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Lord Tomlinson: My Lords, it is amazing but perhaps inevitable that over the past couple of weeks there have been acres of newsprint and hours of radio and television discussion about our European Union. It is the kind of coverage for which we have all been asking. But it has been limited to that very narrow area of the draft constitution, the European Union budget and the CAP reform. And even on that they could not get it right, because the argument was not about the European Union budget but about the financial perspectives for the years 2007 to 2013. So the experts did not get any of that major agenda correct.
In all this there has been no real mention of so many of the issues that are mentioned in the document on current developments in the European Union. We can go through them all. We have a little mention of the Lisbon agenda, but nothing about regulatory reform, nothing about the services directive or the seventh research and development framework programme—and so one could go on right through the agenda. However, it is not that which I want to talk about. I want to talk about the Fontainebleau agreement, and I want to put a rather different gloss on it. I hope that the noble and learned Lord, Lord Howe, does not quite disappear, because I am going to put a slightly different gloss on the Fontainebleau agreement from that which he so glowingly put before us.
The Fontainebleau agreement—almost 21 years ago to the day—also was born out of crisis, out of a failed European summit in Brussels. And so those attending the summit had to go through the agony of a summit all over again within two months. The United Kingdom was led by that great trio whom we saw today on the Front Bench below the gangway—the noble and learned Lord, Lord Howe, the noble Lord, Lord Lawson, and, the captain of the team, the noble Baroness, Lady Thatcher. They turned up in Fontainebleau, and the first thing that the noble Baroness had to do—as it was almost a prerequisite of being able to do anything else—was to sign the statement that she wanted on budget discipline. It said:
"The European Council considers it essential that the rigorous rules which at present govern budgetary policy in each Member State also apply to the budget of the Communities".
I looked through the following decade or decade and a half to see what the impact of that budget discipline was, but it was precious little.
The mythology of Fontainebleau is even further from the truth than just the failure to get a system of budgetary discipline. In order to get an agreement on the corrective mechanism based on a United Kingdom abatement of the succeeding payments to the budget, the noble Baroness, Lady Thatcher, and her team had simultaneously to agree to an increase in the own resources of the European Union, from a budget based on 1 per cent of VAT to one based on 1.4 per cent of VAT. A 40 per cent hike in the budget had to be agreed to as the price for getting an agreement on budgetary discipline.
If there is anything more absurd than that it is hard to realise what it is. That was recognised by Members of your Lordships' House who were in another place at the time that the noble Baroness, Lady Thatcher, made her statement. I looked with great interest at the debate and found that the noble Lord, Lord Higgins, in his former manifestation as the right honourable Member for Worthing, asked the noble Baroness a question. He asked:
"should we not refuse to approve an increase in own resources until after the common agricultural policy is reformed and agricultural expenditure reduced?".—[Official Report, Commons, 27/6/84; col. 995.]
I have to say that the noble Baroness's reply to what was a very pertinent question was rather opaque. I found the reply less illuminating than the question.
Then, my noble friend Lord Sheldon, in his former manifestation as the right honourable Member for Ashton-under-Lyne, was perhaps even a little bit more brutal about the Fontainebleau agreement. He asked:
"Is the Prime Minister aware that even more important than the exact fraction of the loaf with which she returned from Fontainebleau is the need that she faced to withhold her consent, at an historic moment, to an increase in own resources? Why did she not make use of that once-for-all opportunity?".
The reply to that was a little clearer. The then Prime Minister, the noble Baroness, Lady Thatcher, said:
"If we had not made use of it, we would not have obtained the agreement for a refund and we would have been left without any right to a refund whatever".—[Official Report, Commons, 27/6/84; col. 997.]
I want to debunk the mythology of Fontainebleau. What the noble Baroness said at that time was really saying that she knowingly agreed to a 40 per cent increase in the European budget in order to get a refund, at a time when her great achievement was that she had got an agreement to budgetary discipline. That is the budgetary discipline of Bedlam and it has had very serious and ongoing consequences.
It actually got worse than that. We gave our European partners in the Fontainebleau agreement a whole series of other expectations. If you go through the detail, you
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will see at paragraph 1.1.6(i) that we agreed to a "convergence of economic policies". Paragraph 1.1.6(iv) shows that we agreed to the,
It went on to suggest that the European Council,
"expects the Council of Ministers to specify without delay the other areas in which Community initiatives are called for".
It even went on to mention words like "harmonisation" in the context of taxation policy.
In doing those things, we created expectations of our European partners about what Britain was going to do in this Europe with a 1.4 per cent VAT ceiling, and we consistently reneged on everything. Far from working out the inequity of the budget—on the expenditure side of the budget, which is what the language of it was all about—we found Chancellor of the Exchequer after Chancellor of the Exchequer refusing to have expenditure programmes in the United Kingdom because they realised how much of their rebate they would lose if they actually did get the expenditure on the United Kingdom.
That went on and on. Something that was co-financed 50 per cent/50 per cent meant that we paid two-thirds of our own 50 per cent. So we were paying 83 pence in the pound for co-financed European policies. It was an inbuilt structural recipe for disaster. It has meant that we in the United Kingdom have a very clear idea about what we are against in Europe but we have precious little idea about what we are for.
We know that we are against the common agricultural policy. We even know a few of the reasons why we are against it: it benefits inefficient farmers rather than efficient ones; it adds to structural surpluses; it prevents modernisation of the industry and does significant damage to the very policies that we are pursuing in Africa and the developing world. We know the reasons why we are against it but have we really yet developed a clear idea of what we want to replace it? A few ideas have been floated today. Should we renationalise the CAP? Should we partly renationalise it? Should we cut down the level of expenditure and say, "If you want more than that, you do it at a national level"? What is our policy? We are clearer about what we are against than what we are for.
I believe that the great challenge now is to stop the mythology of the Fontainebleau agreement and to stop the idea that that is an automatic corrective mechanism which will ultimately work its way out. The noble Lord, Lord Higgins, in his former incarnation as Terry Higgins the Member for Worthing, was absolutely right to ask the question that he did. The noble Lord, Lord Sheldon, in his former incarnation as the Member for Ashton-under-Lyne, was absolutely right to pose the question that he did to the noble Baroness. We must now get out of the negative mentality in relation to Europe, develop an agenda comprising that which we want, and partly an agenda that we need, and then start to pursue that. I suggest that many of the matters which we have not considered over the past few weeks should be on that agenda.
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There is the whole question of what should happen to the research and development framework programme. Are we in favour of it or are we against it? I personally am in favour of it. It is our job to influence and shape it. That policy brings us benefit, brings benefit as regards regeneration of our industrial base and can create a dynamic inside Europe which adds to our competitiveness. However, what we must all do is not go back to the past, recognise that we have a new agenda, work on that agenda and follow it enthusiastically from the pro-European perspective that many people have demonstrated in this debate, but show our friends and colleagues in Europe what we are for rather than going there with our well rehearsed litany of what we are against.
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