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to organise its expenditure to fit that upper limit. We have long gone beyond the years during which revenue was set to cover all expenditure.

Mr. Stevenson: I am grateful for the Paymaster General's undertaking, as was communicated to me by letter, that the agricultural guideline will not be breached. First, does that include not deferring expenditure from this year to future years simply to keep within the guideline? Secondly, does that mean that such elements as the monetary reserve, which is not within the guideline, will not be used?

Mr. Heathcoat-Amory: As the hon. Gentleman fairly says, I have corresponded with him about this matter. I have explained the purpose of the monetary reserve and the fact that, if it was used for specified purposes, it would not be a breach of the agricultural guideline. I hope that he will accept that reassurance.

7.45 pm

Mr. Spearing: I think that the Paymaster General was responding to new clause 12 earlier. Despite what he says, does he not agree that the five sets of publications which he mentioned are disparate, come out at different times of the year and are not a comprehensive Command Paper? Indeed, the memoranda are many, duplicated and not easily available to the public. What objection does he have to new clause 12?

Mr. Heathcoat-Amory: I want to make a suggestion to the hon. Gentleman. I think that I have shown the Committee that what almost amounts to a deluge of information descends on the Scrutiny Committee. I pay an incidental tribute to the members of that Committee, who presumably have to read the stuff and decide whether it is to be debated in Standing Committee --or, indeed, recommended for debate on the Floor of the House. It seems that most hon. Members find the sheer volume, complexity and detail of that information extremely difficult to cope with. I therefore suggest that the annual report on the Community budget should be expanded into a report rather along the lines of what I think the hon. Member for Newham, South is suggesting.

It has to be owned that the report is not a best seller. It has been published annually for some 14 years, largely without alteration. I understand that it was published initially at the request of the Public Accounts Committee, so it is not a statutory requirement but a request that the Government have granted every year. To make it more accessible, it could be expanded and made more what one may call Member-friendly, and put into a form which could become the basis, if the House so wished, for a debate on its content.

I think that that would meet the terms of hon. Members' requests, which are not so much for more information as for better information in a more accessible way. It does not require legislation, and it does not require a new clause. It requires an undertaking from me, which I am very happy to give. If that satisfies the Committee, I invite it to reject the new clauses.

Mr. Hoon: At the outset, it was suggested that this debate was reminiscent of some of the Maastricht debates, but the one significant difference is that, with the exception of the Paymaster General, almost every hon. Member is in agreement. The right hon. Members for Shropshire, North (Mr. Biffen) and for Mid-Sussex (Mr.

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Renton), the hon. Member for Torbay (Mr. Allason) and, I think, every Opposition Member have agreed about own resources. They agreed that a vote and a debate on an increase in own resources for the European Union should be accompanied by a discussion of how that money is to be spent and whether it is to be spent consistently, properly and in accordance with the normal rules of expenditure that we expect in the United Kingdom and with those set down by the various European institutions. That issue united hon. Members: only the Paymaster General took exception to it.

The Paymaster General took exception by using a very narrow construction of new clause 1. If he looks in more detail at new clause 1, as well as at article 8(2), he will see, especially in the final three lines of article 8(2), that the Council is enjoined "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."

As a member of the Council of Ministers, it is obviously incumbent on the Government to play their part in ensuring that the revenue is made available on the basis of a proper system of collection and that appropriate inspection is available to those who are responsible for ensuring that member states make their appropriate contributions to the European Union's budget.

In a sense, that approach links hon. Members on both sides of the Chamber. Everyone has said that there must be a proper system for expenditure. The first part of article 8(2) ensures that there are proper systems for expenditure and for collection. As we are debating an increase in own resources to be available to the European Union, we should consider the system that bears on the collection of revenue and on how that revenue is spent.

As much as anything else, article 8(2) is concerned with maintaining a consistent system of raising revenue across the European Union, which is crucial under the new system of calculating own resources. A proper understanding of the ceiling on own resources will be achieved only on the basis of a GNP calculation. At the same time, if we are properly to concern ourselves with ceilings on own resources for the European Union, we must be confident that every member state has a proper system for calculating GNP.

It is easy to refer to other countries' difficulties in calculating GNP, but from time to time GNP in Italy, for example, has fluctuated dramatically. Sometimes the fluctuation has been the result of concern about Italy's contribution to the European Union's budget. It is well known that at one stage an adjustment was made because the Italian Government were extraordinarily concerned that Italy was paying more into the European Union's budget than had been anticipated. Given the size of the GNP that had been recorded, Italy was receiving less by way of commitment from that budget. It was not entirely surprising that there was a significant adjustment downwards of Italy's GNP for the following year.

It is important that in voting extra funds for the use of the European Union--this view has been expressed by everyone who has spoken in the debate apart from the Paymaster General--we have regard to how the funds are spent. I am not advocating a wide-ranging, Budget-style discussion during which we consider every heading in the European Union's budget, but in being asked to make further contributions to the European Union's budget, British taxpayers should not be concerned that the budget

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contains significant elements of fraud and some elements of waste. They should be satisfied that there is an effective system of delivering an agriculture policy for the European Union.

It is difficult to understand how anyone in the House of Commons could object to that approach. I assume that even the Paymaster General is sympathetic to my argument, yet the Bill contains no reference to the matters that I have raised so far. It would have been open to the Government, in implementing the decision by which, I accept, they are bound under European law and an international obligation, to ensure that many of the provisions that have been discussed by hon. Members were incorporated in the Bill.

The Paymaster General has defended the Bill, and that is understandable, but the Government could have included provisions of the sort that have been suggested to ensure that the House has opportunities for proper debate, which the European Union's institutions have already.

The Government say that we must debate the Bill, but not more than the Bill. They say that we must debate only how an increase in own resources should be implemented. At the same time, the European Parliament, the Commission and even the Council consider own resources as they consider budgetary discipline and fraud. Curiously, an earlier draft from the Commission contained a specific reference to fraud, which was deleted only after the adoption procedure in Council. I am talking not about a Labour party draft or the publication of a quango or pressure group but about the text of a document that was agreed by the Commission. As I have said, it contained a specific reference to fraud, which showed that the Commission was concerned about fraud in terms of spending alongside own resources.

New clause 3 refers specifically to a Council regulation on the protection of the Community's financial interests. That regulation is not restricted to the raising of revenue or the spending of revenue, for both issues are raised in the same document. Fraud is defined in the regulation as being a "diminution" of the Community's own resources or other revenue. The document refers to fraud in the raising of revenue in terms of own resources, and it treats fraud in expenditure in the same way. That is what all hon. Members who have spoken in the debate have invited the Government to do, with the exception of the Paymaster General.

Mr. Stevenson: Perhaps my hon. Friend will reflect on the question that I put to the Paymaster General, to which he did not respond. We are talking about how revenue is expended as well as how it is raised. I argue that transferring significant parts of agriculture expenditure from one year to the next constitutes a de facto breach of the current guidelines.

Mr. Hoon: I shall not be tempted to go along that path too far, but where there are clear decisions of European Union institutions-- such as the decision on budgetary discipline, which set out a framework for spending-- and the guidelines are breached, surely that is a matter for consideration by the House of Commons, especially when we are considering the payment of extra funds to the European Union.

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We do not need to investigate in detail as part of the budgetary debate precisely how each and every ecu in the EU's budget is spent. We should, however, have the opportunity of considering the broad framework within which the European Union spends its funds. It follows from that--I hope that this is consistent with what is happening in the EU--that we in the House should be considering the broad outline of the budget as we consider how the budget is raised, how own resources are secured and, in a general sense, how they are spent.

The essential question for the Government to answer, having introduced the Bill, is why they have not made that consideration possible. Why cannot we have provisions in the Bill that allow the House, along with the European Commission, the European Parliament and the Council of Ministers, to consider the broad outline of how funds are spent when the British taxpayer is being asked to devote significant sums of extra money to the European Union?

Mr. Bill Walker: I welcome the opportunity to speak, and the Committee will be pleased to know that I shall be brief because my hon. Friend the Paymaster General has taken up the concerns that I and others have felt.

I am pleased to see my right hon. Friend the Prime Minister on the Front Bench. He will know that I and others have been concerned about how the House can scrutinise European funding so that it becomes transparent.

There is no doubt that our constituents are concerned about how the moneys that they contribute in taxes are used within Europe. With that in mind, I intervened on my right hon. and learned Friend the Chancellor of the Exchequer on Second Reading to draw his attention to the explanatory and financial memorandum. I make no apologies for returning to the matter.

Paragraph 5 of the explanatory and financial memorandum states: "The new Decision has to be approved by all member states in accordance with their national procedures before it can enter into force. It will take effect as from 1st January 1995."

Hon. Members on both sides of the House have been trying to ensure that Parliament knows what is going on. That calls for transparency and scrutiny of expenditure by the House. That is what we have been after; we have not been attempting to torpedo the Bill. I felt very upset about being accused of attempting to do so, when, in private conversations, I had made it perfectly clear what my objectives were. I said that I would be brief, and I shall say merely that I welcome what my hon. Friend the Paymaster General said. I take his assurance for what it is worth, and believe it.

8 pm

Mr. Peter Shore (Bethnal Green and Stepney): I listened with care to the Paymaster General. He was more forthcoming on some matters that have been raised than on others. He took seriously the point that was touched on by my hon. Friend the Member for Ashfield (Mr. Hoon) and by the hon. Member for Stafford (Mr. Cash)--that is, the importance of obtaining a correct, unified and uniform definition of GNP. The plain truth is that the component of own resources, which is now being taken up by GNP contributions, is growing. It was about 20 per cent. of the total some years ago. It certainly is destined, under the new arrangements, to rise to about 45 per cent.

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of the total. Therefore, it matters very much that there is a uniform, reliable definition of the GNP of the different countries. I listened with sympathy to what my hon. Friend said about the Italians not always being entirely measured in their GNP figures. It is well known that they have a substantial black economy, and of course it is very difficult anyway to integrate that into the true picture of the GNP. Nevertheless, I broadly welcome what was said about efforts to establish, in a uniform way, the GNP of the member states.

On the role of the Public Accounts Committee, the Paymaster General rightly said that anything that he said tonight had to be in reference to the Committee itself. Indeed, it is for the Public Accounts Committee to decide whether it wishes to have its terms of reference extended in the way that has been suggested. I was glad to see, however, before my hon. Friend finished his remarks on that matter, the presence of the Chairman of the Public Accounts Committee. I am sure that he has taken on board, I hope, sympathetically, what was suggested.

I hope that it will be possible for the PAC, which is a very senior Committee of the House and one whose judgment and expertise we have come to value, to play a part in assessing expenditures made in the United Kingdom from the Community budget and the contributions that we make to that budget.

On the matter which was raised by my hon. Friend the Member for Newham, South (Mr. Spearing) and spoken to by my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) dealing specifically with new clause 12, I was not so happy with what the Paymaster General said. He rightly reminded us that several disparate reports, which come out at different and unpredictable times of the year, deal with the financing of the Communities. As he rightly said, the net contribution that is made by the United Kingdom is set out in the Treasury Red Book. Hon. Members have seen the Red Book for this year. It is true that we receive a departmental report in March. Frankly, most of all, we are interested in our contribution to the European Community budget. Our contribution--that is to say, our gross contribution as well as our net contribution--how it is changing over time and how it compares with the gross and net contributions of other countries are of great importance. Although the Paymaster General expressed willingness to expand the Budget report in future to take account of some of our propositions, I do not think that that is quite good enough.

We gave some thought to what we are urging, and we have a new clause with a number of component parts, all of which we wish very much to see enter the annual report for which new clause 12 calls. It is an annual report which is necessary for one overwhelming reason: there is no annual debate on the United Kingdom's contribution to the European Community's budget. It is only at approximately five-yearly intervals, when a new European Communities (Finance) Bill is required, that the figures are revealed. As we recall, as a preliminary to the debate on the European Communities (Finance) Bill 1994, the Chancellor published what the Treasury described as an

"updated forecast of the UK's contribution to the EC Budget and a detailed paper describing the EC's Budgetary framework".

There is much information in that publication which we do not normally see. Table 1, for example, gives the gross payments of the United Kingdom. I am not aware that

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that information is published in any other document on a regular basis. We know from table 1 of that Treasury document that there has been an enormous increase in our contributions, from £5,800 million in 1989-90 to an estimated £8,308 million in 1994- 95, rising in the Treasury forecast to £10.5 billion in 1997, which is virtually double in seven or eight years. That is significant.

As was argued on Second Reading, it is not good enough simply to have the net figures--although we have those and they are important and relevant-- because they reflect the priorities of the Community in spending money in its budget, not necessarily how we would wish that money to be spent. That is why, in new clause 12(a), we ask for "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". That is a matter of considerable importance. We know that Germany is by far the largest net and gross contributor. We are certainly, massively, the second-largest gross contributor, and certainly the second- largest net contributor. Whether or not the new formula for own resources will lead to a change in our relative position, and whether or not we see Holland and perhaps France and Austria overtake Britain as net contributors, which is something that we would welcome, the only way of obtaining that information is through an annual report of the kind for which we have asked.

I hope that that first requirement will be met, but it is not the only one. The Treasury report has helped to give us a real account of the rebate mechanism which has been used in adjusting Britain's net contribution. That is a very useful piece of information, as is the composition of own resources as between the three major components of agricultural levies, sugar levies, customs duties and VAT and now GDP, as the fourth component.

We need that information. In paragraph (c) of our proposed new clause 12. we ask for the operation of each article of the decision of 31 October 1994. Perhaps the most important of the new articles--the one that we would certainly keep an eye on--is article 10, which the hon. Member for Stafford referred to in his speech. It contains proposals for a new additional own resource component. That is a very important matter and we want to contribute to the thinking behind it at an early stage. Any proposals for additional own resources should be reflected in the annual report for which we have asked.

We have also asked, I think quite properly, for a report on any action taken by Her Majesty's Government in respect of financial discipline. Much has been said about financial discipline and more will be said about it in subsequent debates, but surely it is reasonable for the House of Commons to demand an annual report about financial discipline: what the British Government have proposed and how successful they have been in securing improvements in financial discipline.

In paragraph (e) of our new clause 12, we ask for

"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."

I do not think there is a problem with that; we can expect to receive the information as soon as the European Community has made a decision under article 8(2).

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I think that the precise categories of information for which we have asked are wholly reasonable. I think that they reflect the House's need to keep a close eye on the financing of the European Community, particularly as it affects the British contribution and British net receipts. I hope that we will be allowed to press the new clause to a Division tonight.

Mr. Andrew Smith: I do not wish to detain the Committee for long, although I think that it has been a very useful debate. As my hon. Friend the Member for Ashfield (Mr. Hoon) said, there is a large measure of agreement on both sides. Hon. Members are not satisfied with the way in which the collection of European Union resources is supervised and they are not satisfied with the way in which expenditure is scrutinised. Many hon. Members referred to fraud and the need for better controls.

When the Paymaster General replied to the debate I noticed that he did not answer the question which was put to him by my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) about balances being carried forward from one year to the next. He asked whether that was consistent with the degree of financial control that the Government are seeking. Could the Paymaster General answer that question now?

As Labour Members have said, we are not satisfied with the system of collection and calculation of European Community resources. Conservative Members also referred to the implications of inconsistencies in the way in which different member states calculate gross national product and VAT bases. They drew attention to the inequity in the amount of money paid by different member states. That, in itself, is a good reason to press our new clause to a Division. The Committee should also acknowledge that, in replying to new clause 12 proposed by my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) about an annual report to Parliament, the Paymaster General said that a good measure of the proposals could be incorporated in the annual report made to the House about the budget. But the Paymaster General will not incorporate some very important aspects of my right hon. Friend's new clause.

The information which is detailed in new clause 12-- rather than the great pile of documents that the Government bring to European debates-- would be very useful and enlightening. The public would find it very interesting reading. Why does the Paymaster General think that certain parts of new clause 12 are unacceptable? We intend to support my right hon. and hon. Friends if they wish to press the matter to a Division.

We also face the rather extraordinary prospect of the Paymaster General giving concessions to the hon. Member for Stafford (Mr. Cash)-- concessions which were not given in the normal way in response to the debate, but which were negotiated at Downing street. That is a quite extraordinary turnaround for a Government who last week were going to beat the rebels and Euro- sceptics into the ground. All of a sudden, they are now negotiating with them at Downing street about terms. I suppose that the Government have learnt from last night that awarding

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concessions five or 10 minutes before a 10 o'clock Division does not work. Perhaps they are trying a more structured approach. 8.15 pm

This style of governing--making all sorts of last-minute concessions-- reveals the Government's total disarray and confusion. The Government's tactics are as confused as their Whips must be, if last night's vote is anything to go by. The Government are in as much mess as the European Union when it comes to controlling fraud. The Government have not responded adequately to the very powerful arguments for improved scrutiny and control of finances which were made on both sides of the Committee. In new clauses 1 and 12, my right hon. and hon. Friends advance the case for proper scrutiny by the House of what happens to money which is raised in this country and spent by the European Union. The public have a right to expect that control and scrutiny, and we intend to push the new clauses to a Division.

Question put, That the clause be read a Second time:--

The Committee divided: Ayes 259, Noes 318.

Division No. 13] [20.17 pm


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Abbott, Ms Diane

Adams, Mrs Irene

Ainger, Nick

Ainsworth, Robert (Cov'try NE)

Allen, Graham

Anderson, Donald (Swansea E)

Anderson, Ms Janet (Ros'dale)

Armstrong, Hilary

Ashdown, Rt Hon Paddy

Ashton, Joe

Banks, Tony (Newham NW)

Barnes, Harry

Barron, Kevin

Battle, John

Bayley, Hugh

Beckett, Rt Hon Margaret

Beith, Rt Hon A J

Bell, Stuart

Benn, Rt Hon Tony

Bennett, Andrew F

Benton, Joe

Bermingham, Gerald

Berry, Roger

Betts, Clive

Blair, Rt Hon Tony

Blunkett, David

Boateng, Paul

Bradley, Keith

Bray, Dr Jeremy

Brown, Gordon (Dunfermline E)

Brown, N (N'c'tle upon Tyne E)

Burden, Richard

Caborn, Richard

Callaghan, Jim

Campbell, Menzies (Fife NE)

Campbell, Mrs Anne (C'bridge)

Campbell, Ronnie (Blyth V)

Campbell-Savours, D N

Canavan, Dennis

Cann, Jamie

Carlile, Alexander (Montgomry)

Chidgey, David

Chisholm, Malcolm

Church, Judith

Clapham, Michael

Clark, Dr David (South Shields)

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