Seanad Éireann debate -
Tuesday, 28 Jun 1988

Vol. 120 No. 9

European Communities (Funding), Bill, 1988 [ Certified Money Bill ] : Second and Subsequent Stages.

Question proposed: That the Bill be now read a Second Time."

Minister for Finance (Mr. MacSharry)

The Bill I am recommending to you for approval is a short one, required for technical reasons to facilitate payment of part of our budget contribution to the European Communities for 1988. It arises under the terms of an undertaking given by all member states as a result of the agreement reached at the European Council last February on new funding arrangements for the EC budget. This undertaking was required to provide adequate revenue for the 1988 EC budget pending finalisation of the detailed arrangements on a permanent basis for the operation of the proposed new own resources system. The obligation to make this payment may arise shortly and, accordingly, it is necessary to have the appropriate legislative authority without further delay.

At the European Council last February the overall level of revenue available to the European Communities was increased. A new ceiling was set of 1.2 per cent of Community GNP for payment appropriations. As you will all be aware, there have been difficulties in relation to the level of funding for the EC budget over the past few years. While the ceiling on own resources available to the budget was increased in 1986, the new ceiling was reached in that first year of operation. These funding problems clearly constrained the development of Community expenditure programmes. The new ceiling set at the European Council will provide adequate funding for Community policies until 1992. Annual levels of expenditure have been set for each year up to 1992 and an annual ceiling for own resources expressed as a percentage of GNP has been agreed for each year up to 1992. These expenditure levels provide for a doubling in the level of commitments in real terms from the Structural Funds by 1993 and for maintaining FEOGA guarantee expenditure with moderate real increases of about 2 per cent.

In addition to increasing the total amount of own resources, the European Council decided to change the composition of contributions under the own resources system. Under the system in operation up to now the EC budget contribution of each member state has comprised customs duties, agricultural levies and 1.4 per cent of the VAT base. We did not consider this a satisfactory system. The VAT did not represent fairly the relative wealth of member states since the VAT base as a proportion of GNP varies a good deal between member states. GNP is generally accepted as a good measure of prosperity and ability to pay and the new agreed system reflects this. The contribution of 1.4 per cent of the VAT base will be retained but with the important modification that the base on which it will be charged will be limited to 55 per cent of GNP. Thus Ireland will be charged 1.4 per cent on a base of 55 per cent of GNP rather than on the higher full VAT base. The balance of the revenue required within the ceilings mentioned above will be divided by reference to the share of a member state in total EC GNP.

Ireland's net contribution to the EC budget in 1988 will be about £252 million. This latter figure reflects a £20 million saving as a result of the budget contribution being calculated under the new system as compared with the position if the old system had remained in place. The Bill before the House relates solely, however, to the payment of approximately £32 million out of our total contribution. I want to emphasise that this is not additional expenditure and that it is already taken into account in our figures for 1988. This payment arises because of procedural delays in bringing the new system into force. It is intended that the new system will operate for 1988. However, it cannot come into force until the own resources decision formally agreed last Friday at Council is adopted by each member state in accordance with their respective constitutional requirements.

In order to provide adequate revenue for the 1988 budget in advance of the completion of this procedure, it was necessary for member states to give an undertaking to provide funds in advance of the coming into effect of the new own resources decision. This was done through an intergovernmental agreement on 7 March. Ireland's contribution under the normal system of payments, plus the amount under this intergovernmental agreement, will be same amount as Ireland would pay had it proved possible to have the new system in place in time.

Our normal EC contribution is made from the Central Fund under regulations made under the European Communities Act, 1972. That Act provides that the EC Treaties and all other Community laws are directly binding in Ireland. However, the undertaking given on 7 March at the ECOFIN Council is not governed by a Community law as such. Thus it is necessary for me to have specific approval for payments by way of this Bill under consideration. Some Senators may recall that similar legislation was required in 1984 to allow payments under undertakings given in 1984 and 1985. The payments made in 1984 were repayable advances, part of which have been repaid at this stage. The 1985 payment was non-refundable. Section 2 (a) of the Bill covers payments to be made under the undertaking of 7 March.

However, the figures included in the undertaking were provisional pending the completion of the EC budgetary process and agreement on outstanding issues on the details of the new own resources system. It is possible, therefore, that, instead of seeking payments under the existing agreement of 7 March, a new agreement with the final figures will be formally agreed in the near future. Section 2 (b) is included in this Bill to provide for this possibility. Ireland's share of the intergovernmental agreement is likely to be about £32 million. However, while this figure is included in the EC Commission's proposal to amend the 1988 budget, it is not yet agreed by Council. Furthermore, the figure is denominated in ECU and the Irish pound equivalent could change somewhat. A ceiling of £40 million is provided in the Bill to allow for the possibility of an increase in the estimated contribution.

Ireland's contribution to the Community budget is large but it has to be seen in the context of the present and potential benefits of EC membership. Ireland's net receipts from the EC budget after taking account of the contribution totalled £6,600 million in the years 1973-87 or about £10,000 million in 1987 prices. In relative terms Ireland is the biggest beneficiary from the EC budget. In 1986, the latest year for which comparable statistics are available. Ireland's net transfers from the community budget represented 4.9 per cent of our gross domestic product, the highest percentage of all the member states.

Ireland will, of course, continue to benefit substantially from the Community budget, which as I mentioned above will be expanding on foot of the European Council decisions. The agreement on the Structural Funds will make a significant contribution to cohesion. I might mention that economic and social cohesion is now a Treaty obligation, to be taken into account in all Community policies. This will be particularly important to Ireland when implementing the fundamental changes that are envisaged towards completion of the internal market.

All Senators will appreciate the benefits of the continuation and expansion of European Community programmes and the importance of adequate revenue to do this. I commend this Bill to the Seanad.

Mrs. Bulbulia

Of course we in Fine Gael support this measure. As the Minister has outlined in his introductory speech on Second Stage, it is a technical, procedural matter. It has already been budgeted for and therefore it does not mean that an extra cost will have to be borne by the Exchequer. Over the past years we have been used to seeing crisis type headlines in the papers about European budgetary facts — headlines such as "A New Budget Crisis", "Community's Own Resources Almost Exhausted", "Community Unable to Make Ends Meet" or "Chaos in Community Finances". These are the kinds of headlines that seem to appear quite frequently in newspapers and they give cause for alarm. It is comforting to feel that the European Community would appear at last to have tightened its grip on its own budgetary situation and to have brought about a better position. The thanks of all of us are due to those who sat down and, over long and painstaking meetings, hammered out the kinds of agreements which have brought about a better funding of the European Community budget.

As the Minister said in his speech, the net contribution from this country to the EC budget in 1988 will be in the order of £252 million. The Bill which we are discussing this afternoon relates solely to the payment of around £32 million out of our total contribution required under the intergovernmental agreement. There was an amendment moved in the other House which set the ceiling of our contribution at £40 million to allow for any eventuality. That was probably a sensible amendment. It was introduced by the Minister at the behest of other groupings in order to give the kind of reassurance that putting a ceiling on anything gives to people, even though the increase is only a remote possibility.

The Minister quite rightly stated that Ireland's net receipts from the EC budget, after taking account of the contributions, totalled £6,600 million in the years 1973-87. The latest year for which comparative statistics are available is 1986. Ireland's net transfers from the Community budget represented 4.9 per cent of our GDP, the highest percentage of all member states. It is important to nail the lie that was being bruited abroad about this measure, that it was some sort of blank cheque and that the Minister asked for its endorsement. That is not the case. It was suggested by another party, but it proved not to be so. It is important to spell that out in the context of the debate here this afternoon.

Since our entry into the EC we have been a net beneficiary. I have heard it mentioned that since our entry we are reported to have received some £10 billion. One is tempted to ask the question: where exactly has it all gone? I wonder is somebody somewhere going to do an actual item by item or structure by structure head count of the evaporation of some £10 billion. It is impossible to even contemplate such an enormous figure. We all welcome the improvements in the Social and Regional Fund and the fact that the whole matter is now going to be looked upon as an integrated programme rather than isolated single item projects for funding in various parts of the country. As in Europe, in this country we have become far more cost conscious and we want to see far greater cost effectiveness. I can only welcome the major changes that have taken place. I look forward to the speedy implementation of the Structural Fund and of course to 1992 when the situation will be vastly changed.

One is tempted to ask the question: have we made the best use in the past of the resources from Europe? I am not always sure that we have. I hope that in the future there will be far more planning and evaluation and hard criteria laid down so that anything that is funded will be seen to be cost effective and productive and that we will not have any white elephants coming to us from Europe. I suppose it is a fair criticism to say that in the past it has been the case on occasion that finance has trickled away into non-productive areas.

The Minister's speech set out the background to the decisions which have led to the necessity for this legislation before us. I do not quarrel with anything that was stated. We must not have chaos in the Community finances. The Community must be able to make ends meet. It is true to say that the Community's own resources budget has almost been exhausted and we must not do anything in this country that would precipitate any budgetary crisis in the EC. It is in our interest not to do so. Accordingly we in Fine Gael welcome this Bill before the House.

Mr. Fallon

Like the previous speaker, I too welcome the legislation. As the Minister said, it is a short Bill and I do not propose to detain the House very long. The purpose of the legislation, as we know, is to enable payments to be made to the European Communities in accordance with an undertaking made by Government representatives from all member states at the Council of Ministers meeting in March 1988. As good Europeans and as a loyal member of the EC we must play our full role in every way. In this case we must give practical help in continuing the survival of the EC.

The previous speaker referred to a point which was mentioned by the Minister in his speech. He said that Ireland's net receipts from the EC budget, after taking account of the contribution, totalled £6,600 million in the years 1973-87 or about £10,000 million in 1987 prices. Of course that clearly indicates that we are a very real, huge beneficiary from the entire EC budget. I have no doubt that over the years this money has been spent wisely and well. It would be, nonetheless, a worthwhile and a very informative exercise if at some time it could be arranged that we would get a year by year breakdown of the funding, where the money went to and the various projects involved. I have no doubt, as I have said, that the money has been spent wisely and well.

In my own town a huge relief road and a bridge are being built close to the town at a total funding of £35 million which will come from the Regional Fund of the EC. Without that kind of funding we would never be able to build that type of road and infrastructure. We are certainly wise to be a member of the Community. This Bill highlights what many people have long felt, that Ireland made the right decision 15 years ago. It highlights the very practical and real help that we get as a nation. We are a very big beneficiary from the EC and long may that continue.

The previous speaker also commented on what is a very important matter for the future of this country and, indeed, for the future of the EC, that is, the completion of the internal market in 1992. We are told that it is essential to ensure European survival in a fast changing and very competitive world and that this internal market completion is necessary. Of course, for Ireland it will obviously offer very great and real opportunities for various companies to work hard and to exploit fully that will be a market of 320 million people. The removal of national frontiers will inevitably lead to external lower cost suppliers which will, in their own way, cause problems for many of our own suppliers. Now is the time for companies clearly to reassess the whole marketing procedure, the whole marketing process, research and development and to restudy the needs of the consumers in the Community which will be so large in the future. Obviously from now until 1992 there needs to be greater awareness and the Taoiseach in particular is leading the way. I note this morning that a national conference is to be held to deal with a national awareness and preparation campaign on the EC internal market.

Mrs. Bulbulia

At long last.

Mr. Fallon

Certainly we will be a further beneficiary as a result of this internal market. That is why all of us must take note that it will become a reality and we must readjust accordingly.

To come back to the Bill, I do not wish to detain the House. As a good and loyal member of the EC we have a role to play in this area. The benefits we are getting are enormous. The continuation of these benefits and the expansion of the European programmes are very important to this country and, therefore, I too fully support the Bill before us.

Mr. Ferris

I will not detain the Minister on this enabling legislation before the Seanad. It is a money Bill so, apart from our endorsements, we cannot change it. I would not wish to change it because it is obvious from the Minister's speech that this enabling process of giving legislative power to the Minister to expend between £32 million and £40 million is just an interim arrangement and a new procedure will be implemented to determine the Community budget. There is an interim period in which, if this arrangement is not carried out, there could be a financial crisis in the Community.

The Minister said that we did not consider the original arrangements satisfactory. I take it from that that we also advocated this change in budgeting in the Community and that, as a result, we will benefit this year alone by about £20 million. In other words, our expected contribution is £20 million less. That begs the question as to who pays for the deficit. We are a major beneficiary in the Community but surely there must be a problem with those who are major contributors to Community funding. One remembers the efforts of the English as a member of the Community to change the procedure in the past. There was a major improvement in regard to Britain's contributions to the budget. As one of the major contributors, their Prime Minister indicated in her tough battles that Britain, as a member of the Community, has a mind of her own. I do not think they ever really aspired to being Europeans in the same sense as we did in the Irish Parliament. That point has been alluded to by Senator Fallon. We have performed well in Europe and it is to our credit and benefit that we should do so because we are a major beneficiary.

If the new system is changing and we as a net beneficiary, will benefit by £20 million, what effect does this have on the other members? If it is not binding under the Treaty of Rome or any other Treaty and it is only a governmental arrangement as of now, is this likely to create further problems in future years when we decide on our own resources within the Community? Because of the 1 per cent clause Ireland, as a net beneficiary, was in danger of losing many of the improvements that had been promised to us through CAP, FEOGA and Regional and Social Funds. Many people realised that unless this 1 per cent levy on the VAT base was increased there would be a financial crisis. By increasing that to 1.4 per cent it showed some light at the end of the tunnel for European Community funding.

There are also other customs duties, agriculture levies etc. It is recognised, particularly by the farming community, that things will never be the same again as regards European income. Much play has been made about the £10,000 million that we have received in the years 1973-87. The question arises as to where that money was spent. Farmers say that much of the money that is allocated to agriculture from Europe rarely gets as far as the farm gate, that because of bureaucracy and other arrangements they never really benefit. Perhaps the Minister might avail of this opportunity to explain to people where this money was spent. Reference has been made to infrastructural work, road works and so on. People seem to think that the agricultural sector is one of the major beneficiaries but the agricultural community would disagree totally and say that the money does not come past the farm gate, so to speak. Perhaps the Minister, in mentioning that our net contribution this year is £252 million, might tell us what is our net income this year, or even last year, from the Community so that we can see in comparable terms what we give and what we get back. Everybody knows that we are a net beneficiary and that we get more than we give. It would be nice, instead of giving a figure of £10,000 million for a number of years, if the Minister would give us the latest figure in regard to the income for this country from our membership of the Community.

Briefly I want to mention the agreement on the Structural Fund which will make a significant contribution to cohesion. Everybody is now worried about 1992. It is obvious that 1992 will bring with it some problems for this country, particularly in the area of taxation and VAT and in many areas on which, at the moment, individual decisions are made by the member states. All of them will have to get together in 1992 and have a common base on these matters. This will pose some problems for us. I know the Minister has made public statements in this regard and seminars have been held. The business community and everybody else are trying to prepare themselves to the best of their ability.

I am worried about the Government's attitude to regions. What regions have the Government decided will be beneficiaries from the Regional Fund or will the Government decide on the regions? The Government have abolished the regional development organisations which were set up to prepare plans and programmes for specific and recognised regional boundaries like South Tipperary which is in the south-east region. The south-east region has been excluded from a development point of view.

An Cathaoirleach

Senator Ferris, is that relevant to the Bill?

Mr. Ferris

It is. We are talking about the net benefit that will accrue to Ireland from the cohesion the Minister mentioned in his speech, and about the Structural and Regional Funds. What agreement has been reached on the regions? Mention was made of Dublin city as a region and of the west of Ireland but there has been very little indication as to how regions will benefit and what the regions will be.

The Single European Act gives county councils and other agencies at county level the ability to make a claim directly to the European Community for funding. The procedure is now available whereby this funding could transfer directly back to the applicant. One of the problems at the moment is that all applications go to the Department of Finance. As the Minister is here this is an opportunity to ask him about this. We all make plans and submit them to him for approval. They are then processed through Europe, the money comes back to the Department and they distribute it at their discretion. Admittedly, all these schemes are approved and are correct schemes. How are priorities formed by the Department?

Many of us who are members of local authorities see the need for the Structural and Regional Funds, money that is not available through FEOGA or the other agricultural funding, particularly regarding river drainage which benefits tourism and industry but is considered in Europe as being an agricultural procedure. Anything that might improve agriculture usually gets downed in Europe because it is considered to be an incentive to agricultural production which, in the minds of some of the Eurocrats, is a major problem. I am just looking for some of the answers to questions that are being asked around the country. I hope the Minister will welcome the opportunity to avail of this forum to spell out the figures that I have asked for and to tell us the Government's attitude towards regional areas.

The disadvantaged areas should know whether they are going to benefit, whether the budget of 1988 which the Minister has mentioned here includes the redesignation of disadvantaged areas and when funds are likely to flow back into those areas? I know that the question of additionality comes into all our funding. Whatever we get from Europe, they expect us naturally to put up some funding ourselves. There are no handouts in life anymore and the Minister has always advocated that policy. If we are looking for money for Ireland we have to be able to put up some funding. Has the Minister made an allocation for funding, particularly for the disadvantaged areas so that they can get approval in the European Community?

Minister for Finance (Mr. MacSharry)

I thank Senators for the welcome they have given to the Bill, the important points they have made about it and the acceptance of the points that I have made in my initial remarks. I have to compliment them on their understanding of what is involved in this Bill. It did not fully follow through in the other House but at least here we have full and complete understanding of what is involved.

Mr. Ferris

Ths usual understanding.

Mr. MacSharry

I appreciate that. Before dealing with a couple of points that have been raised, I thank the House for their co-operation.

Senator Bulbulia rightly said that we have had far too many years of this squabbling about the annual budgets of the EC which did not help plan or co-ordinate the efforts of the Commission and the Community generally in assistance for member stales, in particular for underdeveloped slates. We had this problem each year. The Council of Finance Ministers last month confirmed the inter-institutional agreement which is agreed between the Commission, the Parliament and the Council and this augurs very well for the future up to 1992. We are honouring our commitment in that regard through this legislation.

We amended the Bill, as Senator Bulbulia has said, to put in £40 million. All sorts of constitutional questions were raised outside but we did not feel that it was a constitutional question at all. Because it is technical legislation we were not going to have any sort of major constitutional argument on it. We thought of it as very minor legislation and we just amended it to "not greater than £40 million". The question has been asked by Senators: where has all the money gone? We have all asked ourselves that question, but there are answers. All of us in our own way in elected office can see where it has gone. Senator Farrell rightly pointed to a number of projects he knows of and I am sure there are others. Prior to 1973 we were making substantial progress in relation to a number of issues and that progress has been accelerated enormously with the input of EC resources for roads, housing, water, sanitary services, telecommunications, electricity, factories, employment, training, not to speak of the major transfer of resources under the agricultural support measures.

I should like to give some figures about the transfers to Ireland. The gross transfers over the period 1973-87 were about £8,000 million. Almost £5,000 million was paid through the FEOGA guarantee system, that is, for giving our farmers guaranteed prices and markets. A further £450 million was spent through the FEOGA guidance section of the budget and that substantially contributed to the development of the infrastructure for the agricultural community. A total of £580 million came through the regional fund and £870 million through the Social Fund. There was a further £230 million, approximately, that came in interest subsidies after we joined the EMS in 1979. Those are the main headings of the budgetary transfers from the EC to the Exchequer.

Senator Ferris asked how the Department of Finance got their hand on all that and decided how it was going to be spent. That is not the way the system worked. The channel has been the Department of Finance and that continues to be the position. Government and departmental decisions eventually lead to requests for funds from the EC and they are subsequently channelled through the Department of Finance. One has to have some co-ordination in this regard and, obviously, the Department of Finance, not because I am there, were the best vehicle to ensure that there was proper co-ordination.

Mrs. Bulbulia

In some parts of the country it is felt that they have a dead hand over these matters.

Mr. MacSharry

I would not say that; they do an excellent job. Senator Ferris also asked if we advocated the change. We were pushing for a full GNP system but, obviously, that would have some serious cost effects on some member states. They would have to pay much more and a compromise was reached between the two. We are happy about that. It has been agreed by Heads of Government, but it still awaits the other formal arrangements that are necessary before it comes fully into effect. We need this legislation to enable us to honour our commitment under the intergovernmental agreement of £32 million approximately.

I would also like to say that we will continue to benefit substantially as I said in my initial remarks, from EC sources. A question was raised about the receipts for 1988. It has not been the practice to give what we expect in the current year, but I can tell Senators what was the position in 1987. We had something of the order of £1,100 million of receipts in 1987 and the breakdown of those was as follows: £739 million under the guarantee section of FEOGA; £682 million under FEOGA guidance; £193 million under the Social Fund; and £87 million under in the Regional Fund. There were other smaller miscellaneous measures after that. That year we had £1,100 million of transfers from the EC budget and we paid them approximately £255 million. We expect that there will be an increase in the transfers because those figures I gave for the FEOGA guarantee section are only for ten months of the year. They should be much greater for the 12 months of 1988. I have answered most of the questions that were raised. If there are any others, I am sure Senators will pick them up on Committee Stage.

Mr. Ferris

Has the Minister made decisions about the designation of the regions?

Mr. MacSharry

There are two things I should mention and that is one. The other relates to the awareness campaign which will be got under way next Monday by the Taoiseach. It is known, and has been publicly stated on a number of occasions, that we have probably one of the most high-powered committees that could be set up in the country, chaired by the Taoiseach and representative of the Ministers concerned and the Secretaries of their Departments. They have been meeting on a weekly basis for some time looking at all the implications of 1992, whether it is the structural funds, the FEOGA funds, the overall creation of the internal market, the fiscal measures and so on. We will now start the Government's programme to make all concerned aware of what is involved between now and 1992, the opportunities and the challenges.

We welcome the publicity given to it. While we might not agree fully with all the statements made by other political parties we welcome every opportunity to make every man, women and child here aware of what the opportunities, the challenges and the problems will be between now and 1992. We all have — particularly those of us in elected office — a responsibility on our shoulders to ensure that everybody is made fully aware of what is involved between now and 1992. We have not decided yet on what areas will be designated for the preparation of programmes. There will be, in that context, a national plan. We have already decided, and the Government have announced, that there will be a programme for the Dublin area, the greater Cork area and the west. Areas outside Dublin have not been fully decided upon, but they will, I am sure, fit into whatever is ultimately decided in relation to the programme approach that we must now pursue in the EC. For all areas, whether they are designated on the basis of health board areas, regional development areas, Euro constituency areas, or county areas, programmes will be prepared that will fit into the national plan. They will be submitted to the EC to ensure that we have sufficient programmes before them to guarantee doubling of the funds between now and 1992.

Question put and agreed to.

Bill put through Committee, reported without recommendation, received for final consideration and ordered to be returned to the Dáil.