HC Deb 09 May 1967 vol 746 cc1281-414

Order read for resuming adjourned debate on Amendment to Question [8th May]: That this House approves the statement contained in the Command Paper, Membership of the European Communities (Command Paper No. 3269.—[The Prime Minister.]

Which Amendment was, to leave out from 'House' to the end of the Question and to add instead thereof: 'regrets that Her Majesty's Government, having failed to inform the country of the estimated results of Great Britain's entry into the European Economic Community, have nevertheless declared their intention of applying immediately for entry, leaving substantial matters to be negotiated thereafter, and thereby causing anxiety to our partners in the Commonwealth and the European Free Trade Association and creating the probability of injurious repercussions on British sovereignty and the rule of law, on the price of food, on the balance of payments and on the rôle of sterling in the world'.—[Mr. Turton.]

Question again proposed, That the words proposed to be left out stand part of the Question.

Mr. Stanley Orme (Salford, West)

On a point of order, Mr. Speaker. Has your attention been drawn to an Amendment——

Mr. Speaker

Order. I thought that it would help the House—and answer the point of order about to be raised by the hon. Member for Salford, West (Mr. Orme), which he has put in anticipation—if I were to put the House in possession of the position as now I see it. I see that there is a new Amendment on the Order Paper in the names of the hon. Gentleman the Member for Houghton-le-Spring (Mr. Urwin) and his hon. and right hon. Friends. The Amendment which I have selected, that in the name of the right hon. Gentleman the Member for Thirsk and Malton (Mr. Turton), is the Amendment before the House.

At the end of the debate tomorrow night, the first Question that I shall put is the Question we are now considering, That the words proposed to be left out stand part of the Question. If this is carried, there is no possibility of further Amendments, and I am then bound to put the Motion itself as the main Question.

If, however, the first Question is defeated, the second part of the Amendment which I have selected must still be disposed of, by being agreed to or by being negatived, before any other Amendment can be considered. I hope that that is clear.

3.38 p.m.

Mr. Edward Heath (Bexley)

Once again, Mr. Speaker, we are debating the question of an application for Britain to join the European Economic Community. The House will understand if I say that this is a pleasurable occasion for me personally, even though it may be a somewhat nostalgic one at the same time. What we are debating today is not an isolated incident, however important that incident may be. It is, I believe, part of the wide sweep of European history, and to treat it otherwise is both to exaggerate the importance of the incident itself and to under-estimate its importance in the historical perspective of Europe as a whole.

The theme of Britain's relations with the rest of Europe has run throughout all our history. Over many centuries we have tried to prevent the development of unity on the Continent, and we have done so in order to bring about a balance of power and to prevent the domination of this country by any combination of other countries. But, since 1945, we and other countries have worked, at times desperately and passionately, to bring about a closer unity in Europe to try to prevent an outbreak, once again, of internecine warfare between old traditional peoples and, at the same time, to try to establish a better position of balance between Europe and the two great super-nuclear Powers which have emerged during and since the last war.

The theme of European unity has been the theme which I have put before this House since my maiden speech in June, 1950, when the then Labour Government, after a long and extraordinarily interesting debate, finally rejected the Schuman Plan proposals. We all recognise how very different things might be today if that decision of the House had also been different. Then there followed a period when we as a Government took little part in the Messina Conference which produced the Treaty of Rome. There was the attempt to get the Free Trade Area which, despite the hard work of my right hon. Friend the Member for Barnet (Mr. Maudling) proved abortive, and finally the application for membership in July, 1961.

Now this fresh application is being made and is often termed historic. This. I think, is probably a misnomer, because one application has been made. What I think is historic is that the present Labour Government and the party opposite have brought themselves to make application for full membership. This, I believe, fits into the wide sweep of European history, particularly in the post-war period. So in the House today both major parties and the Liberal Party are now broadly in support of full membership and I believe that in the Divisions which are to come at the end of this debate that will be shown.

We as a party, as we were as a Government and as we are as the Opposition today, are committed to this European policy. We have been so since 1960, through the negotiations and all through the party conferences. Of course, I respect the views of my hon. and right hon. Friends who have throughout this period consistently and with integrity differed from me and the policy I have been putting forward as the policy of my colleagues. Now we have the Leader of the Government and the great majority of his party and most of his colleagues behind this policy. So we on this side of the House are backing the Government's application. I wish that to be known everywhere. This clearly demonstrates that the great majority of the House of Commons are backing it also. What is important at this juncture is that this is all history and must make its own impact on Europe and make its impact as it has never made it before.

We therefore hope that the negotiations will be successful and we shall do everything that lies in our power to make them so. Of course, we shall not pursue protectionist interests purely for political reasons. We reserve our right to examine the negotiations carefully and closely because that is our duty as an Opposition, but whatever the outcome on this occasion Europe can see that now Parliament as a whole wants to bring about British membership of the European Economic Community.

This is not just a flash expedient of the moment. I have always regarded the European policy as a long-term policy in every respect. It is a long-term policy if we are to be accepted as a member of the Community. That is so under the Treaty. If the application is not successful on this occasion I believe that this should remain the objective of British policy in the long term, also. The Prime Minister mentioned the alternative and I shall deal with that later in my speech. I believe that this policy is one on which the great majority can now agree. That is the real historic significance of this debate and one which Europe must not fail to notice.

The Prime Minister and his party have come a long way during the last six years, indeed during the last six months, even the last six days.

Mrs. Renée Short (Wolverhampton, North-East)


Mr. Heath

Yes, I agree with the hon. Lady.

Those who watched "Panorama" must have thought that the Prime Minister has moved fast, since after his speech in the House there was a firm commitment to increase old-age pensions—we knew that before the election—and now it is being connected with Europe. The speed of the convert gets greater just as he thinks he catches sight of the Holy City and gets nearer. At the same time, the memory of what it was like once to be an infidel becomes very much weaker. That we notice from the Prime Minister's speech yesterday.

A week ago today, when I asked the right hon. Gentleman whether he accepted the Treaty of Rome, for the first time he enunciated unequivocally, "Yes". I was delighted that in his speech yesterday he gave every impression not only of having accepted it, but, even if he did not write it, of having discovered the document itself. We accepted it in 1961. I understand from what he said that the Prime Minister now accepts the common agriculture policy intact and the levy system.

Only a year ago, at Bristol, he made those memorable remarks—I am sure that the Prime Minister wants to hear them again— we must be free to go on buying food and raw materials, as we have for 100 years, in the cheapest markets …"— Now, of course, the dash does not matter at all— and not have this trade wrecked by the levies the Tories are so keen to impose …An unacceptable increase in the cost of living … An unacceptable increase in our imports bill … A total disruption of trade with Commonwealth countries. That was a year ago. All that has gone. What is more, the Prime Minister has accepted the common tariff, the loss of preferences and the creation of reverse preferences. The Prime Minister even now believes that the Labour Opposition accepted this and supported it in 1961–62. I suggest that the Prime Minister should go back and look up the record to see what was said by the then Leader of the Opposition and himself about reverse preferences in 1961–62.

Then we come to the question of E.F.T.A. Now the Government have abandoned the London Agreement, too. This needs to be put firmly on the record. They had the agreement that all members of E.F.T.A. should come into the Community at the same time as we as full or associate members. The Government have now abandoned that. They set such store by it in 1961, indeed, I remember the right hon. Member for Leyton (Mr. Gordon Walker) telling me that I must not even conclude negotiations until all the E.F.T.A. negotiations had been concluded. Well, that was an option for delay if ever there was one, but this is the point which the Government have now reached: they have abandoned the E.F.T.A. Agreement.

There is, of course, still the myth in which the Prime Minister persists that these negotiations were long-drawn out. It was his own Leader of the House of Commons on 7th November, 1962, who said, as he had already said at the Brighton conference, accusing us of hurrying negotiations, "Why don't you delay, break off negotiations, have a pause and carry them on and see how you get on?". That was what I was being asked to do. This is another myth that we were being urged to get on and that there were long delays. This time, we shall watch the progress of the negotiations. Already, last night, the Prime Minister was laying down a timetable. I suggest to him that it is unwise to say that the negotiations will be through by Christmas. That is only urging others to cause embarrassment. The Prime Minister would be wise to eschew time-tables of any kind.

Finally, there are the special arrangements for which the right hon. Gentleman is asking. The Prime Minister mentioned yesterday in his speech the arrangements we negotiated for association for independent territories in Africa and the comprehensive trade agreement with certain Commonwealth Asian countries. I understand that he wishes to take this up from the point at which we left it. The Secretary of State for Commonwealth Affairs mentioned special arrangements for the older Commonwealth countries. We expected that there would be special arrangements which again will be the tariff arrangements which we negotiated. No doubt the Minister of Agriculture—I am glad to have the Prime Minister's endorsement—will say that he wants to take up the Price Review which was negotiated by my right hon. Friend. I see that I have the agreement of the Minister of Agriculture to that.

The Government are, in fact, taking up the greater part, at any rate, of the arrangements which we negotiated. After the Kennedy Round, if there are no commodity agreements, no doubt the Minister of Agriculture will want to take up the preference which we negotiated for cereals for the old Commonwealth and various other arrangements of that kind.

We have heard nothing about voting rights, which were of immense importance in the debates in the House in 1961 and 1962. Perhaps the Prime Minister is now content to adopt the voting rights arrangement that preserved the two-thirds qualified majority voting position and has worked out a similar position to what we had before. So all these things the Government have decided to take up.

As to the Commonwealth in Africa and the West Indies, gone are the cries of neo-colonialism. Gone is the idea of the rich man's club. It is now a very acceptable position to have established. As to the industrial tariffs with the Commonwealth, gone is all the derision on the kangaroo meat which, in fact, took only about five seconds. What they are going to take up is all the industrial tariffs which we negotiated during the course of those hard-drawn negotiations.

All this gives us cause for great satisfaction. [Laughter.] It gives great satisfaction to those who did the work. It gives one even greater satisfaction when one reads what the Prime Minister said about this at Bristol, when he talked of the unacceptable terms the Conservative Government was ready, even willing, to see imposed upon it". The Prime Minister is taking practically every single one of them.

Then, what did the right hon. Gentleman say about the terms when he looked at them in 1963? I wish to remind him of this. He said that the terms already constituted a national humiliation." —[OFFICIAL REPORT, 11th February, 1963; Vol. 671, c. 963.] Those were the Prime Minister's words in describing the whole of the agreement that he has now come to the House and said that he is to accept and take over willingly.

The Prime Minister justifies all this on the grounds that the Community has changed. What the Community has done is to develop, and it has developed along the lines laid down in the Treaty of Rome and exactly as foreseen in 1961. It is not the Community which has changed. It is the Prime Minister who has changed. I am delighted that he has done so, but perhaps it would also be more honourable for him to say that he has changed and that he has accepted everything which was done before.

The Prime Minister has described the position in the Community. I differ with very little of what he has said in expounding the position as it exists today. I agree particularly with what he said about New Zealand and about the constitutional position, which he described in some detail and which corresponds to the view which we ourselves held.

Perhaps on taxation and on the value-added tax the Prime Minister was somewhat disingenuous, because I think that he will find that it is a tax which comes in automatically in 1970 and that we shall require to accept it if we become a member. Also, the Prime Minister is perhaps labouring under one misapprehension about the Luxembourg Agree- ment. This was an agreement to differ. It was an agreement which, in fact, represented what one had always known, that the Community would not break on any major item of policy. It is not an agreement which removes supranation-ality from the Treaty of Rome. I therefore hope that there will be no misunderstanding about that. This particularly applies, I believe, to the neutral countries of E.F.T.A.

I want now to deal very briefly with three or four points about the forthcoming negotiations themselves. We rely on the Prime Minister and his colleagues to give the House the fullest information. He has often mentioned an opening speech we made. We wanted those negotiations, like any others, to remain confidential, because that gives much more flexibility to those who take part. But it proved to be impossible. I believe that it would be a mistake to think that it will be possible in Brussels, with a negotiation involving so many countries spread right across the world. Therefore, as we did afterwards, let us make the whole of the information available as soon as possible.

If the Prime Minister and his colleagues are to carry this through, it will mean a constant flow of information and argument to the public. We have had experience of the arguments which can take place about this great matter and the way in which public opinion over a time can be eroded by the constant impact of arguments which are not answered. Only the Government have the power and the resources to do this job. Therefore, I urge them most strongly to do it as well as they possibly can.

In the House last November I put forward proposals for handling this matter. Very briefly, they were that the Government should accept the Community as it is, that they should then negotiate all the transitional arrangements right across the board, and that they should take up the special arrangements which we had negotiated in so far as they wanted to do so. I suggested that there should be detailed discussions at a high official level on the transitional arrangements and on the special arrangements after the declaration of intent. I suggested that this should be done in order to have as short a negotiation in public as possible.

I went on to list four other major items—the I.M.F. debt, the sterling area, the political organisation, and defence. I listed these as problems to be discussed beforehand so that it would be possible to see a way through the negotiations. Personally, I still believe that this was a method which could have been used very profitably. The Prime Minister has chosen his own way of doing this and, quite lightly, as he is entitled to do, his own time to do it. We must wait and judge this on the results.

The Prime Minister told me in answer to a question when he made his first statement a week ago that he had to do this without knowing what the reactions of other countries would be. That was a very frank statement and set out the position very clearly. It raises a question as to exactly what emerged during the probe which the Prime Minister was making and whether he ought not to have gone further to try to find the attitude of other countries before engaging in the negotiations. I think that one of the reasons why he could not discover their attitude was that he stated the problems, but was not prepared to state the possible solutions. Therefore, he was not able to get the reactions of the other countries in the Community to specific proposals which were being put forward.

On the solutions, I would like to propose this. First, the Government must put forward what I would term Community solutions, solutions which are on a Community basis, which are consistent with one unified market, and solutions which affect the Community as a whole; because this is the structure and the nature of the Community. Solutions which are put forward purely from a national point of view, except as a transitional phase, will not be accepted by the Community as a final solution. [Interruption.] I have said this before, but I repeat it, because I believe that it is essential if we are to have a successful negotiation, which I want.

The Prime Minister will find that other members of the Community are just as insistent on this as the French Government. This is not a matter of one Government. This is a matter of all members of the Community and the Commission.

It applies particularly to the financial regulation, on which the Prime Minister spoke at some length. During the last negotiations we were able to take up a position. We accepted the regulation as it then was. Now it has further developed. The problem here is that, where there is one market, it should not matter into which port either foodstuffs or industrial goods come if there are levies or tariffs on them.

This is not, therefore, the prerequisite of the port or the country of the port itself. This must be the case with one unified market, in exactly the same way as it is in this country: if goods come into London, Southampton, or Liverpool, then the Customs duties or dues of all kinds go to the centre and not to the port of entry. The problem is that with a unified market, but separate currencies, there can be a balance of payments problem.

This is the difficulty. Therefore, what has to be reconciled is the nature of the market, in which there is this logical answer, and the problems with foreign currency which it presents or can present while there are individual currencies. There can be no doubt that the logical conclusion in a complete market is to move over de facto or de jure to a common currency, because this is the only way in which stresses and strains of this sort can be avoided and in that way the logic of the market kept intact. I wanted to give that as an illustration of the particular problem which the Prime Minister and his colleagues will come across in the negotiation.

The Prime Minister (Mr. Harold Wilson)

Before the right hon. Gentleman leaves that point on the financial regulation, may I put this question to him? Is it his point that, in the negotiations, apart from transitional arrangements, we should not seek any changes, as, for example, Germany did in the matter of a ceiling on the financial regulations, but we should accept whatever is the present position, with adequate transitional arrangements? Does he not feel that perhaps it is a little inequitable that we should be paying more than the other Six put together? Is that a matter about which he would negotiate, or pass over?

Mr. Heath

It is inequitable so long as there are individual national arrangements for currencies, and during the transitional stage, but from the point of view of the full unified market into which they will be moving, with the financial regulation, in 1970, the logic is that the funds go to the centre. It is logical, also, that, according to gross national product or population, the funds should be distributed afterwards; that also, is a matter for negotiation. There is no doubt about it. If the right hon. Gentleman raises that point, there is also the point he will have to face as to what is to happen about Customs dues in 1970 as well, because exactly the same problem arises and the Community has to face it.

The second point I make here is that the solutions must be reasonable and practicable for the transition period. This applies particularly to agriculture. I was glad to hear the right hon. Gentleman say yesterday as a general point—but it applies particularly to horticulture, I think—that the Government ought to use Community and national resources to bring about changes where required. This is absolutely true, and I hope that the Government will work out plans to do it.

Third, there is the question of the lesser items in the negotiations. The Prime Minister owes it to the House to say what the lesser items are. This is not a question of holding the cards close to one's chest. If things are to be left to be settled in the Community, the Community should be told so, and so should Parliament. If they are matters which the Community has not yet settled, it is right to leave them to be settled later. I think that it was a mistake on our part to try to negotiate and settle matters for the future which had not already been settled in the Community itself. This proved to be impossible, and I believe that it will be impossible again. Apart from that, the situation is that there is a policy and that this country has either got to move by transitional arrangements to what exists or go straight away to what exists. I do not understand how it can be left unaltered until we get into the Community. So I hope that the Prime Minister will state what the lesser items are.

The transition period, which covers the whole board, does not automatically produce results for this country. Positive action must be taken to bring about a change-over from this country's position in industry and agriculture to the position of the Community. This requires new economic policies to enable industry to adapt itself, and in some cases new fiscal policies. In particular, if the Prime Minister is worried about capital movement, either direct or portfolio, the answer in the Community, once we are in the Community, or while we are going into the Community, is to bring about a state of affairs in this country in which people will not want to move portfolio investment out into Europe or direct investment out into Europe either.

That is the real answer to the anxieties which the right hon. Gentleman has about portfolio and capital investment. [An HON. MEMBER: "The right hon. Gentleman did not deal with it."] We did not have to deal with it because it did not exist in the Community.

Mr. Robert Maxwell (Buckingham) rose——

Mr. Heath

No, I am sorry. The hon. Gentleman is one of my friends from whom I wish sometimes to be saved.

I turn now to the economic situation, which has concerned the House very much and which the Prime Minister discussed—the problem of sterling and the balance of payments. I hope that the Prime Minister will not underestimate this problem and its connection with the negotiations. The hon. Member for Ebbw Vale (Mr. Michael Foot) was absolutely right in the emphasis which he put upon it yesterday. There are very real problems about the sterling area and the balance of payments in negotiations at this time. They are well known here, and the Prime Minister will find that they are just as well known in Europe.

The right hon. Gentleman has constantly harped upon the fact that the Motion on which he and his right hon. and hon. Friends voted against us when we went into the negotiations accused us of going in on a weak situation, and today, he says, it is strong. Sterling today is at 2.79⅞, still below par at 2.80. When we announced the negotiations it was 2.81×E;, and when we went into the negotiations it was slightly higher than that. That is the comparison between the two sets of negotiations, and it is good to have it on the record.

The balance of payments situation may be improved. The Prime Minister has said that everyone in Europe will recognise that it is one of the strongest. Has he compared it with the Federal Republic of Germany, one of the countries with which he will be negotiating? In the first quarter of this year, the monthly surplus balance of trade was £130 million in sterling terms—£130 million a month, I ask the House to note—and that is the context in which the Foreign Secretary, or whoever it is, will be negotiating.

The Chancellor of the Exchequer (Mr. James Callaghan)

Much too high.

Mr. Heath

The Chancellor of the Exchequer says that it is much too high, but he would not say it if he had that balance himself. Our balance of payments, of course, is brought about by acute deflation and a situation in which the trend of unemployment is still upwards and production is stagnant.

If the Prime Minister is to address himself to these problems, he must be able to show that this is not just a question of an improved balance of payments with deflation, but that he can carry it through during the next few years, to the end of the transition period, and get expansion, still maintaining a surplus on the balance of payments. This is what the right hon. Gentleman must be able to say to the Europeans with whom he is negotiating, and he cannot be effective by just trying to sweep it under the carpet.

Mr. Emrys Hughes (South Ayrshire)

Does the right hon. Gentleman want him to be effective?

Mr. Heath

Yes, I do, and that is why I am asking the Prime Minister to face the reality of the situation. He will have to face it in the negotiations once he starts. Everyone in Europe knows that he has £900 million worth of debt to repay——

The Prime Minister

That is the right hon. Gentleman's debt.

Mr. Heath

—and that will take our balance of payments for years to come. This is recognised in Europe. The Prime Minister will have to have policies to deal with it, and he must face discussion of it in the negotiations.

In a brilliant phrase yesterday, the hon. Member for Ebbw Vale said that the Prime Minister was cooking uncaught hare and dishing it up with lots of sauce as well. But that is what the Government have been doing. They have been asking us to live on uncaught hare during the past two and a half years. This is absolutely typical of them, but it will not wash.

Now that the Prime Minister has been able to relax once again, I put this point to him. His own proposal to exclude sterling from Article 108, when it is not concerned with balance of trade factors, raises a difficult argument to substantiate. Obviously, he attaches great importance to it, but how can one distinguish factors which operate outside the balance of payments?

The right hon. Gentleman instanced the case of Australia running down her reserves. But this, of course, is bound to affect gold and dollar reserves; it is bound to become known in the normal publications. It can undermine confidence, and then it has an effect on sterling. It is impossible to differentiate one from the other. The second argument against it is that it is not a Community solution. It is an attempt to isolate this country from the Community on a particular item, and, in that respect also, I suggest that it is not the sort of solution for which we ought to work. The Prime Minister will find out whether this will be acceptable as a solution to the sterling area problem, and will have to discuss it further in the negotiations.

I want to deal with the general question on the economic side of the alternatives. The Prime Minister said that there are some alternatives. He did not put them forward, and I think that that was wise, because they are not a bargaining counter and it is better not to put them forward. I can deal with them. I can say that the Prime Minister did not indicate that there is any Commonwealth solution. All the proposals he used to put forward for bulk-buying agreements have disappeared. He no longer believes in them as an alternative to a European policy. In that he is quite right. He mentioned new economic groupings, presumably thinking of the American free trade area, and said that this was not a current solution. I believe that that is also right.

My right hon. Friend the Member for Kinross and West Perthshire (Sir Alec Douglas-Home) mentioned a free trade area of Canada, possibly Australia, possibly New Zealand, possibly the United States and possibly E.F.T.A. I do not believe that that is a current solution, nor one which secures support in other areas. The main alternative is to go on as we are, as a member of E.F.T.A. and of the Commonwealth preferential area. That is the alternative.

Let us be quite clear about it and face it—either to have a European policy, endeavour to be successful and, if we are, to carry on in the Community, or if we are not, the alternative is to go on as we are in E.F.T.A. and in the Commonwealth preferential area. [An HON. MEMBER: "It is a good one."] I do not believe that it is as good as a European one if we can bring it off. But there is an immense amount we can do in it as an alternative, to carry on as we are.

I believe that if this is to happen it is essential to change economic policies. We have discussed these on many occasions, but I do not believe that we can keep pace in any way unless there is a change in the policies of the Government which will produce a greater drive and efficiency in British industry.

Sir Cyril Osborne (Louth)

If negotiations fail will E.F.T.A. still be there for us to go back to as an alternative policy? Will it not have broken up in the period of negotiations?

Mr. Heath

I very much hope that E.F.T.A. will continue to exist. I believe that it is very important that there should be the fullest consultation with it. If the negotiations fail, of course, we want it to be there; it is of immense benefit to our trade and to the other E.F.T.A. countries. Let us be quite clear about that.

Mr. Michael Foot (Ebbw Vale)

If the right hon. Gentleman thinks that it is highly desirable that E.F.T.A. should continue to exist, does he not think that it would be a good idea if the Government renewed their pledge to E.F.T.A.?

Mr. Heath

I understand that the E.F.T.A. countries have accepted the situation. All they are entitled to now is the transitional arrangements which, of course, every country would have to have in any case. If the E.F.T.A. countries are prepared to accept them well and good. It undoubtedly greatly eases the negotiations, but it is the Government which has changed the position as far as E.F.T.A. is concerned.

Finally, there is the question of the balance. The hon. Member for Ebbw Vale rightly emphasised this. The main objective in the negotiations is political, I believe—it was in 1961. In the debate after our application then the present Prime Minister paid tribute to Mr. Macmillan. He said that it was a political matter first and foremost and that the Prime Minister had made it so. That is right, and the political purpose is for Europe to be able to expand its influence and for Britain to do so as part of it.

I have never seen a European policy as a policy of withdrawal into a "fortress Europe", either for ourselves or for other countries. I have always seen it as a means of enabling us with Europe to continue an influence which I believe to be beneficial in other parts of the world. I have hoped that it would be continued with other countries in Europe.

This is where I disagree with the hon. Member for Ebbw Vale, who thinks that we can do more if we remain outside. From my experience, part of it in the Foreign Office, I do not believe that this is the case. We can do a considerable amount alone; we have great resources in diplomacy, great communications, knowledge, know-how and techniques. But I do not believe that we can do as much as if we are part of a larger grouping in Europe.

I have always believed that one of the main purposes of having European political unity is to be able to find a solution to the German problem. This has always seemed to me to be first and foremost, because it would help to bind the Federal Republic more and more closely into a peaceful democratic Europe, to reduce tensions with the Soviet Union thereby, and to help to find a solution to the problem of the two Germanys.

This has always seemed to me to be important, and we, with our experience, long traditions of democracy and our Parliamentary system, have a unique part to play. But if this is to be done it must be done through economic means, and the negotiations will be the economic means of trying to secure that greater European unity. Everybody concerned in the negotiations will know what the ultimate purpose is—for Europe to have its political influence. What they will want to know is that Britain shares that objective and shares it fully.

On the economic balance, I do not accept the figures in The Times. The more the Government can tell us about this the more helpful they will be. The problem which faces us of the kind described faces us outside the Community just as much as inside. The problems of reducing our proportion of imports for home consumption and increasing our exports face us just as much, particularly in a world of fiercer competition and diminishing Commonwealth preferences.

The Community provides the opportunities, and we must be able to seize them. There is a price to be paid, and the real price is change. But that price must be paid whether we are inside or outside the Community. For me, the balance, which is the political balance, goes on the side of paying the price of change, because I know that it must be paid in any case. But if European unity is to be effective there must be a means of exerting it. This is where I believe the Prime Minister yesterday failed to bridge the gap. In fact, he deliberately maintained the gap by saying that he was not prepared to discuss defence or any of the aspects with it.

I believe that with the Rome meeting coming on we may very well see a movement of some kind, however slight, towards political unity in the Community. As that moves forward I believe that Europe will want to do more for its own defence; it would be most extraordinary if it did not. I believe that this is where the Prime Minister failed to bridge this all important gap. He did not convince us on how Europe can exert its influence in the world unless it has the organisation for unity and is prepared to deal with the political and defence problems.

This brings us to the policies of the last few months, in which there have been divergencies between Britain and the countries of the Community—very important and deep divergencies. Of course, we must stand up for our national interests, but the question which has been facing us is how we do so and with whom. Let us take the question of the Kennedy Round. This has obviously been a situation in which we have been separated from the Community on many issues. Again, taking the non-proliferation treaty, we did not go to the lengths to which we should have gone as a country to ensure that the civil use of atomic energy in Euratom and the Community was not in any way damaged. This was fundamental.

In the international financial arrangements, we have not been thinking as a member of the Community and of a wider Europe, which is the next stage. I give the Prime Minister every credit. He has come a very long way, and has brought his Cabinet and party a very long way. But the next stage is for him to be thinking in terms of Europe and the interests of Europe, because the purpose of this development is to create an entity which redresses the balance with the United States and Canada on the other side of the Atlantic—redresses it in trade, commerce, agriculture, finance and, ultimately, in its political unity and, to some extent, in its defence arrangements. That is the purpose of the European unity which is developing. It is this to which the Prime Minister and his colleagues must address themselves.

I say frankly that there is the question whether a Europe which is closer in its unity of forms of organisation will seize this opportunity or not. There are some—I think that the right hon. Member for Easington (Mr. Shinwell) is one—who will say that they will never do it or will never contribute towards these ends.

Mr. E. Shinwell (Easington)

They never did.

Mr. Heath

The right hon. Gentleman is not entirely right. But the question now is whether they will do it in future. Has Europe the will power, the determination to do this? I believe that we must create it and play our part in creating it because, unless we do, our own continent will not have that influence in the world that it should have and it is for this reason above all——

The Prime Minister

The right hon. Gentleman is on desperately important subjects when talking about European defence. He will know, of course, what certain proposals would mean in terms of the hopes of a détente with Eastern Europe. The right hon. Gentleman has been reported as being willing to propose that the so-called British independent nuclear deterrent should be shared with other European countries. Will he say that that is his policy or not?

Mr. Heath

I have said on a number of occasions, as the right hon. Gentleman knows, that I believe that Europe will want to contribute to its own defence. It can do so on orthodox grounds with orthodox procurements. I have said, in relation to nuclear defence, that, with the French force de frappe and the British deterrent, it should be possible for these two aspects of nuclear weapons to be held in trust for Europe. This, in my belief, would not end non-proliferation in any way. In fact, I understand that the non-proliferation treaty has been deliberately designed to enable a united Europe to have its own nuclear force. That cannot be denied. Why, then, are the Prime Minister and the Foreign Secretary looking so shocked? This is a different matter from the position in this early stage, where the French and British deterrents exist separately and should be held in trust for the European countries which want it so.

Therefore, I say to the Prime Minister that I believe that the real purpose of Europe now is to achieve an entity, that we should play our part in creating it, giving the will and the determination to bring about its own development as a European civilisation. It is because of this, above all, that I support this application.

The Prime Minister

I am not clear about what the right hon. Gentleman has said. Does he accept or repudiate the proposal to share Britain's so-called independent nuclear deterrent with other European countries? I do not say "held in trust", whatever that may mean. Is the right hon. Gentleman advocating— [HON. MEMBERS: "Oh."] We want to know what he is proposing, because he is trying to help us get in, as he has said. Does the right hon. Gentleman propose sharing the so-called British independent nuclear deterrent for the purpose of forming a European nuclear deterrent, or does he propose keeping things as they are? We want to know.

Mr. Heath

I will tell the Prime Minister, because he is trying to get in a tricky question for his own benefit. If the Prime Minister means that, in the existing situation, I am suggesting that the British nuclear deterrent should be handed independently to other members of the Six, such as the Federal Republic of Germany, Belgium, the Netherlands, or Italy, the answer is clearly, "No".

I propose that France and Britain, each with its nuclear deterrent, should say that we are prepared to have, for example, some sort of committee as there is in N.A.T.O.—the Macnamara Committee or something of the sort—in which members of the enlarged Community can deal with these matters. If this is done in N.A.T.O., I see no objection to its being done in the Community. We would hold the deterrent in trust for these European countries. That is perfectly clear, and the right hon. Gentleman cannot make any capital out of that.

These are the developments I want to see come about and which, I believe, will come about and it is to these that the Prime Minister should address himself.

Mr. Shinwell rose——

Mr. Heath

I am sorry, but I have given way on a number of occasions.

We have said that we will support the Government in their application. Having gone through these negotiations myself, I do not wish to see our present negotiators subjected to the sort of things that we were subjected to. I know what it means.

Here in this House we shall be as helpful and as constructive as we can in enabling the Government to find a solution and also in bringing them to face reality, because that is the best way in which they will be able to bring about a successful negotiation. We welcome the application which the Government are making and we wish them every success.

4.25 p.m.

The Chancellor of the Exchequer (Mr. James Callaghan)

I wish today to speak principally about the effects on our balance of payments and the rôle of sterling in the event of our entering Europe. But, first, I should make some general political comments, arising to some extent out of what the Leader of the Opposition has said; and I will also take up later some of the points he made.

I welcomed, as I am sure we all did, the beginning of the right hon. Gentleman's speech, in which he expressed his approbation of the initiative that Her Majesty's Government have taken and his indication to Europe that the parties are united in their approach to this problem. This is of great help and it should be widely understood and recorded throughout Europe.

But there were other parts of his speech with which I found myself not wholly in agreement, including some parts of history. Indeed, if the right hon. Gentleman does not mind my saying so, when he was conducting an inquest on the last series of negotiations, I could not help feeling that self-justification is the opiate of the politician whose future is behind him. But I felt that what he had to say about our approach to current problems, particularly in relation to the Kennedy Round, was not really accurate on examination of the details.

I shall not take up what the right hon. Gentleman had to say about the nuclear deterrent. It was of such importance that it needs careful examination and, I would have thought, much more explanation by him of what he was putting to the House and the country. As far as I could make out, he was suggesting at one moment that the nuclear deterrent should be held in trust for the Community by France and Britain and then that it should be shared with those Europeans who wanted it.

Mr. Heath


Mr. Callaghan

Those last words I have used were words I thought the right hon. Gentleman used.

Mr. Heath


Mr. Callaghan

I agree that the right hon. Gentleman was under interruption at the time and perhaps under emotional excitement—I do not know. But he did not make the position clear. It is something that needs spelling out carefully for the sake of our future relationships with other countries of Europe and with Russia and the United States. I hope that he will take an early opportunity of explaining what he had in mind, because some interpretations that could be put on what he said could be highly dangerous in the attempts that are now being made to secure the non-proliferation treaty and in trying to rid the world of the nuclear threat.

I do not intend, however, to follow that matter up any more. [Interruption.] I believe these issues should be very carefully set down if a Minister is to speak about them from this Box because they are extremely delicate issues—much more delicate than some of the others I shall talk about. But the matter which the right hon. Gentleman raised at the end of his speech is undoubtedly one of extreme gravity.

I want to pick up some of the questions which were raised yesterday and by the right hon. Gentleman today. I must address myself to the Amendment, because the House is broadly united apart from that. The first of these questions, posed in the Amendment and by hon. Members on both sides, concerns the alleged inroads into British sovereignty entailed in joining the Community, the freedom of action which, it is alleged, would be restricted in that we should be unable to take our own decisions.

My experience over the last two and a half years has led me to the conclusion more and more that to a very large extent nations are not free at the moment to take their own decisions. This is becoming increasingly true, as I have observed in financial, economic and political matters, and it certainly is not limited to the United Kingdom. Although some people may say, "It is because you have a debt which you owe to the International Monetary Fund", that is not so in my experience.

I have been struck by the effect of the international forums in the world today on the policies of individual countries, an effect which is much more than I had assumed before I took office. The effect of the G.A.T.T., E.F.T.A., O.E.C.D., and I.M.F. and the World Bank are all quite substantial in the matter of their discussions and their impact on the policies of individual nations, and it is very clear from standing outside the Community that consultations inside the Community are growing in importance in achieving a concerted view by the members of the Community.

Every nation now surveys the affairs of the others. We know a great deal about them. Forums of discussion are almost continuously in action; views are expressed, and sometimes advice is given. I must say that I have found that some international forums seem to know more than the members of the legislatures do, and that this is influencing me in my consideration of the problem, which has been raised in the House more than once, of how far we ought to publish to the House of Commons economic forecasts which we are ready to give to international organisations. It seems rather absurd that they should know more than hon. Members here do. [HON. MEMBERS: "Hear, hear."] I hope that that was applause and not irony, because there were earlier opportunities. Of course, it could have been done.

This practice is growing increasingly and the reason for it is obvious and clear to anybody who has taken any part in these matters. It is that economic ill-health is infectious and that one nation catches it from another. Hence the close scrutiny and the continuous consultation which take place among nations today.

The right hon. Gentleman thought to use the point against us that Germany was running a large balance of payments surplus. "Ha, ha", he said, "Would not the right hon. Gentleman like it if he had it!" No. The right hon. Gentleman will not know, but, in fact, the size of the German surplus in its balance of payments is causing some considerable concern among the nations which make up these economic discussions, because it is having an effect on the rest of us which is not altogether healthy.

I take up the right hon. Gentleman's point in passing, but this is an illustration of the way in which these discussions of each other's economic problems are becoming much more prevalent throughout the G.A.T.T. and throughout O.E.C.D. Everybody is having to take a view about our problems communally, and although it would be too much to say that international solutions are being worked out, nevertheless, international pressures of opinion are being applied to countries which seem to be departing from what is regarded as the best path for economic progress.

In the event of entry into the Community, we should be hammering out much more common economic policies. I myself would welcome this; I believe that it would be right to do so. I do not believe that Britain would lose from it or that the rest of the Community would suffer from it. Of course, one country can run amok and run counter to the general trend, but that is not the rôle which a great trading nation such as we should seek.

I finish what I have to say on this point by repeating that my conclusion is that the argument about sovereignty is rapidly becoming outdated. It takes no account of the very substantial developments in consultation during the last decade. What nations can do successfully in these international forums, as I have seen, is to insist on safeguards for their own vital economic or political interests, and where they are regarded as being too sensitive, other nations will step back. That would be the case for example, as I would see it, in problems which might arise for regional development in the United Kingdom, and I would have no hesitation, taking the line from what other countries who are now members of the Community have done, in saying that we would be able fully to safeguard the development of our own regions. Speaking as one who comes from South Wales, I regard that as a prime necessity.

Another factor which certainly influences me in our approach now is that the probe has shown that five out of the Six are eager for us to enter. The sixth, I agree, is veiled in greater obscurity, but when one is asked to join that is a powerful reason for not rejecting any opportunity which is offered. The Six are growing together in policies. I said that they do not yet speak with one voice, but attempts are being made to co-ordinate policies the whole time, and if we are outside our task will be more difficult than if we are inside.

Mr. John Hall (Wycombe)

The right hon. Gentleman has made a very interesting statement. He has said that five out of the Six are in favour. Can he say whether they have stated that they will support our application even against French opposition?

Mr. Callaghan

I did not say that there was any opposition from the sixth member. What I said was that its attitude was veiled in obscurity. I therefore cannot answer a hypothetical question of that sort.

What is quite clear—and I understand that the hon. Gentleman is trying to help—is that five out of the Six are anxious that this country should join the Community at the earliest possible moment. That should be an influence in determining our thinking about the alternative roads which are open to us. That is the point which I am making and in these circumstances it is a valid point.

It is obvious that common policies arrived at by a group of countries, policies which we cannot influence because we are outside, can be much more damaging and unpalatable than those which we can help to influence from inside. But I do not regard it purely in that negative light.

The U.S.A. and the U.S.S.R. are two great power blocs. The Community is becoming such a great power bloc. We have the chance—we may have the chance—of joining and forging a common viewpoint on political and economic matters. This should be our aim if we go in. If we go in, we should aim to play our full part in developing the Community's interests. This is a rôle which will be better for us and better for Europe than if we stay sniffing around on the outside.

Yesterday fears were expressed about worsening relationships between the Communist and the anti-Communist world. This is an over-simplified description of the world today. It may have been true some years ago, but anybody who reflects on the relationship between President de Gaulle and the U.S.S.R. cannot believe that the creation of the Community has worsened relations between E.E.C. and Eastern Europe. If anyone were still to advance the view of a conflict between the Communist and the anti-Communist bloc, I would have to say that rather over-simplified the matter when one considered the relationships and tensions between China and the U.S.S.R.

If I may venture a personal view, I believe that in future the increasing emphasis in international discussions will be not on the Communist versus the anti-Communist bloc, but on the problems of race and poverty. These will be the twin problems on which the world will have to focus and I see no reason why we should not contribute fully to the solution of these problems and the release of these tensions from inside the Community.

It has been suggested that we should do more to build up the Commonwealth. My right hon. Friend the Secretary of State for Commonwealth Affairs dealt with this yesterday. There is no doubt that the Commonwealth has a considerable future, but events in recent years have shown conclusively that the Commonwealth is not an exclusive relationship for any one of its members. Those in Asia seek appropriate groupings and relationships with their neghbours, as do those in Africa.

It would be difficult to speak, as my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) did yesterday, in one breath of the necessity to build up the Commonwealth, and in the other of the necessity for ending the east of Suez policy. These two things are not compatible. One can have a changing relationship—[Interruption.] I can assure my hon. Friend that if they really believe that we can build up a tightly-knit Commonwealth—much tighter-knit than today; this was the proposal—and, at the same time, relieve ourselves of all or part of our obligations for defence in the Far East, then they are not living in a world of reality.

Mrs. Anne Kerr (Rochester and Chatham)

Has it occurred to my right hon. Friend that there are other ways of knitting the Commonwealth together man by military means?

Mr. Callaghan

Of course there are, and it is those ways that the Government wish to follow.

I am now speaking, not of my argument, but of the argument of my hon. Friend the Member for Ebbw Vale. It takes two to do some knitting in this matter. The countries in Asia who are concerned about this policy have their own views about the nature of the knitting that should take place, and my hon. Friend should not overlook that.

Go it alone? It would be possible, but we should need to follow autarchic and self-sufficient policies, which would fragment our relations with Europe and maybe with others. It would be a serious matter for ourselves and Europe if we did follow such a course. Industry is opposed to it. The general view of industry is that it wishes to join the Community. It has expressed its views very strongly about the value of entering. We can see—and I do not want to hark back to 1961–62 as much as the right hon. Gentleman did—that there is a much more realistic assessment now about the prospects than there was six years ago. There is no longer the heady feeling that existed then, that entry would solve all our economic difficulties.

Today, there is a greater appreciation that economic success depends on ourselves, and on our comparative efficiency, whether we are inside or outside the Community. I agree with what the right hon. Gentleman the Leader of the Opposition said about that. We approach the question in a rather more sober mood than six years ago. There is greater understanding and information about the issues involved today than then, and a more realistic approach is necessary. One thing that is becoming clear now, which was not clear then, and there was very little information about it, are the figures in the economic balance sheet.

These are clearly adverse in the short term. The long-term positive effects of going in cannot be determined by figures alone. These depend on increased investment, on a willingness to be as efficient as others, on our readiness to adapt to changing and larger markets. One cannot put a figure to the value of the political changes that would take place. The Prime Minister made clear yesterday that, while the long-term effects of joining would be beneficial, the impact on our balance of payments would be adverse in the initial period of our membership.

I can assure the right hon. Gentleman the Leader of the Opposition that we do not under-estimate the seriousness of this matter. We have wrestled with the balance of payments for a long time, and now seem to be getting on top of these difficulties. What effect will entry have on our recovery? I agree that the House and the country, and our European partners, have a right to be satisfied that we are in a position to undertake the additional obligations that are involved in membership of the Community. Having studied all the published figures and the forecasts of balance of payments, I must say that this is the most difficult area of all in which to prophesy with clarity, as those who have experience will know.

On the whole, the most that one can say is that it is easier to forecast the trend than to forecast the actual figures. On the favourable side of the balance sheet as regards our balance of payments, what I can say is that the best forecasts and trends show that we should join the Community with a strong balance of payments. That is not only a forecast, it is a requirement, because we have to get the economy into the best possible shape before we enter.

As far as can be foreseen, the present position, as I have indicated to the House, is that last year's deficit which was £189 million, will be turned into a surplus during the course of this year. That involves much improvement in the trend of our balance of payments. During the course of this year, in spite of the removal of the import surcharge, it is my expectation that, on the basis that I outlined in the Budget, this satisfactory trend will continue in 1968, and I would expect a substantial balance of payments surplus in that year.

We would, therefore, be able to enter the Common Market, as regards our balance of payments, from a position of strength. The next factor that I must draw to the attention of the House in trying to draw up a balance sheet is that, as has been said more than once, the full effects of all the elements which will influence our balance of payments, adverse and beneficial, will not be felt in total all at once. Their effects will be cumulative, and will be spread over the transitional period.

I understand that the need for these transitional arrangements is fully recognised among the members of the Six, who went through such a period: for example, the gradual introduction of the Common Market's agricultural policy, the common external tariff and the abolition of tariffs within the Community—none of these is due to be completed before 1st July, 1968, although the Treaty was signed 10 years ago. It is, therefore, reasonable to assume that, after the period of negotiation, signature, ratification, and legislation, there will be a period of some years during which the necessary transitional arrangements and adjustments will apply and can be made. These arrangements could perhaps extend over different periods for different problems.

The third favourable factor that I put on the credit side of the balance sheet is that the period of transition will be eased by our proposed reductions in overseas defence expenditure. The House is fully seized of the difficulties of bringing these changes about in the short run. But the economies that are now under way, and are planned, are of a substantial nature in terms of overseas expenditure. They will have increasing effects. Probably their maximum effects will be at the end of the 'sixties and in the early 'seventies, that is, at a time when the transitional arrangements will be operating. That is a factor which will assist us.

The fourth factor to take into account, again on the credit side, is that our policies are putting us in a position finally to discharge our obligations to the International Monetary Fund, implying that we shall have a continuing, strong balance of payments surplus, as we intend to do. I do not want to take up the rather small points made by the Leader of the Opposition about the rate. If he has had the experience of the former Chancellor he will know that this is not a serious matter. When his party left office the rate stood at just over 2.78¾. It was right down, bumping along the floor, but the position had been adjusted, for various technical reasons, about which I do not complain.

It is making rather small and cheap party points to talk about the rate in this connection. It depends upon whether one intends to allow the rate to go up by refusing to skim dollars off the market, or whether one intends to take dollars off the market and keep the rate down. There are many technical factors, and I hope that the right hon. Gentleman will stop making this silly point, which has no validity in relation to the job that has to be done.

Mr. Iain Macleod (Enfield, West)

We have listened with interest to what the Chancellor has said about the balance of payments. He has forecast a surplus for this year, and I hope that he gets it, and a more substantial surplus next year. Is he prepared to put figures, however wide, to these estimates?

Mr. Callaghan

No, for the reason that I gave at the beginning, that this is the most difficult area of all to forecast. I do not know whether this was intended as a trick question, but I will give it a straight answer. It would not be helpful to give such a forecast because it could not be regarded as reliable. As far as can be forecast, there will be a surplus this year and a bigger surplus next year, and I must leave it at that. Anyone with the advantage of seeing balance of payments forecasts will realise that I am trying to give the most sensible answer to that question.

I have indicated that this year we shall complete our repayment of the initial borrowing of £385 million.

Mr. Reginald Maudling (Barnet)

I appreciate the difficulty of making balance of payment forecasts, but could the right hon. Gentleman indicate the scale of surplus which he would regard it as necessary to aim at in order to join the Community?

Mr. Callaghan

The scale of surplus must depend on a number of factors. It must depend on our need to enter the Community with a strong balance of payments, on the level of employment at home, and on the need to ensure that there is a reasonable rate of growth at home. Those three factors must be constantly balanced when making an assessment.

We negotiated a loan of £385 million in November, 1964, a month after we came to office. That was with the International Monetary Fund and the Swiss Government. The Leader of the Opposition referred to the loans which we need to repay; he said that the £900 million would be a source of weakness. I have some good news for him this afternoon. Repayment of this sum is due by December, 1967. It has been reduced by £75 million, and it now stands at £310 million as a result of sterling drawings by other countries to which we have agreed.

During recent months our reserves have been building up steadily. They now stand at the impressive total of £1,216 million in addition to other reserves in liquid form contained in the Treasury portfolio. This is, therefore, an appropriate moment to repay a further part of the loan, and I am glad to inform the House that on 25th May I intend to repay to the International Monetary Fund the sum of £145 million and, at the same time, to discharge the whole of the Swiss debt of £28 million, making a total of £173 million.

The point about this repayment is that it represents the amount borrowed by the Fund in 1964 from countries participating in the General Arrangements to Borrow, and by far the greatest part of it, therefore, will be made in the currencies of the present Community member countries which will then be repaid by the Fund. I take this opportunity of thanking them for their co-operation in the autumn of 1964 and of demonstrating that we make good use of their help. This means that by the end of this month we shall have paid off six months in advance nearly two-thirds of the debt repayment due next December. I expect that there will be some further drawings by other countries.

It is clear that, taking together the resources in our front-line reserves, the Treasury portfolio and this year's surplus in the balance of payments, the December instalment will be entirely within our capacity and quite manageable. This repayment of the I.M.F. loan has a dual effect: not only do we discharge our liabilities, but, at the same time, and by the same process, we create new credits for ourselves in the I.M.F. Therefore, after 25th May, our normal front-line reserves will be backed by the proceeds of the Treasury portfolio and by additional drawing rights of the I.M.F. which, by the end of the year, when we shall have repaid the full amount of the loan, will be £357 million. We shall have transferred some of our front-line reserves to the second line. These will be further increased as we make further repayments of drawings in later years.

Mr. J. Bruce-Gardyne (South Angus)

Is the right hon. Gentleman saying that he will transfer the Treasury portfolio into the reserves and, if so, when?

Mr. Callaghan

No, I did not say that.

To sum up: to withstand the adverse impact on the balance of payments of joining the Common Market, we shall be able to rely on a present surplus in our balance of payments and the benefit of a transitional arrangement over a period of some years before the full impact is felt.

Yesterday, the Prime Minister gave details of where the adverse effects will be felt in the short term. The impact has been quantified most easily in the cost of accepting the common agricultural policy of the Community. This might eventually amount to between £175 and £250 million. I do not depart from those figures, but even that estimate, which is probably the most reliable which can be made, rests on a multitude of assumptions about the future level of world prices, the future level of Community food prices, the future level of agricultural production and consumption in this country and on the size of the Community's agricultural fund.

I suggest to hon. Members that they take with appropriate grains of salt a lot of the various "authoritative" figures which have been put around in recent weeks. In the event, the cost will also depend on the terms of entry which may be negotiated. In other matters—for example, trade in manufactures and the consequences of removing tariffs—the impact on our balance of payments is more speculative. It will depend on the effects on our industrial efficiency, the effect on consumer prices and wage demands and the effect of tariff cuts.

The view generally taken by leaders of industry is that industry will respond favourably to the opportunities presented by a larger market, greater economic integration and greater competition. There is much to be said for the view that exposure to these pressures and opportunities will accelerate the existing trends to greater product specialisation and will encourage the development of the more sophisticated and technological industries in which the economies of large-scale production and marketing are to be found.

This favourable long-range forecast is based on a number of factors. Foremost is the trend in our visible imports and exports. The rate of growth in our visible exports has been accelerating over recent years mainly due to the fact that the share of our exports to fast-growing markets has been rising all the time while the share of our total exports to the slow-expanding markets has been declining. So our overall performance has thus been improving as a result of a gradual shift in the structure of our exports. There are good reasons for supposing that this will continue, and it must be our policy to ensure this.

We shall need these extra exports to cover the balance of payments costs of agriculture and the possible cost of capital movements. If these are to be found, but not at the expense of the domestic standard of living, the basic trend of productivity will need to improve. The required improvement is not large and certainly is not beyond our capacity.

The increase in food prices is measured at 2½ to 3½ per cent, spread over the transitional period. Other things being equal, this would tend to lead to higher wage demands. We would, therefore, run the possible risk of higher industrial costs with a resulting encouragement of imports and discouragement of exports.

On the other hand, against the rise in food prices, there would be some lower prices of manufactured goods both for consumption and for use in manufacturing and service industries. This would tend to offset some of the pressures. What will be quite clear to the House, as the Prime Minister said last night, is that we shall need to adjust our social benefits so as to shield pensioners and others from the adverse effects of food price increases.

Dame Irene Ward (Tynemouth)

Would the right hon. Gentleman expand a little on the effects on those in small fixed income groups? How does the right hon. Gentleman propose to deal with them?

Mr. Callaghan

I cannot say any more. I was referring to the adjustment in our social benefits, which cover not only pensioners, but other groups.

Mrs. Anne Kerr

Particularly the old people.

Mr. Callaghan

I am not sure what the purpose of that intervention was. What I was saying was that we need social benefits so as to protect the old people.

I turn to the question of capital movements. Here—and this is not intended as a joke—we are very much in the field of speculation. Capital movements are of great importance to our balance of payments. We have always been a major source of capital for the rest of the world, even though at present we maintain restrictions and a close control on direct investment in the non-sterling area, as well as a voluntary programme for restricting the outflow of capital to certain countries inside the sterling area.

As regards portfolio investment outside the sterling area, that is at present limited by the investment currency arrangements. The relevant Articles of the Treaty of Rome and the Directives on capital movements within the Community show that there is a wide gap between our present policies and the liberal régime now operating within the Community. Most members of the Community have little or no restrictions on long-term capital' movements between themselves and countries outside the Community.

We should of course need to accept the Treaty of Rome Articles, and our policies would have to be aligned with those of the Community. In the early years. this would involve some additional strain on the balance of payments, but the net effects are very uncertain. There will be some outflow to the Community, but not all the movement will be one way. Indeed, during the discussions which my right hon. Friends the Prime Minister and Foreign Secretary had with some members of the Community, the point was made by one or two of them that our concern about United Kingdom funds flowing outwards might be paralleled by Community concern about their funds flowing to the United Kingdom and thence onwards, through the United Kingdom, to develop the Commonwealth. So this is not wholly a one-way street. It is not a problem which the Community has had to face hitherto. Up to the moment, there has been a continuing inflow of funds into their countries—some perhaps regard the inflow as excessive—and therefore they have had no need to be restrictive.

Another factor is the distinct possibility of a flow of direct investment from outside the Community to this country. Some firms may prefer to base themselves in the United Kingdom in order to produce for the Community as a whole.

The whole question of capital movements. is of considerable importance to us, and we cannot afford to take any avoidable risks with our balance of payments; nor would the Community wish us to do so. We shall, therefore, need to discuss the whole question with them, and, from my reading of the preliminary probe undertaken by my right hon. Friends, it seems likely that we can work out satisfactory transitional arrangements.

Portfolio investment may present a particular technical problem. In the absence of any special arrangements, United Kingdom residents would be able, in effect, to channel portfolio investment to North America through financial intermediaries in the E.E.C. such as investment trusts which hold substantial dollar portfolios. This is not the intention of the Community's present régime, but it could be an effect of it. If that were to happen, it would add a significant cost to our balance of payments. If our discussions with the Six show that they find that this is a problem, we could all no doubt think in terms of a general Community solution, because it is one which they have not faced so far. If, as I rather expect, it is more of a particular problem for the United Kingdom, I have no doubt that they will agree to a United Kingdom solution to a problem of this sort; that is, appropriate action by our own exchange control, as provided for in fact by Article 70(2) of the Treaty of Rome.

The difficulties of trying to quantify all these effects will be clear from what I have said. We can anticipate an overall adverse effect on the balance of payments in the short term. But I repeat again that most of the so-called calculations which have been made are no better than the assumptions which have gone into them, and the assumptions frequently reflect the views, both for and against, of the calculators. We can look for time to make a progressive adjustment of the economy to absorb the short-term costs of entry.

The Prime Minister indicated yesterday what shift of resources might be needed: when fully in operation, that is to say, perhaps several years after entry, something of the order of £100 million each year for four or five years—£100 million in the first year, £200 million in the second, and so on. It would, therefore, be necessary to increase our exports or save imports over and above what we expect to do in any case by a further £100 million a year on top of our present total exports, which are £5,000 million a year.

I indicated in the Budget that we can secure a rate of growth of 3 per cent. a year; that is, £1,000 million of extra resources every year. Part of that would need to be allocated to additional exports. The Government's view is that a 3 per cent. growth rate is the base line from which we start. It can be bigger as our competitive efficiency grows—[Interruption.] Right hon. Gentlemen opposite are wrong. It has started, and no doubt they will be glad to make the amende honorable later. to use Common Market language.

Mr. William Baxter (West Stirlingshire)

In his Budget speech, before we were committed to apply for entry into the Common Market, my right hon. Friend suggested that we required a 3 per cent. increase in productivity. Yesterday, my right hon. Friend the Prime Minister said in his speech that, if we went into the Common Market, we should have to have a 3 per cent. increase in productivity. Do those two statements presuppose the requirement of a 6 per cent. increase?

Mr. Callaghan

I am relieved to say that they do not. The Prime Minister was speaking in the same terms as I am now. However, I want to come to my conclusion, in the course of which I will deal with my hon. Friend's point.

Perhaps I might sum it up thus. The bigger our competitive efficiency grows and the more competitive we are, the greater the advantages which we can expect from joining the European Community. Here I deal with my hon. Friend's point, and I can promise him that my right hon. Friend the Prime Minister and I are in full agreement. The broad conclusion which I have reached is that, given a 3 per cent. growth rate as the starting figure, the sort of adjustment that is required by joining the Community—and it is a serious adjustment—is a manageable proposition. If our entry results in an acceleration of the underlying growth of productivity in our economy, the potential long-term gains will far outweigh the short-term costs.

It will be necessary for all of us to emphasise, in the course of our discussions with the Community, that this country has a serious and long-term economic strategy for improving its productive efficiency and for ensuring a steady and continuing balance of payments surplus over the years. I agree with the right hon. Gentleman the Leader of the Opposition that such a strategy will be necessary whether or not we are members of the Community. But, assuming that the Government's policies are correct in believing as we do, based on the best information available, that we can maintain a 3 per cent. growth rate with a high level of employment and with a satisfactory balance of payments, as this policy stands it would carry us through any reasonable transitional period with a continuing strengthening of our competitive position and with the possibilities of a growth in our economic potential.

I remind the House of Article 6 of the Treaty of Rome, because it is of great importance here. It lays down as a basic principle, that the institutions of the Community shall take care not to prejudice the internal and external financial stability of the member states. That is a principle set out at the beginning of the Treaty, and I am certain that it will be observed. With that principle written into the Treaty, and with the long-term strategy which Britain is following, in my view there is no need to doubt our capacity to join the Common Market on equal terms and to accept the responsibilities of membership.

That brings me to the other factor in the current discussions which I wish to bring out, namely the position of sterling as an international currency and, with it, the linked problem of international monetary reform.

On the first of these questions, sterling is bound to continue as an important international currency whether our future lies with the Community, as we hope, or not. I have made it clear on many occasions that it is not the policy of the present Government to seek any extension of sterling's rôle as an international currency, but that rôle cannot be abandoned, because the balances which are held in sterling by overseas countries are the liabilities of this country. Obviously there can be no question of defaulting on them, or of altering the character of the Commonwealth and other countries' sterling assets without their general consent.

I was glad to see that in a recent interview given by M. Debre, the French Minister of Finance, he stated his view quite categorically that the reserve currencies will continue to be needed to play a substantial rôle in financing world trade. Likewise, he said, he sees them as continuing to provide a medium in which other countries can hold their reserves if they so wish, just as the franc zone does today. He went on to say that there would be nothing abnormal in those countries closely bound to Great Britain and to the United States in economic and monetary matters continuing to hold the essential part of their external assets in the form of £s sterling and of American dollars respectively. Those clear statements show that there is much more common ground in this matter than some commentators have suggested.

I do not complain that the rôle of sterling has been raised, although I note that the Treaty of Rome contains practically no provisions for dealing with monetary subjects. It seems to me legitimate that the matter should be raised and, as I would expect, disposed of. Confidence in sterling is now at such a degree that it is possible to discuss the future quite normally, and from a position of considerable strength. We cannot be pushed around by events.

As a preface to what I have to say, I want to emphasise again the old refrain that a strong balance of payments and confidence in sterling go together. When we are paying our way in the world, and are seen to be paying our way, confidence is high. When we are running further and further into debt, confidence becomes low. Given the strategy which I have outlined, this problem should not worry us, but would the question of the strength of sterling hang like a Sword of Damocles over the heads of our future partners in Europe?

Does Article 108 of the Treaty of Rome hold some hidden threat for them? Should we, as the Leader of the Opposition said, seek a Community solution? Article 108 is, of course, the Article which refers to a country being threatened with balance of payments difficulties either as a result of disequilibrium in its own balance of payments—and this is the crux of the matter—or because of the type of currency at its disposal. In my view this is not so, nor do I think that we should go for a Community solution on a matter of this sort, despite the right hon. Gentleman's view.

The Prime Minister dealt with the matter fully yesterday and I think it will be clear that we are not proposing that our entry into the Community should put any extra obligation on the other members of the Community.

Sir Harmar Nicholls (Peterborough) rose——

Mr. Callaghan

I cannot give way. This is a difficult point. I do not agree with the Leader of the Opposition that we should go for a Community solution. We have endeavoured over the years, under the leadership of the former Chancellor of the Exchequer, and others, to build up confidence in a world system in this matter. The obligations which have been assumed by a number of coutries cover not only the Community, but Japan, Canada, the United States, and others, and it is important for the sake of the future development of world trade that we should not fragment this question of strengthening world liquidity into various compartments.

The Community countries have already accepted obligations in relation to reserve currencies, irrespective of their position as Community countries, but because of their membership of the Group of Ten, or because of membership of the International Monetary Fund. I see no reason why, in the case of sterling, which is a world currency, we should endeavour to thrust additional obligations upon the Community in regard to this. They should be shared, and it is in the interests of everybody throughout the world to share them; and this is why I would not seek such a solution, nor is it clear that the Community itself wishes to propose such a solution. As I understand their anxiety, it is that they should not be beset by such an additional problem as this, and I see no reason why they should. This matter could be, and is, dealt with increasingly on a world basis.

Sir Harmar Nicholls

The Prime Minister went further than this. When he returned from Luxembourg he said that he had given an undertaking that we would not invoke Article 108 if sterling got into trouble. An undertaking from the Treasury Bench cannot overcome the signatures of the Treaty of Rome. We cannot tie down future Governments. If we are going to forgo the one point which may be of value to us, if we have to join, can we say that the area covered by the franc has already given the undertaking that it will not call on Article 108 to fulfil the obligation?

Mr. Callaghan

I cannot answer the last part of that question. I am not yet an expert on all the practices inside the Community. As far as we are concerned, and indeed as far as the problem itself is concerned, I submit that it is better to try to seek a world solution to this problem rather than a Community one. I do not think that we will get additional assistance under Article 108, and I put to the hon. Gentleman the further thought that Article 108 was drawn up in 1956 or 1957. This was well before the much newer arrangements for supporting currencies were devised. It is well known that these arrangements could have come into play increasingly since 1957. This was drawn up in different circumstances, and for different purposes. I do not think that we could revert to it—at any rate it is not our desire to do so. If there was a desire on the part of others to revert to it, it would be a matter for discussion.

Mr. J. T. Price (Westhoughton)

I agree with my right hon. Friend's argument that this problem requires a world solution. Will he carry that reasoning a little further, and reconcile the establishment of a common external tariff wall around Europe against the rest of the world with this concept of solving the financial equation by world means? I cannot reconcile it.

Mr. Callaghan

If my hon. Friend, and others of my hon. Friends who are so passionately interested in this question of international monetary forms, will wait, I shall come to the question later.

I come now to the long drawn out discussions on reforming the world monetary system and increasing international reserves.

Mr. William Molloy (Ealing, North) rose——

Mr. Callaghan

In the interests of the House I must get on. The suggestion is sometimes made, and indeed the Leader of the Opposition made it, that our decision to apply for membership of the Community must imply a complete reversal of what we have said or done in the past on reforming the world monetary system. The right hon. Gentleman came very close to this in a recent speech. This, in my view, is inaccurate, and represents an over-simplified view of the negotiations being conducted at the present time. No final decision has been taken by the Six, nor has a final decision been taken by the United Kingdom on this matter.

Looking back over the last three years, it is clear that there has been a continuing evolution of thinking by nearly all the major participants in the discussions on international monetary reform. There was a moment when the United States seemed to be more attracted to the idea of drawing rights, and the French to the notion of a unit, but positions have evolved since then. They are now both taking rather different views on this subject. The Six have not made up their minds on all these points, but I was glad to see that the communiqué issued following the recent conference of Community Finance Ministers at Munich showed a considerable advance, not only—and I welcome this—towards a greater measure of agreement among themselves, but also towards a position which holds out a better prospect of agreement with all the parties to the negotiations.

I will not go into details now, but I express the view that even where the contrast between the differing position of various countries seems to be sharpest, an answer can be found. I do not believe that there is an important issue of principle involved here. The approach of the British Government is to work for an agreed solution by narrowing the points of difference where they exist. This is surely a better policy, I suggest, than trying to extract some short-term political advantage from an abrupt change of front which would surely impress nobody, and which few would believe.

In the Community today there is close consultation and co-operation between the members in domestic monetary policies, interest rates, and credit controls. Here I come to the point made by my hon. Friend. If we join, we shall want to enter into that consultation and cooperation, and indeed to develop it further.

I recognise that the Treaty of Rome does not yet provide for the development of a common European currency. It is not an immediate possibility, nor is a clearing union for payments—which is part of my answer to my hon. Friend—and nor are other ideas of this kind. I am sure that the Community would not wish to take them up in the forthcoming negotiations. They are long-term issues, but, in my view, they are of considerable concern if we desire closer economic integration. I mention them to indicate that, so far as the rôle of sterling is concerned, whether in its international aspect or as a domestic currency, we are ready for change, subject only to safeguarding the interests of the present holders of sterling.

There is no need for us to fear change in this, as in the other matters. The world rôle of sterling is not a matter of prestige but a practical matter. So far from the Community acquiring a potential liability—the House should know this—my own conclusion is that, in financial matters, the accession of Britain would bring practical benefits to the Community and greatly enhance its rôle in the world both economically and financially.

The question of the harmonisation of taxation was dealt with yesterday, so I will only say that we would certainly expect to participate fully in the erection of a system which would do away with economic frontiers and mark an important step in Europe's economic integration.

The House is under no illusion that joining the Community will mean many changes in our economic and fiscal arrangements. So it would be if we were finally to be shut out. From inside the Community, we are ready to accept and indeed welcome many of these changes. We shall play our full part in developing its institutions and influence. We cannot take a static view of developments in the Community or in the world.

Much of the argument about the consequences of joining is conducted on the basis of the world's affairs standing still. It is not given to any of us to look too far into the future, but I would hazard my own guess that, 10 years from now, if Britain becomes a member of the Community, it will be healthier for Britain, advantageous for Europe and a gain for the whole world. I do not know of many economic or political problems in the world which will be easier to solve if Britain is outside rather than inside the Community.

From outside—[Interruption.]—yes, I do not think that it makes it any easier to solve the problems because we are outside. From outside, we should need to maintain and develop this network of separate relationships. If we are compelled to do that—this is a problem for Europe as well as for Britain—we shall certainly survive and, indeed, we may prosper, but it would be at the expense of fragmenting the world instead of uniting it and we should have to build up barriers instead of tearing them down.

I understand and share the strong desire to develop the Community so that the voice of Europe speaking together is heard throughout the world. There are other paths for our future if this venture should fail, but I do not believe that the other alternatives offer, either to us or to Europe, advantages comparable to those presented by a negotiated membership of the Community.

5.24 p.m.

Mr. Jeremy Thorpe (Devon, North)

This debate is a cause for celebration by Liberals; I congratulate the Government on their decision to apply for membership of the European Economic Community and I wish them success in that application. I believe that today, whatever may be the past, both the Prime Minister and the Foreign Secretary are now accepted on the Continent as committed and enthusiastic Europeans. I hope to touch on one or two matters which I think may be relevant to the successful outcome of the negotiations, and I will refer only briefly to the past—first, as it is relevant to the future, and, second, as it is necessary to avoid certain pitfalls.

I must confess that the history of the post-war Europe as understood by the Leader of the Opposition had some astonishing gaps. I found only slightly more astonishing his new nuclear deterrent policy on which there appeared to be some difference as to what he was saying. No one really seemed to know what he was saying—least of all, perhaps, the right hon. Gentleman himself.

If the right hon. Member for Kinross and West Perthshire (Sir Alec Douglas-Home) and the Leader of the Opposition thought that we were in difficulties today because we were late entrants, how right they were. But if that is the only reason in their view, they have failed to take into account the reason that General de Gaulle, on 14th January, 1963, decided to exercise his veto because he said that this country was not ready for membership. Whether he was right or wrong—and I believe that he was wrong—it is vital to assess why he came to that view, so that we should not fall into that position again.

The reason that we were held in that position was that the hypercritical in Europe thought that we were bad Europeans, and even our closest colleagues in Europe thought that we were almost insensitive to trends on the Continent. It is perfectly true that the Atlee Government cold-shouldered the Iron and Steel Community whilst the European Defence Community, which was the one way of including a German Army within a European force, was thrown out by the French Assembly, only after the Eden Government refused to have any British participation in that force.

Indeed, perhaps the monumental understatement of this debate was when the Leader of the Opposition talked of the Messina talks in 1955, and said that we had some small part in them. Indeed we did. We walked out after a couple of days and boycotted them. One can only suppose, from the attitude of the Government of the day, that they suspected the Messina Powers to have some connection with the brothers of the same name.

I well remember the lack of enthusiasm in the 1959 election, when candidates like myself advocated that we should join the Common Market. But when one looks at the election addresses, not only of the Prime Minister and the Foreign Secretary but of the Leader of the Opposition himself, one finds not a single reference to the Continent of Europe and still less to the Common Market in their individual election addresses.

It is, of course, true that the right hon. Member for Barnet (Mr. Maudling) was more aware of the situation. That was why he made his speech in October, 1959: We never dreamed of entering the Common Market. If we joined, we would have to abolish all tariff protection for agriculture and horticulture and give up control of our own agricultural policy. We would sell the Commonwealth down the river and bankrupt the housewife, and this was why the Tory Government could never support what the Liberal Party was advocating——

Mr. Maudling

Is that an exact quotation, may I ask?

Mr. Thorpe

In regard to the first section— We never dreamed of entering the Common Market. If we joined, we would have to abolish all tariff protection for agriculture and horticulture"— I am delighted to give the right hon. Gentlemen this added opportunity of refreshing his memory— and give up control of our own agricultural policy that was verbatim. The reference to the housewife and to the British Commonwealth, he will find not only in this speech, which he made outside the House, but in the first speech which was made in the House of Commons——

Mr. Maudling rose——

Mr. Thorpe

I will answer the right hon. Gentleman. To be fair to him—the words relating to agriculture are verbatim and I am sure that he would agree with that—the reference to the housewife and selling the British Commonwealth down the river——

Lord Balniel (Hertford)


Mr. Thorpe

If the noble Lord would just exercise noblesse oblige for a moment, I should be grateful. I believe that I have given a wholly correct paraphrase of what the right hon. Gentleman said. If, in my references to his remarks about the Commonwealth and his comments about it adversely affecting the housewife, I have in any way misrepresented his argument, I will willingly amend my remarks.

Mr. Maudling

I gather that the right hon. Gentleman was using a mixture of a quotation, which I accept, and a paraphrase, which I do not accept. Is he aware that that is not the normal way of conducting a debate in this House?

Mr. Thorpe

As I said, if I have misquoted the right hon. Gentleman I will be happy to withdraw the section of my remarks which, he claims, misrepresent his views. I am sure that he will agree that he took the view then that adverse effects would flow not only for the Commonwealth but for the British housewife. He does not intervene, so I take it that that was his view.

I also remember two occasions in this House—14th December, 1959, and 25th July, 1960—when we Liberals divided the House on the need to join the Common Market. On the first occasion the then Conservative Government voted us down, while the Opposition abstained. On the second occasion the then Conservative Government had the added assistance in the Lobby of the present Prime Minister, Secretary of State for Defence, President of the Board of Trade and the Secretary of State for Commonwealth Affairs. Perhaps that added Labour support was fortunate, because the present Leader of the Opposition was not able to be present.

Being late entrants, let us realise that one of the reasons for our late entry is that we have given the impression, not only by words but by actions, that we were not anxious to become part of the Community. I believe that the Prime Minister's success lies in the fact that he and the Foreign Secretary have convinced our European colleagues that we are anxious to join and are enthusiastic Europeans. The Prime Minister said: … if we do not succeed, the House will … be able to judge at the end of the day that it was not our fault."—[OFFICIAL REPORT, 2nd May, 1967; Vol. 746, c. 316.] I believe that if we are not successful it will be largely the fault that for too long we had men in control who had no vision of what was happening across the Channel and whose horizon was bordered either by the Channel Isles or by the Isles of Stilly. Thus, as late entrants, we have in my view no more than a fifty-fifty chance of success.

Because of me undertakings that will be needed for the transitional period—concerning our commitments to agriculture and the Commonwealth; and not being a founder member it is difficult for us to negotiate these matters—it will probably take three or four years, even if we are successful, before our application has been signed and we are a member of the Community.

Having said that, the first point I wish to make about the application is that if it is to be a long haul of three or four years, we must guard against public opinion in Britain going sour and becoming impatient. If that were to happen, people would search after alternatives, one of which is the Atlantic Community—and, in my view, the North American Community as an alternative would give us the economic benefits but would also give us the political status of Porto Rica. We therefore need patience.

In the Government today are four senior Ministers who have, up to the very last moment, been passionately opposed to the idea of our joining the E.E.C. What will be their position if there is a long haul of three or four years? It is an interesting acrobatic sight to see senior Ministers standing on their heads. I have great respect for the Secretary of State for Commonwealth Affairs, but I have seldom seen a Minister putting forward an argument with less enthusiasm such as that which the right hon. Gentleman was asked to put forward last night. One can at least say of the Minister of Agriculture, who has not yet spoken in favour of the Common Market, that his previous speeches have been totally consistent throughout.

The Prime Minister would be in a much stronger position if those who are hostile to the Common Market gave practical expression to their hostility now and were not seen lurking like Trojan horses so that, in three or four years' time, their patience was found to have become exhausted.

The Chancellor of the Exchequer speaks with great knowledge about sterling However, the view of the Leader of the Opposition about the need for a European reserve currency is a matter to which greater attention should be given. The fear in Europe is not the present weakness of sterling but its potential vulnerability, which is a very different thing. When the Prime Minister said, on his return from Luxemburg, that we had given assurances under Article 108 that we would not co-ordinate the assistance of Europe if sterling came under pressure—not external but only internal pressure —I sought to make him realise that we had to distinguish between external and internal pressure on a reserve currency.

We are now in the position in which nearly one-third of the world's trade is financed by sterling. Some of us believe that this places an intolerable burden on the economy of this country. Indeed, many of the countries for which we act as banker are not even members of the Commonwealth and have no ties of kinship with Britain. The possibility of a new European reserve currency will, I believe, arise when we are a member of the E.E.C. Instead of the Prime Minister saying, as he did in reply to a Question from me, that this cannot or would not be ruled out after we were in, he should agree that it is a matter that should be ruled in now for discussion so that we really are intent on there being a real Common Market.

After all, we cannot have a Common Market in the fullest sense if one member is acting as banker with an external currency while the others are acting in a different capacity. The speech of Giscard D'Estaing on 4th May to the Federal Trust in London made this point clear when he said that, whether or not we liked it, sterling would be one of the great question marks and worries in Europe during the negotiations. Whatever may be the position of sterling today, a European reserve currency would be very much stronger in future than sterling could be on its own.

Sir Richard Glyn (Dorset, North)

Is the right hon. Gentleman arguing that sterling should cease to be a reserve currency?

Mr. Thorpe

No. I am suggesting that sterling should continue to be a European reserve currency but that when we are in the Community we should be able to expand and fuse sterling into a European reserve currency; to interleave it so that in perhaps 10 or 15 years' time we might be able to transform sterling into a new European reserve currency. That would place less of a burden on this country and would make it a strong world currency.

Indeed, the position of sterling is such that, in terms of politics, it has created a weakness. Some people are so cynical and uncharitable—and I am one of them—as to believe that most of our attitude towards. Vietnam has been dictated by our attitude towards sterling. I consider this to be true. A new reserve currency is, therefore, a matter which we should be prepared to discuss.

Politically, the Prime Minister has always maintained that one of the main reasons why the Common Market negotiations broke down in 1963 was because of the Nassau Agreement which followed the talks at Rambouillet; that it was an effort to keep up a special relationship with America. If that view was right in 1963, it is equally right to say that the continuation of our Polaris programme and the possibility that we shall buy another generation of nuclear missiles in the form of Poseidon is an indication of our intention to keep up some form of special relationship. I should have thought that, again, some criticism could be levelled against us by our prospective European colleagues.

With regard to the idea of the Leader of the Opposition of a new European deterrent, I believe that Britain should give up the pretence of being an independent nuclear Power. I believe that with as much conviction as did the Prime Minister before the 1964 election, although I am less likely to change my views than he is. First of all, we have to renegotiate N.A.T.O., because N.A.T.O. has been shaken to the foundations by the attitude of the French. But we may well see a European defence community evolving from the Common Market. It should be non-nuclear. We must realise that the two nuclear Powers are, should be, and, indeed, will remain, Russia and the United States of America.

I believe that if we get in we shall, having; been the most frightened of political involvement, become one of the most political members of the Community; and that we shall probably insist in the European political assembly that there should be far closer control over the Commission. In 10 or 15 years' time we may be pressing for the direct election of members to the European Parliament.

The Prime Minister mentioned that the Commission has proposed that by 1969 the added value tax as operated in France shall be at the same level throughout the whole of Europe, but I should like us to introduce this tax here before we get in. I had hoped that this would have been done in this Budget, but it may well be in the autumn Budget—nowadays we always have at least two every year, so we may not have as long to wait. If we are going in, we must prepare our physical fiscal system to match that in Europe, but I believe that, even if we are not successful, this fiscal change would release the technical energies of our people.

Technologically, whether we go in or not, the more co-operation we have with Europe the better. I am sure that the House would take comfort to learn of the comparative success of the recent discussions which the Secretary of State for Defence had in France. One of the possible reasons for the change in attitude of President de Gaulle was, I believe, his surprise when he woke up to find that an American company, G.E.C., had a commanding position in the French computer industry by the purchase of a very substantial shareholding in the computer machinery firm of Machine Bull. Technologically, and from the tax point of view, there is much we could do now to prepare the country for entry into Europe.

I do not believe that the Commonwealth position—particularly in the case of the tropical countries—presents insuperable difficulties. Nigeria has applied for associate membership and so have some East African countries. In Canada, from which country I returned last week, the possible short-term effects on aluminium, pulp and wheat are appreciated. The long-term prospect of Britain's being within the Community, and therefore having greater power of capital investment, is that the Canadians feel they could have diversified investment and so get relief from the enormous economic pressures from the United States.

New Zealand presents perhaps the most difficult of the Commonwealth problems. We have read the speech in Auckland by Mr. Leslie O'Brien, Governor of the Bank of England, in which he says that Britain's position is broadly understood. This is helpful. I see no reason why we should not be able to negotiate outlets for New Zealand.

I believe that our agricultural industry is already suffering from the effect of our exclusion from the Common Market. When fanners complain about bacon being exported from Denmark and about the increase in beef exports from Ireland, this is one of the prices we have to pay for our exclusion from the Common Market, because these are exporting countries which cannot export for the Community and so turn to Britain as the softest port of entry.

But even though we are outside the Common Market, British agriculture is greatly affected by the position in Europe. I do not know the position in other constituencies, but I know that in my division the price in the beef market is very largely affected by the extent to which in any particular week we are exporting to the Continent. The question is asked: what is happening in the German market? What is the price there? We are already greatly affected by fluctuations in Europe itself. I have always wanted to see a managed market. I believe that Harold Woolley, as he then was, was quite right in saying that it was lunacy to have a managed home market in this country and a totally unplanned import policy. But, of course, I was howled down on that score in this House six weeks before we announced that we intended to try to join the Common Market; for advocating precisely this for agriculture.

Very great care must be given to the position of our production grants to hill cow and hill sheep farmers. We must see that if there is to be some variation in support, their position is not worsened, because I believe that here we have very great scope for expansion of British agriculture.

Since I understand, Mr. Deputy Speaker—and perhaps this will be some relief to the House—that only one Liberal Member is likely to catch your eye, for which reason I make no apology for having spoken at some length—I wanted to work off my euphoria at the conversion of the very many sinners—I have to say that my Scottish colleagues are very disappointed to know that the Secretary of State for Scotland will not be speaking in the debate. It may well be that his outlook is not sufficiently favourable, or perhaps not sufficiently unfavourable, to the Common Market for him to be put in to bat, but it is certainly hoped that the right hon. Gentleman will make clear the position for Scotland, possibly in the Scottish Grand Committee, at an early moment——

Mr. Emrys Hughes

When the right hon. Gentleman says that, can he assure us that his Liberal colleagues in Scotland will vote for the Common Market?

Mr. Thorpe

My colleagues are perfectly prepared to vote for themselves and to make up their own minds. If the hon. Gentleman is here tomorrow night his anticipation will be answered and he will see exactly what we shall do—[An HON. MEMBER: "A three-line Whip."] Obviously, a party that believes in the very old-fashioned doctrine that hon. Members should vote according to their conscience and not according to the dictates of the party Whips would not, on an issue like this, have a three-line Whip. Neither did we think it necessary to have one on such a great political issue as decimal currency.

I want to hear what the Minister for Agriculture believes about the transitional period. I expect he would like 50 years, but we will need at least three or four years to bring about the transition, and possibly slightly more. If we get in—and I still think that we have only a fifty-fifty chance, it will be our opportunity to make the Community an outward-looking body. In many ways the external tariff is very much lower than the system we already operate here, with the exception of our Commonwealth partners.

There are very great dangers if we are out of the E.E.C. and, frankly, I do not believe that we have any other practical option but to go in. It is because there are no other practical options that the Prime Minister has been so decisive. He is only really decisive when there are no other options available.

I believe that not only economically but politically we have a duty to go in. The last thing I want to do is to try to inflame the feelings one might have about Germany, a country which has, in many ways, had a remarkable record in democracy since the war, but we see the Germans' present disinclination to sign a non-proliferation treaty, which is interpreted by some as a wish to reserve to herself a possible right to independent nuclear manufacture. We see the emergence of the N.D.P., which frightens people in Germany just as much as it frightens them here.

I believe that, politically, the presence of Britain would have a very steadying effect, not only on Germany but on the possibilities of East-West relations. It is very significant that whatever else Soviet Russia may have said in recent years in her criticisms of the Common Market, although she may pay lip-service to current anti-capitalist slogans, the Common Market has not been regarded by Russia as a menace and threat to her own integrity and security.

If it is an outward-looking Community, if it continues with its very impressive record of development, of investment in developing countries—I think Germany has invested more in India's Five Year Plan than this country—because of its economic potential—this can be an expanding Community and a force for world peace, but it will be a long haul. We must be careful not to revive the fears of our being bad Europeans which we did so much to create in the years immediately after the war. If we can convince them that we are good Europeans and that we can make the Community work as a territorially expanding Community, not only this country but Europe has one of the greatest contributions to make to the world in the whole of her long history.

5.51 p.m.

Mr. Stanley Orme (Salford, West)

I am sure that the right hon. Member for Devon, North (Mr. Thorpe) will forgive me for not following the train of his thought and his conclusions, because mine lie in the opposite direction. I make one comment, however. He should be very careful before criticising members of the Government who might have an opposite point of view to his and then talking about the freedom which the Liberal Party has saying that Liberal hon. Members do not have any three-line Whips. It does not lie with him to take that attitude.

Mr. Thorpe

Liberal Members are free. The Government are imposing a three-line Whip.

Mr. Orme

The points in the Amendment signed by my hon. Friends and me appear in the policy of the Labour Party and in the manifesto on which we fought the General Election. The Amendment clearly suggests that the safeguards which we undertook in 1963 still stand so far as we are concerned, but those five conditions have not been written into the negotiations which are about to take place with the European Community. Those conditions, which cover E.F.T.A., foreign policy, national planning and agriculture, we believe, have not been eroded away. We were told only the other day that the E.F.T.A. position was possibly one issue which was eroded more than any other, but if we read the reports of the E.F.T.A. conference, recently held in London, we find that there was far from unanimity among the E.F.T.A. countries represented here at that time. That position is still exceedingly valid.

I turn, first, on the economic side to the European Economic miracle we hear so much about and its relationship to Britain's economy and what the Chancellor was dealing with this afternoon. There is a real contradiction here about the 3 per cent. growth rate which was talked about in the Budget prior to the decision to apply to join the Common Market. It was necessary for this country if we were to be outside the Community. Surely with added commitments a 3 per cent. growth will not be sufficient, if we are to attain membership, because of the additional adverse effects on balance of payments, capital, and so forth. This needs to be cleared up. My hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) made this point in April. Is it 3 + 3 or just 3 per cent.? This should be answered.

Following the destruction suffered in the war by Germany, Italy and France, and the build-up which started in their economies when they were redeveloped with new plant and modern industry, the economic miracle we hear so much about—the yearly increase in productivity—was quite large over a number of years. I maintain that this had nothing to do with the Economic Community as such. It was purely a matter of economic recovery. These nations were catching up with other Western nations, particularly Britain, and they were helped by the Marshall Plan. In addition, Germany had been shorn of her dependencies and France was contracting out of what is now Vietnam and was formerly Indo-China. They were getting rid of their overseas commitments.

We are part of Europe. Although people talk about our going into Europe, without us a European Economic Community might not have been possible. This country has nothing to be ashamed of when we consider that part she played in the 1939–45 conflict against Fascism. These other countries were shorn of their international responsibilities to which our country still clings and which involve vast overseas expenditure. They were able to capitalise on that situation. Even with those benefits compared with Britain, we find that in Germany there is rising unemployment—to the tune of about 700,000. There is unemployment in the Netherlands.

The European Economic Community information memorandum published in Brussels in April, 1967, stated: The gross index in the fourth quarter was only 3..5 per cent. higher than a year earlier; this was due primarily to an unmistakable slackening in the industrial production of the Federal Republic of Germany. But growth continued in the branches of industry not covered by the index and in services. In most member countries pressure on the labour markets eased in varying degree, partly because of the way the general economic situation was developing, partly because of a strong increase in the labour force; the rise in unemployment was particularly rapid in the Netherlands and the Federal Republic of Germany. The economic problems and crises of Western Europe are common to Britain and to the Community. It is no good burking this issue.

Of course, we have to have drastic measures if we are to rejuvenate industry. We want to have increased productivity. Without it the Government, no Government, would be able to fulfil their promises in relation to social services and all those improvements we want to make. This is absolutely obvious, but does it mean that we should go into a bigger economic unit which, even allowing for other countries which might apply for membership at the same time as we do, is only a very small part of the 26 nations which make up Europe as a continent? This corner of Europe is the richest and most highly developed of Western Europe. It is known as "the rich man's club." It has an inward, selfish approach to the economic problems which face the world. Britain should look at a far greater and wider aspect of the world than is contained in some of these countries.

I turn to the question of planning and public ownership. I say this as a Socialist, a member of the Labour Party, and believing very firmly in the necessity for public ownership and its extension into some of the major sections of our economy. This is one of the basic factors. I shall not carry hon. Members opposite with me in this, and I do not expect to do so.

We can study what some of my hon. Friends have said on this issue. The Leader of the Opposition very pertinently reminded the Prime Minister this afternoon of one or two things he has said in the past. It is important to consider some of these previous statements. I and many of my hon. Friends want to know what has changed from 1962 to 1967. It is not the Treaty of Rome. That has not been amended. Every Article is an it was when it was produced. Nothing drastic has changed in relation to Europe and its economic development

I turn to Article 92 of the Treaty, which deals with aids granted by States and says this: Except where otherwise provided for in this Treaty any aid granted by a Member State or granted by means of State resources in any manner whatsoever, which distorts or threatens to distort competition"— that is what the market consists of— by favouring certain undertakings or the production of certain goods shall, in so far as it adversely affects trade between Member States, be deemed to be incompatible with the Common Market.

Mr. Eric S. Heffer (Liverpool, Walton)

Is my hon. Friend aware that Article 14 of the E.F.T.A. Agreement, which was ratified by the various E.F.T.A. States at the end of last year, contains a very similar clause? The rules of competition between E.F.T.A. and the E.E.C. are practically the same.

Mr. Orme

My hon. Friend and 1 do not normally disagree. The House can see what happens over an issue like this. My hon. Friend will be the first to agree that the E.F.T.A. agreement and the decisions arrived at are not the same as making one single economic unit based on the Treaty of Rome. The E.F.T.A. agreement is far more loosely interpreted than the Treaty of Rome.

I have stated the issue. I want to quote something which was said in August, 1962: … we recognise that there is a strong desire in Europe for a form of planning, European planning as opposed to national planning, but let us be clear about this. The aim and objective of that planning is not the same as, for example, the T.U.C. has rightly demanded, planning for full employment. It is planning aimed at holding the ring with conditions for full, free capitalistic competition. That is not what we understand by planning."—[OFFICIAL REPORT, 1st August, 1962; Vol. 664, c. 700.] That was not a spokesman for the Socialist Party of Great Britain. That was said in 1962 by the present Prime Minister.

Earlier, in August, 1961, my right hon. Friend had said this: I say frankly to the House that as I read the Treaty of Rome, and the intentions of those who at present operate it"— they have not changed— the measures necessary to fulfil the policies set out, for example, in 'Signposts to the Sixties' cannot be implemented without substantial amendments to the relevant articles to the Treaty."—[OFFICIAL REPORT, 3rd August. 1961; Vol. 645, c. 1657.] We are now told that the Treaty does not need to be altered in any shape or form.

Mr. Maxwell

Is not my hon. Friend aware that the President of the Commission—Hallstein—has just resigned? Is he not further aware that supranationality has ended with that resignation?

Mr. Orme

I am sure that my hon. Friend is not so naive, and would not expect the House to be so naive, as to believe that because Hallstein has gone there would be a profound change. We have been informed by well-informed correspondents of responsible newspapers that the person who is to replace Hallstein, who is in conflict with the French on this issue, will be sympathetic to the British application and will take a similar view of the development and operation of the Treaty in Brussels.

In August, 1962, Pierre Mendes-France said this about planning: There is no contradiction between national planning and membership of a group of nations practising planning. But it is difficult to see, on the other hand, how national planning can be integrated into a Common Market based on strict liberal principles, which has abjured governmental intervention and leaves economic evolution solely to the laws of the market. Is that what my hon. Friends want, because this issue must be examined?

During the debate on steel nationalisation hon. Members opposite raised the question whether nationalisation would be incompatible with the Treaty of Rome and the Iron and Steel Community. Vesting day has been brought forward, and I welcome that. I wonder how much this had to do with our application to join the E.E.C. Many independent observers believe that nationalisation could have been ruled out of court because it would have conflicted with Article 92. We had an assurance from the Government that this was not so. As a supporter of nationalisation, obviously I welcome the fact that it has gone ahead.

Italy has nationalised its electricity industry since the Treaty has come into operation, but there has been no form of public ownership in any of the six countries which in any way could conflict with Article 92. The one country which has fought against this has been France. I want to make an interesting quote from something said by Sir Robert Shone, who was until recently the Secretary of the N.E.D.C. He said this: The French planners are increasingly moving away from detailed interventions that characterised their early plans. This is partly because many forms of discriminatory help or subsidy are ruled out … and partly because of the greater part now played by market pressures.

Mr. S. C. Silkin (Dulwich)

My hon. Friend has made a number of quotations from what various people have said. Has he visited the European Economic Commission in Brussels and found out from the Commission what it is doing in the way of its medium-term plans?

Mr. Orme

In view of the organisations with which my hon. and learned Friend is associated and the manner in which they ply my hon. Friends and myself with material, it is hardly necessary for me to go out there.

I turn to what is happening inside the Common Market itself and some of the developments which have taken place. We shall have to join this mixture, if we gain entry. On practically every aspect there have been delays, reservations and a slowing-down. Most people know that the French not only have different views on foreign policy, but are at odds on economic planning and at odds on the agricultural policy as such. One of the reasons why the French are not so keen to let Britain in to the Community at the present time is that they think that we will side not with them but with the other five members.

I can go down the list. On harmonisation of taxation, there is delay. The common transport policy has run into difficulties and has been postponed until 1972. On fusion of executives—I am quoting here from "Britain in Europe", by Professor Pickles, a good authority—on fusion of Communities, and on a common commercial policy and freedom of movement of established services movement is very slow. On free movement of capital, it is slower still. On equivalence of university degrees, it is dead slow. So it goes on. Under the Treaty as it exists at present, the Community is making no forward steps at all.

Mr. David Ginsburg (Dewsbury)

Is my hon. Friend arguing that the Common Market is moving too fast or too slowly in these matters?

Mr. Orme

I am trying to show that, instead of being the overall planned economic miracle which it is supposed to be, a thriving and thrusting economy into which we can go, just the opposite is the case at present. General de Gaulle has just taken emergency powers in France which are not altogether dissimilar from what Her Majesty's present Government took on the wage freeze and Part IV of the Prices and Incomes Act recently, but that is rather a sensitive point and I shall not go into that further.

I find the unsigned article in The Times of 1st May dealing with capital flow and the balance of payments very interesting. A lot of figures have been bandied about on all sides. My right hon. Friend the Chancellor warned us today not to take too much notice of these figures. Unfortunately, he did not give us any of his own. The Prime Minister has given us some figures on payments into the Fund in respect of foodstuffs and movement of capital, and these figures, together with those in the article in The Times, could involve us in £500 to £600 million a year; and many think that the figure could be as high as £700 million or £800 million. This is a tremendous amount of overseas exchange for this country to cope with and keep right. There will have to be an enormous infusion into our economy if we are to make a success of it.

We have had some rather sublime statements about the injection of a fresh impulse into our economy, about an increase in productivity, and about how going into the Common Market will get industry off its knees. I want to know, in realistic terms, how all this is to be achieved. No one has dealt with that yet.

We have been told about the infusion of American capital which is likely to come to this country if we join the E.E.C. I am a Member from the North-West, and there are Members here from Wales, the North-East, Scotland and Northern Ireland. These Members are concerned about economic planning and the state of the regions. In spite of the measures which the Government took after 20th July to try to safeguard the regions, the regions were, nevertheless, hit the hardest. The reasons are obvious. If there is a slowing down of industry, a firm based in Birmingham or London and with a subsidiary in Scotland, Manchester or Northern Ireland will close the subsidiary first, and back the capital comes to the centre.

What will happen if we join the Common Market? If someone wanted to start a new factory, where would he put it? First, there are all the inducements in the form of grants and the rest which the Government give to help the development areas. But, if the Government make it difficult and say that the firm cannot go to A, B or C, that firm will be free to go to Luxembourg, the Low Countries, or anywhere else on the Continent of Europe.

Mr. F. J. Bellenger (Bassetlaw)

Where the labour is.

Mr. Orme

It sucks the labour down with it.

Ideally, we want that firm to follow the best planning concepts and set up in one of the regions or development areas. But, if it is refused a development certificate, it is free to go to the Continent. The drift to the South-East will be accentuated, and—let me remind the right hon. Member for Devon, North—it will go from Cornwall and Devon, as well.

Mr. Thorpe

Is the hon. Gentleman suggesting that firms are not at this moment able to go to the Continent? Is he aware how many firms have gone simply to get over the external tariff?

Mr. Orme

It will be much easier for them to go, because they will be able to export back to this country, if necessary, as the tariff wall is withdrawn. The question of regional planning must be treated very seriously. Depopulation in areas like Scotland has not been arrested by most stringent Government action. It will be impossible to stop that depopulation from becoming a flood almost breaking its banks if we go into the E.E.C.

I come now to the vital point raised by the Leader of the Opposition today in relation to the political aspects of this matter. He was right to raise the question of the European deterrent, the British deterrent and the French deterrent. It is proposed to join an economic Community which the Government themselves say they want to see spread out into political association. Yesterday, Dr. Kiesinger called for a common foreign policy. How can issues of defence be excluded?

Mr. Maxwell

For the time being.

Mr. Orme

At any time.

My right hon. Friend the Prime Minister was right to challenge the Leader of the Opposition to clarify where he stood, but my right hon. Friend ought to clarify where he stands on the defence issue. Why have the Germans not supported a non-proliferation treaty? They want nuclear weapons, and they think that they will have more bargaining power if Britain goes into the Common Market. There is no doubt about that. How can we avoid discussing defence? As my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) said yesterday, the last talks broke down on a defence issue, the Nassau Agreement on nuclear weapons at that time and what was agreed between Mr. Macmillan and President Kennedy.

There are those of us on this side of the House who are glad that the nuclear weapons issue has been brought out. It it time to get down to the realities of the situation. I am convinced that these issues will be discussed between the Six and ourselves when we apply for membership. We are entitled to know where we stand. There are many of us on this side who are very dissatisfied—I certainly speak for myself here—about the maintenance of nuclear weapons and an independent deterrent by this country, but I do not want to see Britain going into a Community in which the Germans and others will have use of that weapon. My right hon. Friend and the Leader of the Opposition could have discussed these issues tomorrow night, when they are in the same Lobby.

That brings me to what is, for me, the important issue. A very serious democratic decision is to be taken in the House. My right hon. Friend the Prime Minister said last week, when he was questioned by an hon. Member opposite: This is a major decision of Government policy and will be put to the House as such next week. It is recognised, with the tolerance shown in our party and, I am sure, in the party opposite, that this is a matter on which hon. Members may feel that very deep issues are involved. It is not for me to dictate to hon. Members the conclusions which they may reach."—[OFFICIAL REPORT, 2nd May, 1967; Vol. 746, c. 324.] I do not think that, short of a declaration of war, a more important decision could be taken by this country. It is one of the major issues of our lifetime and it is, therefore, only right that we should honestly and sincerely express our opinions about these matters. We live in a democracy, if, by "democracy", we mean that we reflect the different strands of opinions, reflect what the people really think and believe. As we know, the two major parties are basically coalitions, representing varying points of view. We come together here to work within a party discipline because that must be done to achieve the legislation we want. But there are times when issues go above that, and when we are asked to take a decision a Member must stand up and be counted. When we do that in a genuine way we make the House a living reality, and we make democracy mean something.

People outside tend to deride us at times and criticise Members of all parties for being "Lobby fodder", because to be otherwise might be detrimental to themselves, because they might have the Whip withdrawn, because they might be expelled from their party if they stood up. The party opposite has had Members who have stood up and have suffered for it, and that has also happened on this side.

After a lot of thought, I feel that on this occasion, whatever the consequences, I must follow my conscience tomorrow night. On this issue, abstention is not enough. Therefore, I shall vote against the Government, knowing that four-fifths of the Opposition will be in the same Lobby as my party at the time. I shall vote against the Government believing in what I have said here, and believing that we are making the application without the safeguards which should be guaranteed by the policy of the party which I and other hon. Members represent. I feel that we must make this stand, and I shall, therefore, vote with some of my hon. Friends tomorrow night against the Motion.

6.23 p.m.

Sir Harmar Nicholls (Peterborough)

Whatever views we may have on the details of the speech made by the hon. Member for Salford, West (Mr. Orme), we all agree that we have just listened to an honest speech. That is the sort of thing which raises the standard of House of Commons debate. Hon. Members will note that my arm is in a sling. I thought that I would come in my Emergency Ward 10 gear in the hope of getting a sympathy vote or two.

I agree with the hon. Member; I do not object to the three-line Whip which both Front Benches have put out. In many ways they have a duty to do so, because a three-line Whip in a Parliamentary debate on this sort of issue underlines the importance the Government and the Opposition place on it. It also underlines the importance placed on the issue by those of us who feel that we must ignore that three-line summons from our respective leaders.

Naturally, I could not agree with the hon. Gentleman when he seemed to deplore the possibility of our joining the Community because it would interfere with the speedy advance of Socialism as he wants it. He was rather frightened of the capitalists of Europe stopping him going his merry Socialist way. His hon. Friend the Member for Liverpool, Walton (Mr. Heffer), who interrupted him, seemed to be eager to enter the Community because he thought that our entry could speed up bringing Socialism to it.

My comment on those contradictions is that the issue has nothing to do with the dogmas of Socialism or capitalism. It has to do with Great Britain, Europe and the world, and my Conservatism and his Socialism form only one part of it. It is, however, an important part, and it is the clash of arguments one against the other which we hope will eventually get us along something like the right lines in playing our part for the world and for Europe in the future.

There is a great deal of frustration in having to make a speech on an issue of this importance when one knows before one starts that one will be defeated in the vote. We know that that will happen, so what is our part, what are we doing in continuing the debate as did the hon. Gentleman and as I shall do? We hope that, although the Government will get their mandate to make the application, we can put enough doubts and thoughts into their minds to make them rather more keen than they would have been when they conduct the negotiations.

I also hope that if, through no fault of the Government and whoever conducts the negotiations for them, we are once again not allowed to enter the Community, the debate will at any rate have caused the Government and my right hon. Friends to say, "We have tried honourably with all the effort we can produce but have not got in, and we shall now look at some of the alternatives to see how to live without the Community."

I voted for the then Government in 1961. When this debate and argument was in its early stages then, although I was suspicious and did not like the proposal—my views were not dissimilar to those of the hon. Gentleman—I voted for it because I thought that one should not have on one's mind that we did not give our leaders a chance to go in and find out more about it. With all my doubts, I voted to see the results of the negotiations and probes, which were carried out with great skill by my right hon. Friend the Leader of the Opposition. But those negotiations and probes confirmed my doubts, they confirmed that entering the Community, which means signing the Treaty of Rome, is not for us.

I was appalled by the opening of my right hon. Friend's excellent speech today. He certainly showed that he can dominate the House and that on this topic he is an authority who should be heard. He was impressive, but I should have liked to feel that the skill and ability which he showed so clearly today would be used for the alternative, if eventually—in 12 months or whatever time it takes—we are again not allowed in. But he said that if we were again rebuffed we should go on trying. How often must we be spurned, if we are going to be spurned, before we take the hint?

My right hon. Friend also said that he had no doubts that we would live without entering the Community, that we have all our ability and our exporting strength. He mentioned E.F.T.A., the Commonwealth and the rest of world trade that is ours, and he said in a way that they will still be there.

If it is that we are spurned time and again and that we go on making these applications in the spirit of the last one and of this, are we, in making those applications, going to keep telling our Commonwealth partners that we are prepared to take away their Commonwealth preferences and, indeed, to put tariffs up against them? If it is that we disclaim as clearly and loudly as we are that we have so forgotten the members of the Commonwealth that we are prepared to keep on applying for membership of the E.E.C., the Commonwealth will simply not be there afterwards. If we fail, we shall not be able to fall back on the real base of our export trade.

The same applies to E.F.T.A. I would not presume to claim that they could be anything like as strong as the Government's or my right hon. Friend's, but my contacts in E.F.T.A. countries show that our partners are very disturbed by the eagerness with which we are prepared to end the association with them. So we cannot guarantee that, if it is that we do not get into the Community, we shall automatically have E.F.T.A. to fall back on. We are applying in a weaker position than we were last time. Our position is slightly weaker because many of our friends, many of our trading partners and customers, have left us following the indications we have given of the mood of this country.

I want now to talk for a while about the position of the Conservative Party. No one could have tried harder than my right hon. Friend the Member for Barnet (Mr. Maudling) to make us partners in Europe. Later, no one could have used more skill than my right hon. Friend the Member for Bexley (Mr. Heath) in his negotiations. They were in the Conservative Government. If it proves to be the case that the Labour Government cannot do it either, then surely we should make it clear that this is the last time we are going to crawl to do this thing, which so many of us feel in any case would not do us any good.

The Chancellor of the Exchequer was too patronising about the Commonwealth. He said that there was some talk of a possible weakening of the ties with the Commonwealth and added that of course the "Commonwealth has a future". But he left it at that. It was patronising and is likely to leave members of the Commonwealth who have been loyal—although, naturally, keen in trade—in the position where they think that these ties which have kept us together are now not so strong.

The right hon. Gentleman said how well we had been doing in building up our reserves. He said that the future was bright, that we had got our strength back and that the world was standing open-mouthed at our strides forward. But we did not do all this as a member of the E.E.C. If we can make such strides, we cannot say in the same breath how vital and important and almost indispensible it is for us to join the Treaty of Rome.

Mr. R. T. Paget (Northampton)

What seems to be to be the worrying thing is that we shall not meet an acceptance or refusal but will left hanging about for at least two or three years. What is to happen to any alternatives during that period?

Sir Harmar Nicholls

I thank the hon. and learned Gentleman for reinforcing the point I was making. Speed is the essence of this. I was trying to say that we could not afford to hang about because it is important that we should deal with the alternatives, and one alternative is certainly to make better use of the opportunities for trade that we already have. I am certain that, if we had given one-tenth of this time and effort to building up our existing trade with the Commonwealth, E.F.T.A. and the rest of the world, we would not only have been wealthier but in a stronger position to help Europe and the world in the way we want.

Yesterday, the Prime Minister claimed that the decision of the C.B.I. was pretty well unanimously in favour of entry. He said that it was 90 per cent. He rather suggested that all the people who know in industry are overwhelmingly in favour of joining and are enthusiastic about the consequences. I do not suppose that he did it deliberately but the impression he gave was not true. It is not the case that 90 per cent. of the C.B.I. are enthusiastic and eager to get into Europe.

The truth is that 1,700 firms were asked and that 865 replied to the questionnaire. Only 34 per cent. thought that there would be a clear and progressive advantage in British membership. Of the total membership of the C.B.I., this figure represented only 17.7 per cent., who thought that they would gain from free access to the markets of the Six.

Sir John Rodgers (Sevenoaks)

My hon. Friend should complete the statistics. It is also true that 91 per cent. of those firms which replied thought that there would be a balance of advantage to the country although not necessarily to their individual companies.

Sir Harmar Nicholls

The only point I want to make is that it is not right to give the wrong impression, particularly from the Treasury Bench, for it is not true that 90 per cent. of the members of the C.B.I., which is the most authoritative body in industry, think that it would be a good thing to do in.

Nor is it true that the nation is eager to join. I do not know how important it is that we should count heads on an issue like this. It may not necessarily be the best thing to do. But certainly it is a matter of such importance that the view of the country should not be misrepresented. It is not true, as the Prime Minister and others have suggested from time to time, that the country over- whelmingly wants to join. On what the people know of the issue—and it is not their fault that they do not know more—I would say that they are by and large against joining. Of course, if we do join, we must want to make it a success. I have my doubts and suspicions. I think that it is wrong to apply. But if we do get in, we want the Community to be a success and to do all the good things that we have been told it will be able to do.

But if it is that we do go in, we must not have misled the people in doing so, for the people are, in the last resort, the only ones who can make it a success. This would be the biggest change in our form of government since 1066 and if ever there was a time when we should count heads—not necessarily because the people can understand all the implications and details but because, in the end, it is they who will have to accept the good or ill which comes from it—this is it.

There is an alliance on the issue between the two Front Benches and I do not see how we can count heads on this issue by way of general election. Indeed, the last general election, if it did anything, showed that the people preferred to vote for a party which they understood did not want to go into Europe. Of course there were all sorts of words in the Labour Party manifesto but on this issue the people could recognise that the Liberals were keen to go in on any terms, that the majority of the Tory Party, under my right hon. Friend the Member for Bexley, would want to go in but that the one party that gave the general impression that it did not want to go in was the Labour Party.

It may be that this issue is so important that, if the alliance between the two Front Benches continues, we may have to think in terms of a referendum or some way of getting the views of the people, so that if we apply and fail at any rate the people will have the decision on their own heads. I beg the Minister without Portfolio to put this to his colleagues in the Cabinet before they take us into the Community if they have the chance. But, of course, I do not think we shall get in. I say that with no joy, but all the pointers are that the same difficulties are present today as were present last time. My main purpose now is to try to get both Front Benches to see that they ought to be giving a little time and thought and effort to building up the alternatives.

I now make my one contribution on the actual issue itself and then I shall give way to the next speaker. I think that I understand industry and I think that I understand the minds and the moods of the people who run the industries of this country. Anybody who was born in the Black Country and who has lived there all his life and who was connected with it could not help but have some sort of idea of what makes industry and industrialists tick. I am as certain as certain can be that if and when we apply we succeed and get in, in the short, the medium and the long term the industrial strength, and that is the wealth of the country, will go downhill, and go downhill fast.

It is perfectly true that many industrialists have said that they think that it would be in their best interests to have this bigger market for their research and for the general technological advance which we must have in these days. But when they say that it would be in their interests, these industrialists literally mean that it would be in their firms' interests. I can well see that it would be in the interests of some of the big firms. They do not mean that it would be in the nation's interests. It is not their job to do that. Their job is to make their industry successful.

The job of people in industry is to make a profit by running it well and to pay good wages and to have good working conditions and still get their markets. Their job is to concentrate on being successful in their industries and businesses. It is not for them to weigh up the pros and cons of the social and political consequences. Their job is to be successful businessmen. If they had this bigger 300 million market inside the tariff barriers, there is no doubt that many of these firms would be better off, but I can categorically state what would happen within 15 to 20 years from now, perhaps less.

We know that in industry the second most important ingredient in cost, next only to salaries, is transport costs. If four-fifths of the enlarged home market which is being so lauded is on the other side of the Channel, that is where firms will want to domicile their factories. They will do so not out of spite or malice, but because it will be their duty to do so. In my tuppeny ha'penny business, in the Nicholls organisation, we put our warehouses in the middle of where the business is, not on the perimeter. If they were on the perimeter, that would put an added burden on transport costs, and one would lose business, because that is how keen business is.

As soon as we are inside this great market of 300 million with the tariff protection round it and with four-fifths of the market on the other side of the Channel, firms in this country which now have subsidiaries in Europe will find that those subsidiaries become the main factories and we will be on the perimeter. This is precisely the problem which now faces Ulster. The reason why we cannot get industry to go to Ulster to help with the great unemployment problem there is precisely the added cost of taking raw materials there and of putting machines into cases and putting them on ships and bringing them here.

As sure as sure, if we are successful and get in, the result may well be that British named firms will have better balance sheets and British named firms may retain their head offices in this country and pay some of their taxes into our coffers, but Great Britain as an industrial centre, which has built up some of the greatest industries in the world and which has impressively led the way in technological advance, will no longer be that centre. We shall be on the perimeter and while the European Economic Community as a whole may be more successful, our share will be smaller.

I still believe—it may be old fashioned and some may think it to be selfish—that the first responsibility of a British Government is to look after Britain. If Britain is kept safe and wealthy, then in our wealth and in our strength we shall be able to share with other parts of the world, as we have in the past, as good neighbours.

This much-lauded application to join the Six does not have for me the magic which it is supposed to have. I believe that it will weaken our chances of doing those things. Even when the Government get their mandate tomorrow night, without my vote, I hope that they will not think that they have to go on applying until we have weaned ourselves from all those things which we hold to be important and which have been successful.

6.45 p.m.

Mr. F. J. Bellenger (Bassetlaw)

The hon. Member for Peterborough (Sir Harmar Nicholls) has made a remarkable speech and some remarkable remarks, not least about transport, about which he may know more than I do because of his so-called "tuppeny ha'penny" business. I am certain that transport in this country will only benefit by our joining the Common Market. Why, otherwise, should we dream of building the Channel Tunnel?

I think—I may be wrong and, if I am, perhaps the hon. Gentleman will correct me—that he was a member of the Conservative Government who——

Sir Harmar Nicholls


Mr. Bellenger

He was a member of that Government, but not when the Common Market was debated. [HON. MEMBERS: "He resigned because of it."] Then I give him my approbation.

When the hon. Gentleman comes to vote tomorrow night, let him take comfort from the fact that, although he is in a minority, it is probably bigger than my minority when, during the war, I voted against the Government of Mr. Churchill. I believe that my right hon. Friend the Member for Easington (Mr. Shinwell) was also in that minority. Because we believed in what we advocated, we voted against the Government who, of course, had an overwhelming majority. I agree with him that those who think as he does should act as he tells us he is to act.

The hon. Gentleman was wide of the mark in what he said about our E.F.T.A. partners whom we consulted and whose approval we obtained. It is on the record that at least one of them, Denmark, is bursting to get into the Common Market. What is the good of saying that we are letting down our E.F.T.A. partners when we are doing nothing of the sort? We are proceeding constitutionally, and although some of them may have some apprehensions, in the main they approve of our taking this step.

It does not help the debate to engage in recriminations about the past. No doubt the right hon. Gentleman the Leader of the Liberal Party can proclaim a "holier-than-thou" attitude on behalf of the Liberal Party on this issue. I concede at once that the Liberals have been consistently in favour of joining. But what is the good of the Liberals saying that my right hon. Friend the Prime Minister has done something reprehensible because he has changed his mind, while the Liberal Party has not? As far as we can, we have to concentrate on the more substantial issues, and I hope to hear from my right hon. Friend the Member for Easington, as I have heard from others, the arguments against our going in.

The Government spokesmen have put their argument, notably my right hon. Friend the Prime Minister in a rather protracted speech, for entry, and in the main I accept what my right hon. Friend said. It is true that the Leader of the Opposition taunted him with his conversion, but those of us who still read Biblical history should never forget that Paul on the road to Damascus was a convert from an infidel—and look where he came in the Christian calendar! The Prime Minister may go down in history as one of the noblest converts who saw the blinding light and, if so, good luck to him: … shall be in heaven over one sinner that repenteth, more than over ninety and nine just persons, which need no repentance.

Mr. Ronald Bell (Buckinghamshire, South)

Would the right hon. Gentleman agree that St. Paul, on that occasion, did not add, as the Prime Minister added, that there were other acceptable alternatives?

Mr. Bellenger

I agree. One can make witty points over these illustrations, as the right hon. Gentleman the Leader of the Opposition did. Let us try to debate this issue in a responsible fashion.

The question that will be put tomorrow night, no matter in what form Mr. Speaker may present it is: do we approve of the Government's policy of applying for membership, or do we not? All the frills in the shape of Amendments, if they are put, are beside the point. I thoroughly approve of the Motion and I am about to try to give the House a few reasons why.

I was very interested to hear my right hon. Friend the Chancellor talking this afternoon about the repayment of our debts which he proposes to make in the near future. I am glad of it. There is no doubt that it will give a good deal of comfort in certain financial circles. At first, I was inclined to question whether this came from real savings or whether it came from money flowing into this country, as a result of the high Bank Rate. He assures me that it is not because of this. He tells me, as we all know, that Bank Rate has been considerably reduced. He said that it is because the investment balances are being restored to normal.

Whatever the reason may be, I have been brought up from my youth on one principle alone—the "Micawber" principle. That is the principle of "£1 income —19s. 6d. expenditure". This country can have a true balance only if we have a true balance of trade, namely, more coming in than going out. I believe that my right hon. Friend, with a good deal of unpopularity, is trying to produce that end. I further believe that the reason why he wants us to join the Common Market is because he believes that his balances at the end of the year will be bigger. I think that they will.

Mr. Molloy

My right hon. Friend has used the analogy of the wise Micawber principle. Would he not agree that there is also a danger of this being considered from the point of view of the other Micawber principle, that of being poverty-stricken and waiting for "something to turn up"?

Mr. Bellenger

No, I was proceeding on the more positive principle of Mr. Micawber, not on the negative one. That is the trouble with so many of my hon. Friends, and some hon. Gentlemen opposite. They are "dismal Jimmies", including the right hon. Gentleman the Leader of the Liberal Party, who talks about a fifty-fifty chance. It is an evens chance, at any rate, which is probably better than what my right hon. Friend, the Member for Easington thinks.

My right hon. Friend calls it a gamble. Life is a gamble. There is only one certainty in life, and we older ones know what that is. It is because some of us are still young in mind in spite of our age, that we believe in a gamble. This is probably why the majority is in favour of our joining the Common Market. We could have a referendum, but I do not believe that the question could be put in a form that the majority of people would understand.

They have already been confused by the Pundits in the newspapers and elsewhere, saying that we were literally going to the dogs, that our food will cost us more. At least the Government are honest on this. When I listen to my right hon. Friend the Minister of Agriculture, perhaps I shall know a bit more. It is probable that our food prices will go up, but there are balancing features. My right hon. Friend the Prime Minister spoke of the social welfare. He said that balancing features must be made, quite rightly. We know that on the Continent butter costs more than here, because we buy cheaply from New Zealand and Denmark. The housewives on the Continent know this better than housewives here. In my view, things are not going to be as extreme as is made out by some commentators.

Perhaps I may direct the attention of my hon. Friend the Member for Salford, West (Mr. Orme) to some further points about nationalisation. He has only touched the fringe of the subject. He mentioned the nationalised industries in Italy, but let him examine some of the nationalised industries which were established long before the war in West Germany. Let him examine the electricity industry there. True, it is not nationalised on the same basis as ours, centrally. Probably because of that, it is a better form of nationalisation than ours.

For many years Germany has been ahead of us, as have other countries. The railways are an example. In France, Switzerland and Germany the railways are much more advanced than here. Their Socialism and nationalisation is much more advanced. If it can be done on that basis there, controlled like the electricity industry, by municipal authorities among others, why should it not be done here? My hon. Friend is a little "off beam" in this respect.

We have to consider how the Six came about. We cannot go too deeply into the history, but the booklet which has been issued by the Government, "Britain and the E.E.C., the Economic Background," gives us the details of how these countries decided, in the midst of adversity to get together, old opponents, like France and Germany included. I saw it for myself, after the war.

I was in Germany then, while I was a junior Minister, and I saw the devastation, the near anarchy existing there. An Opposition Amendment talks about law and order. The trouble was that law and order in Germany was almost demolished after the Nazis had been dealt with. These men realised, thank God, that if they were to survive, and to build themselves up, they had to get together, instead of working alone. That is the issue facing England today. We have to work in co-operation.

Mr. John Rankin (Glasgow, Govan)

Surely more than England is concerned in this? There is also Scotland.

Mr. Bellenger

I beg my hon. Friend's pardon.

What will happen when we get into the Common Market, and the foreigners have to understand this subtle difference between Scotland and England, I really do not know. I would urge my right hon. Friends to put this high on their list of priorities. I ought to say Britain. Britain has to get into the Common Market and to co-operate with the others if she is to survive. Especially if we are to survive in affluence.

No one can doubt that affluence exists on the Continent. In many cases, wages are higher than in this country, but, of course, there is a balancing feature in that prices are higher. I imagine that the same thing will happen here. But full employment has not been surrendered. Consider Germany, which has 600,000 to 700,000 foreign workers. We boast of coloured workers from the Caribbean, and so forth, and say that they are citizens of the Commonwealth. The countries of the Six have foreign labour too. They are in Switzerland. There are hundreds of thousands of foreign workers, and this is a sign of affluence.

They do not have enough labour in their own countries to produce that satisfactory balance which they need. That is probably the reason why they are rapidly overhauling this poor little country, which has been shedding its empire. Also, what is far more pertinent, it has been shedding a lot of the funds in those countries.

Take the balance of trade between Canada, one of the old Dominions, and this country, which is mainly tied up with the United States financial system. Some of the best investments in the world, certainly in the Commonwealth, are in Australia, because she has a lot of raw materials—not like coal, which is a waning raw material in this country—which are being developed largely by American and Japanese capital. The Australians—and I was in Australia two or three years ago—would perhaps prefer to deal with the British market; that is the tie of blood, as it were. But, as one Australian said to me, "Money is the same, from wherever it comes. If it is invested in our industries, and if it makes them more prosperous, we do not care whether it is Japanese or Chinese money".

We must take these factors into account. It is no good using mainly rhetorical arguments, saying that we are letting down the Commonwealth. The Commonwealth knows that we are not doing that. It knows that it has to search for other markets, and it is finding them. I do not believe that Commonwealth countries will be any less prosperous if we go into the Common Market.

My hon. Friend the Member for Salford, West (Mr. Orme) talked about the regions. The wages of people in at least one region are being subsidised to the extent of £2 million per annum. If inducements like that can be given, and if tax-free inducements can be given to Ireland, it is small wonder that many European countries are setting up factories in Northern Ireland and Southern Ireland.

My hon. Friend the Member for Salford, West referred to German nuclear armaments. A distinction should be made, which the Leader of the Opposition made, between nuclear armaments and civil nuclear research. There is not the slightest doubt that if we were to drop all the nuclear weapons into the sea tomorrow, nuclear power would remain. It is badly wanted. Small wonder it is that the Germans, in particular, refuse to sign a non-proliferation treaty under these circumstances. Judging from statements made in responsible quarters in that country, Germany does not want nuclear weapons. Germany would be the first to suffer in a nuclear war. She is bang in the centre of Europe. If Russia were to engage in a nuclear war, the probability is that many of the targets would be in central Europe.

But why should not countries have nuclear power for civil purposes? I agree with what the Leader of the Opposition said about this matter. Nuclear power should not be hogged by the two power blocs, America and Russia. Why should we leave it all to them? Everybody knows that, whether it be in civil nuclear power or military nuclear power, Britain is far behind the United States and the Soviet Union. Knowledge should be spread. If it is used for evil purposes, I am against it entirely. That is why I should be loath to see Germany have nuclear power for military purposes.

But I do not believe that Germany wants it. I do not believe that there is any chance of her getting it, except possibly through one of her partners. France, which is coming up well in nuclear power, is a partner of Germany. Hon. Members may say that I have a suspicious mind, but nuclear knowledge might be imparted by commercial firms in Germany and France, many of them allied in trade. They will somehow get that knowledge, whatever we may say or do to deny it to them.

I have not attempted to advance many of the positive arguments which I advanced on a previous occasion when the Conservative Party tried to get this country into the Common Market. Many of Mr. Gaitskell's colleagues were very disappointed when he made his Brighton speech, not least one of the leading members of this Cabinet. Many of us, including Mr. Strachey and I, went to see him in his room and tried to persuade him to stand firm. He did not. He made what I call a face-saving speech—[HON. MEMBERS: "No."] That is my opinion.

Some of my right hon. and hon. Friends, not least my right hon. Friend the Member for Easington—I would not deign to call him an ancient Briton; that was said by somebody else—look backwards instead of forwards. I happen to be one of the forward-looking people. Much of what would happen if we were to join the Common Market will not happen in my time, but it would be better for my children if we were to join than if we were to carry on as we are. That is why I shall vote for the Government tomorrow night.

7.8 p.m.

Mr. Gwynfor Evans (Carmarthen)

I intend to vote against the Motion, but not because I am anti-European. On the contrary, I very much want to see Wales in close and fruitful relationship with Europe. But I ask for the sympathy of the House and ask hon. Members to put themselves in the position of a small nation without a Government. If Wales went into the Common Market as she is now, as an integral part of England—we were incorporated in England in 1536—the result would be a further deterioration of economic prospects in Wales, which are already very grim indeed.

I concede that there is room for debate about the economic consequences of membership if Wales had her own Government, if she were in the Common Market as a separate political entity. But I do not think that there is any room for debate about the consequences of Wales being in the Common Market without a Government. They would be deleterious and they could be damning. For that reason, I think that Welshmen who put the welfare and interest of their country first should vote against the Government.

I recognise that the close economic interdependence of Wales and England means that, whatever constitutional status Wales has, we have no choice in the matter. We are so closely bound up together that, if England goes in, we have to follow, and that would apply even if Wales had her own Government. When Wales has her own Government, of course, there will be a common market between Wales and England, with no tariffs and no passports. We are too closely bound up——

Mr. J. T. Price

Can the hon. Gentleman give the House an assurance that, if this delectable state of affairs ever comes to pass, there will be no balance of payments between England and Wales?

Mr. Evans

That remains to be seen. There would certainly be no border in the sense of a frontier, and no tariffs or passports. If England is in the Common Market, obviously Wales is in. However, if we had our own Government, we should be in with a means of adapting ourselves to the situation, and that is essential for us.

The ground of our opposition today, therefore, is not so much that we object to being swallowed in a bigger organisation than this Whitehall State but, rather, that we object to being swallowed at all. In this debate, there has been talk of a partnership, but there is no possibility of partnership between Wales and the other nations of Europe as long as Wales has not the means of acting for herself.

If we went into the maw of the European whale with freedom to use our own limbs, we should make our presence felt as Jonah did, but we are already in the belly of another capacious fish—let us call it a shark—which is seeking lodgings in that whale, and dire economic consequences to Wales in that situation would be inevitable.

I am sure that no one can speak with precision about those consequences. Certainly no one has been able to throughout the debate so far. There seem to be hard facts to reassure us about the effects, for example, on the basic industries of Wales. I should have been very glad if the Government had been able to give more of the facts and say that the effect of entry would not be adverse on our basic industries. The only industry about which we have had any facts is agriculture, where the effects would be adverse, particularly in Wales where we are dependent to such a great extent on milk production and hill farming. But we have no facts about the effects of entry on coal or steel.

In the Common Market, even Italy imports cheap coal from America. If we were in the Common Market, we, too, would see the import of cheap coal into our country, and that would further depress an already depressed industry. I cannot say what the consequences would be on steel, although I see that steel is included by the Economist amongst those industries upon which the effect of entry could be adverse. Therefore, even with the industries which we have today, the consequences are likely to be pretty grim in Wales. But that is not the worst of it. The worst of it is when we look forward to future development, and I am sure that the House will agree that we have need of development in Wales.

We Welsh are a happy people, and our Ministers are a notably happy and hopeful band. However, although we tend to sing hymns in a minor key, I suspect that the favourite hymn of our Ministers is "All Things Bright and Beautiful". They fail to see the cloud for the silver lining. But the cloud is there—too much of it.

According to the last available figures, there are 42,000 unemployed in Wales, which is between 4 and 4.2 per cent. of the total number of employees. As we look forward we see that unemployment is almost bound to rise. We have been told by some economists who have a good grasp of the situation that, by the early 1970s, we shall need something like 100,000 new jobs in Wales if we are to avoid mass migration or still heavier unemployment.

That is the background of the proposition which the Government make of entry into the Common Market, and it takes no account of the added adverse effects of entry upon our economy.

In Wales, we have an eastern problem. The area to the east of Wales—and Bristol and the West Midlands are to the east of Wales, not to speak of London and the South-East—is a powerful magnet which, for the past 40 or 50 years, has drawn our people away from their homeland. We have lost about a million people this century, and, for the last half-century, we have not had the necessary amenities to develop our own industry in our own country.

One hon. Member has talked about the part which transport plays in the costs of industry. We have not yet had the development of major roads in Wales, and that makes it very difficult for us to develop new industry. We have not an efficient network of railways and, as a result, there is this tendency towards the east—this Drang nach osten, or Tuedd i'r Dwyrain, if I may use foreign words in this Chamber, one phrase from Germany and the other from Wales. This has been a feature of our history in Wales, as it has been a feature of German history in the past.

In these circumstances, it is not hard to imagine the dire effects of entry upon Wales and her economy as long as we remain an undifferentiated part of England, because the economic centre of gravity is bound to move further east. The trend has been marked for decades and will be accelerated. As a result, the development of new industry in Wales will be still more difficult.

Last week, I read in The Guardian that Sir Roger Stevens, who is Chairman of the Yorkshire and Humberside Economic Planning Council, said that joining the Common Market will benefit particularly the eastern side of his region, where it would encourage industrial development and commercial activity because of easy access to the Continent. What is notable is that he does not expect the western side of what could be described almost as a far-eastern region to benefit very much. Obviously, therefore, proximity to markets on the Continent will be extremely important. In that situation, what chance is there of Wales securing benefits, lying, as it does, on the western periphery of this island, as long as the basic disequilibrium continues, which will be increased with entry into the Common Market?

The Prime Minister told us yesterday that he has high hopes of the regional policies inside the Common Market and, of course, even countries like Wales and Scotland are referred to as "regions" by many people. But how often in the last half-century have we heard hopeful sounds like this about what are called regions and their development? Surely the development of these areas depends upon their political strength or upon the determination of the central Government, who are responsible for them, to assist them. How can Welshmen reasonably have faith that government in Whitehall, of whatever colour, will fight for Welsh economic development? No government in Whitehall have ever fought for Welsh economic development. They will still have to fight and even harder in the circumstances of the Common Market.

All the Governments that we have known, without excepting present company, have ignored Wales in the formulation of their policies, and this question of entry into the Common Market is no exception to the rule. None has shown the slightest interest in creating conditions of full nationhood in Wales. On the contrary, they have all tolerated action or inaction which has hastened the decline in the vitality of Welsh nationhood. What hope have we of the Government acting effectively to safeguard the interests of Wales?

Mr. James Dempsey (Coatbridge and Airdrie)

I am interested in what the hon. Gentleman is saying about the alleged neglect of Wales. Would he like to comment on the fact that in spite of the strong claims made by Scotland, Wales got the Mint?

Mr. Evans

I thank the hon. Gentleman for raising that point. It has been used to strengthen the position of Plaid Cymru. We face the position that, whatever happens in the rest of Britain as a result of our going into the Common Market, the consequences to Wales will be unfavourable. How can we have confidence that the consequences will be favourable in England. Many hon. Members have referred to the now famous article in The Times last Monday, which seems to have some authority behind it. It said: To save £600 million of imports by general deflation, demand and output at home has to be cut back by roughly £3,000 million or 10 per cent. of the national income. This would mean unemployment of about 2 per cent. above current levels, that is a long-term average rate of 4 per cent. If that is true—I know that the Chancellor has denied that we can rely on these figures, but one has to listen to facts like this—as unemployment in Wales has constantly been twice that in the rest of Britain for the last 40 years or so, it means that if Wales goes into the Common Market as an undifferentiated part of England we can expect a long-term average unemployment rate of 8 to 10 per cent.

What is certain is that, whatever price England may have to pay for entry into the Common Market, Wales will have to pay a higher one. Indeed, if the situation is as bad as I have described it, to put Wales into the Common Market without a Government of her own will be an act of criminal folly, and for a Labour Government to do this provides evidence that it is Labour policy to write off Wales as a nation.—[HON. MEMBERS: "Nonsense."]—I shall give my reasons for saying that.

For a generation it was the policy of the Labour Party to give Wales self-government. This was reaffirmed more than once at the Labour Party's Annual Conferences, and as late as 1928. In fact the idea was not dropped until about 1931, and it was dropped then not because the leaders of the Labour Party had ceased to believe that self-government for Wales would be a good thing. Indeed, they said that it would, and in fact Arthur Henderson went further than any Welsh Nationalist would think of going and said that if Wales had her own Government she would be a Utopia among nations. No Welsh Nationalist would make an inflated claim of that kind, and yet within a few years of that being said the Labour Party dropped the idea of giving Wales self-government, not because the leaders of the Labour Party thought that it would be bad for Wales—in fact they knew it would be good—but because they thought that it was bad for the Labour Party.

The Labour Party and the Labour Government have a duty to Wales. They owe her a great debt. There would be no Labour Government here today if it were not for Wales, and they would repay that debt in part if they were to ensure that if England went into the Common Market Wales would get self-government. The company in which Wales would find herself in that event would not be purely a company of giants. Benelux was not a group of giants. Luxembourg, whose support for entry was sought the other day by the Prime Minister and the Foreign Secretary, is not one of the world's greatest Powers. Its population is about that of Monmouthshire, but its voice is listened to. It is heeded in the Common Market. Its opinion was asked, but nobody has asked the Welsh people for their opinion. Nobody has asked us whether we want to go into the Common Market. Nobody has taken the trouble to do that.

I do not want to give the impression that I am against the idea of the Common Market. I am saying that if we go in in our present position the effect on Wales could be devastating. I think that the Common Market idea can be a very effective device for ensuring the perpetuation and development of the lives of smaller nations in Europe by safeguarding their political freedom and ensuring for them the advantages of the economies of scale. It opens up a vista in which European civilisation will be the richer for giving its national communities the conditions for developing their full potential. It will be a Europe of the nations, rather than a Europe of the states. Wales, Scotland, and Brittany, among others, would be the gainers from a Europe of this kind, and they would have a great contribution to make to such a Europe.

I think that we have a right to this status. It will give us the benefits for which we are asking, and I think that the Government have a duty to grant us this status. In peace and in war Wales has suffered immeasurably from the consequences of English or British policy. For centuries the Welsh have been seen here as a minor part of English history, and they are still being treated in that way. Our place in this attempt to get into the Common Market is another example of that.

In his peroration yesterday the Prime Minister spoke about creating a unity in Europe, and I fully sympathise with that. He spoke of it as a unity the greater and more real because it builds on, and does not reject, the rich diversity of those nation States whose national aspirations, culture, and characteristics will become more vigorous and more fruitful by being welded together in a wider outward-looking unity."—[OFFICIAL REPORT, 8th May, 1967; Vol. 746, c. 1097.] I go along with that, but on one condition, namely, that Wales becomes one of those nation States. The fourteenth Mr. Wilson, unfortunately, pursues his course regardless of the effect on Wales, and it is for Wales that I speak in opposing this policy.

7.29 p.m.

Mr. Bert Hazell (Norfolk, North)

I am glad of the opportunity to intervene briefly to make a few comments about the effect which joining the Economic Community might have on the agriculture industry. I am sure that the House is aware of my lifetime association with the industry, and particularly with those who work in it. For the last 20 years, British agriculture has been safeguarded by the Labour Measures of 1947, and if we abrogate those successful policies, we shall do agriculture a disservice.

The Prime Minister referred to some of the problems for the industry presented by our application, but I do not think that we fully appreciate the full impact on our farm structure. I am convinced that if we join the Common Market—unless there are some very firm assurances, which I did not gather from the Prime Minister's speech—Britisli agriculture will suffer.

Representing a constituency in North Norfolk, I know that cereal growers on the East Coast will benefit from current European cereal prices, but large numbers of our producers rely on those cereals for maintaining their own farming. Climatically, and for other reasons, it is impossible for us all to grow barley or wheat.

The Foreign Secretary rather oversimplified the position at a meeting recently when he said that small livestock producers who could not early turn to cereal production would be hit. During the war, I was a member of the West Riding of Yorkshire War Agricultural Executive Committee, and we had vast quantities of tractors and equipment to plough up the lush pastures of the Pennines for cereal-cropping. We got the crops, but never had the weather to harvest them.

It is an over-simplification to suggest that, because cereal growers will do well by our application and because cereal production has increased in recent years, everyone might well go over to cereal production. This just is not physically or climatically possible. We are still a nation of small farmers who will be hit by our membership.

The hon. Member for Carmarthen (Mr. Gwynfor Evans) talked of the problems of Wales and I believe that Welsh and Scottish farmers will feel the draught keenly. In spite of the assurances from both sides of the House that we will not let agriculture down, if we join the Common Market we shall be letting down a large percentage of our farmers. On the high ground and ground of marginal quality there will be a quick return to derelict land, because the farmers will not be able to meet the high cost involved.

The cost of feedingstuffs and the lack of subsidies which will follow our joining will put them largely out of business. We must recognise that many hill farmers and those on poor land rely almost entirely on subsidies and grants and the milk cheque to keep them going. No one can say that the agricultural policy of the Six is likely to continue to favour many of the subsidies which British farmers receive.

That policy does not favour producer boards. The establishment of the Milk Marketing Board in the 1930s brought some hope of relief for a large section of milk producers who faced hard times. In spite of the more prosperous era of British agriculture in recent years, there are still large farmers who rely almost entirely on subsidies and the monthly milk cheque from the Marketing Board. If, because of their remoteness, they are unable, as is suggested, to sell their milk in the liquid market, they will not be able to farm as they have for so long and there will be no means of providing a substitute form of farming in these areas.

For over 20 years, I have been a principal negotiator on farm workers' wages. When we submit our claims, the officers of the Ministry show us tables of farmers' incomes in their respective groups and the employers use the argument of small farmers' inability to pay a good wage and say that their profitability and income cannot meet our claim. If the income of small farmers is lessened—I can see no alternative—the chances of securing a reasonable standard wage for agricultural workers, based as it largely is on that ability to pay, will remain low for all time.

I cannot support a policy which must, in the long run, mean a continuation of low wages and long hours for the men of the countryside. Because of this and because of the weakness of the European agricultural policy and its effect on the future standard of living of countryside workers, I cannot support such a policy.

Neither the Government nor any speakers have focused the public's attention on the impact on the cost of living which will result. I know that the Prime Minister said yesterday that the cost of food might rise between 10 and 14 per cent., which does not appear much in this context. I have read and reread my right hon. Friend's speech. I agree that attention has been drawn to the fact that certain foods might be even cheaper than they are now while the prices of others may be contained. While that may be true, it is even more true to say that the prices of some foods will rise astronomically.

Another reason why I cannot support the proposed application for entry is because of certain basic essential foods which will rise enormously. The prices of milk, meat, bread and butter will rise by a lot more than 10 per cent. to 14 per cent. I do not believe that the public generally realises the impact that joining will have on our cost of living. Certainly we can do without some of the "frilly" foods, but the four basic foods which I mentioned will certainly cost a lot more.

It has been suggested that we will be able to adjust our social services to take account of those who will be adversely affected by these food price increases. We are proud of the Welfare State, but only a fortnight or so ago we were debating, on an Opposition Motion, the poverty that exists among certain sections of the community. When the prices of certain basic foods rise substantially, their standard of living will be at an even lower level. The public should be made fully aware of the impact that joining will have on the prices of essential foodstuffs.

I took part in the recent election at Brierley Hill. As I went from door to door in the campaign I was invariably told, "We are not voting this time, because you have done nothing to contain prices". Do my hon. Friends seriously think that, by imposing additional prices, we will get the support of the housewife? If they do they are living in a fool's paradise. The housewife will never be convinced that it is good for her and her family for Britain to join the E.E.C. when she sees the cost of living rising substantially.

When we talk, as the Prime Minister did yesterday, about spreading the overall increase of 2½ per cent. to 3 per cent. rise in the cost of living as a result of our joining the E.E.C, do we consider that that is the end of the story? My hon. Friends must be aware that, as food prices rise, trade unions are bound to demand substantial wage increases. How can food prices go up while wages are frozen? If, as I believe will happen, substantial wage increases will be demanded as a result of food prices increasing, the overall picture will be more disastrous than the one so far presented to the country.

For all these reasons, but mainly because I believe that our joining the E.E.C. will do tremendous harm to our agriculture industry, I cannot support the Government in this matter. Joining will remove the security and stability that has proved the value of the agriculture industry for the last 20 years or more. The second reason why I cannot support the Government is because of the impact that joining will have on the cost of living. That impact will be much greater on our essential foods than the country has been led to believe. The third reason is because many of our people who are already living on the poverty line will find themselves in even more serious difficulty.

7.46 p.m.

Sir David Renton (Huntingdonshire)

Although I represent a farming constituency, I disagree with a great deal of what the hon. Member for Norfolk, North (Mr. Hazell) said, and I believe that his predictions are unnecessarily gloomy for the farming community. However, I do agree with him that on the present cereals policy of the European Agricultural Community our farmers in East Anglia are likely to benefit. I do not anticipate that policy being changed for the worse because the agriculture lobby is very strong in the countries of the E.E.C, stronger than it is in this House. I believe that my farming constituents will, on balance, in the medium and long-term, gain from our joining the Community.

Mr. Paget rose——

Sir D. Renton

I do not want to give way. Many hon. Members wish to speak, so I will romp through my speech. I promise to give way if I become controversial.

The small farmers to whom the hon. Member for Norfolk, North referred will not feel the draught which he predicted. They are more efficient, better equipped and better capitalised than the greater proportion of small farmers on the Continent and I believe—so far as one can form an opinion at this stage—that they will more than hold their own. There is nothing, I understand, in the policy of the European Agricultural Community or in the Treaty of Rome to prevent us from injecting further capital into the industry if we think it right to do so.

The House will have gathered that I am in favour of our applying to join the Common Market. I do not consider, and never have considered, that we should join unconditionally. The Government are presumably not asking for a carte blanche to negotiate the minimum conditions that would get us in and I assume that, when the negotiations are over, we will have a chance to consider what has been agreed and that the Treaty of Rome will not be signed without the approval of Parliament. This has not been plainly stated and I hope that this will be confirmed by the Government before the debate goes much further.

I regard the E.E.C. as an economic grand alliance of independent sovereign States inspired by good political motives. As a lawyer who wants to see Britain remain independent under the Crown, I have naturally looked closely at the effect of the Treaty of Rome on our sovereignty The Lord Chancellor yesterday spoke clearly and at length on this matter and, without wishing to repeat what he said, I would like to add a gloss on some of his remarks because the Treaty has caused a great deal of misunderstanding. Incidentally, as the Chancellor of the Exchequer pointed out, some of it—the right hon. Gentleman referred to Article 108—is already obsolete. After all, it was drafted 10 years ago.

The Treaty of Rome is mostly a statement of aims and principles, rather than a code of positive law. There are some positive provisions in it, but they are only provisions which come into force after other agreements have been made. Those aims and principles have to be implemented by numerous agreements between the member States, and when those agreements have been made they are translated into the laws of each country. In many economic matters—and I agree with my right hon. Friend the Leader of the Opposition when he says that eventually also in defence matters—there must be a pooling of sovereignty. But there is nothing new in that. Every time we make a trade agreement or defence agreement there is some pooling of sovereignty. But I agree that if we enter there will be a much greater pooling of sovereignty than before.

Even in those matters where there is to be a pooling of sovereignty following agreement, the six member States have so far gone cautiously. After tough bargaining, and understanding bargaining—an understanding of each other's circumstances—they have reached agreement. There has been no gleichschaltung—no compelling everyone to toe the line. After all, they all had enough of gleichschaltung during the war. So there has been a spirit of compromise in the negotiations which they have carried on between each other. One hopes that the same spirit of compromise will prevail in their negotiations with us.

My right hon. Friend the Leader of the Opposition today, in what I thought was an extremely clear and helpful speech on the matter, referred to "Community solutions", but even those solutions have been reached as a result of compromise based on the recognition that circumstances vary to a considerable extent in each country. One illustration of this is the agricultural policy, which still has not been completed. The Six are still negotiating it. It will have to be varied as time goes on and as circumstances develop.

Another example of what I mean, and which I should like to mention in greater detail is employment of labour. The Preamble to the Treaty speaks of "eliminating barriers which divide Europe", and Article 48 says that the free movement of workers shall be ensured before the end of the transitional period. That is what the Treaty says—but what has happened? Despite those resounding phrases, all the Six countries still have immigration control, and use it if necessary on each other's nationals. The movement of labour is not entirely free. It is strictly limited, as the Prime Minister pointed out.

When the Six were negotiating, the Italians had very much more unemployment than they have now and they rightly insisted that if there were to be complete freedom of movement of labour from the other countries into Italy it might cause things to get even worse there. So, in this spirit of compromise, it was decided that there should be a notification of vacancies through a Government agency and a filling of vacancies through a Government agency. Frankly, therefore, I do not think that the provisions about freedom of movement of labour will make a great deal of difference to us in this country.

We already have masses of Europeans coming here every year on short visits. Each visitor has a time limit stamped on his passport. Others come here with Ministry of Labour permits, generally for six months or for 12 months. If they stay for five years or more, they can apply for British nationality. If we join, I would expect those things to continue in very much the same way as they do now, and that the Ministry of Labour would still issue labour permits, but would do so under the Community's policy.

As many of my hon. Friends and some hon. Members opposite know, I have joined the ranks of those who are very anxious about the over-population and over-urbanisation of this country, and I have, naturally, considered the effect on that position of our joining the Common Market. Having done so, I doubt whether it will really make much difference.

I wish the Government well in these negotiations. When they are completed, we shall have to scrutinise the outcome. For myself, I think that the most important objectives for agriculture are to get a transitional period of at least five years, and an annual price review.

As to the Commonwealth countries, I greatly appreciated what was said by the Secretary of State for Commonwealth Affairs last night, and I would hope that he would agree with me that it should not be beyond the wit of all concerned to link the future prosperity of Europe and the future prosperity of the Commonwealth in various ways. I am sure that he was right in saying that those objectives are not incompatible, but here I must add something, having heard the speech of the hon. Member for Bassetlaw (Mr. Bellenger), because the year before last he and I went to Australia together with the C.P.A. delegation. It would be a tragedy if we made new economic allies only at the expense of losing our best friends—and I name them: Australia, Canada and New Zealand.

I hope that if the Government pick up the threads that my right hon. Friend had put down in 1961, that can be achieved, and that we can keep our friends and ensure the prosperity of the Commonwealth and of Europe. I would be very disappointed if that did not happen.

I wish that I could speak as hopefully about E.F.T.A. I was really very shocked at the tearing up of the London Agreement, under which it was a question of "all in or none in". As my right hon. Friend the Leader of the Opposition pointed out, it is most regrettable if a position has now been reached in which the most that the E.F.T.A. countries can hope for is merely a good transitional period. When I heard this I almost changed my mind about how I would vote—[HON. MEMBERS: "There is still time."] I will tell hon. Members why I decided not to change my vote, and then they can say whether they think I was wise or not!

I am relying on an assurance given to me at Question Time on Tuesday of last week by the Prime Minister—[HON. MEMBERS: "Oh"]—in answer to a question which I put to him when he made a small slip in his original Answer to my right hon. Friend about the E.F.T.A. countries. The Prime Minister said at first that the E.F.T.A. countries would be associated in any way they could negotiate and cared to choose. I asked whether that meant associated in the technical narrow sense, and the right hon. Gentleman said, "No", that he meant associated with a small "a", which would include full membership. I hope, for the honour of this country, that the Government will strive to achieve full membership for as many of the E.F.T.A. countries as want it.

Last week, I visited Berlin for the first time for many years, and it made an impact on my mind, especially in relation to the young people there. After all, everyone there under 25 is now unable to remember the war and a united Germany. What do they find? They find East and West Berlin divided by a horrible wall, with different standards of living on each side. They find Germany itself divided between two ideological systems, and they find 300,000 crack Russian troops in East Germany. I do not know for certain whether the enlargement of the Economic Community by our joining it will be a solution to all that, but if it would give any hope at all I say that is an additional reason for our going in.

8.0 p.m.

Mr. Charles Pannell (Leeds, West)

I thought that the Leader of the Opposition was rather smug in his speech this afternoon. I suppose that he had some reason to be, because in 1961 he was in favour of going into the Community and he would not be a Parliamentarian unless, having that tactical advantage, he made the most of it. Whatever appeal he might address to the Government Front Bench, he could not have been addressing me, because over a long period of years I have always been in favour of going into Europe. Everything that has happened and everything that happens from time to time strengthens me in my resolve and conviction that it is right to go in.

It is possible, of course, to make a very formidable case against, as my hon. Friend the Member for Norfolk, North (Mr. Hazell) did when he spoke about agriculture in Norfolk. Anyone who knows his record as a negotiator knows of the conviction with which he speaks and he deployed his case with very great effect, but I could make just as good a case for going into the Community. [An HON. MEMBER: "Make it."] Someone says that I should make it; in that case the House would be in for a long speech.

I want to deal with general principles. I could make a case concerning my constituents in the wool trade which would prove the decline of the wool trade in the Commonwealth and its upsurge in Europe. If I took the wool industry alone, I could make a good case for going in. [An HON. MEMBER: "TO pull the wool over our eyes?"] My hon. Friend must not talk about pulling wool over eyes. It is not blind eyes that I want, but shut mouths. In the same way I could make a formidable case, as my hon. Friend the Member for Edmonton (Mr. Albu) knows, for the engineering trade, and particularly for the motor car industry, which is in for a pretty rough time unless we go into Europe.

Having looked at this matter and listened to the whole debate it seems that the arguments which have motivated speeches against entry have been in the main economic ones. To me, this is more of an emotional issue than any I have known. It is a question of how we start, how we look at history, and where we expect to go. I agree with my hon. Friend the Member for Salford, West (Mr. Orme) who said that, short of war, this is the most momentous issue which most of us are likely to face in our Parliamentary lives.

It is known in other places that I would hope at the end of the day, because of profound conviction, that we could have a really free vote on what after all is a great Parliamentary matter. I have been convinced over a period of time, as much as a man can be convinced, that we should go in. I recall, as many hon. Members will, the greatest speech that was made about not going into the Common Market. Everyone knows of the great speech made by the Leader of my party, Hugh Gaitskell, in 1962. Having listened to that speech, and been unconvinced against going in, very few of the third-class speeches I have heard this afternoon would be likely to convince me.

I remember the last conversation I had with Hugh Gaitskell. I understood that it was an emotional issue with him. Questions affecting India went back to his boyhood days. The Commonwealth to him was a living reality. There was an emotional appeal because he thought of a thousand years of history. But that was always a false analogy. Although a party and a nation must always be conscious of its great men and revere past history, more than anything else we must be conscious of our historic mission, where we are going and the people who will come after us. These are the things which move me now.

The Leader of the Opposition appealed to history. I can give only my view of it. I take, first, the Gaitskell five conditions. The first was E.F.T.A. interests, on which, presumably, there has been some accommodation and some agreement. The second was that we should be free to plan our own economy. When I look around Europe I think that they do not seem to be very inhibited about that. The third was the question of agriculture, on which we have heard much this afternoon. Here we have to make a stark choice between agricultural support costs running at about £400 million which could be released for other things and the sort of agricultural industry we have at the moment and joining the Community. I put these against other issues affecting us as a great trading nation. When I consider that there are only five agricultural constituencies represented in the House, I know on which side I come down.

The fourth condition was an independent foreign policy. I find it odd when my colleagues call for an independent foreign policy. They have been grumbling, certainly since 1964, that we have had no independent foreign policy. They have argued that largely because of commitments to the £ and sterling we have been inhibited in our foreign policy; and, as the Chancellor said, the years have proved that we could not have an independent foreign policy. We could not "go it alone." When we look at the geography of our islands and at the resources we have and the call to pull in from east of Suez we know that, geographically, an independent foreign policy outside the United Nations and N.A.T.O. is an absurdity.

Mrs. Anne Kerr

Surely my right hon. Friend is not suggesting that collusion at the time of Suez was in the national interest?

Mr. Pannell

I was here at the time and I can honestly say that I have never suffered more in the House than I did in those debates. I was not particularly pleased to read what Mr. Nutting has written. Suez was a great national humiliation. The House had better pause before it debates it further. Hon. Members had better remember what has happened over Singapore. We do not want to resuscitate that. Suez was a watershed which proved beyond anything else that we could not "go it alone" and that there was no independent foreign policy for us. Do not invoke that as a reason for not going into the Community now. It is a sham to use that as an argument.

Then we have the argument about the Commonwealth. Surely that has altered since then. Australia is looking to the United States for defence and to Japan for its trade. If China came into the United Nations we would have another watershed. Canada is looking to the United States for the financial fertilisation of its trade and more often than not it appears to be an American land rather than a Commonwealth one. These are the facts of life. No one can argue that the world has stayed still since the Gaitskell conditions were put forward. I find it a trifle wounding at times that while so many people want to invoke the Hugh Gaitskell conditions they had so little time for him in his lifetime. At least, I was one of those in those days whom Hugh Gaitskell could count on.

I happen to believe, too, that we should look at big issues in a big way, in exactly the same way as I always believed that Hugh Gaitskell was good for the Labour Party. I did not bother about peripheral things very much. Integrity and other such qualities came higher in my order of things. I was proud to be counted as one of his friends and he would not have held me accountable merely for what happened in that speech.

It always seemed to me that the speech that Hugh Gaitskell made the year before, the "fight and fight again" speech in the teeth of the wind and not with the flowing tide from the wrong people, was his greatest speech. But for that speech and that stand, there would have been no Labour Party and there would have been no Labour Government for the Prime Minister to have inherited. Let us get all that perfectly clear when people speak about "the Gaitskell conditions". I speak with some emotion on this matter. [Interruption.] Do not interrupt me from the back.

Mr. James Dickens (Lewisham, West)

Does not my right hon. Friend agree that these are not "Gaitskell conditions" at all? They are, in fact, the official policy of the party of which both he and I are members.

Mr. Pannell

I find the idea that we should cast a name overboard as a name associated with conditions, as a sort of alibi at this stage, very funny. Everybody knows that these are the Gaitskell conditions, whoever they were who collaborated with him on the National Executive and who are now gone and probably forgotten.

The Leader of the Opposition treated us to some history. We should remember that in the 400 years between the two Elizabeths we grew up as the first nation in the world; we went to the five continents; we built an empire by all sorts of means, for which many of my hon. Friends apologise today; and eventually we arrived at the stage in about 1780 which was the transition period of the Industrial Revolution. That was 1780–1830. We were first in that field. The nineteenth century will for ever be known as the British century. That was the great century of our historical development. We were: able to keep our great empire. We were able to oppress overseas peoples. We were able to levy our tribute from those people. Eventually, with the turn of the tide, those places grew up to their full stature and became emergent countries, free countries.

I remember the late "Nye" Bevan saying that so many Conservatives, including Winston Churchill, thought that every time a nation grew up it was a calamity for the British Empire. "Nye" Bevan said that, instead, we then had to learn to be great in other ways. In the nineteenth century our trade protected the infant United States, which grew up under the shadow of the British Navy. In two world wars there occurred the dissipation of our foreign balances while we bought time for the Americans to enter the war.

There has been a change. Those countries do not look at us in the curious relationship of the mother country any more. We have seen the disappearance of an Empire and the foundation of a Commonwealth. That is change. The watershed was 1960, when Africa started being independent.

We saw the turn of trade all the time. I will give the House some figures. Between 1957 and 1965 the value of British exports increased from £3,500 million to £4,900 million. In this period the value of Britain's exports to the Commonwealth remained virtually static at about £1,300 million, while the value of exports to the E.E.C. and E.F.T.A. nearly doubled. In 1957, exports to Europe were about two-thirds the value of Britain's exports to the Commonwealth. However, by 1965 the value was greater and, at £1,600 million, was approximately one-third of Britain's total exports. Yet we understand that exports to the Commonwealth still account for nearly one-third of Britain's total exports.

My right hon. Friend the Secretary of State for Commonwealth Relations drew attention to this last night. In effect, even taking the figure as one-third, it is a tiny fraction where the other ones arerising. We live by trade. Going into Europe is not the enemy of the Commonwealth, because we can aid emergent countries only to the extent that we are rich and can afford to pay out.

The British Commonwealth sells four times as much to the rest of the world as to Britain; in other words, we are not its principal customer.

These are the facts of life in which we live. This issue must be judged against this mighty background. I do not think that there is any particular future in remaining outside Europe. Of course, we could get on without Europe. This has been said already; but, as my right hon. Friend the Prime Minister rightly said, these other things are second best. We are largely an industrial nation. After all these years, we are back where we belong—in Europe.

This is one of the great debates that we face. I can only tell the House that I admire—even revere—the sincerity and emotion which other people bring to their attitude of staying out. I would not attempt to interfere with that. I hope that they will grant that those of us who want to go into Europe are just as inspired in our vision, just as lofty, just as sincere, and just as emotional.

8.18 p.m.

Mr. Ronald Bell (Buckinghamshire, South)

This subject has been plagued by generalities for a long time. I do not say anything adverse to the speech made by the right hon. Member for Leeds, West (Mr. C. Pannell), who plainly feels strongly about this subject, if I say that his speech was characteristic of many that we hear in support of our entry to the Common Market. Indeed, I would pay the right hon. Gentleman a compliment, which he may not appreciate, by saying that his speech was in that respect rather similar to that made by the Prime Minister.

The right hon. Gentleman spoke of the trends of history which seemed to carry us, by a secular inevitability, into a larger unit—the European Common Market. I have to some extent the same feeling and the same bias as the right hon. Gentleman has. I suppose that most of us are in some degree biased by our education or other circumstances of our lives towards an association with Europe. Like the right hon. Gentleman, at the time of Suez I remember saying to myself, "The lesson of this is that we must go into Europe".

But this is not a debate about whether a connection with Europe is desirable. It is a debate to decide whether an application to accede to a Treaty with 248 Articles, four Annexes, 15 Protocols and 8 regional declarations, should be approved by this country with no other amendment than that occasioned by a change in the number of members, all other matters of British concern being dealt with by protocol, by informal understanding, or by their being left to be solved from inside after entry.

That is the issue before us today, and, for my part, I do not find helpful vague background inducements related to the tide of history sweeping us forward into this or that new arrangement.

This is like a Second Reading debate for the course of action which I have just described, and any further debates which we have as the negotiations move along will be rather like Committee debates. If the time comes—I do not think it will—when we have to decide whether to approve some negotiated terms and sign the Treaty of Rome, that debate will be presented—make no mistake about it—as a Third Reading debate on something the principle of which has already been irrevocably decided by the House.

I have seen all this happen before. Like one of my hon. Friends who spoke earlier today, I did not in 1961 oppose the inception of what I thought were exploratory conversations, an application to discover what sort of terms would be available to us for joining the Common Market. But it is a fact of life that once negotiations start, people get committed. Reputations are at stake. It is not long before one begins to hear the syren song about matters being better decided from inside the club. The price that is acceptable begins to rise. After all, the disadvantages are measurable and the arguments in favour are imponderable, and imponderables, by their nature, can be represented as balancing almost anything.

The White Paper and the Prime Minister's skilful insistence on the factors which cannot be precisely calculated tell me all that I need to know about the course of negotiations, on this occasion, for our adherence to the Treaty of Rome. I have come to the conclusion that this Motion should not be approved tomorrow night, and I shall vote against it, despite the attraction which I still feel for some form of association with the continental States of Europe.

I have risen only to explain, as shortly as I can—at least, it will seem short to me—why I have reached that conclusion. But, before doing that, may I say that I do not complain about the three-line Whip which has issued from both sides. I cannot imagine that any Member of this House would permit his attitude on a subject which may be a breaking point in national history to be governed by the attitude of any other Member or vote other than in accordance with his own judgment. Therefore, I do not mind what is in the Whip.

This matter has been presented to us on either economic or political grounds, and sometimes on both. The danger we must watch for is that there may be a bit of skilful shifting back and forth from one ground to the other as each becomes wobbly. On the last occasion, the House will remember, we began in 1961 on the basis that our entry was economically necessary, and, after particular examination of the matter over the months, we finished on the basis that the economic case was quite evenly balanced but it was the political opportunity which counted.

I turn, first, to the economic arguments against our adhering to the Treaty of Rome, arguments which are fairly precisely definable. The first is the familiar one about the balance of payments. The House has heard so much about it that I do not propose to go over it again. The Times suggested a figure of £600 million per annum as the extra cost across the exchanges of going into the Community, and Professor Beckerman has suggested a figure of £800 million. I do not know which is right, but I was puzzled by what the Chancellor of the Exchequer said today—I sought to interrupt with a question at the time but, quite naturally, he did not give way—when he spoke of £100 million a year. The Prime Minister also referred yesterday to £100 million a year, and he dismissed it, pointing out—not the most obvious reason for dismissing it—that it was only one-tenth of £1,000 million.

Inasmuch as we know from the Government themselves that the cost of the agricultural policy unamended will be between £175 million and £250 million a year, obviously the total of all the factors cannot be £100 million. Therefore, although I may have misunderstood the Chancellor's point, we can be clear in our minds that the cost will be somewhere in the region of £600 million or £800 million—even though it may be less than both, it will be of that order of magnitude—and we must regard this as a very important factor to be put on one side of the argument.

This is not to be looked at in isolation or only for its effect upon the costs of production in this country. It is a reflection of the fact that we have grown up as a nation shopping around the world for food where it can be most cheaply bought. It has been a matter of gratification to us to find that food can usually be most cheaply bought where it is produced by British people somewhere else in the world. But that is by the way.

If that is cut off—and let us make no mistake about it if we put on a levy and bring up the price of food to the price in the Community, the incentive for shopping around the world for the cheapest food is destroyed—then what happens to British shipping and investment beyond the seas in the production of that food? What is to happen to the great refrigerated fleets owned by Britain and used to bring food here? Entry to the Community would be found to be one of the greatest blows to British shipping it has ever experienced. What about the trade and financial services which have grown up around the great maritime system upon which Britain has relied in the past? Nobody has taken them into account in the figures, already large enough, that I have mentioned.

Those are things to which one can point specifically. What is on the other side? It has been pretty clear that the only two items on the other side of the balance sheet economically are competition and the size factor. I find the Prime Minister's conversion to competition a little surprising. I knew that he accepted it as part of the mixed economy, but that it should become the principal medicine for all the ills of the State I had never expected to hear from his lips. He talked about the reflex action or some such thing, or perhaps we were to be flexed, by the competition of going into the Common Market.

But what kind of reflex action, what kind of stimulus and upward surge—another phrase he used—shall we get from our economy if, when we go into the Common Market, we must place an extra burden on our balance of payments of the order of magnitude that we have heard about? Of course, it will have to be dealt with by deflationary measures at home, because nothing else is permitted under the Community rules, and what upward surge can one get from a nation which is being subjected to deflationary pressures?

So much for competition. Incidentally, I suggest to the right hon. Member for Leeds, West, if he really thinks that the motor car industry will be the first shining beneficiary of going into the Common Market, that if it is having difficulties now they are nothing to the difficulties it will have when its tariff protection in this country is removed.

The next matter which is so heavily relied upon is the size factor. I can be short about this because other hon. Members have spoken on it. Perhaps I can almost tabulate it. There is a population of about 80 million in E.F.T.A. We have the whole Commonwealth, where we have a Commonwealth Preference, and there is the rest of the world, which remains indifferent whether we change either way. Shall we have a larger market by entering the Community when we lose the Commonwealth Preference, lose E.F.T.A. and gain the Six nations? My hon. Friend the Member for Wembley, South (Sir R. Russell) referred to comparative figures of how much of our trade is with the Six and how much with the rest of the world. One must have a mighty big——

Mr. Leslie Spriggs (St. Helens)

Is the hon. and learned Gentleman saying that the Commonwealth buys British cars? If he is saying that he had better think again.

Mr. Bell

I was not saying that the Commonwealth is buying British cars. I was talking about Imperial Preference, which we enjoy over a very large part of our exports—[Interruption.]—I had better get on, because many hon. Members wish to speak.

We must have a very large increase in the 20 per cent. or so of our trade that we do with the Six if it is to offset the damage to the 80 per cent. that is not done with the Six. What is meant by the domestic market in the Community? That refers to the average tariff of between 10 and 11 per cent. which is around the Community at present. That is all that it means. Remove that tariff, and the whole discussion falls to the ground. I do not think that a conception of a domestic market which is founded upon nothing other than an average tariff of 10½ per cent. has much reality.

Each succeeding G.A.T.T. round-perhaps I am using "succeeding" in both senses—each G.A.T.T. round which succeeds reduces that common tariff around the market, and as that process goes on the whole of that advantage is whittled away. We are all committed to that process, even if it is grinding a bit at the moment.

Is it not really a lot of nonsense? Look at Switzerland. It has not got a large home market, but we should not be sorry to have a company of the size of Nestles, or to have the Swiss pharmaceutical industry. I wish that we could rival that. Holland has Philips and Royal Dutch Shell, and they were not built up after the Community was formed. The fact of the matter is that the size factor is far too much of a talking point among economists today and, to some degree—I do not want to overstate it—a lot of nonsense.

I come now to the political side, which has been stressed by most speakers. Yesterday we heard a short and pungent speech from my right hon. Friend the Member for Streatham (Mr. Sandys). He brushed aside the economic arguments in the interests, as he said, of brevity—and we all appreciate that in others. He said: … I have no doubt whatever that the balance of economic advantage is overwhelmingly in favour of going in. He left it at that. While it was all right for him to state that proposition briefly in order to allow more time for others to take part in the debate, I have never heard my right hon. Friend establish it by argument in any of the speeches he has made on the Common Market.

Turning to the political aspect, my right hon. Friend said: … together, we could be one of the giants."—[OFFICIAL REPORT, 8th May, 1967; Vol. 746. c. 1124.] What is meant by "together"? There is really nothing about that in the Treaty of Rome. This shows that those who do want us to go in want us to go on much further than that and in fact to become a United States of Europe.

My right hon. Friend the Member for Streatham said that if we did not the world would be dominated by America, Russia and China. But what have these three in common? Each has its own language. I know that there are many different kinds of Chinese but basically the language is the same throughout the country, just as the language is basically the same throughout the United States and Russia.

I am sorry to say this, and I shall not be more particular, but I was immensely impressed at the time, in about 1959, when my right hon. Friend the Member for Barnet (Mr. Maudling) pointed out that the idea that one could build up a European community which would be like the U.S.A. was a fallacy because it lacked the community of history and language which had made the United States an effective national entity. That is the truth.

This is highly relevant to the last point I want to make, which concerns the constitutional issue referred to by my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton). I do not take the comfortable view which I know that he, with the utmost sincerity, takes about this. In the Treaty of Rome, initiative in policy lies with the High Commission, which is a bureaucratic institution the members of which are not answerable individually to the nation States which appoint them. The Council of Ministers has only power to veto, to approve or not to approve. It cannot replace an initiative of which it disapproves by a new one of its own.

That is the Community arrangement. There is no other Parliamentary or democratic control of the institutions of the Community. Of course, the Ministers in the Council of Ministers are controlled by their national Parliaments. One of my hon. Friends has said that he hopes that the European Parliament will be directly elected before long. Splendid! It is envisaged in the Treaty of Rome that it should be directly elected but it is not envisaged in the Treaty that it should ever have any powers of its own. It is purely consultative and it is not in the Treaty that it be anything else. It would require amendment of the Treaty if it were ever to be given any powers.

Mr. Martin Maddan (Hove)

Does not my hon. and learned Friend agree that the European Parliament has power to sack the Commission?

Mr. Bell

Not to any real effect. The only power given to it by the Treaty is by a two-thirds majority to pass a motion of no confidence in the High Commission. If it does that, the High Commission collectively must resign, but it may remain in office to carry out its day-to-day functions until a new Commission is appointed, and serving members may be re-appointed. I shall not say that that is no kind of power, but collecting a two-thirds majority would not be very easy anyway and this is not a weapon with a cutting edge enabling a Parliament to exercise day-to-day control over an Executive in the way that this Parliament, for example, effectively—at least we try—controls this Executive. At least we keep our own Executive in some degree of order.

Those who say that these problems can be solved when we are inside forget that there is a unanimity rule in the Community, not now but at all times, for amendment of the Treaty. It is all very well to leave matters for solution when we get inside, but if any solution which we want involves amendment of the Treaty, we could be blocked by Luxembourg alone. It is all very well to leave the penny numbers to this principle, but no matter which is of major concern to Britain can be left in that way to be swept under the carpet, and it must be sorted out before we go in.

It may be asked, if this is a true balance sheet, why on earth anybody should try to go in. I can give the answer in almost one sentence. The motive now is much the same as it was last time. When an incomes' policy begins to get a bit sticky, people begin to look for other ways of solving the problem. This is not a great step forward; it is a step sideways.

Solving the economic problems of a country like this with universal adult suffrage is no joke, and the temptation to shift some of the problems to some of the institutions in Brussels, which are more insulated from democratic pressures, is very great. Not all Administrations are strong enough to resist it.

It is time that this country stopped refusing its fences, and got down to solving our problems at home, not looking for escape routes. I am afraid that we are about to waste another opportunity on another escapist interlude and for that reason I shall go into the Lobby with very good heart tomorrow.

Mr. Deputy Speaker (Mr. Sydney Irving)

Mr. Pavitt.

Mr. W. Baxter

On a point of order. I understand that there is some dubiety as to whether under the Act of Union it is possible for this Parliament, if it decides to go into the Common Market, to commit Scotland—and it appears that there is some justification for this belief, because the Secretary of State for Scotland is not to speak in the debate and no Scottish Member has yet been called.

Mr. Deputy Speaker

Entry into the Common Market is not a matter for the Chair; selection of speakers is. The presence of the Secretary of State for Scotland is a matter for the Government, and I have no doubt that the Government have heard what has been said.

Mr. Emrys Hughes

On a point of order. My hon. Friend was dealing with the Act of Union.

Mr. Deputy Speaker

I would appeal to hon. Members to remember the time. A large number of Members wish to speak in the debate, and there is very little time.

Mr. W. Baxter

On a point of order. In fairness—and I regret that I am keeping some speakers from participating in this debate—it seems obvious to all that Scotland is being excluded and is not being called in the debate. Is it the intention of the Chair to exclude Scotland? That is all that I am asking.

Mr. Deputy Speaker

The Chair at all times tries to take all circumstances into account in making a selection, but the selection must me left to the Chair.

Mr. Rankin

Further to those two points of order—

Mr. Deputy Speaker

Order. I hope that the hon. Gentleman is really adding something new to the point of order, and not reiterating what has already been said.

Mr. Rankin

I am adding something entirely new. Unlike my two fellow Scots, I have been here all day and have failed to be called. Most of their information came from me. Further to that part of my point of order, would it be in order for me to suggest that you might convey these facts to Mr. Speaker and that there might be a change?

Mr. Deputy Speaker

I will be happy to do that, but I think that the hon. Gentleman's best chance of catching Mr. Speaker's eye is not to waste time on further points of order.

8.47 p.m.

Mr. Laurence Pavitt (Willesden, West)

I have every sympathy with my hon. Friends, having sat here since 3 o'clock yesterday. I had some dread that I might have to follow Welsh Nationalism, but I find that I am having to follow Scotland instead. I can assure my hon. Friends that I have the greatest sympathy with the point that they are making, for I too, have sat since 3 o'clock yesterday and still haven't had a cup of tea today.

The hon. and learned Gentleman the Member for Buckinghamshire, South (Mr. Ronald Bell) addressed a good deal of his remarks to the question of negotiations, and the way in which they are being made. This is what the debate is about. We are concerned with the conditions of entry. We have had a heavy debate, with everyone being very sincere whether for or against. But this is only the start of a very hard round of negotiations, and we should be concerned with those outside the House and those on the Continent who should pay attention to the very pertinent questions in this debate. We are all on the European bandwaggon, it has its full head of steam and momentum and it is now rolling. Some people joined it first, and are the original inhabitants. Others have joined it in comparatively recent times and then there are people like myself who are unwilling passengers.

Having heard all but one speech I can say that everyone is bringing their own baggage with them. They are bringing their own ideals and aspirations, experiences and prejudices. It has been amazing listening to the debate, to find out how diverse these are. I wonder if it was the Patronage Secretary and the Chief Opposition Whip who found themselves in the same carriage of a train at York. One said that he was going to Edinburgh, and the other said that he was going to London, and they remarked how marvellous it was that modern technology should have them in the same train in the same carriage going to different destinations. It has seemed in the debate that a lot of people have been putting one set of arguments and reasons which are diametrically opposed to others, and yet both members want to do the same thing to get in or to stay out.

As you are the keeper of customs in this Chamber, Mr. Deputy Speaker, I declare my two most important pieces of baggage and they are: first, the National Health Service and, secondly, India. No other traveller so far has declared either of these two important items. I want to say to my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) that my baggage also contains much that was in his. I supported a good deal of his speech. He saw a world without barriers, where it was possible to make progress to the kind of world unity which we all want, both politically and economically. I am very open to conviction, and when the probe started there was no one who was able to convince me more than my right hon. Friend the Prime Minister. I was in the position of wanting to be convinced.

I have been looking over the arguments and the changes which have occurred since 1961 and I have to confess that I remain unconvinced. I still find that it is the wrong group, it is the wrong move at the wrong time. It is wrong economically and wrong politically. One of the major changes which I concede as being extremely important, and I am very glad that it has taken place, is to do with regional development. This is a major gain for those who want to go in, and I am glad that we have achieved it, but it does not outweigh many of the other things on the negative side.

I want to know more about the point put by my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot). Would it have been possible, within 10 days of the 1964 General Election, for all office building in London to be stopped? Would this kind of planning be possible under the Treaty of Rome? I am not talking about I.D.C.s for development areas but the sort of measure taken in order to restrict competition and private enterprise in an area where it was injurious to other sectors of the community.

I find that there is no change in so many things. There is no change in the basic philosophy. It is neither free trade nor planning. But, as my right hon. Friend the Prime Minister said on 7th June, 1962, …the whole philosophy …edication to one principle, and that is the principle of competition."—[OFFICIAL REPORT, 7th June, 1962; Vol. 661, cc. 679–80.] It seems to me that it still favours cartels as against small firms. It is still an undemocratic structure dominated by officials. It remains inward-looking, because there has been no reduction in tariff barriers against the outside world in the 10 years that it has been in existence.

I turn now to the effect on our economy. Unlike some of my hon. Friends, I am in favour of the prices and incomes policy. I do not see how we can have such a policy without starting with prices, difficult as it is. I do not see how, if there are to be rises in the price of foodstuffs such as those to which my hon. Friend the Member for Norfolk, North (Mr. Hazell) referred, we can successfully hold a prices, incomes and productivity policy. It is all very well to talk about increases of 10 or 14 per cent. in food prices; but for old age pensioners the increase will be 30 per cent. I accept the assurance of my right hon. Friend the Prime Minister that pensions will be raised. But, in my experience, whenever pensions are raised, it is a long time after prices have increased. Many old age pensioners in my constituency will not live to see the increase in pensions.

I am very much concerned from the consumers' point of view. The consumers' voice is rarely heard in this place. The housewife will take the brunt of the blow. It is said that the price of butter will go up but that the price of margarine will remain stable. I do not wish to become a margarine addict.

I now turn to the question of the effect of entering into the E.E.C. on the National Health Service. I am not referring to social security benefits. If I had more than the quarter of an hour to which I wish to limit myself, I could deal with social security benefits quite separately. But joining the Common Market will have a tremendous effect on our National Health Service. Doctors, dentists, opticians, nurses, midwives, pharmacists, physiotherapists, patients—the lot—will be affected. One of the greatest features of my country, of which I am proud, is the National Health Service. Anything which is injurious to it is injurious to the nation. Professions supplemental to medicine will be affected. The free movement of people, services and capital will inevitably have an impact on the National Health Service.

I wish to pay tribute to the work of Dr. Walter Hedgecock, Deputy Secretary of the British Medical Association, who made a strong plea for these matters to be dealt with before negotiations are completed. A large number of them may well have to be dicussed in the negotiations.

Professional qualifications will be the same across the board, and automatically accepted in member countries, because Article 57 is due to be ratified on 1st January, 1968. I am indebted to a speech by Lord Cohen in another place during the last attempt to join. If we try to compare standards of doctors in this country and elsewhere, the only common ground we have is the extrance examination for the brain drain to the United States. The figures in respect of people who wished to pass examinations in order to practise in the United States which Lord Cohen gave showed that the failure rate is 6 per cent. in the United Kingdom; 30 per cent. in Paris; 30 per cent. in Rome; 34 per cent. in West Germany; 37 per cent. in Brussels; 51 per cent. in Naples; and 71 per cent. in Milan. This shows a wide disparity of standards. We are to have freedom of movement and equality of qualifications. Will we have to lower our standards?

Mr. Austen Albu (Edmonton)

Is my hon. Friend suggesting that the standard of doctors in the countries of the Community is lower than the standard of doctors in this country?

Mr. Pavitt

I have just quoted the figures for comparable examinations. There is a wide disparity between a failure rate of 6 per cent. in the United Kingdom and a failure rate of 71 per cent. in Milan. As Chairman of my party's Health Group, I addressed seven questions on 14th February to any party seeking elucidation. So far, none has been answered. During the Government's negotiations, some of these questions ought to be answered. For example, will doctors be flowing in or out, because that will affect the brain drain and, in turn, our Health Service? At the present time, in Italy, with a comparable population, there are 90,000 qualified doctors. In this country, we have just under 60,000. Shall we see a flow of Italian doctors here?

Could we have an authorised version of Article 48, because there appear to be two versions. The Article says, dealing with the freedom of travel of members of professions between the member countries, that there is an exemption, according to one version, for people in public administration. According to the other version, it is for people in public service. If it is public administration, it will not apply to doctors. On the other hand, if it is public service, that cuts out the whole French hospital service, because that is a public service. These are details which I would like to see clarified. The E.E.C. practice at the moment is to permit such a movement between the member countries without let or hindrance. However, we shall discriminate against doctors from the Commonwealth who will still have to appear before the General Medical Council.

Will we have the same health checks for people from E.E.C. countries as we have for immigrants? What study has been made of the effect on dentists and physiotherapists? Will there be a need for an amendment to the Medical Act of 1956, Section 26 of which gives the Privy Council powers to override the General Medical Council? These are negotiable matters, but, for people engaged in the National Health Service, they are extremely important matters which we should like to hear answered.

We have a principle in the National Health Service that a person who is ill is treated, and his treatment does not depend on the power of the purse. However, there is still a paying section, and most of our consultants are on what is known as the nine-elevenths basis, whereby they do two-elevenths in, say, Harley Street and nine-elevenths in the Health Service. With ratification on 1st October, 1968, it will be possible for our doctors to practise abroad temporarily. We are short of top consultants. Will it mean that they will be doing operations in Rome today, in Brussels tomorrow and doing only four-elevenths in the National Health Service, thereby creating longer waiting lists? We could lose the services of top men who are irreplaceable in the short term.

In relation to the drug industry, there is not a great deal to be said either way. There are points for and against going in. At the moment, as more than 50 per cent. of National Health Service drugs come from America, anyway, the only point is whether American firms set up factories in France or Italy rather than here. There is the problem of vetting drugs, because each country has different standards. Should we have had thalidomide here without having to pass the Dunlop Committee?

These matters are negotiable, but important. However, the basic concern is more intangible. At present, we are the only country with a health service which is financed from direct taxation. Hon. Members opposite are concerned that direct taxation shall be reduced. I am concerned that we still maintain the principle of the National Health Service, for reasons which I have not time to debate here. However, there are pressures, and although we can keep to our present 3.9 or 4 per cent. of the gross national product for health purposes, I am concerned that we shall not be pressurised not to increase it without getting money from other sources. The practice in the Common Market is to have an insurance system, or employee contribution, with the patient paying something at the time of service. Should we pay prescriptions in order not to have more subsidy for the Health Service from direct taxation which may be regarded as unfair competition? In West Germany, for example, the health service is paid for as part of an employer's contribution. I am afraid that there may be pressures in this country to erode the National Health Service. There have been such pressures ever since it started, but I am concerned that those pressures may gain added impetus because of the way in which health services are organised on the Continent and the Treaty provision for "harmonisation".

As I have said, the second main topic of my speech concerns India. We have heard a lot about New Zealand, and I am grateful to the hon. Member for Wembley, South (Sir R. Russell) for the excellent case which he put forward on the Commonwealth in general. As an internationalist I had the privilege of working for three years between 1952 and 1955 for the United Nations on providing technical assistance in Pakistan, India, Burma, Ceylon and other Asian countries. The concept of justifying riches because one is prepared to give 1, 2 or 3 per cent. of our surplus, yet retaining the present imbalance between the primary producers and the sophisticated nations of the West is the wrong way to secure the kind of one world for which I am looking.

Last night my right hon. Friend gave the figures to show what was happening in regard to trade. The Commonwealth percentage is still great. I am reminded of the excellent speech which my right hon. Friend the Prime Minister made to the T.U.C. on 7th September, 1964, when he said: … we are currently being carried by the export earnings of those Commonwealth countries which only two years ago this Government was prepared to sell down the river in their eagerness to enter the Common Market on intolerable and unacceptable terms. He went on to say: … we shall set out our plans for a new drive in exports, not least in those neglected Commonwealth markets where Tory cynicism has meant a decline in the proportion of our total trade coming from the Commonwealth from 44 per cent. to 30 per cent. It is because I believe in this drive that I am anxious to do something about it.

In her trade with the United Kingdom, India enjoys the advantages of the absence of quantitative restrictions on imports from the sterling area, duty-free entry, and preference in respect of a large number of items over non-Commonwealth sources of supply. Due to these special advantages enjoyed by India's trade in particular, the United Kingdom has become the largest market for India's exports, and has also led to a balanced development of trade between the two countries. The close economic relationship of the two countries has influenced the level, structure, and pattern of production of a number of commodities, and over a wide range production in India is geared closely to the requirements of the United Kingdom market.

In contrast to the position obtaining in the United Kingdom, Indian products suffer many disadvantages in the European Economic Community. While India would not wish to influence the decision of the British Government, the least that could be expected is that if Britain decide to apply she would safeguard the interests of India and would take into consideration her problems.

The entry of the United Kingdom into the E.E.C. without proper arrangements for safeguarding the trading interests and advantages enjoyed by India and other Commonwealth countries would have a serious effect on India's trade with the United Kingdom. If the current level of common external tariffs of the E.E.C. were adopted by the United Kingdom on her entry into the Community, the following would be the consequences of India's trade with us. First, the age-old free entry into the United Kingdom would cease. Secondly, in place of duty-free entry, a tariff barrier ranging from 5 to 15 per cent. on semi-processed products such as vegetable oils; from 18 to 32 per cent. on such simple industrial products as cotton textiles, jute goods, hand-knotted woollen carpets, and so on, and 50 per cent. or more on items like unmanufactured tobacco could come into force. Thirdly, preferences for Indian products, which range from 5 per cent. to 15 per cent., would be withdrawn. Fourthly, reverse preferences of varying dimensions would be created in favour of member States of the E.E.C. on such simple manufactures as I have previously mentioned.

These new tariff barriers would affect more than 40 per cent. of India's sales to the United Kingdom, excluding tea, on which the E.E.C. has temporarily suspended duties. These would also inflict on Indian exporters a price disadvantage in the United Kingdom market, and they would be compelled to reduce the prices of goods to compete with supplies from new preferred sources. This would result in heavy losses in export earnings from the United Kingdom, and could affect the whole pattern of Indian development. Moreover, many Indian industries, which for many years have been dependent for a large part of their production on sales to the United Kingdom, would have to contract their production, and in many cases close down. This is a market of 500 million people, with another 90 million in Pakistan, which has precisely the same kind of problem. In the short term I accept that one does not lose quickly, but in the long term, in the kind of world that I want, this will be a tremendous market.

They will not be just hewers of wood and drawers of water. They will be a nation with a balanced industrial and agricultural economy, and it will be disastrous if at this stage we do not enable them to continue with their third and fourth five-year plans. This is what we are doing to a country which we exploited for more than 150 years. It is on these grounds that I think we would be wrong to go into the Common Market, and why I shall be heavily opposed to it. I hope that my right hon. Friends in the Cabinet who also have doubts will continue to try to meet the five conditions which we are trying to get. This will be a long haul and it would be disastrous if they moved from their present position. They should stay there to ensure the best possible terms.

There has been much talk of the great debate in 1962 when Hugh Gaitskell's speech finished with the words: If we are ever to win peace and prosperity for mankind, then the world community that must emerge will be based on precisely such diverse elements as exist in the Commonwealth today—pledged as we are, to friendship and mutual aid. This is our vision of Britain's future and of the world's future—and it must not be allowed to fade. The greatest problem in the last half of this century is how to create a multiracial, one-world society and to maintain peace. If I thought that entry of the E.E.C. was a step in that direction, I would be the first to approve. It is because I believe that it is not a step in that direction but a barrier that I hope that, at the end of the day, we shall stay out.

9.6 p.m.

Sir John Rodgers (Sevenoaks)

I hope that the hon. Member for Willesden, West (Mr. Pavitt) will forgive me if I do not follow his argument about the possible effects on our National Health Service and on India if we join the Common Market.

I agree with the hon. Member for Salford, West (Mr. Orme) that, short of a declaration of war, this is probably the most important subject to be discussed in the House this century. All the pros and cons of our entry have been debated, facts and figures have been given us frankly and clearly as they are known, estimates and "guesstimates" have all been deployed and the major problems which we all know will arise have been discussed. We hope that a satisfactory solution will be found during the negotiations.

I refer to our relations with our E.F.T.A. partners, with the Commonwealth countries, in particular, New Zealand and India, and with our home agriculture. The Prime Minister has not clearly defined what he means by the "lesser problems" which will be left until we join. Presumably, they include the balance of payments and the cost of living, but these seem very important; we require a much clearer definition of these lesser issues.

I believe that it is the right move to apply for membership and I am certain that, despite the voices in this debate which might have led outsiders to think that the issue is evenly divided here, the Government will have a majority of well over 500 in the Division tomorrow.

For the last 18 to 20 years, I have done my best to bring about and foster the United Europe Movement. I have not done anywhere near as much as my right hon. Friend the Member for Streatham (Mr. Sandys), but I have attended with him, from 1950, many conferences on various aspects of a more united Europe.

In 1956, with my right hon. and learned Friend the Member for Hexham (Mr. Rippon), a group of us tabled a Motion expressing agreement in principle to the establishment by stages of a common market in Western Europe. We urged Her Majesty's Government to accept the invitation to participate in the negotiations then taking place with the six countries which now form the E.E.C. with a view to ensuring that the way would be open to British participation on an acceptable basis and in accordance with the interests of the Commonwealth and Empire. Even then, 11 years ago, just under 100 Conservative Members signed that Motion. Since then, the support for going into Europe has gained strength.

The history of our relations with Europe is one of missed opportunities. Going back to the Attlee Government of 1950 and the subsequent Tory Government we have missed great opportunities to get in at the start of the Common Market, which might have been a quite different organisation if we had taken part in the formation of the Treaty of Rome and the subsequent development of the organisation.

A great many of the problems we face, economically and in other ways, would not have arisen had we gone in much earlier with the Common Market countries and forged a more united Europe. But that is history and we must consider the present. However, it is interesting to ask why we did not go in, and, in answering this question, there are two major reasons. Indeed, they are still operating to a certain extent.

The first is because the country as a whole, the electorate, was not ready for such a move. We were still living in the tradition of the war, with enmity between various parts of Europe. This prevented most people from wanting to join the E.E.C. If, as I believe, the present application may result in protracted negotiations, public opinion may become sour on the subject. I therefore support the plea made by my right hon. Friend the Leader of the Opposition that the Government give adequate publicity, explanation and education to the public while the negotiations are going on so that the problems, difficulties and ends in view are constantly before the people. It is most important that the Government undertake this publicity.

The second reason why we did not go in—and this applies to both the Labour and Conservative Parties; both are guilty to a certain extent—was because, at that time, the political parties were divided. If the Conservative Party had expressed any intent, we would have found an almost united Opposition from the Labour benches. One thing about which we can congratulate ourselves now is that the majority of hon. Members of the three major parties are in support of Britain's application to join the E.E.C. [HON. MEMBERS: "No."] We will see what happens when the vote is taken tomorrow night.

Mr. Roland Moyle (Lewisham, North) rose——

Sir J. Rodgers

Not much time remains and I do not want to give way.

The Government should recognise the great support they are getting from the Opposition. We respect the views of those on this side of the House who do not agree about our joining, but the great majority of my hon. Friends are solidly behind Britain's attempt to join the E.E.C. and we want the people of Europe to know that. Having said that, I admit that it is a little hard to take to see the Prime Minister strutting about like a knight in shining armour, the great crusader in favour of our joining.

Mr. T. L. Iremonger (Ilford, North)

Rolling on his back like a spaniel.

Sir J. Rodgers

I do not want to exacerbate relations between the two Front Benches. Suffice it to say that there has never been a more sudden conversion since St. Paul's day than the conversion of the Prime Minister to a devotee of the European idea. There are profound reasons why it would pay us to join the E.E.C. and I profoundly hope and devoutly wish that the Prime Minister is successful in this venture. My hon. Friends and I will do all we can to help in these negotiations.

It is in the long-term economic interests of this country that we should join. In the short term, the issue is finely balanced and undoubtedly there will be immediate problems, such as the rise in the cost of living, the rise in some food prices and balance of payments difficulties. However, in the long term I am absolutely certain that, provided industry—management and labour—becomes truly efficient and competitive, there is little to fear from our entry into the Community, while the reverse is absolutely true, for there are many advantages to be gained.

With access to a market of about 300 million people, with a rising standard of living, protected by a common tariff, we could, I believe, give Europe a new impetus, a new stature and a new excitement. The new science-based industries require enormous sums to be spent on research and development. The subsequent work to be undertaken will involve many millions of pounds. As a result, subsequent output must have access to a market far wider than the 55 million in our own home market. We shall not stay in the vanguard of the technological revolution unless we foster these new science-based industries.

I believe that if we join, as I hope we shall, we could develop, through computerisation, a technology in Europe equal to that in America. This would enhance the future economic prosperity not only of this country, but of the Community as well. It would allow us to play a much better part in financing Commonwealth development and in helping under-developed nations. There is no antagonism between the Commonwealth and our joining the Common Market. The reverse is true. The riches that would flow from the union would allow us to invest more in the Commonwealth and the under-developed countries.

The same could be true not only of the computer industry, but aircraft, space travel, telecommunications, chemicals, fertilisers, man-made fibres and the like. The prospect of joint efforts, with the prospect of sales in this huge home market, would offer individual manufacturers the prospect of recovering the large investments involved in these new science-based industries.

It would be a challenge, and an exciting, glittering prospect to those who wished to stay in the vanguard of progress. Such people would have the benefit of a home market bigger than that enjoyed at the moment by either the United States of America or the Soviet Union. That is something we should never forget. But while the efficient would reap great rewards, we must not underestimate what the Prime Minister said about the cold winds of competition that would blow into this country from Europe.

But this is to the good. The efficient would weather the storms and take advantage of them and reap great benefits, but some would suffer. It would not only be the hillside farmers, the old-age pensioners and the like who would suffer in the short-term from the rise in the cost of living; a great many firms would suffer unless they pulled up their socks, improved their management techniques and their marketing methods. Nevertheless, it is a challenge, and not one which we should burke. If we rise to that challenge, it will be of enormous benefit to the country.

I thought that the Prime Minister played down a little the effect of that cold wind of competition. The negotiations are likely to take quite a time. It may be five years before we get into the Common Market, and it will be about 10 years before we recover from the first effects—[HON. MEMBERS: "Oh."] I say that deliberately. It will be quite a shock. But I am confident that, with the skills, the will power and the imagination of our people, it will be to our lasting advantage.

We shall all benefit—the British people and the European nations. It is not only to our benefit to go in, but to the benefit of Europe itself. Never in history has the voice of Europe been more muted or of less effect than today. How can we expect Europe to have the power it had when it is already divided into four parts—the E.E.C., the E.F.T.A., the Warsaw Pact countries and a fourth group of unfortunate States like Spain that belong to none of the other three groups?

The first step is to try to bring E.F.T.A. and the E.E.C. together, thus making a wider common market. Later, in the years to come, I hope that the apron strings tying the Warsaw Pact countries to Russia might be loosened so that they could join in the wider Europe. Then, who knows, Russia herself might join in.

It is not only on the economic side that I am in favour of going in. The political and defence issues are perhaps of even more importance than the economic issues——

Mr. Emrys Hughes

And theology.

Sir J. Rodgers

Yes, perhaps theology, too. After the hon. Gentleman had drawn attention to it, I read what the Archbishop had to say, but I do not think that it is relevant to what I am saying tonight.

Our job is to prevent Europe getting more inward-looking and help her to get more outward-looking. This is the wider concept of a United Europe, not only of the Six—and the Seven, as it may be—and the main E.F.T.A. partners, or all of them, but of Spain, the countries of the Warsaw Pact, and perhaps Russia. When we have achieved that—and we should never overlook the fact that this is not just the creation of a third independent force—it gives an opportunity to look eye to eye with the Americans in an Atlantic community of two equal partners—America, with a market of about 250 million, and a purchasing population in the new Common Market of 300 million or more.

A joining together of those two partners in an Atlantic pact could be of immense value, not only to Europe but to the whole world, and to the peace of the world, and to the prosperity of the world. That is the great ideal we should keep before us. Of course, all these great issues we have debated about the cost of this or that and the effect on this or that will create problems, but that is not the issue today. The issue today is whether we set our sights high enough and prepare the future for our children and Europe's children.

I do not believe that there is an alternative. There are residual groupings we could try to join if we failed this time, but the effect if we failed in our endeavours to join the Common Market would be disastrous for this country and for its influence and also disastrous for Europe itself. We are building an organisation, not for the next five or 10 years, but for many years to come. There are all sorts of differences between the negotiations we had in 1961 and those about to be embarked upon. There is the effect of the Franco-German Treaty. Who knows what the position over that Treaty will be when President de Gaulle has passed from the scene?

This project of our joining E.E.C. could be of enormous advantage to Europe and the peace of the world. Those who want peace and those who want prosperity should support the Government for once in their attempt to get into the Common Market.

9.22 p.m.

The Minister of Agriculture, Fisheries and Food (Mr. Frederick Peart)

I have listened very carefully to the speeches made this afternoon. I am sorry that I missed the speech of my hon. Friend the Member for Norfolk, North (Mr. Hazell). He made a very sincere speech in defence of agriculture, a very good speech. Apart from being an hon. Member of this House, we know that he is also a distinguished leader of the National Union of Agricultural Workers. It was no discourtesy on my part that I was absent when he made his speech. I have had a very full account of what he said and I shall take up some of the points he made.

There are many aspects of the Common Market question which we should cover and which the House is covering in this wide debate. Agriculture and food are my particular responsibilities and these are the subjects on which I shall now speak. I think it right that the Minister responsible for agriculture and for food policy should state the position as he sees it. This is why I am speaking. The right hon. Member for Grantham (Mr. Godber) will be opening the debate for the Opposition tomorrow and no doubt he will reply to many of the points which I make this evening.

I shall not touch on the main problems of Commonwealth trade. My hon. Friend the Member for Willesden, West (Mr. Pavitt) spoke about India, her trade, and particularly exports of tea. Those matters are very important. I noted carefully what he said. My right hon. Friend the Secretary of State for Commonwealth Affairs dealt with the question of Commonwealth trade yesterday and the Minister of State is present today. He has listened carefully to the debate and will note what my hon. Friend said and its importance to our country in any discussions and negotiations.

I will not deal with the main problems of Commonwealth trade in relation to food products entering this country as my right hon. Friend has dealt with this matter. I shall deal as clearly as I can with the nature of the Community's farm policy and arrangements and with the impact of coming to terms with this on our farmers, farm workers, consumers and, indeed, on the nation as a whole.

As my right hon. Friend the Prime Minister said in his statement on 2nd May, a common agricultural policy raises problems affecting the cost of living and … the structure and well-being of British agriculture … and balance of payments".—[OFFICIAL REPORT, 2nd May, 1967; Vol. 746, c. 312.] Hon. Members on both sides, for various reasons, have stressed these points. They are important and they are problems which I wish to examine.

It is because these matters are important and of great moment, which hon. Members and people outside the House wish to understand, that my right hon. Friend the Secretary of State for Scotland and I were asked by our colleagues to present a White Paper. I can assure my hon. Friends from Scotland that my right hon. Friend the Secretary of State accepts responsibility for this White Paper. [Laughter.] It is a Departmental Paper. There is no need for anyone to be hilarious about it. My right hon. Friend and I produced it. I am merely suggesting that in the White Paper we cover many agricultural matters affecting Scotland. However, it is not for me to get involved in controversy over the choice of speakers. This is certainly a matter for the Chair.

Hon. Members


Mr. Peart

We have presented the White Paper. I hope that all hon. Members, including right hon. Members opposite, have read it.

First, joining the European Economic Community will inevitably create problems for this country in this sphere. The Prime Minister's statement recognised this fact. It is just no good pretending that these problems do not exist. [HON. MEMBERS: "Hear, hear."] There are some who do not accept this, but I am glad that some hon. Members accept my point. We cannot pretend here.

I should be failing in my duty if I did not explain the problems to the House and to the country. That I have done in conjunction with my right hon. Friend in the White Paper to which I have referred. There may be arguments about my White Paper, but we have tried honestly and objectively to present the facts. We have tried to give information for the benefit of hon. Members on both sides and for those who are for or against and those who may take up other positions. We have tried to present objectively the facts as we see them. For this reason, I hope that my White Paper has been carefully read and studied by all hon. Members.

Secondly, I do not in any way retract my view that our present system of agricultural support is a better system and better adapted to our needs. What I recognise, however, in common with my colleagues, is that the common agricultural policy of the European Economic Community is an integral part of the Community and that, if we are to join the Community, we must come to terms with it.

Thirdly, in common with my colleagues, I maintain that, in coming to terms with it, we must resolve some of the key problems and make suitable arrangements, including an adequate transitional period, to enable the necessary adjustments to be made.

Mr. J. B. Godber (Grantham)

How long?

Mr. Peart

It would be very wrong if I started to negotiate with the Opposition on what it should be. It should be adequate, and it should be as long as possible. It would be wrong for right hon. Gentlemen opposite to tie me down specifically on the time limit. This is a matter for negotiation.

Sir Derek Walker-Smith (Hertfordshire, East)

The right hon. Gentleman has advanced two propositions, unexceptionable in themselves: first, that the transition period should be adequate; second, that it should be as long as possible. Would he give a third? What is the minimum period which he envisages?

Mr. Peart

The right hon. and learned Gentleman is making the same mistake as his right hon. Friend the Member for Grantham (Mr. Godber). He wishes to pin me down to a specific period. We cannot do this on the Floor of the House. It is a matter for negotiation. Perhaps I may now make my speech. Time is getting on, and I have a lot to say which I regard as important.

We must have suitable arrangements, and we must have an adequate transition period for the necessary adjustments. As the Minister responsible for agriculture and food it is my concern to see how the problems can be most satisfactorily resolved. There will be those who accuse me of being negative in my approach—no doubt, the right hon. Gentleman will follow that theme tomorrow—but I can only say that they are wrong.

I think that it is entirely right—if I did not, I would not be here tonight—that we should enter these negotiations determined to succeed if essential British and Commonwealth interests are safeguarded. How we can best do so, in all the various aspects of the matter—some substantial, some less important—is a question first for resolution in the conduct of the negotiations which must precede entry, and later for discussion and for adjustment in the light of what might emerge thereafter.

The House will not expect me to define a negotiating position on agriculture, but it is entitled to expect me to set out objectively both the advantages and some of the areas of major difficulty. Since time is short, I shall do my best to satisfy the House on this score by reference to the White Paper.

First, a general word about the fundamental difference in method between the Community's agricultural system and our own. Many hon. Members who specialise in agriculture will know what the basic differences are, but, as not all hon. Members are familiar with the topic, I shall say something about the fundamental difference in approach between the two systems.

As the House knows, our system, broadly speaking, allows market prices to remain at or near world price levels and provides an assured return to producers by means of deficiency payments. In other words, we make up to our producers the difference between the world or market prices and a price which the Government guarantee.

The Community's system seeks to give producers a reasonable return by varying degrees of market management for different commodities. This is achieved, in the main, by means of levies and tariffs on imports, by export subsidies, and for some commodities by support buying.

I have said that our present system has served us well. It has kept food prices low. It has helped to maintain strong trading links with our overseas markets and suppliers, and it has enabled us to build up an efficient and expanding agriculture. I do not believe that right hon. Gentlemen opposite will dissent from that. It has proved itself capable of flexibility in adaptation to meet changing conditions at home and in world trade. This has been due in no small measure to the operation of the built-in procedure for an Annual Review with representatives of the farmers. In this way we have been able to plan ahead on a comprehensive basis, making all the adjustments necessary to secure a balanced development of the industry.

So far, the Community has not yet reached this stage of development. It has performed an enormous and difficult task in achieving the basic elements and structures necessary for a common agriculture policy, but the single market stage is only now about to be reached for some of the main commodities. I think that the Community would be the first to agree that much remains to be done, and that the future development of its system, whose expressed aims are that there should be a reasonable return to farmers and stability of prices, must call for some form of improved review procedures covering more comprehensively the position, prospects and plans for the continued well-being of agriculture as a whole. Indeed, it seems an almost inevitable concomitant of its present arrangements for the annual fixing of prices.

I know that the right hon. Member for Kinross and West Perthshire (Sir Alec Douglas-Home) feels strongly about this. He pressed me on it, and I agree with him. This is important and I have carefully noted the point he made yesterday.

I now turn to the general effect on British agriculture of current community arrangements and prices—

Mr. Godber

On the point the right hon. Gentleman was discussing concerning the Review, could he tell us a little more about just how far the Community has gone? It is a very important aspect and he is hanging quite a lot on his argument on it. He knows that this is developing.

Mr. Peart

I was pressed by the right hon. Member for Kinross and West Perthshire on this matter. The Community has nothing like our Annual Review. There are certain elements in the Community—particularly the French producers—who recently had joint discussions with our own producers in Paris and accepted the argument that a Review of the type we have could be advantageous to the Community. But there is nothing in the Community to compare with our Review procedure.

I now turn to the general effect on British agriculture of the present Community arrangements and prices. They are summarised in the White Paper, and I can be brief, because I have spelt them out there. The assessment inevitably contains a degree of speculation, but it is as objective and realistic as we can make it. I say this sincerely, and, as I have said in public and privately—I have never hidden this—the picture is not all black or all white.

It is clear that cereals growers would do substantially better. Producers' returns could be as much as 40 per cent. higher for wheat and 25 per cent. higher for barley. Beef producers in general could also do well and producers of fat sheep could benefit. Sugar beet growers should also benefit, although this would largely depend on the agreements we might negotiate with the Community, in particular about the level of production quotas.

All this represents a plus factor in an agricultural equation, but we must not overlook the minus factors. Higher prices for cereals mean higher prices for feeding stuffs, and higher feed prices must take their toll of profitability throughout most of the livestock sector. I bring this out in the White Paper, and I have often stressed it. Most of the increase in production costs would inevitably fall on the dairy, pig and poultry farmers.

For different reasons, some sectors of the horticultural industry, faced with increased competition from imports, could also expect to find their profitability reduced. These sectors of the livestock industry and horticulture together currently account for about 60 per cent. of total farm sales. It is right that I should point clearly to some of the problems and difficulties.

As the White Paper says, the aggregate net income of the industry might well be about the same as if we were outside the Community, but it would be very differently distributed as between commodities, types of farm and parts of the United Kingdom. There will, of course, be varying degrees of effect on individual farmers and growers. Even if we were to introduce the common agricultural policy completely unchanged and in its entirety, it would be a mistake to suppose that the effects on profitability whether good or bad, would be anything like uniform as between producers of the same commodities. Anyone who knows the nature of our form of farming will, I am sure, accept that.

In practice, the size and scope of the individual farm enterprise, the production methods practised or available, the local as well as the national market outlets, and the effects of these factors on the new level of prices must combine to determine the eventual degree of profitability likely for the individual farmer whether he is producing cereals or beef or eggs and poultry.

What is clear, as the White Paper points out, is that the general changes in relative profitabilities would inevitably affect the whole structure and balance of the industry as farmers sought to readjust to the new level of prices and costs under the system. This was stressed by my hon. Friend the Member for Norfolk, North (Mr. Hazell).

This brings me to the point stressed by my right hon. Friend the Prime Minister in his statement of 2nd May. We must have suitable arrangements, including an adequate transitional period, to enable the necessary adjustments to be made. This is not a process that can be carried out quickly or easily nor settled in its entirety during negotiations preceding entry. After all, cycles and methods of production cannot be changed quickly nor can the whole system to which they are related be dismantled suddenly. Investment and the redeployment of capital resources would be required.

All this is very well known to the present members of the Community. They themselves have had the practical experience of what was necessary over the last seven years, during which they have managed to move from the first formulation of a common policy concept to the beginning of a single market stage for the main commodities. I would be the last to belittle their difficulties and achievements. But the changes involved for this country in methods of support, in prices and in relative profitability are, in the nature of things, greater than any involved for the Six in moving from their former national systems to the common agricultural policy they have evolved.

I have tried deliberately to avoid too much detail about particular commodities, partly because the nature of any problem they impose is sufficiently indicated in the White Paper and partly because it would be invidious to select too many items for detailed treatment in the debate. But I want to mention one commodity, milk, not only because it is important both to producers and consumers but because of the special nature of the problems we have to resolve.

There is a Common Market regulation for dairy products and there have been decisions by the Council of Ministers on liquid milk. If we were to apply these exactly as they stand, not only would the average level of profitability be somewhat reduced for United Kingdom milk production over the year as a whole but winter milk production would become far less profitable than in summer. As a result, on this hypothesis, there could be a shortage of liquid milk supplies during some parts of the winter.

I want to stress that this is on the assumption of applying unchanged to this country present arrangements and decisions designed primarily for the furtherance of a dairy product system to meet the E.E.C.'s own very different circumstances. As the White Paper points out, however, it would scarcely be in the interests of those members of the Six who are exporters of milk products to enforce on this country a system which would switch the emphasis of United Kingdom milk production away from the liquid milk market. This is a clear example where I would hope that in the course of negotiations about British entry a change could be effected of benefit to us and which might not be unwelcome to the Community.

I now want to refer to an important matter raised yesterday by the right hon. Member for Kinross and West Perthshire and by the hon. Member for Carmarthen (Mr. Gwynfor Evans) and the right hon. Member for Devon, North (Mr. Thorpe) today, and which is certainly important to Scotland—marginal areas and hill farming. I take note of the comment of the right hon. Member for Kinross and West Perthshire that there are special considerations affecting hill and marginal land areas in Scotland, Wales, England and parts of Northern Ireland. This matter was also raised by my right hon. Friend the Member for Llanelly (Mr. James Griffiths).

In these areas, although, as elsewhere, prospects for individual producers will vary with their circumstances, generally the scope for adjustment and adaptation is limited by both nature and money. Clearly, much would depend on whether the direct grants, particularly those which have been specially designed to help in those areas, could still be paid, or some form of comparable assistance given. There is a problem of structural adjustment which we are seeking to tackle now, and hon. Members will be aware of the provisions of the Agriculture Bill, which should become law tomorrow. Clearly, these issues will become of even greater importance for the future.

As my right hon. Friend the Prime Minister has already said, we must certainly press, and press hard, our claims for money from the guidance sections of the Community's Agricultural Fund to help the adaptation and to improve the structure of agricultural production and marketing in this country. Nor should we assume that acceptance of the Community's arrangements mean an end to all forms of continuing State aids to agriculture.

The Six gave their farmers very considerable assistance, particularly on the structural side, and I have little doubt that they would wish to continue to do so in various forms which do not infringe the rules of fair competition within a common policy. In addition, the Treaty itself specifically provides in Article 92 for State aids which are necessary to promote and sustain the economic development of regions which face similar difficulties.

So far, I have been taking a broad view of the economic effects on the industry and I have done so with reference to the farmers and growers. But I have not forgotten the half million or so agricultural workers whose livelihood is closely bound up with the industry's future prosperity. Adjustments in the pattern of distribution in the industry arising out of the new agricultural arrangements would inevitably have their repercussions on agricultural workers. This was emphasised by the hon. Member for Norfolk, North. Their well-being is bound up in the well-being of our farms and farmers. One point which the White Paper mentions is that there is no reason to suppose that the safeguards over wage rates and conditions secured by the operation of the Agricultural Wages Board would be at risk.

The Community does not as yet have any Common Market regulations for fish and is still in the preliminary stages of formulating a common fisheries policy. There is bound to be a common interest in fishery matters. Although both we and the Six are net importers of fish and fishery products, there would be possibilities of selling our fish to the Common Market. We also have a common interest in the effective conservation and proper management of the stocks which we fish in common in many waters.

There is also the very important question of fishery limits and access to fishing grounds. This would be of particular concern to the inshore fishermen—and I know what their feelings are. If we joined the Six, we would not be alone in having important inshore fishing interests. Taking together the several different aspects of the fishing question, there is sufficient common interest to make possible the devising of a common fisheries policy acceptable alike to the Six and to Britain.

So far I have spoken about the implications for producers and agricultural workers. I want now to turn to the effects on consumers.

Lord Balniel rose——

Hon. Members

Give way.

Mr. Deputy Speaker

Obviously, the right hon. Gentleman is not giving way.

Mr. Peart

The right hon. Member for Grantham, is to reply to me tomorrow. I have to finish at ten o'clock and I still have much to say. If I have time, I will give way.

It is inevitable that the adoption of the E.E.C. general arrangements on prices would mean a substantial increase in the cost of food. This is a consequence of coming to terms with the common agricultural policy and it is part of the price which we would have to pay. As the White Paper explains, it arises basically because we should be bringing the prices of all supplies covered by Common Market regulations, whether home grown or imported, into line with Community price levels at the wholesale stage. For the most part, these price levels are higher than those in this country. The increase at the wholesale stage must also have repercussions on the processors' and distributors' mark-up before we get the price in the shops.

I do not wish to make claims to precision where only estimates are possible, but to make estimates we have to make assumptions about world and Community price levels at the end of any transitional period. Assuming that the relativities remained unchanged, the increase in cost to the consumer might well lie within the range of 10 per cent. to 14 per cent., depending mainly on the degrees of increase in the processors' and distributors' margins. This is equivalent to an increase of 2½ to 3½ per cent. in the cost of living. The estimate also allows for some change in the pattern of present consumption.

It is right to point out that this range of averages necessarily conceals a much wider degree of price changes for many separate commodities. For some, like apples, tomatoes and certain other fruits and vegetables, prices might be lower than now. But for most foods—including some of the basic foodstuffs—they would be considerably higher. The price of butter would probably double; the price of beef, if we take an average of all qualities, might well rise by over one-third; and the price of bread by something approaching 20 per cent.

These increases would be substantial. They would fall particularly heavily on those people with small incomes and often with big families where food is the largest item of the domestic budget. [Interruption.] Right hon. Members opposite should be concerned with this; it makes it all the more essential for increases to be spread over a transitional period. This period must be fully adequate to cushion the shocks involved in a radical change of system. [HON. MEMBERS: "How long?"] As long as possible.

I come, finally, to the impact on our balance of payments. As the White Paper explains, this would arise for two reasons. First, at the end of any transitional period we would be paying full Community prices for our imports of food from other members. Secondly, on the basis of the present financial arrangements, we would be a very large net contributor to the Community's agricultural fund. This is mainly because we are, and would largely remain, in spite of an expansion of production to be expected in some sectors, a big importer of food from third countries. [Interruption.] I hope that the right hon. Gentleman will listen. I know that his right hon. Friends would have the minimum of a transitional period. [HON. MEMBERS:' "No."]

Mr. Peter Kirk (Saffron Walden) rose——

Mr. Godber rose——

Mr. Deputy Speaker

Order. There is very little time left for the debate tonight. Members would be advised to hear it in silence.

Mr. Peart

The right hon. Member for Grantham can explain his position tomorrow. [HON. MEMBERS: "Withdraw."] I will not withdraw.

We must, therefore, bear in mind the balance of payments cost, which, we have stated, has been estimated to be between £175 to £250 million annually. This arises very largely from the financial arrangements and the handing over of levies. As my right hon. Friend the Prime Minister said, it is certainly the Government's view that if these arrangements were applied to us without modification they would impose on this country a quite inequitable share of the burden of supporting the common agricultural policy in an enlarged Community. That is important. We should hope that the people with whom we negotiate would recognise these problems.

I have tried to deal with the main issues arising for our agriculture, fisheries and food. [HON. MEMBERS: "What about horticulture?"] There are difficulties about horticulture because there is no support system as we know it for agriculture. A solution will de- pend so much on a long transitional period.

I have tried to deal with the main issues. There are many other problems: the position of our marketing boards; the problems of harmonising regulations in a wide variety of fields—from food standards to animal and plant health safeguards; and, more generally, how the organisational and other arrangements for working the new system are to be devised. These are important examples which it would be wrong to underestimate. The Community is still far from having settled all these matters, let alone having implemented their arrangements.

As I have said, it would be wrong for me tonight to try to spell out a negotiating position. I hope that what I have said will be sufficient to convince the House that we have overlooked none of these problems. We are determined to safeguard adequately the essential interests of agriculture and of consumers in this country. Let me assure the House that we intend to deal with these problems realistically and effectively. It is in this spirit that we shall enter the negotiations.

Motion made, and Question proposed, That the debate be now adjourned.—[Mr. Armstrong.]

9.59 p.m.

Mr. John Hall (Wycombe)

In the minute left to me, may I say that, after listening to the Minister's speech, it is obvious that he will go into the Lobby to vote against the Motion. I have never heard——

It being Ten o'clock, the Motion for the adjournment of the debate lapsed, without Question put, and the debate stood adjourned.

Debate to be resumed Tomorrow.

  1. ADJOURNMENT 13 words
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