Mrs. Clywd:

asked the Secretary of State for Foreign and Commonwealth Affairs if he is satisfied with the implementation of the Fontainebleau agreement; and if he will make a statement.

Following the agreement on control of Community spending reached at Fontainebleau last year, agricultural prices were reduced by 3·5 per cent. in real terms. The new own resources decision, which provides for abatement of the United Kingdom's budget contribution, has come into force. Our 1984 VAT abatement of £605 million has been paid and the abatements being made to our monthly VAT contributions in respect of 1985 will be worth at least £830 million. These figures demonstrate the value of the Fontainebleau agreement to Britain. As I have frequently made clear, reform, especially of the CAP, must be pursued year by year, which is exactly what we are doing.

Is it true that the EEC budget crisis is back with a vengeance, that it never went away and that it will be impossible to fund regional and social programmes already in the pipeline, which especially benefit the United Kingdom, without a further increase over and above the 1·4 per cent. increased VAT ceiling in the current year?

The hon. Lady should not jump to that latter conclusion. The EEC, as with almost all other organisations, must control its spending and revenue. The battle to secure budget discipline is a battle without end which will be sustained.

Is it not clear that there will be mounting difficulties in the EEC and that it is, therefore, of the utmost importance to take effective decisions to safeguard the Community and the interests of Britain? Is not the Single European Act, modest though it is, an essential first step in that direction, and should it not be fully supported?

My hon. Friend has put his finger precisely on the merits of the Single European Act from his point of view. The House will have the opportunity to debate it more fully in due course.

Will my right hon. and learned Friend confirm that whatever reforms there have been in the CAP, the problems of the CAP have accelerated to a greater extent than have the reforms? Will he also confirm that he, like many of us, predicted last year that there would be a massive increase in cereal surpluses and also that there was a strong possibility that the dollar might decline and, therefore, that there is no justification whatever for the Community seeking more money for that purpose?

Plainly it is desirable that the Community should seek to live within the money that has been allotted to it under the existing own resources provision. The change in the dollar-ecu rate is bound to create problems, as was forecast, but that fact must be put in the wider context. The difficulties facing agriculture are not confined to the European Community. Throughout the world agriculture is facing a near crisis of overproduction, caused to a large extent by improvements in technology. The Community is not alone in having surpluses. The world cereal stock is estimated to exceed 190 million tonnes, of which almost half comes from the United States.

Is the Secretary of State aware that when the Fontainebleau agreement was brought back to the House its foundation was budget discipline? The Foreign Secretary now tells us that budget discipline is a battle without end. As the battle is being lost everywhere that it is being fought, and as the financial resources of the Community will run out probably when the Secretary of State takes over the chairmanship of the Council of Ministers, how long will the Fontainebleau basic agreement last? As our rebate is tied directly to the 1·4 per cent. VAT ceiling of the EEC, for how long will the rebate continue in existence while CAP surpluses continue to wreak havoc on the Community's budget?

The hon. Gentleman has made three points. First, it is important to control expenditure and to sustain budget discipline. It is always heartwarming to have support for that proposition from the Opposition.

Secondly, the hon. Gentleman says that it is important to achieve and to sustain continuing reform of the CAP. It is heart-warming, too, to hear that proposition advanced by the Opposition.

Thirdly, it is desirable that the Fontainebleau agreement should remain in existence for as long as possible to sustain the extremely beneficial arrangements for the United Kingdom. I endorse all three propositions.