HC Deb 24 June 1980 vol 987 cc231-53
The Prime Minister (Mrs. Margaret Thatcher)

With permission, Mr. Speaker, I shall make a statement about the economic summit meeting in Venice on 22 and 23 June at which I was accompanied by my noble Friend the Foreign Secretary and my right hon. Friends the Chancellor of the Exchequer and the and the Secretary of State for Energy.

This was the first summit meeting since the Soviet occupation of Afghanistan and the first to have a detailed and formal discussion of international political problems. The unanimity and sense of common purpose that informed this discussion is reflected in our public statements. We confirmed that the Soviet occupation of an independent sovereign nation is and will remain unacceptable. We called for the complete withdrawal of Soviet troops and for the Afghan people to be left free to decide their own future. We were not deflected by the Soviet Government's carefully timed announcement of the withdrawal of certain units from Afghanistan. We made clear that the withdrawal, if confirmed, must be irreversible and must continue until no Soviet forces remained in Afghanistan. We reaffirmed our opposition to the attendance of our athletes at the Olympic Games.

In addition to this declaration on Afghanistan, we agreed statements about refugees, the taking of diplomatic hostages, and hijacking.

The main purpose of these summit meetings, however, is still to review the world economic situation. Here, our discussions were dominated by the problem of oil prices. These have virtually doubled since our last meeting in Tokyo a year ago. The increases in the price of oil have had and will continue to have profoundly damaging effects upon the world economy. They have led to even higher inflation, to the imminent threat of severe recession and to increased unemployment in the industrialised countries.

We agreed at Venice that our top economic priority must remain the reduction of inflation and that determined fiscal and monetary restraint is therefore required. We agreed that if we were to improve productivity and provide new job opportunities, resources must be shifted from Government spending to the private sector and from consumption to investment. We agreed that measures of this kind might be economically and politically difficult in the short term but that they were essential to sustained non-inflationary growth and to increased employment, which are our major goals. These conclusions are entirely in line with the policies that the Government are pursuing in this country.

We accepted the need to break, over the next 10 years, the link that has been apparent in some countries between economic growth and oil consumption. With this aim in mind, we agreed upon a series of measures to reduce consumption of oil, to use it more efficiently, and to develop alternative sources of energy.

The worst sufferers from the sharply increased price of oil have been the developing countries. Both their oil bill and their current account deficit have doubled in the past two years. The increase in their spending on oil over this period is higher than the total amount of aid that they have received from all official sources. At the same time, the ability of the developed countries to help them has itself been diminished by the oil price rises. All seven countries represented in Venice are now in current account deficit.

It follows that the democratic industrialised countries cannot alone carry the responsibility of providing aid to the developing countries. We must look to the main oil exporting countries to use their vastly increased resources to give help. We believe that it is as much in their interests as ours to contribute in this way to the stability of the world economy and to the development of the poorer nations. The fact is that the industrialised countries of the free world, the oil-exporting countries and the non-oil developing countries depend upon each other and need to work more closely together.

Against this background we welcomed the report of the Brandt Commission.

We also agreed to review our aid policies and procedures. We shall consider the results of this review at the next summit.

In addition to our formal business, we had a number of less formal exchanges. In particular, I had a useful bilateral meeting with President Carter.

On the economic side, this was a meeting at which we were largely concerned to carry forward the work begun last year. At the same time, we broke new ground by discussing the major international political issue of the day—the invasion and continued occupation of Afghanistan by the Soviet Union. The meeting offered a timely opportunity for the seven Heads of State and Government to reaffirm their unity of purpose on the political and economic difficulties that we face. That opportunity was taken.

Mr. James Callaghan

It was correct to call for the withdrawal of Soviet troops from Afghanistan, but was the possibility considered that the Soviet Government are finding greater difficulties in Afghanistan than they anticipated? Did the Heads of Government assembled in Venice consider that the Soviet Government might have meant what they said, and might be looking for a way out, although it is absurd to pronounce on that at present? Did the right hon. Lady support Chancellor Schmidt's visit to Moscow, which would give that most experienced statesman an opportunity to examine Soviet policy and clearly state the West's view?

Without reverting to what happened at Question Time, will the right hon. Lady accept that to state that the top economic priority is the reduction of inflation neglects the other factors that leading Western statesmen should take into account, such as levels of unemployment and prospects for growth? Will the right hon. Lady further accept that I criticise the statement because it singles out that issue and because I believe that any proposals for solving world economic problems will therefore fall far short of a satisfactory solution.

If the right hon. Lady wants to reduce inflation—and let us see whether her deeds match her words—what about reducing VAT and asking the gas industry to reverse the price increase that was artificially imposed by the Government? Does she agree that those measures would reduce inflation almost at a stroke?

The statement says that it is necessary to transfer resources to investment. How is that happening in this country, where the level of investment is declining month by month, although there is no indication that consumption has been overstretched?

We welcome the attachment to coal production, but, again, how does the right hon. Lady propose to match her deeds to her words? For example, if pits in South Wales find that because of closures in the steel industry there is temporary overproduction, does she intend to close those pits, or will they now remain open? That is the acid test of such a policy. Will the right hon. Lady still insist that the financial targets, which both sides of the coal industry agree are unrealistic, must be accepted, although we know that that will result in pit closures?

The statement says that it was agreed to review our aid policies. Aid to Bangladesh has been cut from the programmed£65 million to£27 million last year and£42 million this. The President of Bangladesh was here last week. Can his country and others in a similar position look for an increase in aid?

I note that the Prime Minister did not refer to a sentence in the document that referred to the need for a dialogue with what are called the social partners, by which is meant the trade unions. May we hope that the right hon. Lady will now cease her weekly venomous attack on the trade unions?

The Prime Minister

The right hon. Gentleman asked whether it had occurred to us that the Russian troops were finding increased difficulties. I hope that they are. I hope that the resistance of people to an invader and their determination to fight for their own country is great and will increase. That might make Soviet troops withdraw.

I notice that the Russians admitted that the units that they are withdrawing are not necessary at present. It may be that they are of types that are not involved in the direct occupation or in fighting the resistance that they are meeting. We shall look forward to the possibility of further reductions in troop numbers in Afghanistan if the Russians intend to withdraw.

The right hon. Gentleman asked eight questions, which I intend to try to answer. He asked about Chancellor Schmidt's visit to Moscow. The Chancellor is not going on behalf of Western nations, European nations, or those represented at the economic summit. He is going. That is a fact. I am sure that he will deploy his own case and the case of the free world very well indeed. I have not the slightest shadow of doubt that he will stand foursquare behind the defence and the defence policies of the West.

Thirdly, I note that the right hon. Gentleman appeared to be at odds with the seven Heads of Government who, in paragraph 4 of the communiqué said: The reduction of inflation is our immediate top priority and will benefit all nations. That was the message that the right hon. Gentleman was giving when inflation was his top priority. It is this Government's top priority.

Fourthly, the right hon. Gentleman asked about certain specific actions that, he said, would reduce inflation—reducing VAT, and various other things. Of course, they would increase the need to borrow over and above the present amount of borrowing, which is already too high and is one of the factors that are keeping up interest rates. If they did not increase the need to borrow, they would increase the need to print money and, ultimately, that would increase inflation. We could not possibly agree to that at present.

The right hon. Gentleman talked about resources being moved to investment. As he knows, we are investing quite heavily in AGRs and in different fuel-producing capacity. I accept that we need to put more into investment, but on the whole it seems to me that reducing tax on consumption, as the right hon. Gentleman proposed, is not the way to increase investment. It would increase consumption.

The right hon. Gentleman also asked about the communiqué's references to coal. We have the biggest coal-based economy of the countries that attended the economic summit. We already get more than two-thirds of our electricity from coal. The phrases were particularly directed at the United States and Canada, which have to increase their coal output. For example, the United States expects to increase coal production from 600 million tons a year now to about 1.2 billion tons in 1990. The communiqué was also a request to some non-coal producing countries to use more coal rather than oil. For example, Japan and Italy will both need to use more coal rather than to import more oil. If our coal were highly competitive it would be possible for us to have export markets, but I am not sure that it is price-competitive with coal from other parts of the world.

The right hon. Gentleman referred to aid policies and procedures. I do not think that the industrialised countries were thinking of increasing the amount of aid that they gave. As the hight hon. Gentleman knows, we are one of the countries that give a higher proportion of GNP in aid than do a number of the other countries assembled. We are all rather concerned that such a high proportion of the aid that we give goes through multilateral organisations and therefore we have less available to give bilaterally.

The right hon. Gentleman's final question concerned the dialogue between the social partners. I thought that "social partners" was a much better expression than "both sides of industry". That dialogue takes place regularly not only in the NEDC but in many Departments, through my right hon. Friends the Secretaries of State and their Ministers. Indeed, many of the unions are regularly at the Departments, discussing matters of particular interest to those Departments.

Mr. Callaghan

I am obliged to the right hon. Lady for her detailed replies. I do not deny that she is correct in saying that reducing VAT or gas prices would have an impact on consumption. However, the Heads of State have stated that the top priority is the reduction of inflation. How does she propose to reconcile that contradictory aim? Surely that is the object of government. That is why she is there.

I repeat one of my questions, because it concerns a matter that is being watched with close interest in South Wales and other parts of the country. What impact will a temporary over-production of coal have on pit closures?

The Prime Minister

I thought that I had answered completely the right hon. Gentleman's question on inflation. The effect of what he is proposing would be to increase the need for borrowing, which would increase interest rates or lead to the printing of more money. Ultimately, both those courses would lead to a higher level of inflation. They would not fight inflation; they would provide increased inflation next year. We therefore totally reject that course of action.

I do not expect what happened at the Venice summit to have any impact on coal in this country unless we have sharply increased productivity and, therefore, highly competitive prices. In the current financial year the Government are contributing, through the external financing limit, about£834 million to the coal industry, of which£600 million goes to investment. That is a substantial amount of aid to the coal industry.

Mr. Maurice Macmillan

Can my right hon. Friend tell the House a little more about her longer-term discussions with her colleagues on energy questions? Did they discuss the benefits of nuclear energy to the North-South problem and to developing countries? Can she reassure the House that we are soon to make a decision to start on a commercial prototype of the fast breeder reactor, in view of the long lead time and the need to get such aid to developing countries by the turn of the century?

The Prime Minister

All the heads of Government assembled in Venice agreed that the only way to meet the energy gap in the coming years was to increase the output of nuclear energy. That is why we have referred firmly to that need in almost every communiqué. I know that there are groups who do not agree with that, but we believe that the majority of people are fully aware of this matter and that we must go ahead with the nuclear energy programme.

There was a reference in the communiqué, or at any rate in the discussions, to the need to invest in different forms of electricity production in developing countries. One would hope that a certain amount of the resources of the World Bank and other international institutions would go to that, in order to reduce the dependence of those countries on oil.

At the moment I cannot give my right hon. Friend any undertaking about the fast breeder reactor. As he knows, I share his view that it is an efficient reactor. The one at Dounreay is doing extremely well. However, it would need a major public inquiry into the system, quite apart from any planning application, and there are other things to deal with before that.

Mr. Donald Stewart

In the light of the Scottish unemployment figures, does the Prime Minister accept that the immediate concern is not the long-term energy problem but the utilisation of existing oil revenues from the modernising of industry and the creating of new jobs in Scotland?

The Prime Minister

The existing oil revenues—they are, and will become, increasingly substantial—are already going into the Exchequer and being disbursed on many expenditures. Some go to regional aid, some to financing nationalised industries and some to new investment. They are already in the Budget accounts. It is not as if there were a new source to come. They were already being used. The only new sources of revenue are those that have to be earned by our competitiveness.

Mr. Penhaligon

Is the Prime Minister saying that the considered opinion of the summit in Venice was that the general imposition of British levels of interest will lead to a reduction of inflation in the Western world?

The Prime Minister

The levels of interest in the United States were recently higher than ours, although they have now come down. The level of interest rates is one of the ways of reducing the demand for borrowed money. So long as the joint demand for borrowed money, on the part of Government and industry combined, is greater than the supply of money available, so long will interest rates be high. We are trying to get them down by less Government spending.

Sir Frederic Bennett

As, in her opening remarks, the Prime Minister referred to the summit's consideration of refugees, would she care to elaborate on her remarks? The United Nations has announced that the number of Afghans who have had to cross the border into an already overstrained Pakistan exceeds 1 million. Does my right hon. Friend agree that the best test of Russian intentions would be that the flow of refugees should slow down rather than increase, as it is continuing to do today?

Mr. Cryer

The hon. Gentleman is lining his pockets from deals with the Russians. [HON. MEMBERS: "Oh."]

Mr. McQuarrie

On a point of order, Mr. Speaker. Is it in order for an hon. Member to make an accusation against an honourable Member in that manner?

Mr. Speaker

Will the hon. Member for Keighley (Mr. Cryer) repeat what he said?

Mr. Cryer

Certainly, Mr. Speaker. I was making the point that the hon. Member, who is always raising questions about Afghanistan, is, I understand, a director of Kleinwort, Benson Limited, which has entered into a deal with the Moscow Narodny Bank. I therefore said that he was lining his pockets from deals with the Russians.

Mr. Speaker

Order. The House never gains anything from personal attacks and personal criticism. One might as well say that I am lining my pockets by being Speaker, which I am not. So long as the hon. Member for Torbay (Sir F. Bennett) does not feel that it is a reflection on his honour—

Sir F. Bennett


Mr. Speaker

Sir Frederic Bennett.

Sir F. Bennett

Had the remark been made by almost any other hon. Member I would have asked for a withdrawal. What the hon. Gentleman says is totally untrue. However, I regard him with such contempt that I shall not bother, Mr. Speaker, to take up your time.

Mr. Speaker

I think that amounts to an equality of insults.

The Prime Minister

The declaration on refugees referred to the 1 million refugees from Afghanistan, the great majority of whom have gone into Pakistan, but some into Iran. The communiqué put the matter better than I am able to express it, when it said: The Heads of State and Government therefore make a vigorous appeal to the Governments responsible … to remove the causes of this widespread human tragedy and not to pursue policies which drive large numbers of their people from their own countries. I hope that those responsible for driving them from both Vietnam and Afghanistan will take heed of those words.

Mr. S. C. Silkin

Is it correct, as widely reported in the press, that, compared with her colleagues, the right hon. Lady was noticeably lukewarm towards the Brandt Commission's report—in sharp contrast to her right hon. Friend the Member for Sidcup (Mr. Heath), as shown by his distinguished speech a week ago? If so, why?

The Prime Minister

It is totally incorrect.

Mr. Higgins

In view of the importance of deterring Russian aggression in Afghanistan and elsewhere, why are we still making export credits available to the Russians at subsidised rates of interest, which may help the Russian war effort?

The Prime Minister

We are on the international consensus rate of credits in accordance with our agreement not to have competitive credit in sales to other countries. It so happens that the consensus rate of credit is below our present rate of interest. In some other countries, it happens to be slightly above. It would be contrary to the interests of our own people if we did not adhere to that consensus rate of credit.

Mr. Jay

Does the Prime Minister's reference to wage claims mean that this Government have now got an incomes policy?

The Prime Minister

In the universal sense, long before we ever heard the saying that a nation's economy will make sense only if increases in wage settlements are related to increases in output, the answer was "Yes, of course". That is the only way to keep a sound economy. That method is far older than any phrase related to incomes or wage claims. It relates to sound monetary policy.

Mr. Cormack

Bearing in mind the firm statement of the allies on the Olympic Games, and in view of the fact that the British team was named yesterday, will my right hon. Friend consider inviting its members to No. 10 Downing Street, so that she can explain that the only true medals worth winning are those for courage in defence of freedom, and that none of those are available in Moscow?

The Prime Minister

My noble Friend the Foreign Secretary recently spoke to a number of people in a last plea to endeavour to get some of them to reconsider their decision. We must now leave the matter to them. I note that as the days go by some of the athletes who had intended to go are now reconsidering their decision. Some have announced that they will not go. I believe that as more news emerges from Afghanistan the movement not to go may increase. I wonder what we would feel if this country had been invaded but athletes from nearby Europe nevertheless went to the Moscow Olympics to honour the country that had invaded this country.

Mr. Frank Allaun

Does the Prime Minister support Chancellor Schmidt's proposal of a three-year freeze on missiles, both NATO and Warsaw Pact? Does not the decision to deploy cruise missiles here, regardless, conflict with this mutually advantageous proposal?

The Prime Minister

I am reliably informed that Chancellor Schmidt has made no such suggestion, and that he adheres totally to the agreement in NATO. With regard to theatre nuclear forces, before Christmas the whole of NATO asked the Warsaw Pact countries if we could together negotiate a reduction in theatre nuclear forces. That suggestion was turned down. Chancellor Schmidt's policy with regard to TNF—I am not responsible for his policy, but I made inquiries following the reported passage in the press—is exactly that pronounced by NATO. It does not differ in a single fact.

Mr. Paul Dean

Will my right hon. Friend confirm that the leading industrial nations are greatly encouraged by the decisive manner in which Her Majesty's Government are tackling deep-seated economic problems, and that they now intend to follow Great Britain's example? If that is the case, will my right hon. Friend assure the House that she will ignore the strident voices of opposition, from whatever quarter they may come.

The Prime Minister

I am grateful to my hon. Friend. I am pleased that the policies that we are following were endorsed thoroughly by the economic summit as being the sound policies that will eventually produce results. A large number were the policies that the IMF insisted that this country should follow, but the Government of the day did not have the guts to put them into action.

Mr. Faulds

If the right hon. Lady was convinced that the OPEC countries and their financial resources could, and should, work to give help to the underdeveloped world, why was she so unresponsive to the call to hold a world conference between the underdeveloped world, the industrial world and the OPEC countries? Would there not be some advantage even in the involvement of the Soviet Union at such a conference, as a means of lessening present world tensions?

The Prime Minister

As a matter of fact, when we considered whether there should be what I would call a Brandt summit, it so happened that I did not speak. My colleagues at the summit felt that the time was not right for such a summit. It is a mistake to believe that the answer to everything is another summit as soon as possible. It raises enormous hopes long before there has been sufficient preparation for a summit. There is point in having a summit only when we have gone a long way towards preparing for it with all the countries involved, so that there are some positive proposals which are likely to be accepted at that stage. We have not reached that stage yet. Therefore, we said that we would review the policies and the procedures and that we would reconsider the matter at next year's summit.

Mr. Walters

Bearing in mind the continuing gravity of the situation in the Middle East, and the world-wide welcome for the recent European initiative, can my right hon. Friend say whether she and the other European leaders were able to discuss the matter with President Carter, particularly the need to follow up the communiqué with a dialogue with all the relevant parties to the conflict?

The Prime Minister

That matter was not discussed among the seven of us. It was primarily an economic summit, although we departed from it to discuss the Afghanistan question in view of the serious problems associated with it. However, those of us who were present and belong to Europe went no further than we did in the communiqué of the previous week. We understand that the United States regards that as trying to help with the Camp David process, which is still very much alive.

Mr. Marks

Did the Heads of Government give any consideration to the future of Afghanistan after the Soviet troops leave? Have they any proposals to make and have they met any of the Afghan leaders?

The Prime Minister

Of course, my right hon. Friend the Foreign Secretary gave the lead on that matter several weeks ago by suggesting a state of neutrality. Beyond that, the important thing is to try to get the Soviet troops out. Then it will be for the Afghan people to decide their own future, but only when they are free to do so. They cannot have things imposed upon them.

Mr. Peter Bottomley

Can my right hon. Friend say whether at the summit it was recalled that the last time the Soviet Union announced a withdrawal of troops it was from Europe and that that was followed almost at once by the invasion of Afghanistan?

The Prime Minister

We had that incident very much in mind. On the last occasion on which a small withdrawal was announced it was heavily displayed on the television screens. However, I agree with my hon. Friend that it was not long between that withdrawal and the invasion of Afghanistan. I think we have every reason to by sceptical about the present proposed withdrawal and to reserve judgment on whether it means anything or whether it was a ploy just because we were meeting in Venice.

Mr. Pavitt

During the discussions on Afghanistan, was any consideration given to the rather unique refugee problem involved in animal husbandry? Does the Prime Minister recall that the frontiers between Afghanistan and Baluchistan—Afghanistan and the North-West Frontier Province, on the one hand, and Soviet Uzbekistan, on the other—mean that animals move from one side to the other in order to obtain fodder? The big problem in Baluchistan at present relates not only to food and medical supplies for the refugees but also to the fact that the animals which accompany the refugees require help with feeding stuffs. That does not occur in respect of any other refugee problem in the world.

The Prime Minister

I must confess that we did not discuss that particular problem, although I do not doubt its importance. I think that it is part of a larger problem, in that there are a number of ethnic groups which span the borders of countries and have been accustomed to moving to and fro very easily. Of that we are very much aware. Our problem at present is to try to get food, aid and help to the refugees. However, I have not the slightest doubt that, if the presence of a large number of animals is known, that factor will also be taken into account.

Several Hon. Members


Mr. Speaker

Order. I appeal to hon. Members to make their questions as succinct as possible so that I can call more of them.

Mr. Gorst

Can my right hon. Friend say whether, in her bilateral conversations with President Carter, he asked her to use her influence with her European opposite numbers to get the lamentable, misguided, cynical and immoral policy towards the PLO—which will ultimately lead to bestowing de facto recognition on it—withdrawn or changed?

The Prime Minister

No, but President Carter and myself totally and utterly condemn terrorism as a political weapon wherever it occurs. I do not think that there is any difference between us on that.

Mr. Straw

When will it dawn on the Prime Minister that her policies, which are deepening the recession, not only make unemployment worse but make inflation worse and push up borrowing? Is the right hon. Lady aware that the 60,000 low-wage, high-productivity textile workers who have been thrown on the dole during the last year will, in terms of unemployment benefit and tax loss, cost£280 million a year, which is far more than the cost of a sensible support scheme to keep those people in work? When will she do her arithmetic and come forward with policies which keep people in work and keep inflation down?

The Prime Minister

With regard to the question about a deepening recession, the top priority must be to reduce inflation, otherwise we shall end up with a very much deeper recession than we will have if we tackle the problem now. In so far as I have been asked about borrowing, all the invitations have been to increase spending, thereby putting up borrowing. Everything I am doing is designed to reduce borrowing, which will ultimately get inflation down.

As to the hon. Gentleman's question on textiles, he knows that we are honouring every sentence of the multi-fibre arrangement, which was negotiated by the previous Government, and that we are also taking advantage of the opportunity to negotiate new quotas. We are doing a number of other things, with which the hon. Gentleman is familiar, to try to assist the textile industry, and in addition have introduced a short-time working compensation scheme.

Mr. Farr

As one of the themes of the conference was the alternative use of different forms of energy, when my right hon. Friend leaves the House this afternoon will she send for the papers relating to the amount of money that we spend on research into electric vehicle production? She will find that it is absolutely derisory and that it is a lot less than that spent by our European and United States competitors. Will she look into this exciting sphere to see whether she can give the idea a new drive?

The Prime Minister

I shall certainly have a look at that matter again. However, one must also generate the electricity for the cars. Sooner or later it comes down to generating from coal, nuclear, oil or gas sources, although there is a certain amount of hydro-electric generation. But I shall certainly have a look at the matter again.

Mr. Hardy

The right hon. Lady's answers a few moments ago seemed to suggest that she was unaware of the substantial improvements in productivity in the British coal industry. In view of the inadequacy of her understanding, and in view of the achievements, are not we entitled to call upon her to fulfil the international agreement and reconsider the terms of the Coal Industry Bill, if only to remove a rather inflexible time scale from that provision?

The Prime Minister

I am very well aware of the substantial improvements in productivity in the coal industry, and I welcome them. With respect, such improvements have so far not been reflected in a lessening of the increase in price. Indeed, one of the problems with the price of electricity relates to the substantially increased price of coal which the electricity industry has to pay.

Mr. Hal Miller

Does my right hon. Friend accept that there is widespread and solid support for the priority which she has given to squeezing out inflation? In the West Midlands, that squeeze is being felt much more by the private sector, despite the fact that wage awards are lower and redundancies higher in the private sector than in the public sector.

The Prime Minister

I am very much aware that some of the private sector companies which have had low wage claims have strong feelings about high public sector wage awards. That is one of the reasons why we have such comparatively high public expenditure at present, in spite of our efforts to reduce it. It is one of the factors that we must take into account in future public sector wage claims.

Mr. Dalyell

In her bilateral talks with President Carter, did the right hon. Lady discuss the£6,500 million Trident project? What are the objections to a Green Paper on Trident incorporating the paper by Mr. Michael Quinlan to the Treasury defence material section?

The Prime Minister

I did not discuss that matter and, therefore, the rest of the question does not arise.

Mr. Nicholas Winterton

I warmly welcome the robust attitude taken by all the nations at the summit, as expressed in their subsequent communiqué. Will my right hon. Friend say whether the concessionary credit facilities referred to by my right hon. Friend the Member for Worthing (Mr. Higgins) were discussed at the meeting and, if not, why not, bearing in mind that if we are able to impose sanctions against Iran why can we not impose similar restrictions upon trade with the Soviet Union? Is my right hon. Friend prepared to use some of the massive resources from the North Sea to aid private industry more directly? Private industry is suffering severely at the moment as a result of the high level of interest rates.

The Prime Minister

With regard to credit rates for export credit cover, we observed that a consensus existed. We approved of that but did not take the matter any further.

With regard to sanctions against Russia because of her activities in Afghanistan, the reason for our not proceeding further with restrictions is that we do not believe that we could achieve a united response to the imposition of further sanctions. Without a united response, trade could be badly damaged in this country. Revenues from the North Sea go straight into the Treasury and the Exchequer. They have already been taken into account and, in spite of those revenues, we are having to borrow this year between£8 billion and£9 billion.

Mr. Douglas

Am I right in assuming that the right hon. Lady and her colleagues in Venice concluded that there will be zero growth in the international economy and that the squeezing out of inflation means that we must try to do a deal with the OPEC countries whereby those countries might abandon their plan to keep the oil in the ground and invest in fruitful activities in the West? How do we square that with negative growth in the international economy?

The Prime Minister

With regard to the first question, we recognise that the increases in the price of oil, of about 100 per cent., which have taken place in the last year must almost inevitably lead to a world recession, as the vast price increases in 1973–74 led to world recession in 1974–75. When one is paying so much more for one commodity, there is less to spend on other commodities. There is absolutely no way round that problem.

With regard to OPEC, we would not necessarily put the point that way. In the last year there has been an excess of supply over demand for oil but that has not followed the normal market process of reducing the price for the simple reason that people are now so afraid that they will not be able to get oil in future that they are prepared to pay almost any price for it in order to keep their lines of supply open.

We are in an extremely difficult position. Whereas the previous sharp increase in oil prices stopped after a time, and the real price of oil fell over a number of years, the producers now seem to have learnt how to achieve the requisite income by putting up the price and reducing the output of oil. We have not, I am afraid, come to any arrangement or agreement with the producers. We can only urge upon them the great damage that their policies are doing not only to the Western world but also to the developing countries.

I am very much aware that this is the key issue. That was why we spent so much time on it at the summit. But we cannot tell the OPEC countries what to do. We can only tell them that their policies are damaging the interests of the Western world and of the developing world. We have been trying to engage the OPEC countries in dialogue on this issue for some time, but they have refused.

Mr. Eldon Griffiths

Is my right hon. Friend confident that, on the energy front, President Carter will succeed in reducing American oil consumption instead of simply talking about it? On the broader economic front, is it realistic to formulate a world programme for energy, trade and the rest without including one-quarter of the world population, namely, the Chinese people?

The Prime Minister

President Carter is determined to do all that he can to reduce the consumption of oil in the United States. He will, of course, need to take Congress and the people with him. One of the problems is that, whereas in about 1970 the United States did not import oil because she was self-sufficient, she now imports 7 million barrels of oil a day. That places a tremendous strain upon world resources.

We must, of course, take China into account. China has considerable reserves of oil and is carrying out further exploration. Some of the oil companies in the West are involved in that business. However, I doubt whether China's supplies will ever come on to the world market. China will need most of her own oil.

Several Hon. Members


Mr. Speaker

Order. If hon. Members will ask short, sharp questions, I shall call them all. If not, I shall not be able to do that.

Mr. Allan Roberts

Is the Prime Minister aware that her statement today about the economy was invalidated prior to her delivering it by the announcement of the obscene unemployment figures? Is she aware that the anger and the disturbances that manifested themselves in the Chamber today will pale into insignificance compared with the anger and the disturbances that will manifest themselves in the country if unemployment continues to rise? Does she not think that the announcement of today's unemployment figures marks the death of her economic policy? Even the right hon. Member for Sidcup (Mr. Heath) came to the funeral today.

The Prime Minister

The answer to that question in short, sharp, succinct terms is "No, Sir."

Mr. Gummer

Will my right hon. Friend confirm that those parts of the communiqué which dealt with economic matters were agreed by Chancellor Schmidt, a man referred to by the Leader of the Opposition as a very experienced politician? In those circumstances, will my right hon. Friend make sure that the Leader of the Opposition and his friends learn a few economic facts from Chancellor Schmidt?

The Prime Minister

Yes, Sir. I confirm that they were agreed to and endorsed unanimously by all seven Heads of Government, including Chancellor Schmidt.

Mr. Arthur Davidson

Did the Prime Minister discuss with President Carter his Government's policy of subsidising domestic oil? Did she point out to him shortly and sharply the effects that that policy is having on imports into this country and how it is damaging the textile, chemical and other industries?

The Prime Minister

That subject was discussed, though not directly, in bilateral talks and it is a factor that one takes very much into account during the debates. I should point out that President Carter is doing all that he can to take world price increases into account in relation to United States oil pricing policy. I believe that the United States will come into line with world prices in 1981. However, President Carter can go no further, or faster, than public opinion will allow him.

Viscount Cranborne

Does my right hon. Friend agree that one of the most effective ways in which the developed world can help less developed countries is to make sure that tariffs are lowered? If my right hon. Friend agrees with that, how can she square the oft-repeated view of the Labour Party that tariffs should be raised with its equally oft-repeated view that we should help the Third world as much as we can?

The Prime Minister

I am grateful to my hon. Friend for raising that point. At the summit we observed that we all engage in two kinds of debate in our Parliaments. One of them concerns the need to increase aid to developing countries. We all want to give more aid and trade help. The other debate concerns trade and industry in our own countries, with everyone demanding increased protectionism. My hon. Friend is on to a very important point. Often those who are most vociferous in demanding increased aid for the developing countries are most vociferous in demanding reduced trade.

Mr. Welsh

May I ask the right hon. Lady about paragraph 12 of the communiqué, which says: Together we intend to double coal production … We in this country are part of that "we". Will the right hon. Lady consider withdrawing the Coal Industry Bill, having another look at it and giving the industry more money so that we can double our production by 1990, as the communiqué asks?

The Prime Minister

The precise point of that was "together", because we recognised that we already have and use larger proportions of coal in our fuel economy than any other country. The countries which, in the main, will increase and double their output of coal by 1990 are the United States and Canada. The point was increased production and use. Some of the other countries will have substantially to increase their use. I think that we are way ahead in the proportion of our electricity that comes from coal and in our general use of coal. In so far as there are markets—[Interruption.]

Mr. Speaker


The Prime Minister

Mr. Speaker, I cannot answer succinctly both those questions that are asked properly and those that are asked from a sedentary position.

There is great scope for increased output in this country to export, if the price is competitive.

Mr. Alexander

Will my right hon. Friend accept that the international recognition of the potential of coal for energy saving will be widely welcomed in the mining industry and in mining communities? Bearing in mind all that she had said in reply to previous questions, will she nevertheless ensure that the momentum of investment in the industry and in research and development within it is maintained, and, if possible, improved?

The Prime Minister

I think that it is more than maintained. This year we are investing about£600 million in the coal industry. That is a very large sum. [Interruption.] £600 million is going into investment in the coal industry. The total external finance limit is even more—£834 million.

Mr. John Home Robertson

In view of the disappointing lip service that appears to be paid to the report of the Brandt Commission, will the Prime Minister comment on the universal shame that is being expressed in this country, following last Thursday's BBC television programme, at the fact that her Government and other European Governments have failed to deliver essential relief aid that had been promised for refugees and others in drought-stricken Somalia?

The Prime Minister

We have a very good record when judged by the proportion of our gross domestic product that we give in aid to other countries—and, if I may respectfully say so, an extremely good record on both sides of the House for giving relief to refugees, wherever they are. I do not like to hear any reflection on any British Government on this aspect of our work.

Mr. Marlow

Since the Russians felt justified in giving arms and weapons to what they considered to be freedom fighters of North Vietnam, will my right hon. Friend say whether she discussed with her colleagues the possibility of giving arms—particularly ground-to-air missiles—to the freedom fighters of Afghanistan? I am not asking whether any decisions were taken, but was the matter discussed?

The Prime Minister

Only very much in the margins. That is a matter which, of course, we shall have to consider in the future. At present there is a good deal of desertion from the Afghan forces, and deserters usually take arms with them.

Mr. Allen McKay

When the Prime Minister talks about cheap coal and our competitors, does she not realise that it is cheap coal because it receives a higher subsidy than British coal? Will she now answer the question put by my right hon. Friend the Leader of the Opposition? Is she prepared to sit back and watch the closure of colleries for economic reasons rather than because of the exhaustion of reserves?

The Prime Minister

I think that the external finance limit to the coal industry—£834 million this year—is one of the biggest that we have for our nationalised industries—and heaven knows, the limits are big enough for some of the others as well. All of this has to be found from resources. We cannot indefinitely keep open pits that have exhausted their useful life. [Interruption.] No Government have done so. Shortly—I think in about 1983—we shall have the new big Selby coal seam coming in. It is for the National Coal Board to judge which pits are economic and which are not, and how best it can bring up those that are not economic to being competitive.

Mr. George Grant

On the question of coal production, the Prime Minister has talked with forked tongue. Is she aware that the world study group, WOCOL, which has been meeting for 18 months and comprises the 16 leading industrial nations, has stressed the need to increase coal production threefold by 1990? Without going into the merits or demerits of the case, I ask the Prime Minister to read the deliberations this morning of the Standing Committee on the Coal Industry Bill and seriously to consider increasing the financial limits that she has placed in that Bill so that increased coal production in the United Kingdom will be possible.

The Prime Minister

Of course I should have liked to increase coal production. That does not obviate the need for having that production taking place as efficiently as possible. The amount of capital investment that the British people have put into the coal industry over the years—I remember standing at the Opposition Dispatch Box during the time when we had Dick Marsh's fuel policy and we were writing off investments in the coal industry—is a measure of its faith in that industry. We also have to pay the price of the coal that is mined. That is one of the factors that have raised the price of electricity very sharply indeed.

Mr. James Callaghan

Is the right hon. Lady aware that, having listened very carefully to her answers, it seems to me that as a result of the summit what the people of the industrialised world and, indeed, the people of the developing world are being offered is higher unemployment and no relief from poverty or, indeed, hunger in certain cases? In view of the fact that she referred to the need for a summit in 12 months' time, perhaps I may put it to her that it is wrong to wait 12 months for another summit, and that this has been a tragically missed opportunity, because the summit was not properly prepared. It is merely a recipe for recession and for slump. Will the right hon. Lady consider, with her fellow Heads of Government and State, setting aside personal representatives over the next six months to work out policies that will deal with inflation in ways that will not increase unemployment, that will ensure that we get a proper approach to the OPEC countries in the way that has been done before, with success—

Mr. Bruce-Gardyne


Mr. Callaghan

The hon. Gentleman knows nothing about it.

May I put seriously to the right hon. Lady that 12 months is too long to wait for another summit? Will she consider six months' good, hard preparation from now, a meeting in the new year, and offering the world some new hope?

The Prime Minister

I am amazed that the right hon. Gentleman should be so critical of the other six Heads of Government as to say that he is right and they are all wrong.

Mr. Speaker

I have allowed questions on this statement to go on for much longer than usual. I do not want the House to think that it is a precedent. [Interruption.] No, it is not a precedent—not in my mind, and that is the important place.