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Mr. Hurd: As regards Bihac, there has been no significant change during the past few days, as fighting continues around the outskirts of the town, and Bosnian Government forces are still in the town. There has been some shelling around the outside of the town, and fighting continues in the rest of the Bihac pocket. The United Nations is seeking to get convoys through. I think that a convoy reached Bihac the day before yesterday, and a British convoy got through to Gorazde. That is part of the


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essential process of keeping supplies moving for the United Nations forces and the civilian population, which is especially important as winter approaches, as the hon. Lady said.

Several hon. Members rose --

Madam Speaker: Order. We must now move on.


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Points of Order

4.17 pm

Mr. Tam Dalyell (Linlithgow): On a point of order, Madam Speaker. This House operates on the basis that debates are answered by a Minister with ministerial, or at least departmental, responsibility. I do not want to make a party point of this, because I know that the situation would be exactly the same under a Labour Government, but the Crown Office has not been able to answer debates in this House for many years.

That becomes a very serious matter when, in the biggest case of murder in the western world, the lead Department, along with the Foreign Office, is the Crown Office. On Tuesday 13 December 1994, on the motion for the Adjournment of the Scottish Grand Committee, under Standing Order No. 94H(6), you have given me leave to raise the subject of the Crown Office in relation to the Lockerbie investigation.

I do not wish to be disparaging about him in any way, but, under the present set-up, the hon. Member for Edinburgh, West (Lord James Douglas- Hamilton) will be the Minister to respond. To be frank--I am not in any way using pejorative language about him personally--he is a messenger in that matter. The Scottish Office has little, if any, direct responsibility for matters of the Crown Office.

Mr. Robin Cook (Livingston): None at all.

Mr. Dalyell: As my hon. Friend says: that is precisely the situation. The Crown Office goes to endless lengths to say how separate it is from the Scottish Office, and that is indeed the position.

My point of order is that there is a very grey area, which I will raise under the new dispensation. The usual channels believed that part of the reason for the reforms of the Scottish Office and the Scottish Grand Committee was precisely that the Crown Office could answer directly for itself, and make statements. It can make statements, but surely Departments which can make statements can also answer Adjournment debates.

Has there been any approach to allow the Crown Office to answer the debate? If there were such an approach from the Scottish Office and from the Government, would you cast a benevolent eye on it?

Madam Speaker: The hon. Gentleman raised this matter in the House with me only last week, and I can only refer him to what I said on that occasion. The Standing Orders, which were agreed by this House only recently, do not allow the Lord Advocate to respond to Adjournment debates. That is what the hon. Gentleman is seeking. As I told the hon. Gentleman last week, he must find a way to amend Standing Orders if he wishes the Lord Advocate to respond to an Adjournment debate.

Mr. Ian Bruce (South Dorset): On a point of order, Madam Speaker. In columns 243 and 245 of yesterday's Hansard , it is reported that I voted both for and against the Opposition amendment, while the hon. Member for Gordon (Mr. Bruce) is recorded as being absent from both Lobbies. Could this be put right, or--in view of the fact that the authorities appear not to have been able to record


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the votes correctly--could we have a re-run? We would then at least be able put the interest rate increases back in the bag.

Madam Speaker: The error has been noted, and an amendment has been made.

Mr. William Cash (Stafford): On a point of order, Madam Speaker. Under article 11 of the own resources decision, which we are about to debate with respect to--

Madam Speaker: Order. The hon. Gentleman will realise that that matter will be dealt with in Committee by the Chairman of Ways and Means. We shall now go into Committee, if the House will allow me to proceed. I must inform the House that I have not selected the instruction.


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European Communities (Finance) Bill

Considered in Committee.

[Mr. Michael Morris

in the Chair ]

Clause 1

Extended meaning of "the Treaties" and "the Community Treaties"

Motion made, and Question proposed, That the clause stand part of the Bill.

4.23 pm

Mr. Andrew Smith (Oxford, East): On a point of order, Mr. Morris. First, may I welcome you to the Chair for our deliberations? It is quite like old times, and there are many familiar faces here from the debates on the Maastricht Bill. We now have an extra party, over and above what we had then, but that can only enliven our deliberations. Have you received any indication of the Government's intention to make a statement as to which of the new clauses that you have selected for debate represent essential matters of the Bill and which--in the Prime Minister's understanding-- represent matters of confidence and which do not? If the House is to vote to bring down the Government, it perhaps ought to know when it is doing so.

The Chairman of Ways and Means (Mr. Michael Morris): The Chair welcomes the initial comment from the hon. Gentleman, and also welcomes the prospect of getting on with the new clauses.

The Paymaster General (Mr. David Heathcoat-Amory): Further to that point of order, Mr. Morris. It may assist the House if I point out that the Government attach the highest importance to the passage of the Bill, and have asked my right hon. and hon. Friends to attend accordingly. My right hon. Friend the Prime Minister said that the Bill must pass in all its essentials. That clearly refers to the clause 1 stand part debate which we will have shortly, and also to the Third Reading of the Bill.

Mr. William Cash (Stafford): On a point of order, Mr. Morris. Article 11 of the decision that we are to discuss within the context of the Bill says that the decision shall enter into force on the first day of the month following the receipt of the last of the notifications received from the member states in accordance with their respective constitutional requirements. It adds that the decision shall take effect on 1 January 1995.

It is crystal clear that the Dutch Parliament has no chance whatever of managing to complete its procedures by 1 January 1995; indeed, that may well not happen until the end of February. I should therefore be glad if some consideration could be given to the effect on the requirement of an overriding European legal position by virtue of the decision that the measure must come into effect on 1 January 1995 to be effective.

The Chairman: The hon. Gentleman will recognise that that is a matter of argument. My responsibilities are to the United Kingdom Parliament.

Mr. Alex Salmond (Banff and Buchan): On a point of order, Mr. Morris. It seems to have been made clear that


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votes on clause 1 stand part and Third Reading will in effect be votes of confidence, presumably with the full authority of the Government Front Bench--whatever that may be now. Does that mean that other votes, if they take place, will not be votes of confidence? I am sure that that is of great interest to Conservative Members. Is it absolutely clear that two votes will be votes of confidence- -according to the Government Front Bench--while the others will not be?

The Chairman: As an experienced Member of Parliament, the hon. Gentleman will know that it is not for me to judge how many votes take place.

Mr. David Winnick (Walsall, North): On a point of order, Mr. Morris. My hon. Friend the Member for Oxford, East (Mr. Smith) made a passing reference to the debates that you chaired with such distinction during the Maastricht proceedings. My point concerns timing. Would it be correct to say that whether this debate continues after 10 pm is entirely up to the Government? It seems rather odd that it may do so, given that the Leader of the House is constantly telling us of the virtues of the Jopling report and saying that we should not sit through the night because people outside misunderstand. It would be useful if the Government would tell us now whether the 10 o'clock motion will be moved.

The Chairman: The hon. Gentleman has asked me a question to which the answer is yes: whether the motion is moved is entirely up to the Government.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Mr. Dennis Skinner (Bolsover): On a point of order, Mr. Morris. When you put the Questions on clauses 1 and 2, several

voices--including mine--said "No". My hon. Friends the Members for Worsley (Mr. Lewis) and for Liverpool, Garston (Mr. Loyden) both shouted "No". You completely ignored those three voices. There should have been a Division. It looks to me as if you are siding with the two Front Benches.

The Chairman: The hon. Gentleman's point of order was made distinctly; I could hear it clearly. I did not, however, hear a clear "No" from the hon. Gentleman, or from the hon. Members sitting next to him. Let me issue a plea to the hon. Gentleman that in future he speaks with his usual clarity--

Mr. Skinner: I did.

The Chairman: I regret to say that the hon. Gentleman did not.

New clause 1

Entry into force (own resources)

`This Act shall come into force only when the House of Commons has come to a resolution on a motion tabled by a Minister of the Crown as to the measures the Government intends to take in order to implement Article 8(2) of the Council Decision of 31st October 1994 on the system of the European Communities' own resources.'.-- [Mr. Andrew Smith.]


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Brought up, and read the First time.

Mr. Andrew Smith: I beg to move, That the clause be read a Second time.

The Chairman: With this, it will be convenient to discuss also the following: New clause 4-- Own resources calculation: annual reports -- `.-- (1) In implementing the provisions of Articles 2, 4 and 10 of the Council decision of 31st October 1994 ("the Decision") on the system of the European Communities' own resources, Her Majesty's Government shall lay a report before Parliament in each year to the end of 1999, on the operation of the system set out in Article 10 of the Decision in respect of the United Kingdom; and each such report shall include an analysis of--

(a) the revenue which the United Kingdom would be required to provide as own resources entered in the budget of the Communities as compared to the revenue required be provided by other Member States, by reference to the percentages of annual GNP set out in Article 2 of the Decision;

(b) the methods of calculating the GNP of the United Kingdom and each other Member State and their accuracy; and

(c) the effects on the United Kingdom, were it to be implemented, of any re -examination made in any year by the Commission, under Article 10 of the Decision, of the correction of budgetary imbalances granted to the United Kingdom.

(2) Each annual report made to Parliament under the provisions of subsection (1) of this section shall be subject to approval by a resolution of each House of Parliament.'.

New clause 12-- Annual report to Parliament --

`Each year Her Majesty's Government shall make an annual report to Parliament concerning the operation of the Decision in section 1 (e) above in respect of the preceding financial year, which shall include:

(a) a general presentation in text and tables of the financing and expenditure of the European Economic Communities in sterling equivalent and any common unit, which shall include comparable tables of income derived from each member state and expenditure therein in respect of each principal category of expenditure;

(b) an account of rebate mechanisms applicable to any member state;

(c) the operation of each article of the Decision;

(d) action taken by Her Majesty's Government in respect of financial discipline;

(e) the text of any regulation, directive or financial regulation relating to the operation of the Decision to which Her Majesty's Government has given its assent.'.

Mr. Smith: I will begin with new clause 1. The article to which I referred--article 8(2)--states:

"Without prejudice to the auditing of the accounts and to checks that they are lawful and regular as laid down in Article 188c of the Treaty establishing the European Community, such auditing and checks being mainly concerned with the reliability and effectiveness of national systems and procedures for determining the base for own resources accruing from VAT and GNP and without prejudice to the inspection arrangements made pursuant to Article 209(c) of that Treaty, the Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, adopt the provisions necessary to apply this Decision and to make possible the inspection of the collection, the making available to the Commission and payment of the revenue referred to in Articles 2 and 5." That raises several important matters of concern to the House.


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4.30 pm

We have emphasised time and again our anxiety, which is widely shared both in the country and in the House, about the inadequacy of present arrangements in the European Union for the detection or elimination of fraud and waste, and about the shortcomings in the working of the common agricultural policy. We have said especially that the common agricultural policy is wasteful and economically and environmentally damaging. We have also said that the Government have not done nearly enough to combat waste and fraud in the European Union budget.

As recently as last weekend, there were disturbing reports in the press of the way in which Ministers appear to have gone along with the cut of £3.9 million in the budget to counter fraud in the European Union. That was a matter of enormous concern to many hon. and right hon. Members because, if fraud is to be properly eliminated and the people responsible for it properly brought to account, the mechanisms have to be in place and they have to be properly enforced in each of the member states of the European Union. The fact that the Government accepted that cut calls into question the assurances given on Second Reading about the Government's commitment to eliminating fraud. I ask the Minister to reply specifically to that argument when he replies to the debate.

We believe that the House of Commons has a right and a duty to the people of Britain to scrutinise and, as appropriate, to amend the very important measure before us. We believe that the Government have sought, by the confidence motion and the other pressures that they have brought to bear, effectively to curtail the right of the House to determine the way in which money is paid to Europe, the uses to which that money is put and the extent of waste and fraud in its application. The new clause therefore seeks to insist that the Government bring a motion before the House showing the way in which article 8(2) would be implemented.

Article 8(2) mentions many important subjects. One of those touches on the United Kingdom abatement, because the article refers to articles 2 and 5 of the decision. I shall now mention an important issue. When we discussed the matter in European Standing Committee B, as long ago as 15 December 1993, I asked why papers were not available in the Vote Office setting out details of the United Kingdom abatement. In replying to my question, the former Paymaster General said something interesting. He said:

"The working methods paper"--

the paper governing the operation of the United Kingdom abatement--

"is a Commission document that gives detailed examples of how the UK abatement is calculated. The current paper was produced in 1988 following the own resources decision . . . in that year. It is still extant. It was the subject of an explanatory memorandum on 1 July 1988."

He continued:

"The Commission is working on a new working methods paper. So far no copy is available so we could not lay it before the Committee. As soon as we receive a copy, we shall do so."--[ Official Report, European Standing Committee B , 15 December 1993; c. 7.]

I understand that there is now extant a paper SEC(92)/1412/final, dated Brussels 22 July 1992, about the United Kingdom abatement. Will the Paymaster


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General say whether that paper updates the one to which the former Paymaster General referred in European Standing Committee B? Was it presented to the Committee for discussion in line with the undertaking that I was then given?

An interesting aspect of the working paper which will be of concern to hon. Members is its reference to a number of changes, described as technical changes, in the operation of the UK abatement. Page 11 of the working paper states:

"Taking into account the combined effect of these changes which should reduce the abatement by over--1 billion ecus in 1997 from the `No change' scenario, the Commission's proposals should thus contribute towards a diminution of the UK abatement relative to the EC budget. The size of the abatement would fall from around 5 per cent. to under 4 per cent. of the budget by 1997."

That raises an important question to which the House should have a full and comprehensive reply from the Minister. The working papers on the UK abatement are certainly complex and dense to wade through, as anyone who has sought to do so will confirm. If discussions and negotiations--even if they are described as technical--have been taking place about the UK abatement, that must greatly concern hon. Members in the light of the assurances that they have been given on the abatement and the importance of safeguarding the abatement. The Government should make the position clear.

Our new clause has other implications. Before the Act can be ratified, the House of Commons must pass a Government resolution on a motion setting out what steps the Government intend to take to ensure that the United Kingdom has the mechanisms to calculate accurately its contributions. Article 8(2) states that each country should have the mechanisms to calculate accurately its own contributions according to the terms set out in articles 2 and 5 of the decision. Those articles refer to gross national product at market prices and VAT--the VAT harmonised base--so that each country calculates its own GDP and VAT base in the same way as other member countries. The question has been asked before as to how far variations in the adequacy of the arrangements in different member states affect the contributions that each member state is asked to pay. We can all think of examples of European Union member states where the arrangements for properly calculating the level of liability to VAT payments, the way in which they are collected and the measurement of gross national product are not so reliable as they are in this country. The system misses the operation of the informal economy, which is not properly recorded in the official statistics. Will the Paymaster General tell us what discussions he has had with his counterparts in the other European Union states to ensure that common and high standards are applied to the measurement and assessment of those matters, which have an important bearing on the contributions that this country has to make to the European Union budget?

Mr. Eddie Loyden (Liverpool, Garston): Returning to his earlier remarks about what is happening in Europe and the concerns that have been expressed about certain practices in member states, does my hon. Friend believe that the weakness is within European legislation or within the member states?

Mr. Smith: There are clearly weaknesses in the operation of the regulation and the law both at European


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Union level and in member states. Clearly, procedures are more satisfactory in some member states than in others. Equally, there is a need for a binding convention in European law for fraudulent acts against the European Union budget to be contrary to the law in each member state.

A dual approach is necessary to tackle such a serious problem. We need to ensure both that there are proper arrangements in place in each member state and that European law is able adequately to cover the situation. We have advocated that the convention currently being discussed by the European Union should be enacted into United Kingdom law properly to tighten up on procedures and to bring those engaged in fraud to account.

We have also suggested that, where it can be shown that lax procedures operated by individual member states are responsible for shortcomings, fraud and waste, either because the basis for calculating payments has not been properly assessed, or because receipts of money from the Union have not been properly applied, it would be entirely appropriate to have a proper penalty regime which would require member states to pay money back, either by an addition to their required contributions or by a deduction from the revenues they receive.

Mr. Christopher Gill (Ludlow): The hon. Gentleman will be aware that many Opposition Members and many of my hon. Friends have stood at the Dispatch Box and solemnly promised the House that they would get a grip on fraud, and are constantly talking about altering the mechanisms to do so. Has it occurred to the hon. Gentleman that much of the fraud cannot be eliminated without eliminating the system on which that fraud is founded?

The Chairman: Order. Before the Committee goes any further, the next group of amendments--new clause 3 and the new clauses grouped with it--is specifically about fraud. It would be appropriate to develop the arguments on that point when we get there.

Mr. Smith: I am, as ever, guided by your ruling, Mr. Morris, but the hon. Member's point is relevant to new clause 1. We are proposing the opportunity for the House, on a Government motion, to have further and proper discussion of the implementation of the decision in article 8(2).

That would give us the opportunity further to develop the case for precisely the reforms to which the hon. Gentleman was referring and, as we have emphasised, the crucial importance of reform of the common agricultural policy. Notwithstanding the agreements which have been reached in Europe and such reforms as have received commitments from member states, expenditure under the CAP continues to bang up against the ceiling that was agreed at the Edinburgh summit and which forms the basis for the Bill that we are discussing. It can come within the ceiling only by using the devices agreed at Edinburgh, whereby differences in the charges to the CAP accounted for by currency fluctuations allow dipping into Community reserves to provide extra resources for the agricultural guarantee fund. Nobody can be satisfied with that; it perpetuates waste, with all the examples that we shall discuss in the next group of amendments which is


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concerned specifically with fraud and waste and which worries so many Members of the House and members of the public.

Mr. Hugh Dykes (Harrow, East): Bearing in mind the fact that the Labour party has in recent years changed its view and become more enthusiastic about the European Union, does the hon. Gentleman share my concern that, given the primitive nationalism about Europe that one sees in Britain, particularly in the press, there is an attempt to negate the validity of the concept of the European Union and the Community having its own resources--money that belongs to the Community, having been passed over by member states under these complicated formulae? The suggestion is often made in some anti-European journals here that it is our money and we should have it back, notwithstanding that we are the only ones to benefit from the rebate. Will he assert categorically that Labour is very much in favour of the concept of own resources and that the Community budget remains a modest proportion of the total public spending, allowing for all the large amounts in the member states, and that that concept should be developed for the common good of everyone in the Union? 4.45 pm

Mr. Smith: We recognise the importance of the European Union having the resources that it requires to do its job, and there is important work to be done at European level. I shall not return to all the arguments on the Maastricht treaty, and I would be out of order if I attempted to do so, but we made it clear that in today's world, with the extent of interdependence of economies and peoples in Europe, it is clearly appropriate to have institutions, policies and resources operating at a European level for the common benefit of all European Union members.

I wish to make two important points about that principle. First, it should be governed thoroughly by the principle of subsidiarity. Government works best when it is closest to the people and some enthusiasts for the European Union endeavour have in the past overstated the case for those measures which need to be taken centrally. Proper subsidiarity should operate in that the conduct and implementation of policy should be carried out at the level which is most effective and closest to the people.

Secondly, nothing undermines people's confidence in common action throughout the European Union and its institutions more than the extent of the fraud, waste and the unnecessary bureaucracy to which the European Union Court of Auditors' report so frequently draws our attention. If those charged with those responsibilities in Brussels, in the European Union or in the European Parliament let too wide a gap open up between the project in which they see themselves engaged and the perception of the ordinary citizens in different member states and their experience of the European Union, as we saw in the reaction to the Maastricht treaty, not just in Britain and in Denmark but also in Germany, France and elsewhere, it sets up a reaction that is damaging to the concept of European co-operation.

We need to emphasise what can be achieved by popular co-operation which engages people in trade, visits and cultural and sporting exchanges which bring practical benefit to people in their day-to-day lives. The £20 a week extra that the average family in the country is paying to


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keep the common agricultural policy going and the extent of waste from food mountains, wine lakes and tobacco subsidies is unacceptable. Britain needs to assert that and to be much more forceful in pressing for change and reform. It needs to build alliances with others within the European Union who think similarly so that we can get the European Union on to a more sensible course which will benefit people in this country and in other member states.

I repeat from the Dispatch Box Labour's commitment to European co-operation and our concern to see that the European Union works properly in the interests of the people of Britain and throughout Europe. The new clause, which addresses the important issues that I have raised, would give the House, on a motion tabled by the Government, the opportunity more fully to consider the issues. I commend it to the House.

Several hon. Members rose --

The Chairman: Order. I remind hon. Members again that this debate is essentially about own resources, so they should resist the temptation to talk about fraud until we reach the next group of new clauses.

Mr. Cash: First, I want to follow up the arguments that have just been put to us by the hon. Member for Oxford, East (Mr. Smith) regarding the implications of article 8(2) of the Council decision on own resources. The hon. Gentleman said that that is based on the Edinburgh agreement, but that is not strictly true.

The decision arises out of what has been described as an international commitment by the Prime Minister, but it was taken only on 31 October 1994 and in what could be described as extraordinary circumstances, not least of which is that it was taken only 10 days after the Chancellor of the Exchequer was summoned somewhat peremptorily by the commissars in Brussels in order to get him to give in to the Italian blackmail perpetrated as a result of the fraud that the Italians had committed for which they were to be fined. The consequences of giving in to that blackmail have tainted the Bill with the fraud to which we capitulated by remitting a degree of the penalty in order to get through the own resources decision. That is a great pity. We all want to ensure that we can prevent fraud. I hope that we will have some interesting and useful observations from the Prime Minister through the Minister when he replies and that we will have some reassurance that the British taxpayer will have better value for money as a result of proper investigations into the way in which own resources are dealt with, most particularly with regard to the United Kingdom.

There is another disturbing feature of the manner in which the own resources decision went through. As far as anyone can tell, the decision was in breach of the undertaking given by the then Paymaster General to the Select Committee on European Legislation on 24 April this year. The Select Committee told the Government, in response to the explanatory memorandum, that we would expect the Government to come back to the Committee if the proposal was amended and resulted in a substantial change to the arrangements that were previously thought to exist.

I was astonished to find that that scrutiny reserve, which goes to the heart of the Select Committee's scrutiny process, should have been broken on such an important


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matter. The resolution of the House in October 1990 stipulates what is effectively a kind of veto by the Select Committee, and therefore the House, on the implementation of a decision. Therefore, the Minister who is our representative in the Council of Ministers should not, in almost any circumstances, make a decision when the Select Committee has put on a scrutiny reserve.

On 31 October 1994 the own resources decision was passed, it would appear in breach of the resolution of the House in October 1990. That is a pretty serious state of affairs. I raised the matter on a point of order yesterday and I hope that the Minister will deal with it when he replies to the debate.

In addition, the decision is in breach of our European manifesto. I fought hard, with great vigour and determination, during the European elections to support my local candidate and I remember well what the manifesto said. It used words to the effect that we would resist all pressure to raise the ceiling on public spending in the European Community.

We had the presidency conclusions of the Edinburgh summit in December 1992. We then had the European elections in May/June 1994. We know from the sequence that I have described that the decision was not made binding in any respect until 31 October 1994. It would have been perfectly possible to have done a Fontainebleau by saying that circumstances had changed, so we should change with them, just as the Prime Minister said that circumstances had changed when we were ejected from the exchange rate mechanism. We should have said on 31 October, in all honesty and fairness to the other member states, particularly having regard to the behaviour of the Italians in all this, that we would not agree to the provisions.

As I said on a point of order at the beginning of these proceedings, we know from the enormous row going on in Holland, rather unreported in the British press, that the Dutch are so concerned about the additional moneys that they might have to pay in order to implement the decision, that the measure may not go through until February. That throws considerable doubt over whether, in accordance with article 11 of the own resources decision, it would be able to come into effect at all. That is a remarkable state of affairs. The pressure that has been applied to get the measure through by 1 January 1995 is liable to be vitiated by the behaviour or attitude being adopted in Holland at the moment. That is Holland's affair, but no one should be under any misapprehension that we are being told to get the measure through by 1 January, when on any reasonable reading of the situation in the other member states that will not happen.

Mr. Charles Kennedy (Ross, Cromarty and Skye): I am listening to the hon. Gentleman's reasoning with some interest. Is he saying that if the Government had a later implementation date the measure would be acceptable to him? He is using a sophist's argument if he objects to the measure in terms of the trigger date if there are difficulties in other member states. The measure is either acceptable to him or it is not and that should be the basis of his argument.


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