| Previous Section | Home Page |
Column 1021
Illsley, EricJohnston, Sir Russell
Kennedy, Charles
Leighton, Ron
Lewis, Terry
Livsey, Richard
Loyden, Eddie
McAvoy, Thomas
McFall, John
McKay, Allen (Barnsley West)
McMaster, Gordon
Madden, Max
Mahon, Mrs Alice
Maxton, John
Meacher, Michael
Meale, Alan
Michael, Alun
Michie, Mrs Ray (Arg'l & Bute)
Morgan, Rhodri
Parry, Robert
Pendry, Tom
Pike, Peter L.
Powell, Ray (Ogmore)
Primarolo, Dawn
Robertson, George
Skinner, Dennis
Smith, C. (Isl'ton & F'bury)
Steel, Rt Hon Sir David
Stephen, Nicol
Taylor, Matthew (Truro)
Wareing, Robert N.
Watson, Mike (Glasgow, C)
Welsh, Andrew (Angus E)
Wigley, Dafydd
Wise, Mrs Audrey
Tellers for the Noes :
Mr. James Wallace and
Mr. Archy Kirkwood.
Question accordingly agreed to.
Column 1022
Mr. Speaker forthwith declared the main Question, as amended, to be agreed to.Resolved,
That this House welcomes the commitment of Her Majesty's Government to sport in the United Kingdom in the provision of grant to the Sports Council for 1992-93 of £48.8 million, which has been increased in line with forecast inflation next year, complemented by new funds of the order of £40 million this year from the Sports and Arts Foundation and the £20 million per annum additional money from the Football Trust, and a further £0.7 million for the Champion Coaching Scheme ; recognises the important decision to make physical education a mandatory subject in the National Curriculum from the start of the next academic year and the lead given by Her Majesty's Government in international matters such as drug abuse and the participation of South Africa in international sport ; and further believes that Her Majesty's Government has demonstrated its high priorities in the sporting field as opposed to the out-dated, uncosted, bureaucratic, interfering and irrelevant policies of Her Majesty's Opposition and its allies.
Column 1023
European Community Budget[Relevant Document : European Community Document No. 5017/91 relating to revision of the financial perspective.]
10.26 pm
The Financial Secretary to the Treasury (Mr. Francis Maude) : I beg to move,
That this House takes note of European Community Documents Nos. 7184/91, relating to the Preliminary Draft Budget of the European Communities for 1992, 7368/91, relating to Letter of Amendment No. 1 to the Preliminary Draft Budget, 8442/91, relating to Letter of Amendment No. 2 to the Preliminary Draft Budget, the proposals described in the unnumbered explanatory memorandum submitted by HM Treasury on 20th November 1991, relating to Letter of Amendment No. 3 to the Preliminary Draft Budget, 7731/91, relating to the Draft Budget for 1992, 9092/91, relating to the European Parliament's proposed amendments and modifications to the Draft Budget, the proposals described in the unnumbered explanatory memorandum submitted by HM Treasury on 18th November 1991, relating to Council consideration of the European Parliament's proposed amendments and modifications and 8719/91, relating to revision of the Financial Perspective for 1992 ; and supports the Government's efforts to maintain budget discipline and ensure that the Financial Regulation is applied strictly.
I should like to begin this annual debate by expressing my thanks to the Scrutiny Committee, under the chairmanship of the hon. Member for Newham, South (Mr. Spearing), for its hard work in examining the eight bulky and voluminous documents that we are debating. The pace of the Community budget procedure is such that the Committee frequently has to scrutinise documents swiftly to ensure that the interests of the House are protected. I should like to express my gratitude to the hon. Member for Newham, South and the Committee for the tolerance that they showed of the requirements and exigencies of the process.
The House debated the 1991 budget last December against the background of profound changes across the continent of Europe. Since then, those changes have gathered pace. In addition to the Government's preoccupation with the intergovernmental conferences, looming over the horizon is the review of the Community's finances, which is due next year. The budget is therefore the last under the five-year interinstitutional agreement of 1988.
I should stress, however, that neither any agreement that is reached in the intergovernmental conferences nor next year's review of the Community's finances will have any effect on the 1992 budget. Most of the key reforms that the Community agreed in 1988, setting the framework for future budgets and the budget for 1992, can be changed only by unanimity. They do not expire with the
interinstitutional agreement.
Among those key reforms are the budget discipline decision, which includes the agricultural guideline--a legally binding limit that exerts downward pressure on the growth of agricultural support--and the own-resources decision, which sets firm legally binding limits on Community revenues and provides for the United Kingdom abatement.
Sir Teddy Taylor (Southend, East) : My hon. Friend the Minister kindly referred to downward pressure on agricultural expenditure. By what percentage will that expenditure be down in 1992 ?
Column 1024
Mr. Maude : I referred to downward pressure on growth in agricultural support. As my hon. Friend knows very well, it is important to read the fine print. The point that my hon. Friend makes is that there is inexorable growth in agricultural spending, but I shall deal with that in a little while.
The developments beyond the Community's boundaries will have a great impact on the 1992 budget. We tend to focus particularly on the changes taking place in central and eastern Europe which have this year rolled on into the Soviet Union and beyond the boundaries of Europe itself. It is right that we focus on those changes in view of the profound and beneficial implications for world order. However, the 1992 budget also contains substantial provision for the new Asia and Latin America programme which in part aims to foster change in those regions. The budget also reflects the greater need to make provision for emergency humanitarian food aid for the Soviet Union.
Mr. William Cash (Stafford) : Annex B which is attached to my hon. Friend's helpful memorandum shows that the percentage increase in food aid for helping people in the world is minimal. It is absolutely disgraceful that, at the same time, there are massive increases in a wide range of other matters including not only agriculture but structural alterations, fisheries and so on, with figures ranging to an increase of 28 per cent. It is a disgraceful budget because there is no balance between what is required and what is being provided.
Mr. Maude : My hon. Friend needs no reminding that the budget process is by no means complete. There have been several shots at the budget--the Commission's initial preliminary draft budget, the Council's revision of it, the Parliament's amendments and the Council's rejection of most of the Parliament's amendments. There is still a process to go through in the elaborate minuet. I do not think that my hon. Friend will make the mistake of believing that the document to which he refers reflects the final state of the budget.
Mr. Charles Wardle (Bexhill and Battle) : Before my hon. Friend moves on from help given to non-member countries, does not he find it disappointing that in the budget as drawn up at this juncture by the European Parliament there is no amount allowed for technical assistance to the USSR? Is not it generally agreed by all the expert advisers who visited the USSR in recent months that technical assistance should receive priority? Would I be unduly cynical in imagining that the European Parliament assumes that the Council of Ministers will attach priority to that issue and might increase the budget to allow for it? Is not that a nonsense? Should not it be making savings elsewhere in the budget to allow for that priority assistance to the USSR?
Mr. Maude : I shall deal with that point in more detail in a while, but my hon. Friend is right. Technical assistance to the Soviet Union is of the very greatest importance and, as he says, importance has been attached to it by all who have commented on the issue. I think that the European Parliament also attaches great importance to it and it is our view and that of the Budget Council that there is room within the budget for such assistance to the Soviet Union without breaching the financial criteria in the way in which my hon. Friend mentioned.
Column 1025
As for central and eastern Europe and the Soviet Union, the 1992 budget will see the continuation of a substantial programme to help with economic reconstruction--the Poland and Hungary assistance for economic restructuring programme--which now covers all central and eastern Europe. It aims to support the transformation of command economies into free and open economies. The draft budget makes provision--as my hon. Friend suggests--for the continuation of technical assistance to the Soviet Union as agreed by the European Council last December.Another big issue is food aid for the Soviet Union. My right hon. Friend the Prime Minister, as chairman of the G7 countries, agreed a 2 billion ecu package which was subsequently endorsed by the Community. A large part of that will be in the form of food credits intended to meet the food shortages expected this winter with dispersal conditional on genuine need being shown. The meeting of that need will not, therefore, add to expenditure in the 1992 budget.
Against that background, the key issue for the 1992 budget is how the Community should meet new external demands. In particular the question which both arms of the budgetary authority--the Council and the Parliament- -have considered is the extent to which the demands can be met within the budgetary limits or whether they should be met with an increase in those limits.
As has been foreshadowed, the sharpest issue is how to make provision for technical assistance to the Soviet Union. It was clear at an early stage that that would be the key issue, when the Commission, the Council and the Parliament considered proposed revisions for the financial perspective for 1991 and 1992 earlier this year. The revisions were to take account especially of the consequences of the Gulf, technical assistance for the Soviet Union and humanitarian aid.
It may be helpful if I refer briefly to the interinstitutional agreement. It is a political agreement between the Council, the European Parliament and the Commission which was reached in 1988. It sets out the institutions' agreement on how to approach their decisions about the Community's budget during 1988 to 1992. It includes what is known as the financial perspective. That is a set of expenditure ceilings for each of the six main categories of Community spending, which the three institutions agree to respect. The agreement has provided welcome stability to the Community budgetary process since 1989.
The agreement permits the financial perspective ceilings to be revised to cover unforeseen circumstances, but subject at all times to the binding legal framework. Above all, the legally binding limits on spending on agriculture and on the overall level of Community revenues cannot be overridden by the ITA and will continue beyond the currency of the present agreement.
Mr. Christopher Gill (Ludlow) : Can my hon. Friend confirm that, as a result of the increase in VAT that is levied in the United Kingdom since the last budget, there will be a windfall gain to the European Community? Perhaps he would like to tell the House how much that represents. I appreciate that he may not have the figure at his fingertips, but perhaps it could be made available in due course.
Column 1026
Mr. Maude : I shall check that. It is my understanding that that is not the case. When the check has been made, I shall come back to my hon. Friend with a firm answer.
When the Commission presented its preliminary draft budget in June, it made it clear that there were provisions that it considered necessary, but which had not been included in the preliminary draft budget, pending consideration of its proposal for revision of the financial perspective ceilings, especially suitable provision for technical assistance to the Soviet Union, humanitarian aid and administrative costs. The PDB represented an increase in expenditure over the budget adopted for 1991 of about 11 per cent., totalling some 65.2 billion ecu, about £45.4 billion. Although it was a large increase, it was about 1.3 billion ecu within the overall ceiling of the financial perspective. Total provisions were equivalent to about 1.13 per cent. of Community GNP, compared with the 1.2 per cent. ceiling allowed under the own-resources decision of June 1988. That represented a cash margin of about 4 billion ecu.
There are reasons for this seemingly large increase in expenditure. First, the PDB provided for an increase of over 20 per cent. for the structural funds, reflecting the 1988 agreement that the funds should double in real terms between 1987 and 1993. Secondly, there was strong growth in existing policies as well as a need to provide for the new external policies that arose in the course of 1991. Thirdly, the projections for agriculture support indicate that spending will be at the guideline in 1992, rather than significantly below it as in 1991.
Spending on the common agricultural policy represents, as always, the major item in the budget. In recent years, there has been a substantial underspend against the guidelines, but that is not expected to continue into 1992. Indeed, expenditure in 1992 looked set, earlier on this year, to reach the guideline.
We strongly supported the Commission's proposals in the price-fixing negotiations earlier this year, which aimed to ensure that the 1992 guideline would be respected. The savings that resulted from those negotiations ensured that that will be so, and that the agricultural budget fully respects budget discipline. [Hon. Members :-- "Not a chance."] My hon. Friends say, "Not a chance," but the financial perspective guidelines were not amended, even though 10 of the 12 member states wanted them amended, and the budget discipline decision taken in 1988, which many cynics and sceptics said would crumble as soon as it came under pressure, resisted the pressure on it and led to a tougher price-fixing settlement than would otherwise have been the case. That settlement may not be all that my hon. Friends would wish, but I can tell them that it is a great deal better than it would have been without the agreement that we reached in 1988.
Mr. Nigel Spearing (Newham, South) : I thank the Minister for his kind remarks about the work of the Scrutiny Committee. It has indeed been difficult to keep up with the flow of documents--some of them amending documents--the latest of which were placed in the Vote Office this afternoon.
From the point of view of the general public, the Minister is quite right. The table reproduced in our report shows that the guidance fund now stands at about £25,000 million a year. As the Minister said, that is just within the guidelines. Do he and his colleagues at the Ministry of Agriculture, Fisheries and Food expect a similar
Column 1027
arrangement for world prices in future years? At some time--the hon. Gentleman may be able to tell us in which year ; it may be 1993--if the rearranged agricultural policy prices do not do what they are designed to do, we shall not only be above the agricultural guidelines. We shall be looking to the third arm of income, own resources, at that date or before. Is that a reasonable summary of the situation?Mr. Maude : Obviously, further developments have to be taken into account, but any negotiation on prices has to take account of the requirements of budget discipline. I do not claim to be an expert on the operation of the stabliser regime, but I understand that it has an inbuilt mechanism to reduce prices when production is such that it would otherwise spill the demands on the budget over a certain level. I am not claiming that the regime is perfect or anything like it, but there are disciplines built into the system, which faced and withstood a severe test this year. The regime is by no means yet perfect, but it is very much better, and it has turned out to be more robust than many had expected.
The price-fixing negotiation consequences were taken into account in the Commission's first letter of amendment to its preliminary draft budget, making provision for agricultural spending in line with the guideline.
I should comment on the United Kingdom's abatement and on its net contribution to the budget. Revised forecasts will be included in the annual statement on the Community budget--to be published, as usual, early next year, following adoption of the budget--and financial year forecasts were published in the recent autumn statement.
Mr. Tim Devlin (Stockton, South) : I note that the motion on the Order Paper is to take note of the European budget and particularly of certain documents that are about three inches thick. If the House does not take note of the documents, what will be the practical effect? Will it mean that the budget falls? No, it will not. Has the matter been discussed by the European Parliament, and can the Minister explain to us where those responsible for the budget are held democratically accountable to the people of Britain? If it is in the European Parliament, surely Members of that Parliament should be discussing it--not hon. Members.
Mr. Maude : The European Parliament certainly does discuss it-- exhaustively and painfully. It is one of the two arms of the budgetary authority, which consists of the Budget Council, on which I represent the United Kingdom and from which I return to this House to account for what I have agreed there, which I think is what I am doing now, and the European Parliament, which has a considerable influence on the budget procedure. I believe that the requirements of democracy are therefore being met in that process.
Reverting to the United Kingdom's net contribution, I can tell the House that our expectation is that the United Kingdom's net contribution to the Community budget in 1992 would be about £2.25 billion, compared with around £2.5 billion in 1990 and £1.25 billion in 1991. The reason for the very substantial increase in 1992 over 1991 is essentially technical. The 1991 figure is artificially depressed by two factors. First, we expect a very substantial repayment next month, in respect of overpayments made in previous years, especially in 1990,
Column 1028
reflecting the large figure of £2.5 billion in 1990 to which I have referred. Contributions in any particular year are based upon estimates of, for example, gross national product for the year in question ; and any necessary adjustments are picked up in subsequent years.Secondly, because the adjustment last year was a payment by the United Kingdom, we get the benefit in terms of additional abatement this year, 1991. This also depresses our net contribution. The figure for 1992--around £2.25 billion--is in line with the underlying trend of recent years.
As the House knows, our contribution would be very much higher if it were not for the abatement arrangement which my right hon. Friend the Member for Finchley (Mrs. Thatcher) secured at Fontainebleau in 1984. That mechanism is established in legislation and cannot be changed without our agreement.
The current forecast is that our abatement next year will total some 2.5 billion ecu, or £1.75 billion. By the end of next year, the cumulative total for our abatements since Fontainebleau will be around £12.5 billion. In addition, there is the total of £3.2 billion that my right hon. Friend the Member for Finchley secured in abatements before the Fontainebleau arrangements--giving a total of £15.7 billion, which is a huge sum of money by any standards, which was saved for the taxpayer by those agreements and improvements on the arrangements that the last Labour Government so skilfully negotiated for this country.
The July Budget Council adopted a draft budget which was 35 million ecu above the Commission's proposals ; a total little different, but with the contents significantly changed.
The Council's approach was to consider whether the Community's priorities could be met within existing budgetary ceilings and, in particular, to examine the scope for making proper provision for technical assistance to the Soviet Union and for emergency humanitarian aid, within the existing category 4 of the budget--other policies--ceiling of the financial perspective.
First, the apparent growth in category 4 expenditure, was relatively restrained. Because the 1991 base, for measuring growth, was artificially high the underlying growth was very strong indeed, some 15 per cent. between 1991 and 1992, if one were to set those special provisions to one side. On the face of it, therefore, there was scope for significant, but not damaging, reductions in the Commission's proposals.
Secondly, we had particular regard to the requirement which was introduced into the financial regulation last year--at the instigation of the United Kingdom. This requires the budgetary authority and the Commission to ensure the cost-effectiveness of budgetary provisions. The Council adopted a declaration on 25 July that its consideration of reductions in the Commission's proposals was, in large part, guided by value-for-money concerns. The Council concluded that significant reductions in the Commission's proposals were indeed possible and reallocated appropriations in category 4 of the financial perspective to include provision for the Soviet Union, aid to Eastern Europe, and emergency food and humanitarian aid. That reallocation to meet Community priorities was possible without a revision to the financial perspective.
The European Parliament's approach--the issue raised by my hon. Friend the Member for Bexhill and Battle (Mr. Wardle)--has been different. It believes that the new requirements, such as technical assistance for the Soviet
Column 1029
Union, should be met wholly by new money. It voted amendments and modifications adding more than 500 million ecu in commitments and payments to the draft budget. In addition to those amendments, the Parliament also wanted a global revision to the financial perspective to allow a further 1.66 billion ecu--more than £1 billion- -of expenditure. Its intention was that this increase in the financial perspective ceilings would allow provision to be made for spending by the structural funds, over and above the agreed progress to its doubling ; expenditure on central and eastern Europe and the Soviet Union ; humanitarian aid ; tropical forests ; and a reserve for administration.Mr. Tam Dalyell (Linlithgow) : On humanitarian aid, can we have an assurance that the United Kingdom representatives are not putting the brake on in the light of the reports from the Quakers, Frank Judd of Oxfam and the universities of Illinois and Harvard on humanitarian aid to southern Iraq? On tropical forests, will the United Kingdom Government cast a beady eye on what is happening to our aid to Guyana and its tropical forests?
Mr. Maude : I am afraid that I do not have the answers at my fingertips, but I shall provide the hon. Gentleman with a detailed response later.
The European Parliament did not include any provision for technical assistance to the Soviet Union. Instead, the Parliament used, for its own priorities, the available headroom of 50 million ecu in non-compulsory expenditure in category 4, plus 421 million ecu allocated by the Council for the Soviet Union and for aid. In effect, the Parliament took the money that was allocated by the council and used it for its own different purposes.
In addition, the European Parliament adopted two significant changes to the expenditure on research. Provisions in the draft budget reflected legislative provisions for this expenditure, and spending in this category was more than 400 million ecu below the financial perspective ceiling as a result. The first of the Parliament's amendments was to breach the amounts deemed necessary, that is the expenditure ceiling contained in the relevant Council decision, for the second framework programme, by 44 million ecu and that of the third framework programme by 220 million ecu. The second was to propose a range of increases to non-framework programmes, including a series of new pilot projects outside the framework programmes, totalling 170 million ecu.
Our Budget Council's meeting on 12 November followed the decision of ECOFIN the previous day not to accept the Commission's proposals for a revision of the financial perspective. The Commission's proposal comprises a revision of 720 million ecu in category 4 to cover technical assistance to the Soviet Union and to create a reserve for humanitarian aid to the extent of 300 million ecu. It also proposed a switch of 80 million ecu between the sub-ceilings in category 5. ECOFIN could not conclude that such revisions were justified.
The Budget Council in July had made it very clear that the requirements should and could be met within existing ceilings. Accordingly, the Budget Council earlier this month adopted a second reading draft budget broadly in line with its first reading.
Column 1030
Mr. Bowen Wells (Hertford and Stortford) : First, may I congratulate my hon. Friend on representing the British Government and Parliament at ECOFIN and on seeking to cut expenditure to the original Council proposal?
Does my hon. Friend agree that it is outrageous that the European Parliament proposes to increase expenditure when it has no responsibility for raising the taxes necessary to meet that budget? How can a Parliament be put in an irresponsible position, and therefore an undemocratic one, by pressing for expenditure to be increased while not having the responsibility to raise taxes to meet that expenditure?
| Next Section
| Home Page |