HC Deb 29 April 1980 vol 983 cc1151-65
The Prime Minister (Mrs. Margaret Thatcher)

With permission, I will make a statement on the meeting of the European Council in Luxembourg on 27 and 28 April, which I attended with my noble Friend the Foreign and Commonwealth Secretary.

The meeting took place against the background of a sombre international situation of which all of us in Luxembourg were acutely conscious. The first part of our discussion was therefore directed to the problems of Afghanistan and Iran. On both of these we were in total agreement. We reaffirmed the absolute necessity for every Government in the world, whatever their political attitude, to respect the Charter of the United Nations and the principles of international law. This requires in Afghanistan that Soviet forces should withdraw, and in Iran that the American hostages should be released, without further delay. So long as these two illegal situations remain, the world will continue to live in the shadow of potentially grave developments.

I am sure it was right, therefore, for the European Council to repeat the earlier suggestion that the Nine had made for a political solution to the problem of Afghanistan. This would permit that country to resume its traditional neutrality and non-alignment. Equally, it was right for the Council to reaffirm the decision on Iran taken last week by the Foreign Ministers of the Nine while at the same time assuring the Secretary-General of the United Nations of our full support for his efforts to find a political solution to that problem.

The second part of our meeting involved discussion of Britain's net contribution to the Community budget and a number of other Community questions that had been associated with it. For this reason my right hon. Friend the Minister of Agriculture attended a meeting of the Council of Agriculture Ministers on Sunday. That meeting continued the Ministers' previous discussions on the proposed agricultural prices for 1980–81 and other agricultural questions. They reported to us that, with some reservations, the other eight member States were ready to approve an average increase in prices of about 5 per cent., including 4 per cent. on milk and sugar, an increase in the co-responsibility levy for milk, and a range of other measures. There were also fresh proposals on a common organisation for sheepmeat, which the others were ready to approve.

On our budget problem there was broad agreement on the methods by which the Community would both reduce our contribution and increase the benefits to us from Community expenditure. We were able to make considerable progress on amounts, but less on the duration of the arrangements. A number of proposals were made, including one that would have reduced our net contribution to £325 million, but for 1980 only. We were not able to agree on later years. In spite of intensive efforts to reach a satisfactory compromise, it proved impossible, in the time at our disposal, to find an acceptable combination of both amount and duration.

We then discussed the other agricultural matters that our partners wanted to settle at the same time. These discussions revealed a number of difficulties for Britain. I made it clear that the proposals on CAP prices would have budgetary and other consequences for us that my right hon. Friend and I did not feel justified in accepting. Those on sheepmeat contained features that would have been seriously disadvantageous and that we could not accept.

The Council also reviewed the progress of discussions on a common fisheries policy. We all want to continue to make progress, but it is clear that much more work needs to be done on this subject. I told my colleagues that to be acceptable to us any solution must safeguard the vital interests of our fishing industry.

We discussed the energy situation in the Community and the problems caused by the tenfold rise in international oil prices over the last eight years. We invited the Energy Council, first, to examine what new measures may be necessary on oil supplies and, secondly, to review the current policies of member States on the replacement of oil by other fuels, on the development of nuclear power, and on conservation. The Council intends to revert to these matters at its next meeting in Venice.

I regret that it proved impossible to make more progress on the Community's internal problems, but since our partners have brought these several issues together I believe that it is understood that they cannot be dealt with unless at the same time the budget problem is solved.

Meanwhile, the President of the Council intends to be active in the next few weeks in seeking a satisfactory outcome. He will receive our full co-operation. We both believe that such an outcome can be achieved.

Mr. James Callaghan

I think that we were all glad to hear what the right hon. Lady had to say on the international situation and that the Governments generally invited respect for the Charter of the United Nations and the principles of innernational law. She specifically referred to the vital need for Soviet troops to withdraw from Afghanistan and for the American hostages to be released without delay. Both of these are absolutely essential.

But I take it from what the Prime Minister says that a third signal was intended to be conveyed, namely, that the Nine are opposed to military steps to bring about the release of the hostages and that they would therefore be opposed, for example, to such possibilities as the mining of the Straits of Hormuz.

I suggest to the right hon. Lady that those are the kinds of military operations that it is as essential to avoid as anything that has gone before. I do not take the view taken by some that it was wrong, in all the circumstances, to attempt to prise loose people who are held illegally——

Mr. Flannery

Speak for yourself.

Mr. Callaghan

I am speaking for myself and I shall continue to do so, but I have a feeling that I am also speaking for a lot of people in the country.

Surely what is needed now, in view of the failure of the operations over the last six months to secure the release of the hostages, is a new beginning.

The present attempts have failed. Therefore, I welcome what the right hon. Lady says about assuring the Secretary General of the United Nations of the full support of the Government and, indeed, of the House for his efforts to find a political solution. I am in no doubt that to try to secure the release of the hostages under the glare of television cameras day after day is impossible. We shall not do it in that way, and we shall not do it by military means. I hope that quiet diplomacy, whether by the Secretary-General or by anyone else who is qualified to do so, can take over and that the media will give this subject something of a rest, so that diplomacy can play its full part in securing the release of the hostages, because Iran has no right to hold them in any circumstances. However, so long as they are held in the full glare of publicity, there will be every attempt to make the most of it.

As to Afghanistan, has the right hon. Lady any indication that Afghanistan itself is ready to resume its traditional neutrality and non-alignment? That would be a satisfactory way out, as in the case of Austria, but Austria and countries such as Austria have indicated their willingness. Is there any indication whether or not Afghanistan is ready to leave the Soviet orbit? [Interruption.] Well, we are all agreed that the Soviet Union must withdraw, and we are trying to find ways and means of ensuring that she will withdraw. Surely a precondition is that the people of Afghanistan, if they have any opportunity of expressing their views, should be able to indicate that they want to revert to a traditional, non-aligned position. I am asking the Prime Minister whether there is any indication of that likelihood.

As to the budget, the right hon. Lady was absolutely right not to agree to a reduction for one year only, although it was £800 million, which is quite a lot of money. Was she given any details of the proposal that, according to the newspapers, Chancellor Schmidt is reputed to have made: that for the later years there would be a restructuring of the budget mechanism? Was any indication given of what we could have expected to get in the later years had we accepted the £800 million or thereabouts for 1980?

As the right hon. Lady has been quite clear about this, we again ask whether she is aware that our trump card is the price freeze. I repeat very strongly that we shall support her in not giving way on the agricultural price freeze until the budgetary issue is settled. If she follows that course, and if she helps the President of the Council to try to seek a satisfactory outcome, I believe that in the end we shall secure justice. Clearly, the present situation is not tolerable.

I think that the Prime Minister has had a frustrating visit. While it has carried the procedures somewhat further, I think she would agree, at the end of this frustrating period, that it was wrong of her to raise expectations as she did. She gave the impression that this issue could be settled by last December; that when it was not settled by December, it would be settled in February; and that when it was not settled by February, it would be settled in April. It is a much longer process than some of the right hon. Lady's followers seem to think. I think that she has now discovered that. We hope that in the end she will succeed. We believe that she must, because she has the united support of the House of Commons on this matter.

The Prime Minister

I am grateful to the right hon. Gentleman for what he said about the international part of the communiqué. On Iran, I confirm that, taking his definition of "military action", which I think was the same as I indicated earlier—namely, things such as blocking or mining the Straits—we would be against it. We did not discuss specific forms of military action. I make it quite clear that we would be against the things that the right hon. Gentleman mentioned, or what I believe would be a common definition of "military action".

As to the right hon. Gentleman's comments on Afghanistan, we have not been able to get specific indications from the people of Afghanistan, and I do not see any way of doing so so long as the present regime is still held there with Soviet Union support.

I am grateful to the right hon. Gentleman for pointing out that with regard to the budget we managed to secure a promise of an £800 million refund in one year, which I regard as a very significant achievement. When we came to discuss the second year, we got into difficulties. It was clear that we would get a substantial refund in the second year, although the Community was not prepared to define it in a satisfactory way, or to continue it. I felt that we could not go on having this argument yet again at regular intervals, and that it would be better to wait until we could achieve a settlement under which we could also agree on the duration.

I believe that the agricultural price settlement is a major card. As I tried to indicate towards the end of my statement, we shall not get agreement on the agricultural price settlement, or any other major matter, unless our budget problem is satisfactorily solved.

Mr. Walters

Does my right hon. Friend accept that wholehearted agreement on every issue by friends is not always the most helpful thing that they can do? I fully understand American exasperation over the hostages and the patience that the Americans have shown for many months, but surely erratic foreign policy in a crucial area is unsatisfactory. Is not joint consultation with the aim of formulating a united strategy essential in Western interests?

The Prime Minister

There was a very clear indication from each member of the European Council that we must stay absolutely solid in our support of the United States. There was total unanimity on that point, as well as a great appreciation that the more consultation we can have, both with one another and across the Atlantic, the better it will be for all of us. We spend some time in trying to improve that consultation.

Mr. Russell Johnston

With regard to Britain's net contribution to the budget, is the Prime Minister aware that despite what the Leader of the Opposition said, many people believe that the abrasive fashion in which she has conducted these negotiations has been damaging to Britain's real and best interests? She said that a reduction of £850 million was significant. Does not she agree that it was also a notable concession, particularly for the Germans and the French, who are facing imminent elections? In the circumstances, would it not have been wise to accept that offer, provided, as was indicated by the Leader of the Opposition, she could have achieved future budgetary restructuring on the basis of the GNP of a country—not just our country, but any country? Surely it is not the object of British diplomacy to isolate Great Britain.

The Prime Minister

Whatever the description of the methods, our partners were persuaded to offer the very significant reduction to which the hon. Gentleman referred. Whatever the methods, it was pretty successful in that respect. The difficulty arose on the question of the duration and the other things that they wanted along with that reduction. As I have already made clear, we could not accept some of those things, and I hope that the hon. Gentleman would not have urged us to accept them, either.

Sir Derek Walker-Smith

In differing from the hon. Member for Inverness (Mr. Johnson), may I ask my right hon. Friend to accept my congratulations on her firm stance and on having spoken so effectively for Britain during the course of the conference? Can she further confirm that she will pursue with unabated vigour and enthusiasm the radical restructuring of the CAP and the Community budget, which is vital to a satisfactory solution of this problem?

The Prime Minister

I agree that both of those are vital to a solution, especially the restructuring of the common agricultural policy. However, it was interesting that the proposals for a price settlement that came before us, far from restructuring either the common agricultural policy or the budget, would have amounted to an increase of 1,000 million units of account to the budget and would have increased the proportion of the budget going to expenditure on agriculture. That did not seem an earnest of good faith for the Council of Ministers, which was saying that the budget itself must be restructured to have a lesser proportion going to agriculture.

With regard to a restructuring of the budget, there has to be a review of the Dublin mechanism by 1982. It seems sensible—this was suggested by both the President of France and Chancellor Schmidt—that there should be a restructuring, that we should have that review. There have been so many attempts at restructuring and reviews that it was not enough to place our faith in a promise of a review. We wanted a longer duration of the agreement that was being offered.

Mr. J. Enoch Powell

Is the right hon. Lady aware that a nation that is preponderantly and increasingly opposed to United Kingdom membership of the European Economic Community was proud and relieved that our Prime Minister declined to fall into the trap of prejudicing our agriculture and fisheries in- terests to attain a purely temporary alleviation on the budget?

The Prime Minister

That was something that was very much in my mind—namely, that I was being offered one year with a possibility of a second year for permanent principles to determine the permanent regimes on sheepmeat and future of the fisheries policy. To offer something permanent in return for something temporary is never a good bargain.

Mr. Whitney

Does my right hon. Friend accept that in seeking a resolution of this most difficult budget problem it is important to avoid the mistakes of the renegotiation that was so closely associated with the Leader of the Opposition? We must find a solution that is both fair and durable and avoid the squabble that goes on year by year and month by month. There are many other vital issues on which the concentration of the Heads of Government must be fixed.

The Prime Minister

That has been our objective. I think that the solution that we were offered for the first year, had it persisted, would have been acceptable. It would still have left us as the second largest net contributor to the Community. However, it would have given us large refunds. We were trying to get an element of dynamism into that refund. I wholly agree with my hon. Friend that we must secure a settlement that is likely to endure as long as the problem itself, or have absolute guarantees that there will be a review and that if we accept an interim settlement we shall not suddenly have to return to very much larger contributions.

Mr. Cryer

Were the discussions about further consultation with America wishful thinking, or were genuine arrangements entered into with America for consultation about America's military action? As the Prime Minister will appreciate, American military nuclear hardware is scattered over Europe. It is vital that we should be consulted, as the Government are claiming that we are, over its potential use.

As for solving the budget issue, do the Government have any contingency plans for withdrawing from the Common Market, or in the final analysis can we be walked all over? Will we be bound to accept a deal that is unacceptable to the country, because the nation is getting tired of our membership?

The Prime Minister

With regard to the hon. Gentleman's first point on consultation, there are quite frequent contacts between Ministers both within Europe and across the Atlantic. It is not as though we never see one another. The Foreign Secretary will be going very shortly, and there are regular contacts through our ambassadors. I should not like the hon. Gentleman to think that there are not regular contacts or that there is no regular method of consultation. We would just like to step it up at a higher level. We have not yet agreed on a regular method of doing that. Secondly, there are no plans for withdrawing from the EEC.

Rev. Ian Paisley

Will the right hon. Lady take it from me that the people who sent me to the House utterly deplore the fact that these meetings are held on a Sunday, which illustrates the fact that we are being sucked into a Continental system of doing things contrary to British traditions? Will she also take it from me that those who sent me to this place totally support her in her stand to get justice for Britain, if it is possible to get justice in an EEC charade?

The Prime Minister

May I make it clear that on this occasion many of us would have preferred to have a rather quieter Sunday than we turned out to have? I am grateful to the hon. Gentleman for what he said in support of the action that we took.

Mr. Jay

Is it not clear from this latest EEC deadlock that there is little chance of the United Kingdom getting a lasting and fair deal from inside this grotesque organisation?

The Prime Minister

No, I wholly disagree with the right hon. Gentleman. The fact is that we got nearer to it this time than ever before. We got a lot nearer at Dublin and a lot nearer this time. I believe that ultimately we shall be able to accept a favourable outcome. I should also point out to the right hon. Gentleman that the unanimity on international matters was both striking and extremely valuable at this difficult time.

Mr. Anthony Grant

In view of the unanimity that the Prime Minister so skilfully achieved among our partners on the question of Afghanistan, will the Government now please renew their efforts to dissuade our athletes from participating in the fiasco of the Moscow Games?

The Prime Minister

I think that when one or two more nations have made their views clear—I believe that there is mounting opposition on the part of Governments and legislative assemblies to going to Moscow, and certainly when I saw Pastor Georgi Vins this morning everything that he told me reiterated that it would be very unwise for people to go to Moscow because they would appear to be endorsing the policies of the Soviet Government—we shall make a further approach to Sir Denis Follows to ask him to reconsider his decision in time to reply to the formal invitation.

Mr. Benn

Is the Prime Minister aware that the resignation of Secretary of State Vance gives real grounds for believing that there are people advising the President who might push him towards military action—either a second rescue or something more direct? Is it not wise for old friends to give the sort of advice now to the United States that President Eisenhower gave to Sir Anthony Eden at the time of Suez, and tell it that it would be ill-advised to engage in military action of any sort, including an attempt to release the hostages, which might end in further tragedy, if not something worse, for world peace?

The Prime Minister

We deeply regret the resignation of Secretary Vance, although that was wholly a matter for him and the President of the United States. I should like to say that he was a wonderful person to work with——

Mr. Norman Atkinson

That is hypocrisy.

The Prime Minister

As a matter of fact, I was expressing exactly what I felt and feel. I wish to pay a great tribute to his co-operation and to his work. We shall miss him.

I turn to the other part of the right hon. Gentleman's question. Of course, we owe our judgment to our friends. Of course we do. We do not withhold it in any way. We made our views clear on military action at the Council of Ministers.

Several Hon. Membersrose——

Mr. Speaker

Order. I propose to call four more hon. Members from either side of the Chamber before we move on.

Mr. Nicholas Winterton

Does my right hon. Friend accept that even if she has isolated us from some of our friends in Europe she has united the nation, which at this time is a very good thing? Does she agree that the best way of preserving peace in the world and ensuring that military intervention in Iran or elsewhere is not considered is for the European countries and America to stick rigidly together? Will she confirm again that we shall back America in any reasonable and rational non-military action that it cares to take against Iran?

The Prime Minister

I wholly agree with the views expressed by my hon. Friend, which were echoed all round the Council of Ministers during the past few days. We are trying to do everything that we can to support America in order to secure the release of the hostages. Our ambassadors are now back in Tehran. I hope that very shortly they will be able to make a joint approach, once again, to President Bani-Sadr to let our views be known. It is easy to condemn actions to try to release the hostages. It is very difficult to put forward proposals that would actually secure their release. Therefore, we could go on only with diplomatic, political and economic action. I assure my hon. Friend that we shall do that jointly.

Mr. Stoddart

Is the right hon. Lady aware that there is support by the Opposition and the country for the firm line that she took at Luxembourg? Is it not now becoming clear to her that Britain's economy and her institutions are quite incompatible with those of the EEC? Although I do not expect the Prime Minister to do a U-turn and agree to withdraw, is it not now time for this country to use its position, when the European resources are coming to an end, to press for a fundamental reorganisation of the finance and institutions of the Community?

The Prime Minister

I indicated that there must be a reform of the CAP. Many of my predecessors and my right hon. Friends have said the same thing from this Dispatch Box. It is not an easy matter to achieve reform. The opportunity will arise if we stick to the limits on the budget contributions of 1 per cent. value added tax. That limit will come soon. I do not agree with the hon. Gentleman's assertion that it is contrary to the interests of this country to be in the EEC. It is wholly in the interests of this country to be in, and remain in, the EEC. On trade arrangements, we negotiate as part of the biggest trading bloc in the world. By virtue of being in the EEC we secure many investments in this country from overseas—investments that would not come to us unless we were also part of the EEC. About 42 per cent. of our exports go to the EEC, which is a very considerable factor.

Mr. Dykes

To cheer up the right hon. Members for Down, South (Mr. Powell) and for Battersea, North (Mr. Jay), and reduce the hysteria of certain newspapers against the Market, will my right hon. Friend confirm that the negotiations are progressing absolutely in the right direction, with constructive results, and that she remains confident at this stage that the £800 million at least remains on the table, for next time round, and that there is every prospect of a successful solution at the Venice summit?

The Prime Minister

I stress that we came nearer to a solution on the budget problem than ever before and that President Cossiga will be making strenuous efforts during the next six weeks by going round to Heads of Government to try, finally, to secure agreement. There will be no further agreement on other major matters within the Community unless and until our own problem is settled.

Mr. Dalyell

Does not this two-way co-operation with the United States have a reverse obligation? How is it that her Defence Secretary was able to tell the House yesterday that he did not know whether the Diego Garcia base had been used when the exchange of notes of 30 December 1966 made it quite clear that the territory would remain under United Kingdom sovereignty? Is not there an issue for all of us in the House when United Kingdom territory is used for matters of surpassing importance, about which the Defence Secretary and, presumably, the Prime Minister know nothing?

The Prime Minister

I confirm what the hon. Gentleman said. Of course, friendship is two-way. We owe the United States our judgment and, of course, on most matters it wold naturally consult us. However, if it comes to organising a rescue operation, any country that was thinking of it would be very ill-advised to reveal it, even in confidence, to a large number of other nations.

Mr. Kilfedder

As the Prime Minister is being accused of having been abrasive at the Common Market Heads of Government meeting, does she realise that our people applaud her for demonstrating toughness at Luxembourg and regret very much that this tough line was not adopted in years gone by? Will she make it perfectly clear to the other members of the Common Market that withdrawal from the Common Market is an option that remains open to this country, and that we cannot be expected to finance surpluses in other Common Market countries, whose Governments should pay for surpluses that their own farmers produce?

The Prime Minister

It is my job to put Britain's interests in the Council of Ministers and to go on putting them, no matter how long and how difficult it is to secure the required settlement. That I shall do. It is very difficult. The British people deeply resent the fact that they are asked to contribute such large sums to surpluses. First, it is unfair that they should have to contribute such large sums. Secondly, they disagree with the policy of building up huge surpluses. If we were to have a lamb surplus built up as well, that would be wholly the wrong direction in which to go. I repeat that we have no intention of coming out of the Community.

Mr. Hardy

Has consideration been given to the international and European surplus of wheat? Is not it surprising that the price of American grain in Britain is, and will be, very much higher than it is, and will be, in the Soviet Union? Does the right hon. Lady approve of the tariffs that create that rather silly situation, and the 7s 6d loaf that now exists?

The Prime Minister

The Council of Ministers did not have a specific debate on the problem of wheat. I am not sure whether that took place in the Council of Agriculture Ministers. Of course, one would wish particular prices to be lower, but there must be a view that, in a way, is the basis of the common agricultural policy. Those who work in agriculture are entitled to a reasonable return for their efforts, just as much as those who work in any other kind of industry.

Mr. Moate

May I congratulate my right hon. Friend on standing up for British national interests with a strength and determination that this country has not experienced for many years past? In seeking a long-term solution to the budget problem, does she agree that it is now absolutely clear that the French, in particular, will never contemplate any fundamental reform of the common agricultural policy? That being so, might it not become imperative to renegotiate the fundamentals of our membership of the European Economic Community?

The Prime Minister

I do not think that we should go into a renegotiation, ourselves, in any way. When we come up to the ceiling of the budget contributions from us all—the ceiling being 1 per cent. value added tax—there will be an opportunity to restructure the common agricultural policy. Provided that we all remain absolutely firm that we will not contribute more than 1 per cent., we should be able to bring about a restructuring. However, it will not be easy. I can only stress that.

Mr. Straw

Is not it clear that domestic pressures from farmers in the United Kingdom, as well as in Europe, make it undesirable to use a holding back from an agreement on farm prices as the only weapon in the negotiations with the EEC over the budget contributions? Would not it be far better for the Prime Minister now to seek approval from this House for legislation, so that we can withold our VAT contribution now, should negotiations, or the failure of negotiations, render that necessary? Will the Prime Minister say in what circumstances she would seek to withold our VAT contributions?

The Prime Minister

I do not think that the agricultural price review is the only weapon. There are other major items that are before the various Councils of Ministers. For example, there is no overall budget for the Community this year. It is unlikely to have one negotiated unless we get our budget problems settled as well. The price review is not the only item, but I beleieve that it is the most urgent one. As the CAP takes such a large proportion of the Budget it is, in a way, the biggest item.

I said that in the last resort we should certainly have to consider withholding VAT. However, the next meeting is only six weeks ahead. I believe that President Cossiga will make strenuous efforts to complete a settlement, because we did get very near to one. I hope that we shall be able to achieve a satisfactory outcome.