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Orders Of The Day

Volume 958: debated on Wednesday 15 November 1978

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[1ST ALLOTTED DAY]— considered

European Communities (Developments)

4.32 p.m.

I beg to move,

That this House takes note of the Report on Developments in the European Communities, January-June 1978 (Command Paper No. 7361).
This White Paper gives the House a factual account of events and developments during the Danish presidency of the Community. At the outset of our deliberations, I should like once again to thank the right hon. Member for Bournemouth, West (Sir J. Eden) and all his colleagues for the work that they have done for the House in their long hours in the Scrutiny Committee. I would also like to thank those other Members of the House who diligently keep an eye on Community affairs.

Instead of repeating all the detailed material in the White Paper, I want, with the leave of the House, to identify some of the major problems which face us in Britain and to evaluate to what extent our membership of the EEC has or has not helped us to find solutions to them. The Community is not an end in itself. To believe that it is is a mistake some misguided idealists have too often made. It is a piece of political machinery, and its value has to be judged by how far we are able to use it effectively in fulfilling our economic and social objectives.

The greatest single issue which dominated this six-month period was undoubtedly the worldwide effort to achieve growth without inflation in a period of gradual recovery from the oil crisis and other setbacks of recent years. That is why the Prime Minister took the initiative in March this year and presented his five-point plan covering higher growth, improved currency stability, energy, trade and long-term capital flows, including aid for the developing countries.

While the larger members of the Community speak with their own voices on the world economic stage and participate in their own right at economic summits, the Community acting as a whole can sometimes make an even greater impact. The Community is, after all, the world's single largest trading area. Its share of world trade is far bigger than that of the United States of America or of Japan. The figures are 37·2 per cent. for the EEC, 11·7 per cent. for the United States of America and 7·9 per cent. for Japan. It therefore in our view made sense for us to consider what contribution the Community as a whole could make to the success of the Prime Minister's five-point plan, including getting the right results from the Bonn summit.

As the White Paper shows, we were able to bring the Community very successfully into our general strategy for Bonn. It was decided at the April European Council that member States should work out a common strategy including joint commitments on the key point of growth, but also leading to action in a whole range of specialised ministerial Councils such as those on social affairs, energy and aid. The result was agreement at the Bremen European Council later in the summer on a range of commitments and joint positions, with which the Community members involved were able to go to Bonn a week later and work there for a similar agreement with the other leading industrialised nations.

The Bremen European Council saw, of course, not only the completion of this "common strategy" but the launching of a new project—the Franco-German proposals on a European monetary system. This issue of course falls outside the scope both of the White Paper that we are discussing and the current debate, but, as the Prime Minister has made clear, this House will have a chance to debate it before final decisions are taken.

For the moment, I would only say that we believe that a scheme for monetary stability must be judged by its practical contribution to the whole range of our economic objectives, including growth and higher employment as well as monetary stability and the control of inflation. It must also obviously be judged in the context of overall costs and benefits of membership of the Community itself and of how far there is a demonstrable move towards economic convergence between the wealthier and less affluent member States. That is how we in the Government shall judge it when the moment for decision comes. And that is how we recommend that this House should judge it, too.

I mentioned trade. What is at stake in the current Tokyo round of the GATT multilateral trade negotiations is the future of world trading arrangements, quite possibly for the remainder of the century. The Community acts together in these negotiations and its collective weight enables it to bargain on favourable terms with other major trading partners such as the United States and Japan. We stand to benefit a great deal from this. At the same time, for negotiations to succeed, as we very much hope they will, the Community will need to show imagination in responding to the needs of all participants, including the developing countries and the medium-sized agricultural exporting countries such as Australia and New Zealand.

The Tokyo round will be a success only if it is demonstrably fair to all. Frankly, I do not believe that the position of the Community is yet all that it could and should be in some of these respects, and we are determined to play a constructive part in overcoming remaining shortcomings. One particularly disturbing related problem is the failure of the Community as yet to join the International Sugar Agreement and its continued insistence on providing export subsidies greater than the world sugar price, while for some developing countries sugar sales remain literally a matter of life or death. In my view, as long as this indefensible policy goes unchanged, the reputation of the Community will be badly damaged.

It has become increasingly clear at recent summit meetings that the challenge of the Third world is to be seen not in moral terms alone—although the moral demands remain as stark as ever—but in terms of our own well-being, strategically and economically. If we want international stability, we must remove the causes of instability. If we want a prosperous world economy, we must mobilise the economically immobilised millions of Africa, Asia and Latin America. That is why we are concerned not only with the prosperity of this country but with the legitimate needs and aspirations of the people in poorer countries than our own.

On North-South matters, the Community has continued the tradition established at the Conference for International Economic Co-operation last year of making its own distinctive contributions to discussions. We look forward to working within the Community and the wider so-called group B of OECD in the preparation for the forthcoming talks on the proposed common fund for international commodities and for UNCTAD V next year and in the elaboration of a new United Nations international development strategy for the 1980s and beyond.

The Lomé convention, which governs the Community's relations with some 56 African, Caribbean and Pacific States, covers around 600 million people, and its scope is virtually the same as that of the North-South dialogue, as indeed is its aim—namely, the establishment of
"a new model for relations between developed and developing states, compatible with the aspirations of the international community towards a more just and more balanced economic order."
Negotiations, as the House is aware, are now under way for a new EEC-ACP convention, and the Government hope that they will lead to a successful outcome. We want Lomé to be effective. but I must emphasise that we see the convention as only one part of our strategy towards the developing countries. We are determined that it should not become a divisive factor within the Third world.

Meanwhile, the Community's contribution to the development of countries not covered by the Lomé convention, the so-called "non-associates", remains totally inadequate. The Government are working hard with the Governments of a number of other member States to try to increase the amount of money which will be devoted to the Community's programme of aid to them, including as they do some of the largest and poorest countries of the world, not least in Asia.

The Community must do more in the aftermath of the Bremen summit, which agreed that there should be a substantial increase in its aid to the poorest non-associates, to help this part of the developing world. The Government are accordingly pressing for the 1978 allocation of about £45 million for aid to non-associates to be increased to around £70 million in the budget for 1979, and they have been encouraged by the progress which is being made in Brussels to this end.

As the House will be aware, in our overall approach to the new Lomé convention we are concerned to see the issue of human rights taken seriously alongside our concern for economic and social rights of the people of the ACP States. It is simply not acceptable that people in Britain, through their taxation, should be expected to support a repressive regime simply because there is no mechanism under the existing Lomé agreement for suspending its aid or STABEX provisions. But we must avoid a neo-colonial attitude. The fight for human rights is a joint responsibility of ACP and EEC nations alike. We therefore hope to find a way of dealing with this problem which is mutually acceptable.

The development of a new world economic order is not, of course, a problem uniquely for non-industrialised countries. It means changes in the economic systems of the industrialised countries as well, as was clearly brought out in yesterday's' debate. These changes are invariably painful. Three industries where the consequences have been particularly striking are textiles, shipbuilding and steel.

On textiles we are facing up firmly to the challenge of adjustment. This is an occasion when being a member of the EEC has frankly helped: it has been easier to persuade suppliers to reach restraint agreements with the Community as a whole than it would have been for the United Kingdom to act on its own. At the same time, this network of Community agreements with low-cost suppliers, which gives them assured access to our markets, will help industry in the developing countries to plan more securely for the future. The Community has taken particular care to allow special opportunities within these arrangements for exports from the poorer developing countries.

The Mediterranean countries which have preferential arrangements with the EEC were not included in the earlier network of agreements with low-cost suppliers under the multi-fibre arrangement. But separate voluntary restraint arrangements have since been negotiated with most of the main Mediterranean suppliers. These negotiations have been protracted in some cases and, unfortunately, Malta and Turkey have still been unable to reach agreement with the Community. As a result, the safeguard clause in their association agreements has had to be invoked.

In the case of Malta, despite considerable efforts by the Commission to negotiate voluntary restraints comparable to those reached with other suppliers, the Community has found it necessary to limit Malta's exports to the United Kingdom of six sensitive products for the rest of 1978. The Community is, however, very prepared—indeed, anxious—to go on talking to the Maltese about arrangements for subsequent years in the hope that agreement can be reached and safeguards can be lifted.

The shipbuilding industry throughout the world has been badly hit by the recession. Our own industry must be in a position to benefit from the upturn when it comes. We are co-ordinating our action with our EEC partners within OECD in order to ensure as far as possible that the European share of the shrinking world market is not reduced still further. Pressure on the Japanese in particular was for a long time effective in preventing them lowering their prices to attract more orders, although more recently they have declared that the appreciation of the yen makes it impossible for them to do so indefinitely.

Our strategy is also to use the shipbuilding intervention fund to attract enough orders to keep the industry on its feet during the recession. Adjustments of capacity are inevitable, as Ministers have always made clear in this House, but the fund is intended to help make these adjustments as orderly as possible. The adoption of the EEC fourth directive on aids to shipbuilding in April, which admitted the principle of subsidies, enabled us to negotiate with the Commission an extension to the intervention fund.

Those negotiations were not easy, but they succeeded. If they had not, or if no mechanism such as the Community provides existed in this field, there would have been nothing to stop member States rushing into a beggar-my-neighbour subsidy race, with disastrous consequences for the shipbuilding industry in this country. Here again, I suggest, is an area where the Community has made a useful contribution.

Finally, I turn to one of the three industries where the process of adjustment has been particularly painful—namely, the steel industry. At the beginning of the year the world steel industry was in serious difficulties. Many steel producers were making heavy financial losses. The Community industry was particularly badly hit. Its share of world markets had fallen and home markets were suffering serious disruption from low-priced imports. Plants were working at only 60 per cent. capacity. This was an intolerable economic and social problem. It is against this background that the Community has introduced a package of anti-crisis measures designed to restore profitability to the Community steel industry and to provide a breathing space in which necessary long-term restructuring can be carried out.

These temporary measures to deal with the crisis have provided immediate and considerable benefit. Their continuation for a further period is of great importance. We hope this will be agreed before the end of the year. But we and our Community partners recognise that in the longer term the problem can be tackled only by means of detailed plans for restructuring the Community steel industry as a whole. Some progress has been made in this direction, but detailed measures have still to be agreed.

Is my hon. Friend aware that a meeting was held in this building last week with representatives of the metal fasteners industry, which is heavily concentrated in the West Midlands? Those representatives said very strongly and unanimously that they were being badly hit by the use of metal fasteners manufactured with cheap Western European steel—I repeat, not Asian steel but cheap Western European steel—which is being produced and marketed in violation of existing Common Market rules.

I am grateful to my hon. Friend for drawing this further evidence to my attention. I can assure him, because I was present at the Council of Ministers concerned, that we talk frankly about evasion where it occurs and the problems that face us. However, I wish to pay tribute to Commissioner Davignon for the seriousness with which he treats such matters and his determination to overcome these problems. I shall see that this point is fully pursued. I hope that my hon. Friend will give me full details of his discussions.

I wish to press the Minister further on this matter, and I wish to raise a somewhat more general issue. The progress and prospects of the steel industry are a matter of great importance to hon. Members on both sides of the House and, although many of us are prepared to take a fairly pragmatic approach towards the Davignon plan, we are concerned about the kind of allegation made by the hon. Member for Birmingham, Selly Oak (Mr. Litterick). This is a reasonable occasion on which to ask the Minister to dot the i's and cross the t's in detail about the representations which the Government intend to make to ensure that the recriminations which exist between the steel industries of member countries are reduced and that the Davignon plan applies equally to all member States.

I can give the specific assurance that the hon. Gentlemen seeks. First, I am able to tell him, as an illustration, that at a recent meeting of the Council of Ministers I was able to pursue the special problems of the special steel industry in Sheffield, where there were indications that the Community arrangements were not being as effective as one might have hoped. That is a matter that we have pursued with the Commission. I am going to the Council of Ministers next week. I can assure the hon. Gentleman and my hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick) that the specific matter that they have raised will be pursued at that meeting.

I have spoken of the decline of three of our traditional industries. The corollary of their decline is the need for the development of new high technology industries to take their place. This becomes all the more important if we are determined to see justice for the nations of the Third world providing them with an opportunity to develop their own industrial potential—in other words, if we are genuinely wanting to use safeguards as a temporary instrument while we readjust our own economy rather than as a permanent weapon to keep the world at bay.

In this age of rapid technological change, it is clear that collaboration between British industry and the industry of neighbouring developed countries brings benefit to us and, indeed, that for some major projects such collaboration is quite essential. It is now widely accepted, for example, that no new major civil aircraft project can be initiated by the British aircraft industry alone, even though it is the biggest in Europe. The recently concluded agreement on the airbus therefore marks an important step forward.

The Community can create a climate which favours industrial collaboration between its member States, and there are those in the Community who would like to make the Community machinery into a driving force for such collaboration. The British Government's attitude on this is a good deal more pragmatic. We believe it right to judge each case on the benefit it is likely to bring to British industry. However, I believe that we should acknowledge that there may be real advantage in making common cause with other members of the Community in the face of growing competition from newly industrialised countries.

I now turn to some of the aspects of the Community which, we frankly argue, call for improvement. First, it is still not yet widely enough recognised within the Community—it has been emphasised and re-emphasised in the House this week—that we in Britain are the second largest net contributors to its budget. Some calculations, as the House is well aware, suggest that we may soon become the largest. This is obviously at odds with our relative economic strength compared with several of the others. As my right hon. Friend the Prime Minister said in his speech at the Guildhall earlier this week, it is an anomaly which cannot go unresolved. But in the meantime it gives us special authority to speak out on how the resources of the Community are used.

I ask the Minister to clear up a procedural matter. He referred to studies, and I think that he must mean the Economic Policy Committee paper. Is that a public document? If so, will he ensure that it is available to hon. Members? If it is not a public document, will he ensure, in view of the weight that the Prime Minister put on it, that it is published and made available to us?

I was referring to studies that are taking place in and around the Community itself in Brussels. But, in the meantime, it gives us special authority—

The hon. Gentleman has rightly expressed concern about the likely level of the British net contribution to the Community, as has the Prime Minister in the course of this week. Does he agree that the likely level of contribution by the United Kingdom has been set as a result of the renegotiations that his Government entered into with the Community and upon which they placed such great store when they first took office? Therefore, present projections of the likely size of the United Kingdom contribution depend in part on the results of apparently unsuccessful renegotiations carried out by the present Government.

I think that the hon. Gentleman, who is usually fair and objective about these matters, will agree that what may have happened, rather than as he puts it, is that the expectations that those involved in the renegotiations believed would be fulfilled in our future pattern of expenditure have not materialised in the way that might at the time have been suggested.

Will my hon. Friend answer the question put to him by the hon. Member for Mid-Oxon (Mr. Hurd)? Is it the Government's intention to publish the document, apparently emanating from Brussels, which has been widely quoted in the press and which gives a number of detailed figures about the budget which we do not have?

I can assure my right hon. Friend that although it has not yet been published I, together with my colleagues, believe that it should be published, and we shall be pressing for that to happen.

Over 70 per cent. of the total Community budget is swallowed up by the common agricultural policy. In consequence. those countries that derive most from the budget are those that most specialise in agriculture. This does not reflect economic need and is undeniably a wholly capricious basis for the distribution of Community resources.

A tiny fraction is used to improve efficiency. The bulk of the expenditure goes on dealing with surpluses—that is to say, to put it in specific terms, on holding surpluses in store, on subsidising their sale on the Community market itself and, above all, on the restitutions which are needed on exports because of the high level of Community prices.

This means that a Community consumer cannot be supplied by the most efficient world producers because, to protect the Community price level, those producers are largely denied access to the market, and yet at the same time as a taxpayer he has to pay to dispose of the excess supplies that this price level creates. In short, it all amounts to an extravagant and totally unjustifiable waste of resources.

As a result of the discussion at the meeting of the European Council in July, which revealed a great deal of support for our wish to see a more balanced distribution of the use of Community resources, the Commission was asked to report at the European Council next month on ways of reducing agricultural surpluses and achieving a better balance of expenditure in the Community budget. Taken together with the outcome of this year's price-fixing negotiations in which my right hon. Friend the Minister of Agriculture, Fisheries and Food played a powerful part and which resulted in the lowest increase in common prices since we joined the Community, this is an encouraging sign that a new direction in the Community's agricultural policy is possible.

To win the support of all its citizens and the confidence of the rest of the world, the EEC must show itself capable of taking the tough decisions which are needed to bring the CAP back to reality. The urgency is underlined as we come up to new discussions on the Mediterranean dimensions of the CAP, not to mention the consequences of enlargement which we debated at length yesterday. The danger if we repeat the mistakes of the past will not be limited to member countries alone. It could inflict wanton and severe pain on a number of Third world countries, not least in the Mediterranean region, which are struggling for their survival.

Inseparable from the problems of our declining industries is the need for an adequate regional policy sensitive to the needs of both the declining industrial areas and also—a modern problem—to the needs of derelict inner city areas.

We have always maintained that a Community in which the disparities of wealth between regions grow larger is intolerable. The Community needs a regional policy which is geared to prevent that happening, and the European Regional Development Fund is the main Community instrument leading to a direct transfer of resources from the rich regions to the poorer. Though relatively small, and necessarily limited in its effect, it is an indication that the Community does accept the principle of redistribution.

This year we obtained a much larger fund—about double the size of the previous one—a United Kingdom quota virtually unchanged at 27 per cent., and greater flexibility in the conditions for the fund's use. Receipts from the fund should thus amount to £100 million for 1978. There will also be a non-quota section amounting to no more than 5 per cent. of the fund, over whose allocation the Community will have greater discretion.

The Minister is referring to the non-quota section. On page 5 of the White Paper, Cmnd. 7361, at paragraph 60, it is said that

"The Council reached an agreement on the Regional Development Fund for 1978–80."
It was published in September 1978 and makes no mention of the conciliation proceedings that are still going on between the Parliament and the President-in-office of the Council on this precise matter. Meetings were held on this on 24th July and again on 17th October. Is it not arrogant of the Minister to assume that the wishes of Parliament are to be totally swept on one side before the process is over?

Anyone who has seen the hon. Lady's powerful contribution within the conciliation procedures will know that there is no question of the procedures being swept lightly to one side. I suspect that at the end of the next six-months period there will be a very proper mention of the conciliation procedures, in which, I emphasise, she has played a very important role.

The Community has not yet produced a satisfactory solution for the United Kingdom on fish. The White Paper describes the inconclusive discussions in the Community during the first half of this year on the establishment of a common fisheries policy. In the absence of a settlement, the British Government were then forced to adopt certain conservation measures. on a national but non-discriminatory basis, in order to protect stocks.

Nevertheless, settlement of a revised CFP, meeting Britain's interests—that has to be underlined—remains one of the Government's most important objectives in the Community. Following the Prime Minister's discussions in Bonn in October, there is renewed determination on all sides that the negotiations be brought to a satisfactory conclusion during the current German presidency.

The British Government have set out clearly the essential requirements of the British fishing industry as a whole. These are real needs, but they have been expressed in terms which are not inflexible. It is up to the Commission and our partners to show that they, too, are prepared to work for agreed means of providing a fair solution. Substantive discussion on these detailed points is under way. We hope that progress will be made at the Fisheries Council to be held on 23rd–24th November, and will make every reasonable effort to reach a satisfactory conclusion.

Does the Minister fully appreciate that conservation is one of the greatest concerns of those connected with fishing, particularly on the South Coast? The fishermen on the South Coast see a great deal of over-fishing on the part of France and Belgium. Will special regard be paid to conservation? Will it be a paramount part of the negotiations?

As the hon. Gentleman knows, I am familiar with the South Coast. I know that fishermen there and elsewhere around our coastline regard the issue of conservation as being of great importance. That is one reason for urgency in reaching a solution. If we do not reach a solution soon, stocks may become irreparably damaged. In that sense, it may be that we shall be discussing the future of an industry which in fact has no future because we have allowed things to get out of control.

On energy, there have been no major developments since last year's decision establishing the Joint European Torus project in the United Kingdom. On the other hand, there have been some modest advances. During the period under review, for example, the Energy Council agreed to establish joint Community schemes for demonstration projects, both on new technologies and processes for energy saving and on alternative energy technologies, including coal gasification and liquefaction, where British technology is in the lead. These are sectors where Community action makes sense, and I believe the United Kingdom will do well under both schemes, as we have under the Community scheme for research and development in hydrocarbons technology, which has already entered into its fourth year.

The prime objective of the Community's energy policy, reiterated by the European Council in Bremen last July, is to reduce the Community's dependence on imported energy either by consuming less —and consuming it more efficiently—or by producing more, or both. A basic element of such a policy must be Community encouragement for, and protection of, investment in these energy resources which exist within member States. In this context, it is disappointing that the Community has so far sadly failed to provide encouragement or support for its abundant, but expensive, coal reserves. although it must surely do this if it is serious about reducing its dependence on imported energy. We shall be looking very carefully at the Commission's latest proposals on coal to see whether they can provide the kind of support our coal industry needs to maintain its production.

From this brief review, it is clear that it is possible so far only to claim limited success for the contribution the Community has made to finding solutions to many of our basic problems. There is a lot of unfinished business. But, of course, the test is not only in the success with which the Community deals with these material problems, important though they are—nor will it win a place in history by what it does in harmonising, for example, the noise level of the Community's lawnmowers, important though the protection of our environment is. Other vital tests will be, first, its contribution towards effective international cooperation in solving the political problems that confront the world—as the White Paper records, a good deal of useful work has been done on Southern Africa, the Middle East, the Belgrade conference and Cyprus—and, secondly, its impact in strengthening the cause of democracy in Europe and throughout the world. This is the significance of the declaration on democracy printed in full on page 20 of the White Paper.

The requirements of democracy must constantly be borne in mind. It is in this context that the institutions of the Community and their public accountability assume so much importance. I place on record once again the fact that this Government believe that the Community should not develop into a centralised, bureaucratically-dominated federation—a liberally framed mirror of the bureaucratic centralism that we all condemn elsewhere. The Government are determined to uphold the rights of national Governments and Parliaments. It is for this reason that we believe, as I have said repeatedly, that the centre of decision making must remain the Council of Ministers, and that the Council of Ministers must, for its part, remain firmly accountable to the national Parliaments and Assemblies of individual member States.

As the House knows, we are faced next year—little more than six months away—with direct elections. This is a date to which Britain is committed by agreement with the other member States. Each member State has been able to choose its traditional day of the week, and in this country it is therefore proposed that we shall vote on Thursday 7th June. My right hon. Friend the Home Secretary will shortly lay before this House the proposals of the Boundary Commissions and the draft regulations for the conduct of direct elections, and has also to make the order formally to fix the date of 7th June 1979.

Will the Minister give the House a little more detail about the date? We in inner London are anxious to know about it as soon as possible.

I understand the hon. Gentleman's anxiety. I am not able to give this now but I shall certainly bring the point to the attention of my right hon. Friend the Home Secretary.

I would not pretend, however, that no problems remain. There is still the most sensitive subject of the level of the emoluments that directly elected Members of the Assembly will receive. The legal basis for these is in the Community Act of 1976 providing for direct elections, and the procedure is for the Council of Ministers to take the final decision, acting on a proposal from the Assembly after consultation with the Commission.

The Government believe firmly that salaries should not be excessive, and certainly not the wild figures of up to £30,000 which have appeared in parts of the press. In no member State do national parliamentarians receive as much. It would be wrong for Members to be living like fat cats off a rich diet of cream, denied the majority of their fellow countrymen, in days of straitened economic circumstances and recession. It would certainly not do the reputation of the Assembly any good.

The Government's strong view is that the salaries of the Members of the directly elected Assembly should reflect those of their respective colleagues in national Parliaments. They should not be greater. On top of that salary there should be a system of allowances reflecting real expenses. As my right hon. Friend the Chief Secretary assured the House on 27th April, the salaries of directly elected Members of the European Assembly should in our view be subject to national taxation.

I began my speech with an acknowledgement of the excellent work of the Scrutiny Committee. We are indeed grateful to its members. I should like to close by saying that we share the view of the majority of this House that parliamentary control over Community legislation should be improved. We are taking a hard look at ways in which this can be achieved. In this we are indebted to the work both of the Select Committee on Procedure and of the Scrutiny Committee, embodied in their recent reports. I hope that it will not be long before we can bring forward proposals for consideration by the House.

Above all, this Government see democratic control of Community policies and real public accountability as the basis of the Community's future. It is my firm conviction that in history the Community will be assessed by its response to two fundamental realities.

First, the world economically, no less than strategically, is totally interdependent; complete solutions to our economic problems cannot be found in a cosy Western European club. The EEC, therefore, has to contribute effectively to world-wide policies.

Secondly, Western society, if it is to remain a convincingly open society, cannot succeed on the basis of over-centralised, elitist decision-making. This is what makes it different from totalitarian society in the East. There is a desperate need for a redistribution of power in our society, for maximum decentralisation. If we want a responsible society, people must have meaningful opportunities to exercise personal responsibility. The EEC, like any other political machinery, is there for people; people are not there to be impersonally manipulated by it, however well and sincerely motivated its technocrats may be.

I think that both sides of the House will agree that Britain, of all nations, with its rugged and deeply rooted democratic traditions, has an essential contribution to make in encouraging the EEC to come to terms with these realities.

5.10 p.m.

I thank the Minister of State for a speech that had some interesting titbits, which we shall want to study. The speech was a more interesting speech than was the dry and dusty document before the House

By producing the document the Government have carried out their undertaking, but they have not done any more. If the Minister is to be responsible for the production of the next document, there are three suggestions that he might like to take into consideration.

First, perhaps the document should be less shy about giving the Government's views. The Minister gave important information on the Government's views. Why could not those views—indeed, perhaps more—be incorporated in the White Paper so that we might look at them before the debate?

Secondly, could not the White Paper include a summary of the main proposals adopted by the Community in the period under review so that we could see at a glance what had been achieved by way of legislation?

Thirdly, could not the White Paper have rather more statistical information? As I shall show, we are a bit short of adequate statistical information on some of the basic elements of policy governing the Community and our membership of it. Surely the Government could fill that gap six months by six months, as part of the White Paper.

For example, unless I have read it too cursorily, the document appears to contain no reference to the great matter raised by the Prime Minister in his Guildhall speech—namely, the British share of the Community budget. That was his main theme. I cannot think that it has blown up since the end of June. It is odd that there should be no reference to it. It is clear that in practice in the real world the speeches by the Prime Minister at the Guildhall, the Foreign Secretary's yesterday and the Minister of State's today are more crucial to an understanding of what is going on between Britain and Europe than the document before us.

The Prime Minister's speech is important, first, because he deliberately raised the whole question of what the EEC spent and what we contributed to it and, secondly, because there was something that he did not raise but that is absolutely central. The Prime Minister's speech involved in an acute form the whole question of our bargaining strength in Europe and whether we were going about our task there in the right way. I should like to concentrate on those two matters.

One very surprising matter was left out of the Prime Minister's speech. My hon. Friend the Member for Rushcliffe (Mr. Clarke) beat me to this point, but I should like to develop it. During the so-called renegotiation in 1975, before the referendum, the Government set as one of their main objectives—in fact, it was the first objective—the task of finding
"New and fairer methods of financing the Community budget."
That is a quotation from the Labour Party manifesto of February 1974. The Prime Minister, as Foreign Secretary, took a major part—perhaps the major part—in that renegotiation.

At Dublin in March 1975, with a certain sounding of trumpets—I quote from the Government's White Paper following the renegotiation—agreement was reached
"on a budget correcting mechanism which will provide a refund to the United Kingdom if in any year our contribution to the Community budget goes significantly beyond what is fair in relation to our share of Community GNP."
A complicated formula was worked out and published in the same document to show how it would be calculated and when the refund would be made. In effect, therefore, a safety net was created to deal with the precise difficulty raised by the Prime Minister in his speech in London this week.

Does the hon. Gentleman agree that the document was prepared at a time when we were having considerable balance of payments difficulties and that one of the constraints that has prevented the scheme from coming into operation has been that we are now going through a period in which, mainly due to North Sea oil, we are enjoying balance of payments surpluses?

Yes. It may be that the safety net was not well defined. It may be that the precautions taken by the Prime Minister were inadequate. I should like the Minister to deal with this matter. After all, this part of the renegotiation was designed to deal with the difficulty that the Prime Minister now says is unsolved. According to him, the serious position that he feared in 1974 is now at hand. Therefore, it is reasonable to ask the Minister, in winding up, to explain what on earth has become of the safety net. Either the Prime Minister's fears now are exaggerated or his achievement then in the renegotiation has proved worthless. The Government must choose between the two.

I should like to pursue a point that I made during the Minister's speech. I think that, in view of the wide press reports and the weight placed on this by the Prime Minister, the report of the Economic Policy Committee of the Council of Ministers, if that organisation produced it, should be published as a Government paper. This is needed whatever the Community does—it is Her Majesty's Government, not the Community, who have raised the matter at this time—with whatever comments the Government want to make on it.

For example, it appears from the press today that a second set of figures in this same paper is much more favourable to Britain. It sets out an analysis of our net position and is less damaging to Britain than were the original figures published in The Guardian and taken up by the Prime Minister. I imagine that is so because the second set of figures, devised on a different basis, includes the MCAs.

One can argue until the cows come home, if that is the right expression, about the exact nature of the MCAs. They help Continental farmers to sell produce in our markets which otherwise they would not be able to do. To that extent the MCAs are of help to them. To some extent, the MCAs shield our balance of payments and our consumers from the rigours of the CAP. Therefore, to that extent the MCAs are of benefit to us.

I quite understand that one can argue the pros and cons of that matter. However, I think that in view of what has happened we need the full paper, with any comments that the Government wish to include on it, with both sets of figures and any other figures that may be available. I do not think that we can debate this major matter simply on the basis of a series of newspaper leaks and a speech by the Prime Minister. We need the factual basis of the argument. I hope that the Minister, in winding up, will give us a clear assurance on that aspect.

There is another question that seems central to the issue: what would be the figures for the British net contribution if the pound had held its value against Continental currencies since 1974? That seems an absolutely crucial point.

Surely the hon. Gentleman can take little comfort from that point in view of the widespread predictions, including a prediction made by the Chancellor of the Exchequer before we joined the Community, that an inevitable consequence of our joining and of the impact on our trade balance would be that the pound would have to undergo a substantial devaluation.

The hon. Gentleman bothers me, because almost all his interventions in economic debates seem designed to drive the pound even further down as a necessary accompaniment of our economic recovery. It seems that events are disproving his argument. Nevertheless, I appreciate the point that he has made. The Minister will correct me if I am wrong, but I understand—the hon. Member for Southampton, Test (Mr. Gould) evidently regards it as a good thing—that in the first three and a half years of their period in office the Government succeeded in halving the value of the pound against the deutschemark.

Halving the value of the pound against one of the principal European currencies makes an enormous difference in the figures for one's contribution to the EEC, or, indeed, any transfers out of this country into the Community, when these are expressed in sterling terms. Therefore, I really do not think that one can begin to assess accurately until one has the answer to the question "To what extent is this apparently frightening rise in figures the result of the depreciation of the pound brought about by present Government policies?" To a large extent, the Government may be saying to the Community "You must change your ways, because we have failed to uphold the value of our own currency".

The Community must take account of facts as they actually are and of the position that we are actually in. If it is true, for whatever reason, that Britain, which is now one of the poorer members of the Community, would in the next few years become the biggest net contributor, that is clearly absurd and wrong, and the Prime Minister is right in saying that it must be corrected.

I do not believe in the strict doctrine of the juste retour—that every country has the right, at the end of every year, to say "We must take out exactly what we put in". One cannot run any kind of community on that basis. But if the imbalance becomes so large and continuous that it completely upsets the whole purpose and point of the Community as a partnership, it must be corrected. The Community has to take account of that, in the interests not just of Britain but of the Community as a whole.

Naturally, one must be a little wary of predicting simply that existing trends will continue. I think it was Disraeli who said that his own Government were destroyed by three bad harvests in a row. Three bad harvests in a row would mop up the surpluses and put the CAP back on a pedestal as an example of statesmanship. Therefore, one must not be too sure about the future simply reflecting the lesson of the immediate past.

There are other factors working in the direction in which the Prime Minister, quite rightly, wanted to point this country and the Community. There is certainly a growing strength of consumer feeling in Europe. There is the Commission, which, whatever may have been true before, for the last two years has certainly been doing its utmost to persuade the Council of Ministers to under-recoup the inefficient farmers, that is to say, to ensure—as indeed it has now for two years running—that producers of goods in surplus, broadly speaking, do not receive in increased returns anything like the increase in costs which they have suffered as a result of inflation. I agree that that is not enough in itself, but it is a necessary condition and a necessary start.

The second point which I believe is central to the whole discussion is, perhaps, more controversial. We have to look at this whole problem against the downhill slide of our own bargaining strength in Europe. Ministers have to deny this, of course, because they are Ministers. But every objective observer remarks upon this slide as it takes place really month by month. Our standing is low and our good faith is questioned because it appears that we are always pleading a special case and an exception, and are not working for a more sensible Europe.

There is an immense volume of criticism which comes in and I, and my hon. Friends, who visit Europe—and probably most of those at present in the Chamber do so quite often—all find ourselves deafened and, indeed, sometimes embarrassed by the volume of criticism which we receive of the present British Government. Some of that criticism is unfair, but some of it, I fear is sound. It has something to do with the constant presence in Brussels, on matters of agriculture and energy, of two Ministers who are quite openly and honestly building their political careers on the discrediting of Europe.

They gain a certain amount of kudos and applause in this House whenever they do so. We are not quite so clear, perhaps, about the penalties and the damage that is done to British interests as a result. More serious, perhaps, is the fact that they have infected their colleagues.

The Government as a whole—this is true of the Foreign Secretary's speech yesterday and, to some extent, the Minister's speech today—combine perfectly reasonable criticisms of the way the Community operates, criticisms which we often share, with a general half heartedness and lackadaisical approach which actually makes sure that their criticisms do not reach the target and therefore do not have the effect which is required.

I believe that the Labour Party conference this year illustrates this point quite well. Once again it seemed to the outsider that a compromise emerged roughly on these lines: "Let us stay in the European Community on one condition, which must be strictly observed—that we do not make a success of our membership." That seems to be the compromise into which the Labour Party is fixed. It is a compromise which year by year gradually drags down our position, our influence in Europe, our ability to bring about the sensible kind of Europe which Ministers, in their more enlightened moments, preach.

When this point is made, Ministers react—the Foreign Secretary did so yesterday—with criticism of European rhetoric and platitudes. I have much sympathy with what the Foreign Secretary said about that. I do not think, for example, that we should join a European monetary system simply because it is European. I do not think that we should build European aeroplanes simply because they are European or ride in European cars simply because they are European.

However, I must say that the actual logic of Europe increasingly pushes practical people in those directions.

But it should not happen as the result of my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) or myself indulging in European rhetoric. It must emerge as the logic of Europe works its way through our industry, our Government and our agriculture—which, of course, it is doing quite satisfactorily. But there is a difference between simply being rhetorical about Europe—that is a temptation that we ought to resist—and working hard for the success of the European partnership.

Our criticism of the Government is that they do not give the impression of working hard for the success of the European partnership. The fact that they give the wrong impression is deeply damaging to British interests, leaving aside for a moment the interests of Europe. The latest illustration of this point is the way that the EMS negotiations have gone. It is not for this House today, and certainly not for me, to prejudge the debate that we shall be having on that subject in approximately 10 days' time. But whatever conclusion one may come to on the actual proposal when it emerges, the course of the negotiations this year has really been very instructive and very depressing.

Naturally, Britain has been formally associated with the negotiations throughout. But at each stage when a critical point was reached, when there was something of great importance to be sorted out, the key discussion was held between France and Germany in our absence. It happened in Hamburg in June, it happened when the proposals for Bremen were actually drafted, it happened at Aachen in September, and it happened again in Paris in November. It was as if the French and German leaders —the two most successful political leaders in Europe now—had said "Our experience shows that when it comes to getting a move on in Europe, the British are no help. They simply prevaricate and delay, so we must do the serious business between ourselves. If later on they want to join, that is fine. If not. that is fine also."

The unreality of the speech made yesterday by the hon. Member for Liverpool, Walton (Mr. Helfer) makes one almost weep. The idea that anyone will pay a price for British membership of the EMS is very "old hat." It is put to us. We have to decide in our own interests and the interests of Europe whether we want to join. The idea that we can impose conditions, that people are tumbling over themselves to find out what our answer will be, that the thing can be held up while we deliberate, and that the threat of an empty chair is one that has any terrors, is absurd. Many members of the Community would love to have an empty British chair if it meant that they could get on with the business.

The whole concept that we can continue—as we could do in the early 1970s before we let our bargaining position run down—to impose conditions for our being part of the partnership seems to be, where we are now, wholly unreal.

I have been listening to the hon. Gentleman's strictures with great attention. What he is failing to do is to establish what alternative bargaining methods he would himself employ. Does he agree that if one is building a community of nations which is a genuine community, one has to resolve different interests? One makes no meaningful progress in the long run if one leaves anyone in any doubt where one stands on fundamental issues such as consumer interests in the context of the common agricultural policy, and energy interests, which are fundamental to our nation—leaving on one side the far bigger issues, which the hon. Gentleman has now raised, concerning the EMS.

I agree with that. The Minister's problem—it is not his fault personally—is that people in Europe do not know, fundamentally, where the British Government stand on the question of Europe, because the Government are supported and sustained by a party which remains hopelessly divided. If that became clear, if the Prime Minister and his colleagues, even now, made clear their fundamental belief in the European partnership, they would find it a good deal easier to defend the national interests with which they are quite rightly concerned.

Is the hon. Gentleman really saying that Britain ought to say to the Community "Irrespective of our own interests, we are totally committed to everything that happens in the Community"? Is that not totally out of line with what the other members of the Community do? The truth is that it is a community of nations with different interests—nations which look after their interests. In the past the French have been very successful precisely because they have used what muscle they have, whereas we have not used any muscle. The right hon. and learned Member for Hexham (Mr. Rippon) led us up the garden path when we went in, and the so-called renegotiations were also a fake. Do we have to continue to deceive ourselves?

The hon. Gentleman illustrates again my criticism of the speech that he made yesterday. Of course there are national interests to be defended. They are best defended—the French experience over many years proves this—by people making clear where, fundamentally, they stand on the question of Europe. The trouble about present British Ministers is that they always have to be looking at the door marked "Exit". So long as that is so, because of the nature of the party that they lead, they will not make, as they have not made, a good job of defending national interests.

I want to move on a little before giving way to my hon. Friend.

The Tindemans report, now about two years old, raised in theory the possibility of having a two-speed or a two-tier Europe. It was widely criticised in Britain precisely because of that. It was felt to be objectionable in theory that there should be a two-tier or a two-speed Europe in which, by implication, we would belong to the slower part, but what has actually happened in the EMS negotiations this year is that we, by our own deeds and omissions, have allowed the creation of a two-tier Europe in which we are in the second class—the class which is told, a little later, what the first class has agreed.

This is a thoroughly disturbing development, quite regardless of the view that one eventually takes of the EMS proposals.

My hon. Friend has moved on to another point. He was rightly castigating the present Government for the ambiguity of their present position. However, does he agree that it is very important for those who are in favour of our remaining in Europe to make very plain whether they are European Gaullists—and, if they are Gaullists, what sort of function they attach to the Community—or whether they are European federalists. There could be nothing more dishonest for them than to try to move towards a European federal State bit by bit, pragmatically, without telling people what they were doing.

I do not think that that is particularly relevant to what I was saying either five minutes ago or one minute ago. I have never made any secret of my personal views on this matter. The party to which my hon. Friend and I belong will have to come clean on this issue when we face the European elections.

If the House wishes to weary itself by hearing me repeat my views, I shall do that. I do not believe that the European Community, at any rate in my political lifetime, will or, indeed, should, become a federal State with one central Executive and one central Parliament. That is my personal view. One of the advantages of the European elections is that we shall all be smoked out and the level of discussion and debate on Europe, on both sides of the House, ought to benefit a good deal by the need for people to define their position on matters such as these.

In conclusion, between the lines of this White Paper one can read a rather sad story of lost opportunities and the downhill slide. The Opposition do not want the Government to show less courage in defending British interests; we want them to show more courage and a bit more intelligence in working constructively for a more sensible Europe.

5.36 p.m.

My hon. Friend the Minister of State uttered some admirable sentences this afternoon about increased parliamentary control over EEC policy. But, as it happens, on the very afternoon during which he did that I received a message from his colleague who is to deal with the debate later today saying that he has difficulty in accepting an amendment which some of my lion. Friends and myself have tabled, on the ground that it includes words to the effect that this House cannot accept certain proposals in a Commission document.

From what I am told, I gather that the Foreign Office objects to instructions being given to it by this House. That, in itself, is a very extraordinary doctrine, but it seems to me even more odd on a day on which a Minister from that Department has told us that he advocates increased parliamentary control over EEC legislation.

Therefore, I very much hope that Ministers, of the Foreign Office or any other Department, will not adopt the former attitude, and that it will be accepted that in these debates on EEC legislation of couse this House is entitled to record its view, whether that gives to Ministers advice, instructions or whatever.

Like the hon. Member for Mid-Oxon (Mr. Hurd), I want to ask a few questions of the Minister, or whoever is to reply to the debate, about the EEC budget and the United Kingdom contribution to that budget. On this subject again, we had quite a few words from my hon. Friend, but so far as I remember we did not have any figures. The House really ought to be told today what is happening to Britain's mounting contribution to the EEC budget, just what the figures are and, as the hon. Member said, why the renegotiation of 1975 has turned out, apparently, even in the matter of the budget, to be a comparative failure.

Like so many other statements that we get on the EEC, the White Paper before us today is both out of date and very uninformative, particularly on the subject of the budget. It also gives no figures whatever for the British contribution to the budget either in the present year or, so far as I can see, in any other year. Therefore, I have been looking at the present Government's renegotiation White Paper of March 1975, which the hon. Member for Mid-Oxon also quoted, which gave some forward estimates of what the net contribution would be, but only in 1974–75. It stopped there. These estimates, rather reassuringly for those years, were that the United Kingdom net contribution would be only £165 million and £205 million respectively.

In many people's opinion, that was an unnecessary burden on this country. At least it led people to believe that the budget contribution was not likely to be as crippling to this country as were the other EEC burdens on our balance of payments. Of course, it was on the basis of that White Paper that the country voted in the referendum. But if one tries to track down some of the real figures behind all the talk we have had and moves on to the Government's public expenditure Blue Book of last January—although it is usually called a White Paper for some reason—we are given some figures, which in this case are for the United Kingdom financial year as opposed to the calendar year. We find that the net British contribution has jumped very rapidly to £428 million in 1977–78, £682 million in 1978–79—this year—£772 million in 1979–80 and £825 million in 1980–81. Those were the estimates for the net contribution given to us last January, and they were very much higher than anything which appeared in the renegotiation White Paper.

Some hon. Members will remember that on 10th July we had a debate on the EEC budget. The Minister of State, Treasury, who seemed to know something about it—I hope we get equally clear answers tonight—agreed in answer to some questions of mine and said that the net figure for the calendar year 1979 was then thought likely to be £1,000 million or possibly rather more. The Minister's exact calculation was that one started with a gross figure—a remarkable figure —of £1,760 million. He then deducted from that what he called "the refund" of £260 million. I should like to know whether that is the renegotiation refund. He further deducted between £400 million and £500 million of gross payments back to this country. That leaves a final figure of between £1,000 million and £1,100 million.

Following all that—we are now in November—we learn not from the Gov- ernment or any White Paper but from The Guardian newspaper this week that the United Kingdom contribution is still rapidly mounting. We should like to know whether The Guardian story is accurate since we have not been told what this EEC paper actually says.

My first question is whether The Guardian account is correct. Is its statement of the EEC report alleged to be behind the story accurate? Is it the Government's firm intention to publish this report, which clearly exists and clearly contains these figures? If so, when? The Guardian story does not give precise figures for the United Kingdom contribution in 1979 or 1980, but it does tell us that in 1977, when it appears that we paid £423 million net, we would under the full agreement—which is now coming into force after the so-called transitional ceiling on our contribution has disappeared—have paid £820 million. Apparently West Germany would have paid considerably less than ourselves. [f that is true, and as the total EEC budget is growing at the rate of about 10 per cent. a year, the conclusion seems to emerge that in the next few years we shall be paying a net contribution of over £1,000 million a year, rising from year to year, and that our net payment will be higher than that of West Germany. Of course, in terms of net payment per head of population it will also be very much higher than that of any other country in the EEC.

Before I give way to the hon. Gentleman I should like to add that the Prime Minister's remarkable speech at Guildhall this week, although he did not give figures either, appeared to confirm the estimates that emerged from the story in The Guardian.

As The Guardian report was from an EEC paper that is confidential, and now that the Prime Minister and The Guardian together have broken the confidentiality of it, would it not be right to have that paper published and put in the Vote Office? I see the Under-Secretary of State for Foreign and Commonwealth Affairs nodding his head. Will that report be published and out in the Vote Office?

The Under-Secretary of State for Foreign and Commonwealth Affairs
(Mr. John Tomlinson)

I was nodding my comprehension of the point that the hon. Gentleman was making.

When the hon. Gentleman was not here my hon. Friend the Minister of State said that since this report is a Community report we would be pressing for it to be published and to be made available to hon. Members. I shall be dealing with that in some detail later.

At least three hon. Members have now asked to see this document. Whether or not the Government's pressure is successful, I at least hope they will tell us whether the figures in The Guardian are accurate.

However that may be, some vital questions must be put to the Government. First, will they tell us today at least what the estimates are in this EEC report for the net United Kingdom contribution in 1978, 1979 and 1980? We should at least know that. Secondly, and here I echo the questions of the hon. Member for Mid-Oxon, what has happened to the correcting mechanism, which was supposed to have been achieved by the renegotiation in 1975, on the basis of which the country voted in the referendum? That correcting mechanism, affecting the budget, was supposed to be the main—indeed, the only—achievement of the 1975 renegotiation.

It is worth quoting one passage from the renegotiation White Paper of March 1975, which said:
" The United Kingdom is expected to qualify under the criteria outlined in paragraph 39 above in 1977 or 1978 and in subsequent years; and can therefore expect a refund on its contributions of up to a total figure of about £125 million a year."
It then went on:
"But the assurance of a refund if our contribution goes significantly beyond our GNP share represents, in the Government's view, a major improvement in the terms of our membership of the Community."
That also was one of the promises on account of which people voted in the referendum.

What has gone wrong? Was the renegotiation almost wholly a fraud in this respect as in most others, or only a partial fraud as I argued here in debate at the time? Have we—this is a question of fact which ought to be answered—been receiving the refund in 1977 and 1978 or have we not? It seems to me profoundly unsatisfactory that we do not know. Perhaps my hon. Friend the Member for Southampton, Test (Mr. Gould) knows. If he does, I think that he is the only Member who does.

As I understand it, the refund mechanism does not operate because the conditions required are not present—principally, that we are not in long-term balance of payments deficit over a period of years—but there is a refund which arises from the transitional arrangements which expire at the end of this year.

I suspect that that may be the truth, but I should like to hear it from the Government. If that is so, I consider that the renegotiation White Paper was exceedingly misleading because it stated unconditionally that we could expect the £125 million refund in 1977 and 1978. In any case, after all these calculations have been made, why are we now faced with a net bill, apparently, of about £1,000 million this year and the next, or even more?

If the truth is that, even after the refund, we arc facing that sort of bill because the transitional ceiling—I think that this is what my hon. Friend the Member for Test had in mind—has come to an end, that must have been known in 1975 because it was part of the original 1975 agreement. In that case, it is a crushing condemnation of the original agreement of 1971 and 1972 negotiated by the right hon. Member for Sidcup (Mr. Heath) and his right hon. and learned Friend the Member for Hexham (Mr. Rippon), because it is as a result of that ceiling, if that be the true explanation, lasting only up to the present year that this enormous jump is apparently now occurring.

It seems to me that this is just further evidence of how extremely unsatisfactory an agreement we were manoeuvred into because of our hurry in the latter months of 1971, since, of course, our position is now such that, presumably, any change in the agreement can be vetoed by any of the other eight countries in the EEC.

That is the law and the treaty as negotiated in the original Treaty of Accession, and it is, indeed, one of the most glaring absurdities of the whole arrangement, for apparently—I return here to The Guardian, and we want to know whether this is correct—the French and the Dutch are not just paying a lower net contribution per head than is the British taxpayer; they are not paying any net contribution at all. They are receiving a net payment from the EEC budget.

According to The Guardian the net receipts of the other countries are as follows: Denmark, £335 million a year; Holland, £193 million; and France, £116 million. Again, we should very much like to know whether that is correct. If it is, it means that, as a result of the 1972 agreement, the British taxpayer is subsidising French, Dutch and Danish agriculture and also the budgets of those countries in addition since that relieves them of the cost of supporting their own agriculture.

I now put one or two other questions purely of fact to the Minister so that we may have these matters cleared up today. First, do the net figures of our budget contribution which appear in the public expenditure White Paper count loans as well as grants to this country as part of our net receipts? I hope that they do not, for if they did that would be misleading since the loans would have to be repaid. I hope that the Minister can confirm that that is so.

Secondly, am I right in thinking—not everybody is clear about this, though some may be—that the contribution figures given, for instance, in the public expenditure White Paper are additional to the customs duties and food levy revenues which also we hand over direct to the EEC? If they are, our real contribution will be even greater than the figures suggest.

I do not think that my hon. Friend will find that question quite so easy to answer as he may believe, but I hope that matters can be made perfectly clear this evening. If the customs duties and food levy revenues are not included in the figures normally given, we should be told what is the total of customs duties and levies being paid annually in addition to the EEC budget.

My understanding of this matter is that although there is a right under the regulations for us to deduct a certain figure—I think, 5 per cent.—of the import levies and customs duties which are charged in order to cover our costs of administration and collection, the others are immediately credited towards our contribution to the Community and there is therefore no risk of the sort of additional payment which my right hon. Friend suggests.

I did at one time believe that to be true, but the White Paper on the subject plainly implies that that is not the arrangement. So all I am saying now is that we ought to have the matter cleared up tonight.

Next, when all is said and done, for what purpose is the British taxpayer paying over these huge sums to the EEC? The total EEC budget now stands—the White Paper tells us this; it is the one figure there—at very nearly £9 billion a year. But of that some £5 billion or £6 billion is being spent on storing unsaleable food and selling it cheap to any country in the world lucky enough to be outside the EEC. In a sentence, that is what we are spending this £5 billion or £6 billion on, and it is, I suggest, one form of public expenditure which the Conservative Opposition, with their enormous enthusiasm for economy, might possibly wish to cut.

We hand over these huge sums largely for the privilege of then paying 50 per cent. or 100 per cent. more for our food than we would pay if we bought freely on the world markets. As a matter of economic policy, it is almost impossible to imagine a more grotesque folly than this whole operation which I have described.

The right hon. Gentleman always debates fairly. Most of the payments, as he is just illustrating, arise out of the common agricultural policy, which he always criticises and from which he would prefer a return to our deficiency payments system. Has he made any calculation of the cost to the United Kingdom taxpayer of a deficiency payments system which would provide the British farmer with, say, roughly the present level of farm support?

The hon. Gentleman will know that the deficiency payments element of our Budget before we joined the EEC was never more than about £300 million a year. I agree that it would probably be higher now, but even if it rose to anything like these figures it would not be a payment across the exchanges. The figure to which I am referring is a burden on the balance of payments.

Since the hon. Gentleman has brought out that important fact, I just add that as a burden on the balance of payments it is additional to—if we take Mr. Wynne Godley's calculations—about £600 million or £700 million due to higher import prices of food, and over and above that a deficit in trade in manufactured goods between us and the EEC Six which so far this year, according to figures given to me by the Government, has been running at £1,800 million a year. That is the deficit in manufactured trade between the United Kingdom and the original Six.

Even if one argues—which could be argued—that the whole of that is not due to our joining the EEC, although it was in balance in 1970, one is forced to the conclusion that the total burden on the balance of payments due to membership is now running, to put it moderately, at something between £2,000 million and £3,000 million a year—and probably a good deal nearer to the £3,000 million. I was delighted to hear from the Minister that the Government have woken up to all this and are determined to renegotiate yet again. After the Prime Minister's speech the other day I felt inclined to say that there is more joy in heaven over one sinner that repenteth than over the 99 left in outer darkness.

The trouble is that the original 1972 agreement has given at least three other countries in the EEC, notably the French, a hard and fast vested interest in preserving the present system. That is why all the blithe words about how we shall reform the EEC from the inside do not greatly impress me. By all means let the Government do their best to get the situation altered by sweet reason with the full support of the House. I wish them luck, but having not been entirely wrong throughout this story I again record my opinion that unless we follow the example of de Gaulle and make clear that we are not prepared to co-operate unless some of our demands are met I do not believe that all these mountains of nonsense will be swept away.

6.1 p.m.

My opinions on the European question usually conflict with those of the right hon. Member for Battersea, North (Mr. Jay), but there are often a number of factual and other points on which we agree. The right hon. Gentleman has done the House a great service by raising again the whole question of what has happened to the renegotiated arrangements over the British contribution to EEC membership and why the assurances given by the Government in 1974 are apparently not now to be realised in practice over the next few years.

I agreed with the right hon. Gentleman at the time in not being very impressed by the whole process of renegotiation. Like him, I thought that it was bogus and my opinions, on the wisdom or otherwise of our membership of the EEC were not influenced by that process. I differ from the right hon. Gentleman if he believes that the renegotiations played a significant part in the verdict passed in the referendum, for which he was an anxious seeker until he found to his disappointment that the British people agreed with those who wanted membership.

The right hon. Gentleman has asked for further improvements in relation to the British contribution to the EEC, but he does so as one who remains totally hostile to the whole concept of our membership. The Minister indicated various improvements which the Government have sought and would still like to make in the British arrangements, but he did so as one who is sceptical, as are many other Ministers, about the position of Britain within the EEC.

My hon. Friend the Member for Mid-Oxon (Mr. Hurd) brought out the most important aspect of the debate when he pointed out that improvements will not be achieved if those seeking them continue to adopt sceptical or hostile attitudes towards many of the fundamental objectives of the Community.

We face a difficult winter of key negotiations over, above all else, the new monetary system. One common standpoint is that no hon. Member, whether a supporter of our membership or an opponent, disagrees with the proposition that the first duty of a British Government within the EEC should be to protect and defend legitimate British interests there. I accept that the Government have attempted to do that, but they have failed, and many of their attitudes have been counter-productive to long-term British interests and will continue to be so.

The Government have gone through the motions and, often at the instance of their supporters, adopted obstructive tactics in the Council of Ministers, thumping the table when they see a British interest to be defended, blocking common policy initiatives and generally adopting a fairly chauvinistic attitude towards the other members of the Community. In so doing they have reduced British influence to a very low ebb and we have reached the situation where our genuine friends in Europe, who welcomed our membership, are frustrated and disappointed by the participation of the Government in Europe and resentful about the difficulties that British membership has created for the Community.

There are two prime examples of how Ministers have brought our influence to a low ebb. The Minister of Agriculture, Fisheries and Food had a dispute with the Community, within the six-month period that we are discussing, on the question of the future of the milk marketing boards. He won a lot of easy cheers in this country by representing the dispute as something to do with the doorstep deliveries of milk—though it required the most obscure argument to produce any connection between doorstep deliveries and the right hon. Gentleman's resistance to low-cost imports of milk into our supermarkets. The Minister won easy cheers and status within the Labour Party, but there is no prospect of his making progress on other issues in the Council of Ministers where he would like concessions for the benefit of this country.

The Secretary of State for Energy has suddenly started making strong demands of the Community in relation to coal. He bears a heavy responsibility for the fact that there is no common energy policy in the EEC. His attitude on coal is simply to adopt a short-term view of British interests. He is trying to press this view on his European colleagues because he wants European money to subsidise the National Coal Board during its present short-term financial difficulties and the disposal of its excess stocks. The Secretary of State is hostile to the Community and he will not make worthwhile progress.

The Government will not find it easy to persuade our partners in Europe that the British should be recipients of any favours at the moment. In trying to persuade our partners of our legitimate interests in adjusting the budget contribution, getting fundamental reforms in the common agricultural policy or anything else, Ministers who adopt only short-term views, based on hostility to the Community, and whose commitment to the long-term aims is obviously in doubt will achieve nothing.

We face important negotiations over the European monetary system. Other EEC members do not feel that it would be fatal to the EMS if this country stayed out and there is no disposition among them to go out of their way to make considerable concessions to us. If we fail to negotiate our way into the new system on an acceptable basis it will complete the process, which the Government have been carrying out, of isolating us from the main stream of European politics and reducing us to the role of second-class, rather derided members.

The right hon. Member for Battersea, North, the hon. Member for Liverpool, Walton (Mr. Heifer) and other Labour Members, including some Ministers, cannot understand that fact. They claim that the French have always successfully got away with the attitude which our Government are maintaining. A lot could be learned from the French who are just as assiduous as are the British Government in defending what they see to be their interests within the EEC, but are more successful in achieving satisfactory results. The fundamental difference between the European attitude towards difficult French Ministers and difficult British Ministers is that no one doubts the lasting French commitment to the Community as a whole. No one doubts that the French are trying to work towards the long-term development of that Community.

The Government undermine their own position, and their supporters certainly undermine this country's position in the Community, by casting constant doubts on our commitment to the Community, doubts which reduce the disposition of anyone in Europe to make any real concessions to us.

Does the hon. Gentleman recall that in 1965 General de Gaulle succeeded in securing the biggest of all concessions to French demands by boycotting the institutions of the EEC altogether and creating great doubts about whether he intended to remain inside it?

For a short time General de Gaulle certainly cast in doubt the whole future of the Community, which went through a very difficult period as a result. But that is only one example from French history. If we take it further from that, we see that the French advance in the Community and the French position now are based not on the lasting results of de Gaulle's veto in 1965 but on the activities in the past few years of French Ministers who are plainly committed to the European cause. The strong position in the Community of President Giscard d'Estaing, one of the two dominating statesmen in the Western European world, is based on his known commitment to the Community. He is not achieving substantial concessions by hostility to it.

Further to my hon. Friend's remarks about Labour Members and Labour supporters in the country, does he agree that it is even more disturbing that the Labour Party is the only political party of all those in the member States, including the Communist parties, to be virtually officially against the Community and continued membership?

I entirely agree with my hon. Friend. I often have the impression that European Socialists are more furious about the position of the British Labour Party than we on the Conservative Benches here are.

Having said what I have about our position in Europe and our lack of any negotiating clout, I must add that there are clearly real improvements that we need to make and developments that should have taken place during the six months that we are reviewing. The tragedy is that one has only to look at the White Paper to see that precious few developments in our interests have taken place. It was amusing to listen to the Minister talking about one or two achievements that he believed had been made—for example, in shipbuilding, where he outlined as achievements matters where the Government had either been totally unco-operative with the Europeans or had blocked any real progress.

However, despite the Government's attitude throughout the six months that we are reviewing, it is worth reminding ourselves, to reinforce what should be the Government's position in becoming more Community-minded and co-operative with our partners, that the country is continuing to receive the benefits of membership. Our industry would have suffered even more than it has in the prevailing recession in trade if we had not had access to tariff-free markets in Europe.

The anti-European Left terrifies business men and investors here when it raises the prospect of an attempt by this country to leave the Community. I advise any hon. Member wh o does not believe that to study some of the surveys of business attitudes towards the prospect of our leaving.

I take one example from the six months under review. Ford's investment in Bridgend in South Wales is a major matter for this country. The company is committing itself to a large engine manufacturing project there. Let no one imagine that the company would have taken on the risks in Britain—of industrial unrest and strikes, a trade union movement that is not capable of agreeing with its own Government on sensible wage and bargaining procedures, threats of arbitrary sanctions being imposed upon it by the British Government, and all the rest—if it had thought that investing in Britain would possibly put it outside the European Community. That investment is available to Britain only because Ford is building up its whole major motor vehicle enterprise very much as a European enterprise, with Britain continuing to give the company access to the European market.

Ford was in part induced to come here by the regional aids paid by the Government. But all the tea in China would not have persuaded the company to invest in the United Kingdom if doing so had put it on the wrong side of tariff walls around the remainder of its motor vehicle business.

Is not the hon. Gentleman aware that there exists in Western Europe a 16-nation-strong free trade area which is quite independent of the Common Market and to which we would belong whether or not we had to shoulder the burden of the common agricultural policy?

The debate about the merits of a purely free trade area on the one hand and membership of the Community on the other has been fundamental to the whole European debate. It has been the belief of large sections of the Labour Party that this country could obtain the advantages of a large free trade area without entering into any of the obligations to the Community. It has been the opinion of those in this country who support membership that that is a myth and always has been, and that it is an absurd alternative to present.

I should like to get on. I am sure that my hon. Friend will be called to speak, and I hesitate to go back to arguing with him the whole merits of free trade areas versus the Community. No doubt I shall have many opportunities to do so in future.

Having described the advantages that I am confident we are now deriving, I add that Britain needs some assistance in dealing with, and compensation for, the difficulties that we face. The logical next step for Europe, if we are to have the full benefits of the free trade area, is to remove not only tariff barriers and similar non-tariff barriers but some of the monetary obstacles to enjoying the full benefits of the Community.

I have always regarded the development of a common monetary system as a natural corollary which would come in due course from the development of the common trading system that we already have. But here we certainly need some improve- ments and some understanding of our problems, which largely arise from the facts that we look likely to suffer higher rates of inflation than our neighbours in Europe, that we have a more vulnerable exchange rate than they have, that our industry generally is uncompetitive and that there is an expectation of a continued disparity between the economic performance of Britain and that of most of the other EEC countries. The Government need to negotiate a workable way of dealing with those problems.

We certainly shall not be offered cash, as the Irish were. But if we were to adopt a constructive attitude towards the problems to be faced if Europe moved on to the next step of developing a European monetary system, we should certainly need some compensation. I believe that this country should look to the development of European policies designed to help parts of the Community that have our particular problems. I refer in particular to the Regional and Social Funds of the Community.

Therefore, I make clear that I agree with the Prime Minister's remarks earlier this week when he said that from our point of view the Community's present budget is hopelessly overweighted in favour of the agricultural sector and that we in this country should strive to reduce the agricultural bias in the budget and the excessive expenditure on the production of surpluses. However, we should have more chance of achieving that if we took a more positive attitude towards the development of industrial policies and the non-agricultural sector of the Community's activities.

I should like briefly to deal with the question of regional policy, because most important developments took place in that policy in the six months under review. The whole matter is dismissed in four short lines in paragraph 60, where we read:
"The Council reached agreement on the Regional Development Fund for 1978–80."
The figure for the quota is then given, together with the size of the non-quota allocation and the total value of the fund.

The Minister mentioned that agreement as an achievement. In fact, it is very disappointing. It is not an adequate representation of what we in this country should receive for regional matters. In my opinion, the British Government are by their own actions largely responsible for our failure to achieve more.

Major issues of regional policy were being debated in the spring. The allocation of resources to the fund and the whole administration of the fund for the three years 1978 to 1980 were being considered. The first three years had seen the running-in of the policy on a modest scale and the expectation was that there would be a great increase in the size of the fund. There was an issue over the non-quota section of the fund, that is, the allocation of funds outside the rigid national quota, and it was hoped that there would be the development of a genuine Community policy towards the regional problems which we have very much in common. Britain, in my opinion, had a great deal to gain from the development of a stronger regional policy.

In fact, the main issue which determined the future of the fund was whether the policy would be changed from the very limited aims of the first three years to a more Community-based policy which would serve common European interests and not just be a financial prop of a rather small kind to the national regional policies of individual countries. I believe that other member countries of the EEC would have been far more willing to put resources into the Regional Fund if they could have got some agreement on the need to change it into a genuinely Community policy.

The Government, typically, took the view that they were not interested in a real Community-based regional policy. They saw the whole thing in terms of pounds, shillings and pence and as a way of getting back some money to help finance their regional policy. The result was that they were extremely disappointed by the bargain they got. They got nothing like the sum of money for which they were aiming.

The real reasons were summed up most clearly in a reply by the Minister of State. Department of Industry, when I asked him a Question on these varied negotiations on 10th April this year. He was pressed by my hon. Friend the Member for Harrow, East (Mr. Dykes), who I see in his place, and this finally caused the Minister of State to explode about what were really the underlying difficulties. He said:
"There is still the critical question of sovereignty in regional policy, and regional policy has for far too many years dominated the thinking of British Governments. I shall not surrender power over regional policy, and I want to be sure that the House controls the regional development fund."—[Official Report, 10th April 1978; Vol. 947, c. 966.]
A Conservative could be forgiven for thinking that among the powers the Minister wanted was the power that Labour Ministers use in the regional field to support pork barrel politics, patronage in key political areas and the dispensing of funds in marginal seats. Anyone who doubts that approach to national sovereignty over regional policy has only to remember the alterations in the development status of Grimsby on the eve of a recent by-election. That is the national sovereignty which Labour Ministers are most anxious to defend. Because of that approach they are achieving nothing whatever by way of an enhanced regional policy. The actions of the Government are contradicting the Prime Minister's very aims explained in his speech earlier this week.

There are areas where we could usefully negotiate a genuine pooling of sovereignty in the regional field. We should have some agreement on ceilings upon national financial aids to industry in order to stop out-bidding between member States, with their taxpayers' money, to get investments even in developed areas. To stop this wasteful out-bidding we need to update the 1975 guidelines on ceilings and we need more co-ordination of national regional policies.

That co-ordination could include delineation of development regions, because it is extremely difficult to make much progress in European regional policy when every member State reserves to itself the right to delineate those areas which are development areas often for, certainly in this country, purely political reasons.

We need also to move to a system whereby there is direct access by firms seeking European moneys to the Commission and to the European agencies and where one does not have a system in which everything is handled by national Governments. We shall obtain no great concessions from the Europeans so long as we insist on a system where no payments at all are made to individual applicants. All payments under the Regional Fund are made to the British Government, who go in for a fairly bogus accounting system, seeking to demonstrate that they are helping to support additional national regional policy.

We need to concede more on the question of non-quota payments. Five per cent. is mentioned in the White Paper as the achievement. The Commission wanted 13 per cent. The British Government were one of the most hostile to the whole idea of a non-quota section and that achievement was reached in spite of, not because of, British Ministers.

Ministers have been consistently resisting all these demands. I am not saying that all should be conceded of necessity, but all are worth negotiating. By simply wanting to see enlargement of the fund as a financial means of helping to support a very expensive national policy they have been achieving very little financially or in any other way.

I conclude with a further quotation, because the matter is obviously being discussed at the moment. The Government have realised that the future of European regional policy is vital to present discussions on the European monetary system. The Foreign Secretary yesterday referred yet again to the need to deal with this problem. He emphasised that we had to look at the whole question of resource transfers within Europe and at ways in which there might be transfers of resources that would help us to go into any system.

On this question, on 14th November the Foreign Secretary gave away the whole case again. He said:
"It is very important to safeguard our existing share of the Regional Fund, which would argue therefore for an expansion of the Regional Fund at the time of the three applicant States joining. Also, we can look at alternative ways of using both the Regional Fund and the Social Fund. Britain has been pretty successful in using these. However, I do not want to overstress the role of the Community in regional policy. Essentially, this will always be a matter primarily for national Governments. If one looks at the overall percentage of the budget that we spend on regional aid, one finds that by far the largest amount comes from the national budget. But this is a factor which we have to take into account."—[Official Report, 14th November 1978; Vol. 958, c. 230.]
It is my opinion that the nationalist attitude reiterated yesterday by the Foreign Secretary destroys any sensible bargaining position that he has, that the Prime Minister has, that the Minister of State, Department of Industry, has or the Secretary of State for Industry has. in making any worthwhile progress in this field.

It is a perfect illustration of the fact that the Prime Minister is whistling in the dark when he makes the claims that he made earlier this week, if he expects real concessions to be made to us in the Community when we refuse to make any concessions whatever to the real long-term aims of the Community. So long as those attitudes continue, I fear that the next White Paper on the next six months' developments will be as disappointing as the one that we are debating at the moment.

6.27 p.m.

I had not originally intended to speak in this debate and I do so only to comment briefly on the vital matter raised by the Prime Minister in his Guildhall speech. The Prime Minister apparently based his remarks on figures supplied through The Guardian but we have the advantage of having had a debate on the draft EEC budget on 10th July when the Minister of State, Treasury assured the House that, as far as his calculations could determine, our net contribution for 1979 would be £1,000 million.

As my right hon. Friend the Member for Battersea, North (Mr. Jay) has pointed out, that nice round figure is a burden across the exchanges and probably represents about three times that amount in terms of domestic demand. Despite the mythology which has been so assiduously propagated by the European Movement and hon. Members on the Conservative Benches, and despite all the language about concessions, favours and subsidies, the blunt truth of the matter is that it is we who subsidise the Common Market and not the other way round. That is the one major gain that we have made from the Prime Minister's speech—that this simple fact has now permeated through into the national consciousness.

Even so, the Prime Minister yesterday at Question Time, perhaps with a sense of loyalty to the recommendations which he himself had made in earlier years, persisted in saying that the balance of advantage, despite this massive outflow of cash, was still in favour of membership. How can that balance of advantage be made out? What are we paying £1,000 million for?

It seems fairly clear that we are not paying £1,000 million to have free trade, because free trade, if it is thought to be valuable, actually produces for us a deficit amounting to £2,600 million this year with the EEC Six. Of course, that is a major burden, which, although it would still be present if we remained in a free trade area outside the Community, is made worse by the fact that we have to pay much more for our food by virtue of our membership of the Community.

It can hardly be said that we are paying £1,000 million to attract investment, because, although the figures are hard to get hold of, the latest ones that I have seen show that for every £1 of manufacturing investment which comes into this country from the Community £8 goes from this country to the Community.

It can hardly be, either, that we are paying £1,000 million for the privilege of giving up our fishing waters and contributing 60 per cent. of all the Community's fishing waters to the total and then having to struggle—not struggle, indeed, but plead on bended knees—for a 20 to 30 per cent. share.

Nor can it be said that we are paying £1,000 million to have freedom to pursue our own industrial policies, because increasingly we are told by the Common Market that the interventions which our Government may wish to make in British industry are contrary to the Treaty of Rome. It is no accident that at present we are threatened with no fewer than four different actions in the European Court.

Nor can it be argued, surely, that we are paying this enormous sum in order to secure some enlarged influence, although that is often the ground to which pro-Marketeers retreat when they are challenged about what the benefits are for which we are paying this sort of price. As the hon. Member for Mid-Oxon (Mr. Hurd) himself so clearly demonstrated, the leaders of the French and German nations hardly bother any longer to conceal the fact that they see the Community as a two-country director- ate. They hardly bother to consult us at all on any serious matter. So it cannot be said that our influence has been extended by membership.

The truth is that we are paying £1,000 million to support the common agricultural policy. That is what 70 per cent. to 75 per cent. of all Common Market expenditure goes on. That is what the bulk of our £1,000 million goes on—supporting a policy which is directly contrary to our interests.

To those who say that the French are so much cleverer than we and have a much better attitude to these matters, I would say, have they not realised that it is easy for the French to be communautaire when they devised a system which takes up 70 per cent. of all Community expenditure and which actually supports an agricultural structure so advantageous to them? It is easy for a French Minister to pursue his national interests and to portray himself as being communautaire at the same time. It is much less easy for a British Minister who is having to struggle with massive burdens on the one hand and a difficult job on the other to explain to his Community partners what is causing the damage.

The Prime Minister at Question Time yesterday said that he did not wish in his statement at the Guildhall to give any comfort to anti-Marketeers. Indeed, he made a plea to anti-Marketeers to be a little more constructive in their approach. I take that plea rather hard, because it is difficult to be constructive and to offer suggestions about where we should go from here unless we can agree on where "here" is.

In the past few years we have constantly been embroiled in ridiculous arguments and debates with people such as the hon. Member for Rushcliffe (Mr. Clarke) on whether or not we are suffering this damage. If we could only agree, as the Prime Minister now seems to be agreeing, that there is something wrong, that we are suffering damage, we can be constructive. Then we can say, "Let us agree where we start from. What can we do about it?"

The Prime Minister will perhaps have some sympathy with our position when he reads today's press and sees that Le Monde, in commenting on his speech at the Guildhall—on this occasion Le Monde reflects the view of the French Government—tells him, virtually in so many words, to stop moaning, to be grateful for small mercies and to keep making the payments. That is virtually what Le Mondesaid.

The fact that that sort of response can be made—a response which we anti-Marketeers are well used to, based as it is on a complete refusal to look at the facts—is largely the result of the refusal of people such as the hon. Member for Rushcliffe to tell the truth, to come clean with what is actually the case about this country within the Community.

There is no future in the extraordinary doctrine which the hon. Gentleman and his colleagues put forward, that we shall somehow get redress for our grievances by not telling anyone about them. Yet that seems to be the negotiating posture that he recommends.

The hon. Gentleman had the courtesy to sit through the whole of my speech, so I am sure that he heard me agree the case for fundamental reform of the agricultural policy, quite contrary to the conspiracy of silence theory which he is developing so well. I cannot remember a time when any supporter of our membership of the EEC has ever denied that it is fundamentally wrong that such a high proportion of the budget is devoted to the CAP. That needs changing.

I am delighted to hear the hon. Gentleman say that, but it has always puzzled me that people can say on the one hand that they support the Common Market and on the other that they are fundamentally, or in any other degree, opposed to the common agricultural policy, because the Common Market is the common agricultural policy dressed up with a few trimmings. It is not possible to distinguish the two. That is why the French have such an easy ride of it and we do not.

Despite the recommendation of the hon. Member for Mid-Oxon that we should take a cringing posture and beg for small mercies, it is open to this country, particularly in the light of the Prime Minister's apparent realisation of the dangers and damage that we are suffering, to take a much more robust policy.

Our negotiating position is, almost paradoxically by virtue of our very weakness, much stronger than is currently realised. For example, we are the paymasters of Europe. If we withdraw our £1,760 million contribution, someone will have to make that up. We are also the consumers of unsaleable foodstuffs which, if we were not foolish enough to pay twice the market price for them, would add to the food surpluses, the mountains and the enormous cost of disposal.

We are also the market for Common Market manufactured goods. We have a deficit with the Germans alone for manufactured goods of £1,800 million. Does the hon. Gentleman really maintain that the Germans will cut off that trade and spite themselves by giving up that advantage? Of course they will not.

We are also in the unusual position of having made the enormous contribution of our fishing waters to the Community's fishing policy. If we were to withdraw that, there would be no Community fishing policy. We are also the possessor of the Community's energy resources.

Our negotiating position is immensely strong. All we need is to give up the mealy-mouthed approach which is recommended by Conservative Members and which has unfortunately hitherto been pursued by our own Government. Let us take the Prime Minister's speech as a sign that we are changing, that we shall no longer be mealy-mouthed, that we will do some blunt talking; and if blunt talking does not work, let us take some blunt action instead.

6.38 p.m.

It is a great pleasure for me to take part in this debate and to follow the speech of the hon. Member for Southampton, Test (Mr. Gould). He is in the strong and happy position of having a clear state of mind about the Community. He is an eloquent and persistent opponent both of our entry into the Community and of our remaining in it. My old friend, the hon. Member for Rushcliffe (Mr. Clarke), is in an equally logical position. He has been for many years a European federalist. I respect and admire his position also.

I am in a less logical and clear position, in that I am a European Gaullist. In that position, which is difficult to define, I suspect that I am joined now by the majority of the Tory Party. It is important that the Tory Party should now, in reconsidering its position on the Community, try to define what its attitude towards the Community should be. In doing that, it is necessary not only to define the party's attitude to the Community. It must also reconsider its attitude towards the role of government—any Government.

I define my position in relation to the Community by three propositions. I say, first, that the Community should concentrate on those areas of policy which cannot be discharged by nation States acting alone. For that reason, I say that the Community should concentrate primarily upon foreign affairs.

Secondly, I say that it should be an alliance of northern and central European countries. I believe that to extend the Community to all and sundry is to deprive it of that cohesion and force which comes from being geographically close and having, in many instances, much the same culture and historical experience.

Thirdly, the Community should be progressing towards becoming a free trade area. When I apply those three principles, based upon my concept both of the Community and of the role of Government in society, I become deeply disturbed at the way in which the Community has progressed in the last few months.

For example, I note that in the White Paper there is a Community policy on education. What on earth has the Community to do with interfering in education within our nation State? In paragraph 83 there is a lot of pompous rubbish about the selection of projects for inclusion in the Community programme on the transition from school to work. I understand that the Community programme was finished in March.

I apply my criteria and see what the Foreign Secretary said yesterday about the way in which the role of the Community would be enhanced by the inclusion of Spain and Portugal. He said that there were great advantages in including vast numbers of persons from the Spanish-speaking world. He also said that our national difficulties in Africa would be made easier because Spain and Portugal had some experience in their colonial past in Africa. He was saying that bigger is better and that bigger is not only better but that it is always stronger.

When I heard that part of the Foreign Secretary's speech I remembered the speeches of Sir Donald Stokes, as he was then, as he advocated the advantages of knocking together Leyland and Austin Morris. He explained how in every circumstance bigger was better. So it was with the Foreign Secretary yesterday.

Lord Stokes also advocated the entry of this country into the EEC, and now 50 per cent. of the home market is taken up by foreign cars.

I was never much interested in Lord Stokes' views either on foreign affairs or politics in general, but he put himself forward as an expert in the organisation and reorganisation of industry and especially of the car industry, in the same way that the Foreign Secretary puts himself forward as an expert in the grouping of nation States. I am sceptical about the proposition that bigger is always better.

Let us apply one of my principles and accept that an alliance of northern and central European States is likely to be helpful in foreign affairs. One must then examine the thorny problem of Cyprus. The United Kingdom is one of the parties to a treaty which sought to guarantee the status of the two main communities in Cyprus. When hostilities occurred in Cyprus, unhappily we were unable to do anything about them.

If there is a role for the Community in conforming with the three criteria that I seek to lay down, there should have been some role for the Community in dealing with the Cyprus problem. There is total agreement between the Foreign Secretary and my hon. Friend the Member for Mid-Oxon (Mr. Hurd) on the proposition that taking Greece into the Community shall not involve us in the Cyprus problem. Far from enlargement doing anything to help us to carry out our obligations to other countries, enlargement makes that more difficult. That is because by taking in Greece—a country with which we do not have ties of history or culture—we shall become not impartial guaranteeing parties to a solemn treaty; we shall be tainted. Taking Greece into the Community would be seen as an act of partiality which would be misunderstood by the Turks.

I turn to my final proposition—that the European Community should be predominantly a free trade area. We are all agreed that 70 per cent of the Community's funds are spent on the CAP. No one in their wildest dreams, including my hon. Friends the Members for Rushcliffe and Chichester (Mr. Nelson) who are European federalists—

I am sorry to interrupt my hon. Friend. He has put words into the mouth of my hon. Friend the Member for Rushcliffe (Mr. Clarke), but he must not put words into my mouth. Given the views that my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) has expressed, it is important to recognise that we are dealing with a matter of degree. I and many other hon. Members would be more accurately described as confederalists who believe in a considerably greater degree of autonomy for the States in the Community.

If my hon. Friend accepts the identity of the European Community, he must not call us federalists. There is a big difference between federalists and confederalists.

I am pleased that I stimulated my hon. Friend to make an intervention. He would be described as a federalist in the way in which the Republicans in America are federalists. But he believes that there should be a strong movement for State rights. I understand his position. I hope that I do not misrepresent him. However, my hon. Friend can be properly defined as a European federalist who attaches considerable importance to State rights within the federation. My hon. Friend is a vigorous supporter of the concept of a federal Europe and even he would not describe the CAP as a great example of free trading.

I accept that the battle over the Corn Laws cannot be refought. I accept that an element of protection for agriculture is regarded by each European State as a necessary part of government. The CAP takes up 70 per cent. of the Euro- pean Community's funds. At the same time, those who support the Community in all its activities say that the Community should bring peace, justice, wealth, honour and happiness to the Third world. Yet they fail to note that 30 per cent. of the funds devoted to the CAP—that is to say 20 per cent. of the Community's funds—are spent on dumping surplus agricultural produce on world markets. There is nothing more disadvantageous to the third world than finding that its agricultural produce is being beaten by surplus produce from one of the world's richest areas.

One might wish that the Common Market policy on steel would lead to freer trade, but the Davignon plan cannot be said to be an expression of free trading principles. It is the most detailed rigging of the market. When the Minister put it forward as being, as he would say, a necessary measure for the protection of the European steelmakers, he added that in so far as it had any defects they were that we were going in for insufficiently detailed planning.

The right hon. Member for Battersea, North (Mr. Jay) is a great believer in detailed planning—at least, he used to be. It is the language of Socialism in this country, but it is hardly the language of free trade. Surely at least the Tory Party should understand that in so far as it commends the Davignon plan it is commending the most detailed Socialist rigging of markets.

In our quest for free trade let us consider the proposals for a European monetary system. Those in the Tory Party who want an EMS can be divided into three camps. There are the European federalists, or confederalists, who see the European monetary system as a first step towards a European currency. They rightly see that if there is to be a European currency there must be a convergence of economic policies and, therefore, ultimately, economic and monetary union. I understand that argument. It is logical, coherent and intellectually respectable. And I oppose it.

Secondly, there are those who believe that fluctuating exchange rates are not a symptom of inflation but a cause. They believe that if the exchange rates are so rigged that they apparently remain stable. inflation is halted. That is a common view among those in the business community who are disturbed by the rapid fluctuations of exchange rates which we have endured in recent years. Unhappily, it is a mistaken view. I believe that fluctuating exchange rates are a symptom, not a cause of inflation. Exchange rates would inevitably change rapidly where the nation States pursued divergent economic policies and endured differing rates of inflation.

I do not wish to punctuate my hon. Friend's speech with too many interventions, but I should like to mention one important point. Even if he does not accept a complete move towards a common currency for Europe, does he accept that the day-to-day fluctuations of our currency, even in relation to the currencies of our European partners, have markedly increased since we left the snake, and particularly since the end of Bretton Woods? While I accept the intellectually persuasive economic arguments in favour of a floating rate, I believe it to be undeniable that the day-to-day fluctuations, which are substantial and can sometimes be 1 or 2 per cent. in a day, must be harmful to trade. Those fluctuations cannot in any way reflect similar fluctuations in the economic performance of States. They are purely market fluctuations, and to the extent that a stabilisation programme might help to even out some of them, such a programme is worth thinking about.

There are two intellectually respectable extremes here. One is to say that States can hold the value of currencies. States then arm themselves with a variety of swap arrangements, and, if need be, some form of centralised currency like a European monetary fund, or whaever one might call it. The States, usually individually but sometimes collectively, intervene in exchange markets in order to rig them and to provide that stability which my hon. Friend the Member for Chichester (Mr. Nelson) wants. That is very expensive, because in the end the speculators usually win, and thus it is that the nation States, unless they make very clear efforts to change their economic policy to conform with the exchange rate that they want, end up by making a loss.

That extreme position on that side is never entirely possible, because even the most authoritarian country cannot prevent private individuals speculating in currency.

The other extreme position, of course, is to have no exchainge rate policy but to leave the whole issue to speculation. By that one believes tht speculation, far from being damaging and immoral, is a most useful enterprise, and that by speculators each having different views about the value of the currency they stabilise the market.

One can argue that it is because we have at present an uneasy compromise between a free market and a rigged market that we have such large and unfortunate changes in the values of European currencies. It is because the speculators are not rich enough and because the nation States are for ever interfering on a short-term basis that one has neither the advantages of true speculation nor the advantages of temporary rigging.

Before I began on the diversion that my hon. Friend caused me to take I was saying that there are three main bodies of the Tory Party that are advocating an EMS. There are the European federalists or confederalists, and there are the business men, who want stable exchange rates. Thirdly—and here I hope I shall deal with the argument of my old friend, my hon. Friend the Member for Rushcliffe—there are those who see in an EMS the hope of great big handouts from the European Community.

They concede that with a rigged exchange rate there will be disadvantages for the United Kingdom because the United Kingdom currently is, if not the poor man of Europe, at least one of the poorer men. They say that they note with interest condition No. 8 which the Chancellor attaches to our entry into the EMS—that there should be a less perverse transfer of resources than the CAP, and that the budget should devote a greater proportion of its resources to the Regional and Social Funds. That argument is a very interesting argument when it is supported from the Tory Benches, particularly when it is supported by my hon. Friend the Member for Rushcliffe. He is an industrial spokesman for the Tory Party and I am sure that he has been a careful observer of the speeches of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), as I have been.

The thrust of what my right hon. Friend has been saying about regional policy is that if we could go back in this country to the situation before regional policies were introduced we would not have introduced them. He is not saying that the Tory Party will scrap regional policies immediately. But he says that regional policies are an unfortunate intereference by the State into the ways of the market place, because in so far as regional policies are expressed by way of the system of IDCs they have robbed the once rich areas of England, such as the area around Wolverhampton and the Black Country, or the area around London and the South-East. They have diverted resources to other areas of the country where those resources have been less efficiently used.

That is the argument against the "stick" part of regional policies. My right hon. Friend the Member for Leeds, North-East has also argued, in my opinion most persuasively, against national regional policies on the ground that they are expensive and distort the economy so that, for instance, one gets an inefficient plant such as Linwood, which is miles away from the smaller factories that produce component parts for the car industry.

My right hon. Friend has made plain that he regards the vast subsidies which are a consequent part of the national regional policy as being damaging to our national economy. These vast subsidies have to be paid for either out of increased taxation or out of increased borrowing, or worse still, by increased printing. So he attacks national regional policies on the most fundamental grounds. He is saying that no State should involve itself in national regional policies if it can avoid it. I do not see that regional policies become any better when they are paid for by Common Market funds.

I should have thought that the period of great inflation, unhappily starting from events in 1972 and 1973, has taught us that there is nothing for nothing. We all have to pay for the benefis that we receive from Government, whether that Government be the EEC or the Government deriving their power and authority from a majority in the House.

I cannot believe that anybody on the Tory side of the Chamber can be serious in saying that the right way for the EEC to progress is to switch the emphasis from an over-large CAP into other forms of distortion, other forms of expensive and useless expenditure, by way of subsidy in the form of the Regional Fund. I can understand the right hon. Member for Battersea, North being in favour of the. EEC Regional Fund. I can understand very well the hon. Member for Liverpool, Walton (Mr. Helfer) being in favour of a vastly enhanced Regional Fund. But it is not a possible argument from the Opposition Benches. I hope that all of my right hon. and hon. Friends who come to consider our position in relation to the EEC will have a clear view, first about the role of Government generally and, second, about the limited but, I still believe, important role that could be assigned to an EEC based upon the old nation States of northern and central Europe.

7.5 p.m.

I do not think it appropriate for me to intervene in the debate within the Conservative Party concerning the nature of regional policy, which took up the last part of the speech of the hon. Member for Wolverhampton, South-West (Mr. Budgen). I was grateful to hear his definition of Gaullism in the earlier part of his speech. Just as the concept of federalism is thrown around somewhat loosely, so, too, is the concept of Gaullism. I am not sure whether any present-day Gaullists would have recognised the hon. Member's definition as being one that would fit them, but each person has his own definition of Gaullism. Certainly they would have resisted his references to free trade areas, it being the Gaullists in France—and certainly in the European Community—who are pressing for the most energetic protectionist measures.

I was interested in the hon. Member's reference to the role of the Community in education, because earlier this afternoon both the hon. Member for Banbury (Mr. Marten) and I heard the Secretary of State for Education and Science explaining the role of the Community in that matter. I must confess that, as my right hon. Friend and her officials tried to explain it to us, it reminded me of the remark about the Ministry of Finance in Bonn and the European monetary system. There might have been three people in the Department of Education and Science who understood the Community's role in education but they could not explain it. There were three people in the Department who tried to explain the Community's role in education but they clearly did not understand it. Be that as it may, in due course we shall have a chance to read the full text of what my right hon. Friend said to the Scrutiny Committee. Then, perhaps, we shall all be able to understand exactly what the Community is trying to do about education.

This debate, based as it is on the White Paper covering the first six months of Community activity this year, gives us an opportunity to stand back from the de. tailed examination of individual Community instruments—an examination which takes up so much of our time here —and take a broader view of the Community's work and, in particular, the strategy of our Government in achieving their twin objectives of development and change within the Community.

In one sense, this debate is a review of events that are past, those covered by the White Paper in January to June of this year. It gives us an opportunity to draw on the lessons of that period when we are considering the problems confronting the Community in the next few critical months. Perhaps I could echo one or two of the remarks which were made by the hon. Member for Mid-Oxon (Mr. Hurd) concerning the White Paper and the debates we are holding today.

I notice from the introductory paragraphs that these White Papers are produced every six months, according to the recommendation of the Scrutiny Committee in its second report of the 1972–73 Session. I think that the time will come when the Scrutiny Committee, or some other body in the House, should reconsider whether a six-monthly report is right or whether it would be more appropriate to have a fuller report, covering some of the points made by the hon. Member for Mid-Oxon, every 12 months. We could then, perhaps, have a more substantive debate on a 12-monthly basis rather than every six months. I am glad to see that the Minister of State and the Under-Secretary have noted that point.

As for the problems that we are considering today, the whole of our position in the Community has been highlighted by the speech made by the Prime Minister at the Guildhall on Monday. I am glad now to have had the chance of reading the whole of this speech rather than the somewhat curious extracts which appeared in the media and the speeches made by my right hon. Friend the Foreign Secretary yesterday and by the Minister of State yesterday and today. In the near future we shall have other opportunities of discussing the European monetary styem so, although it is in order for us to discuss that subject today, because the foundations of the present proposals are referred to in paragraphs 47 and 48 of the White Paper, I do not intend to go into detail on that subject now.

Instead, I refer to the proposals put forward at the Community summit in Copenhagen, referred to in paragraph 47 of the White Paper, which were for a broad approach to what is described in paragraph 47 as
"the present unsatisfactory trend in the Community's economic and social situation".
These proposals covered not only economic and monetary matters but employment, energy, trade, industrial affairs and relations with the developing world. I regret that that policy has tended to be replaced in the past few months by over-concentration on the technical details of monetary co-operation.

The declaration that came from the Copenhagen summit—which was taking a broader view of the problems facing the Community—should have been followed up rather more effectively at Bremen and beyond. The White Paper, covering as it does such a range of Community activities, shows the wide scope of existing Community activity and the potential for further Community activities and Community participation in many areas of our economic life. It also shows very clearly the lamentably low level of expenditure and the depressingly slow progress in many areas of Community policy which would be beneficial to the United Kingdom.

It would be by the allocation of significantly larger resources and by the development of appropriate policies towards industrial, energy and regional policies that we would obtain the redistribution of resources in the Community with a more appropriate net burden falling upon this country, as was called for by the Prime Minister in his Guildhall speech. It is on this point that I disagree with the hon. Member for Wolverhampton, South-West. I shall return to that point, and to the implications for the Community institutions and the budget of doing such a thing, because these are not unimportant and have implications for our policy towards the Community as a whole.

Before I deal with that point it may be appropriate to say something about agriculture, which is covered in paragraph 4 and section IV of the White Paper. There is no disagreement about the need to ensure that the CAP works more satisfactorily. I thought that the words of the Prime Minister in his Guildhall speech summed up the views shared across the House on this matter very well. He said:
"Britain does not seek to amend the true objectives of the policy. These are to create stable market conditions for consumers and the agricultural industry alike and to secure a fair standard of living for those who work in the industry. We agree. But the simple truth is that the present situation does not tally with the principles and objectives of the common agricultural policy."
My right hon. Friend is making clear that we accept the principles and objectives of the CAP and are disputing only the way that it is working at the moment. In this way. he has put himself in a much stronger position to attempt to reform and improve it, as I believe is necessary.

No one in the House can contemplate with equanimity the costs of the policy, or the surpluses that it is generating. There is disagreement, across the Chamber and within parties, on the question how we should deal with the defects, how we can pursuade our Community partners to make changes, and how long this process will take. My right hon. Friend the Minister of Agriculture can claim, as the White Paper does, some credit for having made a start last May in that the agreement reached then was for the lowest increases in prices since our accession. The figure was, I think, 2·1 per cent.

I hope that my right hon. Friend the Minister of Agriculture will not mind my saying that in my view that figure was not good enough. The Commission's proposals were for a zero increase in prices last year. I wish that that target had been achieved. I hope that in future negotiations for the new price review, which will be starting soon, my right hon. Friend will do his best to ensure that next year's increases in agricultural prices are held to zero, on average. It is only by achieving such a result over a number of years that we can hope to provide a satisfactory basis for improving the CAP.

The other change to which my right hon. Friend the Prime Minister referred in his Guildhall speech is that which calls for a more liberal attitude towards agricultural imports. It is interesting that there is now clear evidence that the Italian Government share our view to a significant extent over this question of agricultural imports from outside the Community. The Community will be under considerable pressure in the multilateral trade negotiations in Geneva to make a satisfactory offer on this question of agricultural policy.

I return from agriculture to the other policies referred to in some detail by the Minister of State—regional, energy and industrial policies. Unlike the hon. Member for Wolverhampton, South-West, I believe strongly that these are the policies which need to be developed in the interests of this country. There is a paradox in the position of some of my right hon. and hon. Friends. We want to develop and extend these policies, but to do this and to have a Community which can have a positively redistributive effect in the European economy—and that is essential if we are to get the balance right between contributions and receipts of the different member States—we cannot have a loose grouping of member States.

Such a development would require a strengthening of the Community and an increase in the Community budget. It would require an increase in the relative responsibilities in the Community as against the nation States. Last year an important study was prepared by a group of economists advising the Commission under Sir Donald MacDougall. This showed the possible positive redistributive effects which could be achieved if there was an increase in the Community budget to about 2 per cent. or 3 per cent. of the Community's gross national product. The study showed that if we moved to that level we could deal with some of the maldistributions of income which exist between both countries and regions in the Community.

If we want a more redistributive Community, a Community prepared to intervene on regional, energy and industrial matters, we must have—this is the other side of the coin—a stronger co-ordination of economic policy in the EEC. I agree with a number of my hon. Friends that there is only limited value for Britain in a Common Market as it is now constructed. We are certainly not benefiting from the Community as we should because it is not operating as it can.

The value for Britain is in the potential of the Community, its potential for development of the type of policies to which I have referred. The Community will make sense for our people only if we work with our partners to develop policies, including sensible measures for economic and monetary co-ordination, and for budgetary redistribution through effective regional energy and industrial policies. This means a positive approach towards building the Community. Some no doubt will call it federalism or confederalism.

My hon. Friend bases his comments on what he calls a positive approach. Will he try to explain why we have had such limited value out of the Common Market, after all our experience of its working? Does he not agree that there has been very little sign of a positive approach?

The positive approach for which I was asking is that which I hope will be adopted by my right hon. and hon. Friends in the Government. It is a positive approach which they should develop with their colleagues in the Council of Ministers governing regional, industrial and energy policies—policies involving budgetary redistribution throughout Europe. Some may call that federalism or confederalism. However, I feel that it would be the application of the principles of democratic Socialism at a Community level.

7.21 p.m.

Having heard the Minister say that

"we need a regional policy capable of preventing the widening of the gap between the richer and the poorer regions",
I must confess that I was astonished to hear him then take pride in the meagre amount put forward for the current three years of the Regional Fund. This will mean a substantial reduction in real terms of the amount put forward for the Fund as far back as 1976, since when, as the Minister admits, the gap between the richer and poorer regions, far from diminishing, has widened from a ratio of 5:1 to 6:1.

This information is particularly dismaying when one considers that the first three years of the Regional Fund were regarded simply as a running-in period and that it was intended that at the end of that period the fund would be revised or updated in the light of experience. That process is compressed into four miserable lines in the Government document.

There is no doubt that the original rules agreed by the Council of Ministers for the fund were most unsatisfactory. Ministers must take full responsibility for this, because the original impartial criteria put forward by the Commission for the Regional Fund in 1973 were very fair indeed. These criteria envisaged a gross domestic product lower than the national average, dependence on a declining industry, such as textiles, or on agriculture, and higher than average unemployment or net outward migration. Nobody can quarrel with those criteria. Unfortunately, they were swept away by the Council who must take full responsibility; and for them were substituted national criteria which had already proved themselves both manifestly unfair and woefully inadequate.

What made matters worse was that Her Majesty's Government, instead of passing on the benefits of the money that came from the Regional Fund to the regions, simply pocketed the cash and refused to allow local authorities to embark on any more schemes because they had received this Regional Fund money. This frustrated the whole raison d'être of the Regional Fund, which is aimed at helping the regions with more assistance, and was not designed merely to bail out improvident Chancellors of the Exchequer. But as we are philosophical we comforted ourselves with the thought that the original Regional Fund would last for only three years and would then be reviewed and revised at the end of 1977 to take effect from 1st January this year.

Because we in the Conservative Party, and in the North-West, believed in getting in the first blow, by putting our ideas forward while the policy was in a formative stage, we, the Conservative members of the Regional Policy Committee of the European Parliament, brought out a booklet entitled "New Hope for the Regions" containing the reforms that we would like to see. Had the proposals been carried out, they would have given the regions great hope. These included the original impartial criteria put forward by the Commission. But we added a most important criterion, that of industrial dereliction. We also added a non-quota section, which we should like to have seen set at 20 per cent. The Commission did not go quite so far as that, but suggested a figure of 13 per cent. The matter is still in dispute, but the Council put forward a figure of a mere 5 per cent.

When we speak of dereliction, we do not mean only visible dereliction. The county in which I was born and bred, and whose county town I have the honour to represent, was first in the industrial race. However, the penalty of that early enterprise and success is both visible and invisible. There are thousands of miles of sewers in the North-West and underground water pipes which are more than 100 years old, and consequently there is one major sewer collapse in that area every day. One of these mornings we shall open our newspapers and read that cars and houses have been sucked into these appalling sewer collapses, with a tremendous loss of life.

It is essential that attention should be paid in the revised Regional Fund to dereliction of that kind. To bring these sewers up to date would cost no less than £9,000 million—a bill which cannot possibly be met by the North-West water authority. Any effective regional policy must take account of the vast scale of such problems—problems which no doubt apply also in the older areas of Belgium, Germany and France. Most of all, national Governments must be prevented from "pork barrel" and unfair regional policies, to which my hon. Friend the Member for Rushcliffe (Mr. Clarke) referred.

The vast bulk of the money coming to the United Kingdom from the Regional Fund goes not to where it is most needed but to the politically sensitive areas of Scotland, Wales and the North-East. It is an astonishing fact that the Government direct six times as much money per unemployed person to the North-East as they do to the North-West, although we in the North-West have the most serious unemployment problem in the whole country. That is grossly unfair.

There is one other matter which is of great importance to the regions of the United Kingdom and to which the Minister did not refer. The Minister emphasised the need for high-technology industries to take the place of declining industries. We agree that these are necessary, and such industries would be most welcome in my area, but a job is a job wherever it is and whatever it may involve.

There is one industry which could be of immense assistance in many of the hard-pressed, far-flung regions such as my own. I refer to the tourist industry. Alas, despite our urgent pleas, the Government refuse to allow tourist grants in intermediate areas. It was only with the most enormous effort that we were able to obtain tourist grants from the Regional Fund—grants which had been denied to us by our own national Government. If Her Majesty's Government would only alter their own regional policy they would make it much easier to obtain this vital assistance in many regions of the United Kingdom.

But the best regulations in the world are useless if there is virtually no money in the kitty. High hopes were raised by the Bremen and Bonn summits, which pledged the Council's efforts to redress regional imbalances in the Community. Therefore it was with particular disappointment that members of the European Parliament, and of the United Kingdom Parliament, too, greeted the figures put forward by the Council in its budget for the coming year. They were precisely the figures put forward in December of last year, as though Bremen and Bonn had never happened. I believe that unless we take effective action to rectify the regional imbalances in the Community, the Community will fall apart. The derisory amount put forward by the Council cannot even begin to touch the fringe of the problem.

Finally, my hon. Friend the Member for Mid-Oxon (Mr. Hurd) mentioned a matter which is of interest to all hon. Members, and that is the provision of statistics. It is not possible to have an accurate regional or social policy, or indeed any other policy, unless we have accurate statistics comparing one Community country with another. I was delighted when one morning through my letter-box there dropped a small volume entitled "Basic Statistics of the Community 1978". I opened it with high hopes, but they were soon dashed. The statistics are not comparable. They are expressed in the currencies of the individual Community countries. It is impossible to compare the wage rates of a German car worker with those of a British car worker, or those of a Belgian textile worker with those of a British textile worker. I hope that when the Minister takes up the various matters raised by my hon. Friend the Member for Mid-Oxon, he will ensure that the information that we receive is in a form that we can use.

The Community has a tremendous future but it will be successful only if we put our backs into it and try to make it work. We shall make it work only if we take a positive attitude to agriculture, to the Social Fund and to the Regional Fund. The majority of hon. Members take that approach. I ask the Minister to convey a positive attitude to his colleagues overseas.

7.32 p.m.

We have reached the stage in our membership of the Common Market when, bearing in mind our previous experience, we can ask a simple question. With all the experience, all the debate and all the information that is available to us, has the United Kingdom received anything comparable to its contribution as a member of the Common Market? At this stage the answer is bound to be "No". Have there been any comparable benefits outside economic considerations? Without examining those matters in too much detail, we can say that the answer is questionable. There are no benefits that are readily identifiable. There are no benefits that are identifiable that would not have been gained had there not been a Common Market anyway.

The hon. Member for Lancaster (Mrs. Kellett-Bowman) made an impressive point when she described the condition of the sewers in her constituency. I presume that much of her information, apart from her personal experience, came from a recent excellent television programme.

In any event, it was an excellent programme. The hon. Lady's experience would have added to that well-documented programme. A vast amount of money is needed to put matters right. However, why should we be relying on the Common Market to put such matters right in our own house? I see no reason to plead a cause in that direction. The British Government should be responsible for their own infrastructure. They should make their own economic decisions.

Economic considerations raise great concern. There is an outflow of investment from Great Britain to the Common Market and there is hardly an identifiable trickle coming back. Reference has been made to the ratio of 1 to 8, namely, £ I coming in to £8 going out. Last year there was a deficit approaching £3,000 million. We must not confine ourselves to last year. If we take into account the preceding year and the year before that, we see that it is clear that we have been a godsend to the Common Market. At the same time, we have suffered.

I take the area that I represent as an example. We were told years ago by those who were keen on the Common Market that the regions would benefit, but in my constituency over 14 per cent. of the men are out of work. It is a steel constituency. I accuse the Government and all previous Administrations of not being honest about the one fundamental fact that applies to the steel industry, namely, that we are not masters in our own house. Further, we are not making our own decisions about plant capacity or our share of the market.

It is interesting that we have about 30 million tons of plant capacity in the United Kingdom. We have a home market steel requirement of 15 million tons but we still have imports of steel. The Davignon agreement is being breached by producers in Europe and by customers in Britain. There is price rigging and dumping in Britain. Steel is being hoarded for future price benefits for constructors.

The general secretary of ISTC, Mr. Bill Sirs, has made it abundantly clear that the fraudulent practices that are contrary to the Davignon agreement and known to everybody should be stopped. It seems that they cannot be stopped. One of the great weaknesses of the Common Market is that it is building such a mountain of rules, regulations and directives that it is impossible for any man or any organisation to get through to it to try to get some sense.

Another example—

Has the hon. Gentleman given any estimate to his constituents of how many more men would be out of work this evening if the European Community, the largest trading group in the world, had not elaborated the Davignon plan? Does the hon. Gentleman agree that even if it is imperfect, the present situation is a great deal better than that which his constituents would have had in the form of protection?

The answer is simple. It is that my constituency would have had a steel-making plant in production. That plant was profitable. We are producing coke in Hartlepool cheaper than anywhere in the United Kingdom. However, the plant is to be closed because it has to submit to other, wider considerations.

We are building huge steel plants in the United Kingdom. These plants are incapable of taking our own small and medium-sized domestic orders. That is because there is not the run-through capacity in a large steel plant. We have given up our small and medium-sized plants according to the diktats of the Common Market. Therefore, we are not able to take advantage of our home mar- ket. The result is that with a huge British Steel Corporation sustained by millions of pounds of Government grant we are almost a net importer of steel. Is that not sad? The only thing that the great planners in Brussels can do successfully—there are too many of them, and they are too highly paid—is attend functions. They are not dealing with the problems that we can deal with here.

In my constituency there is a textile industry. It employs many people. To overcome the great problems that exist in the textile industry—I shall not deal with them because those in the industry know all about them—we have had to apply to and conform with the test laid down by the Government to qualify for the temporary employment subsidy. The British Government succeeded in keeping the men in my constituency at work. It is, as I have said, a constituency in which over 14 per cent. of the men are unemployed. If nothing stops the trend, there will soon be more than 20 per cent.

What has happened? In the past few months the Common Market has said to the British Government "We are sorry, but you cannot do that. The Rome Treaty does not allow you to do it. We shall decide." I anxiously telephoned those concerned in my constituency and discovered that our regional officers and employers were frantically trying to keep the men at work. There is great uncertainty because of the state of organisational constipation in Brussels. That is what it is all about.

Let us talk about the successes in this remarkable organisation. Does anyone need any description of the sad, sickening story of fisheries? I have had to listen to comments from the Opposition Benches about my right hon. Friend the Minister of Agriculture, Fisheries and Food. My right hon. Friend has been criticised because he has taken a stand to try to defend what is left of our industry. Opposition Members say "Do not do that. Do not upset the French. Do not upset the Italians. Do not upset the Germans." The French need not be upset. France has benefited by about £200 million from our contribution to the EEC.

What have the great planners in Brussels done? They have a £200 million steel plant in France. It has not produced a ton of steel, but the planners have decided to dismantle it next year.

I have dealt briefly with steel and with fisheries. I now want to consider energy. There has been nothing more disgraceful than the rows in the Common Market on energy and on the JET programme. There has been row after row, with Italy, France and Germany angrily fighting for their share. We saw this in the case of the argument, which was eventually resolved in our favour, enabling use to be made of our research facilities at Culham. The EEC has no energy policy. It is stated quite clearly in the report that after all these years no agreement has been reached on any policy for energy.

In Bremen there is a nuclear power station which cost £250 million. It is guarded by 40 dogs and handlers, as well as by concealed surveillance equipment for the detection of any breach of the outer boundaries. The local police, the army, and, I understand, the air force are all engaged in guarding it. It was completed in 1976 and has not produced a spark of electricity, because no one will allow it to work. The same sort of story has been repeated in Italy. I understand that, not long ago, one of the member States of the EEC held a referendum—that famous instrument which allows Governments to get away from the major problems of government—as a result of which another nuclear power station will probably have to be dismantled.

Wherever we look in the Common Market there is failure—in steel, in fisheries and in energy, as I have described, but I think that the failure which irks this House more than anything else is that of the common agricultural policy. What nonsense this is. We have seen mountains of butter sold cheaply to anyone but our own people. We know about the wine lakes. Indeed, the great planners in Brussels have not produced a single piece of evidence even to show that Common Market countries other than Britain have benefited. When I have motored in Europe, getting away from the great centres, such as Geneva, Brussels, Paris and Rome, I have seen disgraceful poverty. I would not swap the conditions that I have seen in those countries for the conditions that we have in this country.

Recently, there have been directives concerning the care of water. In this country we have the highest water standards in the world. Indeed, when I have motored in Europe I have seen good, sound, common sense Britishers buying botttled water, if they have not taken it with them from home.

Nobody can honestly say that the standards of care and hygiene exercised in the United Kingdom in this respect are matched anywhere in Europe.

I do not think that any area of the United Kingdom can honestly claim that it has had real benefits of any kind resulting from our membership of the Common Market. But those of us who criticise what is happening in Brussels must not be construed as having anti-European ideas and notions. Far from it. We who want a United Europe believe that we could have had a much better association with other European countries on a free trading basis. That would have been much better than the mountains of directives, regulations and other shackles which have been laid upon us. Indeed, there are so many of them that the House cannot consider them adequately. If anyone thinks that that is not a positively alarming position, let me remind the House that we are debating, in November, matters which relate to January and June of this year. Later, we shall be debating, I understand, a document dated 11th May 1978 concerning a proposal which was made on 19th December 1977. We are always dealing with these matters many months too late. Every document that we have before us is out of date. The matters in the White Paper before us are already out of date, and in six months' time we shall be discussing another White Paper which in its turn will be out of date.

I suggest that we can come to only one conclusion about all this nonsense from the Common Market. The bureaucratic machine in Brussels should begin to realise what has been happening to this country. It involves far more dangerous matters than purely economic ones. The soft belly of democracy has been exposed. Influence and authority have been taken from this House of Commons. They have been diffused in one direction to Europe and devolved in the other direction to Scotland and Wales.

I do not want hon. Members to misunderstand my message. There are extreme political forces watching what is happening. It is not without coincidence that the National Front, the Right-wing elements, the Fascist organisations, have suddenly come to life, because they see that there is some advantage to be gained from the state of weakness which we have allowed to develop.

7.47 p.m.

I was very interested in some of the important constituency matters which the hon. Member for Hartlepool (Mr. Leadbitter) brought to the attention of the House. I agree with his concluding words to the effect that we should never have become involved in the EEC. Had we proceeded by means of a free trade area, I think the hon. Gentleman will agree, we would have had a much better and much more genuine form of unity in Europe, without having a supranational organisation in Brussels.

I apologise, Mr. Deputy Speaker, for my absence during the opening speeches of the debate. I was, like the hon. Member for Farnworth (Mr. Roper), in the Scrutiny Committee, dealing with European legislation. We had to be there to interrogate the Secretary of State for Education and Science.

I feel a little isolated tonight, in that I have only one colleague on the Back Benches with me. I think that this somehow symbolises, perhaps, a diminution in the enthusiasm for European matters in the Conservative Party.

Does the hon. Gentleman agree that the most interesting feature of all our debates on the Common Market is the lack of the presence of those hon. Members who supported entry and are supposedly full of enthusiasm for the Common Market? They never seem to attend. Only the odd one attends these debates. The hon. Members who regularly attend these debates are those who really take an interest in the Common Market, and by so doing they become very anti-Common Market.

I absolutely agree with the hon. Gentleman. This lack of en- thusiasm on our part for the Common Market has to be borne in mind by other people in the Community. There was recently an opinion poll dealing with the views of our people on the Common Market. Before anyone says that it was only an opinion poll, I add that it was carried out by the European Commission itself in the various member States. In answer to the question "Do you think the Common Market is a good thing?", only 29 per cent. of the people in this country said "Yes".

A National Opinion Poll in this country in August of this year showed that 53 per cent. of the people would vote to leave the Common Market if there were another referendum. Only 33 per cent. indicated that they would vote to stay in. I am glad to add that when the poll was broken down into political parties it was found that the majority of people in the Conservative Party would now vote to leave the Common Market.

When I hear my right hon. and hon. Friends hammering the Government on their conduct in Brussels and so on, I wonder whether they are wise to do so. They are, in fact, saying "We would not behave like the Minister of Agriculture" and so on. The implication is that they would be much weaker. I think that, looking ahead to the coming election, the impression being given by the Conservative Party and people who speak in those terms is that we would not get such a good deal out of the Common Market with a Conservative Government as we would with a Labour Government.

I do not pay attention to seated interjections. If my hon. Friend cares to get up, perhaps I shall hear what he said.

The Conservative Party is in great danger in this matter. If we hook ourselves to the European monetary system, there will not be any votes in that at the election. In fact, if the Labour Party is wise it will play the Common Market pretty hard and good at the next election. But I am I of here to advise the Labour Party about the next election, I am sure that it wi11 be able to do that for itself.

I agree with the hon. Member for Liverpool, Walton (Mr. Helfer) that everybody says "We must reform the common agricultural policy". It has been said from the Opposition Front and Back Benches. Everybody has been saying it. The Prime Minister has been saying it. But no one says what will happen if we do not manage to reform the common agricultural policy. I think that the common agricultural policy will go unreformed, just as it has done during the past 11 years. We may tinker with his and that, but I think that the CAP will remain unreformed unless one Government—I hope that it will be the British Government, because we are closely involved—say "Unless we get the reforms that we want we shall do what we now intend to do." That is the point. We must state our case.

While the Minister was out of the Chamber I apologised for my absence, having been on the Scrutiny Committee. But, having heard him make an excellent speech at a dinner on Monday night, I can only say that as he really had his heart in what he then said perhaps it is as well that I did not hear him speak today, when he might not have had so much heart in it.

I should like to turn to and criticise the White Paper. I do not know whether the White Paper is in the format recommended by the Foster Committee. That was, of course, only a recommendation, and therefore there is no reason why it should not be altered in substance. However, as hon. Members have said, it is not a very interesting document.

I suggest that the "meat" of the Common Market as it affects Britain, and so on, should be put into this document. For example, under "Trade" I should like to see the visible trade figures for the past six months. The fact is that our visible trade in those six months has been running a deficit at the rate of £2,400 million a year, whereas in 1971 our deficit with our eight partners in the Community was only £180 million. That would draw the attention of the public to the fact that the balance of visible trade had swung very much against us since we entered the Common Market. The Government could then explain why it had happened. That is the kind of information that we should have.

I suggest that the Government should put in something about our invisibles. In 1974 our invisibles were £400 million in surplus. The latest figures which I have from the Government show our invisibles £300 million in deficit. There has been a swing of £700 million on our invisibles with Common Market countries. That is the nitty-gritty real information that we should be getting across in the White Paper.

I think that we should repeat the estimates made in the January White Paper about what we would be paying next year. Our net contribution to the Community next year will be about £850 million. That is the cost of belonging to this wretched Common Market. We are paying into it, but we are getting nothing out of it.

In that context, I agree with the Prime Minister on two matters. Yesterday he said:
"It is far better that we should try to make the necessary reforms in the European Community than that we should talk about leaving it at this stage."—[Official Report, 14th November 1978; Vol. 958, c. 204.]
The words "at this stage" are very encouraging. Many people have been given a lot of heart. I am sure that that expression will be bandied about quite frequently. The Prime Minister went on to say that we really needed a balance sheet.

I have been and will go on pressing the Lord President of the Council to set up a Select Committee to look into all these matters and to publish its findings. There is confusion in the minds of the public. Some people say one thing while others say something else.

I have quoted certain figures because they have come from the Government. Indeed, they are in today's trading figures. Those are the facts. I should like all those facts to be put together by a Select Committee which looks at the effect of our membership of the Community after five years. It is a serious matter. It was thrown up by the Prime Minister in his speech at the Guildhall. I think that the Lord President of the Council should certainly set up such a Select Committee.

My hon. Friend the Member for Rushcliffe (Mr. Clarke) referred to what our position would be if we were not in the Common Market. If we were not in the Common Market we would be in the industrial free trade area. That would have great advantages for us. Anyhow, we are in the Common Market now. If, as the Prime Minister hinted, we were to withdraw, just think of our enormous bargaining power with our market for agriculture—I hope that Commonwealth imports would replace those from the Community—and with all our fish, coal and oil. There is also the deficit on manufactured goods. The Common Market is making a killing in this country on the balance of trade, as it were, in manufactured goods. We have been or will be the paymasters of the Common Market. I suggest that all those matters together would put us in a very strong position.

Turning to one or two items in the White Paper—

I heard my hon. Friend sotto voce say that the deficit would be the same. I do not think that would be so because of all the cheaper food we would be able to buy on the world market. It would substantially reduce our visible trade with the Common Market.

Paragraph 7 of the White Paper refers to the Lomé convention. I was not present to be updated on the position regarding those negotiations. I think that we should avoid giving the impression—this came out at a conference I attended with people from the Lomé convention countries—that we are adopting even a quasi-neo-colonialist attitude towards the developing countries. They are worried about that.

Mr. Roger Berthoud, commenting in The Times on a pamphlet "Europe Right Ahead", produced by a group of my hon. Friends, refers to the neo-colonialist tendencies in that pamphlet. Lord Thomson of Monifieth also wrote to The Times about sending Common Market forces to Namibia to hold the ring, as he said, during the elections. The suggestion was that we had to do it because of our economic interest there. I think that there is a danger of presenting a neo-colonialist or semi-neo-colonialist attitude towards the developing countries.

For the sake of interest, I turn to paragraph 9 of the White Paper. The Nine supported the Anglo-American initiative on Rhodesia. What was interesting was that the other night, in the vote concerning Rhodesian sanctions, 114 Conservatives voted to lift sanctions. They were all going against the wishes of our partners in the Community, yet many of them were passionate pro-Marketeers. What I am trying to illustrate is the fact that the whole essence of the Common Market—it has been said many times—is that it should speak with one voice. In this instance one has all the people who advocate speaking with one voice suddenly speaking with a voice entirely different from that of the other countries in the Common Market. I just hope that they remember that they cannot have it both ways—or are they operating double standards?

Paragraph 12 deals with enlargement. I think that w probably debated that pretty well yesterday. What worries me—I know that it worries my farmers in my constituency—is the fact that Greece has 36 per cent. of its working population in agriculture, Portugal has 28 per cent. and Spain has 23 per cent., whereas this country has only 2 per cent., or probably slightly less than 2 per cent., of its working population in agriculture. That will mean that in terms of votes, to which any Government must pay great attention, when it comes to the applicant countries joining the Council of Ministers there will be a tremendous agricultural vote lobby behind agriculture, compared with our 2 per cent. Therefore, the common agricultural policy will be even more difficult to change if it is not changed before then.

Paragraph 15 deals with generalised schemes of preferences. It says,
"For textiles, the arrangements for the first six months of 1978 were renewed "—
and so on. There is quite a bit of protectionism, which I do not like, creeping into the Common Market. Again, one fact that came out in the conference that I attended was in the paper produced by the Commonwealth secretariat, although I think it was a United Nations study, which said that only one job was lost in an industrialised country such as ours from cheap imports compared with 40 jobs lost by advancing technology. So it rather puts this question of protectionism in its right perspective. One just wonders whether we are right to support this protectionism when it is technology which is causing the unemployment rather than cheap imports from developing countries.

I have already mentioned the CAP. I remind the House that we are all saying —one says it once again—that we must reform the CAP. But no one—at least, no one on the Opposition Benches—ever says exactly what he wants the reform to be. I should dearly like my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) to state very clearly what reforms the Conservative Party, if its spokesman were at the Dispatch Box now, would advocate for the CAP. Then we should know where we stand.

I remind my hon. Friends that on 19th March 1977 a resolution was passed by the House, with the full support of the Conservative Party, which pressed for easier access into the United Kingdom for efficiently produced foodstuffs from outside the EEC. I should like to know specifically from my hon. Friend whether that is still Conservative Party policy, or whether the Conservatives—as with the green pound—have withdrawn a little from their position as stated in the debate.

I come to the subject of mutton and lamb, which is dealt with in paragraph 38 of the White Paper. I do not know how many hon. Members have read the report of the Select Committee on this subject, but I think that it is estimated that the sheepmeat proposals will raise the price of lamb in Britain by about 15 Per cent. That is the view of the New Zealanders, the NFU, the Minister of Agriculture, and so on. All seem to agree, within a very narrow margin, that for every 1 per cent. that the price of lamb rises there will be a reduction in consumption of 1 per cent.

British farmers ought to be very careful about this proposal. They might, indeed, gain an extra 15 per cent. and a little more money, but they are doing pretty well now. The effect, however, will be that the consumption of sheep-meat in Britain will fall and in the end they will suffer, because the money that they gain will be taxed anyway. I send out a warning on that matter.

Paragraph 49 of the White Paper refers to progress towards economic and monetary union. Here we come up against the European monetary system. One has the impression, from the Prime Minister's speech at the Lord Mayor's banquet, that the Government will reach a decision on this matter, that we shall then debate it in the House, and that he will then go off to the Community, where the Prime Minister will indicate the views of not only the Government but, presumably, this House. The one thing that does not seem to come out adequately in this but which, thank goodness, is mentioned in the leading article in The Times today is that the logic of the EMS must mean that the money supply, if EMS is ever to work properly in each country of the Community, must be controlled by what I think is called the Central Federal Bank in the Community.

I speak as a Conservative. The leader of my party and my right hon. and learned Friend the Shadow Chancellor of the Exchequer have been saying that our policy will depend very much on the control of and manipulation of the money supply. "Money supply", "money supply"—that is the important thing. If that is to be controlled and if the level is set by people in Brussels, I do not see how that is compatible with a Conservative philosophy. I hope that the Government will produce the document to which reference was made at the Lord Mayor's banquet and about which there was an intervention earlier in this debate.

Paragraph 51 of the White Paper deals with value added tax. It is disgraceful. I remember my hon. Friend the Member for Mid-Oxon (Mr. Hurd), when talking about direct elections to the European Parliament, saying day after day and week after week "We are dragging our feet about direct elections." No doubt he will remember that. But let us look at the sixth directive on VAT. We, the good boys, have passed the legislation. It is all there. But the other countries have not done so. The answer to a Question of mine the other day was that the sixth directive has so far been implemented only by the United Kingdom, Belgium and Denmark and that it was not possible to say which other member States will have implemented it by 1st January 1979 except that the Federal German Government have made it known that they cannot meet that deadline.

Have I heard from my hon. Friend any criticisms of the Federal German Government for dragging their feet? I have not heard that day after day, week after week and month after month. I urge my hon. Friend to start criticising some of the other Governments in the Common Market for the frightful dragging of their feet.

It is our job, presumably, to criticise our own Government rather than those of other countries. However, I am delighted to learn from my hon. Friend that he approves of the progress made by the present Government in this country in that respect.

"We are in the Market now"—I think that that is the answer to that one. We must obey the directives.

As this is a very small and friendly debate, I think I have probably said quite enough. I conclude by expressing the hope that the Government whether they be the present Government, or the next Government, will in future produce a proper and worthwhile document. This one might almost have been written by the European Movement or, worse still, by the European Community itself. It is the sort of thing that is pumped out by those organisations day after day and with which our mail is flooded. Let us have in these documents some gritty hard facts which are not necessarily all the good facts. Let the Government put in the truth and some of the bad facts.

8.9 p.m.

I shall be brief. I find the White Paper helpful, but for once in my life I agree with my hon. Friend the Member for Banbury (Mr. Marten). What we really need is something much more factual, showing the balance of advantages and disadvantages to us. A summary would not only be helpful but would also be of great value, not only to the Government but to the electors.

This document does very well, but in the end it does not produce such a summary. If the Government feel that that cannot be done in a White Paper such as this, again I tend to agree with my hon. Friend the Member for Banbury that a Select Committee might well do the job. The Government would lose nothing by this, even in an election year. The facts would be there and would be easily accessible for people to understand. I put that suggestion to the Government in a serious manner.

Both the Prime Minister at Guildhall, and hon. Members today, have laid emphasis on the CAP. That is referred to in paragraph 4 of the document. From what I have heard in all the speeches there is no doubt that there has been a common theme that we want to reform and improve it. I do not know how. Perhaps my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins), when replying, will give some indication as to what we Conservatives would do if in power. However, it is not an Opposition's job to tell the Government what to do. On the other hand, there should be some common ground between the two Front Benches on exactly how this improvement ought to be achieved.

Would not the hon. Gentleman consider that at least one part of the question might well be a consideration that Parliament ought to be able to ask questions about the increase in the preliminary budget each year? For instance, a few lines in the White Paper tell us that the preliminary budget next year is to be increased by nearly £1,000 million. Surely it is for Parliament to question how that figure was arrived at?

I think the hon. Gentleman mentioned that in his speech, and I am quite certain that the Government Front Bench was listening when he did so. I hope that the Minister will reply to that very point.

My hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) took us through the defective sewers in her constituency in order to illustrate the possible uses of the Regional Fund. It was an important constituency point. I believe that a decision has to be made by any Government as to whether the benefits should be for the immediate alleviation of unemployment or whether they should be for some long-term projects. That is a decision which is not unlike the decision which faces this country about how we use the oil revenues. My view about the oil revenues is that we should use them for long-term industrial reconstruction. The same probably ought to apply to a high percentage of the Regional Fund which we receive.

I want to turn to the whole question of the Copenhagen meeting. The document says:
"The strategy would concentrate on economic and monetary matters, but would also cover employment, energy,"—
I should like to stop there for a moment. As I understand it, after all these years, there is still no common policy on energy. The document goes on:
"trade, industrial affairs, and relations with the developing world."
The one thing about that meeting which I regret very much—this is the principal point that I want to raise—is the fact that at present membership of the European Community is not helping us to meet the very heavy burden of our defence forces, in which we contribute probably more than anyone else. I have said that before and I shall go on saying it. We need assistance in this area. One of the things we must thrash out with the Community at some future time is whether it can give us some help towards our defence costs. As all hon. Members and the whole country knows, the cost of defence even at the lower rate constitutes a heavy burden on our economy. I believe it would be of great advantage to us and to the Community in the long run if it was to help us with regard to that heavy burden. I realise that members of the Community are not the same as those of NATO. I appreciate that, but all the members of the Community get the benefit of the defence effort that we contribute.

How large should the Community be? If one increases it almost indefinitely, then in my opinion it must get so large that there comes a point when it ceases to be of benefit. I exclude Spain and Portugal because they are part of Europe. But for how long shall we be able to afford to give enormous concessions to the developing countries once the whole structure has been completed? I cannot say to what point we can continue to grant membership. We want to give membership to Turkey. That is a very good thing, but this whole question bears considerable thought in the future. It is not my intention to say that we cannot help the developing countries. But I wonder how big the inside structure of the Community can be so that it still brings the benefits which we all want to see.

8.18 p.m.

The one thing that has been agreed by everyone who has taken part in the debate is that we have been unanimous in our request to the Government to improve the White Paper when they publish the next one for the last six months of 1978—not only to improve the statistics but to improve the wording, in order to make it more explanatory. As it is—I could not agree more with my hon. Friends who have criticised it—it as a dry document which does not contain all that much useful information. Although it is not the Minister's fault, it is also being debated rather late in the day. I hope that when we get the next six-monthly edition we shall be able to debate it in the early part of next year, when it will be more relevant than this document is today.

My hon. Friend the Member for Mid-Oxon (Mr. Hurd) put his finger on one of the most important aspects of the difficulties and problems which at present exist in the Community when he said that we now have less influence than we did. Apart from Ministers, I am perhaps in as good a position as anyone to judge whether or not that is true. Since I have been in the European Parliament I have had to work with Members of Parliament from other countries as well as listening and dealing with Ministers from other countries who have been in the presidency over the last six years. There is no doubt that the weight which we can carry as a country has become much less.

There are all sorts of reasons for that. One of them surely must be that our European partners have much less faith in our ability economically to continue with the present policies that we have been pursuing over the past four years under the present Government. That is the basic reason why our currencies have been so weak. All countries of the Community have been hit by the rise in oil prices it has been a common problem—but this country has suffered the most and we have lost a great deal. As my hon. Friend the Member for Mid-Oxon pointed out, against the West German mark our currency has been devalued by at least 50 per cent.

I find it staggering now, as one goes abroad, to find how it is the Community which today carries weight, not the United Kingdom. I had the pleasure of going to Japan fairly recently, leading a European parliamentary delegation. I was there just after the Chancellor of the Federal Republic of Germany had been there to deal with trade matters, and there was no doubt that the weight which he carried was extremely heavy, though whether he managed to get what he wanted from the Japanese I do not know. But certainly we were listened to as a European Parliament, as a Community, and I feel that somehow the British point of view was not quite so well heard or did not carry quite so much weight.

Before turning to the other main theme of the debate, I wish to deal with one or two of the smaller matters—smaller, though none the less of importance—some of which have been mentioned. One matter, which is mentioned in the White Paper but to which reference has not been made—I am sure that the House will welcome this—is that the Community has set up a court of auditors. It has taken a long time to get this baby born, but now we have it. There is now a court of auditors functioning, with a proper staff. I regard this as an essential move and, as I say, I am glad that the court has been set up, after all the problems, and that it will now start work conducting its examinations and making certain that expenditure is properly dispensed throughout the Community in the right way as laid down in the regulations.

I turn next to the matter of VAT and the directive to which my hon. Friend the Member for Banbury (Mr. Marten) referred concerning the 1 per cent.—or up to 1 per cent.—of payments into the Community as from 1st January next. My hon. Friend is right when he says that only two countries, the United Kingdom and Belgium, had passed that directive, but now a third country, Denmark, has passed it. Therefore, now that three countries have accepted the directive, as from 1st January it will become the method of self-financing throughout the Community. I am sure that the Minister will confirm that as from 1st January, now that three Community countries have ratified the directive, it will now become the method of financing and other countries which have not yet ratified, such as the Federal Republic of Germany, will be assessed on that basis.

Next, I must say a brief word about the steel industry. I had the pleasure yesterday of listening to Commissioner Davignon making a long statement about the development of the Davignon plan for the industry. It was extremely interesting, because the difficulties being experienced, for instance, in the constituency of the Member for Hartlepool (Mr. Leadbitter) are being experienced by all the member States of the Community.

One has the greatest sympathy for the right hon. Gentleman's constituents and for others throughout the Community who find themselves similarly placed, but we are only at the beginning of the Davignon plan and there are still many snags and difficulties to be ironed out. Having listened to Commissioner Davignon for 45 minutes, I came to the conclusion that what he is trying to do must be in the interests of all the steelmaking industries throughout the Community. There is, as always, the question of self-discipline and the policing of agreements which are made among the member States to ensure that the plan works.

There was reference in the debate yesterday in the European Parliament, and Commissioner Davignon took note of it, to the particular difficulties of the special steels sector. Perhaps this does not directly affect the hon. Member for Hartlepool, but it affects the constituencies of many hon. Members, particularly in the Sheffield area. This will be the subject of special examination yet again in an effort to cope with those problems.

Did Commissioner Davignon make any comment about the need to deal with the steps taken by many producers to get over his agreement, steps such as price fixing and other methods of avoiding the whole plan?

The hon. Gentleman will recall that only two minutes ago I said that problems still exist. Commissioner Davignon readily acknowledges that and the importance of the policing of the plan throughout the Community. That must be accepted. Commissioner Davignon is well aware of all that. Indeed, if he had not been, he would have been made aware of it during the debate on his statement which followed. I think that the hon. Gentleman can rest not content but at least aware that this is in the mind of the Commissioner and of his so-called bureaucratic staff. In passing, I remind the hon. Gentleman that the totality of the staff, the civil service, of the Commission, is about one-third of that of the Ministry of Agriculture of this country, which is not very extensive.

I turn next to the textile agreement which also was mentioned by my hon. Friend the Member for Banbury. One must welcome what has been done in providing safeguards here. Although it has been a little restrictive, if it had not been done many textile factories in this country would have suffered grievously. It is good that the Community has been able, on a Community basis, to give protection to these industries in this country and in the other Community countries as well.

In that context. I draw the Minister's attention to one of the difficulties which we encountered recently with the Turkish Foreign Minister. I am sure that the hon. Gentleman had the same experience. One of the points made strongly to us by the Turkish Foreign Minister is that Turkey is an associate member of the Community and, in its present desperate financial and economic situation, it needs special treatment and help, particularly in regard to textiles. I hone that the Government, and the Minister in particular, will be sympathetic to that cride coeur from our Turkish friends.

One of the difficulties in present circumstances is that Greece is joining, or is trying to join, the Community—I hope that that will come in the foreseeable future—and our Turkish friends who are not only associate members of the Community but have been allies of ours for a long time feel somewhat isolated. Anything that we can do to stop that isolation and make it less harsh will be of great value.

I hope that hon. Members who have raised other smaller points will forgive me if I do not mention them now but return to the main issue in the debate, namely, the contribution which we are making to the Community. All kinds of arguments have been advanced, but the main theme running through the debate has been that our contribution is out of all proportion to our economic strength.

I do not think that anyone would argue that if the projections which have been put forward are correct something must be done to put matters right. As my hon. Friend the Member for Mid-Oxon said, it is an extraordinary fact—this was not taken up by the Minister in opening—that this was one of the main factors in the renegotiation. I am sure that the Minister who winds up will explain what has gone wrong with the mechanism which was meant to adjust our contribution to the Community if it became too heavy for us.

The hon. Member for Southampton, Test (Mr. Gould) said that this applied only if we were in long-term deficit on our external balance of payments. I have not had time to check whether that is true, but if so, it means that the negotiations carried out by the Prime Minister when he was Foreign Secretary were shortsighted and inadequate.

One reason for the lack of balance in our contribution is the lack of balance within the Community budget itself. About 70 per cent. of the budget goes on agriculture, not only because the Community wishes to have a CAP but because the Community and Ministers—and British Ministers are just as guilty in this—have not had the courage to bring forward other policies and to increase the Regional Fund and the Social Fund.

My hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) and the hon. Member for Farnworth (Mr. Roper) made interesting speeches concerning what should and could be done with the Regional Fund. I recommend hon. Members to read the pamphlet produced by my hon. Friend the Member for Lancaster on this subject.

I am struck particularly by the fact that, through this timidity in pushing in the Council of Ministers for a higher contribution to the Regional Fund, from which we would undoubtedly have a greater return than we get from the CAP, a great deal is not being done throughout this country.

If there are such advantages to the British economy in the use of funds for regional purposes, why does my hon. Friend not advocate a bigger Regional Fund, paid for, at any rate in the meantime, by national resources?

My hon. Friend anticipates, in part, what I was about to say. I am advocating an increased contribution from Community funds to the Regional Fund. There are many things which should be done. For example, I was told today that there are 2,000 acres of derelict land in urban Liverpool, mostly in the hands of local authorities and public authorities. The Government have not been able to devote sufficient national funds to develop that land.

The Government have been substituting the Regional Fund contributions for their own development funds for the regions. It was not the original intention of the EEC that the Regional Fund should be a substitute for national funds. It was supposed to be an addition to national funds.

My view is that there should be a great increase in the size of the Regional Fund. We shall be talking in a few moments about where the increased contribution should come from. I should like the extra money devoted to urban and metropolitan areas throughout the Community. In addition, I think that the Social Fund should also be developed. Our rural areas need to be helped in the same way.

At present there are three funds—the guidance section of the CAP, part of the Regional Fund and part of the Social Fund—dealing with the whole of the Community and not concentrating anywhere. It would make sense for our rural areas, where there will need to be a different type of development, for there to be established a rural fund with a rural policy and drawing funds from the guidance section of the CAP, from what I hope will become known as the old Regional Fund and from the Social Fund. In parallel with that, we need the development of a new regional fund concentrating on the urban and metropolitan areas to revitalise them.

My hon. Friend was kind enough to advertise my pamphlet. May I recommend his pamphlet on Community rural policy, which embodies precisely the ideas that he is putting forward and is well worth reading?

We come immediately to the question of how to finance such a policy. If one is talking about increasing the vast amount of money that is put into the Regional Fund, the Social Fund and what one would call a rural fund—

The hon. Member for Wolverhampton, South-West (Mr. Budgen) should allow the Opposition Front Bench speaker to say what he has to say. Is the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) giving way to his hon. Friend?

I would rather develop my argument, Mr. Deputy Speaker. If my hon. Friend is bursting to interrupt me, perhaps he will do so in a minute or two.

I was saying that we had to face the fact that there would be a need for increased funds and that they would have to come from somewhere. One immediately turns to the common agricultural policy, This is not the time to develop a great debate on agriculture and to say how one can or should change the CAP.

No common agricultural policy can succeed as long as there exist the monetary compensatory amounts at their present levels. If they were eliminated over a period, it would release a substantial sum that is now being paid in subsidy to the producers. But, as I have said, we do not want to go into too much detail about how one would want to reform the CAP.

I will if my hon. Friend wishes. Perhaps he will read a pamphlet on the subject that I wrote only a month ago. I think that it would keep him awake at night. I do not advertise it further than that.

I am glad that in his speech on Monday night the Prime Minister accepted the principles of the CAP under article 38, which is the important article. Not only does the consumer get a fair deal and the farmer a fair return for his labour; there is the principle of a protective levy around the Community—at a level to be decided—and the principle that there should be a base price below which products should not fall.

Any belief that if we left the Community we should be able to buy food at low prices on the world market is a fallacy. It would be possible to buy a small amount for a short period, but we would soon find that prices went very high, because the world markets are the terminal markets. They are not stable enough to supply a country such as the United Kingdom with her total requirements over a reasonable period.

That is one of the points that I think the Prime Minister has recognised in his acceptance of the principles of the CAP. Consumers are guaranteed a certainty of supply. That is perhaps one of its most important aspects.

It is true that the level of intervention is much too high, and that what Commissioner Gundelach has been trying to do is right. As the hon. Member for Farnworth said, Commissioner Gundelach tried very hard this year to keep the increase to 0 per cent., giving the green currency rises where they were demanded. I hope that he can do it in the coming year, though I do not know whether he will be able to hold the fort. That is clearly the policy that must be pursued, with the intervention levels and perhaps the co-responsibility level being dealt with at the same time. Certainly we want intervention levels that do not make it worth while or profitable to produce purely for intervention when there is no market for the product, whatever it may be.

My hon. Friend said that if we were outside the Community, which is a purely hypothetical argument, we might not be able to obtain all the cheap food that we wanted on the world market. But if we were outside, apart from getting our butter and so on from New Zealand, we could surely buy all the cheap Common Market food that is heavily subsidised by the Common Market taxpayer—for example, 70p a pound butter sold to the Russians for 17p a pound. That is the cheap food that we could obtain if we were outside the Market.

It would not necessarily be there in the quantities that my hon. Friend hopes. I do not think that we wish to continue an agricultural debate for too long. I am never loth to enter into one, but that is not the basic purpose of this debate.

Returning to the main issue, I believe that the Community is well worth persevering with. I sincerely hope that we shall be able to get ourselves into a better posture within the Community to carry more weight in the negotiations ahead of us, negotiations that are absolutely essential.

This is not the time to develop an argument about monetary union, which will shortly be debated on a Green Paper. Obviously, this will be of extreme importance to the development of the Community and to our standing within the Community. I only hope that Ministers will be able to carry the House with them in what I hope will be their decisions to help strengthen the Community.

I firmly believe that our being outside the Community—I agree with my hon. Friend the Member for Banbury—is entirely hypothetical. We are in it. It is the best place for us to be, and I want to see the Community strengthened and our position within the Community strengthened as well. That can be done only by a Government and a country economically stronger than we are at this moment, economically and politically committed to staying inside the Community. When we are in that posture, I believe, we can contribute positively to the development of a strong and meaningful Community.

8.41 p.m.

Although this debate, like its predecessors, has been fairly wide-ranging, large sectors of the White Paper have not been covered. Even in a full day's debate it is not always possible to consider all aspects of Community business. Nevertheless, these six-monthly debates are valuable, particularly when we have had so many suggestions during the course of the debate for improving them. The suggestions made about the content of the White Paper and the suggestion by my hon. Friend the Member for Farnworth (Mr. Roper) about the frequency of our debates are things that we should consider. I look forward to having the views of the Scrutiny Committee on the way in which we deal with these debates and the content of the White Paper before us. Those are matters which it could usefully consider.

I was astounded when I heard the remarks of the hon. Member for Mid-Oxon (Mr. Hurd) when he intervened in the speech of the hon. Member for Banbury (Mr. Marten) and gave what I thought was, by any standards, an incredible definition of opposition. On the question why there was not more criticism by other countries in relation to the VAT sixth directive—to which I will refer later—he said that he saw it as his job to criticise this Government but not other Governments for their shortcomings in the Community. I found that an astounding definition of his responsibilities and his patriotism.

I am glad that the hon. Gentleman is getting excited about something. Does he not accent that when he was in opposition he felt that the main job for which he was elected as the hon. Member for Meriden was to scrutinise and keep an eye on the activities of the Government of his own country?

That is very much a hypothetical situation, because I have never enjoyed the benefits of opposition. It is something which I shall ponder if the contingency should arise.

I am sorry. I have never enjoyed the benefits of opposition. I think that I am a greater authority on this than is the hon. Member for Mid-Oxon.

Let us come to the details of the debate. I found the suggestions that the hon. Member for Mid-Oxon made, particularly the three points about additional information, to be helpful and ones that I should like to consider. I suggest that the Scrutiny Committee might like to consider them as well.

The hon. Gentleman went on to ask why there was no mention in the six-monthly report of the budgetary problem which has been raised during the past week by my right hon. Friend the Prime Minister.

The origin of the Economic Policy Committee report lies in the meeting of the European Council on 6th and 7th July, and that is outside the scope of this six-monthly report. At that meeting, in the knowledge that the United Kingdom's net contribution to the Community budget was becoming extremely onerous and inequitable, the Prime Minister, in company with others, pressed for parallel studies to be made of the action necessary to ensure greater convergence in the economies of member countries.

Subsequently, the Economic Policy Committee was asked by the Council to undertake concurrent studies of the action needed to strengthen the economies of less prosperous member States in the context of the European monetary system. Heads of Government will have to address themselves to the report. They will have to take account of the needs of the less prosperous member States, against the background of a general strategy aimed at reaching improved economic development and higher employment of productive resources.

The status of the report has been questioned by a number of hon. Members. The report was made by the Economic Policy Committee to the Council of Ministers. The Finance Ministers will consider it on 20th November in preparation for the meeting of the European Council on 4th and 5th December.

A number of hon. Members asked about the publication of the report. It has not been decided whether it should be published, but we see no reason why it should not be and we shall be pressing for its publication. Subject to an agreement about publication, the report will be made available to Parliament by the Treasury under the normal arrangements relating to Community documents. An explanatory memorandum will also be available.

Some hon. Members asked about the content of the report. It states that according to Commission figures the United Kingdom net transfers to the Community budget in 1977 were 624 million units of account, or £420 million. The corresponding German figure was 1,292 million units of account, or £860 million. The report also says that if United Kingdom contributions had not been restricted by the transitional arrangements in articles 130 and 131 of the Treaty of Accession the United Kingdom contribution in 1977 would have been 1,209 million units of account, or £810 million. In those circumstances the German contribution would have been reduced to 855 million units of account or £570 million. Those are net figures.

They mean that had it not been for the transitional arrangements the United Kingdom net contribution in 1977 would have been the highest of all member States and about half as much again as that contributed by Germany. The transitional arrangements for the United Kingdom under the Treaty of Accession will cease to operate after 1979 and we shall then come under the full "own resources" system of financing the Community budget. In that context the Prime Minister made the speech which has received so much attention today.

Irrespective of the various views about what has led to this situation, I agree with the hon. Member for Mid-Oxon that, whatever the reason, if the outcome is as stated in the Economic Planning Committee report it is absurd. That view unites us all on both sides of the House irrespective of the basic view that we take of Community membership. There is a consensus that that position is absurd and must be changed.

The hon. Member for Mid-Oxon said that our credit in the Community is low. That view is shared by the hon. Member for Derbyshire, West (Mr. Scott-Hopkins). I wholeheartedly dissent from that view. We are no less committed to our membership of the Community because we have an acute awareness of the essential matters that concern our national economic well-being.

Opposition Members talk of our credit being low because of our pursuit of our national interest. They must say which essential national interests they would have forsaken. Would they have forsaken our essential national interest in agriculture and price-fixing? Would they have forsaken our essential national interest in fisheries policy, the Joint European Torus or energy policy?

We are not necessarily dissenting from the views that are adopted. We contest the way in which they are taken up. It is one thing to negotiate politely within the Community. It is quite another to be grossly rude. That has been the attitude of British Ministers in the past.

It seems clear that as an alternative to the robust pursuit of our interests by the Government we are being offered a supine approach by the Conservatives.

Would the Minister be prepared, for example, to give up the right to redesignate Grimsby as a development area on the eve of a by-election? The defence of national sovereignty in regional policy has prevented the development of a proper Regional Fund. Those seem to me to be valid examples of ways in which the Government have cut off their nose to spite their face in European negotiations.

I heard the hon. Member the first time he made that remark in this debate. I consider his comments to be as scurvy a reflection of his views now as they were then.

My right hon. Friend the Member for Battersea, North (Mr. Jay) asked a number of questions. I have answered some of the budgetary questions that he asked, although perhaps not in the precise form in which he asked them. I gave the information in the form that was readily available to me. He asked a number of other questions. He wanted to know whether the story in The Guardian was substantially correct. I think that the information I have given indicates that a number of the figures, although calculated on a somewhat different basis from the way in which we would calculate them, are substantially correct. My right hon. Friend asked about publication and I have dealt with that.

My right hon. Friend also asked about the amendment to the motion on mutual assistance in direct taxation. That is a question to which my right hon. Friend the Financial Secretary, in dealing with the next debate, will be more competent to reply than I am.

Perhaps hon. Members will remind me of points that I miss when I run out of notes. I might forget certain points, but the safety net—the corrective mechanism—is not one that I would be likely to overlook.

My right hon. Friend asked whether United Kingdom net contributions excluded the customs duties paid. The answer is "No". We calculate the net contribution by taking our gross contribution to the Community budget from all three sources, that is customs duties, agricultural levies that we hand over, and our topping-up payments currently based on GNP. We subtract from those the money that we get back from the Community in the form of payments under the various funds—the Regional and Social Funds, FEOGA, and so on.

My right hon. Friend asked whether the net United Kingdom figures include loans. They do not. Our contribution figures show the money that we hand over to the Community and the money that we get back in the form of grants. Loans are separate and are not included.

I come now to the important question of the corrective mechanism, which was referred to by some hon. Members as a safety net, and the whole effect of our renegotiation of the terms of membership in 1974.

Will my hon. Friend answer one other question that I asked? What is his estimate of our net contribution in 1978 and 1979?

I am not in a position to give my right hon. Friend that answer. I have been asked for so many specific details that I have had insufficient time to make a firm check. I shall give him the information as soon as possible. It is not that the information is not available, but that pressure of time and the large number of specific questions have prevented me getting it.

Is my hon. Friend aware that in the debate on the EEC budget just before the recess his Treasury colleagues admitted that the net contribution in the next year would be £1,000 million? Will my hon. Friend write to some of us to confirm that figure, assuming that he receives such confirmation from the Treasury? That is a most important figure.

I am aware of the figure that has been mentioned in previous estimates. I do not know whether it has changed. This is a highly volatile situation in which circumstances can alter. I do not know whether the figure is currently valid, but it is of that magnitude.

I come now to the corrective mechanism. When the Prime Minister was Foreign Secretary he went into the renegotiations with the aim of ensuring that our contributions to the budget were not inflated by the largely automatic way in which the Community's collection of revenue operates. He sought to ensure that our contributions were not inflated beyond our economic capacity to meet them. The financial mechanism to which we eventually got other States to agree was a valuable corrective to the growth of our gross contributions. It provided that if the contributions became significantly high as measured against a set of economic indicators we would receive refunds up to a ceiling figure of £200 million.

This arrangement was to be subject to possible later revision. The economic circumstances which trigger the mechanism have not yet occurred but in the coming years we can expect to receive some benefit. However, the mechanism applies to gross contributions. It was never intended to remedy the much greater anomalies that have now arisen with our net contributions. These arise mainly from the fact that the Community has not lived up to its promises, made in 1970 and repeated throughout all subsequent discussions on the budget, about cutting the deadweight of CAP expenditure to, at worst, 60 per cent., and at best, 40 per cent. of the budget, thereby delivering more resources for the redistributive policies which benefit us.

This failure is a setback not just for the United Kingdom but for the Community as a whole. My right hon. Friend's speech on Monday was designed to get the Community to face this fact and was based on the useful analytical work done in the Economic Policy Committee, with the aim of ensuring that member States could reach a common commitment to practise what they had preached and thus achieve a more rational distribution of joint resources. This is an important matter which is very much at the forefront of the Prime Minister's thinking.

The hon. Member for Rushcliffe (Mr. Clarke) raised the question of the corrective mechanism and spoke of a scenario which involved our loss of influence. It was a tub-thumping chauvinistic defence of British interests. It is, however, a scenario which I do not recognise. The hon. Member was singularly unfortunate in the examples that he chose to demonstrate our defence of national interest. He castigated my right hon. Friends the Minister of Agriculture and the Secretary of State for Energy for their views concerning the threat to doorstep deliveries of milk and coal policy within the Community. I remind hon. Members on the Opposition Benches that it was not unknown for us to hear similar criticisms of my two right hon. Friends a year ago. Then the criticism had to do with price-fixing and the Joint European Torus.

It is now clear that in both cases the House ought to offer congratulations to my right hon. Friends for the robust way in which they pursued their aims and eventually succeeded.

Will the Minister now answer the major example which I those, which he described as scurvy—

I gave the example of our refusal to abandon any national control over regional policy, which has frustrated the development of any European regional policy and stopped the growth of the European Regional Development Fund. That position adopted by the Government contradicts all the "guff" given by the Minister about the failure of Europe to build up the transfer of resources from other areas. It is Labour Ministers who have stopped the development of regional policy. Will the Minister deal with that and not just make rude remarks about the matter or try to sit down when it is raised?

The hon. Gentleman is talking rubbish. He is trying to avoid responsibility for the criticism that he has made of my right hon. Friends the Minister of Agriculture and the Secretary of State for Energy. However, he will not find it easy to divert attention from his remarks. Both of my right hon. Friends are justified in expecting the fullest support from all Members of the House for their defence of essential interests. Those who criticise them for their views are exactly the people who criticised them a year ago when they led us to a successful conclusion on essential points of national interest.

I do not agree with a good deal of the criticism of the two right hon. Gentlemen concerned. The Minister said that the House should support his ministerial colleagues. It must be remembered that the Conservative Party supports the Minister of Agriculture in his fishing policy. I hope that that right hon. Gentleman does not retreat on his fishing policy, because that will leave the Conservative Party in an odd position, since we shall have to criticise him for retreating from Conservative policy.

My hon. Friends the Members for Southampton, Test (Mr. Gould) and Farnworth (Mr. Roper), and the hon. Member for Wolverhampton. South-West (Mr. Budgen), voiced a number of criticisms of the common agricultural policy. I remind the House that my right hon. Friend the Prime Minister in his Guildhall speech criticised a number of features of that policy. He demonstrated that much money went to the storage and disposal of surpluses which arise when support prices are too high. He criticised this as not being a sensible use of Community resources since revenues in excess of £2 billion are being spent this year on selling food surpluses cheaply to non-Community countries.

My right hon. Friend the Prime Minister then went on clearly and precisely to outline three changes which are necessary in the CAP. First, he thought that there should be a more liberal attitude to agricultural imports from the rest of the world; secondly, he mentioned the need for a better use of export subsidies: and, thirdly, he spoke about the need to reconsider the policy of annual automatic price increases, especially of products which are in structural surplus.

The hon. Member for Wolverhampton, South-West asked what the Community had to do with education and firmly asserted that it was none of its business. Education is not a treaty matter and the Community has adopted no binding common policy on that subject. Member States have, however, discussed matters of common concern, such as the problems of young people leaving school, and have adopted certain resolutions. But those resolutions are non-binding instruments under which the preliminary study projects mentioned in the White Paper are being carried out.

The hon. Gentleman also mentioned Cyprus and Turko-Greek problems. Enlargement of the Community was discussed yesterday in the House and perhaps that matter was more appropriate to that discussion. However, the Government's position is that entry of Greece into the Community should not lead the Community to become embroiled in Turko-Greek problems. We must work to avoid that and to find ways of ensuring that the Turks are not allowed to feel isolated after the entry of Greece. As my right hon. Friend the Foreign Secretary made clear yesterday, it would help if the Cyprus problem could be solved before Greek entry.

My hon. Friend the Member for Farnworth suggested, among other things, a detailed 12-monthly report, to which I have already referred. My hon. Friend the Minister of State and I—and I suspect the whole House—agreed with many of the things that my hon. Friend said in that respect.

My hon. Friend referred to the need to keep CAP price increases to zero next year. I assure him that my right hon. Friend the Minister of Agriculture will continue to press for maximum restraint in increasing prices, especially for products in structural surplus.

The hon. Member for Lancaster (Mrs. Kellett-Bowman) made what I understand to be an interesting contribution on regional development. I am sorry that I was not in the Chamber to hear it. The management of regional development funds received by the United Kingdom is a matter for the Ministers concerned, including, to a large extent, my right hon. Friend the Secretary of State for Industry. As the hon. Lady said, this issue is closely linked to the emphasis on our own regional and industrial policies. I shall concentrate, therefore, on the Community end of the question.

The Government agree that the amount of money that the Community spends on non-agricultural regional problems is inadequate. It is inadequate in terms of our own expectations from the Community budget and the Community's commitment to relieving regional imbalances. That is a commitment that was renewed at Bremen and Bonn.

Will the Minister give us the views of the Government about extending the assistance given by them—without which they cannot receive assistance from Europe—to the tourist industry, which is of considerable importance to the peripheral regions of the United Kingdom?

That does not arise from the six-monthly report. The question would be better directed to my right hon. Friend the Secretary of State for Trade.

My hon. Friend the Member for Hartlepool (Mr. Leadbitter) made an interesting contribution that covered a number of areas. Everybody in the House recognises the experience that my hon. Friend reflects in his concern about steel. My considered view remains that our essential United Kingdom interests would have been more damaged as regards steel had we existed in isolation to face the problems of recession in that industry than they are by our membership of the Community.

My hon. Friend made a number of comments about the common agricultural policy, a subject to which I have already referred. He concluded with a passionate plea for a free trade area. If that policy were to be applied to steel, about which he was primarily concerned, that would be a recipe for disaster for those whom he represents.

The hon. Member for Banbury (Mr. Marten) dealt at some length with the difficulties and the internal problems that he has within the Conservative Party. I do not propose to intrude too deeply into those private griefs, especially as he found it difficult at the end of his remarks to get any official reflection from the Opposition Front Bench of how the Conservative Party would react to reform of the CAP.

The hon. Gentleman referred to a privately published pamphlet—

The hon. Gentleman, like myself, would have appreciated hearing something official from the Opposition Front Bench about the detailed reform of the CAP that the Conservative Party proposes to put forward.

Perhaps the hon. Gentleman will speak to his right hon. Friend the Leader of the House to ascertain whether he can arrange a debate on agriculture.

In the absence of that, if the hon. Member for Derbyshire, West has such compelling views that demand our attention, I am sure that a Supply Day could be provided if a sufficient number of hon. Members, such as his hon. Friend the Member for Banbury, wished to hear the views emanating from within his party.

The hon. Member for Banbury referred to the important VAT sixth directive. He said that we had ratified it and other member States had not. He received a fairly coy response from the Opposition Front Bench. In implementing the directive in 1977 the United Kingdom was merely executing its Community obligation and following the timing agreed by all member States. I find it regrettable that the other member States took their obligations far more lightly than we did. As a result, the Community was forced into a hasty retrospective change of the deadline. If the same States fail to meet even the 1st January 1979 deadline we shall have to consider our position and the possibility of further action in the light of those developments.

I am not sure whether there have been any ratifications since 30th June. I think the position is that the Belgians, the Danes and ourselves have now ratified.

As I understand the position, it is not that the directive automatically applies, as was suggested by the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) in his winding-up speech. Now that three countries have ratified and the remainder have failed to meet their obligations, I understand that we shall now have a mixed system, with the VAT sixth directive applying to those countries which have ratified and a different system applying to those which have not. My advice is that we shall wind up not as the hon. Gentleman suggested but with a mixed system.

We had a long debate with Commissioner Tugendhat on this question. It was my understanding from that debate that once three member States had ratified the directive it would come into operation on 1st January 1979, and that for that those States which had not ratified an assessment and an estimate would be made.

I am now in a position to confirm to the House that what I said was right, and that we wind up, as I suspected, with this mixed system, with two systems operating in parallel. This makes even more serious the suggestion that 1 was making about others in the Community taking their obligations lightly. Perhaps the hon. Member for Mid-Oxon might want to reconsider his strictures, which previously he was prepared to direct only at us. He might now want to associate himself with the concern expressed from the Government Benches.

It is not only the hon. Member for Mid-Oxon (Mr. Hurd) who is interested in this new disclosure. We are now told that a mixed system of financing will operate, as I understand it, from the beginning of 1979. The House should be given some explanation of this mixed system. We should be told whether it will mean, as it always has in the past, that the relative burden on this country will be even greater than that indicated by some of the figures that we have had. May we at least know the facts? This is the first that I have heard about this mixed system.

I have given as much information as I can. The question was raised at the very end of the debate. I am sure that my right hon. Friend will find suitable ways of pursuing it, because it is obviously an important question.

I am sorry to intervene, but there is obviously a lot of interest in this matter and it is very important. It is not fair to ask the Minister now to find the notes among his many papers, but will he write to us and to his right hon. Friend the Member for Battersea, North so that we can inform those who have been interested in the debate exactly what is the detailed position?

I gave the House as much information as I had readily available. As hon. Members will have heard from the sotto voce whispers, this is the Treasury's responsibility. I am ready to concur with that view at this stage of the debate.

I have tried to deal, with some difficulty, with the many and complex points which have arisen during the debate. Some of the most important Community issues of current interest have not been discussed in the debate today, and there is good reason for that. The House had a full debate yesterday on enlargement and later this month we shall be debating the European monetary system.

As usual, the contributions to the debate have been to varying degrees well informed, and some of them have even been provocative, but that is the nature of proceedings in this House and I welcome it. I should not wish it otherwise. I cannot, obviously, agree with everything that has been said today, but I assure the House that much of what has been said will be taken into account by the Government in pursuit of their Community business in the forthcoming months.

Question put and agreed to.


That this House takes note of the Report on Developments in the European Communities, January-June 1978 (Command Paper No. 7361).

European Community (Taxation)

I have to announce that Mr. Speaker has selected the amendment on the Order Paper.

9.15 p.m.

I beg to move,

That this House takes note of Commission Document No. R /1123/78 on Mutual Assistance in the Field of Direct Taxation.
In the Finance Act this year we legislated for the exchange of information on direct taxes between the member States of the Community either on request or in certain circumstances automatically. What concerned us was the important problem of dealing with the transnational companies. They were really what the mutual assistance directive was designed to deal with.

Transnational companies are large and increasing and both their size and expansion are inevitable. They are valuable in the spreading of technological advance, and they confer benefits upon their host countries. But with this increasing power they have the ability to play off Governments one against the other and to make use of the differences in the tax treatments between the various countries in which they operate. They have the resources and the expertise to discover anomalies in tax law and to use them to their own advantage. That is an inevitable consequence of their international nature.

What is therefore required is a matching increase in power on the part of the Governments concerned. Naturally, in order to make this work, there needs to be considerable co-operation between the member countries concerned. That is not always possible, because the countries concerned are in an ambivalent position. Many try to attract such transnational companies and offer inducements in the way of tax incentives and grants. Acting in this way, nation States are natural competitors one against the other.

On the other hand, countries need to co-operate against tax evasion, and the mutual assistance legislation reflects their desire to bring these powerful companies under control. The essential aspect of that control has to deal with the ability of these international companies to switch profits to those countries where the tax climate is most favourable for the particular transactions concerned. So in the Finance Act earlier in the year we extended our existing powers to deal with the transfer pricing of multinational companies. We are achieving increasing success in this area, in particular through the work of the special transfer pricing unit, which I described in my reply to a Question by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker).

The argument for the greater supervision of the financial affairs of multinational companies and the need for international assistance in dealing with tax avoidance and tax evasion was accepted by the House of Commons in July.

The position now is that the Inland Revenue may exchange with other Community member States information relating to income tax, corporation tax, capital gains tax, petroleum revenue tax, development land tax and similar direct taxes operating in the other member States.

The draft directive before the House this evening proposes that value added tax, which is an indirect tax, should be included in that list. In other words, it proposes that Customs and Excise should exchange information on VAT with the responsible authorities in other member States.

In most of the Community countries the two kinds of taxes—both direct and indirect—are dealt with by the same bodies, and even in the United Kingdom there is a limited interchange between the two. The directive would allow the same kind of information exchange to be applied throughout the community.

The right hon. Gentleman said that there was some limited interchange between the Customs and Excise and the Inland Revenue in this country. The explanatory memorandum states that VAT information could be exchanged to crosscheck income and profit and vice versa. Does that mean that under the directive there will be an internal exchange of information between the two tax authorities that there is not at present, or that there will be an exchange between the two authorities internationally which will still not exist internally?

In most of the countries concerned, the two taxes are dealt with by the same authority. In this country, the two taxes are not dealt with by the same authority, but there are limited interchange facilities. The right hon. Gentleman may be aware of the pilot schemes that have been initiated. The European countries of the Community go further than we would go. If we were to give them this information, it would go to both sides of the service, because in those countries they are the same.

For clarification—this is an important point—does that mean that Her Majesty's Customs and Excise will be able to receive back from its opposite numbers information transmitted to its opposite numbers from the Inland Revenue which it could not have received direct?

In practice, that would depend on the country concerned. I am being hypothetical here, because these matters are still open to discussion, but what could happen is that if this directive in its present form were to be implemented—I shall have some comments to make about that later—VAT information could be given to the other member State concerned and, of course, with its lack of discrimination between the two forms of taxes, direct and indirect, the interchange would take place. In this country, as I said, there is a limited form of such interchange.

Will my right hon. Friend clarify that? I understand now that it could go from the Customs and Excise in this country to those responsible for VAT in, say, Denmark, and as that country has similar authorities for both direct taxation and VAT it could then go to the direct taxation authorities in Denmark. What I am not quite sure about is whether my right hon. Friend followed the further point which was made by the right hon. Member for Down, South (Mr. Powell), which was that it could then go back from the Danish direct taxation authorities to the Inland Revenue in the United Kingdom. My right hon. Friend went only three stages and not four, as far as I can see.

My hon. Friend has chosen a rather bad example, because Denmark is one of the countries with arrangements similar to our own. However, if we exchange Denmark for, say, France or Germany, my understanding is that it would be pretty well as my hon. Friend said.

The information could go backwards and forwards, but clearly these are matters for discussion and debate in the future.

As I said, the draft directive before the House proposes that VAT, which is an indirect tax, should be included in that list. In other words, it proposes that Customs and Excise should exchange information on VAT with the responsible authorities in other member States.

In most of the Community countries, the two taxes—both direct and indirect—are dealt with by one body. Even in the United Kingdom there is the kind of interchange that I mentioned, and in particular the pilot scheme that has taken place in Leeds.

This draft directive has also been discussed at meetings at official levels in Brussels, but because the Select Committee recommended that the House should debate the matter, our delegates have reserved the United Kingdom's position until this debate has taken place. The Government wish to hear the views of hon. Members before finalising their own policy towards the draft directive.

At present there is, under the 1967 Naples convention, to which the United Kingdom acceded in 1974, provision for mutual assistance between customs authorities for the exchange of information concerning the collection of customs duties and other import or export charges. These charges include VAT on imported and exported goods. Therefore, there is that interchange which takes place at present. The draft directive would go beyond the provisions of the Naples convention. In particular, it would cover information on taxable activities inside member States.

As the directive largely duplicates obligations which exist at present, let me say, for the record, that I would not foresee any increase in staff costs were the directive to be implemented, at any rate in the short term.

Most other Community countries are in favour of the proposed extension of the mutual assistance provisions. They are concerned about evasion of VAT by multinational companies. In Britain we have so far encountered no major problems on VAT evasion arising from the activities of large multinational companies. For the other Community countries the draft directive represents a useful additional weapon against evasion, and for this reason they welcome it.

It is obviously important that any information supplied to or received from another member State is treated confidentially. The safeguards in the directive for both taxpayers and member States would apply similarly to VAT information, and information exchanged under the directive would obviously require to be kept as confidential in the receiving State as it is under its own domestic legislation. The receiving State must also observe the secrecy obligations of the supplying countries and must have regard to trade secrets.

The Commissioners of Customs and Excise consider that any facility to echange information could be helpful in dealing with VAT fraud. However, they advise that in practice the benefits of the obligations for the United Kingdom under the draft directive might not represent any considerable advance beyond what is already provided for under the Naples convention. I myself am sceptical about the advantage for Britain in further mutual exchange of information on VAT. I am sympathetic to the ideas behind the amendment. Of course I realise that other member States would welcome United Kingdom agreement in joining in what they would regard as their struggle against tax evasion.

Although I agree with much of the substance of the amendment, the last few words of it produce some problems. The phrase that the House of Commons "cannot accept such proposals" would completely tie the hands of any negotiator at the Council meeting. In fact, such a meeting would be pointless, as the decision would have been effectively made before the Council meeting took place. As I said. I am sympathetic to the ideas behind the amendment and I look forward to receiving the views of the House which will help us in coming to a decision on these matters.

9.26 p.m.

I beg to move, at the end of the Question, to add:

"but is not satisfied that the need has been established for the extension to value-added tax of proposals for disclosure to tax authorities outside the United Kingdom of confidential tax information, and cannot accept such proposals".
I was a little surprised and disquieted by the last few remarks of my right hon. Friend in relation to the last few words of the amendment. He appeared to argue that it is improper, or beyond the competence of this House, to put down an amendment to a motion of this kind which would require the Government to accept the decision of the House of Commons. I cannot really imagine that he was arguing that. If he was, it would be almost the first time since the days of Charles I that such a proposition was put forward. Indeed, it would be so remarkable that I cannot think that was really his intention. I do not propose to pursue that point very much further tonight, but I hope that we shall not hear that argument advanced again on a question of EEC legislation or, indeed, on anything else.

I presume that we are dealing with legislation. In other words, if anything in the form of this directive were to be approved by the Government as well as the EEC it would have to be embodied in United Kingdom law which would be binding on the subject in this country. Therefore, it is clearly a matter on which this House must be allowed to express an opinion.

As to the substance of these proposals, if I understood my right hon. Friend aright, he has grave doubts about the utility of them himself. Even the Inland Revenue, which one might assume a priori would like to have powers for gaining additional information, does not see any great value in them.

I think that my right hon. Friend said that he was sympathetic to the purposes of the amendment. Incidentally, he talked a great deal about multinationals. Men- tion of multinationals always creates a certain amount of prejudice, which I do not wholly share. But I presume that if these proposals became the law of the United Kingdom they would apply to any taxpayer and not just to multinationals. The right hon. Member for Down, South (Mr. Powell) can let me know whether I am wrong, but I do not think we should discuss them on the assumption that it is only these wicked multinational companies which would come under this law.

However, as I understood him, my right hon. Friend said that he is sympathetic to the purposes of the amendment. If that is so, and he can confirm it, I do not think that my hon. Friends or I would wish to press the amendment tonight. I would understand from his assurance that he is sympathetic to the purposes of the amendment that he will not go straight off to Brussels and accept the directive in its present form. I hope, also, that his assurance means that he will not accept it in its present form and that if it is substantially amended we shall have information about it and he will again consult the House before reaching any final decision.

On that understanding, and subject to what my hon. Friends or hon. Members on the Opposition Benches may feel, I do not wish to press the amendment further, though I hope that I shall be assured that I have a correct understanding of what the Financial Secretary said.

9.30 p.m.

In supporting the right hon. Member for Battersea, North (Mr. Jay) in his amendment, I shall briefly follow up the two points that he made and then make a number of others.

I am sure that the Financial Secretary cannot have intended to say that it was improper for the House to pass a resolution treating a certain EEC proposal as unacceptable. We have done it before to my certain recollection—I trust that we shall often do it again—and I should have thought that on constitutional grounds our right to do so and the necessity for any Government to give heed if we did so was unarguable.

Of course, if the Financial Secretary means that, he having expressed his general accord with our anxieties and his grave doubts as to whether anything of this kind is necessary or desirable, it will be easier for him to get it squashed if we do not pass a resolution in these terms as amended, that would be intelligible, and I think that that is probably broadly the purport of what he said. But it was open to misunderstanding, and I hope that the right hon. Gentleman will not mind the points which his right hon. Friend the Member for Battersea, North and I have made.

I take also the second point raised by the right hon. Member for Battersea, North, namely, that since the Financial Secretary is evidently sincere in the opinion which he has expressed, this must mean that, irrespective of any recommendation from the Scrutiny Committee or whether this goes back to the Scrutiny Committee, if there were any question, contrary to the general view which he has expressed on behalf of the Government, of a directive of this sort being accepted, the House would be given an opportunity to consider it again. I am sure that the right hon. Gentleman will, on consideration, see that that is implicit in the understanding which he gave to the House.

If those two points are taken, as the right hon. Member for Battersea, North suggested, the debate can continue in an atmosphere less critical than might otherwise have been the case. But there remain serious objections which ought to be voiced despite what the Financial Secretary has said.

As the form of the directive indicates, this proposal is a follow-up to the directive which was given the force of law in the United Kingdom by what became section 77 of the Finance Act of the present year, which was debated at great length both in Standing Committee and on Report on the Floor of the House. On that occasion the House was debating a clause in a Bill which under the terms of the treaty the Government were duty bound, if they could, to enact in order to give effect to a directive which had already received the approval of the Council and was Community law.

There is no doubt about that, and no one disputed it at the time. Nevertheless, in Standing Committee five hon. Members, three or four of whom certainly are not unfriendly to the principle of our membership of the European Economic Community, felt so strongly that they voted against the clause standing part of the Bill. Then, when the Bill came back to the Floor of the House, no fewer than 81 hon. Members, understanding perfectly well what the constitutional position was, nevertheless felt so strongly about the innovation being made in the removal of confidentiality under that clause that they went into the Lobby against it.

At that time, we already knew that the draft directive was following up the one to which we had just given legal effect. Reference was made to that fact in the debate. The Financial Secretary said:
"The United Kingdom has reserved its position on this "—
he has repeated that clearly tonight—
"and there will be further opportunity to examine the question at a later stage if it proceeds any further "—[Official Report, 13th July 1978: Vol. 953, c. 1878.]
It is worth drawing attention to the dangers implicit in this form of Community legislation because the House does not attend to the real substance of something which is being done at the crucial stage, which is now, when there are half a dozen hon. Members in the Chamber, but tends to take note of what has happened only when it sees the thing in legislative form in a United Kingdom form.

The contrast between the scene in the House late on the night of 13th July and the scene tonight is very instructive. It is not unlike the contrast between the attitude of the House to a general proposition about membership of the Community presented to it in October 1971 and the enormous difficulty that the then Government had in getting that translated into law when the House saw in a Bill exactly what was involved.

We now have an analogy to that, even though it is on a very small scale. In the case of the directive on the shoulders of which this directive is trying to climb, even our vigilant Scrutiny Committee did not suggest that the House ought to debate it and it was not previously debated by the House. We have the extraordinary fact that a directive against which, when it was enacted in a Finance Bill, 81 hon. Members voted—no doubt against a fairly strong Whip—was not regarded by the Scrutiny Committee as justifying at the proper stage even debate in the House, let alone a decision being come to.

Whatever view one takes—I am glad that tonight, as last night, there is so much accord between myself and the hon. Member for Farnworth (Mr. Roper), as the indubitable signals convey—it is not a satisfactory situation. It certainly means that we are not taking EEC legislation seriously enough at the formative stage. That is not the Government's fault, and it is rarely the fault of the Scrutiny Committee. But there is something wrong with a procedure which allows the House no opportunity of debating a directive when it is in draft form, even though scores of hon. Members vote against it when it is presented to the House in the form of a legislative proposal.

The Scrutiny Committee, as is seen from the fact that it has sent this directive to the House, became aware, after it had allowed the other directive to go through, that it had made a mistake. I know that the Chairman of the Scrutiny Committee was subsequently concerned at the fact that the earlier directive had gone through without being put to the House.

I am much obliged to the hon. Gentleman. That is a very fair comment, and I am glad that he has put that fact on the record.

There is clearly a big matter of principle involved, a matter of principle that is not diminished by the fact that, against the will of many of us, a precedent was created in this year's Finance Act. The issue of principle is that information secured by force of law for the purposes of taxation in this country, and only for those purposes, information that is jealously guarded from being transferred to the knowledge of other Departments of Her Majesty's Government in the United Kingdom, should not, unless there are the most compelling reasons, as well as the most watertight safeguards, be disclosed to other parties.

Tonight we had the remarkable disclosure that by a side wind, if these proposals went through in their present form, there would be set up a route of communication that does not exist in the United Kingdom itself between the two revenue-raising Departments. There is an essential difference between, on the one hand, consultation between the Revenue authorities in the different countries of the Community and, on the other, the transmission of particulars relating to an individual taxpayer or taxpaying firm.

I think that we should have little objection to the notion that the tax-raising authorities in the different countries should confer together, should compare notes, as it were, and should if necessary put forward proposals whereby their respective countries could alter their own tax systems, or other devices could be proposed, to render the tax-raising fairer and more searching.

I think that there could be no objection to that kind of collaboration between the tax authorities of the different countries in the Community. But it is a very different matter when, for that purpose, the facts about an individual taxpayer's position, about a firm's position—facts that are known in one country only because the law of that country forces it to be known for the purposes of taxation in that country—are passed for a different purpose to the corresponding authorities in other parts of the Community.

When we first debated this matter in Committee on the Finance Bill it was very much at large, but since then I have noticed, both on Report on the Bill and even more this evening, that those who have been making a case, or a faint case, for these proposals have very much narrowed the scope and intention. I was not quite clear what argument the Financial Secretary was putting forward this evening. He asserted, as he had in July, that there was mutual benefit to be obtained from this extended use of confidential information about taxpayers.

I do not think that any of us in this House would regard that in itself as a justification. I do not think that we would say that because the Revenue or the social security organisation benefited from a disclosure we would on that account be prepared to authorise it. We would probably be pretty promptly disavowed by most of our constituents if we did so.

The right hon. Gentleman went on to specify what the nature of the benefit was. I tried to follow him but found what appeared to be a contradiction. The right hon. Gentleman said that multinational or transnational firms operating in Community countries had a certain advantage in tax evasion—that is, lawfully paying less tax than they otherwise might—

The right hon. Gentleman said both.

I was speaking of the Financial Secretary's reference to an advantage in tax evasion because of the different tax systems in the different countries. The right hon. Gentleman said that because the structure of the tax was different in the different countries evasion was easier on the part of a multinational corporation. That may or may not be so. I find it easy to believe that it is so. In that case, surely the remedy is to propose to this House that the necessary alterations should be made in our Customs and Excise law so as to prevent those loopholes for evasion from existing.

I cannot see that that creates any justification for giving specific information about the circumstances of the operations in this country of a multinational in order to prevent evasion of tax in another country of the Community. If there is this facility for multinationals, I think that most of us would welcome a clause or clauses in a Finance Bill which would so alter the law, if we thought fit, in this country as to prevent that source of evasion.

I have been following the argument of the right hon. Gentleman, who is usually so precise in his use of words. I am concerned that he has been using the word "evasion" when I think that he has been intending to say "avoidance", which is the legitimate avoidance of paying taxes rather than the illegitimate one.

No, I am taking the point at this stage in terms of evasion. Let us suppose that evasion is easy in one country of the Community because its VAT is different in technical details from the VAT law in another country of the Community. That I understood to be part of the case of the Financial Secretary.

If that is so, my argument is that we should not seek to remedy it by sending the file on that firm's affairs in this country to the other country. We should seek to remedy it by the two tax authorities getting together and saying to each other, "There is this difference between our VAT systems and this is making it easy for the multinationals to pull the wool over our eyes. Why do we not propose to our respective Governments that we amend our VAT systems in these technical details so as to remedy the matter? "

Therefore, whether it be avoidance or evasion, the ordinary forms of co-operation, which we would wholly approve, between the tax authorities in the different parts of the Community are completely adequate to deal with the mischief to which the Minister has now fined down the argument for these proposals, so far as he accepts them.

But even if there is still some difficulty, it is, I submit, unjustified to give a general power of disclosure in order to deal with a very limited mischief. When we started to debate this matter, back in June, we were presented with the original directive, which is a very grandiose document and envisages an exchange of information on a wide scale for all sorts of purposes, many going far beyond the prevention of evasion or fraud.

But if what we are concerned with is a specific mischief arising in the context of multinational companies, we ought to limit the breach of confidentiality, if that is indispensable, to the mischief which we are attempting to combat.

I therefore hope that these remarks are in tune with the general prejudice which the Minister himself expressed and that this debate will result either in these proposals not being proceeded with at all or in their coming back to this House—for they must come bank to this House if they are to be proceeded with—in a much tighter and more limited form, and one which is directed towards a mischief which can be dealt with only by a breach of the taxpayer's confidentiality which we ought otherwise to be most jealous to preserve.

9.49 p.m.

As the Financial Secretary and others have reminded us, this debate is a postscript to the debate that we had in the summer on what was originally clause 62 of the Finance Bill and latterly section 77. I make no complaint of the fact that it is a postscript, although it is a pity that we could not debate this subject in the round in all its aspects.

I recognise the constraints on the Government and the time that they have had the new draft directive. However, it is a pity that we are approaching the problems of avoidance and evasion of VAT after we have dealt with the problems of the avoidance and evasion of various forms of direct taxation.

In political logic, we should have approached the problems of VAT first, since ultimately we are to be under a pressure—the commitment to harmonise our systems of VAT. For the moment VAT is to be the basis for the EEC budget. It is important that we should see the problems of harmonisation, the various steps that we should take and the technical and administrative measures that we must take here and throughout the Community if the harmonisation is to be effective and if every country is to pay its due contribution to the EEC budget.

The fortunes of politics have led us to come to this problem second. I suppose that we can derive some advantage from the experience that we had in the summer. I hope that the Financial Secretary will derive some advantage from the observations that were directed to him on that occasion and from some of the amendments that were incorporated ultimately in section 77 of the Finance Act.

I am sorry that the hon. Member for Swindon (Mr. Stoddart) is not present. He tabled a powerful amendment. I did not go all the way with him, but he deployed strongly his argument against the width of clause 62.

We have had a limited but fairly useful debate so far. I have no doubt that other hon. Members will be tempted to intervene.

I am no grudging adherent of the EEC. I do not wish to contrast my position with that of any other hon. Member, but in this type of debate we are entitled to ask two questions. First, is the Minister adequately representing British interests in Brussels on these important questions? Secondly, how will any proposals or draft proposals that the Minister brings back for us to consider be reconciled with our domestic legislation on a particular sub- ject? If they are not immediately reconcilable, how will the proposals be translated into domestic law?

In the summer, we did not have the opportunity to debate the directive. We were confronted with a piece of British embryonic domestic legislation. As the right hon. Member for Down, South (Mr. Powell) said, in the Standing Committee we had long and keen debates, in which both he and I were involved, on the scope of clause 62.

There were misgivings on both sides of the Committee—it was not a partisan division—about the width of clause 62. A leading part was played by my hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind), who tabled a series of amendments, many of which were adopted by the Government and embodied in the subsequent subsections of clause 77. We were delighted that the Financial Secretary, who proved a little obdurate in Committee, had second thoughts about the implications of what he was asking the House to do.

We are privileged to consider a draft proposal rather than a final proposal, a draft proposal rather than British domestic legislation. With great courtesy and flexibility, the Financial Secretary has invited the views of the House. Although not many right hon. and hon. Members are taking part in the debate, I hope that we shall do our duty and convey to him with clarity and vigour what we feel are the essential principles that are to be embodied in any ultimate directive from the EEC and in any domestic legislation that he might present to the House for enactment.

Other hon. Members may share my suspicion that the Government are using an EEC directive or draft directive to further domestic objectives. I would regard that as an illegitimate use of the process. We are obliged to the Financial Secretary for giving us a chance to voice our fears and suspicions. With considerable dexterity, he referred to the possibility concerning transnational companies. I had not realised that now that we have given up referring to multinational companies the current phrase is "transnational company." I do not know whether there is any subtle distinction between the two. If there is it has certainly escaped my attention, but I leave the Financial Secretary to put me wise on that.

We respect the acumen of the right hon. Member for Battersea, North (Mr. Jay) in these matters, but we suspect that he referred to transnational companies because he knows that in that way he can play on deep-seated prejudices held by some of his right hon. and hon. Friends. We on this side will need to be convinced that there are serious problems to be faced. I am sure that the House is at one in the view that avoidance and evasion of direct or indirect taxes must be countered but we have to consider with care the methods which the Government suggest should be adopted.

I feel that the Government may have their priorities wrong. It is more important for them first to improve the tax system and to meet the legitimate objections of taxpayers. There are all too many examples of them to be found, for instance, in the annual report of the Ombudsman. Perhaps I may offer my congratulations, if that is appropriate, to the newly appointed Ombudsman. No doubt he will have as keen an eye for the imperfections of the tax gathering machine as his distinguished predecessors have had.

The Financial Secretary would have been better employed in exercising his considerable talents in reporting to the House what practical steps he is taking to remedy the defects that are disclosed by those reports and, all too often, by parliamentary Questions and debate.

There is just the faint lingering suspicion on my side of the House that the Financial Secretary has an excessive preoccupation with questions of tax avoidance and tax evasion. No doubt on this occasion the right hon. Gentleman will be able to dispel those suspicions and reassure us that we are all Europeans now, that he is deeply concerned with these questions of international comity, and that he is as concerned to see that the Revenue authorities of the other countries of the EEC are collecting their due measures of tax and that we are all contributing our due proportion to the EEC budget.

I feel entitled to put a number of specific questions from these Benches which I hope the Financial Secretary will answer. What VAT situations does the right hon. Gentleman feel these draft proposals, if translated into domestic and Community law, will meet? I do not think that it is sufficient to say that transnational companies are yell placed to avoid their due measure of tax. These measures, of course, will apply with equal rigour to the small individual trader, to the professional man and to the purely national company, as well as to the transitional company which is based not only on both sides of the Channel but perhaps on the other side of the Atlantic.

It is not enough to cloud this issue with delicate or indelicate prejudice. We are moving here from direct taxation. We can talk glibly about transfer pricing; that is not at issue today. What examples of avoidance or evasion of VAT would these proposals, if translated into domestic law, enable the Revenue authorities of this country—I do not ask what might happen in other member States—to counter more effectively than they do at the moment?

I am led to inquire—this may be a matter of legitimate interest particularly to those hon. Members who, like me, have branches of Customs and Excise in their constituencies—whether officers of Customs and Excise, if this directive is adopted and translated into domestic law, will be stationed abroad and, by contrast, will Continental Revenue officers be stationed in this country?

If Continental Revenue officers are stationed here, what kind of powers of investigation and apprehension will they have? What rights will they have concerning probing into documents and activities? That is a matter of some concern. I do not say for a moment that the integrity, the professional skill of, say, the French, German or Danish Revenue does not match that of ours. All the same, there would be some concern if Continental Revenue officers were to set up offices with far-reaching powers of investigation and interrogation in this country. That would be a novel departure—certainly one for which there is no precedent and one which I dare say the House would view with considerable reserve.

Since we are debating, in form, a proposal to amend the original proposals, the Financial Secretary ought to tell us how far the provisions of those regulations have been implemented. I make no special point about the rather specious recitals that talk about distortions of capital movements and conditions of competition. That is, I suppose, mere puff. When I remind the Financial Secretary of my first question about what precise situations these new draft proposals are directed at, he might tell us how capital movements and conditions of competition are being distorted by variations in the implementation nationally of the various systems of VAT.

I come now to article 9, which provides for consultations about the problems, situations and cases which are to give rise to the automatic exchange of information. The House will know that there are two provisions which are of intense interest and are, I believe, novel. Article 3 provides for the automatic exchange of information while article 4 provides for the spontaneous exchange of information. Article 9 refers only to article 3.

When the Financial Secretary was asked about consultations during a similar debate in the summer, he told us that there had been no consultations. I ask him now whether any consultations have taken place about the operation of article 9 and, if so, with what result. If no consultations have taken place, when does he expect them to occur? Once they have taken place, and assuming that some conclusions are reached, it seems that article 3 will be triggered off and this country will be obliged to engage in automatic exchanges of information.

The question of confidentiality has rightly exercised right hon. and hon. Gentlemen, as it exercised them in our debate during the summer. It was because of our deep concern about the breach of a long-established principle of confidentiality that my hon. Friend the Member for Edinburgh, Pentlands was moved to table two amendments which were subsequently adopted by the Government.

We felt that this was a principle of considerable importance. If there are serious and ill-considered breaches of the principle, the confidence of the tax paying public in the Revenue authorities will be seriously weakened. If it is thought that information given in confidence to the Commissioners of Customs and Excise may be made available to the Revenue authorities of other countries and may find its way back, directly and indirectly, to other Departments of State—

Indeed. I would hope—and the trend of the Financial Secretary's reply so far is to this effect—that such information would at least be confined to Government Departments. But we cannot say—and I do not wish to take a chauvinistic attitude on this matter—with what degree of confidentiality, or how strictly, these matters are observed in other EEC countries. The Financial Secretary should reassure us on that score. If he is not able to give us reassurance on this occasion, at least he should take as a clear message to Brussels the deep concern that is felt on this subject in this country.

Although the Financial Secretary said that there are limited occasions when there is an exchange of information between the Commissioners of Customs and Excise and the Commissioners of Inland Revenue, I must tell him that this comes as news to me. Perhaps I am not sufficiently well informed on this subject.

The hon. Member for West Stirlingshire (Mr. Canavan) has a deep knowledge of these matters and one respects his interventions from a sedentary position, even when not cast in full verbal form. Perhaps the Minister would say for what purposes an exchange of information is now permitted between the Commissioners of Inland Revenue and the Commissioners of Customs and Excise. As I understand the oath taken by officers who join the Inland Revenue and by members of the board, they are not entitled to pass information to their colleagues in Customs and Excise, even though they work closely with them. I hope that the Minister will reassure the House on that point.

If the Minister cannot give the House that reassurance, I hope that he will take to 13russels the clear message from this House that, above all, we demand that the confidentiality which taxpayers, both direct and indirect, have enjoyed will not be breached, advertently or inadvertently, by any proposals that may ultimately be adopted.

Does the Financial Secretary foresee the extension of the original proposals to excise duties? This is the first time that we have been asked to consider the extension to indirect taxes. In three, six or nine months' time, we may be faced with a similar situation. It is a pity that we are unable to debate these subjects in the round because, although there are fundamental differences of principle between direct and indirect taxation, nevertheless some of the same points have arisen, and will continue to do so, in our debates.

We put the Financial Secretary on notice about the points that concern us. Therefore, he will be armed and forewarned if and when he returns to Brussels. I do not suggest that we should vote against the proposals tonight, because the Financial Secretary has told us in his engaging way that he is here to listen to our comments. I hope that he will feel that our objections and questions are solidly grounded. I shall leave him to the tender mercies of his Labour colleagues, even to those of the hon. Member for West Stirlingshire.

The Government's activities in Europe have exhibited a familiar but curious sense of priorities. They are lukewarm or pragmatic—an epithet which commends itself to the Prime Minister—about the great European issues of the day. If the Minister is sufficiently encouraged by what he has heard tonight, it seems likely that the Government's main contribution to the European edifice at the end of their term of office will be to let in, possibly without strict control, Continental Revenue officers through the white cliffs of Dover, while extending the tentacles of the British Revenue to the Continent of Europe.

10.10 p.m.

I apologise for rising at this stage in the debate, but I have been provoked to intervene partly because on this occasion I agree somewhat more with the comments of the right hon. Member for Down, South (Mr. Powell) than has been the case in most of the debates in which we have participated. I intervene also because, having re-read the Commission's explanatory memorandum, I find that there are two or three questions that I should like to ask.

In its explanatory memorandum the Commission gives a number of reasons for adopting the directive. The first is that the information received from the member States shows that there is much illegal practice involving VAT in international trade, including fraudulent importation and the use of false export invoices. I thought my right hon. Friend said that if there was that international trade it was caught under the provisions of the Naples convention, in which case the first argument used by the Commission would appear to fall.

The second reason adduced by the Commission relates to the provisions of the sixth VAT directive dealing with the
"location of the supply of services … and tax deduction for transactions effected abroad".
If transactions are effected abroad on which VAT is payable, presumably the Naples convention to which my right hon. Friend referred would also apply. If that is so, it appears that the first two arguments adduced by the Commission are falsely based. I should like to be reassured by my right hon. Friend.

The item on the second page of the memorandum may be more substantive. The House will require much more evidence of the validity of what is said there before it will be minded to give its approval to the proposal. We need to have more evidence of the losses from VAT, either because of fraud or because of non-collection, and the impact that that will have on the Community budget.

If the other member States are keen to have this measure adopted they should make available to my right hon. Friend, and therefore to the House, the information on which they base these general assertions. We as a House, or even as a Scrutiny Committee, have not yet had that evidence, and we need it.

The third approach in the explanatory memorandum suggests that we shall be able to obtain more accurate information on taxes, on incomes and on profits by getting information on VAT. That is asserted, but from what my right hon. Friend has said there seems little evidence that in the United Kingdom information about VAT is or could be of special value in assessments for direct taxation.

The Commission states in the final paragraph of the explanatory memorandum that an amendment to the directive is clearly needed, but it has not established the clarity of the need. If my right hon. Friend returns to Brussels, I ask him to ask the Commission and his colleagues from the other member States who are apparently keen on the directive to ensure that evidence is provided so that the House can understand the reasons for what is proposed. There may be good reasons for it, but what is necessary is not an assertion, as in the Commission document, which seems to be rather dubiously based and not fleshed out, but clear evidence that this is an important contribution to the weapons at the disposal of the tax authorities in the countries concerned.

10.13 p.m.

My hon. Friend the Member for Farnworth (Mr. Roper) dealt with a number of matters which merit fuller treatment.

My hon. Friend questioned the need for these changes since they are not required by the United Kingdom, as I indicated in my earlier remarks. It is not clear to me why the other countries might require the powers arising from the directive. Surely fraudulent importation would be covered by the Naples convention. I would have thought that applied to tax deductions for transactions effected abroad. I do not have any further information and look forward to hearing why the other member countries consider the directive to be so important, as they have stated frequently. Indeed, their views gave rise to the directive.

My right hon. Friend the Member for Battersea, North (Mr. Jay) asked whether the directive would apply just to multinationals or any taxpayer. When I was talking about multinationals I thought that I had made clear, but obviously I had not, that I was referring to points made on this year's Finance Bill. I that the need for action to deal with the multinationals was important when we discussed that Bill, and I believe it to be even more important now.

I understand the point made by the right hon. Member for Down, South (Mr. Powell) to be that he thought that eva- sion, where it arises, should be countered by means of amendments to our own domestic legislation. I am talking not about value added tax—for the reasons that I have given, I do not think that it is relevant in this context—but about corporation tax and income tax. I believe that the main problem, and one of very great importance—this is not a red herring or an attempt to attract votes from those of my hon. Friends who might otherwise wish to withhold them—is that the multinational and transnational companies, as they grow in importance, size and activity, are able to move funds from country to country. This is a problem with which we have to deal. I should be prepared to deal with it on any basis, whether at a European level, an international level, or by means of any forum which could help.

It so happens that one way in which this subject came before us was through the Community, and I welcomed it because I felt that it gave us an opportunity to deal with the problem of evasion by multinationals. It is not sufficient to say that all we need to do is to bring up amendments to our own laws. We need information from other countries.

In this respect I refer to a Question from my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) which I answered recently. One of the major problems that we have is that, as the operations of so many of these companies are extensive and deal with movements of goods and money from country to country, the prices at which those goods are sold can be determined by the companies themselves. Given sufficient determination, funds can pass from country to country, and taxation liabilities of companies can thereby be shifted to whichever country the companies may choose. This difficulty cannot be overcome simply by looking at the tax position in one country alone.

What we have done has been valuable but it has been limited. It is only when countries co-operate to ensure that transfer pricing is done in a manner which reflects the opportunities of such companies to move their funds that countries can equip themselves with the right degree of control over the tax affairs of these companies.

I was not disagreeing with that at all, but the fact presumably remains that legally these provisions do not apply only to multinational companies.

But this is what it is all about. An individual operating a company would be in the same position as a transnational company, but the normal individual does not create these problems of transfer pricing, in the main. We are talking of companies with substantial taxation liability, and I believe that this is an important way of dealing with them.

My right hon. Friend the Member for Battersea, North and the right hon. Member for Down, South agreed that changes would be necessary before they would be satisfied. I suspect that a large number would be needed in order to satisfy me! It was suggested that what we really need are substantial changes, and that these should be brought back to this House. This is not a matter for me, although I am sympathetic to any suggestion of that sort. The present form of the directive is certainly not one that I would wish to see enacted.

The right hon. Member for Down, South asked about the extent of communication between the Inland Revenue and the Customs and Excise. I mentioned that there are some limited forms of interchange of information between the Customs and Excise and the Inland Revenue. One of the forms of interchange, and the most interesting—that is why I mentioned it—is the Leeds experiment, whereby information concerning traders' accounts is exchanged between the Customs and Excise, responsible for the collection of value added tax, and the Inland Revenue. However, under the Finance Act 1972, the Inland Revenue and the Customs and Excise also have the right to exchange information between themselves where fraud is involved. That has been the case now for six years.

The hon. and learned Member for Dover and Deal (Mr. Rees) asked me to ensure that there would be adequate representation of United Kingdom interests in Brussels. It is for the House rather than for me to judge on that. I feel this to be an important matter and I shall seek to represent our interests as best I can.

The hon. and learned Gentleman suggested that it was more important to deal with the problems of the tax system as it operates now than with some of these European matters. It was not for me to bring forward such matters. The draft directive initiated this debate, via the Scrutiny Committee, and I am responding to it. I should be happy to discuss some of the problems of the tax system. Of course, it will not be long before we have our annual bout of enjoyable activities in Committee on the Finance Bill. I am sure that we shall be able to continue these discussions in that Committee.

The hon. and learned Gentleman asked what VAT problems the draft directive would meet. I think that he was partly answered by my hon. Friend the Member for Farnworth and by my comments on that matter.

I was asked specifically by the hon. and learned Gentleman about Customs and Excise officers being stationed abroad and their counterparts from other countries coming in this country. United Kingdom officers will not be stationed abroad, but visits can and are likely to take place where appropriate, when investigation is required.

The hon. and learned Gentleman asked whether consultations would take place under article 9. The other countries are still in the preparatory stages of implementation of the directive. Therefore, I have nothing more to add to what I said in the Finance Bill debates, except that such consultations will probably take place before the end of this year.

As the right hon. Gentleman said that consultations will take place, will he take the House into his confidence and say whether the cases which he will be representing to the Commission will be the subject of the automatic exchange of information under article 3? Presumably he has done a bit of departmental thinking on the subject. Will he take the House into his confidence, so that we may have some idea of the scope of information which is likely to be exchanged automatically regarding taxpayers' affairs?

I expect that there will be discussions about these very matters. Therefore, it would be futile for me to anticipate the outcome of such discussions. I have indicated where my interests and the interests of Community countries lie regarding disclosure of information relevant to transfer pricing which might not otherwise come to light. That aspect particularly interests me. I hope for further success building on what we have achieved within our own domestic legislation and practice.

The hon. and learned Gentleman asked about the extension of the main directive to excise duties. There are no proposals for such an extension. If there were to be any such extension proposed, the House would be informed immediately.

I think that we have had a useful debate. I fully share the anxieties which have been expressed. I have explained that I am sympathetic to the ideas behind the amendment moved by my right hon. Friend the Member for Battersea, North, and I hope that he will accept the assurances which I have given.

In the hope and belief that the Financial Secretary is doing and will do his best to meet the points which have been made in the debate, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question put and agreed to.


That this House takes note of Commission Document No. R/1123/78 on Mutual Assistance in the Field of Direct Taxation.



That the Standing Order of 15th June 1976 relating to the nomination of the Select Committee on Procedure be amended, by leaving out Mr. Richard Luce and inserting Mr. Robin Maxwell-Hyslop.—[ Mr John Evans.]

Ottershaw School

Motion made, and Question proposed, That this House do now adjourn.— [ Mr. John Evans.]

10.24 p.m.

On a point of order, Mr. Deputy Speaker. I should like to ask for your advice—

It is all right. The hon. Member for Chertsey and Walton (Mr. Pattie) is coming—although perhaps the hon. Member for Orpington (Mr. Stanbrook) had better carry on with his point of order for a few more seconds.

I should like to ask for your advice, Mr. Deputy Speaker, as to what happens when the motion for the Adjournment is moved and the hon. Member who has the Adjournment debate happens not to be present—

The hon. Gentleman can now conclude his point of order. I call the hon. Member for Chertsey and Walton (Mr. Pattie).

10.25 p.m.

We are having this debate following the sending out by the Department of Education and Science of a letter dated 27th October 1978, in which it was announced that

"the Secretary of State has considered the local education authority's proposal to cease to maintain Ottershaw Boarding School No. 4097 from 31st Augus 1980, and hereby approves the proposal under Section 13(4) of the Education Act 1944."
At the start of a debate such as this, certain things have to be mentioned. The whole business of the closure of Ottershaw school has been in the offing now for some years. I must at once thank the Under-Secretary of State for her continued patience and courtesy throughout that period. The hon. Lady has seen me on a number of occasions privately. She has received delegations of parents, former pupils and staff, and she has heard some of the existing pupils say why they believe Ottershaw is such a first-class school. I know that she has weighed the arguments very carefully before arriving at this decision.

It is also important to make it clear why Surrey county council has taken the decision that it has. Surrey, as one of the shire counties, was the victim of a violent and short-notice redirection of Government rate support grant money towards the inner cities. Over the past four years this has meant a loss of grant to Surrey county council of £78 million. This loss of income has come at a time of soaring inflation, so much so that a further £87 million was added to the county council's costs in that four-year period. The county has been forced to make savings wherever it could, and it is worth adding that, despite the savings, the rate precept has been doubled in the past four years, so this is not a case of any false economies having been made.

I should be grateful, therefore, if the Minister would accept, with a due sense of responsibility, that the action which caused this debate springs directly from the decision of her Government to change the rate support grant. Ottershaw school is one of the casualties of that decision.

Surrey county council set up a working party to examine Ottershaw school and in 1977 the working party recommended closure. The Minister felt that the arguments were sufficiently finely balanced to ask Surrey to have another look at the matter, and that is a great tribute to the action group, chaired by Mr. Ian Hislop, and the efforts of Tony Blowers, a county councillor.

Surrey county council later appointed another working party which also concluded that Ottershaw school would be too expensive to maintain and it recommended closure. It was this request for approval in May of this year that has now been granted.

But how ironic that this decision letter should be issued within days of a lament over the decline in numbers of boarding places in maintained schools, a lament made by none other than the Under-Secretary herself, replying in this House to my hon. Friend the Member for Macclesfield (Mr. Winterton). According to The Times Educational Supplement, the hon. Lady said that she
"believed that boarding education should be available for those children for whom, for a variety of reasons, it was appropriate.
Apart from handicapped pupils, there were 9,739 boarders at schools maintained by local education authorities in England and Wales in January 1978, compared with 10,736 in 1973 and 11,347 in 1968."
The Minister is reported as having also said:
"it was not considered that the existence of local authority boundaries should be an obstacle to the provision of boarding education where there was a need for it.
Section 6(1) of the Education (Miscellaneous Provisions) Act 1948 enabled the providing authority in such cases to recover the cost of tuition from the child's home authority unless the Secretary of State directed otherwise.
To try to ensure that boarding places in the maintained sector did not go unused, the Secretary of State was financing on an experimental basis a clearing house run by the Boarding Schools Association to provide information about the availability of boarding places in maintained schools."
In other words, the Minister obviously seems to feel, as I do, that there is a strong case for boarding schools in the maintained sector. Boarding schools do a particular job, and they do it well. Indeed, we might well ask why boarding schools should not be available to parents in the maintained sector. What has this decision done to enhance parental choice? I think the House will agree that "Not much" is the answer.

Whatever the Minister's personal, sympathetic inclinations have been, she has found herself without any real powers to stop the county council's closure decision. She regrets the decline in the numbers of boarding places, and yet she allows this closure to proceed.

I have already explained the impossible position in which the county council found itself. I think it would be too easy to criticise the worthy members of the council's working parties. All I would say is that there is a world of difference between assessing a school in terms of its performance and contribution and then making recommendations as to its future, and making an assessment against a background of having to find £8 million from the education budget.

I contend that in the particular situation and context in which it was operating, it would have been a surprise had the working party come up with any recommendation other than the one it did, particularly as no one has ever claimed that Ottershaw is a particularly cheap school to run. Very few boarding schools are.

The hardest area to assess is that of social need. It is still harder to put a price upon it. I very much fea