European Community

Ballot for Notices of Motions – in the House of Commons at 4:39 pm on 18th November 1987.

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Relevant documents: European Community document No. 6476/87, second report from the Commission to the Council and the European Parliament on the implementa-tion of the Commission's White Paper on the completion of the internal market.

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Deputy Speaker (Second Deputy Chairman of Ways and Means)

I announce that Mr. Speaker has selected the amendment standing in the name of the right hon. Gentleman the Leader of the Opposition.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey 5:10 pm, 18th November 1987

I beg to move, That this House takes note of the White Papers on developments in the European Community July to December 1986 (Cm. 122) and January to June 1987 (Cm. 205), and European Community Documents COM(87)100 on making a success of the Single European Act, COM(87)101 on the future financing of Community Budget, and Nos. 8248/87 on Budgetary Discipline, 8249/87 on Own Resources, 8251/87 on Structural Funds, and 8087/87 and 8940/87 on amendments to the Financial Regulations, all relating to the future financing negotiations ; and endorses the Government's objective of securing effective and binding control of Community expenditure. The occasion for the debate are the two White Papers on developments in the Community. The Government would have wished to adhere to their normal practice of holding one debate per White Paper, but pressure of other business in the House and the dissolution of Parliament in May followed by the long summer recess intervened to prevent that.

Although it is customary for such debates to take note of the White Papers, I accept and expect that hon. Members will want to focus more on current issues rather than on events six to 12 months ago. In the period since those covered by the White Papers, events of major and lasting importance have been taking place in the Community. These mainly concern the future financing of the Community. I am sure that, just two weeks before the Copenhagen summit, hon. Members will wish to hear about the current negotiations. I shall turn to them in a moment.

I want first, however, to set in its proper perspective Britain's drive to put Community finances on a firm basis with effective control of spending. We regard proper financial control as a necessary condition for the Community's healthy development, but not a sufficient condition. We have also been working to introduce across Europe new attitudes and practical reforms that will benefit the real economy and the lives of ordinary citizens in the United Kingdom.

The Europe of the future will also be an increasingly efficient Europe. Our companies will supply a domestic market of 321 million consumers. With the strength of that home market behind them, British companies will be better equipped to export successfully to the wider world. It will be a truly competitive Europe. Services as well as goods will be provided freely across frontiers and that will be an enterprise Europe. It will also mean better prospects for British companies, more jobs for the people of this country and it will be an opportunity Europe. The opportunities will not just be for a few companies or in a few sectors.

During the British presidency in the second half of last year — the period covered by the first of the White Papers — a record number of practical measures to benefit business and the citizen were agreed or adopted. To anyone who doubts that, I commend the paragraphs on the internal market on pages 16–21 in the White Paper covering our presidency. The subjects of the agreements reached range from telecommunication terminal equip-ment to tractor controls. That may not sound much in itself, but the Community telecommunications market is worth hundreds of millions of pounds. The tractor market is worth over £100 million pounds a year to British exporters alone so it is very important.

The changes being made to open up the internal market may seem small and unglamorous taken one by one, but they represent important advances for the businesses and individuals to whom they apply. For example, liberalisa-tion of financial services will open up a vast range of export opportunities, and ensure a better service to the consumer. Measures such as the recommendation agreed during our presidency on hotel fire safety and the directive that we are shortly to adopt on toy safety will benefit every citizen of this country.

Although all may not yet be soundly effected, our voice is always heard and respected in the many debates to dismantle barriers to trade, for others have watched the growing success of deregulation here at home in Britain.

What we now need to do is to make sure that all concerned at home are aware of the opportunities of the single market and are gearing themselves up to take advantage of them for the benefit of British jobs and business.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

I shall not give way to the hon. Gentleman now.

Regrettably, too few British companies are yet aware of the obligation, now written into the treaty of Rome by the Single European Act, to complete the single market by 31 December 1992.

British companies will have new opportunities, but they will also face very keen competition. All over Europe business men are talking about 1992 and completion of the single market. Their strategists are planning now for the opportunities and challenges which a genuinely free market in goods and services will provide. We must do the same. We need to study the competition, study the markets elsewhere in Europe, and learn how the coming changes will alter the environment in which we work.

We already sell more than half our exports to the Community. The value of those exports has grown faster than our exports to other parts of the world, but we need to do more, much more. That is why my right hon. Friend the Secretary of State for Trade and Industry has announced that we will launch a major awareness campaign in the new year. We shall support him in every way.

We are creating the framework for a modern Community where, within a framework of common law, individual enterprise will flourish. But we cannot build a sound Community on unsound financial foundations. That is why the negotiations on future financing matter so much and why we attach so much importance to using them to secure improved spending control.

Photo of Mr Bob Cryer Mr Bob Cryer , Bradford South

The Minister has been elaborating on the commercial opportunities that she claims the development of the internal market will produce, but I know that she would not want to omit the dangers that exist. When the Minister notifies the commercial community of the removal of barriers she will also be notifying the arms smugglers, the drugs dealers, people who want to bring animals into the country in breach of our rabies law and people who want to export live animals without proper scrutiny. Will she spend a little time discussing the safeguards that will exist in the internal market to stop such abuse?

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

As I have said to the House on previous occasions, it is in the fight against terrorism, against drug smuggling, arms smuggling and, indeed, the fight against rabies and other diseases, that we have always had unity among members of the 12. The frontier controls that are necessary for such matters will be considered by this Government, and by this Government alone, because we reserve the right to protect our citizens in such situations. I am not talking about such frontier controls now. I am talking about the petty controls that represent an additional cost of billions of pounds to industry and prevent us from having easy and open access to other markets in Europe. Such petty controls prevent our business men and those seeking to be entrepreneurs from realising their full potential.

Photo of Eric Forth Eric Forth , Mid Worcestershire

Before leaving the question of the internal market, will my right hon. Friend give her assessment of the varying degrees of enthusiasm that there might be among our colleagues in the Community for the full development of the internal market? Is my right hon. Friend concerned that, in the bargaining that will inevitably take place to achieve the internal market as quickly as possible, we may have to give up things in other areas that are dear to us?

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

I do not perceive that as a problem. There are many areas where we co-operate and collaborate for the benefit of British industry. We shall continue to do so, because that is top of our priority list.

I come to the nub of the debate. I wish to concentrate on future financing, which is the issue in the mind of everyone in the House. I remind hon. Members that the present negotiations are taking place in the face of proposals from the Commission for an increase in the Community's own resources of 45 per cent. That is simply not on. There are other elements in those proposals that we cannot accept. We cannot accept the proposed change in the abatement mechanism or the proposed doubling of the resources devoted to the structural funds.

But there are other elements in the Commission's proposals on which we can and are building, especially those for the control of agricultural expenditure. The Commission's proposals embody the important principles of stricter budgetary discipline, stricter budgetary management and mechanisms to achieve that. The negotiation is about those principles and their implementation is not a new task.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

It is a task which we started in the early part of the decade. I acknowledge that it has been a frustratingly slow process. No one knows that better than the Ministers involved. There have been two principal elements in our quest to achieve stricter budgetary discipline and management. The first was to ensure that Britain's own contribution to the budget was fair. That goal was achieved at Fontainebleau in 1984.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

The Fontainebleau abatement mechan-ism has worked well. By the end of this year we shall have benefited from abatements worth £2,800 million, reducing substantially our net contribution to the Community budget. If anyone, and I mean anyone — the Commission or any other partner — wants to change that mechanism it can be done only by unanimous agreement.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

I shall finish this point and then give way to my hon. Friend who has been muttering all this time.

Any change in the mechanism must be designed to make the system less, and not more, onerous from the United Kingdom's point of view. The Commission's latest proposals, which are the same ones that it put forward nine months ago, do not meet that criterion ; far from it. On the Commission's own calculations its proposals could leave the United Kingdom about £700 million worse off over the five years up to 1992. On more realistic assumptions, they would leave the United Kingdom approaching £700 million worse off in 1992 alone. That is simply not on. The Commission has described its proposals as being "grossly equivalent" to the present Fontainebleau system. Gross they may be, but equivalent they certainly are not.

The Government's position is quite straightforward. The Fontainebleau abatement mechanism was the result of years of difficult negotiation. It has proved itself. Any change would need to make the United Kingdom's budget burden less, not more, onerous.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

In common with the Minister I was greatly heartened after Fontainebleau when we were told that the new mechanism would greatly reduce our contributions. At that time, our average national contribution was £621 million. Can the Minister tell us—to encourage us all in further efforts — what is her latest estimate for the net contribution for this financial year? How much down is it on £621 million?

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

My hon. Friend will know, if he has read the Autumn Statement, that it has gone up considerably.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

My hon. Friend knows, and I am not telling him what he already knows. He is well aware of what appears in the Autumn Statement.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Clwyd North West

On a point of order, Madam Deputy Speaker. Some of us on the Conservative Benches are having some difficulty hearing my right hon. Friend because of the consistent yelling of the yobbo tendency.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

I am grateful to my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) for his gallant intervention.

We are all well aware that the estimates made early in the year have not turned out to be correct, and it is for that very reason that the mechanisms that we have been suggesting for budget discipline and budget management are vital. I do not disagree with my hon. Friend the Member for Southend, East (Mr. Taylor) that the figures are far too high.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

The figure in the Autumn Statement— I have not looked it up immediately — was £1,400 million. My hon. Friend knows that figure because he has already written it down.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

No. I have already given way a number of times.

My hon. Friend the Member for Southend, East should have listened hard to what I said a few moments ago before he intervened. I repeat that the changes that could be contemplated by the United Kingdom would have to make the budget burden less and not more onerous. They would have to be unanimously decided upon and there is no other way of changing the position.

Of greater interest in the Commission's proposals are the ideas for making Community revenue and the way in which it is raised relate more closely to the real prosperity of the contributors. As hon. Members know, the Community raises its revenue in three ways — through levies on agricultural imports into the Community, through duties on other imported goods, and through VAT. Levies and duties are a declining source of revenue as intra-community trade increases and as other tariffs are reduced. That is exactly what has exacerbated the Community's financial problems.

The Commission's proposals would make two changes in the present system. The ceiling would be expressed in terms of GNP and part of the revenue that is now raised solely on the basis of each member state's VAT share of the budget would, instead, reflect the difference between the VAT base and member states' GNP. The effect of the proposal would be that the United Kingdom would contribute to part of the budget, not at our current VAT share of 18 per cent., but at a lower rate reflecting our GNP share, which is 15 per cent.

The House of Lords Select Committee on the European Communities recently concluded that these proposals would relate revenue more closely to each member state's ability to pay. They would benefit the United Kingdom, and we are seriously considering them. The Committee also supported the Government's view that agreement could not be reached on these matters until enforceable mechanisms of financial control were in place. With strong financial control in place as a prerequisite of the overall package, it could be possible to consider a GNP-based system, but it would be impossible without that control.

Our central goal is the achievement of binding controls over spending. Runaway agricultural spending has squeezed all other expenditure. It is now accepted by our partners that the operation of the CAP has been of declining benefit to the very farmers it was meant to help. With the competitive subsidies deployed by other major producers, it is having an adverse impact on international trade relations and on markets in developing countries.

In 1983, the Community agreed on the need for reform. Terms such as quotas, guarantee thresholds, co-responsibility levies and guidelines entered the vocabulary. Turning words into reality has been a slow process, as it is bound to be in a democratic Community, but substantial progress has now been made, and those words are now actions.

The fundamental reforms to the beef and milk regimes agreed in December last year were milestones. In the milk sector we now have quotas to limit production. We have a cut-off point for expenditure, so that once production reaches a pre-set level no further money is spent on buying into intervention. That cut-off was triggered for milk earlier this year.

The results are already visible. Butter production was down by more than 13 per cent. in the first half of this year. Skimmed milk powder production was down 17 per cent. We expect Community intervention stocks of butter to fall this year, for the first time since 1981. Milk deliveries are down 4 per cent. The penalties for overproduction are bringing production much closer into line with demand. That is exactly what we have been aiming for. As an article in The Independent put it last week: The significant point is that the butter mountain is an old mountain and gradually being eroded … For the first time in a decade it is no longer being replenished with fresh butter. That is an achievement on which we intend to build.

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

When the Minister describes positive advances, she should not give the impression that they were solely and entirely due to the United Kingdom, and that no other country had any part in them.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

The hon. Gentleman does the House a disservice. I did not imply that it was solely due to the United Kingdom. None of these aims could have been successful unless other member states had been persuaded to accept them. That is why the democratic process takes so long to achieve. One has to work by persuasion. It is interesting that, by our example, we are persuading many of our partners to follow what has proved a profitable path for us, and we shall continue to do that. The hon. Gentleman said that I should not claim it for Britain. I do not claim it all for Britain.

The regimes agreed last year introduce order and financial discipline into two important areas of production where overspending was recognised as the major problem. They are landmarks because they provide us with models for the reforms that are needed in all commodity regimes, particularly that for cereals, where Community spending has risen from £1 billion in 1984 to more than £3·4 billion this year. That has to stop and we are all determined to stop it.

We have argued, and the Commission now agrees, that we need stabilisers for each agricultural regime. That means that each commodity must have its own control mechanism built in, so that the costs for which the Community budgets are the costs for which it pays; no more, no less. Those control mechanisms will take different forms in each commodity, but they must be agreed in detail as well as in principle, and once agreed they must be capable of automatic implementation. That is why they have to be agreed by Heads of Government, on a lasting and binding basis.

The Commission's proposals that will come before the Heads of Government meeting in Copenhagen embody that concept in a detail and with a rigour which—I say frankly and gladly—is new to Community negotiations and which we warmly welcome. They are being discussed in the Agriculture Council this week. The outcome of that marathon will determine the prospects for success at Copenhagen.

I should like to make a couple of points about other expenditure.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

It might be useful to clarify this point before the main debate. The right hon. Lady mentioned the discussions in the Agriculture Council. Is it not a fact that, whatever conclusion it may reach, it will have to pass the rigorous eyes of Foreign Affairs or Treasury Ministers to ensure that those disciplinary measures stand up to what the right hon. Lady wants? Will the tests of the more rigorous legislation be available to the House, and will they be placed before the House so that hon. Members can comment before the Prime Minister goes to Copenhagen?

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

I am glad to tell the hon. Gentleman that I am sure that the Scrutiny Committee's recommendation in that respect will be complied with by the House. I hope that there will be a debate before long on the details mentioned by the hon. Gentleman, but it is not for me to say when it will be. I am sure that my right hon. Friend the Leader of the House will be glad to correspond with the hon. Gentleman as soon as the decision is taken through the usual channels.

We all know that obligatory expenditure forms the bulk of the Community budget. Spending on agriculture accounts for most of that obligatory expenditure. So agriculture is the most important thing that we have to get right. But we cannot and should not let other expenditure grow out of control. That has been the problem in the past.

The Commission's approach is very simple. It suggests that the structural funds, which include the regional development fund and the social fund, should be doubled. Of course, I understand the wish to see support for less-developed and industrially disadvantaged regions, but, at a time when each national Government in the Community is struggling to control its own national expenditure, as we in Britain have controlled ours, and when the Community is in the throes of trying to put its own finances on a sensible footing, arbitrary and free-standing decisions on individual future financing issues are not feasible. We have to take all the issues together.

Photo of Mr Win Griffiths Mr Win Griffiths , Bridgend

Will the right hon. Lady give way?

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

I shall give way. I apologise for not doing so earlier.

Photo of Mr Win Griffiths Mr Win Griffiths , Bridgend

On the point about doubling the size of the structural funds, does the Minister agree that, with regard to the social fund and the regional development fund, the Commission is asking not for a theoretical amount, but for the money that it needs to satisfy the applications that are already coming in? As regards the completion of the internal market — although I do not think that that will be done by 1992— it is bound to disadvantage the peripheral regions and countries such as the United Kingdom, so it is extremely important that if that is to happen, the regional and social funds should be doubled in size, if not more, to compensate and create new development in regions such as south Wales.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

I fear that, understandably, the hon. Gentleman is putting the cart before the horse. I understand and am sympathetic to the wish to continue to help the less-developed and industrially disadvantaged regions, but first we have to get expenditure under control. Then we can, and we shall, discuss further plans for structural fund spending. In discussing that issue only yesterday with Members of the European Parliament in Strasbourg, I made it clear that it must be discussed in the light of overall measures of control and that full account must be taken of the industrially disadvantaged and less-developed regions. We shall do that.

Photo of Bill Cash Bill Cash , Stafford

One of the documents that we are debating, entitled "Making a Success of the Single Act", and dated 15 February 1987, states that the Commission is looking forward to assuming fully its initiative-making role and involving the Council and Parliament as equal partners at every stage of the budget procedure. Does my right hon. Friend think that "equal" is the right word, having regard to the fact that if one is talking only of the Council, Commission and Parliament, that excludes by implication any serious investigation by the House into the budget procedure? That must be implicit in those words.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

I do not agree with the Commission's use of the word "equal". it will always be the prerogative of national Governments to take decisions as they affect their own membership of the Community. As my hon. Friend knows, financial decisions are taken by unanimity.

We are seeking, whether on the issue of structural funds or anything else, to make sure that the Community is not just about budgeting — any more than good budget control is the sole goal of national policy. Sound finance is the basis of prosperity, and that prosperity is fundamental to the cohesion of a democratic society. I know that my hon. Friend understands that well. When we say that there can be no agreement to increase the Community's own resources without effective and binding control of Community expenditure, we are not delivering an ultimatum. We are facing up to reality. We are asking the Community to face up to the hard choices that Britain has already faced here at home. In Britain we are now able to hold our head up high because we have restored our economic strength and our national pride. We want to see the rest of the Community doing the same.

The Community is embarking on major trade negotiations in the new GATT round. Its success will be vital to our objective of strengthening the world open trading system, on which our prosperity and employment depend. Not only do we want to see further liberalisation of trade in goods, but we want to extend multilateral rules to such areas as services and intellectual property. In particular, we have a unique opportunity to wind down the competitive support for agriculture, which has distorted world markets and damaged the social fabric of developing countries.

There are, therefore, twin imperatives that require us to tackle the common agricultural policy: first, the inescapable internal logic of reform, driven by growing cost and diminishing returns, and, secondly, the external logic of taking a lead in securing a far-reaching improvement in world trading relations. It is a change which would be as significant for the poorer countries as any debt write-off, and it would be much longer-lasting, which is all-important.

The logic of the external arguments on the GATT and the internal EC arguments on control and reform, which we are deploying, is now accepted. That is a great and important change from the past. The political will to put logic into practice must be made to follow.

I have tried to give the House and, through the House, the public a fair appraisal of the task that we face We face a difficult negotiation in Copenhagen ; it will be difficult but crucial.

The essence of the Community is that it is a democratic organisation. That is its strength. The ideals of Western European democracy are embodied in the Community. That is why I remind hon. Members of the importance of that in the events leading up to the entry of Spain and Portugal.

Hon. Members are perhaps better placed than anybody to appreciate that, because the Community is not a democratic organisation—[Interruption.]—because it is a democratic organisation; sorry, not a good slip at all. I shall repeat the sentence so that it is absolutely clear. As hon. Members are perhaps better placed than anybody else to appreciate, because the Community is a democratic organisation, progress is not always as quick as e should like. Nobody in the Community can simply take a decision and push it through. That comes back to the point that I made about persuasion. The Commission cannot push through—

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

I shall not give way for a moment, although I know that that will only encourage my hon. Friend to intervene again.

As I have said, other countries have to be won over. That will be done only by persuading them to come over to the clear line that I have outlined to the House.

Photo of Mr Nicholas Budgen Mr Nicholas Budgen , Wolverhampton South West

Can my right hon. Friend explain why all this rhetoric about democracy is important? Is she saying that these decisions are taken by the assembly, which is the only quasi-democratic part of the EEC?

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

Certainly, the European Parliament has a role to play in giving its opinion, but my hon. Friend knows only too well that decisions are taken by the Council of Ministers, which is representative of the Governments of the 12.

Photo of Mr Nicholas Budgen Mr Nicholas Budgen , Wolverhampton South West

It is not a democratic structure.

Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey

My hon. Friend and I will never agree on that point, but anyone who is democratically elected forms part of a democratic structure, which is what the European Parliament has been since direct elections began in 1979.

I have had a careful look at all the amendments and in particular at that tabled by the Opposition. It is the type of amendment which brings the House into public contempt. It contains the sort of politics which have been decisively rejected in the past three general elections. I know that I should take comfort from the fact that the Opposition rarely learn from their mistakes— but I do not. The public are concerned about these matters. They expect us to deal with them seriously, constructively and accurately. That is why I must tell Opposition Members that the figure of 17 million in the amendment is incorrect; it should be 15·9 million. I give that information for nothing.

The Opposition's amendment, with its unique combination of invective and inaccuracy, will not commend itself to the public or the House. It is not enough to say that the Community's policies are not working as well as they should. We must come up with detailed, persuasive and workable answers, and that is what we are doing.

I hope that what Opposition Members say in the debate, which will be read in other Community capitals, will help in persuading our partners of the benefits of the reforms that we are seeking for the Community. The reforms are intended to secure binding budgetary discipline and clear budget management, on top of the stabilisers to cut back the excesses of the common agricultural policy. All those are essential if there is to be a major advance in the creation of a single European market, which would greatly benefit this country. We are no less committed to that task than we are to the control of expenditure and the stopping of wasteful subsidy. I hope that we shall have support from all sides of the House for that difficult but possible achievement.

Photo of Mr George Robertson Mr George Robertson , Hamilton 5:43 pm, 18th November 1987

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: 'believes that the response of Her Majesty's Government to the crisis in international financial markets has been wholly inadequate, given the danger of increasing the already unacceptable jobless total in the Community of seventeen million; considers that the proposals to deal with the Community's budget shambles would mean the loss of the British rebate in return for no real financial discipline; further believes that Her Majesty's Government's intransigence and obstruction has sabotaged Britain's place in future space and research programmes ; and calls upon Her Majesty's Government to take a lead at the Copenhagen summit for joint action by the Community to promote mutual growth, trade and jobs, to agree urgent measures to cut food surpluses and to promote industrial joint ventures including aerospace in order to strengthen industrial competitiveness in the European economies.'. Notwithstanding the rosy, sunny-side-up picture painted by the right hon. Member for Wallasey (Mrs. Chalker), this is, by any test, a gloomy time for the European Community. I say that with no sense of pleasure or satisfaction, because I, too, am a citizen of Europe, and, like all hon. Members, I represent citizens of Europe. In my constituency one in four are out of work, and we all deserve better from the organisation at this point in the 20th century. [Interruption.] Conservative Members should kindly take their frustrations out on the Minister and leave me alone — I agree with most of what they say.

Photo of Mr George Robertson Mr George Robertson , Hamilton

The right hon. Lady is wrong. They will agree more with me than with anything that she said about the facts that are on display this evening.

We have just experienced a dramatic, traumatic collapse in the financial markets of the world and the European states could only gaze on, transfixed and paralysed as that collapse did its enormous damage to the fragile conditions of most economies. Even before that financial Chernobyl the realists were talking about growth in Europe being wholly insufficient to get to grips with Communitywide unemployment of at least 17 million people. The right hon. Lady was disingenuous to give us a statistic of 15·9 million. We know that the Government fiddle the unemployment statistics in this country. What do they do across the European Community? Many authoritative commentators, such as Mr. John Palmer in The Guardian the other day, have said that 17 million is only a modest figure for real unemployment in the Community. Now even the optimists realise that the going will get worse before it gets much worse.

The shock waves are still hitting the shores of the 12-nation-strong European Community. It is small wonder that the word "economic" has not been dropped from the European Economic Community. Yet again it is strapped to its usual budget straitjacket, like mental patients in hospitals locking themselves into their wards. The cash is running out, the dollar is falling, agricultural spending is rising out of control, and serious research and technology programmes are being sacrificed on the altar of producing nothing more than an agricultural Tower of Babel.

While all this goes on, the entire attention of the 12 Heads of Government will be riveted on cobbling together yet another temporary, bandaged, inadequate package of half-measures and fudges that will fool no one—least of all Opposition Members. It will not even fool Conservative Members.

Photo of Michael Fallon Michael Fallon , Darlington

Will the hon. Gentleman comment on the fact that the amendment clearly calls for further Community expenditure, and criticises the Government's attempts to impose financial discipline? Do we take it from that that the hon. Gentleman does not support the principle of my right hon. Friend's approach to the budget — that finance should determine expenditure, rather than expenditure finance?

Photo of Mr George Robertson Mr George Robertson , Hamilton

Speaking as one who was at St. Andrew's university long before the hon. Gentleman brought it into disrepute, I suggest that he tries reading the amendment, in which there is no call for additional expenditure. The Opposition believe that if the savings that we have been calling for for some time had been made —the Government have only now woken up to them— there would have been more than adequate finance to deal with the social programmes that we are discussing. The amendment calls for co-ordinated Government strategies across the board to deal with the problem of recession. The hon. Gentleman has completely misunderstood its thrust, but I am not surprised at that.

There is no will to grasp the opportunities and challenges that are urgently before us — in space, research, information technology, energy programmes and transport. In the driving seat of reaction — at the heart of the Luddite forces — is the Prime Minister herself, who goes around abusing her fellow Prime Ministers and Presidents as if they were mere Conservative Cabinet Ministers. She sends the right hon. Member for Wallasey waltzing around European capitals like a demented tourist, only to set the stage for the pantomime dame who will perform her histrionics, deliver her blusters and torpedo the Copenhagen summit, just as she did the Brussels one before it. Then she will fix the front pages, just as she did after Brussels, with her technicolour tantrums, but all the time we know that, as at Brussels, she is ready to sell out again when the crunch comes, just as she did at Fontainebleau three expensive years ago.

I shall now turn to the budget, because that is close to the heart of hon. Members in all parts of the House. It is an endless show that makes "The Mousetrap" look like a first night. In this field, above all others, we shall judge the resolve and intent of the Government, who indulge in fine and noisy rhetoric about reform and financial discipline. We await with above-average expectation the reply to the debate by the Paymaster General, who will be making his first speech since being plucked from the obscurity of these esoteric debates and propelled into the chairmanship of the Conservative party no less. As the right hon. Member for Chingford, (Mr. Tebbit), the Boris Yeltsin of the Tory party. departs to the well-padded Back Benches, we await the new entrant, whose exile to Siberia will not be long delayed if he deals with the Conservative party's finances in the way that he deals with the European Community's budget.

Photo of Eric Forth Eric Forth , Mid Worcestershire

Will the hon. Gentleman take effective action to solve the problem of his metaphor mountain and his excessive verbosity, and get on with the debate in hand? We are most anxious to hear some substance in his speech.

Photo of Mr George Robertson Mr George Robertson , Hamilton

It is nice to hear from an hon. Member who is always so sartorially well turned out that he shows up his colleagues, but that is about the only contribution that he usually makes to debates.

There is, of course, no budget for 1988 and it is now long after the point where one should have been put before the European Parliament. Instead, the Community is inexorably sliding towards bankruptcy, and a whole series of black holes loom before it.

The response by the Community is a series of proposals by the European Commission to revamp the whole sinking ship in the hope of avoiding a few more rocks. These proposals will simply mean that British taxpayers will have to shell out a lot more cash in return for nothing at all, and they get nowhere near the heart of the problem. I know that the hon. Member for Mid-Worcestershire (Mr. Forth) entirely appreciates those sentiments. In addition, the proposals are bound to kill the United Kingdom rebate, about which the Minister, continuing a long tradition, makes so much so often. If the Prime Minister comes back from her Danish blustering, having done a deal on this new GNP-linked scheme, and at the same time having sold the pass on the rebate, that will be nothing less than surrender. I am sure that I carry the whole House with me on that.

Photo of Elliot Morley Elliot Morley , Glanford and Scunthorpe

My hon. Friend has talked about rhetoric and bluster. Does he share my concern, as a Member representing a steel constituency, about the current EC proposals for yet more quota cuts in the United Kingdom steel industry? Does he share my worry that, while we hear rhetoric from Ministers about the industry, if there is a chance of a deal that may make a nice cosy arrangement between Britain and the EC about steel production, it might be made at the expense of one of our steel plants, or certainly at the expense of our capacity? Such a deal would undoubtedly undermine the fragile recovery that is taking place in the United Kingdom steel industry.

Photo of Mr George Robertson Mr George Robertson , Hamilton

I represent a steel constituency, and its largest employer is the Ravenscraig steelworks. Therefore, I fully appreciate the point made by my hon. Friend. It is astounding that the Minister talked for 35 minutes in a debate that covers two six-monthly reports and did not say a word about the steel industry, the shipbuilding industry or the other industrial interests that are being prejudiced by the Government's stance in Europe. I certainly underline my hon. Friend's apprehensions. We shall strongly press the Government on these matters.

I was talking about the budget. Our rebate, the great abatement, will next year be worth £1·75 billion if the present system continues. According to the Treasury figures, which we heard again in the debate, the British bill to the Community if these proposals go through will rise by about £800 million to £900 million a year. The Minister invented a new figure when she said £700 million, but her hon. Friend the Member for Westminster, North (Mr. Wheeler) told the House of Lords Select Committee that the figure was in the range of an additional £800 million to £900 million net per year. The Paymaster General went further. He said that the Commission's idea was ' wholly unrealistic". We all agree with that, and that is what the Minister seemed to be saying.

The question that is then begged is what is a realistic figure. We are not being told, not that the figure is unacceptable, but that it is unrealistic. Is the realistic increase 10 or 20 per cent.? How far is it short of the 45 per cent. by which we are told the new system will inflate the budget by 1992? Perhaps at the end of the debate the Paymaster General will give us the answer to that question.

Photo of Mr George Robertson Mr George Robertson , Hamilton

I should prefer to continue with my speech, because other hon. Members would like to take part.

The United Kingdom rebate is just as unpopular with the other European countries as is the Prime Minister, arid is inextricably tied to the Fontainebleau agreement, which will be thrown out if the idea of the fourth own resource is eventually adopted. On 9 November Lord Brabazon of Tara replied to the House of Lords debate on the financing of the budget. Speaking about the United Kingdom rebate, he said: any changes to the Fontainebleau abatement system (which has served us well) must improve our overall position." — [Official Report, House of Lords, 9 November 1987; Vol. 489, c. 1243.] That is slightly different from the Minister's formula, which is that the budget burden must be less, not more, onerous. However, that is the formula that the Government are taking. What precisely does it mean? Does it mean that under the new system we shall get a more generous rebate, or does it mean that we shall pay less than we are paying at the moment? What precisely does it mean when it is said that we must improve our overall position? We have a right to know so that we can measure the Prime Minister's success in Copenhagen or, in six months' time, at Hanover, against the criterion that is being laid down.

We shall watch closely, microscopically, the outcome of Copenhagen to spot any new deal with which the Prime Minister emerges. She will be judged according to the colour of the money that she brings home, and not on the colour of the language fed to the press by Mr. Bernard Ingham. We support the Prime Minister in her crusade against the lunacies of the common agricultural policy. We welcome her belated arrival at the door to challenge the basic conditions that have led to this crazy, illogical and wasteful position that once again freezes the institutions of the European Community.

As the Minister said, control of the CAP lies at the heart of controlling the budget, and real control is no more likely to come out of Copenhagen than it was to come out of Brussels. Any policy that accounts for nearly 70 per cent. of total Community expenditure will be crucial to solvency, but a policy that takes half the available cash in order to store and destroy food that nobody wants and that nobody can use is plainly berserk. That is all the more so when any small drop in the value of the dollar can automatically drag millions of pounds straight out of European taxpayers' pockets. The Government's crusade for agricultural reform is right and justified, and we fully support it, even though the Government have had eight long, expensive years to do something and only wake up when the real and total disaster looms in on them.

Even as we speak, the farm Ministers are locked in negotiations in Brussels. We wish them fruitful conclusions, but it will not be easy to get agreement. The odds-on certainty is that in Copenhagen the Heads of Government will be asked to bite the bullet and make the decisions—if they are capable of making them. I shall make clear again that what happened at Brussels last time when the Prime Minister torpedoed the 1988 budget, while the night before she sold out on a lucrative deal for farmers, will not fool the people this time.

With 1·5 million tonnes of surplus butter in store, with a million tonnes of dried milk in store, with 16 million tonnes of surplus grain in store — yet on the open market we have to buy from Saudi Arabia to get the right quality of grain—when Mr. Peter Dooley, the Briton who is Deputy Director General of Agriculture in the European Commission says, The problem is now absolutely terrifying, not least because we are now actually holding 80 per cent. of the entire world's stock of butter and when small farmers do not even benefit from the great largesse concerned and are leaving in droves to join the dole queues while those who remain are up to their eyes in debt, the time has come to call an end to the madness. We will be watching to see whether the Prime Minister's rhetoric is matched this time by some results.

When one strips away the froth of synthetic outrage at the ongoing craziness of the CAP and all the fancy ideas of holding out for a new rebate deal and genuine budget discipline, one sees that the Government do not have the tiniest clue about how the European Community could help Britain. There is no better illustration of that than in space and research policy. Last Thursday the Chancellor of the Duchy of Lancaster reported to the House the Government's cop-out of the European space project. As my hon. Friend the Member for Dagenham (Mr. Gould) said, it was a "confession of failure". It was a dismal day for Britain.

In a couple of months' time the Institute of National Affairs will publish a special paper on European future in space. This follows a study by five institutes of international relations in Europe. The report concludes: The extent to which nations or groups of nations are able to explore and exploit space will increasingly determine their standing and influence in the world of tomorrow. It goes on: A quantitative and qualitative jump is necessary towards a truly collective space policy, if Western Europe is to have anything more than a walk-on part in the world. It then makes the practical point: Space technologies foster the flexibility and innovation required to create new jobs and promote economic modernisation. Contrast those sentiments with the sad, bleak words of the Minister last week. No wonder that The Independent, which the Minister had the audacity to quote in her speech, concluded in its editorial that the Minister had added rudeness to our reputation for meanness and myopia". What a knock that decision was for the 300 British companies that are involved in space technology, what a disaster for the remarkable British-invented Hotol project, and what a dismal approach to the challenge of the big thinking that is necessary for the future of our nation.

Sir David Nickson, the president of the CBI, said at the CBI's conference in Glasgow: Sometimes the sheer scale of the investment or the long pay back time means, as the City Industry task force pointed out, a major degree of enterprise not only from us— that is, industrialists— but from Government. The Government must have a role in major projects such as the Airbus, the Channel tunnel and the mega-ventures where no company, not even the largest in Europe, can go it alone. The CBI knows the facts, unlike the Government, and it and future generations have been let down by the foolish Luddites who inhabit the Cabinet.

That penny-pinching short-sightedness is also charac-terised in the Government's attitude to the European framework research programme. The previous Minister for Information Technology has been loud in his denunciation of the Government's decision to pull out of the space programme, but earlier this year he was the mouthpiece of the Prime Minister when the Government set out to sabotage the European research programme. At the start of the year he derided that programme as being "too extravagant", which is one of the mildest criticisms that he levelled at it. The obstruction and intransigence that he displayed during the months has led to the disbanding of scientific teams, to the abandoning of projects and to a unique chance for the Japanese and the Americans to catch up in an area in which they were behind.

On 23 July, after the Prime Minister sacked the Minister, with shades of Boris Yeltsin once again, she capitulated, as she always does, and agreed to a programme with only a 6 per cent. reduction in the total amount. No wonder that Mr. Amédée Turner, the Conservative leader in the European Parliament—

Photo of Mr George Robertson Mr George Robertson , Hamilton

He is nearly that. Mr. Amédée Turner, a Conservative Member of the European Parliament and the leading spokesman on research, said that it was equivalent to taking a mouse hostage. However, the damage was done and a legacy of bitterness has been left behind. Important British interests have once again been subordinated to short-sighted tantrums. We will be watching very carefully what goes on in Copenhagen. We will be watching more than just the budget gyrations, because a lot more than that is at stake, although one may find that difficult to believe after hearing the Minister's speech this evening.

We want to know what will happen about the harmonisation of VAT. The Prime Minister made a number of pledges during the general election campaign about using the veto. She said that the veto would be used to prevent VAT on fuel, food and children's clothing. Apparently that is now a decision that ties even the Chancellor of the Exchequer in his new popular role. What about new building and construction? Will the Government use their veto in the Council of Ministers against any increase in VAT on the important commodities of books and periodicals? What will be done about the harmonisation of excise duty? Will the Government veto any reductions in duties on alcoholic beverages which such harmonisation would mean? So often in the past the tub-thumping has simply been the prelude to a sell out. Will it be any different this time?

As my hon. Friend the Member for Glanford and Scunthorpe (Mr. Morley) asked, what about the steel and shipbuilding industries? Will the Government put their veto on the line in the Council of Ministers to ensure that, as we have carried a far heavier burden than the vast majority of our Community colleagues, those crucial strategic and employment important industries will be safeguarded from any discussions that take place?

By their very nature, these debates cover a wide and diverse range of subjects, but it all comes back to cash. It is estimated that £2 billion will be squandered by the European Community simply to destroy the surplus food that nobody needs. What about the billions of pounds that we now understand goes missing in the European Community through fraud? If that money were liberated —I do not suggest that the Minister is opposed to this —it would be available for other projects. We want the United Kingdom rebate protected, and we want the taxpayers' contribution to the European black hole limited.

The Prime Minister's task in Copenhagen is to do a lot better than she has done before at summits: to sort out the lunacies of the common agricultural policy, to contribute to programmes that build Britain's future and not unwanted mountains of inedible food and to stand up for Britain's interests without caving in as so often before on essentials, while broadcasting her belligerent impotence. If the right hon. Lady can deliver we will congratulate her, but if she fails the condemnation will not just be from the Opposition. It will be universal, and it will be richly deserved.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Clwyd North West 6:08 pm, 18th November 1987

I agree with what the hon. Member for Hamilton (Mr. Robertson) said about the Government's withdrawal from much of the European scientific research programme, but I agreed with very little else that he said. It was sad to listen to a man of such honesty and integrity delivering a speech of such manifest intellectual dishonesty. I want to commend my right hon. Friend the Minister of State, Foreign and Commonwealth Office, who spoke from the Government Front Bench against a steady background of mumbling from behind her, for the job that she has done. I urge her and other Foreign Office Ministers to adopt the bold and radical approach to the European Community and its problems which they would like to adopt if they were free to do so and which they know to be necessary if Britain is to derive full benefit from its membership of the Community.

The target of a single European market in 1992 is not the kind of vague aspiration towards European union that flourished briefly and died in the 1970s. It is a specific target, with specific stages. The situation today is very different from that in the 1970s. Europe today has a manifest need to defend its own interests, a need that is underlined daily by economic developments, the threat of a world recession after the stock market crash—which Europe could, if it had tried, not merely cushioned itself against, but have helped to avert—and by the course of United States-Soviet discussions on nuclear disarmament, as Europe must be able to defend its own interests and influence the course of East-West relations.

The need for closer European Community co-operation is manifest, as is the possibility of achieving it. The Single European Act, which the Government treated initially with such scepticism, has turned out to be an indispensable tool for the achievement of agreement on pretty well anything in a 12-member Community. Even the Government now accept that—at least I hope they do.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Clwyd North West

No. My hon. Friend is the parliamentary equivalent of an automatic bird scarer. He goes off with a loud report every five minutes. He will not scare this particular bird.

In 1985, the Government appointed Lord Cocktield as a Commissioner and told him to get on with the job of removing barriers to trade. He is getting on with the job. However, who is raising hands in horror over that? Her Majesty's Government are doing that. Shame on them. Ministers used to be fond of the proverb about not making an omelette without breaking eggs, and heaven knows they use it often enough in other spheres, notably in local government finance and education. However, when it is a matter of altering our excise taxes, the coverage or rates of VAT, or frontier controls — all of which are eventually indispensable changes if we are to achieve a single market by 1992—Ministers scuttle like frightened rabbits to the shelter of their election pledges.

Photo of Sir Anthony Meyer Sir Anthony Meyer , Clwyd North West

Do the Government want a single market? If every member state is going to cling to its own method of VATBritain and Ireland are the two odd men out here — to its own system of holding up travellers and goods at the frontier and in totality to its own health, hygiene and safety regulations, that may preserve the status quo, but we will never achieve a single market in 1992.

Of course the Government are right in their insistence that the Community must deal with its budget problem and do so properly, not by short-term fudging. Our record on that is outstandingly good. We have managed to keep that problem at the forefront of everyone's attention. However, it is a pity that we have weakened our ability to achieve that vital long-term objective of a just and sensible method of financing the agricultural policy and the Community as a whole by an over-shrill insistence on our budgetary refund and the desire to get our money back. That makes splendid headlines in The Sun or the Daily Express, but it does nothing to advance our long-term aims. On the contrary, it diminishes our chances of achieving them. That only plays into the hands of opponents of the European Community like some of my hon. Friends who have been so vocal during this debate and it enables hon. Members like the hon. Member for Hamilton to exploit the subject quite cynically.

Photo of Mr Tony Marlow Mr Tony Marlow , Northampton North

My hon. Friend is suggesting quite plainly to the House that he would rather that our net contribution was much greater than it is at the moment. How much greater would he like it to be, and what benefits would we get additionally from the Community by having a greater contribution?

Photo of Sir Anthony Meyer Sir Anthony Meyer , Clwyd North West

My hon. Friend has entirely misunderstood me. I have suggested that if we can achieve a sensible long-term solution to the problem of financing the Community, the likelihood is that that will result in a smaller annual British contribution, because the system will be fairer. However, if each year we triumphantly battle for a maximum refund, we damage our chances of getting a sensible long-term solution.

I am glad that the Government are taking measures to make British industry and British public opinion more aware of the opportunities and the challenge of 1992. However, they are too late, and too little. French industry, once renowned for its sluggishness and its yearnings for protection, is moving rapidly to take advantage of the possibilities opened up by the single market. French public opinion has developed a new enthusiasm for the idea of a united Europe and what that can do to bring more jobs, to protect its citizens against world recession, to influence Soviet and United States policy and, in short, to bring about a renaissance of European influence in the world. The only people who are standing out, the only equivalents to the doubters on the Conservative Benches and to the cynics on the Opposition Benches, are the Communists and the followers of Monsieur Jean Marie Le Pen.

The Government now need to wake up the House and the country. Let them admit that under electoral pressure they made some pretty unwise pledges and let them begin to educate people to the changes that are going to have to come and to come well this side of the next general election if we are to meet the 1992 target. Make no mistake about it, the single market is a vital British objective although it is only one step towards a real European Community which remains, as it has been for 16 years, the principal basis of our foreign, economic, commercial and military policy.

The place to begin that process is in the corridors of government. The Government should consider what happened in the 1970s, when Britain first joined the European Community. Each Government Department was required to set up a unit to assess the implications for that Department of European Community membership. Exactly the same should be happening now. Every Department in Whitehall should have a small but high-powered unit with direct access to the Secretary of State, with the specific task of studying what changes are necessary in the policies and practices of that Department to prepare for the advent of the single market in 1992.

There is no time to lose, and no room for half-measures. There will have to be big and deep changes. The Government have not shrunk from such changes in other areas. Let them show themselves equally bold in matters of even greater consequence.

Mr. Bruce Milian:

I intend to make only a very brief intervention in what is obviously a wide-ranging debate covering many important matters. I want to confine my remarks to the shipbuilding industry, which is mentioned in one of the documents under consideration this evening.

Debates of this kind on the European Community are inevitably dominated by discussions of the budget and the completely disproportionate amount of Community expenditure devoted to the common agricultural policy. I do not want to comment on that, except to say that, when I listened to the Minister this afternoon, as I have listened to successive Ministers expressing the Government's firm determination to solve the budget problem once and for all, I listened with the most profound scepticism. I do not believe that that will happen this time, any more than it has happened in the past.

I should like to make one or two points about shipbuilding. First, page 22 of the report in the Blue Book covering the period from July 1986 to December 1986 mentions the agreement on the sixth directive on shipbuilding which was signed at the end of December 1986. That agreement lasts for four years. Incidentally, it does not come into the budget because it relates to aids for shipbuilding which are financed by national Governments. My hon. Friends and I, who take a constituency interest in shipbuilding, were extremely disappointed that the maximum limit for aid to shipbuilding agreed in the directive was 28 per cent. Anyone who knows about merchant shipbuilding in this country and the worldwide problems that it faces at the moment will know that that limit will not allow our industry to get the orders that are required, or keep it at its present demoralisingly low level, because most of our capacity has been lost during the past few years. Therefore, we argued that the percentage maximum limit should be considerably more than 28 per cent.

I do not want to go back over that argument, as I understand it, but that agreement was reached only a year ago. Although the directive applies for four years, it does not necessarily apply at the maximum percentage limit for the whole of those four years. As I understand it — I hope that we shall get an answer on this point—the limit is subject to review during the period of the directive. Are discussions taking place at the moment about the limits on aid that are to be allowed under the Community directive? If so, what are the Government doing to increase the limit of 28 per cent? Can we have at least the basic assurance that there is absolutely no question of the limit being reduced, because that would be disastrous? I hope that there is no possibility of that. However, we require some assurances on the level of aid. I should like an assurance from the Government that they are arguing for a higher level than was set in the agreement that was reached in December 1986, because the 28 per cent. limit is obviously inadequate to deal with the crisis facing merchant shipbuilding in this country.

Secondly, we were told that one of the virtues of the sixth directive was that the various aids would be transparent and that there would be no possibility for members of the Community to cheat on the arrangements. However, just a few months ago an incident occurred that affected Govan Shipbuilders in my constituency. Govan Shipbuilders had pretty well signed, sealed and delivered a contract for ferries for Brittany Ferries, but before the contract was finally settled the French Government intervened and the contract went to a French yard. The Irish Commissioner responsible for such matters, Mr. Sutherland, took the view that the French Government had breached the terms of the directive.

I raised this matter during the Third Reading debate on the British Shipbuilders (Borrowing Powers) Bill on 16 July. The Minister kindly wrote to me afterwards. In a letter dated 5 August, the Under-Secretary of State for Trade and Industry wrote that the British Government were rigorously pursuing the matter and that he would keep the House informed. So far as I am aware, the House has not been kept informed — at least I have no information on it —of what has happened. Whether we like it or not — I dislike it intensely — that order is proceeding in the French yard. We must have an answer to what happened to the objections that were lodged and to the Commissioner's investigations. The House is entitled to know what happened.

My third point is not unrelated to the budget and to what the Minister has said this afternoon about the Government resisting—that was the sense of what the hon. Lady said—any increase in the regional and social funds, not for reasons of merit but simply because the budget is so disproportionately taken up with expenditure on the common agricultural policy at the moment. As I understood it, a few months ago there was, if not a definite Commission proposal, at least some talk — perhaps it had gone beyond that into something more definite— about a package of aid for areas that were suffering from shipyard closures. In July, the Commission mentioned the figure of about £350 million. So far as I am aware, absolutely nothing has come of that. Again, I should like some information from the Minister.

If we are to spend large sums of money in the European Community, I should like it spent on the regional and social funds. I should like money spent on supporting our industry and spent in the regions that are suffering serious unemployment. Unfortunately, that includes my own constituency.

Another example of the way in which the European Community is being completely distorted and its priorities made inappropriate for the real problems that are facing Europe is that we have such an over-emphasis on the CAP, and a disproportionate amount of the budget is spent on it. We should like to see that matter remedied. If it were, money could be spent much more sensibly on the regional and social funds. There is a strong argument for some of that money being directed to areas in Britain and elsewhere that have been decimated by shipbuilding closures during the past few years. I should like the Minister to comment on that also.

Photo of David Curry David Curry , Skipton and Ripon 6:26 pm, 18th November 1987

It is fortunate when inclination and obligation go hand in hand. In the convention in this House that a maiden speaker devotes the first part of his remarks to the record of his predecessor, that coincidence comes happily together.

I have great pleasure in recalling the work in this House and in the constituency of Mr. John Watson, my predecessor in Skipton and Ripon. He was unremitting in his energy, unfailing in his courtesy, and unhesitating in his commitment to the interests of his constituents. He was the spokesman, advocate, sponsor and defender of the constituents of Skipton and Ripon. With those people, who tend to judge a person first by what he is and secondly by what he represents, he had a special empathy. I know now how I will be judged on my time in this House. My constituents will say, "How did he rate against John Watson?" I know that that will be an immensely difficult comparison.

John Watson represented, and I now have the honour of representing, a continent of a constituency. In the east, there is the vale of Mowbray and the rich farmlands of the vale of York, along which so much of British history has marched. In the foothills of the dales there is the great squat bulk of Ripon cathedral and close by is Fountains abbey, which is surely one of the loveliest abbey ruins in Europe, and where there is a special quality of peace and reflection. Going into the centre of the constituency is the great River Wharfe, with its sculpted escarpments and its contours ribbed in stone. The grey of the wind against a tumbled sky shows up with violence against the crystal colours of summer and the gentleness of the changing landscape.

Then the market town of Skipton —confident, self-assured, used to being battered by the ages—giving way to the great spine of the Pennines and the Yorkshire Dales national park. Everywhere one goes, there are the villages: built of stone; built as though they grew out of the landscape; huddled against the elements, but sheltering that especially warm welcome which is so much the hallmark of my part of the world. The Yorkshire constituents, with the reticence and modesty which is their characteristic, believe that they live in one of the most beautiful parts of the country, and I think that they are right.

My constituency is a paradise, but a paradise with problems, including housing. In the dales, it is rare to find a village where more than half the houses are permanently inhabited, with the rest being given over to summer lets or holiday homes. There are problems of planning, because the more farmers are given injunctions to diversify their activities, the more they run headlong into planning restrictions which prevent them from observing those injunctions. Agriculture is especially important in my constituency. There are short growing seasons, long winters and a great deal of bought-in feed. Livestock production is especially difficult. The sheep is the great mainstay of the economy, as it has been from the middle ages. If the sheep disappeared from those hills, the land would become depopulated.

I have chosen a European debate to make my maiden speech not because of any demonstration of Euro-fanaticism, which I understand is frowned upon in the Chamber, but simply because my constituents are vitally affected by the decisions that are taken in Europe.

It is important to review the United Kingdom's three strategic interests in the European Community. The first is the need to develop the political unity which will enable us to stand on our own feet in defence—not because we are preparing against the day when the Americans leave, but because only if we show that we can stand on our own feet will the Americans not leave. Nothing could give a better pretext to those in the United States who wish to take the troops home than the demonstration that Europe is unwilling to assume its share of the burdens. Security and defence are inextricably linked with political unity, which is part and parcel of the European Community.

Britain's second interest is in the creation of the internal market ; but I urge the Government to be cautious. It is all very well to have the great internal market. If we do not have a competitive exchange rate to go with it, and if our industry cannot compete in terms of its labour costs, productivity and control of inflation, we will become the victim, not the beneficiary, of the internal market. We must maintain our economy so that the internal market will work.

The debate on full membership of the European monetary system must be seen in that context. One could argue — it is a plausible thesis — that the United Kingdom economy is so vulnerable to structural inflation that we must always have available the possibility of engineering a creeping depreciation of the currency so that we can compete. If we believe in that thesis, it would be wrong to lock ourselves into a mechanism. But one could equally argue that, if the thesis was correct, we need a counter-inflationary strategy. A formal attachment to an exchange rate discipline might perform that function, but those who argue that must demonstrate the link between membership of the exchange rate mechanism and its effective operation on the disciplines being observed in the negotiating forum of the corporate sector.

Once that is established, the way to membership becomes more plausible. The case for our membership has not yet been made out, although during the past few months the relationship between the deutschmark and the pound has been as close as—on occasions closer than— it would have been had we observed the formal mechanisms of the exchange rate discipline. Our hope now is that the Louvre accord will work to help the world out of its financial crisis, although we should not place too many hopes on that new instrument. In the context of a sustained recovery in world financial markets, an agreement on future financing — which would make a contribution to that recovery — the creation of a free capital movement in the Community and signalling the continued priority of our counter-inflation strategy, our full membership must be kept under urgent review.

Another aspect of the internal market is what has become known as the north-south divide in the European Community. We must be realistic enough to recognise that we will not achieve the internal market unless the new members of the EC—those which have fewer riches and which are peripheral to the Community — can see benefits for themselves. The budget is an instrument for a managed resource transfer, which is politically at the heart of the equation of the enlarged Community. But that should not be a pretext for not exercising rigour in supervising the budget. In 1987, 1 billion ecu of expenditure in the non-agricultural sector cannot be spent because the programmes — mainly social — have collapsed. Rigorous supervision is necessary across the spectrum of the European budget.

The third important strategic requirement for the Community is that the internal market should be created in the context of an open world trading economy, not a closed trading economy.

What is the substance of the Copenhagen discussion on future financing, remembering that the Community budget is roughly the size of the amount of money by which President Reagan is reluctant to reduce American public expenditure in the first year? The case for an increase in own resources is inescapable. The fourth resource is satisfactory for the United Kingdom in so far as it relates payments to wealth, which is something for which we have consistently asked in the Community. Even more importantly, if that resource was linked to gross national product, there would be no further cause to increase the Community's resources, short of a major transfer of new competence from national Governments to the Community. I do not envisage such a major transfer —at least not in the forseeable future.

We have set the budget on a stable path, but there are conditions. The first is that we should fix intermediate ceilings of expenditure. If we do not do that, we shall not sustain the pressure for reform. The evidence is that only by applying budgetary pressure will we obtain those reforms, and we should be fools to sacrifice that weapon. We also need a phased clean-out of expenditure commitments in the budget, of which the write-down of agricultural stocks is the most important. We need advanced planning of expenditure to achieve that.

The second condition is that there should be no special reserves. I can think of nothing more dangerous than to inscribe budgetary discipline simultaneously with the bolthole which enables us to evade it. We have seen in the past how dangerous that can be.

The third condition is satisfaction on the United Kingdom abatement, or rebate. The proposed 50 per cent. rebate on agriculture is not a satisfactory solution. The ideal solution would be the GNP formula, plus the Fontainebleau agreement, and I hope that our representatives will aim for that. But we must be realistic enough to realise that the problem with the rebate mechanism is the way in which it is accounted for in the budget. The 2·5 billion ecu rebate in 1988, which is what the Chancellor of the Exchequer's Autumn Statement predicts, is obtained at a charge to the budget, in accountancy terms, of 3·6 billion ecu. The expenditure equivalent formula means that there is 1 billion ecu of dead money in the budget, because of the mechanism of the rebate, not because of the United Kingdom's entitlement to it. The answer is to move towards a uniform and average means of defining VAT, given that that element is likely to remain in the final equation. The second major item at Copenhagen will be Copenhagen. The reforms have been significant already. I invite those right hon. and hon. Members who do not believe that to my constituency, where I will show them the human face of the reforms that have taken place.

There is remorseless pressure for the reform of agriculture. The dollar is one of the major external determinants, and 5 per cent. devaluation of the dollar against the ecu adds 400 million ecu in a full year to the European budget. To a large extent, however, that is not under our control. The world markets are less than buoyant; they are shrinking, and the only world market that appears consistently open is the Soviet Union. That is due to Soviet incompetence in agriculture.

We have an enormous vested interest in continuing Soviet inefficiency. The day that the Soviets get their act right in agriculture — a low level of technology is needed ; it is a question of storing and moving their products—there will be a problem for all the world's agricultural producers.

Then there are the GATT talks. Agriculture is now inescapably locked into those talks. The United States may not have very much faith in them, but they are at least useful for the negotiators in fighting off protectionist measures in Congress.

Those elements mean that there is no point in asking whether agriculture will be reformed. It will be reformed by the Community, or by others on behalf of the Community. But, if the status quo cannot continue, external circumstances now determine our fate to far too large an extent. We cannot guarantee both farm incomes and farm employment. We may not be able to guarantee either, in the present circumstances.

What we need in the reforms now being discussed are the automatic mechanisms that arrest budgetary overruns. The House must face facts. If we demand discipline in agricultural spending, and that that discipline should be applied immediately, we must give the Commission the competence to apply it. We cannot claim that there is a problem of law and order, and then refuse to supply the gendarmes to enforce that law and order. It is essential that we recognise that, because it touches upon the competence of national and Community authorities.

There will be some who urge my right hon. Friend the Prime Minister to stand firm, because they will rejoice at the disarray that they hope to see as a consequence. But there will he others who have a true belief in the rightness of British membership of the Community, and who will urge her to stand firm for precisely the opposite reason. We believe that those reforms are essential if we are to see a Community under firm control and firm management, which takes political options and supplies the resources to match those options—in other words, a Community in which vision is allied to realism, and imagination is inspired arid nourished above all by common sense.

Photo of Mr Russell Johnston Mr Russell Johnston , Inverness, Nairn and Lochaber 6:42 pm, 18th November 1987

It is a great pleasure to congratulate the hon. Member for Skipton and Ripon (Mr. Curry) on his maiden speech. The hon. Gentleman described his constituency as a continent. He must come to my constituency some time. I do not claim that it is a continent, but it is certainly larger than Cyprus.

The hon. Gentleman gave us a lyrical, indeed poetic, description of his constituency, which we all appreciated. I know his work and his contribution in the European Parliament. I cannot say that I always agree with him, but he has always fought his corner with intellectual rigour and force, and I am sure that that is exactly what he will do here. Indeed, we have already heard him do so.

The Minister produced some rather pallid excuses for the fact that there has been only one debate on progress within the European Community, rather than two, as there should have been. She said that there had been problems—for example, the election, and the pressure of business in the House. I must say that the idea of "pressure of business in the House", an excuse that the Minister proffered in a voice totally drained of conviction, was the least persuasive argument. After all, the business of the House, as we saw from the lengthy debate on the Felixstowe Dock and Railway Bill, is a reflection of the Government's priorities. They determine such matters. In that respect at any rate, I found the Minister's excuses like flat Perrier.

Likewise, not for the first time where Ministers are concerned, I found the right hon. Lady's approach both uninspired and insular. I wish that I could say otherwise, because I think that within the bonds of the brief in which she is bound is a fairly decent person struggling to get out. The Minister has now left the Chamber, so that is the end of that. However, it would be a change if, for once, a Treasury Minister introduced such a debate with a forward looking, constructive speech — not dodging problems, certainly, but at least setting the ideas within positive, co-operative objectives.

The Minister bridled when I suggested that she was implying that any progress that the Community was making was exclusively due to the charm, persuasiveness and foresight of the Conservative Government and their representatives. However, that has repeatedly been the word that we have heard from the Prime Minister, and the Minister has given us an echo of it this afternoon. The lack of emphasis on Community co-operation, the particular stress on rights of individual state action and the Victorian and very shallow references to a recovery of national pride were all part of the pattern of a short, self-righteous speech. We are rather bad at being self-righteous.

If I may say so in the presence of a new Member such as the hon. Member for Skipton and Ripon, the Minister's reference to the democratic nature of the elections to the European Parliament made me spit. I am glad that the hon. Member for Bradford, South (Mr. Cryer), who is seated in front of me, at least makes his demonstration silently.

Photo of Mr Bob Cryer Mr Bob Cryer , Bradford South

I can provide an oral demonstration, if the hon. Gentleman wishes.

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

I assure the hon. Gentleman that I do not.

The Minister knows that the non-proportional system maintained uniquely among European Community countries by the British Government gives Conservatives a wholly false, cheating advantage in the European Parliament, and treats non-Conservative voters unjustly and nastily.

Let me return to the basic issue, on which so far everyone has naturally and rightly agreed: the single market and the budget. It is the Government's contention that, until a system of budgetary discipline is in place, no Community resources can be increased. I do not accept that that is a sensible position. I think that the two questions of discipline and resource must be considered together. Budgetary discipline must be imposed and, of course, improved. However, to suggest that in trying to perform that difficult exercise we should ignore the problems referred to by the hon. Member for Glanford and Scunthorpe (Mr. Morley), and all the other problems included in the work of the regional and social fund, is silly.

In June, all member states apart from the United Kingdom — as often happens — agreed a statement in Brussels, which said: It is essential that a lasting response be sought to the question of the Community's financial equilibrium, on the one hand, by providing it with appropriate resources, and on the other by subjecting the use of these resources to effective and binding budgetary discipline. That, I think, is the essence of the matter. I have repeatedly said as much in this Chamber, wher1e we have again and again had to listen to resounding denunciations of the common agricultural policy which suggested, without any accompanying detail, that somehow or other the whole problem of surpluses in store can be swished away almost overnight. That is simply not possible.

It is true also that we are making progress. Paragraph 3.1 of Cm. 205 states: The package is estimated to constitute a reduction in CAP prices (expressed in real terms) of about 2·5 per cent. across the Community taking into account both changes in institutional prices and other adjustments in support arrangements. The support price of cereals has fallen by 10 per cent. in real terms and the butter mountain—the hon. Member for Hamilton (Mr. Robertson) said that it is the largest such store in the world—is being reduced at long last. It is not realistic, however, to believe that everything can be done overnight.

The British Government are not always in the best position to be hypercritical. They pressed strongly for and obtained a devaluation of the green pound of up to 7 per cent. for some products, and I do not deny that there was an argument for doing so. However, support prices in the United Kingdom have increased by between 5 and 6 per cent., with consequent increases in Community agriculture expenditure. The real argument, which we do not always address, is between the Chancellor of the Exchequer and the Minister of Agriculture, Fisheries and Food, not between the United Kingdom Government and sup-posedly spendthrift Europeans.

The Minister referred in passing to The Independent, and I was fascinated to read on 14 November a small article which I am sure depressed some of those who like to rush across the Channel. The article stated: Cross-Channel shoppers' food allowances will be drastically curtailed from tomorrow. The restrictions are being introduced in the guise of a simplification of existing personal import concessions. In effect, today is our last chance to bring back up to 1 kilo of delicious hams, saucissions secs, salamis, and charcuterie, or even up to 1 kilo of fresh beef, lamb, poultry". What is the reason for this? The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food explained that meat or meat products can be introduced to this country only if they are cooked or are in cans or other hermetically sealed containers.

As we are unlikely to be enlightened about the European monetary system, perhaps the Minister will enlighten us about matters that are not so immediately pressing but interesting for those who cross the Channel from time to time. Why are we suddenly concerned about a health hazard? If the danger is so grave, why are citizens of France, Germany and Italy not dying in the streets? If distance is a problem, let it be understood that the distance from Watford to Dundee is greater than that from Watford to Calais. Is it being suggested that there are grave health hazards in sending English hams to Scotland? Or is it that bureaucracy is having its effect? I suspect that my final rhetorical question provides the answer.

I have found the Government's approach to the Community to be depressing and offensive over a long period. They seem to see the Community as a free trade area rather than a community of peoples working together towards a supranational cohesion. It has been the Liberal vision for a long time that the Community is about bringing the people of Europe closer together, enabling Europe to keep up with the other major economic power blocs and protecting the European environment in a way that no national Government would find possible. I do not think that the British Government contribute enough to the furtherance of these objectives.

I shall give some examples. The framework programme is an eminently sensible and cost-effective way of assisting scientific research. That is the way in which I would describe it. It establishes information links between European establishments that are engaged in similar areas of research. However, Britain refused at first to agree to the establishment of the project, thus delaying for a number of weeks the start of a programme that included work on epidemiology, including AIDS, despite it being the Government's policy to ensure that all research on AIDS is adequately funded. The Government's initial refusal had an effect also on work on advanced communications technology.

Another example is radioactive contamination. Again I find the Government's attitude difficult to understand. At the time of the Chernobyl disaster, the European Community was in almost disarray. Perhaps it can be excused in that the Chernobyl disaster was so sudden, apocalyptic and unexpected, but a system of agreeing common standards of permissible radiation levels is needed. The temporary post-Chernobyl agreement expired in October. That agreement has been extended for a short time, but the British Government are pushing for permitted radiation levels that are over eight times higher —that is, more radioactive—than those that led to the existing restrictions on lamb sales in north Wales and Scotland. I do not understand why the Government are taking this position, and I should like an explanation this evening.

The hon. Member for Hamilton referred generally to unemployment, which is referred to in the official Opposition's amendment. The contribution that the Community makes to tackling youth unemployment especially is not insubstantial. For example, the Manpower Services Commission's schemes receive considerable European Community support, although the Government keep very quiet about that. Unfortunately, the Council has failed yet again to agree a proposed action programme for vocational training to combat youth unemployment when it discussed the issue earlier this year. What are the Government doing to press the furtherance of such agreements?

Political co-operation was mentioned during Question Time this afternoon. The Foreign Secretary is rather good at giving the impression that everything in the garden is lovely and that he is sitting in a deckchair admiring it. It was stated clearly this afternoon that we are in favour of co-ordinating co-operation on foreign policy within the European Community. That being so, why do we walk out of UNESCO when no other member of the Community chooses to do so? What are we doing about walking back in again now that Mr. M'Bow has departed?

There is non-participation in space research. I am sure that the Minister has observed the motion that stands in my name and those of others of my colleagues, which states that we regret the refusal of Her Majesty's Government to support any of the three new projects of the European Space Agency, the Ariane 5 Rocket, the Hermes shuttle or the Columbus Space Station, noting that the United Kingdom is the only European Space Agency member country to be playing no part in any of these; and explicitly reject the Government view that Britain should remain a passenger as America and Japan forge ahead in space technology. When the hon. Member for Hamilton quoted an as yet unpublished report, I noted what I considered to be a most appropriate phrase. I, like the hon. Gentleman, do not want the United Kingdom to have a "walk-on part" in the world. The hon. Gentleman is sitting on the Opposition Front Bench and looking unaccustomedly demure. He is becoming better and better at being rumbustious. His delivery of his alliterative rhetoric — "technicolour tantrums" was quite good—enlivens these debates, and sometimes they certainly need it. The hon. Member for Hamilton did not inspire me, but he certainly did not bore me, which is something. His speech, however, seemed to have only a loose relationship with the amendment that he was supposed to be moving, but that is not so surprising.

Photo of Mr George Robertson Mr George Robertson , Hamilton

Hold on until the wind-up.

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

More is yet to come.

I must tell the hon. Member for Hamilton that I shall be inviting my hon. Friends to support his amendment. However, that is not because I regard it with much warmth, although I applaud the references to the sabotage of the space and research programmes, the need to promote mutual growth, trade and jobs, the urgent need for measures to cut food surpluses, the need to promote industrial joint ventures including aerospace, and so on. Those are all good points with which I agree.

I do not think that using wild language—I am sad to say that the hon. Member for Hamilton is rather given to wild language these days — such as "shambles" is helpful.

It is peculiar that mention is made of international financial markets, yet there is no reference to the EMS or to the establishment of some financial stability in the European Community. The difficulties of the budget are real and hard to solve.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

How would the hon. Member solve them?

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

The hon. Gentleman asks impossible questions. I have often tried to answer his questions, but have now given up. [Interruption.] I have tried to answer the hon. Gentleman several times; perhaps I should write to him.

The speech of the hon. Member for Hamilton, who would like to describe himself as a member of the progressive Left, ignored the problems of rural communities and the particular problems with which they are faced with the shrinkage in CAP expenditure. It was strange that nothing was said about the need to help poorer countries such as Portugal, at the same time as securing proper treatment for our under-privileged areas in the north of England, Wales and the highlands of Scotland from the regional and social funds.

But I must find a way in which to express my deep dissatisfaction with the style, form and approach of the Government.

I began my speech by complaining that we have had one debate too few. Perhaps that remark was wrong, because we tend to have the same kind of debate. However, I should like to put it firmly on the record that Liberals remain completely committed to the European Community and are convinced that only through that Community shall we secure an expanding economic future for our country and an opportunity to express our opinion on world events. With such a Government as we have, that will be slow in coming, but we shall try to make our contribution towards that end.

Photo of Ian Taylor Ian Taylor , Esher 7:03 pm, 18th November 1987

For many years prior to becoming a Member of Parliament I debated with enthusiasm the European cause all around this country and on the Continent. On occasions that has been with representatives of the Opposition parties and sometimes with friends from the Conservative party.

I have long respected the desire of the House to retain control over events in the European Parliament. Having listened to the debate, I have some qualms about whether the House is fulfilling that role with the commitment that it should. I hope that, over the years that I intend to remain in the House, the standard of debate — as evidenced by the speech of the hon. Member for Hamilton (Mr. Robertson), which would have defied all translation into whichever language of the Community if it had been made in the European Parliament—will improve as will the attendance. The debate is about what I regard as an essential part of the future policy and status of the United Kingdom.

Prior to becoming a Member of Parliament one aspect that I commended was the alacrity with which the House accepted the passing of the Single European Act. I did not manage to read all of the speeches made at the time, but I am sure that most of them favoured development of the Community, to transform it so that we could look forward to more efficient institutions. That is what is so important about the Community, and it was referred to by my hon. Friend the Member for Skipton and Ripon (Mr. Curry) in his excellent maiden speech. It may be patronising for me as a new Member who entered Parliament at the same time as my hon. Friend, but I should like to congratulate him on his speech. He brings to the House a great knowledge of the way that the budget is negotiated in Europe, having been responsible for the Budget Committee and the Agricultural Committee in the European Parliament. One or two Members of the European Parliament have not contributed to the strength and sense of the budget or agriculture debates, but that finger cannot be pointed at Conservative Members of the European Parliament.

A point that I should like to underline from my hon. Friend's speech is the importance of the increased strength of these institutions for increased budgetary control. In a sense, there lies the nub of the question. In the past we have not willed the means to the Community to control budgets, despite wishing that that control was applied. In many cases, we have undermined the institutions that tried to control them.

With regard to the budget, on many occasions the House has discussed whether it should increase own resources, after the Community has already made commitments to increase them. The problem is that to appear within the legal budgetary limits the European Community has often had to do things that I, as a corporate adviser, have advised my clients on innumerable occasions not to do, which is to fudge and fiddle the books.

On many occasions the budget has reclassified items that it should not have reclassified and changed the timing of payments and taken the credit for them, which it should not have done. It has budgetised agricultural stocks, which has given a misleading impression. One can justifiably criticise the European Community for those measures, and I do, but one can also justifiably criticise the Council of Ministers for never anticipating the problems, yet always trying to pretend to their domestic Parliaments — this Parliament is no different in that context — that there is no problem. If we look in Hansard at some of the debates of recent years, we see that Ministers have said that budgetary control is within our grasp and that I per cent. or 1·4 per cent. of VAT will be sufficient. Most people knew at that time that that would never be the case.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

They will do it again.

Photo of Ian Taylor Ian Taylor , Esher

If my hon. Friend will allow me I shall demonstrate how it can be avoided.

It is important to point out that the European budget for all 12 member countries, with 321 million people, is about £26 billion. That represents just over half of what our Secretary of State for Social Services administers in any one year. To put it another way, it is 15 per cent. of our national budget. Yet it covers 321 million people throughout the Community. With all the fuss that is made about an attempt to increase own resources, one would have thought that it was dramatic — that it was hundreds of times the size of the British budget or any departmental budget. We have got the matter out of proportion. We have become nit-picking in a way that has stopped us from having a vision of the future. [Interruption.] Interventions from a sedentary position are never clear for the record. There was a murmur of dissent from what I said.

I was clearly pointing out that if we persist in nit-picking and trying to demonstrate an attempt to be completely profligate with resources, which, in relative terms, are small, we shall lose the vision of why many of us have spent many years fighting for increased strength of the European Community. We believe that the vision of the future, which the internal market and the prospects for 1992 could bring us if we stick to the Cockfield timetable, is more than well worth fighting for. In many cases, it justifies an increased contribution from members of the Community.

Photo of Mr Bob Cryer Mr Bob Cryer , Bradford South

Would the hon. Gentleman take the same attitude to local authorities, for example, if, in the past three years, we had spent £4·3 billion more on local authorities than we had received back in services provided? Would he say that we should wave that amount to one side and examine the vision of the future? Does he agree that the Government look rather more scrupulously at local authorities than at the Common Market?

Photo of Ian Taylor Ian Taylor , Esher

The hon. Gentleman chose a bad example. The profligacy of Labour councils makes the organisation of European Community budgets look efficient and parsimonious. [AN HON. MEMBER: "They hit their targets every time."] They have hit their overspending targets, without any question.

Many hon. Members have said that agriculture has been the main problem. Over the years, there has been no doubt that agriculture has been out of control. It is beneficial for the European Community that agricultural production is in surplus. Back in the 1950s, when one started to take an interest in the matter, many hon. Members were worried about the opposite effect ; that is, of famine and shortage. We must now tackle the problem of how to deal with surpluses. The Government have taken a proper lead in that respect.

However, there is absolutely no doubt that the only way in which to deal with the problem is to give increasing powers to the Commission and the European Parliament to trigger automatic stabilisers and reinforce a reduction in quota impositions on cereals, which are still at high levels. I refer to what has happened to milk powder and butter. Last week, The Independent stated that, on a year-on-year basis, the flow into surplus stores has been reduced to a trickle. The Milk Marketing Board is one of the largest employers in my constituency. In many cases, the problems that it thought it would face in regard to quotas are no longer quite as apparent as it first feared. The systems have at least brought that section of the agricultural surpluses within some control and have at least given us the prospect of trying to marry supply and demand. Those measures must not —

Photo of Ian Taylor Ian Taylor , Esher

I have given way once. I shall carry on and make my point.

If we can apply the same sort of discipline to other products — I know that there will be shouts from the agricultural community—we may bring back supply and demand to other products and at last give European Community institutions a chance to apply the automatic stabilisers that will relieve the future problem.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

Will my hon. Friend explain how stabilisers will solve the financial problem if we retain export rebates for items that are not taken into intervention? We must bear in mind that the EEC currently spends £185 millon a week on export rebates, but only £17 million a week on storage. How will it solve the financial problem if we retain export rebates?

Photo of Ian Taylor Ian Taylor , Esher

The financial problem will be dealt with if the system of rebates gets more attention in the negotiations in Copenhagen. I hope that the Minister of Agriculture, Fisheries and Food is dealing with that aspect. My hon. Friend must realise that unless we bring in automatic stabilisers and attack the problem in terms of various commodities and examine how they can be cut off when they run into surplus, we will never get the agricultural budget under control. It is essential to bring it under control. Therefore, I strongly support the Government's line in the current talks and those which will inevitably take place in Copenhagen.

Photo of Bill Cash Bill Cash , Stafford

Will my hon. Friend give way on that point?

Photo of Ian Taylor Ian Taylor , Esher

No, I shall not give way. I have just given way. I should like to continue my remarks.

If we can bring in budgetary control, the future of the Community will require us to examine a wider horizon. We must accept that more resources are required. As I said, the proportion of member countries' budgets that is devoted to the Community through own resources is extremely low. Incidentally, far from being expanded at a massive rate, taken in terms of total GNP, the European Community's budget has been relatively static. If we can develop more resources, we can start to tackle problems other than agriculture, as many people would like us to do, such as the social, employment and regional policies. Therefore, we shall be able to fulfil the requirements of the Single European Act and also those of 1992 targets.

The matter is important. It is not inherently wasteful for resources to be subscribed to and then distributed by the European Community. In assessing which resources should be submitted, there will inevitably and desirably be some transfer of wealth within the European Community. That will strengthen the Community. That is a political objective. The 321 million people within the Community will be better served if the whole Community is strengthened and regional disparities are gradually reduced.

In an age when the super powers are taking decisions over our heads and when we have to sit and wait for President Reagan eventually to make up his mind about what attack he will make upon the United States deficit, it is important that Europe puts its own house in order, and is seen to do so, and makes a strong European Community contribution to world political and economic debates.

I have mentioned the need to control the past, but if we are to look with some vision to the future we must consider the basis on which such extra resources should be raised once control of the existing budget system is introduced. The Delors proposal shows one of the best moves forward that the Community can consider. There may be discussion about whether it moves too quickly, and there may be consideration about whether the total estimate of 1·4 per cent. of GNP is too ambitious a target, but for the first time it relates to greater fairness by not retaining some variety and pot-pourri of structures related to notional VAT rates. I commend the fairness of the proposals to the House. When the Prime Minister goes to Copenhagen, if she can achieve—

Photo of Mr Win Griffiths Mr Win Griffiths , Bridgend

Does the hon. Gentleman agree that we should perhaps extend the principle of the community charge to the Community to produce the money to fund the European Community?

Photo of Ian Taylor Ian Taylor , Esher

Will the hon. Gentleman repeat his point?

Photo of Mr Win Griffiths Mr Win Griffiths , Bridgend

I was wondering whether the wonderful British poll tax device to help finance local government might not be taken by the hon. Gentleman as a means of financing the Community.

Photo of Ian Taylor Ian Taylor , Esher

I could not believe my ears. I am glad that the hon. Gentleman has a sense of humour, but I am not sure how relevant it is in this context.

Photo of David Curry David Curry , Skipton and Ripon

It would not come through in translation.

Photo of Ian Taylor Ian Taylor , Esher

No, my hon. Friend is right.

If we note the package contained in the Delors proposals, the Government should press to find out how the proposals can be introduced in stages. The Delors package relates to an advance budget, three years ahead. That is exactly the point that I raised earlier. In the past, we have reacted to something that has already happened. I believe — and I make this point seriously—that we should have more resources and therefore that we should anticipate what the resources are likely to be in the future. We should take a three-year view. We should look forward, as opposed to being reactive. We are already under great pressure. We have to contend with what is called the cost of the past which might also be described as a historic budget deficit. Let us see how we can plan for the future and what is likely to occur. The 1984 settlement has been undermined to an extent by the fact that it did not allow for currency movements such as have affected the ecu-dollar rate in recent years, thus causing considerable problems.

My hon. Friend the Member for Skipton and Ripon referred to the European monetary system. In attempting to get budgetary discipline imposed on our colleagues in the Community—some of whom have already accepted the argument and some of whom have not—we should show our own European credentials openly and strongly rather than talking about it in guarded terms. We are not full members of the exchange rate mechanism of the European monetary system. In recent years we have made slightly more positive noises about it, but said that we would wait until the time was ripe. When the time appeared to be ripe, the ground rules were changed for some reason. If we are to go to the Copenhagen summit hoping to make a major impact and take a major step forward, we should show our true European credentials. In my previous profession, I talked to many business men and I believe that the strength and discipline that full membership of the European monetary system would give would be more than welcome in Britain.

One can always ask about the sterling-deutschmark rate, but recently we have been behaving as though we were EMS members, Our monetary policy is increasingly tied to circumstances in Germany. Other members of the Community are increasingly making concessions that we have demanded on freeing capital movements and yet we ourselves have yet to make the final commitment. I know that there will be arguments against it, but there are overwhelming political reasons and good sound reasons of economic discipline why we should declare our membership. We need an objective peg by which to maintain our anti-inflationary policies and to provide a greater sense of exchange rate stability. If the Government made that gesture and committed themselves, they would be much more likely to achieve the essential controls of the existing budget system and to provide a strong platform for solid growth of the European Community, for which I very much hope.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South 7:22 pm, 18th November 1987

I agree with a good deal of what the hon. Member for Esher (Mr. Taylor) said at the beginning of his remarks and congratulate him on his approach. However, I could not agree with the rest of his speech and when I come to my remarks about the Cockfield package I hope to show why.

First, let me comment on the hon. Gentleman's dismissal of just £26 billion — not £26 million, but £26,000 million. That sum may be equivalent to our own social security budget. It may be just 12 to 13 per cent. of our VAT take, although that is quite a lot for a Chancellor to deal with. Our current contribution to the EEC, including customs duties of more than £1,000 million, now amounts to £4,000 million. Statistically the hon. Gentleman may be right, but the matter looks rather different when one considers it in terms of what this country would do with that money were this House in control of it.

This afternoon we are exercising the power of scrutiny, but I am not sure that we are doing very much more than that. The power of scrutiny can be defined as the power to be aware both of the factors and of their context, and as having the power to influence through that knowledge. If one has real power, one has the power to change arid, in this context, the power to approve or disapprove. I am afraid that the House no longer has that power. I do not know how long ago the Government last disapproved a Commission document or when the Opposition last succeeded in doing so. It would be instructive for hon. Members to look in the history books to find out when it was. Only this week I received a letter from a prominent Member of the European Parliament referring to the activities of this House in relation to EEC matters as but a "rubber stamp". Whether we are more than that depends a great deal on the activities and integrity of Conservative Members.

On 21 October I asked the Minister of State, Foreign and Commonwealth Office, who is not here now, about the Copenhagen summit and the powers of the Council of Ministers, or the European Council as we now have to call it. I asked whether the decisions would commit this country even if further regulations were promulgated. The right hon. Lady said: The Copenhagen meeting of leaders of European Community countries will be no different from any other European Council meeting. We shall proceed exactly as we have previously, under the Single European Act, which now binds us all together."—[Official Report, 21 October 1987; Vol. 120, c. 708.] I do not know whether the right hon. Lady was speaking Eurospeak, or newspeak, or some other kind of speak, but the remarks seem inaccurate. The Single European Act came into operation only on 1 July. The Copenhagen meeting will be the first meeting of Heads of Government under that Act.

I agree with the hon. Member for Esher that the fact that we are operating under that Act makes this debate, the process of decision-making, the nature of the package and its linkage with the European institutions to which the hon. Gentleman referred a very different matter. That is why I am surprised that the Single European Act and its significance are not dealt with in the two White Papers that we are considering. Only eight lines of these important White Papers refer to the Single European Act, and most of those eight relate to dates. In that respect the Government are off beam in their report about developments in the Community.

In our commitment to the Single European Act there is a commitment to European union. There is the wish for a single European market by 1992, which is frequently referred to by Conservative Members. There is the system of majority voting in the Council for a wide range of harmonisation. There is the power of the European Parliament, now officially named that, to amend legislation. Indeed, with the approval of the Commission, it is almost certain that the European Parliament will amend legislation in a way that we in this House cannot. There is the prospect of increased expenditure—up to 45 per cent. more in real terms — by 1992. There is a commitment to the doubling of the structural funds, much of which must go to the southern members of the EEC, and there is now the attempt at budgetary discipline. I was grateful to the Minister when she said that we would have another debate on the outcome of the Agriculture Ministers' meeting and possibly of the Finance Ministers' and Foreign Ministers' meetings before the meeting in Copenhagen.

One issue that I did not list under the effects of the Single European Act and building towards its success, as outlined in Cm. 101, is the possible United Kingdom rebate. I say "possible" because, under the terms of the proposal from the Commission, we will get it in 1988. In answer to a question, the right hon. Lady said that we would get something because there is a unanimous requirement that it goes on after Fontainebleau. The Treasury Minister may be in a better position to answer.

From what basis does that so-called unanimity spring? I had understood that after Fontainebleau the rebate mechanism would disappear after the end of the 1·4 per cent. ceiling. If there is agreement in Copenhagen, that ceiling will end. I can only conclude that the unanimity to which the Minister of State, Foreign and Commonwealth Office referred was our power of requiring unanimity over an increase in the budget as such, and that it is the linkage of that that provides us with the power to try to renegotiate a United Kingdom rebate. It is to the nature of that rebate that I wish to address my remarks.

In the 17th report of the Scrutiny Committee, Session 1986–87, referring to new own resources, we say: These resources would be subject to a ceiling set at 1·4 per cent. of the Community's GNP until at least 1992. The Commission also proposes replacement of the existing Fontainebleau abatement system by a 50 per cent. refund of the burden to the United Kingdom arising from the CAP. That is the mechanism on the table. The reference to 50 per cent. of the burden is taken from the Commission's proposals. I interpret that as a refund of half the difference between our CAP share and our CAP income.

That may look all right in figures, but there is a quotation in another report which shows that the situation is not as rosy as Conservative Members may think. When the Minister quoted figures, I believe that she was quoting the calculation on the GNP formula, but in relation to our own rebate the position is different. In its 19th report in the 1986–87 Session the Scrutiny Committee said: The EM"— that is the explanatory memorandum— also notes a Commission estimate that under the proposed new corrective system the United Kingdom would have received a compensatory payment in respect of 1987 of 1,016 million ecu (£701 million). This compares to a forecast in the Treasury's Public Expenditure White Paper of an abatement of £1,623 million in respect of 1987 over the existing Fontainebleau abatement system. The abatement would therefore have been £922 million less if the new mechanism had been in operation. This is the abatement. We are not talking about the GNP own resources formula. The abatement plays a large part in our net payments. In 1986, out of a payment of £4,493 million, we received only £2,219 million, with a net payment of £2,274 million. That was reduced by a rebate of £1,701 million, giving a final figure for the net contribution of £573 million. Therefore, the gearing of that final figure to the United Kingdom rebate was 3:1. The nature of our rebate mechanism and the likelihood of us getting a large sum are crucial.

I remind Conservative Members that if the agricultural problem is dealt with effectively, the disequilibrium between our contribution to the CAP and our receipts will get smaller. So far as I can see, and the Treasury Minister will agree or disagree when he replies, the rebate that we receive will also get smaller. Considered in that light, the prospects of the rebate system as proposed by the Commission are not at all bright.

I look upon that as an objective calculation that might have been made by the Select Committee on the Treasury and Civil Service if it had had an opportunity to have a go at it. I am glad to see here the Chairman of that Committee in the last Parliament — the right hon. Member for Worthing (Mr. Higgins). I think that before the election the Select Committee did some quick work on it.

What about the increase in contributions? We will have that only if the Prime Minister and the Chancellor of the Exchequer get their discipline. They may or may not get it, but let us assume that they do. The Minister of State told us this afternoon that if they get the discipline we will not agree to 1·4 per cent. GNP related and that we will not go up to a 44 per cent. increase. Perhaps they will reduce that figure to 1·2 or 1 per cent. and we will hear from the media that the Prime Minister has had a great victory because she has reduced the proposed increase. But out of that increase there is to be a doubling of the structural fund. Again the Minister has said that we do not want a doubling of the structural fund and that that is too much. The Government will have to give something. Even if discipline is achieved there will have to be some increase, if only to pay the deficit in the 1987 budget.

Photo of Mr Terence Higgins Mr Terence Higgins , Worthing

The hon. Gentleman is knowledgeable on these matters. Can he tell me why the figure of 1·4 per cent. of GNP has been selected, since that seems relevant to the argument that he is making?

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

I am grateful to the right hon. Gentleman for asking that question. It must be addressed to the Minister, or perhaps to the Commission. The figure of 1·4 per cent. rings various bells. At the moment it is 1·4 per cent. of the harmonised VAT. Someone may have thought, "Let us put up the same figure because it will sound the same even if the income is half as much again." It is a possibility— I put it no higher than that—as a statistical sleight of hand so that someone reading the Financial Times will see 1·4 per cent. and will not realise that it is related to GNP rather than to VAT. I hesitate to make an accusation against the gentlemen of the Commission, but it might have been better had they chosen another figure. If they wanted a bigger sum, 1·5 per cent. might have given them the ceiling that they wanted. I am grateful to the right hon. Gentleman for pointing out the similarity.

I turn to the Cockfield package and the single European market. Although it is not part of the Copenhagen package, that is the context in which the single European market is placed. Here I take up with alacrity the view and vision of the hon. Member for Esher. What he and other Conservative Members, particularly the hon. Member for Clwyd, North-West (Sir A. Meyer) and indeed the Minister, seemed to be saying, was, "Let us get this great market by 1992 and not only will there be a cornucopia of prosperity throughout Europe, but somehow international brotherly love and all that goes with the positive parts of the EEC will automatically flow with it". They may not have put it in exactly those words, but that at least is the implication.

Photo of Ian Taylor Ian Taylor , Esher

I certainly did not put it in those words. I am not as poetic or as inaccurate as the hon. Gentleman. Does he agree that it is estimated that about 8 per cent. of the cost of all goods traded within the Community is represented currently by internal customs barriers?

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

That may well be, but I shall tell the hon. Gentleman why I think he is being obsessively optimistic about the result of the single European market. Perhaps he will consult some of his business friends, because, although customs are a nuisance and sometimes difficult, there are many other factors in selling abroad that are important to them.

The hon. Gentleman mentioned the social benefit that would flow from the great single market. On the Order Paper there is a little paragraph which says: European Community Document No. 6476/87, Second Report from the Commission to the Council and the European Parliament on the implementation of the Commission's White Paper on the completion of the Internal Market is relevant, to our debate, and I have it here. It is a report on the Cockfield package, the harmonising directives, that will come up shortly. If the hon. Gentleman refers to annex 3, which is about documents yet to be presented, he will see the delights of VAT on passenger transport. Both newspaper articles and hon. Members have drawn attention to the prospects of VAT on articles of clothing, food and newspapers. Those may be delights for Conservative Members, but they are not delights for us. We know that such impositions are socially regressive and cannot be a tool of social policy, as even progressive Tory Members have understood in the past 50 years.

Photo of Ian Taylor Ian Taylor , Esher

The hon. Gentleman should not put words into my mouth. I did not refer specifically to tax approximation, but I am sure that ingenuity will enable us to retain the Prime Minister's pledges and still get close to the Cockfield measures. That ingenuity will be apparent in a few weeks' time.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

I recommend that the hon. Gentleman consults Hansard, as I would take the matter further. The measures in the Cockfield package are socially regressive and the House, if left to itself, would never have conceived them.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

Does the hon. Gentleman agree that if we are to achieve this great internal market and get rid of internal customs it is vital to harmonise VAT in Europe? If we do not do that, customs duties will continue to upset the business men of whom my hon. Friend the Member for Esher (Mr. Taylor) spoke.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

I fear that the hon. Gentleman is right. This brings me to the Prime Minister's policy during the election campaign. She was put in a corner on the question of VAT by my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) and she got out of it very neatly. She said, "Oh, I cannot imagine the House of Commons ever passing legislation to put VAT on children's shoes." The right hon. Lady is right, but I have news for her and for the House. The Barber Budget of 1971 did that very thing. Opposition Members tabled an amendment to exempt that item, but the Prime Minister voted it down. The matter might come before the European Court. Perhaps the House would not vote for such a proposal, but the European Court may impose it on us.

We are awaiting, on 2 December, a preliminary view of the European Court's decision on whether we have to put VAT on new buildings, water and industrial fuels. To judge from Lord Cockfield's package, domestic fuels will not be far behind.

I shall end my speech as I started, by emphasising the importance of scrutiny and power. Following the debate and scrutiny of the documents, we may be a little more aware of what is happening but I doubt whether we have much influence. I do not think that the House can change the document. We are unable to disapprove it because power has flowed away. I hope that no more power will flow from this House.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East 7:44 pm, 18th November 1987

These debates tend to be rather depressing, not just because the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) insists on speaking, but for other reasons as well. However, one thing has made this debate different and that has been the delightful maiden speech of my hon. Friend the Member for Skipton and Ripon (Mr. Curry).

I am glad to reveal that he is my representative at the European assembly, as he represents Southend. Today he spoke with great determination and honesty and those are qualities he has shown in his activities as a representative at the European assembly. I am sure that we all look forward to hearing his future contributions, especially bearing in mind his long experience of European matters. That speech cheered us up. However, the debate has been depressing because, sadly, the official speech from the Government showed that, once again, we are approaching the issue of Europe in terms of slogans and daydreams.

We heard from my right hon. Friend the Minister of State about the great opportunities that Europe provides for jobs. Why on earth do the Government not consider what is really happening? It is a sad fact that the Common Market is awash with unemployment. I challenge the Minister who is to reply to name any part of the world that has a higher rate of unemployment than the Common Market, with the exception of Tibet and Ethiopia where special circumstances exist. The Common Market's growth rate is low, the unemployment is appalling and the situation is extremely serious.

We have heard about the wonderful opportunities for trade and how Britain will benefit immensely. Again, I appeal to the Minister to consider what is happening. Before we joined the Common Market we always had a surplus in our manufacturing trade with that market, but since then we have had a growing deficit and it is now more than £10,000 million. It is not a small problem and indeed, in the long term, it could wreck Britain's recovery once our oil exports go down and our invisible exports no longer grow.

We have heard again about the wonderful oppor-tunities of the internal market as though, somehow, there are now in existence massive tariff trade barriers that will be swept away if that internal market is achieved. The Minister must be aware that, in 1973, we were given free trade. The fact that free trade has not developed has been partly because of illegal, non-tariff barriers—a problem which, unfortunately, the Common Market has been unable to resolve—and partly because we have retained certain national characteristics.

My hon. Friend the Member for Esher (Mr. Taylor) is concerned about business men who find that their costs are increased because they must stop at frontiers where their goods are examined in various ways. The only way in which it is possible to achieve the internal market which Lord Cockfield has discussed and which would enable goods to move more freely between Britain and Germany in the same way as they move between London and Glasgow would be to have complete uniformity of VAT, complete uniformity of excise duties and no statistics taken on trade between countries.

Photo of Ian Taylor Ian Taylor , Esher

It is now established that we will probably move towards tax approximation as opposed to harmonisation and exactitude. That gives room for the freedom to make certain national movements within the barriers.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

I hope that my hon. Friend does not believe that he is the only one who has read the proposals. We know exactly what is meant by approximation. It means two rates of VAT. Does it not mean the taxation of food? Does it not mean the taxation of children's clothes? It is abundantly clear that all the member states, with the exception of two, operate in such a way.

Photo of Ian Taylor Ian Taylor , Esher

My hon. Friend must not try to twist what I have said or what the Commission has said. They are matters for debate and—

Photo of Mr Ron Leighton Mr Ron Leighton , Newham North East

On a point of order, Mr. Deputy Speaker. Is it right that an hon. Member who has already spoken at considerable length should repeatedly interrupt everybody else's speech and possibly keep out other speakers?

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

It is a matter for whoever has the Floor to decide whether he will allow interventions. However, this gives me the opportunity to remind the House that there are quite a number of hon. Members still wishing to speak from both sides of the House.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

I am sure that the Government will accept that it is simply not possible to have the kind of free movement of goods between one country and another that has been suggested unless there is harmonisation of taxation and excise duties, and unless trade statistics between countries are not taken. The Cockfield package is not about moving great trade barriers because that was already guaranteed in the treaty of Rome. The Cockfield package is simply concerned with harmonisation and the introduction of measures such as the mutual recognition of firearms certificates that we discussed in the House recently. I suggest that to remove all the restrictions on firearms would be unrealistic on security grounds.

We have been told that the contribution position has improved because of Fontainebleau. In the Autumn Statement the Government's figures show that this year there will be a net contribution of £1,400 million. That is the highest figure I can remember and it is only part of the story. On top of that sum, many payments have been switched, some legally, some illegally, from the EEC to member states.

I wish that we would stop kidding ourselves and face reality. We should start putting forward positive suggestions instead of slogans such as reforming the CAP. The fact is that, once again, the Common Market is bankrupt, as it was in 1984. It is bankrupt because it has wildly overspent its legal budget. That is not a new situation. In 1984 when the Government said that they wanted binding controls on spending they were promised such controls and they were part of the agreement. We were told that the controls and restrictions were binding on the Council. When several of my hon. Friends suggested that such controls would not be binding, Ministers repeated the assurance that they were indeed binding.

My hon. Friend the Member for Esher has a great interest in these matters and I believe that he described the Delors package as a sensible proposal. I suggest to him that the problem with the last binding proposal was that there was a clause that said that, while there would be restraint, if at any time Ministers, by a majority, took the view that there were exceptional circumstances they could increase spending by any amount they liked. I draw my hon. Friend's attention specifically to what is contained in the Delors proposals. It is there in black and white. In COM (87) 430 of the Delors package, it says: The budgetary effects of exceptional circumstances shall be cancelled out within a three year period. If any overruns have not been offset by the end of this period the Commission and the Council shall assess the situation and decide how to deal with such overruns. If the Government and my hon. Friend the Member for Esher believe that the Delors package has given us spending controls, are they willing, in any circumstances, to agree to an exceptional circumstances clause? If they are, we can forget all about budgetary control and budgetary restraints; they simply will not happen.

I do not question the strength of Government statements on overspending. I do not question the strength of what they have said about the scandals of agricultural spending. However, I hope that they appreciate that there are some outside this House who are beginning to wonder whether strong words are enough. Indeed, in 1984, we heard terribly strong language—the most frightful things were said about the CAP and terrible things were said about overspending. We had wonderful speeches from virtually every Minister saying how the scandals of agricultural waste had to stop. However, when the crunch came, we handed over a 40 per cent. increase in the VAT payment in exchange for a control package that proved to be utterly worthless.

If the Government are truly concerned about overspending, why on earth have they sat round in the Council while commitments have been made that will inevitably lead to overspending? I hope that when the Minister replies he will tell me why the Government have accepted the introduction of this wonderful new Common Market principle that will get round legal limits called the "metric year." Many things have gone metric since we joined the EEC. Now, the financial year in the Common Market has gone metric. The Common Market has achieved that by asking for money one month in advance and paying out one month late. Where were the protests when that device was introduced — a device that was devised simply to get round legal spending limits that we were told were sacrosanct?

We know that the only body that really watches Common Market spending is the Court of Auditors which constantly sends out reports — which no one bothers about—saying that money is being wasted. The Minister is aware of a recent occasion when it said that the device to curb spending by switching the responsibility for butter dumping on member states was, in its words, unlawful and against the treaty of Rome. It sent a report to the Council, saying that it was unlawful. What happened at that time? Where was the voice of Britain that is concerned about overspending? The Minister is aware that the Council unanimously agreed to set the report aside and not discuss it.

Photo of Mr Tony Marlow Mr Tony Marlow , Northampton North

I am sorry to interrupt my hon. Friend. He is talking about some of the devices—legal and illegal — that have been used by the Community to extend its expenditure and sources of finance. I know that my hon. Friend is aware of most things, but is he aware that if there are differing levels of VAT between Community countries, as we develop along the lines that he described, that difference in VAT will be held as a Community resource? We are faced with a 1·4 per cent. GNP assessment, and our existing taxes to the Community, so it has up its sleeve another source of revenue which will be used to develop those policies.

Photo of Ian Taylor Ian Taylor , Esher

My hon. Friend is right, as usual. Again we will be told that if we adopt the new plan, our gross contribution will not be as great as before, and the rebates will be cleared. Again there will be an Autumn Statement saying the Government are terribly sorry but they got their sums wrong. It is not a matter of pennies. The latest estimate in January, which was itself an increase, said that this year's figure was £900 million. The revised Autumn Statement gave us £1,400 million. I suggest that an increase of that size goes far beyond a miscalculation by the splendid Treasury officials who usually take their responsibilities very seriously.

We shall probably hear slogans to justify a further movement. Last time it was quotas. Because we have quotas, we are told, agricultural spending is under control. What has happened since quotas? Production remains at 20 per cent. above the demand within the Community. Farmers have been paid substantial sums of money to go out of milk production. What has happened to the land? It has been switched from milk to other areas of production where there are chronic surpluses. That is why the so-called reduction in the butter mountain has been accompanied, as the Minister knows, by an increase in the beef mountain and the need to export beef at rock-bottom prices. The latest example is that we have sold massive amounts of beef to Brazil at 11p per lb which comes back to us as corned beef.

We were told that quotas would reduce spending. Why then, this year, despite the achievements of December 1984, are we spending £185 million per week on dumping? We are asked "What do millions matter?" Hon. Members may remember Bob Geldof who worked his guts out holding concerts all over the world to raise £100 million for the world's poor. That was a wonderful effort, and I applaud it. How would Bob Geldof feel, having raised £100 million, to know that that amount is spent by the Community every four days on dumping cheap food to destroy the world markets?

That policy is crazy. It is also an evil policy, as by dumping cheap food on the world market we destroy the prosperity of the Third world. Because food is dumped at low prices those countries do not get a decent price for their food, and the world price of food has never been so low. In addition, we spend £17 million a week on storage. Is there not some way in which we in the House of Commons can commemorate the fact that last year, for the first time in history, the Common Market managed to employ men and machines to destroy 1 million tonnes of food and fruit? That is quite an achievement, and I hope that Europeans are as ashamed of that as they should be.

Where has the progress been? Milk quotas are selling at a high price. People have now moved out of milk production and are producing other things, so that the quotas, which were a salvation last time round, have proved to be a fraud.

The new slogan is not quotas but stabilisers. Somehow, if we have stabilisers, our problems will disappear. After we take a certain amount of food into intervention, we shall not take any more. I know that the Minister is speaking on behalf of the Government and that she is an honest person. Surely she must know that the major expenditure in the Common Market is not on storage but on dumping. It is on providing massive amounts of money to export food cheaply on to the world market. If we have stabilisers, and food is not taken into intervention, will we stop export rebates for that food going abroad? The answer is no. The massive expenditure will continue. The only way in which we can solve that problem is by reducing production. That is the only thing on which we have no proposals.

We should like to know the view of the Government about other things that are happening. I am glad to say that I got a good result in the general election, as most Conservative Members did. The one point on which we were challenged constantly by the Labour party was the question, "Will you put VAT on various items?" We said, "No, don't worry. If any such proposals come before the Council of Ministers, we shall use our veto."

That was, as Sir Robert Armstrong, our splendid Secretary to the Cabinet would say, being economical with the facts. The real danger to VAT comes not from the Council of Ministers, but from the Commission going to the European Court. Will the Minister tell us, the country and our party what the blazes will happen if, in January, we lose the current case of levying VAT on house building, construction, electricity and gas for industry, water and sewerage for industry, protective clothing and footwear and news services? Will we use the veto? But we have no right to use the veto — it cannot be used against the European Court. I hope that hon. Members who are interested in these matters will look at the real danger of the Commission exploiting that fact, having found that way of forcing us to charge VAT if it wins its case, despite the views of the House of Commons or anyone else.

In the Single European Act a commitment was made by the Government to harmonise VAT and excise duties in so far as it was necessary to complete the internal market. The Government said, "Don't worry about this. We have unanimity." I should like to ask the Minister, with his legal knowledge and that of his Department, to suppose that in 1992 the Commission takes the view that we have not submitted proposals for uniformity that conform to the commitment in that clause. Is it not possible that, not under the sixth directive, but under the Single European Act, the Commission could just as readily go to the court and say that we have not carried out our obligations? I fear that we are well on the way to having our taxes determined not by the House of Commons but by the European Court.

Photo of Mr Tony Marlow Mr Tony Marlow , Northampton North

Is it not true that, whatever the European Court decides, the House of Commons will vote it down and it will not apply?

Photo of Ian Taylor Ian Taylor , Esher

I know that my hon. Friend is an intelligent person. He may have been asking that question rather simplistically to draw attention to a point. He will be aware from his long experience that it has been proved time and again that European decisions, laws and rules take precedence over the decisions of the House of Commons and, indeed, of the Government.

I have asked two specific questions of the Minister. One was about exceptional circumstances, which was important, and I hope that I shall get an answer. The second was about VAT. I hope that the Minister will also answer my final question. Does he agree that it is rubbish for us to say continually, "No more cash"—bearing in mind that the Community is bankrupt — unless we put forward a specific proposal that would reduce its spending? Unless we are prepared to put forward proposals that would lead to the reduction of spending, it is almost wrong — I could go further than that — for us to say to the Common Market that it is wildly overspending, wasting money and throwing it away, and that it must stop.

I appreciate that we cannot force the Common Market to do anything. We can only make proposals, but if in December at Copenhagen we say, "No more cash," and leave it at that, we know that six months later, as happened in December 1984, eventually we shall go along with it because the money has been spent and the commitments have been made. The only way in which we can say justifiably, "No more money," is if, at the same time, we present a proposal and say how it should be done.

There is no way in which the reform of the CAP will be agreed by all member states. There is no proposal that will not hit one country harder than another. We know the strength of agriculture lobbies. We could contain the spending by proposing repatriation of agriculture policies to member states, which would take away the burden of agriculture from the EEC. We could let each member state try to resolve its agriculture problems within its own national frontiers. Some people will say that if one takes away the only common policy that the Common Market has, one is giving a vote of no confidence to the Common Market. Therefore, could we not simply say that our proposal is that every year the Council of Ministers should declare a percentage reduction in agriculture production for every commodity to bring our demand and supply into stability? For example, we might say that wheat production should go down by 20 per cent. and sugar production should go down by 15 per cent. Every member state would have to implement that proposal nationally.

The difficult decisions that have to be made could be made far more easily by member states. We must get rid of surplus production. No present proposal achieves that. If we do not tell the Community how we think its spending should be cut, some member states might wonder whether we mean business when we say, "No more spending."

Photo of John Taylor John Taylor , Strangford 8:07 pm, 18th November 1987

For the past two years, it has been unusual for right hon. and hon. Members on the Unionist Bench to pay tribute to the Conservative party. I find myself in the rare position of having to applaud it in two respects. First, I pay tribute to the maiden speech by the hon. Member for Skipton and Ripon (Mr. Curry). I have known him for some nine years as a colleague in Strasbourg. He spoke with great expertise today. I did not agree with much of what he said, but he spoke with a background of great knowledge and understanding of the workings of the Community and his presence here will be a great addition to European debates in the House. The hon. Gentleman is a distinguished former chairman of the Agriculture Committee of the European Parliament, and was also rapporteur of the EC budget in the European Parliament. He has a great store of knowledge.

I should also like to pay tribute to the Government themselves because in the debate we are, after all, referring to the past year, during which period Her Majesty's Government were president of the European Community. They served the nation well in those six months, in their regular appearances at the three institutions — the Commission, the Council and the European Parliament. They were regularly at all the committee meetings of the European Parliament. I should especially like to pay tribute to the Minister of State, who was there almost every week batting for the United Kingdom and showing the rest of Europe that the United Kingdom was keen in its interest in developing Europe.

However, debates on the European Community often seem to be about discipline. The word "discipline" seems to be repeated in every other sentence. I thought that, in the debate following the Fontainebleau agreement, we were assured that the matters of the United Kingdom rebate and the own resources for the European Community were settled and there would not be many problems for the United Kingdom or the European budget in the foreseeable future. Tonight, within three years of that event, we are recognising what some of us said was inevitable—that the European budget would be out of control, and that the United Kingdom's contribution to the European budget would have to be increased.

Why has the European budget gone out of control? One of the reasons is not under our control or that of the European Community—the factor of the declining value of the American dollar. So long as the United States dollar declines, the finances of the European Community will be adversely affected. The second major factor is the continuing expenditure on agriculture. The Community has made some efforts on beef and milk, but we urge the Government to bring as much pressure as possible to bear on the Council of Ministers urgently to make a decision to curtail grain production in the Community.

Will the Paymaster General let us know whether the Government have had any change of position on the proposal for an oils and fats tax? If not, we need to know what the Government's alternative proposals are to curtail the production of oil. Olive oil is looming as the next major threat to the European budget and to agriculture expenditure in the Community. Especially in Spain, the production of olive oil is increasing daily, and we need proposals to bring it under control.

Of course, the Community is now changing its system of own resources. As hon. Members have already said, there will now be a fourth basis to finance the budget: the introduction of a system based on the gross national product of each member nation. It is not possible at this stage for the Government to say whether that will mean an increase in the United Kingdom's net contribution to the European budget. We do not yet know the final details, but I suspect—I want to hear the Minister's opinion on this — that the reason why we are leaving the system under which the 1·4 per cent. VAT was the main own resources contributor and introducing a new factor is that that will bring about an increase in the percentage contribution that the United Kingdom makes to the Community's total budget. It is not the total amount that counts, but the percentage that each nation contributes to the Community's budget. That is why the Community is changing the system now. Once again, we shall find ourselves caught in the trap, contributing an increasing share of the European budget.

I was surprised that the right hon Member for Wallasey (Mrs. Chalker) never mentioned the European monetary system. I notice that, in the first six-monthly report, that subject is dismissed in two lines, and in the second report it is dismissed in five. On neither occasion is any reference made to the United Kingdom's membership of the exchange rate mechanism. Not every hon. Member agrees that the United Kingdom should join the European monetary system ; not everyone agrees that that is good for the United Kingdom.

It is all very well for Conservative Members to believe confidently that, as there is a Conservative Government now, exchange rates will be reasonably static. However, we shall not always have a Conservative Government who will keep exchange rates static. There might be a period when there was massive public expenditure and a run on the pound. If that happened, and the United Kingdom was a member of the European monetary system and had to hold the value of the pound sterling, there would be only one way of achieving that—by increasing interest rates.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

You can change the value.

Photo of John Taylor John Taylor , Strangford

Yes, but not every week — only in periods.

So the objective must be to retain the value of the pound sterling. The only way to do that is by increasing interest rates. I understand that people who are involved in industry and the export business want a static value for the pound sterling ; but many others who are in employment, business, and commerce, who are not exporting but are employing people, and who have overdrafts at the bank, might be caught if interest rates went up because of our membership of the EMS. That would be bad news for many people in the United Kingdom.

Apart from economic matters, I want to deal briefly with some of the political issues that are not mentioned in the reports. During their presidency of the European community, the Government initiated the normalisation of relations between the Community and Turkey. There has certainly been an improvement in Turkish human rights and democracy. It is hard to imagine a Europe without Turkey, which has been part of European history —although, at times, not with us. Luckily for England, Turkey is even in the European football competition.

Photo of John Taylor John Taylor , Strangford

Indeed. More recently, Turkey has been president of the assembly of the Council of Europe. It has played a major role in NATO for many years, and I welcome the fact that the United Kingdom's presidency initiated the normalisation of relations with Turkey. I hope that they continue to improve and that Turkey will join the rest of Europe in the Community in the foreseeable future.

This is not to say that we should avoid other countries. There has been too much silence on the issue of Norway. Europe would benefit by having Norway in the Community.

We have had an association agreement with Cyprus. Clause 5 of that agreement specifically states that both communities in Cyprus must benefit from their relations with the EEC. The agreement was initiated before the coup in Cyprus, the subsequent arrival of Turkish troops and the consequent division of that island — a tragedy that has existed since 1974. Therefore, much of the terminology of the agreement is no longer relevant to the island.

Only this year, the Government agreed with the rest of the Community to have a customs union between the European Community and Cyprus. Can the Paymaster General explain how the Community can have a customs union with Cyprus when there is not even a customs union in the island? There is no trade between the south and the north—there is a total barrier. So how can the Turkish Cypriots and the Greek Cypriots benefit in the way in which the original association agreement said that they must? One group should not benefit at the expense of the other.

A subject that has been on the horizon — rather dangerously — for the past six months is Gibraltar. Only last week, about 80 per cent. of the population took part in a major demonstration against an offical from Her Majesty's Government who was visiting Gibraltar. The issue has been raised in the present proposals for airline flights in Europe. Spain has lodged an objection because the Gibraltar airfield is involved. It seems to me that the Government let down the United Kingdom at the time when Spain was negotiating membership of the European Community. The Foreign Office did not have the foresight to see that Gibraltar would be a sensitive problem and did not ensure that Spain's terms of membership would not allow it to raise the constitutional problem of Gibraltar in the EEC.

Let us remember that Gibraltar has been a member of the Community since 1973—long before Spain, which was then a dictatorship, joined. At the first opportunity, Spain objected to Gibraltar being included in the new proposals for flights in Europe. One proposal that the Government are apparently making to resolve this EC dispute is that the airfields should be used jointly by Spain and the United Kingdom, although not controlled by both countries. There are parallels for that. At the Basle-Mulhouse airport passengers can go from the arrival lounge into France through the door at one end, and by the door at the other end they can go into Switzerland. The system there works happily because the two countries recognise each other and there is no constitutional problem.

Gibraltar is different, because one country is claiming jurisdiction over it against the wishes of the people there. Therefore, it would be wrong to enter into an arrangement similar to the one that operates on the French-Swiss border while there is this constitutional difficulty. Certainly it would be bad for the people of Gibraltar, who would misunderstand such an arrangement and would suspect that it was the first sign of the United Kingdom yielding on the question of their constitutional position. Of course it is not unknown for the Government to change their position on the constitution of other territories friendly to Her Majesty's Government.

I should like briefly to refer to one or two matters about my own Province of Northern Ireland. I underline as strongly as I can the thrust of the speech about shipbuilding by the right hon. Member for Glasgow, Govan (Mr. Millan). The shipbuilding industry in the United Kingdom, and, indeed, in Europe, is under great threat. It has declined greatly and there is much unemployment in the shipbuilding regions of Britain. We are worried about the fact that the European Community reduced the allowable grant to 28 per cent. We in the shipbuilding areas feel that European shipbuilding is facing unfair competition from the far east — from Korea, Taiwan and Japan.

While investigations are being carried out into the hidden support that is given to far eastern shipyards, it is unfair to cripple European shipyards. We ask the Government to ensure that there is no further reduction in the foreseeable future, until a full inquiry is carried out into the hidden subsidies given to far eastern shipyards.

Our Merchant Navy has already been reduced too much and it is important that we maintain our shipbuilding industry so that, when fair play exists, our yards can compete on equal terms.

On the matter of agricultural prices, I ask the Government to look carefully at the problems on the Irish border between the United Kingdom and the Republic of Ireland. Too often, when agricultural prices—

Photo of Mr Stuart Holland Mr Stuart Holland , Vauxhall

On a point of order. Mr. Deputy Speaker. You have been quite tolerant about a range of issues from Turkey joining the Common Market to customs facilities at Gibraltar. Do we have to get the Northern Ireland border question into this debate, which is supposed to be about the EEC budget?

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

A wide range of topics is in order on the series of papers that we are discussing, and I am sure that the right hon. Member for Strangford (Mr. Taylor) will resist the temptation to go more than incidentally down the road that he is now on.

Photo of John Taylor John Taylor , Strangford

I am afraid that the hon. Member for Vauxhall (Mr. Holland) does not understand what I am speaking about. Monetary compensatory amounts are a vital issue in the European Community and on the Irish border they operate very badly for the United Kingdom. I am not talking about terrorism or anything like that— far from it. I am talking about unfair competition, in that the MCAs are operated in such a way that cattle and other animals move from plants in Northern Ireland into the Republic of Ireland. As a result, workers in Belfast lose their jobs because of a European Community system. I shall not go into the matter in detail, but I must tell the Government that too often when MCAs are being renegotiated each year they forget about this problem on the Irish border, and overnight many thousands of people are thrown out of jobs. I ask the Government not to ignore this matter, because there is a feeling in Dublin that the Irish Goverment get away with murder every year when this matter is discussed.

During the last six months, the Dublin Government took a decision to restrict the movement of shoppers from the Republic of Ireland to the United Kingdom. That was done without notifying the EC, and in this debate the Minister did not mention it. In their April Budget, the Irish Government ruled that such shoppers had to spend 48 hours in the United Kingdom. The EC Commission has advised the Irish Government that this is contrary to European Community law and that if the Irish Government proceed further they could be brought to the European Court in Luxembourg. However, that would take several years, and in the meantime shops and communities along the border are being severely hit by this budgetary decision.

It is not only hitting shops and business men but is unfair, because the balance of trade in the island of Ireland is in favour of the Republic. Therefore, there was no necessity for this decision and I ask the Government to do all they can to bring pressure to bear on the Irish Government to reverse their decision and not to let it drag on for another two years until it reaches the court in Luxembourg.

Hon. Members have spoken about VAT on things such as food and children's clothes. Given that the internal market will come about in 1992, it is a logical conclusion that at some stage there will be standardisation of VAT rates throughout the Community. While the Government may now say that they will not allow VAT on food and on children's clothes, in the long term they will have no choice in the matter. That is because, as soon as we get uniform rates, they will have to be applied. There is a decision pending on new building, and the Government will eventually have to give in if the court rules against them. The same thing will happen about VAT on food. Even if the Government and this Parliament vote against it, the European Court can overrule us and impose it. That is the reality of what the Common Market is all about. We have to abide by the rules.

The Ulster Unionists believe in co-operation within Europe and believe that it is important to have a market of 320 million people. However, we do not think that, in order to have that market, it is necessary for the House and Parliament to surrender powers drip by drip, day by day, to another institution. That is what is happening and the more powers we give to the European Parliament and the Community the fewer powers we will have in this Parliament, and at the end of the day we will have to abide by the decisions of the European Court. For that reason, I and my hon. Friends will vote against the Government.

Photo of Mr Terence Higgins Mr Terence Higgins , Worthing 8:27 pm, 18th November 1987

I begin by expressing my appreciation to the members of the Select Committee on European Legislation chaired by the hon. Member for Newham, South (Mr. Spearing). Undoubtedly, the vast mass of papers that we are debating was carefully analysed by the Committee in some of its reports. That is a great advantage to the House. The hon. Member was kind enough to speak about the Select Committee on the Treasury that operated in the previous Parliament. It is a matter of great regret that that Committee has not yet been established in this Parliament. The evidence taken by that Committee in the last Parliament was illuminating, particularly at the time of the Fontainebleau agreement. and the evidence that it took about value added tax was important.

I am sure that my right hon. Friend the Paymaster General, who I am glad to see on the Front Bench, will agree that many of the matters before us cannot be clarified in a debate such as this. That requires prolonged examination of Ministers, because it enables a Committee to get to the bottom of the matter. It can then provide the House with the information that it needs if it is to do its job properly. Therefore, in this debate we are under something of a handicap.

The right hon. Member for Strangford (Mr. Taylor) and a number of other hon. Members talked about value added tax. The Treasury Select Committee in the previous Parliament took the view that harmonisation of value added tax was not necessary to secure an effective unified market. That is something of an over-simplification, but in broad terms that is the conclusion that we reached. If we are to go down the route of harmonisation—I think that there is a distinction, which the right hon. Member for Strangford blurred, between those items that may be covered by the court case and the broader issue that is not covered by the present case, where we shall still have a veto —we ought to harmonise on the British basis.

I am not totally unprejudiced in saying that, because I had the somewhat thankless task of steering the original VAT legislation through the House. It was made somewhat easier by the fact that we abolished selective employment tax and purchase tax at the same time. None the less, what we devised was a system with a single positive rate and with a zero rating for the most sensitive items. That is a sensible way of proceeding.

I feel bound to add that, throughout that period, I was advised that that was a sensible way of proceeding by Mr. Cockfield, as he then was, because he was then my senior outside adviser in the Treasury. What a falling off it is ; the arguments that he put forward then were, and remain, convincing. Why he is now going back to double rates and all that sort of rubbish, I cannot imagine. It has been a basic principle of Conservative tax philosophy that one should tax people on their income as appropriate. but then allow them to spend it as they see fit without gross distortions by multiple tax rates and all the sorts of things we got rid of when we abolished purchase tax.

I hope that the members of the Commission, on reflection, will come to the conclusion that, if it is necessary to harmonise—I do not accept that it is—we should harmonise on a sensible basis, with a zero rating for those items that are most sensitive. The calculation of the VAT contribution is not relevant—it never was—because that has always been on a notional basis that made allowance for the fact that rates and zero ratings were in existence.

Other hon. Members have spoken about own resources. I do not doubt for one moment the good intentions of the Prime Minister, the Minister of State, Foreign and Commonwealth Office or my hon. Friend the Paymaster General who is to close the debate this evening. I am sure that we all understand the need for effective budgetary discipline, but we also need to recall that, when the House agreed to increase the limit from 1 per cent. of VAT to 1·4 per cent. of VAT, it clearly did so on the understanding that it would be in exchange for effective budgetary discipline. It would be quite absurd if we now agreed to a further increase in own resources to get effective budgetary discipline. We have already paid that price.

I am sad that my right hon. Friend the Prime Minister was mistaken in her view that, because a number of other countries — Germany in particular, and France — had also become net contributors, that would be the most effective discipline that we could think of. It has not happened and it will not happen now unless we stand firm. It is tremendously important that we should do so.

I hope that the Minister, when replying to the debate, will clear up the mystery that I raised with the hon. Member for Newham, South (Mr. Spearing) in my intervention. We all know that the 1·4 per cent. of VAT was increased from 1 per cent. of VAT, so why on earth are we talking about 1·4 per cent. of gross national product, except that that is the number that we first thought of—or, more accurately, the number that we last thought of? I cannot see why it should suddenly be 1·4 per cent. of GNP. What is clear is that it will be a massive increase in own resources. After all those various adjustments are made, even if our contributions reflect a sort of refurbished rebate system, the absolute amount will still go up substantially. I have yet to hear why the resources going to the Community should go up. We received no real answer why the proportion went up from 1 per cent. to 1·4 per cent. of VAT. We have a proposal for a huge increase in resources, but we have had no explanation why that should be so.

I do not think that any hon. Member who took part in the debate on the increase from 1 per cent. to 1·4 per cent., when we were told that the whole thing would be reviewed by the Commission, thought that it would come up with the sort of extravagant proposal that it has come up with. One can say that it might soon be up to 1·6 or 1·8 per cent. We did not expect an increase of the sort proposed, with a totally different system related to gross national product.

I fear that my right hon. Friend the Minister of State, Foreign and Commonwealth Office is deluding herself. She said a number of clear things about the fact that what is proposed is not acceptable, but she did not indicate what I believe to be the sensible answer, that there should be no increase at all in own resources. I believe that she is deluding herself in thinking that, because we are making some improvements in agriculture, that somehow represents effective control.

In such negotiations, the problem is that, if one thinks that one can get a better deal than that first put forward, one thinks that that is success. That is not true. With all the various manoeuvres and devices on the agricultural side—I hope that the Minister will tell me if I am wrong —at the end of the day there is no device for preventing the Community from spending money that it does not have. That has been the constant problem — that one puts a limit on own resources but one does not put a limit on how much the Community can spend because, particularly on agriculture, it is open-ended.

The detail of the proposals is spelt out in the annex to the Select Committee's report: The agricultural allocation shall be respected each year. However, if the allocation is exceeded in the course of a financial year, the overrun shall be offset by equivalent savings over the following two years. We have heard that argument before. If there is an overspend and it is possible to claw it back, why can we not claw back the overspend that we already have? We have not heard how that is to be done. It is interesting that in the next paragraph we find that, if there is an underspend, it does not suddenly come back the other way: If an annual allocation is not fully used, the margin available may be drawn on in a subsequent financial year. Whether it is needed or not, it goes into the next year. Frankly, by no stretch of the imagination is that effective financial discipline.

It is recognised that much of the problem in agriculture results from changes in the exchange rate between the ecu and the dollar. That really means a degree of protection and special treatment for agriculture. However, we do not give that special treatment to the British shoe industry, the soap industry or any other industry. They do not suddenly find special provisions to protect them from changes in the exchange rate. Therefore, why should we say that, whatever happens to the exchange rate, it will affect every industry except agriculture? The Government believe in the market mechanism and the way in which prices reflect events and bring supply and demand into balance. Therefore, it seems to me that the proposal is inconsistent with the philosophy that the Conservative party ought to adopt.

It will be immensely difficult for my right hon. Friend the Prime Minister to go to the summit and say no as she did at the last summit, subject to some abuse. It is not too difficult to go to that sort of summit, even if one is the only person sticking out for a certain thing, to say no. However, it is difficult, if one is outnumbered, to say no at subsequent summits. The debate is important today because I think that the House must reinforce the Prime Minister in her determination to get effective budgetary discipline, I hope with no increase in own resources, because, as I have already said, we have already paid the price for effective budgetary discipline. We should not be saying that, as a guarantee, there should be yet more resources and a massive increase of the kind put forward in the proposals.

I hope, therefore, that my right hon. Friend the Prime Minister, having been disappointed by the outcome of the Fontainebleau agreement—which came as no surprise to the Treasury and Civil Service Select Committee, but was a surprise, regrettably, to the Government — will appreciate the lesson that is to be learned and strike the matter at a fundamental level and produce an alternative proposal which will give us effective budgetary discipline without an increase in resources to the Community. That should be balanced against the many other claims on resources in this country which must be met from our financial resources. It is very important to bear that in mind.

Photo of Mr Ron Leighton Mr Ron Leighton , Newham North East 8:40 pm, 18th November 1987

It is a great pleasure to follow the right hon. Member for Worthing (Mr. Higgins). The House has been indebted to the work of the Treasury and Civil Service Select Committee over the years, and for the enlightenment that it has given us on many of these complex matters. The sooner that that Select Committee is re-established and able to examine some of the issues that we have debated tonight, the better.

The Common Market is again in a financial mess, and again in crisis. Once again to use the words of the Scrutiny Committee, it is on the "brink of bankruptcy". The cost of the common agricultural policy has again increased and again yet more money is being demanded from us. So what's new? It was ever thus, except that it has now got worse. The Common Market demands more money every year. That is the nature of the beast. It was predictable and was predicted. I predicted in 1984 at the time of Fontainebleau that this would happen. We all remember the ballyhoo at the time and the great victory that we were told had been achieved and would solve the problem because it would impose budget discipline. Of course, that was not so. Fontainebleau has proved a complete and utter failure in every way.

The cost of the CAP has gone further out of control. Since Fontainebleau, Britain's net payments position has become worse. We are paying more now; indeed we are paying twice as much this year as we were then. Fontainebleau was an utter disaster. Of course, there was the famous clause which stated that account should be taken of "exceptional, or aberrant circumstances". However, the whole of the EEC is an aberrant circumstance. It was obvious that such circumstances would occur every year, and that has happened. It is in the nature of the CAP that it cannot be controlled. The CAP is demand led and open-ended and no one knows what it will cost each year until the end of that year. It depends on all manner of intangibles—for example, the weather and the strength of the dollar. Previously, when we imported food from the world market, a cheap dollar meant cheap food and we benefited. Now, a cheap dollar increases our costs because it costs us more to dump the food surpluses on the world market.

That is a crazy system and very much against the British interest and damaging to us. The truth is—and unless we grasp this simple fact we will never get anywhere—the CAP cannot be reformed ; it can only be scrapped. It is impossible to impose budget discipline on the CAP. People have been chattering for years about that but all to no avail. Each year the costs go up and they are rising again this year. To talk of a thorough reform of CAP is chasing a rainbow and a chimera.

The Heads of State at Fontainebleau did not understand that. They did not understand that the EEC budget is not really a budget at all. The right hon. Member for Worthing was an excellent Treasury Minister and he will understand that in the United Kingdom the Treasury and the Chancellor decide the Budget and they tell the Departments what they can spend. That is the position with which we are familiar. When we use the word "budget", we understand what we are talking about. However, it is not like that in the EEC. There are several ministerial councils and they, particularly the Council of Agriculture Ministers, decide what they are going to do and spend. All the obligations are laid end to end and the Finance Ministers come along and I understand that they take about 30 minutes or so to agree to foot the bill. What they fancifully call a budget is really an estimate. It is a guess at what it will all cost. So-called "budget discipline" is a meaningless phrase.

The EEC budget is not a disciplinary measure. Apparently the Heads of State thought that if a figure was included in the budget, that meant something. However, that was in no way legally enforceable. Indeed, it works exactly the other way round in the EEC; it is the intervention payments which are legally enforceable. They are automatic and they take priority. If they are not paid, the producers can take their Ministers to court.

The Finance Ministers in the EEC are powerless to impose discipline. Often the Finance Ministers have no idea and are not consulted on what the Agriculture Council decides. Their sole role is to pick up the tab on our behalf. The only way to alter that is to scrap the market regulations of the CAP. Every time that that is mentioned, we are told that they are sacrosanct, they are the ark of the covenant and they are what allegedly holds the EEC together. However, unless they are scrapped, we shall never get budget discipline. Of course, we should scrap them.

Why not scrap intervention altogether? Why should not producers produce for consumers, demand and markets? Why should they produce for something called "intervention"? Why should we not have a healthy dose of market forces? Why should we not have some free trade and not this rigid protection? Recently—

Photo of Mr Ron Leighton Mr Ron Leighton , Newham North East

Not at the moment.

Recently, in the crisis over the sale of BP, the House had a discussion about underwriters. Controversially the Government have underwritten the underwriters. However, we do that all the time in the CAP. The state underwrites the whole crazy shooting match. Basically, whatever is produced, whether it is needed or not, it is underwritten by the taxpayer. It is not even as if that incredible largesse goes to the farmers. Conservative Members who represent farmers are aware that most farmers are becoming worse off. Some 50 per cent. of the money goes uselessly on storage costs, export subsidies and the depreciation of stocks. Depreciation this year costs 1·5 million ecu. Vast sums are wasted to pay for past stocks while the system piles up even bigger stocks, especially, as we have heard tonight, in cereals. There is no way forward by further chatter about the reform of the CAP. if we do not learn that experience shows us that that has failed, we will not learn anything.

I believe that if other countries want that system, that is their business. However, if we are serious about ending the appalling waste of our money, we must extricate ourselves from the crazy system and return our agriculture to the jurisdiction of this House.

It has always been common ground that money which can be better spent at the national level should be spent there. Can anyone claim that the vast amount spent: on agriculture is spent more effectively in the EEC than it could be at home? Can anyone say that we could not devise a better system than the CAP? The only rational policy is to repatriate agriculture to Westminster. That is the only realistic approach if we are serious. All else is doomed to failure and disappointment.

What is the Government's policy? They say that they will not pay more until effective budget control is established. However, as the right hon. Member for Worthing explained, that is exactly what they told us in 1984. They were kidded that that was going to happen. Therefore, they increased our VAT contribution by 40 per cent. from 1 per cent. to 1·4 per cent. However, although we paid, we did not get what we paid for. We did not get the budget discipline.

Now we are offering to pay again, but should we pay twice for the same thing—and, I would wager, still not get it? In addition, if the CAP were really reformed, and financial discipline imposed, it would not need extra money. Why encourage the monster by throwing more money at it? That is self-defeating. If we continue to throw more money at it, that will be a guarantee of further slippage and failure. Surely we know that any extra money would simply disappear down the black hole of the CAP. We should not waste an extra penny.

I turn to what is happening now and to the Commission's proposals in the documents that we are considering. The Commission has performed extraordinary contortions in its attempts to balance the books. The Scrutiny Committee stated: It has sunk into a morass of budgetary malpractices". It has indulged in prodigious creative accountancy that would have left a British company or local authority in court. Incidentally, it has incurred the condemnation of the European Court of Auditors. The Commission has invented something called a "negative reserve." It has changed the system of agricultural payments from payments in advance to payments two months in arrears because it ran out of money. The effect of that is to save two months' payments, which means that this year's budget will pay for only 10 months, not for 12. The Commission has postponed until the following year payments to member states for the cost of collecting customs duties. That conjuring trick is a way of taking money from the future.

The Commission has resorted to regular inter-governmental agreements to raise extra money outside the official budget. That has had the effect of Britain paying partly for its own rebate. By those tricks the Commission has sought to balance the books. It has used methods to which no auditor would have agreed. To pay for this year's excesses the EEC would have needed 1·7 per cent. of VAT and not the 1·4 per cent. that was agreed at Fontainbleau.

What of the future? The Commission's proposals are outlined in Cmnd. (87)100 and Cmnd. (87)101, the so-called Delors package. The main ingredient is more money, lots more money, and lots more money from Britain. Incidentally, the House should be reminded that at the moment nine countries pay nothing in net terms. It is a funny club in which only three members pay anything and in which we are the second biggest payer, even after our rebates. I studied the Paymaster General's evidence to the House of Lords Select Committee and commend him on it. He is appropriately described as the "paymaster" because he is the paymaster of Europe. We are the second biggest payer. Most countries do not pay anything. However, the Paymaster General went along and coughed up vast amounts of our money. I should like to ask him why we pay anything at all because, after all, we are one of the poorer countries. Why should we not be a net beneficiary like the other nine? But no, according to the documents, lots more money is demanded from Britain.

Let us consider Cmnd. (87) 101 which proposes not only more money but new taxes. Elements of a country's GDP that are not subject to VAT arc to be taxed. There is also to be another entirely new tax, as yet unspecified. There is to be an end to the 10 per cent. refund which is the cost of collecting duties and levies. The Commission also wants to change the way in which our rebate is calculated. As the Paymaster General knows, the Treasury gave evidence to the House of Lords Select Committee which calculated that that would give us only half of what we get now, so our rebate would be cut in half.

The next point is most significant and was raised by the right hon. Member for Worthing. The Commission wants to substitute for 1·4 per cent. of VAT 1·4 per cent. of GNP. If one reads that quickly, one might think that it is the same. However, the Minister of State, Foreign and Commonwealth Office told the House of Lords Select Committee that that would be equivalent to 2·25 per cent. of VAT, compared with the present 1·4 per cent. That is an increase of roughly 50 per cent.

The Treasury also told the House of Lords Select Committee — again I must commend the Paymaster General for the full and frank way in which he answered questions— that the proposed change would leave this country about £900 million worse off. Knowing the Common Market as we do, we know that, with a little slippage, about £1 billion more would be required from this country. That is the proposition before us and that is the amount that the Prime Minister has been asked to pay when she goes to Copenhagen.

The Minister of State, Department of Trade and Industry has recently explained to the House why he would not commit us to paying another £200 million to the European space project, although we should have got something back from that. He said that that sum of money was equivalent to 12 National Health Service hospitals and that it was as much as we spend on text-books for all our secondary schools. He asked how we could consider spending that £200 million. In that case, what are we to say about this colossal and stupendous sum of £1 billion? We cannot possibly contemplate throwing that money down the drain.

On agriculture, the Commission documents state that the plans would reduce agricultural spending as a percentage of the budget, not by reducing agricultural spending — that would increase — but by doubling expenditure on everything else. Agriculture is saying, "If all of you race forward faster than I do, it will look as if I am falling back." That is the only way in which there would be a reduction on agriculture spending as a percentage of the budget. I am sure that the Paymaster General would agree that that would be an extremely expensive conjuring trick.

The only possible attitude that this House and the Government can take is "not a single penny more"—not a single pfennig or centime — nothing. We want a reduction, not an increase. We do not want to pour more money down that black hole. We have had enough and it is time to call a halt. What action will the Government take? We have had posturing and position-taking, but are the Government prepared to take the right action?

When the Prime Minister returned from the last summit, I caused some consternation on the Opposition Benches by saying that I gave the Prime Minister eight out of 10. I said that she had lost two points. The first was because she had returned from the summit at Fontainebleau saying that she had solved the problem. She had not and she lost a point for that. She lost the second point because, after the initial bluster that we normally get, the Prime Minister usually gives way. She is normally kidded. I said then that the Prime Minister could retrieve that point if she resisted and stuck to what she was saying, and carried out the general views that have been expressed in the House from both Front and Back Benches and said, "Not another penny." I hope that that is what we get. If the Prime Minister comes back having done that, I shall give her 10 out of 10.

Of course, we want co-operation with the European nations, but we will never get it satisfactorily on the basis of the treaty of Rome. It will have to be changed, but in the interim, at Copenhagen, we must say no to more money for the Common Market.

Photo of Michael Fallon Michael Fallon , Darlington 8:58 pm, 18th November 1987

Opposition speeches in debates on the European Community seem to vary. Some Opposition Members dislike the European Community altogether. Some do not like spending in some areas, but want more in others. They are keen on Community spending on the social and regional funds. A third category of Opposition Members like Community spending, but want to repatriate it. They want the same amount of Community spending to be organised and controlled by Whitehall. A fourth category would like some areas of Community spending to be abolished and given over to market forces. It is perhaps a unique tribute to the hon. Member for Newham, North-East (Mr. Leighton) that he embodies all four elements.

Debates on the EC are often criticised as being predictable. But they are predictable, by their nature, because they deal with the six-monthly White Papers and are held at odd times during the year. On this occasion, more than 12 months have elapsed since the beginning of the period covered by the first six-monthly White Paper that we are debating tonight. The debates bear no relation to the decision-making processes of the Community. I should like those who are in charge of our procedures— the Scrutiny Committee, for example—to give some more thought to the matter. Perhaps instead of having post facto debates on the six-monthly White Papers we should relate such reviews of Community activities to the European Council and debate what is on the Council agenda. Perhaps we should debate such matters before the Prime Minister and the Foreign Secretary attend European Council meetings. Indeed, we could debate them after the event, just as we debate the Autumn Statement after it has been made. Perhaps we should have these debates on a more fixed agenda.

The most predictable thing of all is the attitude of the Opposition, which contains the four strands that I mentioned. Conservative Members are entitled to comment on the policy of the Opposition Front Bench. For four or five years we have had to put up with the problem that if the Prime Minister does reasonably well at a European Council, the Opposition say that she has not done well enough. If she does very well, they are still disappointed and will nit-pick with the small print.

That is how we should consider the speech of the hon. Member for Hamilton (Mr. Robertson). He talked about penny-pinching short-sightedness. Indeed, he entertained us with many such phrases. He did not talk about the internal market and the huge opportunities for our great industrial companies in that market of 300 million people. He used the words "penny-pinching short-sightedness" in terms of European space policy. He said that we should spend more in Geneva — which is outside the Community — on our subscription to a bunch of European scientists.

I tried to draw the hon. Gentleman's attention to the inconsistency of his amendment. It bemoans the lack of budgetary discipline in the Community, which was a fair point for him to make — indeed, many of my hon. Friends made similar points during the speech of my right hon. Friend the Minister of State, Foreign and Commonwealth Office — but he went on to call for additional Community spending on many different things; joint action on this, that and the other; joint ventures on steel and shipbuilding.

It is time that the Opposition set out their policy on the European Community budget. It is not enough to say, "We will watch what happens when the Prime Minister goes to Copenhagen." The play is the thing with the Opposition. They are perennial spectators in the Community debate, but they will have to come up with a policy on the Community budget. Either the hon. Member for Hamilton believes— as I suggested he should—that finance determines expenditure, or he believes that expenditure should determine finance. Of course, he believes the former at home when he is arguing in domestic terms and trying to win an election—we noted his visit to Darlington during the general election campaign— but he believes the latter when he is talking about the United States. I feel that it is time the Opposition decided whether they are at home or abroad when it comes to the European Community. Are they playing here, or are they playing away?

If Opposition Members believe in budgetary discipline in the United States, they should believe in budgetary discipline in the Community. Some of them do. Some of them clearly believe that my right hon. Friend the Prime Minister is right. The hon. Member for Hamilton clearly believes that my right hon. Friend is right to go on fighting her corner and arguing that further resources should not be released until we have effective controls over budget discipline. Other Opposition Members, however, do not believe that. The hon. Gentleman's hon. Friends continue to argue for increased expenditure for social and regional purposes, but he will have to sort that out with them.

The hon. Gentleman gave us only one indication of Labour's budgetary policy. He implied — in answer, I think, to my intervention—that he was satisfied with the present level of expenditure, but would like to reform the agricultural policy to reallocate some of that expenditure to other areas. If that is not the hon. Gentleman's policy, I hope that he will be given an opportunity to intervene and correct me. He seemed to imply that he was happy with the present ceiling on Community expenditure and simply wanted to reallocate that expenditure.

Photo of Mr George Robertson Mr George Robertson , Hamilton

If it will help to truncate the hon. Gentleman's speech, which keeps laboriously going over the same ground, let me make it clear that I said nothing of the sort. I am saying that there is plenty of scope within the existing European budget, or with a lower ceiling, to accommodate many desirable developments in the areas that I have identified. That can easily be achieved with the discipline of which we are all in favour, and which I advocated in my speech.

Photo of Michael Fallon Michael Fallon , Darlington

I take it from the hon. Gentleman's intervention that he wants a lower level of Community expenditure than we have at present, and, therefore, a much lower level than the Commission is proposing. However, he has not told us how he would make it possible to increase expenditure where he wishes to increase it. He has simply uttered the platitude that he wants the agricultural policy to be reformed. He has not said whether he is prepared to support the various policies for which we have been arguing with the Commission, and now with some of the other member states—not all of them led by Centre-right Governments—for continuing restraints on price, for stabilisers in areas that are subject to over-production and for further measures to take agricultural land out of production altogether. The hon. Gentleman has given us no indication of the extent to which he supports Her Majesty's Government in the achievement of those policies.

There will be a final speech from the Opposition Front Bench. The Opposition spokesman will therefore have an opportunity to set out that budget policy and to explain exactly what savings will be necessary, under all the necessary budgetary headings, to reduce the present level of Community spending. That would he a service to the House if the hon. Member for Hamilton is to continue to contribute the same old line in these European Community debates.

Let me refer briefly to a second aspect — the opportunities presented by the creation of the internal market. These are points, not for the Opposition Front Bench, but for my hon. Friends. I congratulate my right hon. Friends the Foreign Secretary and the Minister of State, Foreign and Commonwealth Office on the awareness campaign that is being launched next year, but the more that we enjoin British industry to wake up to the nearness of the opportunity of a single large internal European market, the more there is an obligation on the Government to continue to deal with the structural problems of the state sector — the other side of the European market.

First, there is an obligation to continue to make competition policy at European level increasingly compatible with competition policy at domestic level. It is not enough to say that partitions within the Community market are being dismantled. Equally, it is not enough to say that one can go to the courts, because the courts of the member states award differing amounts in damages for infractions of the internal market and apply different procedures.

Secondly, it is not enough to reach an agreement on the transparency of financial relations. For example, there are the various subsidies that member states give to the shipbuilding and steel industries. We must ensure that there is more than transparency. There must be an agreement between member states equally to reduce these subsidies.

Finally, as our privatisation programme proceeds well ahead of those of the other member states, various derogations from the treaty, in telecommunications, transport and energy, begin to be ended. With the opening up of the internal market, competition policy in the three areas to which I have referred must begin to be applied as fully in the member states that have not yet privatised as it is in those that have.

Photo of Mr Bob Cryer Mr Bob Cryer , Bradford South 9:12 pm, 18th November 1987

I listened to the Minister of State's speech with a good deal of interest. She gave the impression that she was living in a fairy-tale world. She talked, as her fellow Ministers have done in the past, about the new budgetary discipline of the Common Market. The last attempt at budgetary discipline failed completely and the Common Market finds itself in yet another crisis. That is why it is asking for more money. Why should we believe on this occasion that there will be budgetary discipline? The Common Market wants more money and the Minister has given us no evidence that there has been real and radical change. Her speech consisted of empty platitudes.

We know that the storehouses are full of food and becoming ever fuller, but the Minister claimed that their intake is slowing down. The hon. Member for Southend, East (Mr. Taylor) explained that the greatest cause of the "disappearance" of food is its destruction or its dumping in various parts of the Third world instead of being directed to the storehouses.

It has been said that quotas represent development in the dairy industry. However, with the introduction of quotas, butter stocks in the United Kingdom increased from 205,208 tonnes in January 1986 to 252,289 in December 1986. During the quota period, there was an increase of 50,000 tonnes over 12 months in the United Kingdom alone. If the Commission is anxious to demonstrate that it is well disciplined, it is reasonable to expect that it will make strenuous efforts to get rid of food stocks, especially when there has been an outcry throughout the world in response to the obscenity of the Common Market having massive food stocks.

Throughout the year, the EEC has on average a stock of 10 million tonnes of cereals, and it would be possible to dispose of at least a proportion of those cereals to various areas of the world where people are starving in their thousands. Ethiopia is only one example. Instead, the Commission buys cereals on the open market, although there are suitable cereals in store throughout the Common Market for this purpose, for conveying to the starving of the world. This is an absurdity. The Commission has not demonstrated its competence in pursuing such a policy.

The Commission has no plans for phasing out stocks. I ask the Minister to tell us how long it will be before we see the disappearance of the 218,000 tonnes of butter in intervention stores in the United Kingdom, as at 30 June. How long will it be before the 13,000 tonnes of skimmed milk powder, the 57,000 tonnes of beef and the 2,266,209 tonnes of cereal, which were all in stock in the United Kingdom, disappear? Perhaps the Minister will tell us how long, during this period of discipline, it will take for the 23,000-tonne tobacco mountain that it has managed to acquire to be phased out. We know that these stocks might vary by 1 or 2 per cent., but they are an integral part of the common agricultural policy.

The Minister described the internal market as a new step forward. The Common Market represents only a small proportion of Europe. It is misleading and mischievous for people to keep referring to Europe as though it is the Common Market. It is arrogant to suppose that countries that are not in the Common Market do not have a valid life and identity of their own.

Around the Common Market and the internal market, which is so supported by the Minister, a barrier will cut us off from countries in Europe that are not members of the Community. As one of the documents points out, the European free trade area has managed to reach a trading agreement with the Common Market, so there is life outside the Common Market. The commonly propagated notion that trading relations would be impossible if we were to withdraw from the Common Market is denied by evidence in a Government document.

I maintain that membership of the Common Market has been a burden and a millstone around our neck. It has cost us hundreds of thousands of jobs. The internal market will not increase safety from terrorism, the shifting trade in arms or the increase in drug trafficking. Surely it makes sense to have half a dozen barriers to scrutinise potential drug trafficking rather than one single barrier over which a drug smuggler can leap to achieve complete freedom of movement within the 12 member states.

Rabies and other diseases were mentioned. Once the internal market is complete—which will allegedly be by 1992, although mercifully that seems doubtful — a certificate will accompany an animal saying that it is rabies-free, and that will have to be accepted. As to the scrutiny of live animals that are exported for slaughter —a matter of great concern—we have heard assurance after assurance in the House about scrutiny, but time after time the RSPCA has demonstrated that no standards are adopted universally throughout the Common Market. If the customs barriers are removed, where will the checks and examinations take place? It is an illusion that the drive towards the internal market will not be accompanied by harmonisation of VAT. It will be so accompanied, and the Minister knows that full well.

As to our membership of the Common Market, we have a £10 million deficit in manufactured goods. How do the Government explain that away? What will they do to remedy that imbalance, which in the Government's term of office has cost us about 2 million jobs in manufacturing industry?

Labour Members have been talking about getting money back from the Common Market. It is crazy for us to be continuing supplicants when our local authorities spend thousands of pounds on going to Brussels to plead with the Commission to get some of our money back. Since 1984, our net contribution has been £4·4 billion. I should have thought that that was a very important sum, but apparently the Euro-fanatics do not mind spending such an amount of money.

The hon. Member for Esher (Mr. Taylor) graphically demonstrated that point. He does not mind all sorts of money going to the Common Market. He said that we should have a greater vision and spend even more money. Yet the self-same hon. Member would attempt to batten down the local authorities that are seeking money because they are starved of resources to provide housing facilities for the mentally handicapped, social services, and a whole range of other services that local authorities provide. They are being denied that money. Over the past three years, we have spent £4·4 billion on mostly propping up the Common Market and the bureaucracy that goes with it.

As several of my hon. Friends have clearly and graphically pointed out, the proposals mean a massive increase in our contribution to the Common Market. Year after year, they have been fiddling the budget. The Common Market is running out of money, and it is now coming back to us for a massive increase in own resources to prop up the miserable millstone around our neck. It is time that we clearly said no. I fear that the Prime Minister will not do that.

Photo of Mr Stuart Holland Mr Stuart Holland , Vauxhall 9:20 pm, 18th November 1987

I congratulate the hon. Member for Skipton and Ripon (Mr. Curry) on a felicitous maiden speech. It reflected the fact that he has been the Conservative spokesman in the European Parliament, especially in terms of its philosophy of standing on one's own feet and relying on the internal market, but being cautious about exchange rates. I may have time or occasion to refer to some of those points later.

I am glad to dissociate myself and Opposition Members from the arguments of the right hon. Member for Strangford (Mr. Taylor). My hon. Friend the Member for Hamilton (Mr. Robertson) has just closed "Dod's Parliamentary Companion". It may be worth referring to it, because the listed interests of the right hon. Member for Strangford are extensive. It states that his special interests are: Irish Politics, EEC, Regional and Agricultural Policies, Turkey, Cyprus, Asia and Gibraltar. We got the lot in one speech tonight. As for his would-be welcome for Turkey as a member of the European Community—I am not sure whether this comes in the European rather than the Asian part of his interests—he would open a revolving door. Any self-respecting Government in Greece would be likely to leave the Community on that occasion, but let us leave that point for the time being.

As for the hon. Member for Darlington (Mr. Fallon), it is amazing that in any other respect Conservative Members condemn trying to solve problems by spending public money, yet when it comes to the EEC and the Community budget they not only throw money at the problems, but are prepared to pile it high. The essence of the answer that he wants is economic growth in the European Community. He is quite able to grasp and accept the point that we need growth in the Community as a whole and in Community GDP. We shall need at least an additional one point of GDP in next two years, rising to a 2·5 per cent. increase in GDP growth in the Community in the early 1990s just to offset a world recession and its effects on trade if there is a cut in the United States budget deficit. If we had such growth, any share less than 1·4 per cent. of GDP would mean an increase in real resources. That is the key point.

That is the budget that we need — not simply a budget that is spent by the Commission, but a budget that is jointly spent by member Governments in the Community so that we can counter the deepening recession in the world economy, preserve jobs and defend and extend employment. The overall world economic situation is severe, not only in United States' budget terms, but in wealth-effect terms — lower spending, slower growth and, if we are not careful, beggar-my-neighbour deflation of trade, with increased pressure for protection.

Photo of Mr Graham Riddick Mr Graham Riddick , Colne Valley

Will the hon. Gentleman dissociate himself from the comments of the hon. Member for Newham, North-East (Mr. Leighton), who clearly believes in market forces determining how resources should be spread throughout Europe? The hon. Gentleman argued that market forces should determine how agricultural resources are spread. Should that apply also to steel, coal, the motor car industry and other industries?

Photo of Mr Stuart Holland Mr Stuart Holland , Vauxhall

It is my eternal loss that I was not in the Chamber during the few moments in which my hon. Friend the Member for Newham, North-East (Mr. Leighton) spoke. When I want to learn his views on the market versus intervention, I shall gain them from him rather than from the Member for Colne Valley (Mr. Riddick).

The plain facts are these: the Community has sunk into a morass of budgetary malpractices needed to conceal or postpone the real financial implications of Community policies. Thus, the budgetary effect of the unprecedented build up of agricultural stocks has been disguised by gross over-valuation of the stocks; actual budgetary deficits have been carried forward and only covered belatedly by ad hoc solutions; and Community commitments have been allowed to accumulate without proper financial provision". That view, which is our view, was expressed in those terms by the Commission itself. That shows how dire is the present financial crisis in the Community.

Knee-deep as it is in the mud of the common agricultural policy, there are those who think that the Community can be freed at one bound, and that bound is towards the internal market. On what reasoning and on what economic rationale is that argument based? We know the old argument for the internal market in terms of internal economies of scale and increased efficiency, but that was bypassed years ago. It was the argument of the 1950s. It cannot be the argument of the 1980s and 1990s. Those who argue for recourse to the internal market should tell that to the Japanese, with 75 million consumers. What does the internal market mean to them? The whole world is their market, both by sales over tariffs and by foreign direct investment behind tariffs. We do not need a single internal market in the Community to achieve efficiency.

In the argument about whether we need to harmonise VAT rates in different countries, it seems to have been overlooked that the United States, which is a vast internal market—no one has claimed that the United States has blocked entrepreneurship, efficiency or initiative — has different local state taxes. It does not have harmonised rates. It even has different corporation taxes, which is why Delaware can boom despite the fact that it has no natural advantages to help it to compete with stronger areas. There is a case for a differentiated fiscal policy as a stimulus to attract industry to various regions. The case for harmonising VAT alone is not adequate.

The argument about economies of scale has been rendered completely outdated by flexible automation. One used to need massive plant—the old Fordist model—to achieve economies of scale. That is not the case any more. Flexible automation and computer-aided production have made entry to markets much easier in technical terms. However, in market terms, that entry is blocked by big business, and it is blocked for the small firm in the European Community as much as it is anywhere else.

I was very amused when the Minister opened the debate by saying that the internal markets would result in more jobs … the opportunities will not just be for a few companies or in a few sectors. I was very entertained by that. Is it really the case? On what basis? The reality is that the share of the top 100 European companies in the EEC Ten — before the accession of Spain and Portugal — increased from just over a fifth to one third of the Community's gross domestic product from 1963. Big business has been winning in the competition stakes in the European Community.

The Minister said that we were talking not just about "a few companies". In fact, the top companies are doing very well. It may be of interest to the Minister, if not to the House, to recognise that the share of Community gross domestic product now commanded by 10 firms — I repeat, just 10 firms—is equal to the entire agricultural output of the European Community. We pay a lot of attention to agriculture. Why, then, do we not pay attention to the fact that the internal market increases concentration, centralisation, unequal competition and barriers to entry to the small firms that are supposed to flourish in such larger market areas? The Minister's claim that not just a few companies will benefit is contradicted by the facts.

The right hon. Lady says that there will be more jobs. Let us consider what the big firms have done on jobs since 1969. [Interruption.] The Minister says that there will be more jobs in the future — the future then will be a contradiction of the past — and there will be a great qualitative change in the internal market, reducing the minuscule barriers to the free movement of goods which serve some social purpose. But there will be no such change. Concentration and centralisation will continue apace. The weak will go to the wall and the big will benefit.

Let us consider jobs. Since 1969 the profits of the top 100 companies now accounting for so major a share of community GDP have gone up by nearly three and a half times, by 340 per cent., but their employment has gone up by only 16 per cent. It is clear what will benefit from the internal market. It will be the profit rating of bigger business, not the creation of jobs.

On the internal market, I was sorry not to hear the Minister refer to the transparency provision in the Community, which is covered in articles 85 and 86 of the Rome treaty. We want more transparency. Data such as I have just cited are not published by the European Community. If we were to put together the studies of the Commission's competition division, they would cover the Floor of the House. But the competition division gets information at national, not at Community, level, so companies such as IBM are counted 12 times in the concentration studies of the Community. The figures that I have given are the result of assiduous private academic research and not of the Commission's publication.

I hope that the Paymaster General will be able to assure us that the Government are concerned about competition and transparency and that they would welcome the sponsorship by the Commission of studies on the share of big business in the Community and what it is doing. For inasmuch as the profits of big business are high, its industrial investment is not high. We do not have evidence that those profits are being translated into innovative, pace-making investment of the kind that has made Japan a world leader.

There is no joint European industrial strategy. It has been blocked since 1967 by the Commission. For example, the French were concerned, and the President was very concerned, that there were double taxation penalties on mergers of companies in the European market. The French proposed to the Commission that the double penalties should be suspended — an obvious commonsense pragmatic measure. The Commission, with its federalist vision of the world, said, "Thanks for telling us that you would like European mergers to compete with American and other firms, but the tax must be paid to Brussels and not to your national treasuries." Since the Government had been losing tax in the first place by paying double tax on mergers, this was hardly attractive to the French.

So instead of pragmatic, international joint action for new industrial initiatives, we got a federalist fantasy which has meant that since 1967 not only does the Community not have a common industrial policy, or CIP, to match the CAP, but it has not even managed to define a common industrial statute. We know the fate of the Vredeling proposals for more openness and more transparency. What has happened is that on the lowest common denominator basis of Community decision-making those have fallen off the edge of the table.

Let us take the question of the Community budget. To get a European industrial strategy and joint ventures in Europe the Community should not only be spending its own budget; we also need an expansion of budgets by member states through their own industrial policies. The Community has a role to play by sponsoring such interfaces and making it possible by doing its own studies in research and its own input. But it is only on an international basis that such joint ventures will occur, as they have already occurred between Japanese and European firms.

The same applies to the Europe of the regions. Spending money is not the only way to get resources into the regions. Some of us, including myself, some 20 years ago studied regional policy in the Community. We found that regional incentives did not sufficiently attract firms to southern Italy or northern England. We got that evidence again from the Select Committee on Expenditure in 1972. Firms went to those areas if they needed more labour, and now they do not need more labour because unemployment is high. In Europe we need a networking of the regional, public enterprise agencies, such as we have in this country in the Greater London enterprise board, the West Midlands enterprise board and the Lancashire enterprise board.

I recently attended a conference in Catalonia of 150 people, including local authority officials, concerned with such networking of regional enterprises in Emiglia Romagna, the German Länder, the British regions and Greece. This is a Europe of the regions, built by the people in the regions with public money guaranteeing their share of investment in joint ventures on a regional basis, rather than all their money being spent by Brussels. We do not have to go to Community level to network for a new Europe of the regions. The funds do not have to go to the top—to Brussels—to come down again. It can be done at the base, provided that we change the way in which we think about the Community and do not always try to pass all spending through the eye of the needle in Brussels.

The same applies to agriculture. We have been talking tonight about production quotas to limit budget spending on agriculture. There is an alternative, which is called bringing prices down. We can afford to bring prices down. When the treaty of Rome was signed in 1957, one quarter of the Community's working population were engaged in agriculture. It is now less than 10 per cent. and, for the Community of 10, it is now about 7·5 per cent. so a major rural constituency has changed to an overwhelmingly urban constituency.

We should bring prices down. It is possible to combine the best of price reduction with deficiency payments systems and quotas, but that should be done for smaller firms and for peasant farmers, especially when the average age of farmers is 55 years or more. There is a strong case for the social and regional funds supporting such agriculture within certain production limits on environmental and social grounds, but we now have major agriculture combines, as reflected in the concentration figures that I gave earlier. From those figures, we can see the dominance of agribusinesses in the Community, making monopoly profits out of the CAP. They are ripping off the consumer, and the Community should deal with them. We need not spend another penny on the food budget if we bring prices down.

In one of its background documents the Community admits that it has failed to provide the proper financial depreciation of the book value of stocks and that it is in dire distress in terms of budget spending. Community document 87 (101) Final states: all these factors imply that the Community must engage itself in medium term planning and more effective management. Planning is needed to obtain the desired level of management of expenditure policy, because management does not make sense without medium term policy objectives". Opposition Members agree with that. The Community needs planning for expenditure on agriculture, industry and the regions and to expand jobs. The Community needs to follow what was well established in 1964 by the then Vice-President Robert Marjolin. As Vice-President of the Community, he set up the medium-term economic committee. There was no reference to it in the treaty of Rome. I once asked Marjolin what justification he got for it in the treaty of Rome. He replied that he could not remember and said, "We looked around for a while and found some clause which more or less fitted at the time."

There is a supra-nationalist vision that integration goes through various stages of a free trade area, a customs union, an internal market or the common market, economic union, monetary union —God knows this is not five steps on stairs. It is a downward running escalator and we are going backwards rather than forwards. If so, why do we not get back to where Marjolin was and set up that very pragmatic, medium-term economic policy committee as a powerhouse inside the Community, so that we are not simply reliant on Community summits? Heaven knows that much is wrong with Community summits. It is well known that summiteers are glad to be seen going to the top for a photo call. They get photographed, make their statements, come down and nothing has changed since they went up. That is what is wrong with the kind of photo call summitry that is presently taking place in the Community.

If we restored the medium-term economic policy committee on the Marjolin basis, we could have decision-making that did not have to be majority or minority because it aimed for a consensus on the recovery of mutual spending, trade and beneficial policies that affected those in the less-developed regions as well as those in the declining areas. What is wrong with majority voting in the Community is that, so long as it binds the minority, the Community will always move at the pace of the slowest. So long as the Community must be unanimous or bind the minority, little progress will be made.

We need a new kind of majority voting, whereby if certain countries want to go for expansion they should do so and be aided by the Community, but if others do not want to they do not have to go along, although they would benefit from the recovery programme anyway. We need to co-operate rather than integrate policies. With a deepening international economic crisis, such co-operation rather than integration should now be on the Government's agenda.

Photo of Mr Peter Brooke Mr Peter Brooke Paymaster General (HM Treasury), Party Chair, Conservative Party 9:40 pm, 18th November 1987

There are maiden speeches to which one looks forward because of the ability of the hon. Member to speak to the subject for which he patiently waits; that was the case with the maiden speech of my hon. Friend the Member for Skipton and Ripon (Mr. Curry). He spoke with charm, vigour, relevance and knowledge—all four characteristics which are of a particular utility and advantage to our debates on these matters and are not always universal in them. I welcome the hon. Member for Vauxhall (Mr. Holland) to the Dispatch Box and I look forward to meeting him on future occasions.

This has been a good debate, at times fiercely argued, but always interesting and closely reasoned. The Government's broad approach to the future financing negotiations is well known. We are clear that there must be agreement on effective budget discipline on agricultural and other expenditure before the question a raising the own resources ceiling can be addressed sensibly. We continue to hope that Heads of Government will be able to reach a satisfactory agreement at Copenhagen in December. Some progress has already been made in the preparatory discussions, but much remains to be done.

The hon. Member for Hamilton (Mr. Robertson) spoke of my right hon. Friend in terms of the froth of synthetic outrage. I must say that there is an aphorism about glasshouses that applies to those remarks coming from that hon. Gentleman's lips. He referred to a temporary bandaged package of fudges, and that seemed to me to be an eloquent account of Labour party policy on a wide variety of subjects. He said that, in future, Government policy would be subject to microscopic examination. That will be a change with regard to these matters because, prior to the election, the Labour party took no interest in them. It may be that the arrival of the hon. Member for Vauxhall has stimulated competition on the Opposition Front Bench.

The hon. Member for Hamilton said that this is a gloomy time for the European Commission. I must tell him that, in every report that the Commission has issued on economic matters this year, it has revised upwards the economic growth of this country — although I acknowledge it has revised downwards the economic growth of the Community as a whole.

The hon. Member for Hamilton asked about the discrepancy between the £700 million quoted by my right hon. Friend and the £800 million to £900 million that I quoted in evidence to the House of Lords. Taken altogether we estimate that the proposals put forward by the Commission could increase our net contribution by some £800 million to £900 million, at today's prices, in 1992 alone. The extra cost of the new correction mechanism and structural own resources would be between £600 million and £700 million. The increase in the size of the budget would account for the rest.

The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) introduced UNESCO, which has nothing to do with this debate, although I realise it is the cathedral of the Liberal party. The hon. Member for Hamilton made a reference—as does the amendment—to space. He introduced the European Space Agency, but it is neither a project nor an institution of the European Community. I hasten to say that we on the Conservative Benches will continue to be interested in value for money from public expenditure.

The hon. Member for Hamilton raised a series of matters relating to the harmonisation of VAT. However, the microscopic examination that he has promised did not lead to his understanding the cases before the European Court, whereas my hon. Friend the Member for Southend, East (Mr. Taylor) rightly said that no veto can be applied.

The hon. Member for Hamilton also raised the issue of excise duties. The Commission's proposals were made available in August 1987; they were presented by Lord Cockfield to the ECOFIN Council earlier this week. We have fundamental difficulties with the Commission's approach. We have misgivings about the implications of its excise duty proposals and we shall be ready to enter discussions with our Community partners about the role of appropriate tax measures in the completion of the internal market. We are not alone in finding difficulties in those proposals. The hon. Gentlemen said that the United Kingdom rebate should be protected. One would not think from his words that that rebate had been secured by this Government, and not by a Labour Government.

My hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) spoke about the Government's good record in keeping pressure on the budget to the forefront. However, he expressed distress about the rebate. The deterioration in the figures relating to our contributions, to which some of my hon. Friends referred, seems to be a justification for us to maintain our emphasis upon it. I agree with the emphasis on 1992. Hon. Members will be aware of the new steps being taken by my right hon. Friend the Secretary of State for Trade and Industry to alert the country to these issues.

The right hon. Member for Glasgow, Govan (Mr. Milian) asked me three specific questions about shipbuilding. The first was about the limits on aid, and possible cuts in the aid ceiling below 28 per cent. The aid ceiling is subject to annual review, and the negotations about next year's ceiling have not begun. The Government are considering our position, but we shall resist any attempt to reduce the ceiling below 28 per cent. The right hon. Gentleman asked about Brittany Ferries, and the French bid. The Commission has not completed its investigation, but we shall continue to press vigorously for the matter to be taken up, and we will keep the House informed. I shall do as was suggested, and draw the attention of my hon. Friend the Under-Secretary of Trade and Industry to the right hon. Gentleman's comments.

As to the programme for shipbuilding areas that are in decline, negotiations are currently taking place at Brussels about a Community programme, under the regional fund, for areas affected by the decline in shipbuilding. It is now called "Renaval". The regions of the United Kingdom affected by the restructuring of the shipbuilding industry can expect to benefit considerably from that programme.

My hon. Friend the Member for Skipton and Ripon asked specific questions about the United Kingdom abatement. I am glad that he supports the Government's line that the Commission's proposal is unacceptable. He suggested financing the abatement outside the own resources ceiling. That would have the advantage of avoiding the fluctuations, currently caused by the abatement, in the money available for spending programmes. We would welcome that sensible improvement.

We accept the need to provide Community help for poorer regions. However, we must distinguish Spain and Portugal, and countries such as Greece and Ireland which already receive massive handouts from the Community. In 1986 Greece's receipts from the Community were 4·8 per cent. of GNP, and Ireland's were 7·1 per cent. The United Kingdom's receipts were only 0·7 per cent. of GNP.

Photo of Mr Peter Brooke Mr Peter Brooke Paymaster General (HM Treasury), Party Chair, Conservative Party

No; I have too much to get through.

The hon. Member for Inverness, Nairn and Lochaber balanced discipline and resources. He was longer on asservation than he was on tactical counsel. His speech was in the general Liberal tradition of running with the hounds and apologising to the hare when they caught up. He asked a specific question about ham imports. We have rigorous controls on the commercial import of meat and meat products as part of our policy of avoiding the introduction of diseases. The changes to the so-called personal concessions for the import of meat products simplify the rules and help to avoid the inadvertent introduction of serious diseases. Only fully-cooked products and those in cans or hermetically sealed containers up to a total of 1 kg can be brought in.

The hon. Gentleman described the Liberal vision of Europe and demonstrated his weight of effort in its pursuit by confessing that he did not have the stamina to answer the questions from my hon. Friend the Member for Southend, East, a process which I greatly enjoy. The hon. Gentleman's stamina on behalf of Europe quite clearly was not equal to that of my hon. Friend.

I welcome the new voice of my hon. Friend the Member for Esher (Mr. Taylor) in our debate. He made a thoughtful speech, which will bear further study. He remarked on the absolute size of our contributions and said that the budget was not that large. The Government must be concerned about the size of the budget. Our net payments to Community institutions this year are expected to be £1·4 billion, as my hon. Friend the Member for Southend. East said. That is not a negligible sum. There must also be continuing concern about waste.

The hon. Member for Newham, South (Mr. Spearing) asked me several questions about the United Kingdom abatement. If I understood him correctly, he drew attention to the fact that the Commission's proposal would compensate the United Kingdom only in respect of its net budgetary burden on agriculture spending. That is one of the unsatisfactory aspects of the Commission's proposals. Our net contribution before abatement is high, and it is right that we should continue to be compensated in respect of our burden on all spending allocated to member states. The proposed compensation rate of 50 per cent. is unacceptable, and we shall insist that any change to the Fontainebleau abatement is for the better.

The hon. Gentleman also asked whether unanimity is needed on changes to the abatement or the ceiling. The answer is that it is needed on both. The abatement mechanism, the system of own resources and the ceiling are all contained in the own resources decision, which has treaty status and can be amended only after unanimous agreement of the Council and subsequent approval by national Parliaments, including, of course, the House.

The hon. Gentleman asked about the figure of 1·4 per cent. of GNP. That seemed to be a question for the Commission rather than for me, but I shall come back to it in the context of my remarks about the speech by my right hon. Friend the Member for Worthing (Mr. Higgins).

The hon. Member for Newham, South attributed to his right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) attention to certain aspects of Lord Cockfield's package. That is intruding on private grief, in terms of the right hon. Gentleman's leadership of the Labour party's tax campaign during the election, but I shall not dwell on that subject.

My hon. Friend the Member for Southend, East said that unemployment was high in Europe. The major reason why unemployment levels in Europe have remained stubbornly higher than in the United States or Japan is that the European market, unlike the other major trading blocs, is not yet a single unified market with all the economic advantages and economies of scale that such a market brings. The Government support the internal market because it will be good for jobs in this country and, indeed, throughout the Community. I acknowledge my hon. Friend's remarks about the trade balance, but the changes in our trade with the Community are more or less in line with the changes in our trade with the rest of the world.

My hon. Friend asked me a specific question about exceptional circumstances. In our view, the guideline limit must be an effective constrant on expenditure. We are not convinced of the necessity for provision to be made for exceptional circumstances. There is a serious danger that such a provision, unless it is tightly defined, would undermine the budget discipline agreement.

I cannot predict what precise conclusion the European Council will reach on that or any other matter, but I assure my hon. Friend that the Government would much prefer to have no exceptional circumstances clause. We shall not settle for anything that we regard as unsatisfactory.

My hon. Friend asked about butter stocks arid the Court of Auditors. I share his respect for that court. We have discussed that subject before in parliamentary questions. The Government believe that in that instance the Community was right to regard it as an exceptional circumstance, as a basis for its agreement.

My hon. Friend criticised the fact that we were using stabilisers as a new solution to the agriculture problem. The Commission joins us in proposing stabilisers. The evidence so far is that they are working. With regard to general agriculture expenditure, I cannot improve on the words of my right hon. Friend the Prime Minister at the Lord Mayor's banquet earlier this week: Agriculture cannot be a no-go area for common sense, where the laws of supply and demand cease to apply. Effective control of agricultural spending in Europe is vital to the future of the Community, allied to a drive to ensure that agricultural subsidies throughout the developed world are reduced. We are determined to achieve that end.

My hon. Friend asked me some questions about the VAT court cases. In the words of Queen Victoria during the Boer war, we do not believe in the possibility of defeat. However, given that we live in an uncertain world, if the court came down against us on the matter on which the hon. Member for Hamilton believes that we can exercise a veto—my hon. Friend the Member for Southend, East knows better—we would honour the treaty, study the judgment and frame our next actions accordingly. However, at present that is a wholly hypothetical result, as we have long had every intention of winning.

My hon. Friend specifically asked me whether the matter could be taken further by the court. The current infraction proceedings concern the interpretation of existing VAT law, and are therefore quite separate from our obligations under the Single European Act. The challenge relates only to a small proportion of total zero rating, which the Commission maintains is not for clearly defined social purposes and the benefit of the final consumer. The Commission would be hard put to challenge on such grounds our zero rates for food and gas and electricity and so on supplied to domestic consumers.

The right hon. Member for Strangford (Mr. Taylor) raised the issue of shipbuilding, to which I have already responded. He was complimentary to my right hon. Friend the Member for Wallasey (Mrs. Chalker). He also raised the issue of the tax on oils and fats. In the spring, we opposed the Commission's proposals for such a tax, and we would oppose any new proposal for one. The United Kingdom has suggested that a better alternative for restraining expenditure in this sector is a flat-rate aid, subject to a maximum guaranteed quantity of production.

The right hon. Member for Strangford is, of course, familiar with the islands of Cyprus and Ireland. The protocol on the customs union between the Community and Cyprus was signed on 19 October. It is an integral part of the association agreement, article 5 of which rules out discrimination between nationals or companies of Cyprus. Upon signature, the Danish presidency reaffirmed that the protocol will apply to the whole population of Cyprus.

Thanks to my right hon. Friend the Minister of Agriculture, Fisheries and Food, the United Kingdom— including Northern Ireland — has done better in the current year on MCAs than has Ireland, notably in beef. The Government took up with the Commission the border issue to which the right hon. Gentleman referred. It has now taken the first steps to bringing legal proceedings against the Irish Government, on the grounds that their unilateral measure is incompatible with European Community law. If the right hon. Gentleman will excuse me, I shall deal with the matter of Gibraltar outside the debate.

Finally, the issue of the 1·4 per cent. and the GNP definition was raised. That is really a question for the Commission rather than the Government, but, contrary to the views of the right hon. Member for Strangford, a GNP basis would be more favourable to Britain than the present VAT method, because of our relative shares of GNP and VAT.

I can tell my right hon. Friend the Member for Worthing that I could advance a whole series of reasons why the Commission might want to change the ceiling—but those are questions for the Commission and not for us.

Photo of Mr Terence Higgins Mr Terence Higgins , Worthing

There must be some reason why it chose the figure of 1·4 per cent.

Photo of Mr Peter Brooke Mr Peter Brooke Paymaster General (HM Treasury), Party Chair, Conservative Party

The simple answer is that the Commission has produced a five-year spending plan, including a doubling of expenditure on the structural funds, and argues that own resources of 1·4 per cent. of GNP are required to finance that. That is not a good argument ; the Commission's detailed plans need only 1·3 per cent.

I can tell the hon. Member for Bradford, South (Mr. Cryer) that the stocks—on an August to September, year-to-year basis—are now falling and are lower than they were a year ago. As regards his question about rabies, the agreements that have already been reached allow the Government to maintain their own controls in these areas.

The hon. Member for Vauxhall discussed various aspects of the internal market. As far as the British Government are concerned, the areas identified by the Brussels Council as immediate priorities are public purchasing, insurance, liberalisation of capital movements, freedom of establishment for the professions, and progress on technical harmonisation and standards.

We have heard pleas from all parts of the House for the interests of British taxpayers and consumers to be adequately protected. The Government will defend those interests and in that spirit I ask all hon. Members to support the motion and to reject the Opposition amendment, which, in several parts, is irrelevant to the debate or a travesty or both.

Question put, That the amendment be made :—

The House divided: Ayes 157, Noes 233.

Division No. 74][10 pm
Abbott, Ms DianeAllen, Graham
Adams, Allen (Paisley N)Archer, Rt Hon Peter
Armstrong, Ms HilaryHughes, Robert (Aberdeen N)
Ashdown, PaddyIllsley, Eric
Banks, Tony (Newham NW)Ingram, Adam
Barnes, Harry (Derbyshire NE)Johnston, Sir Russell
Barnes, Mrs Rosie (Greenwich)Jones, Martyn (Clwyd S W)
Barron, KevinKaufman, Rt Hon Gerald
Battle, JohnKilfedder, James
Beckett, MargaretKirkwood, Archy
Beith, A. J.Lamond, James
Benn, Rt Hon TonyLeadbitter, Ted
Bennett, A. F. (D'nt'n & R'dish)Leighton, Ron
Bermingham, GeraldLitherland, Robert
Bidwell, SydneyLivingstone, Ken
Boateng, PaulLivsey, Richard
Boyes, RolandLloyd, Tony (Stretford)
Bradley, KeithLoyden, Eddie
Bray, Dr JeremyMcAllion, John
Brown, Gordon (D'mline E)McAvoy, Tom
Brown, Nicholas (Newcastle E)McCartney, Ian
Bruce, Malcolm (Gordon)Macdonald, Calum
Buchan, NormanMcFall, John
Buckley, GeorgeMcKelvey, William
Caborn, RichardMcLeish, Henry
Callaghan, JimMcWilliam, John
Campbell, Menzies (Fife NE)Madden, Max
Canavan, DennisMahon, Mrs Alice
Carlile, Alex (Mont'g)Martin, Michael (Springburn)
Clark, Dr David (S Shields)Martlew, Eric
Clarke, Tom (Monklands W)Maxton, John
Clay, BobMeale, Alan
Clwyd, Mrs AnnMichie, Bill (Sheffield Heeley)
Coleman, DonaldMillan, Rt Hon Bruce
Cook, Frank (Stockton N)Moonie, Dr Lewis
Cook, Robin (Livingston)Morgan, Rhodri
Corbett, RobinMorley, Elliott
Corbyn, JeremyMorris, Rt Hon J (Aberavon)
Cousins, JimMowlam, Mrs Marjorie
Crowther, StanMullin, Chris
Cryer, BobMurphy. Paul
Cummings, J.Nellist, Dave
Cunliffe, LawrenceOakes, Rt Hon Gordon
Darling, AlastairO'Brien, William
Davis, Terry (B'ham Hodge H'I)Patchett, Terry
Dewar, DonaldPike, Peter
Dixon, DonPowell, Ray (Ogmore)
Doran, FrankPrescott, John
Duffy, A. E. P.Primarolo, Ms Dawn
Dunnachie, JamesQuin, Ms Joyce
Dunwoody, Hon Mrs GwynethRandall, Stuart
Eastham, KenRees, Rt Hon Merlyn
Evans, John (St Helens N)Reid, John
Ewing, Mrs Margaret (Moray)Richardson, Ms Jo
Faulds, AndrewRobertson, George
Fearn, RonaldRogers, Allan
Field, Frank (Birkenhead)Ruddock, Ms Joan
Fields, Terry (L'pool B G'n)Sheldon, Rt Hon Robert
Fisher, MarkShort, Clare
Flynn, PaulSkinner, Dennis
Foot, Rt Hon MichaelSteel, Rt Hon David
Foster, DerekStott, Roger
Foulkes, GeorgeStrang, Gavin
Garrett, Ted (Wallsend)Taylor, Mrs Ann (Dewsbury)
George, BruceTaylor, Matthew (Truro)
Godman, Dr Norman A.Vaz, Keith
Golding, Mrs LlinWall, Pat
Gordon, Ms MildredWallace, James
Gould, BryanWalley, Ms Joan
Grant, Bernie (Tottenham)Welsh, Andrew (Angus E)
Griffiths, Win (Bridgend)Williams, Rt Hon A. J.
Grocott, BruceWilson, Brian
Hardy, PeterWinnick, David
Harman, Ms HarrietWise, Mrs Audrey
Haynes, FrankWorthington, Anthony
Heffer, Eric S.Young, David (Bolton SE)
Hinchliffe, David
Holland, StuartTellers for the Ayes:
Home Robertson, JohnMr. Allen McKay and
Howells, GeraintMr. Alun Michael.
Hoyle, Doug
Adley, RobertGreenway, John (Rydale)
Arnold, Jacques (Gravesham)Gregory, Conal
Arnold, Tom (Hazel Grove)Griffiths, Peter (Portsmouth N)
Atkinson, DavidGround, Patrick
Baldry, TonyHamilton, Hon A. (Epsom)
Beaumont-Dark, AnthonyHampson, Dr Keith
Beggs, RoyHargreaves, A. (B'ham H'Il Gr')
Bennett, Nicholas (Pembroke)Hargreaves, Ken (Hyndburn)
Benyon, W.Harris, David
Bevan, David GilroyHaselhurst, Alan
Boscawen, Hon RobertHawkins, Christopher
Boswell, TimHayes, Jerry
Bottomley, Mrs VirginiaHayhoe, Rt Hon Sir Barney
Brandon-Bravo, MartinHicks, Mrs Maureen (Wolv' NE)
Bright, GrahamHicks, Robert (Cornwall SE)
Brooke, Hon PeterHiggins, Rt Hon Terence L.
Brown, Michael (Brigg & Cl't's)Hind, Kenneth
Bruce, Ian (Dorset South)Hogg, Hon Douglas (Gr'th'm)
Buck, Sir AntonyHolt, Richard
Budgen, NicholasHordern, Sir Peter
Carlisle, John, (Luton N)Howarth, Alan (Strat'd-on-A)
Carlisle, Kenneth (Lincoln)Howarth, G. (Cannock & B'wd)
Cash, WilliamHowell, Rt Hon David (G'dford)
Chalker, Rt Hon Mrs LyndaHowell, Ralph (North Norfolk)
Channon, Rt Hon PaulHughes, Robert G. (Harrow W)
Chapman, SydneyHunt, David (Wirral W)
Clark, Sir W. (Croydon S)Hunt, John (Ravensbourne)
Clarke, Rt Hon K. (Rushcliffe)Irvine, Michael
Colvin, MichaelJack, Michael
Coombs, Simon (Swindon)Janman, Timothy
Cope, JohnJessel, Toby
Cormack, PatrickJones, Robert B (Herts W)
Cran, JamesJopling, Rt Hon Michael
Currie, Mrs EdwinaKellett-Bowman, Mrs Elaine
Curry, DavidKing, Roger (B'ham N'thfield)
Davies, Q. (Stamt'd & Spald'g)Kirkhope, Timothy
Davis, David (Boothferry)Knapman, Roger
Day, StephenKnight, Greg (Derby North)
Devlin, TimKnight, Dame Jill (Edgbaston)
Dickens, GeoffreyKnowles, Michael
Dorrell, StephenKnox, David
Douglas-Hamilton, Lord JamesLang, Ian
Dunn, BobLatham, Michael
Durant, TonyLawrence, Ivan
Dykes, HughLee, John (Pendle)
Evans, David (Welwyn Hatf'd)Leigh, Edward (Gainsbor'gh)
Evennett, DavidLester, Jim (Broxfowe)
Fallon, MichaelLilley, Peter
Favell, TonyLloyd, Peter (Fareham)
Fenner, Dame PeggyLord, Michael
Field, Barry (Isle of Wight)Luce, Rt Hon Richard
Finsberg, Sir GeoffreyLyell, Sir Nicholas
Forman, NigelMcCrindle, Robert
Forsyth, Michael (Stirling)Macfarlane, Neil
Forth, EricMacKay, Andrew (E Berkshire)
Fox, Sir MarcusMaclean, David
Franks, CecilMcLoughlin, Patrick
Freeman, RogerMcNair-Wilson, M. (Newbury)
French, DouglasMcNair-Wilson, P. (New Forest)
Garel-Jones, TristanMadel, David
Gill, ChristopherMalins, Humfrey
Gilmour, Rt Hon Sir IanMans, Keith
Glyn, Dr AlanMarland, Paul
Goodhart, Sir PhilipMarshall, Michael (Arundel)
Goodson-Wickes, Dr CharlesMartin, David (Portsmouth S)
Gorman, Mrs TeresaMaude, Hon Francis
Gow, IanMaxwell-Hyslop, Robin
Greenway, Harry (Ealing N)Mayhew, Rt Hon Sir Patrick
Mellor, DavidSkeet, Sir Trevor
Meyer, Sir AnthonySmith, Sir Dudley (Warwick)
Miller, HalSoames, Hon Nicholas
Miscampbell, NormanSpeed, Keith
Mitchell, Andrew (Gedling)Squire, Robin
Moate, RogerStanbrook, Ivor
Monro, Sir HectorSteen, Anthony
Montgomery, Sir FergusStern, Michael
Morrison, Hon C. (Devizes)Stevens, Lewis
Morrison, Hon P (Chester)Stewart, Andrew (Sherwood)
Moss, MalcolmStradling Thomas, Sir John
Moynihan, Hon C.Sumberg, David
Needham, RichardSummerson, Hugo
Nelson, AnthonyTaylor, Ian (Esher)
Neubert, MichaelTaylor, Rt Hon J. D. (S'ford)
Newton, TonyTaylor, John M (Solihull)
Nicholls, PatrickTaylor, Teddy (S'end E)
Nicholson, David (Taunton)Tebbit, Rt Hon Norman
Oppenheim, PhillipTemple-Morris, Peter
Page, RichardThompson, D. (Calder Valley)
Patnick, IrvineThompson, Patrick (Norwich N)
Patten, Chris (Bath)Thorne, Neil
Pattie, Rt Hon Sir GeoffreyThornton, Malcolm
Pawsey, JamesThurnham, Peter
Peacock, Mrs ElizabethTownend, John (Bridlington)
Porter, Barry (Wirral S)Tracey, Richard
Porter, David (Waveney)Trippier, David
Portillo, MichaelTwinn, Dr Ian
Powell, William (Corby)Waddington, Rt Hon David
Raffan, KeithWakeham, Rt Hon John
Raison, Rt Hon TimothyWaldegrave, Hon William
Rathbone, TimWalden, George
Redwood, JohnWaller, Gary
Renton, TimWard, John
Rhys Williams, Sir BrandonWardle, C. (Bexhill)
Riddick, GrahamWatts, John
Ridsdale, Sir JulianWells, Bowen
Rifkind, Rt Hon MalcolmWhitney, Ray
Roberts, Wyn (Conwy)Widdecombe, Miss Ann
Roe, Mrs MarionWilkinson, John
Rossi, Sir HughWilshire, David
Ryder, RichardWinterton, Mrs Ann
Sackville, Hon TomWinterton, Nicholas
Sayeed, JonathanWood, Timothy
Scott, NicholasYeo, Tim
Shaw, David (Dover)Young, Sir George (Acton)
Shaw, Sir Giles (Pudsey)
Shaw, Sir Michael (Scarb')Tellers for the Noes:
Shephard, Mrs G. (Norfolk SW)Mr. Mark Lennox-Boyd and
Shepherd, Colin (Hereford)Mr. David Lightbown.
Sims, Roger

Question accordingly negatived.

Main Question put and agreed to.

Resolved, That this House takes note of the White Papers on developments in the European Community July to December 1986 (Cm. 122) and January to June 1987 (Cm. 205), and European Community Documents COM(87)100 on making a success of the Single European Act, COM(87)101 on the future financing of Community Budget, and Nos. 8248/87 on Budgetary Discipline, 8249/87 on Own Resources, 8251/87 on Structural Funds, and 8087/87 and 8940/87 on amendments to the Financial Regulations, all relating to the future financing negotiations ; and endorses the Government's objective of securing effective and binding control of Community expenditure.