IMPORT DUTIES

HC Deb 03 February 1975 vol 885 cc1079-109

10.2 p.m.

Mr. Douglas Jay (Battersea, North)

I beg to move, That an humble Address be presented to Her Majesty, praying that the Import Duties (General) (No. 5) Order 1974 (S.I., 1974, No. 2020), dated 4th December 1974, a copy of which was laid before this House on 6th December, be annulled. This is an order one of whose principal effects will be to raise import duty still higher on a number of major and minor foodstuffs, thereby raising the price of these foodstuffs to the consumer in this country. I do not suppose that anyone will argue that raising taxes on imported food will lower prices, or that it is meant to do so. I find it extraordinary that, when the fortunes of this country depend on the success of the social contract, and when the aim of policies should be to keep prices down, the Government should be engaged in pushing them up by raising the taxes on imported food.

The order doubles the import duty on beef and veal from Australia and NewZealand, and all countries outside the EEC, from 4 per cent. to 8 per cent. This duty is due to rise later, according to the Treaty of Accession with the EEC, to 20 per cent. I do not imagine that Ministers will justify the raising of this duty on beef by arguing that at the moment all imports of beef into the EEC from the outside world are wholly prohibitive. That would not be a very great comfort to the consumer in this country. Imported mutton and lamb from those countries which produce it most cheaply will bear an increased main duty under this order. The rate will rise from 8 per cent. to 12 per cent. That figure of 12 per cent. is also to be raised later to 20 per cent. After allowing for a specific duty, which is rather lower on mutton and lamb, the total duty still goes up.

Import duties are also raised on a whole range of other meat and fish products and on various types of fruit and vegetables and manufactured foods too numerous for me to describe in the short period we are nowadays allowed for these debates. In many cases the duty on fruit and vegetables also doubles.

Why do the Government introduce this order, against whose counterpart my right hon. Friend the Secretary of State for Trade, as he will remember, spoke so eloquently last year and against which the Labour Party voted on 17th December 1973? My right hon. Friend made the answer clear enough last year and it is already painfully clear from a sentence at the beginning of the order which reads: This Order does not increase duties of customs otherwise than in pursuance of a Community obligation". In the words of my right hon. Friend, which he would not retract, I think, This measure has been introduced not because it relates to any need … within the British economy but because it is part of a pre-set timetable laid down by the Treaty of Accession …"—[Official Report, 17th December 1973; Vol. 866, c. 1031.] These higher food taxes must raise retail prices, lower the living standards of the poorest consumers, and strike a further blow at the social contract. But they have to be introduced because the Treaty of Accession says so. However, these duties are additional to the import levies which are now being imposed on our food imports without even the formality of an order in the House and which at the moment are as much as, for example, £300 a ton on butter and £380 a ton on cheese imported from outside the EEC.

Nor apparently have the Government made any attempt to invoke Article 108 or Article 109 of the Treaty of Rome, which my right hon. Friend, quite rightly, quoted last year, which say that a country may postpone these impositions if it is in balance of payments difficulties. I should have thought that we could have claimed with great justification that we were, if ever we were, in balance of payments difficulties.

It may be said that the Government, as the executive, are bound by the treaty to introduce these higher food prices. But Parliament is not so bound. What one Parliament can do another can undo, and that is what General Elections are for. I am sure that you will have noticed, Mr. Deputy Speaker, that the Labour Party election manifesto specifically pledged the Government not to take action of this kind. It said, plainly: Whilst the negotiations proceed and until the British people have voted, we shall stop further processes of integration—particularly as they affect food taxes". Surely that meant, if it meant anything—and I reject the unworthy suggestion that it meant nothing—that further increases in food taxes would not be made while the negotiations proceeded.

Therefore, this order can hardly be interpreted as anything other than clean contrary to that undertaking. Indeed, so far from representing the major changes in the common agricultural policy which the manifesto also promised, it represents a further stage in the clamping of the CAP on this country. I therefore trust that the Prayer will have the support of those who respect the Labour Party's manifesto and, in particular, the support of that important body the Manifesto Group of the Labour Party.

The Minister may say, as another Minister said last year, that this order lowers somes taxes on secondary foods traded within the Community as well as raising taxes on staple foodstuffs such as meat which this country imports from other countries. But that is no defence of this order. We are not able to amend it. If we were able to amend it, I should propose an amendment to leave out the tax increases and accept the reductions. But the Government have introduced the order as one instrument which makes this impossible and forces us to take it or leave it as a whole. That is not our responsibility. It is also not our responsibility that the order contains a number of duties on manufactured goods other than food to which we take no objection. That, incidentally, was also true last year when the Labour Opposition voted against the similar order. It is profoundly unsatisfactory that this vast array of different import duties should all be tacked together in one package so that we have either to vote for or against the whole package without any selection.

For brevity's sake I suggest this solution to the Government. Let them undertake tonight to withdraw this package order and introduce another order including the unobjectionable parts of this one but omitting any increase in the taxation of food. I hope that the Minister will be able to give an under- taking in that form so that we can refrain from pressing the Prayer. If he cannot give some undertaking, I do not see how my hon. Friends and I, consistently with our party's manifesto, which I have quoted, or indeed with the paramount need to keep down prices and strengthen the social contract, can let the order in this form go through unopposed.

10.11 p.m.

Mr. Peter Blaker (Blackpool, South)

The right hon. Member for Battersea, North (Mr. Jay) claims that the order would raise import duties still higher, and he gave a list of foodstuffs of which that is true. I waited for him to present the other side of the picture and to mention the goods, whether foodstuffs or otherwise, on which duties would be reduced, but he found that he had insufficient time to do that. It is not for me to defend the Secretary of State—

Mr. Jay

I said clearly that some duties were lower on goods traded within the EEC and that that did not in my view justify the other increases.

Mr. Blaker

I must have missed that passage in the right hon. Gentleman's speech, but he might have gone on to tell the House about the total effect of the order on the cost of living. He will recall that his right hon. Friend the Foreign and Commonwealth Secretary told the House: The total impact of the change in duties will be a small net reduction in duty, amounting to 0.1 per cent. of consumer expenditure, taking into account both food and non-food items."—[Official Report, 18th December 1974; Vol. 883 c. 1576.] Therefore, there is no increase in the cost of living as a result of the overall effect of the order.

The order covers the whole of the United Kingdom's customs tariff and it is therefore proper for me to discuss the effect which the changes in tariffs in relation to the EEC have had so far—there have been two cuts and I understand this to be the third—and the likely effect of the proposed changes. I wish particularly to discuss them in relation to their effect on the balance of trade between the United Kingdom and the Community.

No one will dispute that the deficit on our balance of trade with the Community has increased. I shall not go too deeply into the figures because, like most hon. and right hon. Members I find them extremely difficult. They seem to be drawn up on four or five different bases. I concede that the deficit on our balance of trade has increased, but so also has our deficit in trade with other parts of the world. An answer which I was given recently indicated that while the deficit with EEC countries had increased between 1973 and 1974 by 80 per cent., that with the United States had increased by 394 per cent. That was not true of some other countries, but I mention the United States because it is a country which is comparable in many ways—for example in industrialisation—with most of the EEC countries.

Moreover, the Foreign Secretary told the House on 18th December that in the period 1971–73, on non-oil account, the trading deficit with the EEC had increased fivefold, that with EFTA threefold, that with the Commonwealth thirteenfold and that with the United States seventeenfold. So it is not only with the EEC that our deficit has increased.

By a series of nods, winks and nudges over the last months the Secretary of State has suggested that this increase with the EEC is a result of our membership. What evidence does he have? He has previously sidestepped this question. On 13th January, he claimed that the onus was on supporters of our membership to show that the increase in the deficit was not the result of membership. In answer to a later question on the same day, he said that he was genuinely puzzled by the increase.

That is simply not good enough from the Secretary of State and I will tell the House why. In the journal Trade and Industry for which his Department presumably bears some responsibility, his statisticians said, on 31st October, that the underlying causes of the decline were, initially, the response of imports to the expansion of the whole economy during the earlier part of 1972 and, subsequently, the rise in import prices due to the general increase in world commodity prices and the depreciation of sterling against the European currencies. The onus is on the Secretary of State to explain why he disagrees with his statis- ticians, who made no mention of our membership of the EEC.

When the Leader of the Opposition took up the matter with the Secretary of State, he carefully declined in a series of letters to say if or even whether membership was one of the reasons. I should like him to bring us up to date. If his statisticians could at the end of October give the reasons for the size of the deficit up to the end of June, he presumably can now, in February, give the reasons up to the end of September. If he cannot do so now, I hope that he will do so as soon as possible. The country will want to know, at least before the referendum campaign begins, whether it is his view, and if so on what grounds, that the size of the deficit is due to our membership.

In the absence of any assistance from the right hon. Gentleman, I have sought the assistance of the Library, which has given me the latest figures comparing 1973 with 1974, up to the end of December. It says that in rough figures there was an increase in the deficit of £1,000 million, but the interesting feature is where the increase occurred. The first category was food and live animals, where the increase was about £520 million. That is due to the fact that we were able in 1974 to buy our food more cheaply inside the EEC than outside.

The second main category was mineral fuels and lubricants where the increase was about £160 million. I suggest the reason for that was the increase in the price of fuel. The third main category was manufactured goods, classified by material. The increase is about £300 million, or a little more, of which £200 million represents iron and steel. I understand that in that sector the increase was due to strikes and to lack of capacity in the British Steel Corporation. So it appears from those figures that the balance of trade would have been as bad, or worse, if we had been outside the European Economic Community.

Giving his opinion, the Secretary of State for Foreign and Commonwealth Affairs said: the only deduction one can draw is that membership of the EEC has probably done very little to alter the balance one way or the other."—[Official Report, 18th December 1974; Vol. 883, c. 1570.] I am content to rest on that. I prefer to accept the views of the Foreign Secretary rather than those of the Secretary of State for Trade, for reasons which it would perhaps be kinder not to go into.

I have referred to the increase in our deficit on trade with the United States. If the Secretary of State thinks that our membership of the EEC, and the reduction in our tariffs with the EEC, caused the increase in our deficit, I wonder what reason he could give for the greater increase in percentage terms in our deficit with the United States.

Mr. J. Enoch Powell (Down, South)

Does the hon. Member for Blackpool, South (Mr. Blaker) have the absolute figure of our deficit with the United States?

Mr. Blaker

I do not have the absolute figure to hand.

Mr. Powell

That figure is very important.

Mr. Blaker

No doubt if the right hon. Member for Down, South (Mr. Powell) has the figure, he will quote it.

Mr. Powell

The point is that a percentage increase is significant only if that which is being multipled is significant.

Mr. Blaker

I accept the point which the right hon. Gentleman makes. With respect, I do not think it is material to my point.

If the Secretary of State takes the view that to arrest the increase in our trade deficit we should stop the process of cutting the tariffs with the EEC, should he not also say that to arrest the increase in our deficit with the United States we should do the same thing vis-à-vis the United States? But he is not saying that; indeed he is quoted as having said in Brussels last month, in the context of the preparation for the GATT round of tariff negotiations, vis-à-vis all countries in the world, including the United States, that he favoured the biggest possible tariff cut.

It seems that, as an alternative to the EEC, the right hon. Gentleman supports a free trade area. When I asked the right hon. Gentleman not so long ago what difference membership of a free trade area would make to our trade deficit with the eight member countries of the EEC, he said that food would normally be available at lower prices outside the Community than inside it. He differs in that from the vast majority of informed people in the world.

Hon. Members

Not now.

Mr. Neil Marten (Banbury)

Is my hon. Friend aware that the Secretary of State for Prices and Consumer Protection said in an answer last November that food was marginally—I think that was the word—cheaper in the Common Market than outside? As my hon. Friend knows, all prices have dropped substantially, particularly those of maize and the other most important items.

Mr. Blaker

It would have been better if my hon. Friend had waited for the conclusion of the point I was about to make. I was about to refer not to the right hon. Lady, but to authorities such as Lady Jackson, the Secretary-General of the Food and Agriculture Organisation, the Secretary-General of the United Nations and to the general view of the World Food Conference which was recently held in Rome. The consensus of these people, who study the world situation closely, is that we have passed the time when we could expect cheap food from the world outside the European Economic Community.

The issues in the debate about the Community will be difficult ones for the public to follow. I think that the public will want the facts at least to be presented to them clearly. By all means let us debate and let us express our views about the facts. But let us get the facts first. One fact that the British people will wait to hear from the Secretary of State is his considered view, with reasons, why the deficit on trade with the EEC has increased.

10.25 p.m.

Mr. Nigel Spearing (Newham, South)

The hon. Member for Blackpool, South (Mr. Blaker) concentrated not on the Prayer before us nor even on the voluminous statutory instrument which is the real subject of the debate tonight. Before I pass to those, let me comment on what the hon. Gentleman said.

I do not take up what the hon. Gentleman said about whether there was cheaper food in other parts of the world. The mere fact that there are tariffs and levies set up against maize especially suggests that there may be. Even if there is not at the moment, there may be in a year or two. I think that all that the hon. Gentleman can say in defence of his argument is that it may be that this is the situation. But there is no definite proof either way for him to look into the future.

Therefore, the hon. Gentleman is saying that he is content to throw over the great world free trade in which this country has been habitually concerned for more than a century. Incidentally, I notice that no Liberal Members are present for this debate. In a way, that is understandable, because the debate is taking place after 10 o'clock. But presumably the Liberal Members are prepared to throw over the free trade and food taxes which their fellow Liberals voted for back in the last century.

The statutory instrument deserves a little examination because it is an exceedingly lengthy, heavy and complex document of some 700 pages. However, I understand that the additional cost to our food bill is extremely difficult to calculate from the document, and that people can argue the statistics one way or the other. But that is not the burden of my argument, as it was apparently of the argument advanced by the hon. Member for Blackpool, South. I am more concerned with the nature of the document and with some of the mechanisms lying within it.

As I understand it, we are involved in the second stage of integrating into the European Community's agricultural and tariff system. As everyone knows, we are going through this in five stages. As I understand it, we are coming to the second or third of those five stages. However, it is not just a matter of a stage at a time. It is a matter of substituting one system for another. We are phasing out the system of taxation which applied to certain foodstuffs and manufactured goods. It was a specific duty. We are changing to the EEC system which in some cases will provide much the same result, with perhaps a very small change in the amount of money to be handed over. But at the same time we are going to another system. Whereas the British system in many cases was a specific rate per ton on imported goods or foodstuffs, the common Community tariff applies in many cases what is known as the ad valorem system whereby a percentage is added to the value of the goods imported. It means that if the value goes up because of world-wide inflation or if the Market increases the price, automatically the tariff or levy goes up with it.

Many items which come into the EEC are not contained in this statutory instrument. Many things are covered by levies. This is a tariff. These tariffs will therefore go up if the values and Market rates go up. In other words, the consumer will pay more than he would under a specific system. It is an argument not only about amounts—that could on balance work out either way—but on integrating with the system. The system of ad valorem tariffs means that the percentage of the value will go and has gone up with a jump from 1st January when the order came into force. That is why my hon. Friends and I take exception to it.

My right hon. Friend the Member for Battersea, North (Mr. Jay) rightly said that on 17th December last year all my hon. Friends, including my right hon. Friend the Member for Bermondsey (Mr. Mellish) and his hon. Friends, voted against this further procedure of integration. The Labour Party manifesto of February 1974, page 7, stated that until the British people had voted we should stop further processes of integration, particularly as they affect food taxes.

I say to the House, particularly to the hon. Member for Blackpool, South (Mr. Blaker), although he is not party to this manifesto, that this is a process of integration. Even if for some magical reason the amounts of tariffs are diminished, it would still be integration because we are integrating into the Community system of ad valorem tariffs rather than the specific system which has so far been that of the British Parliament. Therefore, at least taken logically on the matter of mechanism, there is every reason to support the Prayer.

But the matter goes much further than that. I have here some scissors and paste work on the precise order from last year. Mutton and lamb go up from £0.28 per hundredweight plus 8 per cent. last year to £0.1866 per hundredweight plus 12 per cent. this year. In other words, there is an increase "at a stroke" on 1st January of 4 per cent. in the ad valorem tariff on "Mutton, bone-in carcases, whole". This is Class IV. Mutton is certainly one of my favourite dishes as I am sure it is of many of my hon. Friends and hon. Gentlemen opposite.

Mr. Douglas Hurd (Mid-Oxon)

Will the hon. Gentleman concede, as did his right hon. Friend the Member for Battersea, North (Mr. Jay), that at the same time the United Kingdom tariff is coming down, so the net figure is not the same as the one that he gave?

Mr. Spearing

My right hon. Friend informs me that, despite that, the net figure is up. At the same time I am pointing out that this ad valorem system, which is the core of my argument, will go up.

The same is true of beef and veal, but it is not confined only to meats. I see that oranges have gone from 4 per cent. to 8 per cent.

In the debate on 17th December last year figures were quoted which are still relevant. A lot of Canadian salmon comes, or did come, into this country—about £50 million to £60 million worth. Up to the end of last year it came in without any tariffs. By 1977, if these orders continue every year, the rate will be up to 13 per cent. of value.

Again, Australian corned beef to the value of £15 million was quoted last year. The rate will go up to 16 per cent.

At least £50 million worth of tinned fruit comes from the Commonwealth. Again, by 1977, if these orders continue and unless we come out of the Market, the rate of tax will be 16 per cent.

The hon. Member for Blackpool, South has every right to his views. It may be that this is a price worth paying for something else gained. I will not go into that tonight, Mr. Deputy Speaker, because you will call me to order fairly quickly. It is a perfectly logical argument, but the hon. Member for Blackpool, South cannot deny that this is the mechanism of further integration and harmonisation which was challenged at this time last year by my hon. Friends and myself, including my right hon. Friend the Member for Stepney and Poplar (Mr. Shore). At that time we argued that it would be possible on a whole number of grounds to halt Article 26 of the Treaty of Rome and a number of other articles as well.

Article 26 refers to special difficulties of member States. That debate took place before the last General Election, when it was a pledge of the British Government to renegotiate and to look at the whole question of entry into the EEC. Surely it is proper, not only from the point of view of that February manifesto but also within the terms of Article 26 of the Treaty of Rome, to say that while these negotiations are going on we shall not put on these tariffs.

In that debate the right hon. and learned Member for Surrey, East (Sir G. Howe) argued that we should be in breach of the Treaty of Rome, but conditions have changed since then. We are now in a different situation. The British people are being asked—or I hope they will be—to take their decision later this year. I therefore say to my right hon. Friend the Member for Stepney and Poplar that it would be inappropriate at this time, in view not only of what the Labour Party did on that night of 17th December but what it said in the manifesto, and because of the negotiations that are going on, to accept these increases in certain tariffs and a further degree of integration and harmonisation. I hope that my right hon. Friend will accept the Prayer. I believe that it is based on sound reasoning, and I look forward to hearing my right hon. Friend's reply.

10.37 p.m.

Mr. J. Enoch Powell (Down, South)

There is one central issue as I see it in this debate, however many peripheral and in themselves interesting points may be raised, and that is the integrity of Her Majesty's Government.

I do not wish to take up the time of the House by traversing the ground which has already been covered by the right hon. Member for Battersea, North (Mr. Jay) and by the hon. Member for Newham, South (Mr. Spearing), but the fact remains that the undertakings which were given by the Labour Party undoubtedly were very material to the fact that it now forms the Government. The margin by which the Government won in February, and by which they did so again in October, is so narrow that it would be difficult seriously to affirm that they do not occupy their position on the faith of the assurances which they gave on the subject of the EEC, which undoubtedly attracted to them a support sufficient to be decisive, from quarters from which they would not otherwise have had it. Their good faith is therefore especially involved in the execution of what they there said.

I do not think it can be denied that the words which have been twice quoted in this debate are directly applicable to the motion before the House. The hon. Member for Newham, South made it clear that it is a process of integration, in the natural sense of the term, of which this order is a further step. It cannot be argued by the right hon. Gentlemen opposite that they were referring there to something quite additional; some speculative further forms of integration which were not at the moment envisaged. The clear significance of their undertaking was that they were to stop processes of integration which otherwise would automatically take place but for the action of the Government.

The undertaking was not confined to processes of integration which in themselves and at the moment increased the burden upon the British taxpayer or upon the consumer. If it had been their intention to say that they would halt processes of integration which raised food taxes, there was not the slightest difficulty in saying so. But, fresh as they were when they drafted that paragraph from the debate of 17th December 1973, they were careful to say particularly as they affect food taxes". There is not the slightest possibility of doubt that the order is part of the process of integration which affects food taxes, so that the acceptance of the order is undeniably in direct conflict with the undertaking given that this would be stopped while negotiations were proceeding and until the British people had voted, which they have not yet done.

It cannot be argued that it is an obligation under the Treaty of Accession for this country to make the tariff changes on 1st January this year. Ministers knew that perfectly well. The very significance of what they stated, the guarantee which these words gave to the British people of the seriousness of their pledge, was that to stop the processes of integration implicit in the Treaty of Accession would be to suspend the operation of the treaty. It would be a breach of the treaty but for the fact that the then Opposition had given due notice that until all processes set out there were gone through they did not hold themselves to be bound by the treaty and would consider themselves free to do this kind of thing.

So, it cannot be argued that the Government are under force majeure. At any rate they are not under force majeure which they did not contemplate when they made this pledge to the electorate. I hope therefore that the Government will realise that they cannot write this matter off as a technicality or on the grounds of any inconvenience. They have to face directly the fact that they were pledged at the election in March, and they repeated that pledge in October, not to do the specific thing which they are doing by this order.

I shall not dilate upon the importance in this matter above all of the Government being seen to keep their faith most punctiliously. There is no oversight here. That pledge was given by a party which had voted against a corresponding order a few months before in December 1973. The Labour Party knew from that debate what the consequences were. Labour Members voted in that debate because they believed it was possible for the then Government not to have brought that order in, and they promised not to do so themselves. This debate calls upon them to be as good as their word.

10.43 p.m.

Mr. John Roper (Farnworth)

The order is not in the name of my right hon. Friend the Secretary of State for Trade, but in the names, as these orders often are, of two Lords Commissioners of the Treasury. They are unable to speak tonight to defend what they have done in introducing the order. So, to consider whether they have perhaps deviated, as has been suggested, from the February manifesto, I thought I might intervene, not necessarily on their behalf, but at least to give the interpretation which I put upon my party's manifesto, which I assume they must have done or they would not have introduced the order.

The right hon. Member for Down, South (Mr. Powell) and some of my right hon. and hon. Friends have already referred to the phrase in our manifesto concerning further processes of integration, particularly as they affect food taxes". Like everyone else who has ever stood on a manifesto I had to consider what it meant when it said that there should not be further processes of integration particularly as they affected food taxes until the British people had had a chance to be consulted. I—perhaps somewhat naively—obviously put an interpretation on these words very different from that which the right hon. Member for Down, South has put upon them. I had always assumed that taxes were taxes and import duties were import duties. That particular part of our manifesto was referring to the possibility, which we had opposed at all times, of value-added tax being applied to food. That would be a food tax. If value-added tax had been integrated throughout the Community and if in the Sixth Directive which the House was going to consider some time ago value-added tax had been applied to food, that would clearly have been in contradiction of the manifesto on which the party went to the electorate.

Mr. Jay

Is my hon. Friend suggesting that an import tariff is not a form of tax? If he is, he is using language in a sense quite different from that of every administrator and economist for the last hundred years?

Mr. John Golding (Newcastle-under-Lyme)

Would my hon. Friend be so kind as to tell the House—

Mr. Deputy Speaker (Mr. Oscar Murton)

Order. It is not in order to have interjection upon interjection. If the hon. Member for Farnworth (Mr. Roper) is prepared to continue his speech, he may give way later.

Mr. Roper

My right hon. Friend asked me a technical question which I will try to deal with and then perhaps my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) would like to intervene.

I was trying to explain why I had found it possible to accept the fact that two Lords Commissioners had seen fit to lay the order before the House and remain consistent with the manifesto on which they and I stood in February of last year. I think that the reference to food taxes, in view of the tremendous debate there had been about VAT on food, referred to that matter. Perhaps my right hon. Friend is now telling me that I am naive. That seems to me to be perfectly consistent with the manifesto and with the behaviour of my hon. Friends the two Lords Commissioners.

Mr. Golding

Is my hon. Friend aware that, although the order is signed by two Lords Commissioners, it is laid on the recommendation of the Secretary of State and that it should be on the head of the Secretary of State that the criticism is heaped rather than on the heads of the two Lords Commissioners?

Mr. Roper

My hon. Friend, who is a former Lord Commissioner, intervened in an obvious attempt to defend my hon. Friends the Members for Liverpool, Kirkdale (Mr. Dunn) and for Neath (Mr. Coleman), over whose signatures the order appears. My right hon. Friend the Secretary of State for Trade and President of the Board of Trade will no doubt have an opportunity later of explaining why he felt it appropriate to recommend this to my two hon. Friends. I am sure that my two hon. Friends, being Lords Commissioners, will have taken my right hon. Friend's advice seriously before they decided to lay the order.

Mr. Powell

I am obliged to the hon. Gentleman for giving way yet again. He has been very patient. This is a very important point. Did he in his careful textual study of the passage which has so often been quoted notice that the words, particularly as they affect food taxes —whatever food taxes do or do not include—are not vital to the central pledge? The central pledge is we shall stop further processes of integration. Only as a sort of sweetener is it then added particularly as they affect food taxes

Mr. Roper

I am most grateful to the right hon. Member. That strengthens my case. The process we are discussing tonight is a continuing process of integration. The imposition of value-added tax on food and the determination of valued-added tax would be a further process and would, therefore, have been something which I should have been able to object to. Therefore, on whichever leg of the argument he wishes to argue the case, it seems to me that I was perfectly able both to stand on the manifesto in February and also tonight to support my two hon. Friends the Lords Commissioners.

10.50 p.m.

Mr. Michael Shersby (Uxbridge)

The overall effect of the order will be to reduce the rate of increase in the cost of living. The Under-Secretary said on 16th December 1974: The overall effect of changes of duties on Imports from non-Community countries is very little If one were to take into account … changes in duties, including intra-Community traffic, there would be a reduction."—[Official Report, 16th December 1974; Vol. 883, c. 1116.] That is, there would be a smaller increase in the cost of living than would otherwise take place.

We are now involved in a series of changes which take place from 1st January. In considering them, the House must look at the extent to which the United Kingdom economy would be protected through the protective element in the revenue duties. Therefore, I am somewhat puzzled by the Secretary of State's attitude to the order. I do not think that I am any less puzzled than any other hon. Member present.

The Times reported on 3rd December that the Secretary of State had attempted to win permission in Brussels for a temporary freeze on Britain's import tariffs, but that this attempt had not been successful. The House knows the right hon. Gentleman's views about the Community. Why, then, did he seek to oppose the order before us? If I have misunderstood him, perhaps he will clarify that point, as I see that he is shaking his head.

The order does not come within the ambit of the so-called renegotiations which are now taking place. Therefore, if, according to Under-Secretary, the result of the order would be a reduction in the rate of the increase in the cost of living, what is the Government's attitude towards it? There seems to be considerable confusion on the issue, and it should be clarified.

The House deserves to be told what will be the effect of this mammoth order on the balance of payments.

10.52 p.m.

Mr. Terence Higgins (Worthing)

It is already apparent to the House that this is in many ways the most significant, or perhaps the most ironic, debate we have had on the issue of British membership of the Common Market, because on 17th December 1973 the present Secretary of State for Trade moved a motion on the order's predecessor. The beginning of his speech is reported at column 1029 of Hansard for that date. He prayed that that order, very similar to the one before us, be annulled.

There have been a number of changes since then. First, the right hon. Gentleman has become Secretary of State. Secondly, in the past few days we have had enunciated by the Prime Minister a doctrine of collective non-responsibility, or perhaps one would more accurately describe it as a doctrine of collective irresponsibility, which raises tonight the question of what exactly the right hon. Gentleman will do.

A number of hon. Members, including the right hon. Member for Down, South (Mr. Powell), have pinpointed this as the central issue in the debate. We do not know, after what happened on 17th December 1973, whether the Secretary of State proposes to speak in favour of the order and then vote against it, or to speak against it and then vote for it, or perhaps hopes that there will be no vote.

The right hon. Gentleman clearly faces a difficult dilemma as a result of the Prime Minister's statement of a few days ago. The House is not clear at what precise moment the new doctrine is to become applicable. Is it now in operation, or does it become applicable only at such time as the House decides whether to have a referendum? I hope that the Secretary of State will clarify that matter, which is closely relevant to the order and the action which, in putting it before the House—whether he signed it himself is not greatly material—he proposes to take upon it.

The order itself is one of a series through time which relate to the question of both the establishment of the common Community tariff and the reduction of tariffs within the Community. We have had orders already, and we have the treaty itself which makes a move in the direction of integration on both those fronts, and this is a further step in that direction.

I am somewhat puzzled by the doctrine enunciated by the right hon. Member for Down, South tonight, that in some way statements of Ministers as to what they propose to do or do not propose to do, apparently regardless of whether the House should approve such measures, can override our treaty obligations. It is essential to stress the importance of treaty obligations, and I should not myself take the view that statements of Ministers were sufficient to override them. That is a matter of great significance, and we shall listen with interest to what the Secretary of State says on the issue.

Mr. Jay

The hon. Gentleman will know that under Article 108 and 109 it is possible to refrain from accepting those treaty obligations when a country is in serious balance of payments difficulties.

Mr. Higgins

That was my next point. The Secretary of State for Trade, when in opposition, advanced precisely that argument, I think I am right in saying, on the date to which I have already referred, yet when he went to Brussels a short time ago he had, apparently, changed his mind on the issue and decided that it was not possible for him to do so. I agree with the right hon. Member for Battersea, North (Mr. Jay) that it is certainly arguable that our balance of payments situation now is vastly more serious that it was when we debated the previous order. But, none the less, the Secretary of State has come to the view that he does not have the scope for delaying the process which, on the previous occasion, he argued that the then Government ought to have.

The Secretary of State's attitude on this order generally is curious. He was reported in The Times of 3rd December last in these terms: An attempt by the British Government to win permission in Brussels for a temporary freeze on Britain's import tariffs has failed, according to Mr. Shore, the Secretary of State for Trade, who is personally opposed to British membership of the EEC, 'We are bound hand and foot by the treaties', he said with evident relish after today's meeting of the Council of Ministers". In a similar debate in Standing Committee on a related order, the one concerned with the protective element of the revenue duties, I inquired whether this whole question was part of the renegotiation, and I was assured by the Financial Secretary that it was in no way part of the renegotiation. Thus, we have the curious circumstance that the Secretary of State for Trade goes to Brussels, sees M. Ortoli apparently, complains about the process which we are now debating, but in no way includes that in the process of so-called renegotiation to which the Government attach such importance. I hope that the right hon. Gentleman will clarify that matter.

It is true, as the right hon. Member for Battersea, North said, that this is a package, but it is a package which has been negotiated, and it is a package which in some ways increases tariffs and in other ways lowers them. But the matter about which we ought to be concerned tonight in voting on the order is what will be the effect on the cost of living. On 16th December I raised that question with the Under-Secretary of State in these terms: Is the overall effect to increase or to decrease the rate of increase in the cost of living? to which the hon. Gentleman replied: If one were to take into account … changes in … intra-Community traffic, there would be a reduction."—[OFFICIAL REPORT. 16th December 1974; Vol. 883, c. 1116] That surely is an important point, which my hon. Friends have stressed—that the overall effect of the order is to reduce the rate of increase in the cost of living. That is not an unimportant matter. There are other inconsistencies in the Secretary of State's position, and it is the inconsistencies of the right hon. Gentleman's position I am anxious to bring to the attention of the House.

When we look at the speech of 17th December 1973 it can only be described as protectionist in the extreme. The right hon. Gentleman was putting forward an extremely protectionist argument on the grounds of the balance of payments situation then. Quite clearly, the situation now is a great deal worse. On another occasion more recently, at Question Time, he said that he thought that the best alternative to the Common Market from a free trade area. In view of his previous speech and the arguments we have heard from him, the validity of the right hon. Gentleman's free trading stance is, to say the last, in question on this occasion. If the right hon. Gentlemen were in favour of free trade one would have thought that he would support an organisation which not only sought to remove tariff barriers but sought to eliminate non-tariff barriers too.

There are a number of aspects which are in process of change which quite clearly would have been likely to change in the course of economic argument, irrespective of whether there was so-called renegotiation. The statement made earlier today by the Minister of Overseas Development shows clearly that the Community is adopting an outward-looking approach on these problems, and one which is more in keeping with the free trade stance which it is right to adopt rather than the apparent free trade stance being adopted by the Secretary of State.

The Secretary of State is careful to pursue his argument by implication rather than by straight statements of what his views are. The implication of the constant exchanges we have recently had at Question Time has been that the effect of our joining the EEC has been to make our overall trade deficit worse than it would otherwise have been. When I pressed this point the right hon. Gentleman's reply was interesting. He said: I was invited by the right hon. Member for Down, South (Mr. Powell) to draw just such a conclusion … What I said was that I remained genuinely puzzled at the extent of our trade collapse in relation to the EEC, but I have also said that I should be surprised if, at the end of the day, when we have analysed these things thoroughly, there were not some obvious relationship between membership and the trade out-turn."—[Official Report, 13th January 1975; Vol. 884, c. 5.] I do not think that the last sentence is one to which anyone can take exception.

The fact is, and it came out clearly in correspondence with my right hon. Friend the Leader of the Opposition, that the right hon. Gentleman has not pro- duced any significant figures or arguments in support of his contention. If we look in more detail at the situation, the reality is that the right hon. Gentleman has been refuted by the Foreign Secretary, who, answering questions on 18th December, made it clear that he did not support the implication of the arguments being put forward by the Secretary of State.

We invite the Secretary of State to put forward those figures and arguments. It is not the case that the arguments put forward by his officials support the right hon. Gentleman's views. Those arguments draw attention to a number of other factors which are likely to have resulted in the increase in the trade deficit. It is essential if we are to analyse this properly, to put the increase in the trade deficit with the EEC and the figures for the increase over the years alongside what has happened to the overall trade deficit. One then gets a very different picture from the one which the Secretary of State, again by implication in the country as well as in the House, has put forward.

One can easily trot out figures for the increase in the deficit with the EEC, and it may be that if we are to have a referendum that argument will have a superficial attraction and will be put forward by the Secretary of State for Trade and others on platforms when there is no one to rebut the argument or remind the people of what is happening concerning the overall deficit as a result of the Government's policies.

The order and the reduction in tariffs in the Community mean that we have opportunities which we would not otherwise have. But we shall not gain those opportunities automatically. The matter must depend on the complex of economic policies, and it is not surprising, if we change the tariffs in the way we have been changing them and adopt economic policies which stultify industry, that we do not seem to be getting advantage from joining the EEC.

I turn to the points made by the Secretary of State outside the House. He relates the question of the trade deficit to the question of British investment and says that there has not been sufficient investment following the reduction in tariffs and our joining the Community. But this turns on the Government's economic policy.

Mr. John Mendelson (Penistone)

In his address to the Institute of Directors in June 1973, when he was Prime Minister, the Leader of the Opposition said "I have done everything you wanted. I have reduced taxation. I have wanted to help you. But you do not invest". How can the hon. Gentleman relate what he is saying to the present Government only? The Conservative Government took this country into the Community. That Government had a dismal record with regard to investment, and the hon. Gentleman should admit the truth.

Mr. Higgins

The figures for the period immediately before we left office show that investment was rising significantly. This order and others like it have not had the hoped-for effect because the Government have allowed wage claims to rise rampantly, have introduced a rigid system of price control and have increased company taxation. The overall effect of the Government's policy has been to reduce the extent to which industry is able to take advantage of the opportunities which the order and its predecessor should present.

It is high time we got rid of the argument by implication. It is time that the Secretary of State told the truth and produced the figures which substantiate his argument or stopped using the argument by implication, which is not justified, which he cannot prove and which the Foreign Secretary has said is not justified. If he does that, the House and the country will realise that the order should be supported and that the Prayer should be rejected. I invite my hon. Friend's to express that view.

11.9 p.m.

The Secretary of State for Trade (Mr. Peter Shore)

I shall resist the invitation proffered to me by the hon. Members for Worthing (Mr. Higgins) and Blackpool, South (Mr. Blaker) to depart from the ambit of the order and engage in the continuing skirmish we have had in recent months—the hon. Member for Worthing put the matter in a most grotesquely unfair way—about the magnitude of our balance of payments deficit with the EEC and the causes of it. We can and shall return to that matter on other occasions.

My purpose is to deal not with the whole question of the EEC—there will be time enough for that—but with the specific question of this Prayer.

I say at once to my right hon. Friend the Member for Battersea, North (Mr. Jay) that I realise that the order has unwelcome and unattractive features. As his and other speeches have made clear, three aspects give rise to particular offence. The first is the requirement to raise our tariffs on the imports of some important foodstuffs which are part of the diet of most of the families in the land—lamb, tinned fruit of all kinds, canned fish and meat.

The second is the broader effect which the order has of dismantling established preferences long enjoyed by Commonwealth countries other than those in the so-called ACP group. The third is the effect of contradicting the passage in the Labour Party manifesto for the General Election last February which read: … whilst the negotiations proceed and until the British people have voted, we shall stop further processes of integration, particularly as they affect food tariffs. I must say to my hon. Friend the Member for Farnworth (Mr. Roper), who proffered a helpful hand, that I do not interpret the food tariffs there referred to as being only tariffs that relate to value added tax. I think my view on this matter is entitled to be listened to as having some authority because I had some part in the drafting of that passage.

Mr. Roger Moate (Faversham)

In the debate last year the right hon. Gentleman made it clear that the order similar to this one would impose tax on food, and in the Lobby he was supported, after making that point so clearly, by the hon. Member for Farnworth (Mr. Roper).

Mr. Shore

I am grateful to the hon. Gentleman for his intervention. I make it plain that I fully share the objections which have been raised to these unwelcome and unattractive features of the order. Indeed, as several hon. Members have recalled, it was 14 months ago, in December 1973 that I opposed a similar order from the Opposition Front Bench, and in the strongest terms. In recalling that speech today, I qualify the remarks I made then only to the extent that in the aftermath of the great oil price increase of 1974, with its direct threat of contraction and protectionism in world trade, I believe that it is essential for us to go forward with tariff cuts and honour the commitment we made to the OECD last May to refrain from direct restrictions on our trade. That is way I did not feel it right to attempt to trigger the Articles 108 and 109 procedures under the Treaty of Rome which I had mentioned some 14 months ago. But the other criticisms I made then are as strong now as they were when I made them.

Why, then, this order? Why not present an order, as my right hon. Friend suggested, with lower tariffs on trade between the United Kingdom and the Community and refrain from raising them against third countries, particularly Commonwealth food producers? That, of course, was my wish, my intention, my preparation. Moreover it was the wish of the Government as a whole. In pursuit of this objective, I went to Brussels on behalf of my colleagues on 21st November to inform the Commission of our purpose, to explain the conflict of obligations which existed between the treaty provisions and our manifesto, and specifically to propose that the upward movement of our tariffs against third countries should be postponed until after the renegotiation was concluded and the verdict of the British people on membership was known. The Commission, however, was insistent that this could not be done, but, regardless of the Commission's attitude, and even if our proposal received the unanimous consent of the Council of Ministers, we were locked in by the treaty as a matter of Community law, and we could be released from those obligations only by an amendment to the treaty, which would require the whole process of treaty amendment and ratification by the eight other countries concerned. This, even if agreed, would inevitably take many months.

Mr. Higgins

Did the right hon. Gentleman at the same time propose that the EEC should no longer subsidise supplies of sugar to this country or allow us to buy cheaper wheat than we could get outside the EEC? Would not that have been fair?

Mr. Shore

If I had wished to undertake a general bargain, there would have been many other matters I would have wished to bring forward on the other side to secure a fair balance of advantage. We tried on this specific matter in the way I have explained.

In London my colleagues and I examined further the consequences of proceeding as we would have wished. Our studies confirmed that tariff changes against third countries—which is the matter my right hon. Friend the Member for Battersea, North wishes to avoid—are laid down in Article 39 of the Treaty of Accession, the article that spells out not only the extent of the tariff changes but the annual timetable of change over the period 1st January 1974 to 1st July 1975, when the transitional period ends.

More important, we were advised that Article 39 was directly applicable in the United Kingdom by virtue of Section 2(1) of the European Communities Act. The implication was that, even if an order such as the one proposed were passed in the House of Commons, Community law as embodied in the Treaty of Accession would override the order, and any trader whose interests were prejudiced would, therefore, pursue the matter in our courts of law with a possible reference to the European Court. The matter could not be resolved without major surgery to the 1972 Act.

In the light of these considerations, I raised the matter briefly in the December meeting of the Council of Ministers in Brussels, stressed the importance we attached to it and our disappointment, and informed the Council of Ministers that, although we were unable to pursue the matter then, our position was entirely reserved should renegotiation fail and Britain withdraw from the Community.

Mr. Higgins

We understood in our debate upstairs that this matter was no part of the renegotiation. If the right hon. Gentleman attaches such importance to it, will he explain why that is so?

Mr. Shore

There is no problem at all. If the hon. Gentleman had listened to what I said and had studied our commitments he would have realised that we had given to our people and our party a pledge, of which the right hon. Member for Down, South (Mr. Powell) reminded me, not to go forward with the processes of integration while the negotiations proceeded. That is precisely why we made this special effort to meet that obligation to our people and to obtain an agreement to release us from what were otherwise treaty obligations.

Mr. Higgins

I am not clear whether the right hon. Gentleman has simply not taken the point or whether he is deliberately avoiding answering it. If he attaches such importance to the matter and has been discussing it, why is it not part of the renegotiation?

Mr. Shore

It self-evidently was, to the extent that I went to Brussels myself to see whether I could negotiate it.

Mr. Spearing

Is my right hon. Friend telling the House that it was made perfectly clear to the Commission and the Council of Ministers that if, after consulting the people, we stayed in, the period would not end in 1977 but would be extended by one year to 1978? If so, does he not agree that anyone who goes into the Lobby against the Prayer is upholding the Commissioners against the possible will of the House?

Mr. Shore

I think that my hon. Friend had better wait until he hears the rest of my remarks on this subject before coming to any conclusions.

I thought that it was right for the House to know the background to the order and this debate—first, because my right hon. and hon. Friends need to be satisfied that we have made all possible exertions to keep faith with them and with our manifesto commitment. I do not think that it can reasonably be said, in the light of the facts, that we have not done our utmost to meet those commitments. Second, the House should be aware of the constitutional significance of this affair.

I would say to the right hon. Member for Down, South, in particular, that this question of breach of faith is obviously the very one which troubled us most in our handling of this issue. But I put to him and others this important point. Our major purpose in introducing this very wording into our February manifesto, to say that we would not go forward with the processes of integration, was precisely to put a pressure on these negotiations which would prevent their being endlessly dragged out. That was the major strategic purpose of the insertion of those words.

While I do not lightly discard any words which appear in a manifesto, I would remind the House, and my right hon. and hon. Friends in particular, that that purpose has now been, as it were, reinforced, buttressed, by the further commitment in our manifesto that we would set a date, a term, to the whole period of renegotiation, which is to be as we well know, not later than 10th October, and, as the House now expects, well before that date is reached. That is when we hope not only that the renegotiations will be over: we are now hoping, indeed, that we shall have an opportunity to decide the mater by referendum this side of the summer.

Mr. Michael Alison (Barkston Ash)

Before the right hon. Gentleman leaves the significance of the manifesto in the context of an Act of Parliament, may I ask him this? When he was helping to draft this important undertaking did he suspect at all that it might run foul of a sovereign Act of Parliament?

Mr. Shore

As I said, what we had in mind when we drafted it was a more speedy renegotiation than in fact took place, but the outcome of the February General Election was a Government rather small in numbers, the processes of negotiation went rather slowly and there was a further General Election in October. Therefore, the deadline that we had had in mind was, as it turned out, a little unreasonable, and it has been superseded by the other definite deadline contained in the October manifesto.

The economic importance of the order is not great, although it is not insignificant. The lowering of tariffs, which greatly exceeds those which are raised, is, on a wide view, welcome and advances the general cause of freer trade. I do not believe that to reject the order now, in the light of what I have said, is really justified, and to reject it now would have large and damaging consequences. In the first place—I must stress this—it would completely remove all duties on imports from other Community countries, without our benefiting from reciprocal treatment. We should find that we had unilaterally dismantled our tariff barrier between ourselves and the countries of the EEC. However, rejection of the orders will lead to a most unsatisfactory situation as regards duties on goods from third countries.

Duties on most goods will remain in force as a result of the directly applicable provisions of the treaties. However, to add to the confusion, which will be considerable, it is not clear whether the Customs will have legal powers to collect these duties or any import duties. I believe that we must seek to avoid those consequences.

To those who are still unhappy and troubled, I offer consoling thoughts. First, some of the undesirable features of this order, such as the increased tariffs against certain countries, are the subject of trade negotiations, from which we may reasonably hope for some success. Second, and most important, this is the last of the transitional general orders that will be presented before the British people before they, as a whole, decide whether they wish to remain within the EEC or to withdraw.

Last, if the nation decides to withdraw, Parliament will be able to resume its control over the commercial and other policies now covered by the Treaty of Accession. I hope, therefore, that those on both sides of the House who intended to vote for this Prayer tonight will not do so.

Mr. Spearing

Will my right hon. Friend explain the situation in relation

Division No. 82.]	AYES	[11.30 p.m.
Allaun, Frank	Lee, John	Sedgemore, Brian
Atkinson, Norman	MacCormick, Iain	Stewart, Donald (Western Isles)
Bain, Mrs Margaret	Madden, Max	Thomas, Ron (Bristol NW)
Biffen, John	Marten, Neil	Thompson, George
Body, Richard	Mendelson, John	Walker, Terry (Kingswood)
Bradford, Rev Robert	Mikardo, Ian	Welsh, Andrew
Craig, Rt Hon W. (Belfast E)	Miller, Mrs Millie (Ilford N)	Wilson, Gordon (Dundee E)
Ewing, Mrs Winifred (Moray)	Moate, Roger	Wise, Mrs Audrey
Gould, Bryan	Molyneaux, James
Henderson, Douglas	Powell, Rt Hon J. Enoch
Hoyle, Douglas (Nelson)	Richardson, Miss Jo	TELLERS FOR THE AYES:
Jay, Rt Hon Douglas	Rodgers, George (Chorley)	Mr. Martin Flannery and
Kinnock, Neil	Ross, William (Londonderry)	Mr. Nigel Spearing

NOES
	TELLERS FOR THE NOES:
	Miss Margaret Jackson and
	Mr. Thomas Cox

It appearing on the report of the Division that forty Members were not present, Mr. DEPUTY SPEAKER declared

to the order which came into effect from 1st January? If this Prayer is successful, the previous import duties order which came into force on 1st January 1974 will continue, and, therefore, the situation will be the status quo, which is the Government's objective. Is that not a fact?

Mr. Shore

I am grateful to my hon. Friend. However, I assure him that that is not the fact. Article 10 of the order revokes the previous orders. The effect of the revocation is preserved by Section 5(1) of the Statutory Instruments Act 1946. The effect of voting against this order would not be as suggested. It would, in effect, leave us without any order.

Mr. Powell

Will the right hon. Gentleman confirm that, should the Crown accede, as no doubt it will, to the Prayer, which will no doubt be carried, the Crown will also accede immediately to advice from the right hon. Gentleman to reinstate the order of one year ago?

Mr. Shore

The right hon. Gentleman will obviously not wish me to anticipate events. It is not my habit to deal with hypothetical situations. However, I shall consider the right hon. Gentleman's point.

Question put:—

The House divided: Ayes 34, Noes 0.

that the Question was not decided, and the business under consideration stood over until the next sitting of the House.

c1109
1. ADJOURNMENT 13 words