Foreign Affairs Council (Hansard, 28 March 1984)

§ Baroness Young
My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable and learned friend the Foreign and Commonwealth Secretary. The Statement is as follows: "With permission, Mr. Speaker, I should like to make a statement about the Foreign Affairs Council which met in Brussels on 27th March.
"The main purpose of the council was to review the position following last week's European Council and to see if further progress could be made on the remaining areas of disagreement. Ministers also had a short discussion of political co-operation issues, and approved four declarations prepared during the European Council on 19th to 20th March. These declarations relate to East-West relations, the Middle East, Latin America and Cyprus. I am arranging for copies to be placed in the Library of the House.
"On the main question, most of yesterday's meeting was devoted to the issue of budget burdens. The basis for our discussion at this meeting was that there should be only one more year of ad hoc refunds covering 1984, to be followed by the introduction thereafter of a lasting system for a fair sharing of the budget burden.
"It did not, however, prove possible to reach agreement on the figure that would be the basis for such a system. This figure is of greater significance than is implied by the crude size of the gap between the figure of 1,000 million ECUs (£590 million) which is being proposed to us and the figure of 1,250 million ECUs (£737 million) which my right honourable friend indicated at the European Council that we would be ready to accept. Since this is the starting point for a durable system and not just a figure for one or two years, it is important to get it right at the outset. Further work will now be set in hand. Foreign Ministers will take up the issue again at our meeting on 9th April.
"The regulations covering our outstanding refunds for 1983 remain blocked. I have made clear 248 to our partners that this is unjustified and misconceived.
"As the House knows, the Commission have made a request for an advance payment of the own resources due in April. The principal justification for this advance would have been to provide for the payment of United Kingdom and Federal Republic of Germany refunds by the end of March Since these refunds remain blocked the case for the advances can no longer be sustained. We shall not therefore ask the House to approve the supplementary estimate for the advance payment which the Commission requested for 30th March.
"I do not need to remind the House that one of the main issues in the negotiations has been the proposal by other member states and the Commission to change the basic decision under which the Community is financed by increasing the VAT ceiling. This proposal requires the unanimous consent of member states and national Parliaments. The Government have indicated their willingness to entertain that proposal but only if there is effective control of Community spending and a fair sharing of the budgetary burden. Both these conditions remain crucial.
"It is bound to be difficult to reach agreement on fundamental reforms of the kind now under discussion. The decisions will determine the future of the Community for a considerable number of years ahead. It is for this reason that the Government believe that it is in our interest to take no action that might damage the prospects of decisive progress. We shall continue to work constructively for a settlement of these negotiations on a basis acceptable to the Government and to this House".
My Lords, that concludes the Statement.

§ Lord Cledwyn of Penrhos
My Lords, we thank the noble Baroness for repeating that Statement It is clear that the talks between the Foreign Ministers have been a failure, and we regret this. As the noble Baroness has said, the area of agreement is comparatively small: it is the difference between £712 million and about £600 million, which the Government have offered, out of a total budget of £16.5 billion. The Statement says: This figure is of greater significance than is implied by the gap ". Can the noble Baroness enlarge a little on that and say precisely what is meant by it? Have we, for example, reduced our demand from 1.5 billion ECUs to 1.25 billion ECUs by accepting a different accounting method? I ask that question because I read it in a newspaper this morning, and it would be interesting to know whether it is in fact true.
The Statement also says: Further work will now be set in hand". Could the noble Baroness the Minister indicate precisely what is meant by that? Does it merely mean further consultations will begin immediately to try to improve matters? Can she say what prompted the Government not to withold payment to the EEC? Can she further say what are the political consequences of not making the advance payment of £100 million this month? Will there be interest penalties if we do not pay it? And what would be the size of the penalties?
249 Finally, I welcome the fact that there was discussion on major foreign policy issues. We have already had an exchange on the Middle East this afternoon, and I will not pursue that now. Could the noble Baroness say whether any positive conclusions were reached on the problem of Cyprus and on our relations with the Argentine?

§ Lord Gladwyn
My Lords, I, too, should like to thank the noble Baroness and, indeed, sympathise with her for having to repeat this wholly deplorable Statement. I have only one substantial question to put to her. Have the Government no apprehension that, if we go on digging our heels in and refusing to make any concessions, as I understand it, on our original demand for a refund of £737 million—more especially given the very small sum which is apparently now involved—in the long run our nine partners might be tempted to proceed in accordance with the original Treaty of Rome and take a decision on an increase in the VAT ceiling by a "qualified" majority vote? That is an action which I believe they might feel justified in taking in spite of the so-called, and unofficial, Luxembourg compromise. Incidentally, I imagine that such a procedure might eventually be resorted to if the Irish remain in a permanent minority of one in their demand for unrestricted milk production.

§ Baroness Young
My Lords, I should like to thank both the noble Lord, Lord Cledwyn, and the noble Lord, Lord Gladwyn, for their responses to this Statement. The noble Lord, Lord Cledwyn, began by asking me about the size of the gap between what has been offered and what we feel we can accept. He asked why, if it is the size that it is, it could not be bridged. The answer is that the figure is of crucial importance because it provides the foundation for a system which will operate into the future. It is, therefore, important that we get it right, and the gap betwen 1,000 and 1,250 million ECUs is a substantial one so far as the United Kingdom is concerned. But in terms of cost to other member states the gap is relatively small when divided between eight or nine contributors. It is a matter of regret that our partners were unable to take on the necessary small additional burden to bridge the gap.
The noble Lord, Lord Cledwyn, also asked me about a further meeting. This will in fact take place between the Foreign Ministers on 11th April, and we hope, of course, that the negotiations will continue. He also asked me about interest rates which might possibly be charged. The fact is that the Commission may well seek to impose interest charges, but we consider that there is no obligation to make the advance payment and, therefore, no obligation to pay any interest on that.
Finally, the noble Lord, Lord Cledwyn, asked me about the declaration that was made and what was said about Cyprus. I think, rather than reading out what was said, I might leave it to the noble Lord, Lord Cledwyn, to look at the whole Statement, which will be available to your Lordships. It starts by reiterating the council's statement of 16th November 1983 in which they support the Security Council resolution, which should be used as a basis for restoring the territorial integrity and unity of the Republic of Cyprus.
250 The noble Lord, Lord Gladwyn, asked me whether the Government were not concerned that, if we made no concession, our partners might proceed to an increase of VAT by a qualified majority vote, despite the Luxembourg compromise. I think that I should make it plain that we have made concessions. We have made a number of moves to try to bridge the remaining gap. Last week we agreed to work on the basis of the VAT-expenditure share gap rather than the own-resources expenditure share gap, or net contributions; and, on figures, we have moved from 1,500 million ECUs to 1,250 million ECUs for compensation to the United Kingdom in the first year of the system. The fact is that there has been progress between the Council meeting at Athens and the Council meeting at Brussels last week and there was further progress yesterday. We believe that agreement should be possible, but I think that it would be most unwise for me to be drawn into any comment on hypothetical situations.

§ Lord Bruce-Gardyne
My Lords, can my noble friend confirm that there is surely some doubt about what the noble Lord. Lord Gladwyn, has said? Is it not the case that any proposition for an increase in own resources has nothing to do with the Luxembourg compromise and clearly requires the specific endorsement of each individual Government and of each individual Parliament? Can my noble friend at the same time confirm that there is no reason for us to be anxious that, in the pursuit of the perhaps rather narrow issue of the budget share, we should be deterred from achieving that real control of future Community expenditure which seems to be threatened at the moment by expansion rather than contraction owing to the arguments over milk and the total failure to deal with the fundamental problem of grain prices?

§ Baroness Young
My Lords, my understanding of the position on own resources is as described by my noble friend Lord Bruce-Gardyne. On his second point, we have always wanted to get Community expenditure under control and what we have said on own resources is that we would be prepared to consider an increase of own resources provided that we could get agreement on the budget and provided that expenditure could be brought under control.

§ Lord Maude of Stratford-upon-Avon
My Lords, would my noble friend agree, as your Lordships almost unanimously agreed when we debated this matter recently, that important as it is to get a satisfactory budget contribution settlement for this country, nothing will be of the slightest use unless there is a restructuring of the common agricultural policy and a firm and permanent control of that expenditure?—because without that no budget settlement can possibly hold indefinitely.

§ Baroness Young
My Lords, I think that the Government have made plain that they accept that what is required is a reform of the common agricultural policy in order to bring expenditure under control. I agree with what my noble friend Lord Maude has said on this matter.

§ Lord Ezra
My Lords, would the noble Baroness confirm that it will remain an objective of the Government's policy to pursue positive purposes within the European Community, the creation of a real common market, collaboration in technical development, creation of Western Europe as an important world power, and that it will be demonstrated that the negotiation over the budget contributions and the negotiation over the common agricultural policy are subservient to those important objectives?

§ Baroness Young
My Lords, the Government agree that there are very important long-term objectives for the European Community and we should like to be able to turn our attention to these; but we feel—and we believe we have the support of the country in this—that it is right that we should get a settlement on the budget issue and bring the expenditure of the Community under control.