HL Deb 25 April 1985 vol 462 cc1232-9

4.6 p.m.

The Chancellor of the Duchy of Lancaster and Minister for the Arts (The Earl of Gowrie)

My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my honourable friend the Economic Secretary to the Treasury. The Statement is as follows:

"With permission, Mr. Speaker, I should like to report to the House on the outcome of Tuesday's Budget Council in Luxembourg.

"The Council met a delegation from the European Parliament led by the President of the Parliament, M. Pfimlin, to hear the Parliament's views on the proposals contained in the Commission's Letter of Amendment No. 3 to the 1985 Preliminary Draft Budget.

"An essential feature of the Draft Budget from a United Kingdom viewpoint is its provision for payment of the United Kingdom's 1984 1,000 mecu abatement on the revenue side of the Budget. This will take place when the Own Resources Decision has been ratified by all member states.

"On the expenditure side the Council agreed on additional provision of 1,955 mecu of agricultural expenditure. The total figure agreed for agriculture in the 1985 Budget is consistent with the Commission's price proposals for 1985.

"The Council increased food aid appropriations by 26 mecu to compensate for changes in world grain prices in order to ensure the fulfilment of commitments on levels of food aid made at the Dublin European Council in December. In the light of the European Council's agreement in March, provision of 70 mecu was entered into the reserve Chapter 100 for Integrated Mediterranean Programmes.

"In response to a request from Belgium the Council agreed in conjunction with the Commission to re-examine estimates of the VAT tax base for 1985 in each member state to verify the accuracy of the existing figures. The results will be reported to the Council in due course.

"Consequent on decisions taken by the Budget Council the total supplementary finance required in 1985 in excess of the Community's own resources is 1981 mecu. This figure is nearly 1,000 mecu lower than that originally requested by the Commission. In accordance with the Conclusions of the Foreign Affairs Council on 17th to 21st March the Budget Council confirmed that this supplementary finance of 1981 mecu would be made available in the form of non-reimbursable advances through an Inter-Governmental Agreement. I will place a copy of the text in the Library as soon as the definitive version is received.

"I made it clear that payment by the United Kingdom under the Inter-Governmental Agreement would be dependent upon the prior approval of Parliament. This is recorded in the text of the agreement. Member states' contributions to the Inter-Governmental Agreement will be related to their VAT rates in the Budget. Based on the estimated United Kingdom 1985 VAT share of 21.34 per cent. the United Kingdom's gross contribution will be some 423 mecu. This will be partially offset by additional receipts and our remaining net contribution will qualify for the two-thirds Fontainebleau abatement.

"The Council concluded by establishing a draft budget for 1985 and sent it to the European Parliament.

"The agreement provides a realistic basis for the 1985 European Budget and is a satisfactory outcome for the United Kingdom; the overall figures both for agricultural expenditure and for the Inter-Governmental Agreement were lower than had been sought by other member states; and the net cost to the United Kingdom will, as a result of the Fontainebleau mechanism, be significantly less than the net cost of the last year's Inter-Governmental Agreement."

My Lords, that concludes the Statement.

Lord Stoddart of Swindon

My Lords, I should like to thank the noble Earl for repeating the Statement which was made in another place. First, may I ask him this. Would it not be preferable in future if figures in Statements relating to EEC finance were given in pounds sterling, which we all understand, rather than in mecus, which in fact we do not?

Is this not yet another huge injection of cash—£1,200 million, I believe it is—to feed the gargantuan, insatiable and monstrous CAP? Can the noble Earl confirm that the total gross cost to the United Kingdom will be £245 million? Will he explain in detail if possible how that is to be rebated, and what the actual net cost to the United Kingdom will be?

Can the noble Earl also say why the Government, who are so stringent in their budgetary management at home, and are even now planning to cut benefits to the poorer sections of our community, are so ready to agree to enormous increases of expenditure by the EEC?

Furthermore, does he not agree that it is a scandal that the EEC is now spending £20 million a day on destroying and dumping food surpluses, to the detriment of our own Commonwealth and the third world countries, when it is doing so little, in terms of its size, to assist the starving in Ethiopia and elsewhere?

May I also ask the noble Earl what arrangements there will be to obtain parliamentary approval of the Inter-Governmental Agreement? I ask him that because I think he will agree that we do not want a repetition of what happended last December, when the Government were challenged by Mr. Oliver Smedley through the courts. Will we have a Bill and will both Houses have an opportunity to debate the agreement properly?

May I also ask the noble Earl when we are likely to receive the £600 million rebate agreed at Fontainebleau? Will the Government give the assurance that the European Assembly will not be allowed by the Government to dictate how that is spent?

Finally, concerning re-examination of the VAT tax base for 1985, which was referred to in the Statement, how do the Government expect this to affect the United Kingdom overall net contribution?

Viscount Chandos

My Lords, on behalf of these Benches I, too, should like to thank the noble Earl, Lord Gowrie, for repeating the Statement made in another place. We on these Benches welcome the agreement of the draft Community Budget for 1985 and the satisfactory outcome for the United Kingdom itself in the form of the 1 billion ecu abatement in our contribution. I also welcome the opportunity to respond to the noble Earl on an occasion when I think his wrath will be directed more in the direction of other Benches than in the direction of myself.

The modest reduction in the share of the Budget taken by agricultural expenditure is particularly welcome. I am sure many parts of your Lordships' House will agree there are still many areas outside agriculture in which the European Communities have a substantial contribution to play in the economic, industrial and social life of not only the United Kingdom but also all other member states.

In view of the United Kingdom's estimated theoretical commitment under the Inter-Governmental Agreement, of over 400 million ecu, which represents more than 5 per cent. of the Government's projected borrowing requirement, I wonder whether the noble Earl can tell us whether time can be given, at the earliest opportunity, to debate the report of the European Communities Committee on the decisions of future financing for the Community. Secondly, I wonder whether the noble Earl can give any figure for the increase in aid to developing countries under the terms of the Lomé Convention, at a time when the plight of developing countries is so acute that it must eclipse even the need for financial stringency within the Communities?

Finally, in view of what the Government themselves have described as the satisfactory outcome for the United Kingdom of these budget negotiations, and in view, at the same time, of the continuing volatility of the exchange rate and the widespread desire in industry for greater stability of those exchange rates, would not the political gesture of the United Kingdom becoming a full member of the European monetary system not now be wholly appropriate?

4.16 p.m.

The Earl of Gowrie

My Lords, I am grateful to both noble Lords for their reception of the Statement. Perhaps I am a little more grateful to the noble Viscount, Lord Chandos, than to the noble Lord, Lord Stoddart of Swindon, not least because it surprises me, indeed, perhaps it rather gratifies me, that I appear to cast such terror into the bosom of the noble Viscount, Lord Chandos, though I had not noticed it previously.

I do not think that this is the time or place to debate agricultural support systems or the common agricultural policy. I am not even sure whether I would be the appropriate person. However, the shortcomings of the common agricultural policy and the persistent, and in many directions successful, efforts of the United Kingdom to reform it are well known.

I should just say to noble Lords, including those who are considerably more expert in agricultural matters than I am, that all agricultural support systems—including native ones which we have known in this country under successive Governments—produce imbalances and yet most of us are agreed that free markets in food do not work very easily. Thus it is a constant and uphill struggle.

Nevertheless, I think that the noble Lord, Lord Stoddart, was too stringent. The total figure for agriculture is rigorous and realistic and is certainly lower than that sought by other member states. The increase was unavoidable, mainly in order to finance the rundown of intervention stocks from their present high levels, which are the result of setting support prices too high in the past. What matters now is to prevent intervention stocks building up again by reducing the real level of support. The Agricultural Council took the first steps last year, for example with the milk levy. The Commission's price proposals this year are a further step in the right direction.

I rather share the irritation of the noble Lord, Lord Stoddart of Swindon, with Euro-speech and Euro-figures. However, we have to use common terms. He is right to say that the deficit to be financed by the Inter-Governmental Agreement is £1.2 billion.

In respect of ourselves, the United Kingdom share is £245 million. However, given the Fontainebleau agreement successfully negotiated by the Government, we enjoy an abatement of two-thirds. Therefore, although I cannot give an exact figure, our net contribution is about £40 million, which will be lower than our contribution to the inter-governmental arrangement last year.

Both noble Lords asked me about foreign aid, not least to Ethiopia. It has of course been considerable. There has been considerable European response and, I am glad to say, very considerable response from this country to that tragedy. However, I do not think that this is a direct common agricultural policy, or European budgetary issue; but I shall try to find out what are the figures that the noble Viscount, Lord Chandos, sought.

My Lords, the noble Lord, Lord Stoddart of Swindon, asked me whether the House would be asked to approve the inter-governmental arrangement. My advice is that Parliament will indeed be asked to approve it, but I do not yet know in what form the Government will be seeking parliamentary approval. Last year I think it was in a money Bill, so it did not come before your Lordships' House. I do not yet know what the arrangement is for this year.

Baroness Llewelyn-Davies of Hastoe

My Lords, while I quite understand that the noble Earl thinks this is not a suitable opportunity for a debate on the CAP, may I ask him a question about the Community farm prices? The House will know that these negotiations are still being carried on. Can he tell us something about what effect, if any, the outcome of these negotiations may have on the new budget and on the inter-governmental agreement?

The Earl of Gowrie

My Lords, I will certainly endeavour to do so. My advice is that the Council has now agreed a draft budget for the whole of 1985. That will now go before the European Parliament. Our judgment is that this is a rigorous and fair budget in respect of the agricultural contribution but that inevitably, as you seek to go down, there are some costs in the first year. This is why we have had to increase the overdraft, so to say, in this year.

I apologise to the noble Lord, Lord Stoddart of Swindon. He asked me one question which I did not answer, as to when we are going to get our abatement for 1984. The agreement at Fontainebleau was that the 1,000 million ecu abatement would be recieved by the United Kingdom before the end of calendar 1985.

Lord Bruce of Donington

My Lords, now that the draft budget of the Community for 1985 has been firmly established, is the noble Lord prepared to give the House and, indeed, the public the reasons why Her Majesty's Government were able to agree proposals contained in the budget for the expenditure of 3,771 million ecu, or £2,187 million, on the public and private storage of invervention stocks in the Community—a gross waste of public money, of which some £459 million is being subscribed out of the pockets of the British taxpayer? Will he say, in view of all the talk there has been about the imposition of budgetary discipline, particularly in the light of Article 2 of the Fontainebleau agreement, what active steps Her Majesty's Government will take on behalf of the people of Great Britain as a whole for avoiding and abolishing this grossly wasteful and entirely unwarranted expenditure of public funds?

The Earl of Gowrie

My Lords, I think the noble Lord, Lord Bruce of Donington is making, even by his standards, a curiously hysterical intervention. The fact of the matter is that this is a rigorous settlement which the United Kingdom has been in the lead in negotiating. Our own share is less than it was last year, and intervention stocks are on their way down. There is no system of agricultural support known to me which will not provide imbalances and surpluses in some years. One only has to look at the problems that other economies around the world have in this respect to know that. That will be the case unless we all go back to fundamentally agricultural economies, and I do not think that even the noble Lord is suggesting that we should do that.

In my respectful judgment, it is a mistake to talk down this settlement, which, as I say, is a rigorous one. It is the kind of settlement which, in no less trenchant tones, the noble Lord was demanding only last year.

Lord Gladwyn

My Lords, perhaps I may say that, subject to eventual agreement on agricultural prices—which I believe is being held up because of objections by the German Government and efforts of the German Government to protect their own small farmers in Bavaria—on these Benches I share exactly the view of those on the Benches immediately behind us that this Statement is broadly satisfactory. I think that the Government have done what they could in the circumstances.

Perhaps I may ask one question. I understand that the Council met a delegation of the European Parliament to hear the Parliament's views on the proposals contained in the Commission's letter of amendment. What happens if the Parliament does not agree? It is probable that the European Parliament will agree, but what happens if the European Parliament does not agree?

4.25 p.m.

The Earl of Gowrie

My Lords, I am very grateful for the welcome given by the noble Lord, Lord Gladwyn, with his knowledge and experience of the issue. He has posed a hypothetical question to me. I do not think the Parliament would be so foolish as not to agree, but if they do not agree, we do not have a budget.

Lord Harris of Greenwich

My Lords, may I ask the noble Earl one question? He may recall that my noble friend Lord Chandos asked him specifically what the attitude of the Government now is going to be in the light of the current situation so far as the European monetary system is concerned. Can we now have a reply to that?

The Earl of Gowrie

My Lords, I perhaps should have referred to the noble Viscount's question; I apologise to the House. I would have referred to it by saying, very respectfully and gently, that I think it is another issue. It is, indeed, another issue which we are going to discuss next week, and I suspect I shall have drawn the short straw once again in respect to that debate.

Lord Molloy

My Lords, the noble Earl, Lord Gowrie, was quite right when he said that this is hardly the time to have a debate on this subject, despite the fact that it involves the Government spending multi-millions of the taxpayers' money. Some of us are really concerned that the noble Earl, Lord Gowrie, is so very complacent about that, and that, when someone feels a little upset about it, he borders on terms of being offensive when he describes my noble friend Lord Bruce as being hysterical. If I may say so, I think my noble friend is very well-armed with facts, figures and experience in the European Parliament and, indeed, with regard to the EEC. So I wonder whether the noble Earl, who is a fair-minded man, will take back to the Leader of the House the feeling that on a subject of this importance we ought to have the sort of debate that he himself seemed to indicate we ought to have.

The Earl of Gowrie

My Lords, I am naturally very glad that the noble Lord, Lord Molloy, is taking a stern view about the use of taxpayers' money. In respect of domestic politics I wish he took a similarly stern view from time to time. Of course, European expenditure affects domestic economies as well. I think "strictures" is probably too strong a word, but I was responding to what seemed to me to be perhaps an exaggeratedly aggressive tone on the part of the noble Lord, Lord Bruce of Donington. I thought that he might for once be rather pleased with what we had succeeded in bringing off, but I suppose that was naïve of me.

Lord Stoddart of Swindon

My Lords, may I thank the noble Earl for the pretty full way in which he has answered my question; but there are a couple of points which I should like him to answer upon which he did not touch. I asked him whether he could give the assurance that the Euro Assembly will not be allowed to determine how this £600 million rebate will be spent. I mean it in this sense. I believe that rebate is the property of the British Government, and although I might not agree with the way they spend that money, by God, I uphold their right to spend it in accordance with our own constitution.

Secondly—I appreciate he may not be able to answer this one now, but perhaps he will write to me—on the question of the re-examination of the VAT base for 1985, how is this likely to affect United Kingdom overall net contribution since, if the VAT tax base was increased considerably for the United Kingdom, it could affect our contribution very considerably? Perhaps the noble Earl will write to me if he does not have the answer to that last question.

The Earl of Gowrie

My Lords, on VAT, the agreement so far is that the VAT rate would go to 1.4 per cent next year, but there is the Fontainebleau abatement, where the United Kingdom is concerned, which will work in our favour. The noble Lord will also be aware that my right honourable friend the Chancellor, in his Budget speech, ruled out changes to the VAT base. The noble Lord, Lord Stoddart of Swindon, is indeed right in saying that it is the British Parliament which will dispose of the expenditure.