HC Deb 31 March 1982 vol 21 cc305-18 3.30 pm
The Prime Minister, (Mrs. Margaret Thatcher)

With permission, Mr. Speaker, I will make a statement on the meeting of the European Council in Brussels on 29 and 30 March, which I attended with my noble Friend the Foreign and Commonwealth Secretary.

At the end of the meeting, the President of the Council issued a statement of his conclusions on the economic and social situation and the 30 May mandate. Agreed texts on political co-operation were also released. I have placed copies of these documents in the Library.

The Council devoted most of its meeting on this occasion to the economic and social situation, both within the Community and in the world at large. We agreed that, although the specific characteristic of the situation in each member State might call for varying policies, all the member States had the same interest in combating unemployment and restoring economic growth, while preserving monetary stability and ensuring the competitiveness of their economies. The council expressed its concern at the level of productive investment in Europe, especially in the industries of the future, and agreed that the Community and the member States would take whatever steps were open to them to improve that level, while recognising that an increase in investment would mean a reduction in consumption.

During our discussions, I laid particular stress on the need to complete the Common Market in the services sector. We have made disappointingly little headway with the liberalisation of services such as insurance and air transport.

We also discussed the role that the Community can play in the development of information technology and the vital contribution that small businesses can make to the provision of new jobs.

On youth unemployment, which was a matter of special concern, we agreed that each member State would strive to ensure over the next five years that all young persons entering the labour market for the first time would receive vocational training or intitial work experience.

In our discussion of external policies, the Council looked forward to the Versailles economic summit in June. We agreed that our aim at that summit should be to encourage increased co-operation between the major industrial countries. In particular, we agreed that the persistence of high real interest rates in the international markets, combined with inadequate economic activity, was leading to a significant reduction in productive investment and made unemployment worse because of the squeeze on company liquidity and profits.

The Council urged Japan to open its market so as to integrate it more fully into international trade. We also urged Japan to follow an economic, commercial, monetary and exchange rate policy which was more compatible with the balance of responsibilities to be borne by the whole of the industrialised world, thereby contributing to economic recovery.

On the mandate, we had a relatively brief discussion in the light of the recent suggestions put forward by M. Tindemans and M. Thorn. We and most other member States were prepared to accept these proposals as a basis for negotiation. I emphasised the need for a solution to the United Kingdom budget problem which gave us a fair scale of compensation, which was sufficiently flexible to take account of either an improvement or a deterioration in the underlying situation and which would last for a substantial period.

I underlined the conclusion we had all reached in London in November that decisions on all aspects of the mandate must be taken together, that is to say decisions on the budget, the common agricultural policy and the industrial and social affairs of the Community. At this point the President of France stated that he could not accept the Thorn—Tindemans proposals as a basis for discussion.

As the Presidential conclusions indicate, foreign affairs Ministers have been asked to do all in their power to secure early decisions. The Ministers will meet in Luxembourg on 3 April.

The Council also had a very full political agenda. We spoke about transatlantic relations and welcomed the very warm message sent by President Reagan on the 25th anniversary of the European Community.

We discussed the economic and commercial state of East-West relations, in the light of the significant role played by Community trade with the Soviet Union and Eastern Europe. We agreed that these matters, including the related credit problems, should be studied further by the European Community and member States in close consultation with other members of OECD.

We also discussed the situation in Poland, where martial law continues in force, many thousands of persons are detained, and a dialogue with the Church and with Solidarity is still suspended.

We agreed that it was essential not to lose sight of the tragic sufferings of Afghanistan. There can be no solution except on the basis which two-thirds of the United Nations have endorsed, and which the Soviet Union alone has so far frustrated.

On Central America, our main conclusion was the need to support any intiative that could bring an end to the violence, and we noted proposals by Mexico and Honduras, among others. We agreed that economic aid given to Central America and the Caribbean should be coordinated and, where possible, increased.

This was not the moment for a major statement of policy on the Middle East. We expressed grave concern about the situation in the area, especially on the West Bank. The Council welcomed, as a contribution to the achievement of a just and lasting peace in the Middle East, the participation of four member states in the Sinai multinational force. My noble Friend the Foreign and Commonwealth Secretary is paying an official visit to Israel today and tomorrow.

This was a very busy Council in its discussion, both of Community affairs and of international problems. While we were all disappointed and surprised at the attitude of the French Government on the mandate, the same realism will have to be applied to decisions on those problems as was applied in the wider discussions during this European Council.

Mr. Michael Foot (Ebbw Vale)

First, I shall refer to what the right hon. Lady said about the mandate and discussions on the budget which were, of course, briefly referred to in the communiqué.

The right hon. Lady referred to her capacity for stubbornness in these matters. We all recognise that she has that capacity. As long as she is stubborn in defence of the legitimate interests of the British people, she will have some support from the Opposition. [HON. MEMBERS: "Some?"] It will be considerable, and much more generous support than ever my right hon. Friend the Member for Deptford (Mr. Silkin) received when he was also defending the legitimate interests of the British people in discussions at the European council.

The right hon. Lady also has no difficulty about a mandate from the House on this question. The mandate was given to her on two or three occasions. She should demand a zero net contribution. That was the proposal—indeed, demand—in the resolution passed in the House on 16 July 1979. That still stands as the opinion of the House of Commons and is the view that we believe must be translated into action.

The right hon. Lady said that she was surprised at some of the attitudes she had heard in the Council over the past day or two. She cannot have taken account of the full debates in the House, when many hon. Members prophesised that we would have to face these difficulties. That is a reason why more and more people all over the country are looking to see whether it would be better to try to settle some of these important matters with our allies, not in the Common Market context, but in an altogether different context.

An important aspect of the discussion was the general economic situation. The right hon. Lady referred to the necessity for a much bigger investment programme, but she is reported as saying at her press conference that there was a recognition that job-creating investment could be achieved only through lower consumption—through either increased taxation or wage restraint. We know that that may be her view, but that is one of the views that is impeding economic expansion in Europe. Those views might apply to full employment, but we are far from full employment at present. There are not merely 3 million unemployed in Great Britain but nearly 11 million unemployed in the Community countries as a whole. What is required is a much bigger concerted expansion and investment programme than anything that the right hon. Lady has been prepared to contemplate. We can understand how she fails to advocate those policies in Europe when she is not advocating them in Britain.

Would the right hon. Lady be prepared to consider a more open, adventurous and ambitious policy on those matters in preparation for the Versailles economic summit? The world is suffering from appalling unemployment. Unemployment figures are rising on both sides of the Atlantic. It would be of great advantage to the world if the Versailles economic summit could be turned into a success, but it would be a disaster for the world if nothing more were offered at the end of the economic summit than what was offered at the end of the meeting that the right hon. Lady has attended over the past few days. Nothing concrete or expansive has been proposed. Nothing of that nature appears in the communiqué. It does not appear that any solution comparable to the needs of the situation has been proposed by the Government in the discussions. [HON. MEMBERS: "Too long".] The right hon. Lady is still answerable to the House on the economic questions. We want her to explain why she has not been prepared to advocate in Brussels any proposals that would deal with large-scale unemployment.

I do not propose to cover all the general political questions to which the right hon. Lady referred, important though they are, because we wish to debate many of the matters such as Poland and Afghanistan in the House. However, there is one immediate question that I wish to ask the right hon. Lady. I am glad that at the meeting there were discussions on El Salvador.

Mr. Neville Sandelson (Hayes and Harlington)

What about Afghanistan?

Mr. Foot

Yes, I have mentioned Afghanistan on many occasions.

With regard to El Salvador, I am glad to see that the right hon. Lady says in her communiqué that she has joined others in Europe in welcoming any new initiative. That is a considerable advance on what was said by the Government in our debate a few weeks ago. We urged the Government that they should accept and act upon the new initiative. [Interruption.] I am referring to what the right hon. Lady said in her communiqué. We urged that the Government should try to act on the basis of the new initiative for mediation from Mexico. The right hon. Lady and the Government refused to do that. Instead of doing that, they supported the gruesome fiasco of the election in El Salvador.

We are glad to see that the right hon. Lady has now been prepared to join some other countries in Europe in trying to seek a more intelligent way of escaping from the horrific war in El Salvador. We hope that the right hon. Lady will be able to build upon the proposals that she made, which have been belatedly agreed with some of her allies in Europe.

The Prime Minister

With regard to the mandate, I have made it clear that Britain is prepared to make a modest net contribution to the budget of the European Community. I think that that is reasonable and fair. During the time of the right hon. Gentleman's Government, there were occasions when a modest net contribution was made. This year we shall make a modest net contribution, but only last week some £813 million of refunds were returned to this country in respect of last year's budget. More will be coming. That is our money, which the previous Government would have left us to pay to Europe but for our negotiations. They talked a lot about it but did absolutely nothing to negotiate on the mandate.

If we do not succeed in getting an agreement on the whole mandate this year, the arrangement that we made at the last negotiations will persist through this year and would apply in respect of refunds that we should receive in the first quarter of next year. Nevertheless, we regard it as urgent to achieve a full and satisfactory solution, but it has to be on all three parts of the mandate at the same time—the budget, the common agricultural policy and the industrial and social affairs policies of the Community. I am afraid that the decision not to go ahead on the Thorn-Tindemans formula will hold up agreement on all three parts of the mandate, whereas we wished to come to a conclusion.

With regard to the investment programme, we were realistic about solutions to the unemployment problem. The right hon. Gentleman is looking for a magic wand in the absence of any practical policy put forward by his party. In a prolonged discussion, we said that all countries were affected by severe unemployment. In some countries unemployment is rising faster than in this country. There is no magic wand. If we are to have increased investment, there must be reduced consumption. The only alternative would be substantially increased interest rates. We all agreed how important it was to keep down interest rates. To pursue any policy that would increase interest rates would be the best way of aborting any early economic recovery.

With regard to Central America, we have welcomed before the initiative of the Nassau group, including Mexico and Honduras. Unlike the right hon. Gentleman, we also welcome elections in El Salvador.

Mr. Doug Hoyle (Warrington)


The Prime Minister

I do not understand why the right hon. Member for Ebbw Vale (Mr. Foot) is so reluctant to have the democratic process in that country and why he is so reluctant to urge the guerrillas to drop the bullet and take on the ballot instead, as we did in Rhodesia. We are glad that many other countries took the same view as we did about elections. The Pope was much in favour of them. A number of countries have sent observers to El Salvador to see the elections. What confounds the right hon. Gentleman is that, in spite of the difficulties, the turn-out in the El Salvador elections was greater than anyone ever thought it would be.

Mr. Foot

The right hon. Lady referred to a reluctance to have elections in El Salvador. Why does she connive at denying to the people of El Salvador what the British Parliament and Government insisted on for Zimbabwe, which was that the fighting had to stop before the elections took place? The elections in El Salvador are a mockery of anything that can be called democracy. For the right hon. Lady to lend the reputation of this country to those elections is to debase the name of democracy.

The right hon. Lady seems to be departing from some of our democratic traditions. With regard to the mandate, I know that some hon. Members do not care about the resolutions that are passed through the House. We do. The House of Commons has passed a resolution on two occasions supporting the zero contribution. The right hon. Lady has departed from that already in her replies today. She is talking of a modest net contribution. Why did she not put that proposal before the House of Commons? Let her put a motion on the Order Paper of the Council amending the very resolution to which she agreed and for which she invited general support in the House. I suggest that she should do that before she agrees to any modest net contribution.

What about a permanent solution of this problem? The right hon. Lady seems to have lost sight of that altogether. In spite of the stubbornness that she preached at her Press conference, it seems to me that she is yielding already. I ask the right hon. Lady to go back to Brussels and tell them of the resolution that was unanimously passed by the House.

The Prime Minister

Perhaps it has escaped the right hon. Gentleman's notice that El Salvador is a wholly independent country. Rhodesia was a British colony, which put us in charge of the elections which took place there. I may say that, alas, all the fighting did not stop before the elections took place there. I am glad that the right hon. Gentleman is very much in favour of past British imperialism.

Had we been left with the contribution formula to the Community from the Labour Government, we should have paid over£1 billion in net contributions in 1980, and over £1 billion again in 1981. Fortunately, we negotiated a very much better arrangement than the Labour Government had ever been able to negotiate. They have never liked that and they do not like it now.

Mr. Foot

Is the right hon. Lady aware that the agreement with the EEC, about which she was complaining a few minutes ago, was one to which she herself put her name when she was part of the Government that agreed it?

The Prime Minister

Has the right hon. Gentleman forgotten that his Government re-negotiated it, including some of the Budget provisions?

Mr. J. Enoch Powell (Down, South)

Is the right hon. Lady aware that the mass of people in Britain derive encouragement and hope from reports which say that the Prime Minister is willing to maintain our national interests, whatever toes she may have to tread on, and that she will protect our right to take our own economic decisions on matters which vitally affect Britain?

The Prime Minister

That is the position, and I am grateful to the right hon. Gentleman.

Mr. Peter Bottomley (Woolwich, West)

Will my right hon. Friend first say whether there were discussions about trying to encourage elections in Nicaragua? Can she say what implications there are throughout the economy of Europe and Britain in trying to reduce the level of real interest rates and to increase the economic demand that she was talking about?

The Prime Minister

We did not go into detail about any particular country in Central America. The discussion was about Central America as a whole and we did not discuss Nicaragua in detail.

With regard to reducing real interest rates, in order to do that, we have to get down both inflation and the budget deficit. Countries that have done that have a much lower real interest rate. Countries that have either a high inflation rate or a high deficit tend to have very much higher real interest rates—for example, Ireland, Italy, France and Belgium. There is no magic in the formula. Both inflation and the budget deficit must be kept down.

Mr. Roy Jenkins (Glasgow, Hillhead)


Mr. Dennis Skinner (Bolsover)

Mr. Common Market himself.

Mr. Speaker

Order. The hon. Member for Bolsover (Mr. Skinner) must not conduct a running commentary from a sedentary position. That will not be tolerated from anyone.

Mr. Jenkins

The right hon. Lady referred to the industries of the future. Was there a useful discussion at the European Council on the hard warning fact that, so far as the micro-electronic industry is concerned, Europe has 30 per cent. of the market and 15 per cent. of the production? If that continues—it will continue unless there is substantial Government and Community intervention—it is a severe warning sign that Europe as a whole will not be a major economic power by the end of the century. [Interruption.]

Secondly, will the Prime Minister bear in mind—

Mr. Sandelson


Mr. Speaker

Order. I got to my feet because the hon. Member for West Stirlingshire (Mr. Canavan) was shouting below the Gangway and I think that that is exceedingly unfair. This House stands for free speech and we will have it.

Mr. Dennis Canavan (West Stirlingshire)

On a point of order—

Mr. Speaker

No point of order arises on that.

Mr. Jenkins

Secondly, will the right hon. Lady bear in mind that she should give her full support for Britain paying a fair contribution and nothing more? A small contribution is inevitable, given the fact that the major part of our aid to the Third world goes through the Community. Therefore, to talk about a nil cost makes a mockery of the position of the right hon. Member for Ebbw Vale (Mr. Foot) vis-a-vis the Third world.


Mr. Canavan

This is a speech.

Mr. Jenkins

Thirdly, will the right hon. Lady tell us why, in the present circumstances, while nobody wants ill-directed investment, it is essential, particularly on a European basis, that increased well—directed investment should be accompanied by decreased consumption?

The Prime Minister

On the right hon. Gentleman's first point, we did not go into detail about microelectronic industries. He will recollect an occasion when we had a very effective paper before us which set out all the facts and figures which he has mentioned briefly today. We were very much aware that we should co-operate across countries in Europe—from firms in one country to firms in another—if we were to take best advantage of the large market that there is in information technology.

We are also aware that investment on its own is not necessarily good. There has been quite a lot of investment which has not been productive in any way. Therefore, our comments were all directed towards productive investment and to finding the markets of the future.

I am grateful to the right hon. Gentleman for what he said about making a modest net contribution. We must make a modest contribution. We must at least contribute to the administrative costs of the Community.

With regard to what the right hon. Gentleman said about aid to the Third world, he will remember that that is dealt with in a wholly different aspect of the budget. Our aid to the Third world which goes through the European Community is dealt with not on our Common Market budget but within our aid budget.

With regard to the right hon. Gentleman's third point, there was considerable agreement among Chancellor Schmidt, Mr. Spandolini, Mr. van Agt and myself that we had to have increased investment either by increasing taxation so that we could direct it towards that particular end or by asking for reduced wage increases so that we had money available to go towards investment which had not already been used up on wage increases, or it would have meant increasing the borrowing and increasing interest rates. As one of the objectives at the moment is to hold down the deficit—a number of countries are already in difficulty as a result of having pushed it up further—and because we are conscious of the effect of the interest rate both on agriculture and on small businesses, we are not prepared to do anything to push up interest rates.

Several Hon. Members


Mr. Speaker

Order. I propose to allow questions to run until 4.20 pm, which will give 50 minutes on the statement. I hope that we shall have short questions.

Mr. Teddy Taylor (Southend, East)

In view of the concern expressed by the Council of Ministers about Afghanistan, will the Prime Minister say whether any consideration was given to the massive exports of cheap subsidised food to Russia, which broke all records in 1980, and which, according to recent figures, have exceeded that total in the first six months of 1981?

The Prime Minister

We had a brief discussion about the whole commercial relationship between the Community, the Soviet Union and the Eastern bloc, concerning both what we are exporting and the credit policies that we have so far been pursuing. As my hon. Friend knows, those credit policies have led to enormous deficits on the part of the Eastern bloc. Some of them are having difficulty meeting those deficits, even in paying the interest upon them. We have to meet later to consider rescheduling the Polish debts again.

We have set in hand, through the EEC and the member States in consultation with the OECD, a whole study of our commercial relationship with the Eastern bloc, both as between individual countries and the Community as a whole. That will be dealt with in that study.

Mr. Bob Cryer (Keighley)

When the Ministers discussed the deficit with Japan, did they discuss the United Kingdom's deficit with the Common Market, which in 1980, in manufactured and in semi-manufactured goods, amounted to £2 billion, and has cost us many jobs? When we entered the Common Market there was a campaign run by the right hon. Lady's friends called "Jobs for the Boys". That was the claim made for the Common Market—

Mr. Skinner

And Hillhead got one.

Mr. Cryer

It is now clear that the Common Market has not benefited us one iota.

Mr. Skinner

It benefited one person—he got the job.

Mr. Cryer

Will the Prime Minister now accept that we cannot reform the Common Market, as the negotiations to improve our position have clearly shown? Before the Prime Minister says that she has done better that the Labour Government, will she remember that she supported every bit of the negotiation that the Labour Government undertook?

The Prime Minister

We are in balance with Europe taking manufactures and export of commodities into account. [HON. MEMBERS: "That is with oil."] Oil is a very important part of our trading capability and we are in balance. If something is a very important part of our trading capability, why not take the whole of it into account?

With regard to manufacturing industry, our trade with Europe has declined less rapidly than trade with the rest of the world. In other words, we have done rather better with Europe. I remind the hon. Member that our balance of payments last year was almost at an all-time record. He will not like that. He and his hon. Friends never like good news.

With regrd to jobs in Europe, perhaps the hon. Member has seen the CBI estimate that about 2½ million jobs depend on our membership of the Common Market.

Mr. Alan Clark (Plymouth, Sutton)

Was there much discussion concerning the French economy and the medium-term effect on unemployment of Socialist policies, which have brought about interest rates of over 20 per cent., a currency at an all-time low, and accelerating inflation?

The Prime Minister

For reasons which my hon. Friend will understand, we did not discuss in detail the French economy. Several of us had it very much in mind in some of the proposals that we were putting forward to reduce inflation and to keep down deficits.

Mr. Douglas Jay (Battersea, North)

Would there not be much less antagonism between the United Kingdom and France if we both followed our own internal policies and paid for them ourselves?

The Prime Minister

For the vast majority of our budget we do follow our own internal policies. For the rest, we are seeking some advantages from Europe which we have not yet obtained, particularly in services. If we had a full and free internal market in services, it would be greatly to our advantage.

Sir Brandon Rhys Williams (Kensington)

In view of the importance of the Thorn-Tindemans proposals to increase investment and improve the employment outlook, was my right hon. Friend able to discern any good reason why the Socialist Government from France were so obstructive?

The Prime Minister

No, Sir. We were both surprised and disappointed at the suddenness of the intervention.

Mr. Nigel Spearing (Newham, South)

Is the Prime Minister aware that in answering questions today the Lord Privy Seal said that he hoped that there would be a five-year agreement concerning the budget arrangement? Will she agree that continual bargaining every five years is wholly unsatisfactory, as it means that in the intervening period the United Kingdom is a client State?

Do not the arguments in favour of withdrawal continue to grow, while those in favour of membership diminish each year?

The Prime Minister

No. Certainly the United Kingdom is not a client State. We wanted a five-year agreement, with a review at the end of five years. I am the first to say—I have said in that forum on many occasions— that we want a solution so long as the problem persists. The problem persists because of the way in which the common agricultural policy works, which we are trying to change, and because of the relationship between world food prices and Community food prices, which varies from year to year. That is why this year we have had some unexpected results in the budget. We shall try to get a five-year agreement, with a review at the end of it. What I do not want is a constant argument about this matter. We are also simultaneously trying to secure appropriate changes in the common agricultural policy, which is part of the mandate.

Mr. Michael Latham (Melton)

Does my right hon. Friend know how the Opposition Front Bench have the gall even to talk about the Common Market deficits when their own record in Government on this matter was so absolutely abysmal? Is she aware that she will have the full support of Conservative Members in trying to sort this matter out, in view of the excellent progress made three years ago?

The Prime Minister

I am very grateful to my hon. Friend. May I make the matter absolutely clear? I cannot stress too often—we have stressed to our partners—that it is not only a question of getting a good result on the budget. We cannot go ahead with the proposals on the common agricultural policy or the others unless we get an agreement on the budget. The three must go ahead together. Unless we get reasonable results on the budget, a great deal of the Common Market forward proposals will be held up severely.

Mr. Donald Anderson (Swansea, East)

Why does not the Community, with its undoubted trade weight, go beyond merely urging Japan—the word "urging" was used twice in the communiqué—to open its domestic markets? Why is not the Community more even-handed in also criticising the United States of America for its interest rate and trade policies?

The Prime Minister

The Foreign Ministers agreed that the Community would take action with regard to Japan, and we are hoping to invoke article 23 of the GATT.

It ill behoves some of our partners to criticise the United States for having a high deficit. One cannot criticise someone else for having a high deficit if one is pursuing the same policy oneself. I am at liberty to criticise the United States for having a high deficit because we are running a low deficit.

Sir Anthony Meyer (Flint, West)

As the United Kingdom is a permanent member of the Community, should not its budget contribution problem receive a permanent solution?

Will my right hon. Friend also accept that there will be very general support for the firmness with which she defended the idea that the Common Market should extend also to services?

The Prime Minister

I am grateful to my hon. Friend. The Common Market should extend to services, and it is a condemnation of some of our partners that they have not so far been able to agree to the directive with regard to services, particularly insurance and air fares. We have asked for and said that it would be very much better to have the kind of formula which tied the solution to the existence of the problem. We would then not have to look at it again, except, perhaps as a matter of form, to review it after a considerable number of years. We must still continue to try it for that, but I doubt whether we shall be wholly successful. Therefore, if we could get a settlement for five years, it would be an advance on what we have had hitherto.

Mr. David Stoddart (Swindon)

The right hon. Lady described the summit conference as a busy conference. Would it not be correct to describe it as a bitchy conference, bearing in mind the remarks by Mme. Cresson about the right hon. Lady being a terrorist and the discussion between Mme. Cresson and the Minister of State, Ministry of Agriculture, Fisheries and Food? They were slogging at each other on the BBC "World at One" programme? Has it not yet been brought home to the Prime Minister that European unity will be best achieved outside the Market instead of inside the Market, with the perpetual quarrelling about finances, agriculture and so on?

The Prime Minister

Mme. Cresson was not at the conference. There were only two women present at the conference. One was myself and the other was Mme. Flesch. She did not speak, and anything that I said was fully justified, as it usually is.

Mr. Richard Body (Holland with Boston)

In discussing the problems of unemployment in Western Europe, was any conclusion reached by my right hon. Friend's colleagues and herself as to why the unemployment rate in Norway, Sweden, Austria and Switzerland is only 1 or 2 per cent., while it is more than 10 times as much as that in the Common Market, although 12 years ago we were all enjoying full employment? Can it be that the common agricultural policy is having some cumulative effect in misallocating resources?

The Prime Minister

Switzerland has run very low inflation policies and very orthodox financial policies. On that basis, and with very co-operative industrial relations, Switzerland and Austria have both done extremely well. Norway, like a number of Middle Eastern countries, has massive deposits of oil and gas and a very small population, yet even Norway is finding considerable difficulty in some of its industries.

Dr. M. S. Miller (East Kilbride)

In EEC matters, as in other matters, the right hon. Lady has exhibited, if I may use the words of the Home Secretary, an extraordinary degree of patience. Will she tell the House how long it will be before she realises what are the legitimate and reasonable interests of Britain in this respect and recommends that unless they are satisfied she will withdraw from the whole charade?

The Prime Minister

I am extraordinarily patient—provided I get my own way in the end. I have not done too badly so far. On the budget, we are now receiving refunds in respect of last year. In the absence of a fresh agreement, the same formula will continue, so we shall receive refunds at the beginning of next year in respect of this year. We were hoping to overtake that agreement with a much longer one—preferably one that lasts as long as the problem lasts, which would be the only sensible way to do it. If patience gets the right answer, it is the right quality.

Mr. Albert McQuarrie (Aberdeenshire, East)

Following the Prime Minister's statement that the CAP was discussed, can she say whether there were any discussions during the conference on the finalisation of the common fisheries policy, in view of the serious problems faced by fishermen at present?

The Prime Minister

There were not discussions during the full conference, but on the margins of it I made strong references to the need to achieve a common fisheries policy and not only that, but one that was fully fair to our fishermen.

Mr. Dick Douglas (Dunfermline)

Will the Prime Minister reflect on the serious omission from her statement of a reference to the position of the OPEC countries? The fact that the Council of Ministers has met and, apparently, not discussed the issue is a sign of its insularity from international events. Will the Prime Minister concede that the Community should try—I know that it would be difficult—to have meetings with OPEC countries to see how their production can meet the demands of the Western industrialised countries so that we can avoid the cyclical events that we experienced in 1973 and 1979?

The Prime Minister

The hon. Gentleman is reviving the old idea of the Euro-Arab dialogue. It has never got off the ground because the OPEC countries have not wanted it. It takes two to have a dialogue. With regard to what we discussed, the subject of oil prices came up a great deal in the context of future economic and social affairs. We were all conscious that we have had two world recessions because of a sharp increase in oil prices. While a reduction in oil prices may mean that some of the OPEC countries have less to spend on imports, which will affect high exporting countries, we all agreed that on balance, the reduction in oil prices augured well for the world economy and gave the prospect of increasing expansion which would not otherwise have been there.

Mr. John MacKay (Argyll)

Returning to the subject of interest rates, was there a discussion on the likely impact, perhaps later this year, on the diminishing interest rates in Europe of a further rise in American interest rates? Did the summit come to an agreement on how we could manage to isolate Britain and Europe from the adverse effects of an upward movement in interest rates on the other side of the Atlantic?

The Prime Minister

We had a number of discussions, which included American interest rates. At the moment some European interest rates are actually higher than American interest rates. One cannot attack someone else's policies if one is also pursuing them with the same disastrous results. We cannot insulate ourselves wholly from American interest rates. We can try to do our best to keep our own interest rates down by pursuing policies which reduce inflation. Countries which pursue low budgetary deficit policies have a lower interest rate than those which do not.

Mr. Ron Brown (Edinburgh, Leith)

Despite today's royal presence, will the Prime Minister agree that the Afghanistan problem must be resolved? It has been raised already. Will the right hon. Lady not accept that Babrak Karmal's offer is worthy of consideration? As the right hon. Lady will know, he has offered to send Soviet troops out of the country provided that he is given certain guarantees. Will this question of negotiations not figure in the thinking of the EEC? Is the matter not important enough to invite the gentleman to London even if such a visit only exposes his offer as unworthy? Is the matter not important enough—

Mr. Speaker

Order. The hon. Member for Edinburgh, Leith (Mr. Brown) has asked that question three times now.

The Prime Minister

We are not likely to deal with a puppet Government which is held in power by an occupying force. The way to deal with Afghanistan is the way that the United Nations suggested—for the Soviet troops to withdraw. That is being frustrated only by the Soviet Union.

Mr. Ron Brown

You recognised Pinochet.

Mr. John G. Blackburn (Dudley, West)

Will my right hon. Friend accept the congratulations of the House on her statement regarding the Middle East, because it is the desire of the House to have peace in that area? Will she acknowledge that the State of Israel has honoured the Camp David agreement? It has sacrificed 50 per cent. of oil production, its natural gas and Yamit, a town in that area, as a token of peace. Will my right hon. Friend tell the House how she sees the position in Israel, particularly as the Foreign Secretary is there today?

The Prime Minister

We are all anxious to have a lasting peace in the Middle East which does justice to Israel's right to live in peace behind secure borders and does justice to the legitimate claims of the Palestinian people. We are concerned about the grave incidents that are taking place on the West Bank. I agree with my hon. Friend that when the withdrawal from Sinai is secured under the Camp David agreements, that will be a considerable step by Israel to yield some of those territories. I am aware that Israel has already given up some of the oil and gas wells. It is not possible to say precisely what will be the next step when the withdrawal has taken place. Doubtless my right hon. Friend the Foreign Secretary will be discussing that in Israel today. I am sure that his visit will be welcomed by the Israeli people and that he will come back with some constructive ideas.

Mr. Skinner

Will the Prime Minister tell the House what type of mechanism will be used by the Common Market countries to bring down interest rates, as the Community is based on the free movement of capital and labour? Is the right hon. Lady telling the House that, contrary to her views about lack of Government intervention in Britain and leaving matters to market forces, she acknowledges in respect of the Common Market that because of the high interest rates in America and prime rates elsewhere it will be necessary to intervene massively in order to bring down interest rates and to give the industrial economy a chance to breathe and reduce the ability of the casino economy that has proliferated across the Western hemisphere—

Mr. Speaker


Mr. Skinner

I am nearly done.

Mr. Speaker

Order. Another hon. Member wishes to catch my eye.

Mr. Skinner


Mr. Speaker

Order. The hon. Member for Bolsover (Mr. Skinner) is merely preventing one of his hon. Friends from being called, because these questions will stop at 4.20 pm. The hon. Member has made a long statement rather than asked a question. Does the Prime Minister wish to reply?

Mr. Skinner

I know that I do not have a posh voice.

The Prime Minister

I shall answer in so far as I have grasped the meaning of the hon. Gentleman's question. First, there are large sums of money available to move around the world and there is no way in which any country can avoid the effects of the market without having a totally East European economy. Even East European countries have not been able to avoid the market and have come to the market economy countries for food and for help. Those closed economies cannot even feed their own people. Clearly they have full employment, but they cannot feed their own people and they have a low standard of living. The hon. Member for Bolsover (Mr. Skinner) is an East European economist and politician.

Mr. Skinner

No I am not.

The Prime Minister

The way to get interest rates down is to run our economies in a way which reduces inflation and keeps down the amount of money which Government have to borrow. That will bring down interest rates.

Mr. Skinner

On a point of order, Mr. Speaker. I should like to inform the Prime Minister that, unlike—

Mr. Speaker

Order. Hon Members cannot use a point of order for passing information.

Mr. Skinner

Unlike her lot, I do not go to East European embassies.

Mr. Arthur Lewis (Newham, North-West)

A week or 10 days before the Prime Minister left for the conference there were reports in the press that a committee of the European Assembly had been discussing alleged misappropriation of funds and improper payments to various people. Were those matters discussed at the conference? If not, will the Prime Minister ascertain the facts and inform the House, because the charges were widely reported in the press and a number of members of the European Assembly have made allegations? As British taxpayers' money is involved, we ought to know whether there has been any misappropriation of funds under the previous or the current President of the Commission.

The Prime Minister

That matter was not discussed by the Heads of Government. It would be a matter for both the Commission and the Financial Council. I shall inquire further and get in touch with the hon. Gentleman.

Mr. Skinner

On a point of order, Mr. Speaker. As the Prime Minister referred to me as an East European economist, let me disavow all claims—

Mr. Speaker

Order. I think that the hon. Gentleman has made his point. He has disavowed the charges. Hon. Members must not use points of order to continue a debate. If they do, we shall have disorderly proceedings.