HC Deb 13 November 1974 vol 881 cc408-16
The Secretary of State for Foreign and Commonwealth Affairs (Mr. James Callaghan)

With permission, I wish to make a statement on the meeting of the Council of Ministers on 12th November.

I discussed with my Community colleagues the long-term problems which we are facing over sugar and also our renegotiation request concerning the British contribution to the Community budget. The remaining items on the agenda were dealt with by my right hon. Friend the Secretary of State for Trade and by my hon. Friend the Minister of State at the Foreign and Commonwealth Office.

The House will be glad to know that the Council reached provisional agreement on a mandate to the Commission for negotiations with the developing Commonwealth sugar-producing countries. The mandate concerns the arrangements for their sugar exports to the Community from 1975 onwards.

It was agreed that the Community should offer access for 1.4 million tons of sugar a year on a continuing basis.

The Government were also anxious to secure that the bulk of the 1.4 million tons should come to the United Kingdom for refining in order to assist the cane-refining industry. I am glad to say that the Council accepted that in practice the great bulk of the sugar would be exported to the Community in accordance with traditional channels of trade. It follows that British refineries will get the bulk of the sugar delivered to Europe by the Commonwealth producers.

There was considerable discussion on the price that should be paid for the sugar. It was understood that a fair price will have to be offered if supplies are to be secured. But this is a matter which is closely related to the Community's internal sugar regime and it was decided that the Agriculture Ministers should settle this at their meeting on 18th and 19th November.

The Agriculture Ministers will also have to look at the question of the duration of the agreement with the sugar-supplying countries. We take the view that the arrangement should be for a number of years in order to safeguard the interests of both our traditional Commonwealth suppliers and our own cane-refining industry. This view is accepted by the other members.

When the Council of Agriculture Ministers reaches agreement on a final mandate at its meeting next week, the informal consultations which the Commission has already been conducting with the supplying countries will then be turned into formal negotiations with a view to reaching an early agreement.

I also carried further the discussion of our contribution to the Community budget. The House will recall that the Commission was asked by the Council on 4th June to produce a report. A copy of this was placed in the Library of the House on 29th October, and was before the Council yesterday. It broadly supported the two main contentions in my speech on 4th June.

First, Britain is already below the Community average as far as income per head is concerned and, because it is expected that our growth rate will continue to be below the Community average for the time being, our income per head will decline further before it starts to climb back again.

Second, our contribution to the Community budget is going to be substantially above our fair share in relation to the Community avarega as far as income per duct. This situation must be remedied. Though I made it clear that we were ready to consider solutions to deal with the problem, I suggested that the Community might accept as a principle that member States with below-average GDP per head should not bear a share of the burden of financing the Community budget disproportionate with their share of the Community's CDP.

The first reactions of the other Governments were varied. But I noted in a number of speeches round the table that my analysis was not disputed. There is still a long way to go before we find out whether all concerned are ready to agree to a solution which we can accept. The matter will now be discussed intensively in the Community. I should like to be able to make progress towards a solution at the next Council meeting on 2nd and 3rd December, or, failing that, at the Summit in Paris the following week.

Mr. Rippon

I thank the Foreign Secretary for his statement and I express our relief that he is now beginning to recover from the self-inflicted handicap of the threat of withdrawal. It would have been a source of grievous complaint if the Community had not honoured a specific and moral commitment about sugar which we negotiated at the time and which I announced in this House at the time. What has happened is exactly what I told the House would happen when we discussed the negotiations and is entirely in accord with what I said time and again when we were discussing the European Communities Bill.

Will the right hon. Gentleman confirm that the problem now is not access but reasonably remunerative prices for the developing countries? Will he agree that it is difficult, looking to the years ahead, to predict the state of the weather and the state of the commodity market, but will he confirm that the European price is now well below the Commonwealth price and world prices and that as a result of our being members of the Community we shall have sugar at a lower price than if we had stayed outside it? Will he repeat what the Minister of State said the other day that our food is now cheaper because we are members of the Community than if we were not members?

On the budget, I fully agree with him in seeeking a Community solution. I agree that what has been proposed by the Government is fully in accord with the provisions of the treaty and that if Britain's economic situation continues to decline in the way he suggests, and as is likely as long as we have a Socialist Government, we are entitled to seek relief from our contribution in the years ahead.

Finally, will he confirm that the budget contribution in the first two years has been less than we forecast and that as a result of the various payments and grants we have received, and also of the low interest rate loans we have enjoyed, we are already net beneficiaries?

Mr. Callaghan

I fully realise the right hon. and learned Gentleman's difficulties about that matter, and I would not like to make them more onerous. [An HON. MEMBER: "Why not?"] I have always been a kindly chap.

On the particular points he raised, the main problem to be solved is the very important one of price. In some ways I have perhaps had the easiest part of the task. My right hon. Friend the Minister of Agriculture will now have to conclude the fixing of the price to be offered.

I would not go along with the right hon. and learned Gentleman in saying that we shall now obtain sugar more cheaply because we are inside the Community rather than outside it. It will depend on the nature of the long-term agreement and on a number of matters, including the future of the Common Market. It makes no difference to the question of negotiating a long-term agreement with the Commonwealth sugar producers whether we are inside or outside the Community. Therefore, I do not agree with him about that.

As for obtaining assurances in regard to the 1.4 million tons, I do not recognise the right hon. and learned Gentleman's description of what he thought he had concluded when compared with what I went through yesterday. It seems to me that perhaps the more accurate way of putting the matter would be to say that it is rather like a man who negotiates with the bank manager that in three years' time he will get an overdraft without settling the amount, the rate of interest or the terms on which it is to be granted. Yesterday we had to make provision for 1.4 million tons of sugar, which my right hon. Friend the Prime Minister when he was in Opposition indicated we would get. That is what we have done.

I know that the right hon. and learned Gentleman is sensitive about these matters, but he must try to accept the fact that now and again even he may have made a mistake when in Government. He did not tie up this arrangement. He must have that argument with someone else. I am not interested in that. But we got the 1.4 million tons and we got the continuing agreement yesterday. That is important, too. The period of time and the price have still to be settled. Fourthly, we got the major point, which is that through the normal channels of trade the sugar will come here.

As for the budget, I think that the burden that we are bearing is unfair. We are on an upward key. We are not paying the full amount that we shall pay, if it is not altered, in two or three years. That must be altered. It would make a substantial difference to the amount that we would have to pay across the exchanges.

Mr. Jay

Is my right hon. Friend aware that although the budgetary burden of EEC membership may not yet have approached £200 million a year, our total trade deficit with the EEC has actually doubled further compared with last year and is now running at about £2,000 million a yea:, and that therefore the budgetary burden is a comparatively minor part of the total economic burden of membership?

Mr. Callaghan

I hope that my right hon. Friend will not take that point. Surely it is worth saving £150 million a year across the exchanges if we can. It is true that our deficit with the EEC countries has gone up over the past 12 months or two years, but so it has with other parts of the world. It do not think that my right hon. Friend can draw conclusions necessarily from this, one way or the other.

Mr. Grimond

Can the right hon. Gentleman say what is a fair price? If he cannot say that, can he tell the House the sort of criterion which may be invoked? Then can he say which are the countries now below the European average in income per head and whether they are likely to decline?

Mr. Callaghan

We have made no secret of the fact that the initial price that we would strongly support would be equivalent to not less than £140 per ton f.o.b. That is the kind of beginning figure. Nevertheless, this is to be a commercial negotiation and therefore it would be right for Ministers of Agriculture to settle where they think at what price they can get the 1.4 million tons.

As regards the countries below the average, speaking subject to correction, the countries below the average at the moment—the three worst off—are Ireland, Italy and the United Kingdom. This is a matter on which we should have grave reflection.

Mr. Luard

Does my right hon. Friend agree that there is a real danger that judgments about the sugar agreement will be over-influenced by the present short-term situation in the sugar market where we have a very high price and a world wide shortage? What the Commonwealth producers are mainly concerned about is a continuing long-term stable agreement at reasonable prices. Is my right hon. Friend satisfied that in his negotiations so far he has achieved that? If not, in the coming months will he be able to ensure a reasonable income for sugar exporters over the coming years?

Mr. Callaghan

I think that I can give a short answer to that. We were not concerned yesterday as Foreign Ministers with the short-term difficulties of the market. I was concerned with one of our renegotiating points, which was to get long-term access guaranteed on a continuing basis for 1.4 million tons of sugar. That is what we have.

As regards the price to be paid, it is difficult to talk about that when we recall that only six years ago the price of sugar was £30 or £40 a ton. It is now £550, and it is extremely volatile. But a guaranteed price will be worked out now for a substantial period of years with the Com monwealth producers which will be well below the present world price but above the prices that they have been getting under the old Commonwealth Sugar Agreement, which is now running out.

Mr. John Davies

Although I am sure the whole House will wish to commend the Foreign and Commonwealth Secretary on the successful conclusion of these sugar arrangements, the account of the matter that he has given today is manifestly unfair in relation to the actions of my right hon. and learned Friend the Member for Hexham (Mr. Rippon). In making that commendation, therefore, I regret that it is necessary to add that comment. However, may I ask him whether, in dealing with the price, the right hon. Gentleman and the Minister of Agriculture will maintain carefully in their minds the importance of building security into this agreement? Price is one factor. Security is another. The maintenance of our refining industry depends on the security of supplies. There are precarious issues in this matter, and if the price is reasonable at the time it may nevertheless not afford the security that we need of assured supplies.

Mr. Callaghan

I quite accept the last part of the right hon. Gentleman's question. As regards the first part of it, because I thought that someone would want to continue this argument I took the precaution of reading the exchanges in this House on 17th May 1971. I do not think that I can do better than read what my right hon. Friend who is now Chancellor of the Exchequer said about the right hon. and learned Member for Hexham at the time: …many of us feel that he might have got an acceptable and bankable agreement on sugar if he had stuck to the line that he took on Tuesday night, when he talked of figures and quantities, instead of collapsing like a pricked balloon…".—[OFFICIAL REPORT, 17th May 1971; Vol. 817, c. 887.] The right hon. and learned Member for Hexham got the assurance. Yesterday, we had to deal with the figures and quantities. That is the difference.

Several hon. Members

rose—

Mr. Speaker

Order. T must ask for the help of the House. Today has been allotted to a debate on the Budget. I have a list of more than 30 right hon. and hon. Members who wish to speak in that debate. We have another long statement to come. I can call only one or two other hon. Members on this matter.

Mr. Spearing

Is my right hon. Friend aware that there is a great deal of relief in cane-refining circles, especially among employees, but only half-relief because of the matter of price to which my right hon. Firend has alluded? Is he aware also that 1.4 million tons will not be sufficient to maintain our cane-refining capacity? Will my right hon. Friend tell the House a little more about the price? Draft Regulation 2717 refers to a price being geared in some way to the European intervention price. Was that discussed in my right hon. Friend's negotiations, or has it been left to the Minister of Agriculture?

Mr. Callaghan

It was present in the minds of everyone yesterday that the price would be closely related to the Community's internal sugar regime. It was also argued successfully that the actual price to be paid would probably have to be above the guaranteed price in conditions of world shortage. But what will be discussed by my right hon. Friend—and I cannot go further than this today—is the offer that is to be made to those countries which will produce from them a response ensuring 1.4 million tons of sugar. That is the point still left for decision, and it is a commercial matter.

As regards employment prospects in the refineries, what my hon. Friend can say to workers in his constituency and elsewhere is that there is now at least a guarantee of 1.4 million tons of sugar, most of which will accord with normal patterns of trade. That means that it will come here for a period of several years. Up until yesterday there was no assurance of that.

Mr. Rippon

The right hon. Gentleman referred to the history of this matter. If he looks at the record, he will see that we did not put a figure into the treaty. It may be that we shall want to put up the figure at some time. However, 1.4 million tons was the figure always given in this House, by which we always stood. It is very fortunate that the right hon. Gentleman does not have to renegotiate our treaty, because it was extremely well drafted.

Will the right hon. Gentleman answer the two specific points that I put to him? Will he confirm that our food prices today are lower as a result of our membership of the Community than they would otherwise be, as the Minister of State said last week? Secondly, will he confirm that at present we are net beneficiaries under the budget?

Mr. Callaghan

That has nothing to do with my statement today. If the right hon. and learned Gentleman puts down specific Questions on these matters of fact, I shall give him an answer.