Budget of the European Communities for 1995

– in the House of Commons at 9:34 pm on 28th November 1994.

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[Relevant document: European Community Document No. SEC(94)1479, the Commission's Letter of Amendment No. 1 to the Preliminary Draft General Budget of the European Communities for 1995.]
Motion made, and Question proposed,That this House takes note of European Community Documents Nos. COM(94)400, the Preliminary Draft General Budget of the European Communities for 1995; 8782/94, the Draft General Budget of the European Communities for 1995; the proposals contained in the unnumbered document: European Parliament Minutes for the Sitting of 27th October 1994 relating to the Draft General Budget for the European Union for the Financial Year 1995; the unnumbered Explanatory Memorandum submitted by HM Treasury on 23rd November, relating to the Council's decisions on the European Parliament's proposed amendments and modifications to the Draft General Budget for 1995; and European Community Document No. 9943/94, relating to the adjustment of the Financial Perspective with a view to enlargement; and supports the Government's efforts to maintain budget discipline.—[Mr. Heathcoat-Amory.]

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson 10:32 pm, 28th November 1994

I expected to be speaking after hearing what the Minister had to say about the budget. He was supposed to be going to tell us why—

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

On a point of order, Mr. Deputy Speaker. Will you confirm that this is business No. 3, the Budget of the European Communities for 1995, and that the Government have not moved that with a speech but have moved it formally, for a speech later? Is that the position, please?

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

That is what I had assumed. I thought that it was fairly obvious.

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

The Minister may have nothing to say, but we have some questions to ask him. This is a very important piece of information to come before the House. [Interruption.]

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Order. Will hon. Members who want to continue their conversations please leave the Chamber?

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

It seems that Ministers are too reliant on civil servants nowadays, Mr. Deputy Speaker. Perhaps some time in opposition would be helpful, allowing them to learn to prepare their own speeches.

The debate gives us an opportunity to comment on the drawing up of the 1995 European budget before the European Parliament finalises its deliberations next month. I shall excuse the wrong date that we are given in the explanatory memorandum: I understand that the Council meeting took place on 16 November, not 15 November—but, today and on previous occasions, we have become somewhat used to the mistakes in figures that the Chancellor is wont to make, and we shall forgive him.

At present there is clearly a disagreement between the European Parliament and the Council of Ministers about important parts of the budget, but I intend to focus on the role of the Chancellor at the Council of Ministers meeting. First, I should like to know—particularly in view of the Government's rhetoric today—why the Council of Ministers rejected every amendment made to the budget by the European Parliament to tighten control of fraud. In all five categories, the European Parliament tabled amendments transferring financial commitments to the area of tackling fraud; it suggested not using new money for that purpose but moving, within budget headings, money that had largely been allocated to administration.

In the explanatory memorandum, the Minister gives no explanation whatever; indeed, he barely alludes to those issues. I think that, particularly in view of the rhetoric that we heard from the Minister in our earlier debate—

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

On a point of order, Mr. Deputy Speaker. Have you noticed what is happening? Have you observed that the Minister has just been given his speech—

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Order. I notice everything that goes on in the Chamber.

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

I have some sympathy for the Minister: earlier, he had to speak while hon. Members behind him were fighting, and he has now had to get people to bring him the appropriate papers. It is a hard life being a Minister in the Tory Government.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

You were not elected.

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

I was indeed elected.

Along with most other people in the country, I want to know what the Chancellor did at the meeting of Finance Ministers on 15 November in relation to the amendments dealing with tackling fraud. What was his view? If I were generous, I would assume that he fought tooth and nail to support amendments to crack down on fraud. However, in the explanatory memorandum we are given no hint of the Government's view or of why the Council made the decisions that it made.

To date, the Government have not exactly been shrinking violets in their stance on majority voting or, indeed, on the social chapter. Why have they not made a similar fuss about measures to tackle fraud levels which, as we have heard, are costing us £4.5 billion, which in agriculture alone rose by 50 per cent. between 1990 and 1993 and which are set to rise by a further 30 per cent. in 1994? Perhaps the Minister will tell us what action the Chancellor took at the Council of Ministers with regard to those amendments on fraud. Did he ignore them? Did he believe them to be frivolous? Did he argue for them and for the citizens of Britain? We cannot know, but we expect some answers from the Minister when he has had time to read his papers.

What action did the Minister or the Chancellor of the Exchequer take to prevent the Council of Ministers' decision to increase expenditure on the common agricultural policy by 545 million ecu while slashing support on overseas food aid by 65 million ecu? Do the Government believe that aid to multinational agribusiness companies should take priority over support to people dying of starvation through natural and man-made disasters?

What action did the Chancellor take to prevent the Council of Ministers from trying to increase expenditure on the CAP over and above that recommended by the European Parliament? What action did he take over the Council's suggestion, with which he apparently agreed, to cut support for the Northern Ireland peace process and its aftermath by 30 million ecu? What justification can he give for that action?

What action did the Chancellor take to prevent the Council of Ministers' decision to increase expenditure on the CAP while slashing support for internal policies, including constructive initiatives relating to the environment and to consumers? It appears that, in every way, consumers and the citizens of Britain have been hit by budget decisions in which the Chancellor at least participated. We need to know what view he took on those decisions at the meeting.

The opportunity to discuss the European budget during the budget-making process is welcome, but it is clear that not having information about what takes place at Council of Ministers meetings puts hon. Members at a disadvantage. We know what the European Parliament thought and why it took its decisions, but we cannot find out the answers to other questions, except through the explanatory memorandum. As I have already made clear, that memorandum far from explains the Council of Ministers' actions at the meeting and it is our only clue to how the Council voted or how it reached a view on the European Parliament's proposals.

How can we know whether to congratulate or to criticise the Chancellor on the position that he has taken? We have no clue as to what Ministers say, how they vote, what they support and what they oppose at the meetings. We do know what priorities the European budget should have. It is not acceptable that the CAP costs the average family in Britain £20 per week. It is not acceptable that the CAP budget has risen from £6.4 billion in 1979 to £30.4 billion in 1994. It is not acceptable that fraud is costing all of us up to £4.5 billion.

We also note that there is no mention in the memorandum of the fact that the budget headings, particularly those dealing with administration, will include spending on the implementation of the social chapter. We know that, under objective 4 of the social fund, there is to be spending on, for example, skill training to retrain workers. We also know that the Secretary of State for Employment does not intend to claim any money from that for British workers. That is another example of the ideological bigotry of denying opportunity to British people. This country is contributing to the social chapter and the British people want to enjoy its benefits. Half of the top 100 companies are committed to implementing aspects of the social chapter; yet despite the rhetoric that we heard today, the Government are unable to paper over even the thinnest cracks in their party.

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

The right hon. Gentleman has not been listening. Labour MEPs have proposed amendment after amendment to the 1995 budget.

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

The Minister has obviously been enjoying himself before coming to the Chamber.

Labour MEPs proposed amendment after amendment to cut fraud and to introduce measures to tackle it. Those amendments were removed by the Council of Ministers.

Our manifesto for this year's European elections said that ending the present common agricultural policy should be a priority in the next round of treaty reforms, so that the Union will be for all its people, not just for wealthy farmers.

The budget should be spent efficiently to stimulate the creation of quality skilled jobs, to improve skills qualifications, to invest in the trans-European communications network and to fund research and environmental projects.

It was clear today that the Government are so concerned with their own internal problems that they have failed to tackle fraud in preparing for next year's budget. At best, they have colluded with the rise in the cost of the CAP, when there was an opportunity at least to trim. There are important questions surrounding the 1995 budget—I hope that the Minister has some answers.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford 10:47 pm, 28th November 1994

I rise to make the speech that I had hoped to contribute to the previous debate. I hope that my hon. Friend the Minister will be able to answer some of my points, but I shall fully understand if he cannot do so.

Having just supported the Government, I want to make one or two remarks about the European Communities (Finance) Bill. Some misleading claims about the nature of the Bill were bandied about. It was said that it was presented as a Finance Bill, but I question that. A domestic Finance Bill puts all the proposed taxation and revenue-raising measures before Parliament, which then decides whether to approve them; if not, the Government do not have the money at their disposal to make any expenditure.

The problem with the European Communities (Finance) Bill is that not a great deal changes.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Order. We are debating not the European Communities (Finance) Bill but a motion. If the hon. Gentleman does not stick to that subject, I will rule him out of order.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

I am grateful to you, Mr. DeputySpeaker. I was coming on to the way in which we scrutinise European budgets and was trying to use the European Communities (Finance) Bill as an example of how, in many ways, that is never achieved and to give some of the reasons why. I was using that Bill as a particular example. With your forbearance, Mr. Deputy Speaker, I should like to raise one or two points on that matter.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Order. The hon. Gentleman must not try to debate the Bill. The Bill has been debated throughout the day. It is over and done with. We are now debating a motion, and the hon. Gentleman must confine his remarks to the motion.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

Indeed. I was using one or two areas of the Bill only to illustrate the problems that will exist for us in future debates on European budgets. I believe that 1995 is specified, but others will be presented before us. I should like, if possible, to continue using the Bill as an illustration of where the problems will arise and hope that my hon. Friend the Paymaster General can take from that some of the main areas and problems that he would like to look at in relation to the other budgets that come before us.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Order. The hon. Gentleman is trying to tell me that he wants to make the speech that he would have liked to make in the main debate on Second Reading this afternoon. He cannot possibly do that. His remarks must be on the motion, otherwise he will be out of order.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

In that case, I am guided by you, Mr. Deputy Speaker, and will finish at this point.

Photo of Mr Russell Johnston Mr Russell Johnston , Inverness, Nairn and Lochaber 10:51 pm, 28th November 1994

I am sorry that the hon. Member for Chingford (Mr. Duncan Smith) has sat down, because I always find his speeches most entertaining, even if sometimes I do not agree with them. By and large, I think that the people with whom one does not agree are far more entertaining than those with whom one agrees.

Today has not been a great day for Parliament and I do not think that it will end any better in this debate, which is narrower than the European Communities (Finance) Bill, which we have just given a Second Reading. Although the Bill was related to the European budget, the debate ended up not as a rational debate but more like an elaborate game of charades.

In discussing, however briefly, the budget of the Union, one of the basic things that we must recognise is that there are within the House a small but extremely dedicated group of people—in the Conservative party, but also in the Labour party—who are opposed root and branch to everything to do with the Union. Some hon. Members are circling around rather like carrion crows waiting for an appropriate piece of meat on which to alight. I thought that the right hon. Member for Kingston upon Thames (Mr. Lamont) was rather like that today. He is the former Chancellor, the man who took part in the Council meetings of Finance Ministers that determined the budget. Until recently, he was our representative there.

The right hon. Member for Kingston upon Thames made a speech, which I can describe only as entirely in the mainstream of old-fashioned English nationalism. He rejected the idea of the regional fund. The hon. Member for Durham, North-West (Ms Armstrong) remarked, rightly, that the two structural funds—the regional fund and the social fund—are exceedingly important elements in the budget. Liberal Democrat Members and, I know, Front-Bench Labour Members support those funds most strongly, yet the former Chancellor said that he saw no sense in recognising additionality.

Indeed, as far as I could see, the former Chancellor was wholly opposed to the idea of regional expenditure, although, as we know, the budget is used in that area and the Commission presses for that to correct disadvantages in different parts of the Community. Yet the right hon. Gentleman, the man who until recently was the spokesman of our Government, was clearly and absolutely opposed to any such proposition.

One of the things that I found most extraordinary about the right hon. Gentleman's contribution in that regard, considering his recent responsibilities, was the idea that there was an absolute intrinsic incompatibility between us and everybody else in the Community. "All our partners," he said—the Germans, the Dutch, everybody. I do not think that that is true at all. It is terribly dangerous thinking. Speaking as a Scotsman, I think that the Scots are more different from the English than the English are from the Germans. The House should just think about that, because it undermines completely the false argument that the right hon. Member for Kingston upon Thames advanced.

In the previous debate, to which I shall refer only briefly, Mr. Deputy Speaker, we had repeated speeches from the Euro-sceptic area opposing the use of the European budget to improve the balance of wealth and poverty and to improve opportunity in the Community through the cohesion fund and the structural funds. Like the founding fathers and like those who wrote the visionary document that established the regional fund, the Liberal Democrats believe that the budget should be seen as a means not only of running the administration of the Community but of making an actual change to the benefit of the weaker members of the Community.

I support what the hon. Member for Durham, North-West said about the surprising view that was taken by the Council of Ministers in respect of the propositions made by the European Parliament about fraud. As Ministers have been most anxious today to proclaim how zealous they are about fraud, there seems to be a contradiction.

My next point concerns the British clawback which we had following Fontainebleau and the agreement achieved by Lady Thatcher when she was Prime Minister. I do not think that we can expect that to go on for ever. We all know why it was perfectly right that we should get money back; the effect of the common agricultural policy was different for us. There is, however, no sense in pursuing that as a long-term effort. It would be far better if the British Government went into budget negotiations talking about a need to reform the basis of revenue within the Community so that it is more equitable throughout the whole Community than it now is. We should, therefore, be as interested in unfairnesses that happen to other countries as we are in the difficulties that we face.

All day, we have been hearing people say, "We must reform the common agricultural policy. It costs far too much." We did not hear a single word about how that was to be done, not even from Labour spokesmen during the previous debate. We must face the fact that it is not an easy matter. It is certainly impossible to reform the common agricultural policy quickly. The Paymaster General was fair to say earlier that expenditure on the CAP has dropped quite dramatically and that although the reforms that have been instituted are slow, they are beginning to have an effect. People who claim that, somehow or other, one can wave a magic wand and reform the common agricultural policy, just like that, are living in cloud cuckoo land. Political pressures make it impossible. The complications of social and rural support, which feed through the CAP, make it impossible. We all agree that we should move towards reform, but it is wrong for any speaker to suggest that there is some quick fix which will take us out of the situation. There is not.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby 10:58 pm, 28th November 1994

I understand that it is Labour party policy to reform the common agricultural policy, although the party has not put a date on it.

I do not want to give now the speech that I was unable to give in the previous debate, because that would be out of order, Mr. Deputy Speaker, even though I might have brought the Government to their knees if I had been able to give it in the previous debate. I must say, however, that all the pressure, all the arm-twisting, all the panic, all the exaggeration and all the ability that the Government have, in their usual fashion, to turn a difficulty into a disaster, misapplied in the previous debate, have brought us to this mish-mash of rubbish and rhubarb in the relevant documents.

The Minister cannot even be bothered to give us an opening speech to justify, to defend or to explain. It is disgraceful that, after all that went before, when we come to the detailed application of the money to which the Government have just been coercing the House to agree, they cannot be bothered to explain where it is going. The Minister had to have his speech drafted for him during this debate by civil servants in the Box, have it ferried over so that he could skim through it—as he is doing—and learn it off by heart so that he could give us some shambles of an explanation at the end of the debate. It is a disgraceful performance.

My hon. Friend the Member for Durham, North-West (Ms Armstrong) on the Opposition Front Bench coped brilliantly, but she should never have been put in that position. The House should not have been put in that position by the Minister's inconsiderate approach to this matter.

Photo of Mr Peter Brooke Mr Peter Brooke , City of London and Westminster South

The hon. Gentleman would be the first to acknowledge, as a veteran in these matters, that his hon. Friend the Member for Durham, North-West (Ms Armstrong) did not portray total familiarity with the procedures relating to the budget, when she consistently referred to the Chancellor. Those of us like the hon. Gentleman know perfectly well that another Minister takes the Budget Council.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

The right hon. Gentleman does a competent job defending the incompetence of his own Front-Bench spokesmen. However, the Minister was there to give us an explanation. He did not and, in failing to do so, he did not give my hon. Friend any of the material that a Front-Bench speaker normally expects to be able to bite on, rebut and reply to during his or her speech. That is a failure. There is no point in excusing it. A different Minister may be concerned, but the Paymaster General is on the Government Front Bench at the moment and that is all that we can go by.

It is very difficult to follow a budget on this scale, especially when the explanations given by the Government are so slipshod as to get the wrong date for the Council of Ministers. It is also difficult because so much of what we are asked to follow is hypothetical. The European Parliament has not yet deliberated on the matter. We do not know what it will include in the course of its deliberations. I notice that in the Government's explanatory memorandum on the budget on 14 November, they tell us: The Government notes that the European Parliament has proposed the creation of a Chapter to deal with expenditure under the second pillar (Common Foreign and Security Policy) which might be funded from the Community budget. Here is potentially enormous expenditure, which we are asked to note that the European Parliament may well include when it comes to its deliberations in December. It is an enormous issue and we are just given this casual explanation: The Government considers that this prejudges the results of negotiations with the European Parliament on the budgetary mechanisms for those actions under the Second Pillar which are to be funded from the Community budget. The Government will therefore seek to ensure that the Council returns at its second reading to the budgetary structure contained in its Draft Budget. In other words, there is a huge hypothetical area, in which the Government are arguing on one side, the European Parliament is arguing on the other and we are asked to debate it today on the basis of total ignorance and this pathetic explanation.

Another difference is emerging on the expenditures that have been frozen at the VAT rate of 1.21 per cent., over 1.2 per cent., by the European Parliament which can be put back by the Parliament at a later stage. What is the size of those items which are to be put back? What will be produced by the advent of newcomers—probably three, possibly four? Again, there was no explanation and no allowance' made in the budget, although the European Parliament wanted to put it in. The Council of Ministers refused to give it the ability to do so.

Again, something that will affect the scale of expenditure and the scale of everybody else's contributions is left there hanging, a great open question still to be decided. That is an incredible way in which to formulate a budget. How can we in this House, having witnessed the drama and arm-squeezing which went before, be asked now to discuss intelligently—which the Government would presumably like us to do—a budget that has great gaping holes and hypothetical aspects to it? Indeed, the expenditure limit of 1.2 per cent., I note from the budget documents, is not to be exceeded. The limit is to be reached at 1.1999 per cent. recurring. The calculations are so precise that the figure can be set at 1.1999 per cent. recurring. That figure is totally hypothetical, and that is the usual method of fiddling accounts in the Community.

The limits are always exceeded in practice and there is then an elaborate procedure of accountancy devices—which the hon. Member for Beaconsfield (Mr. Smith) could explain for us if he were to bring his accountancy ability to bear on the budget—so the Commission and the Council can fiddle the figures through, through various loopholes. This is not a budget; it is a "bludget". The Government will be bludging all next year to turn the documents into something that amounts to sense.

I object to the basis on which the budget figures have been prepared. There is an elaborate system, of bribing countries, particularly the three Mediterranean states of Greece, Spain and Portugal, and Ireland, with our money to accede to strengthening the process of union at our expense. The cliffhanger over the own resources decision with Italy and Spain is typical of the process.

When the Minister replies to the debate in an informed fashion—now that he has written his speech and given it some coherence that it did not have at the start of the debate—I hope that he will explain the effect of that blackmail in respect of the own resources decision. Italy and Spain have been allowed to get away with a reduced payback after the fiddle on the milk quotas. After starting off all bluster and saying that the money had to be paid back in full, the Chancellor of the Exchequer climbed down and agreed that it did not have to be paid back in full. He said that that was more efficient than proceeding through the European Court of Justice to prosecute those countries.

Have those paybacks been made? Has the money been paid over by Italy and Spain to the Community? What is the effect of that recoupment on the budget? Where does it feature? How can we trace what has happened to that money? The issue sets a most undesirable precedent of blackmail by refusing to agree to budget provisions, in this case to the own resources decision, unless concessions are made for derelictions in other areas. That is the undesirable principle of blackmail on which the decision was based.

I am amazed that a Government who are so strict and stringent about public expenditure that they are hounding single-parent families and social security beneficiaries, and are cutting Government expenditure in every way possible, are so lax when it comes to major items amounting to millions of pounds in respect of the basis on which the budget is drawn up.

I cannot see how the Chancellor could give us the exact estimates, which he set out in the letter that he sent to all hon. Members, of exactly what the Edinburgh agreement was going to mean in terms of extra contributions by Britain based on the hypothetical figures in the budget. We do not know how many states will be contributing to it or what the basis of the contributions will be. We do not know what qualifications the European Parliament is going to make, but the Chancellor can purport to give us an exact figure for our contribution. It is impossible for that figure to be given.

The fourth paragraph of the explanatory and financial memorandum on the European Communities (Finance) Bill states: The new Decision also provides for the continuation of the abatement mechanism whereby the United Kingdom benefits from a correction in respect of budgetary imbalances. Why should such a provision by included in the Bill? I thought that this correction mechanism and abatement procedure could be withdrawn only on the principle of unanimity in the Council. We are certainly not going to agree to its being withdrawn. Why does it have to be there, specified in that fashion?

The next matter is the nature of the GNP contribution, which, as I understand it, is a fallback position if the own resources contribution is not adequate to cover the budget expenditures. The GNP-raised contribution is specified in the European Communities (Finance) Bill. Perhaps the Minister will explain how that emerges in the budget documents. It is a variable. It rises and falls with the own resources contribution. Is it going to rise, or is it going to fall? If it rises, presumably it will benefit us as a country with one of the lower GNPs. How is that mechanism provided for in the budget documents?

The Minister, having prepared his speech, should be prepared to answer those questions. We need his guidance on them, given the size of the pile of documents and the hypothetical nature of the budget that we are asked to discuss. I should very much appreciate his guidance, particularly on those two matters.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington 11:10 pm, 28th November 1994

I intervene briefly to question the procedure that is being used this evening. I do not know whether right hon. and hon. Members have considered the 23rd report from the Select Committee on European Legislation, but the House would do well to dwell on paragraph 1.8, which states: The budget clearly raises matters of political importance and, as in previous years, we recommend further consideration on the Floor of the House, rather than in European Standing Committee B. We trust that this year the debate will be arranged to allow the House to examine the budget properly and not, as was the case in 1993, by means of a late debate on a grossly overloaded Motion. I do not regard that as scrutiny. I cannot believe that any Member of the House of Commons could suggest that what is happening in this debate is detailed scrutiny of those important budget papers. I regret that the Committee took the decision to refer the matter to the Floor of the House. It was in error. It has denied the House the opportunity of scrutinising the matter in Committee. May I explain why.

We are dealing with budgetary headings. The Minister knows that that is the soft option for Ministers. The scrutiny in a Scrutiny Committee or in European Standing Committee A or B is such that Ministers can be constantly pressed on the detail of documents placed before those Committees. In many ways, reputations are made by Ministers in those Committees, which, I understand, are described by Ministers as the most difficult proceedings of the House of Commons to handle because they require extraordinary knowledge of a subject. Clearly, Ministers do not wish to be caught out by Opposition or Conservative Back Benchers.

What we have tonight is second-best procedure and no scrutiny. We have now spent several hours debating this aspect of the legislation, with its implications for the budget, recognising that the public expect us to consider such matters in far greater detail.

As someone who has supported the Community all my adult life, certainly since the age of 14, I have been an impassioned supporter of the Community, which is now the Union. For the first time in my life, having spent all those years arguing, I desperately wanted to vote the way I did this evening because of budgetary considerations, not because of its being a motion of confidence, but because those who support the Community must realise that, unless we sort out problems now, if we are confronted by a referendum in years to come, we will lose on the referendum. The British public will make up their minds on the basis of whether the Community's problems of fraud have been dealt with.

It is only by adopting the right procedure in considering budgets that Ministers can go to Council of Ministers meetings, reinforced and armed with the facts, to argue the reservations expressed in the British House of Commons. By adopting this procedure tonight, first, we undermine even further the prospect of that greater union that many of us support; and, secondly, we undermine the credibility of this place.

Photo of David Heathcoat-Amory David Heathcoat-Amory , Wells 11:14 pm, 28th November 1994

The motion in this important scrutiny debate is, inevitably, rather long because it refers to many papers which are already available to the House. The budgetary process is extremely complex: we move from a preliminary draft Budget early in the year, to a draft Budget which is then amended and which, in time, receives a first reading and then a second reading.

That process is by no means complete. The budgetary Council, which I attended recently, amended the European Parliament's budget. Those amendments have now gone back to the European Parliament and a final resolution of the 1995 budget is expected on or about 15 December.

The budget authority for the European Union is the Council and the European Parliament. Generally, the Council of Ministers has the final say over the obligatory side of the budget, which is chiefly agricultural expenditure; whereas, for many years, the European Parliament has had the final word on non-obligatory expenditure. That has become more important over the years as the proportion of the budget taken by agricultural expenditure has dropped from well over two thirds to its present level of about half.

Throughout that long process, the Government have kept the House of Commons informed through a series of explanatory memorandums. I pay tribute to the Committee responsible for scrutiny for the forbearance with which it received and digested these inevitably complex documents and, where necessary, made them available for debate in the House.

The point is well made by the hon. Member for Workington (Mr. Campbell-Savours) that it is difficult to address these complex matters in the Chamber with the requisite degree of detail. That is why we rely on the Committees which sit outside the Chamber to do a great deal of the detailed work.

Throughout the budgetary process, the Government aim to ensure that budgetary discipline is maintained within the limits of the financial perspective and also, perhaps more importantly, the existing own resources ceiling. The House debated the own resources ceiling and the change to it, consequential on the decision of the Edinburgh Council, earlier this evening.

We believe that the Community budget should be subject to exactly the same restraints as the national budget of each member state. The Government believe that the Council's second reading draft budget is acceptable. Under it, commitments will increase by 3.4 per cent. on 1994 and payments will increase by 2.8 per cent. That implies real growth of about 0.5 per cent.

The Council was right to reject the European Parliament's approach to enlargement and the new anticipated own resources decision. The European Parliament was anxious to take account in advance of the Edinburgh decision—the 1.21 per cent. of contributions—even before national Parliaments had,approved them. That would have been resented certainly by the House and by the Parliaments of other member states.

We believe that when approval is complete in each member state, but not before then, it will be appropriate to move to the 1.21 per cent. ceiling. The Council of Ministers was adamant in bringing forward the 1975 budget on the basis of the existing own resources decision.

We all hope that the Union will enlarge on 1 January next year to include Austria, Sweden, Finland and, we hope, Norway, although the referendum this evening may point otherwise. We do not yet know. Again, we think that it is wrong to anticipate the extra resources that would be brought in by the new member states. If and when some or all the states join on time, amended budgets will be required.

The hon. Member for Durham, North-West (Ms Armstrong), who leads for the Opposition, raised the issue of agricultural expenditure. The Government are certain that the agricultural guideline must not be exceeded. To remind the House, it is a feature of the existing budgetary arrangement that expenditure on agriculture cannot rise by more than 74 per cent. of the growth in Community gross national product. Therefore, the proportion of the budget contributed to agriculture falls through time. That is a very effective discipline.

Naturally, some member states and some interest groups within member states would like that guideline to be exceeded. When the 1994 budget was discussed, there was evidence that the guideline was being breached. However, I am happy to report to the House that it is likely that there will be an underspend on agriculture in the current year.

I am aware of comments made in this debate and the earlier one about agriculture and common agricultural policy reform in general. I can only repeat that no Government have worked harder or more consistently for sensible reform of the CAP than the present one. The MacSharry reforms, which were agreed in 1992, will gradually reduce the level of producer prices. That will bring relief to consumers throughout the European Union. The reforms will also reduce the problem of surpluses and gradually narrow the gap between Community agricultural prices and world prices. Indeed, the gap has already narrowed substantially for commodities such as wheat.

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

I wonder if the Minister will help us by explaining why, when the Council agreed to spend to the guaranteed level in agriculture, the Parliament felt that it was possible to budget for an underspend lower than the level to which he referred, but the Council said no and wanted spending to go right up to the level?

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

As I have explained, the position of the Government is that agricultural budgetary expenditure should be set at the guideline. A great many interest groups, particularly in other member states, believe that that is an almost ferocious discipline which is likely to be exceeded. We say that expenditure must be accommodated within revenue and that revenue cannot accommodate all expenditure.

It is perfectly true—I think that this is the point to which the hon. Member for Durham, North-West alludes—that the European Parliament consistently tries to bring down agricultural expenditure, over which it does not have final control, not, I am afraid, to save money for the taxpayers of the European Union, but to spend any money saved from the budget 6n its own projects on the non-obligatory side of the EC budget—items such as internal expenditure, aid, research and development and other categories.

Other hon. Members mentioned fraud. I do not need to repeat how seriously the Government take that issue and the more general one of the need for financial discipline and an end to the all too prevalent financial mismanagement of some sectors of the budget.

That is achieved only in part by spending more money on anti-fraud activities. The right response to a problem is not always spending money on it. It would be best to build better preventive measures against fraud into the structures of the Community—clearer legislation, more transparent regulations and pre-expenditure checks. We have already ensured that the new regulations governing structural and cohesion fund expenditure contain requirements for value for money and better monitoring and scrutiny.

In answer to the question whether the United Kingdom takes up money available for anti-fraud activities, yes we do, but not simply because the money is available. We do so only where we believe that there is demonstrably added value. It would not be sensible to take already well-trained customs officials off duty simply to put them through a Euro-training course because the money is available, especially as that might take money that could be better spent in some of the other member states, where larger amounts of fraud have been discovered.

The hon. Member for Great Grimsby (Mr. Mitchell) mentioned milk quotas and the court case that Britain launched against the Commission over its proposed relief for Italy and Spain because of over-production of milk in earlier years. Only the British Government launched that case. Others may talk about budgetary discipline, but the British Government act. We were alone in launching that case and I am glad to remind the House—my right hon. and learned Friend the Chancellor of the Exchequer has already argued this strongly today—that the case was settled on our terms. The Governments of Italy, Spain and, to a lesser extent, Greece will have to pay back a £2.5 billion fine.

The hon. Member for Great Grimsby also mentioned the abatement. It is true that we take extremely seriously any threat to the British abatement, which has clawed back about £16 billion since it was negotiated by Lady Thatcher at Fontainebleau. Although the Labour party may have huffed and puffed before then about the need for an abatement, when Labour was last in office it did not get back one penny piece by way of rebate from the European Community. It took the advent of a Conservative Government in 1979 to start getting rebates. That was regularised at Fontainebleau in 1984. Others may talk about rebates; we delivered one.

In answer to the hon. Member for Great Grimsby, 1999 is a significant date only because the existing new own resources decision, which the House debated earlier, runs from 1992 to 1999. At that point, there will be an entire renegotiation of the own resources decision, just as there was at Edinburgh in 1992.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

Is not the reality of the abatement that because of its existence, Britain effectively has a back seat in dealing credibly with the fraud in the European Community? Although we want and need the money, is not the truth that if we did not have the abatement our whole attitude to European finances would be very different? We would be very much in the front lines, and we may well have driven through much-needed reforms and made the Community a far more credible place than it is today.

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

I need no such incentive to pursue the matters of fraud and mismanagement. Even with the British abatement, we are substantial net contributors to the European budget, as the House well knows.

The hon. Gentleman makes one good point, which is that the fact of a member state becoming a net contributor has a dramatic effect on its attitude to the European budget. That is why a very important feature of the recent own resources decision, which was debated earlier today, is that we are now being joined as net contributors by many other member states. Of course, Germany is by far and away the largest net contributor, and the gap between Germany and other member states will widen in the remaining years of this century. But in addition to the UK, the French are now very substantial regular net contributors. In terms of contributions per head of population, we have been overtaken by the Netherlands, and when Sweden and Austria join, they, too, will be contributing more per head than we are.

Italy is a most interesting case. It is now a net contributor and that has had a startling effect on the attitude of Italian Ministers regarding the whole question of financial discipline and the need for it in the Council of Ministers. We are now being joined by many other member states which share our preoccupations with the need for financial restraint and for a crackdown on fraud.

The final point that I must make to the hon. Member for Great Grimsby is that although all the matters will be renegotiated in 1999 just as they were in 1992, we cannot have the British abatement removed from us except by unanimity. Just as this Bill, which sets the new own resources figure for 1992 to 1999, was brought before the House by primary legislation, so it will be that in 1999 another Bill will be brought before the House. Effectively, it is not only the Government who have a veto over any change to the British abatement, but the House of Commons. I hope that the hon. Gentleman will be reassured by that.

Finally, I turn to the advent of other member states and whether they will upset or alter the budget for 1995. I can confirm to the House that the figures in the explanatory memorandum are based on a Community of 12. If, as we hope, the Community enlarges next year, additional resources will be available. During discussions on the European Union (Accessions) Bill, I stated that there would be a net benefit to the UK from the resources brought into the Community by those states, and I remember mentioning a figure of some £300 million. The figures that we have at the moment are the most pessimistic available. If enlargement takes place, they could marginally improve.

Question put and agreed to.
Resolved,That this House takes note of European Community Documents Nos. COM(94)400, the Preliminary Draft General Budget of the European Communities for 1995; 8782/94, the Draft General Budget of the European Communities for 1995; the proposals contained in the unnumbered document: European Parliament Minutes for the Sitting of 27th October 1994 relating to the Draft General Budget for the European Union for the Financial Year 1995; the unnumbered Explanatory Memorandum submitted by HM Treasury on 23rd November, relating to the Council's decisions on the European Parliament's proposed amendments and modifications to the Draft General Budget for 1995; and European Community Document No. 9943/94, relating to the adjustment of the Financial Perspective with a view to enlargement; and supports the Government's efforts to maintain budget discipline.