European Community

HC Deb 18 December 1980 vol 996 cc571-646

Motion made, and Question proposed,

That this House takes note of the Report on Developments in the European Community, January-June 1980, Cmnd. 8042.—[Mr. Wakehum.]

4.38 pm

Mr. Denzil Davies (Llanelli)

This is an unusual debate. It is a Supply day debate on a Government motion on a Government White Paper. I presume that the document has the status of a White Paper. It gives the House the opportunity to look at the whole range of EEC policies and to try to relate them, if possible, to the position of this country and the effect that those policies have on Britain from time to time.

The document covers a wide range of matters, and I do not think that it would be possible for any one of us to cover all of them. I shall therefore try to concentrate on four areas of EEC policy mentioned in the document which it seems at the moment impinge heavily on the British economy. The EEC is an economic community. In spite of the occasional attempts of Foreign Secretaries in search of a role to try to extend it into foreign affairs, ultimately it is an economic Treaty and an economic Community.

The main areas of EEC policy which are currently of considerable concern to Britain are the heavy burden of the CAP, the unsatisfactory nature of the arrangements for the budget, the damage that a common fisheries policy—we have heard a statement in that connection this afternoon and we can come back to it in a few moments—will inflict upon the Britsh fishing industry and on the livelihoods of fishermen, and our poor trade performance with the rest of the Community, especially the continuous decline in the balance of our trade in manufactured goods.

I hope that the Lord Privy Seal will attempt to give us an objective and realistic appraisal of the effect of Community policies on the Britsh economy instead of giving us, as we have so often had in the past from the Foreign Office, vague generalisations and propaganda about the Common Market. I remind the Lord Privy Seal that it is not just Labour Members who will be seeking realistic and objective answers from him over the next few months. I gather that there is a new group in existence called the Conservative European Reform Group, which I believe is about 40 strong. [HON. MEMBERS: "Forty-five."] I was going to call it the Gang of 40, but clearly it is now the Gang of 45. I understand that that group has received one of the highest badges of recognition in Tory circles, that of being invited to tea at No. 10. I therefore hope that if the Lord Privy Seal does not wish to give answers to Labour Members he will at least seek to give answers to his hon. Friends, because some of their demands are not very different from ours.

Mr. Teddy Taylor (Southend, East)

We were not invited. We asked to see the Prime Minister and she very kindly agreed.

Mr. Davies

I accept that entirely. But I was interested to read in the Financial Times this morning the headline: Tory party split on Europe surfaces in public row". Clearly, there seems to be some discrepancy between the view taken by the Foreign Office on these matters and the view taken in other circles and in other parts of the Government.

Mr. Tony Marlow (Northampton, North)

So that that impression is not allowed to endure, may I say that the Tory Party is largely united about our approach to Europe. We are looking for fundamental reforms.

Mr. Davies

Indeed, that is the problem, because the Lord Privy Seal says that they are incompatible with the terms of the Treaty, but I shall return to that in a moment.

The first important policy is the common agricultural policy. Despite its importance and its effect on the British economy, very little is said about it in the White Paper. What the Government say certainly indicates to me that they have not the plans, the will or the inclination to press for a fundamental change and reform of this system.

Paragraph 1.8 of the White Paper states: There is also a growing recognition that the rate of increase in expenditure on the Common Agricultural Policy (CAP) needs to be contained. The emphasis is clearly on the rate of increase in the expenditure. If that is the only comment and criticism that the Foreign Office can make of the CAP, there is no hope of a substantial and fundamental reform.

We are all concerned about the increase in the rate of expenditure, but there is far more to the CAP than that. The real problem lies in the fact that the CAP is not suited to the peculiar position of Britain as a major food importer. Our problem is that the CAP is a tariff system on food. Whatever the arguments about tariffs on manufactured goods—and there are arguments both ways—no one making an objective analysis of the British economy could argue that a tariff system on food imports made any sense at all in the British context.

Before our entry into the Common Market, we were told many things in the House. We were told that over a period CAP prices on food products would sometimes be slightly above and sometimes slightly below world prices and that they would fluctuate marginally between the one and the other. With a few exceptions, however, CAP prices have consistently been far higher than world prices—sometimes 100 per cent., sometimes as high as 300 per cent. Even more important, prices of essential commodities such as wheat, barley and maize have consistently been far higher, because the EEC can never compete with the granaries of North America. That is the real problem of the CAP. I am surprised that the White Paper does not recognise that.

As the House will know, earlier this year the Institute of Fiscal Studies made an estimate of the total cost of the common agricultural policy. The total cost, of course, is not just the budgetary cost—that, indeed, is the smaller cost of the CAP—but the cost in higher consumer prices as well as the cost of our budgetary contribution. The institute came to the conclusion that the total cost was now likely to be about£2,250 million per year. I concede to the Lord Privy Seal that as a result of the budgetary agreement in Luxembourg, with which I shall deal in a moment, that cost may be slightly less, because there will be a slightly lower rate of contribution to the budget.

The Lord Privy Seal (Sir Ian Gilmour)

Two-thirds

Mr. Davies

I referred to the budget contribution, not to the total cost. There will indeed be a slight lowering in the total cost, but by the time we reach next year's marketing and agricultural price fixing that cost will go up again because price increases will be agreed at that price fixing.

With the British economy bearing such a heavy burden as£2,000 million per year on the CAP, all that the Government can say in their White Paper is that the rate of increase in expenditure needs to be contained. Far more needs to be done. We need a fundamental reform of the whole system.

Looking at the rate of increase in expenditure over the past two and a half years, one sees that the Government have not done very well there either, because the main ingredient in the increase in expenditure is the agricultural price fixing each year. On the figures for the 1979 marketing year, the Minister of Agriculture, Fisheries and Food did not do too badly, with a 11/2 per cent. average increase in prices. The following year—that is, this marketing year—the average increase is 5 per cent. I understand from Brussels that by the time of next year's price-fixing arrangements we shall probably have to accept price increases of between 8 and 10 per cent. That, of course, will add to the increase in expenditure on the CAP. It is strange for the Government to say that they wish to contain the rate of increase in expenditure and yet to agree escalating prices every year in the price review. I remind Conservative Members of what their election manifesto said. It clearly promised that the Conservative Party, when in Government, would insist that there should be a price freeze on all products in surplus. That promise disappeared pretty rapidly, as did most other promises in the Tory manifesto.

I turn to another aspect of the White Paper. No doubt the Lord Privy Seal will deal with this as well. That is the agreement reached in the Foreign Affairs Council in Luxembourg on 30 May on the level of our contribution to the budget over the next two years. We welcome the fact that we shall be paying less to the EEC budget over the next two years than otherwise we might have paid. But the House well knows that, despite that temporary agreement—and it is only a temporary agreement so far—we are still the second largest contributor to the EEC budget.

Despite our welcome, we still believe that the Government should not have accepted the agreement. It was bought at too high a price and too high a cost. As I shall demonstrate, we give away far more than we benefit. There were press reports at the time that the right hon. Lady the Prime Minister herself did not want to accept it. Whether that was correct, I know not. But, if it was, her instincts were absolutely right, because the agreement turned out to be the kind of soggy compromise that one expects from the Foreign Office when it negotiates these matters.

I remind the House again that before the Luxembourg meeting of the Council of Foreign Ministers this House unanimously passed two resolutions, both of them accepted by Ministers, that there should be a balance between our contributions and our receipts and that we should not pay more into the budget than we received from it. Those resolutions, of course, were not carried out and the agreement failed to achieve that result. The two resolutions also made it clear that we wanted a fundamental change in the budgetary arrangements. That, too, was accepted by Ministers, but in the Luxembourg agreement the Government failed to secure that commitment.

The Chancellor of the Exchequer said last year that it would not be sufficient to offer a temporary solution that would afford relief for a year or two. He said: Neither I nor any succeeding Chancellor wishes to make speeches in this House in a year or two about yet another debate… on this same subject".—[Official Report, 20 November 1979; Vol. 974, c. 593–4.] He must be a very disappointed man, because the Government have failed to get the kind of permanent solution that the Chancellor said he was negotiating and wished to achieve.

Finally, the Prime Minister repeatedly said in the House before the Luxembourg meeting that negotiations on the budget would not be linked to other issues. She said that other issues would be decided on their merits between ourselves and the other member States and that they would not be considered as part of the budget negotiations. Again, that did not happen because the budget arrangements were linked to other issues, and that is quite clear from the communiqués.

Therefore, not only did the agreement that was reached fly in the face of resolutions of this House and of assurances given by Ministers but it gave away our future bargaining and negotiating position on a whole range of issues. The communiqué shows that quite clearly. It gave away our bargaining position in next year's agricultural price fixing. It gave away the opportunity to challenge the fundamental principles of the CAP. It gave away the opportunity to change the budgetary arrangements when the 1 per cent. VAT ceiling is reached. As we have heard in the last few days, it prepared the ground for the betrayal of the British fishing industry.

Sir Ian Gilmour

How?

Mr. Davies

I shall tell the right hon. Gentleman how. I shall read the communiqué. An organisation called the European International Press Agency issued a communiqué on the agricultural price fixing, which said on page 6: With this objective in mind"— that is, the objective regarding the budget arrangements— all member States undertake to do their best to ensure that Community decisions are taken expeditiously and in particular"— these are the important words— that decisions on agricultural price fixing are taken in time for the next marketing season. That effectively takes away our veto to stop any price increases at the next price-fixing session. [HON MEMBERS: "We can use the veto."] We shall see whether the veto will be used, because the Foreign Office wants to contain the rate of increase in the CAP. Let us wait and see what it does next year when it comes to the price fixing. We know very well that the Government will again give way, just as they have done in the past.

Mr. Ron Leighton (Newham, North-East)

Perhaps it would be helpful if the Government denied those allegations by giving an assurance now that they would not increase food prices for products that are in structural surplus.

Mr. Davies

We know that that promise has gone out of the window and that we shall never get that kind of assurance from the Government.

The other negotiating position which was thrown away was in relation to both a fundamental reform of the CAP and the own resources system of financing the budget. I quote from page 5 of the official communiqué, which states: For 1982, the Community is pledged to resolve the problem by means of structural changes"— then follow the important words, and this is what we gave away— without calling into question the common financial responsibility for these policies"— that is, the own resources system— nor the basic principles of the common agricultural policy". Again, that was part of the agreement. What is the status of this communiqué? Is it a binding agreement between member States? I noticed in the Financial Times report today that the Lord Privy Seal apparently said that a fundamental reform of the CAP is contrary to the terms of the Treaty of Rome. I have read article 39 of the Treaty, and it says nothing at all—

Sir Ian Gilmour

In order to prevent the right hon. Gentleman from wasting the time of the House—I know that he does not mean to do so—may I point out that I said that the abolition of the CAP was contrary to the terms of the Treaty, and that that is quite different.

Mr. Davies

I would question even that, because article 39 says nothing about the means of operation of the CAP. It talks about the objectives. The CAP is a means to an end, and there can be other means of reaching that objective.

The truth is that, whatever the Treaty says, the right hon. Gentleman has given away his negotiating position by the budgetary agreement, because that says quite clearly that the basic principles of the CAP cannot be challenged.

The next area on which the Government gave their position away is in relation to the common fisheries policy. We heard the statement on fisheries this afternoon. The press communiqué makes it absolutely clear that the fisheries question was linked to the budget and describes it as "a concomitant part" of the budget arrangements.

During the election campaign, the Prime Minister had some strong words to say about fishing. In a press release issued on Thursday 26 April 1979, she said: Britain must have a very substantial share of the total allowable catch". We know that there has been no agreement, but agreement is getting quite close to about 35 per cent. of the total allowable catch. No one would say that that is a substantial share of the total allowable catch. The industry has asked for 45 per cent. I do not know whether that is substantial, but 35 per cent. certainly is not. That is another pledge given during the election which the Government have failed to carry out.

Mr. Austin Mitchell (Grimsby)

Perhaps my right hon. Friend will clarify that point. The 35 per cent. refers to seven species. Of the remaining species, the quota offered about 11 per cent., which brings the average offer for all species down to about 30 per cent. compared with the industry's demand for 45 per cent.

Mr. Davies

My hon. Friend is absolutely right. Indeed, a press release issued on 12 December by the British fishing industry described the Commission's original offer of 35 per cent. which was not in respect of all species, as "devious mathematics". In fact, the offer is less than 35 per cent. and comes nowhere near the 45 per cent. which I would have thought was fair and right for the British fishing industry.

When the fisheries policy is finally concluded, perhaps the Government will explain to our fishermen why their industry will be damaged. It will be damaged because we accepted a common fisheries policy when we went into the EEC. That was part of the Treaty of Accession, and it was supported by Conservative Members and some Labour Members. That is why we are now faced with this problem. There is absolutely no need for an independent country to accept special arrangements such as that, either for fishing or for anything else. There is a perfectly proper international law on fishing which says that one can have an exclusive 200-mile economic zone. Other countries can negotiate on that basis, but we are not able to do so because we are enmeshed in these ridiculous rules relating to the common fisheries policy.

I now turn to our trading performance with the rest of the EEC, especially our trade in manufactures. In paragraph 2 of annex VI to the White Paper, the Foreign Office rightly states that our trade with the EEC has been in deficit by about£2 billion to£2¾billion since 1974. In fact, it has been in deficit for every year of our membership.

During the debates on our entry into the EEC, the argument related to the cost of the CAP. The Government never really gave us the true figures. While they admitted that there would be a cost, they did not say that it would be as high as it has been. Perhaps they did not know. The argument was that that cost would be paid for by our increased exports, especially manufacturing exports, to the EEC. That was the whole rationale of the economic case for entry into the EEC. I think that the economic jargon at the time was "economies of scale". It was argued that the economies of scale in this greater market would pay for the cost of the CAP. Again, that has not happened. The CAP costs us£2 billion, and our trade deficit with the EEC is more than£2 billion. That is the position today.

In that annex to the White Paper, the Foreign Office tries to look for some kind of silver lining. It points to the ratio—it calls it "volume"—of exports to imports. In total trade, in 1979 the percentage of exports to imports was 86, which is still bad but better than that of 1978. The figure in 1978 was 85. in 1977 it was 86, and in 1976 it was 81. The Foreign Office concludes from those figures that things are improving a little. However, concealed in those figures are oil exports. The whole of that increase is caused by two-thirds of our oil exports going to the EEC. The real figure is that of the trade in manufactures, because that was the whole basis and essence of our entry into the Common Market.

There is a constant decline in the percentage of trade in manufactures. It went from 128 in 1970 to 90 in 1975; now it is 82 and it is still going down. Thus, there is no basis for the idea that the high cost of food in the Common Market will be paid for by increased exports of manufactured goods.

The White Paper states that some time this year there will be a far reaching review of the operation of the budgetary arrangements. I do not understand how one can have a far-reaching review if one cannot question what is said about the own resources system. I do not see how the review can be far reaching and yet not consider the fundamentals. However, that is what the communiqué said. If there is a far-reaching review, presumably the Foreign Office and other Departments will consider how they will react and what proposals they will put forward. I ask the Lord Privy Seal to publish some time next year a Green Paper setting out the proposals of the British Government so that hon. Members and other people may debate them. If it is to be a far-reaching review, it is important that people should have an opportunity to make a contribution to the debate. I hope that a White Paper will be published which covers these problems.

Successive British Governments have applied for and negotiated entry into the EEC, often, I believe, out of a sense of despair over the future of Britain caused by our economic decline, which is undoubted, and in some cases by our diminished role in the world. The economy is still in a poor condition and is deteriorating because of this Government's policies.

However, since entering the EEC, Britain's situation has changed. The increase in the price of oil in 1973 and our self-sufficiency in oil and in other fuels have changed Britain's position. With sensible policies, we can look forward to a far more stable future than that which we envisaged in the past. In this new situation, there is no need for us to be enmeshed in what, at the end of the day, is only a regional economic treaty, a treaty which is not suited to our purposes. We have seen the problems of the fishing industry. The Treaty is not suited for the problems of the latter half of the twentieth century. The system cannot be fundamentally changed from within because one needs the agreement of all the member States. We should now think of once again standing on our own feet as an independent country. Many people, both in the House and outside, agree with me.

5.2 pm

The Lord Privy Seal (Sir Ian Gilmour)

I welcome the right hon. Member for Llanelli (Mr. Davies) to the Dispatch Box in his new capacity. I would have welcomed him a good deal more warmly if I had not just listened to his speech. Perhaps it is a marginal improvement on the speeches of his predecessor, although his superior, the right hon. Member for Leeds, East (Mr. Healey), has, perhaps wisely, absented himself from the debate.

The right hon. Gentleman's speech was remarkable for what it left out I cannot say much for what it left in. The right hon. Gentleman ignored the fact that he was a member of a Government who were a member of the EEC for five years. When the right hon. Gentleman was appointed, I was marginally optimistic that the level of debate on this matter from the Opposition Benches would be raised. [Interruption.] If the hon. Gentleman wishes to criticise the right hon. Member for Stepney and Poplar (Mr. Shore), that is his affair.

I took the trouble to look up the remarks made in the House by the right hon. Member for Llanelli on 21 February 1979. At that time there was no question of getting out of the EEC. He was fairly statesmanlike and sensible. He said: We shall therefore maintain our policy of seeking a reduction in the total cost of the CAP and a more rational distribution of resources between agricultural and nonagricultural programmes. We shall continue to insist upon a real improvement in the way in which the burden for financing the Community Budget is shared out among member States."—[Official Report, 21 February 1979; Vol. 963, c. 501.] That was very sensible, but the right hon. Gentleman forgot to say tonight that he and his Government did not achieve that objective. They achieved nothing whatever. He also forgot to say that that is exactly what this Government have achieved. He talked about a soggy compromise—that was a little ungenerous when he got nothing at all. He would have done better to congratulate our Government on being infinitely more successful than his Government. That would have been better than putting on the same boring, harping gramophone record.

The right hon. Gentleman also talks about a Tory Party split between the Foreign Office and the rest of the Government. I reassure him that there is no such split. As I am sure my hon. Friend the Member for Southend, East (Mr. Taylor) realises, the letter that I wrote to him set out not my personal views but the views of the Government. It was an authoritative exposition of the Government's view.

I am not sure whether the right hon. Member for Llanelli was giving the official Labour Party policy when he said that he wanted to come out of the EEC. It was notable that the right hon. Member for Leeds, East was away at that time and has not taken part in the debate. Will the right hon. Gentleman confirm the official policy of the Labour Party as regards membership of the EEC?

Mr. Denzil Davies

indicated dissent.

Sir Ian Gilmour

The right hon. Gentleman cannot give that confirmation. Perhaps he was giving his personal view.

The bankruptcy of Labour's European policies is shown in the press reports last week of a Labour Party national executive paper on how to achieve the objective of Britain's withdrawal from the Community so resoundly proclaimed, together with a number of other equally idiotic policies on defence, at the party conference in Blackpool in October.

The paper demonstrates the astoundingly naive assumption that the European Community is like a child's jigsaw puzzle from which the pieces can simply be unpicked to reverse the course of history. Again, if we are to believe what we read, it will apparently take six to 12 months to demolish the carefully contrived edifice of seven years' hard work, which the right hon. Gentleman and his Government helped to carry out under previous Labour Administrations.

Mr. Denzil Davies

The Lord Privy Seal is doing less than justice to the report of that paper in the newspapers. That paper made it clear that it is not easy to negotiate withdrawal from the EEC. It said that it might take a year or two, or even longer, because of the ramifications of Treaty obligations, trade obligations and so on. It was a realistic paper. The Labour Party resolution at the last Labour Party conference was for withdrawal. The paper took into account the difficulties of negotiating withdrawal.

Sir Ian Gilmour

That paper was not realistic. Are we, as some members of the Labour Party said not long ago, to become the fifty-first State of the United States—[Interruption.] I am quoting members of the Labour Party, not members of my own party—or are we to become a neutral island cut off from the world and having no influence over events? Where are they going to find the cushion of an "alternative Europe" to fall back on after our withdrawal? [Interruption.] The hon. Member for Merthyr Tydfil (Mr. Rowlands) was in the Foreign Office in the previous Government. He now sings a different tune. He does not have to dance to the tune of the Labour Party conference. Why does he not have a mind of his own?

Where are the alternative free trade arrangements now that the EFTA countries have already entered into their own arrangements with the European Community? What would happen to our links with the outside world—with the developing countries, not least through the Lomé convention, which we have established largely by virtue of our membership of the Community?

I shall return to this later. It is an interesting point, although I agree that it is rather sensitive for the right hon. Member for Llanelli. The paper apparently admitted that it would not be easy to convince fellow Socialists in Europe. It is well known that virtually every other European Socialist party deplored the Blackpool decision.

Mr. Selwyn Gummer (Eye)

Does not my right hon. Friend agree that it was also rather curious that the paper did not say that the arguments on the side of withdrawal were so poor that the Labour Party did not propose on this occasion that there should be a referendum—in case it lost it?

Sir Ian Gilmour

That, of course, is another immensely weak element in the Labour Party's position—except that we do not know what that position is. I see that the right hon. Gentleman confirms that we do not know it. He does not know what it is either. No doubt some time we shall be told what it is.

Mr. Denzil Davies

No decision has been taken on the question, but I would remind the right hon. Gentleman that he fought the general election of 1970 on a Tory manifesto which said that we would not enter the EEC without the "full-hearted consent" of Parliament and people. The then Prime Minister and the Tory Government reneged on what was a clear promise to have a referendum.

Sir Ian Gilmour

Those words did not appear in the Tory manifesto. I do not know whether the right hon. Gentleman was here then or not. We voted to enter Europe by an enormous majority. Therefore, what he has just said is an even worse point than those that he made in his speech.

Mr. Nigel Spearing (Newham, South)

There was no mandate.

Sir Ian Gilmour

Of course there was a mandate. Then, the right hon. Gentleman and his party decided that they would have a referendum. Then, those who wanted the referendum unfortunately—from their point of view—lost it. They had said that that would be the permanent solution to the problem. Now, after just 40 minutes of cursory debate at Blackpool, as it has been described, they have decided that we can come out without a referendum. However, the right hon. Gentleman has confirmed today that that is not yet the policy of his party. He should think for himself and not parrot a conference decision.

In contrast to the Labour Party, the Government's approach is realistic and positive. We shall not run away from the problems; we shall tackle them as we have successfully done so far. We dismiss as defeatist and irresponsible any talk of withdrawal.

In my speech on the previous White Paper, I said that the Government's wholehearted commitment to Europe had achieved some remarkable successes. The period now under consideration—January to June 1980—gives further proof of that. First and foremost, the Brussels agreement of 30 May deals with the major problems which Labour failed to solve. At the same time, it sets our course for the future.

The right hon. Gentleman tried to disparage that agreement, but, as I have said, it was infinitely better than he achieved, as the figures will show. We have agreed with our partners a mechanism which guarantees us until the end of 1982 a refund of the major part or our excess net contribution, and we have brought our partners to accept that these arrangements need fundamental review to avoid a recurrence of unacceptable situations for any member State.

That is no mean achievement. I will now remind the right hon. Gentleman of the figures. Under Labour, we paid a steadily mounting net contribution to the Community budget—£368 million in 1977,£804 million in 1978 and£947 million in 1979. [Interruption.] I am not surprised that the right hon. Member for Lewisham, East (Mr. Moyle) has come alive at this point, since they are figures that he would not wish to be publicised. The financial mechanism negotiated by the Labour Party was useless. It never brought one penny of refund.

We are about to see the first fruits of this Government's success in the form of the first advance payments due to us under the supplementary measures regulation which entered into force on 1 November, together with the revised financial mechanism regulation. The ad hoc committee met for the first time on 10 December and approved the necessary programmes to enable about£100 million in advance to be paid to us before the end of 1980. Further programmes will be put forward in the new year.

Mr. Spearing

Can the right hon. Gentleman now tell the House something which the Treasury has not been able to tell us so far? There is a list of projects. First, why did the Government not publish the list of applications? Second, when will the list of projects, as approved either by the Commission or by a Council, be available? Will it be published, and will there be a debate in the House on the merits of the projects?

Sir Ian Gilmour

The answer to the second question is, of course, a matter for my right hon. Friend the Leader of the House. I cannot answer the first question, but I have no doubt that the hon. Gentleman will be able to table a question and get an answer. However, I can tell the House that the sum has now been agreed and that it is£97.6 million. That is the first fruit of our 30 May agreement.

Therefore, all the doubts about linkage and conditionality which the predecessor of the right hon. Member for Llanelli raised in the debate on the budget on 2 July—and which the right hon. Gentleman himself has raised—have proved groundless. It would have been in accordance with the traditions of the House if he had admitted that this afternoon. Our partners have honoured that agreement to the letter.

All member States now agree that the progamme of reform of the budget and the CAP must be tackled quickly and seriously. Now that the balance of contributions to the budget has been changed, other member States understand our long-standing concern to see change and reform. If anyone doubts that, let him read the declaration of the new German Government, with their firm commitment to CAP reform.

The approach of the 1 per cent. VAT ceiling on the Community's own resources provides an added incentive towards a fundamental restructuring of the budget, which ensures that funds are channelled to the right objectives. We believe that the ceiling provides a necessary financial discipline for the Community budget and that maintaining it offers the best chance of achieving a sensible and lasting reform of Community expenditure.

The 1 per cent. ceiling is also relevant to reform of the CAP. If we are to obtain a greater share of the budget for policies of particular concern to Britain, such as energy, industrial and urban development and transport infrastructure, it will be essential to secure a reduction in the proportion of Community funds at present spent on agriculture. There is in any case no justification for the high proportion of agricultural expenditure which goes on the wasteful creation and disposal of vast surpluses.

There is no simple overall solution to the question of CAP reform, and the required changes will take time to work, but we have a clear idea of what we are trying to achieve. My right hon. and noble Friend outlined it in these terms in Hamburg on 17 November: First, we should aim to preserve a healthy European agricultural industry. Second, we must reduce agricultural expenditure as a proportion of the total Community budget. Third, we must eliminate structural surpluses, especially in the milk sector. Fourth, we must move towards prices for agricultural products which result in the production of the food we need—to eat, to export without subsidies, to give away to prevent famine in developing countries and to provide a good store to guard against bad harvests—and not more.

Mr. David Myles (Banff)

I was slightly disturbed by my right hon. Friend's reference to the vast cost of the creation of surpluses. Is it not true that the vast cost arises only in the disposal of the surpluses and that their creation is due to the efficiency of farmers and producers in the Community?

Sir Ian Gilmour

I agree with my hon. Friend, but I referred to the vast cost of the creation and disposal of surpluses. Obviously, there would be no problem of disposal if they were not created, but I agree that the main cost comes from the disposal.

It will be for the Commission to present proposals for change in the context of the 1981 restructuring of the budget, but we shall in the meantime be encouraging a wide-ranging debate in the Community so that the issues are thoroughly examined and all the options aired. In our view, this process cannot begin too soon.

The right hon. Member for Llanelli, like his right hon. Friend the Member for Stepney and Poplar, talked about a Green Paper. I do not rule that out, although the right hon. Gentleman will probably agree that it is not necessarily the best way of negotiating. Therefore, it will need careful thought. Negotiating everything in public is not necessarily the best way of proceeding, but I shall certainly consider it.

There have been many other achievements in respect of agriculture under this Government. No one should underestimate the benefits to the consumer which my right hon. Friend the Minister of Agriculture has obtained. The average increase in common agricultural prices of about 5 per cent., agreed in parallel with the budget agreement, represented a drop in prices in real terms by comparison with most other prices. It was certainly far better than anything that the Labour Party ever achieved. The average increase in common support prices under the Labour Government was 7.5 per cent. a year. Under us, it has been 1.3 per cent. in 1979 and 4.8 per cent. in 1980. It would have to be 40 per cent. to bring us up to the average mentioned by the right hon. Member for Llanelli. There is no danger of that.

We also obtained a net financial benefit in 1980 from the agreement on the continuation of the United Kingdom butter subsidy, the introduction of an advantageous aid for our specialist beef producers and a Community commitment to production refunds on cereals used in whisky exports. In addition, the new Community arrangements for sheepmeat will help producers and consumers alike and will safeguard the essential interests of New Zealand.

Fish has already been discussed extensively. The right hon. Gentleman would have been in order if he had withdrawn some of the allegations that were made. Until recently, we were told that an agreement on a common fisheries policy by the end of the year was linked to the agreement of 30 May. The right hon. Gentleman now complains about the failure to get an agreement. He should read what his predecessor, the right hon. Member for Stepney and Poplar, said. The right hon. Gentleman would then understand that it was alleged that such things were linked when we knew that they were not.

I turn to our trade with the Community. The right hon. Gentleman waxed eloquently, if not accurately, on that subject. He said that it was wrong to include oil. I am not sure why. After all, oil represents considerable expenditure in terms of ingenuity and capital. It is wrong to say that oil should be excluded. If oil is included—

Mr. Denzil Davies

rose—

Sir Ian Gilmour

I shall give the right hon. Gentleman some figures first. He will then be welcome to intervene. If oil is included, during the first nine months of 1980 our export-import ratio rose to 98 per cent. The right hon. Gentleman spoke about continuous decline and said that it was getting worse. I am sorry to disappoint the right hon. Gentleman. In 1979 the figure was 82 per cent. and in the first nine months of 1980 the figure stood at 87 per cent. Therefore, there has been an increase, and the percentage is now the same as it was in 1974. I hope that we shall hear less about that subject.

As the right hon. Gentleman knows and admitted at one point, there was a general decline in our industrial performance throughout the 1970s. That decline was not confined to the EEC. Indeed, decline in the EEC was smaller than that found elsewhere.

Mr. Marlow

As regards the turn-round in trade and manufactures, the rate of deficit in manufactures for the first three months of this year between ourselves and the rest of the Community was increasing at a rate of£500 million a year. Since then, it has turned round. We all know why. There has been a deeper recession in Britain than elsewhere in Europe.

I hope, Mr. Deputy Speaker, to catch your eye later. In that event, and in the spirit of Christmas and good will, I shall try to build on the common ground that exists between my right hon. Friend and me. However, I should appreciate it if my right hon. Friend did not, as a matter of course, include figures for oil and energy exports in the balance of trade with the Community. I have asked him several times how our membership of the Community affects the trade in oil. Trade in oil with the Community would have taken place whether or not we were members. This phenomenon has not arisen out of our membership of the Community. However, our trade in manufactures with the Community is a result of our membership. That is giving rise to severe problems in our industry and leading to an increase in unemployment—

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

Order. If the hon. Gentleman intends to catch my eye, he is not going the right way about it.

Sir Ian Gilmour

I am all for the spirit of Christmas, but I am sure that my hon. Friend would be the first to agree that sometimes he is rather trying. We have had this exchange about six times. Each time, in addition to the total, I have given him the figures for manufactures alone. I do not know why he should ask me to do something that I have already done about six times.

Mr. Douglas Jay (Battersea, North)

Cannot the right hon. Gentleman understand the simple fact that if one tries to assess the effects of EEC membership oil should not be included, because oil would have been exported whether or not we had joined the EEC?

Sir Ian Gilmour

It is not much good extrapolating our trade with the EEC and ignoring what is happening elsewhere in the world. It is a complicated matter. If the right hon. Gentleman agrees to that, he must be moving quite close to my position.

There should be no misunderstanding about the options. The arrangements for trade upon which some of the advocates of withdrawal fall back do not exist any more.

Mr. Teddy Taylor

My right hon. Friend has mentioned the dramatic percentage increase from 82 per cent. to 87 per cent. as regards our trade in manufactures with the EEC. In order that the House can make a comparison, has my right hon. Friend got comparable figures for trade with the rest of the world? That would help us to appreciate the impact of the EEC.

Sir Ian Gilmour

Those figures will probably be given at the end of the debate by my hon. Friend the Minister of State. My hon. Friend will know that last year's deterioration in the export-import ratio was not as severe with the EEC as it was with Japan, the United States of America or the world as a whole. That is important. We have done better in our trade with the EEC than in our trade with the rest of the world. [HON. MEMBERS: "No."] That is a straightforward fact. It cannot be gainsaid.

Some may talk of special trading arrangements to be negotiated with the Community, but what do they think would be negotiable? It is difficult to conceive of any arrangement that could serve us as well as tariff-free access to a market of 250 million people, which now takes some 43 per cent. of the exports that we enjoy.

I refer to "some" of the advocates of withdrawal because others clearly envisage withdrawing behind a wall of tariff and non-tariff harriers, which would inevitably invite the fiercest retaliation. If anyone should doubt who will get hurt most in such an exchange, he should reflect on the fact that while the EEC market takes 43 per cent. of our exports, our market takes only 8 per cent of its exports.

Let us suppose that a future Labour Government removed us from the Community and tried to introduce greater protection for British industry. What would they do about our other obligations, notably under GATT? How would they cope with the massive retaliation that would result from the unilateral breaking of those obligations? Plainly, the flow of investment from overseas companies in the United Kingdom would dry up without the access to the European market which our membership offers. How many jobs would cutting off those sources of investment cost? To those who advocate some sort of partial withdrawal, who reject the aspects of the Community that they dislike and who keep the aspects that they like, the answer is simple. There is no convenient half-way house on offer.

This year, internal management and reform of the Community have been at the centre of our efforts. It is important that—just as my right hon. and noble Friend did in Hamburg—we should look ahead to new policies and beyond the narrow interests of the Community to its relationships with other areas of the world. That is an equally important part of our agenda.

The Community is not only concerned with spending money. We also need to develop policies which, while they may involve little or no expenditure, have a direct impact on the ordinary citizen. Much work remains to he done on the elimination of barriers to trade in both goods and services, of which insurance is the foremost example. We should like to see progress made on the cost of air travel, the harmonisation of professional qualifications, security benefits, educational exchanges and frontier procedures. Those are the areas in which progress will help the ordinary people of Britain and of other member States to feel that they have a real share in the Community and a direct interest in its development and improvement.

Steady progress has also been made on enlargement. We are about to welcome Greece—the birthplace of our European ideals—as the tenth member of the Community, while the accession negotiations for the entry of Spain and Portugal continue. Our support for enlargement stems from our conviction that the prospective new members will have an important contribution to make and from our desire to enhance the position of Europe as a force, and a democratic force at that, in the world.

That desire was strongly endorsed by the Leader of the Opposition four years ago, at Blackpool. It is regrettable that he, in this as in other fields, has apparently renounced his internationalist approach.

The accession of Zimbabwe to the Lomé convention, for which negotiations began in June, is also notable. That was a favourable development and, therefore, the right hon. Member for Llanelli did not note it. Not only have we been able this year to bring that country finally to the goal of independence and majority rule but, because of our membership of the European Community, we have won for it duty-free access to a huge market of 260 million people and preferential treatment for its sugar and beef exports, together with a sizeable Community aid programme.

The right hon. Gentleman, in accordance with the general tone of his remarks, tried to disparage political cooperation. That shows an extremely narrow-minded insularity and is extremely out of tune with the developments of the Community and with the developments in the world during this year. One of the most notable developments has been in the area of European political co-operation.

Events in Afghanistan, in Iran, in the Gulf and now in Eastern Europe have fully justified the high priority that we have given to consultations with our European partners.

Mr. Ronald Moyle (Lewisham, East)

What have they done?

Sir Ian Gilmour

In Afghanistan, first this country and then the Nine as a whole produced a proposal which has been endorsed by a large part of the world. If the right hon. Gentleman does not think that that is important, he should bone up on foreign affairs.

The improvement in co-ordination between the Nine on issues great and small has been one of the most encouraging features of the past year. Europe is on the move, but there is obviously room for improvement. My noble Friend the Secretary of State for Foreign and Commonwealth Affairs has put forward some important ideas on this subject, and we look forward to a serious discussion on them among the Nine in the course of 1981.

Whereas in the past the Nine's diplomacy has often taken the form of declarations or merely reactions to events, this year we have seen Europe taking action. It took action in agreeing sanctions against Iran. This year we have seen Europe develop a process of reflection and consultation, which will be continued in 1981 and which we hope will make a genuine contribution to bringing about peace in that region.

Two weeks ago, the European Council took a clear stand on the CSCE process and on the Helsinki principle that each country should have the right to choose and develop its own political, social and economic system and gave a clear warning to the Soviet Union that it will be the end of detente if this principle is not respected in the case of Poland. The Europeans made it clear that the Nine conformed, and would continue to conform strictly, to the United Nations Charter and to the principles of the Helsinki final act. They also expressed their willingness to meet as far as possible the requests for economic aid which have been made to them by Poland.

In this context, it is particularly satisfactory that last Tuesday the Foreign Affairs Council decided to sell food to Poland at favourable prices. The details of this decision were contained in my written answer on 17 December to the question from my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle). The final allocation of the offer as between member States is not yet settled in detail, but the United Kingdom is likely to provide all of the 100,000 tonnes of barley included in the Community offer and a part of other commodities involved.

The credits which Poland will need to buy the amounts of food included in the Community offer will be for member States to provide. The United Kingdom has made it clear that it views with sympathy Poland's requests for economic assistance and, in line with this, is ready to make available the credit needed to finance the United Kingdom share of the Community food offer.

Mr. Myles

Will the cost of subsidising this food aid to Poland go down as a debit to the common agricultural policy?

Sir Ian Gilmour

I think that the credit will come from the member States. Actually, I suppose that it will go to both. The cost will go to the CAP and the credit will come to us.

So the Government have an excellent record in 1980 and we have the vision and determination to tackle the future. The people of this country will not thank us if we expend our energies in sterile controversy and throw away the opportunities and negotiating advantages that we have now gained. Those who think that we can or should opt out of this process are wholly out of touch with the times. Unlike them, we shall seize the opportunities which lie ahead.

5.35 pm

Mr. Douglas Jay (Battersea, North)

The Lord Privy Seal started his speech with what I would describe as sterile controversy and indulged in a certain amount of party pleasantries when there are, after all, some serious economic and trading issues at stake in this whole argument. When he came to trade, all he did was to compare figures of 1979 with those of 1980. But, of course, in this whole argument it is the comparison between pre–1972 figures of trade and those of the present day that really counts. I have some figures that I shall give presently.

In view of the statement today about fishing, the House ought to remember for one moment who was really responsible for putting us in our present position. It was the right hon. Member for Sidcup (Mr. Heath) and the right hon. and learned Member for Hexham (Mr. Rippon), who, in their negotiations in December 1971, when Norway was negotiating vigorously for permanent longterm concessions in fisheries policy, deliberately—because they were in such a hurry to get to the legislation, the European Communities Bill—abandoned all attempts to get any concessions. Indeed, the then Prime Minister went so far as to send a telegram to the Prime Minister of Norway to try to persuade him not to fight the concessions because it made it obvious that the British Government were giving way.

The situation was even worse than that, because in the debates in this House in January 1972 the two right hon. Gentlemen who were then in the Government, tried to argue that this country would retain a power of veto on the loss of all our fishing rights after 1980 if no common fisheries policy was agreed. But when the Treaty of Accession was published it turned out that that was untrue, and it was the action of those right hon. Gentlemen and the hurry that they were in that have left us in the bargaining position that we are in today.

Since the Lord Privy Seal briefly mentioned New Zealand and since negotiations on New Zealand butter are going on at the present time, it would be well—as the hon. Member for Southend, East (Mr. Taylor) mentioned in the House in the last day or two—to have some assurance from the Government, before the debate ends, that they will stand firm on the question of New Zealand exports of butter to this country, which are of great benefit to this country as well as to New Zealand.

It is rather remarkable that the White Paper which the Foreign Office has laid before us says virtually nothing about United Kingdom trade with the EEC and gives virtually no hard figures at all until we get to the last page and the outside cover. For one major part of the economic damage done to the United Kingdom by our membership has been the enormous deficit in manufactured goods that we have suffered since, with the consequent injury to British industry and, indeed, to employment in this country. This deficit is, of course, additional to the balance of payments burden that we suffer from the common agricultural policy and the EEC budget.

The Lord Privy Seal has made a few half-hearted and rather disingenuous efforts to conceal the deficit in manufactured goods by adding into the figures trade in oil. It was only after efforts from the Opposition that he came partly clean—or at any rate a little cleaner—today, by mentioning the oil figures.

The right hon. Gentleman, in spite of some things that he has said today, knows as well as anyone else in the House that the United Kingdom started to produce oil in the 1970s, that large exports of our oil now go to the Continental EEC and that they would continue to be exported to the Continental EEC whether or not we were members of the EEC. I do not think that he would attempt to deny that.

The White Paper exposes the fragility of the right hon. Gentleman's previous propaganda arguments. On the back page it tells us that in our total trade with the EEC—presumably meaning the Eight—our exports paid for 97 per cent. of our imports in 1970 and 86 per cent. in 1979. On the face of it that does not sound much worse, but when one looks at the figures one finds that United Kingdom oil exports, not surprisingly, covered only 55 per cent. of exports in 1970, but 170 per cent. in 1979, whereas exports of manufactured goods covered 128 per cent. of imports in 1970—that is to say, we had a considerable export surplus—and only 82 per cent. in 1979.

Thus, the huge increase in the deficit in manufactured goods caused by membership of the EEC wiped out the greater part of our oil exports, which had nothing to do with our membership. Our oil exports to the EEC have increased from about£100 million in 1970 to approximately£4,000 million now. Even the Government's figures imply that.

If, therefore, we are assessing the effects of membership and the likely effects of withdrawal, it is necessary to exclude oil. If one is seeking an honest and impartial measure, it is also necessary to take into account trade with the Six rather than with the Eight, both before and after membership, because before 1973 the United Kingdom already had industrial free trade agreements with Eire and Denmark. Our joining the EEC did not alter those arrangements in any way, and so our industrial trade with those two countries was not materially affected by membership. Therefore, the true measure of the effects of membership—and the probable effects of withdrawal—is the change in our trade balance with the Six in manufactured goods between 1970 and 1980.

I do not think that the right hon. Gentleman will describe my figures as inaccurate, because they have been provided by the statistical department of the Library of the House. In 1970, before EEC membership, the United Kingdom's trade balance with the Six in manufactured goods was a modest surplus of£102.6 million. By 1980 that had turned into a deficit, based on the first eight months' figures, at an annual rate of£3,586 million. That was a swing in those 10 years of£3,700 million against the United Kingdom.

The right hon. Gentleman made the astonishing statement that we have done better with the rest of the world than we have with the EEC.

Sir Ian Gilmour

That should be the other way round.

Mr. Jay

That we have done better with the EEC than we have with the rest of the world. I was putting the truth into the right hon. Gentleman's mouth. I have the figures, which he apparently has not. They prove the opposite. If one takes the same trade in manufactured goods for the years 1970 and 1980, one finds that in 1970 the United Kingdom had a surplus of£2,115 million with non-EEC countries, but by 1980 that figure had improved to the huge annual rate of surplus of£5,985 million—a swing in our favour of£3,800 million. Those figures show beyond serious argument that in the same years after joining the EEC our balance of trade in manufactured goods swung heavily against us in the EEC and swung heavily in our favour with non-EEC countries.

Sir Anthony Meyer (Flint, West)

I am sure that the right hon. Member for Battersea, North (Mr. Jay) is aware of the other argument—that one of the powerful reasons for joining the EEC was that outside it we would find it extremely hard to meet its competition in the Third world. If our trade outside the EEC with the Third world had abruptly deteriorated, no doubt the right hon. Gentleman would now be proving that it was because of this that our trade with the outside world had so deteriorated.

Mr. Jay

I am not proving anything other than what has actually happened. Our trade has heavily deteriorated with the EEC and enormously improved with the rest of the world.

Mr. Spearing

Deny that!

Mr. Jay

This really proves beyond serious doubt that the removal of tariffs on industrial imports from the Six has caused the huge deficit. One cannot advance any other explanation. The implication is that the restoration of tariffs would greatly reduce the deficit.

In addition to the deficit on manufactured goods, there is the extra cost of food that we are compelled to pay as a result of membership. The bill is very high and persistently remains so. The latest figures from the EEC agricultural report for 1979 give a fair comparison of EEC and world prices. Wheat prices on average were 93 per cent. above world prices; maize, a major feeding stock for British agriculture, was 101 per cent. above; barley was 125 per cent. above; beef 99 per cent., and butter 303 per cent. above world prices.

Nor is there any truth in arguing, as some people have tried to do, that if we left the EEC we could not buy much of this food at the same lower world price. For, if we left, not merely would we buy more food in world markets outside the EEC but, because we would be buying less from the EEC, the EEC would have to sell more on the world market, which would tend to depress the price. Therefore, there is no solid reason for believing that world prices would be materially affected.

Mr. Russell Johnston (Inverness)

Is it true that food prices such as the right hon. Gentleman quoted are lower in countries in Europe outside the Community, such as Norway, Switzerland and Austria?

Mr. Jay

The price would be lower if they bought at world prices. If those countries choose not to do so; that is their policy. But if they and we followed our previous policy of buying at world prices and supporting agriculture with deficiency payments, that would produce much lower prices. I am sure the hon. Gentleman can work that out for himself.

Mr. Marlow

I wonder whether the right hon. Gentleman read the interesting leader in The Times yesterday, which pointed out the devastating effect that the Common Market was having on New Zealand agriculture. It made the statement, which I do not think anyone would refute, that without a single extra penny of capital expenditure New Zealand could increase its production of cheap food available for Europe and Britain by 25 per cent.

Mr. Jay

I have no doubt that that is true also of Australia for dairy products and beef.

What increase in price is the United Kingdom consumer now paying in the shops for food as a result of these policies? On 8 July the Minister of Agriculture, Fisheries and Food gave the annual figure as an additional£3,000 million. This is the total additional cost of food retail in the United Kingdom as caused by the common agricultural policy.

As total United Kingdom retail spending on food at present is rather less than£20,000 million, the figure given by the Minister of Agriculture means that EEC membership is raising the price of all foods to the British consumer by an average of about 20 per cent. But, as that is averaged over all foods, the increase in the price of CAP foods must be a good deal more. I think that it must be about 25 or 30 per cent. That is a major factor that we should take into account when discussing our industrial costs and competitive position with other industrialised nations.

One final blessing resulting from EEC membership affecting food which is not often mentioned but which is specially relevant at the present time is this. In the years before we joined the Common Market, a general fall in world prices, though harmful to British exports, always brought relief through lower food prices both to our import costs and to our cost of living.

Mr. Myles

Will the right hon. Gentleman give way?

Mr. Jay

I think that I should get on. That was generally regarded as a major cause of United Kingdom economic recovery after 1932 and again after 1951. But now, thanks to the CAP, that cannot happen, because food prices are automatically held up. We now get from the very high value of the pound all the handicaps to exports, but we are denied the relief on food prices.

However, in case I am accused of doom and gloom, which is a fashionable accusation at present, there is at least one consoling fact in the economic record. After eight years of membership of the EEC, and despite all the trade barriers—for example, against New Zealand and Australia—it is remarkable how little United Kingdom trade altogether has been distorted from its natural economic channels.

We are frequently told by the Lord Privy Seal—this is another of his favourite figures—that 40 per cent. of our trade today is with the EEC. That, of course, implies that we do 60 per cent. with the rest of the world. But the actual change has been as follows. Our total exports to the EEC Six—this is all goods, including food and oil—rose from 22 per cent. in 1970 to 33 per cent. in 1979. In the same period our imports rose from 20 per cent. to 37 per cent. including oil and food. Even with the Eight, our exports in the 10 years rose from only 29 to 42 per cent. and imports from 27 to 43 per cent.

Those figures slightly exaggerate the extent of our trade with the EEC, because they appear to include about£1,000 million of oil imports into this country from the EEC, and that must presumably be coming through Rotterdam from the Middle East or somewhere else outside the EEC. However, we can neglect that if we wish to do so.

In general, these figures show not merely that we still do about 60 per cent. of our overall trade with the non-EEC world but that all the EEC restrictions and distortions have, after eight years, switched only about 15 per cent. of our total trade out of its natural economic channels. The figure that surprises me most is that we still import only about 25 per cent. of our food from the EEC, despite all the apparatus of restriction. This shows how strong are the economic forces tending to maintain most of our trade in its natural channels and how likely it is that trade would switch back fairly rapidly if the present barriers against trade with Australasia, North America and elsewhere outside the EEC were removed.

Mr. Hugh Dykes (Harrow, East)

Does the right hon. Gentleman agree that if our export figure to the other EEC countries was higher, mechanically and automatically our net contribution to the EEC budget would be lower?

Mr. Jay

If we imported still more food at still higher prices from the EEC rather than from the rest of the world, we should not have to pay so much levy. I do not think that the hon. Gentleman believes that to be a major element.

One still hears ill-informed talk about the vast trade upheavals that would occur if we withdrew from the Common Market. The Lord Privy Seal was inclined to try to make our flesh creep in that way today. But that is not how international trade works. If we removed the barriers against food imports from the non-EEC world and imposed a moderate tariff—it would be sensible to impose our normal GATT tariff on manufactured goods from the EEC as well as from the rest of the world—there would probably be a gradual switch back over, say, five or more years of about 15 per cent. of our total trade to its natural economic channels; and at the same time there would be a marked improvement in our trade balance on manufactured goods.

That is the moral of the last eight years' record. I would argue that that is the objective that we ought to pursue. And it is one necessary way to restore the industry, employment and economic strength of Britain in the contemporary world.

5.57 pm

Mr. Hugh Dykes (Harrow, East)

I suppose that it would be possible for hon. Members on both sides of the House to conjure up even more arguments for and against the total trade picture to try to prove anything, depending on one's basic attitude to our membership of the EEC. That has been done fully by the right hon. Member for Battersea, North (Mr. Jay). However, we know from his reputation that he thinks carefully about his arguments and that he is generally concerned with the other side of the coin, which is the build-up of our trade with the rest of the world. But that concern is common to all hon. Members, whatever their basic views on the Common Market.

Since we went into the Community, the trend—of course, too slow for my liking—-has been for our trade with the other member States to build up. This country, by characteristic definition and behaviour, has always tended to have a deficit in trading terms with other advanced areas of the world. Therefore, the fact that we have a deficit with the other member States—pro rata now a diminishing one, but agreeably so from our point of view—does not prove much, because that has been the picture vis-a-vis other advanced areas of the world. We have tended to have surpluses only with underdeveloped areas, excluding the oil producers.

Again, we see our membership of the EEC as being more fundamental than that, but I am glad that one of the original reasons for going in—to develop a strong and cohesive Common Market—has occurred, despite all the difficulties and the sombre fact that we joined in 1973 when the basic world economic scene changed because of the oil crisis. That was bad luck not only for us but for the rest of Europe. However, that is why it is important for us to develop as a robust and proud oil country in the Community, to offer the other member States on a proper commercial basis even more quantities of oil in future and to build up our oil trade. Therefore. the speech of the right hon. Member for Battersea, North was much better, as usual, than the speech of the right hon. Member for Llanelli (Mr. Davies). The right hon. Gentleman has now left the Chamber, so I suppose that I had better reduce slightly the comments that I had intended to make.

I can place scarcely any reliance on anything that the right hon. Gentleman says, because he is only now, for the first time, summoning up courage to state loudly and clearly that he is a withdrawalist, too, which we did not hear before when he was a member of the Government who were in office until May 1979. That attitude is beginning to poison feelings among other Labour Members and they are all beginning to jump on the bandwagon, believing that there is medium-term popularity in it. It is not only that. There is also the chilling fact that one of the Labour Party 's principal financial spokesmen—and by my definition it does not have many, since finance is not one of its hot subjects—in the debate on 2 July on the European Community budget made an astonishing statement. I hope that the right hon. Gentleman astonished more hon. Members than just myself, although it was late at night and hon. Members may not have been carefully attending to the debate.

The right hon. Gentleman stated in reference to agriculture in Europe: That is why France"— which is the right hon. Gentleman's favourite bête-noire, as it is of most of his hon. Friends— with 30 per cent. of its people employed in agriculture receives a large sum of money from the CAP and we receive nothing."— [Official Report, 2 July 1980; Vol. 987, c. 1682.] That was an official statistic, given by one of Labour's financial spokesmen, for the number of people employed in agriculture in France. As we know, the figure is about 8½ or 9 per cent. It has come down over the years, although that has slowed down since unemployment has risen in France as well. That statement renders out of court and totally unreliable virtually all the other remarks that the right hon. Gentleman makes on this or any other occasion. If Opposition Members base their deep antipathy and hostility to the Community on statistics that are not only shaky and unreliable but downright wrong and inaccurate, how can we listen to them with any care?

As a result of the continuing atmosphere of basic hostility to the EEC that colours the statements of Opposition Members and also, regretfully, one or two of the statements of my hon. Friends, I am coming to the reluctant conclusion, which may sound undemocratic, that it would be preferable if we did not have scrutiny debates on the Floor of the House. This is a kind of scrutiny debate. It is part of the regular programme of considering the six-monthly White Papers. Although I am sad to have to say this, it would probably he preferable if the House carried out its scrutiny more and more in Committee upstairs. These debates should be occasions for constructive consideration of EEC policies instead of the increasingly ritualistic and depressing exhortation of withdrawal. We should be getting down to the details of EEC policy, which would help this nation and the House to deal much more constructively and positively with our membership.

Mr. Roger Moate (Faversham)

My hon. Friend will understand that we are supposed to be debating developments in the European Community, January to June 1980. It is an important and comprehensive report. If my hon. Friend places such little reliance and value on many of the statements that have been made so far in the debate—and I do not quarrel with that as an assertion on his part—would it not be more helpful if he and my right hon. Friend the Lord Privy Seal were to spend less time responding to partisan points and discussed the document in a constructive manner? May I suggest that they are both contributing to the ritualistic debate that he is deploring? May we get on to the subject?

Mr. Dykes

My hon. Friend is renowned for his helpful advice, but occasionally he has lapses. I was going on to say that.

Those who wish to pursue genuinely the aspirations of this country's membership of the EEC for the national good are continually bound to be frustrated by the distortions of arguments that we hear. To some extent it is human nature and understandable, and we are all imbued with it. However, the very fact of the domestic recession that we are suffering should not be used as an excuse to transfer our anxieties and frustrations about that—which is, after all, the most important subject facing us all, I suppose—to the long-suffering European Community, which, although it is legislatively supreme, is still only a tiny part of our total statistical and economic effort. I am amazed at the amount of time that Labour Members rabbit on, worry and harass the House, themselves and their own consciences with a couple of hundred million pounds in the European Community—although every single pound is by definition important— but never talk about the way in which, for example, the money supply figures are above the target that was constructed last year, never worrying—and I repeat again—that£10 billion at current prices was wasted by Labour on wholesale nationalisation in a totally useless fashion. They should keep their views on EEC membership in perspective.

Equally, I assume, too, that the counter-argument to what I have just said, which I am sure is a literal truth, is that, as the domestic recession recedes—and I hope that it will quickly, without too much further delay—the resentment about foreigners and all their works will decline also. It is natural that the feeling of economic nationalism that we have in times of severe recession and economic setback will fade away as things get back more to normal.

I wish briefly to deal with one or two points in the White Paper, perhaps slightly more subsidiary than those that have been mentioned before, in an effort, having made the suggestion to the House, to get away from the continuing obsession with the commanding heights of membership, which is becoming tedious and unwise for the House.

There are, perhaps, two references in the White Paper to the need to build up the Common Market in services. We have talked at length today about the common market in manufacturing, physical trade and to some extent oil. I hope that the primary position of this country in Europe in services—finance, shipping, but mainly perhaps for the moment insurance and banking—will be prosecuted energetically by the Government, representing the national interest. It is vital that we should push ahead in Europe with the emerging draft directive on insurance services.

It is wrong that other member States, through one means or another, at the level of national Government representatives, through other means and, indeed, through the Commission indirectly, have sought to slow down the process, fearing that the British insurance industry would sweep the field in the other European countries, which I am sure would happen. My hon. Friend the Member for Faversham (Mr. Moate) is an expert on the industry and may wish to comment later. To some extent we have now come into those markets, but a lot more needs to be done by laying the common groundwork, principally for insurance but also for other financial industries, so that we can get ahead and establish positions of supremacy for our industries in the EEC.

Moving to foreign policy within the EEC, I am very glad that my noble Friend the Foreign Secretary referred again in Hamburg to the need to build up foreign policy co-operation and co-ordination with the creation of a secretariat. He emphasised that it would be a small body, which was right. However, it is so important that that common policy should grow stronger and stronger that the secretariat is long overdue. I was struck on a recent visit to New York by how many people in the United Nations said to me that the Community was now more and more acting as a single body and achieving far more than it would do if things were left to individual member States.

I wish to make one quick point on the reform of the budget after 1981 and the common agricultural policy. It is no good hon. Members believing that they can have a double standard of philosophy and thinking and stating that they are in favour of abolishing the CAP and also that they are not but that there should be something in its place. The CAP is fundamental to the European Community, and therefore to our membership. Mechanically, mechanistically and in terms of its technical operation, regular management, the functioning committees within the Commission and the intervention boards, it needs a great deal of drastic improvement and structural reform.

We must somehow get back to the old idea that the orientation payments are more important than the intervention and support payments in that policy in order to slim down over the long term the excess parts of European agriculture, which mainly apply to the other member States. When one bears in mind that the price increases in recent years in the CAP have been less than the Community average rate of inflation, one realises that there is an awful lot of adverse shouting done here that is a gross exaggeration of the faults of the policy. It is important to keep the matter in balance.

Mr. Marlow

I am grateful to my hon. Friend for showing a festive spirit on this occasion. Does he agree that reforms of the common agricultural policy could go in two directions at once? One is that surpluses would be paid for in the countries in which those surpluses were produced. The other is that where there is low productivity in agriculture and there is a need for social support and social payments, payment should be channelled not through the common agricultural policy but through a social fund, which could be of benefit to all members of the Community.

Mr. Dykes

I do not think that that is correct. The latter point could be considered, but even there I hestitate. My hon. Friend's first point is not right. It is essential to be a wholehearted and enthusiatic supporter of that policy. We should not change adversely the way in which it functions.

The House is more concerned about surpluses than about price incidence effects. In view of the miserable performance of the Labour Government, when prices doubled in four years, and only one-tenth of that process was directly due to the CAP, we are right to be more concerned about surpluses. We must accept that a large proportion of those surpluses, depending to some extent on the product, is created by British farmers.

If our agriculture industry is so good—it is supposed to be the most efficient, but that can merely mean the most over-capitalised and the most mechanised—it should produce more than 100 per cent. of our requirements. Although the total proportion has gone up to about 80 per cent. of our national food requirements over the years, British agriculture still does not produce 100 per cent. or more of our food requirements. I should like that objective to be achieved as soon as possible. Once that objective is obtained, our net agriculture contributions to the EEC budget mechanism would be much less.

The same argument applies to our non-food imports. If we imported less and developed more of an intra-Community pattern of trade, increasing our average to that of the other member States—60 per cent. instead of our 40 per cent.—we, too, would pay much less into the Community budget. This problem has therefore been of our own making. It is therefore even more to the credit of other member States that they reached an agreement with us when we negotiated very robustly—rightly so—for a fair deal on the budget.

My right hon. Friend the Prime Minister did a magnificent job in this respect, but that deal is bound to be temporary in that the whole budget will have to be looked at when considering the restructuring imperatives, because the VAT ceiling will be reached some time in 1982. That may occur later than some people think, because of the rise in inflation— equivalent receipts on the VAT assessment base.

I want to mention two other matters. The White Paper refers to the common passport. It is time that we made progress with that objective without further unnecessary, absurd, bureaucratic, nationalist delay. The idea that having a common passport will strip away our masculinity—I must not annoy the ladies' lobby, so perhaps I should refer to our intrinsic characteristics as a nation—is crazy, and this step is long overdue.

The common driving licence was mentioned in an earlier debate, though it is not directly mentioned in the White Paper. That, too, is now in a very much diluted and watered down form from the original intention. It is absurd that the Community and the United Kingdom take so long to agree on matters that are really quite modest and yet are fervently wanted by the public. The public are more concerned with these practicalities than with highfalutin arguments about our sovereignty being taken away, as the right hon. Member for Battersea, North always says.

My final comment concerns a subject not directly mentioned in the document, namely, access by European Members to this House. The reference in the White Paper is actually to scrutiny and what the Scrutiny Committee does. The Government must try to make further progress in this connection. I accept that it is difficult for a well-intentioned Government to make progress because of the hostility of Labour Members, but it would help our examination of Community law if we had a proper system of official access for European Members as soon as possible.

6.15 pm

Mr. Austin Mitchell (Grimsby)

The basic argument in the case against the Common Market has nothing to do with high-flown arguments about sovereignty; it has to do with simple economic realities. Those realities have had an increasingly disadvantageous effect on our economy, producing not only the massive public opinion now arrayed against the Common Market but an increasing schizophrenia and an increasing desperation, as evidenced by the attempts in White Papers such as this and in the speech of the Lord Privy Seal, to put a rosy glow on the economic disaster that the Common Market has produced in this country.

When we joined the Common Market, it was argued that the advantages were political and that the economic case was more evenly balanced. That was an understatement. Now that the economic case has emerged as the disaster that it is, we see a constant process, which has more in common with public relations and advertising than with any branch of statistics that I know, of juggling the figures, changing the base dates and altering the calculations to try to show that that reality is not as harmful as most people in this country know that it is.

I shall come to the distortions in the White Paper later. First, I want to deal with the omissions. This record of developments in the European Community does not tell us the basic problems. It says nothing about the industries that have been destroyed and the hundreds and thousands of people who have been put out of work by the huge and still growing flood of manufactured imports from the Common Market taking away jobs from this country. It says nothing about the impact of the Common Market on the steel industry, an industry which is a basis of our industrial strength and which has been severely hit by imports from the Common Market.

Sir Ian Gilmour

The hon. Gentleman must be aware that the steel unions strongly supported the Community action on steel.

Mr. Mitchell

We all make mistakes, as was shown by the referendum in 1975 and in the commitments made in 1972. The reality is that there is a growing tide of imports of steel from the Common Market. The figure was 1.4 million tonnes in 1979 compared with 0.1 million tonnes in 1970, and an increasing amount of steel is coming in on the hoof—certainly on the wheel—in the form of manufactured goods, particularly cars. That is one of the main factors which has weakened the British steel industry and reduced it to its present state.

There is nothing in the document about fishing resources. The resources that this country brings to the Common Market pool have been decimated by Common Market over-fishing by huge fleets kept in being in order to make a political point to gain a concession in the negotiations, decimating our stocks without control. The Government are on the verge of accepting the most humiliating terms for our fishing industry. They were rescued from their own self-induced humiliation only by the French insisting that that humiliation was not enough.

The last omission from the six months' saga is the whole sad story of those six months, with the Prime Minister going in breathing fire, making demands, taking strong stands and then coming back, withdrawing those demands, being taken gently by the arm and persuaded that enough was enough, and climbing down on the demands that she herself had made for a rough balance in our benefits and payments to the Market. In effect, she took half a loaf in return for making concessions and promises on the common agricultural policy, on the common fisheries policy and on sheepmeat, the consequences of which are only now coming home to roost.

The massive public relations effort is concentrated' mostly on the trade figures, but it cannot disguise the basic facts of our trading relationship with the Common Market and the rest of the world. In trading with the EEC Six, we have, contrary to what the Lord Privy Seal said, fared much worse than in our trade with the rest of the world. Our trade with the EEC has improved mainly because we have to export our oil to the Six. Anywhere else, the oil would be refined in the home country and would be the basis of building up a massive chemical industry. The export of oil is, alone, responsible for the so-called improvements in the trade figures.

The juggling of the figures, the changing of the base years and the curious devices that are brought in to give a better gloss on what is essentially a disaster cannot conceal the central fact that we are in massive deficit in manufactured trade. That is what counts, because it provides the jobs and is the basis of an advanced industrial economy. The deficit has been getting worse and it is taking jobs in this country.

The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd)

Is the hon. Gentleman saying that our oil industry does not produce jobs? He appeared to say that we should not export oil to the EEC. How does he square that with the view that his hon. Friends have been expressing all afternoon that we should continue to export oil to the Community even if we withdrew? The hon. Gentleman seems to be getting into a tangle.

Mr. Mitchell

I am not in a tangle. The hon. Gentleman's intervention demonstrates that Foreign Office Ministers should stick to foreign affairs and not get involved in economics or industry. The figures have been doctored by the inclusion of oil, which we might export anyway but which we could also use to provide more jobs by building up a bigger chemical industry. I do not say that we should not export the oil. I was saying merely that the improvement in our trade with the EEC is due entirely to oil exports and not to relationship with the Common Market. That is a simple and straightforward point.

The huge deficit in manufactured trade has been getting worse. In 1970 we exported more finished manufactures to the Six than we imported from them. It was a ratio of 109 per cent. in our favour. The figure is not given in the documents and was not mentioned by the Lord Privy Seal, but the ratio is down to 79 per cent.

We have a deficit in manufactured trade of about£4,000 million with the EEC, whereas we are still in substantial surplus in our manufacturing trade with the rest of the world. That is the key fact. The basis of the explanation is that it is easier to penetrate a small market such as the United Kingdom from a large market such as the EEC than vice versa. Germany, France and even Italy started out with greater economies and advantages of scale, and those have become progressively stronger.

Apart from a substantial devaluation of the pound which is necessary to save our manufacturing industry but on which there is not time to enlarge now, the only solution is for us to return to the tariffs that we took down in 1972 and to restore and rebuild our industries and the jobs that they provide behind that level of tariffs.

We have to point out time and again that all the complaints made by the EEC about the rise in imports from Japan can be made with even more force by this country against the Common Market. Our deficit with the EEC is greater than that of the whole of the EEC with Japan. There is a charade of attacks on the Japanese for destroying jobs in this country. The essential destruction has been carried out by the Commom Market.

Mr. Russell Johnston

Perhaps I am being simplistic, but the hon, Gentleman seems to be arguing that we should be allowed import barriers against other EEC goods whereas the Community should leave its markets open to us. That is totally unrealistic.

Mr. Mitchell

The tariff barriers against them that we took down were greater than the tariff barriers against us that they took down initially. I was advocating the restoration of our tariffs, because otherwise we shall see the demise of industries on an even bigger scale. What is the alternative? That is the simple and basic question. To go on at the present rate, with the accelerating deficit in manufactured trade and the loss of jobs, will produce industrial ruin in this country.

In the Prime Minister's abject surrender in the budget row, she agreed not only to sell out on fishing but to accept the basic principles of the CAP. Here it is in black and white. Paragraph 7 of annex III of the document that we are considering states that we agree not to question the basic principles of the CAP. That was a disastrous failure.

We now have the highest agriculture prices in the EEC. They are even higher than German prices. We have devalued the green pound by 9 per cent. and we have a levy of effectively 61p per lb on butter. If that were reduced to the common levy, it would save our consumers 9p, per lb and would result in a total saving of£100 million. We have indulged in the folly of maintaining prices that are higher than those in the rest of the Common Market. Ministers could reduce those prices at a stroke if they wished. The fact is that they do not wish to do so and the consumer has to put up with far higher prices than are necessary, even in the Common Market.

It is clear that we shall be in the forefront of those pushing for higher prices next year. That is seen as the only way to help agriculture. It is tragic to see our Minister, rather than Mr. Ertl, as the main obstacle to CAP reform.

Much of the praise that was lavished by the Lord Privy Seal on the sheepmeat settlement was unrealistic, because our exports of sheepmeat to France—I do not particularly like the term "sheepmeat"—are still restricted since deficiency payments cannot be collected on exports to other countries. That is effectively killing the trade.

We have even more restrictions on our imports of lamb. New Zealand's trade in lamb with this country before the 20 per cent. tariff was 300,000 tons. Now it will be 245,000 tons—a drastic and substantial restriction in the trade. Who benefits from all that? The simple answer is that the French are the beneficiaries. They can now sell more into intervention. They benefit in that way, but we cannot.

Fishing is more central to my preoccupations. It seems that the Minister's hands were tied by the Prime Minister before negotiations had effectively started. He might have hoped to come back, like Neville Chamberlain in 1938, saying "Plaice in our time", but his negotiating position was undermined by the Prime Minister, by the deal made on the budget and by the regarding of the common fisheries settlement as a concomitant part of that deal. It would have been disastrous more dignified and far fairer to the House for the Government to have admitted that at the start. Instead, the whole concession has been rounded off with attempts to disguise it in double talk.

The terms of the offer that we were about to accept before the French torpedoed it would have been disastrous both for this country and for its fishing industry. The value of the annual catch from British waters amounts, on the estimates of the British Fishing Federation, to£700 million a year. That is a renewable resource. It is not like oil. Once the oil is pumped out, sold and burnt in cars, it has gone. Fish is a renewable resource providing revenue every year. That revenue is£700 million at present-day prices. Of that, we are effectively giving away to the Common Market something like£500 million of the stocks produced and caught every year in our fishing grounds.

Mr. Myles

Will the hon. Gentleman say what percentage of the stock in British waters was caught by the British fishing fleet in the last two or three years?

Mr. Mitchell

The operative question is not concerned with the last two or three years. This is part of the argument against the Common Market. Its calculations are based on periods that suit it and not us. Of the stocks about which we are talking, 42 per cent. was caught by this country in British and foreign waters in the late 1960s. The further one goes back in the 1960s, the higher the proportion that we caught. The talk now is not of 36 per cent., as Ministers have been giving the impression. It is 36 per cent. of seven species of fish. If the other species of fish of which we are being offered only 11 per cent. are taken into account, the offer comes down to 30 per cent. of the catch in the Common Market pool. The industry wanted 45 per cent. That gap means disaster and decline for the British fishing industry.

It is important to point out what has not so far been pointed out. The offer being made to us and which we apparently intend to accept is less than the offer made to us at the Berlin conference in January 1978, the terms of which the Prime Minister herself attacked and said were unacceptable at the time. We are now offered less. Yet we are told that it is an advantageous offer to the country. The French have rescued us from the humiliation of accepting that offer.

Tragically, now that we are in this impasse, the French having forced the situation on us, we cannot use the opportunity to take the action that we should have adopted and increase the negotiating pressure by the imposition of further national conservation measures to protect our stocks through an increase in net sizes imposed by this country, through the one-net rule imposed by this country and through a ban on industrial and beam trawling imposed by this country.

We will not use these negotiating pressures. We cannot use our fishery protection resources to stop the French fishing of herring, which still continues. We cannot increase our demands to a level that the industry could accept and live with. It is not possible because the argument remains that there is a connection between budget repayments and agreement on a common fisheries policy.

The Lord Privy Seal mentioned the payment of£100 million in the pipeline. Can the Government categorically state that we will get all the budget repayments due to us in this financial year if the common fisheries settlement is not reached? I do not think that they can. The two are tied together. Repayments can be held up to force us to settle on the common fisheries policy.

We face the problem of an open and massive attack on our fish stocks. Despite the brave show put forward by the Minister, we are effectively being delivered, bound and gagged, into a humiliating sell-out of the fish stocks of the fishing industry and a vital resource in this country. The argument with the French cannot disguise the basic fact that a massive sell-out is going through and will be finalised next year.

The whole approach of the pro-Marketeers and the enthusiasts for the Common Market, in their diminishing numbers, is essentially one of mirage-mongering. The argument is that things may be bad economically and the direct consequences may be disastrous for this country but that if we wait things will get better and the Common Market will change. It does not change. The argument takes one of two forms. The first is that the situation will improve. The other is that the system will disintegrate of its own accord and that the common agricultural policy will get too expensive and fall apart because of its top-heavy weight. Meanwhile, the economic burdens continue to get worse.

It is time, as the Labour Party proposes, to say "Stop". The Common Market does not suit us. It has been disastrous for us. It imposes on us an agricultural protection that is not to our benefit and not in our interests. It takes from us the ability to defend our own industries and to take those steps to rebuild and to restructure the economy which, if we are to survive industrially and to provide jobs, we have to take. It takes away the power to do what we have to do. The fear put forward by supporters of the Common Market that the world is cold and hard outside is nothing compared to the hard, cold and disadvantageous reality inside.

6.36 pm

Mr. Richard Body (Holland with Boston)

I agree to a considerable extent with the analysis of the hon. Member for Grimsby (Mr. Mitchell).The facts that he has given cannot be denied, but I join issue with him over one conclusion—namely, that we should seek some kind of protectionist policy. I am sure that we shall be asked by my hon. Friend the Minister what is our alternative, where are our markets and how are we going to trade. the answer is simple. As an unrepentant free trader, I say that the answer is to pursue a free trade policy. Our market is, or could be, the easiest in the world to penetrate. It is one of the best markets for any exporting nation to pursue a policy of free trade.

Any student of economic history knows that if our market is open and a floating exchange rate is allowed freely to fluctuate so that the pound goes up and down in relation to the strength of our exporting and importing, the simple answer is to declare a policy of unilateral free trade. I wonder whether the Minister can deny that there are countries that have traded with us for generations and would like to do so again. It is no pleasure for Australians, New Zealanders, Canadians and many others to put up barriers against our exports. They cannot afford to buy from us if we are so foolish as to pursue policies that drive their own industries—and, above all, agriculture—into the ground. If one-third of the dairy farmers of Australia are driven out because of our selfish policy, we cannot expect the Australian Government to be sympathetic about our trade.

I am sure that the House will recall Lord Stokes saying that there would be a wonderful market for British cars in the EEC and that we must enter. I recall writing him a letter saying that he might be right. It would be reasonably fair. We should be able to get into the EEC market and the EEC countries into ours. What would happen, I asked, about the market throughout a great part of the world where our cars could be marketed free of tariffs and where Renaults and Citroens faced a tariff barrier of 17 per cent.? When that tariff was removed, would there not be a difference? I remember the answer that I received from Lord Stokes. He had not appreciated that. He had not realised that we would be facing the same trading terms as the French and the Germans. That illustrated for me how the Europhilics did not quite understand the arguments, caught up as they were in euphoria.

Like everyone else, I have read the White Paper. I know, Mr. Deputy Speaker, that I should be out of order if I were to address my remarks to those who sit only a few feet away from you behind your Chair, and, of course, I shall not do so. However, I am saddened beyond measure, because the thinking in the Foreign Office seems to have stopped. We all know the phrase that is used in Brussels about stopping the clock. The clock stopped in the Foreign Office years ago. It is not moving on. One of the results is that we are making no progress in matters that are crucial to the future of Europe.

I am pro-European, but not in the sense in which certain newspapers use that phrase. I know that the right hon. Member for Battersea, North (Mr. Jay) would find some difficulty in accepting a description of himself as a pro-European. However, I am intensely pro-European. I feel that the countries of Europe should work together on many matters. We are failing to do so.

This wretched White Paper is the same as all the previous ones, in that most of it comes down to the CAP, and the little that is left does not add up to a row of beans. We are not achieving anything. It saddens me. I thought that the Foreign Office was brightening up somewhat. I read the speech that my right hon. Friend the Prime Minister delivered in Bordeaux. I agree with her views about what is called Europe. If I may say so, she made a very good speech to the Anglo-French Council in Bordeaux. I have not the slightest doubt that her speech was vetted and re-vetted and that every syllable of it was examined by Foreign Office officials. They allowed, authorised, or whatever is the appropriate word, my right hon. Friend to say: co-operation amongst neighbours is essential. She continued: We need new initiatives … We must do it without a further increase in the bureaucratic regulations by which nowadays we are all too tightly bound—whether at the Community level, the national level, or the level of local government … I want to build a solid and weatherproof structure well able to resist the storms which lie ahead.

Sir Anthony Meyer

I am sure that my hon. Friend does not want to mislead the House. I was present at the conference at Bordeaux. My hon. Friend has chosen to extract one passage from the speech of my right hon. Friend the Prime Minister to give a totally misleading impression of the content of the speech as a whole, which was taken and intended as a firmer statement of Britain's commitment to the European Community than any statement from any of Her Majesty's Ministers hitherto. It was so taken and so received by everyone at the conference.

Mr. Body

I know that. I know that my hon. Friend was there. I know all the circumstances. It is all public knowledge. I tune in to what is going on on this subject, and I have done so for a long time. If I may say so, I was one of the first six in the House to table an early-day motion urging Her Majesty's Government to be represented at the conference at Messina. I was pro-European then, and I am now. I take a great interest in European affairs. However, it is thought by some—several of us suffer from this attitude—that we are little children and that we do not really know the story. If one is what is called an anti-Marketeer in the Conservative Party, it is necessary to be rather well informed, and better informed than those who are described as pro-Marketeers. I know that my hon. Friend the Member for Flint, West (Sir A. Meyer) was at Bordeaux, and I am well aware of the Prime Minister's purpose. I was saying that her speech was approved by the Foreign Office. My hon. Friend knows that, and we all know that.

Fine words were said at Bordeaux, without any supporting original thought from those in the Foreign Office and from those who speak on its behalf. My hon. Friend knows that nearly 25 years have passed since the European Community was founded. What do we have? All that we have is a common agricultural policy. That is the only fully fledged policy, and it is dividing, not uniting, us.

My hon. Friend was present when exchanges took place over fisheries policy. He will remember that there were angry remarks from all parts of the Chamber about the French, as if the French were playing it dirty. He knows that the French believe that we are playing it dirty. They claim that we are falsely interpreting the Treaty of Accession. They understand the Treaty of Accession to make it plain—they may be right or wrong, but this is their view—that once 1982 comes they will be entitled to fish up to our beaches.

We have the example of UHD milk. I am a member of the Select Committee on Agriculture. Members of the Committee spent several days in France investigating the possible importation of UHD milk. We are keeping it out. If it were to come into Britain, it would undercut our milk. We would have milk on our doorsteps or in supermarkets costing perhaps 2p a pint less than the present price of milk. The French are convinced that if they were allowed to export their UHD milk to us they would collar a great slice of our market and that in the process their surplus of milk would diminish considerably. They point the accusing finger at us and claim that we are largely responsible for the surplus of dairy products in the Community They think that we have a dishonest approach to the importation of UHD milk.

Mr. Hurd

Does my hon. Friend agree that arguments of this sort have gone on with the French and with other countries through the centuries—for example, Colbert, Cobden and the Anglo-French Treaty? There is nothing new about the argument. There is nothing new about fishing disputes, especially between ourselves and the French. What is new is that there is now a struggling—painfully so, I accept—machinery and Community for settling these disputes.

Mr. Body

I should have made rather more progress. I apologise if I have been diverted. My theme is that I believe passionately in co-operation between the old ancient States of Europe. I believe with equal passion that we are going the wrong way about it. The one thing that we should not be dabbling with is a common agricultural policy. I can think of nothing more calculated to divide Britain from France.

The example of UHD milk is only a detail. However, we detected considerable animosity. We are undoubtedly playing it dirty. We cannot honestly say that UHD milk should not come into Britain because it is unhealthy. We observed the boiling processes. The milk is boiled a thousand times over. It cannot have any germs or anything else. It is useless milk to drink, but there it is. It can have no value in that respect. However, the excuses that we advance are dishonest. My hon. Friend the Minister of State is looking doubtfully at me, but that causes ill feeling in France. That extends to lamb and butter. The French believe with great fervour that they are right and that we are playing it dirty.

The French are apt to remind themselves that Britain was allowed into the EEC only after my right hon. Friend the Member for Sidcup (Mr. Heath) had given four pledges to M. Pompidou. The pledges were given in private and concerned the way in which Britain would behave. I regret to say that the pledges were not repeated when my right hon. Friend made a statement to the House after his discussions with M. Pompidou. The French were well aware of those pledges, given in the name of Britain, about how we would behave about the CAP. We were asked to give our interpretation of the CAP. We did so, and it happened to coincide with the French interpretation.

I regret to say that ever since we have been members of the Community we have been thought to have reneged on those promises. We have played it dirty again and again. I am on the side of the French on this issue. Generally speaking, we have behaved badly. The French are entitled to feel aggrieved about our conduct. They will continue to feel aggrieved. One of the reasons why I am so hostile to the CAP is that I like the French. I like visiting France and I like the French people. I should like us to work more cordially with them. But we shall never do that while we haggle over lamb, butter and all the other matters.

I see that the clock is not too adversely against me. It is time that the Foreign Office looked again at the progress that we should be making. I remind it of the Prime Minister's speech at Bordeaux. They were fine words. My hon. Friend the Member for Flint, West (Sir A. Meyer) does not like the fact that the Prime Minister has said that she believes in a partnership of nation States. That is exactly what I believe. If we could refashion the European Community as such a partnership, all the sterile arguments about withdrawal would go away.

My hon. Friends the Members for Flint, West and for Harrow, East (Mr. Dykes) would not be satisfied with a partnership of nation States, nor would my hon. Friend the Member for Eye (Mr. Gummer). They do not want nation States, but most of us would accept that. On numerous occasions I have spoken to the right hon. Member for Battersea, North about this issue. I do not think that he would quarrel with the phrase "a partnership of nation States". I well remember his speeches. The right hon. Member for Lewisham, East (Mr. Moyle), who is to reply for the Opposition and whose views I know well, would not quarrel with that phrase, nor would the right hon Member for Llanelli (Mr. Davies).

If that were to happen, we should not have replies of the kind that we heard from my right hon. Friend the Lord Privy Seal this afternoon. I say that with great respect, because I have always thought that he was a great, original thinker in our party. If we are to pursue the objectives of my right hon. Friend the Prime Minister and reconstitute the institutions of the Community so that we retain—to use the phrase again—a partnership of nation States, it will not be necessary for my right hon. Friend to make the sort of speech that he made this afternoon to the right hon. Member for Llanelli. They would be in agreement. As I have been talking, I have noted that heads have been nodding in agreement. Even the right hon. Member for Battersea, Northand one could not be more anti-Common Market than he—agrees with that thesis and the phrase used by the Prime Minister.

What does that mean? Any student of international relations knows the nature of a nation State. The essence of the nation State is that it can make its own laws. Its judges interpret those laws. They are not subordinate to any external judges. Its elected representatives decide what taxes its people should pay. A nation State is bound by no treaties other than those into which it has entered. Those are the four characteristics of a nation State. They are significant, because the Treaty of Rome has removed each of those four characteristics from Britain. The Treaty of Rome is clear on the matter. It has taken away each of those four elements of a nation State. It has done the same with other member States. It so happens that they are now awakening to that.

When my hon. Friend the Member for Flint, West asserts, sometimes specifically and sometimes by implication, that those of us who take a contrary view are out on a limb—that no one else in Western Europe shares our view—he is woefully mistaken. There are rumblings in almost all the capitals of Western Europe that we are going the wrong way about it if we want to make any progress towards co-operation among Western European countries.

My hon. Friend should be the first to agree that it is essential that we should make that progress, which cannot be reported, and is not reported, in the White Paper. The White Paper is no different from others. It is a regurgitation of the White Papers that we have received on this issue ever since the first one was published some years ago. There is no progress whatsoever. That is why hon. Members on both sides of the House believe that the European Community institution should be refashioned, so that those who are members of it have those four rights restored to them.

That would mean that the Council of Europe would become a different creature. It would no longer make laws secretly. As a result, the European Assembly would have no function and could well be merged with the Council of Europe and in the process be representative not just of a few countries of Europe but of 17. The European Court of Justice would be wound up.

If the case for the nation State working in partnership with its neighbours is successful, I think that we have had sufficient experience during the past 25 years to know that the experiment of supranationality has failed. Almost invariably, it means either undesirable horse trading in the middle of the night or that the progress is that of the slowest in the convoy. Yet the whole Treaty of Rome is founded upon that principle of supranationality.

I invite the Foreign Office to consider whether there is any third way. Either we continue to seek the supranational approach of having our own institutions, our own Parliament, our own courts of law, and so on, subordinate to those supranational institutions of Europe, or we reclaim the powers for ourselves—not only for Britain, but for everyone within the Community. In the process, we should be able to make some kind of progress. The Commission would be slimmed down into something different from what it is now.

As a secretariat, it could service a Council of Ministers, which could include any Minister in Europe, on either side of the Iron Curtain. It could be one of the ways of bringing down the barriers that exist between East and West. It would enable the countries of Europe to shape common policies that suited their interests. If one country found it against its interests, it could drop out of that arrangement.

It would enable Norway, for example, to play a part. Norway might well want to subscribe to the common agricultural policy, but certainly no Norwegian would want to subscribe to a common fisheries policy. There are some who would welcome a common energy policy, although one would hope that we would play no part in that.

There is a great deal to be done, as the Prime Minister set out in that great speech of hers in Bordeaux. I ask my hon. Friend the Member for Flint, West and others who seek the supranational approach, who have this great loyalty to what they think is Europe—this vision of the United States of Europe—whether, in these times of recession, when each of the countries is becoming ever more reluctant to pool anything that it has—that is only natural in the conditions of the recession—we shall ever achieve any progress whatsoever in European co-operation so long as we have the Treaty of Rome in its present form.

7.1 pm

Mr. Russell Johnston (Inverness)

I very much enjoyed the speech of the hon. Member for Holland with Boston (Mr. Body). I would say only two things to the hon. Gentleman, although clearly a number of the points that he made will inevitably be caught up with what I say. First, the passion that he clearly evinced is by no means confined to the proponents of the nation State. Those of us who believe that the way forward is to move towards supranational arrangements equally have a passion, a belief and a fervour in this matter. The hon. Gentleman should not in any way feel that this is not so. [Interruption.] If the hon. Member for Northampton, North (Mr. Marlow) will be patient, I shall come to him in due course.

The second thing I say to the hon. Member for Holland with Boston is that I did not quite understand the part of his speech in which he talked of problems of milk, lamb and fishing. These are problems which must be resolved in any event, whatever the mechanisms one uses. Nation States may not resolve the problems but may simply proceed in their own way and create barriers in their own way—and barriers are things which the hon. Gentleman does not like because he is an innate free trader. But I do not believe that there is anything remarkable about a British judge—to use his example—as being something splendid and Solomon-like in the British judiciary, being of the essence in the kind of way that the right hon. Member for Down, South (Mr. Powell) would see it. Oddly enough, he is not with us today, but he is almost always here on these occasions. He would see, I think, some sort of almost spiritual thing that the British judiciary has, which would be better than anything else. I do not see that at all.

I find it increasingly difficult to make constructive speeches about these White Papers. The hon. Member for Faversham (Mr. Moate) is shaking his head—which he does for a lot of the time during these debates. It is a fact that a significant number of Conservative Members, headed up by the hon. Member for Northampton, North and the hon. Member for Southend, East (Mr. Taylor), now basically reject the whole premise of the debate, which is the development of the European Community. [Interruption.] We are here to debate developments in the European Community, and those two hon. Gentlemen do not want to see developments in the European Community. They want to see the opposite of that. Within the Labour Party, likewise, there is now an official position in which the view is that this country should come out of the Community. Consequently, both of these groups use every single objection that exists to anything that the Community may be doing wrong as an argument not for changing the policy of the Community—which is one thing—but for coming out of the Community altogether. That makes the debate very difficult.

This reminds me very much of the debates that we used to have on devolution. On those occasions, the Welsh nationalists and the Scottish nationalists were not really interested in whether the United Kingdom Government was doing well or ill. They just wanted out, and that was the end of the matter. I always thought that it was rather ironic that some of the strongest opponents of devolution in this House were at the same time the strongest opponents of entry into the European Community. They were British nationalists, yet they rejected the idea of Scottish nationalism. That always seemed to be a contradictory thing.

The other characteristic of these debates is that the Community is most criticised by the Right of the Conservative Party—if the hon. Member for Southend, East will not be offended by my putting him in that category.

Mr. Taylor

No.

Mr. Johnston

On the other hand, it is criticised by the Left of the Labour Party, one of whose Members I see sitting relatively quiescently behind me—the hon. Member for Newham, North-East (Mr. Leighton). Both of them profoundly disagree with each other about practically all alternative propositions. Members of the Left of the Labour Party, such as the hon. Member for Newham, North-East, condemn the European Community essentially because it is, in their eyes, a capitalist club whose policies represent an insuperable barrier to the development of true Socialist policies in this country. I think that that is a reasonably fair comment. The hon. Member for Newham, North-East may feel free to interrupt me if he thinks that it is unfair.

What does the hon. Member for Southend, East say about the matter? In our last debate on 28 November, he said: I am surprised"— he is still capable of surprise after all these years— at the number of Conservatives who support our present relationship with Europe, when we know that basically Socialist policies are being put forward in the EEC. These are very different points of view. I think that it is really about nationalism.

Mr. Taylor

Patriotism.

Mr. Johnston

Patriotism, nationalism—it is the same sort of thing. Because of nationalism, in the end the hon. Gentleman is happier to support, in this country, for example—[Interruption.] Perhaps the hon. Gentleman will permit me to continue. I shall willingly give way to him in due course. I intend to refer to him a little more. Perhaps he ought to haud his wheisht—an expression that he will recall from his days in Cathcart.

The hon. Gentleman is prepared to accept an electoral system in this country which inevitably, because of the swing of the pendulum, will one day bring to power the party of the hon. Member for Newham, North-East, and he prefers that to any continuing association within a Community which, whatever its shortcomings, is committed to private enterprise and to the mixed economy. I find that very peculiar.

Mr. Taylor

How would it stop a Labour Government coming into power in Britain if we were to follow the hon. Gentleman's Euro-fanatic line? If we have the further development of Europe as he proposes, how would that stop a Labour Government in Britain?

Mr. Johnston

It would not stop a Labour Government in Britain. I did not say that it would do that. I said that in the end the hon. Gentleman prefers to come out of Europe, whatever the risks, rather than continue in Europe, where the likelihood is that the pure milk of Socialist doctrine as preached by the hon. Member for Newham, North-East is more likely to be diluted and constrained. That is a fair point to make.

If I may continue and refer further to the hon. Member—

Mr. Taylor

Start again.

Mr. Johnston

I should like to refer further to the hon. Member for Southend, East. I have already quoted from his speech on 28 November. I should like to quote a little more, because the common agricultural policy has been raised several times during this debate. Speaking about the CAP, the hon. Member said: This nonsense of a policy is particularly damaging to Britain at a time when we are concerned about rising prices … It means£5 per week to the average family. That is a great deal of money, particularly when we are battling with inflation. But that depends on what is meant by an "average family". According to my information, if an average family comprises mother, father and 19 children and they spend£143 a week on food, the hon. Gentleman's assertion of£5 extra is correct. I am simply quoting figures that were given by the Government, and, therefore, I am open to correction. I understand that the real additional cost of the CAP is 3½p in the pound. That is not an inconsiderable amount. I understand that an average family of four spends about£27 a week on food. If we multiply that up, it means about 94p or 95p extra a week. I am not denying that there is an extra payment, but that extra payment is nothing like the figure that the hon. Gentleman quoted, and it is worth paying in terms of the assurance of supply that the CAP affords.

Mr. Taylor

I was quoting from an answer that was given by my right hon. Friend the Minister of Agriculture, Fisheries and Food to my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) in which reference was made to the figure of£3,000 million. Of course there are qualifications. If we did not have a common agricultural policy, where would all the food go? My hon. Friends are shaking their heads. I hope that they are not disputing that that answer was given by my right hon. Friend the Minister of Agriculture to my hon. Friend the Member for Aldridge-Brownhills. I wish they would stop regarding this matter as a tennis match. It is a serious issue.

Mr. Johnston

It is a serious issue, and it is important to get it right. In saying that the CAP costs£5 extra a week, the hon. Gentleman is distorting the argument.

If we were to revert to deficiency payments, the cost would be about£1,500 million. The hon. Member for Northampton, North confirms that. If that is the case, our existing deficit with the Community would look rather small.

Mr. Leighton

Does not the hon. Gentleman understand the simple distinction between money paid to our farmers to keep the price of food cheap and money that is paid across the exchanges to foreign farmers to keep the price high?

Mr. Johnston

At the end of the day, whatever money we pay out means that in this case we shall be paying more to maintain farmers in the same reasonable income position, but at the same time denying manufacturing industry access to markets to which it now has access.

I turn now to the question of unemployment. Here the hon. Member for Southend, East appeared to allege that all our unemployment was the fault of the Community. I am not sure whether there are any special contagious diseases in the other member countries of the Community, but if there were I am sure it would be alleged that this was the result of our being members. He said that the whole of Britain was concerned about the level of unemployment and that it was a matter about which we should think carefully. He went on to say: Many factors are involved, but I think that even the Eurofanatics would accept that a£3 billion deficit with the EEC affects many jobs and makes it difficult to maintain employment."—[Official Report, 28 November, 1980; Vol. 994, c. 1116–20.] As I understand it, the essence of the argument is that we have a deficit, and we are buying goods from the Community that we could otherwise produce ourselves and sell to ourselves.

There are three points to make here. We have done less well than we had hoped through our entry into the Community. It has been said that the dynamic effect did not take place at the level that was expected. Nevertheless, we have done better within the EEC than we would have done outside it. About 39 per cent. of our manufactured goods, excluding oil and chemicals, goes to the other eight members. If we come out, what will happen to them? The Community would set up tariff barriers. The assumption that some of the other eight member countries would give us favourable comparable terms is unfounded.

The other related and important matter is that within the areas of high technology—aircraft, telecommunications, computers and so on —development would be more difficult outside the Community than within it.

Mr. Marlow

I wish to return to a point that the hon. Gentleman made earlier concerning the sum of£1,500 million. If we had our own system of agricultural support, we would have to pay for it. But the problem that is not sufficiently accentuated by the Government or by the hon. Gentleman is that we are not only paying the cost of our own agricultural support; we are paying —1,500 million a year for the agricultural support of rich French, Danish, Dutch and German farmers.

Mr. Johnston

With respect, that is untrue. We are not paying for the rich farmers in Europe—and it is a change to hear that all the French farmers are rich. Usually the argument is that they are all peasants. The hon. Gentleman must be consistent. It is absurd to suggest that Britain's total contribution to the Community is all due to that. However, I shall not pursue that argument because time is against it and many other hon. Members wish to contribute to the debate, including the hon. Member for Northampton, North, who is a master of the lengthy intervention.

Mr. Clive Jenkins said at the Labour Party conference: Stop the EEC, we want to get off'. That sums it up. The argument that if we come out of the EEC we shall solve the problems is fundamentally fallacious. If we come out of the EEC, we shall create problems and we shall make things worse. That cannot be said too often. If I may say to the right hon. Member for Llanelli (Mr. Davies), who is sitting on the Opposition Front Bench reading "Dod", the Community is not above all an economic community. Above all, it is a political community and an attempt to create a group of mutually dependent nations with common attitudes and interests. It provides, and I hope it will continue to provide, a vital core of stability in an unstable world. That is very important. If we cannot achieve that in Western Europe, the outlook in general is serious.

The Community will be a success only if it achieves further integration. The fundamental flaw in the Tory reformists' argument is that they claim that they can remain within the Community and go backwards. That cannot be done. The Lord Privy Seal said that explicitly and clearly. The Tory reformists are anti-Marketeers and they want to come out of the Common Market. That is their position, and they should state it.

There is nothing in the White Paper on energy, except a tiny paragraph reporting the status quo. If we wish to make progress we must develop an energy policy, which, in Britain's case, means a gesture of good will—such as priority of supply. We should make oil available to our friends on a preferential basis at world prices.

On regional policy, I find paragraph 6.2 most depressing. It simply records the fact that there has been no agreement about the non-quota element of the regional fund. That is hardly a dynamic statement, and I should like to know whether the British Government are one of those who are causing delay in that area.

Mr. Body

rose—

Mr. Johnston

I have given way a great deal and I do not wish to delay the House unduly—

Mr. Dykes

No. The hon. Gentleman is making a good speech.

Mr. Body

Surely the hon. Gentleman is on the same theme as I was trying to develop, which is that we are not making progress. Will he consider some of the fundamental reasons why we are not making progress? Is it not time that Liberal Members as well as others considered the fundamental issue of whether we are approaching the matter in the right way?

Mr. Johnston

I accept that we are not making progress, certainly not in any of the main areas of co-operation. The reasons for that include a growth of nationalist feeling, for which France and Britain are the two major culprits. All I can say is God help Europe if Germany behaves in the way that Britain and France do. Therefore, the way ahead is not to encourage these nationalist feelings, as many anti-Marketeers do. I do not necessarily say that of the hon. Member for Holland with Boston, who, as a free trader, holds a somewhat different position. Rather we should seek ways of reconciling these differences through supranational institutions.

The two major parties should not spend their time competing about how much we are getting out of the Common Market. They should be competing over how much they can give to it and how our Government can contribute more. These arid, sterile debates in which one side says that it got more than the other are irrelevant. The Common Market is concerned with bringing together people who have a long tradition of fighting each other in a small continent—but who are, nevertheless, very civilised—to take the world a step forward.

7.22 pm

Mr. Teddy Taylor (Southend, East)

It was typical of the hon. Member for Inverness (Mr. Johnston) that he should make a long, hopeless, pathetic speech, in which he desperately tried to pick holes in the arguments of those who disagree with him, and end by saying, as Liberals usually do—the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) is a splendid example here—that it is necessary to get away from the dull, sterile argument and on to a higher plane.

I think that my right hon. Friend the Lord Privy Seal put the hon. Member in his place by saying that it was indeed time to get away from the dull and sterile arguments. They are dull. Look at the numbers of hon. Members who attend these debates that we hold every six months. The debates have developed into a kind of tennis match, with one side saying why the Market is wrong" and the other saying why it is right.

The only aspect of these debates that cheers me up is watching the Box that we are not allowed to mention—the officials' Box. It is a wonderful experience, when the Lord Privy Seal is making a strong point, to see the occupants of the Box looking as though they are watching George Best with an open goal, just about to score. It must sustain my right hon. Friend enormously to know that he has such splendid friends, supporters, allies and worshippers.

Without doubt, we should try to elevate these debates. That is why I and some of my hon. Friends formed the Conservative European Reform Group. It was an attempt to start discussions of the reforms for which everyone, including the pathetic Liberals, express support. I hope that the Government will respond tonight precisely on that.

We want to elevate the debates. I must tell my right hon. Friend, however, in the Christmas spirit, that it will be most difficult to do that if he makes comments such as that our trade in manufactures with the EEC is better than with the rest of the world. Such a comment can spark silly people like the hon. Member for Inverness (Mr. Johnston) into turning our debate into a table tennis match.

I am sure that my right hon. Friend will accept the information given to me the other day in a written answer, which showed that our deficit with the EEC in manufactures in 1977, 1978 and 1979 was£6,000 million. The figure for the rest of the world was a profit of£16,000 million—a big difference. It is not a marginal matter. Even if we consider changes in volume, percentages and all the rest, that fact remains. I am sure that there are many reasons for that trend, but I must tell my right hon. Friend that casual asides of that nature, indicating that our trade is better, when these horrifying statistics are staring us in the face, will only introduce difficulties into our debates.

Sir Ian Gilmour

My hon. Friend must be serious on this matter. He must realise that our trade in manufactures with countries that do not manufacture will obviously be better than with countries that do. Our export-import ratio has deteriorated less badly with Europe than it has with comparable industrial countries, such as the United States or Japan. I must ask my hon. Friend to advance a serious argument.

Mr. Taylor

I am trying to do just that. If my right hon. Friend is referring to trends, surely he does not compare 1979 only with the first nine months of 1980. That written answer showed that in 1972, the year before we joined the EEC, the deficit with Europe was£44 million. Last year it was£3,000 million. Trade with the rest of the world showed a profit of just under£2 billion then and a profit of over£4 billion now. Surely my right hon. Friend will accept that. i am not trying to advance a sterile argument, but there is a problem here, and something is going wrong.

If we carry on in that fashion, we shall hear ridiculous arguments. My hon. Friend the Member for Flint, West (Sir A. Meyer) suggested that the reason why we were doing so well in our trade with the rest of the world might be that we were in the Common Market. That appears to he the new argument, advanced on the ground that the international and multinational companies came to Britain. For goodness sake, let us accept that things have not gone well for Britain in the Common Market. Our trade position, our contributions and the CAP are all dreadful. Therefore, we in these debates should consider how we can best improve them.

When my hon. Friend the Minister of State replies to the debate, will he not just fill up his speech by saying that the Common Market is the best thing since sliced bread and that that shows that the arguments of other hon. Members are rubbish? Let us consider the future and change what we know to be wrong.

Mr. Marlow

If membership of the Common Market is so important to expansion of our trade, why is it that since we joined the Common Market our balance of trade with the Common Market has gone down and our level of exports has gone up at a far lower rate than that of the Japanese, who have expanded their trade with the Common Market far more than we have, without even being a member of the institution?

Mr. Taylor

That is true. It shows how right my hon. Friend is. I am sure that my hon. Friend the Member for Harrow, East (Mr. Dykes) would probably pray in aid our trade with Pakistan or other such countries, which, taken on a volume basis, spread over 24, years and divided by 24 would show a different picture. That does not help us. Surely we can all agree that our trade performance has been awful, that our contributions have, been deplorably high and that the CAP is a mess for Britain.

Mr. Dykes

My hon. Friend attributed to me remarks that I did not make. He must admit that we have deficits with all the advanced areas of the world. The reduction of the deficit with our European partners has been strikingly good compared with what has happened with some other areas. Why does not my hon. Friend deal with the issue that way round? Britain normally has a surplus only with the underdeveloped areas of the world.

Mr. Taylor

My hon. Friend made a courteous speech, for which I was grateful and which contributed to the spirit of our debate. However, surely he will accept that our trade in manufactures with the EEC has got a lot worse. The figures are in the written answer, shown year by year. Our trade with the rest of the world has been super and getting better. Surely everyone accepts the Government's figures, which show a profit of£16,000 million in manufactures in three years with the rest of the world but a loss of£6 billion with the EEC. That means a lot in terms of jobs. If we are concerned about nothing else, we should be concerned about jobs. These appalling figures show that jobs are being seriously affected.

The important thing is what we should do about it. All of us accept—even the hon. Member for Inverness, who is a bit of a Euro-nut—that we must do something about the CAP. Everyone says that it needs fundamental reform. Even my hon. Friend the hon. Member for Banff (Mr. Myles)—and there is no sturdier supporter of the farmerssaid that we need to adjust the CAP. The existing CAP is appalling, and it must go. We want something that is based on the principles of the Treaty, which are so broad that they can mean anything. The Treaty basically says that we must have a fair deal for consumers and farmers and also security of supply.

I want the Government to tell us the basis of their plans for these great reforms, because it seems to me that there has been a slight change in their view. At one time—this is contained in House of Commons Library Paper No. 86, and supported by two written answers that I have sent to my right hon. Friend—the Government's view was that we were committed to the principles of the Treaty, which were a fair deal for the farmers, security of supply, expansion of agriculture and a fair deal for the consumer. It is possible to achieve those objectives in many ways—by national policies supervised from the centre and by a better developed CAP, but certainly not by the existing CAP.

On the other hand, there has been some movement, because just the other day the Minister of Agriculture said in a written answer that we were committed to the Treaty but added that the Government accepted the basic systems of support under the agricultural policy. That presumably means levies, mountains and all the rest.

We also had a fascinating and detailed answer from the Lord Privy Seal in today's Hansard, in which it appeared to me that he was saying "Whatever we do, we must not touch the treaty." He was saying that the views of the Conservative European Reform Group were in some way inconsistent with EEC membership because, in his view, although not in ours, it suggested something that required an amendment to the Treaty.

I was greatly reassured to hear the Prime Minister's splendid interview on radio. I have a copy of it with me. She made it clear that she wanted change, which might involve changes in the Treaty. Therefore, it would help if we had a clear idea of the kind of changes that the Government propose for the CAP. Do they believe that the answer is to restrict production? In my view, that would be inconsistent with the Treaty. Are they saying that we should have a price freeze? We thought that they were in favour of a price freeze for items that were in surplus, but that view seems to have changed. What other system are they in favour of?

We do not want the Government to give away their negotiating hand, hut we are entitled to be told what their objective is. Is it to restrain production, or is it to find other avenues through which we can sell the stuff? We now have a better chance than ever before to reform the CAP because, as my right hon. Friend said, the Common Market is running out of money and it will have to change its policies. We want to know the general direction rather than the details of the plan.

That has been the tragedy of this debate. Everyone has said that we must change the CAP, but we cannot even get agreement on the direction of reform. Will we try to expand consumption? One of the most worrying things is that people are eating less and less. Another answer in today's Hansard shows that the consumption of lamb, butter and other basic foodstuffs is decreasing. That creates further problems for the CAP. It could well be that prices are too high and that people are trying to slim, changing their eating habits and eating different foods, but the fact is that food consumption is going down at a time when production is going up. That is an appalling problem.

I am sure that my right hon. Friend will say that he is in favour of changes in the CAP. However, has not the time come when we should be given a broad indication of the direction of change that the Government will propose to the EEC when the time for change arrives? It is important to have that answer. These debates could then be more meaningful. Surely the Government can give us a clue to the general change which they believe should take place. We could then debate it. All that we had so far is a statement from the Lord Privy Seal that they want to get rid of the surpluses so —do I—and stop over-production. How does he think that that can be achieved?

Mr. Dykes

Those are technical changes and improvements in the CAP that we all want to see. That is not the same as the aim of the reform group, which is the abolition of the CAP. It wants to change the Treaty, to destroy the common agricultural policy and to have it administered nationally.

Mr. Taylor

The group has made it clear that it thinks that the CAP is wrong and crazy. We thought that the Government were committed to the principles of the Treaty, which calls for a common agricultural policy that follows basic objectives, such as a fair deal for the farmer and consumer, expanded production and all the rest.

I believe that there is a desire among all the parties in the House to be told the direction in which the Government want to go to achieve those objectives. The only suggestion that we seem to have had has come from the Commission. The Commission is constantly being told to do things and being given policies that are unworkable. It seems to be suggesting that the answer is an extension of the co-responsibility levy on milk to other products.

That would make the financial position easier. More money would be available and it would be spread over a wider area. It would prevent the EEC from going bankrupt for, say, another two years. But that does not deal with the problem of structural over-supply and over-production. I hope that the Government will not support what is basically a device to buy time at the expense of the consumer. That certainly is not an answer to the structural problem. Let us have a broad indication of the Government's view on how we can proceed.

Mr. Moate

Is not the confusion to which my hon. Friend referred, and the need for clarification of what people mean by "reform of the CAP", demonstrated most clearly in the point made by my hon. Friend the Member for Harrow, East (Mr. Dykes), who apparently endorses the need to get rid of structural surpluses, presumably by Community methods such as co-responsibility levies and the like? However, in his speech, my hon. Friend the Member for Harrow, East referred to his desire to see 100 per cent. self-sufficiency in food production in the United Kingdom. Is that not contradictory?

Mr. Taylor

I am sure that my hon. Friend desires that for patriotic reasons, in case Napoleon comes again. However, it is important to realise that if we increase production it will make things worse. If Britain is able to provide for all its needs, what will happen to the surpluses? They will get bigger and bigger. This is a nightmare of a problem. Therefore, it is about time that we had a broad indication from the Government of what they think the answer is—if, indeed, there is an answer. It may well be that there is no answer. If so, I believe that we shall have to look at an amendment to the Treaty. Certainly the Prime Minister has made it clear that that is something that she does not exclude from the reforms to which we are looking forward.

What about New Zealand produce? We know that New Zealand has a desperate problem. It has been through hell and a great deal of suffering because of the continual cutting of the amount of butter that it supplies to us, on which we put a massive levy.

I believe that New Zealand is the greatest friend that Britain has ever had. It would be terrible if we were to turn our backs on that country. In the past, New Zealand has always stood by us. Even at the time of Suez, when we may have been wrong, the only country in the world that said "We stand by Britain 100 per cent." was New Zealand. New Zealand is a true friend. The New Zealanders are good peole, hard workers and efficient farmers. What do the Government propose should happen if we do not get an agreement on quotas by 31 December?

Parliament goes into recess tomorrow. The deadline of 31 December is not far off. We are entitled to know what the Government intend to do. Will they follow the letter of the law and say "We are sorry, no more New Zealand butter", or will they have the guts and determination to say "There was a clear commitment when we joined the Common Market that New Zealand would be safeguarded, therefore we shall continue to import at traditional levels, in the same way as we export cheap food to Russia at traditional levels"

My next point concerns contributions and linkage. We know that contributions have been horrific—over£2,600 million net since we joined the EEC, which is over£1 million a day. I could certainly use that amount of money in Southend, and I am sure that my hon. Friend the Member for Perth and East Perthshire (Mr. Walker) could use it in Perth. There is a need for sensible spending in both areas.

The Government should tell us what will happen if the cash does not come. Unfortunately, the agreement did not allow for a rebate to be paid. The arrangement is that for 1980 we are to have a rebate of about£700 million. My noble Friend the Secretary of State for Foreign and Commonwealth affairs made it clear, when he announced yet another victory, that about£100 million of that amount would come before 31 December and most, but not all, of the rest would come before the end of the financial year. Unfortunately, two-thirds of that sum is being paid in contributions to projects or programmes.

I suggest to my right hon. Friend the Lord Privy Seal that we have negotiated a fishing deal about which other countries are concerned. The French are involved in the decision about New Zealand butter—a decision that must be made by the end of the year. France is also interested in the further food price rises.

My fear, and the fear of those who do not approach the issue with the same starry-eyed attitude as the hon. Member for Inverness, is that if we do not settle these problems to the liking of the French we may find that there will be administrative delays in the committees that are considering projects, where a majority decision has to be made and where Britain has one voice and one vote. Bearing in mind the fact that the Chancellor of the Exchequer has written the rebates into our cuts, what do the Government intend to do if administrative delays make it impossible to pay the 80 per cent. of the rebates that we have been promised before the end of the financial year?

What is the position of the Government on exports of cheap food to Russia, in apparent defiance of the decision of the Council of Ministers on 15 January? After the invasion of Afghanistan, the Council of Ministers declared that it would not stop exporting cheap food to Russia but that it would restrict food exports to traditional levels. Despite that decision, that action has not been taken. There have been massive increases in the export of some goods and a considerable increase in the export of others. All the figures are laid down in recent written answers. The Minister knows what they are.

What has happened? Is the Commission out of control? It is meant to supervise these matters. What do the Government intend to do if they find that decisions made by the Council of Ministers are not carried out?

I was staggered when I found that the EEC exports wine to Russia, although it is not from ah EEC lake. Since the invasion of Afghanistan, those exports have soared, not only to a record figure but to more than that of the previous 10 years—147 million litres. That is a bottle for almost every man, woman and child in Russia. We have paid a Common Market subsidy of£9 million since the invasion of Afghanistan to provide cheap wine for Russians and Russian soldiers. That is crazy. What on earth are we going to do about it?

The members of the Council of Ministers are meant to be the big-timers, the boys who decide things. They said that there should be no exports above traditional levels, yet in the first 10 months, for many food items, the amount of exports has been considerably greater than that of the whole of the previous year.

I shall give the precise figures Exports have been 149,026,300 litres of wine since the invasion of Afghanistan, compared with a total of 37 million litres in the previous five years. Our exports have risen about sevenfold. We have been providing the Russians with cheap wine at the rate of about a bottle per head per year, only since the invasion of Afghanistan. Are the Government or the Commission in charge? We should reexamine our system of control to make sure that decisions are carried out.

The Government do not mention dumping in the White Paper. What is to be done about it? In almost every industry in Britain there is concern about unemployment caused by dumping of goods from third countries. In the old days it was easy to take action. We took action nationally against unfair competition. People sometimes complained that stronger action could have been taken, but by and large it was pretty fair. Now, we have to go to the Commission in Brussels and ask it to take Euro action.

Nothing annoys people who are being put out of work and whose factories are closing more than long bureaucratic delays because majority decisions have to be made and because it takes months for action to be taken. Would it not be more sensible and consistent with the Treaty of Rome and our obligations if we said that, instead of leaving the action to the Commisssion, each member State could act on dumping, subject to the supervision of the Commision regularly or periodically?

I hope that my right hon. Friend will take that suggestion seriously. Let the member States act and be generally supervised by the Commission. If a country abuses it, let the Commission take action. That would be more sensible and would save jobs.

Many of us are worried about what the White Paper says about foreign policy. In a reference to terrorism and the media, it says that a seminar for officials of the Community was held on the subject on 30 April and 1 May. Many people are worried that the EEC appears to be moving step by step and day by day towards recognition and acceptance of the PLO.

The situation in the Middle East is indeed serious. Anyone who says that there is an easy solution to the problem there is kidding himself. The Government should be aware that many hon. Members on both sides of the House, and many people in the country, are worried about the moves towards the recognition of what is basically a terrorist organisation seeking to achieve its aim by terrorism. Many of us find it difficult to distinguish between the PLO and the IRA.

If we are to move towards accepting people who throw bombs and who raise money from their raids to try to buy guns to use for terrorism, we are on a dangerous and slippery slope. I accept that the Government are doing what they can to sort out the difficult situation in the Middle East, but they should not throw out the baby with the bath water and involve us in a situation where we recognise people allegedly representing interests simply because they throw bombs and are financed by other terrorist groups. I hope that in future debates we shall talk about these problems and put forward suggestions and not just have a sniping match about the extent to which it has been a good or a had thing to be in the EEC.

7·48 pm

Mr. David Stoddart (Swindon)

I enjoyed the keen and perceptive speech of the hon. Member for Southend, East (Mr. Taylor) and I listened intently to the speech of the hon. Member for Holland with Boston (Mr. Body). Those speeches showed that on the Conservative Benches there is now a deep concern about Britain's position in the the EEC and the effect of membership on our way of life.

The hon. Member for Holland with Boston hit the nail on the head when he said that he was not anti-European, that he was pro-European—that goes for all of us, I think—but that he believed that we should co-operate with Europe on the basis of equality and freedom of decision as a nation State—that we should not, in other words, be constrained by a Treaty which not only circumscribes the actions of nation States but alters our constitution fundamentally.

This country has for a long time had a flexible constitution, and the Treaty of Rome has imposed a written constitution on us from outside. Many of us are beginning to get increasingly worried about the constraints imposed by the Treaty.

Very few people are listening to this debate. The Lord Privy Seal boasted about the Government's achievements in the EEC over the last six months, and am surprised that the Government have chosen the last day but one before the recess for a debate on those developments. Although many people think that this is a boring subject—

Mr. Hurd

I would not wish the hon. Gentleman to mislead the country. The choice of subject for today is that of the Opposition. This a Supply day. In those circumstances, it is amazing that there are precisely three members of the Labour Party present.

Mr. Stoddart

Whether it is a Supply day or not is not a matter for me. The fact is that the Government have a duty to provide time for a debate on such an important matter, and to provide it when most hon. Members are present.

Both in the House and in the country, people are bored with the Common Market, and that is dangerous. The House should debate these matters in a way that engenders interest. The more interested people become, the more they will wish fundamentally to change the Common Market.

However, I find that people are becoming increasingly disenchanted with, and contemptuous of, the EEC—and, unfortunately, of Europe. They see the EEC as Europe, and they see other countries in the EEC as imposing their will upon Britain.

Although we are a phlegmatic people, we are deeply patriotic. We do not like the feeling that we are not in charge of our own affairs. People now tend to blame on the Common Market things which are not even its fault.

We therefore need a broad review—all of us together, on both sides—of our position in the EEC, what it is, what it does for this country, what it can do for this country and others in Europe and whether it can be fundamentally changed. Over the last six months the Government have not got down to that fundamental examination. I was sorry that the Lord Privy Seal attacked my right hon. Friend the Member for Lanelli (Mr. Davies) for putting a contrary view, since my right hon. Friend supported the need for a fundamental review and a debate. I was disturbed that the right hon. Gentleman should have said that outside Europe we would become either the fifty-first State of America or a run-down neutral country.

It is remarkable that the Deputy Foreign Secretary should take that view of this country and its people. It is wrong, and history has proved it wrong. This country is perfectly capable, outside the EEC although in co-operation with it and the rest of the world, of pulling itself up by its bootstraps, if that is what we need. It can respond to a lead by the Government and by leaders of commerce and the City. Over the last few years, the people have simply not had that lead.

We went into the Common Market in the first place because politicians of all parties had lost confidence in themselves and in the people of this country. The hon. Member for Harrow, East (Mr. Dykes) put his finger on it when he said that we were unlucky in having gone in in 1973. How right he was: we went in at just the wrong time. The hon. Member, subconsciously, probably accepts now that it was bad for us to go in just when there were prospects of North Sea oil flowing strongly and oil prices throughout the world were escalating.

I wonder where the Lord Privy Seal and the Foreign Office want to take us. We hear a great deal about progress in the EEC. The President of the Commission, who went into his job like a lion but has come out like a lamb, has referred to progress, but he has not been able to report much over the last four years. What worries him is that Foreign Office Ministers see every move they make as a further ratchet towards a federal European system. That appears to be where they want to take us.

Mr. Hurd indicated dissent.

Mr. Stoddart

I am glad that the Minister of State is shaking his head. If that happened, there would be such a revolt by the people of this country that any Government who tried it would be swept from office. I am glad to know that it is not the Government's intention to take us further into a federal European State.

I do not want to enlarge on the many figures that we have been given about trade, but there has been some dispute about how we have done in the Common Market. The motor industry has been referred to, and in my constituency we make parts for cars. We press out the bodies and to some extent assemble them as well.

I well remember my constituents receiving a letter from Lord Stokes. In so many words, he said "Boys, if we don't go into the Common Market the industry will collapse." We went into the Common Market, and the industry collapsed. It had to be saved by the Government of the day. The promise that Lord Stokes held out to my constituents has not been kept since we went into the Common Market. Quite the reverse has occurred. Exports to the Common Market have dropped off considerably and there has been a flood of cars into the country.

As a result, there are 2,000 fewer people working at British Leyland or Pressed Steel Fisher in my constituency. That makes people think about the Common Market. It makes them realise that our entry into the Common Market was contrary to the best interests of Britain and to their best interests. They have been personally affected. Our industrial potential has been harmed, and our membership of the EEC has caused considerable unemployment.

I stress the effects that the restrictions on the import of New Zealand butter will have on New Zealand and its people. I have just read on the tapes that the EEC has given us "permission" to continue the arrangements for a further month. After then, we are expected to conform to the desires of other EEC countries. That means that the existing quota of, I believe, 95,000 tonnes per annum will be further reduced. Indeed, it will probably be reduced to 65,000 tonnes per annum. That is the figure mentioned.

The figure sounds horrific. It will make paupers of farmers and others in New Zealand, just as many Australian beef farmers were pauperised a few years ago. Of all people, hon. Members should have consideration for their kith and kin in New Zealand. They are our people.

Let us make no mistake about that. They are our descendants. Time after time we let them down. New Zealand may be a small country, but it means a lot to the people of Britain, and the people of Britain mean a lot to the people of New Zealand. The Foreign Office and the Ministry of Defence should bear in mind that New Zealand has a strategic importance.

I have enjoyed the debate, although it has taken place just before the Christmas Recess. However, I urge the Government to consider the speeches made today. They were speeches of content and concern. If the Government bear them in mind, we may become members of a Europe to which we can all subscribe and for whose betterment we can all work.

8.3 pm

Sir Anthony Meyer (Flint, West)

One of the most unattractive features of the debate has been the recurrent attacks made not on Foreign Office Ministers but on Foreign Office officials. My hon. Friend the Member for Southend, East (Mr. Taylor) made an utterly disgraceful attack on Foreign Office officials. He should have directed any attack that he wished to make towards my hon. Friend the Minister of State, who is sitting on the Government Front Bench.

Mr. Teddy Taylor

rose—

Sir Anthony Meyer

I shall not give way. I did not interrupt my hon. Friend, and I do not intend to allow him to interrupt me.

From my hon. Friend's speech, one would not have thought that this Government's incontestable success—Heaven knows, their economic policies are taking longer to bear fruit than many of us would have wished—is the result of the policies of the Foreign Office under my noble Friend Lord Carrington and my right hon. Friend the Lord Privy Seal. They inherited the most appalling shambles. All our foreign relations were in disarray. This country had scarcely a friend left in Europe or in the world. The Rhodesia problem seemed insoluble. In little more than a year, they brought peace to Rhodesia and made Britain honoured, respected and heard once again in the councils of the world. They have renegotiated our contribution to the European Community and, as a result of an improvement in our relations with the Irish Republic, they are a fair way towards contributing to a solution of the long-running Ulster sore. If that is not what my hon. Friend the Member for Southend, East calls serving the purposes of the Conservative Party, he had better go away and think again.

My hon. Friend began his speech with an attack on the Foreign Office, and I merely come to its defence. He produced a lot of ropey statistics to prove that our membership of the European Community had been disastrous for our industry. Statistics can be manipulated in all sorts of ways. Those statistics prove only that British industry has been unable for too long to hold its own against other industrialised countries. It proves that; nothing more, nothing less.

However, I share some common ground with my hon. Friend. The EEC must reform itself or it will rapidly decay. Let me make it quite plain that those who most ardently champion British membership of the Community have argued for fundamental reform for a very long time. We welcome the fact that the arrival of Greece and the imminence of Portuguese and Spanish membership, coupled with the near exhaustion of the Community's automatically generated own resources method of financing, mean that reform has become inevitable. That is so,, despite the worst endeavours of member Governments, including the British Government, at least under previous management.

Those of us who are proud to call ourselves pro—Europeans welcome the declared object of the recently formed European Reform Group—namely, to secure fundamental reform of the Community from within. We hope that that means that those of its members who have hitherto campaigned for British withdrawal from the EEC have changed their minds and have accepted the permanence of Britain's membership. We must note that some of the policies advocated by the group are incompatible not merely with membership of the Community but with any type of institutionalised European co-operation.

Mr. Teddy Taylor

Rubbish.

Sir Anthony Meyer

I shall deal later with the argument that co-operation would be more effective if it were outside the framework of rules. At present, I am concerned with the incompatibility between some of the stated objectives of the group and continued membership of the EEC. In this respect, the position of the European Reform Group corresponds exactly with that of the official Labour Party. Both want Britain to remain a member of the EEC but on terms which would not only make continued British membership impossible but would destroy the Community.

If it be argued that Britain can secure its objectives within the EEC only by threatening withdrawal if its demands are not met, one can point to the glaring contrast between the achievements of the present Government in securing adjustments by making it plain that we intend to stay in and the total failure of the Labour Government to win any concessions by the threat of withdrawal.

These threats to pull out if we do not get all that we want have implications that go well beyond changes in the EEC's laws or budgetary adjustments. As Mr. Roy Jenkins put it in his recent remarkable Chatham House address: It is essential, if this country is to have any faithful friends to whom it can turn in time of trouble, and if it is to exercise … any continuing influence in the world, that it should have a reputation for constancy of purpose and reliability of resolve. Such qualities were, indeed, partly as a result of our wartime efforts, thought to be some of the most valuable which we carried into the post-war world. They are also qualities which are at a premium in the dangerous world of today. 'Are they dependable?', 'Are their policies predictable?' are questions which I have constantly heard asked with searching concern, and not only about us, by the most significant of world leaders. Yet, what shred of reputation for constancy would we have if, after trying to get into the Community for 12 years, then after renegotiating the terms of entry, then putting the results to a referendum to settle it permanently, then demanding—with justice—and getting a much better budget settlement, we were to turn round like squirrels in a cage and say 'We are off again'? You simply cannot be a serious factor in world affairs upon such a fluctuating basis. Mr. Roy Jenkins's words apply all the more strongly if it be argued that we would do better to seek co-operation outside the framework of the EEC on the basis of a partnership of member States, as has been put forward by speakers on each side of the House. In such a loose working relationship, the credibility of each participant would be even more crucial than it is within the more tightly organised framework of the Community itself.

How on earth can it be maintained that it would be easier to resolve such problems as the fisheries dispute without the EEC machinery to continue the momentum towards a solution? The fisheries talks have broken down—only temporarily, I hope—because the French Government have behaved as not only the trawlermen but pretty well every Member of this House who speaks on fisheries matters would have the British Government behave—that is to say, they have gone right to the brink, and over the brink, in support not even of the national interest as a whole but of one sectional interest, albeit a very important one.

After the events of last summer, when the French trawlermen showed that they were ready to inflict damage on the equally vital French tourist industry to protect their livelihood, there can be no illusion about the pressures operating on the French President, particularly one so close to an election. So the French Government have chosen to kick the Community table over, there is no fisheries agreement and there is a real danger of over-fishing and depletion of stocks. This sort of thing will happen time and time again. It is restrained only by the resolve of member Governments to stop short of actual destruction of the Community.

Still less can it be argued, even with superficial plausibility, that we would be better able to protect our trading interests outside the EEC, to which 42 per cent. of our exports go. As Michael Shanks put it in his article in The Times yesterday: The fact is that the world is entering a new era of protectionism"— there are no more fervent national protectionists than the anti-Marketeers on each side of the House, with the honourable exception of my hon. Friend the Member for Holland with Boston (Mr. Body)— and those countries which voluntarily exclude themselves from the big trading blocs must expect to be discriminated against. I do not suppose that anyone will seriously argue that any country in the world will be eager to enter into any kind of long-term trading relationship with a country so palpably incapable of sticking to its undertakings as Britain would be if we pulled out of the EEC. The arguments for not joining the EEC are one thing, and I contest them; but the arguments for pulling out are totally untenable.

The tragedy is that the attitudes of the Labour Party and the misunderstanding caused by the European Reform Group's stated aims have reopened the sterile debate about the permanence of British membership, when we should be devoting all our attention and all our limited parliamentary time to discussing how the EEC should be reformed and the far more important question of how it can be given renewed impetus. For if the need to reform the EEC has never been greater or more likely of achievement, the need to maintain and strengthen the EEC has never been more incontestable.

It is no longer necessary to say that the common agricultural policy must be changed. It cannot survive the entry of new Mediterranean members in its present form. On the other hand, to talk of ending the CAP is to disguise a determination to destroy the EEC itself. The agricultural policy is an essential element in the EEC. What is more, a system to maintain food production in Europe, which necessarily involves some degree of European protectionism, is an indispensable precaution in an increasingly hungry world.

If one wants a sensible set of objectives for the common agricultural policy, one cannot do better than quote the words used by my noble Friend Lord Carrington. They have already been quoted but will bear repetition. He said: First, we should aim to preserve a healthy European agricultural industry. Second, we must reduce agricultural expenditure as a proportion of the total Community budget. Third, we must eliminate structural surpluses, especially in the milk sector. Fourth, we must move towards prices for agricultural products which result in the production of the food we need—to eat, to export without subsidies, to give away to prevent a famine in developing countries, and to provide a good store to guard against bad harvests—and not more. To that I would add that, in my view, it will be necessary to move much more towards national subsidies for the poorer farmers. But I ask those who urge—and quite rightly—the absurdity of subsidised butter exports to Russia as an argument against the CAP to consider the role which subsidised food exports to Poland are playing in reducing the danger of Soviet incursion on the pretext of food riots.

I hope that a way will be found of reducing the share of EEC resources which go to agricultural support, but, frankly, I do not think that this will be at all easy to achieve. It is important to reform the EEC but it is far more important to revive it. If possible, resources should be diverted from agricultural support. If not, fresh resources must be made available to the Community—however unpalatable this may be to the Financial Secretary to the Treasury—so as to enable the Community to do what has to be done without delay if Western Europe is to help Britain to get out of its present tailspin and not be sucked into that tailspin itself.

Europe now has to exert all its influence as the world's largest trading bloc. To prevent a further catastrophic contraction of world trade after the latest OPEC price rise, it has to re-equip its industry, to retrain its work force, to enable its members to survive as industrial nations facing the challenge of the newly developing countries in each and every one of those industries which have hitherto provided our people with a high standard of living, and to do so without resort to protectionism.

Above all, only the countries of the EEC, working ever more closely together, could fight back against the long, slow decline of our proud and ancient civilisation, which surely still has much to give the world. Are we to become the hewers of wood and the drawers of water in the twenty-first century? That is what we shall be if we cannot think beyond the protection of our own short-term national interests.

8.20 pm

Mr. Tony Marlow (Northampton, North)

I should like to start by saying how pleased I was to hear the speech of my hon. Friend the Member for Flint, East (Sir A. Meyer) and his commitment to significant reforms in the common agricultural policy. I am delighted to hear him say that and to be able to say that we have common accord on that issue. I should also like to tell my hon. Friend that the Conservative European Reform Group, as much as I know anything about it, stands for fundamental reform of our position in the Common Market. It is reform about which I should like to speak to the House.

I should also like to build on the common ground that we have with my right hon. Friend the Lord Privy Seal, who, sadly, is not here at the moment, but I quite understand that. I should like to start by commending to the House the statement made by my right hon. Friend after the Euro summit on 2 June this year. He said: In the long term, the most important part of the package is the commitment"— that is a very important word; there is no going back on a commitment"— of the Council to review the development of Community policies and the operation of the budget. This, together with the restraints imposed by the 1 per cent. ceiling"— it needs to be stressed that our Prime Minister, the Chancellor of West Germany and President Giscard d'Estaing are committed to that 1 per cent. ceiling— will enable us to press for lasting reforms, which will"— there is no doubt about that word— among other things, resolve the British budgetary problem. This review offers an opportunity that has never been available before, since we joined the Community, to work together with our partners for financial arrangements and Community policies that are to the advantage and interest of all the member States, as befits a community of equals."—[Official Report, 2 June 1980; Vol. 985, c. 1045.] That is a once-in-a-lifetime, never to be repeated, bargain offer. If I can isolate one clause, it is policies that are to the advantage and interest of all the member States". There is an implication there. In fact, there is more than an implication. There is a certainty that at this moment the policies of the Community are not to the advantage and interest of all the member States". I am glad that in his statement my right hon. Friend allows me to have common ground with him. I am glad that I can agree with that statement. Amen at least to this achievement.

Of course, there is much more common ground between my right hon. Friend and many of my hon. Friends and myself. I think that most of us share enthusiasm for European co-operation and unity in those areas in which we have interests in common.

At a time when there is savage blood-letting and slaughter, of the innocents in Afghanistan, when the Red Army is countermarching up and down beside the Polish frontier and when we have growing problems in the powder keg area of the Middle East which could develop into a regional war threatening to drain the fuel tanks of European economies, there is obviously an urgent and growing need for co-ordination, co-operation and political activity working together in those areas in which we have very important interests in common.

In all that I would agree with my right hon. Friend. But what I would hope to convince him of is that this cannot be done when the institutions, the finances and the conditions of membership are such as to discriminate savagely against the interests of one individual country, particularly when the damage and the unfairness are as clear as crystal and are palpably perceived by the people of that country. Such is the situation that we in Britain are in today.

Political co-operation, which is what I have been talking about, needs political will power, and political will power cannot be developed without popular support. There is no way that popular support in the United Kingdom is going to be built on the putrefying scenery of the mountains and lakes of the CAP.

When my right hon. Friend the Prime Minister took her political gloves off at the summit earlier this year, she did three things. First, she secured for this country, well merited and quite fairly—there is no controversy about it in the House—£1,500 million of our money. Secondly, she got the commitment that I spoke about in the introduction to my speech—the commitment to the vital reforms that we so dearly need. Thirdly, she awoke in Britain a realisation of the unfairness of the way in which Britain is so far discriminated against in the existing policies of the Community and, therefore, set in train a growing and urgent demand for the reforms that we are talking about today.

First, I should like to look at the present financial implications of our membership of the Community—the costs, the receipts, the benefits and the penalties of membership. Our contribution, as everybody knows., is based on 1 per cent. VAT, on agricultural levies and on import duties.

Our geography is such that we manufacture only half our own food. Our geography is such that even of temperate climate foods we manufacture only two-thirds. Our history and geography are such that we have always depended, and always will depend, to a greater extent than the rest of the Community upon trade with other countries around the world, the Third world and our ex-Commonwealth. That is our position and that is how our position will remain. It might attenuate, it might get greater, but it will remain basically different from that of the rest of the Community. So long as we have a financing system that relies on agricultural dues and levies, we will be required to pay more than our proper proportion of Community funds.

The second implication concerns the receipts. Our receipts, as everyone knows, have been inadequate, and the reason for this is simple. Some 80 per cent. of Community funds goes on the common agricultural policy. Three-quarters of the common agricultural policy is made up of surpluses. For every£2 that is put into the Community kitty,£1 goes on the surpluses of the sacred cow—milk and beef. Not only is this immensely wasteful, not only is this money spent in areas where it should not be spent, but it is not spent here. It is spent on the other side of the Channel.

Mr. Body

I think that I have explained to the House before that£800 comes into my pocket to keep my pack of hounds.

Mr. Marlow

I have heard my hon. Friend make that point before, and it is a very good point to make. What I meant to say was that the balance of advantage lies on the other side of the Channel. Of course, there is great advantage in the feeding of my hon. Friend's hounds.

The third point that I wish to make about the penalties of membership under the existing arrangements concerns food costs. We are force-fed with European food from the other side of the Channel at up to twice world market prices. If we had to pay up to twice world market prices to our own farmers as a system of agricultural support, that is one thing, because, one way or the other, the likelihood is that we would wish to support our own farmers, be it through high prices or, alternatively, through deficiency payments, through taxation.

However, there is no reason in fairness or justice why, as well as paying for the agricultural support of our own farmers, we should pay for the agricultural support of farmers on the other side of the Channel. We are paying unnecessarily and unfairly for the agricultural support of the French, Danes and Dutch. Our housewives are bearing the social costs of the European peasant, while the poor of Glasgow not only remain unaided through lack of any proper dispensation from a social fund but are forced to contribute to that largesse.

The£3,000 million that we pay extra for our food has been mentioned, as have the calculations of the Institute for Fiscal Studies. In reality, we are spending£1,500 million on our agricultural support and a further£1,500 million on agricultural support the other side of the Channel. We have had negotiations on the budget, but that£1,500 million is massive compared with our existing budget deficit. It is four or five times as large.

One problem arising from that is that in the negotiations that we shall need to have to review, overcome and produce the reforms that are required, the French will be entrenched in defence of the subventions that they are currently receiving from the European consumer. Last year, French agricultural exports were worth£3,600 million within the Community alone. If they were exported at twice the world market prices, it would mean an advantage to the French of£1,800 million a year. If they were exported at only 50 per cent. above the average world market price, it would still mean a benefit to the French of about£1,200 million a year.

What reforms should be introduced? Inasmuch as the Community will have its own resources, I believe that they should be restricted to something like VAT. Any tax, and this one in particular, is based upon people's ability to pay—on levels of consumption. If we were to change European finance overnight to take account of existing requirements and subsidy was based purely on VAT, there would be a benefit to Britain of 500 mua or£300 million a year and, by chance, a disadvantage to the French of some 800 mua or£500 million a year.

Again, other hon. Members have mentioned this so I shall not go into detail, but we must introduce significant changes in the CAP, as the Community knows, particularly with other countries queueing to join. If there has to be dispensation for social reasons, let it be out of a social fund so that others with social needs and requirements can also benefit. Why do we not try to contrive a way in which Community prices for agricultural products can be the world market price, as they were before we joined the Community?

Let there be a system of deficiency payments. If we have a strong currency, we can take advantage of cheap food in the world market place. If we adopted that approach, not only should we have cheap food but we should be able to relieve the Community budget, because I would also suggest that surpluses should be the financial responsibility of the country in which they arise. At the moment they are spread throughout the Community, and no country feels that it has a direct responsibility to do something about them. If each country was responsible for its own surpluses, the position would change radically.

I should like to make two other points briefly on the problems that we suffer in trade. We have a strong and volatile currency. Our trade problems are different and distinct from those on the other side of the Channel. Our engineering industry is in a bleak situation. Many companies are on two-day, three-day or four-day weeks. The reason is not only competition outside the Community or lack of orders from within the country but competition from within the Community. It is almost as if we had an old car on a bumpy road, without shock absorbers.

We must first consider the ability to deal with dumping. In the shoe industry we are suffering from imports from Poland coming in below the cost of production. There is nothing that we can do about that ourselves. We no longer have a regime in Britain that can deal with the problem. The matter has to go to Brussels. Maybe Brussels does a good job or maybe not.

However, two points are important in going to Brussels. First, it looks around the Community and sees whether anyone else can produce shoes as cheaply as those that are coming in. Maybe the Italians, who have child labour and do not bear our social costs, can produce cheap shoes. Secondly, the discussion goes on among all European countries as to whether it is a problem. The Germans, with their ostpolitik and their desire to trade with Eastern Europe, might not have the same perception of the problem as we have. So the control over our shoe industry is relinquished from us and passes to Brussels.

The second matter I want to look at is the question of harmonisation. The idea of harmonisation is to bring the cost structure of the industries of the various countries in Europe on to an equal footing. But, when energy prices here are so different from those in the rest of Europe, when interest rates and other fiscal policies put different charges on our industry from those that are borne by other industries in the rest of the Community, why are we so concerned about the small beer of harmonisation?

What is the financial effect of the tachograph, or what is the relative financial effect of the product liability that we were talking about not so long ago in the House? All that they are is an increase in bureaucracy. It is the highest common factor in bureaucracy. If there is a complicated system in one Community country, one can rest assured that that system will be adopted by the Community as a whole, loading costs and work on to our hard-pressed industries.

There is discussion at the moment about a regulation to do with pollution of waterways. That may be necessary for the Rhine, which is the sewer of Europe, but to introduce the same measure, the same mandatory procedures, for our own relatively clean waterways will only put additional costs on our community and our industry and will have an adverse effect on our competitiveness.

I should like us to look severely at this harmonisation, these late-night orders that come from Brussels. The decision should be taken here. We should stop this multiplication of unnecessary regulations, cluttering up the House, keeping us up late at night and, cluttering up our industry.

Mr. Hurd

I have sympathy with what my hon. Friend is saying, but I am sure that he is aware that there are many go-ahead sectors of British industry—for example, the British insurance industry—which are pressing all the time for harmonisation.

Mr. Marlow

I agree. I should be in favour of harmonisation of the rules so far as they affect insurance companies. But what I am saying is that this House ought to have more involvement and ought to be allowed to be more selective as to what it accepts and what it does not. The bureaucracy in Brussels, to justify its existence and to expand its power and influence, is proliferating a whole series of measures which nobody really wants, and this House is powerless to do anything about it.

Mr. Body

Surely, the answer to what my hon. Friend said about insurance and other industries is that the present system does not enable common policies to be made at any speed because so often we move at the speed of the slowest. If a country—for example, Germany or the Netherlands—disapproves of a common insurance policy, it should drop out and allow the rest of us to proceed with a common insurance policy. Our insurance industry would applaud that, but we cannot take that step under the present procedures.

Mr. Marlow

I thank my hon. Friend for that very sensible intervention, with which I wholeheartedly agree.

Can we get what I and others of my hon. Friends have been asking for? We have to ask whether, if we got what I and others have been asking for, we should be a more sensible a happier, and more co-operative Community. I believe that we would. But, even if other countries in the Community did not believe that this would be the case, in the final event we have to ask whether, even with these changes, they would be better off with Britain as a member under these conditions, or whether they would be better off without us.

Given our benefits to them in terms of trade, given our political benefits, our prestige, our co-operation with them in foreign affairs, which is to the benefit of all of us, and given the oil that we have in the North Sea, I personally have no doubt whatever that these reforms should be acceptable to our colleagues in the Community.

8.39 pm

Mr. John Farr (Harborough)

I support the views that have been expressed from both sides of the House about the cost to Britain of membership of the Community. My hon. Friend the Member for Southend, East (Mr. Taylor) drew our attention to the table at the back of the useful White Paper and pointed out the horror of the figures relating to manufactures, which show that in only 10 years or so we have slumped from a profitable position in trading in manufactures with the EEC to a serious position, which should command the attention, and not the ridicule, of well-intentioned Members.

I remember that during the campaign before we joined the EEC we were told that the Community would provide export opportunities for us and a big bonanza for our industry, which would revel in a huge new domestic market. When it has turned out so disastrously, it is right that hon. Members, however they feel about whether we should have joined, should expect Ministers to apply themselves seriously to the question of what has gone wrong and to advise what should be done in future.

Unlike some hon. Members, I find it useful to have a debate such as this. Life is moving apace so much in the Community that it is appropriate that major debates should take place regularly.

I am particularly concerned about paragraphs 3.1 to 3.4 of the White Paper, dealing with textiles and knitted fibres. One of my worries is the possible enlargement of the Community in the early 1980s by the accession of Portugal and Spain. My hon. Friend the Member for Northampton, North (Mr. Marlow) referred eloquently to that worry.

Spain and Portugal are both big manufacturers of footwear and knitted goods. If they join the EEC, there will be problems for our home industries. The White Paper states: The first phase of the substantive negotiations with Spain and Portugal, aimed at identifying the points of difficulty which will need detailed negotiation in the next phase, was largely completed. It does not mention the matters that cause me great concern. What discussions have taken place about the footwear and knitted goods industries?

My hon. Friend the Member for Northampton, North is concerned about the footwear industry, and I am equally concerned about the knitted goods industry. The nigger in the woodpile is that Portugal, which is currently outside the Community, is one of our major suppliers of knitted goods. In the first six months of this year, Portugal sent us 13 million T-shirts, 1½ million pairs of knitted socks and 1.6 million pieces of outer wear. What will happen to our already battered home producers if Portugal becomes a member of the EEC and is able at will to export its goods, of a much lower standard of production, to Britain?

The White Paper refers to the GATT and the sharp rise in imports from the United States of certain man-made fibre products. My right hon. Friend the Prime Minister recently made a statement, which was widely reported in many newspapers, about the many advantages that United States producers enjoyed front artificially low oil and gas prices. She indicated that the Government would be taking action fairly soon in relation to limiting some of these cheap imports from the United States which are disrupting British industry.

I should like my hon. Friend the Minister to inform the House what efforts have been made recently through the Community to curb the soaring imports from the United States of T-shirts, underwear, jumpers and pullovers, all of which are disrupting the British home industry. They are pouring into Britain at a rate of increase which is extremely high. Each year the level of increase soars. In recent months, imports of T-shirts from the United States have soared by four times. Underwear imports have risen by 1,365 per cent. in 1980 alone. Imports of pullovers and outerwear have increased four times.

Before we joined the Community, the resolution of these difficulties lay in our own hands through the application of domestic anti-dumping procedures. I understand that the only source of resolve for these difficulties now is through the EEC and an approach by EEC countries jointly to the country concerned. This procedure has many drawbacks. Not least is the delay of many months which often occurs before the EEC has the opportunity to consult all the member countries to see whether they wish to be associated with the complaint.

Another drawback of this cumbersome procedure is that, while these imports are almost sounding the death knell for the home British knitwear industry, the same impact is not felt in other countries for different national and domestic reasons.

I should like the Minister to say whether action is being taken through the Community in respect of the flooding-in of these United States imports. I should like to know whether all the Community countries have agreed that certain action should be taken. I should also like to know whether it is still possible for Britain, or any other member country, to initiate its own domestic anti-dumping legislation, which was the only safeguard before we joined the Community.

I remember the complaints that used to be made before Britain joined the Community of delays by the then Board of Trade in invoking anti-dumping legislation and what was called the tripod upon which a case had to exist. The speed of the Board of Trade was electrifying compared with the speed of the Community in dealing with our problems today. I am worried that this important industry in Britain, which has seen its work force decline by 33 per cent. in the last 10 years, may become only a memory unless the Government exert themselves.

I am conscious that more hon. Members wish to speak, but I could not allow the debate to pass without referring to New Zealand. All the good remarks that have been made about New Zealand are fully endorsed by me. That which apparently is being contemplated by the Community for New Zealand imports of butter is intolerable and is something that Britain cannot permit to happen.

One of the difficulties has been the quota that we agreed with the Community on our accession. It has been declining year by year. New Zealand has been told to find its own -markets for the balance that it sent formerly to Britain. Another difficulty has resulted from that. By coincidence or design, whenever New Zealand exporters are seeking alternative market, elsewhere, Community supplies of butter at fractionally less than the New Zealand price have been offered on the same market. That has damaged New Zealand's chances of getting rid of the surplus. I ask my hon. Friend to bear in mind that when negotiations took place the point was made strongly that New Zealand exports, especially of dairy products to third countries, would not be prejudiced by Community action.

New Zealand has had a difficult time in agriculture for the past year or so, with the introduction of the Community sheepmeat regime, which for the first time has put a quota on the export of New Zealand lamb and mutton to Britain. New Zealand is still one of the world's most efficient producers of agricultural produce, and we in Britain must stand by it in its difficulties.

8.53 pm

Mr. Selwyn Gummer (Eye)

A series of issues have been raised and I have found it an interesting debate. That is because it has been more clearly related to the documents that are before us than some of the debates on the subject hitherto.

One of the key issues that cannot be avoided is our attitude towards not merely the European Community but protectionism. It was interesting to listen to the hon. Member for Grimsby (Mr. Mitchell), followed by my hon. Friend the Member for Holland with Boston (Mr. Body), who both used their antipathy to the European Community to produce exactly opposite alternatives. One was suggesting that we should withdraw from the Community so that we could raise protection-around our island and-the other said that we should so organise our relations with the Community that we might have much freer trade.

It seems that the debate has highlighted the first problem when one comes to discuss developments in the European Community, namely, that the alternatives presented to us against working within the Community are extremely disparate, if not opposite. Those of us who believe in the Community and seek its reform on the basis of supporting it find that that is a strong point when we call upon others to start on the basis of European support.

The alternatives have been extremely unconvincing. The proposals that are offered by those who would have nothing to do with Europe are the old proposals of protectionism, which would cut off so many of our important markets, or free trade, which would mean that Britain would bear the brunt of the competition that we are presently finding it pretty difficult to bear even within the Community. I raise this issue because of the ease with which some have talked of protection.

My hon. Friend the Member for Harborough (Mr. Farr) talked about the British knitted goods industry. If we are asking for increased protection for that industry, we must bear in mind the salutary lesson that has been learnt in textiles recently. In seeking to increase the protection of British textiles, we found that the counter-measures were often so draconian that we had fundamentally to change our policy. Our membership of the Community gives us the opportunity of being so strong a trading group that we can force the unfair practices out of our competitors without their being able to take reciprocal action in the way that they could with a single small nation.

Mr. Farr

For a year or two there will be a marked difference in the standard of living between the new members—namely, Spain and Portugal—and the standard of living that present members, such as Britain, are lucky enough to enjoy. I was suggesting that as a transitional measure only there should be a stepping stone until complete competition is achieved.

Mr. Gummer

I am sure that my hon. Friend is right. I hope that the Government will seek to do that through the Community. The Community's methods should be used effectively. We have more chance of ensuring fair competition with other countries in the world if we do it in common and in concert than if we try to do it on our own.

As to the complaint that the European Community is slower in dealing with problems than was the old Board of Trade, that is not borne out either by the experience of the British shoe industry or with many other industries with which I have contacts, when I found that it was quicker to deal with Europe than it was to go through the British home-produced system. The point remains that the more we want to use it, the more we must ensure that it is effective. All who believe in the reform of the European Community should seek to pressurise the Government to give the Community the resources of manpower necessary if it is to ensure that dumping does not take place.

The major criticism contained in the document is that it is impossible to make any progress within the Community because we are tied into this grouping in such a way that we must do things at the pace of the slowest and that it would be better if we disentangled ourselves—that was the phrase widely used—and dealt only with those things with which we had a common interest.

I hope that the example that I wish to cite will not be thought to be rude. There is a clear parallel with marriage. Marriage is a more difficult state to make work than a succession of short-lived partners, but it is a more satisfactory state. The succession of short-lived partners are easy to get on with because they have mutually agreed on terms for a short period of time. If one wishes to build a permanent relationship, one must deal with people, warts and all. That is the basis of the European Community. We are saying that these countries have agreed to work together, even in relation to the things that they find difficult and even in the areas from which my hon. Friend the Member for Holland with Boston would like to opt.

What sort of European agreement on insurance could we have if those countries that did not want an agreement were able to say that they would not join in any agreement? The whole purpose is to try to find ways, across a whole range of issues, in which the countries of Europe can work together, not for a short one-night stand but for a long period, so that they may ensure that, one way or another, they can work together.

Mr. Peter Lloyd (Fareham)

I should like a good, continuing relationship with my hon. Friend, but I do not want to marry him.

Mr.Gummer

My hon. Friend must not push his analogies too far. He must also accept that where like is compared with like—and we are too like to be so compared—there is a difference between the relationship which one sets up to continue permanently—until, in marriage terms, death us do part—and the relationship into which one enters for convenience for one moment or another.

I am suggesting that in the European Community our purposes must be to build a permanent relationship from which the co-operation that we build will enable us to deal with a whole range of things with which we shall have to deal, whether or not we like it. Fisheries is a good example of that. The suggestion that there can be a kind of national fisheries policy unconnected with what goes on in the rest of the world is quite wrong. Those countries which have attempted it are the reason for our present problems. What good to the Western Alliance or the free world has Iceland done by her unilateral arrangements on fish? None at all. She has taken that line, and we may say "Well done, Iceland. Why do we not do the same thing?" We do not do the same thing because in the end we know, first, that fish are no respecters of national boundaries and, secondly, that if we are to create any kind of stability in the West we can no longer go on being individuals fighting for our individual rights without any long-term consideration for the rest of the world.

What I am about to say is not a pro-Market attack on the Labour Party but a very serious comment to the Opposition Front Bench. If one is an internationalist, one can be a superficial internationalist, saying that we will do convenient deals, largely with countries a long way away, which do not put us to too much trouble or cause us too many difficulties. We can deal on pretty measly aid and trade arrangements and the like—about which I sometimes cross swords with my right hon. Friend—because they do not affect our fundamental interests. But when we come to issues which affect our fundamental interests we find who are the true internationalists.

That was why I was so sad to hear one hon. Member say that we would not deal with the rest of Europe on energy because we might not get something out of that. I see the right hon. Member for Lewisham, East (Mr. Moyle) nodding assent to that. That seems to me to be perfectly reasonable for an old-fashioned revanchist Conservative of the extreme Right. But from one who belongs to a party which is fundamentally internationalist it seems to be a denial of the fundamental principles of his party.

Labour Members, who hold so strong to their belief that if the world order is in any way to reflect the kind of standards and values for which they fought there must be a change in that order, should realise that that change can be won only hardly, with difficult decisions, working not just for the odd treaty or two but day by day with people who are not all that easy. How much better it is to deal with the French within the Community than to shout at them across tariff walls outside the Community.

I come to the latter part of the document, which is of great interest to me and on which I take issue with my right hon. Friend. This is a very disappointing document because it does not go anything like as far as we would like it to have gone. In the section on transport, what a miserable agreement we have made on the common driving licence. It will have the same cover and the same number of pages after three or four years. When will we accept that what we need in Europe is common standards, a common driving licence and a common ability to travel under that licence? We see references to the common passport and the tiny movement that we have managed to make on that. We must start being the leaders in the Community to make those kinds of changes.

I am sorry that my hon. Friend the Member for Harborough has left the Chamber, because a third matter about which I feel very strongly is the question of origin marking. There are many areas in which the European Community members could do a lot together on origin marking. I draw my hon. Friend's attention to a very small one.

British piano manufacturers are very concerned that all pianos should be marked with their country of origin, not in order to avoid competition from the Germans but to avoid the fake competition of those who invent piano names which sound like Steinway and Bechstein. They call them, therefore, "Steinbeck" and fail to mention that they are made in Taiwan. I do not mind pianos being made in Taiwan, but I want the husband or wife who wishes to buy a piano to know what he or she is buying. I ask my right hon. Friend to use his influence to see that the Community moves in the direction of being able to give to its members the opportunity of buying Community goods if they so wish, of knowing what the goods are and of being able to see clearly that they are denominated.

I am sad that we have moved so slowly towards a common energy policy. The way in which to make the Community work is to take the thing in which we are strongest and to do as the French did and lay down the terms upon which those things are operated within the Community. The French are so much brighter and quicker. They made a strength of their agricultural position, and it is now an indispensable part of Community policy. Why have not the Government made the strength of our energy position an indispensable part of Community policy? I ask my hon. Friend to seek to build in Europe a common energy policy that will be shaped in the way in which Britain would like it to be shaped rather than to have a policy forced upon us, as will happen, with world forces in the end. We need to use the Community benefits not only to reform the Community but to extend and improve it.

I disagree with some of my hon. Friends in that I believe that reform can take place only if we have an absolute assurance of support for the whole operation. It can take place only if the intention is to reform in order to enlarge and improve. Those of us who believe that can be as tough as we need to be about the faults of the Community and about the failings of the White Paper.

9.8 pm

Mr. Roger Moate (Faversham)

I congratulate my hon. Friend the Member for Eye (Mr. Gummer) on his constructive speech. I disagree with him on a number of points, but the basic disagreement is about the speed of change or the nature of policies within the Community. His speech was a direct contrast to some of the other speeches that we have heard today, particularly that of my hon. Friend the Member for Flint, West (Sir A. Meyer). He has been the most successful anti-Marketeer in the House over recent weeks. His over-reaction, certainly as demonstrated in his speech today, does more harm to the Common market cause than anything that could be done by the most fervent anti-Marketeers on either side of the House.

Many of the speeches have demonstrated the extent to which we are prisoners of old arguments. It is often said that after years of captivity prisoners, when they are finally released, feel a desire to go back into captivity because the world outside is so strange. That instinct to go back into captivity was demonstrated by a number of hon. Members, notably by my hon. Friend the Member for Flint, West and my right hon. Friend the Lord Privy Seal.

I have just been handed a note which asks me to sit down by 9.10. It has always been my fate in life to be given notes like that, so in the two minutes available to me I should like to address a few remarks to the Lord Privy Seal.

In his speech tonight and in his responses to hon. Members over recent weeks to the suggestions of reform, my right hon. Friend has misjudged the motivation. If he proceeds in that way, he will be missing a real opportunity. He should give far greater credit to his hon. Friends for believing what they say, no matter what their position might have been in the past.

There are disagreements about change. A number of Back Benchers have said that they want fundamental reform. That may be a shift in position for some, but the Lord Privy Seal must understand that they mean what they say. He is persistent in saying that the things that he believes to be incompatible with the Treaty of Rome are therefore incompatible with the Community. I hope that he will understand that that is not so. There must be scope for change in the Treaty, and my right hon. Friend the Prime Minister has made that clear.

Sir Ian Gilmour

I should point out to my hon. Friend that it is the Government's position, not my position, that is being enunciated.

Mr. Moate

I am sure that when my right hon. Friend makes statements and writes letters, he does so on his own responsibility. He does not check every letter with every fellow member of the Cabinet. We are free to draw attention to differences of opinion and emphasis that appear to many of us to exist. If they do not exist and we have read them wrongly, there may be something wrong with the presentation.

Here is an immense opportunity to generate an important debate about how we shall reform the Community in the coming years. The importance of the document is that it talks about enlargement of the Community and about the tough budgetary stand taken by my right hon. Friend the Prime Minister. However, the important statement—and I am not sure that even the Foreign Office and my right hon. Friend understand its significance—is the 1 per cent. VAT limit, on which my right hon. Friend the Prime Minister, the French President and the German Chancellor have said they are determined to stand firm. They have also asserted that there will be no alternative sources of revenue.

Enlargement plus these financial limitations will mean fundamental change in the Community and in the CAP. It is surely right for us to look back to first principles on agricultural policy to see how the whole thing can work. If finance is to be limited as the Government say, I cannot see how a workable agricultural policy can be operated for any length of time that gives any reasonable level of income to European farmers.

I urge my right hon. and hon. Friends to look again at the arguments that are advanced. There might be scope for disagreement about detail, but they must accept that there has been a major change which represents an opportunity for this country to get away from the sterile arguments of which many of us are sick and tired. It presents an opportunity. There is a genuine argument between those who want a Gaullist Europe with a true partnership of nations and those who want a federal Europe. That is a legitimate argument that will persist, and it can be carried on within the context of membership.

So far, my right hon. Friend's responses have tended to undermine the possibility of wider and more sensible bases for agreement in the years to come. I hope that that can be dismissed as a matter of style. If so, it is unimportant. I hope that it does not portray a fundamental attitude of the Government. My right hon. Friend the Prime Minister has secured achievements that present great opportunities. I only hope that my hon. Friend the Minister of State will demonstrate tonight that the Government understand the nature of that opportunity and are prepared to seize it.

9.13 pm

Mr. Roland Moyle (Lewisham, East)

We have had a worthwhile debate and a valuable opportunity to review progress in the Common Market in the light of our objective and past developments, albeit in a thin House. To some extent, that represents a lack of interest by many hon. Members in the Common Market, and it reflects, unfortunately, the lack of interest in the subject in the country. The country does not find the subject particularly inspiring.

I can well understand the hon. Member for Harrow, East (Mr. Dykes) wanting to move the whole discussion upstairs into some obscure Committee Room. By my computation, by far the largest number of speeches on the Government Back Benches were directed against this country's present relationship with the Common Market.

I am today returning to debates on the Common Market after a fairly long absence, during which I have done an extended tour of education, Northern Ireland and health. I hope, therefore, with practice, to be able to make thoughtful speeches on the subject such as those we hear from the hon. Member for Holland with Boston (Mr. Body).

The first document that I have to lay my hands on when I return to the subject is Cmnd. 8042, "Developments in the European Community January-June 1980". It is clearly not a document that is intended to appeal to a democratic electorate. It is chock full of Common Market jargon which I believe would be incomprehensible to all but about one in 10,000 of my constituents. I do not know about other hon. Members and their constituents, but I suspect that the same comment would hold with them. It is mostly full of very cumbrous detail.

As preparation for this debate, I read the report of the last debate in this series, which was held on 31 July, and I studied the speech of my right hon. Friend the Member for Stepney and Poplar (Mr. Shore). I think that on that occasion the Lord Privy Seal was mesmerised by my right hon. Friend's anti-Common Market reputation. I thought that, even for those who might wish to remain within the European Community, my right hon. Friend's speech on that occasion was a very sound and sensible statement of case about a number of very serious deficiencies in our relations with the Common Market. That case will have to be answered. In saying that, I believe that my statement is reinforced by many of the points made by the hon. Member for Southend, East (Mr. Taylor).

There is no doubt that political co-operation within the Common Market is developing slowly and everywhere lacks executive bite. There is no doubt also that, economically, Britain is getting a bad deal out of the Common Market. Indeed, there has been much discussion today about the exact relationship of our trade in manufactures and our trade generally with the Common Market countries. I was impressed by the statistics produced by the hon. Member for Southend, East and my right hon. Friend the Member for Battersea, North (Mr. Jay) showing that in fact we were doing better in our trade outside the Common Market than in our trade within the Common Market.

Let us accept the Lord Privy Seal's statistics for the sake of the argument. What is the finest statement that he can make? It is that we are doing less badly with our trade in the Common Market than elsewhere. That is the most that he can claim. That is the clarion call that he is issuing to the country to get it to rally round the Government's policies. It is scarcely likely to send the red blood coursing through anyone's veins.

Indeed, I notice that Mr. Roy Jenkins was today uttering his valedictory words to the European institutions as his period of office comes to an end. The most that he could claim was that we have survived. That was the epitome and the sum of what he had to say about his four years of office—"We have survived." That was the best that could be done.

Indeed, I suggest that the Lord Privy Seal should stick to diplomacy and keep clear of economics. In an intervention this afternoon, he tried to claim that as a general principle we are able to export industrial manufactures more easily to developing countries than to developed countries. If he studies economics, he will find that the developed industrial countries always do much more trade with one another than ever they do with underdeveloped or developing countries.

Sir Ian Gilmour

That is not what I said. I said that obviously we do better in exporting manufactured goods to countries that do not manufacture them than we do to those that do.

Mr. Moyle

If that means anything, what I said is absolutely true and the right hon. Gentleman was off key.

It is common ground among all of us that we want the common agricultural policy reformed. But, having read the White Paper and having read my right hon. Friend's speech in July, I must say that in introducing Cmnd. 8042 it was as though my right hon. Friend had never spoken. We have the same dreary old mess of pottage in this document as we had in its predecessors. Yet my right hon. Friend's case will have to be answered—and answered effectively, if, indeed, it can be answered—if the present relationship between the United Kingdom and the Common Market countries is to continue.

For the first time, one of the major parties in the State wants to get out of the Common Market entirely on the basis of a general election result and without a referendum. That resolution has been passed by an annual conference. A great deal of work must be done on formulating a policy. But if the right hon. Gentleman is serious in his desire he must take account not only of the great majority of speeches from Conservative Members who want a change but of the fact that one of the great parties of the State now wishes to leave the Common Market on the basis of a general election result. That is a serious fact which the right hon. Gentleman must take into consideration. I agree with my hon. Friend the Member for Swindon (Mr. Stoddart)—whatever else it does, it reflects a broad mood of disillusion among the electorate. The pro-Marketeers within the Government have a great deal of education to undertake, and Cmnd. 8042 does not even begin the task.

Let me re-emphasise some of the issues that were raised in July and which should have been commented on in much greater detail, and to a much greater extent, in the document that is now before us. First, there is political cooperation. In an uncertain world, most of us would like to see a development of political co-operation between ourselves and our allies in Western Europe. To some extent, we have relinquished progress in this area. I can remember the days when as a nation we had genuinely warm feelings for our Western European colleagues. Incidentally, that was in the days before we joined the Common Market. I all probability, in 1956 we were far too close to France for comfort. Since we joined the Common Market, whatever the approach of the policy-makers may be, the psychological attitude of the nation seems to be that we should approach negotiations on the basis of "What can we do to thwart the French?" and when the negotiations are over say "Those damned French again."

We had a demonstration of that today in the statement on the fisheries negotiations. The hon. Member for Hastings (Mr. Warren), in the form of a question, made the statement that the French have ruined their own fishing in their own coastal waters; we shall not let them do the same to our coastal waters. That sort of attitude is gaining ground.

There is also a continual feeling of resentment that the West Germans and our other partners in the Common Market have not backed us to the hilt in our battles with the French. Personally, I do not share that attitude. I admire the way in which the French handle their affairs in the Common Market, and I only wish that we could show the same degree of competence in looking after our interests as they manage to exercise in looking after their own.

I turn to other matters. One hopes that the internal attitudes that are being developed will be offset by gains outside Europe. The criticism here is that after seven years of membership co-operation is limited in scope and ineffectual in action. The Common Market is internationally pious but generally speaking ineffectual. How can we take a high line on Afghanistan with the Russians when at the same time we are selling loads of cheap butter to them and, as the hon. Member for Southend, East pointed out, cheap wine in ever-increasing quantities as well? Surely a body which does that simply cannot be taken seriously. That was not an oversight. It was a defect in the essential Common Market system which we were totally unable to control.

When it comes to Iran, the sooner that we can draw the veil of decency over what happened there, the better. When it comes to the initiative in the Middle East, essentially that is a question of possibly giving recognition to the PLO. I do not want to debate the merits of that today, but it has upset many pro-Zionists in this country. I would ask them whether it is really a question about which they should worry. On the basis of the record, the decision, if and when it is reached, will probably be totally ineffectual in its consequences.

Mr. Stoddart

The decision to recognise the PLO has offended many more people than pro-Zionists.

Mr. Moyle

I take that point, although the particular group who would be offended are the pro-Zionists.

Given that all the countries in Western Europe depend on the United States, that we are all sensitive to the demographically and militarily powerful USSR on our Eastern boundaries, that we and the United States have many common cultural roots, that we share the same climatic belt in many respects, that we industrialised at about the same time and that we as a country have a Rhine army and a second tactical air force in Germany, have we achieved anything through our membership of the Common Market that we would not have achieved anyway without accepting all the bureaucratic top hamper of the Treaty of Rome? That question must be considered and answered.

Sir Anthony Meyer

Is there not another question to which the right hon. Gentleman must produce an answer—not merely, whether we are better off in or out of the Community, but whether we would be better off having come out and broken our solemn engagement to remain in. That is another solemn question to which he has not addressed himself.

Mr. Moyle

That is not a question that falls in the context of the problem that I was discussing, and it is not a problem that I was considering discussing tonight. If I did, we should be here much longer than we had assumed.

The Government make much of their renegotiation of 30 May. That merely turns what was a disastrous situation into a debilitating one. We still make the second highest contribution to the European budget. Rather than crow over the past, we should speculate about the future. We do not yet have our hands on even that money. When are we to get it, and will we get it in full? Today, for example, I gather, the European Parliament is debating the European budget. If it throws out the budget, our chances of getting our hands on the money will be further postponed. What are the Government's prognostications on that debate?

In any case, the reduction in our net contribution will be offset by the net agricultural price increase, which is bound to be fairly substantial, because President Giscard d'Estaing faces an election. I do not believe that the rest of the European countries will allow him to face his electorate without a substantial present for him. That is the way the Community operates.

Unless the social and regional funds are increased, Greek accession will therefore lead to a reduction for Britain. If there is to be another agricultural price increase, there is not much prospect of an increase in the social and regional funds in the near future.

We are to obtain the larger amount of our refund on the budget by means of Community spending in the United Kingdom. I studied the Lord Privy Seal's statement on 27 October with some interest. He said that we have to invite the Community to participate in financing the programmes. We then have to wait for the Commission to make proposals on the choice of programmes. The Commission's proposals will then be considered by an ad hoc committee of member States chaired by a Commissioner. Then, a qualified majority of that Committee will be able to reject those proposals. We have a right of appeal to the Council, of course, and the Council may also reject those proposals by a similar qualified majority.

This, of course, is only technically Common Market money. We are still substantial net contributors to the budget. This money is our money. In the good old days, decisions about how it was spent would have been made by the House of Commons and by the other place. There has been an erosion of the sovereignty of Parliament at Westminster. It is another example of the creeping dry rot that is eroding our sovereignty and that was referred to in July. At that time, we were discussing the operations of the European Court. We are now discussing the arrangements reached for the repayment of the money. The French may try to exploit this procedure in order to extract concessions from us in other directions. After all, the Common Market often operates in that way.

Everything depends on the reform of the common agricultural policy. It has been on the verge of reform for 20 years. Common Market enthusiasts claim that we now have an opportunity to reform it.

I remember the early 1960s. The hon. Member for Flint, West (Sir A. Meyer) said that he had argued for reform for a long time. He has. He must have been arguing for at least 20 years. In the early 1960s, the argument was that we should join the Common Market in order to stop the CAP. In the late 1960s, it was suggested that we should join the Common Market in order to stop the CAP solidifying. In the early 1970s, people said that we should join in order to reform the CAP. It is now argued that the CAP cannot go on as it is and that it is bound to be reformed. Every time, there has been a complete failure to take any action.

I venture to make a suggestion. The CAP may be modified, but it will not be reformed. It will remain rooted in its high-price, Corn-law-type principles. We will not be allowed to trade in the world markets and to buy the cheapest good food, although that is in our interests.

One has only to consider New Zealand. Indeed, several hon. Members mentioned New Zealand during the debate. Perhaps we are talking to Ministers who do not recognise the clear claims of loyalty, kinship or gratitude. If that is so, I put it to the right hon. Gentleman that it pays this country, on the most hard-headed calculations, to get its mutton and dairy products from New Zealand. That is the best bargain that we can get in the world.

Not only have we practically agreed to a further reduction in New Zealand's access to the Common Market, but we cannot protect New Zealand farmers from Common Market dumping in Russia. Goods are dumped at reduced prices and Russia then sells the products in third countries at prices below those with which New Zealand farmers can compete.

The editorial which appeared in yesterday's issue of The Times has already been referred to. A shameful sentence in it states: The outlook for a country that specialised (unwisely, it now sees) in supplying the British housewife is bleak. That is no more than an accurate statement of the situation. We pledged ourselves to protecting New Zealand's interests when we decided to join the Common Market. We are moving away from self-interest. On 5 June President Giscard d'Estaing, speaking to the French chamber of agriculture, said: The fundamental principles of the CAP are sacrosanct. But it is true that certain expenditure is growing too quickly and some mechanisms are out of date. Given that the French are almost starting from the position that they wished to reach in their negotiations on the reform of the CAP, my guess is that we shall end up near the starting point.

I shall not go into detail on the problems of convergence. However, during the referendum debate and before that we were promised a substantial share in the prosperity of Europe. I agree that there is not as much prosperity to share out as there used to be. However, the fact remains that we were promised a fair share of what there was when we joined. As a result of the EEC's policies, the richer countries are getting richer and are moving away from the common levels of standards of living, production and economic activity in the Common Market. The poorer countries, including ourselves, are sinking. The richer regions of Germany are far ahead of the poorer regions in the United Kingdom.

We do not seem to be getting the fair share of the prosperity that we were promised as a result of joining the Common Market, and the European economies are diverging, so we may need an insight into the nuts and bolts of the Common Market policies. We should like it, if we get it in future, to be in intelligible English. Let the next report that the Government produce, instead of dealing with these turgid details, deal with the broad and major themes about which the people of this country are really concerned—our balance of trade with the European Community, the progress towards the reform of the common agricultural policy, if not its removal, the matters of broad political co-operation and what real, sound plans there are for developing it on a wider basis. But it should be produced in language that the ordinary British elector can follow.

9.35 pm

The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd)

I congratulate the right hon. Member for Lewisham, East (Mr. Moyle) on his arrival in his new Shadow post. We enjoyed listening to his lively speech. I did not agree with anything except his first and last points, which were identical, when he said that it would be nice to have a rather more lively paper. I made exactly the same criticism when I was in his position on the Opposition Front Bench. I agree that it would be nice, but the difficulties are formidable. It has to make sense in terms of the European jargon in which to some extent we swim, but it also has to be intelligible to a wider world, as the right hon. Gentleman rightly says.

The debate contained many interesting speeches. If I refer first to the speech of my hon. Friend the Member for Holland with Boston (Mr. Body), it is because he put his finger on the basic point of philosophy. I have heard him often on the subject and I do not think I have heard him speak more eloquently. Nevertheless, I found difficulty with his analysis. He quoted with approval the speech of my right hon. Friend the Prime Minister at Bordeaux, but, as was pointed out to him, that speech, and the quotation that he used from it, was a reaffirmation, which the Prime Minister has frequently made in recent months, of her commitment to the Community. It was not a statement of her desire to leave it. She saw it and expressed it as a Community within which there is steadily increasing cooperation between European nations.

Those of us who go to the Council of Ministers do not recognise the supranational monster which is often depicted here. This is not the animal with which we deal. We deal with a Community in which representatives of nation States struggle painfully and slowly for agreement. Sometimes they succeed and sometimes they do not, but that is what it is about.

My hon. Friend concentrated his scorn on the small and bitter arguments which go on and which he said are unworthy. That is right; we all feel that. But I hope that he will address himself to the point that these arguments exist anyway. Problems about fishing have run through our history. We have the problem about milk. I imagine that as a free trader he is in favour of allowing UHT French milk into this country, but others in the House would take different views. It would have to be discussed and negotiated. I do not believe that there is any ground for supposing that that would be an easier problem to solve if the Community did not exist. It would probably be a more difficult and possibly a more bitter problem. But it would not go away if the Community disappeared. If we abandoned the Community, these bilateral problems could be much more difficult to solve than they are now.

The hon. Member for Inverness (Mr. Johnston) had some rather effective but mild fun about one theme which ran through the debate—the criticism from the far Left of the Community as being a capitalist conspiracy and the criticism from some of my hon. Friends that it is a Socialist conspiracy. My hon. Friend the Member for Southend, East (Mr. Taylor) will not mind, I am sure, if I say that, as a result of his own zeal on the subject, he has managed on at least one occasion to encapsulate both criticisms in the same press article.

In the first half of his interesting article in The Guardian on 10 November, my hon. Friend said that the Community was not protectionist enough for Britain, and in the second half he listed protectionism as one of its sins. I agree that it is not sensible to get bogged down in statistical pingpong, as he described it. One can do that. I hope that the House will accept that I have material on food and on the trade figures which, to me, and, I think, to the House, is sufficient answer to the points that have been made on those matters. [Interruption.] If the hon. Gentleman tempts me, I shall go into it. However, I should prefer, as my hon. Friend and others have encouraged me, to deal with the principles and the future. I hope that the£3 billion for the cost of the CAP to the British consumer, which was given with qualifications and is now being used by others without qualifications—not by my hon. Friend—will not be used in future without those qualifications, because they make a substantial difference to the argument.

On the subject of New Zealand, many hon. Members have rightly drawn attention to the unsatisfactory situation that we are in tonight because the Agriculture Council has again failed to reach agreement on long-term arrangements for post-1980 access. As was reported to the House, there is a temporary arrangement. The Community rolls forward the existing arrangements for access for one month. The matter will be discussed at the next Agriculture Council meeting on 12ߝ13 January, and we shall continue to press for a fair deal for New Zealand.

I slightly resent the insinuation by the right hon. Member for Lewisham, East that we were half-hearted in this matter. Successive Governments—this is not a party point—have battled fairly successfully inside the Community for New Zealand. Throughout this time, New Zealand has occupied a wholly exceptional and, in the eyes of our partners, privileged position inside the Community. She has gained that position partly through her own tactical skill, which has been substantial, and partly through the valiant efforts of British Ministers of both Labour and Conservative Governments. That is the position up to now. We accept that it must continue. We have a responsibility and interest to continue this battle, and we shall do so. The lamb regime is extremely beneficial to, and has been welcomed by, New Zealand.

Mr. Body

Does my hon. Friend agree that one-third of dairy farmers in New Zealand—the most efficient dairy farmers in the world—have gone out of business and that that cannot be satisfactory?

Mr. Hurd

I have visited New Zealand and spoken to New Zealand Ministers. There is widespread recognition in New Zealand that the facts are as I have stated them and that we have made a valiant—not wholly successful, but not entirely unsuccessful—effort to achieve for New Zealand a wholly exceptional position inside the Community.

Mr. Jay

rose—

Mr. Hurd

I should like to proceed, because I have many points to cover, including the right hon. Gentleman's.

There has been further news on budget refunds since my right hon. Friend opened the debate. The Commission has today, as he said, approved advances to the United Kingdom of£97.6 million to be paid before the end of this month. This is the first refund under the supplementary measures scheme. It will enable us to keep public spending on certain programmes at a higher level than the country could otherwise afford.

The Commission has chosen for the first refund programmes by central Government and public corporation spending authorities in Wales and the North-West. These include construction of the M4 Bridgend northern bypass, the A40 Raglan to Abergavenny, the Queensferry sewerage works extension in Wales and, in the North-West, several motorway schemes which form part of the Manchester outer ring road and other projects in Liverpool and Manchester.

I list these projects because they are in progress and this is the first of the refunds. The right hon. Member for Lewisham, East, perhaps through ignorance, listed the procedures as though they would not work. He implied that we would never get through this rigmarole, but the first refund has been made. The suspicions expressed by many Opposition Members have been proved to be unfounded.

Mr. Moyle

The hon. Gentleman must have misunderstood me. I never said that they would not work. I said that it was remarkable that money which is our money will be spent in this country on the say-so of the European Commission.

Mr. Hurd

That is right, and I made the point that three years ago we were simply paying out and not getting anything back. That was the extent of the previous Government's achievement. We can have our ding-dong on that, but the fact is that, despite all the fears about linkage, conditionality and so on that have been expressed, the money that we were promised has begun to arrive.

My hon. Friend the Member for Harborough (Mr. Farr) made a number of detailed points. Perhaps I could write to him about them.

Mr. Moate

My hon. Friend said that the refunds would allow projects or work to go ahead that otherwise would not occur, but surely the projects that he has announced are projects that would already have been carried out by the Department of Transport or the Welsh Office in exactly the same time scale.

Mr. Hurd

They are not additional projects. They are projects that enable the general level of public spending to be higher in this country than it would otherwise have been.

My hon. Friend the Member for Harborough asked detailed questions about textiles from Portugal and the position as regards the United States. As my hon. Friend the Minister for Trade told the House this week, we believe that the balance of advantage for Britain lies in a concerted approach by the Community to the United States to find a practical solution. The Foreign Affairs Council this week instructed the Commission to get in touch urgently with the Americans and to report back. It is no coincidence that the next item on the little brief that I have is headed "United States steel anti-dumping measures". It is not sensible, in our view, merely to take a particular industry and say that it is threatened by the United States, without having regard to what happens if there is retaliation.

That leads me to the point which my hon. Friend the Member for Eye (Mr. Gummer) developed and which is very important—the whole question of our external trade. My hon. Friend the Member for Southend, East also raised the point. He was perfectly correct in what he said factually—that anti-dumping measures and the general conduct of external trade are now a European responsibility. He, like several other hon. Members, criticised that state of affairs as damaging to our interests. I should like to spend a minute on that point. It is true, for example, that the multi-fibre arrangement is a European arrangement. When it falls to be renegotiated, it will be renegotiated on that basis. I believe that it is sensible and in British interests that that should be so. It is more sensible for us and our industries in the dangerous state of the world's trading position to belong to and be represented at the great international negotiations by the biggest trading group in the world. It is politically naive to suppose that that is not so. We are exposed to threats of retaliation.

In Indonesia,£200 million worth of business for this country is in danger because we have secured through the European Community some quota restrictions for Indonesian textiles to this country. That is a bad case. In the United States, equally, there is talk of a trade war. There is a danger of our drifting into a position of confrontation. We want to avoid that. The chances of avoiding it and getting a reasonable deal for our industries vis—a—vis the United States—and we have complaints against it—are much better if such matters are handled, with our agreement and our participation in deciding the policy, by the European Community. As I said, it is politically naive to go the other way.

The same is true in the different situation of coal and steel. Those industries, particularly steel, are in massive difficulty. We often argue in the House why that is so. One important aspect is that the situation would be substantially more difficult, particularly for the steel industry, if it were not for the Davignon measures that we have supported and have been urged to support by the management and unions in both major industries. That is something on which Labour Members ought to reflect.

The Labour Party ought also to reflect on inward investment and the creation of new jobs. I choose an illustration not because it is the most important but because it is the most topical. It cropped up this week. There was a report, which seems soundly based, in the Financial Times of an American firm, Magnuson Computer Systems, which is to take over a factory in Washington, near Sunderland, to manufacture medium-sized computers for the European market.

A 27,000 sq. ft. factory will be used to build the computers for European buyers. About 100 extra jobs will be created. It is a small project, but it is not untypical. It just happens to be the one that caught my eye this week. It is on a European basis that the jobs will be created. That is why the Americans have chosen the North-East.

What would the right hon. Member for Llanelli (Mr. Davies) say to the Americans? Would he tell them to go to Belgium or France, because the basis on which they had chosen the North-East was a mistaken basis and a Labour Government would destroy that basis and cut the ground away from the Americans' investment? Would Labour Members solemnly say that to Japanese, American and EEC investors, who are beginning to come forward in quite large numbers?

Mr. Denzil Davies

If the hon. Gentleman intends to follow that line of argument, will he tell us how many jobs have been lost to British manufacturing industry as a result of our entry, the lowering of tariff barriers and the decline in our trade with Europe?

Mr. Hurd

The right hon. Gentleman has not proved that point. Nothing that he has said has made that connection. I am making a practical connection to which, although I gave way, I have not had a reply. As a Tory politician, I should rejoice if Labour Members solemnly took the line that they may be about to take, but as one interested in the economy and prosperity and new jobs for this country I find that line disastrous.

Mr. Marlow

Is my hon. Friend aware that, with the strong pound, the engineering industry in this country, particularly the area that is making engineering commodities, is suffering badly from our membership of the Common Market, because other countries in Europe are making products much cheaper than we are? One day, with new investment, we may be able to compete, but in the meantime our industry is getting slaughtered by the fact that we are in the Common Market.

Mr. Hurd

My hon. Friend did not develop that point in his speech and he has not established it in his intervention. We have a surplus in trade in manufacturing goods across the world, and it is not in our interests to get into a position in which one country after another imposes import restrictions.

I turn to the future, on which most of the questioning and probing has rightly concentrated. Next year will be a testing and difficult year for the Community. We hope that it will include progress towards the sort of European measures that suit and interest the citizen as suggested by my hon. Friend the Member for Harrow, East. But it will be dominated by the commitment made by all members to the restructuring of the budget. As my hon. Friend the Member for Faversham (Mr. Moate) pointed out, the restructuring commitment was made against the background of resources running out on the present basis.

Much energy and effort will be required from us and everyone else to get the right solutions that are sensible for Europe. We shall have a particular responsibility in the second half of next year when we have the Presidency. I hope that we shall be able to rely on all hon. Members to help Britain make the Presidency a success. It will be an important period for the Community and for Britain's reputation.

Let us forget for a moment solutions sensible for Europe, which I have been talking about, and narrow the issue down, as the two Opposition Front Bench spokesmen constantly do, to the question of British national interests. I wonder whether the right hon. Member for Llanelli seriously believes, after his period as a Treasury Minister, that Britain's problems can be solved in isolation. That is the content and drift of his muttering.

We do not have a federal Community in which important matters are settled by majority vote. From time to time, member States slog it out in defence of national interests or in defence of a friend like New Zealand. It is reasonable that the House should examine in this debate the best way of achieving those aims.

There is case history. I despair rather when I hear suggestions from either side of the House that we should go back to the age of empty shouting in these matters which I associate—other hon. Members may share this view—with the right hon. Member for Deptford (Mr. Silkin). He used to come to the House wrapped in his Union Jack. It was very difficult to criticise him. That approach was tried over and over again. It was entertaining while it lasted but it achieved nothing for Britain.

Our approach is based on a commitment to membership. This is the key to the matter. That is why the Prime Minister repeated the commitment; at the very time when she was battling for the budget agreement. That commitment is the reason for the fact that we have made better progress than the Opposition found possible. Without that commitment, we might have done as badly as they did. Without that commitment, we would not have achieved the budget settlement or the lamb settlement or made progress, albeit insufficient, on fishing.

We live in a dangerous world. The European Community goes beyond the regional economic agreement to which reference has been made. The two Opposition spokesmen have failed to grasp the scope of achievement during the last few months. We have seen the advance of policy towards the developing world. That has been a development of European policy. Zimbabwe, on achieving independence, wanted, as one of her first requirements as an independent country, to join the Lomé system and has managed it. These matters of great importance have not drawn any comment from the Opposition, who are supposed to be interested in the Commonwealth.

There have been glancing references to European Community policy towards the Middle East, but this is not the right occasion to discuss the issue in detail. This could be Europe's card of re-entry into an area of vital importance to it. In policy towards Eastern Europe there have been European agreements this year with Romania and Yugoslavia. An important decision was taken this week on help for Poland. These are the sort of things that are beginning to come out of the Community. They are important and full of promise because they are European.

Some of these developments such as the trade agreements with Eastern Europe are Community matters. They come under the treaties and the Commission is involved. Others are a matter of political co-operation. I would ask my hon. Friend the Member for Northampton, North (Mr. Marlow) not to believe that political co-operation, this cohesion that we are gradually getting, this advance in thinking, acting and speaking as Nine which is so important in the conduct of our foreign policy, can be achieved while turning one's back or, even worse, breaking up the Community itself. There is case history regarding Norway, which was part of the political cooperation but withdrew when she did not become a member of the Community. It is not possible, in my view, to have the one without the other.

As someone who has spent most of his working life in this area of Britain's influence in the world, I believe it is on the European basis, that is gradually growing and developing, that we can exercise the greatest influence and have the greatest standing. That is one of the strongest reasons why I would hate to see this country weakened and its influence in the world diminished if we were to turn our back on this sometimes maddening but developing and, I believe, crucial experiment.

Question put and agreed to.

Resolved, That this House takes note of the Report on Developments in the European Community, January-June 1980, Cmnd. 8042.