HC Deb 20 December 1973 vol 866 cc1620-34
The Chancellor of the Duchy of Lancaster (Mr. John Davies)

With your permission, Mr. Speaker, and that of the House, I should like to make a statement on meetings of the Council of the Eurapean Communities since my last statement a fortnight ago. There have been two meetings of Finance Ministers and one each of Foreign, Agriculture and Social Affairs Ministers.

External trade agreements have been concluded with India and Brazil. There has been further consideration of agreements with Mediterranean countries and with those former members of EFTA that have not acceded to the Communities, and of Community adherence to the International Sugar Agreement; work on the simplification of Customs procedures is to be pursued; the improvement of the CAP was discussed, as was a programme for consumer protection; the Community budget for 1974 was finalised at a level slightly lower than in the current year but within the total figure the Social Fund has been increased by about £19 million—45 million units of account—as already agreed.

This week's meeting of Foreign Ministers was dominated by the problems of energy and the Regional Development Fund. No agreement was reached but the Council agreed to resume the discussion not later than 7th January next year. My right hon. Friend the Foreign and Commonwealth Secretary gave a good deal of information on these matters to the House at Question Time yesterday.

Finance Ministers agreed a series of measures defining the content of a second stage of Economic and Monetary Union to apply from 1974 on: A resolution on the move to a second stage was also broadly agreed but since it included references to the setting up of the Regional Development Fund and the work to be undertaken on energy matters, it was deferred until those issues were settled.

The Council has agreed on a programme of action in the field of industrial and technological policy, in accordance with the decision taken at the Paris Summit. The Commission has been charged with submitting draft Directives.

Social Affairs Ministers agreed on a programme of action to be embodied in a Council Resolution. The programme represents a major stage in the development of the Community social policy envisaged at the Paris Summit.

Mr. Peter Shore

The House will be grateful to the right hon. Gentleman for that statement, cheerless though it is.

Before turning to the major matters of energy and the regional development fund, which are rightly singled out as the most important matters under discussion, may I clear two preliminary points with the right hon. Gentleman?

In relation to the trade agreement with India, can he say whether he has managed to secure a no-change position in the British tariff on imported Indian tobacco and on Indian jute manufacturers—and, incidentally, I hope that the jute position will be the same for Bangladesh?

Can the right hon. Gentleman say whether any agreement has been reached, in the talks on the International Sugar Agreement, on the major principles for changing the common agricultural policy in relation to sugar which both sides of this House agreed following our debate a month or so ago?

Turning to the heart of these discussions, may I first ask the right hon. Gentleman why it is that the German Government, at this very late stage in the talks on the Regional Development Fund, have apparently put forward figures which are so much lower than those which had previously been discussed and well below the level of the right hon. Gentleman's anticipation up till only a few days ago? Is it because this is a retaliation against the very unforthcoming British position on the medium-or short-term response to the oil crisis facing Western Europe? If it is, does he think that by refusing to agree to a draft regulation by the Commission to furnish statistical information on oil supply in Britain, by vetoing this proposal, he will persuade the Germans to open their purse and make the money available?

Why is it so important to this country that we should have a large Regional Development Fund? Is not the first reason the need felt to offset the crippling and disproportionate payment this country has to make to the CAP and the dispro- portionate size of the CAP in the totality of Community expenditure? Is it not the case that even if the whole original Commission proposal, which now seems far removed from the possibilities of acceptance, were to be agreed, the budget for the next three years of the regional fund would be no more than 3,000 million units of account as against the more than 12,000 million payment under the CAP?

Does not the right hon. Gentleman now consider that it would have been far better for this country to have taken on these serious matters long before the Treaty of Accession was signed and to have secured for this country proper terms so that he would not now have to try to persuade, from a position of appalling weakness, other countries to be generous to this country?

Mr. Davies

The right hon. Gentleman is seriously at fault on his last point. We have always held, and many hon. Members on both sides of the House have believed, that the appropriate way to deal with imperfections within the Community—if imperfections there are, and I do not dissent from that—is to handle them from within. We still firmly believe that this is right, that the right way to deal with problems of improvement of the Community's activity is as a member. I have little doubt that that conclusion is correct.

With regard to the right hon. Gentleman's specific points, I can inform the right hon. Gentleman on the precise details of the Indian agreement—but suffice to say now that the arrangements entered into for unmanufactured tobacco and jute from India are wholly satisfactory and meet our requirements and those of the Indians. I shall give the right hon. Gentleman precise details separately. It is my firm expectation that similar arrangements as those entered into with India will be negotiated with Bangladesh.

The right hon. Gentleman inquired about the rate of work developing in considering the Commission's CAP proposals. This will continue for some time. The matter requires much discussion among agricultural Ministers, but I sincerely hope that by the time we come to consider agricultural questions, such as the level of agricultural prices, next year, these matters will have been satisfactorily dealt with.

The principal point on which the right hon. Gentleman concentrates is the whole question of the regional development fund and energy. He is right; these were clearly the dominant issues, as I said in my statement. I do not believe that the German reaction to the Commission's proposals was dictated by a desire for retaliation. That would not have been logical in the circumstances, since at the Summit meeting in Copenhagen it was quite clear that the Germans, like all other members of the Community, were well satisfied with the conclusions reached at the Summit. It would therefore be wrong to imagine that there was a feeling of resentment which the Germans sought to carry through to the regional development issue.

I agree with the right hon. Gentleman that the Germans' reaction was both disappointing and, in some ways, very surprising at that stage, in view of all that had gone before. It was perhaps dictated more by considerable anxiety about the evolution of the European economies generally and the German economy in particular, in the light of the clear implications of energy costs for all those economies.

On the question of effectiveness to which the right hon. Gentleman referred—on the energy problem as against the regional problem—the right hon. Gentleman would be wrong to imagine that the proposals before us were simply confined to providing information. My right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs made clear that he had promised that in any case information would be forthcoming to make the work go forward. Action on this included setting up a high-level committee with the task of operating something in the nature of at least a guidance service on the terms of energy use in the Community.

The requirement for a major regional development fund is not Britain's alone—far from it. Indeed, the right hon. Gentleman will remember that, well before our membership of the EEC, it was not only included in the Treaty of Rome, as a major requirement but was specifically regarded as one of the principal issues at the Paris Summit meeting in October 1972.

The reason is that it is realised that it is not just in Britain but in practically every country that there are major regional disparities which militate against the social evolution of the Community and against the possibility of attaining an economic and monetary union of the kind which the Community has in mind. The requirement to achieve a major regional development fund applies to the Community as a whole, and is not restricted to a single country or even to three countries.

With regard to the right hon. Gentleman's remarks about the relationship of the figures now being considered to the total figures involved in the CAP, I agree with him that there is still a great contrast. It is one of the objectives that the fund, when set up, should not merely be large at the outset but should progressively become greater and greater because it has to meet a major problem in the Community. It is to that purpose that the Government will be arguing in the course of the ensuing meetings.

Sir B. Rhys Williams

Is not it obvious that a project as big as the regional development fund is likely to be attended by much haggling and argument? As West Germany now holds more than half the total financial reserves in the Community, is it not also clear that Germany's reservations are not due to a shortage of money but perhaps to Cabinet disputes which are likely to be resolved as soon as the German Cabinet realises the strength of feeling on the matter in this country?

Mr. Davies

It is undoubtedly true that the German Cabinet is very concerned about the future development of its own economy and the economies of other member States in Europe resulting from the cost of oil. The German Government equally is deeply concerned at the thought of being perhaps alone in resisting the institution of the regional development fund on the kind of scale which the Commission has proposed. That should be a powerful factor in influencing German thinking on the matter. I hope that by the time we resume on 7th January—if that be the date—there will be a possibility of reaching agreement.

Mr. Russell Johnston

Is the right hon. Gentleman aware that despite the assurances which he gave to the right hon. Member for Stepney (Mr. Shore), there is considerable Press speculation to the effect that the German position represents a German response to the British attitude on energy sharing in the Community? Will he make that point quite clear?

Secondly, what I find difficult to understand is that the German position came as such a shock and surprise. Everyone knew that the Germans were unenthusiastic about the regional proposals because of the burden which these would lay on them, but no one understood that the position which the Germans would finally take up would be so hard. Has there been dialogue and contact with the German Government in recent months to the developing attitude in Germany to this matter?

Mr. Davies

Despite Press speculation, I do not believe that the position taken up by the German representative at the Council meeting earlier this week was the result of a feeling of resentment against any British attitude on the energy front. On the contrary, I do not believe that at that stage it was a vital issue in the Germans' mind, in view of the decisions taken at the Summit. Regarding the degree of surprise expressed at the German reaction, the hon. Gentleman has instanced the point. I can assure him that there has been continuous discussion. But the inadequacy of the German approach was something of a surprise to us and other members.

Mr. Powell

Do not my right hon. Friend and his colleagues in the Government feel the humiliation of asking the Germans and other nations to put up a little more money to enable us to help our own regions and our own people?

Mr. Davies

I do not agree with my right hon. Friend about this matter. The Community is an organisation which requires inputs, support and contributions of all kinds from its members and offers advantages to its members. Nothing would be further from the truth than to imagine that in this respect we are holding out a begging bowl. We are concerned with a major feature of Community policy, the setting up of a proper regional organisation and policy in the Community to ovecome what is a Community-wide problem. We are concerned with that, not with seeking to extract a few extra Deutschemarks.

Mr. Judd

Does the Minister appreciate that many right hon. and hon. Members are deeply concerned about the lack of detailed information about arrangements with India and Bangladesh? Does he realise that there is growing anxiety about the progress of negotiations on the generalised scheme of preferences and the implications for the relationship of the EEC to the Third World as a whole, which many right hon. and hon. Members believe is becoming an increasingly important and sensitive major political issue? Can he guarantee that we shall have full and detailed statements before irrevocable steps are taken in those directions?

Mr. Davies

I can assure the hon. Gentleman that the fullest information will be given on the arrangements entered into with India and Bangladesh and on the Community's GSP arrangements as from the beginning of next year. I think that when the hon. Gentleman has the opportunity to study both those matters he will not be dissatisfied. In fact, the GSP constitutes from the Community's point of view a big step forward overall in relation to the interests of the developing world.

Mr. Wilkinson

My right hon. Friend has spoken of India and Bangladesh. Would the Government support the accession of other Asian Commonwealth countries or former Commonwealth countries to the external trade agreements? With regard to the question of regional assistance, does not my right hon. Friend agree that the Community is very much a matter of give and take, and that the United Kingdom provides a great deal of industrial and technological expertise to Germany in various joint collaborative ventures in which we are engaged?

Mr. Davies

The identity document which emerged from the Summit meeting at Copenhagen made specific reference to those countries which are broadly classed within the framework of the Declaration of Intent under the Treaty of Accession. The intention has been expressed, and is reiterated, to seek with those countries agreements which are favourable both to them and to the Community. I think that the Indian agreement is the first such case. Bangladesh, Pakistan and other countries will be involved. Malaysia and all those countries will have a major interest in the GSP scheme.

As for the counterparts to the Regional Development Fund, I agree with what my hon. Friend says. The enormous advantages which Germany enjoys in her external trade as a result of membership of the Community, not least in this country, should not be forgotten either.

Mr. Jay

As the Government are threatening to withdraw from our development areas regional employment premium payments, which are now running at £90 million a year, will the Minister give a firm assurance that he will not accept a lesser annual payment than that from the so-called regional fund?

Mr. Davies

To set the record straight, the present Government, as my right hon. Friend the Chancellor of the Exchequer has said on many occasions, have done nothing but to follow the precise intent stated by the former Government on the REP. Therefore, I do not think that the hon. Gentleman's point is very pertinent. But I can assure him that it is not the Government's intention to vary what they have already said on the subject of the REP.

Sir D. Walker-Smith

Whilst one can understand German feeling about the regional fund, as they are maximum contributors and minimum beneficiaries, is not that exactly the British position in regard to the common agricultural policy? Is not the logic of the position, therefore, that a further initiative should now be taken for a more realistic and radical appraisal of the common agricultural policy than has so far been envisaged?

Mr. Davies

My right hon. Friend the Minister of Agriculture, Fisheries and Food has always made it clear that he regards the report of the Commission on the improvement of the common agricultural policy as only a first step, and that it should be followed by a progressive review of the policy as time goes on. I do not think that there can be any doubt of the Government's intentions in that respect.

Several Hon. Members rose—

Mr. Speaker

Order. I will certainly call the hon. Member for Ebbw Vale (Mr. Michael Foot), but I hope first to have a chance to call some other hon. Members from the benches behind him.

Mr. John Mendelson

Does not the Minister realise that there is a widespread feeling throughout the country that the whole policy he is pursuing is breaking down and coming apart in every possible way? Will he not take the House of Commons properly into the Government's confidence and meet that expression of feeling throughout the country? Does he recall that in the summer, also just a day before the House adjourned he told the House and the country that he had been informed about a supplementary budget for the common agricultural policy, amounting to £33 million, only eight hours before he agreed to that supplementary budget? Would it not have been wiser not to be so hasty in paying out from the funds of this country for the common agricultural policy but to hold back on it and say, "Let us see what happens to other policies, like the regional policy and the social fund, which might be of some slight benefit to this country"? Will he now say that he will re-cast the Government's policy on these matters and make a new start which will make it quite clear that unless other countries live up to the expectations of the Government we shall not pay into those funds to which we have been committed?

Mr. Davies

The hon. Gentleman is entirely wrong. I believe that the Government will achieve from the membership of the Community the objectives which they sought I equally believe that on the narrower, immediate question of the constitution of a regional fund the intention we have expressed will be realised. I do not accept the hon. Gentleman's views.

At the time of the supplementary budget to which the hon. Gentleman referred, I pointed out that it was not a departure in budgeting of the kind to which this House is accustomed, in that it simply reflected policy decisions which had been taken previously, and to which the House was privy.

Dame Joan Vickers

Yesterday I was in Paris discussing with the Germans and others the question of regional policy. Does not my right hon. Friend think that as the Germans destroyed so many of our cities, including the city of Plymouth, it is only right that they should pay some compensation now?

Mr. Davies

It would be a great pity if the purposes and future of the Community were to be established on the basis of compensation and recompense for past matters. The Community is constituted as a forward-looking organisation seeking to devise a better, more secure and more prosperous order in Europe. That is certainly the basis on which I bend my mind when seeking to achieve our objectives.

Mr. Fernyhough

Does the Minister realise that his continued optimism about the eventual outcome of our association with the EEC is most surprising to anyone who gives deep thought to the position? He repeatedly comes back and turns defeats into victories. Is it not humiliating, as the right hon. Member for Wolverhampton, South-West (Mr. Powell) said, that he and the Foreign Secretary have to be there with their begging bowl at a time when massive British investment, as Le Monde reported yesterday, is being made in Brussels and in France in particular?

Would it not have been better if those massive British investments which have been put into the EEC had been put into our own regions—and then we would have saved the right hon. Gentleman the trouble and humiliation of having to go almost on his knees to get a fund which the Government promised the British people they would get when they took us into the Common Market?

Mr. Davies

I do not think that I should add to what I said earlier on the subject. The right hon. Gentleman's outburst does no credit to himself or, indeed, to any of us. The fact is that there is no question of a begging bowl and I should like very sharply to reject that suggestion.

Mr. Body

As my right hon. Friend will be aware of what my right hon. Friend the Foreign Secretary told the House yesterday afternoon—that there was a plan to make the Common Market into a free trade area—will he tell the House now who are the authors of this plan, whether the plan has the support of M. Pompidou, and on what grounds can this principle of a large free trade area be reconciled with the principle of Community preference? Finally, is my right hon. Friend aware that, if this plan is likely to come about, even I, who have not been backward in my views about the Common Market, will at last be reconciled to the advantages of the European Community?

Mr. Davies

I do not know where the thought of the conversion of the Community into a free trade area has emerged. It certainly is not to my mind a likely project. Perhaps it is an interpretation of the thought that a free trade area is a minimal part of the existing plans of the Community itself.

Mr. English

In the light of the Chancellor's statement, can the right hon. Gentleman tell us whether he asked permission in Brussels to cut by 10 per cent. that portion of our public expenditure which results from our entry into the EEC?

Mr. Davies

I am not clear about the precise part of public expenditure to which the hon. Gentleman refers. One of the issues which the hon. Gentleman will have noticed was involved in my statement was that referring to the budget, which he will have noticed is less this year than it was last year. Perhaps this is what he meant.

Dame Irene Ward

As regards this controversy which has arisen over the Regional Development Fund, had there been any indication previously that this might be the attitude of West Germany, or does my right hon. Friend think that it is some sort of Cabinet controversy in that country, taking the sort of line that we sometimes do—put something out to get something over?

As my right hon. Friend has not been in the House of Commons for all that long, may I ask him whether he is aware that my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) stated many months ago to me personally and publicly that he would do nothing for the regions, so I wipe him out?

Mr. Davies

There was never any real doubt that the Germans were markedly less enthusiastic than ourselves on the subject of the establishment of a Regional Development Fund. What constituted the surprise was that they should have proved as reticent as they were.

I have been aware of the reluctance of my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) to consider the problems of regional policy, even nationally, as being one warranting major effort by the Government.

Mr. John Morris

Would I be right in assuming that the proposed figure of £1,250 million for the Regional Development Fund is the Government's sticking point—or, if it is not, is the Commission's £1,000 million the sticking point?

Mr. Davies

I think that I would be unwise to negotiate across the Floor of the House in the way that the right hon. and learned Gentleman suggests that I should.

Sir Gilbert Longden

As the common agricultural policy, until its terms can be renegotiated, which we all hope will be soon—[HON. MEMBERS: "Oh."]—my right hon. Friend will be well aware that I have from the very start hoped that the common agricultural policy terms would be renegotiated. Since it places a heavy burden upon our country, is it not rather surprising that so many hon. Members on both sides of the House, including two right hon. Members, should denigrate my right hon. Friend's efforts to get something for the regions from the regional policy? Will my right hon. Friend take it from me that the large majority of hon. Members who are normally on this side of the House are behind him in his efforts and wish him well?

Mr. Davies

I am most grateful to my hon. Friend for those remarks. I absolutely agree with him. There has never been any doubt at all that the Government had firmly in mind the improvement of the common agricultural policy, but they believed most substantially that they would do that much more effectively—and it looks as though they will, from inside the Community—than from outside.

Mr. Spearing

My hon. Friend the Member for Portsmouth, West (Mr. Judd) mentioned the generalised system of preferences, but this was not mentioned in his statement by the right hon. Gentleman. Will he confirm that this agreement has to come into force from 1st January, that it was contained in a draft regulation placed before the Council of Ministers by the Commission, and that if it were to be adopted it would mean that handicrafts, edible coconut oil and jute would be disadvantaged in terms of entry into this country from ex-Commonwealth territories, whatever the general effects may be as outlined in the right hon. Gentleman's reply?

Mr. Davies

The only reason it was not included in the statement was that, broadly speaking, the Council had dealt with it previously. I referred to it in the last statement that I made to the House. There are a number of small points to be clarified before it is finalised. That will be done before 1st January. What one should be concerned with is the overall balance of benefit of the GSP scheme. That I believe from the Community standpoint is very satisfactory.

Mr. Michael Foot

Will the right hon. Gentleman clear up one aspect of these combined negotiations at Copenhagen and Brussels which still mystifies me and, perhaps, some others?

It is suggested, as I understand the Minister's statements today and the reports which have been made, that to deal with the derisory figure that has so far been offered for a regional fund the sanction—if that is the proper word—which the Government propose to use or to invoke to secure alteration by 7th January to this state of affairs is to hold up the discussions or the procedures agreed in Copenhagen about the energy arrangements.

If it is true, as my hon. Friend suggested, that that agreement in Copenhagen is solely an agreement by a committee reporting on statistics, then it is not a very formidable deterrent. The right hon. Gentleman shakes his head. If, on the other hand, the agreement in Copenhagen is a further and more far-reaching arrangement about energy, which might touch not merely immediate matters but such major matters as the future disposal of oil supplies from the North Sea, that would be vastly different, and I presume that the Government are opposed to proceeding with such discussions as that.

Therefore, I hope that the Government will not be entrapped into having to agree to what they objected to at Copenhagen about energy because somebody comes along with a slightly better figure on the regional account.

In view of these considerations, which are of the highest possible importance in our present circumstances for the future of this country, will the right hon. Gentleman give me an absolute assurance, without any qualification whatever, that neither in Brussels nor at the Summit, nor anywhere else, will any agreement be made by Her Majesty's Government affecting the long-term disposal of oil supplies from the North Sea or the Celtic seas to this country? Will the right hon. Gentleman give an absolute assurance that no commitment whatever in any form, or any undertaking which might lead to a later commitment, will be made without the House giving the authority to the Minister to do that? Does the right hon. Gentleman appreciate—I hope that he does—that it is on that clear understanding that any discussions on this matter should take place with Governments in Europe?

Mr. Davies

I can assure the hon. Gentleman that it is absolutely not part of the Government's intention in any way or form to alienate the advantage of interest in oil from the North Sea or Celtic Sea.

Mr. Douglas

On a point of order, Mr. Speaker. On the occasions that we have statements from the right hon. Gentleman regarding meetings in Europe, could you, Mr. Speaker, consider expediting the reports from Committees of this House so that we might deal with those statements more in keeping with the need to ensure the right of right hon. and hon. Members to have a more suitable and adequate discussion of such matters?

Mr. Speaker

I will have regard to what the hon. Gentleman said. The length of time that I allowed on supplementaries today is some indication of my view of the matter.