§ Mr. Peter Bruinvelsasked the Chancellor of the Exchequer if he will make a statement on the achievements of the United Kingdom's presidency of the European Community Council of Ministers in respect of economic and financial matters.
§ Mr. Lawson[pursuant to his reply, 12 January 1987]: The Economic and Finance Council made the following major contributions to the Presidency's achievements on the completion of the internal market. On financial services, two important directives were adopted. The first extends liberalisation obligations for certain types of capital transactions in the Community, viz long-term commercial credits, transactions in listed and unlisted securities and some unit trusts. The second provides for a standardised regime for the accounts and consolidated accounts of banks in the Community. On tax and the internal market, progress was made on several structural VAT and excise duty proposals, and the Council adopted the 13th VAT directive on harmonising the system for refunding VAT to traders established in third countries.
The Economic and Finance Council agreed the substance of a new Community lending facility for small and medium-sized undertakings. 1,500 million ecus (about £1,100 million) will be made available in two equal tranches, raised by the Commission and the European Investment Bank respectively. All the lending will be managed by the EIB, and will be mainly global loans made through financial intermediaries.
The Council discussed Community spending on agriculture, leading to enunciation of presidency principles for the future operation of the common agricultural policy that:
- (1) support prices should more closely reflect market conditions;
- (2) the intervention system should operate as a safety net, not as a standard marketing outlet;
- (3) price support policies should be flexibly operated so that risks arc not borne entirely by public finance.
The Economic and Finance Council had useful discussions on the economic situation in the Community, and agreed to adopt the annual economic report for 1986–87, as amended, to take account of member states comments. The report is directed towards increasing employment in the Community in the context of monetary stability and fiscal consolidation.
The Council reviewed the progress made by the Greek economy since agreement in November 1985 to provide Greece with a Community loan of 1.75 billion ecus (about £1.25 billion). The Council agreed that the Commission should release the second tranche of the loan. In reaching its view, the Council took into account the agreement reached between the Commission and Greece on the phasing out of the Greek trade measures on export subsidies and import deposits.
On travellers' allowances, the Council made good progress on meeting individual member states' concerns in respect of duty—and tax-free shopping, against the background of its acceptance of the continuing existence of duty—and tax-free facilities as long as fiscal frontiers remain. In particular, the Commission gave an assurance that the Channel fixed link would enjoy the same fiscal treatment as other cross channel operators.
Following discussion in both the Economic and Finance Council and the Budget Council, the United 233W Kingdom presidency secured agreement on 10 July on a new budget for the Community for 1986, only seven days after the European Court of Justice had found that the European Parliament had exceeded its powers in December 1985 in adopting a budget without the agreement of the Council of Ministers. The 1986 budget provided for a United Kingdom abatement of its VAT contribution of 1,900 million ecu (about £1,250 million).
The presidency also secured agreement at Budget Councils in September and November to first and second reading draft Community budgets for 1987 which fully respected budgetary discipline. The European Parliament did not, however, accept that the growth of non-obligatory expenditure should be restricted in accordance with the maximum rate of increase defined in the EEC treaty and, in the absence of agreement between the Council and the Parliament, the President of the Parliament was not in a position to adopt the budget. From 1 January 1987, therefore, the Community will have to operate under the provisional twelfths regime, set out in article 204 of the treaty, until an agreed budget is adopted. This limits total spending to at most the amount spent last year.
With regard to public purchasing, an area of economic policy for which the Treasury has overall policy responsibility, the Industry Council on 22 December agreed on the content of a new supplies directive to modify the early directives. This will further open up purchasing opportunities in the Community. Before the new directive is adopted it will need minor modifications to take account of changes accepted by the Community when agreement was reached on the renegotiation of the GATT agreement on government procurement on 21 November.
A detailed list of United Kingdom presidency achievements will be placed in the Library of the House shortly.