HC Deb 14 March 1991 vol 187 cc1285-98 4.41 am
Mr. Bob Cryer (Bradford, South)

The rules of the House preclude me from taking part in more than one debate, so the comments of the Minister and of the hon. Member for York (Mr. Gregory) were sadly misplaced. I am sorry that the hon. Gentleman attacked British Rail rather than defending it, as he should have done given that he represents an important railway station and rail centre.

My subject for debate is the cost of the EEC to the United Kingdom. Some in the Conservative party believe that the right hon. Member for Finchley (Mrs. Thatcher) has been standing up for the United Kingdom against the encroachments of the Common Market. That simply is not the case. As soon as she came into office in 1979 she abandoned the United Kingdom derogation from the Common Market rules by removing exchange rate controls.

The channel tunnel, which the right hon. Lady agreed with Mr. Mitterrand, is not a transport improvement. It is designed to link us ever more closely to the Common Market. It was clear during the discussions of plans for it, in Strasbourg, that that was its basic purpose. Furthermore, it was as a result of the right hon. Lady's collaboration with the former Chancellor of the Exchequer that we were taken into the exchange rate mechanism with an overvalued pound and without any safeguards. Far from resisting the encroachments of the Common Market, she dug us deeper into it.

As the Minister is in a petulant mood, let me tell him that my criticism of the cost of membership of the Common Market cannot be ascribed to a little Englander view, in case he takes that line or make jokes about not liking foreigners, and that sort of thing. I find that a peculiar attitude, because the Tories are quite happy to bomb millions of Russians. They are foreigners, and I have opposed that so-called defence strategy.

Like the vast majority of Labour Members, I thought that sanctions against Iraq should have been tried for longer. We did not like the idea of engaging in warfare with innocent Iraqi citizens, as well as the troops. We were concerned about the preservation of human life and the resolution of the conflict without warfare. That is because we are concerned on an international basis. I was supporting the United Nations well before the Government's recent enthusiasm for that organisation. As I have said on many occasions, the Government's embarkation on Trident was a breach of the United Nations nuclear non-proliferation treaty. I do not want to hear lectures from the Government about support for internationalism and bodies such as the United Nations. I know that the United Nations is an extremely important body, and it will have my continued support.

Criticism of the Common Market is based on a much wider view than the narrow little Englander outlook. It is based on the claim that the Common Market is not Europe, to take up the Eurospeak of today. Europe is a continent of 41 countries, yet the term "Europe" is bandied about as though it has been appropriated by a tiny group of inward-looking countries that will create a so-called free market. In fact, they will create a protected market with a substantial barrier around it. That barrier has already cost us dear.

The Common Market has been, is and is likely to continue to be a millstone round the United Kingdom's neck. There are those who claim that there is no alternative. They come out with sonorous platitudes such as, "We are in and we cannot change things." The Prime Minister said only a couple of days ago that we must be in the heart of the Common Market.

The Common Market is sometimes linked with growing prosperity. The highest standards of living in the continent of Europe are in Switzerland and Sweden, and neither country is in the EEC. So membership of the EEC is not necessary to achieve a high standard of living. It is claimed that the Common Market is necessary if we are to develop our prosperity because we must have a large domestic market of 350 million people to establish the base of a prosperous and developing manufacturing industry. When I ask how it is that Japan is the most prosperous and successful manufacturing country in relation to its population in the world when it does not have such a large domestic base, it seems that there is difficulty in producing an answer.

Can we change what has been done? Of course. Circumstances have a habit of changing radically from time to time. Who would have said two years ago that East Germany and West Germany would so soon become united? Who would have said that the Soviet Union, that seemingly implacable power, would be facing enormous difficulties and its potential break-up? Only a couple of years ago Conservative Members were arguing that we should spend yet greater sums on armaments because of the imminent invasion of the other part of Europe by the Soviet Union. Who would have said that in two years that would all be swept aside and that the notion that the Soviet Union was about to embark on an attack was absurd?

It is the view of some that the Common Market is quite efficient. It is argued that it employs only about 25,000 bureaucrats to cover 12 nations and that that is a modest number, but the number of people employed in Common Market administration duties does not fall into that pattern. In March 1989, I asked the then Minister of Agriculture, Fisheries and Food: what is the number of civil servants in his Ministry whose main work is related wholly or mainly to the European Economic Community? The Minister, who is now a Back Bencher, the hon. Member for Calder Valley (Mr. Thompson), replied: We estimate that between one quarter and one third of the Department's manpower"— I think that that should be "staff" at a time of greater egalitarianism between the sexes— including common service and support staff, are concerned directly or indirectly with duties arising out of EEC membership. At 31 January 1989 this amounted approximately to between 2,500 and 3,400 staff … The 950 staff of the Intervention Board for Agricultural Produce are entirely engaged on work related to the European Community."—[Official Report, 15 March 1989; Vol. 149, c. 250.] It would not be unfair to say that there are 4,000 in the Ministry of Agriculture and the Intervention Board for Agricultural Produce engaged in such work. The Ministry contains the largest number of people working for the EEC on EEC matters.

The number employed by other Departments, with the exception of Departments like Education and Science—not as yet covered by the Common Market although it has ambitions in that direction—is considerable. If we tot them all up, it is a very large figure. However, it is not possible to tot them all up because under the Conservative Government some Departments are so concerned with transparency and public accountability that they refuse to answer such questions. I give the illustration to show that the employment of EEC employees is wider than the narrow definition normally used.

I will not give figures for every year on the actual money that is handed over to the Common Market, but I have the figures that were provided on 31 July 1990 of the United Kingdom's net contribution to the EEC budget. Although I asked a question, the facilities of the Government proved inadequate to the task and the then Paymaster General said that it was not possible to provide the answer before the summer recess. Therefore, he later sent me a letter and placed a copy in the Library.

In 1979 the net figure, after all grants and hand-outs from the Common Market, was £947 million. When we see notices saying, "Europe helps Bradford again," "Europe helps Scunthorpe again," or Europe helps wherever again, it means that some of our money is coming back. A laborious and expensive process has been undertaken whereby we hand over billions of pounds and then go as supplicants to get some of it back. Local authorities, strapped of cash by the Conservative Government, are naturally grateful for anything that they can obtain to try to improve their services, which have been lament ably cut by the Government.

By the way, it is worth pointing out that if the Conservative Government restored the rate support grant to the level that it was in 1978–79 under Labour—and they are very fond of making comparisons with Labour—we could have an average poll tax of £152 instead of £353. That shows the way in which the Government are pressing local authorities and why local authorities are naturally looking to the Common Market for all the money that they can get back.

Our net contribution to the European Community budget in 1979 was £947 million; in 1981 it was £397 million, in 1983 it was £647 million, in 1985 it was £1,808 million, in 1987 it was £1,721 million and in 1989 it was £2,315 million. The total sent between 1979 and 1989 was £11,737 million. The Minister's letter concluded with the information that the latest estimate is that the United Kingdom's net contribution for 1990 was £2,175 million, making a total to the end of last year of £13,912 million—and that despite the Government's claim that they secured considerable rebates. They do not seem to have benefited the country very much.

There is an additional cost in jobs. The Government's enterprise culture has failed to penetrate the Community's markets in the way that it is supposed to do. As a result, the United Kingdom has a somewhat lamentable trade in manufactured goods. The Conservative view is that trade between this country and the Common Market is increasing and that, somehow, the bigger the deficit, the more successful the economy.

Figures provided by the Library, show that the United Kingdom's trade in cars with the EC for 1990 produced a deficit of £3,898 million; in commercial vehicles, the deficit was £228 million; in parts and accessories, the enterprise culture managed to achieve a shortfall of £1,137 million—a total deficit for our automotive industry of over £5,000 million.

The British textile industry is of particular concern to me, because it employs 14,000 people in Bradford—one third of whose inner-city constituents I represent. That industry shows an EC trade deficit of £1,066 million. If the Minister were minded to argue that if the industry produced the right goods, having the right designs, and at the right price, they would sell, I should have to tell him that life is not quite like that.

Britain's textile industry is modern and well equipped and I imagine that even the Minister accepts that its work force has been highly co-operative in accepting changes in shift and other work patterns, retraining and rescheduling. The Minister can name it, and it has been done. The industry's standards of design, equipment and production are as high as anywhere in the world.

When Labour was in office, a number of Britain's chipboard manufacturers faced closure. Unlike the Government, we did not shrug our shoulders and say that under the enterprise culture, things must take their natural course according to market economics. Instead, we tried to reverse the trend and to maintain jobs. In comparison with the Conservatives, we did so extremely successfully.

We told the Commission that EC chipboard was being dumped in the United Kingdom at below cost and that that practice was causing job losses. The Commission asked why we did not dump chipboard in Belgium—the country whose activities were causing us concern. The Commission did not realise that if British manufacturers had attempted to do that, every chipboard importer in Belgium would have been placed on a hidden, unofficial, unacknowledged black list, which would have prevented them from distributing any British timber in Belgium. There was, in effect, a barrier against United Kingdom imports and I am certain that the same happens today in respect of our textile industry.

I can draw the Minister's attention to the hidden subsidies in the Prato region of Italy, where social security contributions are virtually not paid because of the pattern of payments, which means that they have a 10 per cent. cost advantage in wages straight away. Many difficulties have arisen for the textile industry from such sources, which is extremely unfair.

The clothing industry had a deficit of £548 million; footwear had a deficit of £504 million; generating equipment had a positive balance of £358 million, but specialised machinery again had a deficit of £588 million; metal working equipment had a deficit of £129 million; industrial machinery had a deficit of £637 million; office and data processing equipment had a positive surplus of £674 million; telecommunications and sound equipment had a surplus of £668 million, but electrical machinery had a deficit of £409 million; and machine tools, which are the arbiter of the health of manufacturing industry, had a deficit of £20 million. There was a deficit with the Common Market in 1990 of £9,724 million, and for all goods, a deficit of £10,831 million.

That is an significant deficit, as is demonstrated by the important loss of jobs in manufacturing industry due to a combination of our membership of the Common Market and the. policies of the Government—a poisonous combination for the health of, our manufacturing and general industry.

I shall quote from an interesting article, which appeared in Public Money and Management magazine for the winter—No. 4, volume 10—written by Dr. Brian Burkitt, senior lecturer in economics at the department of social and economic studies at the university of Bradford, and Mark Baimbridge, who is a lecturer in economics at the same university. Describing our manufacturing industry in that article they say: the historical record demonstrates the damage caused to Britain by EC membership: between 1957 and accession to the EC in 1973 United Kingdom manufacturing output"— in the 1960s, which the Minister seems so scathing about— rose by 67%, but from 1973 to 1988 it rose by only 3%. Britain is therefore in danger of becoming the first `underdeveloping' nation: in 1970 the value of UK exports of goods, other than oil, fell short of the value of imports, including food and raw materials, by 3%. In 1988 the shortfall was 26%. Most of this decline was caused by trade with the EC in manufactures. In 1970 the value of manufacturing exports, other than precious stones, to EC countries, exceeded manufacturing imports from them by 30%, yet in 1988 they were 31% lower. This major turnround was not accompanied by an equivalent trade imbalance with the rest of the world. That shows how our decline in manufacturing has been allied to our membership of the Common Market.

Supporters of the Common Market claim that 2.5 million jobs depend on exports to the EEC. However, between 1970, when we had a manufacturing trade surplus of £16.2 billion at 1988 prices, and 1988, when we had a deficit of £ 15.7 billion, we have lost about 3.75 million jobs in lost manufacturing capacity.

Another cost to our country is the Conservative Government's entry into the exchange rate mechanism. Given the rate that was agreed, our entry was overvalued and imposed a cost on exporters. It was also a blow to our democratic accountability and to economic management by an elected Government. ERM entry cost Belgium 500,000 jobs and cost France cuts in wages; devaluation and interest rates are now determined not by the economic needs of our nation, but by the demands of the exchange rate mechanism.

On 20 February, the Yorkshire Post said: Britain's membership of the Exchange Rate Mechanism will cost the country 600,000 jobs over the next five years, the chief economist of the National Westminister Bank claimed yesterday. And although likely effects on jobs were calculated before the Government decided on ERM entry last year, the Treasury refused yesterday to make them public. It eventually confirmed that jobs would be lost. Both the Treasury and the Department of Employment said yesterday that the means to avoid huge job losses lay in the hands of employers' and employees' wage negotiators … A Department of Employment spokesman said: 'It is not possible to put a figure on the effect of ERM entry on jobs as it will depend on the prices and wage setting behaviour of employers and employees. The sooner the disciplines of the ERM are accepted and reflected in pay settlements, the smaller will be the effect on jobs'. The ERM imposed a decade of deflation on Italy and France because it required other members to achieve Germany's abnormally low rate of inflation. Both countries now have substantially higher unemployment rates than Britain, yet Britain must now go through the same process of deflation, but in a much shorter period and without the benefit of the easy American market that we had because of the overvalued dollar.

Tories prefer an overvalued currency, because they represent finance— money, and those who have it. Labour represents unions and workers, who will experience the main impact of deflation. Our view should be different: we cannot accept deflationary economic management and the disciplines of unemployment. When the Government and the National Westminster bank talk about discipline, they do not mean that Ministers will involve themselves in any such discipline; far from it. When the former Chancellor of the Exchequer talks about discipline, he is talking about workers' being disciplined—about their being told by management, "You cannot have a wage increase, and if you don't like it we will close down the factory."

When the former Chancellor— who endorses the use of such discipline against workers and their families— leaves his comfortably paid job as Chancellor, he goes off to the City and receives an outrageous amount of money: some £200,000 a year for two or three days' work a week. Meanwhile, he is still moonlighting here in Parliament, being paid £30,000 a year of taxpayers' money. It is a scandal and a disgrace. Workers outside should know about the double standards that prevail in this place. If the Tories want to encourage workers, they can always set an example by taking wage cuts and making their own sacrifices.

Another cost of our Common Market membership is the cost in food. The common agricultural policy costs around 70 per cent. of all EEC expenditure. On 14 July 1990, the Financial Times gave a figure of around £62 billion—£16 a week for every family in Britain. We impose a tariff on cheap food from outside the European Community, and pay between two and four times the world price for food.

We have been pouring nitrates on our soil year after year. We have ripped out hedges and paid cereal farmers— and other farmers, but particularly cereal farmers—big money to grow food. We pay them to store it and then the EC buys food on world markets if starvation occurs in central Africa, the Sahel and the Sahara, as it frequently does, while EC food rots in stores.

The Government, in order to get rid of these food mountains, have resorted to free hand-outs of food. I welcome that. It is a reflection of the crazy common agricultural policy and the way that huge food mountains are produced which are sold anywhere but inside the Common Market— and if they are sold at rock-bottom prices on world markets they inhibit the development of the indigenous agricultural industry of the developing world.

Even where there is a hand-out of free food from the Common Market surpluses, however, the Government adopt a churlish and mean-minded attitude towards it. They insist that the only people who can receive it must be on either family credit or income support. In Bradford, where there were long queues for the food, to a point where several pensioners fainted because they were outside for long periods in cold weather—over an hour and in some cases two hours—they were deeply offended to be told on reaching the counter that they could not have any food because they were not on family credit or income support.

If this is the result of a recommendation by the European Commission, the Government should stand up to it and insist that the food may be given out to all pensioners, irrespective of whether they are on family credit or income support. After all, since we have been in the Common Market since 1973, the pensioners will have paid for that food. The food is not free: it is bought and paid for by British taxpayers through their contributions to the common agricultural policy.

In that context, in spite of difficult circumstances, the voluntary organisations—because the Government will not allow local authorities to distribute the food—have coped magnificently with the distribution. They are very much to be congratulated on the work that they have done. I hope— and I publicise the fact that applications for distribution must be in by 22 March with the Ministry of Agriculture, Fisheries and Food—that more organisations in Bradford and elsewhere will make those applications.

We are in a balance of trade deficit with the EEC, I fear, for food as well. The information supplied by the Library demonstrates yet again that the benefits from the Common Market are somewhat sparse. I am sorry that the figures are proving somewhat elusive among my papers, but I can assure the House that the Library provided me with figures that demonstrated that our deficit in the balance of trade in food—I now have the figures to hand—is considerable. The figures are in millions of ecu. Our deficit is 11,282 million ecu, roughly about £5,000 million. So the common agricultural policy is expensive and wasteful and it does not help us in our balance of trade with other EC countries.

One last point worth making about the common agricultural policy is that it is an extremely selfish policy, particularly in its link with the Lomé convention and the Lomé countries, which are really the Francophile countries because when the Conservatives negotiated entry in 1973 they excluded the Commonwealth countries from any benefits that might arise. With few exceptions, if the Lomé countries package or process food, a tariff is slapped on it. That means that the developing countries are not given the full access that they should have to the wealthier Common Market countries.

Our textile industry also faces a cost in the Common Market because the Commission has been desultory in its attitude towards the multi-fibre arrangement and the relative failure—we are not quite clear about the true position—of the general agreement on tariffs and trade. The talks are not yet concluded, but the Commission has been pressed on several occasions to ensure that the MFA is extended, pending any outcome from GATT. The MFA regulates the imports of textiles and clothing from 26 developing nations into the United Kingdom and it is vital for the future success of the textile industry. I urge the Minister to make it clear to the Commission that the MFA must be retained if GATT fails.

What is the cost to our environment? Quite apart from the CAP, a directive is floating around the Commission that would increase maximum gross vehicle lorry weights to 44 tonnes, because that is the harmony weight in the Common Market. Our maximum gross vehicle weight is 38 tonnes. When that was agreed in 1983, the then Secretary of State for Transport said that it was the upper limit and that it would not be exceeded. He was pressed by a number of Conservative and Labour Members who were appalled at the thought of even bigger juggernauts going around the narrow lanes and roads of our cities, towns and hamlets.

The then Secretary of State gave an assurance, but the Commission now wants to harmonise road transport throughout the 12 member states and it has produced a directive that will be subject to majority voting. 'We shall be part of a permanent minority in the Common Market. The directive gives a derogation for the United Kingdom and Ireland, but it also provides that after a given number of years, yet to be decided, that derogation will come to an end. Those 44-tonne vehicles will then be on our roads, unless we take very clear and firm action to oppose that, and even then the directive may be imposed by virtue of our minority position.

There is yet a further pressure for harmonisation, and that is on voting systems. There will be a cost to democracy. There is pressure for the proportional representation system, which is prevalent in every other EEC state, to be introduced in this country. In its proponents' eyes, it has the merit of a rigorous centralised party system of control so that, for example, the members of the EEC assembly in Strasbourg or the other parts of the socialist group dare not give any opinion until they have cleared it with the central apparatus of the political party, in case they are dropped 10, 15 or 20 places on the voting list and essentially removed from office by the party apparatchiks. It is a measure for coalition governments, in which the programme is decided in smoke-filled rooms, rather than on the hustings, as the first-past-the-post system provides. That would destroy the relationship that we enjoy— although I suppose that there may be one or two people who do not enjoy it—between ourselves and our constituents, because all the constituencies would become multi-Member constituencies. It would be yet another example of the Community's diminishing the power of this Parliament. It would also be more difficult for people to gain access to the democratic process if control were transferred from London to Brussels and Strasbourg.

My concern about the cost of the Common Market is shared by the Minister. Yesterday we debated the Court of Auditors report. Indeed, my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), who is present today, contributed to that debate. He expressed great concern because fraud in the Common Market runs into millions of pounds a year. In that debate, the Financial Secretary to the Treasury said:

There are some consistent and worrying themes. In particular, there is continuing evidence that certain Community programmes lack objectives that are sufficiently precise. In a number of instances the financial controls needed for proper implementation of certain policies are not in place, are not sufficiently rigorous, or are not being observed properly."—[Official Report, 13 March 1991; Vol. 187, c. 1045.] That has been said in the House year after year. The Government consistently maintain that they have obtained adequate financial safeguards from the Common Market to ensure that expenditure is properly accounted for, accurately undertaken and is subject to rigorous scrutiny and control. However, it is not; year after year the same thing happens.

That situation will continue as a result of the Common Market's sprawling and amorphous bureaucratic nature unless the Government stand up and argue in the Common Market for proper control and so reduce the costs of membership.

We must always reserve the right to withdraw from the Common Market. That is an important lever in negotiations. I do not claim that we should withdraw in the little-Englander sense. We must maintain our trading and social relations with all the countries of Europe, not just the 12. We need not be bound by political union— we should set our faces clearly and solidly against that.

5.22 am
Mr. Chris Smith (Islington, South and Finsbury)

My hon. Friend the Member for Bradford, South (Mr. Cryer) has done the House a considerable service by identifying an extremely important issue for us to discuss. I wish to elaborate on several of his points which deserve closer attention.

My hon. Friend referred to the role that had sometimes been claimed by the former Prime Minister, the right hon. Member for Finchley (Mrs. Thatcher), and her so-called achievements in securing a better deal for Britain within the Community. My hon. Friend did not make as much of that as he might have done. The record does not bear out much of the rhetoric that we heard from the right hon. Lady at the time or subsequently. My hon. Friend quoted some interesting figures of the fluctuating net contributions that this country has made to Community finances.

My hon. Friend the Member for Bradford, South also made a valid point about the need to consider Europe not just in terms of the 12 member countries in the Community, but as a wider entity. He was right to do that.

The Labour party believes that the Community should be widened as soon as possible. Austria has already submitted its application for membership and we believe that it should be accepted readily by the existing members. Sweden is shortly due to submit its application for membership and we hope that Sweden and, indeed, the other remaining European Free Trade Association countries can be brought within the European Community at an early date.

Looking to the medium-term future, we hope that some of the emerging democracies in central and eastern Europe will be able, perhaps initially by means of an association agreement, but eventually by full membership, to play their full part in a wider Europe. On the need to look beyond a little-Englander mentality, my hon. Friend the Member for Bradford, South and I are on all fours.

My hon. Friend also drew attention in graphic detail, with a sector-by-sector analysis of the trade deficit, to the deficit between Britain and the European Community. He was right to do so. However, I am not sure that he was right to put the lion's share of the blame for that deficit on the Common Market. The lion's share of the blame for our deficit with the European Community, as for that with much of the rest of the world, lies with the Government's policies and inaction on the needs of British industry in the past 12 years.

The Government not only allowed unbridled credit growth in the period from 1986 to 1988, which ensured that consumption grew massively in our domestic economy and inevitably led to substantial levels of imports being drawn in, but they neglected the needs of the supply side of British industry. In his reply to the previous debate, the Financial Secretary made some glancing references to the relationship between the public and private sectors in the economy. I have to tell him that we in the Labour party believe in a constructive and involved relationship between the public sector, the Government and private industry to ensure that the supply side of the economy works properly—exactly the intervention that has produced the most successful economies in the world is rejected by our Government almost alone among the industrialised nations of the 1990s. They do not believe that such intervention is the right approach to running an economy.

My hon. Friend the Member for Bradford, South also mentioned environmental issues. Of course, I take his point about the possible draft directives which may be in preparation at present, but we should think about using the instruments of the European Community to our advantage in environmental terms. I want to see a British Government who not only say yes to the provisions of the European Community social charter but put forward a programme for an environmental charter which provides the citizens of Europe with the right to ensure their own environmental protection. If we had a Government who wanted to play an imaginative and constructive role in the European Community, we might be able to achieve that objective. My hon. Friend the Member for Bradford, South has raised a series of important issues.

Mr. Cryer

When we form a Government, we shall not have to wait for the Community. My hon. Friend suggested that we should have to negotiate to achieve something. It is important to recognise that we can set standards through the work of a Labour Government to which other member states can aspire if they wish. We do not have to go through a long set of complex negotiations to wait for those standards to be achieved in the United Kingdom.

Mr. Smith

My hon. Friend is right. There are many policies can can and will be implemented by a Labour Government in Britain without waiting for cross-European action, and the sooner the better. However, although action on environmental rights would be useful if carried out in Britain on its own, it would be even more useful if we could achieve a cross-European approach on these matters, because environmental pollution knows no national boundaries. Action against environmental pollution and the protection of citizens from it should cross national frontiers.

The debate also raises a number of fundamental issues about the way in which the European Community budget is currently used and how it performs. I want to draw the attention of the House briefly to three specific issues. First, there is an absolute need to continue the drive to ensure proper value for money in the spending undertaken by the Commission and by the various funds of the EC. We debated that matter all too briefly yesterday when we had the annual debate on the report of the Court of Auditors. That report reveals that there is a need for constant watchfulness about the way in which some of the programmes of the Community are monitored and undertaken. That is not to say that those programmes are not valuable—many of them are—but we must ensure that we get proper value for money within them.

Secondly, there is undoubtedly a case for looking for and continuing to press within the Community for changes to the balance within the overall Community budget between agricultural support and all other aspects of expenditure. Agriculture still gobbles up the overwhelming proportion of the Community's budget funds and the farmers at the end of the line do not benefit by anything like the amount that goes in at the start of the pipeline. There is undoubtedly a need for reform and change within the expenditure of the Community and especially within the operation of the common agricultural policy. I hope that we shall begin to see some changes, especially with the external pressure from the negotiations on the general agreement on tariffs and trade. The process of the Uruguay round may provide just the extra external stimulus that will provide for some sensible changes in the patterns of expenditure and agricultural support with the Community.

Thirdly, we must acknowledge the growing importance within the EC budget of the regional funds, especially as economic co-operation between the 12 member countries of the Community increases. If we are to move along the road towards greater economic and monetary union within the EC, the regional funds will have a crucial part to play in ensuring that we can still have some mechanisms for addressing the imbalances between different regions of the Community.

The Opposition do not wish to see a European Community divided between its rich and poor citizens and its rich and poor regions. The principal mechanism that can and must be used to ensure that that does not happen has to be a sensible and developing use of the regional funds.

My hon. Friend has rightly and sensibly placed the issues before us. He has considerable experience from his time in Strasbourg and from his distinguished career on the ministerial Benches in the House. He has a fund of experience to bring to bear on the issues. Therefore, I am sure that he will share with me a determination not to rubbish the EC and all that is stands for, but a determination rather to make the EC work successfully and properly for the people of Britain and Europe. Labour Members have a constructive approach to the developing co-operation of Europe— we just wish that Her Majesty's Government would show the same approach, which they have not done in the past.

Mr. Maude


Mr. Deputy Speaker (Sir Paul Dean)

I take it that the Minister has the leave of the House to speak again.

5.37 am
Mr. Maude

If I had known that this would be such a wide-ranging debate covering almost every aspect of matters falling under the ambit of the EC, I might have been able to arrange for my hon. Friend who succeeded me as Minister of State, Foreign and Commonwealth Office to have the pleasure of attending the House to pull together all the multifarious strands. That would have enabled a wider view to be taken than my narrow responsibilities allow and would also have enabled me to get a little more sleep. But such is life.

The hon. Member for Bradford, South (Mr. Cryer) has brought an important matter before the House. He has taken his subject in its widest sense— the cost of EC membership to the United Kingdom. He has not adverted to or expatiated on the benefits of membership of the EC, but that is perfectly proper. However, it is always worth remembering that there are two sides to every balance sheet and he has given us only one. He has provided an account which I think it is fair to say is not impartial. He has distinct and definite views on the subject and they happen to be very different from those expounded by the hon. Member for Islington, South and Finsbury (Mr. Smith). But that is a matter for them to resolve between themselves.

The Government are committed to membership of the European Community and to making it a success. That does not mean, as the hon. Member for Islington, South and Finsbury seems to believe, that we should roll over and agree to everything proposed by Brussels to appear co-operative, decent, friendly and cuddly. Life is not like that. Proposals are made, we assess our broader interest and argue for it. The fact that sometimes we do so robustly shows that we are committed to membership of the Community.

The hon. Member for Bradford, South cast his net wide and referred at length to our balance of trade with the rest of the European Community. I shall not deal in detail with what he said— this is the last refuge perhaps not of the scoundrel but of Ministers in the middle of the night—as it does not fall within my responsibilities.

The performance of a country's industries in the world marketplace depends on how well they compete. In some circumstances, competition may not be fair, but the European Community has mechanisms to remedy distortions in competition. There are similar mechanisms in the GATT, which is one reason why we are so adamant that it must be improved and enhanced. We are as determined as anyone that it should be successful. An unsuccessful conclusion would strike a savage blow at the economies of the third world. The best service that we can provide is a free and open market for the goods that they are able to produce. The benefits that accrue to their economies from such market access will always vastly outweigh the benefits of direct financial aid. We should never forget that lesson.

The hon. Member for Bradford, South mentioned the effects of our membership of the exchange rate mechanism. I am not surprised that he is not enthusiastic about our membership, unlike the hon. Member for Islington, South and Finsbury who thinks that membership is a good idea at any time, under any conditions and in any circumstances. The Government believed that we should join when the time and conditions were right. Subsequent events have shown that we joined at the right time and at the right rate.

Mr. Chris Smith

Does the hon. Gentleman agree with the Governor of the Bank of England that it was not right for the Government to reduce interest rates at the same time as joining the ERM?

Mr. Maude

That is not what the Governor of the Bank of England said. My right hon. Friend the Prime Minister explained at length why we decided to lower interest rates when we joined the mechanism. Experience shows that that was the right decision.

The hon. Member for. Bradford, South suggested that we joined the exchange rate mechanism at the wrong rate. I assume he meant that the pound is overvalued against the deutschmark and that United Kingdom businesses that seek to export to the rest of the continent are placed at a huge disadvantage. No dispassionate analysis of the facts bears that out.

The purchasing power parity of sterling against the deutschmark throughout the last decade and more was a little above the central rate at which we joined the exchange rate mechanism, which suggests that the rate we chose was about right. If it is right that that rate places exporters at such a crashing disadvantage, it is odd that when the rate of the pound against the deutschmark last summer was significantly above what it now is exporters were doing very well, particularly in their exports to Germany, which were booming. It is wrong to suggest that the pound is cripplingly overvalued against the deutschmark.

The hon. Gentleman disparaged the discipline that flows from membership of the exchange rate mechanism. That discipline would have flowed in any event from a firm monetary policy. He objected to the fact that that discipline applied only to trade unions and workers. It applies, however, to everyone taking decisions about the economy. The traditional soft option that accompanied—I put it no higher than that—the British economy's gradual decline, in relative terms, between the end of the last war and 1979 or thereabouts—the traditional soft option of constant devaluation and a constant decline in the value of the pound against other currencies—has gone. For British businesses to remain competitive and to improve their competitiveness, they have to improve their performance. Consequently, their costs have to be controlled. There is no easy way out. It is uncomfortable. A discipline of that nature is meant to be uncomfortable. Only if we accept and work within such a discipline shall we see sustained growth and prosperity.

May I deal with what I am bound to say I took, in my naivety, to be the main thrust of the debate—the financial cost to the United Kingdom of membership of the European Community. The hon. Member for Bradford, South properly dwelt upon that at some length. I expect our contribution to the Community to be around £1.9 billion in 1990–91 and £1.1 billion in 1991–92. The fall in next year's figure is simply because of a refund of contributions in 1990 and a higher level of abatement, reflecting adjustments to contributions in previous years. The underlying figure is about £2 billion a year. By any standards, these are substantial sums. However, they would have been vastly greater without the abatement of our contributions that my right hon. Friend the Member for Finchley (Mrs Thatcher) secured under the Fontainebleau abatement mechanism.

By the end of this year, cumulative abatement under the mechanism will have totalled almost £10 billion in addition to the £3.2 billion worth of refunds secured before the mechanism took effect. On that score alone, the United Kingdom is £13 billion better off today than we would have been if the previous contribution arrangements, so skilfully negotiated by the Labour Government in 1975, had continued to apply. A further £7.5 billion worth of abatement is forecast from 1992 to 1994.

We have a well-earned reputation throughout the Community for exercising discipline and restraint on EC budget spending. We have continued to give firm backing to the 1988 measures to set a limit on Community own resources, to exercise budget discipline arrangements on agricultural spending and to fix medium-term expenditure ceilings in the financial perspectives that form part of the inter-institutional agreement. Within that framework, we exercise a rigorous scrutiny of budget spending, looking at it item by item and programme by programme to see where funds can usefully be directed—and where they cannot.

The arrangements negotiated in 1988, taken with our efforts to keep expenditure below the maximum levels that they imply, have so far exercised a firm discipline on Community spending. For example, the 1991 budget sets a level of payment appropriations falling more than 5 billion ecu below the ceiling implied by the own-resources decisions, despite rapidly growing structural fund spending and despite a series of unforeseen demands for expenditure associated with eastern Europe, with German unification and with the Gulf.

It remains of the utmost importance that this discipline continues. Although for a number of reasons agricultural spending since 1988 has been well below the ceiling in the financial perspective, upward pressures are developing, and it will be important to resist them. We shall encourage the Commission to take firm action by using its own management powers to curb expenditure and by a restrictive price-fixing package.

We should not, however, concentrate exclusively on levels of Community expenditure. How the money is spent and accounted for is of great importance, too. As the hon. Member for Islington, South and Finsbury said, we had the chance last night to discuss this matter in the debate on the European Court of Auditors annual report. We have already taken the leading role in seeking quantified objectives for Community programmes and in seeking stringent financial controls to ensure that money is spent properly and is effectively used. Those aims are reflected in the financial regulation of May 1990.

We also aim to underline the Community's commitment to the principles of financial management, to effective accountability and to value for money, by a series of suggested treaty amendments at the intergovernmental conference on so-called political union. These are intended to enhance scrutiny by the European Parliament, to clarify the responsibilities and duties of those concerned with financial control in Community institutions, to develop the responsibilities of the Court of Auditors and to underline member states' obligations to counter fraud.

The Community's financing arrangements are due for review at the end of this year. There will be an important set of negotiations then. In our approach to them we shall continue to be guided by the principles of budget discipline, effective accountability and value for money.