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Question put and agreed to.


That, for the purposes of any Act resulting from the National Health Service and Community Care Bill, it is expedient to authorise the payment out of money provided by Parliament of--

(a) any sums required by the Secretary of State for making loans to a National Health Service trust,

(b) any sums required by the Secretary of State for fulfilling a guarantee of a sum borrowed by a National Health Service trust, (

(c) any amount paid as public dividend capital under any provision of that Act,

(d) any expenses of the Secretary of State under that Act, and (

(e) any increase attributable to that Act in the sums so payable under any other enactment.



That, for the purposes of any Act resulting from the National Health Service and Community Care Bill, it is expedient to authorise--

(1) the imposition of charges to value added tax by a provision relating to the treatment of National Health Service trusts for the purposes of section 27(4) of the Value Added Tax Act 1983 ; (

(2) payments into the Consolidated Fund.-- [Mr. Chapman.]

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European Communities (Budget)

[Relevant documents : European Community Documents Nos. 8848/89, Letter of Amendment No. 1 to the Preliminary Draft Budget of the European Communities for 1990 and 9627/89, Letter of Amendment No.2 to the Preliminary Draft Budget]

10.59 pm

The Economic Secretary to the Treasury (Mr. Richard Ryder) : I beg to move,

That this House takes note of European Community Documents Nos. COM(89) 175, the Preliminary Draft Budget of the European Communities for 1990, 8271/89, the Draft Budget of the European Communities for 1990, and 9704/89 and the Supplementary Explanatory Memorandum submitted by Her Majesty's Treasury on 6th December 1989 relating to the European Parliament's proposed amendments and modifications to the Draft Budget ; and welcomes the impact on the 1990 Budget of the new arrangements for budgetary discipline agreed at the European Council in February 1988.

Mr. Deputy Speaker (Sir Paul Dean) : Mr. Speaker has not selected either amendment.

Mr. Tony Marlow (Northampton, North) : On a point of order, Mr. Deputy Speaker. You will be aware that there is a very important amendment on the Order Paper in the name of the leader of the Liberal party. You will also be aware that the leader of the Liberal party made a very passionate intervention on a point of order earlier today about the importance of this great debate in terms of the strategy of the European Community. As he is not in the Chamber yet, although it is obvious that he will arrive at some stage, is there some way in which we can delay the commencement of the debate until he arrives?

Mr. Deputy Speaker : I do not think that that would be at all popular with the House. As I have already said, Mr. Speaker has not selected either amendment.

Mr. Ryder : Earlier today I spoke to a Liberal supporter who told me that at the next general election their slogan will be "We're all mild about Paddy."

The European Community is central to Britain's foreign policy. Since 1979, the Conservative Government have been playing an active role in the Community's affairs. Today, Britain leads the way in searching out practical solutions to the practical problems that confront Europe and the European Community. Not least because we are the second largest net contributor to the Community budget, our political commitment to the Community is backed by a firm financial one.

Mr. A. J. Beith (Berwick-upon-Tweed) : Does the Minister regard the exchange rate mechanism of the European monetary system as a practical way of tackling the problems faced by the Community? Why is Britain not taking a lead in that?

Mr. Ryder : That particular point is not central to the budget. However, I reaffirm, no doubt much to the hon. Gentleman's surprise, that the Government have committed themselves to entering the European monetary system once the Madrid conditions are met. The question is not whether we shall enter the ERM, but when.

Mr. Marlow : My hon. Friend the Minister said that we are the second largest net contributor to the Community budget. We are all aware of the historic efforts of my right hon. Friend the Prime Minister in reducing the United

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Kingdom's contributions some years ago. However, we are now net importers of European agricultural services and massive net importers of European industrial products. As I understand it, we are still contributing a massive £2,000 million to the European budget next year. That is obviously wrong. What are the Government going to do to ensure that our budget contribution is reduced to a much more modest figure, in keeping with the other benefits that we provide for other Community nations?

Mr. Ryder : But for the efforts of my right hon. Friend the Prime Minister the present position with regard to the budget would be even worse for this country.

Not long ago the common agricultural policy was out of control, the finances were chaotic and the budget had huge imbalances. The food mountains were piling up and the single European market was no more than a dream. Today's Community is no longer crippled by those problems. Reforms, proposed and supported by Britain, have transformed the Community so that today the Community budget is in surplus and agricultural expenditure in 1988 is estimated to have been some £750 million below the ceiling agreed.

Britain pays a much fairer share to the Community budget. Rebates likely to amount to £10 billion by the end of 1990 have put an end to the grossly inequitable contributions passed on to us by the previous Labour Government. The food mountains are dwindling fast, too, as the CAP comes under better control. The completion of the single market has moved from near the bottom of the Community's agenda to the top with a firm deadline for completion. As Jacques Delors stressed in his report at Strasbourg last week, of the 88 single market directives that should have cleared all legislative hurdles, Britain has passed 69. Our record is better than that of any country except Denmark, and it once again underlines the need to judge a country's commitment to the European Community as much by its deeds as by some of the claims that emanate from European capitals.

Mr. Rupert Allason (Torbay) : Will my hon. Friend confirm that, although the United Kingdom has passed 69 such directives into law, the European Community average is nearer 35?

Mr. Ryder : Unhappily, I confirm that. Jacques Delors talked about it when he gave his report to the Strasbourg summit last week. Mr. Marlow rose --

Mr. Ryder : I have given way once to my hon. Friend. I know that several hon. Members on both sides of the House wish to speak, but I will give way once more ; then I must proceed with my speech.

Mr. Marlow : My hon. Friend has said, rightly, how much better we are as Europeans than are other Community countries, but--sadly--we are not one of the wealthiest Community countries. Can my hon. Friend explain why we are still a massive contributor to the European Community budget? That seems most unfair.

Mr. Ryder : If my hon. Friend will allow me to proceed, the answer will become apparent to him.

This year's budget procedure has been overshadowed by the Community's commitment to underpin economic and social developments in Poland and Hungary. It is encouraging that the Budget Council has been able to

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respond promptly and generously, while at the same time respecting the budgetary rules and parameters that were put in place after the February 1988 session of the European Council. Today's debate provides a useful opportunity to review how the new arrangements for budgetary discipline have been working, and how they have coped with developments in eastern Europe that could not have been foreseen when they were drawn up.

Two aspects of the arrangements are particularly relevant. First, there is the inter-institutional agreement, or IAA. The House will recall that that is a political agreement under which the Council, the European Parliament and the Commission have bound themselves to respect ceilings for each of the main categories of Community expenditure between 1988 and 1992. Those ceilings are set out in the so-called financial perspective, which was initially drawn up at 1988 prices. A technical revision to update the price base was made in April 1989. The Commission may propose a more substantive revision of the ceilings under article 12 of the IIA ; that requires a qualified majority in the Council and the equivalent in the Parliament. So far no such proposal has been made, but a revision will be needed early next year to allow for Community aid for Poland and Hungary, which was discussed at Strasbourg last week. I shall return to that later in my speech.

Mr. Tam Dalyell (Linlithgow) : Is the Minister aware of the statement by Walter van Dieren, director of the Amsterdam environment and system analysis institute, that five guilders spent in Holland are worth only one guilder spent in eastern Germany? Environmental problems have no frontiers, and therefore expenditure in eastern Germany is more productive for the environment of Holland than is spending in Holland itself. Could that view at least be taken into account?

Mr. Ryder : It is inconceivable that such issues should not be taken into account now that the shape of Europe is beginning to change as a result of the transformation of eastern Europe during the past two or three months.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak) : Will my hon. Friend give way?

Mr. Ryder : I will give way once more, and then I really must proceed apace.

Mr. Beaumont-Dark : I am much obliged to my hon. Friend, who is now dealing with a germane problem with which we are all concerned. A good deal of sentiment--happy sentiment--has been prompted by the fact that the east European community is heading towards democracy. The Common Market, with its usual flabby attitude, talks about the vision splendid and the money that we are all going to give. When I was at the World Bank in late October, however, the experts talked about the need for $40 billion for Poland alone, and $15 billion for Hungary. Now we have Czechoslovakia and East Germany. It is super that they are going to join the free world, but what will two members of the Common Market hegemony--Greece and Portugal-- think if the money that was going to go their way suddenly goes to eastern Europe? Who is going to pay for all these happy, joyful thoughts and items?

Mr. Ryder : The crucial programme for Poland is the IMF programme which my hon. Friend doubtless

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discussed on his recent visit to Washington. That programme is being drawn up at the moment and I understand that an announcement about it will be made in the relatively near future. That is the key programme, but in addition we have believed that direct inward foreign investment into countries such as Poland and Hungary is of greater benefit to them than anything else. When Mr. Walesa was in Britain recently, he met a number of my right hon. Friends and agreed with them that supply side changes and reforms were desperately required in Poland. Indeed, it is inconceivable that the Polish Government will not introduce those supply side measures as a result of the IMF programme that is now being drawn up.

The Council has undertaken to apply the IIA in accordance with paragraph 14 of the conclusions of the February 1988 European Council. This paragraph distinguishes between "privileged" and "non-privileged" expenditure. "Privileged" expenditure includes the structural funds, the research and development framework programme and the integrated Mediterranean programmes. The growth of this category of expenditure between 1988 and 1992 has been pre-ordained by Council decisions. However, for the remainder of non-compulsory expenditure--the "non-privileged" element--the Council has agreed to respect the maximum rate of increase calculated by the Commission at the start of each year's budget procedure, within the framework of article 203(9) of the treaty. The calculated maximum rate for the 1989 budget is 6.1 per cent.

The second aspect of the new budget discipline arrangements about which the House may wish to be reminded was to a large extent a product of our determination to prevent a recurrence of the overspending which brought the Community tottering to the edge of bankruptcy in 1987. I am referring to the financial guideline for agriculture. The guideline sets a legally binding limit on agricultural support expenditure. The annual growth of that limit is confined to 74 per cent. of the rate of growth of Community GNP. The guideline is buttressed by automatic, legally binding stabilisers that trigger price cuts whenever production of the main commodities exceeds maximum quantities set by the Council.

Mr. Teddy Taylor (Southend, East) : Will my hon. Friend give way?

Mr. Ryder : I have given way five times already in a one and a half hour debate. I must proceed with my speech

Mr. Taylor : That is shocking. What happened to cereal stabilisers?

Mr. Ryder : Cumulative expenditure in 1988 and 1989 was over 5 billion ecu below the guideline, and a further large shortfall is in prospect next year.

It may be helpful if I set out a chronology of this year's procedure so far --a ball-by-ball commentary of the highlights of the procedure, as my right hon. Friend the Secretary of State for Northern Ireland used to describe it when he spoke in these debates.

Mr. Bowen Wells (Hertford and Stortford) : On a point of order, Mr. Deputy Speaker. I am sorry to disrupt the Minister's speech, but will he explain some of the technical terms that he is using so that the House can follow? I am sure that you, Mr. Deputy Speaker, are following what my

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hon. Friend is saying, but will he tell me what IAA means and what are obligatory and non-obligatory expenditure, and preferential and non-preferential expenditure? It is not easy for those of us on the Back Benches to follow what is being said.

Mr. Deputy Speaker : I hope that the hon. Gentleman is not asking me to explain these terms. Perhaps the Minister can.

Mr. Ryder : It is just as well that someone explained them to me, Mr. Deputy Speaker. I shall not go into all of them because as I have proceeded through my speech after each term or acronym I have said what it stands for or means. In fact, the IAA is the IIA, which stands for the inter-institutional agreement. The Council begins with the preliminary draft budget-- [Interruption.] For my hon. Friend the Member for Hertford and Stortford (Mr. Wells), that is the PDB, which the Commission presented in July. The PDB was around 4.5 per cent. bigger than the adopted budget for 1989, but it was nonetheless more than 4 billion ecu within the overall ceiling in the financial perspective. Total provision was equivalent to around 1 per cent. of Community GNP and almost 2.5 per cent. of public expenditure by member states.

Two aspects of the PDB exemplified underlying trends in EC expenditure. First, the proportion of the total budget accounted for by expenditure on agricultural market support was down for the second year running. This largely reflected developments in the world market for agricultural produce, but the new budget discipline arrangements have also played an important part. For example, price cuts have been triggered by the automatic stabilisers--3 per cent. cuts in cereals have resulted this year and next.

Secondly, the PDB provided for an increase of over 20 per cent. in expenditure on structural operations and research and development. These areas now account for almost one third of the total budget. I should also mention that the PDB included provision of 70 million ecu for measures to combat fraud. This was further tangible evidence of the Community's new- found determination to root out fraud. The Government spearheaded efforts in Europe to persuade our partners to combat fraud more robustly. That has led to the creation of the anti-fraud co-ordination unit, and anti-fraud cells are now in place in key directorates in Brussels.

The PDB was given a first reading at the Budget Council on 28 July. The United Kingdom argued strongly that the Council should stick rigidly to the letter of the Brussels conclusions and confine the growth of non-privileged DNO to half the calculated maximum rate--to 3.01 per cent. A majority in the Council agreed, and the Commission's proposals were accordingly pruned by around 280 million ecu in commitments and payments. Overall, the draft budget established on 28 July was some 700 million ecu in commitments and 650 million ecu in payments lower than the PDB.

It was at this point that the dramatic developments in eastern Europe started to occupy centre stage in the 1990 budget. In September, the Commission presented a letter of amendment to the 1990 PDB which provided for assistance of 200 million ecu towards the economic restructuring of Poland and Hungary and for a

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Community guarantee for loans to those two countries from the European Investment bank. The 200 million ecu is on top of the emergency food aid package of 100 million ecu which the Community agreed last July. It is intended to cover such things as special import programmes for pesticides, agricultural machinery, business training and environmental improvements.

When drawing up the letter of amendment, the Commission took the view that expenditure on economic aid to Poland and Hungary should be over and above the relevant ceiling in the financial perspective. The Commission accordingly included in the letter a so-called "negative reserve" of 200 million ecu. This was a stopgap measure enabling expenditure on the aid package to go ahead, pending a formal revision of the financial perspective under article 12 of the IIA. The Commission intends to propose such a revision in February next year. Publicly funded aid is by no means a complete solution to the problems of the Polish and Hungarian economies, as I said to my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont -Dark), who has left the Chamber. The crucial role belongs to the private sector. The Government have nonetheless unreservedly welcomed the proposed EC aid package, as well as the fact that the Commission and the Council have managed to respond to those developments within the framework of budget discipline. Thus, when the amending letter was established at ECOFIN on 9 October, the Council made two important statements for the minutes. The first was that it would agree to the proposed revision of the financial perspective for 1990, provided that this was confined to the amount of the aid package for Poland and Hungary. The second was that the application of article 203(9) of the treaty in the 1990 budget procedure would be unaffected by the financing of the aid package. The purpose of this latter statement was to underline the need for genuine co-decision between the Council and the European Parliament on the overall level of DNO in the 1990 budget.

The first letter of amendment was quickly followed by a second one. The purpose was to bring to account 800 million ecu of savings in agricultural expenditure in 1989 that had been transferred to the monetary reserve. The monetary reserve is symmetrical in operation. It allows for expenditure on agricultural support of up to 1,000 million ecu above the guideline if, and only if, that is needed as a result of the ecu appreciating against the dollar. Conversely, budget appropriations of up to 1,000 million ecu which are no longer required because the dollar has appreciated against the ecu must be transferred to the reserve. In 1989 the latter situation has prevailed. The effect has been to create a budget surplus which, when carried forward to 1990, will reduce member states' contributions to the budget for that year.

In fact, the budget surplus in 1989 will be much larger than 800 million ecu, due mainly to underspending on agricultural support which has occurred for reasons other than exchange rate movements. The Commission declined to include this additional amount, which totals over 1 billion ecu, in the second amending letter, and thereby provoked the Council to take action at its second reading of the budget in November. I will come to this in a moment. But the next event in the chronology was the Parliament's first reading of the budget at the end of October.

The Parliament took the view that the current ceilings in the financial perspective could not accommodate the

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expenditure consequences of new legislation which the Community had adopted since 1988. It therefore demanded that the Commission propose a general revision of the financial perspective before the second reading of the budget.

In terms of numbers, the Parliament voted for amendments and modifications, adding over 1.2 billion ecu in commitments and almost 1 billion ecu in payments to the draft budget. Three amendments were especially significant : first, an increase of 100 million ecu in the package of economic assistance for Poland and Hungary ; secondly, the removal of the negative reserve of 200 million ecu to which ECOFIN agreed on 9 October ; and finally, the introduction of a so-called operational reserve of 184 million ecu over and above the relevant ceiling in the financial perspective. All that added up to a bid by the Parliament to increase the ceiling in category 4 of the perspective by 484 million ecu : 300 million ecu for Poland and Hungary and 184 million ecu for the other policies covered by the operational reserve.

The Budget Council on 14 November tried to persuade the Commission to revise its second amending letter by including a reasonable estimate of the agricultural underspending in 1989 stemming from factors other than exchange rate movements. The Commission was unwilling to do that and the Council therefore revised the letter on its own authority. It increased the figure by 1 billion ecu to a total of 1.8 billion ecu. That underlined the important principles that surpluses should be stripped out of the budget as soon as they are identified, and that own resources raised from member states should not exceed the amount strictly necessary to finance the budget.

The Council then turned to the Parliament's amendments and modifications. Its key strategic decision was to resist the Parliament's pressure for an immediate, wide-ranging revision of the financial perspective. In effect, the Council reaffirmed the position which ECOFIN had adopted on 9 October. That was that the revision to the financial perspective for 1990 should take place next February and should be confined to expenditure on aid for Poland and Hungary. The Council did, however, agree to increase the aid package to 300 million ecu as the Parliament had proposed. The intention is that 200 million ecu of that will be inscribed in the 1990 budget before it is adopted, together with the corresponding negative reserve. The remaining 100 million ecu will be provided for in a supplementary budget next spring, following a revision of the financial perspective sufficient to cover the whole of the 300 million ecu, and thereby to cancel the negative reserve.

As regards other DNO, the Council accepted amendments totalling 219 million ecu in commitments and 96 million ecu in payments. That brought the growth of non-privileged DNO in the revised draft budget to a little over 5 per cent., comfortably within the calculated maximum rate of 6.1 per cent.

The upshot of all that is a revised draft budget in which commitments are around 4.6 billion ecu below the overall ceiling in the financial perspective, and in which member states' contributions are equivalent to less than 1 per cent. of Community GNP, compared with the annual sub- ceiling for own resources of 1.18 per cent. We have not yet reached the end of the road. It remains to be seen whether the Parliament, at its second reading later this week, will try once again to push the Council further and faster than it has been prepared to go in

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relation to a revision of the financial perspective. At the very least, the Parliament can be expected to push DNO back up towards the relevant ceilings in the perspective.

The Council for its part has agreed the basis on which the Presidency can enter into a process of co-decision with the Parliament, under article 203(9) of the treaty, to agree the overall growth of DNO in the 1990 budget.

The Parliament's strategy in the 1990 budget has been to try to use the relative depressed level of agricultural spending as a pretext for a major hike in expenditure on other policies. The Parliament has tried to pressurise the Commission and the Council into an immediate revision of the financial perspective to cover aid for Poland and Hungary and a range of new policies for which the Council has allegedly failed to make adequate provision.

Several Hon. Members rose --

Mr. Ryder : I am coming to the end of my remarks and I must press on.

This strategy cannot easily be reconciled with budget discipline. The figures in the financial perspective are ceilings, not entitlements and still less targets. Spending on agriculture is below the relevant ceiling for largely fortuitous reasons, including the continuing effect on world prices of the United States drought in 1988. There is no case for recycling this surplus to other areas of the budget.

Moreover, even the Commission has refused to accept the Parliament's view that insufficient provision has been made for new policies in the 1990 budget. The Parliament is therefore alone in its wish to break through the existing financial perspective for 1990. The budget procedure is always a tortuous affair and this year, as I have explained, has been no exception. The Community's ability to respond to events in eastern Europe must not be stifled by inflexible procedures. That response, however, must not become a pretext for chipping away at the fabric of budget discipline. I believe that the Council has managed to tread the line between these two essentials with some skill. Against that backcloth, I urge the House to agree to the motion.

11.27 pm

Mr. Chris Smith (Islington, South and Finsbury) : Before dealing with the substance of the matters that are before us, perhaps I might be permitted to voice two complaints. My first complaint is about the manner of presentation of European Community budgetary details to the House, which is far from satisfactory. The explanatory memoranda from the Treasury do not explain much. There is a mountain of indigestible paper. Documents are unavailable from the Vote Office until well after they are presented in Brussels or Strasbourg. Even now, we do not have the full details of the most recent Council decisions on the budget. It is surely unsatisfactory that the House should not have the full details when trying to address itself to the extremely important issues that apply to the nature of the budget.

Mr. William Cash (Stafford) : Does the hon. Gentleman agree with my right hon. Friend the Prime Minister in her insistence that there should be political accountability for national parliaments in matters of this sort? If her views were to be agreed within the Community, we would get far more control and better surveillance over these matters.

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Mr. Smith : There is little on which I agree with the Prime Minister. I would wish, however, to see the action of Ministers from national parliaments in the Council of Ministers being much more readily accountable to the national parliaments.

It seems that there is a lack of proper time--this is my second complaint-- fully to debate these issues in the House. The budget has already gone to the Commission, to the Council, to the Parliament and back again. It is due for final decision by the European Parliament on Wednesday. Ministers have given their views and contributed to decisions at the Council of Ministers, and only now do we in our Parliament have a chance to discuss, and then only in a relatively academic manner, the decisions that are being taken. There must be a better way of going about the process.

From the point of view of the Opposition, there are some welcome features to the budget, and I shall draw attention to three in particular. First, the overall expenditure figures have been kept well within the ceilings imposed by the inter-institutional agreement and the financial perspective. The perspective imposes a discipline, especially on agricultural expenditure. It has its drawbacks, but the whole picture makes for an increase well below our rate of inflation. That perhaps says more about our rate of inflation than it does about the financial discipline imposed. We welcome the seriousness of approach that all parties have used in drawing up the budget. The second feature to welcome is that the budget represents, whatever the Government may try to say, a shift in the balance of expenditure. There will be in the coming year less spending on agricultural guarantees and more on such sectors as regional aid, research and development and the social fund. That shift in expenditure priority within the Community budget is welcome. The decrease in the agricultural expenditure has come partly through the favourable position of the ecu in relation to the dollar, partly through changes in patterns of food consumption and production around the world, and partly as a result of some of the disciplines imposed by the financial perspective.

The improvements in expenditure on a number of social matters are those that even the Council of Ministers identified as its priorities from the outset, in sectors of expenditure such as the environment, education, research and international aid. The European Parliament added others, and from our point of view the more that the Community moves away from budgets overwhelmingly dominated by the CAP, the better.

The third point to welcome in the budget is that, from the early stages of the budget-making process, everyone has agreed that substantial economic aid should be made available for Poland and Hungary. With the enormous and exciting changes that have been taking place in eastern Europe in the past few months, it is surely important that the European Community--not just the national Governments of the Community, but the Community as a body-- plays its part in supporting and facilitating those changes.

We shared the doubts of the Government and the European Parliament about the device of a negative reserve--a suggestion put forward by the Commission. This was an attempt to get round the constraints of the financial perspective that militate against unexpected and major items of essential spending that become needed

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during the course of the budget-making process. It was an unattractive way to go about solving that problem. The Council now appears to have decided on a revision of the financial perspective, to allow an increase at a later stage. It is a better way to do it, although we would have preferred a change to have occurred now so that the money could have been committed immediately. As a result of the Strasbourg meeting over the weekend, the one point on which all the Twelve seemed to be unanimously agreed was that a new financial framework should be established to assist and provide economic aid to the whole of eastern Europe as it democratises. How will this new financial framework mesh with the provisions of the budget? That question is important even if the precise details of the framework proposed at Strasbourg have not yet been worked out.

I must ask a further question of the Government because the explanatory memorandum and the details from the recent Council of Ministers is unclear. The European Parliament recommended a budget total of 49,397 million ecu in commitments and 47,132 million ecu in payment. The Council has agreed to commitments totalling 48,375 million ecu and to payments totalling 46,200 ecu. That represents a cut in the European Parliament's recommendations of about 1 billion ecu in each category. We have to ask, since we have not yet been given the full information by the Council of Ministers, where the cuts are to be made. The Economic Secretary said that it was allowing only some 240 million ecu and 96 million ecu, respectively, of the European Parliament's recommended additional expenditure. It would be useful to know in more detail what items the Council agrees to and what items it is cutting from the European Parliament's recommended items of expenditure.

I hope that cuts will not be made in some of the progressive proposals that are to be found under the new policy and non-privileged headings that have been put forward by the European Parliament. I draw the Minister's attention to a few of the specific items of expenditure that were recommended by the European Parliament. They represent initiatives, ideas and programmes that this country sorely needs and that we shall not get from our Government. Under amendment No. 623 there is support for improvements in transport infrastructure. Under amendment No. 625 there is support for training in new technologies and for bringing together universities and industry in new training initiatives.

It is worth noting the European Parliament's comments, because it describes exactly Britain's needs when it states :

"Several regions of the Community have been affected by acute skill shortages which limit their prospects for future economic growth even though there is unemployment in these regions. These facts point to a mismatch of vocational training and the needs of industry in these areas."

That precisely describes one of the central problems of the British economy. The European Parliament has proposed a number of extremely important initiatives to tackle it.

Amendment No. 630 provides for assisting moves towards a more social Europe and the implementation of the social charter, which would provide enormous benefits in terms of the smooth working of British industry and better labour relations. Amendment No. 654 provides for a highly imaginative programme to regulate the trade in tropical hardwoods and to encourage tropical forest

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management and conservation in developing countries. That is a much-neglected area that greatly needs support and assistance. Many other progressive and imaginative examples could be cited. The European Parliament was frequently supported by Conservative MEPs. It was proposed that these initiatives should be added to the budget. I hope that the British Government will not join the Council of Ministers in its attempt to scrap many of these extremely important initiatives.

While taking note of the documents and the budget proposals, it is worth remarking on the Government's lack of constructive thinking about the opportunities that developments in the European Community and beyond its eastern borders are opening up. If only our Government were willing to enter into prudent but constructive negotiations about membership of the exchange rate mechanism, if only they were able to embrace the social charter, because of the positive benefits that it could provide, if only, while acknowledging, as we do, the profound imperfections of stages 2 and 3 of Delors, they were willing to come forward with more positive proposals than the rather daft idea of equal validity for 12 circulating and competing currencies, andif only they were prepared to be more constructive, perhaps we would have a more powerful voice and a greater influence on the forward movement of the Community and a better chance to create new links with the East. In the meantime, we can welcome many of the budget proposals as steps in the right direction. However, I fear that our own Government still have a great deal to learn about the budget and the progress of Europe.

11.40 pm

Sir Richard Body (Holland with Boston) : The hon. Member for Islington, South and Finsbury (Mr. Smith) spoiled his speech by decrying what the Government have been doing in the Community in the past few years. He should remember that we are one of the two principal paymasters of the Community and, as such, we should have some right to express our views a little more loudly than some. That applies particularly to the draft budget.

It is a bad budget and it will always be bad so long as agriculture is treated in the wrong way. My hon. Friend the Minister said that agricultural expenditure is under control. That is true when one considers the total figure which has shown a slight decline, but I draw his attention to the proportion of the budget spent on the guarantee section and the guidance section. The guarantee section receives 57 per cent. and the guidance section receives 3.5 per cent. and has been pegged at roughly the same figure for many years. It is wrong that we are holding down the guidance section at the same time as the guarantee section. That is a clear contradiction. If we are to have a common agricultural policy there is some sense in having a guidance section to enable farmers to adapt, to allow them money to farm with regard to the environment and for other noteworthy purposes of which my hon. Friend has had great experience. But it is wrong to maintain the level of expenditure on guarantees. The purpose of a guaranteed price is to goad farmers into producing more. If it does not have that effect it has no effect at all because a guarantee must be above that market price. Once again the budget is putting the farmers of the Community into an intolerable

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position. It is goading farmers into producing more with guaranteed prices and maintaining the same proportion of expenditure as before, yet at the same time it is doing nothing to make life easier for them by increasing the money available in the guidance fund.

I hope that my hon. Friend will take one message with him. As one of the two principal paymasters of that policy, we should raise our voice and say that it is not fair on the farmers, the taxpayers or the consumers. It is not fair on millions of people, particularly in the Third world, who have to compete in the world market against dumped commodities and excessively high duties on imports from the Third world into the Community.

My hon. Friend the Minister dealt rather hastily with agricultural spending. I hope that he will not forget that only a few days ago the Council of Ministers showed its true colours in its attitude to agricultural expenditure by disregarding stabilisers for cereals. We were given to understand that they would be binding and that there would be no more nonsense about cereals, yet only a few days ago they were disregarded, at a cost of £38 million. We may say that £38 million is neither here nor there in a budget of this size, but it shows the attitude of the Council of Ministers, which the House should thoroughly deplore. As one of the two paymasters of the Community, we should raise our voice and say, "It is not good enough."

11.45 pm

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