HC Deb 14 February 1978 vol 944 cc117-20W
Mr. Spearing

asked the Secretary of State for Foreign and Commonwealth Affairs if he will publish in the Official Report the relevant extracts of letters sent by the Minister of State, Foreign and Commonwealth Office, to hon. Members on legal matters arising out of the Committee debate on the EEC Assembly Elections Bill on 2nd February last.

Mr. Judd

The extracts are as follows:

Extract of my letter to my hon. Friend the Member for Newham, South (Mr. Spearing) dated 8th February: You, and other members expressed concern that Article 235 of the Treaty of Rome might permit the Council to increase the powers of the Assembly. It could be argued that in certain circumstances increased powers were needed for the Assembly in order to attain one of the objectives of the Community, that such powers had not been provided by the Treaty and that the Council could therefore take action to increase the powers of the Assembly. The strict legal answer to this suggestion is that Article 235 cannot be used to alter the constitutional structure of the Community organs. Article 235 must be read in conjunction with Articles 2 and 3 which set out the basic objectives of the Community, and with Article 4. Article 4 says clearly that the institutions of the Community shall act within the limits of the powers conferred on it by the Treaty. Accordingly, a regulation made by the Council under Article 235 of the Treaty could not constitutionally confer increased legal powers on the Assembly. Extension of Community competence into new fields is of course a different question, and that can indeed, provided it is within the objectives of the Treaty of Rome, be done, and has been done, in the case of the Regional Development Fund under Article 235. As you suggested in the debate this would indeed lead to an increase in the areas where the Assembly were competent to criticise and advise. But this is not in the formal legal sense an increase in the powers of the Assembly, unless the Assembly's advice cannot legally be disregarded or overridden. To give the Assembly legal powers of this kind would require formal amendment to the Treaty of Rome and this amending treaty would be caught by the procedures set out in the new clause. As to the budgetary implications of Article 235, it is correct that the expenditure required by new policies adopted under this Article is, by virtue of the terms of the Article itself, classified as non-obligatory. But the decision to launch such a new policy has to be taken by the Council of Ministers, acting unanimously. The policy will be embodied in a draft Regulation or other instrument which will go through the normal process of scrutiny in national parliaments. The final decision to go ahead will lie with national Ministers, acting in the light of their Parliaments' views and in full knowledge of the implications. As I emphasised during the debate of 2nd February, what will guarantee that the rights of the House of Commons will not be undermined in this area will be the determination, the commitment and quality of Members of the House of Commons. Once a new policy has been adopted, the Assembly can seek to amend the annual payments and commitments entered in the Budget for the expenditure it involves. But the extent to which the Assembly can use its powers to increase expenditure overall is strictly limited by the maximum rate. This rate, calculated by the Commission to reflect the average pace of inflation in Europe, governs the total increase that can be made by both institutions in non-obligatory expenditure; and it can only be altered with the Council's consent.

Extract of my letter to the hon. Member for Harrow, East (Mr. Dykes): Since the Treaty of April 1970 all expenditure contained in the Budget has been divided into two categories, obligatory and non-obligatory. Obligatory expenditure is that which is needed for the working of policies laid down in the Treaty of Rome or subsequent Acts adopted in accordance with it. The most obvious example is the running costs of the CAP which take up such a large proportion of the total Budget. Then there are the running costs of the Institutions, and the sums required for the new Funds and other policies which the Community has decided on since the framing of the original Treaties. This second class of expenditure is called non-obligatory. It is important to remember, however, that it is not free of all constraint. It takes place on the basis of, and within the guidelines laid down by, legislative acts of the Council such as the Regional Fund Regulation. The Commission have recently confirmed that except in the rather unusual cases where inscription in the Budget provides a sufficient legal basis, they will not spend money provided for in the Budget without such an Act or policy decision from the Council. The scope for the European Assembly to alter obligatory expenditure in the Budget is limited. The Council has the last word on any modifications the Assembly may try to make to such items. The Council could certainly not be expected to acept any modifications through which the the Assembly sought to change the nature of the Community obligations involved; this could only be done by amendment to the relevant Act which is a matter for Member States. On non-obligatory expenditure, as you know, the Assembly can in the last resort maintain any amendments it wishes to make, although the Council has a chance to express its own views on these. But there is a maximum rate limiting the total increase in non-obligatory expenditure which the Assembly can bring about by such amendments. This maximum rate is calculated by the Commission each year using general indicators of growth and inflation in Europe, so as to maintain the real value of the Budget from year to year. If the Council uses up less than half that maximum rate in the draft Budget which it "establishes" in the Summer, the Assembly can freely use up the rest of the rate. If the Council makes clear it wants a larger Budget by using more than 50 per cent. of the rate, the Assembly can make further increases adding up to another 50 per cent. on top of that. These options are all within the framework of normal Budget procedure. In addition, one or more of the Institutions may consider that, to allow for a larger increase than is needed simply to keep pace with inflation, the maximum rate itself should be increased. The treaty allows this to be done, but only if both the Council and the Assembly agree. The Assembly cannot approve expenditure going above the maximum rate on their own authority alone. Thus when a new maximum rate is agreed, it constitutes an exercise of the powers given to the different Institutions under Article 203 of the Treaty; it does not increase or otherwise alter the powers themselves. There was, as you know, an agreement to increase the maximum rate in the case of the Budget for 1978. It is worth setting out just how this happened. The European Council in early December reached decisions on the future of the Regional Development Fund which implied an increase in expenditure both for 1978 and subsequent years. These increases went well above what the maximum rate calculated for 1978 would have allowed, and if they were to be accommodated in the 1978 Budget a new higher maximum rate had to be agreed between the Council and Assembly. The Council accordingly asked the Assembly to consider a rate which would cover the new RDF and other increases desired by Member States. The Assembly pointed out—quite correctly—that the last date on which the Council could legally propose changes in Budget items had passed well before the European Council. Partly to register a protest about this, they said they wanted to make further increases in non-obligatory expenditure themselves which would demand a new maximum rate still higher than the Council had suggested. (Significantly, however, they asked for only a symbolic increase of 1 million EUA in the 580 million EUA for RDF commitments in 1978 which was the key figure decided at the European Council.) But the Assembly could not, at this point, go ahead to adopt on their own authority a Budget containing this last round of increases. They had to come back to the Council to seek Ministers' agreement to the still higher maximum rate their proposals implied. If the Council had refused, the Budget could not have been adopted and the system envisaged in Article 204 of the Treaty would have come into effect (i.e. the Commission could have spent in each month of 1978 only one-twelfth of what was provided in the Budget for 1977, and expenditure for the new year could not have been increased without special Council decisions.) In the event, weighing up all the considerations I have outlined above, Ministers decided to accept the level proposed by the Assembly for the new maximum rate. The Budget was duly declared adopted just before Christmas. I hope this helps to clarify the importance of the maximum rate and the way in which Treaty provisions limit the Assembly's effective powers. But you were also concerned about future changes in the powers of the Institutions and how the new clause in the European Assembly Elections Bill would bite on them. You mentioned the possibility of the Member States deciding on a new way to dispose of the percentage of public expenditure devoted to the Community Budget. The scale and nature of the revenues flowing into the Community Budget are determined at present by the Own Resources Decision of 22nd April 1970. This Decision is the legal equivalent of a Treaty and was ratified by all Member States. Any amendment to it would similarly require ratification and it would be regarded as a Treaty for purposes of parliamentary handling in the U.K. Whether it fell under the arrangements indicated in the new clause would depend on whether it affected the powers of the Assembly and this is something that would depend on the nature of the amendment itself. If it had no effect on the Assembly at all (e.g. made some change to methods of calculation of revenue) the Government would not be compelled to pass an Act of Parliament in the U.K. but could choose among the normal procedures for handling Treaties and equivalent international agreements. Precisely how the Government would decide is something it would be difficult to predict now when we have only hypothetical cases in mind.