FALKLAND ISLANDS (Hansard, 21 January 1977)

§ Mr. Richard Luce (Shoreham)

I am grateful for this opportunity to raise the subject of the economic future of the Falkland Islands, which is 7,000 miles away in the South Atlantic.

I am glad to see present the Parliamentary Secretary to the Overseas Development Department, who will reply to the debate. In view of the importance of this subject at this time for the Falkland Islanders, I hope that he will convey my 924 views, which command support among Members on both sides of the House, to the Islanders.

We have reached a critical stage for the Falkland Islanders. Last summer in July 1976, the Shackleton Report conducted an economic survey of the islands and contained a number of important suggestions touching the future of the Islands. My main objective this afternoon is to highlight the recommendations in that report and to express a hope for the near future that the Government will come out with a clear statement on how they intend to respond to the recommendations in that report.

It is necessary at the outset to examine the background to the Falkland Islands. It is a remnant of Britain's overseas responsibilities, as are Hong Kong, Belize and Gibraltar. It cannot be said that there is any clear or single answer to the problems of the Islanders. I suggest that we should examine those problems on their merits in a pragmatic fashion and look primarily at what is in the interests of the Islanders, but fully taking into account where Britain's interests lie.

I had the pleasure of visiting the Islands as a member of a delegation sent by the Commonwealth Parliamentary Asosciation in the autumn of 1971. I shall for ever remember my visit to the islands. It is a beautiful group of islands. Its people are the salt of the earth, and if hon. Members have an opportunity to go there they will readily agree that one of its greatest advantages is that it is far away from some of the worst aspects of industrialised countries. It is free from pollution. It is beautiful, isolated, and its people lead a peaceful country life. The population is just under 2,000, on two fairly substantial islands. They are largely dependent for their survival on wool, and are a short distance—300 or 400 miles—from the mainland in the Argentine.

The United Kingdom has had sovereignty over these Islands for about 150 years. When talking about the economic future of the Islands, it is essential to touch for a moment on the sovereignty question, for a clear understanding of this is and must be a key to the islands' economic future.

Since I have been a Member of this House, successive Ministers in successive 925 Governments have affirmed that there will be no change in the sovereignty of these Islands without the full consent of the Islanders. I hope that the Minister will repeat that affirmation today. We must remind the Islanders exactly what is the British policy on sovereignty.

However, we must also recognise that the Argentine makes a claim to the Islands and is the main neighbouring country. We must take into account not just the proximity of the Argentine but its size and, in some ways, its importance to the Islanders. In 1971, the Buenos Aires Communications Agreement was signed among Britain, the Falkland Islands and the Argentine, designed to improve economic co-operation and social and cultural co-operation between the Islands and the Argentine.

At the time, I supported that agreement. I thought that it was a sensible and practical move which demonstrated the willingness of our three countries to co-operate. It would be a great help if the Minister would comment on how that agreement is working, particularly in the economic context.

The Islands have only just over 2,000 inhabitants, but because of the size of the main islands, they could support many more. They are largely dependent on the sale of wool, but their output of wool has been static for about 10 years. There is no shadow of doubt that over the years the morale of the Islanders has declined because they have been uncertain about their future. Perhaps because of this emigration has increased—to a rate much higher than emigration from the Scottish Highlands and Islands.

The Islanders depend largely on the United Kingdom and also on the Falkland Islands Company, which has done much to foster the prosperity of the Islands. One can ask, as the Shackleton Report does—I am sure that the company itself would agree—whether it is healthy to have one company with too strong a monopoly position. They have a limited infrastructure. There are virtually no roads. Local investment opportunities are lacking, and many funds are draining out to the United Kingdom. The standard of living is lower than in the United Kingdom. They have 10 per 926 cent. lower wages in real terms than the average in this country.

However, for the past 100 years, the Islands have been virtually self-supporting and the United Kingdom has benefited financially from our relationship with them. In 1974, we earned about £2¼ million from the sale of special quality Falkland Islands wool. The Shackleton Report highlights the fact that between 1951 and 1973 the revenue from taxes on profits transferred to Great Britain was twice the amount of aid from Britain to the Islands. We took £1.9 million in direct tax taken from dividends and profits transferred here, whereas we gave out £0.9 million in aid. It may be true that, since 1973, the balance has changed a little, but that is the figure highlighted in the Shackleton Report.

What about the economic survey of the Falkland Islands? It should be said that Lord Shackleton and his team have done a great service to the Islands and the United Kingdom. The report is thorough, comprehensive and exciting in its recommendations, and I want to highlight some of the main areas of potential development to which the report referred.

The first is in agriculture. There are only 36 farms on the Islands, each on average amounting to 75,000 acres, so they are very large farms. Of the total, 27, amounting to 95 per cent. of the acreage, are company-owned. It must be emphasised that the Falkland Islands Company, although it owns only eight farms, owns about 46 per cent. of the acreage. The report recommends that it would be healthy for the agricultural future of the Islands if more attention were given to facilitating tenant and owner-managed farms, and perhaps in some cases breaking down the size of the farms and enabling more individuals to have a private stake in running small farms and small holdings.

The report recommends also that it should be possible, given our agricultural expertise, to increase the wool yield per acre by improving the nutritional value of the grass. It estimates that this could achieve a 10 per cent. increased yield, which might produce another £150,000 gross income for the Islands. It also recommends some degree of agricultural diversification.

927 When we consider the fishery situation, I believe that we in Britain have let the Japanese and the Russians in particular get away with the exploitation of the South Atlantic. There is undoubtedly, as the report highlights, enormous potential in the fishery field around the Islands, and because of our special relationship we would have the advantage of a base from which to operate.

An obvious fact which comes out in the recommendation on fisheries is that the potential for blue whiting is enormous. Blue whiting, which can be used for fishmeal, has substantial scope. The report, on page 11 of volume 2, says: The yield of blue whiting alone might be equivalent to the current total of the United Kingdom's fish landings. Again, krill, a shrimplike animal, has enormous protein content. The krill in that area is the largest untapped source of protein in the world. If we were to develop it, a local fishmeal processing plant would have to be established. These are simply two very important areas of fisheries which lie open to exploitation.

I turn now to alginates. The Islands are familiar for what is known as kelp, a giant seaweed, which can be used for stabilisers and binders in foodstuffs, pharmaceuticals, textile and papers. Alginate Industries Ltd., operating from Britain, has some interest in the Islands but has not been able to develop it sufficiently in the recent past because the market is poor and because it has insufficient confidence in the long-term stability of the Islands. But the Shackle-ton Report estimates that in the initial stages the development of this project could yield another £200,000 to the economy.

The Alginate Industries predict a dramatic increase in their turnover provided that they are given adequate assurances on sovereignty and that they can be sure of the British Government's strong economic commitment to the Islands.

Now let me turn to tourism. The Islands are unique for their wild life and natural beauty and the report estimates that there is potential for about 5,000 tourists a year—most of whom would come from the Americas—and that this would yield another 340,000 a year. This sum represents a 14 per cent. increase in the Islands' gross domestic product. There are obstacles, including the 928 need to develop facilities such as hotels and the problems in obtaining a white card to get through Argentina to the Islands. There are also difficulties associated with the permanent airfield.

The report plays down the importance of oil but is contradictory in places. It is understandable that the subject of oil should be played down because it is politically sensitive, but the report says: It is likely that a positive response from oil companies would ensue if political barriers to exploration and production in the area were removed and licences offered. The report rightly suggests that if this is to happen, we must offer co-operation with Argentina. The prospects for oil may be long term, but it is important to bear this in mind and to be willing to co-operate with Argentina and respond to the known interests of the North American oil companies in undertaking further surveys and possibly oil exploration in future.

The report makes recommendations about the need for improved financial services in the Islands, including better overdraft and loan facilities and financial advice. At present, the Islanders get a poor return on their investments.

I turn now to the main difficulties in carrying out the recommendations of the Committee. The first is cost and, at a time when we are under severe economic pressure, any suggestion to increase public expenditure must be considered with the greatest care.

The cost of implementing all the recommendations would be about £13 million. Of that, £5.1 million would be Government investment spread over five years. It is questionable whether some recommendations, such as the £1 million for roads, are needed at least in the immediate future. The recommendations on fishing would cost £8.5 million, but they are for the longer term and I wonder whether some of this money could not be raised through private investment from this country and elsewhere.

A second constraint is the sensitive and important issue of the permanent airfield. I understand that we have just about completed a 1,250 metre strip at a cost of about £4 million, but that it can take only small jets. I do not think that it is open yet and I should be grateful if the Minister could tell 929 us when it will be in operation and what has been the cost to the British taxpayer so far. There is a danger of the airfield becoming a white elephant. The report recommends strongly that the runway should be extended by 900 metres. That would cost about £3.5 million of taxpayers' money. But the strong feeling expressed in the report is that, unless we have that extension to the runway it will not be possible to facilitate the economic development of the Islands, and I highlight tourism, the fisheries and the export of mutton and fish products. Unless we can get some assurance about that, there will not be a real prospect of developing the Islands.

As I see it, we have three options. First, we can do nothing, in which case the Islanders will potter on, morale will decline still further and the Islands will sink into a slough of despond. Secondly, we can undertake a compromise on the Shackleton Report, which in my view would be counter-productive. Thirdly, which is what I recommend, we can decide to undertake an exciting joint venture between Britain and the Falkland Islands under a new investment plan following the recommendations of the Shackleton Report which would be to the mutual advantage of Britain and of the Islands and at the same time we can seek the active co-operation of the Argentine in doing just this.

I recommend to the Government that they reaffirm the sovereignty and that there shall be no change without the consent of the Islanders. I hope that the Minister will say when the Government intend to respond to the Shackleton Report. I hope that they will announce that there will be a positive investment programme in the Islands and that we shall co-operate economically with the Argentine if that is what they would like us to do.

It is time to be bold about the Islands. The scope is enormous, and the Shackle-ton Report provides a catalyst for this. I express the wish on behalf of both the Islands and Britain that the Government will in the very near future—in a few weeks at the most—come forward with a statement giving a new source of help and encouragement to the Islanders.

§ The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. John Tomlinson)

I am grateful to the hon. Member for Shoreham (Mr. Luce) for raising the interesting subject of the economic future of the Falkland Islands. My right hon. Friend the Minister of State has asked me to reply.

I know that the hon. Member for Shoreham is among those hon. Members who have visited the Islands in recent years. This gave added weight to what he said. He spoke from personal knowledge of, and obvious sympathy with, the concerns of this community, whose remoteness from the United Kingdom and tiny size are complicating factors in any consideration of their economic development. Another factor in considering their economic future is that, judged by developmental standards. the Islands are relatively prosperous—a fact acknowledged by the hon. Gentleman. As hon. Members will know, our limited aid funds have to be applied where the need is greatest, subject, of course, to the reasonable requirements of any British dependent territory.

Lord Shackleton's wide-ranging and detailed economic survey of the Falkland Islands, to which the hon. Gentleman referred in some detail, is the basis of our present consideration of the economic future of the Islands. The hon. Gentleman set himself a very difficult task in attempting in a 20-minute speech to highlight the recommendations of the report, running as it does to more than 400 closely-argued pages and containing more than 90 separate and distinct recommendations.

The report merits careful study by all concerned about the future of the Falkland Islands. Since the report was published, there have been detailed discussions between a number of Departments of State, with commercial interests, with the Islanders and with both the previous and the present Governor. The Government have not been dragging their feet on this issue.

The hon. Gentleman asked me specifically about a statement. All that I can say is that my right hon. Friend will make a statement at an opportune moment. It is impossible for me to go beyond that at present.

931 In the eyes of the Islanders, a key recommendation in the report is the extension of the permanent airfield which Her Majesty's Government are now building in the Falkland Islands. Lord Shackleton's view was that this was a crucial factor in any economic development of the Islands. But, as hon. Members will know, these facilities can be very expensive. The cost would run to many millions of pounds. As my hon. Friend the Minister for Overseas Development told the hon. Member for Eccles (Mr. Carter-Jones) on 22nd November, we have run into technical difficulties about the completion date and cost of the present airfield. It would be a misuse of public funds to proceed with Lord Shackleton's proposal for an extension without the most searching technical and economic evaluation of the project.

As I said earlier, the Governor has discussed Lord Shackleton's report with the Islanders. This process of consultation will continue. The new Governor, Mr. Parker, who arrived in the Islands just before Christmas, will be examining further with his councillors the implications of Lord Shackleton's recommendations. He has already assured them, as I now assure the House, that there is no intention whatever of brushing the recommendations under the carpet. There is one important aspect to which we and the Islanders will have to apply our minds —that is the question of recurrent costs. Some of Lord Shackleton's recommendations, if implemented, would be expensive. The Islands are not given budgetary aid and, I know, are anxious to continue to pay their way. This is just one of the problems which we and the Islanders will have to consider together.

As I mentioned earlier, we have consulted with commercial interests. One particularly interesting proposal has come from a firm occupying a leading position in the important activity of the extraction of alginates from seaweed.

Its plans, if brought to fruition, could confer considerable benefits on the Islanders. Initial discussions have also taken place about ways of encouraging a detailed appraisal of the prospects for a deep-water fishing industry. We also keep in regular contact with the Falkland Islands Company.

932 Although the hon. Member's speech was confined to the economic future of the Islands, certain other topics have been raised. In view of the wide interest quite propertly shown in these remote islands I can quite understand that, but I hope that I shall be forgiven if I deal with only some of them, and briefly.

I note what the hon. Member said about the importance of tourism, about the white card, and about the financial provision. I can give him an assurance that these points are noted and will be taken seriously by the Government. Due weight will be given to what the hon. Member said.

I have dealt with the question of sovereignty. The hon. Member also raised the problem of the communication agreement. I am advised that the agreement with the Argentine is working reasonably well and that the arrangements have benefited the islanders. The hon. Member raised detailed questions about the agricultural problems and the question of diversification. These are all the subject of study and of consultation, and I am sure that he would not expect a detailed reply from me about them.

There is also the problem of fisheries. Lord Shackleton's view, with which I personally concur, was that any development of offshore fishing would be subject to considerable difficulties in default of some agreement with the Argentine. Given the rich potential of the area, which Lord Shackleton emphasised, we intend to discuss the possibility of reaching some agreement with the Islanders and the Argentine. The hon. Member raised the particular problem of krill. The development of this potentially valuable resource must, however, await further scientific assessment. This is another activity which I believe—and, judging from what the hon. Member said, he believes too—should be discussed with the islanders and the Argentine.

The hon. Member referred to the important question of oil and said that this had been underplayed by the Shackleton Report. For practical reasons, there can be no question of issuing licences for oil exploration and development in disputed areas before we can reach an agreement with the Argentine. There would be little prospect of a commercial response to a unilateral British licensing initiative.

933 We come then to the problems of the airport, which the hon. Gentleman recognised. I have referred to the airfield and I am sure that the hon. Member appreciates not only the difficulties about provision but the steps taken by the Government in full consultation with all concerned.

In conclusion, I should like once more to thank the hon. Member for raising this interesting subject. In spite of the small size of the Islands and their population they produce a number of complex problems, 934 some of which have been highlighted this afternoon. I have touched upon only some of the broad factors which have a bearing on the economic future of the Islands. But I hope that I will have left no one in doubt of the Government's concern for the future of the Falkland Islanders against the background of the important recommendations by Lord Shackleton in his report.