HC Deb 14 July 1971 vol 821 cc491-500
The Chancellor of the Duchy of Lancaster (Mr. Geoffrey Rippon)

With your permission, Mr. Speaker, and that of the House, I should like to make a statement about the meeting with the European Community which I attended in Brussels on 12th July.

We discussed three issues : harmonisation of capital movements, transitional arrangements in the field of the common commercial policy, and fisheries.

Our object in negotiation on capital movements was to secure the agreement of the Community to an adequate transitional period which would allow us to make the necessary adjustments to our present exchange control restrictions progressively and in reasonably even stages.

Our proposals were briefly outlined in paragraph 130 of the recent White Paper.

I am glad to be able now to report that the Community has accepted our proposals in relation to capital movements in full.

The main transactions affected, and the stages of the proposed changes, are as follows.

First, from the date of our accession, restrictions on financial transactions necessary to facilitate the free movement of labour will be removed, and there will also be a substantial relaxation in the rules affecting financing of direct investment, both ways.

Secondly, remaining restrictions on the financing of direct investment will be removed not later than the end of the second year.

Thirdly, restrictions on movements or personal capital, among which the most important are those affecting emigrants and those affecting house purchase, will be removed by the middle of the transitional period. The main impact of this change is likely to be a once-for-all cost to our reserves probably spread over about two years.

Finally, arrangements will be made to cover dealings in quoted foreign currency securities by the end of the transitional period If circumstances permit, any of these timings may be accelerated at Her Majesty's Government's discretion.

The negotiation itself has of course been concerned only with this question of transition. Her Majesty's Government have throughout accepted the obligation ultimately as a Member State to conform with the Community's rules regarding capital movements. At the same time, it is worth recalling that the Treaty of Rome itself provides for all Member States, important safeguards, particularly Articles 109 and 70(2).

The directives explicitly leave members free to verify by appropriate exchange control measures the nature and reality of transactions or transfers, for example to ensure that a direct investment in the Community is in truth what it purports to be. This gives protection against the exploitation of freedom within the Community as a channel for movement of funds outside it.

There is provision also for special action by Member States to take protective measures in the face of any actual or prospective damaging balance of payments situation.

Her Majesty's Government are satisfied that the phased transition which has been negotiated will spread the unavoidable impact on our reserves as evenly as possible and over a period which will delay the main burden until it is likely to be increasingly offset by income returns and an expected growth of inward investment.

We also reached agreement on a number of transitional measures in the field of the common commercial policy, in particular in relation to anti-dumping and the gradual phasing out of certain import restrictions against state trading countries.

Finally, fisheries. As I reported to the House on 24th June, we have explained fully to the Six the great difficulties that would arise for the United Kingdom, as indeed they would for the other applicants, from the extreme nature of access provisions of the common fisheries policy and the need to modify them to take account of the circumstances of an enlarged Community.

In an attempt to find a permanent solution which would be fair and reasonable for everyone, we proposed that waters within a six-mile limit, measured from the usual base lines, should be reserved for vessels genuinely belonging to the ports from which such waters are now being fished.

We still consider that our proposal is in all the circumstances a reasonable basis for a common settlement that would be sensible and equitable for all the parties concerned.

The House will recall that at the Ministerial meeting at Luxembourg between 21st and 23rd June it was not possible to reach a substantive solution to the problem. But there was an important advance in that the Community put formally on record its recognition that the access provisions of the common fisheries policy would need reconsideration in the different circumstances of the enlarged Community. It was agreed that the matter should be taken up at the Ministerial meeting which has just taken place. Recognising that this is a matter of great political, social and economic concern to all the applicants and that a satisfactory settlement could be therefore worked out only on a multilateral basis, we proposed that the other applicant countries should also be invited to join in these discussions.

In the event, it did not prove possible to arrange this. In those circumstances, we could not hope to find an effective and equitable way of reconciling the interests of all four applicant countries and the existing Community at the meeting on Monday.

Against this background and given that there must be agreement regarding the common fisheries policy in the Treaty or Treaties of Accession, I proposed to the Community that we should seek to reach an interim agreement. This would mean that, if the negotiating conference was unable in the time available to reach a final agreement satisfactory to all, everyone's legitimate interests would be protected until we had done so.

Under such an agreement, the applicant countries would maintain the status quo pending further reconsideration of the regulations and the achievement of a detailed and definitive agreement after enlargement of the Community. None of the applicant countries would be called upon to give up anything at this stage or be put at any disadvantage in discussing more permanent arrangements. In particular, it would avoid the unacceptable situation in which any of the applicants would be expected to agree unconditionally to a permanent solution for themselves without knowing what the final outcome of the common fisheries policy would involve for an enlarged Community as a whole.

The Six have taken note of this proposal and have indicated that they now feel the need to study the matter in greater depth.

We shall take up the question again after the Summer Recess. I am convinced that together we shall be able to find a way through this complex problem to a satisfactory solution.

This is a matter in which it is more important to get the right answer than the quick one. In the meantime, our interests are fully safeguarded.

Mr. Harold Lever

Will the right hon. and learned Gentleman take into account the fact that these negotiations, because they happen to come after the White Paper, leave hon. Members without that explanatory detail which might have been incorporated in the White Paper if they had happened to come earlier? Will he, therefore, take steps to circulate to hon. Members, either in the OFFICIAL REPORT or by some other means, greater detail, especially dealing with capital movements, explaining the effect of the Government's economic and financial strategy in relation to these new arrangements, so that hon. Members may be provided with the proper means of examining these matters before the "take note" debate? Is the right hon. and learned Gentleman aware that the House will expect in the "take note" debate a very rigorous and comprehensive examination of these important decisions on capital movements?

As for commercial policies, can the right hon. and learned Gentleman say whether reports which have been issued are true, that the Common Market countries have pressed him to liberalise the terms of our trade with the Eastern European countries, and whether he has reacted favourably to that pressure?

Finally, will the right hon. and learned Gentleman bear in mind that the fisheries question is a matter of important principle as well as of grave economic consequence to many of our fellow citizens who eke out their livelihood in difficult circumstances? Will he, therefore, bear this in mind continuously throughout the remaining negotiations on the fisheries problem?

Mr. Rippon

I am grateful to the right hon. Gentleman for the points which he has raised.

On the details of the agreement on capital movements, I will certainly take steps to see that further information and details are circulated in the OFFICIAL REPORT. The best way to deal with this detailed explanation is better left to be considered. However, I appreciate what the right hon. Gentleman said about the need to consider these matters in detail in the debate which we shall be having next week.

Concerning the common commercial policy, it is true that in certain fields the Community, which has been expanding its trade not only within itself but with Eastern Europe and the Commonwealth, has a more liberal trading policy than we have. Throughout the transitional period we shall be taking steps in these directions to harmonise our policy with theirs.

Concerning the fisheries regulations, I think that I have made it clear that we attach a great deal of importance to this matter. I accept the views which the right hon. Gentleman and, indeed, hon. Members on both sides have at various times expressed on the matter.

Sir D. Walker-Smith

In view of the fact that control of direct investment is to come to an end within two years at most, will my right hon. and learned Friend tell us what studies he has made and what estimate he has arrived at as to the amount of plant and factories which British and overseas capital, such as American capital, may locate on the other side of the Channel instead of here? In the event of consequential unemployment arising, will he tell us whether, in his understanding, Article 109 of the Treaty provides any opportunity for relief or whether, as appears from the text, it is restricted exclusively to balance of payments considerations?

Mr. Rippon

It is not possible to make precise estimates of the effect of these arrangements on the harmonisation of capital movements over the whole period, but I do not see why the balance should not be positive.

Concerning protective measures, I am inclined to the view that regard should be had in this case not to Article 109, but rather to Article 70(2), or perhaps Article 73.

Mr. Grimond

Is the right hon. and learned Gentleman aware that he gave me great pleasure this morning by the announcement that he is standing out for a 12-mile limit around Shetland comparable with that asked for by the Norwegians? Is he further aware that a high proportion of the fish landed in the Shetlands is caught between the 6 and 12-mile limits and that it would be grossly unfair to Shetland to be put in a different position from the Norwegians as fishing is of great social as well as economic importance to the islands? Will the right hon. and learned Gentleman also confirm that what he said at Brussels is correct?

Mr. Rippon

What I suggested in Brussels was that, as I indicated in the statement, although we put forward our proposals in good faith as a basis for negotiation, if any of the other applicants sought and obtained different arrangements—for example, a 12-mile limit—we would wish to be free to put the case for a 12-mile limit around particularly the Shetlands. I gave the Shetlands only as an instance, but not the only instance which might arise. I pointed out that whereas since last October, because the Anglo-Norwegian Agreement has ended, Norway had been able to impose certain limits in her 12-mile limit, nevertheless she had rights in the Shetlands to fish only dog-fish and shark and therefore could not unilaterally hope to come and take our herring.

Mr. Horden

Will my right hon. and learned Friend tell us now, or in the "take note" debate, what will be the position during the transitional period about the surrender of the 25 per cent. of the dollar premium which under present conditions is surrendered to the Bank of England? Will he also confirm that freedom of capital movements will be allowed into European securities quoted not only in this country but in Europe itself?

Mr. Rippon

We have until the end of the transitional period to deal with portfolio investment. As to how we operate it in detail within the framework of the broad agreement which I have reached will be a matter for my right hon. Friend the Chancellor of the Exchequer. However, I will draw my hon. Friend's points to his attention. I am sure that these are the kind of matters which can and ought to be dealt with in the debate we shall have next week.

Mr. McNamara

Reverting to fishing policy, will the right hon. and learned Gentleman tell us when the next meeting of the Council of Ministers will be held to discuss this point, and will he confirm that before the House is requested either to accept or reject the White Paper and the terms which have been agreed by the Government and the Community we shall have a definitive fishing policy?

Mr. Rippon

We shall be raising this matter at the next Ministerial meeting, which we have fixed for 21st September. I hope that we shall then make substantial progress. I have always been careful throughout these negotiations not to tie ourselves to a particular deadline where that is not necessary or desirable, because it is important that we should get this aspect of the negotiations right and deal with it in a way which is not only acceptable to us and to the Community, but to the other applicants as well.

Mr. Wall

I congratulate my right hon. and learned Friend on the firm stand which he has taken on British fishing interests. Is he aware that the two alternatives to which he referred in his statement would be acceptable? What would not be acceptable is that Britain should contract for a 6-mile limit whereas other members of the enlarged Community expanded or maintained 12-mile limits. Will my right hon. and learned Friend also tell us whether the question of marketing, as well as the limits question, will be dealt with before the final vote in this House?

Mr. Rippon

I thank my hon. Friend for his support. Different circumstances apply to different applicants. At the end of the day, we must work out a solution which maintains a fair balance between us all. That is our purpose.

We agreed that we could not deal with the marketing arrangements at our last meeting and that we would have to leave them until after the Summer Recess. They are complex. We have quite a number of points to make on them, particularly the inadequacy and unsatisfactory nature of the proposals concerning, for example, the withdrawal prices and the effect on remoter areas.

Mr. Mackintosh

I should like to reinforce this point. Does the right hon. and learned Gentleman appreciate that, while many fishermen would like the withdrawal price system of the marketing regulations, there is genuine worry that the remoter ports could not sustain a uniform withdrawal price compared with the central ports? In this matter an element of subsidy is acceptable, but not one which would be damaging to these ports.

Mr. Rippon

There is no reason to suppose that we should not benefit from proper regulations, including marketing regulations, provided that we get a full opportunity, for which we have asked and which I know we shall not be denied, to sort out these problems as they affect remoter areas in particular.

Mr. Burden

Has my right hon. and learned Friend made it perfectly clear that a 6-mile limit is the absolute minimum we can accept? Will he assure the House that he will not allow this limit to be eroded in future negotiations?

Mr. Rippon

We have made our proposals quite clear about the 6-mile limit. It is from the 1964 base lines. I must leave it there. It is perfectly clear.

Mr. Healey

Will the right hon. and learned Gentleman tell the House whether he has yet succeeded in identifying the person, described in the Financial Times as a senior member of the Government's negotiating team and elsewhere vaguely as a Minister, who was responsible for reports in several newspapers on 25th June, the day after the Chancellor's last report to the House, that the Government's estimates of the foreign exchange cost of entry to the Common Market in 1977 would be £500 million?

Mr. Rippon

No, I have not.

Several Hon. Members rose——

Mr. Speaker

Order. We are to have a four-day debate on these matters. There are two other statements to be made today and a debate to which I know that many right hon. and hon. Gentlemen attach great importance. I call the Secretary of State for Scotland to make the next statement.

Mr. W. H. K. Baker

On a point of order, Mr. Speaker. While in no way questioning your right to call whom you wish on this matter, is it not a fact that my starred Question No. 68 bore a direct relation to the statement which has just been made? Might it not be possible to put that Question to my right hon. and learned Friend who is just leaving the Chamber?

Mr. Speaker

My recollection is that the hon. Member has already had an opportunity today of asking a question on these matters. I may be wrong. Anyhow, it is a matter for me and I have called the Secretary of State for Scotland to make the next statement.