MONEY European Budgeteering
KEITH KYLE
We are lucky that on 21 July the Six in Brussels assigned the summer research studies on British entry to the European Commission rather than to the seven-sided international fact-finding groups that Mr Barber was in- duced to suggest. The Commission is far better equipped to come up with creative suggestions and has a strong incentive to do so, because it wants to enhance its role in the negotiations. The only 'facts' to be found are forecasts, and the raking over of these without political illumination would have been an unrewarding exercise. It is, we need to keep reminding ourselves, in Britain's interests to get a move on. What one hopes from Mr Geoffrey Rippon's superior Euro- pean political experience is that he will recog- nise a time-waster from afar off when he smells one.
The toughest of the questions that have been initially posed is that which has been labelled 'Community financing and the im- pact of the agricultural policy.' Here it is essential to distinguish what really matters from what does not. What does matter is that after we are in, the European Budget, taken as a whole, should not have an unfair impact on the British economy. Stated in such terms the problem looks like one that can be solved. But stated purely as a problem of agricultural financing it does not. It will never be true that we draw as much from the Agricultural Fund as we put into it; it is likely that the net outlay, taking agriculture alone, will always be higher for us than for any other partner.
There is no realistic possibility of the principles of the agricultural policy or of its financing being changed for our benefit. But it is important to realise that these principles do not of themselves dictate the present high levels of subsidy nor the accumulation of unmanageable surpluses. As briefly defined by the Commission, the essential principles are those of 'a single agricultural market based on the common organisation of that market with common prices for the main products, a single system of trade with non- member countries and priority for commo- dities produced in the Community.'
The policy is to be financed entirely from the Community's 'own resources', which con- sist of the income from the agricultural levies and the common external tariff (less 10 per cent deductable by the national treasuries for administration) plus, from 1975 onwards, levies on the member states equal to at most a 1 per cent value added tax. From Janu- ary 1978 onwards the workings of this bud- getary system are autonomous. The burden falls where the policy causes it to fall; there is no assurance to any member that its liability is limited to a given proportion of the cost. And it is in January 1978. most Community experts predict, that the British transitional period will also come to an end. But there is nothing whatever in the Treaty of Rome which requires that the Com- munity's 'own resources' should be devoted entirely to the one item of agriculture. It is very much in Britain's interests that by Janu- ary 1978 this should have ceased to be so. Since a solution on these lines requires that other activities provided for in the Treaty which are at present stunted for funds should be developed, this places Britain firmly on the side of the Community's progress.
If the Community does nothing in the meantime to change its present farm policies, expenditure on them could expand to fill any resources likely to be acquired by the com- mon budget. However, the major set of reforms currently being sponsored by the Commission, though politically difficult for the Council of Ministers to swallow, fall entirely within the agreed principles of the agricultural policy. To say therefore that Britain must accept the principles does not preclude reform. Indeed Dr Sicco Mansholt, the commissioner in charge of the agricul- tural policy, sees the British negotiations as a lever for accomplishing his reforms. The last Commission as a whole, in its revised opinion on the British application, wrote that by establishing targets for the accomplish- ment of the Mansholt Plan 'the Community would create a favourable outlook which could induce the new members to accept more easily certain commitments that they will have to assume.'
Even if, as the result of the Mansholt reforms, the cost is brought more under con- trol, the British will still be the net losers on agriculture. But there would then be room in the European Budget, fed by its three pre- scribed sources of revenue, for other sub- stantial items. Moreover it does so happen that there exist two declared Community policies, which, though stunted for funds and agreed guidelines, have some political steam already behind them. These are regional policy and the European Social Fund. The first deals with development areas, the second with the retraining and resettlement of workers.
Britain is perfectly entitled to argue, in a recognisable Community idiom, that the re- sources that she must divert to Northern Ireland, Scotland and development areas in England and Wales are a handicap to her competitive position in the Community, which deserves some recognition. This will seem all the more equitable insofar as the Mansholt reforms take hold. The substantial savings which these envisage in the 'guaran- tee section' of the agricultural policy, which keeps up market prices and subsidises ex- ports, will be offset in the early phases by rising expenditure on the 'guidance section' which consists in effect of regional and social policies in the agricultural sector. Britain does not need very much of this kind of assistance in this sector, but it could do with a great deal of it in other sectors.
Northern Ireland is a case very much in point. The economic burden which we are shouldering there in order to help buy civil peace will be increasingly heavy. The Com- munity's regional policy makes mention of three types of area for special treatment: regions on the fringes of Community, areas facing industrial decline and areas astride the frontiers between member countries. Since the Irish Republic will become a member if Britain does, it would be considered a Com- munity-like gesture if Britain would make
known her readiness to co-sponsor with the Republic a European regional project for North-West Ireland that would straddle the Irish border.
The point to keep in mind is the total financial impact of the whole range of the Community's activities from 1978 onwards. The wider the range of the activities the less unfavourable the impact is likely to be for us. And 1978 is of course very close to the date by which Community optimists are hoping to have a common currency. But this is another story.
Nicholas Davenport is on holiday. He will write again next week.
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