I move: "That the Bill be now read a Second Time."
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.
Under the system in operation up to now, the EC budget contribution of each member state has comprised customs duties, agricultural levies and a percentage of the VAT base. From 1986, the maximum allowable percentage was set at 1.4 per cent but this percentage was already reached in that year, clearly limiting the scope for any further expansion of community expenditure. In addition, the VAT system was not fully satisfactory as it did not represent fairly the relative wealth of member states, since the VAT base varies quite a lot between states 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 and the new agreed system reflects this. It provides that the VAT contribution of 1.4 per cent 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 GNP rather than on the higher full VAT base. The balance of the contributions will be raised on the basis of the share of member states' GNP in total EC GNP. As well as changing the composition of contributions under the own resources system, the European Council took a decision on the overall level of revenue which will be available to the European Communities: this will involve a new ceiling of 1.2 per cent of Community GNP for payment appropriations. In the past we have experienced a succession of crises related to the EC budget. There have been continuing shortages of funds to fulfil obligations and dire warnings of impending bankruptcy. On reasonable assumptions, the new arrangements should guarantee adequate funding for Community policies for a considerable period ahead.
While it is intended that the new system will apply for 1988, the procedure required to bring a new own resources decision into force at Community level is somewhat cumbersome and is unlikely to be completed until late in the year. In order to provide adequate revenue for the 1988 budget in advance of the completion of the 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 and it is necessary for me to seek specific approval for this extra payment for technical reasons. As you are aware, 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 1988 at the ECOFIN Council is by its nature a voluntary undertaking and it is not possible to make payments under it without this new legislation. Some of you may recall that similar legislation was required in 1984 to allow payments under undertakings given in 1984 and 1985.
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 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. This is the amount expected to be required under the intergovernmental agreement. I want to emphasise that this is not additional expenditure and that it is already taken into account in our figures for 1988.
The figure of £32 million is not finally settled yet but I have no reason to believe that there will be a significant variation on this. Concern has been expressed from the Opposition benches that this Bill does not set an upper limit on the amount which can be issued from the Exchequer in respect of this agreement. While I do not accept that it is necessary to specify a limit in this case, I am prepared, in order to allay any concern, to introduce such a limit by way of amendment on Committe Stage. I propose to set this ceiling at £40 million to allow for the possibility, however remote, of an increase in the estimated contribution.
Our contribution to the Community budget is substantial 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 £6,000 million in the years 1973-1987 or about £10,000 million in 1987 prices. 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. The package agreed by the European Council in Brussels on 11-12 February ensures that the Common Agricultural Policy will be broadly maintained with moderate real increases in expenditure and that the provisions for the Structural Funds will be doubled in real terms by 1993. This 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. While there may be a growing awareness that the deadline is 1992 and that this is no longer in the distant future, the evidence so far would suggest that there is not sufficient appreciation of this. We are by no means an exception as the same problem is being encountered in other member states. The Government will be taking steps shortly to create an adequate awareness of what the changes could mean for our economy and what is required to get the maximum benefit from the new order of things.
Completion of the internal market will offer us substantial new opportunities provided we are adequately prepared to take advantage of the situation. Some of the adjustments required of us will be difficult. In an entirely open market we will stand to lose heavily if we fail to manage our affairs properly and we should be in no doubt about the importance of this. The Government's approach to preparation for the internal market will be positive. We will press ahead as soon as we reasonably can with changes to meet our new obligations.
All Deputies will be aware of the importance of the provision of sufficient revenue for the continuation and expansion of Community expenditure programmes, not alone in terms of their financial benefits to Ireland but more generally in their contribution to the development of the European Communities.
I commend this Bill to the House.