HL Deb 30 July 1984 vol 455 cc544-51

3.50 p.m.

Baroness Young

My Lords, with the leave of the House, I shall now repeat the Answer which has been given to a Private Notice Question in another place on the 1983 European Community refunds. The Answer is as follows: "Our 1983 refunds, totalling £440 million, were agreed by the heads of Government at the European Council in Stuttgart over a year ago. Two principal steps were needed before the refunds could be paid: approval by member states of the necessary implementing regulations and agreement by the European Parliament to transfer the sums concerned from the reserve chapter of the budget.

"Two member states, France and Italy, made clear after the Stuttgart meeting, that they would only approve the regulations in the context of overall agreement in the negotiations on budgetary imbalances.

"Following the agreement reached at Fontainebleau in June France and Italy gave their agreement to payment of the refunds. The only remaining substantial step was for the European Parliament to approve the necessary transfer. This was done by the Budgets Committee of the Parliament on 12th July by a vote of 25 votes to nil with two abstentions. Following that vote, on 26th July the advisory committees of member states approved the necessary decisions actually implementing payment of the refunds on projects in the United Kingdom. All the procedures to enable the refunds to be paid had thus been completed.

"As honourable Members know, the new Parliament held its first session last week. It decided to overturn the decision taken by the Budgets Committee and to hold up payment of the 1983 refunds.

"Mr. Speaker, there is no possible justification for the Parliament's petty and churlish action. Agreement on our refunds was reached at Stuttgart by all Heads of Government and was specifically endorsed by them at Fontainebleau. The Fontainebleau settlement itself met the Parliament's earlier conditions. There was thus no ground for new conditions being set. There was no ground for linking payment with the issue of the 1984 overrun on which the Government have made positive proposals in conformity with the treaty and consistent with the own resources system.

"The Parliament's inept behaviour will not affect the Government's attitude to discussions of the 1984 budget overrun which will be resumed at the Budget Council on 6th September. It will, however, make the search for an agreement more, not less, difficult.

"Mr. Speaker, one of the most welcome conclusions of the Fontainebleau Summit is that, in future, our refunds will be paid automatically on the revenue side of the budget. This would prevent similar difficulties arising in the future. It may be for this reason that the Parliament has been making difficulty over our 1983 refunds, the last refunds in which it will be involved.

"The Fontainebleau agreement set the Community's finances on a new and sounder basis. We have no quarrel with other member states who are working with us to implement the Fontainebleau agreement. Honourable Members will have noted the statement of the French Government criticising the Parliament's action. When the Parliament next meets in September, we trust that it will rethink its hasty, intemperate and damaging action. The President of the Parliament has said that the eventual repayment of the refunds is not in doubt. That promise will have to be honoured".

Lord Cledwyn of Penrhos

My Lords, we are grateful to the noble Baroness for repeating the Answer to the Private Notice Question. It is deeply disappointing that after the optimism created by the outcome of the Fontainebleau talks at the end of June we are once again transported into that slough of despond—the budget deficit debate. The decision was made by the European Parliament, and it has not improved its reputation by its action.

Nevertheless, the decision raises a number of important questions which I should like to ask the noble Baroness. For example, does she not agree that while Mr. Channon, the Minister for Trade, was attempting last week to reduce internal trade barriers within the Community, a more fundamental disagreement was developing between Britain and the other nine member countries over the question of supplementary finance? Can the noble Baroness explain to the House the precise reasons for the breakdown of last week's talks and tell us where we go from here?

As the noble Baroness stated clearly, it is appalling that the European Parliament has voted against the rebate settlement of Fontainebleau. especially in the light of Britain's commitment to increase own resources in the forthcoming financial year. Is it true that the EEC is about to go into debit, amounting to £1.2 million? What proposals has Britain offered as a solution to what is undoubtedly a serious financial crisis?

Can the noble Baroness tell us what agreement was reached at Fontainebleau about action to be taken on the possible bankruptcy of the European Community? Was it agreed, as reported, that EEC Ministers would implement policy: to cover the needs of the 1984 budget and to ensure that the Community operates normally"? What sort of practical measures does that commitment involve? Further, when will the funding of EEC grants run dry? If that occurs, what impact will it have on those in receipt of Community finance?

Finally, is there to be a meeting in September? Are the Government confident that the issues of Community finance and budgetary discipline will be satisfactorily resolved then, despite the present worsening of Community relations?

Lord Gladwyn

My Lords, we thank the noble Baroness for repeating that important Answer. I think we would all agree that the European Parliament's recent action is quite deplorable and doubtfully legal, although perhaps in the circumstances not entirely unexpected. I suppose the reason for it was a desire, as it were, if possible, to put pressure on us to be more (as they would say) "reasonable" in respect of the budgetary negotiations now in progress.

The first question that I should therefore like to put to the noble Baroness is whether we are to assume that in the negotiations that are at present going on, and about which I think we know practically nothing, we are in a minority of one; that is to say, with not even the Germans on our side? Is that or is that not the case? If it is the case, is there not on the face of it an evident conflict of interests—perhaps a genuine conflict of interests —which must be recognised?

For instance, I suppose that all our partners, even the Germans, as a matter of practical politics, have to pay more attention than we do to the agricultural vote. That may be deplorable, but I suggest that it may also be a fact. May we not therefore have to abandon what in some respects seems to be our present rather inflexible attitude in the negotiations now proceeding and, while still maintaining that discipline must be restored, and hence that there must be further cuts in agricultural expenditure, over and above those that have already been effected, happily, in the case of dairy products. vote some further funds to prevent the Community going bankrupt (as I think that the noble Lord, Lord Cledwyn, said that it would otherwise do) in September of this year, although not perhaps so much as, on the face of it, is at present envisaged? By abandoning a totally inflexible attitude while maintaining our general point of view, I suggest that we should not only he able to get a refund of the money which is due to us—anyhow legally—but set the Community off in a direction which may result eventually in a budget acceptable to all the partners.

Baroness Young

My Lords, I should like to thank both the noble Lords, Lord Cledwyn and Lord Gladwyn, for their response to this Answer. I should like to make it quite clear that the difficulty and the quarrel that we have arises not with the other member states of the Community but with the Parliament, which has voted in that way. I am glad that there has been a recognition by both noble Lords of that point.

The noble Lord, Lord Gladwyn, asked in regard to the overrun whether we were in the position of one country against nine. In fact, that is not the position. There are several other member states who believe that more work is needed on the size of the overrun and that the immediate priority is to find savings. I can confirm that the Budget Council will be meeting again in early September to consider the problem further.

The noble Lord, Lord Cledwyn, asked me whether or not the Community is going into deficit. The position is that the Commission's original estimate of the 1984 overrun was for 2.6 billion ecus or £1.5 billion. At the Budget Council on 19th and 20th July the president suggested that the financing requirement could be reduced to half that sum and the Irish presidency has suggested a compromise of 1³5 billion ecus. This demonstrates that there is scope for savings and that deferrals must now be examined in detail. So far as the United Kingdom's attitude to all this is concerned, we have put forward constructive proposals for dealing with the question of this problem of the 1984 overrun, in accordance with the provisions of the treaty and in a way which is consistent with the own resources system. Indeed we have taken the orthordox Community-minded approach.

4.2 p.m.

Lord Home of the Hirsel

My Lords, I am glad that my noble friend made it clear that this country was not in a minority of one. After all, the Council of Ministers at the Prime Minister's level were unanimous in the recommendation that they made. However, could I ask my noble friend one question on the procedure? Am I right in thinking that while the parliament can delay, they cannot override a decision of the Council of Ministers? Could my noble friend possibly say whether there is a limit to the time by which the parliament can delay such a matter as this? Can the Council of Ministers at their next meeting reverse the policy of the parliament or do we have to go through the parliamentary process once more?

Baroness Young

My Lords, of course this question that my noble friend has asked is very important. In a way it relates to whether or not the parliament's action is illegal. That was a question that was asked by the noble Lord, Lord Gladwyn. The answer is that this is a question about which the Community lawyers could argue for years. We do not want to put ourselves into that position. What we want is to have our refunds paid. We shall do this because ultimately we do not believe that the parliament will stand against the rest of the Community and that it will not stand against an agreement which was reached under Chancellor Kohl's presidency of the Community and was endorsed under President Mitterrand's presidency and was agreed at the Fontainbleau Summit.

Baroness Elles

My Lords. is my noble friend aware that all British members in the European Parliament protested strongly and loudly against the very irresponsible action of the majority in the European Parliament on Thursday? The British contingent pointed out firmly to their colleagues in the European Parliament that this form of blackmail, expecting the British Government to submit to a supplementary budget for 1984, would certainly not be the way to get the British Government to find a satisfactory means of dealing with the Community budget overspill. This was pointed out loud and clear by British members in the European Parliament. From what my noble friend has said I am quite certain that this is indeed the case.

With regard to the legality of the action of the European Parliament, even the European Parliament will claim that its actions are sovereign and I believe that there is no question that what it did on Thursday was perfectly legal. The question will be how soon the Parliament will give its authority for the transfer of appropriations from the reserve chapter to the budget lines in order that the Commission may act on that recommendation. We very much hope that this will go through in September and that the majority of the Parliament will realise that this is not the way to make the British Government change their minds or come to another solution. So far as the British contingent are concerned, we are quite certain that the British Government will continue their policy of ensuring that the Community budget is run on efficient, sound and legal lines. I strongly support all the actions that have been undertaken by my noble friend and other members of the Government.

Baroness Young

My Lords, I should like to thank my noble friend Lady Elles very much for the remarks that she has made. We know that the British members of the European Parliament have spoken out vigorously against this decision that was taken. I am well aware of the very important and valuable role taken by my noble friend Lady Elles herself on this matter. We are glad to hear what she has to say. We do of course hope that there will be a settlement of this issue in September.

Lord Bruce of Donington

My Lords, is the noble Baroness aware that so far as the evidence is available, the budgetary procedures as prescribed in Article 203 have been gone through and that all that remains to be done is for the president of the Parliament to sign the budget? To some of us it seems that the parliament itself has not acted within its rights on the strict interpretation of Article 203 of the treaty, in that the outgoing president could himself have signed the budget, as agreed, after it had been through the conciliation procedure, which I understand it has been through. So will the noble Baroness take another look at the legal position which seems to be so clear as not to necessitate an indefinite series of conferences between lawyers?

Would she also hear in mind that it is not always wrong or even reprehensible to he in a minority of one? Noble Lords will recall that there have been many times in our history when we have been a minority of one, and we have not always been wrong either. Will the noble Baroness further bear in mind that it is not necessary to give way to the request for an increase in VAT resources from 1 per cent. to 1.4 per cent. until the disciplines have satisfied the British Parliament, who are also going to be involved in this? It is not the best way to agree to finance a deficit which has been caused by grossly overspending on the common agricultural policy. It is not the best way to discipline, to give away in advance a contribution by way of loan to overcome a deficit in order to secure the final objective. Is the noble Baroness aware that even though Her Majesty's Government may be a minority of one, all efforts made by them to stand up to this position and ensure an effective control of common agricultural policy will be welcomed not only by your Lordships' House and another place but by the country at large?

Baroness Young

My Lords, the noble Lord, Lord Bruce of Donington, has raised a number of points. I would not wish to add anything to what I have already said on the question of whether or not the parliament's action is illegal, but I have noted what he has to say. I do not think that there is any member of Her Majesty's Government who would not agree that there have been occasions in which we have been in a minority of one in the European Community because we have been standing up for principles which we believe to have been right.

The outcome of the Fontainebleau Summit was a vindication of our stand on a number of policies. Therefore, we are very glad that in future under the agreement reached at Fontainebleau our refunds will be paid automatically on the revenue side of the budget and our 1983 refunds are the last refunds to be paid on the expenditure side of the budget and therefore the last opportunity for the Parliament to delay them.

On the noble Lord's point about budget discipline, it will come as no surprise to him to know that just as Her Majesty's Government have felt that budget discipline was right in home affairs, so we believe it to be right in European affairs. We have sought all the time to bring a measure of budget discipline into the Community budget.

Indeed, as I indicated in an answer to a previous question the size of the 1984 overrun has been reduced. We believe that in 1985, as the Budget Council agreed at its meeting on 19th and 20th July, expenditure cuts will bring the budget within the 1 per cent. ceiling.

Lord Bruce-Gardyne

My Lords, can my noble friend shed light on one aspect of the argument over the current year's overspend? Is it the case that while we are seeking to bring the arrangements for financing this within the rules of the Community, the Commission is apparently perfectly at liberty to add to the size of the overrun by unlimited disposals of for instance, butter to the Soviet Union, more or less of its own volition and without any ability on our part to control it? Is that really the position? Does it not suggest that the situation could get worse rather than better in that respect?

Baroness Young

My Lords, it has always been envisaged that our 1984 refunds would be paid in 1985 on the revenue side of the budget; that is, as part of the revised own resources decision. On the particular point that my noble friend Lord Bruce-Gardyne has raised on the disposal of butter, this is a possibility and it is one about which we have expressed our concern.

Lord Elystan-Morgan

My Lords, will the noble Baroness please return to the crucial question of the legality or otherwise of the act of the European Parliament? Will she confirm that Her Majesty's Government have taken the advice of the Law Officers in this matter? Since it is a question of such crucial public interest, will Her Majesty's Government consider the publication of a White Paper incorporating that opinion? If it be the opinion, as many apprehend that it undoubtedly will be, that there has been a clear and fundamental breach of agreement in respect of the rebates, will Her Majesty's Government clearly say that they will not exclude the possibility of taking action in the European Court?

Baroness Young

My Lords, I would not have given the answer that I did when the Question was originally asked if I had not had advice from lawyers. The answer is therefore that this is a matter on which lawyers have given an opinion. The opinion is that it is an issue on which Community lawyers could argue for many years. In fact, we do not want that; we want our refund. That is what we want. That is what we hope we are going to achieve.

It is to speculate about what might be the outcome to consider the other supplementary points which the noble Lord has raised. We have not reached the position of not getting our refund. I can perhaps also say that on the matter of the behaviour of the Parliament, the French Prime Minister M. Fabius is reported to have described the Parliament's act as wrong and disastrous, and the French Minister for European Affairs has said that the vote risked creating serious difficulties for the functioning of the Community and did not contribute in a constructive way to the solution of the budget problem for 1984.

Lord Cledwyn of Penrhos

My Lords, I am much obliged to the noble Baroness for the replies that she has given. Can she say what will happen now in practical terms? Is it the case that the Government will now await the European Parliament to see whether the Parliament will reverse its decision, which we regard as totally unjust; or are the Government proposing that some further action be taken in the meantime? Can she explain precisely what is going to happen?

Baroness Young

My Lords, we hope, of course, that when the European Parliament reassembles it will reconsider this matter. My noble friend Lady Elles said that this was a matter that could be considered in September, and the Parliament will be meeting at times for the rest of this year. If the noble Lord, Lord Cledwyn, is suggesting that we should withhold—it is one of the suggestions that has been made—that is something on which it would not be proper for me to speculate at the present time. What is clear in all this issue, as I made plain right at the beginning, is that the Community Heads of Government have entered into a commitment, that all the Community institutions except one are ready to honour that commitment, and that it is only the Parliament that is at odds not just with Britain, but with all the other member states.

Lord Cledwyn of Penrhos

My Lords, do the Law Officers of the Crown in this country take the view that what the Parliament has done is illegal?

Baroness Young

My Lords, I really do not think that I can add anything on this point to the answers I have already given.