HC Deb 26 June 1979 vol 969 cc288-99
The Prime Minister (Mrs. Margaret Thatcher)

With permission, Mr. Speaker I should like to make a statement on the European Council Meeting at Strasbourg. With my noble Friend, the Foreign and Commonwealth Secretary I attended the European Council in Strasbourg at the end of last week. Among the matters we discussed were, first, contributions to the Community budget. I made our dissatisfaction with the results of the present system very plain. The European Council called for action by the Commission to assess the facts about how the budget transfers are likely to affect each member State in 1979 and 1980 and whether and how the 1975 financial mechanism, intended to reduce our contribution, will work. That report will go first to the Finance Council of Ministers, who will have the opportunity to put forward practical ideas to solve the problem.

Taking those views into account, the Commission has been asked to formulate proposals in time for decisions to be taken at the next meeting of the European Council in November, in Dublin. At last, therefore, we have an agreement to tackle the inequitably high contribution that Britain at present makes to the European budget. The time for decisions will be at the next Council.

Secondly on energy and the oil shortage, we agreed to reinforce our efforts to reduce consumption of oil and to achieve the objectives that the Community has set itself. We also emphasised the part that alternative sources of energy must play, nuclear power and coal in particular.

We recognised the need for consumer and producer countries to work together to reduce demand and increase supply and made clear the readiness of the Community and member States to establish contacts with producer countries to that end. We had in mind the Tokyo economic summit meeting this week and that by showing that the Community was ready to shoulder its own responsibilities, we should be in a good position to call on other industrialised countries to make comparable efforts to reduce oil consumption and imports. We agreed that higher oil prices will adversely affect the outlook for growth, though prices will only steady if demand and supply balance.

Thirdly, the Council reviewed the early operations of the European monetary system. I also told it of the Government's intention, about which the House has already been informed, to deposit part of our reserves against ECUs.

Fourthly, the Council was anxious to help refugees from Vietnam and supported the proposals for an international conference.

Finally, we noted with satisfaction the first direct elections to the European Assembly and welcome the intention of the Irish Prime Minister to represent the Council at the inaugural meeting of the new Assembly on 18 July.

Mr. James Callaghan

The House will hope that the meeting at Tokyo will be able to assist the discussion on the refugees from Vietnam in view of the horrific figures now being quoted about the number, for example, that Hong Kong may be required to take because its policies are perhaps more humanitarian than those of some surrounding countries. I hope that progress will be made on that matter.

The right hon. Lady referred to the inequitably high contribution to the Community budget. Does she mean the net contribution? This is a matter not only of the resources that we put into the Community but the receipts that we get. Does the study to which the right hon. Lady referred include a study of the receipts that we might be expected to get as well as the contributions that we make? If we cannot make progress on that matter, will she consider suggesting that we should put a ceiling on our contribution, as a concrete request to be made to the Commission before the budget?

The right hon. Lady will have the support of the whole House in continuing the work that we began. It is fair to say that we took the shine off the ball and that it is now for her to hit the runs. I believe that that will be possible. I only hope that the right hon. Lady is not too sanguine when she says that at last we have agreement on this matter.

Finally, we welcome the dialogue that is due to take place on the energy and coal shortage. We must proceed with nuclear energy, but what steps are being taken to ensure that proper safety measures are put into operation? If we are to increase the production of coal, why is there a report in the newspapers this morning that the Secretary of State for Energy has agreed only up to 1982–83 the "Plan for Coal", which runs up to 1985? It is a provisional endorsement. Is not that a halfhearted way of approaching a critical situation? I press the right hon. Lady to see that the Secretary of State for Energy gives full consent to the "Plan for Coal" up to 1985. When can we expect a proper conservation plan from the Government, in view of the statements that have been made at Strasbourg?

Finally, the Government appear to have had welcome second thoughts about the European monetary system. When I came back from Paris and the scheme was established the right hon. Lady said that it was a sad day for Europe that we had not joined that system. I do not see much enthusiasm for it yet by the right hon. Lady. I welcome her second thoughts, but what is the Government's policy?


Mr. Nicholas Winterton

The right hon. Gentleman has already had two "finallys".

Mr. Callaghan

Then this is my third "finally", and after it I shall sit down. These are pertinent questions.

Finally, I wish to question the Prime Minister about co-ordinating budgetary policies. The right hon. Lady has agreed to co-ordinate budgetary policies to produce a satisfactory level of growth. When can we expect the summer Budget?

The Prime Minister

I am grateful to the Leader of the Opposition for his comments about refugees from Vietnam. We hope that there will soon be an international conference. That is the only way to try to sort out the vast numbers involved. The right hon. Gentleman asked about contributions to the budget. Our partners were not all aware that Britain had, to us, an unanswerable case.

Mr. Callaghan

They were.

The Prime Minister

I am sorry, but they were not. Nor, indeed, did they accept that Britain's contribution to the budget was inequitably high. One of our first problems was to convince them of that.

The right hon. Gentleman asked what type of contributions we were dealing with. They were net contributions, although there is some argument about how the monetary compensatory amounts are dealt with—whether they are dealt with on behalf of the exporting country or the importing country. Of course, the net contributions are affected by the difference between the gross contributions and receipts. That is an important part of trying to assess the budget in future years.

The right hon. Gentleman also asked about energy and coal shortages. He is well aware that we have an excellent nuclear inspectorate in Britain. Our designs have a high regard for the safety of nuclear equipment, and that is right.

I believe that it is hoped to produce about 108 million tonnes of coal this year. I remember that when I first dealt with the fuel portfolio when in opposition we were producing much more. We want as much coal produced as possible. I hope that one day we shall be able to produce much more than 108 million tonnes per annum.

The right hon. Gentleman asked about the European monetary system. We have swapped some of our reserves, but we shall not make a final decision for some time. We said that we would be in a position to make some preliminary observations when this matter was dealt with again in September. I believe that it is right to review the whole position now, in the light of existing circumstances, before we reach a final decision.

Mr. Eldon Griffiths

Will my right hon. Friend undertake to keep the House informed of the progress in the Government's thinking on EMS before a final decision is taken by the Cabinet? Is my right hon. Friend satisfied that there is now a common European policy for the production as well as the conservation of energy? Will Europe be able to speak with one voice not only in Tokyo but to OPEC? Is the Prime Minister aware that there is a wide welcome in Europe, as there is in Britain, for the refreshing change in style and manner in which she has approached the European Community?

The Prime Minister

I shall endeavour to meet my hon. Friend's point about the EMS. The next meeting is in September when, unless anything unusual occurs, the House will not be sitting.

I am not in a position to say that we have one policy for Europe for the production of energy. Indeed, we certainly do not have a single policy. In addition to the oil that we have, there must be more concerted action on agreeing about the future of nuclear energy.

Most of us agree that we shall not have enough power unless we go nuclear on a larger scale than at present. We must make clear that we are all in favour of safe nuclear production and that we shall take all necessary steps to that end. I hope that we shall be able to speak with one voice in Tokyo and that it will be a powerful voice in relation to fuel and energy.

Mr. Donald Stewart

Is there any substance in the reports that the Government will attempt to disguise the size of the contribution to the EEC budget by diverting a substantial part of it to food prices? Is the Prime Minister aware that a fiddle of that kind will be even more offensive and unacceptable than the present direct contribution?

The Prime Minister

That is the first time that I have heard that report. I wholly reject it.

Mr. Churchill

Did my right hon. Friend have an opportunity of discussing with any of her colleagues the grave implications for the defence of Europe of article 12 of SALT, which appears effectively to rule out any future Nassau-type agreement or any transfer of strategic technology from the United States to our NATO Allies? Will she consider taking that matter up urgently with President Carter when she meets him in Tokyo this week?

The Prime Minister

We did not discuss defence in Strasbourg. As my hon. Friend knows, defence comes under NATO and is not a matter for the Community. I have answered questions before on SALT and made it clear that we believe that we shall be able to obtain the technology that we need for updating our own nuclear deterrent and that SALT does not affect that in any way.

Mr. Jay

What parliamentary or legal authority have the Government for transferring part of the gold and dollar reserves to the European monetary co-operation fund? Full legislation in the House was needed for a similar transfer to the IMF in 1945. Has any deposit yet been made?

The Prime Minister

I cannot say whether any deposit has yet been made, but I do not believe that we need special legislative authority to make it.

Mr. Skeet

Does the Prime Minister agree that the reference to coal for power stations means not more British coal but more coal from South Africa, Australia and Poland? How can it be said that a subsidy of £6.35 a tonne will make a viable export trade for the United Kingdom?

The Prime Minister

Obviously we want more coal from our own production. There are contracts with other countries for importing coal and some is being imported, but not much. We should not need to import it if we could use more of our own.

Mr. Benn

Has the Prime Minister agreed that the international oil companies can deplete the North Sea more rapidly to meet the Common Market need for oil? Following the French pattern, has the Prime Minister in mind to build an American reactor of the kind involved in the Harrisburg accident? Does she intend to lift all restrictions on the import of coal? Is she aware that any one of those three policy changes would have to be fully debated in the House, because of their importance?

The Prime Minister

The right hon. Member asked about production from the North Sea. As he knows, that would mean making alterations to the flaring regulations, among other things. We have not made a decision to use American nuclear reactors, especially the PWR. The decision is still open. No decision has yet been made. We have not made an open commitment to import unlimited quantities of coal.

Mr. Nicholas Winterton

Will my right hon. Friend indicate what political and economic action the European Community will take against Vietnam and its backer, the Soviet Union, to prevent them from taking their present brutal and in- human action? Since my right hon. Friend attended the meeting with our noble Friend the Foreign Secretary, why was there no discussion about Rhodesia? Will she recognise Bishop Muzorewa and his Government at an early date in order to ensure that tribal conflict does not bring chaos and disorder to that country?

The Prime Minister

We did not discuss economic action against Vietnam, although a number of countries made the point that the Community supplies subsidies for food to Vietnam and suggested that they should be switched to supplying food for the Vietnamese refugees.

We did not discuss Rhodesia in formal session. There were one or two informal meetings and the subject was raised there. I saw Lord Harlech today, and he will be going to Salisbury early next week. Bishop Muzorewa will then travel to the United States. He has asked to see me on the way back and I shall, of course, see him. My hon. Friend will see, therefore, that a good deal of activity is under way.

Several Hon. Members


Mr. Speaker

Order. May I appeal to the House for short questions? We must be fair to the Welsh business that is to follow, which is very restricted. [HON. MEMBERS: "Hear, hear.") Well, the House should get its priorities right.

Mr. Russell Johnston

How can the Prime Minister have the gall to express satisfaction with the result of the direct elections? Is it not gratuitously arrogant to dismiss the fact that the 13 per cent. of the British electorate who voted Liberal have no representation because of a system that is unique in the Community? Surely the result can give no satisfaction to any democrat.

The Prime Minister

I certainly wish that more people had voted in the first direct elections to the European Parliament. However, the Liberal Party did not do particularly well in those areas where it could have won.

Mr. John H. Osborn

Does my right hon. Friend agree that the problem in the Community is to promote the use of coal-fired power stations? Will she explain what progress has been made in implementing proposals for trade in coal, and coal stocks, and in creating coal-fired power stations, an idea that was supported by the Parliament and the Commission but got stuck in the Council of Ministers?

The Prime Minister

I think that that subject was not raised at the Council. As my hon. Friend knows, some of us are already switching some of the burn from oil to coal and helping to save oil in that way. I think that most of us consider that the real future lies in building more nuclear power stations, and it is to that that we must give our attention.

Mr. Dalyell

The Prime Minister used the phrase "reinforcing efforts to reduce the consumption of oil". What practical suggestions were put forward?

The Prime Minister

As the hon. Gentleman knows, the Secretary of State for Energy has made statements about reducing the use of power in the public sector. Each and every country can do that. It does not reduce consumption by a great deal, but every marginal reduction helps in the current situation. Further, prices have gone up, and that of itself depresses demand. Fortunately, our prices for petrol are nothing like so high as those in Europe.

Mr. Ian Lloyd

Since the lead time for nuclear reactors is about a decade from mine to production, and since the Western world is likely to deplete its resources of uranium even more dramatically than it depletes its oil resources unless we build fast breeder reactors, was this issue considered by my right hon. Friend and her colleagues at the summit? If it was not, how soon will it be?

The Prime Minister

The answer in respect of the fast breeder reactor is "No". The French are further ahead with their fast breeder reactor—the Phoenix—but we are committed to holding a public inquiry before any decision is made to go ahead with a fast breeder reactor.

Mr. Douglas

Will the right hon. Lady specifically consider the regulation of the Rotterdam spot, or free, market? Does she believe in the French proposal for a ceiling on dealings there? Will she tell the House how her Government propose to enter into price-fixing in respect of the Rotterdam market?

The Prime Minister

The main outflow of crude oil that is not sold at the official price is not through the Rotterdam spot market. The idea that all of the oil that is being sold at a very high price goes through the Rotterdam spot market is false. Only a tiny amount goes through that channel. The real problem arises because some producer countries are selling at prices that broke free from the base price, which is of Saudi Arabian marker crude. That is the source of the high prices of oil. I do not believe that those prices are affected by the prices of crude on the Rotterdam spot market. The bigger Rotterdam spot market is on product, but that is small compared with the volumes of crude that have to be sold the world over.

Mr. Adley

No one underestimates the urgency needed to agree a policy on oil conservation in Europe or in the rest of the world. Is my right hon. Friend aware that there has been another tanker disaster off the South Coast of England, and that there remains in this House and in the country generally continuing concern about the problem of oil pollution? Is she further aware that the Community has made interesting and progressive proposals for Community-wide measures to deal with the problem, including proposals to make the oil owners partly responsible for what happens? Will she, with her Cabinet colleagues, take an opportunity to encourage the Community to pursue this policy, and will our Government take notice of what the Community is saying?

The Prime Minister

We are all anxious to deal with this matter, and I shall certainly look into it to see whether any further steps need to be taken by this country, either on our own or in conjunction with our partners.

Mr. Skinner

Will the Prime Minister confirm that what is really happening on the Rotterdam spot market in relation to oil is the operation of free enterprise? I was always under the impression that she, perhaps more than most of the Tory Benches, fully supported that. Does she understand that the real problem with coal in this country is how to sell what we already have? It is a matter not so much of producing more coal but of getting rid of it. Is the right hon. Lady aware that large stocks are still available in this country, and will she therefore, on the basis of all that, ensure that there is no further importation of coal?

The Prime Minister

The Rotterdam spot market is a symptom of the imbalance between demand and supply. It works in the same way as any other spot market. When there is a surplus, prices are very low indeed. When there is a scarcity, prices are high. Some countries that have no other way of getting oil would rather pay higher prices than have more people unemployed.

We could certainly do with a good deal more coal production in this country, particularly since our stocks have been depleted by the cold weather last winter. We could do with a good deal more coal, and we shall be grateful for anythig that the hon. Gentleman can do to encourage that.

Mr. Gummer

Will my right hon. Friend confirm the widespread impression that the Community is more likely to come to terms with Britain's problems both on energy and on the Community budget now that it is dealing with a Government who support Europe instead of opposing it?

The Prime Minister

What my hon. Friend says is true. Certainly the Council was very welcoming to the new member.

Mr. Heffer

Since the Prime Minister, like myself, does not agree with proportional representation, and since less than one-third of the people of this country voted in the European elections, will the right hon. Lady tell us what she told her colleagues in Europe? How did she explain that over two-thirds of the British people turned their backs on the Euro-elections, showing that they were not happy about the elections, and therefore about the Common Market?

The Prime Minister

I do not agree with the hon. Gentleman's interpretation of the low turnout. We have had a surfeit of electionitis in this country recently, and I think that it was due to the fact that people had been to the polls on a number of occasions that they did not turn out in such large numbers as they otherwise would have done.

Mr. Rost

As security of energy supplies must be second in importance only to the need for defence, is my right hon. Friend satisfied that simply agreeing to freeze oil imports into Europe will help towards self-sufficiency in the long term and in preparation for the time when the oil will not be available to import?

The Prime Minister

There are, quite clearly, problems at two levels—the immediate and the long-term, which is the time that it takes to build the nuclear power stations to replace the oil and fossil fuels as an alternative source of power. I agree with the underlying premise of my hon. Friend. Though we are talking a great deal about replacing power supplies in the longer term by nuclear power, perhaps not enough is being done to give information to our people and to assure them about the safety of nuclear fuel. We must take all possible steps to do that.

Mr. English

Does the right hon. Lady recollect that in the previous Parliament a Committee of this House produced an interim report on the EMS and Britain's relationship to it? Does she agree that, to be effective, the reallocation of reserves that she has announced may not need an Act of Parliament, but will probably need a statutory instrument to be laid before the House? Will she promise that any such change, or decision, will be placed before the Treasury and Civil Service Committee of this House?

The Prime Minister

This is a technicality. What we have done is only a swap. I doubt whether that needs regulations. It is a swap, that is all, and I do not think that we need legislation for that. With regard to the EMS itself, we shall not take a decision until we are in a position to do so.

Several Hon. Members


Mr. Speaker

Order. I propose to call two more hon. Members.

Mr. Shore

The Prime Minister spoke earlier about the timing of the possible main EMS decision in September. Will she think about this again, because it really would be intolerable, given the importance of the issue, if such a decision were made at a Council of Ministers meeting at a time when the House had no opportunity to debate it and was, in fact, in recess.

The Prime Minister

What I said about September was that we would be in a position then to make our first assessment. I did not say that we would be in a position then to decide whether we would join. We shall be in a position then to make our first assessment. I am determined that we shall not hurry this matter, and I shall take full account of what the right hon. Gentleman and my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) said.

Mr. Leighton

Has the Prime Minister had the opportunity to see the distinguished article by Lombard, on page 16 of today's Financial Times, which explains that we are already making a net contribution to the Community, across the exchanges, of over £1 billion? I think that that is worth 3p off the standard rate of income tax.

The Prime Minister

I have not seen the article. I should have thought that the £1 billion referred to the adjustment at the end of the transition period, or possibly to next year. The hon. Gentleman is reinforcing the demands that I have made that this matter be considered. After all, the Council of Ministers agreed to consider it and to propose solutions in time for decision in Dublin in November.