HC Deb 27 October 1980 vol 991 cc96-100W
Mr. Kenneth Carlisle

asked the Lord Privy Seal if he will make a statement on the agreement reached at the Foreign Affairs Council of 7 October on the implementation of the Council agreement on the United Kingdom's contribution to the Community budget.

Sir Ian Gilmour:

The Foreign Affairs Council on 7 October reached agreement on all the points of substance outstanding on the two draft regulations under which the United Kingdom's budget refunds agreed by the Council on 30 May will he made. The regulations were formally adopted at the Fiscal Council today and will enter into force on 1 November.

We expect to receive net refunds of not less than 1,175 meua in respect of 1980 and not less than 1,410 meua in respect of 1981. These sums are equivalent to about £710 million and £860 million respectively, when converted at the exchange rate of 1.65 eua to the £ which I used when reporting the 30 May agreement to the House on 2 June. For convenience, I use the same exchange rate in this statement. A higher exchange rate reduces the sterling value of the refund but tends also to reduce our unadjusted net contribution, so that there is unlikely to be much effect on our residual net contribution.

Under the Community's budget conventions, we have to contribute towards the financing of our refunds, as with other Community expenditure. To allow for this, the gross amounts of the payments made to us will exceed the agreed net refunds. We expect accordingly to receive gross payments totalling £870 million in respect of 1980: £280 million under the amended financial mechanism and £590 million by way of Community contributions to the financing of United Kingdom public investment programmes under the "supplementary measures" scheme.

On timing, we expect to receive 75 per cent. of our estimated gross entitlement under the financial mechanism in January of the year following that to which the refund relates, and not less than 80 per cent. of our minimum gross entitlement under the supplementary measures scheme before 31 March. Of the total amounts due in respect of 1980, therefore, we expect to receive £210 million under the financial mechanism in January next, and £470 million under the supplementary measures scheme by 31 March. It has also been agreed that a portion of this £470 million will be paid as an advance payment before the end of 1980: the precise amount will not be known until December, but we expect it to be of the order of £100 million. We expect the balance due to us in respect of 1980—on present estimates a further £70 million under the financial mechanism and a further £120 million of supplementary measures payments—to be paid by the autumn of 1981. Similar arrangements will apply to payments due in respect of 1981.

Under the regulation amending the financial mechanism, any excess in our share of gross budgetary contributions over our share of Community GDP (currently about 18 per cent.) will be fully refunded to us. The major amendments in this regulation apply only to the United Kingdom and involve the suspension of the conditions in the 1976 regulation which considerably reduce the refunds payable or eliminate them entirely. In the first instance these amendments apply to the Community financial years 1980 and 1981. If the Council decides, in accordance with the last sentence of paragraph 7 of the Council Conclusions of 30 May 1980,* that a solution on the same lines is also required for 1982, the amendments will automatically be extended to cover that year also.

* Annex to Explanatory Memorandum on Document 7943/80 which was considered by the House on 2 July.

The difference between our receipts under the amended financial mechanism and the level of receipts guaranteed by the Council agreement of 30 May will be made up by receipts under the supplementary measures regulation. These receipts will take the form of financial contributions paid from the Community budget in respect of certain special categories of public sector investment programmes in the United Kingdom, principally in the regions. It has been agreed that the categories of investment eligible for Community support under the regulation should include energy supply, transport and communications, telecommunications, water supply and sewerage, industrial sites, advance factories and housing and urban renewal programmes where these are an integral part of economic development programmes. We have made it clear that Community contributions in respect of investments in the energy sector will not affect current national policy on energy pricing or result in any direct subsidy to price or operating costs. They will not, therefore, have any repercussions on competition contrary to the proper functioning of the Common Market.

The Council has also reached agreement on procedures for consultation with other member States on the choice of programmes for support and the amounts contributed by the Community. The British Government will invite the Community to participate in the financing of a range of programmes of eligible investments by the Government themselves and public corporations, broken down by region and investment category. The Commission will then make proposals on the choice of programmes and the amounts of Community support for the financial year in question. It has been agreed that the rate of Community support, including support from other Community sources, will not exceed 70 per cent. The Commission's proposals will be considered by an ad hoc committee of member states, chaired by a Commission representative, and will be adopted unless a qualified majority of the member states vote for rejection. In the event of a qualified majority against the Commission's proposals, the Commission will refer the matter to the Council within one month. The Commission's proposals will, however, prevail unless the Council reaches a different decision by a similar qualified majority within two months. This procedure is on the same lines as that set down in Articles 15 and 16 of the European regional development fund regulation.

Article 6.4 of the supplementary measures regulation sets out the procedure to be followed if programmes do not conform with the provisions of the regulation or depart substantially from plan. In such cases, we expect the Commission to reallocate the amounts concerned to another investment programme (or programmes). This procedure will also apply in cases where actual expenditure falls short of planned levels, thus causing a substantial change in the implied rate of Community support, and in particular in cases where the maximum rate of 70 per cent. would be exceeded.

The supplementary measures scheme will relate in the first instance to our net contributions in respect of the 1980 and 1981 Community budgets. As provided in the Council's conclusions on 30 May 1980, however, the Commission will make proposals for 1982 along the lines of the 1980–81 solution, and the Council will act accordingly, if agreement has not previously been reached on structural changes in Community policies and the budget designed to prevent the recurrence of unacceptable situations for individual member countries.

Mr. Teddy Taylor

asked the Lord Privy Seal if he will make a statement explaining why the Foreign Office Ministers agreed at the October meeting of the Council of EEC Foreign Ministers that the United Kingdom should receive only 80 per cent. of the rebate for 198081 which was agreed at the summit meeting.

Sir Ian Gilmour:

I refer my hon. Friend to the reply I have given today to my hon. Friend the Member for Lincoln (Mr. Carlisle). As my hon. Friend will see, his question does not correctly reflect the agreement reached at the Foreign Affairs Council on 7 October. There was no question of any agreement that the United Kingdom should receive only 80 per cent. of the refunds for 1980–81. It was, on the contrary, agreed that we would receive not less than 80 per cent. of the amount due under the supplementary measures regulation in respect of 1980, and payable in 1981, by the end of March 1981, that is to say within the current United Kingdom financial year. This agreement thus gave practical effect to our earlier understanding that we would receive the bulk of the payments due in respect of 1980 during our own 1980–81 financial year. The remainder of the money due in respect of 1980 is to be paid later in 1981. So far as the refunds due in respect of 1981 are concerned, it was agreed that we will receive not less than 80 per cent. of the amount due before the end of March 1982 and the remainder later in 1982. Under the financial mechanism regulation we shall receive 75 per cent. of the refunds due in respect of 1980 in January 1981 and the remainder later in 1981; a similar arrangement applies for the refunds due in respect of 1981.