I attended the European Council of Heads of State or Government in Brussels last week, accompanied by the Minister for Agriculture and Food, Deputy Michael O'Kennedy, who was acting, on the occasion, for the Minister for Foreign Affairs, Deputy Brian Lenihan, who was indisposed. The Minister of State at my Department for European Affairs Deputy Máire Geoghegan-Quinn, also attended in Brussels.
I have had the agreed Overall Compromise paper laid before both Houses of the Oireachtas, together with the draft Conclusions of the European Council. It was accepted in Brussels that the latter are deemed to be adopted unless certain agricultural elements included are changed by a qualified majority at the Foreign Affairs Council on 22-23 February. It is a foregone conclusion that this will not happen but until after that meeting these detailed points must, strictly speaking, be described as draft conclusions. The Overall Compromise paper sets out the agreements reached on the key questions discussed in Brussels last week.
In the margins of the Council, I had a meeting with the British Prime Minister, Mrs. Margaret Thatcher, on Northern Ireland and Anglo-Irish affairs generally. For the purposes of this meeting, I was briefed by the Minister for Justice, Deputy Gerry Collins, and the Minister for Energy and Communications, Deputy Ray Burke, who came from London for the purpose, following the informal meeting they had there with the Secretary of State for Northern Ireland, Mr. King, and Minister of State, Mr. Stanley. I shall be speaking to the House about these matters tomorrow and I will, therefore, not comment on my meeting with the British Prime Minister at this stage except to say that the meeting was conducted in a calm, reasonable, and dignified atmosphere, in which both of us set out clearly or respective positions.
Before going in detail into the Conclusions of the Brussels Council, I should like to warmly welcome the outcome. The success of this Council was an important step for Europe and could legitimately be described as an historic breakthrough. It provides the institutional and financial framework by the implementation of what has become known as the Delors Plan — for the completion of a Single Market for the whole Community, comprising 320 million people, by the year 1992.
Success at the Brussels Council provides a new plateau for development in Europe from which we will all benefit. As Europe develops, Ireland progresses. Estimates of the effect of the Single Market on the European Community, published by the Commission, indicate that the member states of the Community will together gain by between £80 billion-£90 billion on the completion of the Market, as a result of greater market efficiencies. The Brussels Council provides secure financing for the Community. Within this framework it underpins the future of European agriculture, by providing a firm financial basis for the CAP and it contains key mechanisms in accordance with the cohesion articles of the Single European Act to bring the less favoured regions, including Ireland, up to the overall Community level of prosperity.
As a result of the Brussels Council, the structural funds will be doubled in real terms over the period to 1992 for the regions in greatest need of structural reform, including this country. This will mean a substantial increase in resources. At present Irish receipts from the funds are about £300 million a year. The guideline which has been entered in the records requires the Commission to ensure that GNP per capita in the member state will be a criterion to be taken into account in determining the least prosperous regions for which a special effort will be undertaken. Ireland will be included in these regions. The precise effect of this requirement in money terms is impossible to calculate at present but I can assure the House that it will be substantial — running into hundreds of millions of pounds by 1992.
The new basis agreed for contribution to the Community's own resource budget will save Ireland about £20 million in 1988. This is about 7 per cent of our total contribution. This saving will rise to about £25 million in 1992.
On cereals, despite considerable pressure to set a lower quota or production limit, the Council agreed that there should be no penalty up to a limit of 160 million tonnes which is about the current level of production. A new system of set aside for which there will be 50 per cent EC recoupment will be introduced. It will be available for 20 per cent of arable land for not less than five years. The land may be put into fallow grass or used for forestry or other purposes not involving the output of products in surplus.
In Irish terms, these gains are substantial. They must, however, be considered against the likely effects for this country of the elimination of internal frontiers, and the effect of the new and tighter budgetary disciplines, as they affect agriculture. Our concern must be to make sure that the central states do not gain disproportionately in comparison with those at the periphery. The aim must be that Europe and Ireland together will make substantial gains from the implementation of the plan now given the go-ahead in Brussels.
I will now go in detail into what was decided at Brussels, taking first the increase in own resources agreed there. These will now be within a global limit of 1.2 per cent of Community gross national product for payments from the Community budget and 1.3 per cent for commitments.
These resources will be provided through a significant change in the way in which member states contributions are determined.
Contributions at present are based largely on VAT, with each country last year paying 1.4 per cent of its VAT base. The problem with this system is that it gives anomalous results, since the VAT base varies quite a lot between countries as a proportion of GNP — from 42 per cent in Italy, to 62.5 per cent in Ireland and 70 per cent in Portugal. GNP is generally accepted as a good measure of prosperity and ability to pay, so that those with a high VAT share have been paying more than their fair share.
A straight switch to using GNP as the basis for contributions would have solved this problem but would have involved unacceptable increases in contributions for some countries. The compromise reached is a rather complex one which removes the major anomalies. The 1.4 per cent VAT contribution will be retained, but the base on which it will be charged will be limited to 55 per cent of GNP. That means that Ireland will not be charged 1.4 per cent of its full VAT base, since this VAT base is about 62 per cent of GNP but will be charged only on a lower notional VAT base equal to 55 per cent of GNP. Ireland will save about £20 million in the current year as a result of this change, rising to about £25 million in 1992.
In addition, the extra resources being provided to the Community over and above the 1.4 per cent VAT will be charged on the basis of GNP.
The intention is to have the necessary legal decisions adopted by the Council of Ministers by 31 May next, in order for it to be finally approved, after ratification by the national parliaments before the end of 1988, with retrospective effect from 1 January 1988.
This will give a much more equitable distribution of the burden over the years to 1992. A further improvement on the existing situation is that henceforth the correction of budgetary imbalances, primarily the British abatement, will be carried out in such a way that the amount of own resources available for Community policies will not be reduced. It is envisaged that the system will be reviewed again before 1992. There will be a further saving of £6 million to this country in regard to the British abatement.
The Brussels negotiations had major implications for Irish agriculture. The Commission proposals were designed to put a strict limit on agricultural expenditure and contain production around current levels. Clearly we could not oppose reasonable limits in the agricultural area. From the outset we were, however, determined to ensure that the Common Agricultural Policy would remain effective and continue to provide a realistic support base for Irish agriculture. In this we were successful, as the arrangements agreed demonstrate.
The critical issue was the base figure for agricultural expenditure. If this were seriously inadequate then the policy as it applied to all sectors — including the beef and milk areas — would be in jeopardy. This figure has been fixed at a level — 27.5 billion ECU — which takes reasonable account of current policy needs. Given the possibility of an increase in expenditure on agriculture in future years at a rate equivalent to up to 80 per cent of the increase in Community GNP, this should provide a secure, even if tight, base for agricultural expenditure. This is particularly the case when account is taken of the fact that special and adequate provision has been made for the disposal of old stocks and that the cost of this disposal will fall outside the guideline figure. Special provision has also been made to cover exceptional increases in agricultural expenditure due to fluctuations in the dollar or a failure on the part of other world producers to match the discipline of the Community or to meet their international obligations.
The arrangements for dealing with production increases were, in the case of most sectors, largely worked out in the Agriculture Council. That Council had, however, been unable to finalise the cereals issue and this became an important topic in our discussions at this Summit, as it had been also in Copenhagen. In the end, we reached agreement on a Community limit of 160 million tonnes — or 5 million tonnes higher than that proposed by the Commission — and on a system which provides for more limited penalties on excess production than those proposed by the Commission or included in the Copenhagen compromise. While accepting that some restrictions in this sector were inevitable and, indeed, at Community level necessary for the overall viability of the CAP as a whole, we were determined to avoid a threshold or penalty system which would marginalise Irish cereals production. We also agreed to the set aside arrangements to compensate farmers who opt out of crop production and so reduce the danger of production overruns. In the case of the level of aid likely to apply in Ireland, the Community would contribute 50 per cent of the cost of the programme.
Finally on cereals, we adopted resolutions calling on the Commission to negotiate in the GATT to secure a solution to the problem of cereal substitute imports and to propose measures to encourage the incorporation of cereals in animal feed. Thus we can reasonably look forward to action internally and externally to create a better balance between cereals and substitutes.
The measures to contain production in the other sectors went through more or less in line with the majority view of the Agriculture Council. These arrangements do not, of course, involve additional measures in the beef or milk sectors, which account for some 75 per cent of Irish production — although they do involve some reduction in the compensation for suspended milk quotas after 1988-89. They involve a settlement of the deficit problem in the sugar sector in a way that is favourable to the Irish sugar industry.
All in all the agricultural negotiations have been concluded satisfactorily from our point of view. The important thing is that the basis of the CAP has been secured and we can hope to see an end to the constant sniping against the policy from critics within and outside the Community.
Finally, on the detail of the meeting, the amount to be provided for the structural funds, by way of commitment, will be doubled by 1993 in comparison with 1987 — reaching a figure of 13 billion ECU in 1992 in comparison with 7 billion ECU in 1987. Within these totals, the contributions for the less developed regions will be doubled by 1992, with a special effort being undertaken for aid to the least prosperous regions, among which Ireland will be included.
A further very important element is, under the detailed conclusions, that the percentage rates of assistance from the funds will be differentiated in favour of the less developed regions. Within these regions, the rate could be up to 75 per cent compared with the previous maximum of 55 per cent. This means that where in general, we have hitherto had to match Community finance by national finance on the basis of £1 for £1, for the future £1 of eligible national expenditure will be matched by up to £3 from the funds. This will ensure that we can take up the moneys available, while still pursuing the Government's programme to restore order to the public finances.
I cannot conclude without paying tribute to the magnificent efforts by the German Presidency to bring the Council to such an eminently successful conclusion. Chancellor Kohl in his capacity as chairman of the meeting missed no opportunity to accommodate widely divergent views, and to press for agreement. In his efforts to reach consensus, he was ably assisted by Foreign Minister Genscher. Both leaders gave extraordinarily effective leadership and a stimulus to the meeting. At the same time, the success would not have been possible without the will of the assembled Heads of State or Government to reach agreement. It was clear to me that every Prime Minister present was willing to make a contribution, in the interests of the Community, to agreed conclusions. The work of President Delors and his colleagues from the Commission and of the Commission and Council officials in making suggestions and finding agreed formulae really showed extraordinary political skill, dedication and commitment. After 17 hours of virtually continuous meeting on the day and night of the 12 and morning of the 13 February — following a very full meeting the previous day — those around the table made it clear that they were not prepared to accept defeat and finally reached consensus on those aspects of the Delors Plan before them for decision.
It was a meeting at which the European ideal was paramount, and each participant was agreeable to yield a little so that the people of Europe might gain greatly in future years.