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Mr. A. J. Beith (Berwick-upon-Tweed) : A little earlier in the debate your assistance, Mr. Deputy Speaker, was sought to elucidate some of the terms being used by the Minister. That was, perhaps, an unfair burden to place on you. These debates could be conducted with a little less use of the jargon and abbreviations that pass in the European Community. Such habits are probably unwelcome to most citizens of the Community, and are a product of the bureaucracy at the centre. There is no need to talk about mecus, becus, IIAs and DNOs to such an extent that nobody has the faintest idea what is going on, least of all those who are responsible for scrutiny of these proceedings. Those outside the House and the European Parliament can hardly be expected to follow them, so let us do our best to reduce them to sensible and intelligible terms.

I want to refer particularly to some of the main features of the recent budget discussions, of which perhaps the most significant and widely reported was the assistance to eastern Europe. The Minister decried on the strictest budgetary grounds the transfer of any surplus in the Community's budget to any other activity, yet he acknowledged that the position in Poland and Hungary justified significant expenditure, which would not have been possible had the surplus in the budget not arisen. He did not try to argue against what Parliament and the Council have supported. Like most other people in the country, hon. Members support that, although I heard one or two murmurs of criticism from hon. Members, one of whom is no longer present.

It is clearly in the interests of democratic western Europe that the processes of economic recovery and democratic change in eastern Europe do not collapse because of an economic crisis. It is in the long-term trading interests of western Europe that it should have viable trading partners in eastern Europe as well as, we hope one day, viable partners in democracy. The moves in that

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direction have gathered pace quite remarkably since the new budgetary provisions were made, which has led to questions being asked about Czechoslovakia and East Germany, which are different in their economic character and achievement from Poland and Hungary, so the same considerations do not apply. The need for western Europe to have regard to the problems in eastern Europe is no less, despite that.

Questions are now being asked about the Baltic states and the Soviet republics and our attitude to their needs. Their economic and democratic needs seem to come to light simultaneously. The possibility of further developments was clearly recognised at the summit.

It would be helpful if the Minister said a little more about the European Bank for Reconstruction and Development, about which a major decision was made at the weekend, with the idea that negotiations about it may begin in January 1990. It will clearly have long-term budgetary implications and many other implications. The Council will receive support for what it is trying to do across the Community, but we need to know a little more about what is planned.

Mr. Ian Taylor (Esher) : I have closely followed the hon. Gentleman's comments. He is right to say that we must do as much as possible to help eastern Europe. The European Commission is already co- ordinating many measures, including aid from the 24 countries, as agreed at the Paris summit. I hope that the hon. Gentleman did not imply that part of that process could be a reallocation of any savings on the agricultural budget. It would seem to be an important principle that that is not redistributed and that it becomes part of a separate decision in the Council as to whether any extra funds should be devoted to eastern Europe.

Mr. Beith : I am strongly in favour of the most careful examination of what is done with surpluses that arise from the budget and the application of budgetary disciplines. At different stages, the Parliament, Commission and Council have become committed to expenditure for eastern Europe which would otherwise have had to be financed by new contributions from member countries. As the Minister explained, the reasons had nothing to do with the need that had arisen, but these funds have made meeting that need a little easier. Regional policy is another aspect which will be important in European budgetary matters and which already features in the budget. The Minister gave the impression that the Government often give-- that most Community expenditure, except that on the common agricultural policy, is viewed with great suspicion by the Government. I have no doubt that regional policy falls into that category. The Government must recognise that developments which are taking place, including some that they oppose, will lead to a greater, not lesser, need for active regional policy. The developments towards 1992 will generate a need to ensure that the various parts of the United Kingdom that are furthest from the present transport to the Community can gain full access to the single market. That will involve expenditure which was previously assisted under the heading of "regional policy", particularly regional and transport infrastructure.

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That will become more important in the context of monetary union. The Government--or at least the Prime Minister-- are very much opposed to a commitment to monetary union into which they have entered by treaty. They must recognise that, because other member countries will proceed at a pace that they choose, developments will take place in Europe which will give rise to a need to ensure that the peripheral regions in Europe can compete effectively and play a full part. That means that expenditure on regional policy will become more, not less, necessary.

Mr. Christopher Gill (Ludlow) : On the question of regional policy--

Mr. Beith : I should like to give way before the hon. Gentleman launches into the subject of his intervention, but I give way.

Mr. Gill : I am interested in the hon. Gentleman's comments about regional policy. Does he agree that we have two regional policies--a regional policy as expressed by the European Community and a regional policy as expressed by the domestic Government? Does the hon. Gentleman contend that we should have one or the other, or that we should continue twin-tracking?

Mr. Beith : In this country, we do not have two regional policies. We have one, which is that of the European Community. In effect, there is no regional policy as expressed by the domestic Government. I have been interested in the map for assisted area status because of the removal from it of parts of my constituency with high unemployment. The only interest in getting assisted area status is in getting access to European regional policy. There is virtually nothing left of British regional policy. I lament that, because the British Government could play a role. If I am offered a choice, experience would lead me to believe that we will get more of a regional policy out of Europe than out of the kind of British Government under whom we have been living for the past 10 years. I am prepared to put my support behind the development of European regional policy. It seems to make sense in an examination of Europe as a whole to accept that needs arising on the periphery of Europe differ from those in London, Paris, and the main centres of industrial and financial Germany. The needs in the north of England, Scotland, Wales and the west of England and in southern Italy, Greece and Portugal contrast markedly with the needs of places in the geographical centre of the Community which are most immediately connected by the Channel tunnel--all the places to which advantage is already conferred. That strengthens the reasoning behind the European regional policy.

Mr. Gill : Will the hon. Gentleman give way?

Mr. Beith : No, because I gave way to the hon. Gentleman and I sought to give a full and detailed answer to his question. As we look back on the events of the past weekend in the circumstances of this budget debate, we are bound to inquire whether this was the summit at which the Prime Minister finally gave in, not to our European partners, but to her colleagues in Government, in adopting a more conciliatory public line on Europe. Was it the summit at which the Prime Minister finally recognised that there are few votes to be gained by posing as someone who wishes

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that she had never voted to enter the European Community in the first place? By doing so, she might win the enthusiastic support of the hon. Member for Southend, East (Mr. Taylor) and one or two of the other hon. Members who stay for these debates not just because of their genuine commitment to budgetary discipline, but because they wish basically that we were not in this show. They were against it from the start and they are still against it.

Mr. Chris Smith rose--

Mr. Beith : I give way willingly to the hon. Gentleman, who will certainly have something interesting to say on this topic.

Mr. Smith : Is the hon. Gentleman not wrong in one respect? The line at Strasbourg was not more conciliatory. It was the same as before, but the tone was more conciliatory.

Mr. Beith : That is what I sought to convey. I hope that no such criticism could be made of Opposition Front Bench Members in their attitude to Europe, because they have taken a more conciliatory line of late. I refer not especially to the hon. Member for Islington, South and Finsbury (Mr. Smith), but to some of his colleagues, not least the hon. Member for Dagenham (Mr. Gould), who is now having to adopt a conciliatory line on Europe. I have known him for 25 years and his conciliatory line on Europe has come as a great surprise to me at a late stage in my long acquaintance with him. I am not yet convinced that the substance is there to match the conciliatory line.

Mr. Dalyell : Will the hon. Gentleman give way?

Mr. Beith : No, because I have given way many times. I am sure that the hon. Gentleman wants to take part in the debate and I should like to leave him the opportunity to do so.

One particular point that intrigued me about the Prime Minister when she was being nice about Europe was that she said :

"The moment that you go from the rigid and valuable discipline of the German central bank and people you lose the very thing that helps you get inflation down."

The Prime Minister has at last found something in Europe of which she should be in favour, but it does not seem to have influenced her line in general. She has rightly recognised, as I sought to explain to the Minister earlier, that a practical solution to the problems of inflation and exchange rate volatility has been found in the exchange rate mechanism and in the influence that the Bundesbank exercises in that exchange rate mechanism. Only the other day the Prime Minister seemed to argue that the reason why she could not stand the exchange rate mechanism was that it led to the undemocratic central bankers of Europe having an influence. Now she has discovered that that influence was no bad thing.

The Prime Minister must sort out the basis of her attitude. If she continues to try to cling to sovereignty on the basis that otherwise we shall have undemocratic central bankers across Europe influencing our policy on inflation, she will continue to look like a Prime Minister who is hanging on to sovereignty because it gives her the power to inflate, to print more money and to devalue the currency. That Prime Minister has not faced up to the reality of Europe or to the leading role that Britain should be playing in Europe.

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11.58 pm

Mr. James Cran (Beverley) : I associate myself with those who, in previous years, spoke about this debate being a waste of time. Having sat through this debate thus far, I go as far as to say that it is a charade and nothing else. We have an hour and a half to debate this enormous subject, of which the Government and Opposition Front Bench speakers took up--and I counted it--40 minutes. There will, no doubt, be an answer by my hon. Friend the Minister, which will make the total 45 minutes. That means that Back-Bench Members will have had only half of this debate in which to register any point. I regard that as an absolute disgrace.

Unusually, I agree with the hon. Member for Islington, South and Finsbury (Mr. Smith) that the Treasury memoranda on the budget were singularly unhelpful. I found them wholly uninformative and indigestible. Perhaps the Treasury should have a look at how it puts these documents together. One might be forgiven for thinking that the Treasury regards this debate as a waste of time, too.

All I can do in the time available is highlight one point of the 29 budgetary headings. It is an important one concerning the internal market. The budgetary document outlines a considerable increase in the budget item termed "Industry and internal market". I hope that the Economic Secretary will be able to tell me in the fullness of time how that budgetary increase will bring about what the United Kingdom wants--the completion of the single market. All the signs are that we are nowhere near it. How will those budgetary increases dissolve the political objections of those in the Community who want to delay the single market? There are certainly plenty of such people.

I shall mention only three examples of delay in this connection. I am told that there are good and bad Europeans. We have been lectured on that subject by the hon. Member for Berwick-upon-Tweed (Mr. Beith), so let us examine the Germans. I discover that the Germans do not want to open up their insurance market to competition, for the good reason that they do not want to encounter the competition from British insurance companies.

We are told that the French are good Europeans. Why do the French--this is but one example of many--refuse to allow other European Community countries' ships to pick up and offload goods in France? We allow that, but the French do not. Who, therefore, are the good Europeans? I should have thought that we were. This therefore indicates that the debate on the internal market is oversimplified. Moreover, the French, Italians, Spaniards and Belgians do not want the full-scale liberalisation of telecommunications in Europe, but the United Kingdom does. Which country is a good European in those circumstances? I should have thought that again it was the United Kingdom.

We are in favour of the completion of the internal market ; why are not many of the other states of the Community? Why are we called bad Europeans when under our presidency 40 single market measures were agreed--a record? Why are we accused of being bad Europeans when the United Kingdom has voted against only three of the 152 measures that have been enacted for the internal market? All that seems to show that we are

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good Europeans. Lastly, why has the United Kingdom agreed 66 of the 68 measures that are presently in place for the internal market? Clearly a great deal remains to be done for the completion of the market. That fact was notably missing from the speech of the hon. Member for Berwick-upon-Tweed. Only half the 300 measures that must be agreed on the internal market have been. That is a disgrace. How will the budgetary increase for industry and the internal market help? Even worse than all that, only seven of those measures for the internal market have been agreed by all the countries of the Community. Bearing in mind that we agreed to 66 of them, that shows who in the Community are dragging their feet--the United Kingdom is certainly not one of those.

As I believe that other hon. Members should take part in the debate--little time for which is left--I will bring my remarks to a close. I am particularly in favour of the single market in financial services. It represents 10 per cent. of the United Kingdom's gross domestic product and 1.2 million people work in that area. Financial services account for about £8 billion in the invisible trade surplus in this country. We want the free market in financial services, but several other Community countries do not. They want a liberalised United Kingdom market place for financial services so long as they can keep the barriers up in their own market places. That is wholly unfair.

The Select Committee on Trade and Industry, of which I am a member, recognised this and reported on financial services in the European market and made 37 recommendations. How many of those recommendations, referring to action by the Community, will be aided by the budgetary increase which it appears the Government have already agreed? I should have liked to discuss many of the other subjects in the budget. I should have liked to discuss agriculture and the increases for the structural fund. Above all, I should have liked to discuss the controls, if they exist, for this budget. Alas, poor Back Benchers such as I do not get a look in in this debate.

12.6 am

Mr. Tam Dalyell (Linlithgow) : In any debate on Europe this week we should reflect that last week saw the death of Eduardo Amaldi, one of the architects of European science development since the war, a distinguished pre-war nuclear physicist and colleague of Belgium and friend to Britain. He should be mentioned in the House.

I want to ask several questions. First, what is the Treasury's view of the Sofia conference on co-operation? How much money is the Treasury prepared to put towards work with Poland? I do not think that we should say that we should slosh money to every country in eastern Europe, because conditions differ. I would rather stick to Poland, which has pollution problems like London smog, instead of aiding Hungary which seems to be doing much better.

Does the Treasury agree with the Amsterdam analyst, Walter van Dieren, and others who say that one guilder put into East Germany is worth, in terms of the European including the Dutch environment, five guilders spent in Holland? Surely there is an element of self-interest, to put it at its lowest, in helping to resolve the ecological troubles

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of eastern Europe. What is the Treasury view on that, and how much money is it prepared to put into the proposed European economic environment agency?

My next point occupied a large part of the day on 14 November at the interesting conference in Carlton gardens which the parliamentary and scientific committee had in conjunction with the Royal Society. That topic affects us directly in this House. Are we going to go the same way as the Bundestag in relation to embryo research? If so, what is the assessment of the British and international pharmaceutical firms in the light of the fact that Hoechst has, at short notice, become one of the great German firms which will have to transfer considerable sectors of their research elsewhere in Europe, or more likely to the United States, unless a British decision is forthcoming as a matter of urgency?

This is not the time to discuss the embryology Bill, but I think it fair to ask Treasury and other Ministers for an economic analysis of what would happen if we took such a course. Hon. Members should be under no illusions- -whatever the final verdict that they reach in their personal capacities on a free vote--about what will happen to significant sectors of British industry if we decide to inhibit embryo research.

Let me couple that with a second question. In a Committee chaired by the hon. Member for Arundel (Mr. Marshall), we heard David Baldwin of Hewlett Packard issue a strong complaint supported by a powerful array of figures, just one of whom revealed that, for £900,000 given to charity, in Britain £135,000 had to be paid in VAT. What is the Treasury's attitude to charity payments in Britain compared with those in France? David Baldwin simply says that the French are entirely flexible in such matters. The great multinational firms, as they donate huge and significant sums for education and training, say to themselves, "Our good work will be much more valuable in France, Italy, Germany or the United States than it is in Britain", because of our unique tax laws. I believe that Baldwin's submissions--known to the Treasury--must be taken into account.

My third question was also raised by my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith). I am not going to ask about the Government's attitude to the import of hardwoods, which is outside the bounds of the debate ; what concerns rain-forest countries, however, is the extent of their debt--and here there must be either a co-ordinated response or no response at all. One reason why some of us are so reluctant to urge the case of Hungary, Bulgaria or Czechoslovakia is the desperate plight of south American and other rain-forest countries. Something must be done, or we shall be in enormous danger of having precious little rain forest left-- let alone the threat of a botanical and biological holocaust.

Have the Government contemplated what is likely to happen to Brazil if its new president should be "Lula", representing a massive Left-wing force and giving expression to the aspirations of many people? I think that it is high time that European Governments got together on the question of debt-- although that is no easy matter, as Kit McMahon found when he went out to Brazil on behalf of the Midland bank.

Other hon. Members wish to speak, so I shall leave it at that.

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12.12 am

Mr. Graham Riddick (Colne Valley) : It is noticeable that, despite all the fine words that we have heard about the common agricultural policy, it continues to swallow up vast sums ; it is also interesting to reflect that European countries spend twice as much money on protecting themselves from Third world agricultural imports as they contribute to developing countries. Because of the time pressures under which we all find ourselves this evening, I cannot develop the CAP theme ; but let me say a bit about the structural funds and some of the other aspects of the budget.

I wonder whether the people of this country appreciate the fee that Britain pays for membership of the EEC. This year it is some £2 billion, that being our net contribution to the EEC. Without the efforts of our present Prime Minister, and had we still been governed by the arrangements of the last Labour Administration, our contribution would have been infinitely higher. What we do know is that the EEC budget has grown by 189 per cent. over the past 10 years, from £9,800 million in 1980 to £28 billion in 1990. I am still old-fashioned enough to translate all the figures that come to us in ecu into pounds. That represents an increase of over 100 per cent. in real terms because inflation during that period has averaged 75 per cent. throughout the Community. How much the National Health Service, the building programme or the education service in this country would have loved such an increase.

We know of the CAP's profligacy, but the two areas that have seen the greatest explosion in expenditure are the regional development fund and the social fund, the budgets of which have risen during the past 10 years by 547 per cent. and 352 per cent. respectively, to total nearly £5 billion in 1990. It is the Commission's objective to double the structural funds by 1993. Indeed, that is reiterated in the foreword of the preliminary draft that we are debating. Most of the support, which is designed to help the most disadvantaged regions, goes to the southern member states, such as Greece, southern Italy, Spain and Portugal. Whether my constituents are aware that £2 billion is flowing out of this country and, it could be argued, straight into those countries is debatable, but I doubt whether they would approve of it. I reckon that they would want any spare money that is leaving this country to be used to address the structural problems of some of the most poverty-stricken countries in the Third world.

What I object to is that, having just about succeeded in pulling the British people away from the idea that the economic prospects of the regions can be improved by pouring Government money into them, the EEC, in a rather grandiose fashion, is carrying forward exactly that policy throughout the Community, much of it with our money. Indeed, that is what the disagreements over the social charter and the exchange rate mechanism are all about. As we know, the social charter would impose increased costs on industry, and entering the exchange rate mechanism would take us back to the days of the operation of exchange controls. Anyone would think that membership of the ERM would solve all our economic problems, but since March 1979 the lira has fallen 40 per cent. and the franc 33 per cent. relative to the deutschmark despite being inside the ERM, while sterling has fallen only 17 per cent. Furthermore, during that period Britain performed better on inflation than both Italy and France

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until, I regret to say, about a year and a half ago when British inflation became higher. Far from being a reflection on the efficacy of the ERM, Britain's recent increase in inflation is, I am sorry to say, a reflection of my own Government's failure to run a proper and tight monetary policy.

The growth of the structural funds makes it all the more difficult for those countries which benefit so much from them to disagree with some of the more unacceptable interventionist proposals which are put forward by the European Commission. I find the reference by Commissioner Schmidhuber in the draft general budget to

"the Commission's political determination to continue the orderly growth of revenue and expenditure in its budget"

particularly unfortunate. The reference to the Commission's "political determination" is revealing. The Commission clearly knows what it is about.

I am afraid that time is against me and as other hon. Members wish to speak I shall not develop what I had been going to say. However, I hope that my hon. Friend will give his full support to our right hon. Friend the Prime Minister when she continues to stand firm against some of the EEC's worst excesses.

12.19 am

Mr. Bowen Wells (Hertford and Stortford) : I see from the briefing that I have here that non-obligatory expenditure represents nearly 50 per cent. of the budget. I believe that it is the same thing as the non- privileged expenditure to which my hon. Friend the Minister referred. It is that which the European Parliament can influence, amend or modify to increase the budget.

In general terms, the House has welcomed the major increase of expenditure in favour of Poland and Hungary, but throwing money at the problem will be counterproductive, especially if my hon. Friend the Minister and the Community do not pay attention to their serious indebtedness. The EC should take a lead, finding a way to restructure those countries' debts so that they are not overhanging problems, and Poland and Hungary can invite investment from the public and private sectors to restructure productively. I hope that we are not simply throwing money at those countries through this budget.

I do not think that the House has noticed that the European Parliament is increasing expenditure but has no obligation or responsibility for raising the necessary revenue. In the context of an intergovernmental conference in which we shall have to participate, is it not time that we cut--stopped, indeed--that privilege? Is it not an important constitutional issue which the budget presents to this Parliament?

12.21 am

Mr. Teddy Taylor (Southend, East) : There was one thing that I found strange in the Minister's difficult-to-understand speech. I think that he found it difficult to understand himself, but that does not matter as we have no power in this regard and nobody is listening at this quite ridiculous hour to a discussion of the budget. When, once again, we agreed to give the EEC lots more money, we were given two assurances : first, unlike in the past, budgetary controls were to be legally binding and, secondly, the new stabilisers were to be automatic. When we last heard of binding controls, the Europeans found a way out, and decided to have a 10- month year for spending and a 12-month year for raising income. That

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made 1987 a rather bad year. The EEC also did something wholly illegal--it agreed to the transfer of spending on butter dumping to member states. The Court of Auditors said that that was illegal, but the Council of Ministers decided not to consider the matter. We were told, "Things have changed. We now have a new deal." The Minister must, however, be aware of what happened 10 days ago. We had the first breach of the stabiliser. Unfortunately, the automatic cereal production level, of 160 million tonnes last year, was breached. What happened? The Council of Ministers had a meeting and decided to disregard it. It disregarded a problem to the extent of £38 million. How on earth can the Government expect us to take them or the EEC seriously when the most clear and specific assurances are given to the House and simply do not work? Even more distressing, we find that there is nothing that we can do when assurances do not work. When the Court of Auditors told the EEC that it was acting illegally, nothing happened. When it decided to have a 10- month year, nothing happened. Now it has gone through the stabiliser which we were told was automatic, nothing will happen.

Therefore, it is understandable that my hon. Friend's excellent speeches show a feeling almost of despair. We have heard the usual reassuring messages from the Minister. We are told that contributions are down, yet the Library tells us that they are at an all-time high of £2,050 million, which is £3 a week per average family. We see scandalous expenditure. There is a new programme to combat alcohol abuse--a splendid idea for the Common Market--but at the same time it is dumping about 4.2 million hectolitres of wine at the crazy price of about 2p a pint. How on earth does it make sense to pump in money to fight alcohol abuse while spending hundreds of millions of pounds on dumping alcohol at crazy prices throughout the world? It is the same with tobacco. The Community has told us to change our advertisements, yet we are dumping 25,600 tonnes of high- tar tobacco at crazy low prices in Africa and the Third world, spreading all the damage with our alms.

Finally, does anyone look at how the Common Market spends its money? If the Minister would like education, I plead with him to find out what happened to the £130,000 which the Common Market out of its generosity gave to the institutions of Broadwater Farm. He will find that the money is handled by trustees, who are former solicitors struck off the list. There he will find the only nursery schools in the world with masses of receipts for whisky and vodka, which is a strange way for nursery schools to spend their money. I hope that the Minister will realise that it is sad for the country that we are talking about all this nonsense when we have no power to do anything about it and nobody is listening.

12.26 am

Mr. Ryder : In the brief time remaining to me I shall reply to as many points as possible. If the clock beats me, I shall write to the hon. Gentlemen concerned as soon as possible.

The hon. Member for Islington, South and Finsbury (Mr. Smith) and my hon. Friend the Member for Beverley (Mr. Cran) drew the attention of the House to the fact that

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documents are not made available early enough. I shall look into that and I assure both of them that I shall make every effort to remedy that problem. I shall ensure also that my right hon. and learned Friend the Lord President is made aware of the hon. Gentlemen's wish to bring forward this debate in future years. The hon. Gentleman asked about the new financial framework for economic aid to eastern Europe. Further aid may well have implications for future budgets and we shall strive to keep it within budget discipline as this year's aid has been. The Strasbourg Council meeting has had no direct bearing on this.

My hon. Friends the Members for Holland with Boston (Sir R. Body) and for Southend, East (Mr. Taylor) understandably complained about last week's decision by the Agriculture Council. The Commission put forward a proposal to the November Agriculture Council that we should give it powers to waive the additional cereals co-responsibility levy in this and future years on unspecified de minimis grounds. The United Kingdom opposed the proposal and was prepared to abstain in the vote on condition that, first, the proposal should apply only to the current marketing year and, secondly, that a retrospective adjustment mechanism be introduced which would both tighten up the stabiliser by reducing the likelihood of underpayment of a levy and obviate the need for any future de minimis arrangements. Those conditions were met. I agree with my hon. Friends that it was a disappointing decision, but it could have been worse in the circumstances.

As a result of what has been said this evening, particularly by my hon. Friend the Member for Southend, East, the House may like to know more precisely about some of the figures on the United Kingdom CAP market support in real terms. The CAP market support based on 1987-88 prices was £1,393 million, in 1988-89 it was £1,079 million and we estimate for 1989-90 is £870 million--

It being one and a half hours after the commencement of proceedings on the motion, Mr. Deputy Speaker-- put the Question, pursuant to Standing Order No. 14 (Exempted Business).

Question agreed to.


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. Andrew Rowe (Mid-Kent) : On a point of order, Mr. Deputy Speaker. I think that you will have noticed that virtually every contributor to the excellent debate on the European budget commented that our procedures for debating such issues are thoroughly inadequate. I ask you, Mr. Deputy Speaker, to ensure that Mr. Speaker knows of the strength of feeling that ran through the debate.

Mr. Deputy Speaker (Sir Paul Dean) : I shall do so but, as the hon. Gentleman knows, Mr. Speaker is bound by the Standing Orders of the House. I have no doubt that what the hon. Gentleman has said will be noted by those who sit on the Government Front Bench.

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European Community (Research and Development) 12.30 am

The Minister for Industry (Mr. Douglas Hogg) : I beg to move, That this House takes note of European Community Document No. 8375/89 and COR 1 and the Supplementary Explanatory Memorandum submitted by the Department of Trade and industry on 22nd November 1989 relating to the Framework Programme of Community research and development activities 1990 to 1994 ; and supports the Government's view that the Commission's proposals for expenditure need to be more clearly justified before the Programme can be agreed.

Despite the late hour, the debate is timely and important as the Research Council is to meet on 15 December and will discuss proposals for a third framework programme for Community research and development for the years 1990-94. I am therefore extremely grateful that I have this opportunity to learn both the views and the concerns of hon. Members. I shall endeavour to highlight the main areas of interest, but I will leave to the end of the debate my response to queries on the more detailed aspects of the proposal.

The first framework programme was for the years 1984-87, and the budget was of 3.75 billion ecu, or £2.5 billion. The second framework covers the years 1987-91 and has a budget of 5.4 billion ecu or £3.6 billion. It is that programme which is now in existence. The Commission is now proposing a programme of significantly expanded research activities in six main areas with a total cost of 7.7 billion ecu, or a programme of about £5.1 billion. Further details are given in the explanatory memorandum before the House. There would be a two-year overlap with the present framework programme. The origins of the present proposal lie in the review required in the third year of the present programme. The Commission produced a paper on the state of science and technology in Europe. In addition, a report on the operation of the current framework was produced by a review panel of five eminent figures in European science and technology. The Commission concluded that a further five-year programme should be proposed. The framework programme sets out the broad objectives, technical coverage and funding of the main lines of activity. The detail of specific programme proposals would be the subject of subsequent decisions.

The Government have taken a constructive and prominent part in negotiations. Our objective is, if at all possible, to reach agreement on 15 December. We have a number of reservations, some of which are shared by other countries and most of which have been expressed at the past two meetings of the Research Council. First, the Government were and indeed are not satisfied that the Commission has adequately justified the size and coverage of the new programme. We thought it essential that the proposal was fully supported by adequate technical information and that the Commission demonstrated the added value required for action at Community level. The original proposal was clearly deficient in both these regards. To correct this lack of detail as to technical goals and purpose, we and other member states have worked with the Commission to produce a completely revised technical annex to the proposal.

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I am glad to be able to tell the House that, not least as a result of our efforts, the revised draft decision is now a great deal more satisfactory than it was and broadly accords with out expectations. Thus, the objectives for each area of proposed activity are made clear. It emphasises that Community research and development should concentrate on pre-competitive work and should avoid near-market activities. Support of product development is excluded. The importance of Community research and development in the context of setting European norms and standards is fully recognised. The programme will also include selective feasibility projects to validate such standards.

So far as the technical annex is concerned, only a relatively small number of technical issues remain to be resolved at the Council on 15 December. I can assure the House that I shall press for improvements where we deem them to be necessary. I shall also press for a more detailed breakdown of the proposed financing as between the lines and sublines of the programme. I also favour a larger number of specific programmes than the six originally proposed by the Commission. This is essential for coherent programme management and for satisfactory financial planning.

Mr. Tam Dalyell (Linlithgow) : What are the additions that are proposed?

Mr. Hogg : At the moment there are six programme lines. The problem with having such a limited number of them is that too much is subsumed within them. Therefore, we should like to expand the number of lines. We have in mind 20, but it might be possible to reduce that if the Commission would come to an agreement on a slightly lesser figure. We should be better able to define the exact context of the proposed work within a larger number of lines, and as we hope that each of the lines will have a management committee, it would be better to provide a more coherent system of management than we have. At the moment the programme has 37 lines, but I concede that that is too many.

Mr. Dalyell : What does Mr. Pandolfi think about a national Government interfering to this extent in what he might think is his business? Some of us had the impression at the Royal Society conference on 14 November that the Commission was less than happy about the attitude of the British Government.

Mr. Hogg : I do not think that that is right. We have a great deal of support for increasing the number of lines. I recall clearly, at the last meeting of the Council, the Dutch delegation arguing in favour of 20 lines, and I was able to support what it had in mind. There is considerable support in the Council for expanding the number of lines because it is felt that six lines are too few to reflect accurately the amount of work that is being proposed and does not permit of sufficiently direct and detailed control of that work. We are not isolated in this regard.

A second concern is the nature of the decision to be taken about the funding of the programme after 1992. The current budgetary perspective for the Community under the 1988 inter-institutional agreement runs to 1992. It is essential that any new funding proposals for research and development do not prejudge any arrangements which replace the IIA.

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There must therefore be a clear distinction between budgetary resources in the period covered by the present agreement and any new commitments beyond 1992 which must be subject to further decision, once the current IIA has been reviewed in 1992. That further decision will of course have to be unanimous.

By accepting the proposal for a new 1990-94 programme overlapping with the current 1987-91 programme, we are moving towards a series of rolling programmes, themselves subject to a mid-term review. As yet, the Government have not taken a final view on the desirability of continuing rolling programmes. However, it is obvious that they have real managerial and scientific advantages.

Mr. Matthew Taylor (Truro) : I understand that the projected figures would simply carry forward the present spending levels. The Minister has said that such a level of spending would be unacceptable. May we assume, therefore, that there will be reductions in the Commission's research and development budget?

Mr. Hogg : I find it difficult to understand the hon. Gentleman's point. I shall be dealing with funding. If the hon. Gentleman thinks that I have done his question less than justice, when I have done so, I shall certainly give way again and he can make such criticism as he thinks fit.

Another concern is the lack of detail regarding management and evaluation. The Commission has suggested that these details can be resolved later. However, I have been insistent that these important issues should be clarified at the outset. Clear objectives, the procedures for programme management, including the role of member states, procedures for the appraisal of research and development proposals and the evaluation of programme results, together with specific provision for a mid-term evaluation of the whole framework programme, should all be included in the text.

Finally--this is the point that concerns the hon. Member for Truro (Mr. Taylor)--I come to the overall cost of the new framework programme. We have always thought that 7.7 billion ecu is far too high, on grounds of affordability and of programme content. It is this issue which will probably occupy most of Friday.

For the period 1990-92, 3.1 billion ecu is of course still available from the current programme. The present IIA includes a ceiling of 2.7 billion ecu for further work. That would be additional to the 3.1 billion ecu to which I have just referred.

In my view, the figure of 2.7 billion ecu for the period 1990-92 is too high. It is not justified by the content of the technical annex and should be reduced.

Mr. Dalyell : First, has any provision been made for the European proposals on means of research? Secondly, has environmental aid been taken into account, either through the proposed European environmental agency or by some other means, to assist research in eastern Europe?

Mr. Hogg : My recollection, after reading the technical annex, is no. However, I shall have my answer checked and if I am wrong I shall correct the error.

I have dealt with spending in 1990-92, but there are two elements to the spending during that period. The 3.1 billion ecu, which is the outstanding balance of the existing

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