HC Deb 14 March 1979 vol 964 cc453-71
The Prime Minister (Mr. James Callaghan)

Mr. Speaker, I will, with permission, report to the House on the meeting of the European Council in Paris, which I attended with my right hon. Friend the Foreign and Commonwealth Secretary on 12 and 13 March.

The Council's decisions and discussions were focused mainly on European aspects of such issues as economic development, the problem of unemployment, energy, the future of the common agricultural policy and the proper use of the Community's resources.

As regards unemployment and social policy, it is the Council's view that quite apart from the beneficial effects that would result from faster economic growth, specific measures are also needed to reduce unemployment. Ministers of Labour and Social Affairs were asked to work closely with trade unions and employers in further co-ordinated action in such matters as youth employment and training schemes, limitation of overtime, vocational training for women, social measures to assist workers in industries in difficulty such as iron and steel, earlier retirement and work-sharing. They were asked to report on these matters to the next Council meeting.

On energy supplies and use, the Council adopted the objective of a reduction in 1979 Community oil consumption of about 25 million tonnes, that is, about 5 per cent. below present forecasts, by such methods as encouraging conservation, making the best use of hydrocarbon and coal reserves and strengthening production of electricity from nuclear sources whenever conditions permit.

Arising from a report by the Commission, I asked that Finance Ministers should examine the proposition that economic convergence between member States would be strengthened if their net contributions to the budget were more closely related to some objective criteria. In this connection, Heads of Government have asked Ministers of Finance to examine in depth how all the policies of the Community, taken as a whole, could be developed to make a greater contribu- tion to achieving economic convergence and to make a report to the next Council.

These discussions on energy, employment and the social situation in the Community led me to put forward the view that the Community needed to make a reassessment of its own social and economic priorities, and that there was room for considerable improvement in the way the Community allocates its expenditure, especially as this expenditure will, within the next few years, reach the limit of the resources available to the Community. This called for speedy action to reduce wasteful and unnecessary expenditure on accumulating food surpluses through agricultural aid, which can then be disposed of only at considerable loss and which disturb our trade relations with other countries.

I urged the Community, in the interest of a healthy development, to correct its priorities and, while ensuring a healthy agriculture, to devote more attention and resources to the acute problems that have shown themselves in parts of European industry and in the social decline of the centres of some European cities.

The subsequent discussion on the common agricultural policy was the most realistic that I have taken part in. Heads of Government showed a welcome recognition that the existence of surpluses and the costs involved could not be justified. It was agreed that the existence of these market imbalances in agriculture required, in the wording used at such meetings, a prices policy appropriate to this situation ".

Mr. Teddy Taylor

What does that mean?

The Prime Minister

I made it clear that for the United Kingdom this wording meant that we should not agree to increases in common prices for products in surplus at forthcoming meetings of Agriculture Ministers. I am sure that that was clear to them, as it will be clear even to the hon. Member for Glasgow, Cathcart (Mr. Taylor).

In summary, I can report to the House that the validity of the arguments advanced by British Ministers on some of these issues, over a long period, is being increasingly recognised. The next step will be for all member States to take the necessary action.

Mrs. Thatcher

Does the Prime Minister agree with the conclusion of some commentators this morning that it was a disappointing summit, and that that disappointment was reflected both in the communique and in the statement that the right hon. Gentleman made? Does he agree that it would be more to Britain's advantage if he and his colleagues dropped their abrasive and critical attitude towards our Common Market partners and behaved genuinely as partners, in which case we might get some of the problems solved?

May I put three particular points to the Prime Minister? First, on the budget and the common agricultural policy, does he recall that when he renegotiated these matters in 1975 and commended them to the British people as a whole, he did so on the basis that he had largely solved the budget problems and that Britain would in future pay less? What hapened to his estimate then? Was it wrong? What has happened after four years of constant criticism?

Why, after that constant criticism, if he has done well in the Common Market, is Britain still paying more? Would it not be better if, instead of that criticism, he were more co-operative?

Does the right hon. Gentleman recall that in the White Paper he indicated that he had gone a long way towards securing a better balance between supply and demand of common agricultural policy products? There is a tremendous gap between what he says and what has happened as a result of our negotiations with the Common Market. What reforms has the right hon. Gentleman brought about, as distinct from the regular statements and communiques that we receive at intervals?

Secondly, the right hon. Gentleman made no statement about the future of fisheries policy, a subject upon which Britain has perhaps the best case of all for most favourable treatment Will he give us some indication about that?

Thirdly, the right hon. Gentleman mentioned that it was mainly an economic summit. As he will know, there are serious problems affecting a close neighbour of the Common Market—namely, Turkey. America and Germany were to give Turkey valuable financial assistance. There seems to be some delay. Was Turkey discussed? Has he anything to say on that? It is a very urgent matter. If anything happens to Turkey, it will be highly damaging to the whole of the Western alliance.

The Prime Minister

The budget problem is one that has taken up much time. That is because we are trying to get the Community to recognise that the principle of capacity to pay on one's net resources is as good for external use as it is in our internal affairs. At present our contributions are made on the basis that we happen to be a large food importer. When the discussions took place in 1975 we received assurances that surpluses would not be allowed to build up. However, surpluses have been built up, and it is only now that the Community seems ready to face the fact that when it reaches the ceiling of its resources it will no longer be able to pursue this rake's progress. Apart from the arguments that we are advancing, the sheer facts, as the President of the Commission said yesterday, can cause the policy to collapse under its own weight. We have valuable allies in the Community.

As to whether the budgetary problem should have been solved in 1975, there was a mechanism that helped us. That was produced in Dublin, where I was present with my right hon. Friend the Member for Huyton (Sir H. Wilson). That mechanism is of some assistance and, indeed, may be brought into use in 1979.

Since those days when the Conservative Party was in power, through a combination of circumstances, including North Sea oil and our increasing exports, we have passed from the balance of payments deficit that we inherited to the substantial balance of payments surplus that is now developing. One of the conditions of the Dublin mechanism was that the country concerned should be in balance of payments deficit. Therefore, for that reason, that has not operated.

The Agriculture Ministers are discussing fisheries policy. It is not thought appropriate by us that we should do so at this time, as the discussions are not at the stage where Heads of Government can resolve the issue. The House knows of the attitude taken by my right hon. Friend the Minister of Agriculture. Hon Members may rely upon him to be pretty sturdy about these matters.

The question of Turkey, and aid to Turkey, was discussed informally among Heads of Government after the formal sessions had been concluded. I hope that additional assistance may be given to Turkey, but I am not able to disclose what it is at the moment.

As to the right hon. Lady's general conclusion, I do not think that she should accept what the commentators say about this matter. I am sure that she must have more reliable sources of information than the commentators, who, unless there is a tremendous row, always say that every summit is disappointing. The summit was not disappointing to Britain, because, for the first time, the arguments that we advanced seemed to have gone home. We did not have to adopt an abrasive attitude. We merely had continually to put forward the logical virtue of this case, as we have done year after year. Perhaps it is a pity that that was not done when the Conservative Party took us into the Common Market.

Mr. Powell

Can common prices be increased if the United Kingdom does not agree?

The Prime Minister

There is a legal point here, under the treaty. Perhaps I could explain it with some care. The Commission makes price proposals under article 43. The Council decides on such a proposal by a qualified majority. However, under article 149 it can modify a Commission proposal only by a unanimous vote. Thus, provided the Commission does not change its proposal for a price freeze, it would require all nine member States, including the United Kingdom, to force an increase in prices. The right hon. Gentleman has already heard me say what would be the attitude of the United Kingdom on that matter.

If the Commission changed its proposals, the United Kingdom would continue to oppose any increases and discussion would have to continue until an agreement satisfactory to all member States, including the United Kingdom, could be found.

Mr. David Steel

While, understandably, the need to reform the CAP and the matter of the budget balance attracted most attention out of this Council meeting, does the Prime Minister agree that that tended to overshadow the important decision that was arrived at on the reduction of energy consumption? Does not that call for a more detailed policy statemen from the Government, as it will affect this country? Should we not debate the matter in the House?

The Prime Minister

My right hon. Friend the Secretary of State for Energy reported to the House a week or two ago that we were, following the decisions taken at the International Energy Agency, putting forward proposals for further conservation. We have indeed already introduced some, including, for example, financial assistance to householders to insulate their lofts. At the other end of the scale we are coming forward with proposals for burning more coal in power stations in place of oil. I am satisfied that the United Kingdom will be able to meet its share of the target of a reduction of about 5 per cent.

Mr. Jay

In contrast to the humbug that we have heard from the Leader of the Opposition, will my right hon. Friend note that his speech on the EEC budget and the CAP was so good that it deserves to be followed up by equally resolute action?

The Prime Minister

Yes, Sir.

Sir Raymond Gower

Does the Prime Minister recall that he was a prominent member of the Government who renegotiated the terms of entry? Does not his statement today suggest that he and his Government had it wrong when they renegotiated those terms? Secondly, is the Prime Minister not somewhat anxious that his present attitude is so popular with those who opposed entry altogether?

The Prime Minister

I hope to win over those who opposed entry altogether to the belief that a community of interest and working together are better for us than a Britain in isolation. The adoption of a critical posture—where it is not only in Britain's interest, as this is, but in the interests of the healthy development of the Community—is the best way to get the people of Britain and those totally opposed to entry to see the virtues of this. That policy I have always taken. I shall continue to do so.

Mrs. Castle

Is my right hon. Friend aware that the people of this country are wholeheartedly behind the Government's determination to resist any increase in farm prices until surpluses have disappeared? Is he aware that officials of the Community are hanging on to the hope that a Conservative Government would be more pliant? Do not the right hon. Lady's remarks this afternoon prove them right? Will the people take warning before it is too late?

The Prime Minister

My right hon. Friend had a great friend in Mr. Aneurin Bevan. She will recall his famous phrase to this effect:"Why peer into the crystal ball when you can read the book?"Why should the British people take any more warnings about the future when they can see what happened on the last occasion when the Tory Government had responsibility for our affairs?

Mr. Donald Stewart

Is the Prime Minister aware that the attitude taken at this meeting meets with the approval of the majority of the population of the United Kingdom and that the United Kingdom negotiators cannot be abrasive enough? Assuming the return of a Labour Government after the election, will he say whether this policy will continue after that date? Is he aware that the answer to all these problems is the bringing forward of the signing of the inevitable document of withdrawal?

The Prime Minister

I agree that the question how these policies develop is of great importance. The arguments that have now gone home to some of our Common Market colleagues are the growth of unemployment in their countries, the sight that they have of industrial difficulties, with industries that are running down, and the fact that some of the great towns and cities of Europe—I shall not name any of them—are infected with some of the same social tensions and problems as we have seen to a lesser degree in our country. They are ripe for the argument that it is time to change the priorities and devote more attention to these matters that cause unemployment.

It was probably right 20 years ago, when agriculture was in a fairly depressed state, to spend a great deal of time and attention on the restructuring of agriculture. Even now it is the Government's intention to attack not the fundamental objectives of the agriculture policy but its excesses, which have brought the policy into disrepute.

Mr. Spearing

As the Prime Minister agreed with the points so cogently put by my right hon. Friend the Member for Blackburn (Mrs. Castle), does not that show that the protection of the British people should not rest alone in Governments but that there is merit in the protection of the British people by the powers of this House in the matter of EEC policies?

The Prime Minister

Yes, Sir. Indeed, my hon. Friend has been most assiduous in protecting the British people according to his attitude in these matters. Ministers stand here only by virtue of the fact that they secure the support of the House of Commons. When they do not have that support, they no longer stand here.

Mr. Marten

My hon. Friend the Member for Barry (Sir R. Gower) referred to the terms renegotiated in Dublin. Is it not logical to suppose that everyone who supported the"Yes"campaign agreed, presumably, with the renegotiated terms?

The Prime Minister

The hon. Gentleman is really too young a soldier in this battle to continue to fight all these hoary old campaigns, and I urge him to look ahead.

Mr. William Hamilton

Is my right hon. Friend aware that there are millions of people in this country who agree that in his speech in Paris on Monday he spoke for the national interest, for the interest of the taxpayer and the consumer, in a way in which no Tory spokesman could possibly speak, as is evidenced by the contribution made by the right hon. Lady the Leader of the Opposition this afternoon?

Does my right hon. Friend agree that the House of Commons will not for ever sanction the paying of money by the British taxpayer to inefficient farmers on the Continent, to the cold storage business in Europe, or to anything else, unless we see an adequate return for the United Kingdom?

Will my right hon. Friend give a firm assurance that although we have these criticisms of the EEC we have problems that we are incapable of solving by ourselves, and that therefore we must fight for the solution of these problems within a wide international context?

The Prime Minister

I am certain that the House of Commons would not be willing to increase our contributions beyond the present limits unless these very important reforms were introduced. Indeed, the present Government would not put forward such a recommendation to the House unless these reforms were achieved. We can do it here by vote. Other Governments may find institutional difficulties. This may in itself prevent an increase in the funds allocated to the Community budget. On all counts there is growing pressure to try to get a sensible agriculture policy.

Those who attend these meetings recognise the interdependence of our countries and know that the same kinds of problems afflict us all. The steel problems that we have are repeated in other countries, and so are the shipbuilding problems and the textile problems. There is no doubt that, by a wise application of policies—and without giving too much power, perhaps, to centralised bureaucracies—we can achieve better solutions than we can by acting individually.

Mr. Dykes

Does the Prime Minister agree that the total amount in £ sterling expended on intervention in the CAP is much less than the figure that would now arise if we had retained the old system of direct farm subsidy?

Everyone would agree that the CAP needs modernisation and reconstruction, but is it not a fact that no more fundamental problem arises from that in respect of our membership of the Community? As the right hon. Gentleman said just now, these problems can be solved through the summit machinery and through meetings of the Council of Ministers. Does he agree that no enormous, excessive or insoluble problems still arise?

The Prime Minister

There are no insoluble problems in that sense. What is needed is the will. Frankly, until the meetings on Monday and Tuesday, I had not seen any dawning recognition that the will existed. Now, for the reasons that I have given, I believe that it may exist and that we shall get changes. I have high hopes in that direction.

As to the relative cost of storing surpluses and the old British system of deficiency payments, there are too many imponderables for us to make a calculation of that sort. We do not know what the level of world prices will be. We do not know what the prices of New Zealand and Australian produce will be. I do not think that it is much use making theoretical calculations of that sort.

What we know is that we are growing food to excess and selling it at a loss at the present time. That has already soured our trading relations with the United States and made for difficulties with Australia and New Zealand. It has prevented Fiji and Mauritius, and some of the West Indian islands, from selling us sugar which they could otherwise have sold more cheaply. There can be no defence of the present system, in my view, and I hope it will soon be corrected.

Mr. Heffer

Is it not rather sad to see the Leader of the Opposition, at a time when the Government are clearly standing up for the interests of the nation, not standing beside the Government in defending those interests?

Arising from the point made by my right hon. Friend the Member for Batter-sea, North (Mr. Jay), will my right hon. Friend say when action will be taken and whether there is to be a time limit for the making of these fundamental changes?

The Prime Minister

Heads of Government do not reach conclusions on matters relating to agriculture prices. That is a matter for the Agriculture Ministers. They will be meeting in about the last week of this month. My right hon. Friend will be attending the meeting in order to carry out the policy that I am bound to say I have enunciated on many occasions, particularly at the Guildhall last November. This is no sudden conversion on our part. My right hon. Friend will carry out that policy. It will then be for the Agriculture Ministers to come to some conclusion on it. They know our attitude. It is not put forward in an abrasive way. It is critical, certainly, but it is not abrasive. We are allowing the facts to speak for themselves. We are satisfied that what we are doing is in the best interests of the British consumer, of the European consumer, and of a healthy agriculture everywhere.

Sir David Renton

Is the right hon. Gentleman aware, as a farmer, that in relation to overall farm production the margin between surpluses and shortages is a surprisingly narrow one? Is he further aware that surpluses are generally in the interests of the consumer and that shortages are against the interests of the consumer? Is not the reality of the situation that he dare not risk changes in the agricultural policy for Europe which would or might involve shortages?

The Prime Minister

The right hon. and learned Gentleman is quite right. The margins are very narrow. No one complains if, because of nature's bountiful providence, there is a surplus in one year. But it is not nature's bountiful providence that is yielding us a growing and mounting surplus every year. It is a fact that inefficient and part-time farmers are being propped up by prices that are far too high. That is particularly so in some Continental countries. It is not true in this country. If there were a sensible agriculture system in the Community, it would enable British agriculture to expand.

Mr. Fernyhough

Concerning the discussions on Europe's energy supplies, is my right hon. Friend optimistic that it will be possible to get the European countries to substitute British coal for foreign oil? Does he accept that if that were done it would mean a boost to our exports, it would give security to our mining industry, and it would be a fair quid pro quo for our taking Europe's dairy and horticulture products?

Will my right hon. Friend accept from me that the speech he made in Europe at the weekend lifted the hearts of the common people, the ordinary people—as distinct from the extraordinary people—of this country, and that if he continues to advocate such a policy he can call the general election whenever he likes, and he will be sure to win it?

The Prime Minister

As for the use of British coal in Common Market countries, we would be very happy indeed to accommodate them, but it must depend on the prices at which they can buy it. Some of the countries that are now purchasing coal from third countries turn the prices argument upside down. Up to now they have not wanted us to buy food in the cheapest market, although they want to be able to buy coal in the cheapest market. We have to be careful how we deploy that argument.

As for the next election, I am interested that my right hon. Friend's mind is turning in that direction. I hope that he will—

Mr. Skinner

The right hon. Gentleman is not standing.

The Prime Minister

If he is not standing, he rests easy. I hope to get around to thinking about it some day.

Mr. Buchanan-Smith

Does the right hon. Gentleman agree that simply to oppose price increases without at the same time advancing constructive proposals for the reform of the common agricultural policy generally is simply a sterile exercise? What proposals is he putting forward in a genuine reforming spirit?

The Prime Minister

There is much merit in what the hon. Gentleman says. It was not for me to deal with this yesterday, because we were discussing the CAP at a rather rarefied level. However, as the hon. Gentleman knows, the Minister of Agriculture, Fisheries and Food has made a number of proposals and will continue to do so.

Mr. Gould

Does my right hon. Friend agree that his difficulties hitherto in getting effective action on the reform of the CAP, and on our budgetary contribution, show how dangerous it would be if ever these vital decisions were taken by institutions in which we did not have a veto and in which we were a permanent minority?

The Prime Minister

There is a danger there, but I hope that my hon. Friend has not overlooked the fact that on this issue of achieving a sensible reform of the CAP it is the Commission that has come forward with the proposals, because it is aware of the pressure on its resources. It has been considering the other issues of employment and the social fund and the needs that must be met there. Therefore, institutions can be helpful as well as dangerous.

Mr. Rost

What is it that we have overlooked about this Government's record over the past five years that gives our Prime Minister the authority and credibility to lecture to our more successful partners about economic management and waste of funds?

The Prime Minister

I hope that I do not lecture to our colleagues. I use the simple force of logic and argument to persuade them when we are right, and it looks as though the argument is now winning through.

Mr. Torney

I congratulate my right hon. Friend upon the stand that he took in Paris this weekend regarding the CAP. May I have his assurance that he will give support to our Minister of Agriculture, Fisheries and Food—who is doing a good job in the Common Market—for a veto, should it become necessary, on the question of farm prices? Further, will he please tell the House how long we must wait and accept being put off by the rest of the Common Market in regard to the CAP, and whether, at some time or other, he will decide that enough is enough and"Out"is the answer?

The Prime Minister

I am afraid that the answer to my hon. Friend's last question is"No ". I do not think that we have reached that stage, or that it would be good for this country if we did. On the first part of my hon. Friend's question, the Minister of Agriculture, Fisheries and Food has done sterling work in Brussels. Somehow I thought that my right hon. Friend was supporting me. My hon. Friend can be assured that I shall support my right hon. Friend, too. On the question of a veto, I am sure that my hon. Friend would not want to be unreasonable about this. I would hope that it might be possible—because the spirit of conciliation and understanding is apparent—for the Ministers to talk through these matters and reach agreement on them without the need for the use of the ugly word"veto ". That is their task. They must get agreement, and it is far better that they should seek to do so.

Mr. Costain

Is the Prime Minister aware that we on the Opposition Benches could well wonder whether the Prime Minister knows who it is who is supporting him on this issue? During the discussions on energy conservation, did the right hon. Gentleman bear in mind the fact that the chairman of British Railways had indicated that the building of a Channel tunnel could save oil products? Was this discussed in any form? If it was not, when it comes up for discussion will the Prime Minister bear in mind that the South-East of England was paralysed for 15 years through lack of decision on the Channel tunnel and that when a decision was made it was subsequently cancelled? Will he ensure that a quick decision is made?

The Prime Minister

I was aware of Sir Peter Parker's new proposal but I cannot say that it was discussed at the European Council meeting yesterday. The hon. Gentleman says that I am not at all sure who is supporting me. I am quite clear that it is not the Opposition. What is more, not only are the Opposition not supporting the Government; they are not even supporting this country's best interests.

Mr. Fitt

Will my right hon. Friend accept from me that the 20,000 unemployed people in my constituency and their families, who are living on social security benefits, are completely in support of his attitude of resisting any further increases in the price of food? Will he give an assurance to me and my constituents who are living at such a low level and finding it difficult to exist that he will continue with his opposition before the election, during the election and after the election?

The Prime Minister

Yes, Sir. On the last part of the question, I hope to be here for many years in order to follow this policy. As to the level of common food prices, I have spoken to the President of the Commission about some of the issues in Northern Ireland. If more resources were available it would be possible, through the social fund, to make quite a substantial difference. I think I am right in saying that expenditure on the so-called social fund, which deals with these matters, is about one-tenth of the expenditure on agriculture. This is why I think we have now managed to marry, in a convincing way, these two arguments. The real problems we have to face and solve are those such as exist in the hon. Gentleman's constituency and others in Northern Ireland.

Mr. William Ross

Does my right hon. Friend accept that the fact that all the questions have been on the CAP demonstrates a weakness of the Common Market? Was there any discussion at all, on the economic and development side, in respect of regional policy? Is he aware that we in the West of Scotland are very concerned about the activities of multinational companies—particularly firms such as Massey Ferguson, which was able to withdraw important production from a development area in Scotland to a non-assisted area in France, leaving the United Kingdom without a manufacturer of combine harvesters? Surely this is where the EEC could be useful if it were doing the kind of thing that we were promised it would do a few years ago.

The Prime Minister

The"social partners "—the term used to describe the trade unions, employers and the Government—are to have a meeting in the latter part of May about some of the matters that my right hon. Friend raised. I know that one of the matters that is under discussion in that Council, or in other Councils, is what general regulations can be applied to movements by multinational companies. I shall see that this matter is drawn to the attention of the Secretary of State for Industry.

Mr. Tim Smith

May I press the Prime Minister further on the question of the best use of coal reserves? Would we not be more likely to make some headway if we were prepared to make some concessions in the negotiations? How can we hope to win any concessions if we are not prepared to make any? Would there not be a better prospect of exporting British coal if we were prepared to concede something in another area of energy policy?

The Prime Minister

I always believe that at the end of a negotiation both sides should feel that they have won. Of course, the hon. Gentleman is correct. However, he might care to suggest to me in what other areas we could make the concessions. Is it in fisheries or energy policy, or should we hand over control of our oil resources to the Community? Is that the intention? It is all very well to state the truisms, but the hon. Gentleman had better come forward with some practical propositions.

Mr. Raphael Tuck

Is my right hon. Friend aware that he deserves the gratitude not only of this House but of the whole country for the courageous stand that he has taken? More power to his elbow. What prospect does he think there is of making the more myopic members of the European Economic Community see a little further than their noses?

The Prime Minister

I think that the facts are now being borne in upon the Community as a whole and that the most likely way of getting the changes that we have argued for for some years is on the grounds of logic and interest.

Several Hon. Members

rose—

Mr. Speaker

Order. I propose to call four more hon. Members from each side.

Mr. Stanbrook

Will the Prime Minister be honest with the British people and admit that this is all a bit of ritual dancing, and that there is no hope of reform of the CAP while he remains in office?

The Prime Minister

If that defeatism is typical of the whole of the Conservative Party, heaven save the British people from it.

Mr. Spriggs

Is my right hon. Friend aware that all his friends who sit behind him appreciate the statement that he has made today? As for the unemployment problems confronting this country, in conjunction with those of the rest of the Community, does he agree that a strong team of all relevant Ministers, including himself as First Lord of the Treasury, should be present to make sure that a real effort is made to overcome unemployment internationally?

The Prime Minister

I am obliged to my hon. Friend. The next step is for the Secretary of State for Employment, who is spending a lot of time on these matters, to meet with his colleagues during the next month, and then to report back on what further steps can be taken to integrate Community policies in these matters with national policies. This country has already undertaken a substantial programme. Indeed, there was hardly any aspect that was touched on yesterday on which I was not able to say that we have ourselves already taken action, but we are ready to take further action in co-ordination with the other member countries.

Mr. Raison

Does the Prime Minister recall that it was the declared policy of the Labour Government to grow an ever-increasing amount of our own food? Will he now admit that it is because this policy has failed that we are having to pay more into the CAP?

The Prime Minister

No, that is not the case. We are growing more of our own food. We could grow more, because we are among the most efficient European producers of some products. I believe that when we have a sensible policy, and when small farmers in some countries—I shall not name them—are not propped up by the subsidies, there will be a much better future for British agriculture than there has been so far.

Mr. Stoddart

Is my right hon. Friend aware that his warning to other EEC Heads of Government that the United Kingdom will not be treated as a milch cow will be warmly welcomed by the British people? Did he also inform his colleagues that the £1,000 million-plus annual contribution that this country makes to the EEC is not only an unfair burden; it prevents the expansion of our economy by about £3,000 million a year, with a consequent reduction in our standard of living and an inhibition on Government opportunities to deal with unemployment?

The Prime Minister

There is no doubt that the nature of Britain's net contribution to the Common Market is out of proportion to that paid by other Community countries. I think that my hon. Friend is right in saying that I should concentrate, as I did yesterday, upon adjusting the financial mechanisms, but, above all, we must concentrate on ensuring that we can get growth in our own country through a productive economy and through keeping inflation down. It is to that that the industrial strategy and other instruments of policy are directed.

Mr. Michael Marshall

Does the Prime Minister admit that the problems of the CAP, which have been known and recognised for a long time, simply cannot deflect us from an overall view of membership of the Community? With regard to his point about the declining manufacturing industries, was the steel industry discussed? Does he agree with the view of the British Steel Corporation and that of the independent steel producers that at present membership of the Community is saving that industry from a crisis of 1930s proportions?

The Prime Minister

The work of Commissioner Davignon on steel has had some advantages for European steel. I am not, however, certain that it has had the same advantages for Britain. That is a matter for argument. I know that Commissioner Davignon is trying to ensure that there will be a healthy future for European steel as a whole. I agree with the hon. Gentleman about what he has done so far. The fact that nine countries have negotiated has saved the European steel industry as a whole from a much worse crisis. I hope that we shall continue in that way. We have only to look at recent events in France to see the consequences that can ensue, even with the present degree of negotiations that we have.

Mr. Wrigglesworth

Will my right hon. Friend make it clear that, contrary to the impression being given by the Conservative Opposition and others, the Government are not isolated in the criticism that they are making of the CAP and the budget? In seeking support from other parts of the Community, will he bear in mind that direct elections are coming up in June, and will he seek support from the European Parliament?

Mr. Molloy

What a waste of money that will be.

The Prime Minister

My hon. Friend must remember that this is election year. Therefore, he need nt expect fair treatment for the Government, or anything that they do, in a number of Conservative newspapers which are realy right back to their old 1951 standard. I could not say anything much lowe than that about them.

Mr. Whitelaw

What about"Whose finger on the trigger "?

The Prime Minister

That was a year earlier, Willie, and it was not yours, either. As to isolation, that is a bit of newspaper exaggeration, which my hon. Friend should not take too seriously. What I found significant and hopeful was that a number of my colleagues—as these were private discussions it would not be fair to enumerate them—said that they agreed with the general trend of criticism that the United Kingdom Prime Minister was making on that occasion. Far from our being isolated, there was more agreement with our analysis of the situation, and of the need to reorder our priorities, than I have ever known.

Mr. Giles Shaw

I accept that on this issue there has been some movement towards the United Kingdom's point of view, but does the Prime Minister recall that on one issue—the European monetary system—we are totally isolated? With his new-found penchant for negotiation, when does he expect to join that school?

The Prime Minister

It is just as well for Europe that we did not join, or we might have been dragging them all up—such is the strength of the pound at present. I believe that the European monetary system will have a long-term, healthy and viable life only if there is more convergence in the economies. It is to that that we should be directing our attention and are now doing.

Mr. Flannery

Has my right hon. Friend, by some slim chance, noted the quite evident demoralisation on the Tory Benches as a result of his defence of Britain in his speech yesterday? More importantly, is he aware of the massive and developing ground swell among our people against the Common Market as a result of the utter futilities of the CAP? Does he at least think that at some time, unless this is changed, our people will demand that we come out of the Common Market?

The Prime Minister

I think that the CAP has been a source of great irritation and worse to our people. Therefore, I have no doubt that there is widespread support for the progress that we are making in this particular matter. I think that my hon. Friend is right. It is extraordinary that this afternoon I should be criticised for being abrasive and critical when I am stating an attitude that is founded in logic and based on British interests. But I suppose that we are here seeing the true face of the Conservative Party.

Several Hon. Members

rose—

Mr. Speaker

Order. We must move