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Financing The European Community

Volume 489: debated on Monday 9 November 1987

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4.16 p.m.

Debate resumed.

My Lords, in returning to the debate on the European Communities Committee, I am happy to begin by congratulating the noble Lord, Lord Plumb, on a most excellent maiden speech. I am sure that your Lordships will have been delighted to hear him and will look forward to hearing him on many future occasions given his expertise, his knowledge and experience in this important field. I certainly shall, and I am grateful to him for the contribution he made to our debate.

I should also like to begin by congratulating the noble Lord, Lord Kearton, and his committee. I should like to congratulate the noble Lord himself for the way he spoke today, and the committee for the report which they have delivered to your Lordships' House. I would want to put a slightly different emphasis on it—although I agree with much of what is in the report—and I should like to note just one or two of the inconsistencies in the report.

I have always strongly believed that it is in the national interest that the European Economic Community should succeed and that we should be a strongly-working member of that Community. At the same time, when (as I have) one has been for some years or more attending finance meetings in Brussels, Luxembourg, and Strasbourg, it is difficult to retain initial enthusiasm and willingness to be optimistic at all times. That does not mean that we should not retain that optimism and should not seek to achieve the success that I still believe to be in the national interest.

The central question, as has been pointed out by the committee, is the budget itself and particularly the agricultural question. The noble Lord, Lord Plumb, emphasised to us some of the particular nonsenses that relate to the excessive cost of the agricultural element in the budget. The committee do so in paragraphs 49(i) to 49(v).

I both agree and disagree—as the noble Baroness, Lady Trumpington, might sometimes say—with what the committee said in paragraph 49(ii). I think it is worth quoting:
"Additional resources must not be made available until Community spending is properly controlled. The system of 'budgetary discipline' agreed in 1984 is fundamentally flawed; new machinery is required."
I entirely agree that a system of budgetary discipline is required and that the present system is fundamentally flawed. But to precede that by saying:
"Additional resources must not be made available until Community spending is properly controlled"—
is something I do not entirely agree with. The fact is that you will never totally control any expenditure—and I have tried my hand at it for some years—and it is particularly difficult in the field of agriculture.

I do not pretend to be as expert as the noble Lord, but you will always have either under-production or over-production in the field of agriculture. There are some areas which affect this particular industry. We think we have troubles in the rest of our industries; but there are areas which affect the agriculture industry that it is just not possible to control, as we all know. It is declared that we will not move forward at all until we get total control of that particular item of expenditure. I know that that is not precisely what the Committee said, but I shall come later to some of the things it did say. However, for anyone to say that we must not make any progress in an area that is vital to our national interest until we can totally and properly control something that it is impossible, totally and properly, to control seems to be as much a nonsense as the agricultural policy itself.

My Lords, surely it is possible to control the amount of money available. We need not have increased the 1 per cent. to 1.4 per cent. If the amount of money available is controlled, then it is up to the people to ensure that expenditure is kept within those limits.

My Lords, with respect to the noble Lord, I must tell him that the fact is that one cannot control it in that way precisely because of the reasons I gave. One would need to have the kind of supplementary budget that we have had over recent years, because there will be people within the agricultural community who, as the noble Lord would be the first to agree, we must help out of particular difficulties. So my answer to that point is to say that, no, that is not a solution, much as I should like to it be. As he knows, throughout much of my political life I have tried to control public expenditure. I did not have always the degree of success that I should have liked, although I am happy to say that I left a percentage of GDP in public expenditure lower than it is likely to be in the current year.

Perhaps I may turn to what the committee noted in paragraph 44 as an especially vital area. It is again worth quoting from that paragraph:
"In view of the vital importance of the completion of the internal market for the Community, and the benefits which will undoubtedly accrue to all the Member States, the Committee recommend that Her Majesty's Government agree to such increase in the structural funds as will help to secure this objective".
I very much agree with that statement. However, as I have pointed out, the committee also consider that we must wait until the budget is under control. Fortunately, the Government seem to take a slightly different view.

The other day, in answer to a question that I put to him about zero rating for VAT—something which I happen to believe is impossible to continue along present lines if we are to have a true internal market—the noble Lord, Lord Young, started off by commenting on something which I had not said: I certainly did not suggest a desire to unify all VAT rates. He went on to refer to the Prime Minister, saying:
"She has also said that it is not right that anyone should tie the hands of the Chancellors of the Exchequer for an indefinite period".
The noble Lord did not clarify what was an indefinite period, but continued:
"Therefore she has confined her requirement to food, gas, electricity and children's clothing. There are no present plans for making any changes".—[Official Report, 3/11/87; col. 891.]
That is a delightfully ambiguous statement, if I may say so. I personally should be delighted to hear the Minister make it less ambiguous or unambiguous when he replies.

I appreciate the political problems that face any government in this field. Any government will be attacked from all sides, even by the noble Lord, Lord Harmar-Nicholls, if they concede one inch in the negotiations. I hope that they will not be attacked by the Select Committee and I do not believe that they will be. Certainly they will not be attacked by me.

However, for reasons implicit in the remarks of the noble Lord, Lord Kearton, the committee happily concluded its report on an inconsistent note. After the comments from paragraph 49 that I have already quoted, the committee then states in paragraph 49(vii):
"The Committee conclude that although these developments are likely to work to the short-term financial disadvantages of the United Kingdom, Her Majesty's Government must be prepared to give some ground for the sake of the future of the Community".
I entirely agree with that statement but it is not consistent with everything in the report that has gone before.

I understand the Government's difficulties. I do not expect them to enter negotiations by admitting in advance just how much they will give way, whether it be the 1.4 per cent., or whatever percentage, of GDP. That is a ridiculous way to negotiate. Of course they cannot say in advance what they will do.

For myself, I am willing to accept what I conclude to be the deliberately ambiguous statement of the Secretary of State, and I hope that it signifies some willingness to give ground. Certainly we shall need to give some ground and show some flexibility and willingness to compromise if there is to be any chance for that vision of the European Economic Community, which I believe would be of enormous benefit for all the member countries in the Community and not least for ourselves.

4.27 p.m.

My Lords, I can understand the anxiety of the House to return from discussion of Northern Ireland to this Select Committee report, but I was disappointed to be deprived of asking questions about Northern Ireland. However, I shall ask them and pursue the matter in a different way. I intend to ask the Minister whether he is satisfied with the way the churches are handling the present situation there. I do not want to pursue this matter any further now but shall do so outside the Chamber.

I should like to congratulate the noble Lord, Lord Plumb, on his effective maiden speech and I should also like to thank him for his work in the European Parliament. It has enhanced the reputation of that institution and reflected credit on this country. I know that it is customary to pay tribute to the chairman of a sub-committee on which one has served, but I think that in this case a special tribute is well merited for the very effective chairmanship by the noble Lord, Lord Kearton, of a committee dealing with a very complicated question.

Discussion on a Select Committee report in this Chamber is designed to draw out the views of those Members of the House who did not serve on the committee. So far that has effectively been done, as was demonstrated particularly by the speech of the noble Lord, Lord Barnett. As a member of the committee I do not want to take up the time of the House by repeating views that have already been trenchantly expressed in the document under discussion, but I should like quickly to draw particular attention to four simple and basic points made by the Select Committee.

It is said, first, that Her Majesty's Government are entirely justified in insisting that Community spending is brought under firm control; secondly, that it is reasonable for the Commission to aim in the long term to increase its expenditure to accommodate the legitimate requirements and expectations of members, especially the new members; thirdly, that the European Council of Heads of State and Governments bears the heaviest responsibility for the proper co-ordination and advancement of the Commission's work, but that this Council has generally speaking failed to discharge adequately that responsibility; fourthly, that the right atmosphere for agreement in that Council is not necessarily achieved by confrontational attitudes since, for historical reasons, sometimes justly and sometimes unjustly, the United Kingdom is still regarded with some suspicion, and ministers should therefore seek to minimise that suspicion by well-chosen speeches and sensible compromises.

Lastly, I should like to mention one additional point that I am tempted to elaborate but which goes outside the scope of the present debate. The budget problem is only one part of a much larger problem. In the past, international crises of the kind that we are now experiencing have served only to increase nationalistic selfishness. One has only to recall the oil crisis in the 1970s. In my view it is vitally important for this country that such nationalistic attitudes are replaced by genuine international co-operation. I believe that the Government are perfectly aware of that. However, first and foremost the Government should give urgent priority to making a success of the European Community in the widest sense.

The United Kingdom and its European partners are in danger of being overwhelmed by future developments in the Far East and by changes in United States' policy, to say nothing of possible advances in the Soviet Union. If we do not make a reality of European co-operation and consolidation in foreign, defence and economic policies we must fear for our future.

4.30 p.m.

My Lords, I too should like to thank the noble Lord, Lord Kearton, and his colleagues for this admirable report. I have worked with the noble Lord in a more distant part of the world and appreciate his quite remarkable ability to cope with complex problems. This is a Select Committee report of which your Lordships should be proud and, as may have been said before, the reports of your Lordships' European Communities Committee are considered—I think the noble Lord, Lord Plumb, would agree with this—to be the best of all those emanating from the 12 national parliaments.

In mentioning the noble Lord, Lord Plumb I, too, should like to congratulate my noble friend on his excellent and remarkably uncontroversial maiden speech; yet he made the essential points. I hope that your Lordships will think it appropriate that the first British Vice-President of the Parliament, your humble servant, should congratulate its first British President, which is a post of great importance and significance in the European Community. After six and a half years in the Parliament I know full well the sort of extremely difficult problems which which he has to deal. I had the privilege of sitting on the Budget Committee of the European Parliament for some six and a half years from 1973 to 1979 and continue, therefore, to be interested in following EC budgetary matters. At one time I did indeed lead the delegation of the European Parliament to the Council of Ministers in what was described as the "conciliation procedure".

From what I read in the press and elsewhere the wrangling between Parliament and Council seems to continue and I only hope, as I said in our debates on the European Communities (Amendment) Bill when we were discussing the Single European Act, that the conciliation procedure between Parliament and Council can be made to operate more smoothly and effectively. Indeed, when I was concerned with this and when the noble Lord, Lord Barnett, was Chief Secretary to the Treasury—and I was most interested in the noble Lord's contribution to this debate—certainly it seemed to me that the conciliation procedure worked quite well. However, I must stress that I am being entirely non-party-political in this matter.

I had a meeting in Paris only last Thursday which was attended by distinguished personalities from all 12 member states. Following this meeting I had a conversation with a well-known permanent representative of another member state in Brussels, who is a great friend of this country. He said that what distressed him most about the British policy in the Community—and I am only quoting it and reporting it here; I am not agreeing with it exactly—was that when we held the presidency of the Council we would put budgetary questions first on the agenda rather than perhaps discussing primarily questions in which progress was being made, namely, political cooperation, the Single European Act, joint ventures in research and development, the internal market and bringing down non-tariff barriers to trade. However, I fully agree with Her Majesty's Government that revenue should determine expenditure, and not the other way round.

I shall not detain your Lordships for more than a moment. All I wish to say this afternoon is that in principle I am supportive of the Delors package and its concern with stimulating economic growth. I hope that my noble friend Lord Brabazon will be able to confirm, or partly confirm, the report in The Times of 7th November that this new method of paying for the EC is backed by the Government. I was interested to read in that report that Danish hopes were boosted by the talks in September between my right honourable friend the Prime Minister and Mr. Paul Schluter, the Danish Prime Minister, who is now President of the Council, whom I knew and greatly respected when we were both members of the European Parliament. I shall certainly be interested in the comments of my noble friend Lord Brabazon on this report.

Overspending amounting to £3 billion a year must be stopped. I agree with our Select Committee in paragraph 46 when they state that they would welcome a new GNP-based resource and a new ceiling based on GNP and, I assume, on economic growth rather than on 1·4 per cent. of VAT. I am not going to discuss what percentage on GNP would be appropriate, although I noted what noble Lords opposite said on this. I agree that the "budgetary discipline", as agreed in 1984, is fundamentally flawed and that new machinery is required.

I was one of those responsible in the European Parliament's Budget Committee, together with my honourable friend Michael Shaw and the noble Lord, Lord Bruce, for setting up the Community's Court of Auditors. Both my honourable friend and the noble Lord made important contributions for controlling expenses. However, not all is well at the moment for it must, in the end, be for the Council itself to act. I would agree with the noble Lord, Lord Kearton, and his committee that Her Majesty's Government may have to give some ground for the sake of the future of the Community; I was certainly most interested that the noble Lord, Lord Barnett, agreed with this.

I am all for careful examination by our own Department of Trade and Industry and other departments of spending on every European science and technology project, but I hope that consideration of budgetary aspects will not halt the advance of Europe in competing with Japan and the United States of America.

I was also glad to hear my noble friend Lord Young of Graffham say to the noble Lord, Lord Bruce, on 4th November that the Government will do their utmost to ensure that the Community does not adopt a budget in excess of its own resources' ceiling, unless and until the Council decides unanimously to raise that ceiling. It is quite clear that the Community cannot spend money that it does not have.

Finally, I should like to go a bit further than the report and take this opportunity of expressing the hope that the Government will now agree that the time is ripe—and we have heard this quite often—and indeed right to accept the exchange rate mechanism of the European monetary system in order to show that we are now prepared to play the game—the European game—under the same rules as other member states. I say this despite the fact that I recognise that being part of that mechanism would not have changed our position in so far as recent adjustments in the stock market were concerned. Moreover, now that the United States dollar is weak, I should like to see more general use made of the European Currency Unit which might eventually be thought of as an alternative to the dollar in international markets. Then ultimately I hope we might achieve European monetary union. I know that this goes beyond the scope of the noble Lord's report, but I hope that my noble friend Lord Brabazon will forgive me for having transgressed in this way. I thank the noble Lord, Lord Kearton for his report and my noble friend Lord Plumb for his highly important maiden speech.

4.41 p.m.

My Lords, I should like to start by adding to what seems to have been a chorus of praise, in which I think the noble Lord, Lord Plumb, participated in his very powerful maiden speech, for the committee and its chairman on what seems to me as a non-expert to have been a really first-class report. I—again as non-expert— wholly agree with all the conclusions in this report. I only hope that Her Majesty's Government when they come to reply to this debate will announce their ability to do so too. If not, I shall be very interested to hear exactly why they object to any of these conclusions so that we may know where we stand. I may be wrong, but I think that Her Majesty's Government have already accepted—have they not?—the proposal that in principle members' contributions to revenue should be based on GNP rather than on VAT. If that is not so, I shall be interested to hear it.

As the noble Lord, Lord Barnett, said, the whole matter is summed-up in the final paragraph, subparagraph (vii) of paragraph 49, which states that:
"The Committee conclude that although these developments are likely to work to the short-term financial disadvantage of the United Kingdom, Her Majesty's Government must be prepared to give some ground for the sake of the future of the Community."
That sums up, broadly speaking, the whole purport of the report.

Having said that, I should like to devote two or three minutes to considering the report in the light of the rather hazardous situation in which we now find ourselves as a result of the recent stock market crash and the accompanying weakness of the dollar. We must all hope—no doubt with some confidence in view of the latest reports we have on the tape—that these events will be followed by, at any rate, some recovery in the markets and some stabilisation of the exchanges. Most experts, anyhow on this side of the Atlantic, seem to think that the chief reason for the collapse—and certainly the Chancellor of the Exchequer seems to think it—lies in the fearful United States budget deficit resulting from the disastrous "supply side" economic policy, as it is called, adopted by President Reagan in 1981 and resolutely pursued ever since. "Reaganomics" were, I believe, originally approved by our Prime Minister though it seems she has now seen the light, her recent intervention with the President and her whole attitude having been denounced by what seems to be a majority of Republican spokesmen in the United States. Naturally everything depends in practice on whether the President himself sees the light.

But it also seems that we are unlikely to be out of the wood unless the Germans and the Japanese, even at some risk of a return to a measure of inflation, by one means or another do something to prevent the dollar from disappearing over the horizon. We can only hope that that will be so.

However—and this is the only point I really want to make—it is possible, and even probable, that we may soon find ourselves having to cope with an American recession necessarily involving some protection of the United States market. Surely therefore we must now at least be thinking of what we should do in such a distressing event.

The French have a phrase "envisageous le pire"—that is, to contemplate the worst—which is a very wise thing to do. To say this is not to be pessimistic, which is the last thing I want to be. I only suggest that there are now some precautions which should necessarily be taken.

I have long believed—and have indeed said—that one of the less fatal results (perhaps the only good result) of some American recession would be actually to oblige members of the Community to advance much more rapidly in the direction of real economic and indeed political unity. Surely in such circumstances, if the worst should happen, there must be an increase in inter-Community trade, if only to offset any loss of trade—and there might be a very great loss of trade—with America. If the Community were to survive at all in such circumstances, it must be by accepting very quickly what the noble Lord, Lord Cockfield, has been trying so long to achieve—namely, the abolition of all remaining barriers to trade—and also by agreement on the budget, which as recommended essentially by our committee, would involve our having to abandon our rather individual approach by making some concessions to what is undoubtedly the majority view, and also—I say this in parenthesis—by joining the EMS.

I know it is useless to ask the Government to consider specifically what they would do in a hypothetical situation—I quite recognise that—but I suggest that they should at least ponder on such possibilities and on what they might have to do if some recession should unfortunately occur. There would obviously be political consequences, too, and they might be dire, for there would be many in America who, faced by a recession, would no doubt be inclined for one reason or another, to blame the Europeans and this might result in a majority in Congress deciding to withdraw a portion, if not all, of their troops in Europe leaving the Europeans to look after their own defence. It would clearly be out of order at the moment to go any further in that direction; but I suggest it is something that might be pursued even now, in increased collaboration with the French who, whatever their policy may be at the moment, in that regrettable event would undoubtedly find themselves with us in a rather leaky boat.

I repeat that I have no desire to appear pessimistic, but I should like to be reassured that the Government arc at least conferring with other members of the Community on steps that might have to be taken in Europe, more especially if by any chance the situation produced by the worldwide collapse of shares were to take a serious turn for the worse.

4.49 p.m.

My Lords, this is a comparatively short report and I strongly recommend anyone who has not done so to read it. It gives a fairly clear explanation of how the Commission got into this state and, the recommendations seem to me not only sensible but much in line with government thinking. There is one point that I ought to make right at the start.

In my view, and I think in the view of the Committee, the Commission itself is not responsible for the mess we are in. The fault lies almost entirely with the Council of Ministers. The oral evidence given by Mr. Christophersen—he is the EC Budget Commissioner—was very interesting and most revealing. I have little doubt that if his recommendations and those of his predecessors had been followed the present chaotic situation would not have arisen. The calibre of the Commission and of the Commissioners has been underrated. The Commissioners are of a very high quality. Any policy giving them more powers of decision and legal authority to implement the general directions of the Council of Ministers would be a good thing.

I do not wish to dwell to any extent on the troubles with the CAP. We have had several separate debates in the House on this subject and it need not be pursued by me. But the Agricultural Ministers have consistently ignored the Commission, have made no provisions for the writing down of stocks and have set their faces in the past against price reductions.

Anyone with accountancy experience or who has been involved in business would find it quite incomprehensible how people of ministerial status should pile up liabilities in the future with no arrangements whatsoever for their liquidation. They must have known that those liabilities were quite beyond the resources available to the Community.

It must be aknowledged that outside events have contributed to the problem. I must say that to ameliorate the feelings that I have about the Agricultural Council. One such event is the slide of the dollar. Over the years that may have cost the Community something in the order of 4 billion ecu. That is the equivalent of £3 billion. It will be even worse this year with the continued slide of the dollar.

It is now vital to make the budget a legally enforceable instrument rather than a guideline. As Mr. Christophersen said, that must apply right across the board, not only to agriculture. The Council and Parliament as well as the budget authorities must all be involved in the monitoring of the execution of the budget.

As has already been said, the expenditure of the Community in terms of the GNP of the Community as a whole is not very heavy. I should like to see the development of the internal market supported financially, if that is necessary. I should like to see more expenditure on helping the backward nations and the derelict areas. I would approve of greater contributions from member states if we were certain that those funds would be wisely spent. The Prime Minister is absolutely right to insist on financial discipline as a sine qua non for additional finance.

So what of the future? Since the report we are debating was finalised, there have been a number of communications from the Commission which I imagine are intended to crystallise the agenda for the Copenhagen meeting. But perhaps it might help your Lordships if, first, I explain very briefly the present system of decision-taking. Reference is made frequently to the Council of Ministers which has to approve any regulations or directives or the budget and so forth.

Whatever was stated in the treaty it has evolved since then that there is no such thing as the Council of Ministers. There are six Councils: the Budget Council, the Internal Market Council, the Economic and Finance Council, the Agricultural Council and the Transport Council. Each takes its own decisions and consists of the appropriate Ministers of member states. There is no overriding Council apart from the summit of Heads of State which meets twice a year. That is where important decisions take place and where more should take place. As noble Lords can see, at present there is little or no possibility of real discipline being exercised.

I wish to make brief reference to what I think has occurred in some of the documents that have appeared since our report was published. The documents' first proposal is that the Commission should be empowered in future to adopt a very strict approach to forecasting and budgeting and to create an overall general reserve from which to draw in case of need. At this point I should like to reply to the noble Lord, Lord Barnett, by saying that I am sure that he knows perfectly well and better than I do that in the United Kingdom there are always provisions in the Budget for unforeseen events. It is perfectly possible to allow the same provisions in the agricultural sector as in any other sector.

The second proposal is to change the present system in the agricultural guarantee section from advance payments to reimbursements in order to move to the principle of providing a safety net rather than a fixed price. Thirdly, in the spirit of the Single Act there is the proposal to develop the use of the ecu not only as an accounting instrument but also as an instrument for expressing the Community's financial rights and obligations and as an instrument of payment thereby avoiding the complication of 12 different currencies and moving exchange rates. It has now become clear that with the unreliability of the financial policies of the United States and the ability of Japan to see its own interests with the utmost clarity, it is necessary for the Economic Community to become a reality so that it can stand up and not be blown over by the United States' or Japan's misbehaviour.

All those suggestions and some others which I have not had time to mention depend in my view on giving the Commission legal powers to see that the budget, once agreed, is binding and that the appropriate machinery is in place for continuous monitoring of the expenditure.

I have made no mention whatsoever of increasing the competence of the European Parliament. I had rather hoped that the noble Lord, Lord Plumb, might have said something in his very excellent speech. I expect that it will be the subject of another debate. Certain proposals are now coming forward from the Commission. I have read them. They seem to me to be basically sound but rather cumbersome in execution. That is all I wish to say.

4.54 p.m.

My Lords, I have only one short point to make. I should not have asked for permission to do so if I had known what the noble Lord, Lord Seebohm intended to say. The report follows a number of others which have drawn attention to the sorry state of the Community's finances. One of the main thrusts of the report is contained in six lines in paragraph 39 which states:

"The Committee consider that the blame for the state of Community finance rests not with the Commission, but with the Council of Ministers…This is in part due to the composition of the Council of Ministers, since no specific Council has ultimate financial responsibility. The Committee consider that this can only rest with the European Council of Heads of State and Governments; but that Council has not yet succeeded in producing either effective procedures or the political will to use them.".
The plain fact is that until the European Council of Heads of State and Governments does exercise political will, so long will the European finances be in a disorganised state.

For my part I feel that unless this position is grasped, unless political will is expressed, the whole future of the European Community is in doubt and in danger. I do not think that my colleagues on the sub-committee feel quite so strongly as I do, but it is common ground that unless political will is exercised and the organisation put into a proper state, the fulfilment of the short-term and long-term aims of the Community will be frustrated.

4.56 p.m.

My Lords, as other noble Lords have said, the report is an admirable one. It was introduced by its admirable chairman in an admirable speech. I do not say that out of politeness. I do not think that the noble Lord, Lord Kearton, goes much for insincere politeness. I say that because I believe it to be true; and it is manifestly true.

This debate has been first class, with many outstanding speeches. I must mention the speech of the noble Lord whom I shall for the moment call my noble friend; that is, the noble Lord, Lord Plumb. It is good to see him sitting on any Bench, though it would be nicer to see him sitting on these Benches. However, it is far better to listen to his wisdom and to his experience.

Two points which my noble friend made stand out in particular. He made the point that the whole report must be set in a far wider context than that of agriculture, important though agriculture is, especially from the financial point of view. That was emphasised by the noble Lords, Lord Seebohm and Lord Benson. Whether their prognostications and forebodings are true or not, there can be no doubt that the world is crying out for a strong and wise financial and economic leadership. Regrettably, that is sadly lacking both from the other side of the Atlantic and in the Pacific, from Japan. The European countries should be able to provide wisdom individually. However, they are not strong enough economically to be listened to as individuals. It is only as a collective body that they can have the influence which is so badly needed at the present time.

Having said that, I reiterate what other noble Lords have said in that from the purely financial point of view agricultural spending is the key to the whole spending of the Community. That takes between 60 per cent. and 65 per cent. of the total amount.

The noble Lord, Lord Barnett, told your Lordships that it was impossible totally and properly to control agricultural expenditure. Those words are his and not mine. Of course that is true. But for all that, there can be a far stricter control on agricultural spending than there now is within the Community. I suggest that the key to achieving that is to place an absolutely firm limit on total spending for every significant agricultural commodity which would have to be adhered to.

I know that in theory that has been done. However, the controls, such as they are, are far too remote, far too slight and far too delayed. There is now something which is called a stabiliser. That system has been operating in a mild way for a year or two with regard to certain commodities. As your Lordships will have read in the report, the Commission proposes to bring in a series of automatic budget stabilisers, which are defined as being any mechanism which operates within a CAP regime to keep expenditure within the budgetary allocation. That can mean anything or nothing, and if one goes on past experience and what we have heard from other noble Lords it may mean nothing.

In Community spending on agriculture today there is a double paradox. If there is a good harvest in the conventional sense, the treasuries of the member states wring their collective hands. For them it is a bad harvest because it will cost them more. That is the first paradox. The second paradox is that when there is a good harvest, farmers do not need much support because they have a lot of grain, sugar, milk or whatever to sell. However, that is the time when it costs the Community most. With a bad harvest, farmers need more support but the treasuries rub their collective hands because they will have to fork out less at a time when it is most needed.

That cannot be a wise policy upon which to base the expenditure of the greater part of the Community budget. Without going into great detail, I suggest to your Lordships, as I have done on previous occasions, that the solution must lie eventually in increased liberalisation of agricultural trade and, at the same time, retention of the essentials of the common agricultural policy to ensure that there is not only free trade in agricultural commodities between all member states but that the costs of production are, to as great an extent as possible, maintained at an even level. As a result, no one country should have a greater advantage over other countries than that which was given to it by its soil, climate, the skill of its farmers and so on. Free trade in agricultural products should be maintained and, where possible, enlarged outside the Community as well. I believe that that is possible.

We should ensure that such cash as is available goes only to producers and is not, as the noble Lord, Lord Plumb, so rightly pointed out, syphoned off for the cost of storage, disposal of surpluses, and to other people who come in to achieve the objectives. The vast amounts of money which are spent (and they should be smaller amounts) should go directly to the people for whom it was originally intended—the producers of food.

That leads to the inevitable and logical conclusion that there should be a support policy of social rather than economic payments to farmers who will suffer if the present common agricultural policy is to continue. That is well brought out in paragraph 43 of the report, which says:
"the Committee are disappointed with the limited plan of direct income supplements which the Commission is proposing, and consider it would still leave large numbers of small farmers in serious trouble when support prices come down. (The Committee would make a similar criticism of the British Government's new measures of 9th February which will involve expenditure of only £25 million: this is a small sum in relation to the need)".
I am in full agreement with that, although I would, with some hesitation, point out that not only small farmers are liable to suffer because of the change in the common agricultural policy. There may well be some large farmers and many farm workers who will also suffer. We must not lose sight of that.

Since social needs and methods of meeting them vary greatly between the member states, payments should be partially funded by Community resources. It should be open to individual member states to supplement social payments—provided that they are not used to further increase production—according to the various levels of standards of living and amenities enjoyed by other workers within each country. There is no need to remind your Lordships of the differences between Greece and Portugal, on one hand, and the Netherlands and Denmark, on the other. It should be open to each member state to supplement whatever the Community is able to provide for purely social reasons. The administration of such payments should be left to individual governments so that bureaucracy is minimised and distribution is carried out to the satisfaction of the individual country.

Your Lordships may feel that I have spent too long on the common agricultural policy, but I make no apology for that because, as I said at the beginning, and as we all know, unless the CAP is drastically reformed there will be no curtailment of expenditure and the budget will not be brought under control. Without some radical solution on these lines, that over-spending will continue; the Community as we know it will be placed in increasing jeopardy and its ability to play the part that it should play in the world economic scene will be even less than it is at the present time.

My final comment is to give the strongest possible support to the two points mentioned in paragraphs 47 and 48. At the end of paragraph 47 the report says:
"if the Government are right in claiming, as they do, that according to several indicators the British economy is improving relative to that of other Member States, some concession on the abatement would be appropriate, and it would help secure an agreement which will, among other things, bring the benefits of the completion of the internal market".
The report continues in paragraph 48:
"Finally, the Committee urge on Her Majesty's Government the importance of improving the presentation of their policies in the Community. National interests must of course on occasions be protected, and all Member States do so, but this should be done in a context which is more recognisably communautaire. The Government must emphasise that their refusal to discuss increasing the Community's resources is based not on considerations of national profit and loss but on the desire shared by citizens of all Member States to see an end to the excesses of the CAP, and in particular to the surpluses which damage the Community in the eyes of the world".
This is a report which I hope will not only be read very widely but will influence Her Majesty's Government in this country and the Community and its members in Brussels and their respective capitals.

5.14 p.m.

My Lords, we on this side of the House are most grateful to the noble Lord, Lord Kearton, for having introduced to your Lordships' House perhaps one of the most important reports that it has had the opportunity to lay before it over the past four to five years.

I personally am indebted to the noble Lord, Lord Kearton, who presided over the committee concerned with investigating this matter with the indulgence and kindness he extended to me in allowing me to participate fully in the proceedings of the committee. In fact his kindness went further. In my view he dealt very kindly with the evidence that was laid before the committee, and I invite the House to give urgent attention to it.

I am afraid that I shall have to interpret the evidence in slightly more astringent terms than those with which the report itself deals with it and also the manner in which the noble Lord, Lord Kearton, himself has touched upon the evidence. Unusually perhaps for me I find myself firmly behind the iron resolve of the Prime Minister in this matter. I am surprised that tribute has not been paid to her resolve from all quarters of the House.

The title of the report and the subject we are discussing is Financing the Community. I hope I take the House with me when I say that the purpose of financing is to provide funds for the achievement of specific projects or objectives. Some of these objectives may be very wide in scope and cover whole industries. I take the example of agriculture. Some will be devoted to more specific and possibly smaller purposes. I think it must be agreed between us that if a project or a purpose is to be financed, it must be financed adequately. In common with normal business and accounting principles we should have an adequate reserve for contingencies. Above all, I trust you will all agree, my Lords, that there must be value for money.

There will be few who will dissent from the general philosophy of Her Majesty's Government that problems are not solved by slinging money at them. That applies in the same manner to any project in the United Kingdom and in the EC as well. A problem is not solved, an objective or an ideal reached or perhaps the Holy Grail obtained purely by slinging money at it. As the noble Earl, Lord Bessborough, will confirm, because he and I, together with Sir Michael Shaw worked very closely on these matters the expenditure of the EC is divided into two. One kind of expenditure is obligatory (or in Continental terms, compulsory), and the other is non-obligatory or non-compulsory.

Dealing with the latter type of expenditure first, this occupies about 25 per cent. of the Community's expenditure and comprise expenditure on the regional social funds, on research and development and a limited part of the farming funds in terms of the guidance funds. It is widely used by member states including the United Kingdom in substitution for expenditure that would normally be incurred within our own budget.

Strictly speaking, this is slightly dishonest from the EC standpoint. I deplore the fact that governments have adopted this device because EC expenditure on the regional social funds is supposed to be additional to that provided by member states. As the noble Lord, Lord Barnett, will well appreciate, there is the obligation of additionality which was very rarely observed by member states. Nevertheless, the non-obligatory expenditure, broadly speaking, is easily controllable.

It is the obligatory expenditure or the compulsory expenditure which is overwhelmingly the common agricultural policy. That expenditure is in fact the Community itself and it is important. It is all very well to say that one does not want to discuss the CAP unduly because the CAP is not the whole Community. In fact I would draw your Lordships' attention to the last speech of the right honourable Roy Jenkins, to the European Parliament on the 17th December. He said in, I thought, a somewhat melancholy fashion:
"As I told the European Council, we have a largely agricultural community with political trimmings and an incomplete common market in industrial goods with a common external tariff".
That indeed is a fair summary of the European Community—a common agricultural policy with a few peripherals.

It is important that your Lordships should realise that there is virtually no control at all over 75 per cent. of the budget of the European Community. There is no control over common agricultural policy expenditure under the CAP. Budgets are entirely immaterial. As the noble Lord, Lord Kearton, knows—I am quite sure he would confirm if necessary, though he would not wish to interrupt me—the budget entries in respect of the common agricultural policy are merely guidelines. They are likely to be varied by supplementary estimates at a later stage, and for all practical purposes nobody pays the blindest bit of attention to them.

It is the regulations that are passed by the European Council—whether or not these are based upon proposals arising from the Commission—that govern the amount of expenditure. They are open-ended. There is a legal responsibility by the European Community backed, if necessary, by the European Court of Justice, that according to the price levels for the commodities affected, determined in the agricultural council of Ministers and enshrined in the regulations, any farmer can obtain subsidies on the basis of whatever production he produces and on the basis of the stipulated intervention price. The greater the amount he produces, the greater the income he receives in respect of it.

There is no question of any budgetary control in the normal sense that we understand it. This can be verified. I will not waste your Lordships' time by citing the passages, but I can assure the House that they are all here and can be produced out of the excellent evidence of Mr. Christophersen the Europe Budget commissioner. I pay tribute to him. In my experience over the past seven years he has probably been the most honest and forthright of all the commissioners in telling the whole world the unvarnished truth of exactly what happens in the finances of the Community. It is a great pity that the national media of this country—press, radio and television—have not devoted sufficient importance to this vital item in the whole of the finances of Europe so that, in the main, the population do not know of the existence of the facts or of the procedures that actually take place there.

Of course some of the agricultural expenditure does an enormous amount of good. There is no question about that. The farming communities in parts of Europe would have been very ill-placed if it had not been for the provision of finance in this way. However, with regard to the United Kingdom, let there be no doubt that the funds available to British agriculture from the CAP—incidentally, they also go on the Minister of Agriculture's estimates and are paid direct by the British Government to the intervention agencies, and so on, through to the farmers—have benefited, in the main, some 12 per cent. of British farmers. They have mostly benefited the larger ones; and it is not the case, as in some cases on the Continent, that the smaller farmers have benefited all that much.

Therefore, some of the money—remember, you cannot solve a problem by slinging money at it—has been well expended and will continue to be well expended. However, the setting of prices by the intervention board on the basis of the regulations that are passed by the council has resulted in the overproduction of butter, beef, cereals, wine and milk to an extent which amounts to billions—I repeat, my Lords, billions—of pounds that is entirely wasted. There is this element of wasteful expenditure of which the United Kingdom itself bears its share and to which our attention should be directed. If one eliminated all the items of waste and all the items of fraud—and I am going to refer to that as well—it would be unnecessary to raise the finances of the Community beyond its present 1.4 per cent. based on the VAT base. We have billions of surplus items in store which are rapidly deteriorating and for which the Commission itself admits it has made no provision whatever. It is going to have to write them off at the rate of £1.5 billion per year, of which the United Kingdom is going to have to bear its share. There is another waste in the Community funds of which the United Kingdom is paying her share; that is, the cost of refrigerated storage throughout Europe. About £2 billion a year is spent on excess storage costs for goods that are not going to be required and that are deteriorating. Therefore there is that continued drain on the resources of the Community.

That is not all. Your Lordships may have noticed a report in The Times of 15th October last from which we now learn that the European Commission is launching a fraud inquiry as losses rise to £2 billion a year. We are talking of billions. We are talking of fraud on a massive scale occurring not, I am happy to say, in the main in the United Kingdon, as perusal of the auditors' report will show, but in other European countries. This is done by driving cattle to and fro over the frontiers and by a whole series of other measures. That money is being lost.

I submit to your Lordships that Her Majesty's Government are right to insist that no further funds be made available to the European Community until proper financial control is exercised. This is not only the philosophy of the Prime Minister, but it happens to be my philosophy as well, and it is extraordinary that that should be so.

It is not enough to eliminate the frauds and the wasteful expenditure which runs into billions of pounds. It is all very well when one refers to billions to say that it is only X per cent. of the national income or only X per cent. of the budget. One does not use the same terms when people are dying in our hospitals because of lack of medical equipment. One does not say it then when people are dying because of lack of treatment due to artificial cash limits being imposed upon the National Health Service and the local authorities. One does not say then that it is only an ignominious proportion of the national income.

The reason it is happening was clearly put forward by the noble Lords, Lord Seebohm and Lord Benson. We can quote the old proverb that the fish rots from the head and not from the tail. Where it is wrong is in the Council. The report of the evidence makes clear how that happens. Agricultural Ministers meet year by year to determine prices. They decide what the price should be. Mr. Gaston Thorn of the little republic of Luxembourg put forward a suggestion that finance Ministers should be involved in this at the same time so that when they reach a price decision, they (including the Chancellor of the Exchequer or the Financial Secretary to the Treasury) could advise them of what the consequences on national finances should be.

That was the suggestion of Gaston Thorn, but the British Government and other governments neglected it, as a result of which the agricultural Ministers determined a price level on the basis of which they could go back to their constituents and say, "Aah! We fought for your interests." They can say to the farmers, "We protected your interests in the matter." However, at the same time, the finance Ministers, who were not involved, and who in one instance walked out of the meeting at Luxembourg, could avoid taking responsibility but could also take the credit by protesting at the lack of financial stability. That is hypocrisy on the worst possible scale.

One of the cures for that would be for the Prime Minister possibly to relinquish her chairmanship of the Cabinet sub-committee on privatisation, which has perhaps fallen rather into temporary disrepute, and to form a new Cabinet sub-committee to deal with EC finances and presided over by the Prime Minister, because, clearly, the Foreign Secretary and the Minister of Agriculture, Fisheries and Food are incapable of dealing with the problem themselves. There therefore have to be changes at the top. There has to be change in the agricultural regulations, including the stabilisers which have been mentioned. There has to be a ruthless prosecution of fraud and a tightening up of procedures. There has to be the adoption of an agreed system of accounting, instead of the miserable creative accounting which amounts to the fiddling of accounts with which the public are presented at present. There has to be a repatriation of some of the agricultural support away from the community, where it cannot presently be controlled, to the United Kingdom where it can.

I am sorry to have to adopt a slightly more astringent attitude towards this report than some of your Lordships. I do so more in sorrow than in anger. I am one of those who, together with the noble Earl, Lord Bessborough, devoted four years, practically full-time, to supporting the Community as a United Kingdom representative. I do not think that even my worst political enemy would accuse me of neglecting my duty in that regard. It is a matter of great regret to me to have to address your Lordships' House in these terms.

Like so many of your Lordships' I am a member of Europe. I am also a Briton. So long as I speak in your Lordships' House, it is as a Briton that I shall continue to speak with the European being a second priority.

5.33 p.m.

My Lords, this debate has been both important and timely. Important, because of the large sums of money involved in the proposals under discussion, and also of course because of our very real commitment to the European Community. Timely, because we are now in the thick of negotiations on the future financing of the Community, leading up to the European Council at Copenhagen next month.

I have listened with great interest to the points made by noble Lords today. I am sure that noble Lords will not think it invidious if I select two of them for special mention. First, the noble Lord, Lord Kearton, to whom we owe thanks not only for proposing today's Motion but also for chairing the sub-committee which produced the report we are considering today. Secondly, perhaps I may congratulate my noble friend Lord Plumb who selected an opportune moment for the first British President of the European Parliament to make a most impressive maiden speech in this House.

I should like, if I may, to begin by outlining very briefly the Government's general approach to the current negotiations on financing the Community; then to respond to the main points in the Select Committee's report; and, finally, to reply to some of the other matters raised by noble Lords today.

First, I should like to stress that the UK is adopting a constructive approach to the future financing negotiations. The key areas are CAP reform and budget discipline. The UK made clear at the European Council in Brussels in June that we were not prepared to address the question of additional resources until agreement is reached on effective and binding control over Community spending, particularly agricultural spending. The proper and effective control of agricultural expenditure, as identified by the noble Lord, Lord Bruce of Donington, is absolutely essential. I am delighted that he supports the Government's approach of seeking proper reform of the CAP.

The essential requirement for reform of the CAP is the introduction of automatic stabilisers together with other provisions to ensure that any given limits on agricultural expenditure can be respected. If an agreement is to be reached at Copenhagen in December, the widely accepted principle of stabilisers must be translated into specific, quantified decisions so that it is certain that the new arrangements will work effectively and as intended. In other words the agricultural guideline must become a real limit on agricultural spending.

The noble Lord, Lord Banks, referred to the Commission's proposals for agricultural stabilisers. The Government have made it clear that agreement on effective agricultural stabilisers is essential if there is to be a settlement at Copenhagen. We are pressing hard for agreement within that timetable, but my right honourable friend the Prime Minister has made it clear that we shall not accept measures that are not effective.

We also need to ensure that effective budget discipline applies to non-agricultural spending. The proposal by the Commission for a doubling of the structural funds is in our opinion quite unrealistic—I shall come back to that point in a moment because I know that the Select Committee had its own views on the matter.

As far as the UK abatement is concerned, any changes to the Fontainebleau abatement system (which has served us well) must improve our overall position.

We accept that the Commission's proposal for a new own resource based on the difference between GNP and the VAT base could make the own resources system fairer. The proposal deserves consideration, although, in answer to a question from my noble friend Lord Bessborough and the noble Lord, Lord Gladwyn, we have not at this stage agreed to the proposal, whatever it may have said in The Times on Saturday. The Government are working hard for agreement at Copenhagen, though clearly agreement will not be easy. The noble Lord, Lord Benson, referred to the importance of political will to solve the Community's problems. We have that will. Heads of Government agreed in June that decisions on all issues must be made together. Interim or partial solutions would not do. We need an overall agreement which is clear, complete and legally binding.

Against that background, perhaps I could now turn to the Select Committee's report. First of all, I should like to welcome the committee's endorsement of our general negotiating position. As the committee says:
"spending must be brought under firm control before any decision is reached on increasing the Community's resources".
A number of noble Lords have echoed that today. I was pleased, for instance, to hear the noble Lord, Lord Seebohm, say that my right honourable friend the Prime Minister is absolutely right to insist on control of expenditure as a sine qua non before there is any question of extra finances.

Secondly, the committee is absolutely right to stress the importance in this context of budgetary disciplne in general and control of agricultural spending in particular.

The Government are firmly committed to ensuring that budgetary discipline in the Community is made more effective, building on the Council's unanimous budgetary discipline conclusions of 1984. We must now ensure that the constraints agreed then bite more effectively on expenditure.

On agricultural spending, the committee has rightly drawn attention to the need for the guideline on agricultural expenditure to be made effective by legally binding and effective controls in each product régime. These "stabilisers" and other budgetary controls of the kind are needed to ensure that any potential overspend in a particular commodity régime will be dealt with before it becomes irreversible. There is now widespread recognition in the Community of the need for stabilisers. Our aim will be to reach agreement on specific quantified mechanisms for each régime.

The noble Lord, Lord Barnett suggested that introduction of proper budgetary discipline in agriculture was not a feasible aim. The Government do not accept that any area of Community expenditure should be exempt from the need for budgetary discipline, as applies to domestic expenditure; proposals for stabilisers are part of the Commission's response to the need to control agricultural expenditure. This was a point made by the noble Lords, Lord Seebohm and Lord Walston.

The committee has also stressed the importance of tighter budget management, drawing attention in particular to the question of transfers of unspent balances. It is a key principle for the UK that funds controlled by the Community should be managed at least as efficiently as they are in the member states. We have proposed specific improvements to tighten up on the use of funds and ensure more effective control by the budgetary authority. These ideas and proposals put foward by the Commission are now under detailed discussion in Brussels. We have made clear that we expect to see real progress in this area.

Thirdly, there is the question whether the Community needs more resources. The committee says that it does. The Government's position, as I said earlier, is that until we have agreement on control of spending it does not make sense to address the question of any increases. What I would say, however, is that the increase in the own resources ceiling proposed by the Commission—equivalent to an increase of 45 per cent. in 1992—is quite unrealistic, as well as being inconsistent with the need to make budget discipline more effective.

Fourthly, the committee says that once agricultural spending has been brought under control, spending should be increased on the structural funds, and on other policies such as research and the environment, so long as action at Community level offers value for money. We could certainly endorse the emphasis on value for money. But I would sound a couple of notes of caution about the rest of the recommendation.

We need to ensure that "non-obligatory" expenditure—broadly speaking, non-agricultural spending—does not grow excessively. This is best achieved through respect of the so-called "maximum rate" limitation on such expenditure in the annual budgetary procedure, which is an important element in budgetary discipline.

On the structural funds, yes, we recognise the role that they play. But that does not mean that we should go along with the Commission's plans to double them in size. We should not forget that they have grown by almost a third in real terms over the last three years and if the Community gets its priorities right, there will be scope for further real growth in the years ahead without infringing budget discipline. Moreover, the funds have always taken account of the problems of the poorer member states. However, in answer to the noble Lord, Lord Kearton, and others, we do not accept that increases in the funds are needed specifically to "compensate" for completion of the internal market. That is a process from which all member states, not just the more prosperous ones, should gain. Therefore there is no justification for the Commission's extravagant proposals to double the structural funds in real terms.

Fifthly, the committee recommends that if agricultural support is to be brought under control, parallel steps should be taken to prevent rural depopulation and dereliction. They refer specifically to income supplements. I was interested to hear what the noble Lord, Lord Walston, had to say on this subject. Direct income aids to farmers could be considered as being one way in which the transition to a more market-oriented CAP could possibly be eased. It is important however that any such aids, if they were agreed, should be linked to the achievement of genuine CAP reform. They should also be degressive and time-limited, and financed by member states within a Community framework. The Government have of course already announced a package of measures to assist the process of adjustment in this country under the Farming and Rural Enterprises Initiative. Indeed, your Lordships are currently considering the Farmland and Rural Development Bill which includes powers to introduce the new farm woodland scheme and grants for diversification.

Sixthly, the committee supports the Commission's proposals for a new own resource related to GNP, and for the own resources ceiling to be based on GNP. I have already said that we think the new own resource deserves consideration. As for the ceiling, while recognising the arguments in favour of the proposal, we also need to bear in mind that using a GNP base—whatever the percentage rate chosen—would mean that the ceiling could be substantially higher by 1992 than if defined on the present basis. The question of moving to a GNP ceiling, like the proposal for an increase in the ceiling, cannot sensibly be addressed unless and until we have agreement on effective control of expenditure for the future.

Lastly, the committee recommends that the Government should show some flexibility over the proposals to replace the UK's abatement mechanism, which has served the UK well. I would remind your Lordships that by the end of 1987 we shall have benefited from abatements worth over £2.8 billion. I should like to explain why we cannot accept the committee's charge of over-rigidity on this issue.

I listened with care to the point made by the noble Lord, Lord Kearton, about the need for the UK to give ground on this point. However, I feel I must remind the noble Lord and others that despite our abatement our net contribution has increased substantially since Fontainebleau in 1984. We are the second largest net contributor to the Community budget. Any changes in expenditure along the lines proposed by the Commission would be likely to make our imbalance significantly worse. Meanwhile other member states more prosperous than us remain substantial net recipients from the budget.

The new mechanism proposed by the Commission would cut the UK's abatement by about half. Overall the commission's proposals could, on our estimates, increase our net contribution by about some £800 to £900 million a year at today's prices—a point upon which the noble Lord, Lord Bruce of Donington commented. I am sure therefore that noble Lords will understand why we are not prepared to change the present system (which can only be changed by unanimous agreement and with approval of national parliaments) unless our overall position is thereby improved.

I have tried to cover many of the issues raised by noble Lords today, but there are a few specific points on which I should like to respond now. The noble Lord, Lord Bruce, talked about the additionality of Community expenditure and suggested that expenditure on the social and regional funds was not additional to domestic spending plans. This is not strictly accurate. The availability of Community spending allows total public expenditure in the UK to be higher than otherwise would be the case.

My noble friend Lord Plumb and others have stressed the importance of competing in the internal market. We quite agree with that. It is indeed a major United Kingdom priority. During the United Kingdom presidency last year the Council adopted or agreed 48 individual measures which will help to remove barriers, but this momentum needs to be maintained if the internal market is to be achieved by 1992.

The noble Lord, Lord Greenhill, and others stressed the need for the Government to show a positive approach to Europe. We thoroughly agree. It is significant that future financing negotiations are not one against 11: the United Kingdom against the rest. The need for CAP reform and better discipline is now widely accepted.

Lastly, on specific points, my noble friend Lord Bessborough and the noble Lord, Lord Gladwyn, spoke once again of the desirability of our joining the exchange rate mechanism of the European monetary system. I fear that once again, having answered that question on several occasions I have nothing further to add other than to say that we keep the issue under continual review—a reply with which the noble Lord, Lord Ezra, will be thoroughly familiar.

As I said before, this has been an important and most interesting debate. I should like to conclude by referring to the comment in the Select Committee's report that the Government should stress the positive side of its approach to Europe. Our approach to the European Community is positive. We are committed to the Community and that is one reason why we are striving to put its finances in order. At the same time of course we are determined to protect the interests of British taxpayers and consumers. These objectives are not incompatible. In the current negotiations we are doing our utmost to ensure that the deal that is reached is good for Britain and good for Europe; and I am sure that noble Lords would support that approach.

5.50 p.m.

My Lords, in winding up the discussion I should like very sincerely to thank all those noble Lords who have taken part in the debate. I should particularly like to refer to the noble Lord, Lord Plumb, whose contribution was so powerful. We are delighted that he has appeared here to make his maiden speech and we look forward to many more speeches from him on European affairs in particular.

I think all the speakers were commendably brief. The noble Lord, Lord Bruce, had the record. I am sure he wanted to speak for longer than anyone else. He mentioned that he was astringent. I should have used the word "strident" myself. Nevertheless, many of the things that he said were not in conflict with the committee's general conclusions.

I should like to thank the Minister for his reply in winding up for the Government. I should like to compliment him on the way he presented it. He was extremely clear and cogent, and the speech was courteously and lucidly argued. Having paid the Minister this compliment, I hope he will not mind if I say that I found his speech like the curate's egg—good in parts and not so good in others. The Government, as they often do, take the line that if you agree with them you are splendid people. If you venture to have a slightly different point of view you are spendthrift, narrow-minded, unrealistic and really a very doubtful character indeed.

When one looks at the membership of the Select Committee one finds a high concentration of financially eminent people of great distinction. I think the idea that they are recklessly improvident with the interests of the United Kingdom is a charge that cannot be sustained. So I am taking the charitable and very natural view that the Minister must retain the Government's bargaining position in negotiations at Copenhagen. I very much appreciated his comment that the Government really wanted to see the Community succeed and that they shared the vision expressed so powerfully by many Members of this House today.

We wish the Government well and hope that in the outcome they move a little further than in the Minister's speech towards the recommendations of the Select Committee. I formally beg to move that the House takes note of the report.

On Question, Motion agreed to.