European Community

HC Deb 26 May 1982 vol 24 cc936-1013

Mr. Speaker

I have selected the amendment in the name of the right hon. Member for Ebbw Vale (Mr. Foot).

4.23 pm

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Francis Pym)

I beg to move, That this House welcomes the decision of the United Kingdom's Community partners to extend indefinitely economic measures against Argentina; regrets the way in which the Community's customary procedures were set aside at the Agriculture Council on 18th May; and supports the Government in its efforts to establish clear procedures for the conduct of Community business and to secure continuing equitable arrangements for the United Kingdom's budget contribution. This is the first occasion on which, as Foreign Secretary, I have had the opportunity to address the House on the European Community. I am glad to be able to do so now because I have always been convinced that the decision we took to enter the Community was the right one and in Britain's best interests, and that the best course for the British Government to pursue is to make a success of it. Membership of the Community is one of the central features of our foreign policy, and, in my view, that will remain so.

Some opponents of British membership seem to hold as a matter of faith to the proposition that it is an unmitigated disaster, but it is not necessary—nor reasonable—to go to the other extreme to justify our policy. It is a question of balance, not of absolutes. The balance is one that I calculate to be very much in favour of our playing a full and active part in the Community.

The motion before the House illustrates the point that we are not dealing with unmixed blessings or unmitigated disasters. The support we have received from our Community partners in the Falklands crisis is extremely welcome, and I hope that the House will take this opportunity to make that unmistakably clear. At the same time, the violation of the Community's customary procedures at the Agriculture Council on 18 May was very unwelcome, and we all want to make our views clear on that point.

The last part of the motion makes it quite clear that much work remains to be done if we are to secure our objectives both on procedures for the conduct of Community business and on our budget contribution. The favourable balance to which I referred at the outset is something we have to work hard for, and that will always be so.

I want to speak first about the support we have received from our Community partners over the Falklands crisis. Their action immediately after the Argentine invasion was exemplary. They gave us the fullest support on the political level, and, with unprecedented speed and unanimity, they enforced an arms embargo and other economic measures against Argentina.

Nothing can detract from the importance of those decisions at the very moment that we were attacked by a foreign aggressor. Our partners are continuing to support us in pressing for the implementation of Security Council resolution 502 Eight of these countries have just renewed economic measures for an indefinite period. The two which, for domestic political reasons, have found themselves unable to do so have undertaken to ensure that this does not undermine the general effort. The practical effect of the import embargo will now be increasingly significant for Argentina.

I believe that the action of our Community partners and our Commonwealth partners, and of Norway and the United States, is without precedent in an international dispute of the sort in which we are now engaged and something that we welcome and appreciate greatly. I think that there was good reason why this support was forthcoming. Certainly the issue itself is one on which we should expect all democratic Governments to take the same view as we do. But within the Community there was also the solidarity that comes from a sense of common interest and common purpose, and from the growing practice of working more closely together in international relations.

Compared with the problems on the economic side of Community activity, this political co-operation receives less publicity. It might get more if it did not work so well. Its value cannot be measured in tonnes or calculated in millions of units of account. But it is a valuable and important aspect of membership, and I have been impressed with it during recent weeks.

The growth of European political co-operation was of particular interest to my predecessor, who can take much credit for what has been achieved. I want to do what I can to see that this co-operation continues to develop because it is a source of strength to this country as it is a source of strength to our partners.

The solidarity shown over the Falklands is an example of the Community working at its best. I want to deal now with an example of the Community at its worst. There is no doubt that the vote at the Argiculture Council on 18 May constitutes a major departure from the way in which Community business has customarily been conducted. It is a departure which will have the most serious implications for the future if we are not able to establish clear procedures which everyone follows as an essential basis for confidence between member States.

When my right hon. Friend the Minister of Agriculture, Fisheries and Food reported to the House last week, he expressed the Government's deep concern and dismay at the events which took place at the meeting on 18 May. For the first time since the Community resolved the most serious crisis of its early years by reaching the Luxembourg compromise 16 years ago, decisions were taken by majority vote despite the fact that a member State had made it clear that very important national interests were at stake. The point is of fundamental importance, as this House will appreciate perhaps more than any other Parliament or Assembly.

It is worth recalling the history. The Treaty lays down how Community decisions are to be taken. In many specific areas unanimity is the rule. It is the rule also if the Community is to take decisions in new areas, not provided for explicitly in the original Treaty. But the Treaty also provides that in certain other clearly defined areas of Community business decisions shall be taken by a system of qualified majority voting, with each member State having a prescribed number of votes.

In 1965 the French Government argued that qualified majority voting should not be applied if a member State considered that its very important national interests were involved; they proposed an amendment to the Treaty to this effect; and they backed up their demand by boycotting the Community institutions for a period of seven months. The other five member States refused to accept an amendment to the Treaty, and the text of the compromise which was reached in January 1966 records an agreement to disagree.

The Luxembourg compromise is thus not a legally binding agreement. But the French view was tacitly accepted and it has been the consistent practice of the Community, without any exception until 18 May, than if a member State makes clear that its important national interests are involved, discussion is continued and no vote is taken. In other words, it became a procedural convention. It is this convention that has now for the first time been set aside, and without the agreement of all the parties involved.

Mr. Russell Johnston (Inverness)

It may be that the right hon. Gentleman is about to approach this, but he knows that it has been argued that in seeking to implement the Luxembourg compromise we were not defending something we objected to because we accepted the farm price package but that we were seeking to link it to the budget and that that was an improper interpretation of t he compromise. Could he comment on that?

Mr. Pym

Yes. The farm price agreement to which the Council of Agriculture. Ministers appeared to be about to agree had a major effect upon the cost of the CAP to the United Kingdom. Clearly, that is relevant to our budget contribution since we are talking about how much money the British are to pay. So there was indeed a connection between the two, but I shall return to this subject in a moment.

All British Governments have made clear the importance they attach to the Luxembourg compromise. Its terms were explained in the White Paper dealing with our accession to the Community and the procedure was regarded as an inherent and essential safeguard. Suddenly, now it has been disregarded on grounds that we do not accept as justifiable, and I have made this very clear officially and in no uncertain way.

The Government's objective now is to ensure that nothing like this happens again. I informed our partners at the outset of the Council meeting on Monday that we took the gravest view of what had happened. It was quite unjustified. There cannot be confusion about the way decisions are to be taken. The Community's practice must apply equally to all members, and there must be a means of safeguarding the important national interests of any member State. We had a preliminary debate about this later on Monday morning. We are returning to the subject at the next meeting of the Council in June, when I hope that an absolutely clear understanding will be reached for the future.

Before the vote in the Agriculture Council was taken, my right hon. Friend left no doubt whatever in anyone's mind that important British national interests were at stake in what was being decided.

I want to recall what was involved on the Community budget, and on the agricultural points that still have so great an influence on that budget that the two areas are effectively inseparable.

Mr. Peter Shore (Stepney and Poplar)

Before the right hon. Gentleman leaves this point, which is very much at the heart of the debate and of his concern, will he tell us what preliminary points were made by Her Majesty's Government at the Council of Ministers in the debate as to the means of safeguarding in the future and making certain that these events never occur again? Will he also tell us what the response was?

Mr. Pym

In the context of the Genscher-Colombo plan we had a preliminary debate on the subject when I set out the arguments which I have rehearsed to the House. Other members of the Community made their position plain. There was a general desire that the Luxembourg compromise should continue. It was agreed that we should reflect further upon it and should return to it at the next Council meeting with a view to reaching a conclusion that would, it was hoped, prevent the recurrence of anything such as happened on 18 May. That is the best way I can put it at the moment.

Mr. Roy Hughes (Newport)

Does the Foreign Secretary agree that, as a result of the putting aside of the Luxembourg compromise, the whole basis under which the British peope gave their consent in the referendum of 1975 to continued membership has been undermined?

Mr. Pym

It was set aside on that day. That is the cause of the problem. We have to make arrangements with the Community partners to ensure that that does not happen again. We are by no means the only people who want that arrangement established firmly. There are a few members of the Community who feel less strongly about it, but most of them want an arrangement whereby vital national interests can be safeguarded.

Mr. Eric S. Heffer (Liverpool, Walton)

May I ask the right hon. Gentleman to say more about the conversations that he had on the basis of the discussion on the Genscher-Colombo plan? Is that not a plan for a European act that would lead to majority voting? Can he say a little more about that? That seems to be a highly dangerous sort of discussion to be having.

Mr. Pym

The first thing I did at the outset of the meeting was to set on record our dismay and concern at and objection to what occurred on 18 May. Then, on the passage of the Genscher-Colombo plan, which deals with decision-making and the method of taking decisions, we had a preliminary discussion. It was regarded by everybody as a preliminary discussion when first reactions to what had happened on 18 May could be expressed. Certain ideas were put forward, and it was agreed that we would return to the matter at the next Council meeting. That is a sensible way to deal with a fundamental issue, as I made unmistakably clear.

What successive Governments have been trying to do, ever since the time when we were negotiating for accession to the Community, is to arrive at a situation where the budgetary demands made on Britain are equitable and seen by the British people to be equitable.

Britain's prosperity is less than average for the Community. We are in the lower half of that league table. At present, before account is taken of our refunds, Britain is a net contributor on a large scale to the Community budget, from which all but one of the other members derive a net benefit. Anyone who considers the matter knows very well that this must be unacceptable to the British people and damaging to the Community.

There were assurances at the time of our accession that things would turn out differently; that the structure of the Community's budget would change; that agricultural expenditure would take up a lesser proportion of it; that the pattern of our external trade would alter; and that the problem would thereby be greatly reduced.

The reserve with which these assurances were received has turned out to be justified. The pattern of trade has changed, but not all those things were carried out. The Community still spends a substantial proportion of its budget on agriculture. The relative smallness of our agricultural sector means that the burden we carry as a result of the Community budget is considerable. So we insisted on an undertaking in the accession negotiations that if an unacceptable situation arose the very survival of the Community would require the institutions to find a solution. This assurance remains of the utmost importance. By the agreement on the budget which the Government negotiated on 30 May 1980, our partners recognised in a positive way that such a situation had indeed arisen.

This agreement produced very large reductions in Britain's net contribution to the Community budget in 1980 and 1981. It required the Commission to produce a report, and provided for decisions to be taken by the end of 1981 on a longer-term solution to the problem. In recognition of the complexity of the issues involved, it also provided that if this target was not met there should be a third year of refunds along the lines of those agreed for 1980 and 1981.

The Commission's report noted that our problem arose largely from the excessive concentration of the Community's expenditure on agriculture, from which we got relatively little benefit. It therefore recognised that the problem could not be solved merely by a greater or faster adaptation by this country to the Community, as has sometimes been suggested. The Commission proposes a series of measures designed to shift the balance of the Community's spending away from agriculture and towards other policies. But it realised that it would take some time to achieve this result and that meanwhile there must be an arrangement for dealing with our budgetary problem until this structural change could take effect.

Mr. Tony Marlow (Northampton, North)

I am full of awe for the massive load on my right hon. Friend and full of admiration for the work that he is doing on behalf of the United Kingdom. However, will he ask the Commission, our Community partners, or anyone, to explain to the British people why Britain must put about £400 million into the Community budget this year while the French put in nothing, the Danes and the Dutch benefit and each and every Irish citizen takes away £100 Community gold and silver in his pocket? Will my right hon. Friend ask our partners to say whether we derive any benefit from the Community as a result of paying that extra money that is not available to each and every country in the Community? If we do not, will my right hon. Friend promise the House now that when he returns to the budget debate he will ensure that we do not have to pay sums into the Community that others do not have to pay? I am sure that the British people do not accept the situation.

Mr. Pym

I have made that point in summary form. Indeed, I assure my hon. Friend that I have made that point on a number of occasions and in a number of ways to our Community partners. The Government have accepted the position that notwithstanding that we might—on any logical analysis of our position in the Community—expect to be a beneficiary, we are prepared to be a modest contributor. That concession was made a long time ago. Sometimes, our partners do not take it adequately into account. However, my hon. Friend's point is well taken.

s Working from the starting point that an arrangement must be made, we made a determined effort during our Presidency to bring matters to a conclusion. In November 1981, the Heads of State and Government got close to endorsing a set of guidelines covering all three sectors—agricultural reform, the development of the Community's non-agricultural policies and the budgetary adjustment. Everybody then accepted that progress on all three must be made in parallel. That is further comment on the point raised by the hon. Member for Inverness (Mr. Johnston).

Unfortunately, progress thereafter became painfully slow. From January onwards, it was more or less nonexistent, and it became increasingly difficult to focus the attention of our partners on the long-term objectives of the mandate negotiations. Valuable time was wasted in December and January debating the absurd proposition that refunds paid to us should decrease in succeeding years, whether or not the scale of our net contribution grew less. Clearly, we could not possibly accept that proposition.

In March, the Presidents of the Commission and of the Council abandoned the guidelines approach and tried to break the deadlock with a new and simpler proposal. My predecessor agreed to discuss it constructively. But at the end of March the President of France announced that he was not prepared even to accept it as a basis for discussion.

Last month, this approach was abandoned. We were presented with a new proposal, which provided simply for a lump sum refund for a period of three years, with no provision for any increase in the refunds if our net contributions turned out to be higher than the Commission's conservative predictions. At an informal meeting of Foreign Ministers early in May, I was strongly pressed to accept this offer, on a take it or leave it basis. I made it clear that I could not possibly do so, but was still ready to negotiate seriously towards a reasonable and fair settlement. The readiness that I showed was not matched by our partners.

Simultaneously, separate discussions were taking place on the annual agricultural price fixing for 1982. The proposals that the Commission put forward in January took only very partial account of the progress made in discussion of the common agricultural policy of the European Council in November. They included proposals to help small milk producers, to which the French had attached great importance, but were less than satisfactory on the need to control prices and costs.

By 10 and 11 May, our nine partners had reached agreement on a package that we came under strong pressure to accept. My right hon. Friend the Minister of Agriculture, Fisheries and Food made it clear that we had a number of reservations on that package—both on specific agricultural points and on its overall cost. It was clear to us that the package would not contribute to the objective, that had been agreed by our partners, of shifting the balance of Community spending away from agriculture. It would also, in the absence of a budgetary agreement, have added £120 million to our net contribution over the next year. How could we accept that, with no end to the budget negotiations in sight? In response to an attempt by the chair to take decisions on a majority vote, my right hon. Friend made it clear that very important national interests were involved. On that occasion, no decisions were taken.

Mr. Tindemans and Mr. Thorn then suggested that we should try to break the deadlock on the budget by dealing with the refunds for 1982 alone, leaving negotiation of a longer-term solution until later in the year—in other words, that the Community should now take refuge in the provision of the 1980 agreement for a third year of refunds. As the House knows, this was not what we or the Community wanted, but it was obvious that a great deal of work remained to be done before we could achieve a longer-term agreement. I therefore agreed, with much reluctance, to see whether an acceptable formula consistent with the 30 May agreement could be found. The Commission put forward a proposal but unfortunately it did not, in my view, meet that criterion.

In making that clear to the Council on 17 May, I said that I was ready to consider other documents or proposals if a better Commission text was forthcoming. And I tabled our own propositions on how the relevant provisions of the 30 May agreement should be applied in 1982. That was the background against which, on the very next day, the Agriculture Council adopted the agriculture regulations by a majority vote, overriding the Luxembourg compromise. The Government abviously immediately reviewed the situation. We all realised that the prevailing atmosphere was anything but favourable to an early agreement on the budget.

There was a real danger that we and our partners would become ever more deeply ensconced in irreconcilable positions and would talk ourselves into a crisis that should be avoided if possible. Such a crisis at this time might have done considerable damage to the cohesion of the Community and to Britain's own long-term interests within it.

Monday's meeting of Foreign Ministers offered a chance, which might not recur, of giving ourselves time to reach agreement on the long-term budget, by securing an agreement on our refunds for 1982 only. After a lengthy discussion, we reached that agreement in the early hours of 25 May. What we agreed is as follows. The figures were fixed in the Community's own units of account, but I have, for the sake of clarity, translated them into sterling. The Commission's estimate for the United Kingdom's unadjusted net contribution in 1982 is £880 million. On the principles of calculation used in the 30 May agreement for 1980 and 1981, a refund of £580 million would have resulted. We have accepted a basic refund of £490 million, which, on the basis of the Commission's estimate, will make the United Kingdom net contribution, after refunds, one of £390 million.

The Government decided to agree to that on the ground that it would be fair to take into account, in this way, the favourable outcome hitherto. But I must warn the House that some, at least, of our partners continue to claim that we were over-compensated in 1980 and 1981. I have made it quite clear that we disagree with that analysis, but we have accepted that our partners' views on the point will have to be taken into account when we come to negotiate the longer-term solution.

Mr. Roy Hughes

I thank the Foreign Secretary for giving way a second time. With regard to the rebates that the Common Market is now apparently offering on our overall contribution, is there any stipulation as to how we spend the money that we receive?

Mr. Pym

It simply means that we contribute less to the Community.

If the basic estimate of £880 million is exceeded, the excess will be shared as follows. Any increase in the range £880 million to £908 million will be borne by the United Kingdom. The next £86 million from £908 million to £994 million will be split 50:50. The other member States will finance 75 per cent. of any increase over £994 million and the United Kingdom will pay the rest. We are, therefore, protected against a sharp rise in our contribution. If the Community estimate proves too high, which I frankly think unlikely, there will be a similar risk-sharing formula applying downwards.

The basic refund of £490 million will be paid out of the 1983 budget. This follows the precedent of the 30 May agreement. Any further adjustments resulting from the risk-sharing formula for 1982 will be made as a charge to the 1984 Community budget. The Community has undertaken to reach decisions on the solution of the budget problem for 1983 and later years before the end of November 1982.

I make no secret of the fact that the new settlement is less good than the Government would have wished. That applies to duration—we had hoped to achieve a longer-term solution. That is not yet possible. The same is true of the amount. However, we believe that it is an acceptable settlement for 1982, bearing in mind that we have fared better than we expected in the earlier years. It was important, both for the United Kingdom and for the rest of the Community, that a settlement should be reached at this stage. It will, of course require a great effort to secure a satisfactory solution for 1983 and later years, but I can assure the House that the Government will pursue those negotiations very rigorously. What we have achieved from 1980 to 1982 gives us a sound foundation for that work.

Mr. Marlow

rose—

Mr. Pym

I am coming to the end of my speech.

I summarise the position thus. We have two important problems to resolve. They are problems not just for Britain but for the Community as a whole.

First, we, and not only we but every member country, need the assurance that our important interests will be adequately safeguarded in the work of the Community.

Secondly, a way must be found to assure us that we can look forward to our fair share of the benefits of Community membership as well as the burdens. This must be on a continuing basis, without having to engage in endlessly renewed disputes within the Community which, I am certain, are not good for its life and progress.

Getting those things right is difficult. It will take time and a great deal of determination. I have confidence that we shall in the end succeed, in the spirit of co-operation which the Community showed and achieved this week in its decision to give us such strong and firm support on the Falklands issue.

4.54 pm

Mr. Eric S. Heffer (Liverpool, Walton)

I beg to move, to leave out from "Argentina" to the end of the Question and to add instead thereof: 'deplores the failure of the Government to secure a long-term and just settlement of the United Kingdom's budget contribution; condemns the flagrant violation by the Council of Ministers of the Luxembourg Agreement; and calls upon Her Majesty's Government to halt forthwith all payments to the Community Budget and to make a fundamental reappraisal of the United Kingdom's relationship with the European Economic Community.' The House recognises the tremendous burden that is now on the Foreign Secretary. Moreover, it understands that that burden is made much more difficult because of the Common Market developments. We would have hoped that all the efforts of the right hon. Gentleman could have been devoted to reaching a peaceful settlement to the problem of the Falkland Islands. That is not so. That is how history goes. We understand, therefore, the problem that faces him and the Government.

Nevertheless, I must be frank. Although the right hon. Gentleman put the best possible gloss that he could on the circumstances that have developed in the Common Market, he has not given us any real answers to the problem. We are a long way from the promises that the Prime Minister made on various occasions. She promised that we would reach a permanent settlement to the problem of the budget as quickly as possible. We are nowhere near a permanent settlement. The Government have failed to secure a long-term and just settlement of the United Kingdom's budget contributions. The issue has not been settled. The whole sad business and the effort of constant negotiations will have to take place again. In spite of the right hon. Gentleman's assurance that it is hoped to have an agreement by November 1982, we cannot be confident that it will be reached.

We must examine the circumstances that have developed on the basis of what is happening with regard to the Falkland Islands. It is regrettable that I must draw attention to what The Guardian said today: Even the supposed magnanimity of seven of our EEC partners in renewing trade sanctions against Argentina turns out on closer inspection to involve little sacrifice, since the import ban affects only new contracts … The final impression is of a Community which, far from rallying to the support of a member state in need, has taken psychological advantage of our preoccupation with more pressing events. Even a slight improvement in yesterday's budget offer might have redressed this impression, but it did not come. We should recognise that, despite assurances that our Community partners are giving every possible aid in the form of economic sanctions, as far as our budgetary efforts are concerned pressure is being applied in the light of our involvement with the Falkland Islands. We should take note of that. The appropriate enthusiasm and determination to give Britain the aid and the agreement that we require with regard to the budget were not forthcoming.

The best that the Government can say is that they "regret" the way in which the so-called veto was set aside on 18 May and that they will do their best, in the words of the motion, to establish clear procedures for … equitable arrangements". The Falklands problem makes things difficult, of course, but it is not good enough for the Government merely to say that they regret what has happened and will do their best in future. We have not heard any positive proposals as to what the Government intend to do. All we heard from the right hon. Gentleman was that there had been a discussion based upon the Genscher-Colombo plan.

Mr. Pym

There will certainly be proposals not only from me but from other member countries when the matter is discussed at the next Council in June.

Mr. Heffer

It would have been better if we had had some idea of what the proposals were likely to be and whether there was real determination by the Government to take a stand on this.

Mr. Pym

I made that clear.

Mr. Heffer

The right hon. Gentleman made it clear in one sense. We are told that the Government will do their best, but that does not mean that they are likely to take the kind of action that is now required. I believe that the Genscher-Colombo plan is extremely dangerous, and I hope that the Government will not become bogged down in a discussion that may leave us in a worse position than we have been in the past. I trust that any such idea will be thrown out of the window, as it deserves.

At the Agriculture Ministers' meeting on 18 May there was a flagrant violation of the Luxembourg agreement. I think that we all agree on that. When the House discussed this in June 1972, my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) moved an amendment urging that the so-called agreement should be written into legislation. That was not done because the Government of the day refused to accept the amendment. Yet Sir Henry Plumb said at the Tory women's conference yesterday that there should have been an amendment to write matters of this kind into the Community legislation.

I shall have more to say about Sir Henry Plumb in a moment. Indeed, I should have thought that the Prime Minister would also have had words with Sir Henry Plumb, as he and some of his colleagues have tended to act as a political fifth column against the interests of the British people. In the European Assembly debate on the Falkland Islands, he said: Other groups in this House know very well that we are in favour of majority voting as a means towards this end. He was referring, of course, to farm prices. The resolution for which he and many members of the European Assembly voted calls upon the Council to abandon the Luxembourg compromise and to put into effect the 1982–83 agricultural prices at the earliest possible date.

Mrs. Elaine Kellett-Bowman (Lancaster)

The voting list shows that Sir Henry Plumb did not vote for that amendment, and nor did I. Very few Conservatives did so.

Mr. Heffer

He voted for a 14 per cent. increase in farm prices.

Mrs. Kellett-Bowman

That was on a different day.

Mr. Heffer

It may have been on a different day, but he made it clear that he and his colleagues favoured majority voting and were thus sabotaging the efforts of their own Government. I do not ask the hon. Lady how she voted. That is up to her.

I do not wish to dwell too much on the behaviour of Sir Henry Plumb, but it is of some consequence that when the Government are supposed to be fighting our corner in Europe he and his colleagues act as a political fifth column to undermine their own Government and the interests of the British people. The Financial Times on Saturday quoted him as saying in a speech to the National Farmers Union of Wales: I am not entirely dismayed by the prospect of majority voting, if that is what is going to emerge. When we entered the Common Market, the one thing that was consistently put over and the basis on which people were prepared to accept entry was that in the last analysis there would be no question but that where national interests were concerned decisions would be unanimous. I could give chapter and verse of what the right hon. Member for Sidcup (Mr. Heath), the right hon. and learned Member for Hexham (Mr. Rippon), who negotiated British entry, and others said at that time. It is all on the record. I could also quote what was said in the referendum campaign, in the Labour Government's White Paper and in the "Yes" campaign document. All made it absolutely clear that this was a matter of great importance to those in favour of entry.

I have not always agreed with the right hon. and learned Member for Hexham, certainly not at the time of our entry into the Common Market, but I fully agree with the conclusion of his piece in The Times the other day, when he said: The Community will become a fallen oak if it fails to understand that respect for the Luxembourg compromise of 1966 is a necessary part of the way in which the Community works and is essential to its survival.

Sir Anthony Meyer (Flint, West)

I am sure that the hon. Gentleman would be the last to claim that these matters are entirely black and white. He will recall that at the time of Britain's original application, when he was persuaded by my right hon. Friend the Member for Sidcup (Mr. Heath) of the advantages of joining and was, indeed, quite a keen supporter, there was no veto whatever.

Mr. Heffer

The hon. Gentleman has got the dates wrong. By the time we were about to enter the EEC, I was bitterly opposed to our entry on the ground that, having seen what would happen to our people, I could not accept membership on the basis of the Treaty of Rome. Without wishing to say "I told you so", my opposition, together with that of my hon. Friends, was proved to be 100 per cent. correct.

Mr. Douglas Jay (Battersea, North)

My hon. Friend mentioned the "Yes" pamphlet in the referendum, which conveyed the promise of the Luxembourg agreement. Is he aware that on the back appeared the name of Sir Henry Plumb, who was one of its sponsors?

Mr. Heffer

I was not aware of that. That is interesting and important.

We have heard from the Foreign Secretary that we have not yet solved the problem of the budget. For one year we will still pay far more than the Government hoped we would pay. Unless an agreement is reached at the end of the year, there will be negotiations once again and we will be faced with interminable debates and discussions. Our Ministers will travel back and forth to Brussels, Strasbourg and elsewhere, constantly and unnecessarily getting in conflict with other members of the Community.

When the Opposition argue that there must be a fundamental reappraisal of the United Kingdom's relationship with the EEC, that means that sooner or later we must negotiate our way out of the Common Market.

Mr. John Home Robertson (Berwick and East Lothian)

Is my hon. Friend aware that a number of us in the Opposition who support the motion do not interpret it in that way?

Mr. Heffer

Hon. Members are perfectly entitled to their own point of view. No one is saying that they should not have their own point of view. I was expressing a personal opinion. I personally support the view of the Labour Party, which is that we should negotiate our way out of the EEC. I shall not make any excuses for that and will not back down from that statement.

Mr. Hugh Dykes (Harrow, East)

Are we right in making the assumption that the hon. Gentleman has the endorsement of the Leader of the Opposition for the statement that he has made as being on behalf of the whole Labour Party?

Mr. Heffer

If the hon. Gentleman had read the speech made by my right hon. Friend last Friday or Saturday, he would know that my right hon. Friend supports, as I do, the views of the Labour Party on the Common Market.

A fundamental reappraisal of the United Kingdom's relationship with the EEC means precisely what it says. I have said that I take the view that Britain sooner or later must accept the view of the Labour Party and get out of the Common Market. That is my position. I should be totally dishonest if I did not make it clear that that was my view, in the same way as my right hon. Friend the Shadow Foreign Secretary has made it clear that he does not accept my interpretation on the question of nuclear weapons.

If we are arguing about Labour Party policy, I hope that sooner or later we shall have a debate on that specific question. We are discussing the crisis that has blown up in the Common Market because of the flagrant violation by the Council of Ministers in a majority vote against the interests of the British people on the question of farm prices, linked with our budgetary contribution. That is the main argument in today's debate. That is why we are clearly saying to the Government that we believe that the time has come for a positive statement by the Government to deal with that question.

The Government are saying that they intend to do their best to negotiate a better deal on the budget, but what happens in the meantime? Will we or will we not continue to pay the budgetary contribution? The Government's answer is "Yes". That is not the answer of the Opposition. We believe that if we are serious about the matter, we should begin to make it clear that we do not intend to pay any further contributions to the budget. Why? Because those contributions are bolstering the common agricultural policy. The Foreign Secretary did not say that the Government would make positive proposals to change the common agricultural policy.

We could get out of the common agricultural policy. We could refuse to be a part of it. We could, if we wanted, go as far as General de Gaulle did at one stage. We could refuse to carry out the policy of the empty chair. I have been a member of the Council of Europe and I remember the hostility in Europe of the other members towards the French. However, the French were looking after their interests. There is nothing wrong with any nation protecting the interests of its own people. The French are protecting their interests at present. We should say to the French and to our colleagues in the Common Market that our national interests from now on should determine our refusal to pay any further budgetary contributions until this matter is satisfactorily settled in the interests of the British people.

We must make a stand. I know that it is difficult for the Government because of the Falkland Islands situation. I understand that very well. It is a great pity that the two issues have become involved with each other, but that has happened. There has been a great deal of pressure on the Government.

When I was in Europe recently I heard many people making statements. Although they would deny it publicly, in reality they were saying to the British Government "We will support your sanctions against the Falkland Islands but, in return, we do not expect you to fight for the budgetary position that you want." That is what has happened. It is useless to deny it or to pretend otherwise.

The time has come, despite the other difficulties, to say to the rest of the Common Market that we are no longer prepared to accept the position because we have been strung along on these issues for the past 10 years. That is particularly so since the right hon. Lady rightly said that she hoped to reach a permanent settlement. We are no nearer to that permanent settlement today.

There is another matter that I should like the Government to take on board. We must not allow ourselves to become second-class citizens in the Common Market. Either we should be in the Common Market as a full member with full rights or, when it is not in the interests of our people, we should come out of the Common Market. To be part in and part out would not be satisfactory to the British people. The British people would not accept that. When negotiating a future relationship with the Common Market, it would be possible to discuss all types of associations and statuses, but it should not be done on the basis of our being second-rate members of the Common Market. That would not be acceptable to the British people.

In the negotiations, I hope that the Government will not get inveigled into discussions of that type. I hope that we shall say to President Mitterrand and his colleagues that that is not the way to proceed. [HON. MEMBERS: "What about the budget?"] I have not dealt with budgetary issues for the simple reason that my right hon. Friend the Member for Stepney and Poplar, who is a great expert on budgetary matters, will deal with them more than adequately in his speech.

We wish to make it clear to the Government that the time has come for positive action. They have come back with an unsatisfactory answer to the problems in the Common Market. That is not only disappointing but, to some extent, we have found ourselves placed in an almost humiliating position. That is what one of the newspapers has said, and that is what is being said in the Common Market. We cannot allow that to be the case.

We want a solution to these problems. We want a positive policy. We want the Government to come forward with positive ideas. We hoped that today the Government would come forward with the type of proposals in our amendment, but, as such proposals are not in the motion, I ask my right hon. and hon. Friends to support our amendment. It is the way to proceed and is the best way to deal with the position. That is the positive answer to the problems we face.

5.24 pm

Mr. Edward Heath (Sidcup)

I should like to offer some reflections on the present position—I hope, briefly—and also some suggestions for the future to my right hon. Friends in the Government and, in particular, to the Foreign Secretary and the Minister of Agriculture, Fisheries and Food.

The Prime Minister has constantly emphasised that membership of the European Community is vital to Britain's future. I believe that she is profoundly right. The decision to enter was made by the House in 1971 with a majority of 112, and was overwhelmingly reinforced by the referendum at a later date. Since membership of the Community is vital to our future, I ask my right hon. Friends not to allow themselves to be manoeuvred into false and untenable positions by Opposition Members who believe—we have heard it again in the speech of the hon. Member for Liverpool, Walton (Mr. Heffer)—that Britain must be taken out of the Community at the earliest possible moment. That applies to the Labour Party, to some Northern Ireland Members and, regrettably, to some Conservative Members.

Those hon. Members have no interest in producing constructive suggestions for dealing with the problems that exist in the Community. Their only interest is to exploit to the utmost any public feeling that they can muster against the Community in order to support their policy—avowed at the Labour Party conference, as well as by individual Opposition Members—of leaving the Community forthwith. I beg Opposition Members—not in an attempt to appease or placate them—not to get themselves in untenable positions. I shall expand on that point.

I do not believe that my right hon. Friends the Foreign Secretary and the Minister of Agriculture have anything to apologise for in the arrangements that have now been agreed. I separate this matter from the question of the means of negotiation, about which I shall say something in a moment.

With regard to the arrangement for the annual price review, the Opposition seem to have overlooked the fact that our own farmers need the prices in the review. I can remember the time—it was a long time ago, too—when Labour spokesmen, from Tom Williams onwards—a most persuasive and delightful Minister of Agriculture—would boast that the Labour Party was the farmers' party and that it looked after the farmers under the price reviews. At that time we did not hear such fuss about an increase of 0.25 per cent. in the RPI because of an increase in farm prices. Of course not. The farmers needed it to maintain a standard of living commensurate with the industrial community.

Mr. Marlow

Will my right hon. Friend give way?

Mr. Heath

I am sorry, but I have given way so often in past speeches in the House that I am told by those who listen to them on the radio that they are beginning to lose their quality because of the quality of the interruptions.

The price review that has been agreed is not only in the interests of but is necessary for the British farming community. We should be concerned about it. The British farming community lost heavily under the Labour Government. Its standard of living fell a great deal. In the past two years it has just kept pace with inflation. It has made no recovery. By this price review, that is all it will continue to do—barely keep pace with inflation. The farming industry in Britain deserves more than that. That is why I completely support my right hon. Friend the Minister of Agriculture in the price review that he has now agreed.

What puzzles me is the extraordinary acquiescence of the National Farmers Union in these circumstances. I look back to the time of Lord Netherthorpe and others, when the powerful voice of the NFU rang out from every rafter from January right through to June. Now we hear nothing at all. There is no support for my right hon. Friend because he is looking after its interests. It is merely keeping its head below the battlements and letting other people take the blame offered by the Labour Party and the press for what has been achieved. I believe that the time has come when the NFU should stand up and give its support to a price review that it desperately needs.

Mr. Nick Budgen (Wolverhampton, South-West)

Will my right hon. Friend give way?

Mr. Heath

I am sorry, I cannot. If my right hon. Friends read Christopher Johnson's article in The Times, they will see that it specifically sets out the extent to which our farming industry is in need of this price review. It explodes the myth of the effect of our entry on food prices. Between 1972 and 1981, food prices rose by only 3 per cent. more than the rest of retail prices in Britain. That is another fact—

Mr. Marlow

rose—

Mr. Budgen

rose—

Mr. Heath

That myth, which is always suggested by the Opposition, is demolished.

Mr. Budgen

rose—

Mr. Heath

Over those 10 years, the rise in food prices was only 3 per cent. more than the rate of inflation over the rest of the economy.

I hope that I can introduce some realism into the discussions on the Community budget. During the transitional period, we paid £1.2 billion less into the Community than was negotiated by my right hon. and learned Friend the Member for Hexham (Mr. Rippon) in 1961, and the right hon. Member for Stepney and Poplar (Mr. Shore) ought to know that. The Community has never complained about that. It said that it was negotiated as a treaty and accepted that the British had gained. That should also be remembered, because we enjoyed an additional benefit during that period.

Next came the post-transitional period, during which my right hon. Friends negotiated the budget arrangement. In the last fiscal year, we were expected to pay into the Community 730 million units of account more than we got out. In fact, we paid only 6 million. We therefore paid 724 million units of account less than was calculated. In those circumstances, who can possibly argue that it is perfectly straightforward to calculate what we shall pay into the budget? It is not possible.

Mr. Marlow

rose—

Mr. Heath

I know that this is unacceptable to my hon. Friend, but I shall not give way.

Mr. Marlow

rose—

Mr. Speaker

Order. The right hon. Gentleman has indicated that he is not giving way. He must therefore be allowed to continue with his speech.

Mr. Heath

In that last fiscal year, we paid 724 million units of account less than was calculated—three times what my right hon. Friend the Minister of Agriculture, Fisheries and Food has said the Community price review will cost us this year. We may like to ignore these facts, but they are known by other members of the Community who take them into account. That is absolutely right.

Perhaps I can offer some advice to my right hon. Friends on how one should tackle these problems. First, we shall never achieve a budget solution on the basis that what we put in, we must get out. No other member of the Community will agree to that doctrine, because one cannot organise any community, be it in a village or a club, on the basis that everyone puts in exactly what he gets out. [Interruption.] There is no point in hon. Members jeering. They must face these facts of life. Therefore, I do not believe that my right hon. Friends will achieve a budget solution on that basis.

Mr. Doug Hoyle (Warrington)

Will the right hon. Gentleman give way?

Mr. Heath

Running throughout the debate is an extraordinary inferiority complex about Britain and its position in the Community. One of my hon. Friends asked "We are so poverty striken, how can we contribute anything?" Our standard of living is higher than that of at least four other members of the Community. We have enormous oil resources, which the Community knows about and recognises. Since we entered the Community, our trade has increased from 28 per cent. to 43 per cent., and is still increasing. What is more, we have received a large amount in grants. A total of £3.9 billion sterling in grants has come out of the budget.

We have always recognised that countries with a much larger agriculture industry than ours will gain proportionately more from the budget. The answer is to seek what we require from the budget—money for development. It is to the discredit of the Labour Party that when in power between 1974 and 1979 it deliberately refused that money.

When the right hon. Member for Bristol, South-East (Mr. Benn) was Minister of Technology, he refused payments from the Community for the development of British industry. If, instead of obstructing every Community move, we were to be constructive and use more of these resources—which is what we arranged at the summit in 1972—our position would be infinitely stronger. Leaving aside the considerable sum of £3.9 billion in grants, we have received £4 billion in loans at low interest rates for our own industrial development.

The Community was formed on the basis that Germany would have industrial markets at her disposal and that France would have agriculture development. That was the clear basis on which the Community was formed. We went into the Community on the clear basis that, as our agriculture industry was smaller, we would seek benefits in the industrial sector. We have had those benefits already to the extent that I have outlined. We now have a trade surplus with the Community of £750 million a year. [HON. MEMBERS: "Only because of oil."] Oil must be sold like everything else. It is sold to the Community, which is charged a very good price for it.

Mr. Budgen

rose—

Mr. Heath

The understanding is that we get our return from industrial activity, the sale of oil and the benefits for industrial development.

I hope that the hon. Member for Walton will not take offence, but the speeches that he made at the beginning of the 1960s when he was a fervent European, when I was negotiating our first entry, were infinitely better than the speech he made this afternoon. It is completely incomprehensible that an hon. Member from Merseyside, with all its appalling problems and ghastly level of unemployment, should say that he wants to get out of the Community, sacrifice more jobs and money for development and forgo investment from America and Japan. It will be equally incomprehensible to every worker on Merseyside. Perhaps the hon. Gentleman will reflect on that when he boldly says "Cut away and get out."

We shall never achieve a solution if we insist on getting out what we put in, because so many other factors are involved and all our partners know it. We shall not get an arrangement so long as we say that it must be for five or seven years. The right hon. Member for Leeds, East (Mr. Healey), who, I regret to say, is not in his place, was Chancellor of the Exchequer for five years during which time he introduced 17 Budgets. He will forgive me if I am one or two out either way. Yet we are saying to the Community "You must enter into a permanent arrangement for seven years" or for five years if we are flexible.

The figures that I have given for the last fiscal year are what we were expected to pay in, but what we did pay in shows that it is not possible to tie the Community down in that way. This is why I have said to my right hon. Friends that I hope that they will not allow themselves to be manoeuvred into untenable positions, because the troubles that follow are the sort that we have just experienced.

Mr. Nigel Spearing (Newham, South)

rose—

Mr. Heath

I have heard the hon. Gentleman's views and I know them very well. I promise I shall not misrepresent him in any way.

I turn to the so-called Luxembourg agreement, which was a gentleman's agreement to differ. At the time the Five did not agree with it; all that they did was tacitly to accept that General de Gaulle would continue behaving in that way. We have heard that General de Gaulle had the empty chair for six months. What achievement did it bring him? Absolutely nothing. At the end of six months, France had to go back.

When I first came into the House, there was a story that the Leader of the Labour Party at that time, Mr. Attlee, was under great pressure, when his party was in Opposition, to lead a walk-out against the tyranny of the Conservative Front Benches. Finally, his party members asked him if he would do so and he said "No". They asked why and he replied "We would all have to come back." That epitomises the wisdom of a remarkable Prime Minister.

The same is true of empty chairs in the Community. One has to come back, and what does one achieve in the meantime? Absolutely nothing. I hope, therefore, that my right hon. Friends will not be manoeuvred into any sort of empty chair arrangement. What we have to do is to negotiate patiently on the budget with our partners, year by year, so that such negotiations become an accepted fact.

I described the Luxembourg agreement as a gentleman's agreement to differ. It is roughly the equivalent of a convention in this House. We know full well that conventions can be urged on the House, but they cannot be enforced on the House because they are not in our rules of order.

We made it clear in the original White Paper that a large part of the Treaty demands unanimity. In other parts, the Luxembourg agreement was concerned with, in the words of the White Paper, "vital national interests". Those words are important. They are not the same as the words used by the hon. Member for Walton—"national interests". "Vital national interests" were at stake in the Luxembourg agreement.

We continued negotiating under the price review until the point was reached where our partners knew that the Minister of Agriculture was prepared to accept the price review. That was well known and, indeed, the Minister confirmed that when he made his statement to the House. It was what the British farmers wanted. The Minister did not get everything he wanted; it was a compromise, but a very considerable compromise and the Minister of Agriculture and his colleagues should take the credit for it. They achieved that result and everybody knew it, but the Minister refused to endorse it. That was the point at which our partners said "We have vital interests in agriculture and in every case they are more important than yours." Thus one had nine countries claiming their vital interests and us claiming ours. The Luxembourg agreement does not deal with that situation in any way. If my right hon. Friend and his colleagues are giving thought as to how the problem can be handled in future, that is one of the factors to be considered.

Mr. Roger Moate (Faversham)

Will my right hon. Friend give way?

Mr. Heath

No, I am sorry. As we are all aware from our own price review, our partners know that the first week in March is the date for announcing the European price review. The same applies to Europe as to our own farmers. We have passed that time; we have moved through April and we are now in the last week of May.

The other members said "Our industry must know what its future is." That was a reasonable thing to say. Driven into that position, they said "All right, overthrow it and we shall achieve our purpose." And that is what they did. That is dangerous in many ways, but it has shown that a convention can be overthrown if people are put into a position in which they have no alternative.

I come next to the linkage with the budget. The arrangement was that the price review and the budget would be considered in parallel.

Mr. Heffer

Is the right hon. Gentleman saying that his Government were wrong in standing firm as they did? Does he agree with Sir Henry Plumb and the others who sabotaged the Government's efforts?

Mr. Heath

With great respect to Sir Henry Plumb—I have known him for many years and he was chairman of the NFU—what he and the other European parliamentarians did had no effect on the Ministers in Brussels who were driven by their own agriculture industries to get an answer. One can understand that, because one knows the pressure that our Minister of Agriculture was under to give an answer to the farming industry. That was what produced the explosion.

The agreement was that the budget and the price review would be considered in parallel. There was no agreement that the price review could be blocked until there was agreement about the budget. Our people knew that.

Mr. Marlow

But the price review increases our contribution.

Mr. Heath

There are all sorts of other things that increase contributions and decrease contributions, and no one has suggested that we have to wait for all those to be negotiated before the budget can be settled.

In any case, the Government have always said that they oppose linkage. They have always refused to discuss energy or fisheries with other things. Sometimes we would have gained a great deal if we had discussed some matters together. On this occasion, it was agreed to discuss the price review and the budget in parallel.

The Nine said that they were not prepared any longer to wait on agricultural prices. After that, we rapidly settled the budget. They see that those things can be settled. II at is the dangerous development for us as regards long-term arrangements for the organisation of the Community. I am not criticising the settlements, but in the negotiations we drove people to break a convention and then we settled on the budget.

I wish to make some suggestions for the future. First, I agree with the hon. Member for Walton that there can be no question of our being a second-class citizen inside the Community. That is absolutely out and I do not believe for a moment that the House would endorse it. It may be that Mr. Mitterrand is putting forward that suggestion with the best of intentions and is following his Foreign Secretary, but we cannot be a second-class citizen inside the Community.

My next suggestion is that my right hon. Friend the Foreign Secretary and others will find it extremely difficult to formalise the so-called Luxembourg agreement. I have already outlined the difficulty of reconciling the different aspects of only one of the problems. Indeed, I do not believe that they can be reconciled.

The agreement can be made workable only in the way that affairs of the House can be made workable—by respecting other people's vital interests as well as our own. We have all seen occasions in the House when the two Front Benches became so angry with each other that they were not on speaking terms. The only thing that held the House together was the cardinal rule that in no circumstances must the two Whips Offices fail to speak to each other. The same applies in the Community; the Luxembourg agreement can be worked only if there is genuine respect for what others want to do.

I ask myself what was our vital national interest in the price review. Our farmers wanted it, it was justifiable and the price increase to consumers was very small. The Minister of Agriculture said that the cost was £120 million. Suppose that he had achieved not a successful compromise but everything that he wanted. What would have been the difference in the £120 million? Would it have been £10 million or £15 million? Are we to argue to the whole of Europe that that was a vital national interest that justified our action? None of them would be silly enough to believe that.

It is inconceivable to think that we can argue to the whole of Europe that a difference of £10 million is a vital national interest to us. My right hon. Friend would have made us the laughing stock of the Continent. He cannot argue that that was a vital national interest. We can argue that the budget is a vital national interest, because it is covered by the Treaty. That was what the European Economic Community saw clearly.

We have to be clear about what a vital national interest is. It is not just something that we should like. Here, I wish to make a constructive proposal, although it will be difficult, if not impossible, to formalise. When a country wishes to claim, round the table, that something is a vital national interest, it should do so at the beginning. It must set out its arguments for saying so and the other partners should be allowed to comment on it, in writing and in discussion. It must be publicised so that the whole of Europe can see why we believe, for example, that £10 million is a vital national interest that entitles us to block the whole European agriculture policy and the budget. My suggestions are that, first, countries that claim a vital national interest should examine it and, secondly, other member countries should have the opportunity of commenting on it and putting their views.

I started off by emphasising the Prime Minister's words that Europe is vital to us. In this case, we have to present our problem in a way that carries public opinion with us. With great respect, this is not being done at the moment. Therefore, we must change our approach as a Government—and the approach of the great majority of the Conservative Party—in presenting European problems. They are not something about which we shall fight to the last ditch because we are so inferior that we simply have no alternative, but something about which we are taking a realistic and constructive approach, to find a genuine answer to something that we value. If the Government do that, we shall achieve far better results than we have been able to achieve so far.

5.52 pm

Mr. Roy Jenkins (Glasgow, Hillhead)

I begin by satisfying some hon. Members by declaring my interest in having been President of the European Commission from 1977 to 1981, covering, among other things, the period when the 1980 budget settlement was concluded. That does not affect my views. My views are affected by my basic convictions about Europe and about Britain's interest in Europe.

The hon. Member for Liverpool, Walton (Mr. Heffer) would have been able to speak more clearly and more forthrightly had he tabled on the Order Paper an amendment saying that his purpose was to take Britain out of the Community. It is not clear to me why that was not done. It would have been a far more honest position to take rather than pretend that he was talking about constructive solutions.

Mr. Arthur Lewis (Newham, North-West)

It would have been more honest for the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) to have told the people at the referendum.

Mr. Jenkins

I agree, as did the right hon. Member for Sidcup (Mr. Heath), with the point about second-class citizens. There is no room for a second-class status in Europe. I agree, too, on that with the hon. Member for Walton. However, the only thing that can put us in a second-class position in Europe is if we approach Europe in a second-class frame of mind, believing that we are second-class citizens and that everybody is automatically against us. That is not true, and is the worst possible approach.

The Foreign Secretary has had a difficult time in Europe and a difficult baptism. He has had problems with other issues, but I thought that he had his head a bit down towards Europe in his speech this afternoon. It is better to put one's head up and stress some of the positive advantages.

It should be made clear that it was not the agriculture price settlement to which the Minister was objecting in Brussels last week. He got most of what he wanted. He would have accepted, had there been an acceptable budget settlement. There was, therefore, no question of the issue being that of high consumer prices.

I do not entirely agree with the right hon. Member for Sidcup. The price level proposed is rather too high in view of the circumstances. It has to be faced that the prices agreed are usually higher than those put forward by the Commission. During my Presidency of the Commission, the Commission put forward modest price increases, including one price freeze, and the Ministers, including the present Minister of Agriculture, Fisheries and Food in my first year, the year of the attempted price freeze, pushed them up to a higher level. Even so, the levels of price increase, certainly under the last Commission, were well below those for inflation in the Community.

The issue is not the level of prices but that the Government thought that they could rely on linkage. In other words, they thought that they could block a farm price settlement until a budget settlement had been achieved. Was that a reasonable expectation? In many ways it was. Linkage has undoubtedly been a Community device, employed by many Governments on a variety of subjects, and was employed by Britain in 1980, when we made it clear that we would not agree to an agriculture price settlement until we had the budget settlement. We got that on 30 May, after which the agriculture prices went through.

On the other hand, never previously has any country explicitly invoked the Luxembourg compromise in the terms of saying "I will not allow a vote because a vital national interest is involved, not about what is going on in this Council but about what is going on at a different time in a separate Council." Therefore, we were resting on an untried hinge. Perhaps it was not altogether unreasonable to think that it would work. I would have said probably, but not certainly.

The Foreign Secretary was not there but has probably followed the details of the negotiations on 30 May 1980, when our great issue was to avoid a linkage the other way round. The British Government wished to avoid the French inserting something that said that the payments would not be made in the two years for which the agreement was being signed if we held up the agricultural price settlement. It is, therefore, a somewhat tangled and complicated history.

Nevertheless, the seven countries which voted acted, on the whole, unwisely last week. At the very least they ought to have given us a clear, explicit and direct warning in advance that they would do this, although it was not a glorious chapter in British diplomatic history that we did not pick up what was happening through a great number of grapevines and were therefore unaware of what was likely to happen.

Beyond that, although the Luxembourg compromise is far from being God's gift to the Community, it ought not to have been abrogated without prior discussion among the Foreign Ministers about its institutional consequences.

Mrs. Kellett-Bowman

Would the right hon. Gentleman agree that it was not our Ministers who asked for the linkage? The other Foreign Ministers insisted on having the linkage and it is not surprising that we have tried to use it to our advantage.

Mr. Jenkins

I am not sure that I follow that point, but as far as I understand it I mentioned it in the preceding passage. There has been a problem of reverse linkage and the whole is more complicated and tangled but is allowed for in the Government's presentation.

First, what should we do now? We should consider as constructively as we can why we play our hand almost consistently so badly in the Community that even this allegedly pro-Community Government always have a running sense of grievance and find themselves forced to alienate British opinion from Europe by the lead that they give or do not give towards the Community. At the same time, they find themselves deeply distrusted by many people of sense and good will in the rest of the Community. Why do we so often get into that position?

Secondly, we should demand and seek the working out of a much clearer understanding about where everybody now stands on the Luxembourg compromise so that we know where we are for the future. On the first point about how we play our hand, I do not believe that we showed a great sense of timing. It was difficult for the Government, who had major difficult issues coming together. It would have been much wiser, once they had arisen, to have stood back and not to have fought too many battles at once. That does not mean that one must give way. It means that matters should be sometimes postponed. Once the sanctions issue had arisen, it would have been much wiser to have gone immediately for a one-year settlement, which would have been much easier and wiser to negotiate, rather than to try to do everything at once.

A better settlement is not necessarily achieved by holding out longer. I do not know whether the Foreign Secretary has achieved a better settlement than he could have got at Villiers-le-Temple in early May. A lot of trouble has been caused in the meantime. In April 1980, the Prime Minister turned down the settlement at Luxembourg and then left it to Lord Carrington to pick up the pieces and bring back another settlement a month later—a settlement no better, but one obtained after a lot of bitterness, risk and a substantial amount of time. It is extremely important to know when to settle. We should not end up believing that we do not have friends in the Community and it is all a conspiracy against us.

If we look back at the settlement of 1980, we see the devoted work that the Italian Foreign Minister—he is still the Italian Foreign Minister—Signor Colombo, did as President of the Council of Ministers, and the great risks that a relatively junior Minister, Klaus von Donhanyi, of the West German Government took in working out a settlement himself and hoping that Herr Schmidt would accept it next morning, which I believe he did reluctantly and in a fairly bad temper. Herr von Donhanyi took the responsibility for doing that. One cannot take the view that one is dealing with a lot of people who have no desire to do anything except stab us in the back.

We should beware of how we present our own political problems. What does not effectively aid our cause is to be constantly talking about our own political problems at home while being quite unable to see that other people may have political problems and interests, and to talk as though for other Governments not to sweep them aside is just a sign of weakness and corrupt politics.

The mistake that we make is of nearly always taking a minimalist position. We go and see what the Community is doing and try to stop it doing it. It is an approach that we have taken only too often and it is not in British or Scottish interests. I shall explain and give some examples of why that is so. By doing it, we are inhibited from any position of constructive leadership that many people would like to see us assume, particularly when they sometimes get a little impatient at the too close working of the Franco-German axis.

I turn to the question of the compromise itself. It is an extremely obscure piece of paper.

Mr. Thomas Torney (Bradford, South)

The right hon. Gentleman did not say that in the referendum.

Mr. Jenkins

The compromise is really an agreement to disagree. The Treaty is precise and different. Could we, should we, go back to the Treaty? Frankly, I do not think that is practical and it may not be right. I take note of the point that was mentioned during the referendum. In the pamphlet produced by the organisation of which I was President, there was one sentence which mentioned it in passing.

Mr. Spearing

rose—

Mr. Jenkins

I know what the document is. The hon. Member for Newham, South (Mr. Spearing) has read it to the House previously. I do not see any reason for him to do so again. It is precisely one sentence. It is something that is certainly there and I make not the slightest attempt to deny that. I am, in any case, arguing a point with which I thought the hon. Gentleman agreed. It is why one cannot go back to the Treaty position. Let us not waste too much time on that.

I was saying why I did not think that it was practical to go back to the Treaty position. Too much water has flowed under the bridge. Nationalism and separate interests are too deep and there are too many disparate forces. If the Community of Ten—that I fairly soon hope will be one of 12—is to work, the decision-making process must be improved. Vetoes cannot be allowed, in practice, on every subject on which people care to exercise them. Do not let us deceive ourselves into thinking that the Luxembourg compromise has been used only on things that could legitimately be called vital national interests. It has been explicitly invoked on, I believe, 12 or 13 occasions. Some of them were fairly minor occasions. It was once used by the Italians on the import of limited quantities of Israeli oranges, and once by the Irish on the import of limited quantities of so-called baby beef from Yugoslavia. It was done by the French to block a proposal on the use of the social fund to help young people.

Mr. Moate

I am grateful to the right hon. Gentleman for the courteous way in which he gives way. Is he quoting those interesting examples of where it was accepted that they were matters of vital national interest? Is he by implication contradicting my right hon. Friend the Member for Sidcup (Mr. Heath), who said that on the question of the farm price review, it should not have been seen as a matter of vital national interest?

Mr. Jenkins

The linkage issue is a complicated point. Our general budgetary position is a matter of vital national interest, but there are complications relating to the linkage. The Luxembourg compromise has been used on a number of fairly peripheral issues. It has been used by us on fisheries agreements, but on an international agreement and not an internal regime.

As the Secretary of State for Scotland confirmed this afternoon, following what the Minister of Agriculture, Fisheries and Food said last week, we have twice missed the opportunity to have a fisheries agreement that would have been of great value to the fishing industry and acceptable to it by the use of the veto by other countries. Do not let us believe that the veto always works to our advantage by any means. Do not let us believe that majority voting always works against us. In the case of getting the JET project for Culham, it was not even done by a qualified majority. It was done by a simple majority, which the Germans, who also wanted JET, accepted in those circumstances and allowed us to settle the matter.

But there is a wider question. I am not arguing that we can get rid of the veto entirely. Where real national interests are involved, it is a matter of practice certainly that that is bound to be taken note of in a Community as relatively disparate as the Community that we have today and will have for many years to come. But on more minor issues we must have a more effective decision-making process and we must, above all, have it in the interests of this country.

Why is that? To use the veto on everything is a recipe for a static Community. Do we want a static Community? [HON MEMBERS: "We do not want one at all."]

There are those who want to get out of the Community at all costs, never mind what happens to 60 per cent. of British exports and the jobs that go with them, never mind what happens to inward investment, never mind what happens to our political support—[Interruption.]—but for those who believe cautiously that we should stay in the Community I say that we do not want a static Community, for an overwhelmingly good reason. It is not as a matter of European idealism, although there is nothing wrong with that; it is a matter of direct national interest.

What is the essence of our budget dispute? It is that the present structure of the budget means that the Community does too much for agriculture and far too little for the other major interests of a largely industrial Community—far too little to help the Community deal with the present problems of unemployment, industrial innovation and the regional and social funds.

We need a Community of change if we are to have a permanent budget solution. A solution will not work in which we just get people to pay a certain amount for whatever exact number of years it is. That means that one is constantly in the position of having to ask for something, perhaps justly and rightly, but it has to be done. It was so in 1980. It is so now in 1982. It will be so again in 1983. It is essentially a weakening position, and the British interest must be in a basic restructuring of the budget so that less is spent on agriculture and more on those other things. By that means—by the natural operation of the budget and not by a special artificial subvention, although we have to use that in the transition—we shall get back to a position in which we can do thoroughly well.

We must approach the matter from the point of view of national interest, although not being afraid to talk of European interest, and be prepared to break out of the dreary dispute that is with us year after year to fight the battle on higher ground. To be an advocate of movement and not of immobility in the Community would not only make national sense but move us from a position of too frequent isolation to one of leadership within the Community. That can be achieved by a more constructive and optimistic approach than we have had from either Front Bench. It came only from the right hon. Member for Sidcup.

6.14 pm

Sir Russell Fairgrieve (Aberdeenshire, West)

I trust that the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) and my right hon. Friend the Member for Sidcup (Mr. Heath) will not mind if I do not follow their arguments too closely, firstly, in the interests of brevity and, secondly, because I agree with virtually everything that they said, and they have a good deal more experience of the subject than I.

I venture to suggest that one reason why we found ourselves in these farm price and budgetary contribution difficulties with our partners in Europe last week and last weekend could be a historical fact of many years ago. That fact is that we did not join the EEC at the beginning. It was more than unfortunate that at those talks in Messina many years ago we did not have someone of competence to realise the great significance of what was being born. Had we been in at the beginning, the CAP would not have taken the form that it did, and it is the CAP that basically causes our budgetary problems.

Unfortunately, that has continued to be our history in Europe. In 1951, when Robert Schuman put together the European Coal and Steel Community, thus putting steel and coal and, therefore, substantially the armaments-making industries of France and Germany into one confederation, this great stroke virtually eliminated for ever the possibility of war between those two countries. However, we did not join.

Again, in 1952, when the European Defence Community was being formed, we decided not to go in because of what we thought were our Imperial commitments at that time. As a result, France pulled out and another great loss to Europe took place. Recently we failed to join the EMS fully and, as in all other instances, I have no doubt that we shall have to join properly in the end and probably, again, at the wrong time for Britain. One wonders when we shall finally learn this continual lesson and join these institutions at the beginning instead of when their ground rules have been formulated by others.

One sometimes wonders also whether General de Gaulle had a point when he produced that veto of his at our first application by saying we were not yet ready for a full European commitment. It was the same General de Gaulle who engineered the Luxembourg compromise of 1966 for France's benefit, although the Treaty of Rome enshrines majority voting.

Unless the Community is to stand still we shall have to move towards majority voting some day, and are we sure it would necessarily be such a bad thing for Britain? After all, had we had majority voting last autumn we could have had a fisheries deal satisfactory to Britain and our fishermen, because only France disagreed with the arrangements then proposed.

Perhaps in his reply my right hon. Friend the Minister of State could consider whether we might dust off these proposals and put them forward again to our partners for, if necessary, a majority decision.

Mr. Donald Stewart (Western Isles)

I congratulate the hon. Gentleman, unlike previous speakers, on giving way so that we may have a debate. If the majority rule applied there would be no hope for British fishing.

Sir Russell Fairgrieve

The arrangements last autumn were satisfactory to all Community members except France, and they suited our fishermen. I am asking my right hon. Friend in the light of what has happened to dust off the proposals, take them back to Brussels and, if necessary, put them through by a majority decision. That is what I wish him to comment on.

One difficulty in present circumstances is that we more or less agree with the new farm prices, but did not sign because we were not satisfied with the budgetary proposals, which is a slightly different matter although, as I said a moment ago, basically caused by the CAP. I can only hope that we shall resolve this crisis and take it as a salutary lession that we must take a lead in moving the Community forward.

I end on a philosophical note. When we consider the problems in the Middle East, in Europe and now in the South Atlantic, is there not a case to be made by those of us whose political views started to be formulated during the Second World War and who believe that, although the nation States of Europe must continue to develop their own policies in their own traditional and national ways, in foreign policy and deployment of defence forces the correct answer is a federal authority for a United States of Europe?

6.20 pm

Mr. Douglas Jay (Battersea, North)

I had hoped to compliment the right hon. Member for Sidcup (Mr. Heath) on being the sinner who had repented, but I am afraid that I can only describe him now as the sinner who was as unwise after the event as he was before it. His account today of the Luxembourg compromise was very different from the account that he gave when he was inviting us to join the European Economic Community. In view of what he described as the overwhelming majority who voted for joining the EEC, I take this opportunity to underline a few of the facts.

The breach of the Luxembourg compromise by the EEC last week has deprived British membership of the EEC of what claim to moral and constitutional validity it ever had. Throughout both parliamentary debates in 1971 and 1972, and the referendum campaign in 1975, we were assured over and over again that ultimate parliamentary sovereignty was guaranteed because of the principle of unanimity enshrined in the Luxembourg agreement. Pro-Marketeers repeatedly told the public that we would be the judge of what was or was not a matter of vital interest. The right hon. Member for Sidcup's White Paper of July 1971, on which the House voted in the crucial vote of October 1971, said this—and it is quite different from what he said today: On a question where a Government considers that vital national interests are involved, it is established that the decision should be unanimous … There is no question of any erosion of essential national sovereignty". There were no qualifications. That was the basic assurance on essential national sovereignty. It was the fundamental promise, on the basis of which the House of Commons voted.

Of course, it may be said that the Luxembourg agreement, after all, was only a gentleman's agreement, not embodied in national or international law, though the White Paper did not say that. However, as my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) said today, on 13 June 1972, in the course of the discussions on the European Communities Bill, the Labour Opposition moved an amendment which would have incorporated the Luxembourg compromise in the legislation and made a reality of that basic promise. Incidentally, under the guillotine operating at the time we had less than half an hour in which to discuss the issue.

The amendment was moved by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore). The right hon. and learned Member for Hexham (Mr. Rippon) opposed it for the Government, saying that it was not necessary. The Labour Opposition voted for it, but the Conservatives, including the present Prime Minister, the right hon. Member for Sidcup and, I suspect, the present Foreign Secretary, voted against it. So it was lost. So much for the way that Parliament was misled in 1971 and 1972.

The same deception was practised on the electorate when we came to the referendum in 1975. In that referendum there were two "Yes" pamphlets—one from the Government, and one from the so-called "Britain in Europe" organisation, of which the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) was an ornament—and only one "No" pamphlet. That, in itself, was perhaps odd. The Government "Yes" pamphlet said: It is the Council of Ministers not the Market's officials who take the important decisions. These decisions can be taken only if all members of the Council agree. The Minister representing Britain can veto any proposal for a new law or new tax if he considers it to be against British interests". The other "Yes" pamphlet, also distributed to every elector in the country, said: All decisions of any importance must be agreed by every member". The right hon. Gentleman said that it was only one sentence. But it is perfectly clear, and the fact that it was said only once, but printed 6 million times, does not make much difference.

Those were the promises on the basis of which both Parliament and the electorate voted in 1971 and 1972. They have now turned out to be a fraud. Incidentally, the "Yes" pamphlet bore the names—I shall not give them all—of the right hon. Member for Sidcup, the right hon. Member for Crosby (Mrs. Williams), the right hon. Member for Hillhead, and Sir Henry Plumb. Those were the guilty men, and one woman, who misled the nation.

Sir Henry Plumb is a particularly interesting figure among those delinquents. He signed that pamphlet in 1975, promising the electorate that the Luxembourg compromise would be honoured. Two weeks ago, in the Strasbourg Assembly, he sponsored the proposal that it should be overridden, contrary to the recommendations even of his own Government. Finally, apparently. he did not have the courage to vote for it.

Mr. Geoffrey Johnson Smith (East Grinstead)

The right hon. Gentleman's assertion about Sir Henry Plumb is incorrect and has been denied.

Mr. Jay

I am not clear what the hon. Gentleman is saying. If he is saying that Sir Henry Plumb did not at any time put forward the proposal, that is contrary to all the information that we have on this subject.

The deception that was practised on the British public concerning this central issue is the sort of thing that makes ordinary people cynical about politics. They all heard that promise, because it was bandied all around the country.

The Luxembourg agreement raises a crucial issue of sovereignty. I have agreed with the Government throughout the Falklands controversy that sovereignty is not a minor matter to be casually given away. However, sovereignty over the United Kingdom is surely just as important as sovereignty over the Falkland Islands, and rather more British subjects live in the British Isles than in the Falkland Islands.

I regret, therefore, that the Government's response to the breach of the agreement has been so weak and woolly. After some brave words from Ministers at first, the appeasers began nibbling again, and no doubt told the Prime Minister "We must not break the rules and we cannot quarrel with the EEC just when we are trying to persuade it to continue sanctions against Argentina." That attitude means that yet again we keep the rules and the other members of the organisation do not, and if sanctions were the crucial issue it proves once again how often EEC policies are decided not on merit but as a result of a kind of horse trading in which concessions are exchanged.

As my hon. Friend the Member for Walton said earlier, the only effective response would be to cease paying money into the budget until the breach of faith was reversed. Imagine what the French would have done in this situation. Instead, there have been attempts today to suggest that this was not a vital national interest. But the overriding of the veto on farm prices has not merely removed the main constitutional safeguard in the whole arrangement but in one fell swoop has destroyed any hope of fundamental reform of the CAP and left this country in a hopelessly weak position on the budget.

Sir Russell Fairgrieve

Rubbish.

Mr. Jay

The hon. Gentleman says "Rubbish". It is not rubbish to say that we have had to climb down and accept a one-year agreement. All the main promises that we have had—on the Luxembourg agreement, on reform of the CAP and on fundamental reform of the budget—have thus gone up in smoke.

These latest fiascos prove beyond serious doubt yet again that the only tolerable and, indeed, honourable course for Britain is to work for a looser and friendlier relationship with the EEC countries. All the present friction, disharmony, disputes and damage that Britain has suffered spring essentially from the attempt to force agricultural, economic and other internal policies and legislation on unwilling countries. By all means, let the French have the common agricultural policy if they want it. But that is no reason why the British consumer and taxpayer should have to pay for it.

e should, of course, preserve machinery for consultation and co-operation on foreign policy, trade and other international issues but free ourselves from the common agricultural policy and the other legislative and bureaucratic monstrosities of the EEC. Several hon. Members have mentioned General de Gaulle this afternoon. The irony is that General de Gaulle, in one of his moments of real wisdom and foresight in 1969, proposed precisely that compromise for Britain. In February 1969 he told the British ambassador that he foresaw the Common Market changing, and would like to see it change into a looser form of free trade area with arrangements for each country to exchange its agricultural produce. He offered to discuss with the United Kingdom what should take the place of the Common Market, such as an enlarged European Economic Association. Admittedly, those were vague words. But it was a profound mistake for the British Government at that time to refuse the offer. The sort of arrangement that General de Gaulle had in mind would have had many great advantages for Britain then and would now. It would, first, avoid all the political bad feeling regularly created by the disputes over the CAP and the budget.

Mr. Marlow

There has been a lot of uninformed talk about second-class members of the Community. If such an arrangement were arrived at, would it not be a case that we, who would then be holding more of our own sovereignty than other European countries, while at the same time working with them in beneficial contract and agreement, would be the first-class members of the Community and all the others second-class members?

Mr. Jay

I agree. The phrase "second-class members of the Community" is used only by those people who do not understand the full realities. If we had accepted General de Gaulle's offer, we should have been first-class members.

Economically, General de Gaulle's offer would have saved the United Kingdom's fishing industry by giving us a 200-mile exclusive fishing zone like Norway, Iceland, Canada and the Soviet Union. Next, by enabling us to import food at world prices, it would have eased enormously our economic difficulties, particularly now when world prices are low and falling. I do not know whether Conservative Members have noticed how low world food prices are. They have so often told us that they were going up and up and would continue to do so.

In addition, a looser link would enable us, like the EFTA countries, to continue free trade in manufactures with the EEC if both sides wished; or, if they did not wish, it would offer the chance—this is what would probably happen—for the imposition both ways of the EEC's existing common commercial tariff, which, in general, is a low tariff, on manufactured goods.

Politically, therefore, we should take the opportunity presented by the present crisis to seek the maximum consultation and co-operation. While NATO must remain the major instrument of defence, there is no reason—I make this as one suggestion—why the so-called European Council, which is a meeting of Heads of State outside the ambit of the Treaty of Rome, might not be used by us for general political consultation.

The collapse of the Luxembourg agreement gives us the chance to retrieve the mistake that was made in 1969, and to explore actively and constructively the details of such a new start. The fact that French Ministers in the last fortnight have themselves spoken in terms similar to those of de Gaulle in 1969, shows that they may also understand that this is likely to be the best way forward if we want to avoid these repeated Anglo-French disputes. It would certainly make for far happier and more harmonious relations between all the main countries of Western Europe.

6.35 pm

Mr. Donald Stewart (Western Isles)

I need not comment on the speech of the right hon. Member for Battersea, North (Mr. Jay) since I am in entire agreement with it. I could virtually say "Amen" to all that he said.

The speeches of the right hon. Members for Sidcup (Mr. Heath) and for Glasgow, Hillhead (Mr. Jenkins) were apologies for the Common Market. Both right hon. Members have a great deal to apologise for. The right hon. Member for Sidcup asked what all the fuss was about. He said that farmers had had a rise in prices, and that was all. He was at great odds with his right hon. Friend the Minister of Agriculture, Fisheries and Food, who, in his statement last week, was under no illusion. He told us that he had been mugged and was extremely angry about it.

The right hon. Member for Sidcup also said that five countries claim a vital national interest, as does the United Kingdom. Therefore, he argued, our vital national interest must go by the board. That is why the Luxembourg compromise is essential. Until now, despite the optimistic forecasts made by the Foreign Secretary in his opening speech, Ministers have been coming to the House to explain how they have been seen off by their alleged partners, how we have been cheated, how the French have acted illegally, how foreign vessels have broken the law on British limits and so on—apologising all the time. We are at the receiving end every time Ministers report to the House.

The right hon. Member for Sidcup carefully skated over the vital point about farming increases. It was well expressed by Ronald Butt in one of the weekend newspapers. He said: In enforcing the new farm prices against Britain's wish by using a majority vote, the agricultural ministers were, if their action is taken as a precedent, detracting from any member government's accountability to its own parliament. If a government can be overruled by a Community majority in this way, the power of the democratically elected parliament to which it is responsible can only be diminished. That is the vital point at issue.

The Common Market started with a gigantic breach of a commitment by the right hon. Member for Sidcup. The story was that time was needed to negotiate—no more, no less. That implied that at a certain stage the whole matter would come back to the United Kingdom's electorate for decision. However, that was never done. In the propaganda war it was said that we must go in to protect jobs. With 3 million unemployed, we see how little truth there was in that.

In the past few weeks, right hon. and hon. Members have been expressing grateful thanks to Australia, New Zealand and Canada for supporting, United Kingdom in the Falkland Islands crisis. That support is more than the United Kingdom has any right to expect or to receive. We entered the Common Market. People who had been told for decades that they were part of the great British Commonwealth family were brushed aside and left to their own devices. They were abandoned to their fate.

It was argued that the Common Market would improve trade for our goods. Yet, in the years since we joined, there has been a switch of only 10 per cent. in the manufactured goods that we sell to the EEC and those that we sell to the rest of the world. The violation of the compromise and the implementation of the new agricultural budget will add to the housewife's budget in the United Kingdom. The concessions on the budgetary fund last year are made to seem small beer.

The apologists find excuses. One of them, a Member of the European Parliament, wrote an article about the present dispute that appeared in a weekend newspaper saying "Let's cool it". On reading the article, one finds—as in the speeches of the right hon. Members for Sidcup and for Hillhead—that what is meant is "Let's swallow it". They argue every time the reasons why we should give way. If the argument turns towards accepting majority decisions, they will be advancing reasons why this proposal should be accepted.

We are now coming to the end of discussions on a common fisheries policy. I do not believe that any fisheries policy that is acceptable to the French and possibly the Danes will mean a fair deal for the fishermen of the United Kingdom. If it were acceptable to our fishermen, it would not be acceptable in the EEC. That is what we are up against.

Mr. Russell Johnston

Has the right hon. Gentleman taken aboard the point made by the hon. Member for Aberdeenshire, West (Sir R. Fairgrieve) that there was an agreement on the table from which only France dissented and that if there had been a majority vote it would have been implemented?

Mr. Stewart

I heard that point made, but hon. Members have been given no details of the agreement. There are other countries in the EEC with fishing interests as well as France and the United Kingdom. The Danes and the Germans have large fishing industries. Bad faith on fishing was proved from the inception. It was only when the United Kingdom application for admission had been accepted that the Common Market countries got together to draw up a fisheries policy. They had never previously had any fisheries worth bothering about. It was the United Kingdom's fisheries that they decided should be carved up once the United Kingdom had entered the EEC.

The gradual growth of the Common Market will mean more indecision, more time-wasting and more unjust decisions. We have already seen Greenland getting out and the Greeks renegotiating their terms. The very least that we must seek to ensure is that no payments are made until this injustice has been corrected. In the long run, there is no alternative for the benefit of the United Kingdom except that we cease to be members of the Common Market.

6.43 pm

Mr. Maurice Macmillan (Farnham)

I wish to be as brief as possible. I hope that the right hon. Member for Western Isles (Mr. Stewart), for whom I have great respect and affection, will forgive me if I do not follow his argument. Nor shall I follow the argument, much though I am tempted, of the right hon. Member for Battersea, North (Mr. Jay). Both right hon. Gentlemen made good debating points in building up the argument for leaving the Community. They ignored some of the benefits such as the political and wider economic benefits. The arguments put by the right hon. Gentlemen, relevant though they may have been to leaving the Community, seem completely irrelevant in respect of the real problem that we are debating today.

I intend to congratulate my right hon. Friend the Minister of Agriculture, Fisheries and Food on his achievement. I should therefore perhaps declare an interest. I am concerned in a farm partnership. On the whole, my right hon. Friend seems to have achieved a not unreasonable increase in farm prices considering an over-rapid move out of agriculture at a time of high unemployment and at a time when farm incomes have been falling. The agreement has been achieved at no greater cost to the housewife in food prices than the increase that my right hon. Friend was originally seeking. It is, judging from his words, entirely marginal.

There is no need for my right hon. Friend the Foreign Secretary or any member of the Government, including the Prime Minister, to be remotely apologetic to the House or to the country for their handling of matters in the Community, not just recently but over the years. I would however suggest to the Government that it would be an error if Ministers became too indignant over what has just happened because a number of Opposition Members, and I regret to say, some of my hon. Friends, are trying to use this incident to provide evidence where none exists of so fundamental a change that there is no alternative but for us to leave the Community. This argument must be resisted.

There is no doubt that the Luxembourg compromise still remains. There is no doubt that it is in the interests of all the countries in the Community. If it were not, it would not have been used so much. One of the problems has been abuse of the compromise, including to some extent by Britain, and certainly by most of the other countries, forgetting that its terms apply only to "essential national interests". There has been an attempt by our country and by other countries to get their own way when this has simply been a matter of domestic political convenience or possibly even a matter of overriding party interest within the country concerned.

I agree with those who say that it is almost certainly too difficult and also possibly undesirable to codify the Luxembourg compromise. I hope, however, that some clearer idea can be established of how and to what extent it will be used in the future. It is worth following up the idea proposed by my right hon. Friend the Member for Sidcup (Mr. Heath): if the member State concerned is to be the sole judge of what is in its essential national interest—I regard that as a reasonable position—that member State should give some indication of its stopping point before negotiations start, rather than at a later stage.

I believe that Britain needs to try to take a more positive view towards the Community interest, however much we may be arguing against other nations' interests within the Community. If for a moment I may be critical, I feel that the British approach sometimes has failed to distinguish the arguments of nation States which are not "communautaire", to use the European phrase, and so to appear to be attacking the Community as such in trying to protect British interests. What we should point out is that we are defending Britain not against Community interests but against other nations' purely national interests. They are not the same thing.

I can see the point of view expressed by our partners. No one can say that the increase in farm prices is of overriding national interest this year. It is entirely marginal. No one can say that this year's budget contribution compared with what we were seeking is of overriding national importance. It is only a marginal increase of about £90 million over what we were originally prepared to pay. One needs also to recall the success of the Prime Minister and my right hon. Friends in what might be termed special pleading over the years and achieving benefits for the United Kingdom. Therefore their attitude is perhaps understandable in these circumstances and in their consciousness that for the first time the Community has taken a firm stance in its political support for us in the South Atlantic.

Mr. Robin Squire (Hornchurch)

Wobbly.

Mr. Macmillan

My hon. Friend says that its support is wobbly. Is he suggesting that we have not wobbled too when our national interests were at stake? Certainly the Foreign Ministers of the European Community countries, as NATO Foreign Ministers, have been entirely in our support, although for domestic reasons Italy has found it difficult to put that support into practice and continue sanctions, and is thus seeking only the same sort of special derogations as we are seeking.

Mr. Squire

rose—

Mr. Macmillan

I would rather not give way because I want to finish quickly.

The problem is that the common agricultural policy is virtually the only common policy of the Community. It is awkward for us and it will take time to resolve. Meanwhile the budget in principle, although not perhaps in this year, and the method of arriving at the budget must be considered of overriding national interest. It is the lack of balance between what we put in and what we take out on current account that is the major problem, although when one considers it in the terms of our total current expenditure that is almost marginal in itself.

The difficulty is that there is no counterbalance from the Community for our position on capital account. I hope that in the future my right hon. Friends can urge that more effective use is made of the facilities which the Community could provide to finance major items of capital expenditure which would benefit the United Kingdom and to some extent counterbalance the outgoings on current account. We are not yet getting the full benefit of membership of the Community as provided in the treaty which we could get if the Government could urge the Commission to give some impetus to develop what my hon. Friend the Member for Kensington (Sir B. Rhys Williams) has called a united Community market for capital. This would help us particularly in developing our invisible trade to match the rapid development of our visible trade.

We could perhaps get better value by trying to urge on the Community such policies rather than over-exaggerating the importance of the budget contribution on current account. If linkage is to be used, it could be introduced here. An important matter in regard to capital investment must be the problem, which is bedevilling not only the countries of Europe but the whole of the Western world, of exchange rates and interest rates. A European initiative is needed before we can try to do much in the wider world.

I plead with my right hon. Friends to stand firm on the Luxembourg compromise but not to make too much of it because clearly no one has an interest in doing away with the veto and all have an interest in seeing that it is used more coherently in future.

6.53 pm

Mr. Julius Silverman (Birmingham, Erdington)

I had intended to speak in this debate as the Chairman of the European Legislation &c. Committee to which I shall come in due course. That is a theme not directly related to the major theme of the debate, but it is not irrelevant.

Before dealing with that I want to say some things about the Luxembourg resolution. The White Paper of 1971, Cmnd. 4715, set out clearly the view of the Government on what the Luxembourg agreement meant; it was not just a vague gentleman's agreement. I shall read out the words because they are extremely important: The practical working of the Community accordingly reflects the reality that sovereign Governments are represented round the table. On a question where a Government considers that vital national interests are involved, it is established that the decision should be unanimous. That is the document which the Government produced before entering the Common Market in 1971, and for which the right hon. Member for Sidcup (Mr. Heath) was responsible. It goes further: Like any other treaty, the Treaty of Rome commits its signatories to support agreed aims; but the commitment represents the voluntary undertaking of a sovereign state to observe policies which it has helped to form. There is no question of any erosion of essential national sovereignty; what is proposed is a sharing and an enlargement of individual national sovereignties in the general interest. All the countries concerned recognise that an attempt to impose a majority view in a case where one or more members considered their vital interests to be at stake would imperil the very fabric of the Community. Therefore it is clear that this departure from the Luxembourg agreement is serious, probably more serious than the actual financial issues involved.

Lest it be thought that this was just the political view advanced to persuade the electorate, I must point out that the Foster committee, which made recommendations to deal with European legislation, was working upon the basis of unanimity. That committee was set up about 10 days before Britain joined the Community. Upon its recommendation the European Legislation &c. Committee, now known as the Scrutiny Committee, became operative. The Foster committee said: What is under consideration is a part of the making and amending of the law of the United Kingdom, no less. That applies, of course, to budgetary matters, farm prices and all the rest. They become part of the law of the United Kingdom. The committee went on: As the inevitable consequence of the entry of the UK into the Community substantial and important parts of that law are now, and will be, made in new and different ways and with new and different consequences. The important point, as the committee said, is that: The Executive itself by agreeing with the other member Governments to a proposal for legislation makes the law i.e. has assumed the constitutional function and powers of Parliament. Therefore, when we are talking about the Luxembourg agreement we are talking about Parliament and its sovereignty as a lawmaking body. Let us never forget that. In paragraph 36 of its report the Foster committee said: It remains central to the United Kingdom concept and structure of Parliamentary Democracy that control of the law making processes lies with Parliament—and ultimately with the elected Members of it. It follows therefore that new and special procedures are necessary to make good so far as may be done the inroads made into that concept and structure by these new methods of making law. That is the basis upon which our committee has worked. Therefore, I regard as even more important than the finance the departure from sovereignty which this implies. I cannot accept the suggestion that it has just happened once and that the Luxembourg agreement remains in existence. This has blown a hole in the Luxembourg agreement. The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) said that it would be a good thing if it wont and that it is against British interests largely to retain it, except in an attenuated form. I would point out that the veto has been used in comparatively few cases.

Certainly, Labour and Conservative Governments have used it in comparatively few cases. However, because of the veto's existence, in the vast majority of cases decisions on individual issues and on legislation have been reached by agreement and compromise, instead of by a majority overriding a minority. Moreover, it is essential that Britain should retain the right of veto. Our economic structure is basically different from the economic structures of the other member States. To a great extent, they base their economies on a large agriculture sector. It plays an important part in their economies and in their political systems. As Britain has a different economic structure, it must retain its power of veto under the Luxembourg agreement. If the Community survives, it might even be better to include it in the treaty itself.

Many hon. Members will agree that British farmers may be entitled to higher prices. Indeed, the right hon. Member for Sidcup (Mr. Heath) made that point. However, our contribution supports not only British farmers but French, German and Italian farmers. If the British Government chose—whether by intervention or by subsidy—to support British farmers and to ask the taxpayer or the consumer to pay more to give farmers higher prices, that would be different. Many hon. Members could agree with Sir Henry Plumb on that issue. However, that is not the issue. The point at issue is the British taxpayer's support of farmers in Europe.

The European Legislation &c. Committee was born of the Foster committee's report. It is—an all-party Committee that has an enormous amount of paperwork to consider. So far this Session I believe that we have considered 435 documents. In the previous year, I understand, the figure was 735. I have not made any precise calculations, but I estimate that about two-thirds of those documents have legislative effects. They are either regulations that come directly into operation, or directives upon which we are to legislate. Thereafter, they form part of British law. Indeed, they represent an enormous addition to British law. The ordinary Back Bencher has not the time to pursue such innovations in addition to his ordinary examination of our law and that is why the Scrutiny Committee was set up.

Many Committee members believe that a good deal of legislation and directives should not be foisted on member States. For example, we have to consider regulations on matters such as motor cyclists' rear view mirrors, the use of asbestos, the noise made by lawnmowers, the noise made by coffee grinders, the pollution of ground waters, radioactive waste, electrical equipment, and so on.

Sir Anthony Meyer

Is the hon. Gentleman saying that it is neither desirable nor necessary to enforce common standards for radioactive waste and that everyone should do as he pleases?

Mr. Silverman

I am not suggesting that there is no merit in some of the items. Nor am I saying that the view that I have given is the Committee's unanimous view. However, some Committee members believe that much of the legislation that encumbers our statute book should be decided by national Governments. That is the point. Some of the measures are introduced in the interest of harmonising inter-Community trade. The noise made by lawnmowers is relevant to trade barriers. However, I think that legislative measures will have little effect and that trade barriers will continue despite the fact that trade within the Community is supposed to be free.

At some stage Parliament must decide whether our legislation should be encumbered with items that should be decided—and largely used to be decided—by national Governments. We have a good working Committee with useful and informed advisers. It is extraordinary that although all parties are represented on the Committee from time to time, and although its members are both pro and anti the Common Market, there is a fairly good working relationship. I have been a member of the Committee since its inception and I believe that there have been only two Divisions. All Committee members thoroughly examine the legislation that comes before the House in critical scrutiny.

I have taken this opportunity to mention the work that the Committee does because we are the servants of the House. We are performing a function imposed on us by the House. We are the dog that barks to acquaint the House with what is happening.

Mr. Arthur Lewis

Both the Chairman of the Committee and its members deserve our thanks and appreciation. However, whatever they may say, do or recommend to the House, is it not a fact that we cannot amend the legislation? We have to carry it out. Is that democracy?

Mr. Silverman

My hon. Friend is wrong. Sometimes the time given to debates in the House and the time at which they take place is criticised.

Mr. Lewis

We cannot amend the legislation.

Mr. Silverman

I accept that. However, before a Minister goes to Brussels to vote, there should be a debate in the House so that he knows what to do.

Mr. Lewis

I appreciate what the Committee does, but hon. Members have no say in amending legislation. That is not democracy.

Mr. Silverman

The House cannot amend. We can only instruct our Minister not to vote for or against a particular motion. The disappearance of the Luxembourg agreement will have this effect: both the Committee and the House will have lost their teeth. I welcome the intervention of my hon. Friend the Member for Newham, North-West (Mr, Lewis) so that I can make that point. The House still has that right today, although I believe that if the matter is not debated before the Minister agrees in Brussels, he should make his explanations to the House orally rather than in writing. A written answer to a question is not good enough. Nevertheless, the House and the Committee excercise an important function in that regard.

If the right of veto disappears, the rights of both the Committee and the House disappear with it. I hope that that matter can be borne in mind by the House.

7.10 pm

Mr. Tony Marlow (Northampton, North)

In present circumstances, with our forces in the South Atlantic, with our young men being killed and our ships being sunk and with our problems in the war, it is very difficult for right hon. and hon. Members to think of anything else. But there is a connection between this debate and what is happening in the South Atlantic, as those who read today's Financial Times will be aware. As its European correspondent, reporting from Brussels, says: The Falklands conflict has been a constant thread running through Britain's difficulties in the EEC over the past few weeks. Several governments were encouraged to disregard the British veto on farm prices last week because they saw it as an ungenerous response to speedy adoption of the ban on Argentine imports in mid-April. If there is any truth in that whatever it is a disgrace and it is shameful. It is something that will be taken into account by the people of this country when they consider their relationships with the other countries of the European Community. That will be a political fact and a political factor.

My right hon. Friend the Member for Sidcup (Mr. Heath) said that we should not pay too much attention to public opinion in that field. When my right hon. Friend refused to take account of public opinion he got his comeuppance. We are now fighting a war in the South Atlantic not just on behalf of this country but on behalf of world peace and on behalf of those issues that matter, not just to us, but to other Western European countries as well. Right hon. and hon. Members will be fully aware of the fact that our European partners came in on our behalf with sanctions as soon as the conflict got under way. We were full of praise for their solidarity. As my right hon. Friend the Foreign Secretary said, their behaviour was exemplary. But sadly, no sooner was the ink dry on the glowing tributes on this practically meaningless gesture than second thoughts started coming through. It was a gesture but, in practical terms, it was meaningless.

If one is talking about sanctions on new business when existing business can go on and if one is talking about sanctions on new business over a likely period of time, by the end of which all that new business can be got through, the gesture becomes practically meaningless. No sooner was the ink dry than second thoughts—panic-stricken second thoughts—started coming through. Last week, we had an insulting and partial one-week extension. European solidarity has been drowned in a stinking bog of vested self-interest and pious platitudes while little New Zealand—

Sir Anthony Meyer

It is monstrous that my hon. Friend should be called at all—

Mr. Teddy Taylor (Southend, East)

On a point of order, Mr. Deputy Speaker. Did the so-called hon. Member for Flint, West (Sir A. Meyer) say that it is monstrous that my hon. Friend the Member for Northampton, North (Mr. Marlow) should be called to speak?

Sir Anthony Meyer

No reflection on the Chair was intended.

Mr. Taylor

On a point of order, Mr. Deputy Speaker. Surely it is quite shameful for any hon. Member to say that it is monstrous that one of his colleagues has been called to speak. Is that not a reflection on the Chair? Should not my hon. Friend withdraw his remark?

Sir Anthony Meyer

If there was any reflection on the Chair, of course I withdraw it. We all admire the heroism with which my hon. Friend the Member for Northampton, North (Mr. Marlow) is fighting the battle of the Falklands, at great risk to his own life. He might have the decency to admit that the French Government have given unfailing support to Britain throughout the Falklands crisis. If he has any generosity in his soul, he will say so.

Mr. Marlow

If my hon. Friend the Member for Flint, West (Sir A. Meyer) had listened to what I said at the start, he would have realised that the French Government, among others, were linking sanctions and their support to our being more flexible on other matters of vital interest.

Mr. Charles Morrison (Devises)

My hon. Friend has made several direct and implied criticisms of our European partners. Does he believe that if we had been outside the European Community any member State would have bothered to support us at all?

Mr. Marlow

I can only say that little New Zealand, with 1 per cent. of the population of the European Community, is not only supporting us, it is providing us with a frigate. What are the Europeans doing by comparison? Rich, spoilt, Western Europe was ratting on us while the Commonwealth was helping us out. Europe, that receives so much and demands so much from Britain was giving us so little.

This week, apparently, seven European countries have gone for indefinite sanctions. It is a trading bloc. One must have them all or none. Whatever people say, if two European countries do not follow sanctions, free trade within the Community means that the sanctions are meaningless.

I turn now to agriculture prices. Let us take the position whereby agriculture prices, farm prices, go up more than is agreeable within the United Kingdom. That has two effects. The first is on the budget. It means that agriculture policies within the Community take a bigger slice out of the budget than they would otherwise do. Therefore, those parts of the Community budget from which we would benefit get less. Therefore, if agriculture prices go up higher than we would agree to, we have to pay more, net, into the Community budget.

There is a second and equally important, if insufficiently recognised, point. It is that we are net importers of European food. In 1980 we imported, net, European food to the value of some £800 million. If European food, as it was, is 50 per cent. higher in price than world market prices, our housewives must find an additional £250 million to £300 million to pay the European farmers. My right hon. Friend the Member for Sidcup said that our farmers need a price increase. But by giving our farmers a price increase, we also give the European farmers a price increase, which we here have to pay for. So what happened when they voted against us and did away with the veto last week? They voted but we paid. That must be, under any terms, constitutional or judical, quite wrong. On the basis of the vote last week, they can plunder uninhibited both the Treasury vaults and the housewives' handbag. There is nothing whatever under majority voting that we can do about it.

We have been mugged. Just as President Galtieri has temporarily robbed us of our sovereignty in the Falkland Islands, so Gaston Thorn and his henchmen have robbed us of our assets through suspending the veto. The burglars of Brussels are no more entitled to walk away with the swag than Galtieri himself.

The White Paper under which the House agreed to join the Community contained the following very important sentence: As has been made clear … where member states' vital interests are at stake, it is Community practice to proceed only by unanimity. That is the basis on which the British people joined the Community and on which the House passed the European Communities Act 1972. Short of another Act and another referendum, the only honourable, proper and constitutional basis on which Britain can remain a full member of the Community is the restoration of the veto.

We need changes in the Community. To bring about a solution of our problems, two things must be done. Like other hon. Members, I love Europe. I wish to get on with Europe and to work with Europe, but there are two running sores.

The first is the budget. In 1980, we paid £700 million net into the Community budget. Last year we paid £400 million net, and this year, under the new arrangements, we are likely to pay another £400 million net. France, Holland and Denmark pay nothing.

Mr. Dykes

Will my hon. Friend give way?

Mr. Marlow

No, I shall not give way. Every Irish citizen benefits from the Community budget to the extent of £100 per year. If we derived benefits from membership of the Community that other countries did not receive, that would be right, fair and reasonable, but we do not. If we do not receive additional benefits, why should he pay a penny piece more than any other Community country?

The second running sore is the common agricultural policy, which causes the budget problems, increases food prices for the poorer people of this country and forces up the cost of support for citizens on social security benefits and of other things that must be provided from taxpayers' resources.

Much though we wish to get on with Europe and to work with it in spheres of common interest, so long as those running sores exist we cannot do so. The one thong that we can and must do is to withdraw, not from the Community, but from the common agricultural policy. That will solve the problem of our budget contributions at a stroke. At a stroke, we shall be able to bring down food prices and cut the cost to taxpayers of social security benefits and so on. In that way, we would solve the problems between the Community and ourselves. We could then work together far more effectively both politically and in terms of trade, and industrial cooperation because we should be working in areas of common interest and not in constant conflict.

Hon. Members may say that the other countries in r he Community will not allow us to do that. Why should we not do that? We have the North Sea oil that they want. We have the agricultural markets that they want. We have a £2,000 million trade deficit in manufactured goods, which they also want. We have political instincts and abilities that they want in co-operation with them. Why should it not be done? If we demand that, common interests will predominate. Their interests and our interests agree that even in those circumstances we are better acting with Europe than without Europe.

Why should we not stand up for British interests in this? That is what the House of Commons is for—to sustain British interests. I remind some right hon. and hon. Members that it is not about sustaining European interests but purely about sustaining British interests. That is the duty of the House. Just as our young men and our warships are sustaining British interests in the South Atlantic, so we here should ensure that our Government sustain British interests in Brussels.

Mr. Dykes

On a point of order, Mr. Deputy Speaker. There have been repeated exhortations from the Chair about the virtues of not interrupting hon. Members' speeches and about being brief, especially at this rather sensitive stage when the pressure of time begins to build up. Does not that apply to hon. Members who seem repeatedly to interrupt every other hon. Member's speech but who seem nevertheless to be called with monotonous regularity?

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

I am sure that the hon. Member for Northampton, North (Mr. Marlow) has heard the plea for brevity. So far, his speech has been as long as any recent contribution.

Mr. Moate

On a point of order, Mr. Deputy Speaker. My hon. Friend the Member for Harrow, East (Mr. Dykes) referred to my hon. Friend the Member for Northampton, North (Mr. Marlow) being called with monotonous regularity. Is it in order to cast such reflections on the Chair as to the manner of selection?

Mr. Marlow

I am aware of the time that I have taken, but to a large extent it has been taken up by points of order and the wish of other hon. Members to intervene, which I have been only too happy to indulge.

I have one further point I wish to make. It is suggested that if we come out of the common agricultural policy we shall face a massive bill in paying for our own agriculture policy and our own deficiency payments. It must be recognised that already we are paying for our agriculture policy, first, through the budget contribution, and secondly, through the housewife having to pay higher prices than would otherwise be the case. Moreover, the housewife is also paying for the agriculture policy of farmers on the Continent. If we came out of the common agricultural policy, we should have the benefit of that saving and we should be spared in the Community budget. I genuinely believe that if we are parted from the common agricultural policy and the problems of the budget we shall get on like a house on fire with our European friends.

7.26 pm

Mr. Douglas Hoyle (Warrington)

It is interesting to see the Conservative Back Benches in disarray as a result of the speech of the hon. Member for Northampton, North (Mr. Marlow). Although I did not agree with his nationalistic attitudes towards the Common Market, on one point he was rather nearer to the facts than the Foreign Secretary was. The hon. Gentleman was right to say that our EEC partners have been lukewarm over the Falklands and to draw the distinction that, although sanctions may apply to new contracts, they do not apply to existing contracts. I should like to know how much of the trade is carried out under existing contracts. I suspect that it is a very substantial proportion. Moreover, there is no doubt that there is a link between this and our partners' attitudes on agricultural prices and that it was seen as a means of getting price increases through. The hon. Gentleman was right to draw attention to that, despite the dismay that it caused to some Conservative apologists for the Common Market.

The breach of the Luxembourg compromise is a very serious matter. My right hon. Friend the Member for Battersea, North (Mr. Jay) was right to draw attention to some of the statements that were made, and to the White Paper issued by the Conservative Government when the right hon. Member for Sidcup (Mr. Heath) was Prime Minister. However the right hon. Member for Sidcup tried to get out of it today, that White Paper was quite clear on the subject. It said: On a question where a Government considers that vital national interests are involved, it is established that the decision should be unanimous. The right hon. Gentleman today spoke differently about what is a national interest, but there is no doubt that at that time the British public were taken in—that is the right phrase—and led to believe that the interests of this country would be protected.

It was not only the Conservative Government under the right hon. Member for Sidcup (Mr. Heath). It was also the Labour Government, under my right hon. Friend the Member for Huyton (Sir H. Wilson), in which a prominent part was played by the then Home Secretary, the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), who now takes great interest in Scottish affairs. The 1975 White Paper states: It remains the unchallenged right of each member State to decide which issues it does regard as sufficiently important to require unanimous decision. My right hon. Friend the Member for Battersea, North also quoted from the pamphlet persuading people to vote "Yes". Another passage in that document states: No important new policy can be decided in Brussels or anywhere else without the consent of a British Minister answerable to a British Government and British Parliament. That is precisely the point that my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman) made. Where is that safeguard now? It is no use anyone pretending that we can wash that away. The British public have lost many of the safeguards that they thought they had. When we entered the Common Market the British public did not have a chance to express an opinion. At the time of the 1975 referendum the British public were sold the safeguard that, with regard to the EEC, power would reside with the House. There is no doubt about that.

Mr. Alan Clarke (Plymouth, Sutton)

All part of the big con.

Mr. Hoyle

The hon. Gentleman is joining what appears to be the majority view on the Conservative Benches. I am pleased about that, because it was a big con.

Other promises have not materialised. Where is the Eldorado that we were promised? We have 3 million unemployed. The EEC has not protected us from the world recession. We have fared worse than the other countries in Europe, because those countries know how to look after their interests better than we do.

France has benefited from the agricultural policy. Germany has benefited from the industrial policy. We cannot impose tariffs or any restriction on German goods coming into this country. We have run up a large deficit with Germany in manufactured goods. It will continue that way.

As we rightly said at the time of the referendum and when the right hon. Member for Sidcup took us into the Common Market, it does not serve our interests because we are not an agricultural country; we are an industrial country. We must be able to trade with the world. We must be able to buy our food and raw materials at the lowest possible price.

Mr. David Myles (Banff)

The hon. Gentleman said that Britain was not an agricultural country. Does he know that agriculture is the biggest single industry in this country?

Mr. Hoyle

I recognise that. I recognise the efficiency of British agriculture, but it is true that our agriculture industry is not large in the sense that other countries are not importers of food to the same extent as we are. That is our problem, and it has been referred to by speaker after speaker. The EEC does not serve our interests. We are a manufacturing country. We cannot get away from that basic weakness.

I am sorry that the right hon. Member for Glasgow, Hillhead is not here. He often quickly leaves the Chamber.

Mr. Arthur Lewis

He always does.

Mr. Hoyle

The right hon. Gentleman talked about the necessity for changes and a new emphasis in the Community away from agriculture. What was the right hon. Gentleman doing when he was President of the Commission? That was the time that the reform should have been made. However, there is little to show for the time when the right hon. Gentleman was President of the Commission.

Another factor that has been important to many industries, particularly the textile industry, of which I claim to have a little knowledge, is that we took away the right to implement clauses against dumping. Again, that is thanks to the Common Market. Too little has been done too late. We have been tying ourselves up with the EEC, which bears no reality to the needs of this country.

I am sorry that the right hon. Member for Sidcup did not allow any hon. Members to question him during his speech. He said that we were members of a club. The burdens on members of any club vary. It gets a bit much when one is standing the rounds every time. When one is buying the beer and the drinks every time, one gets a bit fed up. Therefore, one decides whether one still wants to be a member of a club, where all the members are sponging on one all the time. Therefore, we must reconsider the matter.

That is why the Labour Party policy on Europe is important. I speak as a member of the national executive committee of the Labour Party. I respect the decision of the Labour Party to leave the EEC. That decision was carried overwhelmingly at the last Labour Party conference by a majority of six to one. We intend to implement that policy when we return to office. It is our policy to withdraw from the EEC.

At this point I part from the hon. Member for Northampton, North. We want to withdraw from the EEC and the Treaty of Rome, but not from Europe. That is the difference. We want to continue our friendship and our relations with Europe with a policy that serves the interest of this country better than at present. We want to remain on friendly terms with Europe. We want to trade with it.

From day one of the Labour Government coming to office we would seek the agreement of our partners in Europe and make it plain. We are having discussions on that matter now. That is Labour Party policy. We can work out an agreement that we shall withdraw from Europe, but still preserve our trading links. There is no reason why Europe should not want that. It has done well out of trade with us. European countries still want to buy British oil. France still wants a market in Britain for agricultural products. Germany has done well.

From a Socialist point of view, our problem is that we cannot plan our economy if we remain in the Common Market. We cannot begin to plan our trade. We cannot begin to restrict imports from the Common Market. Our vital industries are threatened.

Mr. Roy Hughes

indicated assent.

Mr. Hoyle

I see that my hon. Friend agrees with roe. There is a large steel industry in his constituency.

We have seen what has happened to the automobile industry. I went to see the Japanese ambassador because I had a bitter complaint about Japanese trade policy. I still complain bitterly. He said that there would be a voluntary restriction on cars coming into Britain of about 10 per cent. It has remained at about that level. However, he said that what the Japanese gave up would be replaced by our partners in the EEC. That is true. Almost 46 per cent. of the motor vehicles coming from abroad are from the EEC.

Many British people do not realise the full extent of those imports. Many multinational manufacturers such as Ford, Vauxhall and Talbot import completed vehicles from the Common Market.

Mr. Arthur Lewis

That may be true outside the House, but let my hon. Friend spend five minutes walking around the car park in the House to see the number of cars there from the Common Market. He should note that the potential leader of the Social Democratic Party cannot even buy a car from an EEC country. He has a Volvo, which is the only car that is made in a European country that is not in the Common Market.

Mr. Hoyle

I am grateful, as always, to my hon. Friend for making that point. We should set an example by buying British cars whenever possible. I also advocate that we should buy British textiles whenever possible.

The point that I am making remains true. If we are to be able to plan our industries, build them up and aim for markets in the world, we must have temporary restrictions on imports from all over the world. A ceiling must be imposed, which should not be breached by members of the Common Market.

When we return to power we intend to offer hope to the British people that we shall come out of the Common Market, and that we shall escape from the albatross that the right hon. Member for Sidcup placed around the necks of the British people without their consent.

7.42 pm

Mr. Hugh Dykes (Harrow, East)

I wish to make a brief speech, and if I follow the brevity of my hon. Friend the Member for Aberdeenshire, West (Sir R. Fairgrieve), who spoke earlier, I shall be pleased. A large number of my hon. Friends wish to speak, and it is especially important to be brief at this sensitive time of the day when many hon. Members are still attempting to speak in the debate.

Although he has now left the Chamber, I was concerned that the Chairman of the Scrutiny Committee, the hon. Member for Birmingham, Erdington (Mr. Silverman)—who has chaired the Committee extremely well all the way through and worked extremely hard—slightly gave the impression that the veto right was inherently indispensable to the Committee's functioning. While it is an important part of the rationale of the Committee, none the less, even if majority voting were increased in future, that Committee would still have a vital task in the House.

I, too, share the view that the farm price increases were not only acceptable but were, indeed, essential to the British farming community and to the other member States. That was the awkward point that our colleagues in the other member countries had to face. For them, the farm price increases had to be agreed by a certain date so that the new financial season could start for farmers. It is equally true that we had our own interests to look after. That was right. That was the way that the Government handled the matter. It was pleasing to see that an acceptable and satisfactory compromise has resulted for one additional year, the third year in the original plan for the budget compromise on payments. This will provide us with a good opportunity to negotiate a satisfactory deal for future years.

Even allowing for the fact that we shall still be making a net contribution that I would regard as modest in financial terms—other people might disagree and say that the figure is too high—that has never worried me unduly. It is, however, essential for the United Kingdom to have an equitable basis for its budget contributions. However, the actual amounts involved, particularly last year when the figure was modest in final outturn effect, partly because of the move in world food prices, have been tiny in comparison with the total amount of public spending, the total amount of local authority spending and the total amount of spending in one area such as the social services. Indeed, the sad reality now is that the total cost of the task force is already approaching the net budget contribution figures that we are discussing. Of course, that is a quite different aim, and I accept that emergency defence spending is in a different category. But on all relative amounts of money, one could not say that our budget contribution problem was other than a serious and important problem but not more than that. It is not a potential reason for leaving the Community.

Part of the problem is our efficient agriculture. Although our agricultural production ratio has increased to about 70 per cent., which will continue to rise in the future, paradoxically, even with the most efficient agricultural industry of all the member States—perhaps with the exception of Holland and Denmark—we still do not produce more of our total national needs. That problem will diminish as time goes on.

The only way of reducing the proportion of the amount of money spent on farming—one cannot do it in absolute terms; there is no way to reduce the amount being spent for farmers in the Community—is to build up the Community budget on other purposes and to enlarge the Community budget deliberately as time goes on. The necessary time must be allowed to achieve such an object.

That would mean almost automatically that more money would accrue to Britain for other industrial and economic purposes—non-farming purposes which will do so much for development in the regions for instance.

It depresses me that there are far too many hon. Members who are intent on undermining the European Community and all it should mean. A Community means the member States working together, not the United Kingdom constantly standing—through the Labour Party Party most of all—against the other member States and saying "We cannot trust these foreigners, old boy; their eyes are set more closely in their heads than other people's, they have horns and tails, they eat garlic and they do not speak English very well and it is difficult for us to co-operate with them because they are always working together in a grave international conspiracy to do us down." That is complete nonsense.

It was refreshing to hear the words of my right hon. Friend the Member for Sidcup and the right hon. Member for Glasgow, Hillhead (Mr. Jenkins). They put the picture in perspective. There are issues on which we must make a stand and there are other issues on which other members States have to make a stand. It depends on the arguments. That is perfectly normal. The purpose as a successful Community in the future must be to move forward through the co-operative endeavours of the member States. Britain would be the leader in many areas such as insurance and financial services. We could become a whole-hearted member of the European monetary system. There is the air service network that we so badly need. There is need for more company mergers between the member States. EEC company law still trails years behind. We need to have the trademark office in Britain. At the moment, we do not have any significant Community institutions here. We can build on such things in the future if we resume the old traditional enthusiasm for the European Economic Community, which is still incorporated in the Conservative Party and is manifestly evident in the Alliance, but has now disappeared almost completely in the Labour Party. We have also one or two awkward customers on the Conservative Benches. Their voice is a small one in comparison with the total and repeated commitment of my right hon. Friend the Prime Minister to our membership of the Community.

The Community is faltering now because of the failure of will among the political leaders to take it forward. The problem is greater here for various historical and more recent reasons. It is time that the House of Commons once more found its courage and became enthusiastic again.

7.46 pm

Mr. Thomas Torney (Bradford, South)

I begin my speech by commiserating with the Foreign Secretary. I am sorry that he is not in the Chamber. I commiserate with him because he has had to negotiate the budget, and his right hon. Friend the Minister of Agriculture, Fisheries and Food has had to negotiate the farm prices, at an extreme disadvantage with other members of the Community—I shall not say "partners" because I do not believe they are, or ever have been, partners. They have taken every possible advantage of the serious position in the South Atlantic. I shall not go into a discussion about that. Nevertheless, the price of what little support they have given has been heavy and has made the jobs of the Foreign Secretary and the Minister of Agriculture a great deal tougher.

Both of those Ministers are aware of my position on the Common Market. But I also felt genuine concern when I listened to the right hon. Member for Sidcup (Mr. Heath) lecturing the Foreign Secretary on what he had done wrong and what he should have done. I listened with great care to the right hon. Gentleman. I am sorry that he is not here now. From what I could make out of the gobbledegook, the Foreign Secretary, instead of being pushed over by his Common Market colleagues, should have lain on his back and allowed his colleagues to walk over him. That seems to have been the intention of the strange speech from the right hon. Member for Sidcup. He appeared to say that we did not give away enough, that the pressure over the Falklands to come to an agreement on the budget and the farm prices was not enough, but we should have given way before any pressure was put on.

I listened carefully to the hon. Member for Harrow, East (Mr. Dykes). A sum of £400 million may be a mere bagatelle to the hon. Member for Harrow, East, but in view of the Prime Minister's utterances I doubt whether she is happy about it. I thought that she intended to press for a much greater reduction. Here again, she has been the victim of the fact that, due to the spot of bother in the South Atlantic, she has had to give way. That disturbs me greatly.

The significance of the farm price review is not merely the fixing of these prices, important though that is. It is rather the fundamental principle that in the last resort important decisions affecting our vital interests must be decided by Westminster and not by an untouchable gathering of bureaucrats in Brussels, who are determined to use all possible means to advance their national interests no matter how much other nations suffer, and to use whatever means or practices are necessary, no matter how sharp.

We must realise that the British taxpayer is still paying for the over-production of French agriculture, despite the fact that Britain is the second poorest nation in the Community while France is one of the richest. The rebate still leaves Britain bolstering the agriculture of these richer countries to the tune of at least £400 million.

The rebate secured is for only one year. It could well increase our contribution in the future. If our total contributions go up, obviously our percentage position will worsen.

The British people understood that when our vital interests were threatened we could always use the veto. That was but an empty promise. In future negotiations, Britain will be left with the prospect of settlements agreed virtually over our heads. As a result, our vital interests will be completely ignored by continental Governments, whose sole purpose within the EEC is to feather their own nests, regardless of everyone else. The trouble with Britain's attitude to the market is that we fight wearing boxing gloves whereas our so-called partners knee us in the crutch.

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

Does the hon. Gentleman agree that similar speeches are made in every national Parliament in the Community, and therein lies the problem?

Mr. Torney

Of course I realise that such speeches are made in every Community country. Possibly the Governments of those countries take more notice of such speeches than do the British Government.

When we were in Government, I recall that one of my colleagues who negotiated in the Common Market found the going extremely tough. No doubt the Foreign Secretary has in the past few weeks found the going tough in more ways than one. My colleague said "Ask some questions, show the discontent about what the Common Market is doing, because that will bring it home to the other Common Market Governments that the feeling among the British people and the House of Commons is that we are not getting a fair crack of the whip." I am proud to be able to say what I am saying, because I hope that it demonstrates to the Governments of the Common Market countries that, unlike some of our Ministers, the British people are not prepared to be walked over. We in this House are not prepared to be walked over.

We must not forget the consumers. We are all consumers and some of us are also producers. I have difficulty accepting the Minister of Agriculture's statement about how much the farm price review will increase prices. I believe that it will be much higher than the official estimates.

Many hon. Members are apologists for the Common Market. They are mainly Conservative Members, but there are also some Opposition Members who in their beliefs and utterances are much closer to the Conservative Party than to the Labour Party. They minimise the effect upon the housewife. Frankly, they do not care. They look upon the Common Market as a sacred cow and do not point out that the British housewife pays twice. First, she pays higher taxes—if she does not, her husband does—to defend the poor French farmer and, secondly, she pays higher prices in the supermarket.

That is the price of membership of the EEC. We know that the Prime Minister is unhappy about the EEC decision to ignore our veto, but she and the Foreign Secretary must have been embarrassed by those Tory Members of the European Parliament who said that they were satisfied with the farm price review. There must have been a considerable split in the Conservative Party in the European Parliament. From this debate, it seems that there is a considerable split in the Conservative Party in the House of Commons.

Judging by some of the speeches that we have heard, there seems to be support for those Tory Members of the European Parliament who were critical of the Minister of Agriculture when he was negotiating these farm prices.

Mr. Arthur Lewis

I am sure that my hon. Friend has made a slip of the tongue, because on four or five occasions he has referred to a European Parliament. There is no such body, as he well knows. It is a European Assembly. If it were a Parliament, many of us would feel differently.

Mr. Torney

Point taken. I accept my mistake. It is an Assembly. I realise that it is merely a glorified talking shop with no teeth and no real power.

It is argued that an increase in farm prices is needed for our own farmers, but how much better it would be if British taxpayers' money was deployed to help only our own farmers instead of going into the already bulging pockets of the French and other continental farmers ! Moreover, would it not be much better if such aid decisions were taken by this Parliament here in Westminster rather than by people in Brussels who are concerned only for their own individual national interests?

What of the future? Just look at our fishing industry. Because of the procrastination of this infernal machine-- the EEC—that industry has gone from bad to worse. Ships have been laid up and hundreds of our workers in coastal areas are unemployed. Without the veto the industry is doomed to utter destruction because we shall have no final say to protect our vital interests. This is only the beginning. The destruction of the veto is only the thin end of the wedge. It will not be available in the future.

The Common Market has its eyes on our shores and on our fish. It will deal as ruthlessly with those as it has done with farm prices. Without the right to veto, it is like going into the South Atlantic without guns or missiles.

The debate gives us an opportunity. There will be a vote. I am not saying that we should come out of the Common Market tomorrow, but in no way have I changed my views. I stick by the opposition amendment. We should withold our payments to the Common Market until we have satisfaction on the veto. Farm prices are important, but the important issue is the fact that our vital interests may be threatened in the future, and we shall want to use the veto.

8 pm

Mr. Charles Morrison (Devizes)

I cannot help wishing that the hon. Member for Bradford, South (Mr. Torney) had taken the advice of my hon. Friend the Member for Harrow, East (Mr. Dykes), who said that we should stop carping about Europe.

The speeches of the hon. Members for Bradford, South, and Warrington (Mr. Hoyle) proved yet again that, although time moves on, the attitude of many Labour Members does not. They are not prepared to accept realities. We are in Europe, we shall stay in Europe, relations with our EEC partners will develop and our ties will grow and strengthen. Despite that, we shall no doubt hear the hon. Member for Bradford, South or his successor making the same speech in 10 or 15 years' time.

I wish to discuss the agricultural prices settlement. I declare my interest in agriculture. It is remarkable that at a time of continuing, albeit falling, inflation, the price settlement will only add 1¼ per cent. to the food price index and only ¼ per cent. annually to the RPI. The hon. Member for Bradford, South said that he did not believe those figures, but he should remember that my right hon. Friend the Minister of Agriculture, Fisheries and Food emphasised last week that the calculations on which the figures were based were exactly the same as the calculations on which the Labour Government based their

Mr. Arthur Lewis

They were wrong, too.

Mr. Morrison

Not only is the increase in food prices for a whole year less than the increase in every month under the Labour Government, but it is clear yet again that food prices are dragging down the rate of inflation rather than adding to it. Between 1978 and 1981 retail prices increased by 64 per cent., while food prices rose by only 48 per cent. If the food price record had been equalled elsewhere, inflation would have been a great deal lower.

It is encouraging that the president of the NFU has recognised that the settlement should create a recovery in real farm incomes. He may not have kicked up enough fuss before the settlement, but at least he has had the grace to recognise the achievements of my right hon. Friend the Minister of Agriculture.

My right hon. Friend is also to be congratulated on ensuring that there was no revaluation of the green pound and on the cut in the milk co-responsibility levy, the continuation of the butter subsidy and the improvements in EEC aid for school meals. It is also excellent that the question of cheap gas for Dutch horticulturists has been dealt with, because that caused considerable difficulty to our industry.

It is remarkable that following the settlement the proportion of CAP funds coming to the United Kingdom is double the level that we were receiving when the Government came to office. That says much for my right hon. Friend the Minister of Agriculture.

My right hon. Friend subscribed and agreed to most of the settlement and it is regrettable that the occasion turned out to be the one on which the agreements on budget linkage and the power of veto were ignored, without warning and, in effect, by subterfuge. Whoever was to blame, that was not very friendly or constructive.

The events of last week have presented the Community with a crisis, but I hope that, not for the first time, they will help to clear the air. I have no doubt that, in theory, when a group of countries conclude that their collective interests are best served by membership of a political and economic organisation, bearing in mind that that must imply a considerable degree of give and take, majority decisions should be the normal course.

However, in the early stages of the existence of such a group—we are still in those early stages—given the many and varied interests of the members, it is necessary to provide each member with a power of veto, so that what may be regarded, for the time being, as a vital national interest can be safeguarded.

After all, that was the origin of the Luxembourg agreement and more than 16 years later, following the accession of four new members of the Community, the same argument holds good. As we know, the use of the veto has been limited, but the threat of its use has had the equivalent effect of demanding unanimous decisions on many occasions.

On the other hand, it is unacceptable to use or threaten to use the veto on matters that can hardly be described as vital. That is an abuse and a recipe for stagnation. How would it be if the House could make only decisions based on unanimity? To take a better analogy, how would it be if Cabinets could act only on the basis of unanimity? Apart from the fact that it would be a bad Cabinet if it were unanimous about everything, I suspect that the country's best interests would not be served by a House or a Cabinet that could act only on the basis of unanimity. Likewise, in the European Community.

Thus, it seems clear that in the future there must be a more precise definition of what is meant by a matter of vital interest. If that can be established—and perhaps the key lies in the Genscher-Colombo proposals—a major step forward will have been taken for the Community. While the disregard of the Luxembourg compromise by several States last week was unacceptable, it is now part of history. I trust that this action can be used as an occasion for thought, and for further action about the use of the veto in future. If the occasion is not so used, it may be the precursor of a fragmentation in the Community, and a loss of unity. That would give pleasure to some, including many Labour Members. I am convinced, however, that it would not serve the interests of the people of this country any more than those of other member countries.

It has been suggested that our membership should be on a different basis from that of others. I can imagine nothing worse. It is clear that if that were to happen our political influence would be sharply reduced; and it should not be forgotten that from the beginning the purpose of the Community has been political.

Economically, it would raise doubts in the minds of investors, both domestic and from outside the Community, about the commitment of the United Kingdom to the Community. Thus, their desire to invest here, rather than in mainland Europe, would be affected. That would be extremely serious, particularly in view of the steady increase in the proportion of total Japanese and American investment in Britain since we joined the Community. A reduction in such investment would create a considerable loss of jobs in the future, let alone the loss of tax benefits and so forth.

Part of my constituency, the borough of Thamesdown, has had between 4,000 and 5,000 jobs created in it over the past five years, many of which have come from the United States. I have no doubt that little of that investment would have gone to that area if we had not been members of the Community. Therefore, I trust that last week's crisis will prove to be no more than a hiccup from which we can recover, and from which we can collectively work as members of the Community towards acceptable solutions to current Community problems.

8.12 pm

Mr. Russell Johnston (Inverness)

I should like to move the amendment that stands in the name of my right hon. and hon. Friends.

Mr. Speaker

Order. That amendment has not been selected. I selected the amendment that we are discussing.

Mr. Johnston

Knowing that you keep these things under benign review, Mr. Speaker, I thought that there was no harm in trying.

I know that the hon. Member for Northampton, North (Mr. Marlow) revels in a kind of jaunty eccentricity, but I thought that some of his remarks went very far. In particular, making comparisons between General Galtieri and Gaston Thorn, of the Commission, was as distasteful and unpleasant as it was ludicrous. We do not advance arguments by making statements of that sort.

It is clear from what the Foreign Secretary said in opening the debate that the Government have no doubt that they wish this country to remain part of the Community. It was equally clear that we are in considerable difficulty because of the way in which our budgetary contributions have worked out, and our lack of success in seeking to achieve a long-term stable adjustment that would take account of this.

The diplomatic failure, both short term in recent weeks and long term, is in large part our own failure. If the Community is in some disarray—and it must be faced that it is—we must share a responsibility for that. We have been in the Community for 10 years, and we cannot escape serious self-examination about the way that we have behaved.

The policy of "They are all out of step but Jock" is simply not good enough. Over these 10 years we have had Governments who, in the main, have failed to take positive initiatives and have thereby condemned themselves to the current negative battles. In turn, that has unquestionably affected our ability to attract the sympathy and understanding of our Community partners. Over the past year we have seen initiatives, to which hon. Members have referred, on decision making and the improvement of the political side of the Community from the Germans and the Italians in the Genscher-Colombo plan, and, from the French initiatives on social and industrial policy by President Mitterrand. We have had nothing at all from this country.

The hon. Member for Liverpool, Walton (Mr. Heffer) asked the Foreign Secretary what the Government's positive proposals had been. The Foreign Secretary said that we should wait. That is the problem. We have waited and waited and neither this Government nor their predecessors have produced positive proposals. They have engaged in trench warfare and built up ill will and resentment.

Let me take three examples. The first is the common agricultural policy. We have taken no initiatives and made no proposals to reform the common agricultural policy. I am not even sure in what role the Minister of Agriculture, Fisheries and Food went to discuss the farm prices. I do not know whether it was to negotiate the best price for British farmers or to link it with the budget and delay the farm price review. We all know that in the real world, given the agricultural interests of France, West Germany, the Netherlands, Denmark and Ireland, a fundamental change in the system is not practical politics but a great deal can be done—

Mr. Teddy Taylor

Like what?

Mr. Johnston

Last year the French threatened to introduce national agricultural measures. We did nothing about that. That would have opened the way to important adjustments and to using direct income support for poorer farmers, thus preventing their social problems from distorting the price mechanism.

Secondly, the Liberal Party has a straight record on majority voting. Before the 1979 European election the common manifesto on which we fought with our European partners said that in those cases provided for in the treaty the Council should take its decision on the basis of majority voting. I believe in moving to majority voting in a sensible way. The directive on insurance last year failed because the West Germans would not accept it. There was no way in which the West Germans could have claimed that that was a vital national interest. Why did we not press for a majority decision to be taken, even though it was in our interests that that matter should not be changed? Out of a mistaken insistence on unanimity we did nothing. It should be within our wit to turn those matters to our advantage instead of sitting po-faced in the corner complaining and waiting for the next row.

The hon. Member for Aberdeenshire, West (Sir R. Fairgrieve) referred to fishing and the fact that there was an occasion when a majority vote could have achieved something that the British wanted with our Community partners.

The Luxembourg agreement has been referred to. I understood from the Foreign Secretary's reply to me that he felt that the French argument—that the Luxembourg compromise has not been breached—was not sound. That is not a view shared by Mr. Edmund Dell, a former Member of the House and one of the few people who has been officially described as a wise man. In a letter to The Times on Saturday he said: The French are probably reasonably secure in their claim that from their point of view the Luxembourg compromise has not been undermined. The Luxembourg compromise has always been a matter of relative power and of the sensitivity of member states to the political problems of their partners. The Luxembourg compromise is in fact one of those things that the British are supposed to be so good at but at which, in Community relations, we have proved so bad: that is, judging how far one can strain an unwritten constitution without breaking it. That is considerable criticism of the Government's position by a gentleman with great experience in Community affairs.

What about initiatives on energy policy? As the right hon. Member for Sidcup (Mr. Heath) said, we have enormous oil resources which give us immediately an advantage in taking a lead in forming an effective energy policy. Why were we difficult over allowing Norwegian gas to go through the United Kingdom? Why have we abandoned our domestic wave energy programme and allowed the Japanese to step in? It is an obvious area for action in Community research. [HON. MEMBERS: "How?"] We are abandoning the programme because it is expensive. But it has enormous potential. I could quote many other examples, but what I have said is sufficient to stress my first contentions that the Government, like their predecessors, have failed to act positively in the Community. To be in the Community without knowing what to do about the fact is the worst of all possible worlds.

I shall not develop my second broad series of points at length because of the hour. They concern ways in which we should change our approach. The Liberal concept of the Community has from the outset been of a Community moving, perhaps slowly and certainly with agreement, towards stronger supranational institutions able to undertake tasks beyond the capacity of individual member countries. There is no point in being in the Community without give and take and common policies which are seen to be fair to all.

I take an example from last week already touched on by the hon. Member for Devizes (Mr. Morrison) concerning Dutch gas price harmonisation. A press release from the NFU draws attention to the fact that The Dutch proposals … will bring about harmonisation of the gas tariff with Heavy Fuel Oil … one year earlier than proposed by the Dutch Government. That is due to the influence and work of the Commission. Harmonisation is often mocked—it has been today—by opponents of the Community, but in practice it is about finding means to remove inequalities within the Community because temporary advantage can so easily become temporary disadvantage. All that the opponents of the Community offer as an alternative is a pattern of bilateral tariff barriers.

Mr. Myles

Does the hon. Gentleman believe that we should have harmonisation by majority decision?

Mr. Johnston

Ultimately, yes. But such matters require sensible progress.

Many hon. Members have mentioned Sir Henry Plumb, the leader of the Conservative group. His activity is critical of the Government, as the Minister is aware. I have criticised the fact that the Conservative group is bloated by the unfairness of the electoral system that produced it, I have been critical of the nationalist statements that it has been responsible for, but here at long last a substantial proportion of it is acting in a Europen sense. That is good. It is what the European Parliament should be about, looking not at national interests but at what is a fair pattern for the Community as a whole.

The second fundamental for progress is an active pursuit of the principles of redistribution. Without the Community we cannot achieve redistribution. I do not see how effective wealth creation and distribution can be achieved other than in the Community. The regional and social funds are the main instruments at this moment, but they are not sufficiently funded to have a significant effect.

The logic of that ultimately is an increase in the budget, but it is reasonable for the Government, before agreeing to such a step, to hold out the possibility of doing so provided that the budgetary system is adapted to take account of GNP, as they have argued. It would also help the Government if they talked not only about themselves and their problems, but about the equivalent problems, for example, that the Portuguese will face when they enter the Community.

I was depressed by the fact that so many hon. Members took a niggardly attitude to Italy's attempts, with great difficulty, to respond to the problems in the Falkland Islands. I doubt whether we should respond to Italy if Italy were in the same position and we had 2 million passport holders in the Argentine. We fail to understand the attempts that our Community partners make, and are ungrateful.

Thirdly and lastly, there is no question but that the relationship between the industrialised countries in Europe and the Third world is advanced enormously by the existence of the Community. People in the Third world want the Community to develop. We should press for the Community to be more active in that area. That is again a good opportunity for us to take the lead.

The Government should take to heart—whatever the Minister may say because of the Government's view, I suspect that he agrees—the speech of the right hon. Member for Sidcup. We must stop behaving as if all the other members of the Community have a united interest in doing Britain down. That is the approach of the keepers of our national inferiority complex. It simply is not true. Much good will has been eroded, but much remains. Let us use it with the maturity of which we are capable. There is no other way.

8.27 pm

Mr. Roy Hughes (Newport)

The debate has revealed that the issue of our continuing membership of the Common Market will not go away.

One views with disdain the developments of the past few days. When Britain is fighting over a sovereignty issue in the South Atlantic, our national sovereignty is being eroded by the Common Market.

Our so-called Common Market partners have dallied and dillied, dillied and dallied over the sanctions issue, and, when Britain is in a corner over the Falkland crisis, they have simply stabbed us in the back over food prices.

I want close and friendly relations with the countries of Western Europe. However, such a relationship can be best obtained without the Treaty of Rome.

It has been said many times in the debate that during the referendum campaign of 1975 we were all told by the right hon. Members for Sidcup (Mr. Heath), Glasgow, Hillhead (Mr. Jenkins) and so on, that if we did not like certain developments inside the Common Market, we could always use our veto. Now, we know all too well that the reality is somewhat different and that the Luxembourg compromise of 1966 has been set aside. As I said to the Foreign Secretary in an intervention, that seems to mean that the basis on which the British people give their consent to our continuing membership of the Common Market has been overturned. To give the Foreign Secretary his due, he seemed to agree with that.

Then we had the reaction of the Minister of Agriculture, Fisheries and Food after the veto had been overruled. Following this arbitrary and dictatorial decision on the part of our partners, it was said in The Times that the matter would be considered urgently by the Government. However, despite all the furious talk the Government simply caved in. President Mitterrand has been unyielding. He has told us that we are bound by the Treaty of Rome and if we do not like it we can always quit. From time to time the Prime Minister has been referred to as the "Iron Lady". However, the Common Market seems to have turned her into a paper tiger.

I am concerned about the effect of the food price rises on ordinary families. We know that the price of basic items, such as bread and sugar, will rise. Butter will rise by 8p a pound and cheese by 7.5p a pound. Consumer organisations have estimated that those increases could cost the average family something like £1.50 per week. Even before the current increases the position of housewives and British taxpayers was simply deplorable as a result of the common agricultural policy.

The April edition of the Journal of the Institute of Economic Affairs carried an article by a Professor Stephen Baker, who said: Membership of the Common Market has raised the cost of some food to almost 5 times as much as comparable world prices. Why should the British housewife or taxpayer continue to subsidise inefficient continental farmers? Why indeed? Again, as Professor Baker says: The costs of the CAP are borne by consumers who pay higher food prices than they would otherwise, and by taxpayers who contribute towards the costs of operating the policy. When I raise these issues with Ministers from time to time, particularly with the economic whizz kids in the Welsh Office, they tell me that these increases are only marginal, and they gloss over them. When I was a student of economics, I was taught that everything was decided at the margin. Long ago, Mr. Micawber gave an elementary lesson in this respect: Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. Those figures, of course, were before decimalisation. Perhaps there is a moral there. However, they illustrate the effect that these food price increases have had on the British economy.

It is my contention, and it has been my contention for a long time, that these increases put an impetus into wage claims. As a result, our products become less competitive in the world markets. Foreign imports then flood in, our factories close, and people are put on the dole.

There is another aspect to consider. Last Saturday, a driver employed in the National Health Service came to see me. He carried valuable cargoes of items necessary for hospital operations. He showed me his pay ticket. It showed £64 gross, £51.40 net. I can only say that he has not got much leeway to pay these increased food costs. It seems to me that Mr. Alan Fisher, general secretary of the National Union of Public Employees is now well justified in increasing the percentage basis of the wage claim on behalf of his members.

The food price increases have made Health Service workers more determined to fight for a just pay settlement. I believe that the Government, if they have not the backbone to stand up to the Common Market, should provide the money for public bodies to meet legitimate wage claims. It is not only Health Service workers but also low-paid workers who bear the brunt of these increases. Then there are the pensioners. One hears talk about a bit of butter. It can only be a bit when pensioners are paying five times world market prices for it. The low paid and the pensioners contribute to the estimated £1,700 subsidy paid to each agricultural worker in Europe. This is again a statement of Professor Baker writing in the Journal of the Institute of Economic Affairs.

One should not forget the £1 million a day membership fees revealed in a parliamentary reply to the hon. Member for Southend, East (Mr. Taylor) some weeks ago. I would have thought that the money would be better spent in attracting new industry to Scotland, Wales and the North-East of England. If the Labour Party is anything at all, it is the champion of the underprivileged. That is its raison d'être. I shall certainly support tonight the amendment of my right hon. Friend the Member for Ebbw Vale (Mr. Foot). We want a fundamental reappraisal of Britain's relationship with the Common Market. That is not to lose sight of the fact that our party's policy is to withdraw from the Community. This was passed by a six to one majority at the last Labour Party conference. The National Executive of the Labour Party reaffirmed the decision by a very large majority only a few days ago.

Last weekend, in Swansea, I attended the annual conference of the Labour Party in Wales. An emergency motion was moved by my own union, the biggest, the Transport and General Workers Union. The resolution deplored the conduct of the EEC. It also said that the Government should indicate their intention to withdraw. I fully support that decision.

8.40 pm

Mr. Alan Haselhurst (Saffron Walden)

I deplore the fact that we are still, nine years after entry and seven years after a national referendum on the subject, debating essentially whether we should be in the European Community. It is to the advantage of no one that that should be the situation. It is a demeaning stance for this country still to be arguing publicly over membership. We would do better for British interests if we accepted that we are members of the Community and worked on that basis.

Let us remember what the essential reasons were for considering membership in the first place. There is the economic imperative. We need a large market for our goods. While I accept the point made by my hon. Friend the Member for Banff (Mr. Myles) about our farming interests, we are essentially a country that relies on manufacturing industry. We need a strong domestic market in which we can operate so that we can generate funds for research and development. We shall then have available the products that the rest of the world wants to buy.

Our salvation does not lie in selling goods to Australia and New Zealand. I have some experience in industry of trying to sell to those countries and they have never neglected to defend their interests when it has suited them. I do not blame them for that. They wish to develop many of the products that we have traditionally supplied to them. They have proved over many years that they intended to shut out British goods.

British industrialists agree that we should be in the Community. There are not many industrialists who believe that Britain's interests would be served by leaving. Possibly we may not have made the best fist of being a member of the Community but part of the fault lies with ourselves. As our partners in the Community see us, they can argue that there are things we should have done to improve our economic position but which we have signally failed to do. There is no reason why we should not have performed better over the period that we have been in the Community.

There is also the political imperative. We undervalue the significance of what has been and can be achieved by the European Community. It is incredible to me that these countries have come together and effectively ensured that they cannot wage war on one another again when these same nations have been locked in conflict throughout the centuries. My hon. Friend the Member for Northampton, North (Mr. Marlow) has referred to the young men of this country. I am thankful that we have locked ourselves into the Community so that those young men's lives will not be put at risk fighting the same battles that our fathers and forefathers fought.

If we are spending £400 million per year as the price of membership, it is a small price to pay for achieving what we have been striving for through many centuries, which is to have an arrangement of peace and prosperity with our neighbours across the Channel.

Those who criticise the Community should consider it as a whole. A subject of close interest to me in my constituency is the possible development of Stansted airport. Sir Colin Buchanan in a recent book said that it was ridiculous to start to evaluate whether it was right for there to be a major airport in north-west Essex on the basis of calculating the fine print, and considering the effect of noise contours, the number of acres that will be put under concrete and the number of extra houses that will be required. One needs only to look at that area of north-west Essex to say that it is ludicrous to consider putting a major international airport there. Equally, it is ludicrous to discuss the pros and cons of membership of the Community in terms of tens of millions of pounds or hundreds of millions of pounds. The point is whether it is right for Britain to operate as a full economic and political member of the Community.

Our membership requires an extension of patriotism. I am a patriot. I believe that we should defend British interests, but I am not afraid to say that that patriotism could be extended to take in the whole of the European Community. If Churchill's offer of union with France had been accepted in 1940, I would have been as proud to defend that union as I am to defend my country today, as well as the interests of our partners in the European Community.

Given the Community's present stage of evolution, it is, of course, right to defend British interests within it. How best can that be done? The Government's negotiating position will be weakened if it is thought that Britain is half in and half out of the Community. The Labour Party's gyrations are not exactly helping the situation. It is the so-called Government-in-waiting—and I suppose that there are some people who still believe that it could form the next Government—but it is committed to taking Britain out of the Community without so much as a referendum. What on earth are our partners in the Community supposed to make of that? What on earth are they supposed to make of negotiations in good faith with Britain, if they can see that it is at least possible—not very—that the Labour Party will form the next Government?

Recently, we have been lobbied by those on the extreme Left. I refer to those to whom the Leader of the Opposition is very much beholden. They argue that we should think in terms of peace and brotherly love, but they are dead against membership of the European Community, although its development is the most practical form of extending friendship across national frontiers that the world has seen. It is not helpful and does not promote British interests when disputes in the Community take on an air of bitterness. When something happens—such as happened last week—there is usually a chorus in the press. We then read headlines such as the one in the Daily Mail on 19 May: Britain was stabbed in the back again by her Community partners yesterday". On 23 May the Sunday Express stated: Our partners in the Community have kicked us in the teeth once again". Such remarks stir up deep emotions in the British people and xenophobia is altogether too respectable a word to describe such emotions.

When our partners hear what we are sometimes provoked into saying and see what our journalists are provoked into writing, they must despair of us making an attempt to be a serious member and wonder whether it is right to do deals with us.

Much has been said about the veto. I campaigned hard and passionately for Britain to be a member of the Community. Of course I believed that the veto existed for instances in which our essential interests were at stake. However, if that weapon is used all the time, it becomes devalued. No one will know what our essential interests are. I trust that we can work out something with the agreement of our partners. However, we should not think that we have lost some great protection for our virginity and strength.

Britain will achieve more by commitment to the Community. If our industrialists know that we are there to stay, they will plan accordingly. In addition, we shall achieve more politically and psychologically if we know that we are there to stay. There is a world of difference between approaching development of the Community and reform of its institutions with the determination to succeed and approaching it in the hope of failure. The sooner we all accept that Britain is a member, intends to remain so, is determined to make the best of it and will press for its successful evolution, the better it will be for the British people and for the European community of nations.

8.49 pm

Mr. Ron Leighton (Newham, North-East)

The Opposition's amendment deals with a reappraisal of our relations with the EEC. I am only too happy to pay my respects to the motives of the visionaries, dreamers and Utopians who had what they no doubt considered to be the noble idea of uniting the countries of Western Europe to stop them squabbling and to build them into some form of super power.

The first approach was a direct political one. It failed with the collapse of the European Defence Community. Jean Monnet then tried the economic approach. He thought that by merging the economies of the nations political unity would follow willy-nilly. It was a three-stage rocket—a customs union, an economic and monetary union, leading inevitably to a political union. The founding fathers thought that, economically, the process could be left to the free movement of labour, capital and goods, in the belief, rather like Adam Smith, that that would lead to the optimum use of those resources. Politically they were in favour of majority voting and a supranational super power. They wanted us to give up sovereignty or, as they put it, to pool individual sovereignty into a greater one.

Many of us did not agree. We translated the word "sovereignty" into democratic self-government and we wanted to preserve our parliamentary self-government. We distrusted the idea of super States and we did not agree with laissez-faire economics. We did not believe that we would prosper under the proposed arrangements. We believed that Continental industry would gain a larger part of our markets rather than the reverse. We believed that the flow of capital would be out of Britain rather than into it. We believed that the common agricultural policy would increase prices and lower living standards. Moreover, we believed that we would pay more into the budget than we would receive from it.

Then came de Gaulle. He was clear that France would not be subordinate to any European Commission. As a result, we had the empty seat and the Luxembourg compromise. He put a stop to the development of a supranational federal or unitary State.

So what remains? It has been described as something that resembles a corpse. We have the common external tariff, a customs union which provides free trade in manufactures and does not work in our favour and the CAP, which is rigid protectionism in food for a country that imports more food than any other. That is the opposite of our national interest. We have an extremely bad fisheries policy. The regional and social funds are virtually non-existent. They are merely decoration.

Experience has shown that membership has so far worked against our national interests. It has brought no benefits. We have piled up billions of pounds in trade deficit in manufactures with the EEC and we have paid billions more into the budget than we have received from it.

The Luxembourg compromise was enshrined in the manifestos at the referendum. It was in the Government's manifesto and in the "Vote Yes" manifesto. I can provide the texts if anyone wishes to read them. It was also enshrined in the communiqué that came out of the meeting of the right hon. Member for Sidcup (Mr. Heath) and President Pompidou. It was reiterated endlessly in broadcasts, speeches and articles during the referendum campaign. The basis of the referendum campaign was that no decision could be imposed upon Britain against her will, that no decision could be rammed down our throats without the consent of Parliament and the Government. We were assured that we would remain masters of our own destiny. Recent events have marked the abrogation of the basis upon which we joined. It is a clear breach of faith that goes right to the heart of EEC procedures.

I know that others take a different view. They regard the veto as an obstacle to paralyse progress. The Tindemans report wanted to get rid of it in 1976. The Genscher-Colombo plan now wants to move to majority voting. We were assured at the referendum that that would not happen.

If the Government are overruled, they are no longer accountable to the House and it is proved that we have lost control of our own agriculture. If the Government are subservient to the EEC, they are not accountable to the House.

The French will argue, of course, that unanimity has not been ended but that this issue is not appropriate for the application of the unanimity principle. They will be very selective about what is covered by the doctrine. But who is to determine what is a vital national issue, if not the nation being overruled? The answer is clear. The French will decide. It is like the story of Beatrice and Sidney Webb, who had a marvellous marriage and never argued once. When Beatrice was asked how they managed that, she said that the answer was simple; "Sidney decides the important things and I decide the unimportant things—and I decide what is important and what is not important". That is exactly how the French will regard the so-called Luxembourg compromise.

President Mitterrand recently said that what is involved here is not the unanimity agreement but the role that Britain tends to play in Community decisions and, in the last analysis, the presence of Britain in the Community. I accept that. I believe that the French have a case. Britain is the only country which does not see eye to eye with all the others. It is we who are continually out of step on the CAP, on the budget and on fish. We came into their club on their rules. Yet we constantly want to change it. This is the only country that has always and continually been out of step.

On the budget, when the Prime Minister went to Dublin the situation was so bad that the deficit was £1 billion. The Prime Minister, who I think is an agnostic in EEC theology, said that she wanted our money back and that she would not take half a loaf. But the Foreign Office obtained half a loaf and convinced her. An agreement was secured for two years, during which reforms were promised. Last May, the Commission was given its mandate. We were told that during the British Presidency all this would be changed and reforms would be made so that we would not make these payments to the budget. The Lord Privy Seal said all this in the House—I guarantee to give the Foreign Secretary the exact text—but when November came nothing happened. That was to be expected, because the CAP is the Ark of the Covenant. There are so many vested interests behind it that there is no chance of changing it or of any progress in that direction. The farm price review increase is the biggest ever. This merely entrenches the CAP and makes the situation worse.

On the budget, we pulled back for one year, but next year we shall have another argument with our partners. There will be more friction every year. So what do we do? As our amendment suggests, our only weapon now is, first, to halt payments and pay no more into the budget than we get back.

Secondly, in order to stop the annual friction, we must leave the common agricultural policy and have a looser arrangement with the Common Market countries. There is nothing to fear in that. Norway, Austria, Sweden and Switzerland are all living quite happily and prosperously. The idea that we cannot do the same is defeatism of the worst kind. The sooner we do it, the better.

Mr. Myles

rose—

Mr. Speaker

Mr. Peter Shore.

Mr. Shore

rose—

Mr. Jim Craigen (Glasgow, Maryhill)

On a point of order, Mr. Speaker. The last two speeches were commendably brief, but has the 10-minute rule fallen into disuse? Secondly, I do not object to right hon. Members being called, but would it not do their souls good if they were called by priority at the end rather than at the beginning of the debate?

Mr. Speaker

The hon. Gentleman is undoubtedly right. It would also do their souls good if they were present to hear the rest of the debate.

Mr. Arthur Lewis

We all appreciate the difficulty that the Chair is in because of tradition. When you make recommendations, Mr. Speaker, through the usual channels of the Procedure Committee, perhaps you will suggest that a system of fair shares for all should be organised, perhaps on a rota basis. In that way the Chair could be helped. Instead of all hon. Members applying to be called, the Chair could be told that only two or three hon. Members should be called. A little abstinence would help.

Mr. Speaker

I am grateful to the hon. Member for Newham, North-West (Mr. Lewis) and to the House. Hon. Members who have not been called may not believe this, but I share their sense of frustration. I know that it is a misery because I had long experience of it. I wish that every hon. Member who wanted to speak could be called.

9.1 pm

Mr. Peter Shore (Stepney and Poplar)

I fully understand the frustration of my hon. Friends and Conservative Members who have not been able to catch your eye, Mr. Speaker, and make their contribution. I have no doubt that many of my right hon. and hon. Friends would have made extremely interesting contributions. Probably all of us can make such contributions on this occasion.

There is no doubt that the range of matters that are embraced by the Government's motion and our amendment cover many of the issues affecting the European Community—not only our relationship with it, but overall relationships in the EEC, and its past, present and future development. The matters of long dispute in the European Community have come together in the past fortnight when the Foreign Secretary has had other matters on his mind, clamouring for his attention. The dispute has come at a time of great difficulty for the Foreign Secretary. Even if there had not been the problem of the Falkland Islands and the Argentine aggression, the matter would have needed the maximum attention of any British Foreign Minister who had to deal with the covergence of major issues in Europe.

Let us make no bones about it. Europe is in crisis. The Community is in crisis and we are in crisis in relation to it. I could pick up points from many of the speeches that have been made. The essential point was made, as usual with great clarity, by my hon. Friend for Newham, North-East (Mr. Leighton). He picked up a point that goes near to the centre of our concern. He said that there had been a breach of trust in the way in which the Luxembourg compromise had been unilaterally steam rollered, overcome and overborne after being the central convention in the EEC for the past 16 years. My hon. Friend said that the reason why the House had to take the matter seriously was that it was only as long as the ministerial veto in the Council of Ministers obtained that the House had any grip on the decisions that are made in the Community. The ever-spreading range of Community competence eats into the decision-making areas that were previously and properly—and should be again—matters for decision by the House.

My next point is in the Foreign Secretary's motion and the Opposition amendment. It concerns what we have to say about the European reaction to the events in Argentina, particularly the decision, which I welcome, which was taken yesterday to extend indefinitely the economic measures against Argentina. However, it has not been easy going, even in that area. The European Community responded swiftly. I was glad of that. At the meeting of 17 April it imposed economically modest but diplomatically important sanctions. However, at the end of that month there was a conspicuous withdrawal of support. That came at a time, as the Foreign Secretary knows well, when it was extremely important for the world to signal to the men who command events in Buenos Aires its continued disapproval of what they had done.

It is one thing for Italy and Ireland to withdraw their support. They have their own special difficulties and problems. Italy certainly has from its deep involvement in Argentina, and Ireland is a professional neutral. But for the other seven members to agree to a one-week extension to sanctions was remarkable and it was in no way helpful to us. Indeed, it was the very opposite.

I do not believe that that decision deliberately to waver in their support had anything to do with their assessment of what was going on in the South Atlantic. It had everything to do with the matters that we were negotiating elsewhere in the Council of Ministers, and which were entirely internal to the European Community. The very nations that deliberately wavered in their support 10 days ago reaffirmed—it was interesting to see the contrast—continuing support for the United Kingdom in their NATO role.

That is not how allies should behave. While my view of the European Community, as the House well knows, has been hostile to the whole notion of "community", it certainly has not been hostile to the idea of alliance. As a matter of a fact, I believe in alliance, friendship and cooperation with the other countries in Western Europe. What I have always been sceptical about, and, indeed, highly resistant to, is the nonsense of "community", the nonsense of the special relationship and above all, the procrustean nature of the Treaty of Rome, and the Treaty of Accession.

It is interesting that the very same nations that wavered, reaffirmed in their NATO role continuing support for the United Kingdom on almost the very day that they wavered in the Council of the EEC. That illustrates a point that many of us have frequently made, that our relationships with our European neighbours, far from being improved and made closer by our membership of the EEC, are often harmed by it, and that we enjoy a better relationship with the alliances of which we are also members, as Community members are, than we do in the rigid framework and beneath the grating provisions of the Treaty of Rome.

Having first dealt with that less controversial matter, I now turn to the unsolved question of the United Kingdom's contribution to the EEC budget. With the exception of the right hon. Member for Sidcup (Mr. Heath), whom I hope we shall see later in his place, the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), and just conceivably the right hon. and learned Member for Hexham (Mr. Rippon), it would be difficult to find a Member of this House who believes that the arrangements entered into under the Treaty of Accession and enshrined in the European Communities Act 1972 were anything other than disastrous to the United Kingdom.

As I and many of my right hon. Friends pointed out at the time—4 am speaking specifically about the budget—as soon as the seven-year transitional period was over, which was an exceptionally long transitional period, the full shock of the financial exactions imposed upon this country would become plain, and that the nation would not then have it. So it has turned out to be.

The seven-year transitional period ended on 1 January 1980, and the Prime Minister and her new Government forthrightly declared in May 1979 with the support and resolutions of the House that the arrangements were unacceptable and intolerable and that they would have to be changed.

The House will well recall that it was the Prime Minister who insisted upon a permanent solution based on a broad balance between our contributions and payments. She said that in a series of speeches and statements in the summer and autumn of 1979, leading up to the Dublin summit of December that year. Although the right hon. Lady stormed and raged, although she rightly asserted that it was our money, and although she insisted that she would not continue to play Lady Bountiful to the Community, all she got was just over half a loaf—not broad balance—and that for two years, with the future and more permanent arrangements still at large.

When the House of Commons discussed this matter at the beginning of 1980, the Prime Minister and the Chancellor were proud to claim the fact that we had become not the first and largest contributor to the EEC budget but only the second largest. From their point of view—at the time they claimed it as a great gain—a serious and profound study was to be undertaken by the Commission, then under the distinguished President, as he no doubt was, the right hon. Member for Hillhead. That was the famous mandate of 30 May 1980.

We warned that this Commission study was likely to be abortive. In particular, we warned that its terms of reference were far too restrictive and that it was no good speaking about the need for fundamental structural changes in the EEC budget, which would in turn affect the disproportionate United Kingdom contribution to the budget, unless there was a clear determination to reexamine and dismantle a large part of the CAP and that bizarre mix of taxes that make up "own resources".

Those specific ways were ruled out in the very terms of reference given to the Commission as it undertook its mandate. It was not to attack the principles of the CAP and it was not to call into question the common methods of financing—in other words, the system of "own resources".

Our advice was spurned. The Commission reported, and we all know about that. The London summit meeting last December failed to reach any agreement. The truth is that unless the CAP is genuinely redesigned and unless the particular mix of taxes in "own resources" is changed, it is in all conscience difficult—indeed, impossible—to see how any sensible and acceptable relationship between net contributions and capacity to pay can be achieved. That is the heart of the matter.

That will still confront the Foreign Secretary when he again meets his colleagues to discuss the matter, as he will later this year. Under the agreement that he announced, I believe that the net payment is £381 million. We are told that a longer-term solution—it really is like two years ago—is to be agreed by the member States before the end of November. No doubt that is another mandate to the Council, if not to the Commission, to find such a solution that is permanent, lasting, fair and just. We shall see.

I must warn the Foreign Secretary against the siren voice of the right hon. Member for Sidcup. His contribution was extraordinary. It was as fascinating as the contribution of the right hon. Member for Hillhead. They both share the great distinction of being Charlemagne prize winners. They both share whatever credit there is for the state of Britain in Europe. They share the joint architecture of the structure of British relations with the EEC. But they are both so arrogant and shameless about what they have done that they cannot bring themselves even to re-examine critically the evidence before their eyes of the state of the Community and the condition of Britain within it.

The right hon. Member for Sidcup, who is not here, advised the Foreign Secretary not to make a fuss. He said "I am sorry that the convention has gone, but after all, it is not very much money"—only £3,400 million to date. There is a reduced sum of £381 million for this year, but if it were not reduced it would be about £1,000 million a year and that will be the starting point for the negotiations for 1983, which the Foreign Secretary has to agree by November this year. That is a lot of money and it matters to this country. It is £10,000 million in a decade; that is the sum at stake.

The architect and author of that arrangement was the right hon. Member for Sidcup whose advice was foolish at the time and is still foolish today. There is no reason to believe that the outcome of the further negotiations will be any more favourable or permanent than were the results of the previous negotiations.

I turn to the related matter of the price fixing for 1982–83 of the products covered by the CAP—a remarkably generous settlement for farmers. There is far less reason to believe that any sensible agreement reflecting the genuine unfairness that exists for the United Kingdom will emerge in November than there was reason to believe that when the mandate was given to the Commission two years ago. Why? Because the principal means that the United Kingdom Government thought that they had of exerting counter-pressure on their partners in the EEC—by withholding consent to farm price increases; the ability to veto—has been overriden and, in effect, dismantled and removed.

So what leverage do we have and will we play in November this year? The Foreign Secretary nods his head. He is serious and he understands the nature of the problem that he faces. I could not help noting the remarks of Foreign Minister Cheysson, who gleefully told journalists this week: Britain had been forced to accept a far lower refund because it had no weapons left. That was Monsieur Cheysson's interpretation of the effect of the steamrollering of the veto on prices, with the Foreign Secretary being brought to accept what he did not want to accept—a third year settlement, with Britain having to pay about £390 million under the formula that the right hon. Gentleman described earlier.

What happened at that meeting of Agriculture Ministers only nine days ago is the most serious of all the developments that have taken place, not only since we joined in 1973, but since the Luxembourg agreement was achieved by France and the other Five as long ago as 1966. The agreement provides that any country, in judging a matter to be of "vital national interest", can exercise the veto, even though the Rome Treaty provides for qualified majority voting, and it has been the central constitutional convention of the Community for the past 16 years. Just as its acceptance in 1966 invalidated half the clauses of the Rome Treaty—it wiped them out—so its revival reactivates qualified majority voting throughout all the clauses in the Rome Treaty where the Treaty provides for it.

I do not want to detain the House by spelling out the vast area of affairs in which, regardless of our national interest, we may now be subject to qualified majority voting. The Foreign Secretary and the House have no means of resisting such voting.

I emphasise that Britain and, for that matter, Denmark and Ireland joined the EEC or, rather, were persuaded to give their post facto consent—in our case in the 1975 referendum—on the clear understanding and specific assurance given in White Papers presented to the House, reiterated in Commons debates in 1972, restated by all our political leaders and in the 1975 referendum, that no significant surrender of sovereignty was involved in our membership of the EEC, precisely because the national veto—the Luxembourg compromise—stood and commanded Community behaviour. That central condition on which Britain's consent to membership was obtained has now at a stroke disappeared.

Sir Anthony Meyer

rose—

Mr. Shore

I am glad to see that some of the implications of what has happened are recognised so widely in the House. The Prime Minister said: it looks as if the prices will be implemented by a majority vote."—[Official Report, 18 May 1982; Vol. 24, c. 188.] If that is so, it is without precedent. It raises serious issues.

Two days later the Prime Minister said: What has happened over the Luxembourg compromise is very serious and could be even more serious if majority voting is applied to other aspects of Community work. On the same day, in reply to another question she said: The decision is without precedent and has serious implications."—[Official Report, 20 May 1982; Vol. 24, c. 467–8.] The same note of concern was struck by the Minister of Agriculture who said: It is wrong that for the first time in 16 years a number of member States should have changed the rules of procedure to suit their immediate requirements."—[Official Report, 19 May 1982; Vol. 24, c. 353.] He rightly drew attention to the fact that three of the four member countries that joined the EEC after 1972 had protested strongly at the violation of normal procedures.

What I found interesting and extraordinary—indeed, I would add disgraceful—was the acceptance and the endorsement of this change by the right hon. Member for Sidcup and to a considerable extent by the right hon. Member for Hillhead and the hon. Member for Inverness (Mr. Johnston) in his supplementary question to the Prime Minister. What amazed me was that they had played an active role in the referendum seven years ago. Indeed, the right hon. Member for Hillhead was the president of the European movement. His name was on the front of the pamphlet which went to every household in the land urging people, as he was perfectly entitled to do, to vote "Yes". That pamphlet contained the sentence, which I shall read again to him: All decisions of any importance must be agreed by every member. That is what it said. That was the basic condition on which not only the right hon. Gentleman put forward the pamphlet, but so did all the other participants, who took a different view on the merits of the matter in the referendum campaign.

Mr. Roy Jenkins

The right hon. Gentleman who slightly qualified his reference to me will be aware that I said that I took account of this. I did not think that the veto could be abolished. I said that it should not have been abrogated without the fullest consultation with Foreign Ministers, but that it had been used too freely on a number of relatively minor issues. I said that we should redefine the position so that vital national interests should prevail, but that we should not think it was in Britain's interests that there should never be majority decisions on any issue.

Mr. Shore

I did hear what the right hon. Gentleman said. I do not think that I find in his carefully qualified statement evidence of the will to restore the situation, to reclaim for this country a right of veto. On the contrary, I see a great willingness to compromise. He was advocating what he saw as the only way of rectifying a genuine national grievance—the disproportionate budget contribution. What he exhorted the House to accept was that we should change, and increase the whole range of expenditure of the EEC—not 1 per cent. VAT, but perhaps 2 per cent. or 3 per cent. VAT, so that we could spend via the Commission our money on projects that might do us rather better than the expenditure undertaken so far on food prices.

I have stressed the breach of the Luxembourg compromise, because it goes to the root of the matter and to the root of the condition of Britain's membership. I listened anxiously to what the Foreign Secretary had to say about what the Government intend to do. I did not find anything that he said that gave me any great confidence. He referred, if I remember correctly, to the so-called Genscher-Colombo plan as being the framework within which discussions might take place.

Mr. Pym

What I said was that the preliminary discussions that we had had on the subject took place in the context of the Genscher-Colombo plan, but it was against the background of the statement that I made at the outset of the meeting, setting my views on record for the Council.

Mr. Shore

That is helpful because, as the right hon. Gentleman and the House will know, the Genscher-Colombo plan for a so-called European Act is deliberately designed to weaken the right of national veto—which is the matter that we are complaining about—to strengthen the rather odd concept of European union in the form of a legal union as well as a policy union. Finally, and almost unbelievably, it would bypass the House and all its procedures by giving the European Council decision-making powers in the Community that it did not previously have. I am delighted to hear that we are to have no part or place in that.

That does not help us, because in what context will the right hon. Gentleman make his stand? On what basis of argument will he try to retrieve the situation? This is very serious because it affects all of us. It affects the great range of issues that are now covered by majority voting in the Community. I can only give the right hon. Gentleman my reaction, and the advice of the Labour Party about what is now needed.

What is now needed is a short but strong response to the events of the past fortnight. We must deal directly, as the time for reaching agreement has long elapsed, with the continued problem of our inequitable budget contributions. The House knows what it has to do, and how to do it. It has to do it by amending the European Communities Act, which alone gave authority to the Brussels Commission to levy taxes in this country, and therefore to take from Britain and its people a disproportionately high proportion, in tax revenues, of the Community budget.

That is why we urge the Government in our amendment to withhold forthwith all payments to the Community budget. In the presence of my party leader and colleagues—we have discussed these matters before—for the second time in three years I offer the Government the full co-operation of the Opposition in getting through amending legislation to bring the British budget contribution back within the scope, purview and control of the House of Commons. We shall do it as quickly as we passed the Southern Rhodesia Act 1979, which was dealt with in 48 hours, to let the Government and others in Europe know that we are perfectly prepared to assist in rectifying this grievance.

In the Labour Party we speak of a fundamental reappraisal, and surely it is necessary, of the United Kingdom relations with the EEC. We have already made our own reappraisal and have said that we intend to "patriate the British constitution". We shall recall to Westminster the powers over legislation, taxation and treaty-making that were ceded to the European Community by the right hon. Member for Sidcup, who is not here, although his colleagues are.

We must now, as a House, seriously turn our minds to the implications for the treaty arrangements of the unilateral abandonment of the Luxembourg compromise. The House will know that the Vienna convention on the law of treaties allows, in carefully defined circumstances, for major changes in international treaties between a number of States. Article 62 deals with the occasions when a fundamental change of circumstances has occurred. That is not a light matter but a serious one. Such a change has to be made, and has to be one that could not have been foreseen by the parties at the time of the signing of those treaties. The change has to be of a character that affects the essential basis of the consent of the treaty parties.

The changes in the central governing convention of the European Community, which took place just over a week ago when the Minister of Agriculture, Fisheries and Food was steamrollered and the veto was taken from him, meet the terms of article 62 of the Vienna convention. For that reason the House should adopt and support the amendment that we have tabled, which would enormously strengthen any Government who seek to secure the interests of Great Britain in the EEC.

9.30 pm

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

The debate has concentrated on the way in which the Community takes its decisions and on the budget. I should like to deal with both points. But, first, I want to refer to some points which have been made about European sanctions against Argentina.

I do not believe that the hon. Member for Liverpool, Walton (Mr. Heffer) was as fair-minded as he usually is. The sanctions do not apply to existing contracts, just as our sanctions against Iran in 1980 did not apply to existing contracts when the American hostages were held in Teheran. It was at the insistence of the House that existing contracts were excluded. Although circumstances were different, it might be worth right hon. and hon. Members reading the debates if they want to consider the problems that our partners have faced.

Sanctions that exclude existing contracts begin as a political sign of solidarity. They begin to have a major economic effect only later. That makes it all the more important that they should continue. The right hon. Member for Stepney and Poplar (Mr. Shore) made a slightly bogus point about the difference between NATO and the Community. It is in the Community that the action is being taken. There was a moment of hesitation—as he described—when the sanctions were renewed by seven countries for only one week. A good many people were quick to find that as a stick with which to beat Europe and to write and talk about support ebbing away.

That must have been about the time when my hon. Friend the Member for Northampton, North (Mr. Marlow) wrote his speech. It read a bit oddly, as, indeed, did others in the light of the decision taken on Monday by seven countries—one of them through national measures—to continue sanctions without a deadline. We warmly welcome that reinforcement of support. My hon. Friend made a specific point about Italy and Ireland. He alleged that trade might seep through those countries into the rest of the Community. For that reason, both countries have undertaken to prevent that from happening.

Mr. Tam Dalyell (West Lothian)

Is it not a fact that Aerospatiale-Dassault, the suppliers of the radar avionics and other parts for Mirages and Exocets, is continuing to supply Argentina, possibly through Venezuela? Is it true that Siemens has told the West German Government that it will go through a third country as it does not want to bitch its relations with Argentina? Is that not the fact?

Mr. Hurd

That is not the fact. We have received from the French and West German Governments the maximum co-operation throughout in the area of policy which the hon. Gentleman mentioned.

There is a whiff of humbug about some of the comments that have been made. I may be wrong, but I cannot imagine any of those who have attacked the solidarity that we have achieved in Europe coming to the House in different circumstances and insisting that we should impose sanctions and possibly put jobs at risk if some distant French or Italian possession had been attacked. European sanctions, particularly in the past day or so, have been savagely attacked by the Argentine Government. They do not regard them as a light matter of no account, and nor do we. We are glad to have support, and we are grateful to those who worked with us to achieve it.

Mr. Shore

I do not believe that the right hon. Gentleman meant what he said. He will recall that as recently as in the case of Iran we were prepared to take sanctions in combination with others, although we may have argued about the details. It is wrong to say that we are not prepared to back our allies.

Mr. Hurd

I have difficulty in imagining those who criticise Community action on Argentina arguing that Community action should be taken if one of our partners is attacked.

On decision taking, the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) stated that we should have guessed what was likely to happen through the grapevine. To some extent, there is common ground in the House on the issue. We are dealing with the breach of a convention that has operated without exception for 16 years. It was insisted on—to some extent invented—by France. There have always been those in the Community and in the House who have consistently and honestly opposed the Luxembourg compromise. But it was a reasonable assumption—I believe that the right hon. Gentleman came to the same conclusion—based on experience that, if the rules were to be changed, the change should be sought through discussion and agreement and not smuggled in in the closing stages of a farm price negotiation.

No one should pretend that Community decision taking worked well, even before last Tuesday. It is absurd that Ministers of foreign affairs and Governments should argue for hour after hour on immensely complicated matters of detail. An immense amount of ingenuity and energy goes into keeping the machine ticking over. There is not enough left for fresh ideas and initiatives. For some time it has been in the national, as well as the European, interest that decision taking should be improved. But that cannot be done by overriding vital national interests. That would only produce aggravation and confusion.

I agree with the analysis of my hon. Friend the Member for Devizes (Mr. Morrison). Many of us hoped that by now the discipline of working together and the force of shared interests would have been sufficient to produce a smoother way of decision taking. To some extent, they have—certainly in foreign policy—but elsewhere the record has been disappointing. That is why it is important that the discussion which my right hon. Friend the Foreign Secretary opened on Monday and which is to be continued in June should lead to clear arrangements for decision taking within the treaties.

No Minister at the Dispatch Box—the right hon. Member for Stepney and Poplar acknowledged that—has underestimated the importance of what happened in the Agricultural Council in May 1980. It cannot be swept under the rug as if it had not happened. It is impossible for most of us to imagine how the Community can prosper and proceed smoothly until there is again a clear basis for decision taking that respects vital national interests. It is that basis which in some way has to be reconstructed.

I come now to the financial arrangements. There is still light to be shed on the financial arrangements, of which my right hon. Friend gave an account. This is crucial to an understanding of what happened. The 1980 agreement, about which the right hon. Gentleman has always been a little grudging, provided that the United Kingdom should receive minimum refunds of £700 million in 1980 and £800 million in 1981. Those figures were based on assumptions made in the spring of 1980 about the likely outturn for Britain in 1980 and 1981. Those assumptions turned out to be well wide of the market, and the agreement has operated far more favourably for Britain than was expected in 1980, bringing us to the point where, in 1981, we nearly broke even, and our net contribution after the refund was about £6 million.

Mr. Marlow

I received an answer from the Treasury yesterday which showed that the cash flow last year from this country to the Community, after the net refunds were paid, was between £350 million and £400 million. How does the Minister square his figures with the Treasury figures?

Mr. Hurd

I am talking about the budget contribution and the correct figure after the refund.

In the third year—

Mr. Norman Buchan (Renfrewshire, West)

rose—

Mr. Hurd

I shall not give way, because I have already given way on this point. My hon. Friend the Member for Northampton, North is obviously producing figures of a different kind based on a different calculation.

There was no figure in the 1980 agreement for the third year—1982. In calculating the figure for 1982—that is what my right hon. Friend has been negotiating for some time now—some partners argued, with the benefit of hindsight, that our position had become far more favourable than expected and that in some way we should repay part of the refunds that we had received. I understand that some attempt has been made to put together a legal case on that basis. Our legal advice is that the 1980 agreement gave Britain the absolute right to receive the minimum refunds specified in that agreement, and that there is, therefore, in our interpretation of the law, no obligation on Britain to repay anything.

Therefore, there is a difference of interpretation here which it was not practicable to resolve this week. [HON. MEMBERS: "Oh!"] I It will be further discussed in negotiations between now and the end of November for a longer term settlement. My right hon. Friend recognised that the outcome for 1980 and 1981 was considerably more favourable to us than anyone had expected. We were therefore ready to accept for 1982 a basic refund of £490 million, with—and this is a crucial point which occupied much time in the negotiations—the risk-sharing provision for an increased refund, if the Commission's estimate of our unadjusted contribution turned out to be too low.

Let me sum up this part of the argument. We have recently been discussing the third year of a three-year agreement. The first two years turned out to be much more favourable to us than was expected. That fact is recognised in the figure which we have agreed for this year, but it will still be true that the 1980 agreement, over three years, is almost certain to work out much more favourably for us than anyone predicted in 1980. That is a crucial point in considering the Government motion and the amendment to it.

I shall say a word now about the continued search for a long-term agreement. I accept the point that my right hon. Friend the Member for Sidcup (Mr. Heath) made that it is difficult to try to negotiate fixed refunds years in advance. It is equally difficult and destructive to negotiate year by year, which is what we have had to do this year. We have sought, and will continue to seek, an agreed formula with percentages and risk-sharing that can continue to be applied so long as the problem exists.

Mr. Shore

A problem arises if one compares what the right hon. Gentleman says with what the Foreign Secretary said earlier. The Foreign Secretary reiterated what has been the main theme of concern in the House during the period of this Government, and rightly so. He requoted that famous quotation about the unacceptable situation in Britain's net contribution. Listening to the Minister of State, one gets the impression that in his view there is not an unacceptable situation but rather an entirely acceptable one. I hope that he will keep a strong vigorous line on this and that he will not constantly communicate the wrong message to Brussels.

Mr. Hurd

There is no confusion about this at all. We made a satisfactory agreement in 1980 for three years. That did not solve the problem indefinitely. Unless there is a continuing solution by way of continuing refunds, the problem will become unacceptable again, as it was before 1980 and as it was throughout the time that the right hon. Gentleman's party held office.

That leads me to the Opposition amendment. It is an absurd amendment coming, as it does, from signatories who held high office in the Labour Government. I exclude the hon. Member for Walton because I believe that he gave up his job on that issue. However, the other right hon. and hon. Members presided over a situation that was clearly deteriorating and they did nothing to correct it. They obtained no refunds. They had no redress and all the time they were paying in full.

We have obtained massive refunds over three years, the last of which my right hon. Friend announced today. We have also obtained a commitment to negotiate long-term arrangements. Therefore, we have no difficulty in repudiating the Opposition amendment. It would clearly not be sensible now to talk in terms of withholding payments.

Mr. Shore

rose—

Mr. Hurd

I have given way to the right hon. Gentleman on several occasions and I would rather continue.

There should be no doubt of the importance to us of success in the further negotiations which, it has now been agreed, should take place. Nor should there be any doubt among our partners or in Europe of our determination to carry this through until we obtain a long-term settlement.

The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) and the hon. Member for Inverness (Mr. Johnston) chided us for our attitude towards Europe. They asked why the Government found it so difficult to carry public opinion with them and to take a bold, constructive line with our partners for the construction of Europe. The answer lies in the subject matter of the debate and in the absence of a just, long-term settlement to the budget problem.

We do have friends in the Community who understand the problem. It is childish nonsense to talk in terms of a conspiracy against us. However, it must be recognised that so long as there is this imbalance against us we cannot relax or leave the subject. So long as the imbalance continues, it hinders and impedes us when we are discussing other matters. That is a statement of fact and one of the main reasons why we must press forward and not leave the subject as if it were unimportant.

We want to get this occasionally poisonous argument about budget contributions out of the way. We are prepared to be a modest contributor. My right hon. Friend the Prime Minister has explained that on several occasions both here and in Europe. We are not insisting—this is often misinterpreted on the Continent—on the exact juste retour. We accept that we are prepared to be a modest contributor. We need a settlement of this problem over the coming years—that is, for as long as the problem exists—which will prevent our contribution from once again reaching unacceptable figures.

I agree with the point made by the hon. Member for Walton and taken up by several other hon. Members. Ii is not sensible to talk in terms of being half in and half out of the Community. I have been a little surprised that some Opposition Members have lapped up certain suggestions from across the Channel to that effect in recent days. It is an old tune; it has been played before. Hon. Members should regard it as a siren voice.

We intend to remain as full members of the Community playing a full part in the working out of its policies, abdicating none of our rights and none of cur responsibilities. The real, long-term answer lies in getting a better balance of European Community policies, as several hon. Members have mentioned. There has been some underestimate, particularly by the right hon. Member for Stepney and Poplar, of the amount of work and the amount of progress made in the last year or so in working out such policies. Of course, they are not complete; the work needs to go on. I agree with those who say that we must tackle this part of the job with a sense of confidence and not of inferiority.

We are not regarded on the Continent and by the Parliaments and the press of our partners as hopeless innocents fit only to be plundered and deceived. We are rgarded as remarkably cunning operators, as quick to take a trick as anyone. Unless that fact is recognised, we get the state of play out of perspective.

The long-term objective is to achieve a better balance of European policies so that we do not have to continue arguing year after year, or three years after three years, about the budget refund. But until that new balance can be achieved the refunds will be necessary. The question has been raised why we do not treat this as a European problem and not simply as a British problem. That is what my right hon. and learned Friend the Chancellor of the Exchequer tried to do. Our first reaction to the search for a long-term settlement was his statement in The Hague that we should try to find a solution that takes account of other countries, as well as Britain, that may face unacceptable situations. Because that was not accepted, we had to return, against our will, to discuss these matters in purely British terms.

We should not neglect the progress that has been made. One figure for the CAP is significant. In 1979, the CAP took 80 per cent. of the Community expenditure. In 1981 it took 66 per cent. Of course, that has something to do with world prices. It is nevertheless a significant drop in the proportion of total Community spending taken by the common agricultural policy.

The hon. Member for Walton gave a fascinating analysis of the disagreement within the Labour Party on this question, but the hon. Gentleman was talking, as he was honest enough to say, about withdrawal. That is the foreign policy of the Labour Party, opposed by the Shadow Foreign Secretary, who has not spoken in this debate. The Labour Party seems to think that this is a winning card electorally, although it would be polite to say that it does not seem to be having that effect. Labour Members have claimed that they are not anti-foreign and not anti-European. They believe simply that we would do better as good internationalists outside the European Community. That produces a vision, which is wholly unreal, of a world outside the Community of tranquil, democratic, free trading countries longing to welcome us once we escape from the embrace of Brussels. That is absolute nonsense. That is not a world which we can recognise.

We live in a world which is becoming year by year more dangerous and more narrow-minded. We live in a world which has its military super powers and its economic super powers, the United States and Japan. We live in a world of more than 150 nation States and large parts of that world are quarrelling and in turmoil. The latest tragic example is in our minds all the time in the House.

If anyone believes that without Community membership we could have operated sanctions against Argentina he is profoundly mistaken. Our partners have supported us on Argentina because of a principle of Community solidarity which is not always respected and which does not always hold good but which held good in this case. Without our membership it would not have occurred.

Mr. Nick Budgen (Wolverhampton, South-West)

Since my right hon. Friend is speaking about the sanctions imposed by the EEC, does he hold out any hope that Ireland will now support the remainder of the EEC?

Mr. Hurd

I am not sure whether my hon. Friend was in the House when I dealt with that about 20 minutes ago. I referred then to how pleased we were that seven of our partners had joined in sanctions, and I dealt with the point that Ireland and Italy have agreed that they will not allow their own policies to let the actions of others be compromised and breached. Although we would have liked Ireland to do more, we understand its position.

Mr. Roger Moate (Faversham)

We should assert that we are genuinely grateful for the support that we are getting from our Community allies. Where a country like Ireland asserts its reasons for not backing sanctions as neutrality, does that not by definition mean that one can never have anything resembling a Community foreign policy?

Mr. Hurd

No. The countries in the Community, including Ireland, have made substantial strides towards such a foreign policy in recent years and that progress is continuing. We understand the position that Ireland has taken up, although we wish that it could have been more positive. I am using this as an illustration to make the point that it is unreal, as hon. Member after hon. Member urged us to do, to pick and choose among the policies of the Community. Either we are a member or we are not. If we are a member, we are a full member.

Mr. Marlow

rose—

Mr. Hurd

I have given way to my hon. Friend already.

It is not possible to pick and choose among the policies which we prefer. In this increasingly dangerous and in some respects disastrous world, one of the few great achievements which the international community has made since the war has been the construction of the Community. It cannot be right to undermine and destroy that achievement. It must be right to steer it to success. As the right hon. Member for Stepney and Poplar has made clear, the problems embodied in the debate are remarkably important and complex.

It cannot be right to deduce from the difficulties which we are in that the experiment has failed. In our view, it must be right to continue on this range of subjects to work for a solution which safeguards the interests of our country and also of Europe. It is fair to say that we are still, historically speaking, at the beginning of that experiment. The faint hearts are evident and the difficulties are clear, but in our judgment, and through the coming negotiations, we shall do what we can to serve our national interest, to get an equitable budget settlement and to get a clear and fair system of decision making in the Community which respects vital national interests.

Question put, That the amendment be made:—

The House divided: Ayes 205, Noes 323.

Division No. 173]	[10 pm
AYES
Abse, Leo	Dalyell, Tam
Adams, Allen	Davidson, Arthur
Anderson, Donald	Davies, Rt Hon Denzil (L'lli)
Archer, Rt Hon Peter	Davies, Ifor (Gower)
Ashley, Rt Hon Jack	Davis, Clinton (Hackney C)
Ashton, Joe	Davis, Terry (B'ham, Stechf'd)
Atkinson, N. (H'gey,)	Dean, Joseph (Leeds West)
Bagier, Gordon A.T.	Dewar, Donald
Barnett, Guy (Greenwich)	Dixon, Donald
Barnett, Rt Hon Joel (H'wd)	Dobson, Frank
Benn, Rt Hon Tony	Dormand, Jack
Bennett, Andrew (St'kp't N)	Douglas, Dick
Bidwell, Sydney	Dubs, Alfred
Booth, Rt Hon Albert	Duffy, A. E. P.
Bray, Dr Jeremy	Dunwoody, Hon Mrs G.
Brown, Hugh D. (Provan)	Eadle, Alex
Brown, Ron (E'burgh, Leith)	Eastham, Ken
Buchan, Norman	Edwards, R. (W'hampt'n S E)
Callaghan, Rt Hon J.	Ellis, R. (NE D'bysh're)
Callaghan, Jim (Midd't'n & P)	English, Michael
Campbell, Ian	Ennals, Rt Hon David
Campbell-Savours, Dale	Evans, Ioan (Aberdare)
Canavan, Dennis	Evans, John (Newton)
Cant, R. B.	Ewing, Harry
Carmichael, Neil	Field, Frank
Carter-Jones, Lewis	Flannery, Martin
Cocks, Rt Hon M. (B'stol S)	Fletcher, L. R. (Ilkeston)
Cohen, Stanley	Fletcher, Ted (Darlington)
Coleman, Donald	Foot, Rt Hon Michael
Concannon, Rt Hon J. D.	Ford, Ben
Conlan, Bernard	Forrester, John
Cook, Robin F.	Foster, Derek
Cowans, Harry	Fraser, J. (Lamb'th, N'w'd)
Craigen, J. M. (G'gow, M'hill)	Freeson, Rt Hon Reginald
Crowther, Stan	Garrett, John (Norwich S)
Cryer, Bob	Garrett, W. E. (Wallsend)
Cunliffe, Lawrence	Gilbert, Rt Hon Dr John
Cunningham, Dr J. (W'h'n)	Golding, John

Graham,Ted	Orme, Rt Hon Stanley
Grant, George (Morpeth)	Palmer, Arthur
Hamilton, James(Bothwell)	Park, George
Hamilton, W. W. (C'tral Fife)	Parker, John
Harrison, RtHon Walter	Parry, Robert
Hart, RtHon Dame Judith	Pavitt, Laurie
Hattersley, Rt Hon Roy	Powell, Rt Hon J.E. (S Down)
Healey, Rt Hon Denis	Powell, Raymond (Ogrnore)
Heffer, Eric S.	Price, C. (Lewisham W)
Hogg, N. (EDunb't'nshire)	Race, Reg
Holland, S.(L'b'th,Vauxh'll)	Radice, Giles
HomeRobertson, John	Richardson, Jo
Homewood, William	Roberts, Ernest (Hackney N)
Hoyle, Douglas	Roberts, Gwilym (Cannock)
Huckfield, Les	Robertson, George
Hughes, Mark(Durham)	Robinson, G. (Coventry NW)
Hughes, Robert (AberdeenN)	Ross, Ernest (Dundee West)
Hughes, Roy (Newport)	Rowlands, Ted
Janner, HonGreville	Ryman, John
Jay, RtHon Douglas	Sever, John
John, Brynmor	Sheerman, Barry
Johnson, Walter (Derby S)	Sheldon, Rt Hon R.
Jones, Rt Hon Alec (Rh'dda)	Shore, Rt Hon Peter
Jones, Barry (East Flint)	Short, Mrs Renée
Kaufman, Rt Hon Gerald	Silkin, Rt Hon J. (Deptford)
Kerr, Russell	Silkin, Rt Hon S. C. (Dulwich)
Kilroy-Silk, Robert	Silverman, Julius
Kinnock, Neil	Skinner, Dennis
Lambie, David	Smith, Rt Hon J. (N Lanark)
Lamborn, Harry	Soley, Clive
Lamond, James	Spearing, Nigel
Leadbitter, Ted	Spriggs, Leslie
Leighton, Ronald	Stallard, A.W.
Lestor, Miss Joan	Stewart, Rt Hon D. (W Isles)
Lewis, Arthur (N'ham N W)	Stoddart, David
Lewis, Ron (Carlisle)	Strang, Gavin
Litherland, Robert	Straw, Jack
Lofthouse, Geoffrey	Summerskill, HonDrShirley
McCartney, Hugh	Thomas, Dafydd (Merioneth)
McCusker.H.	Thomas, Dr R. (Carmarthen)
McDonald, DrOonagh	Thorne, Stan (Preston South)
McElhone, Frank	Tilley, John
McKay, Allen (Penistone)	Tinn, James
McKelvey, William	Torney, Tom
MacKenzie, RtHonGregor	Varley, Rt Hon Eric G.
McNamara, Kevin	Wainwright, E.(Dearne V)
McTaggart, Robert	Walker, Rt Hon H.(D'caster)
McWilliam, John	Watkins, David
Marshall, D(G'gowS'ton)	Weetch, Ken
Marshall, Dr Edmund (Goole)	Welsh, Michael
Marshall, Jim (LeicesterS)	White, Frank R.
Martin, M(G'gowS'burn)	Whitehead, Phillip
Mason, Rt Hon Roy	Whitlock, William
Maxton, John	Willey, Rt Hon Frederick
Maynard, Miss Joan	Williams, Rt Hon A. (S'sea W)
Meacher, Michael	Wilson, Gordon (Dundee E)
Mikardo, Ian	Wilson, Rt Hon Sir H. (H'ton)
Millan, Rt Hon Bruce	Wilson, William (C' try SE)
Miller, Dr M.S. (E Kilbride)	Winnick, David
Mitchell, Austin (Grimsby)	Woodall, Alec
Molyneaux, James	Wright, Sheila
Morris, Rt Hon A. (W'shawe)	Young, David (Bolton E)
Morris, Rt Hon C. (O'shaw)
Morris, Rt Hon J. (Aberavon)	Tellers for the Ayes:
Moyle, Rt Hon Roland	Mr. Frank Haynes and Mr. George Morton.
Newens, Stanley
O'Neill, Martin

NOES
Adley, Robert	Baker, Kenneth (St. M'bone)
Aitken, Jonathan	Baker, Nicholas (NDorset)
Alexander, Richard	Beaumont-Dark, Anthony
Alison, Rt Hon Michael	Beith, A. J.
Alton, David	Bendall, Vivian
Amery, Rt Hon Julian	Bennett, Sir Frederic (T'bay)
Ancram, Michael	Benyon, Thomas (A'don)
Arnold, Tom	Benyon, W. (Buckingham)
Aspinwall, Jack	Best, Keith
Atkins, Rt Hon H. (S'thorne)	Bevan, DavidGilroy
Atkins, Robert(Preston N)	Biffen, Rt Hon John

Biggs-Davison, SirJohn	Goodhew, SirVictor
Blackburn, John	Goodlad, Alastair
Blaker, Peter	Gorst, John
Boscawen, HonRobert	Gow, Ian
Bottomley, Peter (W'wich W)	Gower, Sir Raymond
Bowden, Andrew	Grant, John (Islington C)
Bradley, Tom	Gray, Hamish
Braine, SirBernard	Greenway, Harry
Bright, Graham	Griffiths, E. (B'ySt. Edm'ds)
Brinton, Tim	Griffiths, Peter (Portsm'thN)
Brittan, Rt. Hon. Leon	Grimond, Rt Hon J.
Brocklebank-Fowler.C.	Grist, Ian
Brooke, Hon Peter	Grylls, Michael
Brotherton, Michael	Gummer, JohnSelwyn
Brown, Michael(Brigg&Sc'n)	Hamilton, Hon A.
Browne, John (Winchester)	Hamilton, Michael (Salisbury)
Bruce-Gardyne, John	Hampson, Dr Keith
Bryan, Sir Paul	Hannam, John
Buchanan-Smith, Rt. Hon. A.	Haselhurst, Alan
Buck, Antony	Havers, Rt Hon Sir Michael
Budgen, Nick	Hawkins, Paul
Bulmer, Esmond	Hawksley, Warren
Burden, SirFrederick	Hayhoe, Barney
Butcher, John	Heath, Rt Hon Edward
Butler, Hon Adam	Heddle, John
Cadbury, Jocelyn	Henderson, Barry
Carlisle, Kenneth (Lincoln)	Heseltine, Rt Hon Michael
Carlisle, Rt Hon M. (R'c'n)	Hicks, Robert
Channon, Rt. Hon. Paul	Higgins, Rt Hon Terence L.
Chapman, Sydney	Hill, James
Churchill, W.S.	Hogg, Hon Douglas (Gr'th'm)
Clark, Hon A. (Plym'th, S'n)	Holland, Philip (Carlton)
Clark, Sir W (Croydon S)	Hooson, Tom
Clarke, Kenneth (Rushcliffe)	Horam, John
Clegg, SirWalter	Hordern, Peter
Cockeram, Eric	Howe, Rt Hon Sir Geoffrey
Colvin, Michael	Howell, Rt Hon D.(G'ldf'd)
Cope, John	Howell, Ralph (N Norfolk)
Cormack, Patrick	Howells, Geraint
Corrie, John	Hunt, David (Wirral)
Costain, SirAlbert	Hunt, John (Ravensbourne)
Cranborne, Viscount	Hurd, Rt Hon Douglas
Crawshaw, Richard	Irving, Charles (Cheltenham)
Crouch, David	Jenkin, Rt Hon Patrick
Dean, Paul (NorthSomerset)	Jenkins, Rt Hon Roy (Hillhead)
Dorrell, Stephen	JohnsonSmith, Geoffrey
Douglas-Hamilton, Lord J.	Johnston, Russell (Inverness)
Dover, Denshore	Jopling, Rt Hon Michael
Dunn, James A.	Joseph, Rt Hon Sir Keith
Dunn, Robert (Dartford)	Kaberry, SirDonald
Durant, Tony	Kellett-Bowman, MrsElaine
Dykes, Hugh	Kershaw, SirAnthony
Eden, Rt Hon Sir John	Kimball, SirMarcus
Edwards, Rt Hon N. (P'broke)	Kitson, SirTimothy
Eggar, Tim	Knight, Mrs Jill
Ellis, Tom (Wrexham)	Knox, David
Emery, Sir Peter	Lamont, Norman
Eyre, Reginald	Lang, Ian
Fairbairn, Nicholas	Langford-Holt, SirJohn
Fairgrieve, SirRussell	Latham, Michael
Faith, MrsSheila	Lawrence, Ivan
Farr, John	Lawson, Rt Hon Nigel
Fenner, Mrs Peggy	Lee, John
Finsberg, Geoffrey	Lennox-Boyd, HonMark
Fisher, SirNigel	Lester, Jim (Beeston)
Fletcher-Cooke, SirCharles	Lewis, Kenneth (Rutland)
Fookes, Miss Janet	Lloyd, Ian (Havant & W'loo)
Forman, Nigel	Lloyd, Peter (Fareham)
Fowler, Rt Hon Norman	Loveridge, John
Fox, Marcus	Lyell, Nicholas
Fraser, Rt Hon Sir Hugh	Lyons, Edward (Bradf'dW)
Fraser, Peter (South Angus)	Mabon, Rt Hon Dr J. Dickson
Freud, Clement	McCrindle, Robert
Fry, Peter	Macfarlane, Neil
Gardiner, George (Reigate)	MacGregor, John
Gardner, Edward (S Fylde)	MacKay, John (Argyll)
Garel-Jones, Tristan	Maclennan, Robert
Gilmour, Rt Hon Sir Ian	Macmillan, Rt Hon M.
Glyn, DrAlan	McNair-Wilson, M. (N' bury)
Goodhart, SirPhilip	McNair-Wilson, P. (NewF'st)

McNally, Thomas	Page, Richard (SW Herts)
McQuarrie, Albert	Parkinson, Rt Hon Cecil
Madel, David	Parris, Matthew
Magee, Bryan	Patten, John (Oxford)
Major, John	Pawsey, James
Marland, Paul	Penhaligon, David
Marlow, Antony	Percival, Sir Ian
Marshall, Michael (Arundel)	Peyton, Rt Hon John
Marten, Rt Hon Neil	Pink, R. Bonner
Maude, Rt Hon Sir Angus	Pollock, Alexander
Mawby, Ray	Porter, Barry
Mawhinney, DrBrian	Prentice, Rt Hon Reg
Maxwell-Hyslop, Robin	Prior, Rt Hon James
Mellor, David	Proctor, K. Harvey
Meyer, Sir Anthony	Pym, Rt Hon Francis
Miller, Hal (B'grove)	Raison, Rt Hon Timothy
Mills, Iain (Meriden)	Rathbone, Tim
Mills, Peter (West Devon)	Rees, Peter (Dover and Deal)
Miscampbell, Norman	Rees-Davies, W. R.
Mitchell, R. C. (Soton Itchen)	Renton, Tim
Moate, Roger	Rhodes James, Robert
Monro, SirHector	RhysWilliams, SirBrandon
Montgomery, Fergus	Ridley, Hon Nicholas
Moore, John	Rifkind, Malcolm
Morgan, Geraint	Roberts, M. (Cardiff NW)
Morris, M. (N'hampton S)	Roberts, Wyn (Conway)
Morrison, Hon C. (Devizes)	Rodgers, Rt Hon William
Morrison, Hon P. (Chester)	Rossi, Hugh
Mudd, David	Rost, Peter
Murphy, Christopher	Royle, Sir Anthony
Myles, David	Sainsbury, Hon Timothy
Neale, Gerrard	St. John-Stevas, Rt Hon N.
Needham, Richard	Sandelson, Neville
Nelson, Anthony	Scott, Nicholas
Neubert, Michael	Shaw, Michael (Scarborough)
Newton, Tony	Shelton, William (Streatham)
Nott, Rt Hon John	Shepherd, Richard
Ogden, Eric	Silvester, Fred
O'Halloran, Michael	Sims, Roger
Onslow, Cranley	Skeet, T. H. H.
Oppenheim, Rt Hon Mrs S.	Smith, Dudley
Owen, Rt Hon Dr David	Speed, Keith
Page, John (Harrow, West)	Spence, John

Spicer, Jim (WestDorset)	Waddington, David
Spicer, Michael (S Worcs)	Wainwright, R.(Colne V)
Sproat, Iain	Wakeham, John
Squire, Robin	Waldegrave, Hon William
Stainton, Keith	Walker, Rt Hon P.(W' cester)
Stanbrook, Ivor	Waller, Gary
Stanley, John	Walters, Dennis
Steel, Rt Hon David	Ward, John
Steen, Anthony	Warren, Kenneth
Stevens, Martin	Watson, John
Stewart, A. (E Renfrewshire)	Wellbeloved, James
Stewart, Ian (Hitchin)	Wells, John (Maidstone)
Stokes, John	Wheeler, John
Stradling, Thomas, J.	Whitelaw, Rt Hon William
Tapsell, Peter	Whitney, Raymond
Taylor, Teddy (S 'end E)	Wickenden, Keith
Tebbit, Rt Hon Norman	Wiggin, Jerry
Temple-Morris, Peter	Wilkinson, John
Thatcher, Rt Hon Mrs M.	Williams, D. (Montgomery)
Thomas, Jeffrey (Abertillery)	Williams, Rt Hon Mrs (Crosby)
Thomas, Rt Hon Peter	Winterton, Nicholas
Thompson, Donald	Wolfson, Mark
Thorne, Neil (IlfordSouth)	Wrigglesworth, Ian
Thornton, Malcolm	Young, SirGeorge (Acton)
Townend, John (Bridlington)	Younger, Rt Hon George
Townsend, CyrilD, (B'heath)
Trippier, David	Tellers for the Noes:
van Straubenzee, Sir W.	Mr. Anthony Berry and Mr. Carol Mather.
Vaughan, DrGerard
Viggers, Peter

Question accordingly negatived.

Main Question put and agreed to.

Resolved, That this House welcomes the decision of the United Kingdom's Community partners to extend indefinitely economic measures against Argentina; regrets the way in which the Community's customary procedures were set aside at the Agriculture Council on 18th May; and supports the Government in its efforts to establish clear procedures for the conduct of Community business and to secure continuing equitable arrangements for the United Kingdom's budget contributions.

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1. BUSINESS OF THE HOUSE 21 words