has become far worse. There is total press censorship and the ominous new development of censorship of the speeches of Members of Parliament. At present they are censored only in the press, but the way things are going the time will no doubt come when they are censored in the Pretoria Parliament itself. That has disadvantages even for the Pretoria regime as rumours increase and abound in South Africa and outside about what is going on. The latest suggestion is that some 30,000 people, including children, have been detained and that between 2,000 and 3,000 people, again including children, have been killed.

Sadly, the regime in Pretoria shows no sign of making any concessions. The visit by my right hon. and learned Friend the Foreign Secretary during the British presidency was a wonderful opportunity for Pretoria to show sincerity in seeking reform and modernisation in that unhappy world, but there was no response to that opportunity. The alliance foreign affairs spokesman referred to my right hon. and learned Friend's visit but did not mention the earlier visit by the Commonwealth Eminent Persons Group when the beginnings of a negotiating possibility were, I believe, deliberately sabotaged by elements in the South African Government who saw it as a chance for a breakthrough by one or two slightly more moderate figures in that very depressing Government.

Here, too, there is not only the important role of the United Kingdom Government in saying and doing whatever they can to try to get Pretoria to see sense at last, and outside interference and suggestions are entirely legitimate. There is also the European Community itself, as a much more important force, representing the moral and political authority of the 12 member states acting together, with the will to insist that Pretoria now begins to put its house in order.

I hope that during the current presidency and later in 1987 massive efforts will be made to do those things that 1 have described in broad terms and also to consider the possibility of equating more closely to the United States' position on limited sanctions. I am not an enthusiast for sanctions, but unless Pretoria itself shows signs of responding to the increasing rage and anger of not only its black population but many sensible whites, and to outside pressures such as those of the European Community, only misery, total revolution and chaos can ensue.

I concur with my hon. Friend the Minister in congratulating Willy de Clercq on the recent negotiations with the United States. He is turning out to be one of the more brilliant in a collection of very distinguished Commissioners and has done very good work there. It shows that, as the United Kingdom gets used to working with the various organs and channels of the European Community, including the European Parliament, we get more self-confident. I should like to think that it will be as one of the economically strong of the four main states in the Organisation for Economic Co-operation and Development listing, the four main members of the Community. That will come later, because at the moment Italy seems to perform better than we do, although it is supposed to be the weakest of the four. Nevertheless, it will come, together with the political self-confidence which will mean that, once and for all, these arid, sterile and old-fashioned arguments about whether we should have joined in 1973 will be totally otiose and out of date.

7.21 pm

Mr. Eric Deakins (Walthamstow)

I always seem to have the pleasure or privilege of following the hon. Member for Harrow, East (Mr. Dykes). Our views on this matter are as diametrically opposed as those of any two hon. Members can possibly be. He is, of course, a federalist. There is an increasing number of them, though still a small minority, mostly on the Government Benches and in the alliance parties. I sometimes wonder about the hon. Gentleman. When I hear the speeches that he makes on this issue, I wonder whether he is in the right party. I do not think that the Prime Minister—I cannot speak for any future Conservative leader—shares his views at all about the future, whereas the alliance parties are the only two major parties in British politics completely committed to a federalist solution. I do not agree with that solution, but the hon. Gentleman knows me well enough to appreciate that I will not spend time rehearsing arguments with which we are both familiar. We have been through this many times before in the House since 1971 and even longer than that outside the House.

I wish to begin by looking at the document which the Minister, as my hon. Friend the Member for Hamilton (Mr. Robertson) said, disposed of in a few minutes before going on to talk about the glories of the subsequent six months of the European Economic Community. In paragraph 1.4 reference is made to a single European market to realise more fully the benefits of our membership of the European Community. That phrase, if it means anything at all, implies that there have already been considerable benefits to the British people and economy. I take just one example to undermine that particular claim of the Government, a point to which the hon. Member for Southend, East (Mr. Taylor) referred—the balance of manufacturing trade.

In 1972, the last year before Britain entered the Community of Six — there were only six members originally—we had a small deficit of £257 million in our manufacturing trade with the six original members of the Community. In 1985, the last full year for which figures are available, the deficit had increased to £9,706 million, a net worsening of our trade balance during the first 13 years of our membership of £9.35 billion. With benefits like that, who needs disadvantages? The damage is already being done by membership and it happens to coincide with our period of membership. The figures also give the lie to the arguments used originally to justify our entry into Europe—arguments which succeeded in misleading the majority of the British people that it would be for the trading benefit and economic advantage of this country to remain in the Community in 1975.

Those figures are unanswerable. To do them justice, the Government always seek to avoid this issue and merely talk about the percentage of our exports which go to the EEC. There is nothing wrong with an increasing proportion of our exports going to the EEC, but what really matters in the end is the actual volume of trade in both directions and the net advantage and disadvantage. As we go further into the single European market, the Government's hopes will no more be fulfilled than were those of the British people, such as the hon. Member for Harrow, East who advocated entry in the early 1970s.

It may be that the Government would argue, as they have sought to do in paragraph 1.15 about the EUREKA initiative, that there are advantages in technical co-operation. Every hon. Member in his right mind will be in favour of technical co-operation between Governments, companies, and so on, in order to spread the cost of research and development and to take advantage of specialisation in different countries. What do we find? The most successful civil project of technical co-operation in the last decade, certainly since we entered the Common Market, has been the Airbus project, but that project had nothing whatever to do with our membership of the EEC. It was a project negotiated between the Governments of four countries—and rightly so. It appears to be a very successful project, and one that will have every success in future, but as an argument for our being in or out of the Common Market, it is quite irrelevant.

The same goes for the EUREKA project, which the Government have the gall to mention in connection with this six-monthly review in paragraph 1.15. The EUREKA project is for 19 European states, plus the Commission. I cannot think why that is; it is not as though it is a state yet. Those 19 states are much wider than the Community: they embrace the whole of western and northern Europe. So there is no need for Britain to be a member of the EEC to have the benefit of such technical co-operation. That again gives the lie to some of the arguments by the Confederation of British Industry in the early 1970s and again in 1975 to justify our membership.

Paragraph 2.16 of the document refers to liberalisation of capital movements—something that I am sure will be widely welcomed and accepted on the Government Benches. What worries me a little is that we, Opposition Members, do not seem, officially at least, to have woken up to the implications of this for Labour party policy when Labour forms the next Government—that liberalisation of capital movements and the single European market will undermine many of the major policies that Labour will be putting to the British people at the next general election.

My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley), who will make an excellent replacement for the present Chancellor of the Exchequer, has gone on record as saying that while we are not against further liberalisation, we want to repatriate capital that has gone abroad, and he has put forward a very ingenious scheme for doing so. There is nothing wrong with that, except that those who know about the Common Market and the way in which it operates will realise that this goes right against the liberalisation of capital movements—

Mr. Dykes

rose—

Mr. Deakins

I will give way in a moment—and the whole purpose of the single European market, which is to allow capitalists in any country absolute freedom to invest where they like. There can be no restrictions. What is more, there can be no inducements or penalties, as my right hon. Friend has suggested. I am sure that my right hon. Friend is taking this point on board, but it will be a rather tricky issue for us to handle unless we come out now and say that we are not in favour of further liberalisation of capital movements as implied in the single European market.

Mr. Dykes

I have great respect for the hon. Member's candour and his knowledge of European law. Has he not admitted something which is central to the economic policy of his colleagues on the other side of the House? They know that because these things are governed by directives they cannot undermine or unpick them and therefore the policies on which their economic strategy is based are in tatters before they start.

Mr. Deakins

I would not go all the way with the hon. Gentleman on that, but I remind him and the House that my hon. Friend the Member for Dagenham (Mr. Gould) and I were co-authors of a pamphlet, published towards the end of last year by the Labour Common Market Safeguards Campaign, which I recommend as good reading. My hon. Friend dealt with the economic aspects and I dealt with the political aspects of our membership. We proved conclusively that there is incompatibility between some of Labour's economic policies and the existing rules and regulations of the EEC and its whole spirit.

Mr. Dykes

Good.

Mr. Deakins

Federalists will say good, but this conflict has to be resolved. I hope that when we are in Government after the next election we will be determined not to kowtow to EEC rules and regulations. We shall ensure that the Labour Government will be able to carry out the policy on which they will be elected, without regard to Common Market rules and regulations.

There are two major issues in this debate. With respect to the Minister—I am sorry she has left the Chamber and that she will be replying to the debate — in this debate we are commenting on budget procedures and financial control measures. It would have been helpful if the Minister of State had replied, because he does know his subject. He has made a couple of interventions, but he is rather restricted. This report says that the 1986 budget was disputed. The 1987 budget is also disputed. There is increasing — I hesitate to use the word "chaos" —financial uncertainty about the future economic and financial development of the Community. My hon. Friend the Member for Dunfermline, East (Mr. Brown) made the very good point that no one knows what will happen next year on the budget and on financing of Community expenditure.

One of the problems in the disputed budget last year and this year is the attitude taken by the European Assembly. The Assembly is spendthrift because Members of the Assembly, no matter how distinguished they may be, like the new President, have no responsibility for raising money. In my opinion—I hope it will eventually become the opinion of my party—they should have no responsibility for spending money. They have power at the moment to influence expenditure, without any responsibility whatsoever to answer to taxpayers in individual countries for the raising of that money. It is for national Parliaments to control EEC expenditure. It is representative Members of national Parliaments who are responsible for the raising of the money and answerable to the electorate, not members of the European Assembly.

In paragraph 2.15 we are told that in future the budget is to take account of the cost of the past. Is that not a defeat for a point of view that used to be put forward by Her Majesty's Government—that they did not recognise that the cost of the past ought to be a factor in budget considerations from year to year, and that there ought to be some other way of dealing with it?

Even worse, we are entering a period of deficit financing for the EEC, although that is illegal under the treaty of Rome. On 24 November the Minister of State said: There is no question of expenditure in the draft 1987 budget exceeding that allowed under the 1.4 per cent. VAT ceiling. If the funds are not available, they cannot be spent and expenditure over the VAT ceiling would have to be cancelled or deferred." — [Official Report, 24 November 1986; Vol. 106, c. 107.] Can anyone in their right mind believe that spending towards the end of next year will be cancelled, and how can spending on the common agricultural policy possibly be deferred? There must be some other solutions.

Her Majesty's Government, before Christmas, were casting around for expedients, as the hon. Member for Southend, East said in his excellent speech, to try to square the circle, to prove that with less income than budgeted expenditure one can overcome that deficiency. The same problem faces a number of Labour councils, especially in London. It is surprising that the Government should be lambasting those Labour councils for doing something that they are encouraging the European Community to do, of which they are a principal member. There is a great deal of optimism on the Government Benches about the 1.4 per cent. VAT limit. That paragraph, and it is rather mealymouthed, says: it was generally recognised that these, and other, pressures would have to be contained within the 1.4 per cent. VAT ceiling. Why are those words "generally recognised" used? Are they not a euphemism for the fact that it is not generally agreed? If it was generally agreed, the Government would surely have use the word "agreed" in that sentence in that paragraph. The Government's attitude towards the budget next year and the programmes it will bring with it represent once more, as in 1986, a triumph of hope over experience.

In 1987 will we have a supplementary budget or an intergovernmental agreement? The Minister of State, Foreign and Commonwealth Office suggested that the financial crisis might be resolved in one of these two ways. I remind the Foreign and Commonwealth Office and the Minister and the Government that the Prime Minister has set her foot firmly against the idea of intergovernmental agreements. The Prime Minister, in the statement on the European Council in London, said: If one goes in for more intergovernmental arrangements, one fundamentally undermines the discipline." — [Official Report, 8 December 1986; Vol. 107, c. 27.] I hope that those responsible in Britain for tackling these budgetary crises will bear in mind the very wise words of the Prime Minister on that occasion. Unquestionably intergovernmental agreements have undermined budgetary discipline and led to the postponement of the real issues of the future financing of the Community.

That is not all. In the debate on 24 November, which was a rather more technical debate—I have no intention of going over the points I made then, to which the Minister of State, Treasury was kind enough to try to reply—I said that there are a lot of things wrong with the budgetary and financial procedures in the EEC.

I want to draw attention to one aspect which bridges the gap between what happens on the budget and what happens on the common agricultural policy. In paragraph 3.15 of this report there is reference to the representative rates under the common agricultural policy. These have been devalued by most member states of the Community. In that paragraph there is no estimate whatsoever of the cost of devaluing the representative rates, yet there is unquestionably a cost to the Community which could have been estimated and was not. Our Government should have insisted that cost estimates were presented to the Council by the Commission before a decision was made by the Agriculture Ministers, no doubt subsequently approved by Finance Ministers, to approve the devaluation of representative rates. This is another means whereby the impact of the CAP is partly disguised. There is a hidden cost there and we do not yet know what it will be.

Finally, I turn to paragraph 2.19, where there is a reference to changes in the relationships of currencies to each other in the existing exchange system of the European monetary system. The hon. Member for Berwick-upon-Tweed (Mr. Beith), who spoke on behalf of the Liberal party and possibly the alliance, did not understand the system because he talked about Britain not being a member of the European monetary system. He should know by this time that Britain is a member of the European monetary system, but not of the exchange rate mechanism of that system.

The European monetary system is in chaos because the system cannot cope without constant realignments, having set rates of relationships between different currencies. There is some flexibility, but every year or every two years it will be necessary to change the balance completely. My objection is not to that—that might be inevitable under any system— but changing alignments of rates distorts the whole financial control over what goes on in the EEC. Every time the rates are changed, as they were last autumn between France and Germany, and also between the states in West Germany, with a devaluation of one currency and a revaluation of another, that increases the cost of operating the Common Market by raising the costs of the common agricultural policy. I shall come back to that in a moment.

Mr. Dorrell

The hon. Gentleman isolates a problem which arises because of fluctuations of currency and then criticises the machinery which damps down those fluctuations. Surely, without the machinery the fluctuations and the probems that he identifies would be worse.

Mr. Deakins

If there is a fixed mechanism, it must be comprehensive; otherwise it should not exist at all. It is like going back to fixed exchange rates with a little floating within certain bands. I am not an economist so I may be shot down by those who know more about these matters. but I would have thought that that was a disadvantage. With the world moving over to floating exchange rates, I would have thought that that was a much greater advantage to traders and merchants than the European monetary system.

The common agricultural policy has dominated the debate. I do not need to go into details because it is widely accepted that the costs of the common agricultural policy are increasing. The costs to Britain are increasing, but they are partly shielded by the system of abatement which was agreed at the Fontainebleau summit. One thing that the hon. Member for Southend, East did not mention in an otherwise excellent speech was that the abatement system agreed at Fontainebleau is tied clearly and definitely to the 1.4 per cent. maximum VAT rate.

If it should become necessary—as it will towards the end of 1987 — to consider going up to a 1.6 per cent. VAT rate from 1 January 1988, the whole system of abatement will come under challenge again and there will need to be another summit to reassess whether there should be an abatement for Britain. We shall go through the mill once more. Incidentally, I assure the Government that they will have much more trouble in the House over a 1.6 per cent. VAT rate than they had over the 1.4 per cent. rate. We had hoped after Fontainebleau that the issue had been resolved for ever. Now we shall have it back with us, as some of us forecast at the time, no more than three years after that much-trumpeted agreement. The agreement will have to be renegotiated if we are so daft as to go up to a 1.6 per cent. VAT rate.

On the CAP, paragraph 1.10 of the White Paper mentions savings that were made in 1986. My remarks are directly for the benefit of the hon. Member for Harrow, East, who may or may not have been getting at me when he said that some Members were emotional about these things and did not understand finance. I think I know more about it than he does. I am a member of the Public Accounts Committee, and no one on that Committee has taken a greater interest in financial management and control than I have. I only wish that the Labour party would take more interest in these matters. It is because of that experience and that interest that, although I am not an expert, I hope I can speak at least as someone who knows what he is talking about.

In paragraph 1.10 we are told that the savings on the CAP for 1986 were against the original proposal of the Community. Contrasting savings with proposals is no way to exercise financial control. The proper way is to contrast the saving with the estimated outturn. The Community does not yet work to estimated outturn figures. It is about time it did.

In regard to the December agreement on dairy and beef products, here again the Government have misled the House. In the Minister of State's statement to the House on 17 December there was virtually no reference to information which was given to the House two days later in a written answer, after the time for questioning the Minister had passed. The Minister did not tell us what was in the written answer, namely, that there was a Commission paper outlining plans for a two-year stock disposal programme covering 1 million tonnes of butter. The Commission proposes to finance this"— here are the important words— by deferring the reimbursement of member states of any losses on these sales for two years and then making four equal annual payments borne by the Community budget in the normal way. For the period of deferral interest will be paid to member states on the amount outstanding." — [Official Report, 19 December 1986; Vol. 107, c. 832.] The answer went on to point out that no detailed arrangements had been made. If the Minister had told that to the House on 17 December, his much-trumpeted dairy agreement would have had a different reception, even from his own Back Benchers who thought that it was a good agreement. We should be grateful to the hon. Member for Southend, East and to other hon. Members who asked written questions which elicited the information from the Government after the event.

I do not wish to echo the arguments of the hon. Member for Southend, East, because that would be superfluous. We are told that there is to be a £1.3 billion saving over the next three years because of that agreement. As the hon. Gentleman pointed out, most of that will be because the costs of the common agricultural policy are being switched to national budgets. What is this, in effect, but a loan by member Governments in advance to the EEC to finance current expenditure, a loan which will be paid back hopefully from future annual budgets? That is what the Minister's answer meant. It is one expedient after another.

In her introductory remarks, the Minister of State made an interesting statement when she said that the costs of surpluses should not be for the EEC alone. I think that I have quoted almost her exact words. That is a major change in one of the basic principles which have dominated the EEC since its foundation in 1957, and which we had to accept when we become a member on 1 January 1973.

One of the three basic principles is that there shall be common financing of common problems. We are now departing from that principle. I do not object to the departure, but I point out to the House that the principle is being breached by those who trumpet most about the principles when those of us who object to the CAP say that it should be swept away root and branch and a different system substituted. The EEC is undermining by stealth the system to which it is so dedicated.

The devaluation of representative rates leads to extra costs, but it has another consequence for agriculture and for the costs of the CAP. Again, it is one to which very few hon. Members have paid attention. However, it is important. Every time representative rates are devalued, prices to farmers in national currencies go up. When that happens, that is all that matters to the farmers. They are not interested in the national rates negotiated in the annual price review in Brussels or wherever, although there is much trumpeting about them by the Government because they reduce the cost of the CAP. What the Community takes with one hand—by price freezes or sometimes by price reductions — is given away with the other by changes in representative rates. The Government have actually boasted about that.

The Minister told us — and the Minister of Agriculture, Fisheries and Food has said on other occasions since the agreement in December—that there have been cuts in the price for beef in the EEC. Technically, that is correct; there were cuts in the beef price last April for the marketing year 1986–87, but what the Government are also telling us in written answers, though not in public statements on the Floor of the House, is that British beef producers will be better off because of the devaluation of representative rates. So the Community, by its financial manipulation of the common agricultural policy, is sabotaging financial discipline and increasing the cost of the CAP in practice.

The hon. Member for Harrow, East likes to tell us that we should consider practice, not theory. When we consider the practice, we see that the Community speaks with two voices, a forked tongue, or whatever the appropriate analogy is. It is doing one thing on the one hand, and completely the opposite on the other. There has not been a cut in beef prices; instead, there has been an increase for most farmers in many member states. I am not arguing whether that is right or wrong; that is a different matter. What I am saying is that the Community should get its house in order. There is no sign that it will ever do that.

My last two points are references to the ways in which the common agricultural policy is spreading out its tentacles into other areas. Two are mentioned in paragraphs 3.32 and 3.33. [Interruption.] I am sorry that perhaps the expression "tentacles" is not a happy one, but the hon. Member for Harrow, East will understand my use of it when I mention the particular paragraphs.

Paragraph 3.32 refers to the Community, for the first time, agreeing production refunds for certain manufactured sugar products. The Community price for sugar is way above the world price. Manufacturers who use sugar in certain products, if they export to the rest of the world, naturally are penalised because their imports are much higher. There will be production refunds for manufacturers. That will be a cost of the common agricultural policy. There is no estimate in paragraph 3.32 — I challenge the Minister to let me know whether there is such an estimate — of the cost of production refunds. In addition to the known costs of the CAP, there is a hidden cost. There is another hidden cost in paragraph 3.33. For the first time, there will he a refund on starch used in manufactured products. I have no objection in principle to these refunds, but the consequences to the Community budget and to the common agricultural policy will be serious. There has been no estimate of costs.

I challenge the Minister of State on a future occasion —he is not able to reply on this occasion — to say whether it is the policy of Her Majesty's Government, when future proposals on agriculture or on any other aspect of Community expenditure and activities arise, to insist that, first, the Commission should provide estimates of the cost involved before Ministers reach agreement. If they do not, they will reach agreement in the dark.

The common agricultural policy is completely out of control. There is financial chaos and indiscipline. Who speaks about the principles of budget discipline? Ministers pay lip service to the principles — that is all. It is a regrettable situation and it will not be resolved except by the Government, later in the year, coming back to the House with an intergovernmental agreement, against which the Prime Minister will set her face, or with a supplementary budget or some other cock-eyed idea for somehow deferring expenditure so that, eventually, income and expenditure will match. If we keep pushing a balanced budget further into the future, eventually, with costs continuing to go up, in deference to the hon. Member for Harrow, East, there will be a real financial crisis in the Community. The Community is behaving in the way in which the Government are accusing some Labour councils of behaving. Frankly, I support Labour councils because they have particular problems.

This is what value for money is all about. It is not about querying the objectives of policy, but determining whether management and so on are sufficient to ensure that objectives are achieved. That is not happening in the EEC, which is what the debate is all about. It is about time that the Government did something about it.

7.52 pm

Mr. Stephen Dorrell (Loughborough)

It may be because of the limited number of Labour Members of Parliament that I seem quite often to find myself speaking in the same debates as the hon. Member for Walthamstow (Mr. Deakins). Sometimes I am able to say that I agree with the general gist of what the hon. Gentleman has to say. But if the first 10 minutes of his speech today accurately reflect his basic approach—and I think that they do — to our membership of the European Community, I totally reject his basic analysis of the subject. Some aspects of the detailed points to which he referred later in his speech require proper answers either today or later.

One of the matters on which I disagree with my hon. Friend the Member for Harrow, East (Mr. Dykes), with whose general approach to the subject I am in sympathy, is the statement that this is only a few hundred million pounds and, therefore, we do not need to worry about it. The House, quite properly, should ask, "What is the purpose of public expenditure, and is it being used for the best possible purpose?" It is too simple and too glib simply to gloss over the matter and to say that it is very small in the context of the whole.

Mr. Dykes

If I said that, I used my words wrongly. I did not mean to convey that impression. Millions of pounds are often voted through our Parliament, and other national Parliaments, without Members paying the slightest attention. There has been a searchlight on every single item in the European budget in a way that appears to be illogical and out of balance. That is what I said.

Mr. Dorrell

If my hon. Friend sought simply to draw a distinction between the different approaches to relatively large and small sums, he had a point. It is right that the House should ask whether public expenditure is effective for the purpose for which it is voted.

I congratulate the Government on the basic approach that they adopted during their six-month presidency of the Community. Some useful work was done. They were quite right to concentrate attention on developments towards a completion of the internal market, the removal of unnecessary restrictions to the flow of goods around the Community and, perhaps more importantly and more fundamentally, to seek to remove some of the longstanding restrictions to the provision of services between countries in the Community. My hon. Friend the Member for Harrow, East made that point, and I agree. There were well-reported fights to try to liberalise the provision of air transport.

Those achievements are the result of the priority that the Government gave to the completion of the internal market — a priority that I believe was right. Our six months' presidency of the Community has brought about some practical achievements, and that is to the Government's credit. My right hon. and hon. Friends on the Government Front Bench have every reason to be proud. The initiatives that the Government took to try to co-ordinate the activities of Community countries against the threat of terrorism was an important initiative and one on which they should be congratulated.

The hon. Member for Walthamstow and my hon. Friend the Member for Southend, East (Mr. Taylor) devoted most of their speeches to drawing attention to imperfections in the Community. Of course the Community has imperfections. Few human institutions do not have imperfections. The imperfections of the common agricultural policy, I freely concede, are pre-eminent among the imperfections of the Community. As I said to my hon. Friend the Member for Southend, East by way of an intervention, the main shortcomings of the common agricultural policy are the result of the weakness of main budgetary authorities within the Community. The weakness of those authorities follows directly, and is the necessary consequence of, reluctance on the part of the House and other Parliaments around the Community to delegate the power necessary to achieve proper budgetary discipline in the centre of the Community. The weakness of Community institutions produces the problems within the common agricultural policy to which my hon. Friend the Member for Southend, East and the hon. Member for Walthamstow drew attention.

Mr. Deakins

I fully agree with the point that the hon. Gentleman made. Does he accept that there are real weaknesses in the budgetary procedures in the Community? It is not a case of Britain giving more power to the centre — there is plenty of power in balance between the two — but of the procedures? If the Community—if it is to last for much longer—were to adopt the sort of financial procedures that Ministers of any party must adopt, it might be on a better wicket.

Mr. Dorrell

The hon. Gentleman used the word "procedures", and I used the word "institutions". I am not sure that I wish to argue the semantic difference. I take the point that the hon. Gentleman made. It is because nobody in Brussels has the responsibility or authority to hold the purse strings and to determine spending priorities. That leads to the nonsense that make such easy prey for antimarketeers.

Although I congratulate my right hon. and hon. Friends on the Government Front Bench on their useful if sometimes rather modest progress during our presidency of the Community, the time has come to seek to give the Community a new impetus to achieve identified and clear goals. I shall suggest some outlines as to the direction in which the Community should move in the foreseeable future. Once again, I distance myself from some of the points that have been made by my hon. Friends the Members for Harrow, East and for Clwyd, North-West (Sir A. Meyer). One of the problems encountered by supporters of our membership of the Community is that they tend to get carried away by their enthusiasm and imagine that the Community can deal with defence, our relationships with the middle east and the whole panoply of the responsibilities of the state.

The fundamental insight that led to the success of the Community in its early years was the perception on the part of its founders that a successful basis for European union had to concentrate on a relatively narrow sphere of responsibility. We do well to remind ourselves that in its early days, the Community that led to the foundation of the Common Market was concerned solely with coal and steel. It was narrowly defined. The leaders of the Community would be well advised to try to achieve a similar form of concentration. We could do worse than return to the old name of the Community — the European Economic Community — and seek to concentrate its efforts back to the area of economics.

Mr. Deakins

Absolutely.

Mr. Dorrell

The hon. Member for Walthamstow nods vigorously because he believes that that will allow the Community to withdraw from the political sphere and from greater political shared purpose. He is wrong. I advocate that approach because it would produce a more soundly based Community, which would achieve much faster the purposes of European integration that my hon. Friends the Members for Harrow, East, for Clwyd, North-West and I all have in common.

Mr. John Mark Taylor

My hon. Friend is developing very cogently his point about the origin in coal and steel in the Community and his wish for a concentration on economic matters. However, surely he would concede to me and the House that the original objective of the Community was the political one of reconciliation after war. As long as the objective is wider and political, he cannot keep it entirely within an economic frame.

Mr. Dorrell

That was the point I was seeking to make in response to the sedentary intervention made by the hon. Member for Walthamstow. If the Community concentrated on economics it would be able to make more progress and it would be seen that the Community was achieving results. Therefore, it would develop a momentum that would give it a stronger political presence than it has at present while it is trying to advance on all fronts and facing the danger of running into the sands. We would be well advised to make the sphere of responsibility slightly less ambitious and concentrate on economics.

To develop that point, I shall mention the concern of my right hon. and hon. Friends on the Front Bench to complete the internal market. That sits four square with our belief in the market system and it is a belief that I strongly share. If we look at the total impact of Europe in the world's economy, we see that by far the most important single cause of Europe's collective weakness is its fragmentation. The completion of the internal market is an attempt by the leaders of Europe to resolve that problem and try to exploit the fact that in Europe we have the world's largest developed market.

As part of the new impetus towards European integration, I would like to see a much clearer political commitment to breaking down the differences in product specifications that lead to fragmentation. More importantly, I would like to see a clear commitment on the part of our Government to membership of the exchange mechanism of the European monetary system. If one looks at barriers to trade between different European countries, it is hard to argue with the proposition that the greatest non-tariff barrier to trade are the floating exchange rates within what is supposed to be a market that is coming together. The fact that a British manufacturer cannot know today how many pounds he will get for a product sold in Germany tomorrow because the exchange rate may change overnight, sometimes by I or 2 per cent. within 24 hours, is a major barrier to trade.

Mr. Cash

I am interested in my hon. Friend's speech and he is making some interesting points. However, will he tell me whether, in his words, integration equals economic, and political equals federalism? Does he distinguish between them, or does he think that they are convergent?

Mr. Dorrell

I am suspicious of labels of any sort. I am saying that the countries of Europe should exploit the major opportunity which is there for them but which is not being taken. The opportunity will be taken only if they achieve the same unity as our competitors in the United States and, in a strange way, Japan. We should be seeking to fix our exchange rate against the exchange rates of other member states.

We cannot stop there. Mr. Sam Brittan wrote an interesting article in today's Financial Times drawing our attention to the fact that it is no good simply saying that the pound will be at a fixed rate against the deutschmark if one is not prepared to follow up that commitment with the necessary domestic policy consequences of creating and maintaining currency stability within one's chosen area. Therefore, I believe that we have no choice—I would not seek to create a choice—but to join the EMS instead of pulling back from it as we have tended to do in the past few years. We could then develop it further and return to the commitment that the Community has had in form but not in reality for over 10 years; to move towards real monetary union so that there is a binding and fixed currency relationship between the different states of the Community. That would greatly ease the trade in goods and services between different member states. It would ensure that manufacturers and providers of services could exploit their larger domestic market in a way that the Americans and Japanese can but European companies cannot. Although it is not the main subject of the debate, it would also make our monetary policy much simpler and easier to understand and, because of that, more likely to be successful.

As the hon. Member for Walthamstow and his hon. Friends would be quick to point out, it is not enough simply to create a unified market if it benefits the Germans, the French or, more likely, the Japanese. We should not simply create the market place to allow European companies to exploit their strengths. We have to make certain that European companies and, in terms of the House, British companies, are strong competitors within that united market place.

Another aspect of the impetus towards the economic angle of the Community, which 1 urge on my right hon. and hon. Friends, is that we should attempt to ensure that there is more discipline and more Community expenditure on research and product development so that the research base of European industry matches its competitors elsewhere in the world.

It makes nonsense of our commitment to complete the internal market if we maintain a system of national control over monopoly legislation which ensures that the division of Europe into national markets remains the main criterion by which competition policy is determined. If we are really committed to a comprehensive internal market in Europe, surely that should be taken into account by our monopoly and merger regulators, as well as by the people concerned with product specification. When we are deciding whether a particular company has a monopoly or whether a merger should be disallowed on monopoly grounds, we should not look simply at our own narrow national market, but see whether the company that would emerge has a monopoly share of a wider European market. Only by applying that yardstick can we expect to see in Europe the emergence of some world-beater companies that are large enough to take on the technological giants of Japan and the United States on equal terms.

The people who argue that all problems should be dealt with on a national basis fail to face up to the fact that, although there is a vibrant small business sector — I warmly welcome that—the weakness in the economy of Britain and Europe when compared with the economies of the United States and Japan is our failure in the past few years to see emerging the centrepieces—big companies—that provide the technological basis for advanced manufactured products. That is the weakness of Europe's economy, and until we allow the internal market and the monopolies legislation to develop to ensure that such companies emerge, Europe will continue to be the poor performer in the world's economy.

I emphasise that, taken as a whole, Europe is the laggard of the world's economy and has been for 15 years. That problem is not exclusive to Britain, because Europe has been out-performed by the United States and Japan and by several newly industrialised countries. In 1939 it was taken for granted that Europe was one of the economic giants, if not the economic giant, of the world. That can no longer be taken for granted, because Europe's economic performance has easily been surpassed by that of our competitors.

I shall now return to the point that I made earlier about Community institutions. The great weakness of the existing institutions or procedures — I shall not argue about which word we should use — is that they are irresponsible. There is no clear budgetary authority. There is nobody whose job it is to hold the purse strings and determine spending priorities. The 17th century political arguments, about which hon. Members should at least be vaguely aware, established beyond peradventure that political power is held by those who have power over the purse strings. The problem with the Community is that the institutions as they exist at present do not provide for convincing power over the purse strings to rest anywhere. The result is that the Community does not have a clear sense of purpose or clear opportunities for leadership.

The Community needs a clear sense of purpose that will lead to some clearly defined economic aims. We do not need to be president of the Community to give that sense of purpose because we can do it at any time we choose. The need is there and it is clear and urgent. I mean no disrespect to the Greeks when I say that if we fail, the whole of Europe will become the Balkans of the world's economy and will be weaker as a result.

8.12 pm

Mr. Robert N. Wareing (Liverpool, West Derby)

I am always interested in hearing the hon. Lady, the Minister of State, leading for the Government. We have one thing in common in that we both represent Merseyside constituencies. She must surely have been as concerned as I was to read in the seclusion of the House of Commons Library, because it has never been made public, the "UK Regional Development Programme 1986–90". That was the Government's submission to the European Community on regional policy. The forecasts in that programme contrast starkly with the sparkling future that we hear from the mouth of the Chancellor of the Exchequer and which we are about to have under a Tory Government.

In the north-west and north of England and especially in Merseyside it is a far from rosy future which the Government themselves foretell between now and 1990. According to this submission, 430,000 people will be unemployed in the north-west of England in 1990. That figure is larger even than today's unemployment figure, yet the Prime Minister tells us that unemployment will come down. According to that submission, the position in Merseyside "has continued to deteriorate" since 1981. It says: Prospects for reducing unemployment are frighteningly bleak — there are only approximately 4,100 unfilled vacancies in Merseyside". That has to be taken in the context of the fact that in January 1986 some 196,634 people were registered as unemployed in the area. That is 20.4 per cent.—even on the basis of the Government's massaging of the unemployment figures. The report says that greater Merseyside has problems with many outmoded transport facilities unsuited to modern demands, with decay and obsolescence in much of the basic infrastructure … prospects do not appear to be optimistic. Of particular concern is the growing disparity between the availability of jobs and the numbers seeking jobs".

The important thing about this debate is that it allows hon. Members to put on record that which the public has been denied sight of, because they will read Hansard tomorrow and will see what was contained in the Government's submission. That is the truth of the matter and not the made-up stories, the fairy tales, that we hear in the House from the Prime Minister and the Chancellor of the Exchequer. Although investment is expected in Merseyside in industries such as chemicals, paper and glass and in services such as banking, the report says: investment in these sectors may not necessarily he paralleled by employment growth and indeed in many instances may lead to further job losses. What a prospect for people like those in my constituency where the unemployment rate is well above 30 per cent. Indeed, in some wards in my constituency male unemployment is over 40 per cent.

The report talks about the aging rail rolling stock in my area. It says that there is an inadequate road network inappropriate to the needs of modern goods vehicles. It goes on: As far as public transport services are concerned, the main problem is how to maintain such services". This report was prepared before the devastation wrought in Merseyside and in other areas by bus deregulation. That affects many people, not only those who are old and have difficulty in getting about but also those who are employed. Managers in firms like the General Electric Company in Liverpool, West Derby, made representations to the public transport authorities and, I understand, to central Government.

Regional aid has always been insufficient. The hon. Member for Mid-Worcestershire (Mr. Forth) made an important point, but the situation in Merseyside would be much more difficult without a regional policy, inadequate though that policy has been under successive Governments. We would not have a motor-car factory at Halewood or many of the other benefits that regional aid has provided. Under this Government, that aid has been cut and the special development area status of Merseyside has been abolished.

The Government's regional policy has aided mostly the high capital and low employment industries on the periphery of the region. Since 1979, only 2 per cent. of regional assistance to Merseyside has gone into Liverpool itself. The rest has gone to the green belt areas on the perimeter of the region. Conservative members who do not believe that there is a north-south divide, spoken about by my hon. Friend the Member for Easington (Mr. Dormand), should look at the report published last year by the Institute of Directors. It lists 280 towns in order of prosperity and Liverpool's position is 273. The Minister will be interested to know that Birkenhead and Wallasey, part of which is in her constituency, was 271st out of the 280 towns in that rather dishonourable league table.

Mr. Cash

On that point, did the hon. Gentleman hear an interview with Professor Halsey on the wireless this morning? Professor Halsey referred to the social trends report that has just been published. He said, with particular reference to the hon. Gentleman's constituency, that there is not really a north-south divide. He said that there are areas and pockets north, south, east and west and that the Wirral is more prosperous, whereas Liverpool, West Derby has difficulties. We acknowledge that.

Mr. Wareing

Indeed there are pockets of prosperity even within the devastated north of the country. Nevertheless, if the hon. Gentleman referred to the league table produced by the Institute of Directors, he would discover that Winchester is top of the league table. He would also find that the first 100 towns are in the south of the country. I would not argue for a moment that there are not pockets of unemployment and misery in the south. There are. I want to see their problems tackled also. Nevertheless, there is a fundamental division between north and south.

Many people in Merseyside believe that the proposal of the then Chancellor of the Exchequer in 1981 that the Government should aim for a managed decline of Merseyside has occurred. The Prime Minister and the Cabinet in 1981, following the riots in Toxteth, rejected the advice of the then Secretary of State for the Environment, the right hon. Member for Henley (Mr. Heseltine). The right hon. Member for Henley produced a report which, again, was never published. The right hon. Gentleman's report "It Took a Riot" prepared after the Toxteth riots called for the problems of Merseyside to be tackled with urgency and resources.

The Government's response to the need to regenerate Merseyside and its economy has been negative. Of course the Government can quote certain instances of assistance. However, on the whole, they have been unhelpful. Local authority resources have been cut drastically. Merseyside county council, which very often served as a chrysalis for the development of schemes and initiatives and which drew Europea regional development funds into the area, has been abolished. In the first five years of this Tory Government, 106,000 jobs have been lost on Merseyside and there was a 22 per cent. drop in employment in Liverpool.

Recently, Mr. Ken Stewart, the MEP for Merseyside, West, received a communication from Jacques Delors, the President of the Commission, who, far from supporting the idea of a managed decline on Merseyside, referred to a report financed and encouraged by the Commission entitled "Merseyside Integrated Development Operation". That report resulted from a study carried out by Roger Tym and Partners and submitted to the Commission in January 1985. The report envisaged a total package of measures covering the years 1985–1990 of £388.85 million. The EEC contribution would be £155 million. Jacques Delors has claimed that little progress has been made. We do not have to look far to see why. The additionality aspect is a major factor preventing the implementation of that form of regional package.

The Government are apt to blame local authorities, as the Prime Minister did in a letter to me in October. She blamed that terrible local council in Liverpool with its municipal Socialism. That is the Government's view. Local authorities that want to play a full role and attract funds to develop schemes are not allowed to do so. They are prevented from doing that because they are inhibited by cuts in rate support grant, by rate capping and by the regime of financial stringency that has been one of the Government's major policies. I suggest to the Minister that, if she means to do well for Britain in the Common Market and for her constituency, she should get together with her right hon. Friend the Secretary of State for the Environment and have a word with him about why Merseyside and other regions are being denied EEC funding.

Schemes approved by the Commission for areas of multiple deprivation requiring a local authority contribution should be disregarded for GRE assessment purposes. If borrowing is required, there should be automatic ministerial sanction. European Community aid should not he withheld simply because the Government refuse to provide the necessary resources to enable local authorities to promote schemes using ERDF or ESF financial assistance. In so far as local authorities are so inhibited, the Government are reneging on their responsibilities.

The hon. Member for Mid-Worcestershire made an important point when he referred to the inadequacy of regional planning under successive Governments. Probably the most worthwhile instrument of regional planning and location since 1945 was the industrial development certificate system developed as a result of the Town and Country Planning Act 1947.

Hon. Members will recall that the IDC system allowed the Government to tell a firm that it could not invest resources entirely in the prosperous south-east, but they would encourage the firm, with an IDC, to go to the north-east, the north-west or other areas of high unemployment. However, with entry into the Common Market—I never use the word "Europe" in relation to the Common Market because the Common Market is not Europe and I sometimes wonder nowadays whether there is a Community—the IDC policy was destroyed. A firm that was refused the right to invest in the south-east could say, after our entry into the Common Market, that it refused to invest in the north-west or the north-east. It would prefer to invest in the rich triangle in the Common Market where 40 per cent. of the Community's gross domestic product lies, in the triangle between Paris, Milan and the Ruhr. Such economic regional planning under the IDC system, which is vital to areas such as mine, was totally destroyed.

We have long argued that the common agricultural policy takes up too much of the Community's resources. It accounts for some 76 per cent. of the budget and that figure has not changed very much since 1973 when we entered the Common Market. Very little is left for regional aid.

Even the modest amounts that are made available by the Community to areas such as mine are not able to reach us because of the Government's policy of denying the resources to local authorities in those regions which would enable them to use schemes to develop the infrastructure and so develop employment and create better opportunities for the people living in those areas.

8.28 pm

Mr. John Mark Taylor (Solihull)

Although I follow a Member for Merseyside, the hon. Member for Liverpool, West Derby (Mr. Wareing), I should like to refer to the stimulating speeches made by the hon. Member for Walthamstow (Mr. Deakins) and my hon. Friend the Member for Loughborough (Mr. Dorrell).

The hon. Member for Walthamstow spoke about locked exchanges and free floating currencies, and implied that anything in between would be unsatisfactory to international traders. He developed his arguments strongly, but I suggest that if an international trader was given a choice between damped oscillations and unrestrained oscillations, he would probably settle for damped oscillations as the less difficult to work with in his costing and contracting.

I think that I agree with all the eloquent speech made by my hon. Friend the Member for Loughborough. He spoke of the absence of a mechanism to control and watch expenditure by the European institutions, and his concern about that. The hon. Member for Walthamstow spoke similarly about watchdogging expenditure in the Public Accounts Committee.

I think that the solution that would satisfy my hon. Friend the Member for Loughborough and me is if the Budget Commissioner could form a permanent and effective alliance with the Budget Control Committee of the European Parliament. That would be the basis of an instrument in the European institutions for control of expenditure to ensure that it was effective.

I believe in the value of the European Community, but I am not starry-eyed or blind to its shortcomings. I think that the British presidency worked hard at the areas that needed improvement. It did well and made measurable progress. The important areas are referred to in the report. They are budgetary discipline, agricultural pricing, which is still a matter of such anxiety, the internal market, on which approving comments have already been made, and political co-operation, which is one of the success stories which carries almost no budgetary implications and is all the better for that.

My hon. Friend the Member for Loughborough mentioned the initiatives on drugs and on terrorism. My hon. Friend the Member for Birmingham, Northfield (Mr. King) made an excellent speech and mentioned the resolution today of the trade difficulties with the United States of America. That resolution is an excellent example of the achievement of greater maturity on political cooperation and growing experience in the Community.

The change in attitude towards the Community budget in the Council of Ministers since 1979 is almost entirely a British achievement. In 1979, our national contention about the unfairness of the distribution of the burden of the EEC budget between member states was isolated. That argument, which was once a British solo, has become the orthodoxy of the Council of Ministers on budgetary matters. That is a great achievement. It is the orthodox view in the Budget Council that the old arguments about juste retour, which were used against us, should no longer carry their original force. It is much more readily accepted that there should be some evenness of distribution.

By consensus, the CAP is the most worrying feature of the Community. The central orthodoxy of the CAP is also its cardinal weakness. As long as it remains axiomatic that Europe should provide enough food to feed its consumers, we are accepting surpluses. Once we say that, even with a bad harvest, there will be enough to 'feed Europe's consumers, we are saying that in any year that is better than the worst there will be surpluses. It ceases to be an adult question to ask about surpluses. The adult question is what to do with them.

I should like to trespass into the speculation that, ultimately, the only reform of the surplus problem may be a partial abandonment of the axiom that in every year Europe will grow enough food for itself.

I hope that I have given the impression that I appreciate the Government's handling of the presidency. I include in that my hon. Friend the Minister of State, Foreign and Commonwealth Office and her ministerial colleagues. The election to the presidency of the European Parliament of Sir Henry Plumb has been referred to. It comes at a propitious time and on the heels of our presidency to demonstrate the British commitment and a belief in British competence to a wide audience. The impressive work of Lord Cockfield in the Commission completes a picture of British participation across the Community institutions.

In the end, the perception of our role in the Community is of the greatest political importance. In the last analysis, it is not how we see ourselves that counts, but how others see us. I had the pleasure of lunching today with Japanese diplomats. It was interesting that their perception of the West was the United States, Europe and Japan. I took the opportunity to suggest to them that it was in their best interests to have the European trade mark office in London because the lion's share of their European activity is in Britain, as is the lion's share of their investment and presence in Europe. I hope that they will take that advice.

In a world of super-powers and major trading blocks, our participation in the EEC is important to us, but British leadership, such as our recent presidency of the Council, is important to the EEC as well.

8.35 pm

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

The hon. Member for Southend, East (Mr. Taylor) argued once again for the repatriation of agricultural policy. I have some sympathy for that view and would like the fisheries to be repatriated.

There is still a great deal of concern among Scottish fishermen about certain elements of the common fisheries policy. This is the first time today that the CFP has been mentioned. It is entirely right and proper to subject the EEC and its policies to tough and sustained criticism. Rigorous critical analysis should give rise to prescriptions that are aimed at changing some elements of those policies.

I shall confine my speech to those sections in the document which concern regional policy, research and development and transport. If I can catch the Minister's ear, I should like to outline some of the problems with which Strathclyde and the rest of Scotland is faced.

The economic and employment circumstances in Strathclyde grow bleaker by the day. Nobody can dispute the fact that unemployment in Scotland continues to rise remorselessly. I regret to say that that is especially true of my constituency, so I wish to discuss those problems. I shall suggest some proposals which, in the long run, might go some way to dealing with the problem of unemployment.

My proposals concern the implications of the Petroleum Bill for an expansion of employment in Scotland, and the concept that has been vigorously advocated by the Scottish CBI for a Euro-west port on the Clyde. The Government have published a report entitled "United Kingdom Regional Development Programme 1986–1990", which, in one of its 17 volumes, highlights the problems of Scotland. The authors of the Government document suggest that, in the year 1990, unemployment in Scotland will be at least 330,000, and that Scotland will be faced with further job losses in the steel, shipbuilding and coal industries.

In addition, the same report, which was sent to Brussels, suggests that the renewal of outworn infrastructure in Scotland is a priority in urban areas, and that much of it is in need of modernisation. That is the Government's analysis of the problem in Scotland.

I regret to say that in recent years, unemployment in my constituency has again grown at a much faster rate than elsewhere in Strathclyde, in Scotland and in Great Britain as a whole. Since 1981, male unemployment in Strathclyde has increased to 28 per cent., in Scotland as a whole it has increased to 33 per cent. and in Great Britain to 25 per cent. In the Greenock travel-to-work area, the figure is 44 per cent. The male unemployment rate in the Greenock travel-to-work area is now 26 per cent. When the redundancies that were announced by Scott Lithgow before Christmas take place — in fact they are taking place now because 200 men left this week—the male unemployment rate in the area will be nearly 38 per cent. making Inverclyde one of the bleakest areas for unemployment in the United Kingdom.

The problems have, of course, been compounded by the understandable refusal of the offshore oil and gas industries to invest in new structures and facilities, primarily because of the drastic decline in the price of oil. However, there is a chance to increase employment in the offshore oil and gas industries in this country, curiously enough, in maritime demolition. Although I appreciate that it is not his ministerial responsibility, I should like the Minister to convey to his colleagues in the Department of Trade and Industry and in the Scottish Office my belief that the Petroleum Bill, which has just finished its Committee stage and is due to come back to the House for Report and Third Reading in a couple of weeks, could lead to a massive increase in jobs. However, we need a comprehensive research and development programme, funded to some extent by the European Community's regional and social funds.

Why do I say that there is a chance to expand employment in this sector? In a nutshell and to oversimplify like mad, the Petroleum Bill concerns the removal or the partial removal of oil and gas platforms and pipelines. With the assistance of Government and the EEC, Scottish firms and individuals could become world leaders in the highly complex and highly skilled task of maritime demolition, just as the Dutch are recognised as the world leaders in maritime salvage. There is an opportunity for thousands of jobs, but the implications are for much more than jobs. We shall need various physical facilities and resources. This work is due to begin in the early 1990s when the first of the platforms will become redundant, and will require heavy lifting barges capable of lifting chunks of hardware weighing anything up to 10,000 tonnes.

These scarce resources and skills exist, although not in the United Kingdom. The Government could make a telling contribution in the form of research and development programmes and a training centre. Naturally, I believe that that would be best sited in Greenock or Port Glasgow, on some of the derelict waterfront sites in my constituency. Such a training centre could be set up with assistance from the European Community regional and social funds because there is massive unemployment. When the Petroleum Bill was deliberated in Committee, the Minister of State, Department of Energy at no time denied that those opportunities exist for United Kingdom nationals.

I do not wish to sound xenophobic, but when the work starts, I do not want to see it carried out by migrant engineers, divers and ancillary workers.That work could be carried out by people living in the United Kingdom. Therefore, I request that urgent consideration be given to the funding of research and development programmes for this highly skilled and deeply complicated task of maritime demolition.

The only other people in the world who have any experience of such work are the Americans. However, they have removed structures only from shallow and sheltered waters. We shall have to remove structures and pipelines from relatively deep and dangerous waters. I am speaking as someone who knows a little about the North sea from the deck of a fishing vessel. We have some highly skilled divers—those trained by the Royal Navy are the best in the world, but they are few in number.

The Government, with the EEC, could play an important role by locating the research and development programmes, and the training centre in Scotland, so that those skills may be developed and the work carried out by British, or rather Scottish firms. Hon. Members must excuse my ethnocentrism.

Oil companies have estimated that it will cost about £150 million for the total removal of some of the biggest structures. We are talking about a massive industry and an important element of the offshore oil industry. It would be tragic if the opportunity were ignored or handed over to those corporations and organisations in other countries that have the physical resources and some of the skill that are needed. For example, the Dutch and the Americans have heavy barges.

I am not talking just about demolition but about construction. Scott Lithgow in my constituency could easily, with the aid of Ferguson's and Kincaid, build any number of heavy lift barges. In the next two years, two or three of these vessels wil be needed for such work. I am making an appeal to the Government on behalf of people who are suffering from dreadful joblessness, young highly skilled people who may turn to their traditional Scottish solution to unemployment and migrate to the south of England—God forbid—or further points. I know that the hon. Member for Mid-Worcestershire (Mr. Forth) has migrated, but that was some years ago.

Mr. Foulkes

Thank goodness.

Dr. Godman

I will reserve judgment on that.

There is no point in analysing problems if one cannot come up with descriptions to tackle them. I have outlined one. I genuinely believe that upwards of 20,000 jobs could be created in the task of removing these structures, although the Government talk about partial removal. If it was in the national interest to anchor these structures to the United Kingdom's continental shelf, it is in the national interest to accept that we should remove them completely so that future generations of fishermen can fish these commercially viable waters.

The concept of the Euro-west port depends upon the plans for the Channel tunnel. I have mixed views about that as a civil engineering problem. Looking from North America, Europe has become a more integrated single economy market, and its centre of gravity has shifted eastward across the North sea. The golden triangle is now something like London, Dusseldorf and Paris. It is perhaps questionable whether London is included, except as a financial services centre.

Britain is becoming an offshore adjunct to industrial Europe where maritime transport—the shifting of cargo around the world—is concerned. The combination of these factors has severely affected the ports of Liverpool and Greenock in particular, but also Grangemouth and Southampton to some extent.

The idea of the Euro-west port is that the Clyde is the closest main collection of European ports to North America. There is about one to one and a half days less sailing time between North America and the British ports than between North America and other ports, if the ships go into the Clyde. There are deep water berth facilities at Hunterston and Greenock and there are terminals for bulk and container cargoes. Both of them would need to be expanded. It is possible, by way of the Channel tunnel, to funnel all European travel, with great economies of scale, on to the landward side.

There are other advantages. If we were to have electrified rail links to the continent, it would become extremely advantageous for container firms to send their ships, which are expensive pieces of machinery, to the Clyde rather than have them sail into ports in Europe such as Rotterdam or Antwerp. There are other facilities. There is, or could be, a financially viable and well-managed port administration and there is land available for development.

Sir Anthony Meyer

I am pleased to hear the hon. Gentleman make that point. If properly and intelligently used, the Channel tunnel could be the salvation of west coast ports generally.

Dr. Godman

The hon. Gentleman is right. I am asking the Minister for financial aid in terms of a feasibility study of the Euro-west port concept. It could prove to be an attractive object for shipping companies. Again, I have a constituency interest. The Greenock container terminal is a first-class physical facility with an excellent work force — this is readily acknowledged by most directors of container shipping companies—and excellent industrial relations. Regrettably, the Greenock container terminal has only one shipping line using it, and that is the HapagLloyd line. Unfortunately, it has entered into an agreement with Atlantic Container Line to use the Seaforth container terminal in Liverpool. That means that the Greenock container terminal is under severe threat. All this takes place against a bleak, dark picture of unemployment in the area.

The hon. Member for Renfrew, West and Inverclyde (Mrs. McCurley) had a meeting with the Prime Minister just before Christmas to press upon the right hon. Lady the very severe problems that we are both facing in our adjoining constituencies. I propose that funding for a rigorous feasibility study into the Euro-west port concept be provided by the Government and the EEC.

There are problems in the area. The west of Scotland continues to experience a remorseless economic decline. But we must move beyond simply lamenting the problems and come up with proposals. In these two areas, any Government — even this English Government — should give careful consideration to the proposals that I have outlined tonight.

9 pm

Mr. Edward Leigh (Gainsborough and Horncastle)

I hope that the hon. Gentleman for Greenock and Port Glasgow (Dr. Godman) will forgive me if I do not follow him in his remarks about the Clyde. We have had a long, interesting and wide-ranging debate. I have sat through it for four hours, but I want to make only a brief point. I want to deal with one narrow part of the document which relates to agricultural price fixing and cereal farmers.

Agriculture is not only our most important industry, it is our most successful industry. Listening to some hon. Members, one would think that farmers were living a life of prosperity and ease—I am glad to see that the hon. Member for Barnsley, West and Penistone (Mr. McKay) does not take that view. As the Ministry of Agriculture, Fisheries and Food's statistics for 1987 make clear, average net farm income fell by 45 per cent. between 1984–85 and 1985–86, largely due to the wet summer that we suffered. I am glad that there has been a considerable improvement in farm incomes, and I hope that we can look for even greater improvement.

The annual review of agriculture for 1987 shows that the cereal harvest this year was a particularly good one, and that aggregate farming income is forecast to rise by 21 per cent. to £1,411 million in 1986. As one might expect with agriculture—which since the war has been one of our most efficient industries — labour productivity continues to rise, and is forecast to rise by 2 per cent.

We have a very mixed picture before us, and it is incumbent upon the House and Ministers to appreciate — as I know Ministers do—the severe problems that face farmers. In that context, farmers are aware of their responsibilities. They are aware of cereal surpluses, and as I meet my NFU regularly, this topic of conversation always arises. I do not think that we can deal with the problem of cereal surpluses — I know that Ministers share this point of view—by price fixing alone. If we dealt with the problem by price fixing, it would probably necessitate a price cut of at least 20 per cent. Otherwise farmers would increase production to meet a shortfall in prices. Therefore, we have to look at a whole raft of measures. I shall deal with what I consider to be wrong before I support what the Government are putting forward in this field.

It is not right to proceed by way of quotas, because they would be a bureaucratic nightmare. There are about 4 million cereal farmers in the Economic Community. We have no cereal marketing board in the sense that we have a Milk Marketing Board, and thus they would be impossible to administer. Quotas would discriminate against United Kingdom farmers, because they would discriminate against farmers who have good land and who are efficient and productive. Quotas must inevitably lead to compensatory price increases which would harm the livestock sector. If quotas were introduced there would be no stimulus to competition, and they would lead to severe structural development difficulties.

Many farmers look at quotas with a benign eye, because they feel that they would allow them to plan ahead. The experience of dairy farmers should not lead cereal farmers to want to follow that example.

I am often asked whether we could do more in the EEC to control the import of cereal substitutes. That is an attractive policy and I have looked at it in the past. It is not sensible to use controls that would, in large measure, increase costs. It is fair to say that the EEC import controls on such products as manioc from Thailand. I do not believe that controlling the import of cereal substitutes would solve the problem of cereal over-production.

If quotas are not appropriate for the country—if it is not right to deal with the problem by trying to control the importation of cereal substitutes—what does that leave us? It leaves us with set-aside polices. I have considered carefully the policy favoured by the National Farmers Union, which I understand is a kind of flexible compulsory set-aside policy. That would not be appropriate for Britain because it would discriminate against efficient farmers and farmers on fertile land. It would probably discriminate in favour of farmers on marginal land or small farmers. Taken in the round, the compulsory set-aside proposal would not be the best solution for our farmers.

That leaves the voluntary set-aside system, for which I know Ministers have been pressing in the Council of Ministers. That is the only way forward and I commend it to our farmers. But if we are to make the voluntary set-aside system work and release land from agricultural production, there must be a profit incentive to encourage farmers to enter the scheme. I may be accused of speaking up only for pockets of farmers, but it is not as simple as that. Farmers are business men, and why not? They must be given an economic incentive to join the scheme and I hope that Ministers arc well aware of that.

I do not want to he completely negative. The set-aside proposals — we need to couple set-aside with price restraint, about which the White Paper talks—give us an opportunity to develop our forestry policies. That is one area of agricultural production in which we are deficient. We are less than 5 per cent. self-sufficient in forestry. The returns of forestry are slow. The returns on hardwood production can take as long as 100 years. Therefore, in pressing for a set-aside policy, Ministers must grasp what may be a historic opportunity to increase the amount of land given to forestry. I should like to see the position improved by the tax regime. That is, of course, a matter for my right hon. Friend the Chancellor, but, in consultation with our EEC partners, it may be possible, by means of a system of grants and set-aside, and encouragement, perhaps, for short rotation cropping on former cereal land, to encourage an increase in forestry production.

Although the picture for cereal farmers has been mixed — not a good harvest last year but this year a much better harvest and much better prospects for exports this year with much less going into intervention—we have an opportunity to look ahead. Farmers can have confidence in the Government, who appreciate the severe difficulties that face farmers. The Government are determined to deal with cereals in such a way that farmers can plan ahead. I stress that. Agricultural production cannot be turned on and off as other forms of production can. Farmers must plan not in terms of months but years.

I urge my hon. Friend the Minister to look at the United States example where price fixing is often done five years in advance, and that gives farmers a chance to plan ahead. It is important, if we are to make a set-aside policy work, to give farmers that degree of certainty and confidence in the future which in the past they have often not had.

I am confident that the Government are aware of the problems and can press ahead. I know too that they realise that they cannot deal with the problem of surpluses simply through the price mechanism. The matter is far more complex. Ultimately, they will have to introduce voluntary set-aside procedure.

9.8 pm

Mr. Allen McKay (Barnsley, West and Penistone)

In the time that is left, I want to put on record the voice of Yorkshire and Humberside.

I can agree with the hon. Member for Gainsborough and Horncastle (Mr. Leigh) on the quota system, because I have seen many of my small dairy farmers going out of business, and because many dairy farmers are much poorer financially because of the quota system. Dairy farmers still seem to have severe problems with the system, and it looks as though they will continue. By and large there is no joy for them, although the problems will probably be overcome eventually.

I hope that the hon. Gentleman was not advocating coniferous forestry, which seems to be becoming predominant. I prefer broadleaf and mixed forestry. I certainly would not go all the way with him on what he said about afforestation. The environmental aspects must also be taken into account.

I want to deal with the way in which European and Government policies have affected Yorkshire and Humberside. I regret hearing the Prime Minister and other Ministers telling us that there is no north-south divide. There is a north-south divide, and I am worried by the Prime Minister's statement to the contrary. Her statement means either that she does not know that such a divide exists, which is dangerous, or that she knows that it does exist but does not want to do anything about it, which is even more dangerous. Or perhaps the Prime Minister does not want to talk about it. If the latter is true, we can overcome that problem. However, if the Government do not recognise the north-south divide, how will they solve the problem? If they do not recognise that problem, they will not recognise the measures that need to be taken.

Recent documents showing average household incomes make it clear that the south-east corner of Britain is by far the most prosperous region. The next prosperous regions are the south-west, the east midlands, East Anglia and Scotland. They are followed by the north-west, Wales and the west midlands. The poorest region by far is Yorkshire and Humberside. The Government should take that into consideration.

We consider that the answer may be regional government. Although there are doubts about such a policy, I would encourage such regional government because I should like to see more regional administration. It is clear that Scotland and Wales, which are represented by Ministers, are far better off than Yorkshire and Humberside. Therefore, one must ask whether it is because of such ministerial backing that those regions are better off. I should like to see the development of regional government and, if possible, a Minister responsible for Yorkshire and Humberside who could deal with the region's problems.

The region faces many problems and it is clear from unpublished Government documents that while the United Kingdom has lost 7 per cent. of its work force, Yorkshire and Humberside has lost 12 per cent. It has lost 35 per cent. of its manufacturing jobs, whereas the rest of the United Kingdom has lost 28 per cent. The region has lost electronics, electrical and instrument engineering jobs.

It is a historical fact that Yorkshire and Humberside was, for generations, the foundation of Britain's prosperity. Its glass, coal, steel, textiles and in some areas farming all contributed to that prosperity. The Government document, "United Kingdom Regional Development Programme 1986–90" has little encouragement for the region. The Government expect the region to lose 288,000 jobs by the 1990s. That is the Government's forecast of the increase in unemployment in that area. They state that the short-term prospects for the economic development of the area are "not good" and that more diversification is needed to reduce dependence on traditional and declining industries". The Government then say: future employment prospects within the coal industry remain bleak, and they forecast that there will be further reductions in manning levels by a significant degree up to the 1990s. Such are the Government's estimates of what will happen. When one considers the future of Yorkshire and Humberside and, indeed, the whole of the north, one realises that the future is bleak.

Regional help from the EEC has been useful and I would like more. I recognise that Community aid has been helpful in my constituency. particularly with the Stocksbridge bypass. Such help has been welcome, but it deals with only a small part of the problem.

During the past four years there has been a significant decline in the steel industry as a result of a worldwide reduction in demand leading to over-capacity. This has aggravated the problem for the United Kingdom, as it is faced with low-price imports. We warned the Government time and again of the results of low-priced imports into the United Kingdom and Europe. As cheap steel flooded in from Taiwan and other far eastern countries, we asked the Government to take action, but the Government allowed one of the nation's basic industries to go into decline and there is no sign of that decline ending.

The cutlery industry in Sheffield has continued to experience problems because the Government refused to take action on cheap imports. Much discredit, too, must go to companies in the industry which encouraged the import of cheap blanks, finishing them in this country and stamping them "Made in Sheffield". Those companies have contributed to the decline of their own industry. The Government talk of a change to sunrise and non-manufacturing industries, but the banking and insurance jobs to which the Prime Minister refers will not come to Yorkshire and Humberside unless encouragement is given. The Government must recognise the north-south divide. Rationalisation of the mining industry has a domino effect on the industries depending upon it, producing an even greater impact.

In Yorkshire and Humberside we have the will to succeed and to overcome the problems, and our work force is second to none. Industrial development land is available, north-south communications are good and we look forward to improved east-west communications. So why have the problems not been overcome? I quote from a report on infrastructure investment. It comes not from the Labour party or from a council in the area, but from the British Institute of Management, which represents management throughout the British Isles. It says: Since 1980 infrastructure investment has been one of the most important concerns in the Institute…The two main arguments…are:—Modern infrastructure

1. (a) a modern infrastructure has cost-reducing benefits for industry which enhance economic performance and competitiveness;
2. (b) a policy of delaying … renewal of the infrastructure is not cost-effective".

The Government's failure to invest in the infrastructure has helped the decline of the northern regions and of Yorkshire and Humberside in particular.

The British Institute of Management advocates the very policies that we have put forward. It asks for more roads, including a second Pennine road. The Minister knows all about that, as she had responsibilities at the Department of Transport for some time. The institute also asks the Government to consider the structure of the area. It refers to the need for investment in hospitals, roads, schools, housing, water and sewerage systems, all of which could produce genuine permanent jobs. We need a diversification of finance from the prosperous regions of Europe and of this country to Yorkshre and Humberside.

I wish to put two suggestions to the Government. The first relates to the coal industry, which has gone through a traumatic period. It is time that the Government and British Coal stopped pussyfooting about. They keep saying that no one is forced to leave the industry, but what would they have done if the 400,000 men who took redundancy had not done so because it was not compulsory? The financial inducement to leave led people to take up the redundancy offer if they wanted. This has meant that EEC money that should be available for restructuring in the area is not coming in because the Community will not give its money to areas where there are voluntary redundancies. British Coal should now stop this charade and begin restructuring the industry, thereby making the area eligible for further grants from the Community to build the industries which must take British Coal's place.

The grants that are available from the Government are actually working against my own local authority. I would like to put on record my request that the Government look at the way that the grants are given to the northern regions, because it works against them. The northern regions have the men, the will and the desire. All they want is encouragement from the Government and from the EEC. In that way, we could succeed.

9.20 pm

Mr. Gordon Brown (Dunfermline, East)

The debate has been both wide-ranging and very detailed in its study of Community policies and of United Kingdom policies. It has focused on the problems posed by the internal market and the problems that have also recently arisen from trade difficulties between Europe and the United States; it has focused on the large sums spent by the agricultural fund and the small amounts made available for the regional fund.

We have had speeches from my hon. Friends the Members for Wansbeck (Mr. Thompson), for Easington (Mr. Dormand), who focused on the problems of the northern area, for Liverpool, West Derby (Mr. Wareing), who pinpointed the problems faced by the north-west, for Greenock and Port Glasgow (Dr. Godman), who made a number of very positive suggestions about how Government regional aid could be increased and spent, and for Barnsley, West and Penistone (Mr. McKay) who also made suggestions about the coal industry and spending on infrastructure. All these speeches have demonstrated concern about unemployment both in Europe as a whole and in this country, where it is felt particularly acutely. They have also expressed our concern that things should be done by both the European Community and this Government.

I make no apology for concentrating the bulk of my remarks on one of the major submissions made by the Government to the European Commission in the past year—our submission to the European regional development fund. It showed that the gap between the rich and poor regions of this country is widening, that the shires and suburbs and the inner cities and industrial towns have even less in common after seven years of this Government, that the gap between rich and poor is not temporary but threatens to become ineradicable as a result of the Government's policies. I want to suggest how, by their failure to secure proper funding from the European regional development fund, their failure to secure proper guarantees about the movement towards an internal market, but most of all by their failure to secure a proper regional policy in the United Kingdom, the Government are exacerbating the division between the rich and poor areas of the country.

We have heard from the hon. Member for Southend, East (Mr. Taylor) who made a charge against the Government, that money apparently gained in December by reducing the agricultural budget is money bought at the price of having to increase the contribution of member states. Before the end of the debate, the House deserves an answer from the Minister of State. We need to know whether the Government or the Commission have been guilty of the sort of creative accounting over the agricultural surpluses that might make even their friends in the City blush.

We have also heard an interesting set of proposals about the future of the agricultural fund. We heard from the hon. Member for Birmingham, Northfield (Mr. King), who spent a large part of his time dwelling on the Government's success story in relation to British Leyland, just on the day when British Leyland appears to have announced another 1,000 redundancies in the midlands and elsewhere.

The hon. Member put forward a proposal for supermarket Euro-zones and asked about the distribution of agricultural surpluses to pensioners and others. We deserve from the Minister an explanation of how this distribution of stocks will take place throughout the country. Without a clear explanation of who gets what, how it is to be distributed and how many people are to receive it, I fear that there will be no distribution system at all.

By relying on unfunded charities, we will return to the queues of the soup kitchen society that many fear the Government are to impose anyway on this country by social security policies. Given the spending on agricultural policy that British taxpayers have to bear and the fact that food prices are higher in Britain as a result, it is not Europe that is subsidising the poor families of this country, it is the poor families of this country who, for years, have been subsidising Europe and the agricultural policy.

As a newcomer to these debates I was drawn to a series of Community publications, and indeed publications by the British Government, in the hope that I would secure some enlightenment about some of the more detailed policies being pursued by the Government in Europe and by the European Community. I rather wish now that I had left aside some of the publications that I bothered to consult. One publication that the House of Commons Library put in front of me and that I started to read with interest was entitled "The United Kingdom Presidency July to December 1986". It started by saying: The attached note lists achievements in the Community during the United Kingdom presidency".

Our presidency saw the biggest budget crisis ever, the biggest budget deficit in the Community's history and, despite the recent agreements that the Minister of State heralded to the House, the biggest agricultural surpluses ever, a European economic report to the effect that unemployment will not fall this year, next year or in the foreseeable future in any substantial way, and a community regional report stating that regional disparities were about the widest ever.

These are events which, we are to believe from the Government's report to the House of Commons, are achievements of the United Kingdom presidency. To talk of these so-called successes and achievements when they range from the negative to the negligible is bad enough, but to hear the Minister speak of further successes over the next few months is another example of the triumph of hope over experience. I read with interest the claim about United Kingdom achievements over the six months of its presidency in a newspaper report of a speech made by the Prime Minister to the European Parliament, or the European Assembly, as some people would call it. That speech was at pains to emphasise the achievements of the United Kingdom presidency.

The report said that the Prime Minister stated: I do not believe we should under-estimate the achievements of the last six months. The Prime Minister then proceeded to talk about achievements in terms of helping the unemployed at a time when European unemployment is still more than 16 million. Then she said that Britain would continue to lead the pack in facing the real problems. The newspaper report finished by saying: Mrs. Thatcher's address made little impact on a sceptical House". This was in a House where the Conservatives have a majority, we are led to believe.

With European unemployment above 16 million, with 6 million under the age of 25 unemployed throughout the European Community, with the recognition that unemployment is not getting better but will remain at this all-time high, and with the economic report, one would think that the United Kingdom's problems will not get better.

We have heard the Prime Minister promise that we will return to full employment. Therefore, one might think that the initiatives on unemployment taken during the United Kingdom presidency were substantial — perhaps a European new deal, a European renewal project, a European war against unemployment, a European war against poverty by creating jobs and improving the infrastructure of this country. But we have not got any of these things. There is no great new initiative, no new programmes of public spending on infrastructure investment and no programmes to improve manufacturing investment. What we have from the United Kingdom, in association with Italy and Ireland, is not a policy to reduce unemployment but a substitute for a policy. In December, the Financial Times called it an apology for a policy on unemployment.

The Government's presidency and their actions in Europe have done little to create jobs or to reduce unemployment. That could not be emphasised better than by referring to the shipbuilding industry, which was raised by my hon. Friend the Member for Greenock and Port Glasgow. During the United Kingdom presidency, the Government started negotiations, chaired by Trade and Industry Ministers, for a new European directive on shipbuilding. They commissioned an independent report that said that unless the cost subsidy was 36 per cent. we could not bridge the gap between the highly subsidised far eastern shipyards and European yards.

That report was accepted as both independent and excellent. There was evidence from European shipbuilders that subsidies had to be above 30 per cent. The Government were told by British Shipbuilders that unless they secured 33 per cent., the future of the only two remaining big yards, at Govan and in the north-east, would be at risk and the work force might fall from 6,000 to 800. The Government had all that evidence before them when they were chairing the negotiations; yet, after hard negotiation in Europe, they ended up with an agreement for only a 28 per cent. subvention. That is a betrayal of British shipbuilding and puts at risk many hundreds of jobs and communities in the north of England and Scotland.

It is amazing that we, the biggest island trading nation in Europe, with most to gain from a strong shipbuilding policy in Europe, should have agreed to such a level of subsidy. That is the record of the United Kingdom presidency in protecting and creating jobs and in reducing unemployment.

The submission made by the Government to the European regional development fund has been commented upon by my hon. Friends because of its implications for each region. That submission states not as an assumption but as a projection that unemployment will be. above 3 million not just next year but in 1990. For the Government to say that the prospects for Scotland, the west midlands, Yorkshire and Humberside, the north-west and the north are bleak, frighteningly bleak or gloomy, and that it is impossible to reduce unemployment until fundamental problems have been resolved, is an admission of the depths to which they have brought the economy; it is an admission also of the measures that need to be taken to put the economy in order.

What is as bad is that the Government have admitted what is needed, but are unprepared to do it. Throughout the regional reports that are in the House of Commons Library and available to hon. Members but not to the public, there is a recognition of the infrastructure problems that require money to be spent upon them. They also contain a recognition of the problems faced by manufacturing industry that require extraordinary measures if they are to be resolved and, most important of all, a recognition of the importance of public spending, which the Government have denigrated for the past seven years. The Government have failed to provide solutions to these problems.

I shall quote from some of the most important conclusions of the regional reports so that Conservative Members can see what their Government have been telling Europe about the problems that have been created during the past seven years. On Greater Manchester, the report states that replacement work on roads, sewers, water supply, railways and building stock has not kept pace with the rate of decay resulting in a serious situation in which some aspects of the infrastructure are in a state of collapse. These deficiencies result in a great deal of inefficiency in the functioning of the urban system". The report goes on to state: real dangers exist from sewer collapse and pollution. On the west midlands, the report states: The cumulative effect of under-investment in apprenticeships and in modern plant and machinery will affect the ability of the region to take advantage of any increase in demand.

Mr. Cash

The hon. Gentleman is wrong.

Mr. Brown

If the hon. Gentleman says that this quote is inaccurate, I shall be happy to give way. I am quoting from the report that the Government placed in the Library. It makes it absolutely clear that the failure of the Government to secure manufacturing investment is putting jobs at risk and is a cause of the catastrophic unemployment that we face.

Mr. Cash

rose—

Mr. Brown

I shall not give way because the passage that I quoted is accurate.

What is the state of manufacturing investment in the regions? Manufacturing investment is vital to secure the future of our regions and jobs for the future. According to the latest figures, investment in the north of England is 41 per cent. down on what it was in 1979. In Yorkshire and Humberside, about which my hon. Friend the Member for Barnsley, West and Penistone spoke eloquently, it is down by 33 per cent. In the west midlands it is down by more than 29 per cent., and in the north-west it is down by more than 31 per cent. That is the appalling state of investment that the Government have failed to improve and which they are making worse by their cuts in regional aid. Cuts have even been announced in the past few days.

The other point made in the report is one that the Government would do well to take to heart. The report, on the Greater Manchester area this time, states: Due to difficulties in securing private investment … the vast infrastructure … has to be provided by the public sector agencies … It therefore follows that considerable importance attaches to the level of financial resources available to the public sector.

That is a clear sign of what the Government need to do. In their submission to the European regional development fund, the Government recognised not only what the problem is and what the prospects are, but that the solutions required are those that, for ideological reasons, they have spent the past seven years rejecting.

It makes absolutely no sense to cut regional aid, to delay an improvement in the funds available from the European regional development fund or to proceed with the internal market when there are no proper guarantees for the regions and no proper safeguards against the implementation of internal market measures that may ruin further prospects for the regions.

Labour Members talked about the problems that face the regions of this country. We did so deliberately. The Government have it within their power, through the submissions to the European regional fund, negotiations in Europe and, most of all, through spending on regional aid, to do a great deal about the problems that face the regions.

In case the Government do not believe that there is a north-south divide and that divisions in Britain are getting worse, I shall quote the Bishop of Liverpool who issued a statement a few days ago which said: Let us be quite clear that the divide is true, it is felt and it is very damaging. Of course there are divisions in parts of the country. There are divisions between the inner cities and the suburbs and the shires, and there are major problems in London. However, the Government cannot deny that they share a great part of the responsibility for the widening gap between the prosperous shires and the inner cities and traditional industrial regions of the country.

The Government's response to regional divisions over the past seven years has been to allow them to widen. They have created an industrial wasteland in many parts of Britain. They have called it recovery and even hailed it as a triumph of monetarism and hoped that no one would notice. Labour Members are aware of the problems. We know what ought to be done. I tell the House that over the next few months we will push the Government back to their last stockbroker belt, their last suburb and their last shire. Very soon they will find that there are not enough millionaires without a conscience to keep them in power.

9.41 pm

Mrs. Chalker

This has been an interesting debate in parts. I welcome the hon. Member for Dunfermline, East (Mr. Brown) to the debate. I understand that he was winding up last week's debate on which many hon. Members wished to speak. He made a far better job of the industrial debate that he had decided upon than his hon. Friend the Member for Hamilton (Mr. Robertson) made in the debate on the European Community.

The hon. Member for Hamilton may be a reluctant and a grudging convert to the case for the Community. However, I was surprised at his speech because he showed unmistakeable evidence that he has now accepted the arguments that the Government have been making for some time. I shall explain. He accepted the arguments and looks forward to the adoption of still more internal market measures. A few months ago he was denying that the internal market was of any benefit to this country. He spoke warmly about the Single European Act. Perhaps the arguments put forward against the Act by his hon. Friend the Member for Walthamstow (Mr. Deakins) have done the trick. The hon. Gentleman was against the Act then, but every right-thinking person must be in favour of the Act now.

The hon. Gentleman went on to decry the absence of a budget for 1987. I hope that he does not agree that the maximum rate of increase in the budget and the agricultural guideline should be thrown away. Surely he takes the view that they should be respected. He seemed to be implying that we should ignore budget discipline. I was surprised at that. I cannot agree with him on that as I cannot agree on many of the other things he said.

So great was the hon. Gentleman's enthusiasm that he described some of the achievements of the presidency as trivial. I hope that he will circulate his views on the achievements to those constituencies where jobs have been created, and are being created and safeguarded thanks to the internal market measures that we have negotiated. I hope that he will circulate those remarks to Socialist Governments and the ETUC which agree that our employment strategy is a real basis for creating new jobs. I hope that he will draw his remarks to the attention of his hon. Friend the Member for Linlithgow (Mr. Dalyell), who rightly regards the steps being taken to fight cancer as a major health initiative, one which we fully support.

I hope that the hon. Gentleman will defend all that he said in the future. For those whose task it is to protect us from terrorism and for those who welcome the new intensity of co-operation between police forces across the Community, introduced by my right hon. Friend the Home Secretary, those have been nothing but positive achievements.

Mr. George Robertson

Will the hon. Lady give way?

Mrs. Chalker

I will not give way. Time is short, as the hon. Gentleman knows.

The Opposition's basic line has been that we have not solved all the problems, so they will pretend that we have not solved any problems. That is simply not true. They are recalling their own experience in office many years ago when they claimed to have solved all the problems of the Community, whereas they knew full well that they had solved none of them.

I refuse to share the alarmism of the hon. Gentleman about the Community and the negative approach that is adopted to every challenge that arises. The problems are serious and that is exactly why I drew attention to them in my opening remarks. However, they are not so serious as to defy solution. Throughout this debate we have heard the twin themes of the vital need to control spending on agriculture and firm budgetary control. Those twin themes are completely shared by the Government, as is the importance of the structural funds. That is why I want to speak about the budget.

We have never hidden the fact that the Community faces a serious budget deficit. However, the agricultural measures agreed in December will alone save £1.3 billion over the next two years. More reforms must be undertaken to save still more money, but the commitment to reform started in April and achieved in December was a major step towards the agricultural reform that is so necessary.

I agree with my hon. Friends that we need a better system of budgetary control in the Community. The existing budgetary control mechanism has led to two readings of the budget in which the Council has agreed to constrain expenditure within the agricultural guideline. Hon. Members should not forget that last year the Council of Ministers won an important case in the European Court of Justice. It constrained the European Parliament from unilaterally adopting a budget which exceeds the maximum rate of growth in expenditure.

Hon. Members bemoan the fact that the lack of a budget in 1987 may constrain expenditure on the structural funds. The lack of a budget reflects the determination of the Council of Ministers to bring discipline into Community expenditure and, above all, into CAP spending. Even without a budget and with the provisional twelfths regime which is now operating, spending on the structural funds will continue at the levels of last year.

The year 1986 was within budget and we know that past commitments have built up, but payments made are no more than the amounts budgeted. That is control on spending. Spending is constrained by the VAT ceiling. That was the case last year, and that will continue. We are on the one twelfth basis because the Council of Ministers has refused to exceed the maximum rate of permitted expenditure. We cannot have it both ways and we will achieve budgetary control of spending.

Of course there is pressure for more spending in the Community. We heard that pressure in the debate and it is a serious problem. That is why the Government negotiated the Fontainebleau agreement, and we must not forget what it entails. By the end of this year Britain will have got back from the Community £3,000 million in rebates on our budget contribution. That is why, even with expenditure in the Community as a whole running up to the 1.4 per cent. ceiling, our own VAT contribution remains well below the old 1 per cent. ceiling. The VAT rate for other member states in 1986 was 1.4 per cent.

Thanks to the Fontainebleau agreement, the effective VAT rate in 1986 for the United Kingdom was 0.67 per cent. That means that with the Fontainebleau rebate and even with the 1.4 per cent. maximum VAT rate, we actually pay less than we did under the old 1 per cent. VAT rate without the Fontainebleau agreement. That must be beneficial for Britain. As I have said, we know that there is pressure in the Community to raise that 1.4 per cent. ceiling. That step would require the unanimous consent of all national Governments and all Parliaments in the Community.

We know that the President of the Commission is visiting capitals and will come here to present his ideas on the future financing of the Community, the reform of the CAP and the reorganisation of the structural funds. I have made it clear in this and in other debates that through our receipts and the Fontainebleau abatement we now get back five sixths of what we contribute to the Community. I agree that we are still net contributors. Germany contributes most and France contributes a bit less than we do. For us, like France and Germany if extra money was spent in the Community, that: would mean less money available to be spent in this country. That is why the Community policies have to give an added value. We should judge the Commission's proposals for financial reform against that yardstick.

We are not considering the issue of when there should be an increase in the own-resources ceiling or what size that should be. We will be considering how excess expenditure on agriculture can be restrained and how control of public expenditure in the Community can be assured.

The entire focus of this year's negotiations — this point was repeated in many of the remarks tonight—must be to deal with the underlying problems of the Community, with CAP expenditure at the top of the agenda. That is not to say that I disregard the remarks about structural funds. I will consider those in a moment.

I remind the House that, during the British presidency, my right hon. Friend the Minister for Agriculture, Fisheries and Food succeeded in getting the largest measure of CAP reform—a 9.5 per cent. reduction in milk production over the next 15 months and a 13 per cent. reduction in the price of beef. That is only the beginning. It will not be easy for our dairy producers, but it is absolutely essential if the Community is to control its agricultural surpluses. We shall use the discussions to push through further essential measures of reform on cereals and Mediterranean products.

My hon. Friend the Member for Southend, East (Mr. Taylor) argued, as he has argued for many years, for the repatriation of the common agricultural policy. That is not a realistic choice for this country—not for the reasons that he gave but because the budgetary costs of a deficiency payments scheme would be higher for us than the costs of the existing CAP. Nor would a system in which Britain tried to compete alone against the collective strength of European and American producers be one in which our agriculture could flourish. Either there would be a free-for-all in which many of our farmers would go to the wall, or we would have to erect protectionist barriers which would push up costs.

Mr. Teddy Taylor

Does the Minister accept the view of the European Union of Consumers, which claims that if we adopted deficiency payments there would be a big saving in that the average family in Britain would have a reduction in household bills of £13 a week? The Minister has not included that in the calculations.

Mrs. Chalker

Indeed, we have taken that into the calculation. I know that my hon. Friend is as keen as I am to solve the problems of agriculture. These problems are not confined to Europe alone; they are technical and worldwide problems. We will not change the position by turning the clock back. We must solve the problems from within the Community and between the Community and the other producers. We have successfully begun to do that. In the Uruguay round of GATT, for the first time, we are including agricultural produce in an attempt to rectify the world problem that is not simply limited to Europe.

I must stress to my hon. Friend the Member for Southend, East that real savings will be made through the CAP reform measures because the decisions taken in December will produce real savings. It is not simply a matter of delaying payments, as my hon. Friend seems to believe. The savings arise from the lower levels of support and that will mean real cuts in surpluses in future. That is why, taking into account all aspects of the package, including the costs of the butter stock disposal scheme, at the end of the day the Community will save about I billion ecu a year—£745 million—from 1990 onwards. Until then, the total net savings are estimated to be about £1.3 billion.

Delaying repayments to member states from the disposing of butter stocks simply means that the cost does not fall all at once but is phased over a number of years. That is the position and it is more manageable for the Community and individual states' budgets. I have said all along with regard to agriculture that it is all very well to empty the tank in that way, but that can make sense only if the tap has been turned off. In December, we agreed to turn the taps off and to run down the level of the water.

I assure my hon. Friend that the reforms which were negotiated last December involve production cuts which will affect everybody elses producers as well as ours. As my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh) said, those production cuts must be managed rationally. I am sure that my hon. Friend would not advocate steps that would go against the interests of our farmers.

The hon. Member for Dunfermline, East (Mr. Brown) spoke of the distribution of food surpluses to the needy. It makes sense to give excess produce to the needy, and that is being done, as my right hon. Friend the Minister has said, through various organisations with whom he has had discussions and explained the methods to be used. The meetings show the willingness of organisations to give out food to the most needy. I understand that, since last week, butter and beef stocks have been distributed and that further stocks will go out during the next few months. If the hon. Gentleman wants further details, the Ministry will supply them.

The scheme is not a long-term answer to CAP surpluses but a response in extreme weather conditions, and it has been welcomed by all involved.

I said earlier that, this morning, we achieved agreement ad referendum between the European Commission and the United States about the trade effects of enlargement. The agreement has yet to be confirmed formally, but I hope that it soon will be. My hon. Friend the Member for Southend, East suggested that the cost of the deal between the EC and the United States was $400 million. That is not correct. He has confused the budgetary costs with the trade volumes which were under negotiation.

The United States claims that it would lose $400 million-worth of grain exports to Spain as a result of the latter's accession, which involves adopting a system of variable levies on all agricultural imports, including those from the United States. There was never any question of the EC paying $400 million.

I can estimate immediately the direct cost to the United Kingdom which would have occurred in the event of a trade war. It would have been a loss of $80 million in gin exports.

In the agreement there is no cash transfer. The deal provides United States grain exporters with reduced-levy — not levy-free $ access for the bulk of a quota of 2 million tonnes of corn, 300,000 tonnes of sorghum and increased access to the Portuguese market. That will mean a slight reduction in levy income to EC budgets, but no figure can be given at the moment because the amounts must be set out when the individual tenders are opened in the light of market circumstances. The lesser tariff concessions will also cause a slight reduction in customs duties income, but my hon. Friend will receive the figures when they are known.

I understand why a large part of the debate has concerned the structural funds and I understand what hon. Members have said. I should like to put the House right on one matter concerning shipbuilding, a subject in which I also get involved. Contrary to what the hon. Member for Dunfermline, East said about the sixth directive on aids to shipbuilding, it is a considerable improvement on previous arrangements. The ceiling refers to 28 per cent. of the cost, which is equivalent to 39 per cent. of the contract price. That compares favourably with limits in the fifth directive of 22.5 per cent. of contract price or 18.5 per cent. of costs.

Mr. Gordon Brown

rose—

Mrs. Chalker

I am sorry, but I have only two minutes.

The structural funds benefit us. We have received £2.25 billion from the social fund, which is more than any other member state except Italy. We have sought to maximise our receipts from the fund. We have also received £2.25 billion from the European regional develoment fund since 1975, and the north of England has received more assistance than any other area.

We have achieved a great deal of what we set out to do in the last six months of last year. It is hard to put a price on peace and democracy in western Europe, but the Community helps to maintain it. We are a net contributor, but we shall ensure that we continue to pay no more than our fair share into the Community.

I commend the motion to the House, because the European Community could help to maximise our benefits and our influence, and protect our trade interests. I hope that the House will unite behind the achievements that have been made.

Question put and agreed to

Resolved, That this House takes note of the White Paper on Developments in the European Community, January to June 1986 (Cmnd. 9911); and supports the emphasis which the Government placed during the United Kingdom Presidency on developing Community policies of practical benefit to industry, business and the consumer.

1. STATUTORY INSTRUMENTS, &c.
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1. PUBLIC HEALTH 54 words