HC Deb 19 January 1965 vol 705 cc18-20
36. Mr. Bruce-Gardyne

asked the Chancellor of the Exchequer what progress has been made to date in the negotiation of contracts with the Federal German Government under the terms of the 1964 agreement for offsetting the cost across the exchanges of British troops in Germany.

Mr. Callaghan

The position on individual contracts is confidential to the firms concerned, but, as my right hon. Friend the Prime Minister said in his speech in the House on 16th December, we can at present see no firm prospect of receiving more from Germany, by way of offset payments, than perhaps £25 million to £30 million.

Mr. Bruce-Gardyne

In the absence of any clear assurance from the Germans that the position regarding the cost of the Rhine Army can be improved, would the right hon. Gentleman consider with his right hon. Friends the possibility of reducing these costs by stationing some of these troops in this country at the end of an airlift and returning them to Germany as early as possible in the event of an emergency?

Mr. Callaghan

That opens up another question. On the finances of the matter I very much regret that the agreement entered into has made the position on the balance of payments so much inferior this year compared with what it was. This year, the net cost to us is likely to be £50 million. Before the last agreement was signed the net cost to us was only of the order of £17 million a year. Therefore, we are having to pay another £30 or £40 million across the exchanges.

Mr. Shinwell

As it has been found impossible to effect a satisfactory financial agreement to reduce the deficit in the balance of payments arising from the presence of large numbers of troops in Germany, would it not be advisable to begin to withdraw many of them instead of imposing a heavy burden on the British taxpayer?

Mr. Callaghan

I am sure that the presence of our troops in Germany has been of value to the German people and to the peace of the world. I hope that that factor will be taken into account in considering the cost which this burden imposes on our balance of payments and on the British people.

Mr. Boyd-Carpenter

Is not the right hon. Gentleman aware that the source of the trouble is not the agreement signed last summer, which contemplated a very large measure of offset of our foreign exchange costs, but the German performance?

Mr. Callaghan

I do not think that that is quite true. The original agreement provided for specific figures. Unfortunately, the last agreement stated that the Germans would do their best. I am sure that they are doing their best, but, alas, it does not match up to the figures in the original agreement.

Mr. Boyd-Carpenter

Would the right hon. Gentleman reconsider what he has just said about the Germans doing their best? Will he contrast the achievement of the Germans in the last few months in the implementation of the agreement with ourselves with their much more successful efforts under their agreement with the Americans?

Mr. Callaghan

I think that there is a lot to be said for the way in which that worked out, but I am operating within the limits of the agreement which the right hon. Gentleman signed, and he must take his responsibility for it.

Mr. Michael Foot

Would my right hon. Friend tell us which potential Leader of the Opposition signed this disadvantageous agreement?

Mr. Boyd-Carpenter

As the Chancellor of the Exchequer has referred to the limits of the agreement within which he is operating, may I ask him whether he is aware that the limits of that agreement are a full offset of our foreign exchange costs?

Mr. Callaghan

That really is not true as an interpretation of events. The right hon. Gentleman knows that he found it very difficult to get a figure written into the agreement in continuation of the old figure—this has been made public—and he therefore signed an agreement which put in no figures but which said that the Germans would do their best. When people are doing their best, there can be different constructions on how much their best amounts to.