HC Deb 31 July 1981 vol 9 cc687-8W
Mr. Whitney

asked the Chancellor of the Exchequer whether he will make a statement on the EC Budget Council of 23 July.

Mr. Lawson

The Budget Council on 22 and 23 July established both the draft amending budget to the 1981 Budget and the draft general budget of the European Communities for 1982. I chaired the Budget Council and my hon. and learned Friend the Member for Dover and Deal (Mr. Rees), the Minister of State, Treasury represented the United Kingdom.

The Council was preceded on 22 July by a useful meeting with a delegation of the European Parliament. This was an innovation, and allowed more time for discussion than the customary meetings on the same day as the Council. In the light of the discussion, I hope that the European Parliament will be able to adopt the amending budget in September.

The Council agreed to establish the preliminary draft amending budget for 1981 to reflect a compromise proposed jointly by the Presidency and the Commission. In brief, there would be an overall reduction in commitments of 441 million ecus and in payments of 197 million ecus. The 1981 budget totals would then be 20,688 million ecus in commitments and 19,129 million ecus in payments.

The draft amending budget also reduces the amount needed to finance the 1981 budget from VAT own resources and GNP-based financial contributions by 275 million ecus. The United Kingdom's contribution would accordingly be reduced by 51 million ecus—about £32 million at the 1981 budget rate of 1.58894 ecus =£1—and become 3,933 million ecus, about £2,475 million, gross. The reduction in revenue reflects the incorporation of own resources carried over from 1980. The United Kingdom's gross contribution will be reduced to the level envisaged in the 30 May 1980 agreement on the United Kingdom net contribution by receipts from Community programmes and the supplementary measures provided for in the agreement.

The main changes in both commitments and payments in the draft amending budget are (i) a reduction of 521 million ecus for the guarantee section of the European agricultural guarantee and guidance fund, (ii) an addition of 100 million ecus for food aid and 200 million ecus for the European regional development fund.

The Council's revisions will involve an increase in the "maximum rate" for 1981 which is calculated under a formula specified in the Treaty and determines the permitted percentage increases on non-obligatory expenditure such as the regional development fund and social fund. This increase over the 1980 level of appropriations will be from 12.2 per cent. to 13.8 per cent., and was accepted by a qualified majority of the Council.

This agreement on the 1981 amending budget satisfactorily resolved the earlier dispute about the validity of the 1981 budget. The three member States which have withheld certain sums indicated that they will pay their outstanding contributions to the 1981 budget in full once the amending budget has been adopted.

I was pleased at this measure of agreement at the first Budget Council in our Presidency.

The draft budget for 1982, as established by the Council at this meeting, provides for 22,801 million ecus for commitments and 21,738 million ecus for payments.

Within the Budget total, 18,469 million ecus for commitments and 18,413 million ecus for payments are for "obligatory" expenditure—principally for the guarantee section of the European agricultural guidance and guarantee fund, refunds to the United Kingdom, payments to Greece under the transitional arrangements for accession and overseas aid; 4,332 million ecus for commitments and 3,325 million ecus for payments are for "non-obligatory" expenditure, principally the regional development fund, social fund, research and administration.

The Budget Council for the first time scrutinised in detail expenditure in the guarantee section. The draft budget now includes 13,933 million ecus, of which 433 million ecus is entered in the reserve chapter, and requires detailed justification before being withdrawn and spent. The Commission had proposed only 123 million ecus in the reserve chapter, but the Council agreed to transfer an additional 310 million ecus from the "line" into the reserve. The figures represent an increase of 9.3 per cent. over the 1981 provision in the budget, or 12.8 per cent. taking into account the amount entered in the reserve chapter.

There was a prolonged discussion of the provision for non-obligatory expenditure, principally for the regional development fund and the social fund. Under the formula referred to above, the maximum rate of increase for the 1982 budget would be 14.5 per cent. Given the need for retrenchment in public expenditure, most member States could not agree to increases as high as this for commitments. Agreement was eventually reached on increases of 4.3 per cent. for commitments and 14.5 per cent. for payments.

Within the totals, the Council agreed in respect of the regional development fund that there should be commitment appropriations of 1,600 million ecus and payment appropriations of 950 million ecus. For the social fund, the Council agreed to commitment appropriations of 1,000 million ecus and payment appropriations of 738 million ecus. For the two funds together this represents an increase compared with the 1981 amending budget as adopted by the Council of 4 per cent. for commitments and 16 per cent. for payments.

The draft budget contains full provision, totalling 1,657.9 million ecus, for refunds to the United Kingdom in respect of our contribution to the 1981 budget.

The draft budget reflects compromises made by all Council members. It will now be considered by the European Parliament; there will be further consideration by the Council on 24 November.