HL Deb 21 December 1982 vol 437 cc938-42

3.50 p.m.

Lord Cockfield

My Lords, I will, with permission, repeat a Statement made in another place by my right honourable and learned friend the Chancellor of the Exchequer. The Statement is as follows:

"With permission, I would like to make a statement on the outcome of the Finance Council meeting in Brussels which I attended on 17th December.

"The Council discussed and adopted the Annual Economic Report for 1983, and budgetary guidelines for member states. It briefly considered the Commission paper on budget discipline which it had first looked at in July. The Council also reviewed international monetary questions.

"But the main business concerned the United Kingdom's refunds in respect of the 1982 Community Budget. The House will know that on Thursday of last week the European Parliament rejected the 1982 draft Supplementary and Amending Budget, which made provision for our basic Budget refund in respect of 1982, and for certain parallel arrangements for Germany. This decision resulted from a conflict between the Community's institutions. The Parliament believes that a lasting solution to the problem of budgetary imbalances in the Community should be found and implemented as soon as possible. So do we. But this has not so far been the Council's unanimous view. We share the Parliament's concern at the unsatisfactory nature of current ad hoc arrangements.

"But the fact is that it was clear as long ago as last May that there was no realistic prospect of reaching a long-term solution which could take effect in this calendar year. Instead, the Council agreed last May, and in detail on 26th October, on a method of ensuring a settlement for 1982 satisfactory to the United Kingdom. The immediate result of last week's action by the Parliament was to put that settlement in jeopardy.

"However, on Friday 17th December the Council was unanimous in confirming that the commitments contained in the October Agreement must be fully honoured. The Council noted an undertaking from the Commission to take steps to ensure that the United Kingdom will not be put in a worse position than had been intended under that agreement. They will take early action to this end, and will also draw up a work programme for the development of the Community's policies.

"It is thus now for the Commission and the Council to take the practical steps needed to give effect to the assurances which we have been given, and to prepare for new discussions with the Parliament.

"I am arranging for copies of the Council's conclusions on this subject to be placed in the Library."

That, my Lords, is the end of the Statement.

Lord Cledwyn of Penrhos

My Lords, may I first thank the noble Lord for repeating the Statement. Would he not agree that the European Parliament's rejection of the supplement to the Budget—that is, the repayment to the United Kingdom—was another disturbing development? Would he not also agree that it shows that there is a growing dissatisfaction with the imbalance in EEC spending policies? We note that the Chancellor has now decided not to withhold some British payments to the EEC and to accept a commitment to settle by the end of March. Is the noble Lord reasonably satisfied that the repayment will be made within this period, and, if there is a further hold-up, what steps would the Government then contemplate?

It does seem that the European Parliament believes that the United Kingdom budgetary arrangements must be resolved by structural reform and not by emergency adjustments. I was glad to hear the noble Lord confirming—or, at least, so I understood—that that is the Government's view also. Again, does not this development provide a good reason and opportunity for both the Commission and the Council to sit down and deal with this recurring problem once and for all? I assume—I shall be grateful if the noble Lord will confirm this—that this is the Government's strong opinion as well.

Reverting to the date of payment, may I ask the noble Lord to comment on the legality of the Parliament's action in this matter? While there is no time this year for a fresh Supplementary Budget, which could again be rejected by the Parliament, could not a transfer within the 1982 Budget be made, as there are still unexpended amounts allocated to the agricultural fund which might be used for this purpose? If the Council could transfer the necessary appropriations without parliamentary intervention, it would be fair to this country and avoid the tensions and the suspicions which further delay will inevitably cause.

Lord Gladwyn

My Lords, we too thank the Minister for repeating this important Statement. We on these Benches note with satisfaction the apparent belief of the Government that on the whole it was a good thing that the European Parliament precipitated this issue of the Community Budget. Would the noble Lord and the Government not agree that this was in no sense, and could not possibly be interpreted as, a move directed against the United Kingdom, as has been—I think unfortunately—suggested recently by certain newspapers and indeed by certain politicians? Is it not high time that the necessity for some reform of the common agricultural policy was squarely faced, together with the question of the proportion of the Community's expenditure that should be fairly attributed to the United Kingdom?

Finally, would not the Government agree that all these difficult and urgent problems would be much easier to solve if by any chance the members of the Community now agreed to increase the Budget to a considerable extent, possibly by raising the allocation of VAT to the Budget from 1 per cent. to 2 per cent.?

Lord Cockfield

My Lords, I am grateful to both the noble Lord, Lord Cledwyn of Penrhos, and the noble Lord, Lord Gladwyn, for their response to the Statement. The action of the Parliament has, of course, highlighted the issue. We do indeed fully understand the sense of exasperation in the Parliament that a proper solution to this problem has not been reached. I entirely agree that what we need is a proper long-term solution and not a series of ad hoc solutions, every one of which gives rise to argument, dispute and misunderstanding. On the other hand, we do feel that the action by the Parliament has created a serious situation. It is to the great credit of the Community that the Council has unanimously decided that the agreement of 26th October must be honoured, and they are fully supported by the Commission in that determination.

Perhaps I may say, on the specific point raised by the noble Lord, Lord Cledwyn of Penrhos, that the Treaty of Rome does provide for the Parliament to have the power to reject the Budget where there are substantial reasons for so doing. On this occasion the action of the Parliament was not unlawful, but it was certainly unwise.

So far as the actual steps to be taken are concerned, this is a matter which has now been remitted to the Commission. We are determined to ensure, and indeed the Council of Ministers and the Commission have committed themselves to ensuring, a solution which will not only enable the money to be paid over by 31st March, but will ensure at the same time that the United Kingdom is not prejudiced as a result of that delay. We must now await the detailed proposals and proceed forward on that basis.

So far as the final point raised by the noble Lord, Lord Gladwyn, is concerned, he asked whether this did not indicate the need for an increase, among other things, in the "own resources". We would certainly not agree that any increase in our own resources ought to be made, and certainly not before these major issues have been fully settled to our satisfaction.

Lord Kennet

My Lords, is not the Council of Ministers in the position of any Cabinet which has submitted its budget to the duly elected legislature and has seen its budget rejected? Must it not, therefore, take the step that any ordinary Cabinet would take, namely to devise another budget and resubmit it? If it cannot agree on what should be in the second Budget, the Government may remember that quite recently the rule of majority voting in the Council of Ministers was revived—when it was revived, it was done at our expense—and it is surely not beyond the wit of man to imagine a coalition of members of the Council who could simply vote down, using the Treaty of Rome, the minority which would oppose a sensible Budget which the Parliament desires, which the Government desire and which we on this Bench desire.

Lord Cockfield

My Lords, the noble Lord, Lord Kennet, raises a number of very broad issues. The constitutional position of the Parliament and the Council of Ministers in the European Community is very different indeed from that in the United Kingdom. I do not think one could usefully draw analogies between the situation here and the situation in Europe. As far as provision for the refund is concerned, what is in mind now, and is inevitably in mind because of the dates, is that provision should actually be made in the 1983 Budget or, rather, by way of an amending and supplementary budget for 1983, the original Budget having already been agreed. As regards the funds, they will not have been spent and it is simply a matter of carrying them forward from one year to the next.

Baroness Llewelyn-Davies of Hastoe

My Lords, will the noble Lord expand a little on his answer to my noble friend Lord Cledwyn of Penrhos? Do I understand correctly that this particular problem of the refunds comes under obligatory expenditure and that, therefore, the Commission could still propose a transfer which would enable the refund to be made within the 1982 Budget?

Lord Cockfield

My Lords, the noble Baroness raises an important point. My information is that it could not be done under the terms of the 1982 Budget, the supplementary budget having been rejected. The precise mechanism to be adopted is now under consideration by the Commission.