European Communities (Budget)

Part of Supplementary Estimates, 1986–87 – in the House of Commons at 5:53 pm on 10th July 1986.

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Photo of Mr John Townend Mr John Townend , Bridlington 5:53 pm, 10th July 1986

I rise as a member of the Select Committee on the Treasury and Civil Service to support the amendment of my right hon. Friend the Member for Worthing (Mr. Higgins). He made an outstanding speech and his arguments were unanswerable.

I found the speech of the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) most illuminating. Perhaps the absence of his colleagues is due to the fact that they do not agree with the views that he has advanced. The hon. Gentleman has criticised a number of paragraphs of the Select Committee's report, and the press and the public might be interested to know that it was a unanimous report which was supported by the hon. Member for Colne Valley (Mr. Wainwright), who is a Liberal Member. What is even more interesting is that the hon. Member for Colne Valley has signed the amendment of my right hon. Friend the Member for Worthing. It is clear that even on this rather technical issue there is disagreement not only between the Liberal party and the SDP but also between Liberal Members.

Despite the fact that the hon. Member for Inverness, Nairn and Lochaber was pressed by my right hon. Friend the Member for Worthing, the hon. Gentleman implied that an alliance Government would not be prepared to use the veto to prevent an increase in VAT own resources. Indeed, the hon. Gentleman said that he supported increasing the own resources of the Community. The alliance should make it clear to the British people that it feels that the Community can spend their money rather better than the Government, which is controlled by the House. I find that unacceptable, and I am sure that the British people do. If we are to help the depressed areas, it is far better to do so under the control of the Government than by increasing finance to the EEC social fund.

To bring these proposals before the House must make this a sad day for the Government. The bringing forward of payments by one month does not seem a matter of great importance on the face of it, but I suggest that we are being presented with the tip of the iceberg. Indeed, the Supplementary Estimates warn that other requests for advance payments are expected to be made. This is not merely a cash flow problem; we are faced with a major financial problem. Despite repeated promises that there would be adequate budgetary discipline and control, the Community's finances are in a state of chaos and the Community faces a major financial crisis. The discipline agreement that was negotiated at Fontainebleau has turned out to be worthless. Many of us who voted against increasing own resources to 1·4 per cent. thought that this would be the result, and it gives me no pleasure to say that tonight.

The current financial crisis must be set against the background of an enormous increase in the resources of the Community, which was provided by a 40 per cent. increase in VAT contributions. My right hon. Friend the Member for Taunton (Sir E. du Cann) has said that the agreement was reached subject to three assurances, which were that the cash would last for at least several years, that strict budgetary control would operate and that the rate of increase in farm spending would be curbed. We are only six months through the first year and we are running out of money already. Farm spending is clearly out of control and there has been no budgetary discipline. This must come as a great shock and disappointment to the Government.

It is clear from Hansard quotations made earlier in the debate that at the time when my hon. Friend the Member for Eastbourne (Mr. Gow) was at the Treasury the Government expected that they would not have to return to the House in this way. Many of my right hon. and hon. Friends feel—I am sure that the Government do as well — that the EEC should follow a policy of resources determining expenditure rather than expenditure determining income. It must adopt that policy because there is a ceiling on VAT contributions. This has not happened despite all the negotiations and understanding on budgetary control which were explicit in the Fontainebleau agreement.

It is clear that time and time again the Community undertakes commitments for future years which it must appreciate it will not be able to meet because of lack of resources. It then resorts to financial manipulation, intergovernmental agreements and delays in payments, and now the bringing forward of contributions. If public companies ran their finances like the EEC has run its, they would be brought before the courts and the directors would end up in gaol. Even at this moment negotiations are taking place between the European Parliament, which wants to increase expenditure to the very limit of the 1·4 per cent. ceiling, and the Council of Ministers. I understand that the Council has already compromised and is suggesting that the budget could be increased. As spending on agriculture is open-ended, it is clear that the 1·4 per cent. threshold will be reached quickly.

There are good grounds for thinking that this is part of a sustained policy. It could be described as a plot by the bureaucrats and Euro-fanatics to put pressure on member Governments, especially the Government of the United Kingdom, to agree to a further increase in the VAT ceiling. That is unacceptable to many Conservative Members. We do not want to see European expenditure rising inexorably year after year when it is part of our policy to gain greater control of public spending, so that we can fulfil our commitment to reduce taxation, especially on the low paid.

The EEC now needs to cut its coat according to its cloth. The hon. Member for Inverness, Nairn and Lochaber talked about the change in the value of the dollar and the ecu, which is exactly the case where it should take effect. The United Kingdom has had to face an enormous fall in oil revenues, but, because of the ability and financial rectitude of my right hon. Friend the Chancellor of the Exchequer, we have absorbed it. The EEC should have the same financial rectitude. I suggest that the Government accept the final paragraph of the Select Committee report, which states: We therefore recommend that the Government should make clear its intention of using its veto against any proposal to raise VAT ceiling, of declining to support any further substitutes in the form of Inter Governmental Agreements. As a shot across the bows of the EEC, the Government should accept the amendment tabled by my right hon. Friend the Member for Worthing.