Orders of the Day — European Community (Budget)

– in the House of Commons at 12:00 am on 18th July 1977.

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6.46 p.m.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

I beg to move,

That this House takes note of Commission Document No. R/1541/77 relating to the EEC 1978 Preliminary Draft General Budget, together with R/1013/77, R/851/77, R/1226/77, R/480/77 and R/848/77.

The documents are fairly modest in size. I do not propose to read through them all this evening unless I am pressed. I thank the Scrutiny Committee for its report and for the way in which it received the evidence which I gave to it two weeks ago. I propose briefly to concentrate on the preliminary draft budget, which is summarised in Volume 7.

I shall say a word, first, about the timetable which was referred to by the Scrutiny Committee in its report and by me in my evidence to the Committee. There are advantages and disadvantages in bringing forward the timetable—in other words, in having the preliminary draft budget earlier in the year than had previously been the case The advantage is that the Scrutiny Committee and the House then have an opportunity to consider it before I or any other Minister has to go to Brussels to the Budget Council. In this case it is this coming Wednesday that I shall be attending the Council of Ministers meeting on the budget. It is a considerable advantage to allow the House an opportunity to discuss the budget and put forward suggestions on the line that the Government should take.

On the other hand, one is bound to recognise that there are disadvantages in that estimates are much further away from the year in question. In the case of agriculture, for example, it is then necessary for a rectifying letter to be sent by the Commission, probably in about September or October of this year. Nevertheless, I agree with the Scrutiny Committee's report that the advantages outweigh the disadvantages. It is important that the House and the Scrutiny Committee should have the opportunity to consider the matter, and I hope that hon. Members will consider it helpful, in spite of the disadvantages which I have described.

Photo of Mr John Roper Mr John Roper , Farnworth

My right hon. Friend was referring only to Volume 7 which deals with the Commision's budget. Will there be another opportunity for the House to debate the Parliament's budget, particularly as next year we may assume that, being directly elected, it may wish to pay its Members' salaries?

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

As my hon. Friend knows, I am happy to discuss almost anything at any time. It is not for me to say what should be discussed in this brief debate. I hope that it will be possible for the House to have an opportunity of discussing other aspects of the Community budget.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

The explanatory memorandum with which we have been issued specifically refers to the budget for the European Parliament for 1977–78. If I am able to catch the eye of Mr. Deputy Speaker, I shall certainly refer to that matter.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

I should not like to prevent the hon. Gentleman from speaking about any subject under the sun. That tends to be discussed in the European budget as well. I think that it almost came into the last debate on energy. If I am allowed to reply to the debate, I shall deal with the points that hon. Members intend to raise in relation to the Parliament's budget. The main issues certainly seem to be the questions of the own resources system, the unit of account and the rôles of the Parliament and the Council.

Perhaps I can deal briefly first with the own resources system. It will apply to the original six members from 1st January 1978. However, the United Kingdom and the other two new members are still operating under the transitional arrangements of the Treaty of Accession and we do not come fully under the own resources system until January 1980. Included witht the own-resources system would be value added tax with up to a maximum of 1 per cent. on a harmonised base, which has been agreed in the sixth directive, although reservations have been entered by both the Belgian and Danish Governments.

I turn to the problem area, which I hope will not develop into too much of a problem, concerning the unit of account. The preliminary draft budget is presented by the Commission in European units of account. Budgets were previously based on budget units of account which were in turn based on the last declared pre-Smithsonian parity on a gold base. Now, I think sensibly, but with one reservation which I shall express in a moment—

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

I should hope so.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

I can tell my hon. Friend that it is a very strong reservation. The unit of account is now based on the value of a basket of Community currencies. It will be clear to the House just what that means from day to day within the Community.

I agreed at a Budget Council meeting originally that I would be prepared for this country to accept a European unit of account for 1978 and 1979 subject to the very strong reservation that the interpretation of Article 131 of the Treaty of Accession should be such as to ensure that movement towards such a unit of account would not involve this country in any additional expenditure.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

I apologise for interrupting my right hon. Friend so soon, but I take it that he will be dealing with the glib way in which many people—certainly those in the Press—are seeking to suggest that the difference between the ordinary unit of account and the European unit of account can be absorbed without difficulty. My right hon. Friend's remarks seem to indicate that that is not the case for the United Kingdom.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

I have this strong reservation on the move to the European unit of account by the United Kingdom because the whole purpose of the Treaty of Accession was to smooth the path until we came under the own-resources system. I am happy to note that the Commission has agreed with our interpretation of Article 131. It is fortunate that that is so, because if we were simply to accept the view of some other member States about Article 131 and the move to the new unit of account it could cost this country up to about £500 million gross over the two years in question. That is precisely why I have expressed such a strong reservation. We do not accept such a proposition. I hope that that approach will be acceptable to the House.

I come now to the rôle of the Parliament in relation to the rôle of the Council of Ministers. There are a number of issues on which differences of opinion exist between the European Parliament and the Council, but two are closely related. They are the most important and they concern the question of commitment and payment appropriations, and the maximum rate for them. The Commission has proposed an extension of the system of commitment and payment appropriations, and this has been welcomed by the Scrutiny Committee as a sensible move. It is a sensible move in my view because it gives a clear indication of the expenditure in a given year rather than including in the Budget large sums of money which are unlikely to be spent in that particular year. Basically, therefore, I agree with the move to a greater use of commitment and payment appropriations.

The Council, however, has concluded that the application of separate payment and commitment appropriations should be as laid down in the financial regulation, but the European Parliament wants the matter to be decided in the context of the budget. Let me explain briefly what the consequences of that would be. At the moment, the matter is unresolved between the Council and the European Parliament. The difference relates to the problem of the maximum rate which limits any increases in non-obligatory expenditure in the Community—that is, largely expenditure outside agricultural expenditure.

The Commission and the Council agree that the maximum rate should apply to both commitment and payment appropriations, but the Parliament wants it to apply only to payment appropriations. If the Parliament were to have its way, that could mean that it would be able to write very large sums of money into the budget for commitment appropriations, which would then commit the Council in the future to large sums of payment appropriations. I should not like to provide for that kind of situation. Like the rest of the Council and the Commission, I would prefer that the maximum rate, which is designed specifically to limit increases in expenditure on the non-obligatory side of the budget, should apply to both commitment and payment appropriations. That is the line I shall be taking at the Budget Council meeting on Wednesday.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

Will my right hon. Friend say whether that is the unanimous opinion of the Council?

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

My understanding is that it is the general opinion of the Council. I know of no member State that agrees with the Parliament on this issue.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

The right hon. Gentleman keeps referring to "the Parliament". If he could refer to "the Assembly" nstead, that would distinguish the body in Europe from our Parliament here. We want to be quite clear which organisation we are talking about.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

I should be astonished if the hon. Member for Banbury (Mr. Marten) was not aware of the organisation of which I am speaking. I understand his point, but I think he knows which Parliament I was talking about.

I turn, therefore, to the size of the budget. It is the preliminary draft budget, not the final outcome of what will be the budget in 1978. The Commission proposes a budget of 11,850 million European units of account.

For the reasons I gave in evidence to the Scrutiny Committee, it is difficult to make a straight comparison with 1977. First, it is not a comparison of like with like. We are talking about a Commission proposal whereas there is a need to compare outturn with outturn or, at least, what the eventual budget turns out to be. Secondly, this is a budget proposal whereas our White Paper is based on estimated expenditure. That difference is very important from our point of view. A budget proposal in the European sense means that it does not necessarily follow that that amount of money will be the amount spent in the year. It means that it will overlap years. Therefore, in that context too there is not a fair comparison.

Many items of non-obligatory expenditure—that is, non-agricultural expenditure —have not been agreed as policy. For example the Regional Fund, which I gather is to be debated in the next debate, is still under review within the Community but the Commission has put in an estimate of expenditure for next year. It has estimated that there will be a large increase in Regional Fund expenditure when clearly we do not know at this stage what will be the expenditure within the European budget on the Regional Fund for next year.

That applies to a number of other areas of the budget. It stems in a large measure from the difference of approach between the Council and the Commission. The Commission is in favour of putting items into the budget even though there is no agreed policy, on the assumption that there will eventually be an agreed policy and that an allocation will need to be made. The Council believes, as I certainly believe, that we should not allocate token funds of that sort—in this instance they are not so much token funds—to the budget when there is no policy for those funds.

For all those reasons—not least because in the major part of the budget, which is the obligatory expenditure on the guarantee section of the agricultural expenditure, there is much uncertainty—we are dealing with estimates rather than actual policy. It is not reasonable to make a direct comparison with previous years. We are making estimates in a provisional draft budget. On that basis, bearing in mind all the qualifications and provided that we have, as I believe we should, the correct interpretation of Article 131, our approximate gross contribution would be about £1,100 million. Against that there are receipts, which, like expenditure, are difficult to estimate in these years. Provisionally the receipts might be about £400 million to £500 million, on top of which there would be the benefit from monetary compensatory adjustments of about £300 million.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

Is it the unanimous view of the Council that it. is against writing in moneys for which there is no clear policy? The reason why I ask the question will be obvious to my right hon. Friend. Those of us who take his view are told from time to time that we are being anti-communautaire.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

If it is thought that if my hon. Friend takes my view he is being anti-communautaire, that puts me in great difficulty. I do not consider that my view is anti-communautaire. However, it is difficult enough speaking for one Government and my hon. Friend has asked me to speak for all nine. I am pretty sure that my view is the view of most members of the Council, but I have not heard it specifically expressed by every member so it is possible that one or two may have some reservations. There may be some agreement with the Commission, but in the main my view is the view of the Council. In that case it cannot be anti-communautaire. My hon. Friend and I can be happy with that spirit.

I deal briefly with the other main area of concern—namely, agriculture. It is the largest area of budget expenditure. The guarantee and guidance sections together, depending on the method of calculation, amount to between 68 per cent. and 73 per cent. of the budget. As I have always told the House and the Scrutiny Committee, the money put into this area of expenditure is an estimate. That is bound to be so because it is dependent upon the policy that is fixed by the Agriculture Council. The reason why the proportion is so large is well known to the House—namely, price support, which tends to build up surpluses in certain areas of agricultural expenditure.

As is well known, the major area is milk. For example, milk alone represents almost 30 per cent. of the whole budget and a rather higher percentage of the agricultural section of the budget. I hope I carry everyone with me when I say that the overriding need is to reduce the surpluses. I hope that it will be possible to do so in the near future.

We are not discussing the agricultural policy, although I should have no wish to prevent such discussion even if I had power to do so. We are discussing an estimate which goes into the budget. We may change that estimate, as some have suggested might be done, but that does not have the remotest effect on the fixed agricultural policy. If we write in smaller figures for an estimate while retaining an open-ended policy, we should have to find the money from supplementary estimates later.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

Surely it is the balance between the guarantee and guidance sections that is so worrying. Surely it is the budget or the estimates which are the supreme weapon to achieve a balance between the two sections. It should serve to give more to the guidance section so as to get a restructuring of agriculture in the Common Market.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

I was coming to that. I agree with the hon. Gentleman in the sense that it is true that we need to put greater emphasis on the guidance section so as to do something about the structure of agriculture in the Community. However, if we are not careful there is a considerable danger that increasing guidance section expenditure while doing nothing about the guarantee expenditure would be to replace national budgetary expenditure in some member States. That would operate at our expense. There would be a much smaller proportion of our own budget for agriculture while leaving the guarantee section to grow again at our expense. As a major importer, we must be careful about the balance between the guarantee and guidance sections.

Although it is important to do more on the guidance front to do something about the structure of agriculture in the Community, that does not mean that we can leave the guarantee section as open-ended as at present. If we put in a smaller figure as an estimate for the guarantee section, one of the problems is that in a way we are avoiding that which the Scrutiny Committee sensibly pointed out—namely, the guarantee section having such a high proportion of the budget. If we put in a smaller figure, we fail to highlight the problems of the guarantee section having that high proportion. If we reduced the estimate and made it seem as if the expenditure was smaller, that would not be helpful to those who want to see changes in the guarantee section.

There are at least two improvements that I know the Scrutiny Committee will welcome. The first is that on this occasion the Commission has not included provisional appropriations in the guarantee section to cover possible additions for next year. It is not sensible to do so because we do not know what the policy will be for next year. I hope that there will be an improvement in policy that will avoid some of the worst aspects of guarantee section expenditure.

Secondly, the Commission has not assumed on this occasion that there will be cuts in MCAs, which it wanted to do last year. Although that is helpful from our point of view, I believe that it is a misunderstanding to suggest that we do not want cuts in MCAs only because they are helpful to us. I believe that MCAs are of benefit to the Community generally. That is because, if one simply reduced our MCAs by a devaluation of the green pound, one would increase the price to the consumer, increase the money paid to the producer and depress consumption. That would lead to increased surpluses. It is not right to say that MCAs at the present level help only the United Kingdom. They help the Community generally.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

Will my right hon. Friend comment briefly on the suggestion that MCAs should be put into a part of the budget which is more easily identifiable?

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

I am not sure about that. I note that it is the view of my hon. Friend the Member for Crewe (Mrs. Dunwoody).

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

It is not my view. It is a proposal.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

I am not in favour of putting MCAs in a separate part of the budget. That is because if one separated them they would appear smaller than they are. It would be misleading to suggest that they do not form part of the agriculture budget. As always, I am happy to be in agreement with my hon. Friend the Member for Crewe.

I hope that that brief survey will be helpful to the House. I welcome the Scrutiny Committee's report. I shall be happy to listen to hon. Member's views on the preliminary draft budget. With the leave of the House, I shall be pleased to reply to any questions that are raised.

7.12 p.m.

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough

We thank the Chief Secretary for the way in which he opened our short discussion. I assume that he will be winding up the debate and replying to our questions. He and I have met before about the draft budget—or, as he rightly says, the preliminary draft budget—when he was kind enough to see us in the Budget Committee of the Assembly. I hope that by using the word "Assembly" I have pleased my hon. Friend the Member for Banbury (Mr. Marten).

In several ways this is a Community budget which could be a turning point in the history of the Community's fiscal policy. It is the first budget that has been presented to us by the new British Commissioner, our ex-colleague Commissioner Tugendhat, who has been well received in his new job and for the work that he has already done.

For the first time, Community expenditure will be fully financed by our own resources. For the first time, the figures used in the budgetary documents will be expressed in European units of account. For the first time, a new financial regulation will be in force which amends the old financial regulation of 1973.

If we are to fulfil this, the procedural difficulties will be considerable. They will demand more discussion and agreement between the institutions than before. The details covering the working of VAT, the setting up of the EUA and the financial regulation have still to be agreed, and yet the whole basis upon which the budget has been drawn has been on the assumption that such agreement will be reached. It is significant that as these changes are being made, so we are moving towards the direct election of Members of Parliament to the European Assembly. After they have been elected, they will be responsible directly to their electors for the proper discharge of the budget.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

They have had a long time to do it.

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough

We have to aim for changes. We certainly have to aim for changes in the budgetary procedure over the years. I believe that the changes in the Assembly will come about. It would be a pity if these technical complexities were to so attract our attention that the policies in the budget became overlooked.

I must comment on one technicality. When I was appointed rapporteur for the regulation adopting the EUA, my first move was to contact the Treasury to confirm that the Commission had given in writing its own interpretation of Article 131 and that it was exactly in agreement with the interpretation placed upon it by the British Government. I was told that it was. I therefore went ahead with the processing of that document in the knowledge that it would cause no additional financial burden to this country. I took that view particularly since Article 131 specifies that its interpretation and calculation shall be by the Commission. There was no contrary view expressed by any other country. It is strange that this matter should now be brought forward, perhaps as a bargaining counter, within the Council. I fully support the Chief Secretary in his view and in the stand that he makes.

Today we are examining the preliminary draft budget It has been drawn up by the Commission but it is subject to a number of changes. It is subject to changes by the Council, by the Assembly and by the Commission itself. As the Assembly's general rapporteur for the 1978 budget, perhaps I might say a word about our approach.

Photo of Mr Hugh Dykes Mr Hugh Dykes , Harrow East

I apologise for interrupting my hon. Friend. He has used the word "Assembly". I understand that that is at the request of my hon. Friend the Member for Banbury (Mr. Marten). Is it not reasonable to stick to the word Parliament "because that was the collective decision of the Parliament?

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough

I am happy to mix my phraseology to suit everybody. I used the word "Assembly" hoping that everyone, including my hon. Friend the Member for Banbury, would understand what I meant. I shall mix the words and hope to please everyone.

As has been so often explained, the size of the European budget is so small compared with the Community's GDP and compared with the total of national budgets that it cannot play any part in influencing the fiscal policy of Europe as a whole. None the less, we regard it as our duty to see that proper control and economy exist in all that we propose and do. The main task as a Community is to create European policies based on a growing need and belief that in many vital areas we must act as a Community. We must act together and not as nine individual countries.

The lesson from that is that the Community budget must be concerned with the efficient implementation of these policies. Thus, the message that I am stressing in the Assembly—or Parliament—is that the annual budgetary process should not concern the Budget Committee alone. It needs the full participation of nearly all the specialist committees and, indeed, of the whole Assembly itself. It is these committees that are responsible for evaluating the necessity and value of the policies, the cash needs for which are disclosed in the budget.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

I am in complete agreement that the committees must have responsibility for the budget in their own work, but, since one cannot tell from the budget document what are appropriations, what are commitments which have been paid, and what are commitments which have not been paid, can the hon. Gentleman tell us how, for example, the Social Committee, of which I am vice-chairman, can compare like with like and decide what is actually happening in the budget?

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough

That must be largely a matter for the proceedings of each committee itself. I have arranged for the chairman of the Budget Committee to write to each specialist committee asking it to appoint, early, a rapporteur to look into its own sector of the budget so that we we as a Budget Committee can discuss with each specialist committee, through its rapporteur, the details of the part of the budget that affects it. I hope that someone will have been or will shortly be appointed as rapporteur for the hon. Lady's committee, so that we may get a full and considered report of the matters that affect both the budget and her committee.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

I take the point and I hope that we shall soon have a rapporteur. But can the hon. Gentleman say exactly how any committee can report on a document in which at least two columns after the appropriations are left blank?

Photo of Mr John Roper Mr John Roper , Farnworth

On a point of order, Mr. Deputy Speaker. How appropriate is it for the House to discuss the proceedings and activities of an Assembly or Parliament which meets on the other side of the Channel? I thought that the House was considering how it should consider the budget of the European Community?

Photo of Sir Arthur Irvine Sir Arthur Irvine , Liverpool Edge Hill

I understood that the hon. Member for Scarborough (Mr. Shaw) was relating his argument to the budget of the Community.

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough

Perhaps it would be in the interests of both yourself, Mr. Deputy Speaker, and of the House if I proceeded with my speech. The point has been made on the matter raised by the hon. Member for Crewe (Mrs. Dunwoody). I will talk over the matter with her in greater detail afterwards, if I may. I want to re-emphasise that it is only by the participation of the committees that we can balance the claims for cash presented to us so that the Assembly can honourably and conscientiously fulfil its duty as part of the Community budgetary authority.

As the Chief Secretary said, the largest element in the prelimary draft budget is, as always, agriculture. The Commission indicates that expenditure relating to agriculture will equal some 69 per cent. of the 1978 budget as opposed to 74 per cent. this year. But, again as the right hon. Gentleman has said, these figures are of necessity at this stage only guesswork. After the harvest there will come an amending letter; after the 1978 price review will come a supplementary budget. Experience indicates that on both occasions the agricultural costs will go up.

Furthermore, the relative share of agricultural expenditure is likely to increase, because the Council of Ministers tends to cut back on new initiatives outside the agricultural sector—indeed, in the very areas where we are seeking to act as a Community and for the benefit of the Community.

I want to make a point which I do not think has often been made in this connection. The expenditure on the EAGGF within the general budget accounts for about three-quarters of the total general budget of the Community. In 1976, support for agriculture in the guarantee section was about 6,000 MUAs, yet the total of each individual nation's and Community expenditure was some 17,000 MUAs. In other words, in spite of the size of the proportion of the Community budget, the expenditure we are making in this sector is still comparatively small when compared with the whole amount spent throughout the Community.

This could lead Ito another factor which should be looked into—that the money spent through this budget might be pushed in a direction different from the help that is being given to the industry by the individual countries. I think that this is a matter on which we should have much more information than we have.

I turn now to other sectors that we feel are so important to building a Community policy. We have had considerable debate today about energy policy, although the Under-Secretary of State said in reply that there were certain aspects that had not been touched upon. Nevertheless, they appear in some size in the budget. These policies, so far as they can be, are spelt out in a considerable amount of explanatory matter, in Volume 4 particularly and in Volume 7. If the Council of Ministers decides to change the content of the budget before it passes it on to us as the draft budget instead of the preliminary draft budget, I would ask that a full explanation be given for the reasons for any changes that are made, just as explanations are given in the first place by the Commission for the putting in of the items. Should the items be altered or taken out, I hope that the Council, as it has not always done in the past, will give a full explanation so that the specialist committees will be able to assess and weigh up the pros and cons of the arguments and which way they should lend their support.

There is a similar situation with regard to research and investment. There is a large section of the budget in which the details are set out. I am glad that they have been set out in a new way which has saved 140 pages in the budget, although, looking at the size of the budget, one would never think that that had happened.

I want to lay particular stress on two further aspects—the Social and Regional Funds. Both of these funds are due for review, and it comes at a very important time, because they concern the well being and development of the poorer and more difficult parts of our Community. They concern help in renewing employment and retraining, in bringing new work and new jobs, and in bringing new structures to areas of the Community that require help.

Perhaps the figures that have been put in in this respect are guesses. Perhaps no finalisation of programmes has been made. Even if the Council has made no final decision with regard to policies in this direction, however, it would not be right for the figures not to be included in the budget. To remove them entirely, in spite of what the Chief Secretary says, would be unwise. Indeed, it would be wrong. Clearly, considerable thought must have been given to these matters. There must already be a fairly shrewd idea of the amount of money that the Council and the Commission are prepared to spend in these fields.

Now that we have an own resources budget, having to forecast income for next year, it is right that we should equally forecast the likely expenditure that is to be set against that income. In most things in this budget the right hon. Gentleman and I are in agreement, but I take issue with him on the matter of the non-inclusion of items if the policy has not been fixed. We have to include figures where we can be reasonably certain that the amounts will be spent and reasonably certain as to the size of those amounts, otherwise we are saying that we shall exclude the figures now so that we can dress up the budget to look as though we have been very highly disciplined in the settlement of the budget this year. Not until later, by means of the supplementary budgets, which tend not to have the same publicity as the original budget, will the sums required to pursue those policies then come before the Parliament and Council and be duly passed. If that happens to any great degree, the complication may arise of the rate of VAT, which may have to be altered.

I am speaking rather longer than I had intended, but I have been interrupted several times. I wish to deal with two further points. The first is the Audit Court. For the first time, provision is made on the budget for the setting up of the Audit Court. The law for this has now been passed and ratified. Provision has been made, even if only by way of token entry, for the setting up of the court. This will have a greater status than the Audit Board which preceded it, and will be able to employ the resources that it will properly need for the effective audit of the Community's finances. Incidentally, the names of the proposed members of the court have been sent in, except in the case of two countries, of which the United Kingdom is one. Will the right hon. Gentleman say what is holding up our own nomination?

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough

Clearly, the quicker we can get the new court established, the better. Several suggestions are going around Europe as to the real reasons for the delay, but it is not for me to speculate, nor would it be helpful.

We have in the Assembly a control sub-committee which has been set up as a sort of Public Accounts Committee. I have little doubt that that sub-committee will develop into a full committee. It is already beginning to establish its rôle as a watchdog of Community finance. I have always felt that it could never fully do so until the Audit Court had become established and a close link had been forged with it. As a member of that subcommittee, I am therefore doubly anxious for the early establishment of the court

I turn now to the receipts side of the budget. On a number of grounds—political, accounting and budgetary—I am not very happy about the VAT rate of 0·77 per cent. which is suggested by the Commission for 1977–78. The Commission suggests that this would drop to 0·61 per cent. in a normal year. The higher percentage arises from the time lag in the first year, which reduces the income from what it would have been in subsequent years because the basis of assessments is usually a three-month period. If the basis of assessment was dated on 31st January, the first two months of that quarter would be excluded from the first year, so the revenue available would be that much the less.

The sum of money is not affected, but the assessment and the presentation in the budget are important. I have contacted the Commission on this matter, and members of the Commission themselves have certain reservations. For example, at least one country has altered the period over which it assesses and collects its VAT. This immediately upsets the pattern. We have arranged to have further discussions on this point, and I hope that we can resolve the outstanding difficulties in a manner acceptable not only to ourselves but also to the Council when it comes to consider the matter. I hope that in the end it will be possible that the form that we agree will allow the use of the same percentage—namely, 0·61 per cent.—as would have been used in a normal year.

The last point I wish to make is about commitment appropriations and payment appropriations. In discussing the various figures and, in particular, the proposed maximum rate of increase for non-compulsory expenditure and the margin of manoeuvre available to the Parliament, the House will notice the increasing use of commitment appropriations. In order to cater for multi-annual programmes and yet do away with the undesirable carry-forward procedure, ceilings of commitment can be laid down in any one year that will involve a programme of payments covering several years. No longer will it be necessary to put the whole cost of a project in the first year as a payment provision.

However, the Assembly differs from the Commission in one respect. In looking at the budget and its increases, the Commission—and, it seems the Council—works on the amounts to be committed rather than on the amounts to be paid. There is a difference in character between the two types of appropriation. That is why we in the European Parliament have sought to refer to commitment authorisations rather than commitment appropriations. The budget is, after all, concerned with the estimated revenue coming in, balanced on the other side by the payment appropriation going out. I believe that that is the crux of any budget. We must rest on the supreme importance of the payment appropriation.

However, this is also a matter that has to be conciliated upon, and there are many other matters too. With good will on all sides, I hope that all these various matters will be reviewed and that a certain measure of compromise will result, but I believe that the new financial regulation is a regulation that has a real meaning and real help to the present and immediate future of the Parliament and that it reflects the changes that have taken place since 1973, when the existing financial regulation came into being.

I welcome the opportunity for this early debate. It comes before the preliminary draft budget has been examined by the Council and before the representatives of the European Assembly have met the Council in Brussels. That meeting is to take place on. Wednesday this week. This is, therefore, a well-timed debate and I hope that it proves to have been useful.

7.40 p.m.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

I, too, welcome this debate, because if there is one thing that is constantly clouded in an air of mystery it is the amounts of money that are spent not only by the Common Market but by all its institutions. This House should take more time to debate the amounts of money that are being spent not only by us but by other people.

I shall not pretend to be able to follow even the small Volume 7 of the preliminary draft general budget with the expertise of either my right hon. Friend the Chief Secretary or the hon. Member for Scarborough (Mr. Shaw), because if nothing else, having studied the section which particularly concerns the Social Fund, I know that it is exceedingly difficult to try to sort out from the figures listed in the budget documents exactly what the real and political implications may be.

However, I say to my right hon. Friend and to the hon. Member for Scarborough that it is about time that someone explained in very simple terms to the British public that we really shall be net contributors to the overall finances of the EEC, not only this year but to an increasing extent in the coming years. Indeed, our net contribution this year alone, as far as I can see, will be £553 million, and it will rise within three years to £1,000 million, after receipts. That is calculating the contribution before the change to the European unit of account.

I was grateful to my right hon. Friend for his comments about the European unit of account, because if there is one thing that is extraordinarily misleading it is the suggestion that is emanating from certain Continental sources that the differences between the calculations in the European unit of account and the present unit of account are so small as to be positively minimal. My right hon. Friend has already made clear that the British will be faced with a very considerable burden, which I really dc not think they can accept in any form whatsoever. Indeed, the comparison of both the IMF and the unit of account parities used in the 1977 budget and the EUA parities used for the 1978 appropriations makes it clear that yet again this nation, which we are eternally being told is one of the poorest of the EEC, will be called upon to make an even greater sacrifice at a time when it desperately needs its own resources to do many of the things that we think are tremendously important here in Britain.

If one looks at the amounts about which we are talking for the extra costs, one finds that it would possibly be open to us to give the equivalent of about £2·per child for each child receiving benefit in this country for the sort of amounts of money that the Common Market is asking us to contribute.

Photo of Mr Hugh Dykes Mr Hugh Dykes , Harrow East

Will not the hon. Lady, however, also take the point made by the Chief Secretary that the agricultural pound and its relationship to the real £ sterling means that we get an additional amount, which reduces our net contribution to a couple of hundred million pounds in the current period? That is a permanent thing, according to the Chief Secretary a few moments ago.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

I am delighted to follow the Chief Secretary, whom I always believe absolutely because I know him to be a man of great worth and intelligence. I am happy to come to precisely the question of the agricultural funds because if there is one thing that two years in the Agriculture Committee of the European Parliament have taught me it is that there is an astonishing capacity on the part of the European agricultural lobby to persuade the Commission to give open-ended financial commitments.

One point that the hon. Member for Scarborough did not make strongly enough is that the 68 per cent. that we are told the agricultural funds at present represent is totally unrealistic. I leave aside the fact that at present there are plans going through in the Agriculture Committee which will result in an increased expenditure in improving things, such as the milk programme and negative taxes for the British consumer in many fields, such as isoglucose, and the changes envisaged in imported products. I leave aside all that and say to the hon. Gentleman that, even if one ignores those political decisions, there are still open-ended commitments on citrus fruits and on any kind of agricultural produce that appears to be under any attack from imported agricultural produce.

There is even a fantastic suggestion under consideration that, because Cyprus sherry is imported into Great Britain, those who make Marsala, which bears no relation to Cyprus sherry, should be compensated for importing it into the United Kingdom. That is the level of political decision-making in the agricultural sector of the Community.

It is no use our saying "Look how clever we are. We have cut down the amount of money we intend to spend on agriculture and we have increased the amount of money that we intend to spend on the Social Funds" if we do not spell out exactly what that means. In the Social Committee we were very concerned to find out what the budget commitment actually meant in real terms. The Social Fund is supposed to be used for those sectors of Community policy which I should have thought were among the most vital—for the retraining of workers who are unemployed, for the amounts of money spent to deal with youth unemployment and for changes in the structural development of the textile industry and the steel industry. We were told that one of the encouraging things about the budget was that it represented an 11 per cent. increase in the Social Fund.

However, when we tried to look at those commitments in terms which would make clear where the improvements would come and how the Commission envisages spending those funds in the coming budget year, it became very obvious that that increase might be in the areas in which it is certainly desperately needed but where there are already large sums of money outstanding.

In other words, the whole accounting procedures of the Commission, particularly in relation to the Social Fund but in fact in relation to all sorts of other policies, are so complex that it is quite impossible for the average committee member to work out how much money has actually been spent in the last year, how much money remains to be spent in the Social Fund and how much money will be an increasing amount available to the Social Fund in the year 1978.

I do not pretend in any way to be an economist, but it seems quite impossible to suggest that we are improving the economic controls of the Community when, even after presenting everyone with vast volumes the size of that which I have in my hand, individual Members of not only this House but, it seems, of every other Parliament in the Community find it virtually impossible to sort out what is actually happening.

When I questioned Commission officials I was horrified to learn—I have figures only in documents with French title headings—that in fact the appropriations in this budget for actions in favour of the agricultural sector, but more particularly of the textile sector, are actually less than they would have been in normal circumstances and that the increase will be used up in other ways.

It seems to me that in a Community that is totally committed to spending two-thirds of its budget on agriculture, and which eternally says that it is deeply concerned about the industrial sector, about regional policy and about social policy but still is not capable of producing changes that would make more money available to those sectors, one has a right to doubt both the sincerity and the commitment of such a budget.

I say to my right hon. Friend that I am deeply worried about the constant propaganda that comes from the Commission suggesting that the monetary compensatory amounts are so large and that the Commission is being so open-handed to the British people who are benefiting from the largesse provided by the Community as a whole. There is no explanation of the cost to the British people. If there is one interesting fact in this budget, particularly in Volume 7, it is the amount of money, even now, being entered into the budget for the storage of surplus food. Although my right hon. Friend said that he did not wish to discuss the common agricultural policy, the budget makes it clear that the political implications of this policy can and will be translated into considerable expense for the ordinary taxpayer.

The agricultural policy is not only expected to require vast amounts of money for the storage of surplus food. There is the positive entering of money in large amounts in the budget in such a manner that it is obvious that there is to be little structural change in the agricultural policy in the coming year.

While we are on the subject, I am deeply concerned by the section in the budget relating to the financial assistance to be given to countries outside the Community. It is obvious, when we look at the figures, that what is intended is that Greece will get a small amount, Portugal will get virtually a derisory amount of assistance and Cyprus will get so little as to be hardly anything at all but the Maghreb countries will get a considerable amount of money from the Common Market, presumably on the basis of the agreements negotiated for them as financial protocols. This is a political question.

If we are to discuss the enlargement of the Community, there seems to be no excuse for saying "Yes, we would like to see the Mediterranean end of the Community extended but we do not want to do it too soon because the agricultural products of those countries would cause considerable difficulty to existing agricultural producers in the Community." Yet those who use those arguments are also saying "Never mind, we are giving considerable political and economic assistanca to Portugal and Greece to help them, even before they are fully involved in negotiating entry to the Common Market."

If we look at the figures, it becomes painfully obvious that nothing of the kind is happening. Portugal is desperately in need of our support. It has a democratic system of government which needs our support in every way. Yet the countries of the Maghreb, already getting considerable assistance from other sources, are to be given far more money in total than any of the other nation States. This is a clear indication of the level of political decision-making inside the Community.

Photo of Mr John Roper Mr John Roper , Farnworth

I have been trying to follow what my hen. Friend has been saying about Portugal and the Maghreb countries. My reading of page 646 of the budget suggests that there are to be about 410 million E.U.A. for Portugal and only 339 million for all three Maghreb countries. Perhaps I have missed a page.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

My hon. Friend will see that the Maghreb countries are receiving in total 172 million units of account whereas individual countries such as Greece, Cyprus and Portugal are getting nothing like that amount of support. Whichever way we look at it, that is not a commitment to a political support system. I am afraid that I cannot accept my hon. Friend's interpretation of the figures.

What I find very depressing about the debates in which I take part in the European Assembly is the singular lack of reality. Tory Members have said, and will no doubt say again, that all this will be changed by direct elections. The hon. Member for Scarborough welcomed the development of "own resources" as a positive step forward. I believe that it is anything but that. A system which says that anything up to 1 per cent. can be added to VAT to develop a common system is capable of being expanded in such a way that the British people will find themselves committed to even greater expenditure, over which they will have no control.

If the hon. Member tells me that directly-elected Members will take it upon themselves to play a far greater rôle, all I can say is that, if we develop an assembly of highly-paid positively-removed "Euro-smoothies "who have no idea what the average person has to do in terms of budgetary control in this country, we shall not raise the level of debate, particularly in economic terms, to a greater degree of reality. All that we shall do is to remove it even further from the realms of understanding.

Those who live on the inflated rates to be found in some European institutions will not be good judges of what is an acceptable level of payment for agricultural produce or any other revenue-raising policy. I hope that the hon. Gentleman will not suggest that after direct elections—when the European Assembly finds itself in even more expensive premises based in Brussels, about which it appears already to be giving commitments—the Assembly will be better representing the British housewife than he or I are doing at present. I do not believe that that will be so.

Photo of Mr Michael Shaw Mr Michael Shaw , Scarborough

Would not the hon. Lady accept that it is possible that she and I might stand as candidates and might become Members of a directly-elected Parliament? Does she believe—I do not—that we shall be any less assiduous in looking after the interests of our constituents than we are now?

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

The hon. Gentleman is kind enough to suggest that he should join me. I would welcome his joining me on almost any occasion in almost any place, but I can assure him that I shall not be seeking election to the European Assembly, for one simple reason. I sit in this House as the representative of the people of Crewe. I go backwards and forwards to learn their views and to represent them here. There is no doubt in my mind that that task will be beyond any elected Member when he has a population in his constituency 10 times the size of my present constituency. I have no doubt that if I find the debates of the European Assembly unrealistic now I shall find them positively surrealistic after direct elections. The one thing that frightens me about the budget is that it is the forerunner of a system which we shall soon find totally unsupportable.

8.0 p.m.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

I agree the general tenet of what the hon. Member for Crewe (Mrs. Dunwoody) has been saying. The debate has made us dig into the finances of the Community, and the more one digs, the more disturbing it is, particularly in the light of the economic stringency that we have in this country and that I support for obvious reasons. The more one digs into these great big volumes, the more profligate the EEC is seen to be.

The Minister has a Council of Ministers meeting on Wednesday. May we have his assurance that on this occasion he will make a statement to the House on Thursday and not on Friday? It would be very convenient for hon. Members if he would do so. Perhaps he will deal with that when he replies to the debate.

I welcome the debate, but I am afraid that it is too short for this vast subject. The very shortness of the debate results in a number of hon. Members not being present, their feeling being, Mr. Deputy Speaker. that there is little or no chance of being called in a debate lasting only two and a half hours.

I agree with the idea of having three EEC debates on one day—indeed, I proposed it to the Scrutiny Committee and to the Leader of the House—but I do not think that we should be taking together with other subjects such a major subject as the budget. I think that the budget should be given a rather longer time than has been allocated.

I should like to cast a critical eye over the Assembly. I call it the Assembly because that is the word used in the Treaty of Rome, and it is also the word used in the European Assembly Elections Bill, which has been before the House for Second Reading. I think that we ought to pass a very critical eye over the affairs of the Assembly in terms of its budget as direct elections have been proposed. They are not yet with us, of course, and I hope that they will not be with us, but I think that we should look at the Assembly at this crucial time.

I agree with the hon. Lady that it is very confusing to look at the figures in these budgets, particularly this year, when they are in units of account and European units of account. It is extremely difficult to compare one year with another. I hope that the House will therefore forgive me if I make any technical errors.

As far as I can understand it, the estimate for the Assembly in 1978 is 86 million European units of account. The Library worked out for me that that sum for 190 Members of the European Assembly—MEAs—is equivalent to £55 million. The cost of our own House of Commons is £15 million for 635 Members and £20 million if we include the House of Lords. There are three times as many Members in the House of Commons as in the European Assembly.

I should like to draw attention to the rise in expenditure on the Assembly. For the first year of the enlarged Community, 1973, the cost was 25 million units of account. For 1977–78 the cost has risen to 70 million units of account. That is almost three times as much as in 1973. These figures are in units of account, not in European units of account.

One does not know what the increase will be if we have a directly elected Assembly, and I am greatly worried about the way in which these things are done. Speaking in the Assembly on 16th June, Lord Bruce of Donington said: There is, I believe, a convention established —I do not know how long it will last—for the budget of Parliament to be more or less assented to by the Council on the basis that Parliament will not unduly query the Council's budget either, and with this comfortable arrangement the passage of any budget of Parliament is satisfactorily assured. If Lord Bruce of Donington is right in what he says, I regard that as a highly dangerous situation. Indeed, it places on us in this House a much greater duty to look with a toothcomb at the sort of thing that is going on. That is what I propose to do in the short time for which I wish to speak.

My first point refers to the Members of the European Assembly. I shall not particularise, because I do not know the facts relating to individuals, but one picks up various stories, in addition to which we have a magnificent Press which gives guidance on these matters. I should like to know who exercises control over the money spent by the MEAs. We pay our share in this country, and it is the British taxpayers' money that is in part paying for the MEAs' expenses.

On 3rd July, the Sunday Times had an article on this very question. It worried me when I read it. That is why I am raising it in the House today, so that perhaps we can cl2ar it up. It is a touchy subject, I imagine. The article states that One MP who previously sat in the Europarliament claims it is possible to make £9,000 a year on expenses. Yet most MPs claim there is little or nothing in it for them. There is laughter from those Members who have attended. I do not know who is right, but, according to the article, this MP who has attended says that it is possible to make £9,000 on expenses. If that is so, it is enough to alert one to the whole question.

Photo of John Prescott John Prescott , Kingston upon Hull East

The hon. Gentleman rightly says that this is a very sensitive subject. A number of people are quoted in the same article. The Member referred to in the quotation did not mention the period of time and did not have the guts to be named in the article. I would even challenge the statement and say that it is not possible to make that money. A Member has to stay in a hotel and, with the differential between what is received and what is spent, it would not be possible to make anywhere near that sort of money. A number of hon. Members made statements to the reporter and he did not carry them all in his article, being more concerned with sensational comments.

I point out that the expenses paid to Members of the European Assembly for secretarial work are subject to a contract with a secretary and that the money is paid by the Assembly directly to the secretary and not to the Member. This House might care to look at that procedure. In addition, Members of the European Assembly have money made available to them for research. It is a pity that this House does not provide us with money for research, which would make us more effective in this country.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

The hon. Gentleman has made some interesting points about the House of Commons. I note what he says about the statement in the article that it is possible to make £9,000. I think that all Members of the Assembly who have attended would say that is not so, but the article goes on to state: one Labour Member says that he has made no more than between £2,000 and £3,000 over two years. That is quite a lot of money to make out of expenses, and I feel that the subject requires examination.

Dealing with travel expenses, the article states: In April, a month after he joined the British delegation to Europe, Lord Brimelow attended a meeting in London of all the European Socialist MPs. For the two days he was paid an attendance allowed of £106"— this is in London— although his only outlay, he says, was on bus fares to and from Lancaster House. 'This was obviously a bit extravagant,' he says. I would not question Lord Brimelow, with his long record of public service—

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

With the greatest respect, there is one thing that I find vaguely irritating. Many of us take part in debates in the European Assembly. They are of some importance, but they are never reported anywhere in Britain. The sort of remarks that the hon. Gentleman is making may indeed be perfectly justifiable. Many of us are only too happy to deal with our problems about expenses. However, I hope that the hon. Gentleman will accept that those of us who use our expenses for expenses are not making money. I would say that very plainly. The hon. Gentleman may question anything that he likes, but I hope that he will not continue along this line, because there are justifiable defences.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

I absolutely accept that. But what I am doing—this is my duty as a Member of Parliament—is to question the control of this money. In order to question it one has to build up a case, and the only case that one can build up is from quotations from a variety of Members of Parliament and respectable people like Lord Brimelow, who was given £106 for two bus fares. That is the sort of nonsense that one expects from the European Community.

The article goes on: Twenty-six MPs and 10 Peers leave for Luxembourg tomorrow for their monthly stint at the European Parliament. If they choose to fly tourist, their return fare will cost £80. But their allowance for travel expenses will be at least £200. Is that true or not? These are the sorts of things—

Photo of John Prescott John Prescott , Kingston upon Hull East

That is one of the difficulties with which Members are faced. A point that could have been made is that the tax position of Members of the Assembly is not yet established. We are pressing hard to get a decision about that. What is paid for travel journeys is determined for all the European Members. One of the difficulties with British Members is that sterling has constantly declined, thus affecting sterling payments, which has led to a discrimination between the actual fare paid and the amount paid in sterling. Some steps have been taken to correct this, but that has left us with this kind of anomaly.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

I am glad to have that confirmed. I suggest that the right way for people to travel is by some form of warrant so that no money changes hands. Each MEA could get a bunch of warrants just as we do. There should be close liaison between the fees office in Brussels and the Fees Office here so that someone coming from Liverpool does not get a mileage allowance from Liverpool to Brussels when in fact he comes down on a House of Commons travel warrant.

It is rather like coming down by car from one's constituency. The Fees Office naturally checks one's accounts to see that one is not coming down—

Photo of John Prescott John Prescott , Kingston upon Hull East

There is very tight control.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

I hope that the Fees Office would do that so that one does not get a return ticket and then travel by car one way. I should be appalled if we were told that such a suggestion was even vaguely right.

Photo of Mr Hugh Dykes Mr Hugh Dykes , Harrow East

Is my hon. Friend suggesting that hon. Members of this House who are also Members of the European Parliament may pass through the House of Commons on a journey to Europe and actually make a double claim?

Photo of Mr Neil Marten Mr Neil Marten , Banbury

I was asked not to go on quoting this article, but that question is raised in the article. I shall pass it to my hon. Friend. For the sake of Members of the European Assembly, it is right that this should be looked into. I put it no higher than that. I am glad that the Chief Secretary nods agreement.

I turn to trips overseas, which are necessary in any Parliament. I should like to know what the procedure is. When a Select Committee of this House is going overseas, there is very tight budget control. The expenditure has to be forecast and has to go before the Chairman of the appropriate Expenditure Committee. There is fairly tight control. I wonder whether Assembly visits overseas are as tightly controlled as we would wish. It is British taxpayers' money. One comes back to this point all the time.

The budget does not really deal with the directly elected MEAs. It is therefore difficult to forecast what the increased expenditure will be. But the numbers are going up from 190 to 410 directed elected Members, if that ever comes to pass. However, a couple of guesses have been made on various hypotheses, the best of which puts the increase at an extra £12 million. Therefore, the total cost of running the European Assembly will jump from £55 million to £67 million a year. That is quite a lot compared with the running of this House of Commons.

The secretarial allowances have already been dealt with, but I should like to know whether the secretarial allowances are taxable in the ordinary way. Is the money coming from Brussels taxable in the same way as the pay that secretaries in the United Kingdom receive?

The other point that I should like to raise relates to payments to political parties. I can find very little reference to this in the budget. If payments are made to political parties, I should like to know what control there is over the expenditure once the payment has been made. Are the accounts audited and published? I think that the public ought to know.

Money paid to political parties is something of which I disapprove strongly. I hope that the sort of sums paid to political parties in the European Community will never come to pass in this country.

Photo of John Prescott John Prescott , Kingston upon Hull East

The hon. Member's party receives money.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

Indeed, the Conservative Party does. I should like to see the accounts properly published so that we can all see exactly what has happened. It is vital to keep on the straight and narrow so far as one can.

I noticed that last week, or the week before, a group of Conservative agents were taken to Brussels. I understand that the trip was paid for out of some money left over from the referendum by the European Movement.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

It was freely subscribed.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

Does my hon. Friend wish to explain?

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

If persons wish to subscribe to a movement in which they believe, is my hon. Friend saying that they should not do so? Is my hon. Friend saying that there is something wrong in people wishing to subscribe after tax income to something like the European Movement?

Photo of Mr Neil Marten Mr Neil Marten , Banbury

lf my hon. Friend will read Hansard tomorrow, she will discover that I said nothing of the sort.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

My hon. Friend is putting into my mouth words that I have not spoken. I recommend that she reads Hansard tomorrow.

With regard to European Assembly staff, I understand from the budget that 60 per cent. of permanent posts cover language services—translators and interpreters. The number of days worked in 1976 was 10,684 interpreter work days. That is very expensive and is a very great number of days spent on languages. Most right hon. and hon. Members are Community minded. I am certainly surrounded by them. As they are so Community minded, I am absolutely certain that they would like to overcome this wasteful expenditure on interpreters and translators.

Since I myself am European minded but hate the Treaty of Rome and all that jazz, I think that the time has come for the Community to move to one language. I believe that that language should be French. French is by far the most spoken language in the Community. It is a most attractive language and it would be a very good example of British Communeautaire if we were to approve French as the language for the European Community. I am sure that M. Debré and M. Chirac would thoroughly approve.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

Not just now. I shall do so in a moment.

If that were so, those hoping to run as candidates in direct elections would have to pass a little test of colloquial French. If they did so, they could then get on to the candidates' list in Central Office. I understand that masses of people are queuing up there to become candidates for the European Assembly. It would cut down the numbers if candidates were required to have the qualification of speaking French. So I think that there would be a massive saving of money if everyone over there spoke French.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

Will my hon. Friend accept that he is rather out of date when it comes to new members seeking to join the Community? For example, whereas the older generation of Greeks speak French, the newer, modern, "with-it" Greeks speak English.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

Bless them for that! All I say is that they should be made to speak French, like everyone else. is the most beautiful language—

Photo of Mr Neil Marten Mr Neil Marten , Banbury

I agree, but French is the language which is largely spoken in the centre and heartland of Europe, which I am sure all my hon. Friends who are in favour of the Community think of as Europe, and France personifies Europe.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

Is the hon. Gentleman not aware that there is now an EEC directive suggesting that the children of immigrant workers should be taught in the languages of their mother countries and that the only people who are not to be given this privilege are the Irish in Britain who, for some reason, are to be deprived of the right to learn Erse?

Photo of Mr Neil Marten Mr Neil Marten , Banbury

That may be so and I am sorry to hear about it. But I recall the draft directive to which the hon. Lady referred. I deplored it thoroughly. As one who is interested in race relations, I believe that people who come here from the Commonwealth to take up residence should want to be integrated as much as possible.

All this duplication, triplication and whatever the word is for sixfold printing, having every document published in six different languages, means that in 1976 the number of duplicated, offset-printed and typographic pages produced by the Assembly, amounted to 83,436,321. That number could have been divided by six. I ask right hon. and hon. Members to imagine what a saving of money there would have been if each document had been in French only.

Ten per cent. of the staff employed at the European Assembly are employed because of the lack of a single seat for the Assembly. Sometimes the Assembly sits in Luxembourg and sometimes in Strasbourg. According to the Assembly's report on this budget, 10 per cent. of the staff are required for that purpose.

This is the sort of nonsense which must be sorted out. It is the longest running farce in Europe, and the people responsible for it are sitting round me now. I say that because they have done nothing about it. They have not blocked it or had a "demo" about it. They go on and on from one place to another. I hope that they realise how very foolish they look in the eyes of those of us who sit outside the Community.

Then there are visitors to the European Assembly, sometimes to Strasbourg and sometimes to Luxembourg. In 1976, there were 21,627 visitors to the Assembly. I dread to think what the cost was. But it is a good propaganda exercise, of course.

Then there is the matter of Press cuttings on direct elections. It is said with pride that 16,000 articles on direct elections have been collected. I cannot imagine what is done with them. It is a beautiful piece of bureaucracy. But it is bureaucracy gone totally mad.

What evaluation is made of the work of the staff at the European Assembly? I have been there. They can be seen all working very hard. But what is the worth of what they achieve?

Then there are the expenses of the propaganda for direct elections. May we know what they amount to and how the money is being used in various countries?

There is a nice little item in Chapter 15 under Item 1490. It is fascinating to learn that 145,000 units of account are to be spent on a creche, day nurseries, holiday camps, domestic help, etc. British taxpayers, hard pressed as they are, are paying for a proportion of that—

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

Lady Members asked for one here.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

British taxpayers are paying a proportion of that. There would be an outcry if the British Parliament put into its Budget expenses for domestic help and holiday camps. It is a ghastly thought to have to go on holiday with some of my colleagues, anyhow, but it would be unthinkable for the Government to subsidise the cost of doing so.

Then I look at the Commissioners and their pay. A Commissioner who is married and has two children is now getting net, after paying tax, about £42,000 a year. After he has done five years and retires, he get "redundancy" pay for three years amounting to £23,000 a year. That is quite an expenditure which ought to be looked at. After all that, he gets a pension of £12,000 a year when he reaches the age of 65.

The European Community, especially the Assembly part of it, is becoming rather a sick joke in the eyes of the average British person. What does the Assembly achieve? I know that people work hard. They produce many reports. I admire what they do. But what does it all achieve?

When it is directly elected, if it is—God forbid—with all those additional people there, what will it achieve? There will be a great deal more cost, but I doubt whether it will achieve very much. It has become and will continue to he, as the article in The Sunday Times describes it, a bit of a "gravy train".

I am appalled by what is contained in the budget, and I can only suggest that the British Inland Revenue together with a Select Committee of this House looks at the whole position, otherwise its name will get worse and worse as the years go on.

Several Hon. Members:

Several Hon. Members rose

Photo of Sir Arthur Irvine Sir Arthur Irvine , Liverpool Edge Hill

I draw attention to the fact that we have had one hour and 40 minutes' debate, with only four speeches. We have to end this debate at 16 minutes past nine. I ask for the co-operation of right hon. and hon. Members.

8.27 p.m.

Photo of Mr John Roper Mr John Roper , Farnworth

I shall not take up what I consider to be the rather squalid attack made by the hon. Member for Banbury (Mr. Marten) upon hon. Members of this House and their behaviour in the European Parliament. However, I intend to turn later to one or two remarks about the Parliament itself.

When we come to consider the budget of the Community, the first feature of it that one notices is that, despite some of the remarks made earlier, it is a remarkably small one. We hear talk about very substantial expenses—they are substantial and perhaps too high in certain areas—but overall the budget represents only 2·3 per cent. of the total national Budgets of the nine members of the Community.

We have to consider two specific items in the budget which will occur in the coming year and which are of special importance. The first is that on 1st January 1978 the Community will go over to a system of own resources—that is, if the reserves which have been placed by the Belgian and Danish Governments are withdrawn and there is a satisfactory system for VAT collection throughout the Community. I hope that my right hon. Friend the Chief Secretary will comment on those reserves, because obviously this is an important matter which could block the move to own resources.

The second matter which is of considerable importance is the proposal that the budget should be based on the European unit of account. We should understand the problem that exists for the Community as a whole before we consider the problem for this country in particular. For the Community as a whole, the fact is that by the end of the year all that will be left of the IMF unit of account will be—rather like the Cheshire cat—just a grin. It will have totally disappeared and it will not have provided a satisfactory basis for continuity of Community accounting.

The regulation that will be required to introduce the European unit of account will need unanimous approval by the Council of Ministers. I am glad that my right hon. Friend will be able to exercise his influence to ensure that it goes in the right direction.

There is a paradoxical situation in the explanatory memorandum from the Treasury which shows, on page 3 of Annexe A, that the budget itself can be adopted by a qualified majority—by 41 weighted votes out of 58. That means that one would require 18 votes to block it. The United Kingdom, and even the United Kingdom and Ireland—Irish interests are not dissimilar from our own here—will make up only 13 votes. We could have a situation where the Council of Ministers adopted by qualified majority a budget in the European unit of account when the Council of Ministers had not agreed unanimously to the regulation introducing that unit of account. Perhaps the Minister will explain how this paradox could be resolved, either when he replies or when he returns from Wednesday's Council.

I am pleased that after a transitional period of two to three years we have moved to a position in which there is a distinction between appropriations for payment and appropriations for commitment. The final stage of introduction of this system is an important advance.

My hon. Friend the Member for Crewe (Mrs. Dunwoody), when discussing the budget and in particular what might be called the enormous telephone directory that we have received of some 700 pages, said how difficult it was to get through this document. Once again I pay tribute to the helpful explanatory memorandum from the Treasury, because it sets out very clearly the difference between the commitment appropriation and the payment appropriation for 1977 and 1978. There is possible confusion in this— in the Social Fund where there would appear to be an increase from payment appropriation from 141 million European units of account to 536 million European units of account between 1977 and 1978. This is not an increase of 400 per cent. as would appear at first sight. It is simply that the Community will pay its bills more rapidly in future and that in 1978 we shall have a once-for-all payment.

It is worth saying that the figures written in for commitment appropriation relating to the Regional Development Fund have increased from 398 million European units of account in 1977 to 750 million European units of account in 1978. At this stage, that is only what is to be in the budget. The Council of Ministers has not yet agreed on this figure, but I very much hope that this will be finally agreed.

These are the sort of areas where we want to see the development of Community spending, and similarly in industrial and energy policies where there has been an increase from 93 million European units of account to 250 million European units of account, an increase of 300 per cent. This also has not yet been agreed, and I hope that it will be.

In reading the report, I rather like the new word which has appeared for MCAs. MCAs are now referred to as "agrimonetary expenditure". This is not a word that is on everybody's lips, but it is a bit clearer than MCAs.

The hon. Member for Banbury made a number of remarks about the European Parliament. I leave aside his references to Members' expenditure. It was interesting to see in different parts of the budget that the lowest increase of 4·36 per cent. is attributed to the European Parliament.

That suggests reasonably good housekeeping, though no doubt there could be improvements. But in making comparisons between the costs of this House and those of the European Parliament one must take into account the totally different situations—the fact that Members have to travel much greater distances, by air rather than by train, and the fact that there have to be translations.

Whatever the hon. Member for Banbury may say about the French—I agree with much of what he said—for most people it is difficult to debate in a foreign language. An effective Assembly with effective committees must have translations. I know from the Council of Europe, where there is not total availability of translation, the difficulties faced by Members whose language is not spoken in the Assembly. They are inhibited from intervening in debates.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

Would not the hon. Gentleman agree that there are already sufficient languages in the Community and that we must ask anyone else who wishes to join the Community to accept one of the existing languages? Otherwise, the expense of translation will be prohibitive.

Photo of Mr John Roper Mr John Roper , Farnworth

That is an interesting point, but it goes against my argument that people should be able to take part in debates in their own language. That does not necessarily mean a translation of all languages into one's own, but one should be able to speak one's own language and have it translated into a limited number of languages. The solution will be found in some such arrangement. Although younger Greeks are fluent in English, it would be unfair to restrict membership of an Assembly to those fluent enough in a foreign language to be able to take part.

Page 20 of the document refers to the Community's powers to borrow. The President of the Commission has for some time proposed that the Community should have greater powers so that it can develop some of its programmes. I hope that that will be agreed soon as it will add flexibility in regional, social and industrial matters.

My hon. Friend the Member for Crewe mentioned commitments outside the Community, quoting from page 646. It is true that in the reference to budgetary amounts alone there is a discrepancy between the figure of 60 million units of account for Portugal and 172 million for the Maghreb countries, but if one totals the amounts granted in the budget and the amounts in the European Investment Bank, the interest on which is subsidised by the Community, one sees a dramatic change, as there is provision in this period for 350 million units of account in loans to Portugal and only 167 million in loans to the Maghreb.

We have had a discussion which might have been relevant to this debate about what happens in committees in the European Parliament. Although tonight's debate has been useful, it might have been more so if there had been a Committee of this House consisting of Members of the European Parliament and other hon. Members interested in European matters. I hope that in due course the Select Committee on Procedure will recommend something of the sort.

8.40 p.m.

Photo of Mr Hugh Dykes Mr Hugh Dykes , Harrow East

I agree with the last suggestion of the hon. Member for Farnworth (Mr. Roper), depending on how it was precisely worked out.

This debate has strayed from the initial examination of the budget as presented by the Chief Secretary into a detailed analysis of some particularities of the European Parliament. I do not feel that it is appropriate in the short time available to carry out a detailed examination of how the European Parliament functions—whether in its expenditure, the expenses of individual Members or its operational characteristics—in a debate on the Community budget. That would be out of place because this fascinating and interesting subject needs a lot of time to itself. Therefore, one can touch only fleetingly on one or two details.

I should not like in any way to follow the inference of my hon. Friend the Member for Banbury (Mr. Marten) in casting not aspersions in a particular and personal way on individual Members but a general slur on the way in which expenses may be paid in the European Parliament. I agree with my hon. Friend's anxiety, but for a different reason. The main faults are partly the way in which the system of expenses payment is con- structed but mainly, as in all these matters, a reflection on the poor relative economic position of this country compared with the leading members of the Community. It is all very well to quote individual figures and expenses and to say that they seem lavish, sizeable and considerable. They seem so only in British terms; in Continental terms they are reasonable. The dilemma is that one cannot differentiate and have lower payments for relatively poorer nations and higher ones for the better-off.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

I should like to make it absolutely clear that in quoting from the article in The Sunday Times I was saying only that there was enough in that article to make people anxious and that the matter therefore needs to be cleared up —nothing more and nothing less.

Photo of Mr Hugh Dykes Mr Hugh Dykes , Harrow East

Obviously, my hon. Friend the Member for Banbury was agreeing with that article, but his idea of issuing warrants and instruments to enable journeys to be made seems to be the rational way of developing this. The problem will become even more alarming after direct elections, when salaries will start to be paid and there will be the important relationship between salaries and expenses. I hope that the House and other European Parliaments will apply a searchlight to that.

I should like to say something about the budget, but I do not have time to go into details. Incidentally, two and a half hours is an unsatisfactory time for such a debate because there is a tendency for some hon. Members—who have already spoken previously—to speak for too long.

The budget represents a groping and faltering step in the right direction through the onset, for the first time, of own resources. That is not the same as the creation of an autonomous Community budget in the intrinsic sense of that adjective. I hope that the budget will develop as soon as possible not only in size but along the lines of autonomous decision-making and decisions on spending under the various heads.

As for the procedures for the budget in the European Parliament, the way in which they are scrutinised by national Parliaments is unsatisfactory. It is a Byzantine and mysterious process within the European Parliament. My hon. Friend the Member for Scarborough (Mr. Shaw) has done the House a great service in explaining some of the mysteries. However, the discrepancies in assessments, and the fact that the final budget is different from the preliminary draft produce enormous obfuscation and an opportunity for deliberate obfuscation by the Council of Ministers. I hope that parliamentarians, national and European —and perhaps, to a lesser extent, even the Commission—will work hard together to overcome this central problem.

The development of the budget is an urgent and pressing matter and, therefore, it is related directly to the paradoxical and rather illogical argument about the contribution. The hon. Member for Crewe (Mrs. Dunwoody) complained about the net contribution made by the United Kingdom. However, we shall perpetually be complaining about the contributions of various member States, and if the United Kingdom remains one of the laggard economies in the Community we in particular shall complain about the contribution.

However, since our contribution to the Community budget by definition replaces current or future items of national expenditure, this is not really a contribution in the sense of a direct financial burden. It is a payment into a common budget for, I hope, the common good. The way that it is distributed is partly connected and partly separate, but even that can be decided at a political level in a satisfactory way if the member States' economies do what they should have done—and what they always did up to the time of the oil crisis at the end of 1973—namely, by and large and with some detailed exceptions in performance, move together.

Economic convergence and development of the Community budget go hand in hand. This is not a strategic budget in the national sense of a budget with deficits, surpluses or coming into balance as a result of deliberative economic management performance. It is a passive receipts and payments budget whose original political aim was to prop up the inefficient farmers of Germany and France. That motivation is declining fast, although agricultural expenditure remains high at about 70 per cent.

I hope that the budget will transform itself from an artificial passive budget into an autonomous budget that is more dynamic in its deliberative effects and that it will be decided more collectively with the European Parliament having a more direct say over the whole of the budget. At present, the European Parliament has a direct say in less than 10 per cent. of the budget. It should become a positive instrument for the good of all the citizens of the Community.

Lest my hon. Friend the Member for Banbury be alarmed, I should stress that this has nothing to do with federalism. It is a real long-term expression of the Community in practical terms, developing common funds to counter such problems as unemployment and doing things for the common good that national Governments cannot do.

8.47 p.m.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

Owing to the amount of time available, my speech is necessarily "itsy-bitsy", so I shall put seven brief points to my right hon. Friend who will choose to reply to some, all, or none, according to taste.

The first is that many of us on the Budget Committee are worried about what will happen if there is a bumper harvest. Commissioner Spinelli, from his knowledge of Italy and the Commission, and others outlined the acute problems that such a harvest would render and, since it looks as though there will be a bumper harvest from Italy to Scotland, can my right hon. Friend say what contingency financial plans have been prepared?

The second matter concerns the Treasury. Ministers will know from long correspondence with Director-General Schuster that there is a real problem in energy financing matters in the Community in relation to energy expenditure by national Governments. The Treasury has taken the view that if more funds are put into certain common research projects, much less will be available for institutions in Britain doing similar work. This is a long story and I do not expect an off-the-cuff answer, but there are real problems here and I hope that Treasury Ministers will look at them and the role that they have.

This is a matter that could well be discussed on 20th July. It is a question of priorities and I hope that Britain will be particularly sympathetic to the Community's feeling that, if there are any cuts, energy should be protected.

The third point was raised by the hon. Member for Scarborough (Mr. Shaw) who, like me, is vice-chairman of the sub-committee on control. I agree with what the hon. Gentleman said about the audit court, but we want some philosophy established on the question of confidential documents because this is a grey area. The Chief Secretary knows what happened on the malt issue and that should not be repeated.

There must be clearly established guidelines about the availability of documents. I am not persuaded of the value of a massive handover of secret documents, but there are occasions when some rules should apply as they do with our Public Accounts Committee. Have Treasury Ministers any view on these delicate issues?

Fourthly, there is the worry about Article 131. I have sympathy with my right hon. Friend's point of view. But is there not a danger that, as with JET, if we are not careful we shall slip into a system of generalised blackmail and tit for tat? That would be very unhealthy for the development of the Community?

Fifthly, many of our problems arise from the fact that the pound sterling is undervalued. More and more of us believe that a proper rate for the pound, without any damage to British export potential, would be ․1·90 or even․2. There are many people in Brussels who think that the fact that the pound is undervalued is the source of many of our current problems.

Sixthly—this I regard as an important question—my right hon. Friend—I would comment on his personal assiduity in coming to the European Parliament—has now had six months' experience as President of the Council of Ministers. I understand why the Foreign Ministers should be appointed by rotation, but I would ask whether, on reflection, he thinks that this revolving presidency for six months every so many years—it will be six months every six years, presumably, if Greece, Portugal and Spain accede—is a sensible way of conducting the necessarily highly complex, delicate financial affairs of the Community. It hardly seems that six months is a suitable period to get together not only Ministers but a whole set of different officials.

Can one run an efficient policy on this basis? Has not the time come to inject some ingredient of permanency into this revolving presidency, particularly in relation to financial affairs?

Lastly, come enlargement, will there be the same automaticity in the various organs of the Community, particularly the financial organs, which has hitherto been taken for granted? Should the position not be made plain to any of my fellow Scots who think that a separate Scotland hived off from the United Kingdom would automatically be entitled to representation as Scots on the Council of Ministers, the Commission and on all the organs of the Commission? That would be unacceptable if for no other reason than that it would be unworkable.

8.53 p.m.

Photo of Mr John Osborn Mr John Osborn , Sheffield, Hallam

It was my intention to speak in the earlier debate on energy. I shall now take the opportunity in this debate of dealing with two points. I have been interested in regional policy and energy. On the budget, the Chief Secretary outlined the global picture and my hon. Friend the Member for Scarborough (Mr. Shaw) outlined the work which is going on in the committees of the European Parliament. My hon. Friend is rapporteur for the budget, and there are rapporteurs in the committees who will look at the various issues. That work is going on now. That is why the timing of this debate is so important. It is right that there should be this debate in the House of Commons now.

I regret that agriculture still dominates the budget. Either 60 per cent. or 69 per cent. is devoted to agriculture. Bearing in mind, however, that the Community budget is so small, should we not reconsider this proportion? Energy research, which might include industry and transport, is only 4 per cent. of the overall budget. The Regional Development Fund is still only 6 per cent. of the overall budget, although there has been an 88 per cent. increase.

The increase which we are concerned with, in thousand million units of account, is from 10·2 to 12·4 on appropriation of commitment, a 21 per cent. rise. The increase in the appropriation as to payment is from 9·58 to 11·85, a 23 per cent. increase. These increases are considerable.

Over the next decade, energy and agriculture will be subjects of vital importance both for the Community and for the world as a whole. We had a valuable debate on energy earlier tonight, and before that there was a debate on British energy policy. When I was in Strasbourg I was able to see these matters from the European viewpoint and I could see the impact of the British approach on the problems which are dealt with there. It is possible in that way to see how the views we hold here fit in with the views of our German and French counterparts.

In our earlier debate, this afternoon we discussed five draft proposals on energy, covering financial aid to demonstrate energy-saving projects, new sources of energy, modernisation of existing buildings, the performance, maintenance and insulation of heat generators, and the general view of energy in the Community. Whatever we do in the Community, particularly in relation to energy, must coincide with the international approach and particularly that of the OECD and IAE.

Our discussions earlier were perhaps related to the cost of energy. Constituents saw me at the weekend complaining that electricity had gone up by 60 per cent. and gas by 30 per cent. over the last three years. Some of my constituents have put in control mechanisms, insulation and double glazing to cut down their energy bills. Too many people do not realise, however, that the world faces an energy crisis and that over-dependence on oil could create difficulties for us in five, 10 or 15 years hence. There is a need, therefore, to look elsewhere for energy. The problem is that the demand for oil threatens to outstrip supply. North Sea oil is a product that we might want to sell to the rest of the Community and assist our balance of payments.

The Community is an economic entity. In energy and agriculture it wants to be less dependent on outside sources of supply and to avoid the vagaries of the market. [Interruption] If you will interrupt me and tell me when I should sit down, Mr. Deputy Speaker, in order that the Minister can make his winding-up speech, I shall be happy to do so.

Photo of Sir Arthur Irvine Sir Arthur Irvine , Liverpool Edge Hill

That is not a matter over which I have any control.

Photo of Mr John Osborn Mr John Osborn , Sheffield, Hallam

I understood, Mr. Deputy Speaker, that I could speak for another six minutes without preventing the Chief Secretary from replying.

Photo of Sir Arthur Irvine Sir Arthur Irvine , Liverpool Edge Hill

As a postscript, I suggest that the hon. Gentleman addresses himself to the budget.

Photo of Mr John Osborn Mr John Osborn , Sheffield, Hallam

I shall certainly take your advice, Mr. Deputy Speaker. In fact, the budget has items of expenditure on research and energy. Earlier today we were debating underground gasification and expenditure on geothermal energy. There have been debates on the various research organisations' work on hydrogen as an energy carrier. One or two items have been excluded, perhaps, such as wave power and tidal sources of energy. However, the implications are that there are many items of expenditure in energy, industry and research that are better handled as part of a Community budget, not as additions to national expenditure.

Obviously, if I wanted to criticise I should refer to Articles 321, 322, 323 and 324 dealing with hydrocarbon exploration and the exploitation of uranium deposits: and there is the need to consider the stocking of coal in power stations. Those are matters that are probably better dealt with as Community items. They should not fall on the budget of any one nation.

There has been considerable discussion today on whether it is possible to cut out the flaring of gases. There is an item in the energy and research budget for their processing, refrigeration and compression of liquid petroleum gases which might be of use to the Community.

The real issue is that Governments feel that they should have under their own control expenditure in these sectors. I very much hope that Treasury Ministers who will be speaking at the Council of Ministers—we must bear in mind that already there are threats that the Commission's proposals for research will be cut—will bear in mind that collective expenditure and the avoidance of duplication could be much more economical in the long run.

In these areas of Community expenditure we must bear in mind that regional development is of value. Although certain countries can afford to contribute to less fortunate regions in their own lands, it is better to look at the Community as a whole and ensure employment and a reasonable standard of living in those areas. Such development should be considered on a Community basis rather than on a national basis. Therefore, I hope that when considering the budget we shall try to concentrate on the small items that will give us a return in the long run, such as ensuring our foodstuffs, energy for our industry and energy to help with our food supplies, energy being a great factor in agriculture. We must ensure that our collective institutions are financed, even at the expense of national institutions, providing that national institutions work for the Community on a contract basis

I regret that in research terms the Commission looks only at the expenditure by the Community institutions and not at overall expenditure by national Governments as well. I very much hope that we can use the debate to focus attention upon the small items of expenditure and endeavour to draw a fair comparison with the expenditure of the other eight member States. If we do so, we have these issues in perspective.

9.5 p.m.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I am sure that the House would like to express its pleasure that my hon. Friend the Member for Scarborough (Mr. Shaw) is the rapporteur of the Budget Committee. I am sure that we can feel that our money is in safe hands because of the trouble and care that he takes.

A theme of this short debate has been that hon. Members feel that the proportion of the budget which goes to agriculture guarantees is far too great. I do not think that anyone would dissent from that, nor that nearly 8,000 MEUAs is a large sum of money. I cannot agree with the Chief Secretary that the MCAs do nothing but good, not only to this country but to the whole Community. It is clear that there are no pig farmers in either Heywood or Royton. That must be taken as certain. He will find that there are various other livestock producers who are not as happy about MCAs as he.

He may argue that cheap food is a useful political plank for the Labour Party. I have never understood why members of the Labour Party are so in favour of cheap food while cheap television tubes or footwear do not seem to please them. I have never understood that ideological difficulty. We should all like to see pressure for the reform of the agriculture policy.

Another thing that has emerged from the debate is the devastation upon Community affairs that the Government's disastrous handling of the British economy has caused over the last four years, particularly the fall in the value of the pound. As my hon. Friend the Member for Banbury (Mr. Marten) said, those who attend the Assembly are able to secure a profit on their expenses because the money with which they are reimbursed is worth more than the money that the Chancellor of the Exchequer inherited in 1974. I agree that that needs to be examined, but it is not a major problem. My hon. Friend said he wished to look at that with a fine tooth comb. That would be a physical feat.

I turn to the question of MCAs and the green pound. The fall in the value of our pound has caused the problem. The difficulty of getting the green pound down again bedevils the whole of the Community as well as the British farming community. It is clear that the CAP was not designed to have people such as the Chancellor of the Exchequer causing wide swings in currency values. That has made the system almost unworkable.

A third area that has been affected is that of the value of the European unit of account. We welcome that there are now 1·5357 EUAs to the pound but we wonder how soon it will get out of line again. The hon. Member for East Lothian (Mr. Dalyell) thinks that it might go up. If that is so, it will put the relationship out of line again. We shall have continual change and the problem of the value of different currencies. The value of our budget contribution has been affected.

There seem to be so many figures. The hon. Member for Crewe (Mrs. Dunwoody) said that there was an air of mystery about the figures. Indeed there is. I take the figures from the House of Lords Select Committee, which is more likely to be right on a matter such as this. Their lordships have nearly always succeeded in getting at the truth, and I am sure that they have on this occasion.

In the year for which this preliminary draft budget is intended, we are to contribute £1,092 million and are likely to get back £530 million, meaning a net contribution of £562 million. This is becoming quite a hefty sum and the right hon. Gentleman must control it as hard as he can. We shall support him in his efforts to get that figure under control.

Moreover, if it had been indexed, as it were, and had taken into account the fall in the value of our currency, it would be another £200 million—I may be wrong in my figures, but it is difficult to get at them—totalling nearly £760 million. By 1980 indexation will apply when Article 131 runs out—that is, if we get away with it even until then. The right hon. Gentleman is stacking up a nice little problem for the next Conservative Chief Secretary, both on present figures and on present forecasts.

This is a situation with which we all ought to be concerned. We must be concerned not only with the Community budget but about the fact that our share of it has become disproportionately large. That in part relates to matters which several of my hon. Friends have raised and partly to the fact that agriculture plays such a great part, which brings us back to the need to look at the common agricultural policy again. The only solution to the problems caused by the changing value of currencies, particularly the fall in the value of the pound, is to move towards economic and monetary union.

I ask the Chief Secretary to look at the cost of the collection of value added tax by national authorities. To my surprise, we are to spend 649 million European units of account to pay back national tax authorities for collecting just 1 per cent. of VAT. I suppose that for us the figure will be about 40 million EUAs. I cannot believe that to pay out 1 per cent. of our VAT is really going to cost 40 million EUAs. It seems an unnecessary sort of subsidy. Will the right hon. Gentleman cast his steely eye on that part of the budget?

The hon. Member for Farnworth (Mr. Roper) said much with which I agree. He suggested that we should move towards allowing the Community to borrow more. At the moment it can only borrow 1,000 million EUAs. But we have to ensure that it can develop a proper budgetary process and begin to influence economic affairs. One would like to see most urgently the harmonisation of national taxes so that we did not have to pay the beastly taxes that this Government have put upon us. It would be nicer to have Community taxes than Barnett's taxes.

Finally, we have to get back towards the freedom of movement of capital. It is steps such as these that will make the Community budget a real budget and move towards a solution of the many problems that bedevil the Community and its economic progress.

9.14 p.m.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) has one simple philosophy. When he does not know what he is talking about —which was very obvious from his speech—he has a party political "go". That is crystal clear. That will be the reaction of anyone who reads his speech inHansard I see one of his hon. Friends nodding. I have only two minutes in which to reply, but in passing let me assure the hon. Gentleman that my electors are perfectly happy to have cheap pigmeat and any other kind of cheap food that we are able to provide for them.

In two minutes I shall not be able to reply to the many excellent contributions to the debate, including speeches by my hon. Friends the Members for Farnworth (Mr. Roper), Crewe (Mrs. Dunwoody) and West Lothian (Mr. Dalyell). As I shall be unable to answer many of the questions that have been raised in the time available, I assure all hon. Members that I have taken very careful note of the points made and I shall bear them very carefully in mind when I represent this country in Brussels on Wednesday.

Many hon. Members have spoken about the European unit of account. My hon. Friend the Member for Farnworth was right in his analysis of the situation, but, despite the fact that the budgets can be adopted by a qualified majority, the fact remains that the financial regulation to change the unit of account to the European unit of account requires unanimity. Since I am opposed to it, that might be difficult.

The point made by the hon. Member for Banbury (Mr. Marten) was very effectively answered by many hon. Members on both sides. I assure him that a directly elected member of the European Parliament will pay United Kingdom taxes on his salary whatever its size.

It being two and a half hours after the commencement of proceedings on the motion, Mr. DEPUTY SPEAKER put the Question, pursuant to the Order of the House this day.

Question agreed to

Resolved

That this House takes note of Commission Document No. R/1541/77 relating to the EEC 1978 Preliminary Draft General Budget, together with R/1013/77, R/851/77, R/1226/77, R/480/77 and R/848/77.