European Communities (Budget)

HC Deb 04 December 1990 vol 182 cc200-28

Mr. Speaker

I have selected the amendment in the name of the hon. Member for Thanet, South (Mr. Aitken).

5.1 pm

The Financial Secretary to the Treasury (Mr. Francis Maude)

I beg to move, That this House takes note of European Community Documents Nos. COM(90) 121, relating to the Preliminary Draft Budget of the European Communities for 1991, 8182/90, relating to the Draft Budget of the European Communities for 1991, and 9865/90 and the supplementary explanatory memorandum submitted by Her Majesty's Treasury on 30th November 1990, relating to the European Parliament's proposed amendments and modifications to the draft Budget. I know that the House has been waiting with bated breath for the debate to begin. This is my first opportunity to address the House on this important issue. It is an annual event that is of considerable importance for the House.

This year's budget procedure has been preceded and accompanied by developments of great moment in the world. We have seen historic change in eastern Europe, with political and economic reforms that the Community has rightly been quick to support. Germany has united—a welcome development that enlarges our Community. The United Nations sanctions against Iraq have had a disproportionate effect on three countries in particular—Turkey, Jordan and Egypt. The European Community has, properly, decided to provide special assistance to them. All those developments require changes to the Community's financial perspective.

In the past two years, European Community spending has generally been well contained. The figures for commitments in both the 1989 and 1990 budgets have been consistently below the ceilings in the financial perspective, at 2 becu and 4.5 becu respectively. The United Kingdom's net contribution was more than £2 billion in both those years. It would have been substantially higher but for the abatement provided by the Fontainebleau agreement.

The general level of spending under the European Community budget is likely to rise quite strongly in 1991, partly because of the exceptional factors to which I referred at the outset. There is, in addition, pressure on the agriculture budget, reflecting falling world prices—especially for grain—depressed market conditions for livestock and a range of other factors, including the loss of export markets because of the Gulf crisis.

The financial guideline for agriculture was largely a product of Britain's determination to prevent a recurrence of the runaway growth in spending that brought the Community to the edge of bankruptcy in 1987. The guideline sets a legally binding limit on agriculture support spending. The annual growth of the limit is confined to 74 per cent. of the rate of growth of Community gross national product taken from the 1988 base. That guideline is buttressed by automatic stabilisers for most commodities, which trigger price cuts when production exceeds maximum quantitites set by the Council.

Until this year, the system seemed to be achieving its objective of restraining expenditure. Cumulative expenditure in 1988, 1989 and 1990 was 11 becu below the guideline, but recent developments in the trend of agricultural spending suggest that next year the guideline may be under greater pressure. I fully understand the z concerns of my hon. Friend the Member for Thanet, South (Mr. Aitken), as expressed in the amendment that he has tabled, about that upward pressure. It will remain essential to resist it.

The House will recall that the inter-institutional agreement is a political agreement under which the Council, the European Parliament and the Commission have bound themselves to respect ceilings for each of the six main categories of Community spending for the five years between 1988 and 1992. Those ceilings are set out in the financial perspective. They need to be revised to accommodate expenditure which could not reasonably have been foreseen when the financial perspective was agreed.

The agreement distinguishes, within non-compulsory expenditure, between privileged and non-privileged spending. Privileged spending includes the structural funds, the research and development framework programme and the integrated Mediterranean programmes. This category will double in real terms in that five-year period, but for the non-privileged element, the Council has agreed to respect the maximum rate of increase calculated by the Commission within the framework of article 203 of the treaty. The calculated maximum rate for the 1991 budget is 7.2 per cent.

In June 1984, the European Council in Fontainebleau agreed a permanent mechanism to abate the United Kingdom's grossly disproportionate net contribution to the budget. By the end of next year, cumulative abatement under the mechanism will have totalled almost £10 billion, in addition to the £3.2 billion-worth of refunds extracted by my right hon. Friend the Member for Finchley (Mrs. Thatcher) before the Fontainebleau mechanism took effect. On that score alone, Britain is £13 billion better off today than it would have been under the sloppy arrangements that were so skilfully negotiated by the last Labour Government. Those arrangements amounted to a scandalous betrayal of British interests.

In June, the financial perspective was revised to provide for assistance to eastern Europe and to Mediterranean, Asian and latin American countries. A small amount for structural funds and administration was also included. The effect was an increase in the financial perspective by 200 mecu for 1990, 1.2 mecu for 1991 and nearly 1.5 mecu for 1992.

Mr. Tony Banks (Newham, North-West)

Does the Minister have the sterling equivalents of those ecu figures, which might assist those who are trying to follow the debate?

Mr. Maude

No, I have not, but I can lend the hon. Gentleman a pocket calculator, which will enable him to do the sums with great rapidity.

Mr. Teddy Taylor (Southend, East)

That is silly.

Mr. Banks

It was a genuine question.

Mr. Maude

I accept that it was a genuine question. I do not have the figures in exact equivalents, but they can easily be provided. If the House prefers to have them in that form, they can be provided. The difficulty arises because the accounts for the European Community are, properly, calculated in ecu. It is not difficult for sterling equivalents to be provided.

Mr. Hugh Dykes (Harrow, East)

Are not we being a little panicky? Figures for international transactions are frequently given in dollars, and usually there are no protests from hon. Members. Taking the whole picture into account, does my hon. Friend agree that budget control is eminently satisfactory, not least due to pressure from the United Kingdom Government in recent years, compared with the previous position that he mentioned? That particularly applies to agriculture, which needs careful monitoring and depends much on the negotiations on the export refunds.

Does my hon. Friend further agree that the eastern European expenditure is being dealt with satisfactorily, that most German reunification expenditure is dealt with by German national expenditure and that the outlook remains one of further control and of remaining under the financial perspective?

Mr. Maude

It is right to say that the arrangements negotiated in 1988 have, until now, exercised a firm discipline on Community spending. It will remain of the utmost importance to continue that discipline. The present discussions on next year's budget illustrate how important it is to maintain that discipline. Although, for a number of reasons, agricultural spending has been well below the ceiling in the financial perspective, there is upward pressure for the future, and it will be very important to resist that.

Mr. Teddy Taylor

How?

Mr. Maude

My hon. Friend will be aware that discussions on the general agreement on tariffs and trade are going on at present. They should have at least the effect of restraining further increases. If, as I hope, a good agreement is reached, there may be a prospect of some reductions, which would be as welcome to me as to my hon. Friend.

Mr. John Butcher (Coventry, South-West)

Does my hon. Friend agree that the common agricultural policy budget is a massive aberration at the heart of Community finances? As we speak, the CAP threatens to undermine the general agreement on tariffs and trade and to impoverish not only the people of Europe, but those who wish to sell cheap agricultural products to this country. It is utterly foolish for us to vote for increases in aid from the European budgetary programme to the nations that are not allowed to trade with us in agricultural products. Does my hon. Friend further agree that his negotiations on this question on our behalf are really about whether the tradition of Adam Smith or the tradition of Colbert and of Richelieu will dominate European debates in future?

Mr. Maude

In reply to the first part of my hon. Friend's question, it is certainly right that we need to be careful to ensure that policies on agriculture enable developing countries—for these purposes, I include the reforming countries of eastern and of central Europe—to sell to us the goods that they are capable of producing. It is absurd for us to provide funds for such countries to firm up their economic reforms and, at the same time, to deny them markets where those products can properly compete.

For some time, I have argued that the GATT negotiations this year are, by quite a margin, the most important set of international discussions. Not only the future prosperity of the world but its future security depends on those discussions. I hope that those who are conducting the negotiations in Brussels at present will have in mind the terrible price that could be paid if a satisfactory outcome is not reached. There is a huge prize to be won if the discussions are successful, and a terrible cost if they fail.

Mr. Dykes

I am sure that all of us agree unequivocally with my hon. Friend's view, and we all believe that the Community negotiators have a special responsibility in that context. However, does my hon. Friend agree that it is somewhat ironic that the United States negotiators usually fail to remind us that the bulk of the internal support system in the United States—deficiency payments, which we used to have, but no longer have—amounts to about 82 per cent. of the total United States dollar support for American farmers.

Mr. Maude

It is certainly the case that none of the protagonists in the discussion is quite as pure as he makes himself out to be. All the protagonists have a negotiating position and, at present, those positions are incompatible. A negotiating position is, of course, one on which one can negotiate. If the negotiators fail to reach a satisfactory outcome, they will have a heavy burden of guilt to carry.

Rev. Ian Paisley (Antrim, North)

Does not the Minister believe that the Government should now be applying themselves to getting rid of the green pound? Would not that be a considerable help in this matter?

Mr. Maude

The hon. Gentleman takes me beyond the scope of this debate. The green pound needs to be considered in the light of our entry into the exchange rate mechanism and the hon. Gentleman is right to draw attention to that matter.

Mr. Teddy Taylor

I hope that my hon. Friend can clarify a point about the GATT talks. Do my hon. Friend and the Government consider that the alleged 30 per cent. reduction in farm support is really a reduction? The Commission's proposals make it abundantly clear that farmers will be compensated fully for any reduction in subsidy, and that there is no question of freedom of trade being permitted. It would be helpful for us to know whether the Government consider that the alleged 30 per cent. reduction in agricultural support will be a real reduction, as the words in the proposal seem to show that there will be no reduction, but simply a reduction in subsidy, which will be compensated for by other subsidies.

Mr. Maude

My hon. Friend is right to say that it is not a question of a clean and straightforward reduction, as has been suggested. Equally, he will be aware that a substantial part of the 30 per cent. has already been harvested—if that is the right word in the circumstances—reflecting the changes in the common agricultural policy since 1986.

I can now provide for the hon. Member for Newham, North-West (Mr. Banks) the sterling equivalents for the figures that I gave earlier on the first revision to the financial perspectives in respect of eastern Europe. The figure for 1990 was £140 million, for 1991 it is £950 million, and for 1992 it is £1,035 million, at a conversion rate of £1 to 1.435 ecu, which is the central exchange rate mechanism rate.

In September 1990, the Commission proposed a further revision to take account of assistance to the front-line states in the Gulf conflict: Egypt, Jordan and Turkey. It was proposed to raise the ceiling for category 4 and for the total ceiling of the financial perspective by 630 million ecu.

In October, a further revision was proposed to take account of the effect on the budget of the unification of Germany. The total ceiling for that purpose was to be raised by 1 billion ecu in 1991 and by just over I billion ecu in 1992. In return, the Council sought savings within current spending to offset those increases in part. In addition, a fourth revision has recently been proposed by the Commission to take account of agricultural rebates to Spain and to Portugal.

I want now to outline this year's budget procedure so far. The Commission presented the preliminary draft budget in July. For 1991, the preliminary draft budget was about 13 per cent. bigger than the adopted budget for 1990. I know that that will rightly concern the House. None the less, that budget was almost 4 billion ecu below the overall ceiling in the financial perspective. Total provision was equivalent to about 1 per cent. of Community gross national product, compared with the 1.19 per cent. ceiling allowed under the own resources decision of June 1988.

Two underlying trends in Community expenditure emerge from the preliminary draft budget. First, it provided for an increase of more than 13 per cent. in expenditure on agricultural market support. That reflected the expected growth in compulsory expenditure on agriculture which resulted from falling world prices rather than from any slackening of control.

Secondly, it provided for an increase of about 20 per cent. in spending on structural operations and on research and development. Those areas now account for almost 30 per cent. of the total budget. The budget also included 65 million ecu for measures to combat fraud, which was further evidence of the Community's desire to root out fraud, although much more remains to be done.

On 27 July, the Council adopted a draft budget about 830 million ecu below that proposed by the Commission and more than 4.7 billion ecu below the overall ceiling in the financial perspective.

In the light of developments in eastern Europe, the Council decided that, exceptionally in 1991, it would not be appropriate to apply the maximum rate procedure to non-privileged, non-compulsory expenditure. However, the Council agreed to cut the Commission's proposed level of non-privileged expenditure by more than it had in previous years and endorsed a robust declaration making it clear that the procedure adopted in relation to this year's budget was an inevitable consequence of developments in eastern Europe and implied no weakening of budgetary discipline.

At the same meeting, the Commission said that it would present proposals for a revision of the financial perspective in the light of German unification. There was strong support from a number of member states—notably from Germany and France—for our view that the revision should cater for unification and for nothing else.

Finally, the Council decided to take the Parliament to court over the 1990 second supplementary budget. The Parliament excluded some 780 million ecu from the amount of the 1989 budget surplus to be taken into the 1990 budget on the basis that inclusion would reduce member states' VAT payments below 1.4 per cent. and that the Parliament had powers under the treaty in respect of revenue. The Council could not and did not accept that, because its immediate practical consequence would have been to postpone bringing to account a substantial part of the 1989 budget surplus, with a consequent delay in member states receiving the benefit of reduced contributions. That would contradict the requirement of the financial regulation that surpluses should be brought to account at the earliest opportunity.

For that reason, and for the more fundamental reason that the Council alone has competence over revenue, the Council agreed to initiate a court action to amend the Parliament's adoption of the second supplementary budget.

The Parliament presented its amendments to the draft budget on 25 October and voted for modifications adding over 1.9 billion ecu in commitments and almost 1.6 billion ecu in payments. In its amendments, the Parliament anticipated the proposed revisions to the financial perspective and thus threatened to breach the existing ceiling. As, in effect the Parliament has the last word on matters of non-compulsory expenditure, its amendments amounted to a challenge to the Council to approve revisions along the lines that it wanted. Otherwise, the financial perspective would be breached, and the inter-institutional agreement would be thrown into question.

Two other problems emerged. The Council debated whether to reject two of the European Parliament's amendments to the structural funds category—known as category 2. These concerned a new environmental fund—LIFE—and a fund called "PERIFRA", intended to alleviate the effects of the Gulf crisis on poorer and outlying regions.

The second problem stemmed from the Parliament's proposals on research. The Parliament wanted two things—first, to reallocate resources within existing multi-annual framework programmes and, secondly, a substantial increase in spending outside those programmes.

The amendments caused a number of difficulties. In particular, the reallocation of resources along the lines proposed could not be reconciled with the framework programmes agreed by the Council in accordance with the treaty and with the inter-institutional agreement, and risked serious damage to the concept of multi-annual planning that the Community has developed to lend certainty to the funding of long-term projects.

Following preparatory work in the Budget Committee and the Committee of Permanent Representatives, the Budget Council undertook its second reading of the 1991 budget. Initial discussion on 15 November was adjourned until 19 November to take account of related Economic and Finance Council discussions of the outstanding revisions to the financial perspective on that day. As expected, the consideration of revisions to the financial perspective dominated decisions on the 1991 draft budget.

In response to the presidency's report on its continuing discussions of the revisions with the Parliament, the Council insisted on a tough line, demanding off-setting savings from within existing headroom in the financial perspective. Moreover, as part of that process, the Council pressed for a satisfactory compromise on the Parliament's amendments to the 1991 budget—in particular, on research. The presidency undertook to seek an acceptable compromise.

In the meantime, the Budget Council duly adopted its second reading position—in particular, it confirmed the rejection of the European Parliament's amendments on research and rejected the LIFE and PERIFRA funds. Furthermore, the Council insisted that agreement to a limited number of new Commission posts should be conditional on implementation of the Court of Auditors' report on improved staff management. The amendments that were accepted amounted to 200 million ecu in commitments and 154 million ecu in payments.

The upshot was a revised draft budget in which commitments—at around 54.9 billion—are about 4.5 billion ecu below the overall ceiling in the financial perspective and in which member states' contributions are equivalent to 1 per cent. of Community GNP, compared with the annual sub-ceiling for own resources of 1.19 per cent.

Following further discussion at ECOFIN yesterday, I think that we may be close to an agreement on revisions to the financial perspective. There would be significant offsetting savings from within the existing headroom, the transfer of the Parliament's amendments on LIFE and PERIFRA funds out of the structural funds category of the budget, and modifications to the Parliament's amendments on research to bring them into line with existing framework programmes. The Parliament will undertake its second reading later in December, with a view to adopting the final 1991 budget before the end of the year.

The budget procedure is always a fairly tortuous affair, and this year has been no exception. We have had to be flexible in responding to major developments in eastern Europe, Germany and the Gulf. Equally, as a substantial net contributor, we have had to be firm in insisting that strict budget discipline is preserved. We shall continue to do so.

At the intergovernmental conference starting next week on institutional reform, we shall press hard for changes to the treaty which will intesify the war against fraud, deepen scrutiny of spending and require ever better value for the money supplied by tax payers and spent by the Community.

5.26 pm

Mr. Chris Smith (Islington, South and Finsbury)

I am glad to see the Financial Secretary still firmly in place—apparently the only fixed point in a whirling Treasury team.

First, I must make my usual complaint about the quality of the information presented to hon. Members on complex issues concerning the European Community budget. The Treasury's explanatory memoranda do not actually explain very much. The overall figures are set out rather better than they were a year ago, but the notes do not tell us much about the detailed discussions and negotiations that have taken place or about what has happened on the detailed items of each programme in the budget. It is difficult, to say the least, to find one's way from one document to another, and the format used by the Treasury does not help. I hope that the Government will continue to examine ways in which the presentation of information to the House can be improved. The Government must be accountable for what they are up to in the Council of Ministers and the information is crucial if the House is to do the job of scrutiny that it is supposed to perform.

We still do not have before us the Council's response to the European Parliament's budget. We do not have the Council's detailed decisions about the various items in the European Parliament's amendments and, given that the Council's response is so crucial to the European Community's budgetary process, it is rather difficult for us to take an accurate snapshot of the present state of the discussions on and the development of the EC budget. I shall return to that point in a moment, because I have a number of specific items to raise with the Government.

When we reach this stage in the discussions next year, I trust that the Treasury—by then, I hope, under the control of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith)—will be able to present us with an account of exactly what has happened in the Council's response to the Parliament. It would be useful for us to know that.

Rev. Ian Paisley

Even if we had all the information that we should, what power would the House have to make any changes?

Mr. Smith

The House certainly has the power that it should have, which is to scrutinise what the Government are up to, because the Government and Ministers are our representatives in the Council. We need to know what decisions the Council is taking, when it takes them and what measures it is proposing so that we can hold Ministers to account for what they are up to.

Mr. Kenneth Hind (Lancashire, West)

Surely all we need to know is that three quarters of the budget goes on agricultural subsidy, which costs every average family in this country £1,000 a year, or £20 a week. Those are the most salient points. Does the hon. Gentleman agree that that figure needs to be reduced? What would he do if he were to take over the Treasury team with his right hon. and learned Friend the Member for Monklands, East (Mr. Smith)?

Mr. Smith

I am glad that the hon. Gentleman has woken up to join in our debate. There is much of importance in the documents, not just the item on agriculture. I shall refer to the item on agriculture in a moment. I happen to believe that it takes too great a share of the European Community budget and that we would like to see that share reducing over time. I said that last year, and I will continue to say it. There is much else that we need to scrutinise as well.

One small but important technical point that I need to raise with the Government was referred to by my hon. Friend the Member for Newham, North-West (Mr. Banks) when he raised the obvious layman's question about what the figures are in pounds rather than in ecus. The Government, in all the figures that they have put before us, have used the conversion rate of the pound to the ecu of 1.435, which assumes that the pound is at its central rate within the exchange rate mechanism.

We all know, however, that the pound is currently substantially below its central rate within the exchange rate mechanism, which means that the calculation that the Government are currently using for the exchange rate between the pound and the ecu is incorrect. The pound is at a lower value than it was when the documents were drawn up. Obviously, one question that we must ask the Government is how much extra, in terms of our own contribution to the budget, the lower standing of the pound as against the ecu will cost us as a result of those exchange rate fluctuations.

Mr. Tony Banks

I am grateful to my hon. Friend for giving way. I do not want to disturb his flow too much, but with regard to his point about conversion, he mentioned the ERM central rate of £1 to 1.435 ecu, which is in volume 7, document 8182/90. When I looked at the report of the Select Committee on European Legislation, which accompanies the documents, I noticed that the conversion rate in that report is £1 to 1.387557 ecu. To which figure are we supposed to pay more attention?

Mr. Smith

My hon. Friend points exactly to the problem that I identified. The figure in that Select Committee report was used some months ago, before our entry into the exchange rate mechanism. I presume that the Select Committee took the actual rate of conversion at the time it drew up its report. The Government are now taking a theoretical rate of conversion in terms of our central rate within the exchange rate mechanism rather than the actual rate of conversion as of today.

Mr. Terry Dicks (Hayes and Harlington)

Would not the simple answer be to talk of the good old British pound so that we all would know where we are? It is nonsense and gobbledegook to talk about ecus in the British House of Commons.

Mr. Smith

I have some sympathy with what the hon. Gentleman says. I do not usually have much sympathy with what he says, but he has a valid point. In dealing with such matters, it would be useful if we could perhaps refer to ecus and pounds so that everyone can know exactly where we stand and what we are talking about.

Mr. Maude

It comes a little ill from the hon. Gentleman to sympathise with the concern of my hon. Friend the Member for Hayes and Harlington (Mr. Dicks) for the good old British pound. As I understand Labour Members' recent pronouncements about their proposals for economic and monetary union, they would like to get rid of the pound altogether.

Mr. Smith

All the issues about economic and monetary union and the possibility of a single currency stand in the background of many of our discussions in the House. I shall refer to that matter in a moment or two.

In the meantime, the detail of the draft budget is important. One feature of the draft budget is certainly welcome, and that is that the agricultural support section 1 vote is well within the financial perspective by a considerable margin. It still, however, takes the lion's share of the Community budget. Over time, as I have mentioned, we would wish to see that pattern change. Much will depend on precisely what happens in the current round of general agreement on tariffs on trade discussions. None the less, the balance within the European Community budget between support for agriculture, which takes such an overwhelming proportion, and all the other social, regional and structural programmes in the European Community must change over time. We shall support that position.

Any increase in the agricultural support figures required to provide support for the new German Lander which have joined Germany from the former East Germany must come within the existing financial perspective ceiling. It is possible to accommodate that within the existing ceiling. The financial perspective must not be amended to take account of that change.

We should also welcome within the draft budget the agreement that seems to have been reached between the Council and the Parliament to establish an environment fund. Even if it is at a very token level at this stage, it is none the less a small step in the right direction and, I hope, something that can be built on in future.

Elsewhere in the draft budget, however, the news is not so good, and it would be useful to know what part our Government have played in drawing up the response from the Council of Ministers to many of the proposals that have been made by the European Parliament. As I understand it—we do not have the papers in front of us, so I have been able to find this out only by direct contact with colleagues in the European Parliament—the European Parliament has made a range of proposals for spending, which is extremely valuable spending from our point of view, and it seems that the Council of Ministers has rejected them or has demanded cuts. It would be useful to know what role our Government and our representatives in the Council of Ministers have played in some of those decisions.

Let us consider, for example, item 3531 relating to controls, studies and analyses in connection with the fight against fraud, something about which the Government said that they were extremely concerned when we debated the Court of Auditors report some months ago. The Council is proposing a cut of 631,000 ecu in that budget. Item A354, on computerised customs networks for fraud prevention, which is a similarly important issue, is faced with a cut of 200,000 ecu. A cut of 13 million ecu in commitments and 10 million ecu in payments is being proposed in the financial support for transport infrastructure projects within the Community.

In item B3105, on the Lingua project, which is an extremely important educational programme for the children in our schools, the Council is proposing a cut of 2 million ecu. In item B34000, on industrial relations, the Council is proposing a cut of 1.1 million ecu. On measures to combat poverty, item B34103, the Council is proposing cuts of 2 million ecu.

Following some of the Government's statements, we had assumed that environmental concerns would be one of their priorities, but a cut of 2.68 million ecu is to be made in the budget of item B43043, on action to combat pollution caused by waste products. On item B5105, dealing with product safety measures, a cut of 500,000 ecu is being made. In item B75010, which deals with support for the Third world and the Community's contribution to the projects of non-governmental organisations, a cut of 13 million ecu is being proposed in commitments and of 7 million ecu in payments.

Those are just some of the decisions which, as far as I can establish, have been taken by the Council in relation to the proposals of the European Parliament. In some cases, they take the' position back to worse than it was when the first preliminary draft budget was proposed. Surely we should know what our Government have been up to when participating in those decisions?

Mr. Geoffrey Dickens (Littleborough and Saddleworth)

As the United Kingdom is one of the largest net payers into the Community, surely we should be pleased that there have been certain economies. Although they have been described as cuts, they are probably economies because, once the legislation is under way with seedcorn money to launch the projects, it does not necessarily follow that spending on those areas should always increase. We have probably been successful in sonic of those areas and will not need as much money for them in the following year. To describe the proposals as cuts is probably incorrect. They are reductions, not cuts.

Mr. Smith

I am amazed at the hon. Gentleman, who appears to think that we currently have perfect safeguards against fraud in the Community, that our transport infrastructure is absolutely up to scratch and needs no support, that we have solved every problem relating to product safety across the Community, and that charities and voluntary organisations working in the Third world need very little support. I am surprised that the hon. Gentleman reaches those conclusions. My colleagues arid I do not share those views.

Mr. Maude

Perhaps the hon. Gentleman could therefore tell us which of those programmes he knows anything about, other than their titles which he has read out; which ones he would agree to; what the total cost of those increases would be; and the resulting addition to our net contribution to the budget.

Mr. Smith

I am happy to tell the Minister that I would not necessarily agree to a considerable number of the items in the budget of the European Parliament. We certainly share the aim of wishing to go through the budget carefully, to look at it item by item and programme by programme, to see where funds can usefully be directed and where they cannot. Any sensible Government would need to undertake that process. However, there are a number of extremely useful projects which need to be undertaken and I have drawn attention to some of them. I have taken the trouble to go into them in some detail simply to raise those areas of concern.

There are two other areas of concern——

Mr. Geraint Howells (Ceredigion and Pembroke, North)

rose——

Mr. Smith

I shall give way for the last time, because I have been very generous in giving way.

Mr. Howells

I am grateful to the hon. Gentleman. I have listened with interest to what he has been saying. If I understood him correctly, he said earlier that he was very much in favour of cutting farm subsidies. What type of policy will he and his party pursue to ensure that family farms in Britain will survive without any support of any kind?

Mr. Smith

I am afraid that the hon. Gentleman misheard—perhaps deliberately. I did not at any stage say that we wished to cut farm subsidies. I said that we wished to redress the balance within the European Community budget and to see a reducing proportion of that budget being devoted to agricultural support, and an increasing proportion being used for support for the regions and for social policy. That has been the clear position of my party for many a long year, and it is one to which we still subscribe.

We need to raise two other areas of concern with the Government. I should like to know where the funds are coming from for the aid that has been promised to the front-line Gulf states, and for Germany's unification costs. I understand that there is a debate under way at the moment between the Council and the Parliament about whether those items can be contained within the existing financial perspective. I understand that the European Parliament is insisting that a revision to the financial perspective may well be required. The Council seems to think otherwise.

I believe that earlier today—it may have been yesterday—ambassadors met under the Italian presidency to discuss whether a proposed revision to the financial perspectives for those two items would be required. I also understand that the United Kingdom representative at the meeting voted against any revision. If that is the case and my information is correct, we need to ask the Government where they believe that the funds for those two commitments will come from because, over time, they may be quite expensive. It would be useful to know the reasoning behind the Government's decision to instruct their representative—as they must have done—to cast our vote in that way at that ambassador-level meeting.

My next point is, in some ways, the most important point about the budget. We must recognise the crucial importance of regional policy in the European Community. In that respect, item 2 of the budget headings—dealing with the structural funds—will take on an ever-increasing importance. We are delighted to see an increased commitment in the 1991 European budget for the structural funds used to enhance development in the less wealthy regions of the Community. It is part of a four-year process of doubling the structure funds, which we welcome. However, we would want to go further.

As the European economy becomes increasingly co-ordinated, regional policy will be ever more important. That will be especially true if we move towards economic and monetary union with a single currency and a common monetary policy. In such circumstances, an absolutely essential requirement would be a strong regional policy to help to redress imbalances between different parts of Europe. That view is shared by the overwhelming majority of our European partners. We do not want a Europe divided between rich and poor regions or rich and poor citizens, but that is the clear danger if we leave everything to the operation of the market. Regional policy and an enhancement of the structural funds are crucial if we are to achieve genuine economic and social cohesion across the Community.

Meanwhile, the British Government, even in their new clothes, remain virtually the only people who do not share that view. They denigrate a regional policy approach at every opportunity. They believe that the market will do it all, but it will not. The Labour party sets a key priority on the development of a European regional policy and wishes to discuss that issue constructively with its European colleagues at the earliest opportunity.

Mr. Christopher Gill (Ludlow)

rose——

Mr. Smith

I shall not give way, because I am drawing my remarks to a close.

If we are to consider what the Government have actually said about regional policy, it is worth going back to an historic document dated November 1989—just 12 months ago—entitled: "An Evolutionary Approach to Economic and Monetary Union." The document is pre-history and even pre-hard ecu. It was the "12 competing currencies—the Nigel Lawson scheme", brought forward by the Government with a fanfare of trumpets. Its relatively brief discourse makes some interesting points, the most important and perhaps the most tragic of which relates to regional policy. It notes the doubling of structural funds by 1992, intended to help reduce regional disparity, but continues, in a classic sentence: But regional disparities will be alleviated primarily through the operation of the market. That is the Government's belief.

In some respects I am pleased to see the Financial Secretary nodding his head, because it makes it crystal clear that the Government have not changed their spots one iota as a result of recent changes. They believe that economic inequalities will be realistically redressed only through market operation—[Interruption.] The Financial Secretary seems to have changed his mind—I give way to him.

Mr. Maude

I refer the hon. Gentleman to what he read out and the word that he missed in his earlier caricature—the word "primarily."

Mr. Smith

I am happy to reinstate the word "primarily", because it means that the Government simply see the market operation as the main focus of their approach. It is quite clear that they believe that regional disparities will be redressed primarily through the operation of the market. We believe that those disparities will be redressed primarily by having a strong, sensible, secure regional policy, which we want to put in place. The budget goes some way towards achieving that end, and most of our European partners agree with us, rather than the Government. I look forward to the day when a Labour Government will see that regional policy fully and properly in place.

5.55 pm

Mr. Jonathan Aitken (Thanet, South)

I beg to move, at the end of the Question to add: notes with concern the further substantial increases proposed in agricultural spending under the headings EAGGF Guarantee, EAGGF Guidance and Agriculture, and expresses astonishment at the proposals by the European Parliament that these figures should be further increased.". The amendment expresses my hon. Friends' deep concern at the agricultural spending element in the European Community budget. It was selected for debate by Mr. Speaker at a timely moment. In an ordinary year, the issue of how many ecus the EC budget spends on agricultural subsidies might seem to many to be an archane and academic subject, but this year is different. As the House knows, the Uruguay round of negotiations on the general agreement on tariffs and trade is stalling on the issue, which is so contentious that last night there was rioting in the streets of Brussels. That trouble may yet be the harbinger of worse worries still to come.

We are discussing the topic against not just a background of a five-minutes-to-midnight crisis in world trade talks, but a looming catastrophe in world trade. The word "catastrophe" is justified because it would be a catastrophe if, as expected, the GATT era, which has done so much for the prosperity of the world, flounders and sinks on the rock of EC agricultural subsidies and the world is thrown back into the dark ages of protectionism and trade wars. Those conditions of protectionism created the slump in world trade of the 1930s, symbolised here in Britain by the Jarrow marches. The spectre of falling living standards and, in some parts of the world, poverty and starvation, will loom again if the EC and other Governments fail to tackle the problem of billowing agricultural subsidies.

To call the EC level of agricultural spending on subsidies "billowing" is far too polite. The common agricultural policy has blown Europe off course into a fool's paradise of extravagant and excessive agricultural spending. The average European family of four now spends £17 a week on subsidising agriculture. Some two thirds of the European Community's £40 billion budget now goes to subsidise farmers, who do not seem particularly content with the results of the bountiful munificence conferred on them.

No end to the problem is in sight. The United States and the rest of the world, as symbolised by the Cairns group in the GATT talks are right to be critical of our failure to tackle agricultural subsidies in a meaningful way. My hon. Friend the Minister said, as he was bound to do, that this year at least the agricultural guideline spending figures had not been breached by the Community. But in 1991, as he was fair enough to say, those guidelines are likely to be breached and the story of overspending is likely to be with us again.

The CAP reforms of the 1980s were not really reforms, but merely cosmetic improvements. After seven years of ineffective tinkering with the CAP we still have a far too high price support level, far too much interference in the domestic market and too much subsidised dumping of the resulting surplus on the international export market. The cost of that folly to the British or the European consumer is painfully expensive. I wonder how many families in this country know that their pocket books are being hit to the tune of £17 a week for agricultural spending.

Subsidies distort and artificially inflate the price of land, encourage intensive farming methods which damage the land and sometimes involve mistreatment of animals. Under the extraordinarily lax EC system, the subsidies often end up in the pockets of fiddlers, fraudsters and cheats, rather than genuine farmers. The small 3 per cent. of the European population who work in farming are not noticeably prosperous. It is a long time since any of us with farming constituents talked to a happy farmer, and the same is true on the continent. Now these agricultural subsidies have brought us to the edge of the greatest crisis in world trade since the 1930s. So something is going seriously wrong, and one wonders whether anyone in the European Commission is listening seriously to this litany of justified complaints.

The answer seems to be that the Commission is not listening seriously enough. It displays a negative attitude which speaks volumes for the political clout of French and German farmers. I hope that, at least in Germany, those attitudes will change following the German elections, but I have my doubts.

America, the Third world and all the nations of the world are now lined up against the European Commission and the European Community. Their demand—it is a negotiating position, of course—is that the EC should cut farm subsidies by 90 per cent. The EC response has been to offer a cut of 30 per cent. If that were a genuine figure, it might be a step—albeit a small step—in the right direction. It would not be bad news if we could save £5 or £6 a week for the average British consumer. There would then be some hope of Third-world and east European producers being able to start selling their goods on world markets at real prices.

The European Commission's response, however, has been phoney. The small print of the EC reply to the GATT negotiators says that half the 30 per cent. cut in subsidies has already been achieved, apparently without anyone noticing, and that EC farmers will be compensated with other subsidies for reductions in subsidy resulting from the GATT talks. The EC document concerned reads: The Commission will propose measures to compensate for losses that the liberalisation of agricultural trade will cause to farmers' incomes". In plain language, that means that whatever subsidies are reduced on the GATT swings will be increased again on the Commission's roundabouts.

The European parliamentarians seem perfectly happy to go along with this folly—to give the nod to this series of jolly backhanders. Indeed, they want to increase spending on subsidies. Our amendment draws attention to the increase in the EAGGF guarantees and guidance proposed by the European Parliament—it expresses astonishment at them. When European parliamentarians are asked what they did in the great trade war in years to come, they will say, "We stoked it up. We proposed an increase of 16 per cent." These MEPs will soon discover that a fool's paradise can be the anteroom to a fool's hell. All hell will break out if GATT breaks down, as I now think it will, and we will be back to the dark ages of protectionism, trade wars, hardship and starvation.

We must get back to fundamentals and recognise that today's farm policies in the EEC were created at a time when the Commission was erroneously predicting world food shortages. When I campaigned for a yes vote in the 1976 referendum, the arguments of almost all those in favour of staying in the Community included the cry that we should stay in because we needed access to adequate food supplies.

Now it is clear that all this was a charade. There never were going to be shortages of agricultural or food supplies. We live in a world of agricultural abundance. Hunger is caused by inefficiency and poverty, not by scarcity or inability to produce. Over-production is the problem. Sooner or later, we must grasp the nettle and set farmers free. We must give them the basic economic freedom to produce what they want, using whatever technologies they want, and to sell their produce freely at home or overseas at the prices they can get for it.

That would be a revolution—uncomfortable, but no worse than the original GATT revolution when manufacturing industry was set free—to the great benefit of world trade and prosperity. Of course the revolution could not be effected overnight. There would have to be a crawling-peg phase-out of agricultural subsidies over several years and special arrangements for small family farmers and hill farmers. There would be a lot of political trouble, but Europe must put its agricultural house in order.

The Government have a good record of pushing for these reforms. I noted that my hon. Friend the Minister said that it will be essential to resist further increases in agricultural spending. He avoided saying how he would resist them, but we shall be glad to take his word for that, just as we take at face value statements supporting the GATT negotiations from my right hon. Friend the Minister of Agriculture, Fisheries and Food.

Mr. Dykes

Will my hon. Friend join me and others in calling on the United States at least to reduce and possibly even to abolish its internal deficiency payment support system, which forms the bulk of United States internal support arrangements?

Mr. Aitken

I agree that the United States does not have clean hands in this matter and that it, too, must deal with its enormous subsidies. There have been some signs in the negotiations that it is willing to do that. At least America has someone with whom to negotiate seriously. The United States has sided with the Third world producers——

Mr. Dykes

The difference is that the United States is siding with the Third world and others in respect of the export refund system but not of the internal support payment system.

Mr. Aitken

My hon. Friend is right, but it is good to support reforms of export subsidies on prices. So far, Britain alone in Europe has been a good European and a good internationalist in this matter. We have been pressing for change, and I applaud the stand that our Government have taken thus far, which is why I shall advise my hon. Friends not to vote against the Government on this amendment, important though it is and correct though its terms are.

The Commission is fiddling around with the treaty of Rome while the GATT talks burn, seeming to regard it as a higher priority to hold inter-governmental conferences on political and economic and monetary union while neglecting these more vital issues. If the amendment does nothing else, it will concentrate the eyes of the House, as the eyes of the world are concentrated, on the serious crisis in GATT which will blow up into a catastrophe unless Europe starts to put its agricultural house in order along the lines that I have suggested.

6.6 pm

Mr. Tony Banks (Newham, North-West)

I have some sympathy with the points made by the hon. Member for Thanet, South (Mr. Aitken), although his amendment is rather wimpish. If it had really encapsulated his genuine anger, it would have been couched in stronger language.

I shall not delay the House long because we have only until 7 pm to discuss this important series of budget proposals. I went and collected my papers on them from the Vote Office; any documents that come in such great quantities must contain information of some value, but having to get through them all in a two-hour debate makes a mockery of the procedures of this House, of the EC budget and of the way in which it is discussed by those who are supposed to have some influence on or control over what takes place.

It is virtually impossible to understand the subject of this debate. My hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) talked about presentation. I asked the Minister a genuine question because I had become confused about what budget we were considering. I see at least two figures for the 1991 budget: one of 55,472 mecu and one of 59,384 mecu. I am assured by my hon. Friend the Member for Newham, South (Mr. Spearing), who knows a great deal more about these matters than I do, that there are draft preliminary budgets, preliminary budgets, final budgets and all sorts of others, and I do not know which one we are discussing this evening.

I am not sure either which conversion rate we are using, which is why I asked the Minister whether we were using the rate of £1 to 1.387 ecu—the figure given by the Select Committee on European Legislation—or the rate of £1 to 1.435 ecu—the figure that the Government use. According to my hon. Friend the Member for Islington, South and Finsbury, the latter rate does not exist anyway—it is all nonsense.

The common agricultural policy is making a mockery of the EC and reducing it to the level of the absurd. I was not able to follow the figures given by the hon. Member for Coventry, South-West (Mr. Butcher) because, when I looked at the budget, it seemed that the amounts allocated to the CAP worked out at about 56 per cent. of the total, whereas the hon. Gentleman said that it was two thirds.

Mr. Butcher

I listened with great interest when the hon. Gentleman asked for the figures to be provided in pounds. Does he think that he has been well served by his Front-Bench spokesmen on the matter of European monetary union, which, if followed to its logical conclusion, will mean that the pound will go? Is the hon. Gentleman prepared to test his Front-Bench spokesmen on what yesterday's statement means for the future of the pound?

Mr. Banks

I do not blame the hon. Gentleman for not realising that I am a Front Bencher. I do not brag about that outside because careerism is not looked upon with great affection by the London Labour movement. I am quite satisfied with the explanations given in the debate by my hon. Friends on the Front Bench. This is a complicated matter.

I have said that I look forward to the day when we have a federal Europe with only one currency, one European Government, one President, one Chancellor and so on. I should add that that is not Opposition Front-Bench policy. Nothing that my Front-Bench colleagues have said in the debate frightens or worries me. We have a long way to go. The common agricultural policy is at the centre of our debate and it is making nonsense of the whole European movement. It reduces it to a sordid, silly and scandalous level. Until we get rid of the CAP and the nonsense that it encapsulates, the whole concept of Europe and the EEC will be ridiculed all over Britain.

6.11 pm

Rev. Ian Paisley (Antrim, North)

We should realise that the common agricultural policy was wrong from the beginning. I campaigned against entry to Europe and I warned the farmers in my Province about what would happen. It has happened. Northern Ireland had a prosperous agricultural community. What happened to it? We were not allowed to purchase at reasonable prices feedingstuffs on the world market and as a result we lost two thirds of our laying fowl and two thirds of our pig industry. The whole system is catching up on us and we are beginning to see where we are going. I am a Member of the European Parliament and I can tell the House that there is only one common policy in Europe—the common agricultural policy. That is why there is such a rage to pour money into it.

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

There is also the common fisheries policy. When the hon. Gentleman warned his farmers about the dangers of the CAP, did he also warn fishermen in his Province about the dangers inherent in the common fisheries policy? Does he agree that the interests of fishermen seem to be disregarded by the decision makers in Brussels?

Rev. Ian Paisley

The common agricultural policy and the common fisheries policy are tied together.

I warned our fishermen about what would happen. It has happened and will continue to happen unless we apply the brakes. However, the House cannot apply the brakes. I asked an Opposition spokesman to tell me what power we had. He said that we could scrutinise what Ministers do in Europe. Our Ministers can fight with all their might but when the votes are cast the majority in Europe will be against them. There is no point in hon. Members hammering Ministers, because Ministers have no power in Europe. The House needs more than scrutinising power. It needs real power so that it can call a halt.

Our farmers were encouraged to spend vast sums on dairy farming and beef production. Now they are penalised because they did what the Common Market told them to do. They cannot now be told that their subsidies will have to go. I am totally against farmers resorting to violence, but I understand how they feel. They did what the Common Market told them to do—produce, produce, produce—but they did it too well and now they are being penalised.

If we are to unshackle ourselves, we must formulate a policy that will help farmers in the interim. Farmers would be glad to be free, but to bring about that freedom, we must have a reasonable policy and neither the Government nor the Opposition have said anything about that. I recently pressed Ministers, including the Secretary of State for Northern Ireland, on how to help farmers. There does not seem to be a policy on that.

The backcloth to Europe is monetary and political union. I was amazed at some of the statements about the former Prime Minister. Our local newspaper on Saturday sated: ad of Germany's central bank said yesterday Mrs. Thatcher 'was absolutely right' in warning that EC monetary union would weaken sovereignty. And he told Common Market countries they should take heed. The Bundesbank president … Stockholm School of Economics: 'As a matter of fact monetary union means a loss of sovereignty'. Market states must be careful to avoid what happened with German reunification. There monetary union forced political union, he said. That is the head of the central bank and not the right hon. Member for Finchley (Mrs. Thatcher) speaking. We should heed that warning and find a way to free ourselves from the shackles and set the farmers and the fishermen free.

No one knows more about fishermen who ply their trade off the coast of Ulster than I do, and I know how they feel. They see their trade being taken from them and there is nothing that they can do about it. We should face that. It is ridiculous that this British House of Commons has just two hours on a Tuesday afternoon to decide such an issue. That is the sorry pass to which the European Community has brought us.

6.18 pm

Mr. Richard Livsey (Brecon and Radnor)

I agree only with the latter part of the speech by the hon. Member for Antrim, North (Rev. Ian Paisley), when he spoke about us having so little time to discuss this matter. I am not a member of the Stockholm school of economics, but I appreciated the election address by the hon. Member for Newham, North-West (Mr. Banks), who seems to want to be the next President of the European Community.

There are several matters to be discussed and we have a short time in which to do it. The key issues in the debate are the parts of the budget that are clearly being cut, the direction of aid to eastern Europe, the assistance to front-line states in the Gulf, budgetary control and the budget in the wider context of European Community developments. Expenditure on agriculture seems to be dominating the debate. I understand why that is so, and I shall return to the matter.

It is clear from the Treasury's explanatory memo of 30 November that the European Parliament wants to spend more than the Budget Council. The differences arise because the Council has rejected the Parliament's amendments on research and has agreed only to token entries for the PERIFRA and like projects that are regional and environmental. Because of that, they are both extremely important.

We want to support the European Parliament's decision in those matters, but as it has little power, we must give it more power. Moreover, as its programmes are less than its financial perspective, budget rectitude appears to be being maintained. I cannot go into as much detail as I should like, but I regret that the preliminary draft budget for exchanges of young workers is being cut. I should have thought that it would be highly desirable to continue that, to obtain a greater understanding among the peoples of Europe.

There are also cuts in the Youth for Europe programme. The proposed cut in the PDB for that programme is 2.5 million ecu and, as with the proposed cut in the programme of exchanges of young workers, the European Parliament is trying to reverse that cut. Despite the importance of training young people, it has not been able to do so. Measures for disabled people are also to be cut, and that is extremely regrettable in this day and age, when social conditions for disabled people are improving. They should be able to obtain the necessary resources for a better quality of life.

There are other aspects of the programme—for example, support to eastern Europe is extremely important—but the two major aspects are agriculture and additionality. Quite rightly, many of us have been lobbied this afternoon about the latter by the Coalfield Communities Campaign. I listened with care to the hon. Member for Thanet, South (Mr. Aitken) speaking about the agriculture budget and the CAP. However, as the hon. Member for Antrim, North (Rev. Ian Paisley) said, the CAP is the only common policy that the European Commmunity has ever had. If there were other policies, there might be greater bargaining powers. By default, the European Community has not fashioned other policies, although it has had plenty of opportunity to do so over the past 15 years. I regret that, because we need other European policies to balance the CAP.

Many crocodile tears have been shed this evening about the CAP. I noted the comparison that the hon. Member for Thanet, South made with the deficiency payment system operating in the United States, which gives a great deal of support. The Americans have come to the GATT round negotiations with proposals for a 75 per cent. cut in subsidies, but that has yet to be debated by Congress. It is by no means certain that Congress will accede to such a cut. Given the pork barrel politics of the mid-west and the farmers there, I doubt that it will go along with the 75 per cent. cut.

The post-war systems of support for agriculture in the United States, Canada and other countries, and in this country after the Agriculture Act 1947, and the CAP itself show that support for agriculture is a primary objective for all western Governments. Are we serious in wanting an overnight dismantling of those systems, with all that that will mean for agricultural communities? That life support system cannot be taken away from them all of a sudden.

We are all in favour of the liberalisation of trade and of GATT, but the reality is not as simple as that. There are grave distortions of trade on world markets. For example, one sees few Japanese cars in France, and few British cars in Japan. Great barriers need to be taken down, and it will take a long time to achieve that.

Our agriculture is in serious trouble. In the GATT round, a 30 per cent. cut has been proposed for European Community support, but Britain has been making cuts in support since 1984. Now, in 1990, we have the lowest farm incomes in real terms since 1945. That compares with the circumstances that made it necessary to introduce the Agriculture Act 1947 to support agriculture.

Farmers in my constituency are going bankrupt, and many young farmers are selling off their stock and letting their land. It is all very well to discuss matters of world trade and support systems in an academic manner, but farmers are suffering grievously and many of them will not survive the next 18 months. The matter must be treated seriously. If we are to readjust, we must bring into balance supply and demand in food, as that will even up the pricing system. We cannot let rip the market in agricultural products, because the market will not support our agriculture. European farmers demonstrated in Brussels and Japanese and American farmers demonstrated there, too, because their family farms will go under as a result of the GATT round.

World trade must be liberalised, but that cannot be achieved overnight and agriculture must continue to have support systems. I am thinking in particular of the family units not only in Wales but in Britain, the European Community and worldwide. There will be grave social unrest without a commitment to support systems. The planning of the CAP needs to be readjusted and its funding must be better directed to the family farming units that require support. There is undoubtedly wastage within the CAP, but that does not mean that we should abolish it. Without such better direction of funds, I fear for the future of our agriculture.

6.27 pm

Mr. John Butcher (Coventry, South-West)

I gave an undertaking that I would not detain the House for more than five minutes and I shall endeavour to discharge that undertaking.

This debate, coupled with the deliberations of the House on European monetary union and on the social and regional fund assistance, which have been linked to the debate by the Labour party, is of key importance. It is no exaggeration to say that the debate about European monetary union is probably the biggest economic question as well as the biggest constitutional question that the House has faced since 1945.

Thus far, the House has tried to conduct the debate in an open and candid fashion. I hope that Labour Members will not think me too provocative if I point out that, hitherto, Labour Members have been able to lie back and watch the debate raging on the Government Benches, because they are putting together their policy documents—documents that will eventually surface in a manifesto that they will put before the public. I implore Labour Members to be a little more forthcoming than they were until yesterday. Yesterday, if I am interpreting the remarks of one of their Front Benchers properly, they attempted to outbid the Government in their enthusiasm for progression towards European monetary union.

I listened carefully to the Treasury shadow spokesman, the hon. Member for Islington, South and Finsbury (Mr. Smith). He appeared to say that there was a quid pro quo for the Labour party's resolute commitment to European monetary union—that a future Labour Government would argue for a major increase in regional fund expenditure and assistance to the poorer regions. Presumably that includes the poorer regions of Britain.

That is an awful attempt to sell the parliamentary Labour party an utterly false prospectus. There are only three contributors to the fund—Germany, France and the United Kingdom. One of them, Germany, has plenty to do in funding a £150 billion programme—which is tantamount to a huge welfare programme—for its cousins and other relatives in the eastern provinces of the new federal republic. The key paymaster of that fund is in no position to consider either increases in or additional takes from countries such as the United Kingdom, let alone Greece, Spain, Portugal and others. If the Labour party is arguing that it will go for full-blown EMU—which it appears to be doing—on the basis that it will get back resources from the Commission, it is misleading its supporters in the House.

It is ironic that we are having this debate on regional aid. The hon. Member for Islington, South and Finsbury quite literally included it. If the Germans will not pay, and if the French just stand pat—which they usually do—the only people who can increase the payments of the fund are the British. What is the Labour party's argument? Presumably it is that Britain must increase its payments to Europe in order to achieve a bigger payment from the regional fund, in exchange for a loss of sovereignty on our currency and constitutionally—something that most members of the Labour party, both rank and file and in this House, would find unacceptable. What a way to run a debate on the biggest question facing this country since 1945.

I have made my views on the common agricultural policy clear. There is a dangerous threat to the GATT round. I am not a socialist, but I have argued in some two dozen Council of Ministers meetings in Europe for the interests of the third world and the poorer countries in their trading relationships with the EEC. I have argued for the Lomé countries. If we do not achieve a clear position on a free-trading, open-looking Europe, with zero barriers, our arguments on aid programmes to help those poorer countries will be academic and meaningless. There will be a huge lacuna in the logic that we have deployed to get to that protectionist position in Europe.

Hitherto, the real debate may have taken place on only one side of the Chamber. As of yesterday, the real debate appears to be beginning on the other side, the Opposition side. I hope that this House will be accorded the privilege of a free vote on these issues. It has been argued elsewhere that there should even be a referendum. I sincerely hope that the House will do its fellow EEC members the courtesy of candid information and an open and honest debate on this question.

6.34 pm

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

I shall follow the fine example set by the hon. Member for Coventry, South-West (Mr. Butcher) and make only a brief intervention.

I part company with the hon. Gentleman in his criticism of the role of the parliamentary Labour party in the debate. The major defining characteristic of debates on critical matters such as this is the lack of interest displayed by so many hon. Members on both sides of the House. A few moments ago, when we debated the decision of the President of the European Court of Justice on the Merchant Shipping Act 1988—an important decision concerning the constitutional position of this Parliament—there were fewer than 18 hon. Members in the Chamber. That is characteristic of this place—an appalling and near-fatal lack of interest in what is taking place within the European Community of 12 nations.

I agree with much of what has been said about: the disastrous common agricultural policy. It has damaged, and continues severely to damage, the very structure of the European Community. I hold a similar view on the common fisheries policy. That so-called common policy is falling into even further disrepute in our fishing communities.

The plain fact is that the European Community fishing fleet is too big for the stocks upon which it depends. The fleet must be severely reduced, especially in the United Kingdom. According to the multi-annual guidance programme, our fleet must suffer a reduction of between 30 and 40 per cent. before the end of 1991. If that sort of reduction must be inflicted upon our fishing fleet and our fishermen, and on those who find their work in that indigenous industry, it must be done humanely. There must be a decommissioning scheme, both in this country and in the littoral states of the European Community, that will allow fishermen to avoid the terrible fate of being driven ashore and into bankruptcy.

We are talking not only of people being put out of work but of small coastal communities, located hundreds of miles from Brussels—indeed, hundreds of miles from London—that will wither away. The only beneficiaries will be the people looking for holiday homes in our picturesque fishing villages.

Mr. Gill

I respect the hon. Gentleman's views on the fishing industry. Is it not ironic that the position in the fishing industry that he is describing has come about despite many programmes of aid to assist with the building of new vessels, all with the aim of improving the marketing and production of the product? Is that not symptomatic of what will happen to all the industries affected by structural funds? Despite all the benefits that are supposed to flow from the introduction of structural funds, it all appears to end in tears.

Dr. Godman

I agree with the hon. Gentleman. I blame both Conservative and Labour Administrations. While we have had to face up to those MAGP applications, our fishing fleets have grown in size. That is an insane policy, given the fragile nature of stocks, especially those in the North sea. Indeed, off the west coast of Scotland and in the Irish sea, the stocks are equally fragile. We cannot allow them to be overfished, or the small communities will be destroyed. That would be a scandal for the nation and for Parliament.

I hope that I can elicit a response from the Minister on two points. First, it might surprise some hon. Members to know that I am pleased about two elements in the huge document that we have. One, on pages 529 and 530, is the aid programme of 20 million ecus for Romanian orphanages. Will United Kingdom non-governmental organisations be involved in the monitoring of that aid? There has been a deal of press speculation about the somewhat shady characters who have become involved in aid for those young children in such desperate circumstances.

What monitoring will there be, and can we be certain that the aid will go to those young children who so desperately need such assistance? Will the United Nations International Children's Emergency Fund, which has considerable experience in assisting children caught up in equally tragic circumstances, be involved? Despite the powerlessness of this place in seeking to restrain or influence decisions taken at a strategic level in Brussels, those are important questions for the young children in the Romanian orphanages.

Secondly, I welcome the aid for financial and technical co-operation with Latin American developing countries which is detailed on pages 483 and 484. I have genuine hopes for the establishment of democracies in, for example, El Salvador, Guatemala and Nicaragua. In El Salvador, the United Nations mediators are playing an important role in bringing guerrillas, the army and the so-called Government to the negotiating table. More aid should be given to those countries, but what discussions have taken place with United Nations officials who are directly concerned with establishing parliamentary democracies in such countries, particularly the three that I have mentioned?

6.42 pm

Mr. Teddy Taylor (Southend, East)

This has been a useful and helpful debate but, as the hon. Member for Greenock and Port Glasgow (Dr. Godman) knows, the Opposition Benches are empty because nothing can be done about the massive expenditure of £40,000 million, or about the court decision now affecting his fishermen and others throughout the United Kingdom. Basically, we are utterly powerless. Only if the Minister were to accept the amendment could any good at all come of this debate.

We know that jobs in every constituency will be affected, factories will close and trade will be disrupted if the GATT talks break down. Those talks are breaking down because, sadly, the EC has become the protectionist wrecker of the GATT. Instead of offering some reduction in farm spending, we have offered a bogus formula, which I am sure that the Minister accepts is not a reduction in the farm subsidy at all. Half the alleged 30 per cent. cut in the £23,000 million farm subsidy has, it is claimed, already taken place and the other half will be replaced by other subsidies. The Minister must at least tell the GATT that the United Kingdom recognises that the EC has offered nothing, that that is scandalous and that we will work in any way that we can within the EC to see that there is some meaningful comparison.

Those who think that farm subsidies have not been increasing should look at a parliamentary answer given on 19 October which set out clearly the fact that since the Government came to power agricultural subsidies from the EC have increased by about 260 per cent. and, since we joined the EC, they have increased by about 1,000 per cent. Looking to the future, all the signs are that, in 1991, agricultural spending will go through the roof.

The reasons are obvious. The beef and lamb markets have collapsed, while production has increased. We all know that that is true. In addition, the exchange rate of the dollar has fallen and German unification has imposed extra costs, all of which will add to the FEOGA guarantee commitments. If that happens, the EC will do yet another accountancy fiddle, and then what will the Government do? As the Minister said, in 1987 there was the agreement on strict budgetary controls, but when it came to 1988 an accountancy fraud was perpetrated by means of a metric year. The Minister works hard for us in Europe and I think that he knows that the same thing will happen next year. All the signs are that we will break through the new higher barriers, and the only way that we will be able to cope is through another accountancy fraud.

We should accept that there is no way in which the EC will agree to reform of the CAP. Any thoughts of that should simply be thrown aside. There is not the slightest chance that all the silly talk about new reforms and controls will have any effect. They can simply be overcome by an accountancy fraud, or some other kind of fraud. The Minister knows that fraud exists because the figures given disregard special provisions made for the elimination of surpluses of 1,400 mecu.

What on earth can we do? The Government must start saying what they think about this. That would be a step forward. The next time the EC wants more cash, we shall simply have to say no. That will be the only point at which we shall have any power. Unless we say no, we are completely and utterly powerless.

I hope that the Government will not follow the shameful example of the hon. Member for Islington, South and Finsbury (Mr. Smith). This has been a good debate and I agree that most hon. Members have spoken sincerely, but the hon. Gentleman, when asked whether he was in favour of cutting agricultural subsidies, said no, he was just in favour of cutting a proportion and that, if other expenditure was increased, a proportion would be kept.

That is shameful, speaking as the hon. Gentleman does for a party which represents working people and for whom it has fought sincerely and fairly. The hon. Gentleman should be ashamed of himself. He should appreciate that people in London are homeless and people elsewhere are starving, while he and his colleagues are agreeing to spend £140 million each and every week on the dumping and destruction of food.

There is nothing that we can do about that dreadful spending, the fraud or the fact that we shall once again break through all the limits while the same old tactics are used, but I hope that hon. Members will realise that what we are doing today will have a nasty effect on jobs. I hope that the Government will start saying clearly that they believe that what is happening to the CAP is shameful, that it helps no one and that they disagree with the CAP proposals and the EC stance in the Uruguay round, which is simply a fraud and a farce, as are so many things to do with the EC.

6.48 pm

Mr. Christopher Gill (Ludlow)

The explanatory memorandum states on page 4 that the Community budget has significant financial and policy implications. That is certainly an understatement. The budget perpetuates the structural funds, the regional development fund, the social fund and not least, as my hon. Friend the Member for Southend, East (Mr. Taylor) pointed out, the 30 million ecu to be spent on the agricultural guidance and guarantee fund.

The structural fund has done great harm to both the agricultural and fisheries industries. We have only to look at the end result to know that is so. There is over-production, and mortal damage has been done to traditional family farming. An otherwise efficient industry has been weakened, and serious international antagonism has been created. That is apparent in the current GATT round, and many of us are aware of the damage that has been done to the Third world in the process.

Higher expenditure, lower incomes, and chaos in world markets are the consequence of the structural fund. Does my right hon. Friend accept that fraud is endemic and deep rooted in many budget policies? How many of these budget measures would the Government have taken on their own account? Are the Government satisfied that the functions performed under the budget are not already duplicated by British organisations such as development boards and agencies? How do many of the articles in the budget accord with our political principles of non-intervention and a free market economy?

Mr. Roger Knapman (Stroud)

If subsidiarity means anything at all, could not agricultural support be left to national farmers?

Mr. Gill

If subsidiarity is to be made meaningful, the British Government will have to do an enormous amount to make it a reality. I am sad to say that we are at fault in this country in taking to the centre rights and controls that really belong with lower authorities. My hon. Friend makes a good point when he suggests that agricultural support should be repatriated to the United Kingdom, so that we may exercise more control over how our farmers are supported, and have more say in the way in which our intrinsically efficient industry, which can compete not only in the European market but worldwide, should develop. It would be so much easier to make such considerations within our own shores.

The final question that I wish to put to my hon. Friend is whether he recognises in the budget that is before us yet another blueprint for socialism.

6.53 pm

Mr. Maude

This has been a valuable debate, and not one that has taken a party political approach, which is desirable and right. The House properly takes a serious interest in these matters, and I regret that our debate had to be truncated, with rather less than two hours available to us. The debate was originally meant to last half a day. If there had been fewer bogus points of order from Opposition Members at the beginning, more time would have been available for debate.

The hon. Member for Greenock and Port Glasgow (Dr. Godman) asked whether there would be monitoring by British non-governmental organisations of support to Romanian orphanages. I cannot provide him with an answer, but I acknowledge his genuine and proper concern, and I shall ensure that he receives a satisfactory reply. The hon. Gentleman asked also about aid to Latin American countries and whether there had been discussions with UN officials concerned with the establishment of democracies. I understand that such discussions have taken place, but I cannot give the hon. Gentleman a definitive answer. I shall ensure that my colleagues in the Foreign and Commonwealth Office provide the hon. Gentleman with a reply as soon as possible.

Much of the debate focused on the common agricultural policy. As a Minister, one is always keen to try to draw together the sense of the House and to achieve a consensus. I do not think that it is an exaggeration to say that the common agricultural policy has not found many friends in the House today. Attitudes have ranged from the very hostile to the fairly hostile, with the possible exception of the hon. Member for Brecon and Radnor (Mr. Livsey), to whose contribution I shall refer later.

Clearly it is undesirable that spending on the CAP should increase further, but clearly it will be difficult to constrain an increase in spending. Equally clearly, we must continue trying to do so, as we have done consistently during our term of office. I am not as despondent as some of my hon. Friends about the prospects of achieving a resolution to the GATT negotiations. I believe that realism will prevail and that there will be a satisfactory outcome. It is of overwhelming importance that there should be. As my hon. Friend the Member for Thanet, South (Mr. Aitken) warned, the absence of an agreement would lead to a perhaps not so gradual erosion of the multilateral trading arrangements, which would bring impoverishment across the world. There is an enormously heavy burden on those conducting the negotiations to do so in a way that will allow agreement to be reached.

My hon. Friend the Member for Ludlow (Mr. Gill) asked whether I accept that there is fraud in the European Community. Yes, I do. Of course there is fraud in the way in which some of the European Community's money is spent. It is essential that proper action is taken to fight that. I mentioned the budget line of additional funds to fight fraud. The Commission has started to take the problem seriously, and I assure my hon. Friend that the British Government at least will be constantly at hand to ensure that the Commission retains an interest in the fight against fraud.

My hon. Friend asked also whether there is duplication of spending. I believe not, in this country. We do all that we can to avoid duplication. I know from a previous office that I held of my hon. Friend's close interest in subsidiarity, which I am glad that he maintains.

The hon. Member for Brecon and Radnor expressed passing concern about the disproportionate amount of agricultural spending. His solution is that, rather than control agricultural spending, more should be spent on everything else. That thought had an echo in the contribution of the hon. Member for Islington, South and Finsbury (Mr.Smith), whose remarks were rather illuminating. He spoke of economic and monetary union, and seemed to believe that it would be all right for Britain to lose the power to take decisions, provided there were huge transfers of resources.

I am not sure that the hon. Gentleman understands that, if there were to be such transfers, they would overwhelmingly be from the United Kingdom to elsewhere. If the hon. Gentleman had understood that—which I doubt—he might well take a different view about whether the proposals constitute a good bargain for the United Kingdom. I do not believe that they do; I believe that they constitute a very bad bargain.

In general, the hon. Gentleman's speech demonstrated an extraordinarily undiscriminating approach to the European Community budget. He read out a list of the European Parliament's proposals to increase spending, all of which had nice cuddly titles. That is all that the hon. Gentleman knew about them: they sounded nice. If that is the Labour party's approach to public spending—if it sounds nice, commit yourself to it and look at the small print later—it is lucky that Labour's chances of being elected are very slight. Its attitude seems to be, "If it sounds nice, buy it; if the European Parliament suggests it, buy it; if the two coincide, we must have it."

Mr. Deputy Speaker (Sir Paul Dean)

Order. I must now put the Question on the amendment.

Mr. Aitken

I beg to ask leave to withdraw the amendment.

Mr. Deputy Speaker

Order. I am afraid that, as it is now 7 pm, the hon. Gentleman cannot withdraw the amendment. By resolution of the House, I must put the Question.

It being Seven o'clock, MR. DEPUTY SPEAKER proceeded, pursuant to Order [30 November], to put the Question already proposed from the Chair.

The House divided: Ayes 20, Noes 188.

Division No. 17]	[7pm
AYES
Abbott, Ms Diane	Lewis, Terry
Aitken, Jonathan	Mahon, Mrs Alice
Body, Sir Richard	Moate, Roger
Canavan, Dennis	Nellist, Dave
Carlisle, John, (Luton N)	Skinner, Dennis
Corbyn, Jeremy	Spearing, Nigel
Dalyell, Tarn	Taylor, Teddy (S'end E)
Fry, Peter	Wise, Mrs Audrey
Gill, Christopher
Godman, Dr Norman A.	Tellers for the Ayes:
Hughes, John (Coventry NE)	Mr. Harry Barnes and Mr. Bob Cryer.
Kilfedder, James

NOES
Alexander, Richard	Benyon, W.
Alison, Rt Hon Michael	Bevan, David Gilroy
Allason, Rupert	Blackburn, Dr John G.
Amess, David	Boscawen, Hon Robert
Amos, Alan	Bottomley, Peter
Arbuthnot, James	Brazier, Julian
Arnold, Jacques (Gravesham)	Brooke, Rt Hon Peter
Ashby, David	Brown, Michael (Brigg & Cl't's)
Aspinwall, Jack	Browne, John (Winchester)
Baker, Nicholas (Dorset N)	Bruce, Ian (Dorset South)
Batiste, Spencer	Bruce, Malcolm (Gordon)
Beaumont-Dark, Anthony	Buchanan-Smith, Rt Hon Alick
Beith, A. J.	Buck, Sir Antony
Bellingham, Henry	Budgen, Nicholas
Bellotti, David	Burt, Alistair
Bennett, Nicholas (Pembroke)	Butcher, John

Butler, Chris	Harris, David
Butterfill, John	Hayward, Robert
Campbell, Menzies (Fife NE)	Hicks, Robert (Cornwall SE)
Carlisle, Kenneth (Lincoln)	Hill, James
Carrington, Matthew	Hind, Kenneth
Chalker, Rt Hon Mrs Lynda	Holt, Richard
Chapman, Sydney	Hordern, Sir Peter
Chope, Christopher	Howe, Rt Hon Sir Geoffrey
Churchill, Mr	Howell, Rt Hon David (G'dford)
Clark, Dr Michael (Rochford)	Howells, Geraint
Clarke, Rt Hon K. (Rushcliffe)	Hughes, Robert G. (Harrow W)
Colvin, Michael	Hurd, Rt Hon Douglas
Coombs, Simon (Swindon)	Irvine, Michael
Cope, Rt Hon John	Kennedy, Charles
Cran, James	Key, Robert
Currie, Mrs Edwina	King, Roger (B'ham N'thfield)
Davies, Q. (Stamf'd & Spald'g)	Kirkhope, Timothy
Davis, David (Boothferry)	Kirkwood, Archy
Dickens, Geoffrey	Knapman, Roger
Douglas-Hamilton, Lord James	Knight, Greg (Derby North)
Dunn, Bob	Knight, Dame Jill (Edgbaston)
Durant, Tony	Knowles, Michael
Dykes, Hugh	Knox, David
Evans, David (Welwyn Hatf'd)	Latham, Michael
Evennett, David	Lawrence, Ivan
Field, Barry (Isle of Wight)	Lee, John (Pendle)
Fishburn, John Dudley	Lester, Jim (Broxtowe)
Fookes, Dame Janet	Lightbown, David
Forth, Eric	Livsey, Richard
Franks, Cecil	McCrindle, Sir Robert
Freeman, Roger	Macfarlane, Sir Neil
French, Douglas	MacGregor, Rt Hon John
Gale, Roger	MacKay, Andrew (E Berkshire)
Glyn, Dr Sir Alan	McLoughlin, Patrick
Goodhart, Sir Philip	Malins, Humfrey
Goodlad, Alastair	Mans, Keith
Goodson-Wickes, Dr Charles	Marland, Paul
Gorst, John	Martin, David (Portsmouth S)
Greenway, John (Ryedale)	Maude, Hon Francis
Gregory, Conal	Mawhinney, Dr Brian
Ground, Patrick	Meyer, Sir Anthony
Grylls, Michael	Michie, Mrs Ray (Arg'l & Bute)
Hague, William	Miller, Sir Hal
Hamilton, Hon Archie (Epsom)	Mitchell, Andrew (Gedling)
Hannam, John	Mitchell, Sir David
Hargreaves, A. (B'ham H'll Gr')	Monro, Sir Hector
Hargreaves, Ken (Hyndburn)	Morrison, Sir Charles

Morrison, Rt Hon P (Chester)	Stanbrook, Ivor
Moss, Malcolm	Steel, Rt Hon Sir David
Mudd, David	Stern, Michael
Neubert, Michael	Stevens, Lewis
Nicholls, Patrick	Stewart, Allan (Eastwood)
Nicholson, David (Taunton)	Stewart, Andy (Sherwood)
Norris, Steve	Summerson, Hugo
Onslow, Rt Hon Cranley	Taylor, Ian (Esher)
Oppenheim, Phillip	Taylor, John M (Solihull)
Paice, James	Thorne, Neil
Patnick, Irvine	Thornton, Malcolm
Pattie, Rt Hon Sir Geoffrey	Thurnham, Peter
Pawsey, James	Tredinnick, David
Peacock, Mrs Elizabeth	Trippier, David
Porter, David (Waveney)	Trotter, Neville
Powell, William (Corby)	Twinn, Dr Ian
Price, Sir David	Wallace, James
Raffan, Keith	Waller, Gary
Rhodes James, Robert	Watts, John
Riddick, Graham	Wells, Bowen
Ridsdale, Sir Julian	Welsh, Andrew (Angus E)
Rifkind, Rt Hon Malcolm	Widdecombe, Ann
Rowe, Andrew	Wiggin, Jerry
Ryder, Richard	Wilkinson, John
Sackville, Hon Tom	Wilshire, David
Salmond, Alex	Winterton, Mrs Ann
Shaw, David (Dover)	Wolfson, Mark
Shaw, Sir Michael (Scarb')	Wood, Timothy
Shersby, Michael	Yeo, Tim
Skeet, Sir Trevor
Smith, Tim (Beaconsfield)	Tellers for the Noes:
Soames, Hon Nicholas	Mr. Tim Boswell and Mr. Neil Hamilton.
Spicer, Sir Jim (Dorset W)

Question accordingly negatived.

Main Question put forthwith, pursuant to the said Order, and agreed to.

Resolved, That this House takes note of European Community Documents Nos. COM(90) 121, relating to the Preliminary Draft Budget of the European Communities for 1991. 8182/90 relating to the Draft Budget of the European Communities for 1991, and 9865/90 and the supplementary explanatory memorandum submitted by Her Majesty's Treasury on 30th November 1990, relating to the European Parliament's proposed amendments and modifications to the draft Budget.