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European Communities' Budget

Volume 374: debated on Tuesday 5 October 1976

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2.44 p.m.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether, in respect of the EEC Decision of 21st April 1970, they anticipate that the budget of the European Communities will be financed as from 1st January 1978 by applying a rate not exceeding 1 per cent. to value added taxes as assessed by individual Member States and what provisional estimates have been made of the United Kingdom contribution in this event either for the year 1978 or for the year in which the provisions are thought likely to come into force.

My Lords, at the meeting of the Joint Finance and Foreign Ministers Council on 5th April there was general agreement that the VAT own resources system should be implemented by 1st January 1978. Measures for the harmonisation of VAT which will be necessary before such a system can be introduced are under consideration within the Council. The harmonised base, on which any VAT contribution would be calculated, has not yet been agreed and the size of the 1978 Community Budget is not yet known. It is therefore not possible to estimate the United Kingdom contribution to the Communities' budget in 1978 on that basis. The latest estimate of United Kingdom contributions to the Community budget on the present basis was published in Public Expenditure to 1979–80(Cmnd. 6393).

My Lords, in thanking my noble friend for his reply, may I ask whether he is aware that his Answer means that the finances available to the European Economic Community will be indefinitely constrained within an amount which equals approximately 0·6 per cent. of the gross domestic product of the Community? Is this constriction consistent with the declared intention of Her Majesty's Government of expanding the power and influence of the European Economic Community?

My Lords, I am not aware of the figure which my noble friend has used, but the proposal is that instead of the present system of raising contributions which are related to GNP there shall be an "own resources" system which shall consist of agricultural levies plus the whole of Customs duties and a balancing VAT factor. VAT is simply the balancing factor.

My Lords, will the noble Lord, on behalf of the Government, undertake to get on quickly with the harmonisation of VAT?

My Lords, there is a meeting on 21st October which will be attended by the Financial Secretary to the Treasury.

My Lords, in continuing the discussions about the harmonisation of VAT will my noble friend bear in mind that the existing proposals before the Council provide for a series of VAT measures which would be very onerous indeed on practically every small enterprise in the United Kingdom?

My Lords, I am confident that our representatives will uphold the interests of the British Isles.

My Lords, would the Minister, in consideration of hamonising VAT, take account of the differences in direct taxation between our country and other countries in the Community? Might it not lead to a reduction of direct taxes in this country?

My Lords, I do not think it will work like that. What has to be agreed is the base. There is to be no harmonisation of rates but there is to be harmony in regard to the base and structure. When that agreement has been reached there will be, for balancing purposes only, a uniform percentage, which the Commission at the present time estimate at 0·74 per cent.

My Lords, is my noble friend aware that those of us who were drawn screaming and kicking into the Common Market see more counterpoint and cacophony than harmony in the Common Agricultural Policy and that the sooner we look to our own mote in this crisis the sooner we shall get out of it?

My Lords, we have been in the Market for such a short time: I am sure that after a while we shall be so pleased that we entered it.