EC Budget

Oral Answers to Questions — Foreign and Commonwealth Affairs – in the House of Commons at 12:00 am on 18th March 1987.

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Photo of David Heathcoat-Amory David Heathcoat-Amory , Wells 12:00 am, 18th March 1987

asked the Secretary of State for Foreign and Commonwealth Affairs when the EEC Council of Foreign Ministers last discussed the 1987 budget.

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

The Foreign Affairs Council last discussed the 1987 budget on 26 January.

Photo of David Heathcoat-Amory David Heathcoat-Amory , Wells

Will my right hon. and learned Friend confirm that the European Community will spend about £3 billion more than its permitted revenue this year, and that the Commission's reaction to that is to try to switch to a more generous revenue system so that the budget can continue its upward path? Will my right hon. and learned Friend undertake to veto any such scheme? Will he bring to the European budget the prudence and financial rectitude for which he was famous when he was Chancellor of the Exchequer?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

I acknowledge with gratitude the tribute from my hon. Friend. He is right to remind the House of the continuing problems of securing effective control over the Community budget. He will know that our position with regard to any possible increase in resources rests absolutely on the Fontainebleau agreement, which provides that the maximum rate may be increased to 1·6 per cent. on 1 January next year, by unanimous decision of the Council and after agreement by national Parliaments. I emphasise the word may, not shall. We stand by the letter of that agreement. We see no case for going beyond it. We intend to achieve control over the budget that is as effective as my hon. Friend would like.

Photo of Mr Russell Johnston Mr Russell Johnston , Inverness, Nairn and Lochaber

When will the Delors proposals that budgetary contributions be based on national GNPs be discussed by the Council, and what is the Government's initial response to them?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

The Delors proposals are now under consideration by permanent representatives, having received preliminary discussion by Ministers. The Foreign Affairs Council will have its first discussion of the Commission's proposals on 27 and 28 April, on the basis of which there will be a report to the European Council. However, our position is as I have stated it. We stand by the letter of the Fontainebleau agreement, as I have just described it.

Photo of Stephen Dorrell Stephen Dorrell , Loughborough

Is it not a distortion to say that the main responsibility for Community budgetary discipline rests with the Commission? Does not the main responsibility for the problem rest with the Council of Ministers in its various guises being unwilling to impose upon itself a proper set of budgetary priorities? Is it not the case that we are unlikely to produce a permanent solution until we tackle that institutional aspect of the problem?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

I wish that it was as easy as something that could be solved by reshuffling the institutional responsibilities. The basic reason for the extreme difficulty in securing control over Community expenditure on agriculture is the same as the reason for achieving similar discipline in the United States, Japan and most other industrial countries— the problem of protecting the health of rural communities in a fashion that is compatible with the cash resources that are available. I am afraid that it will be a matter for the whole House, just as for the whole European Parliament and all those engaged in institutions, to seek further and better ways of protecting the rural environment that do not depend upon the production of food surpluses that cannot be sold and can be stored only at great expense.

Photo of Mr Eric Deakins Mr Eric Deakins , Walthamstow

Is the Foreign Secretary satisfied, and is the Council satisfied, that the revenue side of the budget agreed by the Council recently will be adequate to produce the revenue needed in 1987? If not, do he and the Council favour a supplementary budget or a new intergovernmental agreement?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

We have made it clear in the discussions that have taken place so far that we shall not provide additional finance outside the own resources system.

Photo of Eric Forth Eric Forth , Mid Worcestershire

Does my right hon. and learned Friend mean by what he has just said that he sticks by the triumph of the Fontainebleau agreement, with its commitment to strict budgetary discipline, and that he is not prepared to support any form of intergovernmental agreement or any other form of financing that goes outside the budget as defined and as limited by the Fontainebleau agreement?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

I said in my earlier reply that we shall not provide additional finance outside the own resources system. There is scope for savings in the agricultural price fixing. There is also some headroom in the 1·4 per cent. ceiling. Of course, there is scope for consideration, under the Fontainebleau agreement and subject to the requirement of unanimity, of the possible increase provided for there.

Photo of Mr George Robertson Mr George Robertson , Hamilton

The Foreign Secretary has come to the House before and told us all this. It is all very well his saying that he will stick to the Fontainebleau agreement, but the Community is already working at 1·6 per cent. of VAT and its accumulated liabilities now total £12 billion. If the Government were to reject the Delors package, which would put the price tag up to 2·1 per cent. of VAT, what would happen then? Even these proposals provide for an increase in CAP of 2·5 per cent. a year. Why is there such a silence from the Government about this very important crisis affecting the Community? We have had no debate, no statements from the Finance Ministers Councils, nothing except a lot of dithering. How is the circle to be squared? Where will the extra mony come from to fill the huge hole that exists in the Community's finances?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

The hon. Gentleman should really know better than to make that kind of observation. He should know perfectly well that we have put in place the budgetary discipline arrangements of the Fontainebleau agreement. They are fortified and sustained by the specific limitations of the own resources system. The limits of the room for manoeuvre are as described, with the possibility—and I emphasise the word possibility—of a 1·6 per cent. ceiling with the unanimous agreement of all member states. It is a matter of may, not must. We are entitled to look to the hon. Member for Hamilton (Mr. Robertson) for his support for the range of extremely difficult measures that are likely to be necessary if we are to secure effective control of the financing of agricultural policies.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Dr. Blackburn. I am sorry, I meant to call Mr. Willie Hamilton. That was my mistake. I was listening to something else.