HC Deb 11 June 1980 vol 986 cc209-11W
Mr. Marlow

asked the Minister of Agriculture, Fisheries and Food if he will explain the figure of £1,000 million quoted in his reply to the hon. Member for Northampton, North on 2 June.

Mr. Peter Walker

The fundamental background principles and methods underlying my Department's calculation are set down in Government economic service working paper No. 27, a copy of which has been placed in the Library of the House. This calculation measures the two features of the common agricultural policy which distinguish it from national agricultural policies. These are : common financing, from which arise in large part the United Kingdom's net contributions to the Community budget ; and Community preferential pricing for agricultural trade, from which arises a food trade cost. It is estimated that these together would amount to some £1,500 million in 1980, though this figure ignores the considerable benefits negotiated last month on both the budget and agriculture.The Sunday Times has quoted a figure relating to the "Cost of Europe" of £2,490 million. The difference of nearly £1,000 million arises almost entirely on the non-budgetary side of the calculations.

There are several reasons for this. First, the calculations published in The Sunday Times incorporate costs, estimated to amount to some £400 million, arising from the price support provided to agriculture under the common agricultural policy. The clear implication is that agriculture would not be supported if we were not in the European Community. But the policies of all post-war Governments have recognised the need to support agriculture and it is, therefore misleading to attribute the cost of doing so solely to the CAP. Moreover, successive Governments have devalued the green pound so as to set appropriate support price levels. There is, therefore, no justification for arguing that the degree of support would differ radically if we were not in the European Community. Whether the method would be the same is another matter.

Secondly, The Sunday Times calculaion assumes that, in the absence of the CAP, we would pay lower prices for imports of, for example, milk products from New Zealand and sugar from Commonwealth and other developing countries. In the case of butter, the implication is that New Zealand would be content with a price some 40 per cent. lower ; in the case of Commonwealth sugar, that producers would take a price some 45 per cent. lower. Such assumptions are unrealistic and ignore the long history of special arrangements for supplies of such products. It is inconceivable that, in the absence of the CAP, existing arrangements to protect these sources of supply would be terminated. Yet, The Sunday Times calculation assumes a benefit of some £300 million (including excessive savings on some other products) by ending these special arrangements if we were not in the European Community. This is totally misleading.

Thirdly, The Sunday Times uses data on basic trade and other volume data that relates to 1976–77. Since then both trade volumes and patterns have changed significantly. If more up-to-date data were used, the computed costs would be reduced by some £280 million.

These three reasons explain the major differences between the two calculations. My Department's calculations attempt to measure those costs which flow uniquely from the common agricultural policy and the common financing of it. The calculation published in The Sunday Times, however, provides both a measure of these costs and measures of the effects of two additional and distinct assumptions. These are that price support for United Kingdom agriculture is ended and that special arrangements for imports of, for example, New Zealand milk products and Commonwealth sugar are no longer made. Such assumptions are not realistic. For these and the other reasons mentioned above, the estimate published in The Sunday Times as measuring the "Cost of Europe" is wrong by some £1,000 million.