§ Mr. Teddy Taylor
To ask the Chancellor of the Exchequer if he will make a statement explaining the differences between the controls on European Economic Community spending agreed at the Council meetings in 1985 and 1988, respectively.
§ Mr. Brooke
[holding answer 24 October 1988]: The meeting of the European Council in February 1988 agreed to the following major improvements in the previous arrangements for controlling EC agriculture expenditure which had been set up after the European Councils in Fontainebleau and Dublin in 1984:
- (i) the guideline limit on agricultural expenditure is now embodied in a legally binding Council decision which provides for expenditure to grow at no more than 74 per cent. of the rate of growth of the Community's gross national product (previously the guideline was set out in informal Council conclusions and expenditure was permitted to grow at the same rate as the Community's own resources revenues);
- (ii) the provision in the 1984 conclusions which permitted the guideline limit to be exceeded in the event of "exceptional circumstances" has been deleted and replaced by a monetary reserve of 1 billion ecu designed to compensate solely for large fluctuations in the exchange rate between the US dollar and the ecu. The revenue to fund the reserve will only be called up if it is needed (there has been no such call in 1988) and the mechanism will work symmetrically (i.e. privision will be reduced if the US dollar appreciates);
- (iii) the Council's decision on budget discipline provides not only that the Commission's price proposals shall be consistent with the limits laid down by the agricultural guideline but that expenditure will be managed on a sector by sector basis to ensure that the limit will not be breached;
- (iv) automatic stabiliser mechanisms have been built into the regulations governing each of the major commodity regimes. For the most part these are designed to trigger price cuts whenever production exceeds maximum quantities set by the Council;
- (v) a new regulation has been introduced to provide for systematic depreciation of new intervention stocks and specific sums have been set aside outside the guideline limit to provide for the costs of depreciation and disposal of existing stocks which have not been fully depreciated in the past.
As regards non-agricultural expenditure, the inter-institutional agreement (IIA) between the Council, the Commission and the Parliament provides a procedural and financial framework for implementing the conclusions of the Brussels European Council on budgetary discipline. The financial perspective attached to the IIA represent 131W ceilings on Community expenditure between 1988 and 1992 which the signatories to the agreement have bound themselves to respect.