HC Deb 25 October 1994 vol 248 cc512-3W
Mr. Matthew Banks

To ask the Chancellor of the Exchequer if he will make a statement on the Council meeting of the Economic and Finance Ministers of the European Union held on 21 October.

Mr. Kenneth Clarke

EC Finance Ministers met in Brussels on Friday 21 October to discuss the own resources decision and Italian and Spanish milk disallowances.

Italy, and to a lesser extent Spain and Greece, faced disallowance due to their failure to fine farmers who had exceeded EC milk quotas over the period 1989–93. Italy and Spain claimed that this was unfair, as their national quotas had been set too low to begin with. In 1992, it was agreed at a Council of Agriculture Ministers to increase Italian and Spanish milk quotas for 1993–94. Subsequently, in the course of clearing the EAGGF accounts for 1989 and 1990, the Commission decided to disallow only the amounts which would have been payable by Italy and Spain if they had had in those years the extra milk quota which had been awarded them for 1993–94. It indicated that it intended to do the same for 1991, 1992 and 1993. This would have resulted in Italy and Spain paying roughly half the amount for which they were liable at the outset.

The United Kingdom objected to this and brought proceedings before the European Court of Justice on the grounds that the Commission had exceeded its competence by backdating quota, a power which could be exercised only by the Council of Ministers. Italy and Spain also began ECJ proceedings on the grounds that the disallowance decisions were still excessively harsh and claimed that they should make no further repayments at all.

Even had we ultimately won on all aspects of our ECJ cases, on which judgment was still two years distant, the level of the fine would have been a matter for the Council to determine on the basis of a proposal from the Commission. There is no reason to believe that the Commission would then have produced any different proposal from the one that it had originally made. Therefore Italy and Spain would only have paid roughly half of the penalties for which they were theoretically liable even if we had won our cases in the ECJ on all points.

I therefore negotiated a settlement which resulted in Italy and Spain agreeing to repay much higher sums to the Community budget than they would have paid if we have not brought our action in the European Court or if we had allowed our action before the Court to take its course to a possibly successful conclusion over the next two years.

Ecofin on Friday agreed to increase total disallowance from the Commission proposal of 2 .1 billion ECU or 1.6 billion to 3.2 billion ECU or £2.5 billion—an increase of 1.1 billion ECU or £860 million on the level of disallowance fixed by the Commission. This is the largest agricultural fine even levied in the history of the European Community. Payment will start in 1995.