§ The Prime Minister (Mr. James Callaghan)With permission, Mr. Speaker, I will make a statement about the visit of the Chancellor of the Federal Republic of Germany from 23rd to 24th January. This was one of the series of regular six-monthly visits between the British and German Heads of Government.
Chancellor Schmidt was accompanied by Herr Genscher, Vice-Chancellor and Federal Minister of Foreign Affairs, Dr. Apel, Federal Minister of Finance, Dr. Friderichs, Federal Minister of the Economy, and Herr Leber, Federal Minister of Defence. On our side the Chancellor of the Exchequer, the Foreign and 1175 Commonwealth Secretary, the Secretary of State for Energy and the Secretary of State for Defence took part. We began with a general discussion among all Ministers followed by a series of bilateral talks and then we came together again for a final session. This pattern worked well, and the Federal Chancellor and I agreed to repeat it at our next meeting.
The talks covered a wide range of international and Anglo-German bilateral matters. I expressed to the Chancellor the appreciation of Her Majesty's Government for the support which the Federal Government have given us in recent weeks in connection with the IMF loan and the "safety net", both of which have contributed greatly to more stable conditions in the international money markets.
Much of our talks was concerned with the present world recession and how we should approach the series of international meetings which are in prospect over the next few months. We were agreed that a properly prepared meeting of leading industrialised countries would be helpful in co-ordinating our policies for bringing the world out of recession.
Britain's prospects for recovery in 1977 are based on growing exports and I emphasised the importance we attach to continuing expansion in the economies of the world, including those of the United States, the Federal Republic of Germany and Japan, as a means of generating greater expansion and more employment in the rest of the world.
We reviewed the present position of the negotiations between the industrialised countries and the developing countries in the Conference on International Economic Co-operation. We also discussed our relations with the Soviet Union and the preparations for the talks that will take place in Belgrade this summer to follow up the agreements reached at Helsinki.
On defence matters, we welcome the declared intention of President Carter and of the Soviet Union to seek a new agreement on strategic arms limitation and agreed that the Vienna negotiations on reducing conventional arms should be given a new impetus.
We did not attempt to reach a final agreement on the question of offsetting the cost of stationing our troops in Ger- 1176 many, on which our two Governments hold different positions. The Federal Chancellor pointed out that similar arrangements with the United States had already been brought to an end. Our discussions will continue and we are both confident that we shall with time reach a conclusion on this matter.
Our joint interests with the Federal Republic of Germany cover many areas —in the European Community, in NATO and more recently in the Security Council of the United Nations. I am glad to report that in all these fields our relations are close and in good repair.
§ Mrs. ThatcherI am grateful to the Prime Minister for his courtesy in always reporting to the House the results of these conversations. However, we should like the reports to be a little more informative sometimes. I should like to ask the right hon. Gentleman three questions. The first is about defence. He says that he has not reached or attempted to reach a final agreement on offsetting costs, yet the last one expired in March 1976. Will he undertake to have no reduction in our forces in BAOR except in the context of a mutual and balanced force reduction agreement in the meantime?
Second, as the right hon. Gentleman has discussed the economic position with the Federal Chancellor, may I ask whether he discussed with him why our own index of industrial production has risen by only 3 per cent. over the last year, while Germany's has risen by 9 per cent., that of the United Sates by about 8 per cent. and Japan's by about 11 per cent? There is expansion in the world but we are not getting it here. Did the Prime Minister discuss why our performance is so much worse than theirs?
Third, what did the right hon. Gentleman say to the Federal Chancellor about the prospects of direct elections here?
§ The Prime MinisterI would wish to be as informative to the House as possible, but when there are joint discussions with other Heads of Government there has to be a certain reticence in what is said afterwards. However, I shall bear in mind what the right hon. Lady says.
As for the reduction in our forces in Germany, as a matter of policy it is certainly not the Government's desire to 1177 reduce such forces, for the reasons that I gave in an answer just now. We also have treaty obligations on this matter which are well understood and which were entered into by the Earl of Avon many years ago. There is, therefore, no intention of reducing our forces pending any discussions or agreements on mutual balanced force reductions in Vienna.
I do not think that the right hon. Lady will expect me to give a short and concise answer to her question about why the United States and the Federal Republic have done better. One reason which certainly stands out is that their expansion has been export-led. That is certainly true of the Federal Republic and of Japan. That is why it seems to us that some expansion in the internal German economy might help to increase exports elsewhere. As I said earlier today, it is our intention now, and we are working on it—this is one of the reasons why we cannot have domestic reflation—that exports should be in the lead for our recovery, too, so that it is soundly based. That means having to withstand a great deal of pressure for easy reflation, which would be simple to do but would upset and offset many of the things that we should be tackling.
As for direct elections, we discussed Community matters but we did not discuss that matter in particular. However, the Government's intention still stands.
§ Mr. David SteelIn discussing with the Federal Chancellor the relative success of the German economy, was the Prime Minister able to make any assessment of the contribution to it which has been made by the system of industrial partnership which we ourselves, as an occupying Power, helped to introduce into Germany at the end of the last war? If so, does not the right hon. Gentleman now regret that the terms of reference and membership of the Bullock Committee were so rigged as to produce such an unsatisfactory report as we shall all receive officially tomorrow?
§ The Prime MinisterYes, we had some discussion about industrial democracy or industrial partnership, because it has had considerable success in the Federal Republic—as I believe it will have here.
1178 As regards the Bullock Report, there is no point at this stage in jobbing back to the terms of reference. I have never seen a report that has been so criticised, attacked and described prior to its publication. Perhaps the right hon. Gentleman will be kind enough to read it first—or he may have already done so —before he asks me further questions.
§ Mr. Frank AllaunWill the Prime Minister reveal how much offset the German Chancellor is prepared to offer to this country against the £500 million a year that we are spending across the exchanges on BAOR? Has not this drain continued year after year? If West Germany will not pay up, why cannot we do as the French have done and reduce by 10,000 the 55,000 men we have in Germany?
§ The Prime MinisterNo, Sir, I cannot reveal how much the German Chancellor has offered, because we have not yet reached the stage of discussing figures. The position of the German Government is clear. They wish to bring the matter to an end because they feel that certain political taints are attached to this occupation which they very much resent. I understand that attitude, as I am sure we all do.
On the subject of whether we should follow the action taken by the French, I must remind my hon. Friend that the French have never had an offset agreement and have never secured any payments from the Federal Republic for these costs but have borne them year after year. Therefore, there is a big difference between their situation and ours. They do not have a duty that requires them to maintain a certain number of troops, whereas we do.
§ Rear-Admiral Morgan-GilesDid the Prime Minister discuss with the German Chancellor the arrangements and procedures for "crisis control" within NATO? I am referring to the prevention of war rather than the situation that exists after the outbreak of war. Is the Prime Minister aware that General Alexander Haig recently said that he was not satisfied with the security of communications or with "crisis control"?
§ The Prime MinisterI did not discuss that matter with the German Chancellor, 1179 but our Ministers of Defence had discussions. Perhaps the hon. and gallant Gentleman will table a Question on that topic to my right hon. Friend the Secretary of State for Defence.
§ Mr. CantIn view of the underlying improvement in our balance of payments situation and the fact that we are now supported by massive loans, does not my right hon. Friend feel it possible to ask the German Chancellor whether Britain could reduce its minimum lending rate by a further 2 per cent. to prevent the crippling of investment by local or central authorities in this country?
§ The Prime MinisterThat is an ingenious supplementary question, but we did not discuss either minimum lending rates or base rates. I am sure that my hon. Friend was pleased to see that base rate was reduced today by 1 per cent. I trust that that will be the beginning of a trend. There is no doubt that last year interest rates hampered industrial development, especially in small businesses. It is Government policy as soon as it is prudent to do so to see that interest rates are reduced.
§ Mr. BakerIs it not clear that the Prime Minister did not find time yesterday to discuss with the German Chancellor the subject of direct elections to the European Assembly, which are likely to take place in other European countries in May or June next year? Will the right hon. Gentleman undertake to introduce the Bill providing for direct elections sufficiently early in the present Session to give it a reasonable chance to get through Parliament?
§ The Prime MinisterThat proposal was in the Queen's Speech, and the Cabinet is now considering when a Bill should be introduced.
§ Mr. AtkinsonWill my right hon. Friend say whether he was able to take any initiative in talks on the reprocessing of nuclear fuels? Does he feel that we are any nearer to agreement with Germany in a joint European approach to President Carter, not only on the centralisation of reprocessing plants but on the subject of the international transportation of nuclear materials? Does he not think that a European initiative with President Carter is now possible?
§ The Prime MinisterWe had some discussions on the processing and commercial arrangements in respect of nuclear fuels, which is a most important matter. My hon. Friend is correct to focus on the problems and dangers that can be associated with them. Our policies and those of the Federal Republic are close in these matters, but we did not discuss the particular problem of the internationalising of transport arrangements or of centralising them. My hon. Friend can take it that there will be serious discussions with the new United States Administration so that we can achieve a concerted policy.
§ Mr. WaltersDid the Prime Minister discuss with the West German Chancellor the situation in the Middle East? Bearing in mind that for many years there has not been a better opportunity than now exists to achieve a settlement, should not Western Europe be playing a much more active role in achieving that settlement? If no settlement is reached and another war results, will not Western Europe suffer more than anybody else, apart from the confrontation countries?
§ The Prime MinisterThe last part of the hon. Gentleman's supplementary question is very much in our minds as to the dangers that might arise from any inability to settle the Middle East situation. We discussed what possible helpful steps might be taken by the Community or any one member of it. I prefer not to go into any further detail now.
§ Mr. AndersonDid the subject of our mutual images of each other arise in the discussions? Does my right hon. Friend share the concern of the West German Government and population concerning the daily diet of war films served up on our television screens? If so, will my right hon. Friend use all his influence to ensure that a proper realistic image of today's Germany comes across to our population?
§ The Prime MinisterThis matter arose only in the course of the television discussion involving the German Chancellor. The Chancellor did not raise the matter with me as a subject of high policy. He expressed on television last night the irritation felt in Germany about some of these films. I tried to explain that we have repeats of old films and of old 1181 trends. I am told that the trend on television at the moment is towards the 1920s—and I think that I can certainly qualify on that score. These matters go round in circles. I hope that the German Chancellor has not taken the matter too seriously, because it does not represent the underlying attitude of the British people.
§ Mr. SpeakerOrder. There is another major statement to follow, together with other business. Therefore, I shall call two further speakers from each side. I call Mr. Crouch.
§ Mr. CrouchMay I congratulate the Prime Minister on what appears to be a good relationship with the German Federal Chancellor? Will he use that growing friendship to persuade the Chancellor to receive people from this country, principally trade unionists and employers, to explain to them the basis of industrial democracy as practised in Germany, which is one of co-operation and does not involve handing over control to one side or the other?
§ The Prime MinisterI am obliged to the hon. Gentleman for his congratulations. There was such a meeting last July between the Federal German Chancellor and members of the Bullock Committee, including those who signed both the majority and the minority reports. I accept that the principle of industrial democracy, if it is to be permanently based, must arise from agreement between both sides. I shall be striving for such a principle in whatever discussions follow the Bullock Report.
§ Mr. FernyhoughFrom what my right hon. Friend said, it would appear that the Federal German Chancellor was somewhat upset at the raising of the question of offset costs. When my right hon. Friend next meets the Chancellor, will he remind him that last year the German Government came to a good agreement with the Americans concerning United States forces stationed in Germany and that if matters go that far with us we shall have no quarrel with the Chancellor?
§ The Prime MinisterThe Chancellor was not upset. He explained his position and I explained ours. As I recollect it, 1182 the agreement with the Americans last year was a final and conclusive agreement on the sum of $61 million. I am not able yet to say whether that would be a satisfactory ending to the problem as far as we are concerned.
§ Mr. MartenAs the balance of trade deficit of about £460 million in 1976 with Japan has led to talks with the Japanese in which they have been asked to restrict exports from that country, and as there is a balance of payments deficit amounting to some £900 million with the Germans, is the Prime Minister following the logic of the Japanese situation and asking the Germans to restrict their exports?
§ The Prime MinisterThe logic of that situation would demand that the Japanese were as open to receive our exports as are the Germans. This is a serious matter. I take the view that the expansion of the internal German economy would be one way in which we could hope to improve our exporting prospects. I pressed that view on the Chancellor.
§ Mr. DalyellDid the Federal Chancellor express any curiosity about our country's constitutional problems, especially when he has 17 million Bavarians and Franz Josef Strauss? Did he comment on the demand of nationalist Members on the Opposition Benches in this House and of my hon. Friend the Member for South Ayrshire (Mr. Sillars) for separate Scottish seats in the Council of Ministers and on the Commission?
§ The Prime MinisterWe did not discuss these particular matters but, in view of my hon. Friend's concern about it, if the Chancellor raises the issue at a future date I will unleash my hon. Friend upon him—and God help both of them.