HL Deb 27 June 1984 vol 453 cc922-31

3.33 p.m.

Viscount Whitelaw

My Lords, with the leave of the House, I shall now repeat a statement being made in another place by my right honourable friend the Prime Minister about the European Council in Fontainebleau on 25th and 26th June.

"With permission, Mr. Speaker, I should like to make a Statement about the European Council in Fontainebleau on 25th-26th June, at which I was accompanied by my right honourable and learned friend the Foreign and Commonwealth Secretary.

"I am glad to tell the House that the European Council reached agreement on a fairer and more soundly based system for the United Kingdom's financial contribution to the Community. This is a successful culmination of our long and persistent efforts to correct the budget inequity and to put the United Kingdom's refunds on a lasting basis.

"The main features of this agreement are, first, that it provides for a refund of about £600 million (1,000 million ECU) in 1984, with the new system in effect thereafter. Under the new system the United Kingdom will get a rebate of 66 per cent. of the gap between our share of VAT and our share of expenditure. This means that, in terms of our marginal net contribution, the United Kingdom will be contributing not about 21 per cent. as we are liable to do at present but about 7 per cent. to new Community expenditure. This arrangement is far better than anything previously on offer and far better than the offer of the other Nine member states at the last European Council.

"Secondly, this system can only be changed by a unanimous decision by all member governments and ratified by their Parliaments. The benefits for the United Kingdom will continue unless and until we ourselves agree to change it.

"Thirdly, the advantages of the system will be available to us from 1985. We shall have the arbitrary refund of about £600 million for the single year 1984 only. This is a substantially better situation for the United Kingdom than was on offer earlier.

"Fourthly, the refunds will be implemented, as we have requested, by reducing the United Kingdom's VAT payments to the Community in each successive year.

"The House may recall that at the last European Council we reached provisional agreement that measures be taken on budgetary discipline. We considered it essential that the rigorous rules which at present govern budgetary policy in each member state also apply to the budget of the Community. We went on to add that the Community should fix at the beginning of the budget procedure the maximum level of expenditure which it considers it must adopt to finance Community policies during the following financial year; and further that net expenditure relating to agricultural markets should increase less than the rate of growth of the own resources base. Finance Ministers are now working on the precise measures to guarantee the effective application of these principles.

"In the light of the agreement reached both on the United Kingdom refund and the future control of Community spending, the European Council also agreed that the own resources ceiling should be increased to 1.4 per cent. of VAT. The Government will be prepared in due course, and when the arrangements are in place on budget discipline, to recommend to the House that the own resources ceiling should be increased to 1.4 per cent. of VAT. However, the net effect of such an increase and of the VAT refunds for the United Kingdom is that, although the ceiling will be increased to 1.4 per cent. for the Community as a whole, the United Kingdom will itself be contributing less than we are at present liable to contribute under the one per cent. limit.

"It was further agreed that the refund of about £440 million (750 million ECU) due to the United Kingdom in respect of 1983 should now be released. The Council of Ministers yesterday approved the necessary regulations. It is now for the European Parliament to transfer the funds from the reserve chapter of the budget. We thus have the assurance of the successful implementation of our refunds for 1983 (£440 million), 1984 (£600 million) and for future years, for as long as the 1.4 per cent. VAT ceiling lasts.

"The European Council discussed current world political and economic developments. I described the outcome of the London economic summit. President Mitterrand and Chancellor Kohl spoke about their visits last week to the Soviet Union and Hungary. It was heartening to find that the four keynotes of the London summit—unity, resolve, dialogue and co-operation—were unanimously endorsed as the basis for a secure and constructive relationship with the Soviet Union which the visit to Moscow by my right honourable friend the Foreign and Commonwealth Secretary in July is designed to promote.

"The European Council confirmed that the negotiations for the accession of Spain and Portugal should be completed by 30th September 1984. We also discussed the negotiations for the renewal of the Lomè Agreement with African, Caribbean and Pacific countries. The European Council stressed the importance of bringing these negotiations to an early conclusion.

"The European Council also discussed the future development of the Community. We have put forward specific ideas in a paper which I gave before the European Council to other heads of Government. Copies have been placed in the Library of the House. I laid particular emphasis on the importance of achieving a genuine common market in goods and services leading to the creation of new jobs throughout the Community.

"The outcome of the Council is good for Britain and good for the Community. It will result in Britain's paying for the foreseeable future lower contributions than would have been due under existing arrangements with the 1 per cent. VAT ceiling; it will make possible a relaunching of the Community in which Britain will play a full role; will give an impetus to enlargement, thus strengthening democracy in Spain and Portugal; and remove what has been a constant source of friction in our relations with the Community ever since we joined."

My Lords, that concludes the Statement.

Lord Cledwyn of Penrhos

My Lords, we are grateful to the noble Viscount for repeating that important Statement. It gives the impression that the agreement is an achievement and that it resolves the outstanding problems. The Prime Minister said yesterday, "We have now ended the long series of weary and debilitating wrangles." I am bound to say that she herself contributed very substantially to the wrangling and that there is room for speculating whether a better agreement might not have been achieved before this if the negotiations had been conducted rather more sensitively. The right honourable lady the Prime Minister promised a better balance. I am afraid that we have not had a better balance; that is, a balance between refunds and contributions.

A number of matters need to be made absolutely plain at this stage. First, is it not the case that the difference between the new arrangement and the previous ad hoc arrangements is that the calculation for the rebate will be based on a lower figure, taking account of the proportion of Britain's VAT contribution to the budget? Will not this be 20 per cent. lower than the full amount? Further, does not this mean that we shall in effect be paying more in three years' time and that the reality of the situation is that the Government have made very substantial concessions? Are not the rebates less than those granted to this country between 1980 and 1983? Furthermore, do not the figures, based on the Government's own calculations, suggest that the British contribution could double over the next two years? In these circumstances, how can the right honourable lady or the noble Viscount say that Britain will he better off as a result of this agreement in the longer term?

Secondly, can the noble Viscount tell the House how permanent this solution really is? The Statement refers to placing our refunds on a lasting basis. Will the noble Viscount confirm that the rebate is valid only during the period that the Community keeps its spending inside the new higher limit and that when the limit needs to be raised, as obviously will happen, when Spain and Portugal accede, the whole question of Britain's contribution will inevitably come up for further negotiation, and that in a very short time to come? That, my Lords, is not a lasting basis, even to the most optimistic politician.

Does the noble Viscount agree with the commentators who over the last 24 hours have been saying that the ceiling will need to be raised within three years or so, and is it not the case that this year's budget is likely to be £1,400 million overspent? Would the Minister not agree that the forthcoming enlargement of the Community provides a useful, indeed, an essential, starting point for radically shifting the emphasis of European agricultural policy so that attention is directed at food requirements, rather than producer demand?

Thirdly, can the noble Viscount say what are the implications for this country of increasing Community resources? Is he absolutely satisfied that the increase in own resources will not go towards further increasing agricultural support which would, in turn, result in further surpluses? Does he not agree that without some discipline in this area the Community will soon find itself in further trouble? Does he not agree that additional resources should be concentrated on Community industrial development and on energy problems and other acute problems, including unacceptably high unemployment?

Finally, does not the noble Viscount think that the meeting of Finance Ministers next month is of crucial importance, because their success in agreeing a formula for the control of spending will decide whether the budget stands or falls? And does not the whole unstable exercise once more underline the urgent need for a radical reform of the common agricultural policy, as Select Committees of this House have so frequently recommended?

Lord Diamond

My Lords, I, too, on behalf of my noble friends and colleagues, thank the noble Viscount for repeating this very important Statement in this House. May I say to him that we give it a rather warmer welcome than has been indicated by the noble Lord who speaks for the Labour Benches. We give the Statement a rather warmer welcome because although we are very conscious—and anybody who knows my past history will not challenge this—of the need to control expenditure and fix budgets, and to work within those budgets and not to be sloppy about it, as appears to have been the case, we nevertheless take the view that what is important in all this is that we cease to have a business haggle and that we turn to working together as partners for the good of Europe, to decide the future of Europe, and to decide the Europe of the future. That is what the Economic Community is about.

May I ask the noble Viscount one or two questions to clarify the situation and to put an end to arguments which might otherwise arise? The noble Viscount's right honourable friend has, of course, put her best foot forward, and one would not expect anything other than that. But the Statement says, towards the end, that the agreement will result in Britain's paying for the foreseeable future lower contributions than would have been due under existing arrangements with the 1 per cent. VAT ceiling". Nobody quarrels with that statement. But is it not also true that if the arrangements which the Prime Minister has now accepted, subject to the approval of Parliament. had been in force over the past four years, there would have been received by this country approximately £144 million per annum less than has been received? To that extent, there is a considerable difference between what has been hoped for and what has been achieved.

Nevertheless, I hope that I make it absolutely clear that figures of that dimension, however important they are, rank as very small beer indeed in relation to the possibilities for improvement in international trade, in European trade, in European influence, and in developing policies to diminish unemployment, as well as all the other matters which are mentioned in the Statement. To that extent, we give it a modest, but reasonably warm, welcome.

3.50 p.m.

Viscount Whitelaw

My Lords, I am grateful to both noble Lords for their contributions. Perhaps it would not be unreasonable to say that I am more grateful to the noble Lord, Lord Diamond, for his contribution than I am to the noble Lord, Lord Cledwyn, for his, but they will not be surprised at that.

On the general point of the noble Lord, Lord Cledwyn, about the contributions—about what has happened over the three years, and about what might happen in the future—I think he is being somewhat less than fair to this Government. I have to point out to him in the crudest party political terms that the agreement means that since 1979 this Government will have secured £3,000 million in refunds from the Community. This means that we have contributed £3,000 million less than if Labour's arrangement had still been in effect. That is a fact. The noble Lord is entitled to say that maybe they, too, would have made efforts to get refunds since then, but those are the facts. I think that they put his comments about what has been achieved and about what my right honourable friend the Prime Minister said in a somewhat churlish light. I do not think I can accept what he said.

When it comes to the question of whether the system is durable, I have to tell the noble Lord that it can be changed only by the unanimous decision of the member Governments and the national Parliaments. I think that is a pretty considerable safeguard. I do not suggest that anything in life is ever a complete and total safeguard, but something that can be changed only by the unanimous decision of the member Governments and the national Parliaments is surely at least entitled to be described as durable. That I believe it is, and I believe it is very important for that reason.

On the next point, about the Finance Ministers' meeting, that is of course very important because they are going to work out the details of the financial discipline which, very properly, is needed, and to which the noble Lord, Lord Cledwyn, himself referred. When it comes to the agricultural position and to the agricultural arrangements, I would have thought that this Government had gone a long way at some considerable difficulty and with some unpopularity in various agricultural circles to seek to play their part in reducing the amount of agricultural expenditure. I think that that is important and has to be faced as necessary.

As for the question of where the increase in Community resources will go, perfectly plainly it will go, as the noble Lord wished it should, in large measure to the regional and social funds. It will be a failure of the Finance Ministers and of the Community as a whole if it goes to agriculture, and not to those funds. Clearly it should go to the regional and social funds, and for some part, no doubt, to the enlargement as well, both of which will contribute, I think, to democracy from the point of view of enlargement and, through the regional and social funds, to employment.

I have already said that I am grateful to the noble Lord, Lord Diamond, for the somewhat warmer welcome that he gave to the Statement. I would agree with him entirely that, beyond the settlement of the actual budget contributions, an improvement in relations, an improvement in the work towards partnership and an opportunity for enlargement in the Community must be good for the Community, must be good for the countries of the Community and must be good for democracy in Western Europe. One has to put the whole agreement very much in that context. The noble Lord gave some figures about what we might be getting in the future compared with past years. I think he said £114 million less each year. I am bound to say to him, with his very considerable financial knowledge, that much of that must inevitably be somewhat hypothetical. I can remember him in his days as Chief Secretary in another place saying that such figures would be hypothetical, and so who would never aspire to such a position, will turn round now and say that I think such figures are hypothetical, too.

Lord Thorneycroft

My Lords, will my noble friend convey to the Prime Minister, on behalf of at any rate many in the House of Lords, our congratulations on a negotiation stubbornly conducted but reaching such a successful conclusion? Will he also recognise that many in this country would prefer determined negotiations by people who are genuine in their desire to stay and work within the Community to, on the other hand, weak negotiators who are utterly uncertain as to what their role there would be?

Lord Barnett

My Lords, will the noble Viscount—

Viscount Whitelaw

My Lords. I think it would be correct for me to reply to my noble friend Lord Thorneycroft first. I will seek to answer the noble Lord, Lord Barnett, afterwards.

I am grateful to my noble friend for what he has said. I totally agree with him; and I am sure that when he describes as he did my right honourable friend's conduct in the negotiations he is much nearer the mark than was the noble Lord, Lord Cledwyn, who I think was a little unkind and perhaps unreasonable, because I do not believe that we would have reached this settlement—it is certainly far better than anything that has been on offer before—unless the negotiations had been conducted as my noble friend indicated just now.

Lord Barnett

My Lords, on the question of durability, of which the noble Viscount spoke, does he accept that there is no way that this can be thought or said to be durable without control over expenditure? Nothing whatsoever has been done or said in this Statement to deal with that vital area, and in particular the common agricultural policy.

Viscount Whitelaw

My Lords, in answer to the noble Lord may I say, first, that it has been made perfectly clear. The Statement said: Finance Ministers are now working on the precise measures to guarantee the effective application of these principles". Those principles, of course, are proper budget discipline. In addition, efforts have been made and are being made—this country has been in the lead—so far as agricultural expenditure is concerned. Those efforts must continue; and that is the purpose of the Finance Ministers' meeting. The Statement says that. The noble Lord may shake his head and say that the Statement does not say that, but I have just read out what the Statement does say. so he cannot shake his head.

Lord Barnett

My Lords, will the noble Viscount confirm that we have agreed to increase VAT own resources to 1.4 per cent. regardless of what happens at the Finance Ministers' meeting?

Viscount Whitelaw

Certainly, my Lords, that is part of the agreement, but it is also a part of the agreement that the Finance Ministers will deal with budget discipline. The noble Lord may not think they will, but it is clear from the Statement that that is the intention.

Lord Harmar-Nicholls

My Lords, is my noble friend aware that every reasonable person would have to concede that the Statement he has made means that the Prime Minister has achieved better terms for Britain—that must be conceded—with no help at all from the party opposite, who did all they could to undermine her prestige and her general style when she was trying to get something even better?

Having said that, I made a note of the phrase in the Statement, "lasting basis". Can it be a "lasting basis" when the position is that if own resources have to be increased beyond the 1.4 per cent. this arrangement falls to the ground and will have to be renegotiated all over again? That does not seem to reflect a "lasting basis". Does my noble friend also recognise that there is some disappointment in many quarters that what was promised was that we would not increase our contribution under VAT or anything else until the expenditure which brought about the surpluses had been ended? That is, not merely a promise to end them, which we have been promised for the last eight years, but that they had in fact been ended; and that has not happened yet.

I wish to put two questions to my noble friend. Will both Houses of Parliament have to affirm these alterations, as set out in the Statement, before they become effective? Will both the other place and this House have to affirm them? If the answer to that question is, "Yes, they have", will my noble friend make it certain that neither House is asked to affirm them until we have the result of the meeting of Finance Ministers, which takes place next month? If at their meeting they can show that the financial discipline will be compulsory and will have to be carried out, it could well be that these alterations could be accepted without a qualm. But if as a result of their investigations they merely say that it might be or ought to be, would there then be time for us to have second thoughts as to whether or not the increase in own resources—the 1.4 per cent. —is proper at this stage until the discipline of saving money on agricultural spending has actually been put into practice?

Viscount Whitelaw

My Lords, I am grateful to my noble friend for what he has said about the negotations and about the deal which has been achieved. On the question of own resources, the Statement says: The Government will be prepared in due course, and when the arrangements are in place on budget discipline, to recommend to the House that the own resources ceiling should be increased to 1.4 per cent. of VAT". Therefore, it has to be put before the House of Commons. I have yet to check, because of its financial implications, whether it would also have to be approved by this House, but, of course, I undertake to the House that I shall do that. Naturally, the House will expect to debate any such proposition, and I can certainly undertake that your Lordships will be able to do that. I shall have to take advice on whether this House, too, will have to approve it. I am sure the House will understand that, and I will do so as soon as I can.

Lord Gladwyn

My Lords, this agreement (though, as we think, much overdue) is certainly very welcome to all those who believe in the development of greater European unity and indeed in the future political development of the EEC. The next step, as has already been said by several speakers, will be to get agreement among the Finance Ministers as to the so-called budgetary discipline. This, we all admit, will be difficult though not impossible. But on the assumption that real progress is now at last possible, I would simply ask the noble Viscount whether the scheme recently approved by the European Parliament is going to be discussed in this House and in another place. It may not be totally acceptable, but we think many of its features are clearly desirable—if not essential—if we are to advance towards the political goals which have already been accepted by all the governments concerned. Notably of course the system based on the continuous and abusive use of a national veto must be greatly modified if we are to avoid complete stalemate when the EEC is enlarged by the addition of Spain and Portugal. So I repeat my question, my Lords: when, if at all, is the European Parliament's scheme going to be debated in this House and in another place?

Viscount Whitelaw

My Lords, I am grateful to the noble Lord for what he has said about negotiations, the Community and the hopes for the future. On the question of debating the European Parliament's report in this House, that is something which will have to be considered through the usual channels and it is quite separate from my undertaking on being able to debate, whatever the actual rules. So far as the results of this negotiation are concerned, that is a separate matter. On the European Parliament's scheme, that will have to he considered through the usual channels.

Lord Bruce of Donington

My Lords, may I ask the noble Viscount a short question? It may have a profound effect on the whole process of budget discipline to which he has referred. Is he aware that the expenditure under Titles 1 and 2 of the operating budget, which mainly concerns agriculture, is open-ended expenditure and demand-led expenditure which, to a very large extent, depends on the result of the price review? Will the noble Viscount call to mind that in the last price review Britain's veto was overridden? Therefore, how can he say that there are likely to be satisfactory budget disciplinary arrangements until he re-establishes the right of British veto at the price review and also takes some active steps to control all obligatory and demand-led expenditure?

Viscount Whitelaw

My Lords, I am grateful to the noble Lord, who makes a very important point. This clearly must be considered by the Finance Ministers. The noble Lord elevates my position very considerably if he thinks that I could have the sort of influence he has suggested on those. But I will certainly make sure that his remarks are brought to the attention of my right honourable friend the Chancellor of the Exchequer, because they are extremely important. I accept that. Certainly the agricultural expenditure is demand-led and does depend on the price review. It is true that our veto was over-ridden on the last occasion. These are matters which have properly to be considered by the Finance Ministers when they come to decide on the budget disciplines.

Lord Lloyd of Kilgerran

May I personally presume to congratulate the Government, through the noble Viscount the Leader of this House. on the fact that at last this book-keeping wrangle has come to an end, whatever may be the merits of it. May I ask the noble Viscount, in the context of the latter part of his reply to my noble friend Lord Diamond, whether he would advise or consider that more attention should be paid by the Government to co-operation in the EEC on science and technological matters, and particularly in their support of the ESPRIT development introduced by Viscount Davignon so as to assist British industry and to give more confidence to British industry that the Government, in the context of the EEC, will be able to increase jobs and reduce unemployment?

Viscount Whitelaw

My Lords, I am grateful to the noble Lord for what he has said. We have throughout said that the important reason for settling the budget problem—I would not describe it as a "book-keeping wrangle"—is that I do not think one can have it both ways. There are some who seem to suggest that they would have got a better deal than my right honourable friend the Prime Minister but I am quite certain that was not on offer and would not have happened. At the same time, if one is critical of the deal, one cannot at the same time refer to it—although I do not think the noble Lord did this—as "a book-keeping wrangle". It is certainly more than that and considerable sums of money are involved. As for the science and technological developments, certainly these are matters which are now open to the Community to pursue with more vigour than many people have felt has been done in the past.

Lord Elystan-Morgan

My Lords, May I ask the noble Viscount a simple but I trust a fundamental question? Is it the policy of Her Majesty's Government to continue, as indeed all successive governments have sought to do over the past 11½ years since our entry into the European Community, to seek to bring about fundamental changes in the constitutional structure of the common agricultural policy which many members in all parts of this House regard as both inequitable and repressive? Is it the case that such efforts as have been carried out by successive governments will no longer be pursued in the future so far as Her Majesty's Government are concerned?

Viscount Whitelaw

My Lords, I am not quite sure of the answer to the noble Lord's point about the constitutional changes to the agricultural policy. If he means that we will continue to work to change the basis of the common agriculture policy, the answer is, "Yes". I am just doubtful about the word "constitutional": but, on the face of it, "yes".