European Communities (Budget)

Part of the debate – in the House of Commons at 4:25 pm on 20th February 1984.

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Photo of Robin Cook Robin Cook , Livingston 4:25 pm, 20th February 1984

With great respect to the hon. Gentleman, I wish to proceed with my speech. I have no doubt that he will find something with which he disagrees in a later part of my speech, and he may wish to intervene at that stage.

I trust that the House will not regard me as eccentric if I make some initial comments directed to the expenditure side of the budget. After all, there are two sides to a balance sheet. The purpose of raising revenue is to meet the commitments on the expenditure side. This year's budget opens with the startling statement that it is the first step in translating into reality the commitment by President Thorn to double the structural funds. Although that statement is contained in the text, I find in the tables that it is by no means certain that the process of doubling the structure of the funds in five years is likely to be achieved.

The Economic Secretary to the Treasury claimed that there had been an increase in expenditure on the regional fund. That is true, but expenditure overall on regional policy will fall by 20 per cent., instead of doubling over five years. Expenditure on industrial policy will fall by 7 per cent. The budget is very much the same as previous budgets and contains the same major imbalance. It is dominated by expenditure on agriculture.

In the draft preliminary budget, the proportion of resources to be spent on agriculture rises from 64·2 per cent. in 1983 to 67·4 per cent. in 1984. President Thorn has been obliged to revise his own bold objective of doubling expenditure on the structural funds. He said last week in Strasbourg to the European Parliament: If there is no solution to the Community's financial crisis very soon, either member states will have to reach a unanimous agreement to foot the extra bill themselves or cuts will have to be made in, say, the social fund, or the regional fund, to make more money available for agriculture.

There we have it. As bankruptcy approaches over the horizon, it is the 5 or 6 per cent. of the budget that goes to the regional fund, the social fund or the industrial fund, which will be expected to absorb financial constraints to protect the agriculture lobby, which will continue to receive the lion's share of the budget. In the present year the draft preliminary budget provides for a increase in agricultural expenditure of 17·4 per cent. That will take place in a year in which the Commission expects the rate of inflation throughout the EC to be 7 per cent. I concede that there is no reason why the rate of inflation in agriculture should be precisely the same as the standard rate of inflation. Equally, it is implausible that the rate of inflation in agriculture will be 250 per cent. of the standard rate of inflation.

The increase cannot be explained away by referring to the need for support to be given to support small marginal farmers, a laudable objective which we are always told is at the heart of the CAP. Paragraph 32 relates to structural measures for less favoured areas, and we find that it provides for only a 3·5 per cent. rise. In other words, after inflation, expenditure on small marginal farms will fall rather than increase.

We are confronted with a general increase in support expenditure because, yet again, more products will be produced than will be needed, there will be larger surpluses and we shall pay higher prices for some commodities. Once again there will be a widening of the disparity between the incomes of large and small farmers and a widening of the disparity between the incomes of those who produce commodities that are favoured by the CAP, such as milk and cereals, and the incomes of those who are in the sectors that are neglected by the CAP, such as poultry and pigmeat.

The increased expenditure on agriculture will be 250 per cent. in excess of the rate of inflation. That is being proposed in precisely the same year in which we are assured that the Commission is likely to go bust. Against that background, we can well understand the exasperation of Mr. Dalsager, the Commissioner with responsibility for agriculture, when he complained that some seemed to think that reform of the CAP means ordering smaller oysters and cheaper brands of champagne. The Government cannot escape complicity in the crisis that we face. During their first three years in office they were happy to order the most expensive champagne on the menu. For the first three years they supported increases in farm prices which were even greater than those requested by the Commission.

We are now assured that the Government are of reformed character and that they are committed to the reform of the CAP. However, we have noted as the debates have proceeded over the past few months that what the Government mean by reform of the CAP, instead of gaining in clarity and precision, has gained imprecision. It reached a new depth of vacuity last month when the Economic Secretary, in reply to my question on what was meant by reform of CAP, said: The hon. Member for Livingston discussed reform. I believe that the changes needed to deal with Community expenditure and with the CAP amount to a need for reform. We can see only as negotiations develop and as new decisions are taken what that means." — [Official Report, 26 January 1984; Vol. 52, c. 1139.] When I first heard that, I assumed that it would be one of the instances in which a private secretary would rush to Hansard to rescue sense from the rubble of the Minster's syntax. When I received my copy of Hansard, I was delighted to discover that the gem had been preserved on the record.

The Economic Secretary came close to saying that we can ascertain what the Government mean by reform of the CAP once they have discovered what they have got out of the negotiations. That will not do. If the Government are sincere in their desire to obtain reform of the CAP, one test of their resolve is coming up in the immediate future, and may even be presented to them before the Brussels summit.

The test will come when the Government make their decision on the farm price review. Although the review has its weaknesses, it is more realistic than anything we have seen yet. I cannot resist referring to a speech by Commissioner Tugendhat while in Britain only a week after our previous EC debate. He said: It is not surprising that the agricultural lobbies throughout the Community have criticised these proposals"— or the farm price review— they are simply doing their job. What does surprise me is the eerie silence of leading politicians from those Governments who are on record as deploring the excesses of the CAP and urging the need for lower prices". About whom could he have been thinking? I hope that he did not care to make that speech in Britain because he was thinking of the British Government. I hope that the British Government will not only speak out in support of the Commission's proposals, but will ensure that there are no increases above those proposed by the Commission. I warn the Economic Secretary that the Government's commitment to reform of the CAP will ring hollow if they permit any increases above those already on the table.

There is one other test which the Economic Secretary might turn over in his mind when he returns to the Treasury, because it is a matter wholly within the gift of the Treasury and the Ministry of Agriculture, Fisheries and Food. This matter was referred to also in Commissioner Tugendhat's speech. Unless any hon. Member suspects that Commissioner Tugendhat may be a partial witness in these matters, I put it on the record, since legions of new Conservative Members of Parliament have joined us since Commissioner Tugendhat left us, that he once sat on the Government Benches, and, I believe, is still a Conservative party member.

A fortnight ago Commissioner Tugendhat said that it is now nearly four years"— my arithmetic tells me that that does not put it within the period of this Government— since the positive monetary compensatory amounts —a tax on imports which effectively raises the price of food—have been applied in the UK. In everyday terms this means that prices paid by processors, and ultimately by consumers, have been higher. generally by at least 5 per cent. and often by much more, than the Community level. This is tantamount to an additional tax which is in no way imposed on the UK by the Community. It is a self imposed food tax". The reality, as I am sure that the Economic Secretary would be the first to confirm, is that not even this Government would dare to come to the House and ask for 5 per cent. VAT on food prices. Yet it is precisely that effect that the Government are achieving by the way in which they operate MCAs. If the Government are serious about reforming the CAP and genuine in their claim that they are not the party of the farm lobby, let them show it by acting — this does not require further negotiation, further confidential proposals from Mr. Delors or further exchanges of letters — to eliminate the positive MCAs and abolish the iniquitous 5 per cent. tax on food.