HL Deb 25 July 1983 vol 443 cc1389-97

4.10 p.m.

Lord Cockfield

My Lords, with permission, I shall now repeat a Statement made in another place by my right honourable friend the Financial Secretary. The Statement is as follows:

"With permission, Mr Speaker, I should like to report to the House on the outcome of last week's Budget Council in Brussels, at which I represented the United Kingdom. The Council had a discussion with the Parliament and finally established a draft supplementary and amending budget No. 2 for 1983 and a draft budget for 1984. These will now go forward for consideration by the European Parliament.

"The draft supplementary budget No. 2 for 1983, as established by the Council, in response to a presidency compromise, makes provision for budget refunds for 1982 for the United Kingdom and Germany under the risk-sharing provisions of the 26th October agreement of 370 million ecus. The United Kingdom's share in this is around 305–310 million ecus. In our view the total figure should have been 495 million ecus, including 408 million ecus for the United Kingdom. We are therefore left with a shortfall of about 100 million ecus gross, or 75 million ecus net (£58 million gross and £43 million net). I voted against the presidency compromise which included this provision, but all others voted for it, except the Danes who abstained. I therefore made clear to the Council, for formal inclusion in the minutes, that they had failed to discharge in full their obligations to the United Kingdom and that the Community institutions must take the necessary action as a matter of urgency to ensure that the United Kingdom receives its full entitlement. The budgetary processes for 1983 are not yet completed, and the Government intend to ensure that this matter is resolved satisfactorily.

"The presidency compromise was also unsatisfactory in that it included a cut of only 50 million ecus in the extra provision for agricultural spending proposed by the Commission. I argued strongly for a larger reduction.

"The draft budget for 1984, as now established by the Council, will make provision of 1,202 million ecus for refunds to the United Kingdom and Germany, including 991 million ecus for the United Kingdom. In contrast with the 1983 supplementary, this gross provision correctly provides for a refund to the United Kingdom of 750 million ecus net, and so honours the Stuttgart undertaking fully.

"The draft budget provides for agricultural guarantee expenditure of 16½ billion ecus, as recommended by the Commission; but the Council decided to place 250 million ecus out of this total in the 'reserve' chapter of the budget rather than 'on the line'. Together with two other delegations I argued for cuts of 1 billion ecus in the provision for agricultural guarantee spending but this proposal was finally out-voted.

"The draft budget makes provision for total non-obligatory expenditure, including the non- obligatory element in the United Kingdom and German refunds, to rise by half the maximum rate—that is, by 5.8 per cent. But the combination of the large provision for agriculture with the necessary provision for United Kingdom and German refunds left little room inside the own resources ceiling for increases in the Regional Development and Social Funds.

"Before either budget is finally adopted there will be extended negotiations between the Council and the European Parliament. During this period the Government will take all appropriate steps to ensure that the United Kingdom receives its agreed entitlement to refunds for 1982 in full. My right honourable and learned friend the Secretary of State for Foreign and Commonwealth Affairs will raise the matter at the Foreign Affairs Council at the earliest possible opportunity.

"I am sure that the Government can count on support for this from all sections of the House."

That, my Lords, concludes the Statement.

4.15 p.m.

Lord Bruce of Donington

My Lords, the House will he grateful to the noble Lord for having repeated the Statement made in another place. May I, as an aside, offer some personal sympathy to the Financial Secretary to the Treasury on the record session of 40 hours? As one who has had some experience of lengthy conciliation proceedings between the European Parliament and the Council of Ministers. I admire his fortitude, and I wish him luck in any future proceedings in which he may become involved.

Her Majesty's Opposition of course sustain the attitude that has been taken by the Government in regard to these shortfalls of £58 million gross and some £43 million net. We also support the Government's rejection of the presidential compromise, which put the figure at some £29 million. We note with some interest that, as per the Statement, the Government intend to ensure that this matter is resolved satisfactorily". The noble Lord will forgive me if I lay some emphasis on the words which I now put in parenthesis, "resolved satisfactorily". What does that mean? The first question I have to ask the noble Lord is: does he regard "resolved satisfactorily" as meaning a payment to us of the sum in full, to which we are entitled, or do the words "resolved satisfactorily" represent an ambiguity which enables the Government to settle at a figure between £29 million and some £58 million? We should like some information on that point.

We note from the noble Lord that agricultural expenditure for the year 1984 is put at 16.5 billion ecus, which is roughly £9,470 million. Is the noble Lord aware that expenditure is already running at a rate that appears on the face of it to be a prelude to expenditure for 1984 of some 18 billion ecus, or some £10,440 million? Is the noble Lord aware of that? Is he also aware that every year, with monotonous regularity, we have a supplementary budget? The draft budget for 1984 has been put at this figure of 16.5 billion ecus, or £9,470 million. Will the noble Lord cross his heart and say that there will be no supplementary budget for the year 1984?

The House and the country are becoming a little fed up with this perpetual increase in agricultural expenditure, which is denounced just as fervently by members of Her Majesty's Government as it is by all quarters of this House and also the other place. Year after year we have, immediately prior to the annual price review in Brussels, a firm statement by the Minister of Agriculture—and we have had it many times now—that Her Majesty's Government will firmly resist any increase in price in respect of items in structural surplus. About three weeks later, after meetings in Brussels, the Minister comes back to the country and claims that a rise in prices of anything between 4 per cent. and 10 per cent. represents a magnificent victory' for Her Majesty's Government.

Can we have a stop to this nonsense, so that when the Minister says that we shall not have any increase in price in items in structural surplus, he means exactly what he says? We note well from the Statement that his right honourable friend suggested a figure of £580 million more for next year, which is a shortfall against the figure which it will become—in the region of £970 million. In short, from the Statement it is quite clear that the finances of the European Economic Community are in disarray.

I now ask him the second question on which I should like a specific response. Is it Her Majesty's Government's intention that the 1 per cent. base on VAT as the determinant in the Community's own resources is not to be exceeded? From time to time Ministers have made encouraging noises and have said that on no account will it be exceeded. Can we have the Minister's specific assurance, on behalf of Her Majesty's Government, that the Government's efforts—including if necessary the exercise of the Luxembourg veto if it is required—will be exercised against any further such increase?

My third question relates to a statement that has been attributed to the Commission—I do not know with what truth, but it was in The Times and the Guardian, so presumably it has some considerable authenticity—about whether in the event of the 1 per cent. ceiling to VAT for the Community's own resources not being exceeded, and in the event of budgetary requirements being in excess of that figure, both non-obligatory and obligatory expenditure would abate pari passu. Obligatory expenditure consists in the main of agricultural expenditure. Will the Minister say whether he agrees that if the expenditure of the Community is to be held within the 1 per cent., then he also agrees with the Commission's concept that agricultural expenditure should abate together with the other non-obligatory expenditure? If the non-obligatory expenditure is to be abated, will he also bear in mind that under Title 5 of the Community's budget, which deals among other things with the regional funds, if that is abated then that item is the sole item in the European budget where the United Kingdom receives a net profit return varying between 7 and 8 per cent?

I trust that in asking those three questions, which I hope have been succinctly put, I may have satisfactory replies from the noble Lord. I would not wish to end on a churlish note. If the Government are prepared to do battle on this and are prepared to match their words with their deeds, they will receive the full support of Her Majesty's Opposition.

Lord Banks

My Lords, I join in thanking the noble Lord, Lord Cockfield, for repeating that Statement made in another place. I am glad to note from the Statement that the British refund for 1983 is being respected and I regret that that would appear not to be so for the refund for 1982. The Government must press that that agreement be respected.

However I understand that it is the British interpretation of what is owed that is challenged, particularly according to the report in The Times of 23rd July by Denmark. Is it right that there is no intention to deprive the United Kingdom of any amount due, but the argument is about what is due? In any event, it is a comparatively small amount, £43 million net. Would it be worthwhile making some concession of that if we could have in return a significant reduction on agricultural expenditure in 1984?

Finally will the noble Lord agree that in the long run, while a reduction in agricultural expenditure is clearly desirable, the long-term British budget problem is unlikely to be solved unless there is an increase in the total budget so that there is an increase in expenditure on policies from which we will derive greater benefit than we do from expenditure on agriculture? Will that not necessitate raising the own resources ceiling?

4.27 p.m.

Lord Cockfield

My Lords, I am grateful to the noble Lord, Lord Bruce of Donington, for his support and also equally grateful to the noble Lord, Lord Banks, for what he said. I will most certainly pass on to my right honourable friend the Financial Secretary the good wishes of the noble Lord, Lord Bruce, which I am sure he will greatly appreciate.

The noble Lord, Lord Bruce, raised three points. First he asked what was meant when we said that it was the intention of the Goverrnment to ensure that this matter was resoved satisfactorily. Quite shortly the answer is that. as the Statement makes clear, we propose ensuring that we receive the full amount to which we are entitled. At this point I will take up Lord Bank's point as it is associated. The noble Lord is quite right in saying that part of the difficulty rests upon the fact that other people claim that the figure should be calculated in a different way. I do not want to go into the detail of this, but in the past refunds have always been calculated on what is known as the payments basis and there has been an attempt now to argue that it ought to be changed over to the assiette basis.

The fact is that refunds have always been calculated in one way and we see no reason why' this basis of calculation should be changed now simply because it would produce a lower figure. We believe that what is behind the argument is not any point of principle, but simply an attempt by other people to whittle away the amount to which Her Majesty's Government and this country are entitled. Looking at it from that point of view I do not think it would be right to try to "trade" this point—if the noble Lord will forgive my using such a phrase—in the hope of getting concessions elsewhere. I do not for a moment think that one would. I propose returning to the second point of the noble Lord, Lord Banks, in a moment, because it ties up also with the point raised by the noble Lord, Lord Bruce of Donington.

The noble Lord, Lord Bruce, drew attention to the fact that the provision made in the 1984 draft budget for the CAP is £16½ billion, and he said—as has been said elsewhere—that expenditure may very well run at a rate which exceeds that level. It is too early yet to say exactly what the outturn might be. We regard the £16½ billion as too high and my right honourable friend, together with certain other Members, proposes that it should be reduced by 1 billion ecus. We shall now have to see how this goes.

Concerning the long-term negotiations and the general question of reaching the limit of own resources, which was raised by both noble Lords, I can do no better than read the Statement which was made by my right honourable friend the Prime Minister at the conclusion of the Stuttgart summit. What she said was: I think we all need to recognise that these matters must be taken forward together. There is no way in which it would be sensible to prejudge one in advance of the others. In the context of a long-term settlement of all these problems, I would be prepared to consider an increase in own resources provided that"— and this is the important point— we reached agreement on an effective control of the rate of increase of agricultural and other expenditure and provided that it is accompanied by an arrangement to ensure a fair sharing of the financial burden so that no country has to pay a share disproportionate to its relative national wealth". I do not think that I could either usefully or properly add to what my right honourable friend said on that occasion. This is really the answer to the third point raised by the noble Lord, Lord Bruce of Donington. We hope very much that these long-term discussions will reach a fruitful conclusion before there is any question of reaching the limit of own resources.

Lord Harmar-Nicholls

My Lords, the noble Lord has received two sets of advice on what I think is the number one problem; that is, whether or not we agree to an increase in own resources. He had the advice put in the form of a question from the noble Lord, Lord Bruce, who suggested that we should not countenance an increase until such time as restraint has been shown in the expenditure on agriculture which flows from the common agricultural policy. Then he had the advice of the noble Lord, Lord Banks, who suggested that it might be sensible to give an increase in own resources in return for breaking the log-jam on the others.

It seemed as though my right houourable friend the Prime Minister, in her statement at Stuttgart, came down on the side of the noble Lord, Lord Banks. Is my noble friend aware that I hope that within the time that we have he will adhere more to the suggestions put forward by the noble Lord, Lord Bruce? It is quite clear to those of us who recognise the poker game that is going on in this respect that, until such time as they do not have the money to spend on agriculture, they will continually overspend. That is what has brought them to their present position of shortage of money. If we give the impression, as did the noble Lord, Lord Banks, and as my right honourable friend the Prime Minister seemed to give in her statement after Stuttgart, that there is a chance of giving them more money before they have shown that they can adhere to the restraint which the future needs if the Community is to continue, then I think we shall be running away from our responsibilities. The point that I am suggesting to my noble friend is that at this stage we do not countenance any increase in own resources until such time as the common agricultural policy has been reformed to a point where there is real reason to expect these surpluses to be no more.

Lord Cockfield

My Lords, I am grateful to my noble friend Lord Harmar-Nicholls for what he has said. I had sensed that there was a difference of opinion between the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Banks; but, with respect, I do not regard it as part of my function to endeavour to resolve differences of opinion of that kind. So far as Her Majesty's Government are concerned, the position was put with absolute clarity by my right honourable friend the Prime Minister in the statement which I read out to your Lordships; and I do not think it is either necessary or right for me to expand upon that statement.

4.35 p.m.

Lord Diamond

My Lords. I rise to assure the noble Lord, in response to the last sentence of the Statement, that he can rely upon the full support of this section of your Lordships' House as well in the line which the Government are taking. Is he aware that his further explanation (in reply to the question of the noble Lord, Lord Bruce) of what the Government intend is fully acceptable? On that same note, may I ask what is meant by the words in the Statement, that "appropriate steps" to ensure the United Kingdom receive an agreed settlement will be taken? "Appropriate steps" may mean appropriate in the view of the Government or appropriate in the view of other parties to this argument. Would the noble Lord tell us what these appropriate steps are? I do not hide from him the hope that his answer on this will be as satisfactory as the answer he gave to the noble Lord, Lord Bruce.

On a point of information, may I ask whether the presidential suggestion of a compromise with regard to agricultural payments was—as it seemed to me and my arithmetic—a totally nominal amount, an amount which, in relation to total agricultural payments, was so small as a percentage, so infinitesiminal, as hardly to be entitled to call itself a compromise at all? Do I have the facts right or have I misunderstood what is intended in the Statement?

Finally, could the noble Lord tell us on what basis the settlement at Stuttgart was interpreted? Presumably, when this settlement was arrived at the Prime Minister had in mind a certain figure which would be likely to result from the formula. As I now understand it, there is some argument as to how one interprets the formula. It may be that the formula was not very precisely worded and is therefore capable of more than one interpretation. But surely it must be the case that the Prime Minister had in mind a particular figure which would have resulted from her application of the formula in accepting it. Can the noble Lord tell us whether that is the case and whether it represents what is now described as the full refund?

Lord Cockfield

My Lords, I am grateful to the noble Lord for his assurance of support in these matters. He asked first of all what was meant by the statement that appropriate steps will be taken. The position is this. The budgetary procedure is not yet complete and the budget will probably return to the Council in the autumn. Therefore, there is a further opportunity of these matters being pursued on that occasion. It is certainly our intention to insist that the matter is dealt with until a satisfactory conclusion is reached.

So far as the point the noble Lord raised about the presidential compromise, the position is this. The total figure that we thought that we were entitled to—in fact, the total figure that we believe we are entitled to —is 408 million ecu. The figure that emerges under the presidential compromise is between 305 million ecu and 310 million ecu. That gives a shortfall of 100 million ecu. That is quite a considerable figure. It is perfectly true that there is an attempt, as I mentioned when I was replying to the noble Lord, Lord Banks, on the part of certain other member states to claim that the basis on which the figures are calculated should be changed. We are simply not prepared to accept that a change of that sort should be made.

The Principal Deputy Chairman of Committees (Baroness Llewelyn-Davies of Hastoe)

My Lords, is the noble Lord aware that this House very much shares the concern expressed in the Statement about the non-obligatory expenditure, that the increase in agricultural expenditure plus the necessary provisions for the refunds for West Germany and the United Kingdom will he at the expense of the regional fund, the social fund and possibly of the Lomé countries, and so on; and that we very much share the hope that in the discussions which will be forthcoming, as the noble Lord has said, Her Majesty's Government will pay very great attention to this?

Can he confirm what was stated in the Economist last Friday, that under the Treaty of Rome the Commission has a legal obligation to balance the priorities of policies and that while the whole House will understand the Community's wish for increasing their own resources, there would be very little practical point if it were all to be dissipated in agricultural expenditure and not in other ways?

Lord Cockfield

My Lords, I am grateful to the noble Baroness for what she says. It is perfectly true that the very big rise in expenditure under the common agricultural policy has tended very much to be at the expense of expenditure on the social and regional policies. This is one of the reasons why we believe that the agricultural expenditure needs to be restrained. So far as the question of an increase in own resources is concerned, again, with respect, I must come back to the Statement made by my right honourable friend the Prime Minister, because she made it clear that any change in the level of own resources was dependent upon reaching an agreement on effective control of the rate of increase of agricultural expenditure inter alia. So that that point is, in fact, very fully taken aboard.

Lord Molloy

My Lords, is the noble Lord aware that what is perhaps giving most people the largest amount of concern is the fact that, as the noble Lord. Lord Cockfield, stated in answers and read in the Statement, each time the Common Market reneges on an agreement, we have to preface that agreement, and the fact that they have not honoured it, with the words "It was an agreed entitlement." It was an agreed entitlement which they have not honoured. There is no doubt about that. That is why, as my noble friend Lord Bruce of Donington has said, I believe we must see that the noble Lord. Lord Cockfield. the Financial Secretary and, indeed, the Government receive full support from everyone in this Chamber and, I hope, in the other Chamber as well. They will get the full support of the British people all right.

But there is another very interesting assessment which I have made, and which I hope the noble Lord, Lord Cockfield, may be prepared to consider. Those of us with experience and who have served in the European Parliament have come up against this sort of thing before. It is very difficult for some Members of this House or of another place to imagine a senior civil servant entering the Parliament, going up to the Dispatch Box and telling us what we ought to do. But that is how it works.

When we had the authority, though we might have been defeated in a so-called democratic vote, we could stand up and say, "We cannot accept this. This has raped the Rome Treaty. Therefore, we will take this hack to our Parliament". When we could do that, we could usually force some form of justified compromise. After the direct elections, that withered on the vine and so did our policy. All that happens now, as each year goes on. is that we are told of the temporary shortfall in what Great Britain should get, and I am rapidly coming to the conclusion that there is nothing so permanent in the EEC as a British shortfall from the proper legal entitlement. Therefore, the Government are entitled to our support. We want fair play, because that is what the British people voted for in the referendum. They did not vote for this fancy fandangle which is going on.

The noble Lord, Lord Cockfield, can tell his colleagues that they can count on the full support of this House, of another place and of the British people as a whole, so that, by the time the 1984 budget goes before the European Parliament, they will know beyond all peradventure the support which the Government are getting from Her Majesty's Opposition, from all other parties and from the British people, in trying to rectify what is an appalling, grievous wrong to our nation.

Lord Cockfield

My Lords, I am, of course, grateful to the noble Lord, Lord Molloy, for the support that he offers. I do not always enjoy it, so I am particularly grateful to him. I must take issue with some of the points that he raises. It simply is not true that the Common Market always reneges on its agreements. As the Statement itself makes absolutely clear, so far as 1984 is concerned, the gross provision made in the draft budget correctly provides for a refund to the United Kingdom of 750 million ecus net, and so honours the Stuttgart undertaking fully.

Lord Oram

My Lords—

Lord Denham

My Lords, I know that the noble Lord, Lord Oram, has been trying to get up for some time. But we have been going on a long time and I think perhaps, after he has asked his question and my noble friend has replied, we then might move on to other business.

Lord Oram

My Lords, may I ask the Minister whether he will address himself to what I think was the last point made by the noble Lord, Lord Diamond, which I do not think received an answer. If I got it aright, it was this. If the other member countries succeed in maintaining a different method of calculation in respect of the last repayment, will it not be the case that that method can be applicable to the rebate agreed at the Stuttgart meeting in respect of the draft budget? Therefore, is it not doubly important that the Government's resistance to that method of calculation be reinforced?

Lord Cockfield

My Lords, I entirely agree with the noble Lord. I am sorry if he and the noble Lord, Lord Diamond, feel that I did not answer the point adequately. But I entirely agree that we must not accept this change in basis. It is wrong in itself, because it represents a departure from what has always been done in the past, and it clearly would have implications for the future. I am grateful to the noble Lord for underlining the point.

Lord Denham

My Lords, I am afraid that I have slightly misled your Lordships in that I am told that my noble friend Lord Bessborough has been trying to get up for a very long time, so perhaps we may have his question, too. I apologise to your Lordships.

The Earl of Bessborough

My Lords, I apologise for delaying the proceedings further, but I should like to ask my noble friend this question. While of course welcoming, as all your Lordships have done, the tremendous efforts of my right honourable friend the Financial Secretary to get fair and full refunds on the budget, can my noble friend say one thing further about own resources and the future financing of the Community? I listened with interest to the repetition of the Statement made by my right honourable friend the Prime Minister on Stuttgart, but can my noble friend tell us whether any consideration has been given to alternative financing of Community institutions in the future other than raising the VAT ceiling? For example, there was some discussion in the past about a levy on imported energy. I wonder whether my noble friend can tell us if other methods of financing are being discussed?

Lord Cockfield

My Lords, as my noble friend said, there has been discussion from time to time about alternative methods of raising additional finance. So far at any rate, these propositions have not made any significant progress. I am not in a position, at the moment, to say exactly what progress has been made in the discussions leading up to the next summit at Athens, where proposals will be tabled, or what alternative proposals are being put forward.