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Economic And Finance Council

Volume 129: debated on Wednesday 9 March 1988

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To ask the Chancellor of the Exchequer if he will make a statement on the outcome of the Economic and Finance Council meeting on 7 March.

The European Community's Ecofin Council met in Brussels: I represented the United Kingdom.The Council established the draft Community budget for 1988 and reached agreement on a provisional draft intergovernmental agreement. The Italian delegation made it clear that in the forthcoming discussions on the new own resources decision it will continue to argue that the GNP-based financing of the United Kingdom's abatement should be brought to account against the new fourth own resource (thus in effect increasing the proportion of the budget which would be financed in accordance with VAT shares) rather than (as proposed by the Commission) within the VAT ceiling.The draft budget proposals for expenditure remain as set out in my written answer on 24 February, at columns

194–6. The budget total remains at 44·7 billion ecu (£31·0 billion) for commitment appropriations and 43·4 billion ecu (£30·1 billion) for payment appropriations. Provision for the United Kingdom's abatement is 2·387 billion ecu (£1·656 billion).

The provisional and indicative amount which member states would contribute under the intergovernmental agreement has been reduced slightly, from some 7·7 billion ecu to some 7·647 billion ecu (£5·304 billion), with a United Kingdom contribution of 1·263 billion ecu (0·876 billion). This extra financing would be partially offset by smaller VAT payments, leaving total extra financing, compared with the maximum amount available under the existing own resources ceiling, of about 5·4 billion ecu (£3·7 billion) after allowing for a surplus of 0·5 billion ecu (£0·3 billion) carried forward from 1987. As before, all sterling equivalent figures are calculated at the rate of 1·4417 ecu to the pound used by the Commission in its latest budget proposals.

Over lunch the Council considered preparations for the forthcoming discussions on budget discipline with the European Parliament, which were foreshadowed in paragraphs Al4 and 15 of the consolidated conclusions of the Brussels European Council (SN 461/1/88).

The Council heard a presentation by the president of the European Court of Auditors of the court's report for 1986. I emphasised the importance which the United Kingdom attaches to obtaining better value for money from Community expenditure. I welcomed the increasing attention which the court is giving to fraud in the Community and I also encouraged the Commission to bring forward cost-effective proposals for combating fraud. The Council approved a resolution recommending that the European Parliament should grant the Commission a discharge on implementation of the 1986 budget.

Increase in income after tax (£ per week) compared with indexation in 1988–89 for married man with two children

Multiple of average earnings

1

½

¾

1

2

5

10

Increase derived from:
(i) 1p cut in basic rate0·461·071·692·913·603·603·60
(ii) 5 per cent. increase in income tax thresholds 0·990·990·990·993·9010·6910·69
(iii) Increase in child benefit

(a)£3·40 per week2

6·806·806·806·806·806·806·80

(b)£2·15 per week3

4·304·304·304·304·304·304·30
(iv) reduced rate band of 25 per cent. on first £3,400 of taxable income0·931·311·311·311·311·311·31
(v) reduced rate band of 20 per cent. on first £850 of taxable income1·141·141·141·141·141·141·14

The Council reviewed the economic situation in the Community and agreed that there was no need to change the policy guidelines set out in the 1987–88 annual economic report adopted last December.